Babywear retailer Pumpkin Patch is pulling out of Britain after being placed in administration there, but says it has no intention of closing Australian stores and is using stronger negotiation tactics with landlords to maintain current rents.
The move comes on the same day another major British retailer, Peacocks, has been placed in administration, as the Eurozone debt crisis impacts consumer confidence. Late last year, Australian retailer Billabong also said it was recording lower sales due to decreased confidence in Britain.
“We are aggressively resisting any suggestion of rent increases, and in many cases we’re actually negotiating rent reductions,” chief financial officer Matthew Washington told SmartCompany this morning.
Pumpkin Patch, which is listed in New Zealand but records the majority of its sales in Australia, announced overnight it would close 36 stores in Britain after appointing an administrator. The restructuring cost is set come in around $24 million.
But Washington says although the Australian business is “well behind” what it was even a year ago, the company has no intention of shutting Australian stores.
“Certainly Australian Christmas sales were well above the last year, but margins have been impacted, and that’s a common theme through retail now.”
“Christmas is only one period, however; it’s not the whole year, and it will be interesting to see how the customer rebounds after Christmas time.”
The shock announcement comes just two days after Speciality Fashion Group announced it may shut up to 120 stores if current trading conditions and rents continue. But Washington says the company is negotiating with landlords – and simply isn’t accepting any rent increases.
“Gone are the days when tenants would just accept the rates landlords give them. We will walk away from a site if we don’t get a suitable outcome.”
However, Washington says that isn’t likely, as the company has been negotiating with a number of landlords over rates that work for both parties.
“We don’t have any intention of closing Australian stores. We have a great relationship with our landlords, and we have a responsibility to shareholders. I think the company’s position is that landlords have had a good run, and in the current environment, the status quo doesn’t work.”
Washington says the company is using slightly “harder” negotiation tactics than it used to, but is buoyed by the fact Pumpkin Patch is a medium-sized player.
“The big players have a lot of power, the small players have no power, but we’re in the middle. We’re a good tenant to have, and right now we’re in negotiations, but have no intentions of closing things down.”
“If appropriate sites open up, we’ll continue to look at them if the opportunity is right.”
This isn’t the first time Pumpkin Patch has experienced problems with an overseas arm. In 2009, the company announced it would close 20 stores in the United States.
The latest announcement comes as the company says consumer confidence due to the debt crisis is directly impacting sales. This matches with a statement from Billabong last year, which said its sales were suffering due to the downturn.
But in Australia, Washington says the company is relatively pleased with the local performance.
“We’re relatively pleased, but it’s certainly way off where it was a year or two ago. The Australian retail market is still tough.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
