High-end fashion label Trelise Cooper is stopping production of its girls' clothing range and closing its kids' boutique in Auckland's trendy Nuffield St.
The company says it plans to focus on more profitable parts of the business.
In a statement to the Herald, the firm said there had been a decline in sales.
"The lease on our Nuffield St kids' store came up for renewal and we have decided to take the opportunity to put production of the Trelise Cooper Kids ranges on hold for a few seasons," the statement said. "It is our intention to revive the label in the future once global economic conditions improve."
The company said one full-time and four part-time staff members at the store would be affected by the closure.
"We launched a new women's wear label last month to the Australasian market with great success and are putting our focus and resource into this profit-making brand instead."
Many items had been heavily discounted on Sunday when the Herald visited the Trelise Cooper Kids store, whose products are aimed at girls aged 2 to 8.
Prices ranged from $60 for a pair of tights to $120 for a miniskirt and $160 for a leather jacket.
The jacket had been marked down from well over $200.
The recession had left shoppers less willing to shell out on children's fashion, said Goldman Sachs retail analyst Buffy Gill in a research note released in April.
She said shoppers were moving to lower-priced offerings, and families were using hand-me-downs.
One fashion industry insider said making money out of children's clothing was "a nightmare".
"You put almost as much manufacturing time into a children's wear garment as you do into an adult garment, but of course the parents don't want to spend [a lot of] money on children."
Trelise Cooper Kids, which was founded in 2006, was the only children's fashion label to feature at last year's New Zealand Fashion Week.
At that time Trelise Cooper chief executive Alex Brandon said the label had just entered the Chinese market, supplying a large Beijing-based retailer.
"We've got through the recession really well - primarily because we've extended the number of markets we're in," he said.
The Trelise Cooper Kids range is also stocked in the firm's stores in Christchurch, Sydney and Melbourne, according to the company website, as well as by other overseas retailers.
Arms of Cooper's business - which was "conservatively valued" at $20 million in 2008 - include Cooper by Trelise, Trelise Cooper Jewellery and a perfume.By Christopher Adams Email Christopher