Pacific Sunwear Issues Profit Warning

Pacific Sunwear of California Inc., a retailer of casual clothing for teens and young adults, warned that its third-quarter profit may miss estimates because of sluggish sales in August.

The Anaheim company issued a similar warning for the second quarter, then managed to meet analysts’ estimates for the three months after logging strong sales in July.

In August, however, sales at stores open at least a year fell 2.5%, the company said, prompting the latest warning.

The company also announced that Gary Hunt, who oversaw design of the company’s private brand merchandise since October 1993, resigned as vice president of product development.

Pacific Sunwear’s stock fell 10.5%, or $1.56 a share, to $13.31 in Nasdaq trading. The shares have fallen about 58% so far this year.

If sales don’t improve, Pacific Sunwear expects to earn less than 46 cents a share in the quarter ending in October, the average estimate of analysts polled by First Call/Thomson Financial. It earned $12.3 million, or 38 cents, a year earlier.

Pacific Sunwear’s sales of its young men’s and juniors’ pants, including wide-leg jeans and cargo pants, were lower than expected in August, analysts said.

Rivals American Eagle Outfitters Inc. and Hot Topic Inc. said Thursday that their same-store sales rose last month.

“This is a company-specific challenge,” said Kimberly Greenberger of Credit Suisse First Boston, who downgraded Pacific Sunwear’s stock to “hold” from “buy” and lowered her fiscal third-quarter and fourth-quarter earnings estimates. “People who are carrying the right products are getting the business.”

American Eagle’s same-store sales rose 9.1%, while Hot Topic’s climbed 18%.

The company’s profit margins were hurt by markdowns intended to clear out slow-selling clothes, Chief Financial Officer Carl Womack said in a recorded statement. Pacific Sunwear is moving further away from wide-leg jeans, he said.

Total sales in the four weeks ended Aug. 27 were less than expected, rising 27% to $71.8 million, the company said. Same-store sales fell 2.8% at PacSun stores while rising 4.9% at the company’s d.e.m.o chain.

Pacific Sunwear operates 553 stores, including 449 PacSun stores, 40 PacSun outlet stores and 64 d.e.m.o stores.