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PacSun reports loss in Q2; more cautious in its Q3 outlook
26
Aug '11
Pacific Sunwear of California Inc a leading specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle, announced that net sales for the second quarter of fiscal 2011 ended July 30, 2011, were $214.9 million versus net sales of $218.3 million for the second quarter of fiscal 2010 ended July 31, 2010. Total Company same-store sales increased 1% during the period. The Company ended its second quarter of fiscal 2011 with 821 stores, as compared to 880 for the second fiscal quarter of 2010.

For the second quarter of fiscal 2011, the Company reported a net loss of $19.3 million, or $(0.29) per share, compared to a net loss of $23.5 million, or $(0.36) per share, for the second quarter of fiscal 2010. Results for the second quarter of fiscal 2011 and 2010 reflect the continuing impact of a valuation allowance against the Company's deferred tax assets. On a non-GAAP basis, using a normalized annual income tax rate of approximately 36%, the Company's net loss for the second quarter was $12.2 million, or $(0.18) per share, as compared to a net loss of $14.7 million, or $(0.22) per share, for the same period a year ago.

"We continued to make progress in the second quarter as evidenced by our results, which included our second consecutive quarter of positive comps, better than expected merchandise margins, reduced inventories, and further reductions in operating expenses," said Gary H. Schoenfeld, President and Chief Executive Officer. "Until recently we had expected this positive momentum to continue, yet we are now more cautious in our near term outlook due to a combination of factors including macroeconomic pressure, along with a highly promotional start to the back to school season."

Financial Outlook for Third Fiscal Quarter of 2011

The Company's guidance range for the third quarter of fiscal 2011 contemplates a GAAP net loss per share of $(0.16) to $(0.29), which reflects the continuing impact of maintaining a valuation allowance against deferred tax assets and a low effective tax rate. On a non-GAAP basis, using a normalized annual income tax rate of approximately 36%, the Company's guidance range translates to a net loss of $(0.10) to $(0.18) per share for the third quarter of fiscal 2011. The forecasted third quarter GAAP guidance range is based on the following assumptions:

• Same-store sales of mid to high negative single digit comps;
• Gross margin rate, including buying, distribution and occupancy, of 22% to 24%;
• SG&A expenses in the range of $66 million to $68 million; and
• Minimal income tax expense as the Company no longer records income tax benefits against its operating losses.

Pacific Sunwear of California Inc and its subsidiaries is a leading specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle. The Company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults.

Pacific Sunwear of California Inc

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