Pacific Sunwear of California Inc. scaled back its third-quarter losses more than analysts expected despite lower sales and margins.

This story first appeared in the November 23, 2010 issue of WWD. Subscribe Today.

For the three months ended Oct. 30, the net loss came to $7 million, or 11 cents a diluted share, versus a shortfall of $10.9 million, or 17 cents, in the year-ago quarter.

Stripping out the effect of a tax valuation allowance, the loss came to 7 cents a share, 3 cents better than the 10-cent loss expected by analysts polled by Yahoo Finance.

Sales in the quarter backtracked 3.9 percent to $257.9 million from $268.3 million as comparable-store sales decreased 3 percent. In the quarter, gross margin downtrended to 24.9 percent of sales from 27.4 percent a year ago, while cash and cash equivalents almost tripled to $44 million from $15.6 million.

“Our third-quarter results were led by positive comps in our men’s business and significant improvement in the sales trending of our women’s business,” said Gary Schoenfeld, president and chief executive officer of the Anaheim, Calif.-based 877-unit chain. “We are eagerly anticipating Black Friday and the kickoff of the holiday season and the prospects for further strengthening of both our men’s and women’s businesses.”

On the company conference call, Schoenfeld said denim remained a problem category that was “below plan” in the third quarter and had continued below expectations as the fourth quarter began.

He noted that e-commerce accounts for about 5 percent of sales and that a 10 percent share was “not unrealistic but not necessarily a target.”

Based on expectations of flat comps to a 5 percent decline, the company expects fourth-quarter earnings, exclusive of the valuation allowance effect, to range from a loss of 7 cents to a loss of 18 cents a share versus the current consensus estimate of a 9-cent loss. Gross margin is projected to improve to between 23.6 percent and 26.6 percent.

For the nine months, the net loss expanded to $61.5 million, or 93 cents a diluted share, from $33.8 million, or 52 cents. Sales were down 9.3 percent to $666.5 million from $734.5 million.

Results were released after the close of the market Monday. Earlier, the company’s shares rose 6 cents, or 1 percent, to $6.27.

Elsewhere in the equity markets, the S&P Retail Index bucked the broader market and rose 1 percent, or 4.85 points, to 488.21, the highest close since April when Greece’s debt troubles began to worry investors. Retail gainers included J. Crew Group Inc., up 3.2 percent to $37.65, and Nordstrom Inc., ahead 1.2 percent to $42.69.

Sovereign debt in Europe is making headlines again — this time it’s Ireland, which is lining up a bailout from its European Union partner states — but the global markets appear to be taking the troubles in stride. The Dow Jones Industrial Average dipped 0.2 percent, or 24.97 points, to 11,178.58. The CAC 40 slipped 1.1 percent in Paris as the FTSE 100 fell 0.9 percent in London.

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