PacSun earnings fall on excessive inventory

Pacific Sunwear of California Inc. posted a sharp drop in quarterly profit Thursday because of excessive inventory from lackluster sales.

Net income in the third quarter was $9 million, or 13 cents a share, compared with $40.5 million, or 54 cents, a year earlier. As previously reported, sales at Pacific Sunwear fell less than 1% to $375.4 million.

Excluding an inventory charge related to footwear and accessories and a charge related to the recent departure of Chief Executive Seth Johnson, the company earned 24 cents a share.

On that basis, analysts on average had expected the largest mall-based retailer of surf-inspired apparel for young men and women to post earnings of 25 cents a share, according to Reuters Estimates.

The Anaheim-based company had said earnings per share would be 22 cents to 30 cents.

The company has struggled with disappointing sales this year because of merchandising missteps such as too many cold-weather styles during the warm back-to-school season. At the same time, growth has slowed as its main PacSun stores reach saturation in the United States.

CEO Johnson resigned last month and Sally Frame Kasaks was named interim CEO. Wall Street is hoping that a new CEO can help turn around the struggling business.

Looking to the fourth quarter, Pacific Sunwear said it expected earnings of 45 cents to 50 cents a share, compared with an average Wall Street view of 47 cents, according to Reuters Estimates.

After the earnings report, Pacific Sunwear shares rose $1.27 to $18.54 in after-hours trading. They had closed down 24 cents at $17.27 in regular trading.