Kids' clothing-maker seeks US patch

LA'S smallest stars - its kids - may soon be sporting Pumpkin Patch gear.

The company said yesterday that it would make its first direct foray into the American market, where it already sells children's clothing through partnerships with some department stores.

Negotiations over leases for three stores in Los Angeles have reached the late stages, with the first US Pumpkin Patch store expected to start trading around August. The Pumpkin Patch and Urban Angels brands will share the premises.

Pumpkin Patch chief executive Greg Muir was quick to highlight the company's cautious approach to the US market, where its decision will put it head-to-head with stiff competition from the likes of GapKids, Gymboree and The Children's Place.

"It's a relatively modest toe in the water," he said. "We don't place large bets, we place relatively small bets and we give those time to see if they're working. We're not leaving the organisation exposed."

But the company has already had a taste of the market and clothes sold through wholesale partners such as Nordstrom and Bloomingdales have found good acceptance.

"That helps give us confidence ... right from the start they encouraged us to do this," said Muir.

The market will be updated on progress when Pumpkin Patch reports financial results, but Muir believes it will be at least a year before the company can say whether further expansion in the US is warranted. He wants to get through at least two seasons before making concrete plans.

The cautious approach echoes the company's slow expansion in the UK, where its operation of 13 stores finally made a small profit in the year to January. Muir said it had taken more than four years to move beyond the trial stage in the UK.

Pumpkin Patch's international aspirations are well known and its cautious approach has hemmed in worries over the risks involved.

"This is just dipping a toe in the water ... we have no concerns," said Tyndall fund manager Rickey Ward. "If you truly believe you are a global brand, you have to act as if you are a global brand."

The small scale of the latest move will keep costs down. A small part of the start-up costs will fall into this financial year - but Muir said the company had made no adjustments to its previously signalled forecast that it would make at least $23 million in the year to July.

The company expected the US stores to be loss-making in their first year, but Muir would not disclose when they were budgeted to become profitable.