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Children’s Clothing Retailer Pumpkin Patch Teetering

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Struggling children’s clothing retailer Pumpkin Patch, which has dozens of stores in Australia, is fighting for survival.

The New Zealand-based company has entered a trading halt after informing the market that it was “highly unlikely that there is any residual value in the company’s equity.”

After years of declining sales Pumpkin Patch has seen its market capitalisation dwindle to just $10.1 million from a valuation of $NZ231 million ($216 million) in 2013.

Its second-biggest shareholder is Jan Cameron, the co-founder of NZ adventure-wear retailer Kathmandu.

On Friday, Pumpkin Patch told shareholders that “substantial uncertainty” remained regarding its future and it would put forward proposals to its bank by October 31.

“Shareholders should note that it is highly unlikely that there is any residual value in the company’s equity.”

The news comes as rival Baby Bunting, Australia’s biggest baby goods chain, plans to ramp up store openings. Baby Bunting’s first year on the sharemarket was helped by the collapse of its major competitor, My Baby Warehouse, which gave Baby Bunting a dominant position in the highly fragmented $2.4 billion baby goods market.

Other baby-focused retailers to have collapsed in recent years are Babyco and the Australian arm of British giant Mothercare, thanks to slowing sales, tough trading conditions, writedowns and restructuring costs.

Early last year Pumpkin Patch put itself up for sale.

But that sale did not proceed, and the company instead planned a four-year turnaround program, which includes store closures and focusing on online sales.

Reporting a deeper loss of $15.5 million for the year to July 31, 2016, Pumpkin Patch said it was at a “very early stage of its recovery journey” and “apparel retailing continues to be highly competitive and challenging.”

It said declining sales were due to store closures, and a decline in its international wholesale business and northern hemisphere online business. The rise of the New Zealand dollar against the Australian dollar was also a “major headwind for the business and if sustained represents a material risk to earnings.”

“The business remains significantly over-leveraged and capital constrained,” it said last month. “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.”

Online Source: The Sydney Morning Herald.

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