Pacific Sunwear of California Inc. narrowed its loss in the first quarter on declining sales, but management said the specialty retailer had stronger merchandise margins and expects to post positive same-store sales later this year.
The net loss came in at $3.5 million, or 5 cents a share, which compares to a loss of $10.4 million, or 15 cents a share, in the same period last year on sales that fell 2.7 percent to $166.5 million from $171.1 million. Same-store sales fell 2 percent during the quarter. Results include a non-cash gain of $9.1 million, or 13 cents per share, which reflects a “derivative liability” relating to convertible shares that were issued from a term loan facility that was completed in 2011.
Gary H. Schoenfeld, president and chief executive officer, said in a statement that continued “increases in merchandise margins offset our first quarterly negative sales comp in more than three years. Some key categories including shorts and non-apparel have underperformed, which is also reflected in our near-term outlook for the second quarter. Yet as we look ahead to the back half of this year, we believe the strength of several key brand initiatives, coupled with anticipated growth in long bottoms will get us back to positive comp store sales along with further increases in margins.”
Total gross margins gained 71 basis points in the first quarter, rising to 26.81 percent. By way of outlook for the second quarter, the company expects gross margins to be between 27 and 29 percent, and same-store sales between a decline of 4 percent and flat with net sales between $201 million and $209 million.