ANAHEIM, Calif. — Pacific Sunwear of California Inc., sees plenty of growth ahead.

The surf and skate retailer, which operates the businesses PacSun, PacSun Outlet, Demo and, is quickly approaching the $1 billion in annual sales mark and has its sights on opening 300 stores between 2003 and 2005, or a 39 percent increase in the number of stores. Some 83 new stores are expected to bow in 2003 and an expansion is expected of 30 of its “highly productive” stores. In the next three to four years, chairman and ceo Greg Weaver sees PacSun, currently at 626 units, to grow to 825 units; PacSun Outlet, currently at 75 units, to increase to between 85 and 90 stores, and Demo, currently at 109, to surpass 200 units.

“We are preparing to become a very large retail operation,” Weaver told shareholders at the company’s annual meeting. “This business is clearly bigger than it has ever been in our past.”

Weaver indicated there are high hopes for Demo. Since 2001, store operations have been brought up to PacSun’s standards, merchandise has been redefined to include the growth of teen girls’apparel and future store sizes have been upped from 2,300 square feet to between 2,500 and 3,000 square feet. Demo posted a 36.5 percent comp-store sales increase in the first quarter of 2003. “We’re gaining a lot of confidence from Demo,” Weaver said, adding the company will make a full disclosure of the division’s potential in August. He is expected to announce Demo will be significantly larger than a 200-unit chain.

As reported, the retailer’s first quarter ended May 3 made headlines with a 142 percent net income jump, due primarily to the growth of the retailers’ teen girls’apparel business. Net income increased from $3.3 million in 2002 to $8 million in 2003 at a time when many juniors specialty stores posted significant profit dips. Sales for the same quarter increased to $198.3 million from $161.7 million while comparable-store sales increased 13.1 percent.

PacSun decided to push the teen girls’ business in 2001 when the men’s business lagged and dragged down company sales. Two years ago, teen girls’ apparel accounted for 20 percent of the merchandise mix. In 2003, teen girls’apparel will account for about half of PacSun stores, up from 43 percent in 2002.The strategy has worked well. “Girls comps have been double digit for the last six quarters,” Weaver said. “I didn’t think it would work this well. Actually, every product category — guys, girls, accessories and shoes — they’re all comping so they’re all driving our business. But first and foremost, it is the girls.”

Last year, sales increased 24 percent to $846 million while net income grew 80 percent to $49.7 million. Total comp-store sales grew by 9.7 percent in the year with core PacSun stores up 9.4 percent and the urban hip-hop concept, Demo, up 12.4 percent.

Another significant component of growth is offering “great product diversity to the target 15-year-old customer,” said Weaver. “Definitely this is helping us to grow market share,” he said, noting 67 percent of sales come from brands Fox, Dickies and Hurley, and the remainder from the company’s private label, Tilt.

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