‘Sad day’ for Pumpkin Patch story

The future of listed children’s clothing company Pumpkin Patch is uncertain after it went into a trading halt.

The business was struggling with a lack of money and too much debt, according to a notice on the New Zealand Exchange from chairman Peter Schuyt and managing director Luke Bunt.

Banking arrangements meant Pumpkin Patch could keep its doors open, but there was some doubt over its future.

‘‘Our ability to move forward from here is impacted by the lack of available capital for debt reduction and reinvestment. This represents a material risk to the ongoing viability of the business.’’

A disappointed Wellington shareholder said it was a sad day because he had clothed his children in Pumpkin Patch gear for many years.

‘‘I became a shareholder because they seemed to have a great investment story to tell as they expanded overseas. A few years ago it became obvious their strategy hadn’t worked, and now I’m over $8000 out of pocket.’’

Shareholders were advised in the statement that it was highly unlikely there was any residual value in the company’s equity.

Pumpkin Patch expected to make some headway in the next few days and make an announcement to the market. It said the main factor was a decline in the international wholesale and northern hemisphere online businesses.

During the year the company closed 12 loss-making stores, mainly in Australia. The NZX statement said the company had tabled options to address capital constraints.

‘‘Further work [on the options] coupled with discussions with the bank and certain key stakeholders had generated ongoing substantial uncertainty regarding the company’s future.’’

Last month, Pumpkin Patch reported a 71 per cent bigger loss this year than last.

Children’s clothing was a tough category in the global market, said First Retail Group managing director Chris Wilkinson. Even some of the biggest operators were finding it tough and with little success as market dynamics changed and fast fashion moved in.

Cotton On Kids is set to open at Sylvia Park in Auckland this month, in line with a new store concept rollout. ‘‘They have the size and buying power, which is why we are seeing the childrenswear landscape changing.’’

Another reason for the decline in the sector was the growth of second time around, he said.

‘‘Kids grow out of clothes quickly and are being sold on. When Pumpkin Patch started, Trade Me would not have been around.’’

Wilkinson speculated that the future of the company could be in the hands of a department store such as David Jones.

Otherwise there would not be many other options for Pumpkin Patch, he said.

‘‘David Jones just bought Australian men’s fashion brand Politix and have been inquisitive about taking over other brands.’’

Morrisons found this out in 2011 when it pumped £170 million into kids clothing, only to report a £164m writedown in its investment.

British kids clothing chain Adams went to administration three times between 2006 and 2010 before closing the stores.