Finding a buyer for Pumpkin Patch would be the best option to save the troubled company, a retail analyst says.
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First Retail Group managing director Chris Wilkinson said several big Australian retailers were in "acquisitive" mode, and David Jones - which opened its first store in Wellington this year - could be a potential suitor.
"In the last few weeks David Jones puchased the Politix meanswear group in Australia. David Jones have in the past had a relationship with Pumpkin Patch and we would see an opportunity there potentially that this brand would have a nice fit in their market."
Shares in Pumpkin Patch were placed in a trading halt on the stockmarket on Friday as it warned it was in financial trouble and its shares were "highly unlikely" to have any value.
"It's a desperately sad situation really. This was the darling of the retail scene, it was an innovator, a business that really excelled and one of the first New Zealand retailers to head into overseas markets.
"But in actual fact it was those expansions that have come back to haunt it now in terms of debt and some legacy issues," Mr Wilkinson said.
Although the retailer sector in New Zealand was experiencing strong activity, childrens apparel has been struggling for some time, he said.
"We have the emergency of fast-fashion retailers that are now very active in this space."
Companies like Cotton On, which also sold children's clothing, had intensified competition among retailers in recent years, Mr Wilkinson said.
First Union, which represents some employees at Pumpkin Patch's distribution centre in Auckland, said it was trying to find out from the company what its financial situation meant for workers.
Pumpkin Patch was established in 1990 and now has about 1800 staff.