Last week Pumpkin Patch updated earnings guidance as well as announcing that it was going to close the US operations and address the underperforming United Kingdom business. The earnings guidance was downgraded to $12m- $14m (from $16m – $18m previously), the downgrade was attributed to the continuing “challenging and volatile” conditions intensified by rising input costs.
While most retailers have been finding it difficult at present, it has been especially treacherous for Australasian children’s apparel retailers of late as the competition heats up with international brands venturing down under and depressed consumers staying away from shops. By closing the US operations Pumpkin Patch has decided that the bulk of its future opportunities are closer to home.
Even though there are opportunities for Pumpkin Patch to further expand its footprint in Australia this will be difficult with the increasing level of competition. Pumpkin Patch needs to re-establish a niche position for itself and its brand lest it follow the path of The Warehouse, which capitulated in Australia only to focus on NZ and then lose market share to the evermore agile and energetic specialist retailers.
We believe that for a company to continue to succeed in both international and domestic markets it needs to have strong management with interests firmly aligned to the shareholders’ in addition to a solid strategic plan implemented by an independent board. The first cut is always the deepest and we admire people who are able to admit they were wrong and move forward looking for the next opportunity. Hopefully, Pumpkin Patch is able to get back on track and reclaim their position as Australasia’s premier children’s apparel retailer.