Pumpkin Patch targets big rivals

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Pumpkin Patch is launching a lower-priced range of children's wear under a new brand in New Zealand and Australia.

The company will test the market with six to eight stores by the end of the year and if it is successful look at expansion in Australasia and in its other markets around the world.

The new range - under an as yet undisclosed brand - will pit Pumpkin Patch against discount department stores such as The Warehouse and Kmart.

Clothes in the playwear or everyday wear end of the market sell around 20 per cent to 30 per cent below the Pumpkin Patch range.

Chief financial officer Matthew Washington said the new stores would be smaller and cheaper to fit out and totally distinct from Pumpkin Patch.

"It's a totally separate brand - you won't see Pumpkin Patch mentioned," he said.

The company says the playwear market accounts for more than 70 per cent of Australasian children's wear sales worth about $3 billion.

"We want to trial and test it and iron out any rough edges and then contemplate where to go long term," said Washington.

"Most investors have said growth would be a continued rollout of stores and new wholesale markets in the long term. Effectively what we are saying is we have two brands that we can roll out new stores and look at new markets."

He likened the concept to a full service airline also owning a budget carrier.

The new stores' impact on debt would not be material given the use of existing infrastructure, lower fitout costs and marketing costs.

Pumpkin Patch was founded in 1990 and now has 223 stores - 50 in New Zealand, 114 in Australia, 39 in Britain and 20 in the United States.

Equity analyst at Tower Asset Management Manher Sukha said the company would have thought hard about how to avoid cannibalising sales at existing shops.

"A lot of children's clothing is sold through discount department stores and supermarkets so do they take share off the other guys without losing their own share?" he said.

"If you can get that brand and the target right, why shouldn't it work?"

The new stores are in addition to the 30 to 40 Pumpkin Patch stores the company expects to open over the next three years in Australasia.

Pumpkin Patch posted a 50 per cent rise in first-half profit after stemming losses in the US and Britain and reducing interest costs by cutting debt.

Net income was $14.3 million in the six months ended January 31, up from $9.5 million a year earlier.

Pumpkin Patch shares closed up 2c at $2.22.


Child's play

* Pumpkin Patch employs 2800 people.


* It has 223 stores worldwide.


* Clothes are available in NZ, Australia, Britain, the US, South Africa and the Middle East.