First NZ Capital has announced they believe NZ brand Pumpkin Patch will
under perform in US Markets this year. Pumpkin Patch has been aggressive in their attempt to become a power in the US retail market- opening 35 stores in the states. While the brand is still performing strongly in NZ with profits this year of about $62 Million, the US expansion is expected to loose $14 Million.
Sarndra Urlich, and analyst with NZ Capital believes that one-third of the US stores will never see a profit. She has gone on the record to say that if Pumpkin Patch were to close just these stores, their losses could be cut by more than $10 Million. Her main concern cited was the timing of the expansion- one which coincided with recession in the US, and what Urlich referred to as the "depressed retail landscape in the US".
This all comes about the day after the New York Division of Budget has
released a report that lays out their belief that the economy could be stable and recovering between July and September of this year. If this report holds water, then we must believe that the projected losses could be mitigated by a rebound in the market.
Still, Pumpkin Patch has some tough hurdles in the US market. It cannot be denied that Pumpkin Patch has not made a dent to their competition here in the states. Their marketing seems to be non-existent, their website is difficult to navigate, and their markdowns are...well, not that good. On rack of last season's clothes, you can often find marked down prices on par with what the other mall retailers are charging for new styles (full price). Undoubtedly, Pumpkin Patch has some cute styles and nice quality, but the prices make it impossible to compete.
Fashionmomcafe.com has researched the issue and found that New Zealand (the home of Pumpkin Patch) does not currently have a free trade agreement with the United States. Talks have gone on for months now with New Zealand seeking an
agreement similar to that between the
United States and Australia, but as of this writing, none has been signed. Opening up free trade between the countries could potentially poise Pumpkin Patch to become a major player here in the states. Why? Because New Zealand has a
free trade agreement with China, which the US does not. That means that Pumpkin Patch can buy fabric from China MUCH cheaper than US companies can. In the US, textiles from China are heavily taxed and triffid. If New Zealand gets free trade with the US, it is possible that Pumpkin Patch can buy their textiles at less cost and then import products here at less cost, resulting in lower overhead and the ability to give the US market the markdowns that make their competitors such strong performers.
Given all the factors, we are definitely putting
Pumpkin Patch on our list of companies to watch. This is really a make or break time for them in the US and we hope they can pull it off!
Happy shopping!
-The FMC Team
Labels: News, Pumpkin Patch, watch list