After reviewing its United Kingdom operation, Pumpkin Patch has decided to pull out from that market, appointing administrators to its UK subsidiary company.

The stand alone UK registered subsidiary company operates 36 Pumpkin Patch retail stores.

According to Neil Cowie, Pumpkin Patch Group’s CEO, said the return on investment from the UK retail operation has not been acceptable and the current trading losses being generated only accentuate this.

“The economic environment in the United Kingdom and in wider Europe is extremely difficult and we believe it is going to get worse before it gets better. Therefore we expect the UK operation would continue to make losses for some time to come,” he said.

“While the decision is a hard one it is a decision we had to make as it just doesn’t make sense for us or our shareholders to continue to maintain the existing operation up there”.

As part of the administration process, all day-to-day controls of the UK subsidiary will be handed over to the administrators.

The decision however does not impact any other group company including the New Zealand parent company, the Irish subsidiary company or the group companies that operate the 185 retail stores across Australia, the 20 international wholesale markets, and the online businesses operating in 5 international markets.

The company still expects year end bank debt will be between $40 and $50 million, but believes the elimination of the losses from the UK retail operation will improve total group operating earnings and cash flows from the second half of the 2012 financial year and into the future.

 “Our major focus has been on Australasian retail sales across the Christmas period which tracked well above last year but margins were slightly impacted as increased promotional activity was needed to get the customers shopping; a theme that has been seen across much of the year. However this allowed us to clear a lot of inventory and we go into the new season happy with the level of inventory we have,” Cowie said.

“We are still seeing very strong growth across all of our online markets and the early indications are that wholesale customers will be increasing orders in FY13. Our Wholesale Team is currently in discussions on two new wholesale opportunities which we hope to be able to confirm within the next two months.”