Shares of Pacific Sunwear of California Inc. jumped 16.1 percent in late afternoon trading Friday after it was disclosed that the company has hired advisers to help it determine what to do with its debt load.
The teen retailer reportedly has hired investment bank Guggenheim Securities as financial adviser and FTI Consulting Inc. as its restructuring expert. The company has $160 million in debt that is due to mature later this year. The debt consists of a $100 million revolving loan with Wells Fargo Bank NA and a $60 million term loan backed by private equity firm Golden Gate Capital. Neither executives at Guggenheim nor FTI returned a request for comment. Officials at Pacific Sunwear could not be reached for comment.
Teen retailers have been particularly hard hit since the downturn. Some, such as Aéropostale, still haven’t regained their footing in the teen space. Abercrombie & Fitch Co. Inc. is still in the process of overhauling its core Abercrombie brand, although its younger sibling Hollister seems to be turning the corner. Others, such as The Wet Seal and Quiksilver, have had to file voluntary Chapter 11 petitions to restructure their operations.
Gabriella Santaniello, founder of independent retail research firm A-Line Partners, said, “You can walk into a PacSun and the stores look beautiful. They have in their girls’ assortment Kendall + Kylie and Brandy Melville. On the guys’ side, they bring in niche brands, and I like them from that perspective — it’s a different assortment. The problem in the surf-skate-action sports market is that it’s tough right now because there’s a lack of any trend going on. That trend and what PacSun looks like in their aesthetic is all over the place. It’s bohemian chic. If you want the California lifestyle, you don’t have to go to Pacific Sunwear. You can go to Zumiez. There are just now a lot more players.”
Santaniello said the issues the teen retailer is facing are likely to continue until it can find the next trend in the market.
Peter “PT” Townend, a pro-surfer and actions sports industry veteran who runs consultancy firm ActivEmpire, said, “PacSun has been struggling for some time….I don’t know if the PacSun distribution today is as relevant as it used to be [for brands]. It’s important, but there’s been a change in the marketplace. The cornerstone brands aren’t as strong as they used to be. Surf brands aren’t resonating as much in Middle America.”
Townend said competition from Tilly’s and Zumiez vying for the same mall consumer hasn’t helped. “Now you find in most malls all three of them,” Townend said, noting that merchandise from one can be bought at the other two.
Shares of Pacific Sunwear closed at 22 cents Friday. News of PacSun’s hiring of Guggenheim Securities was first reported by The Wall Street Journal.