Teen retailer Pacific Sunwear of California Inc., hoping for a financial turnaround after a three-year slump, said it plans to close as many as 200 of its weaker-performing stores around the country.
The Anaheim-based company known for its surf- and skate-inspired apparel also said it had secured $160 million in financing for its overhaul, even as it reported its 13th straight quarterly loss, of $17.6 million. That compares with a $6.96-million loss in the same period a year earlier.
The new financing, along with the store closings, “greatly enhances our financial and operating position, and is a critical step forward as we work to reestablish PacSun as a leading specialty retailer across the U.S.,” Chief Executive Gary Schoenfeld said in a statement Wednesday.
The news sent PacSun shares as high as $1.99 in after-hours trading, a 47% gain over its closing price of $1.35. The stock could use the bounce; PacSun shares have lost 75% of their value since Jan. 1.
In an interview, Schoenfeld would not say which stores would close or the number of jobs that would be lost. “They are spread across the country,” Schoenfeld said. “But in general our business in California continues to strengthen.”
The company said its new financing came from two principal sources. It said it obtained a $100-million revolving line of credit from Wells Fargo Capital Finance and a $60-million secured loan from San Francisco-based Golden Gate Capital, a private equity firm with substantial retail and restaurant holdings.
Golden Gate was given two seats on the PacSun board.
Analysts say that the last few years has been a troubled time for the retailer, which has suffered from a lackluster product mix and lost ground to more trendy competitors.
“They lost their way a bit on merchandising, and as a result have lost relevancy with their core customer,” said Pamela Quintiliano, a specialty retail analyst at Oppenheimer & Co. “They are struggling to regain credibility.”
Quintiliano said that PacSun’s mix of private-label and third-party surf brands — such as Roxy and Billabong — hasn’t attracted trend-hungry youngsters who are eager for up-and-coming designers. As a result, many have flocked to rivals such as action-sports chain Zumiez Inc., which has been more conscious of offering exclusive merchandise.
PacSun’s “private-label brand wasn’t cheap enough to attract customers nor was it differentiated enough,” Quintiliano said. “They are also not the only stores in the mall to have Roxy or Volcom; other stores carry them too.”
That’s something PacSun has been eager to change. The company has shaken up its women’s merchandising and design team as part of an effort to produce more trendy apparel to better appeal to female shoppers, Schoenfeld said. The company is also trying to target an older teen and early-20s customer base to better align itself with its more successful menswear.
“The women’s business has been where there has been some significant declines,” Schoenfeld said. “Historically PacSun was a pretty basic tees and shorts and fleece business on the girls side, and she’s definitely looking for on-trend and fashionable merchandise.”
In recent years, the company expanded to nearly 1,000 stores, and ended up stretching past the point of profitability, industry experts say.
“There simply aren’t that many good malls across America today, and these reductions put us in a much better position to focus on stores doing over a million dollars in revenue,” Schoenfeld said.
The stores targeted for closure had average sales of $600,000 in the last year, compared with stronger stores that had about $1.1 million in sales, the company said.