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PacSun Profits Shine in Quarter

NEW YORK — Casual apparel specialty retailer Pacific Sunwear of California said income more than doubled in the second quarter due to lower expenses and increased sales across all merchandise categories.<br><br>Going against the grain of recent...

NEW YORK — Casual apparel specialty retailer Pacific Sunwear of California said income more than doubled in the second quarter due to lower expenses and increased sales across all merchandise categories.

This story first appeared in the August 13, 2002 issue of WWD.  Subscribe Today.

Going against the grain of recent reports from teen retailers, the Anaheim, Calif-based firm said sales are on track for back-to-school.

For the three months ended Aug. 3, the firm said net income reached $7.3 million, or 22 cents a diluted share, matching Wall Street’s already raised estimates, 105.9 percent higher than the net income of $3.5 million, or 11 cents, reported in last year’s quarter.

Sales for the quarter rose 21.9 percent to $190.9 million, compared with year-ago sales of $156.5 million. Same-store sales increased 7.3 percent, comprised of a 7.4 percent gain at PacSun and a 6 percent increase at Demo. All four merchandise departments at PacSun generated positive comps, “with men’s turning positive for the first time in six quarters,” Greg Weaver, chairman and chief executive, said in a statement.

During a conference call, Weaver said female apparel rose 9 percent in the quarter, men’s in the low single digits and footwear in the midteens. Accessories were virtually flat.

“Our plan is to aggressively grow our girls’ business in 2002,” Weaver said of its female apparel component. He noted PacSun’s plan to grow its girls’ division to 45 percent of total sales in the second half, up from 43 percent in the first. In addition, he said the stores have added brands and expanded sizes to spur sales.

For b-t-s, Weaver said comp sales so far have exceeded plans for a positive low-single-digit gain through the first week of August: “I believe our target customer is responding to our focused assortments and diversity of brands.”

In reiterating her “buy” rating, Jennifer Black, a retail analyst with Wells Fargo, said in a research report that PacSun is on track to be a big winner during this b-t-s season. “I believe that the company’s product assortment across all product categories is fashion right and is consistent with the current trends,” she said.

As reported, based on July’s sales results, PacSun raised its second-quarter guidance to 21 to 22 cents, exceeding consensus estimates of 18 cents. The consensus estimate then rose to 22 cents.

PacSun opened 59 new stores in the first half of 2002, and it said it expects to open 17 in the second half for total square footage growth of 15 percent for the year. It currently operates 599 PacSun units, 70 PacSun outlets and 108 Demo units.

For the first half, net income increased 135.6 percent to $10.6 million, or 32 cents a diluted share, compared with income of $4.5 million, or 14 cents, for the first half of 2001. Income in last year’s first half included a one-time aftertax charge of $2.5 million, or 8 cents. Sales increased 19.9 percent to $352.6 million from $294.2 million, while comps increased 4.2 percent, with PacSun up 4.5 percent and Demo up 0.9 percent.