Pacific Sunwear Sees Margin Pressure in April…

Pacific Sunwear of California, Inc. 2007 had a small ray of sunshine fall on its first quarter results as the company’s PacSun concept posted a slight quarter comp sales results. This increase, however, was more than offset by large comp decreases at demo that lead to a decrease in comps for the company as a whole. On a conference call with analysts, then interim CEO Sally Frame Kasaks noted that “combined March/April PacSun comparable store sales [increased] 2.1% versus the 1.5% decrease…experienced last year.”

The gain at PacSun was not all good news, though, as “earnings did not flow through due to a weaker than expected April resulting in significant additional markdown,” said Kasaks. In fact, on the conference call, Jerry Chaney, CFO noted that “520 [bps] of the [gross margins] decrease was due to additional markdowns at cost that were taken after weaker than expected April…”

Juniors was strong for PacSun in the quarter with juniors apparel increasing in the “low-double-digits versus a mid-single-digit decrease during the first quarter last year.” Shorts and swimwear were pointed towards as driving the comp gain, as were dresses. The guys business was described as “flat” on the call, while footwear was down “high-single-digits.” Footwear was said to be strong in fashion product, but soft in sneakers. At demo, juniors was down “high-single-digits,” while guys was down “mid-teens.”

For the quarter total transactions per comp store were up “mid-single digits.” The average sale per comp store was down “mid-single-digits” driven by a “low-single-digit” decrease in average units sold and a “mid-single-digit” decrease in average unit retail.

Looking ahead, the company expects Q2 diluted earnings per share to be in the range of 18 cents to 20 cents per diluted share. In other PSUN news, shortly after the conference call, the company announced that Kasaks would be dropping the interim from her title, naming her outright CEO, as well as a director of the company.