Pacific Sunwear of California Inc. hitched its merchandising fortunes to Mossimo Giannulli’s Modern Amusement brand on Tuesday as it reported its eighth consecutive quarter of net losses and forecast a ninth losing quarter.

This story first appeared in the August 25, 2010 issue of WWD. Subscribe Today.

PacSun will hold exclusive rights as licensee to Modern Amusement for apparel, accessories and footwear through 2013, with an option to renew through 2020. The Anaheim, Calif.-based specialty store will work in tandem with Modern Amusement’s parent company, Dirty Bird Productions Inc., to develop additional licensing and distribution opportunities, the parties said, and will share in royalties generated by the association. They also will share approval rights for such arrangements.

On a conference call, Gary Schoenfeld, president and chief executive officer of PacSun, described the partnership as another step in the company’s effort to differentiate itself through a mix of “heritage, proprietary and emerging” brands. “Customers want alternatives in malls that have become dominated by vertical retailers,” he told analysts.

Giannulli, the founder and designer of the Mossimo brand, now owned by Iconix Brand Group Inc., acquired Modern Amusement in 2004. His placement of the Mossimo brand in Target stores, a deal penned in 2000, was one of the first instances of a designer forming an association with a mass market retailer.

For the second quarter ended July 31, PacSun’s net loss grew to $23.5 million, or 36 cents a diluted share, from $14.2 million, or 22 cents, in the year-ago period. Eliminating the effect of a valuation allowance against deferred tax assets, the loss in the most recent quarter came to 22 cents, 1 cent better than the consensus estimate carried by Yahoo Finance.

Sales in the quarter receded 10.1 percent to $218.3 million from $242.8 million on a 10 percent decline in comparable-store sales. Comps in young men’s rose in the low-single digits, Schoenfeld said, but juniors fell in the low 20s.

In the first half of the year, the company’s net loss more than doubled to $54.5 million, or 83 cents a diluted share, from $22.9 million, or 35 cents. Sales contracted 8.4 percent to $408.6 million from $446.3 million.

In the current third quarter, PacSun expects a loss of between 15 cents and 25 cents a diluted share, including valuation allowance effect, on a same-store sales decline of between 4 and 9 percent.

Results were disclosed after the close of the equity markets. PacSun shares finished the day down 1.7 percent to $4.05.

The S&P Retail Index took its lead from the housing market Tuesday and fell 1.3 percent, or 5.29 points, to 399.72 — the first close below 400 since Aug. 13.

The Dow Jones Industrial Average gave up 1.3 percent, or 133.96 points, to close at 10,040.45. Retail decliners included The Bon-Ton Stores Inc., down 8.8 percent to $6.83; Saks Inc., 5 percent to $7.20; American Apparel Inc., 4.1 percent to 71 cents, and American Eagle Outfitters Inc., 3.8 percent to $12.49.

With a tax credit having expired, existing-home sales dropped 27.2 percent from June, according to seasonally adjusted figures from the National Association of Realtors. The decline, to an annual rate of 3.83 million units, was far worse than the 11.6 percent dip economists were expecting.

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