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Shopping Centers Today -> December 2005
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KIWI CLOTHING
New Zealand children’s apparel chain enters U.S. retail sandbox
By Donna Mitchell
Pumpkin Patch, a New Zealand-based children’s clothing retailer, brought its Down Under styles “up over” to several California malls this past summer.
What exactly are “Down Under” styles? Well, they are bright colors that play off the vivacious, fun-loving lifestyles that those living in sun-soaked Australia and New Zealand enjoy, says Greg Muir, Pumpkin Patch’s executive chairman.
“The children grow up in an area where there is a lot of sunshine and a lot of color,” said Muir. “There is a lot of use of color in people’s everyday lives — in buildings, apparel and elsewhere.”
The company’s merchandise mix is comprehensive, offering fashions for the age groups from infant through early teens and for expectant mothers. In New Zealand, besides its 31 Pumpkin Patch-branded stores, the company also operates 14 Urban Angel stores, catering to the 8-to-14-year-old set. It has 135 units worldwide.
Pumpkin Patch is considered not only New Zealand’s top children’s apparel brand because it has the most stores in the segment, but also one of the largest companies in that country’s retail sector overall, says Guy Hallwright, senior investment analyst for investment research at Auckland, New Zealand-based Forsyth Barr Research.
The company, which started as a mail-order business, is also going global. Already entrenched beyond New Zealand and Australia in continental Europe, the U.K. and the Middle East, Pumpkin Patch is using the proceeds from a recent initial public offering to open stores in Asia, South Africa and now the United States.
This past summer, Pumpkin Patch opened stores in the Galleria Tyler Mall, in Riverside, Calif.; Glendale Galleria, Los Angeles; and Valley Fair, San Francisco. Muir says the company hopes to have three more stores in California by April, though he would not discuss plans beyond that.
When Pumpkin Patch opened its 3,185-square-foot store at Galleria Tyler Mall in September, customers packed the place, says Jerry Irwin, general manager of the mall, which is owned by General Growth Properties.
“The store is very well merchandised,” Irwin said. “It is bright, clean and inviting. At General Growth Properties, and especially here in Southern California, we are always excited to get the first-to-market retailers.”
Such a warm reception bodes well for Pumpkin Patch in the U.S., because it reflects the willingness of mid- and higher-income parents to spend a premium on their children’s clothes and bedroom decorations and equipment, says Wendy Liebmann, president of New York City-based WSL Strategic Retail. Besides sometimes buying designer clothes for their children, parents look for fresh and interesting items, and Pumpkin Patch’s styles deliver that.
In the crowded children’s apparel business, Pumpkin Patch’s competitors include Gap, Liebmann says. And certainly, Pumpkin Patch’s designs appear to be as mainstream as Gap’s, she says.
If the chain decides on a national rollout, it should lease in lifestyle centers and upscale malls, says Britt Beemer, chairman and founder of Charleston, S.C.-based America’s Research Group, because it could reach its target base more effectively than if it opened only in midmarket malls.
It seems unduly modest for the company to have just 45 stores in New Zealand, but there, only supermarkets, department stores and general merchandise retailers operate more stores than that, says Hallwright. “On a population-adjusted basis, Pumpkin Patch’s 31 New Zealand Pumpkin Patch-branded stores would be the equivalent of over 2,000 stores in the U.S.,” said Hallwright. New Zealand has a population of 4.1 million, and Australia has 20 million.
California is the best test market for Pumpkin Patch stores in the U.S., says Muir, because of its sunny climate and its residents’ love of the outdoors. What’s more, Los Angeles is the gateway city for travelers and goods coming to the U.S. from the Pacific Rim. More important, the state has a substantial number of top-flight malls, which are the types of centers the company seeks, says Muir.
Pumpkin Patch’s growth has been nearly as vibrant as its clothing designs. It all began with Sally Synnott, who started the company in 1990 after growing disillusioned with her job as a head buyer for the Australian department store Kmart (no connection to the Troy, Mich.-based retailer). The department store focuses on delivering high-volume goods at low prices, but Synnott was convinced there was a market for well-designed clothes at higher prices. She launched Pumpkin Patch as a mail-order company and opened its first store shortly afterward in New Zealand.
In 1995 the company began opening stores in Australia, and in 2000 it expanded its brick-and-mortar presence to the U.K. Then, in late 2002, it launched a wholesale business that allowed it to distribute to high-end department stores not just in the U.K. but also in the Republic of Ireland and the U.S. Today Pumpkin Patch clothes are sold in Bloomingdale’s, Lord & Taylor, Marshall Field’s and Nordstrom in the U.S., in the Roches Stores in Ireland and in House of Fraser in the U.K.
Pumpkin Patch says it also has a franchise agreement with Bahrain-based Jawad to open 29 stores in Dubai, Kuwait, Oman, Qatar and Saudi Arabia.
Pumpkin Patch accomplished all of this as a private entity and mainly on the strength of delivering appealing designs to shoppers at mid-range prices, says Hallwright.
The company went public early last year. The stock price doubled in the second half to NZ$2.80 ($1.90) and then peaked at NZ$3.50 in March this year. Ironically, the rise gave some analysts pause. “There was certainly some feeling that the stock was overvalued at the time, although this was not universal,” Hallwright said.
Analysts also expressed worry when Pumpkin Patch launched Urban Angel last year. The company bought 14 stores from Hallensteins HBK Girl and rebranded them with the Urban Angel line that had previously sold in separate areas of Pumpkin Patch stores. Moving the line into dedicated stores made the brand more attractive to girls in or approaching their early teens, who do not want to shop at the same stores that cater to their younger siblings, Hallwright says. But selling to this customer is risky, because she has fickle tastes.
“Pumpkin Patch’s expertise has been selling to a parent customer rather than children,” said Hallwright. “That said, the company’s design and retail management team has a lot of general apparel industry experience predating Pumpkin Patch, so they should know what they are doing.”
Sales performance would seem to indicate that. Total sales across the company’s segments were up 39 percent for the first half of the year, at NZ$139 million, versus NZ$99.7 million a year earlier. (The company does not disclose comp-store sales.)
Pumpkin Patch says it plans to keep right on pushing those bright colors Down Under and all over. n
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