Byline: Kristi Ellis

ANAHEIM, Calif. — Vigorous earnings growth has Pacific Sunwear of California fixing its gaze on the possibility of 700 stores by the end of next year and 1,000 by the end of 2003.
Greg Weaver, chairman and chief executive, told the annual shareholders meeting here Wednesday that the company will open 125 stores this year and end the year with a total of 580 — 453 PacSun units, 80 d.e.m.o. stores and 47 outlets. He noted that, based on its ability to grow profitably, the company could easily have over 700 stores in operation at the end of next year and 1,000 by the end of 2003.
“The growth opportunities for the company are significant,” said Weaver. “We feel comfortable with PacSun being 700 or more stores, our outlet stores being more than 75 and the d.e.m.o. division, which is two years old, more than 200 stores.”
Weaver noted that earnings growth has averaged 50 percent a year. “We have had some of the most consistent earnings growth in specialty retailing in the past five years.”
For the first quarter ended April 30, Pacific Sunwear reported a 38.2 percent increase in sales to $112.6 million and a 43.6 percent increase in net income to $5.8 million, as previously reported. Year-end net earnings in 1999 soared 50.2 percent to $35.3 million on a 36 percent sales increase to $436.8 million.
“The mission of the company is to become the dominant national specialty retailer of casual teenage apparel, footwear and accessories for multiple retail formats,” said Weaver. “Today, our stores are more diversified than they have ever been in the past.”
The company developed a more diversified strategy to cater to the 30 million teens in the U.S., who have an annual spending power of $150 billion, Weaver said, and it has been rewarded with customer loyalty. PacSun customers visit the stores at least twice a month, he reported.
In 1999, sales per square foot were $398, “which is a strong number in light of the fact that we expanded our square footage by over 40 percent last year,” said Weaver.
The company will add another 477,000 square feet of retail space this year, he added, building from a base at the start of the year of 1.25 million.
Pacific Sunwear’s newest store concept, d.e.m.o., launched in April 1998, is geared to a slightly older customer. Weaver noted it logged sales of nearly $400 per square foot in the first year in an average space of 2,000 square feet. “We have very limited competition with this concept on a specialty store basis,” Weaver said.
D.e.m.o targets 16 to 24 year-olds and offers cross-cultural merchandise that is influenced by music and professional sports personalties, unlike PacSun, which is influenced by surf and skate.
In 1999, comp sales in the d.e.m.o. division were up 13 percent, and in the first quarter they were up 16.5 percent.
“They in no way cannibalize the PacSun business,” Weaver asserted.
He also noted that there are plans for more free-standing, non-mall stores along the lines of the 6,000 square-foot Boston store in Harvard Square.
Among categories, the fastest growing has been juniors. “It is truly our number one growth vehicle for the future.”
He noted that the junior category accounted for 25 percent of the company’s overall sales in 1999, adding that he expects it to reach 30 percent of sales this year.
In larger stores, young men’s will account for about 46 percent of sales; juniors, 29 percent; accessories, 16 percent; and shoes, 9 percent.
The young men’s category, which currently represents 50 percent of Pacific Sunwear’s overall sales, is banking on a strong pants offering for back to school this year, according to Weaver.
“We have had explosive pant growth here at PacSun. As a category, it was only $11 million in 1995 and we expect it to exceed $110 million this year.”