Pacific Sunwear of California, Inc. reported total sales for the second quarter of $313.7 million, an increase of 1.5% from $309.1 million last year. Second quarter net earnings were 14 cents per diluted share, including 2 cents related to stock compensation and pre-opening rent expenses. On a comparable non-GAAP basis, earnings per diluted share were 24 cents in the second quarter of 2005. Net income for the second quarter of fiscal 2006 was $9.7 million compared to a non-GAAP $18.5 million for the second quarter of fiscal 2005. Same-store sales decreased 5.5% for the comparable second quarter period.
“I am obviously very disappointed with our second quarter results, commented Seth Johnson, chief executive officer. “Although it is still too early to make a judgment regarding the strength of our back to school assortment, we must be cautious in our planning and expectations for the third quarter.
Total sales for the first half (twenty-six weeks) of fiscal 2006 were $613.6 million, an increase of 4.2 percent over total sales of $589.0 million for the first half of fiscal 2005. Net income for the first half of fiscal 2006 decreased 36 percent to $21.6 million, compared to a non-GAAP $33.8 million for the first half of fiscal 2005. Earnings per diluted share decreased 32 percent to $0.30 compared to a non-GAAP $0.44 per diluted share for the first half of fiscal 2005. Same-store sales decreased 3.7 percent for the comparable twenty-six week period ended July 29, 2006.
A reconciliation of second quarter and year-to-date fiscal 2005 reported GAAP earnings to the non-GAAP measures contained in this press release is set forth below.
Reconciliation of Fiscal 2005 Q2 Earnings to Non-GAAP Disclosure
----------------------------------------------------------------
GAAP EPS as originally reported for Q2 2005 $0.28
Less impact of stock compensation and
pre-opening rent expenses (0.04)
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Adjusted non-GAAP EPS for Q2 2005 $0.24
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GAAP net income as reported for Q2 2005, in $000's $21,112
Less stock compensation expenses, tax-effected (2,170)
Less pre-opening rent, tax-effected (418)
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Adjusted non-GAAP net income for Q2 2005 $18,524
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Reconciliation of Fiscal 2005 Year-to-Date Earnings
to Non-GAAP Disclosure
---------------------------------------------------
GAAP EPS as originally reported for Q2 2005 $0.51
Less impact of stock compensation and
pre-opening rent expenses (0.07)
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Adjusted non-GAAP EPS for Q2 2005 $0.44
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GAAP net income as reported for Q2 2005, in $000's $38,719
Less stock compensation expenses, tax-effected (3,991)
Less pre-opening rent, tax-effected (951)
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Adjusted non-GAAP net income for Q2 2005 $33,777
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Stock Repurchase Program
During the second quarter of fiscal 2006, the Company repurchased a total of 3.2 million shares of its common stock at an average price of $19.02. These repurchases occurred under the $100.0 million share repurchase authorization approved by the Company’s board of directors on May 18, 2006. At the end of the second quarter, $50.5 million remained available for future repurchases
Financial Outlook
At this point, the Company believes it is too early in the back to school selling period to accurately predict third quarter volume. However, assuming a continuation of the negative mid-single digit second quarter comp trend, the Company is comfortable with third quarter earnings estimates in the range of $0.22 to $0.30 per diluted share. At this time, the Company is not providing fourth quarter or full year earnings guidance.
PACIFIC SUNWEAR OF CALIFORNIA, INC.
SUMMARY STATEMENTS OF INCOME
(unaudited, in thousands except share and per share data)
Second Quarter Ended First Half Ended
----------------------- -----------------------
JUL. 29, JUL. 30, JUL. 29, JUL. 30,
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net sales $ 313,682 $ 309,064 $ 613,570 $ 589,049
Gross margin 97,425 110,357 194,708 207,707
Selling,
G&A expenses 82,855 77,592 162,794 147,714
---------- ---------- ---------- ----------
Operating income 14,570 32,765 31,914 59,993
Interest income,
net 1,090 1,180 2,885 2,265
---------- ---------- ---------- ----------
Income before
taxes 15,660 33,945 34,799 62,258
Income tax
expense 5,950 12,833 13,223 23,539
---------- ---------- ---------- ----------
Net income $ 9,710 $ 21,112 $ 21,576 $ 38,719
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Net income per
share, basic $ 0.14 $ 0.28 $ 0.30 $ 0.51
========== ========== ========== ==========
Net income per
share, diluted $ 0.14 $ 0.28 $ 0.30 $ 0.51
========== ========== ========== ==========
Wtd avg shares
outstanding,
basic 71,335,467 75,125,782 72,239,872 75,209,185
========== ========== ========== ==========
Wtd avg shares
outstanding,
diluted 71,866,482 76,118,501 72,783,954 76,338,599
========== ========== ========== ==========
