By  on May 19, 2005

ANAHEIM, Calif. — Pacific Sunwear of California Inc., seeking to grow merchandise selections, said Wednesday that it plans to roll out a new store format that expands to 7,000 to 9,000 square feet the company's average 3,600-square-foot unit.

The design is scheduled to make its debut in July at the Tyler Mall in Riverside, Calif., home to one of the most profitable PacSun locations. The teen retailer based here said it wants to grow to 900 nonoutlet stores from the current 754. Overall store square footage increased 15 percent last year.

"We want to see how big is big, because we haven't had the opportunity to expand our product assortment," executive chairman Greg Weaver said during the annual shareholders' meeting here.

Weaver, who stepped down as chief executive officer in April and passed the reins to Seth Johnson, said the larger-style format would be conducive to testing new products, which the company has been largely unable to do. He didn't provide specifics about the design or the products.

If the expanded design succeeds, it "is adaptable to other PacSun locations," Johnson said.

Other initiatives include growing the girls' and denim businesses, both of which were "underdeveloped compared to the competition," Johnson said. The company was still mum about details of its new retail concept, saying only that it would likely make its debut toward the end of summer. Competitors such as Gap Inc., with its Forth & Towne stores, also are launching new concepts.

The girls' business accounts for 44 percent of sales; the guys', 56 percent. Johnson said a key to expanding the girls' business is offering a more feminine product assortment to a customer he acknowledged is no longer the tomboy who used to make up PacSun's core girls' demographic.

Two-thirds of the PacSun division's business is in surf- and skatewear and one-third is in private label, he said.

In addition to providing new product for the customer, Johnson said improving the visual presentation is essential. "To sell the more feminine products, you need to show the outfit and show the kid how to wear it," he said.The challenge of readjusting merchandise was evident in April as the company posted a 6.4 percent decline in same-store sales. It reported a 3.5 percent increase in total sales compared with the same period last year.

The company posted an overall 7.5 percent comp-store increase for 2004 and sales of $1.2 billion, up from $1 billion in 2003.

Johnson said he was not concerned about the April dip. "We've had great success with things like tube tops, tanks and halters. And denim is a big growth initiative for us. It's comping strong and we expect it to be much bigger for back-to-school."

PacSun is working to improve the denim assortment through the addition of new washes and fits, he said.

Accessories also has been a big growth category and accounts for 20 percent of sales of the PacSun division, Johnson said. It still, however, remains an underserved category in the company's hip-hop-inspired D.e.m.o. business, which reported a 5.7 percent comp increase for the year, despite having to change gears to respond to the trend toward what the company called a "more cleaned-up, dressy look."

PacSun shares closed at $21.49 on the Nasdaq, down from $21.60.

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