With Sales Up, Pacific Sunwear to Add 50 Stores

Pacific Sunwear of California Inc., riding high on its success with fashion-conscious teens, announced plans Friday to step up its expansion.

The retailer of young men’s casual clothes said it will open 50 new stores this year and an additional 60 in 1998. That would bring its total number of stores to about 320 by the end of next year. Last year, Pacific Sunwear said it planned to open 40 new stores in 1997.

“Our company had a very strong 1996, and that success has spilled over into 1997,” said Greg Weaver, Pacific Sunwear’s president and chief executive. “All we’ve done is marginally increase that which makes sense to us.”

The company’s aggressive growth plan also includes boosting the size of 10 to 15 existing stores by half--to 3,000 square feet--in 1998. The extra space will accommodate Pacific Sunwear’s ongoing expansion into casual clothes for teenage girls and shoes.

Weaver said the decision to add girl’s apparel was an obvious step, since teenage girls have always frequented Pacific Sunwear shops in search of T-shirts and other items.

Analysts praised the moves, saying the company has found a winning formula in the teen market, and has been quick to fill the void left by chains that closed or consolidated in the past few years.

“A lot of people went out of the young men’s business and the junior’s business. Merry Go Round and Edison’s closed,” said Laurence C. Leeds Jr., managing director at Buckingham Research Group in New York.

Pacific Sunwear has “done a very good job of picking things for young men. They’re very well-run, and they have their pulse on the market,” he said.

Analyst Daniel R. Wewer Jr. at Robinson-Humphrey Co. Inc. in Atlanta said the company’s new merchandise has been very well-received, resulting in strong same-store growth and higher profit margins.

In its fiscal year ended Feb. 2, Pacific Sunwear’s net income surged to $7.4 million from $2.6 million in the previous year. Its sales rose 38%, to $155.3 million from $112.9 million.

Wewer projects the retailer’s earnings will climb an additional 43% this year.

The company is also benefiting from generous incentives being offered by mall owners trying to fill space, which have held down the costs of its expansion, Wewer said.

Perhaps most significant, analysts say, is that Pacific Sunwear has targeted a big growth market. Unlike their Generation X predecessors who favored the grunge look--to the distress of many retailers--teenagers today are spending freely on fashion wear. What’s more, Wewer said, these teens tend to eschew department stores in favor of shops that cater specifically to them.

Pacific Sunwear’s Weaver said the company’s expansion has no particular geographic focus. Pacific Sunwear is in 33 states, and by the end of the year it hopes to be in six more.

“For the most part, this is a fill-in of existing markets,” he said.

The key to the company’s continued good fortune, Weaver said, will be distinguishing itself from other chains. The stores won’t sell dresses or skirts, or the “club look” for boys, but will remain focused on shorts, pants, tank tops and other informal separates, he said.