Press Release:
ANAHEIM, Calif., Aug. 24, 2010 (GLOBE NEWSWIRE) — Pacific Sunwear of California, Inc. (Nasdaq:PSUN – News) (the “Company”) today announced that net sales for the second quarter of fiscal 2010 ended July 31, 2010, were $218 million versus net sales of $243 million for the second quarter of fiscal 2009 ended August 1, 2009. Total Company same-store sales decreased 10% during the period.
For the second quarter of fiscal 2010, the Company reported a net loss of $23 million, or $(0.36) per share, compared to a net loss of $14 million, or $(0.22) per share, for the second quarter of fiscal 2009. Results for the second quarter of fiscal 2010 reflect the continuing impact of a valuation allowance against the Company’s deferred tax assets. On a non-GAAP basis, using a normalized 37% income tax rate, the Company’s net loss for the second quarter was $15 million, or $(0.22) per share.
“Our second quarter results were led by our fourth consecutive quarter of improving comp trends in young mens and a return to positive comps for this critical piece of our business,” said Gary H. Schoenfeld, President and Chief Executive Officer. “Our young men’s customers are responding well to the renewed prominence of great brands at PacSun. As we progress through the second half of the year, we look forward to continuing to achieve positive comps in young mens and the beginnings of trend improvements in juniors as well.”
The Company also announced that it has completed two mortgage transactions regarding its primary real estate assets, its corporate offices in Anaheim, California and its distribution center in Olathe, Kansas. The transactions generated total net cash proceeds of approximately $28.3 million for the Company subsequent to the end of the second quarter of fiscal 2010. A description of these transactions is included in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission today.
Commenting on the transactions, Mr. Schoenfeld said, “Shortly after I joined PacSun, we began looking at options for monetizing these real estate assets. Given the current attractiveness of interest rates, the mortgage transactions we completed proved to be the most efficient and economically beneficial way to do so giving us added flexibility as we plan for the long term growth of our business.”
The Company also reported in a separate press release that it has entered into an exclusive agreement with Mossimo Giannulli and Dirty Bird Productions, Inc. to license the Modern Amusement brand for apparel, footwear and accessories.
Financial Outlook
For the 3rd Quarter
The Company’s guidance range for the third quarter of fiscal 2010 contemplates a GAAP net loss per share of $(0.15) to $(0.25) for the third quarter of fiscal 2010 which will reflect the continuing impact of maintaining a valuation allowance against deferred tax assets and a very low effective tax rate. On a non-GAAP basis, using a normalized income tax rate of approximately 36% to 37%, the Company’s guidance range translates to a net loss of $(0.09) to $(0.16) per share for the third quarter of fiscal 2010. The forecasted third quarter GAAP earnings range is based on the following significant assumptions:
Same-store sales decline of 4% to 9%;
Gross margin rate, including buying, distribution and occupancy costs, of 24% to 26%;
SG&A expenses in the range of $74 million to $76 million;
As the Company no longer records income tax benefits against its operating losses, tax expense is expected to be less than $100,000 due to taxable income projected to be generated in certain state and local tax jurisdictions.
For the Full Year
The Company also updated certain of its targets for the full fiscal year ending January 29, 2011 as follows:
The Company continues to target sequential quarterly improvements in comparable store sales and the prospect of reaching a positive comp in the fourth quarter;
Merchandise margins are forecasted to improve materially over 2009 but may not be sufficient to fully offset deleveraging of occupancy costs;
SG&A is now projected at $305 million to $310 million compared to a previous range of $310 million to $320 million;
Capital expenditures are now projected at the lower end of the Company’s previous guidance range of $20 million to $30 million.
About Pacific Sunwear of California, Inc.
Pacific Sunwear of California, Inc. and its subsidiaries (collectively, the “Company”) is a leading specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle. The Company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults. As of July 31, 2010, the Company operates 880 stores in 50 states and Puerto Rico. PacSun’s website address is www.pacsun.com.
The Company will be hosting a conference call today at 4:30 pm Eastern time to review the results. A telephonic replay of the conference call will be available, beginning approximately two hours following the call, for one week and can be accessed in the United States/Canada at (800) 642-1687 or internationally at (706) 645-9291; pass code: 93436717. For those unable to listen to the live Web broadcast or utilize the call-in replay, an archived version will be available on the Company’s investor relations website through midnight, November 15, 2010.
About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles, please see the accompanying table titled “Reconciliation of Selected GAAP Measures to Non-GAAP Measures” and the section following such table titled “About Non-GAAP Financial Measures.”
