PacSun moves to cut costs
Teen specialty retailer Pacific Sunwear of California Inc. on Wednesday became the latest company to announce sweeping cost-cutting plans to cope with the worsening economy.
The retailer, which sells mainly surf and skate apparel and accessories, said it would eliminate 47 positions at its Anaheim headquarters and 10 field management positions, which would reduce its headquarters and field management staff by about 11%.
“It’s very difficult,” said Betty Chen, a specialty retail analyst with Wedbush Morgan Securities. “No one wants to see layoffs right now, but I think management made the right decision in thinking about what ’09 could bring to them. . . . Across the board, we always welcome companies that are getting leaner and meaner and are bracing themselves.”
Pacific Sunwear also said it would reduce planned inventory levels by at least 20% throughout the year.
Shares of Pacific Sunwear rose 15%, or 16 cents, to $1.22.
Chief Executive Sally Frame Kasaks said the cost-cutting moves were “aimed at putting our company in a stronger position to weather the continuing challenges in the macroeconomic environment.”
“We are very disappointed to announce the workforce reductions,” she said, “but believe we must be prudent in managing our costs and strengthening our balance sheet and liquidity as we meet head-on the unprecedented conditions that the retail industry is currently facing.”
Pacific Sunwear operated 811 PacSun stores and 126 PacSun outlet locations in 50 states and Puerto Rico as of Jan. 3, the company said. Many of its locations are in malls.
Retailers across all sectors faced big cutbacks in consumer spending in recent months, resulting in the worst holiday season in 40 years. Pacific Sunwear reported a steep, 10% decrease in same-store sales for the crucial December period.
With a 9.6% year-over-year drop in sales, the teen apparel sector posted the worst December figures, according to Thomson Reuters, which tracked 35 major retailers.
Still, a handful of youth-oriented chains, including Hot Topic, Urban Outfitters and Guess, have held up relatively well, said Christine Chen, a retail analyst with Needham & Co.
“There are some bright spots,” Chen said. “Pacific Sunwear is not one of them at this point.”
--
