Pacific Sunwear Posts Weak Q4; 2006 Down Too…

Pacific Sunwear of California, Inc. put a disappointing end to a frustrating year as it saw comparable sale decreases in both its PacSun and demo concepts fuel a steep decrease in net income for the both the fourth quarter and fiscal year. For the fourth quarter, net sales were $458.2 million, an increase of 7.8% over total sales of $424.9 million for the fourth quarter of fiscal 2005. Same-store sales decreased 4.3% for the fourth quarter after increasing 2.2% last year.

The 53rd week of fiscal 2006 added approximately $20 million to the top line for the company. For the fourth quarter, PacSun sales totaled $339 million with outlet stores posting $46 million in sales; demo adding $70 million; and One Thousand Steps recording $2.5 million. Boys accounted for 58% of sales at PacSun and 59% at demo; and, private label accounted for approximately 35% of sales at PacSun.

Net income for the fourth quarter of fiscal 2006 decreased 80.6% to $9.1 million, or 13 cents per diluted share, from $47.0 million, or 63 cents per diluted share, for the same quarter last year. Fourth quarter results for fiscal 2006 include asset impairment and inventory write-down charges of approximately $16.6 million net of tax, or 24 cents per diluted share, primarily attributable to the company's closing of 74 underperforming demo stores. Before the impact of these charges, net income for the fourth quarter of fiscal 2006 was $25.7 million, or 37 cents per diluted share, down 43.1% compared to non-GAAP income of $45.2 million, or 60 cents per diluted share, for the fourth quarter of fiscal 2005.

For 2007, the company expects low single-digit square footage growth with the opening of approximately 15 to 20 new PacSun stores and three new demo stores. Comparable store sales are expected to be flat to up low-single-digits with diluted earnings per share between 23 cents and 27 cents. At the newly renovated PacSun stores, the company expects sales to grow between 15% and 20%.