Pacific Sunwear Sees a Rare Dip as Tastes Change
Pacific Sunwear of California Inc., noting that young male customers are losing interest in baggy pants, on Monday reported a rare dip in sales at stores that have been open more than a year.
The Anaheim retailer of casual apparel said so-called same-store sales, a key indicator in the industry, dipped 1.6% in the four-week period ended Sunday since the same period in 1997. It was the first such decline in three years, the company said.
The company said sales of young men’s clothing, particularly wide-leg pants, have declined.
“We expect our young men’s apparel business, which represents approximately 60% of total sales, may continue to be adversely affected for several more months,” Chief Executive Greg Weaver said in a prepared statement.
He also noted that pants in Pacific Sunwear’s spring line will have a “cleaner” look with narrower legs.
Analyst Joseph Grillo said the company is faced with replacing sales of wide-leg denim pants that generated strong sales a year ago.
“At this time last year, it was a very hot product category, a must-have, if you will,” said Grillo, with BT Alex. Brown Inc.
The company’s overall sales, which include sales from new stores, rose 25% to $24.2 million during the four weeks.
On Monday, with its stock hitting a 52-week low, Pacific Sunwear said its board has authorized the company to buy back up to 1 million shares of stock.
Pacific Sunwear’s stock closed Monday at $14.81, down $1.63 after dropping to a 52-week low of $14.56 during the trading session. The volume was heavy with 2.6 million shares changing hands, almost three times the daily average over the past three months.
“The stock repurchase program reflects the board of directors’ opinion that the current share price of [Pacific Sunwear] is undervalued,” Weaver said.
Last Tuesday, the company’s stock tumbled 32% after Grillo downgraded his rating to “market perform” from “buy.”
Although the company has reduced its inventory of wide-leg pants in response to the changing whims of young shoppers and is bringing in other styles, the investment firm prefers to “sit on the sidelines and wait for sales trends to improve,” Grillo said.
Still, the analyst said he has confidence in the company.
“We think they’re great merchants,” he said, “and they will make the transition.”
Indeed, Pacific Sunwear said it will push ahead with its expansion plans, which call for opening 108 stores next year. The company operates 344 stores in 43 states.
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Sun Down
Pacific Sunwear of California’s stock, declining since mid-year, hit a 52-week low Monday before creeping back a bit to close at $14.81. The company’s board has authorized Pacific to buy back up to 1 million shares. Weekly closing prices and Monday’s final:
Monday’s close: $14.81
Source: Bloomberg News
