Continual trading losses amid a poor economic environment in the UK were cited by Pumpkin Patch Group chief executive Neil Cowie as the reason to exit the troubled UK retail market.
"The return on investment from the UK retail operation has not been acceptable and the current trading losses being generated only accentuate this," Mr Cowie said in a statement yesterday.
Shares in New Zealand-based Pumpkin Patch were up 5.7% at 74c yesterday, having traded down from $1.63 in January a year ago to a year-low in early December of 58c.
Mr Cowie said the economic environment in the UK and in wider Europe was extremely difficult and "it is going to get worse before it gets better", meaning the UK operation would continue to make losses for some time.
In late September, Pumpkin Patch announced its annual after-tax profit had plunged 50% to $12.6 million.
The UK decision mirrors one taken in the United States in 2009, also because of languishing retail performance, when Pumpkin Patch exited the market.
In September that year, it posted a $26.7 million after-tax loss because of almost $40 million in restructuring costs.
In early July that year, Pumpkin Patch had decided to close 15 of its then 35 US stores as the United States financial crisis and recession wore on, placing its US trading subsidiary in Chapter 11 bankruptcy, which allowed protected trading to continue during restructuring.
Mr Cowie said yesterday the UK restructuring would not materially affect any of the group's other companies, including those in New Zealand, the Irish subsidiary, the companies which operate 185 retail stores across Australia and Asia, the 20 international wholesale markets or the online businesses in five international markets, he said.
Cash costs for the reorganisation were expected to be between $3 million and $5 million, while non-cash costs were estimated at between $25 million and $27 million, Mr Cowie said.
The elimination of the UK losses would improve total group operating earnings and cash flows from the second half of the 2012 financial year, with full recognition of all reorganisation costs made in the current first-half financial period, he said.
Pumpkin Patch would retain a UK presence with its "fast-growing" online operation.
Australasian retail sales during Christmas tracked well above last year, but margins were slightly reduced because of the need for increased promotional activity.
