Sluggish sales, closures hurt PacSun earnings

From the Associated Press

Pacific Sunwear of California Inc. on Tuesday lowered its fourth-quarter earnings forecast to account for anemic January sales and its planned closure of 74 unprofitable urban-themed d.e.m.o. stores.

The mall-based retailer of teen clothing now expects earnings of 36 cents to 38 cents a share in the fourth quarter -- excluding 22 cents to 24 cents in estimated charges related to the d.e.m.o. store closures. Pacific Sunwear’s d.e.m.o. brand focuses on hip-hop-inspired urban fashion, but the chain has struggled to find an audience.

The Anaheim-based company had previously forecast earnings of 45 cents to 50 cents a share in its third-quarter report. Analysts expect earnings of 46 cents a share, according to a poll by Thomson Financial.

The weaker outlook follows a dismal January during which Pacific Sunwear’s same-store sales -- a key measure of a retailer’s performance -- slid 7.7%. Same-store sales refer to sales at stores open at least one year.


Pacific Sunwear’s decision to shutter a third of its money-losing d.e.m.o. stores also factored into the reduced guidance. The company said it expected to book $25 million to $27 million in charges in the fourth quarter on asset impairment and inventory write-downs.

“Exiting the stores now will allow us to focus our efforts on our better-performing locations, which we believe will improve our future financial results,” Chief Executive Sally Frame Kasaks said.

Lease termination expenses, severance payments and agency fee costs will result in an extra $10 million to $15 million in charges, to be booked in fiscal 2007.

For 2006, Pacific Sunwear forecast profit in a range of 78 cents to 80 cents a share, compared with analysts’ consensus forecast of 88 cents a share.

Pacific Sunwear shares fell 2.6% to $19.15 in after-hours trading after earlier closing unchanged at $19.67.