Sporty Retailer Kicks Off Edgy Campaign
Feeding on youth’s ongoing fascination with extreme sports, Pacific Sunwear of California Inc. is aggressively expanding nationwide, opening larger stores and pushing into territory as far afield as Puerto Rico.
The Anaheim-based retailer of casual clothes for teens and young adults will open 125 stores this year, matching last year’s expansion and bringing its total number of stores to 575 by the end of 2000. By the end of 2003, it expects to be operating about 1,000 stores.
The company, which caters to youth who surf, skate and snowboard--also will launch its first television ads on Friday. The launch is tied to the ESPN 2000 Winter X Games, which begin Thursday and cater to the same audience. About 1,000 television spots will run this year, mainly on sports, comedy and music stations.
“Pacific Sunwear really is about casual apparel for young teens, and I think the images of the California lifestyle bode very well throughout the United States,” Chief Executive Greg Weaver said Tuesday.
The company sells popular surf wear made by a variety of local companies, including Huntington Beach-based Quiksilver Inc. and Irvine-based Billabong USA, and skate shoes made by the Lake Forest-based Sole Technology Inc.
In expanding from its Southern California base into 47 states--including its first store this year in frigid North Dakota--the mall-based retailer has capitalized on favorable demographics and fashion trends.
Over the last five years, the nation’s population of 15- to 19-year-olds--a core group of the company’s customers--has been growing at more than double the rate of the overall population. As the popularity of surfing and skateboard fashions has grown in recent years, Pacific Sunwear has also expanded its product line, adding more apparel for girls and young women, and also accessories, shoes and outerwear.
The stores sell casual sportswear to youth from 12 through 22, with 15 as the median target age. Young men account for 57% of sales, Weaver said.
The strategy of connecting with young buyers is paying off: Sales have jumped from $227 million in 1997 to more $415 million for the first 11 months of the fiscal year that just ended. Earnings, which were 53 cents a share in 1997, are estimated at $1.06 for the year just ended, according to Zacks Investment Research. Analysts see $1.34 a share this year.
The stock has soared from less than $10 a year ago to a recent peak of $36.75 on Nasdaq. It closed Tuesday at $30.56, up $1.19.
Now polishing its national image, the company is co-sponsoring the daredevil Winter X Games. Pacific Sunwear also said in December that it was shortening the name on its store signs to the catchier PacSun, which is what many of the company’s customers have been calling its stores. Now all ads, posters and television spots will feature the initials “P.S.” enclosed in a circle.
The 30-second television spots, and also a series of new magazine ads, will feature a “gritty visual style,” tattooed and pierced teens and edgy wording, such as “Never play it safe,” to promote the retailer’s “cool” image, according to a statement by advertising agency Bates USA West in Irvine.
The new commercials show a fast-paced video montage of youth interspersed with shots of surfers and skateboarders in action. Some of the print ads will use offbeat teen models, and others will focus on sports themes, including surfing and snowboarding.
“There are other retailers that carry many of the same labels as PacSun,” Jeremy Skiver, director of marketing for Bates USA West, said in a statement. “Our strategy is to make teens feel that PacSun is cooler because it is ‘core,’ meaning authentic, the real thing.”
But the ads are “not really about pushing the envelope” and should not offend mainstream teens, Weaver said. “I think we are not so overly conservative or so far along edgy that we alienate any segment of the mainstream population of teens.”
The company operates 450 Pacific Sunwear and d.e.m.o. stores nationwide. The d.e.m.o. stores, launched in 1998, target ethnic, urban customers. Both concepts have done well.
The company’s decision to nearly double its ad budget to about $9.5 million could be wisely timed, because competitor Abercrombie & Fitch may launch a new retail concept this year that could vie with Pacific Sunwear, said Joseph Teklits, an analyst with Ferris, Baker Watts.
“They might be going after some of Pac Sun’s business, so anything that strengthens the brand helps them at this point,” Teklits said. “Whether it’s coincidence or not, it’s probably very good timing.”
