Wellington, April 26 NZPA - Pumpkin Patch Ltd is opening a new chain of shops selling practical everyday clothes for kids in a market with players such The Warehouse, Kmart and Target.

The company hopes to open one store in New Zealand and one in Australia in the next two to three months. It wants to have six to eight stores by the end of the year. It is keeping the new brand name under wraps.

"These stores will be very, very profitable because we are leveraging off our existing infrastructure," Matthew Washington, the company's chief financial officer said.

"Basically everything we make at the store level is going straight to the bottom line because you don't need more accountants or backroom staff."

The danger is that the new brand will damage the company's existing Pumpkin Patch brand but Mr Washington was confident it would have a different look.

"The biggest danger of any new brand is that the existing and new brand merge, so we are putting in additional resource to make sure we have a different hand writing.

"If all goes according to plan you won't sniff Pumpkin Patch in the product," he said.

The location of future stores, which will be about half to two-thirds the size of Pumpkin Patch stores, will be weighted toward Australia, where there were bigger opportunities longer term. The total number of stores for the new brand was unknown.

The playwear market the company is aiming for makes up between 70 percent and 80 percent of the childrens' clothing market.

"It is sort of the product you would dress the children in to go to school, go to kindy, play in the backyard. Whereas, Pumpkin Patch is more fashion orientated and what you dress the kids in to go and see grandma in the weekend and go to parties," he said.

The brand would include basic T-shirts and pants.

"It will offer people a very good value product with good colours, good styles. It will still be a bit funky but at a much lower price point," he said.

The new brand stores are in addition to the 30 to 40 Pumpkin Patch stores the company expects to open over the next three years in Australasia.

The strategy of developing a lower priced brand had been adopted by a number of business in different industries, including the airline industry and banking industry.

The company did not expect any immediate impact on earnings or debt levels.

"We believe this move will be a driver of earnings and cash flow growth going forward."

The company is not disclosing the set up costs.

"In childrens' wear you don't spend a lot of money on public relations or advertising. It is primarily word of mouth," he said.

Mr Washington said the company had significant cash generating ability.

Pumpkin Patch shares were unchanged at $2.20 in afternoon trading.