News Flash

Young men's customers respond well to PacSun brands

31 Aug '10

4 min read

Pacific Sunwear of California, Inc. announced that net sales for the second quarter of fiscal 2010 ended July 31, 2010, were $218 million versus net sales of $243 million for the second quarter of fiscal 2009 ended August 1, 2009. Total Company same-store sales decreased 10% during the period.

For the second quarter of fiscal 2010, the Company reported a net loss of $23 million, or $(0.36) per share, compared to a net loss of $14 million, or $(0.22) per share, for the second quarter of fiscal 2009. Results for the second quarter of fiscal 2010 reflect the continuing impact of a valuation allowance against the Company's deferred tax assets. On a non-GAAP basis, using a normalized 37% income tax rate, the Company's net loss for the second quarter was $15 million, or $(0.22) per share.

"Our second quarter results were led by our fourth consecutive quarter of improving comp trends in young mens and a return to positive comps for this critical piece of our business," said Gary H. Schoenfeld, President and Chief Executive Officer. "Our young men's customers are responding well to the renewed prominence of great brands at PacSun. As we progress through the second half of the year, we look forward to continuing to achieve positive comps in young mens and the beginnings of trend improvements in juniors as well."

The Company also announced that it has completed two mortgage transactions regarding its primary real estate assets, its corporate offices in Anaheim, California and its distribution center in Olathe, Kansas. The transactions generated total net cash proceeds of approximately $28.3 million for the Company subsequent to the end of the second quarter of fiscal 2010. A description of these transactions is included in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission.

Commenting on the transactions, Mr. Schoenfeld said, "Shortly after I joined PacSun, we began looking at options for monetizing these real estate assets. Given the current attractiveness of interest rates, the mortgage transactions we completed proved to be the most efficient and economically beneficial way to do so giving us added flexibility as we plan for the long term growth of our business."

The Company also reported in a separate press release that it has entered into an exclusive agreement with Mossimo Giannulli and Dirty Bird Productions, Inc. to license the Modern Amusement brand for apparel, footwear and accessories.

Financial Outlook

For the 3rd Quarter
The Company's guidance range for the third quarter of fiscal 2010 contemplates a GAAP net loss per share of $(0.15) to $(0.25) for the third quarter of fiscal 2010 which will reflect the continuing impact of maintaining a valuation allowance against deferred tax assets and a very low effective tax rate. On a non-GAAP basis, using a normalized income tax rate of approximately 36% to 37%, the Company's guidance range translates to a net loss of $(0.09) to $(0.16) per share for the third quarter of fiscal 2010. The forecasted third quarter GAAP earnings range is based on the following significant assumptions:

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