New Zealand-based children's clothing retailer Pumpkin Patch Ltd. (PPL.NZ) said Wednesday it is closing its U.S. retail operation and potentially could shut 17 stores in the United Kingdom, noting that trading conditions remain challenging and volatile across all its markets.

"The company has made the decision to shut the remaining 20 retail stores in the United States and in the medium term focus on wholesale and web based growth opportunities in that market," it said in a release. The stores will cease trading on a staggered basis over the coming six months.

The company also said it is focusing on 17 underperforming stores in the United Kingdom out of a total of 41. It said it would seek to "negotiate with landlords appropriate rent reductions or other reorganization options" as leases expire over the next 15 months in 12 of the stores and in the remaining five after the 2012 financial year.

"Should acceptable solutions not be found stores will be closed," it said.

Pumpkin Patch said it expects its net profit in the year ending July 31 to be between NZ$12 million and NZ$14 million, before reorganization costs.

-By Rebecca Howard, Dow Jones Newswires; 64-4-471-5990; rebecca.howard@dowjones.com

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