Children's clothing retailer Pumpkin Patch says its decision to close stores in the United States is the final step in its plan for dealing with the recession.
The company told the New Zealand stock exchange yesterday that over the next two months it would close around 20 of its 35US retail outlets, with the more recently opened stores the first to go.
It said import quotas and the prolonged financial crisis had "created significant headwinds" for its American business.
Chief financial officer Matthew Washington said the newer US stores, mostly on the east coast, had particularly struggled because they didn't have the same brand recognition as its more established outlets.
Trading in the US was tough and volatile. "One week it's up, one week it's down."
The American move was the fourth step in the company's programme this year to tackle the tough economic times. It had also reduced debt by 60 per cent, lowered inventory levels and cut costs.
"We think those four initiatives put us in a very good state for the future."
Washington said there were no more special projects or cost-cutting measures in the pipeline.
Sales in all its markets - Australia, New Zealand, the US and Britain - hadn't deteriorated any further in the past three to four months. "We must be pretty close to bottoming out in each of the markets."
The company told the NZX that assuming there was no deterioration in market conditions the US stores would generate an earnings result close to break-even.
Including cuts in American head office costs, the division was expected to make a loss in the 2010 financial year of $3 million, not the $13 million that analysts had forecast.
Pumpkin Patch shares closed up 14c to $1.49 yesterday.
