Pacific Sunwear of California, Inc. said sales in the fourth quarter decreased 17% to $352 million with comps off 19%. The loss in the period came to $36 million, or 56 cents a share, after charges compared to a loss of $27
million, or 42 cents, a year ago.

During the fourth quarter of fiscal 2009, the company recorded a
non-cash charge of $19 million, or 29 cents per share, to provide a
valuation allowance against certain of its deferred tax assets.
Excluding this charge, the company’s non-GAAP net loss for the quarter
was $17 million, or 26 cents per share.

The company ended the year with total cash of $93 million and no
borrowings under its credit facility. Year over year, inventory
decreased by 16%, from $107 million at the end of fiscal 2008 to $90
million as of January 30, 2010.

“When I joined PacSun, given all that we needed to do I knew it would
take time to turn things around. Eight months into the job, Im
encouraged by the changes were making and the prospects for PacSun to
once again become a leader for teens in the mall,” stated Gary H.
Schoenfeld, President and Chief Executive Officer. “Weve still got a
tough period ahead of us in our Juniors business, yet I believe our
Young Mens categories can begin to lead the turnaround of our business
as we look further ahead to Back to School and Holiday.”

Full Year Results

Total sales for fiscal 2009 ended January 30, 2010 were $1.03 billion,
a decrease of 18 percent from total sales of $1.25 billion during
fiscal 2008 ended January 31, 2009. Total Company same-store sales
decreased 20 percent during fiscal 2009. For fiscal 2009, the Company
reported a loss of $70 million, or $(1.07) per share, compared to a
loss from continuing operations of $39 million, or $(0.59) per share,
in fiscal 2008. Excluding the $19 million, or $0.29 per share, non-cash
valuation allowance charge discussed above, the Company’s non-GAAP net
loss for the year was $51 million, or ($0.78) per share.

Financial Outlook

First Quarter

The company expects to report a GAAP net loss per share of $(0.50) to
$(0.60) for the first quarter of fiscal 2010 which will reflect the
continuing impact of maintaining a valuation allowance against deferred
tax assets and thus a very low effective tax rate.
On a non-GAAP basis, using a normalized 37% effective income tax rate,
the company would expect to show a net loss of $(0.32) to $(0.38) per
share for the first quarter of fiscal 2010. The forecasted first
quarter GAAP earnings range is based on the following major assumptions:

  • Same-store sales decline of 13% to 18%;
  • Gross margin rate, including buying, distribution and occupancy, of 19%
    to 21% versus last year’s 27% due to a combination of merchandise
    margin declines and occupancy deleverage;
  • SG&A dollars in the range of $71 million to $74 million versus last
    year’s $77 million. This range includes estimated non-cash store asset
    impairment charges of approximately $3 million to $5 million compared
    to $2 million in last year’s first quarter;
  • As the company will no longer be recording income tax benefits against
    its operating losses, tax expense will be approximately $500,000 due to
    taxable income projected to be generated in certain state and local tax
    jurisdictions.

Full Year

While it is difficult to predict full year results for fiscal 2010, the company is currently planning for sequential improvement in its
same-store sales results as the year progresses with the goal of
getting back to positive same-store sales results by the fourth
quarter. As a percentage of sales, gross margin, including buying,
distribution and occupancy, is targeted to improve by approximately 50
to 100 basis points based upon anticipated improvements in merchandise
margins which would offset further deleveraging of occupancy expenses.
SG&A expenses are estimated to be in the range of $310 million to
$320 million versus $340 million in fiscal 2009. Total capital
expenditures for the year are expected to be in the range of $20
million to $30 million with depreciation and amortization expenses in
the range of $55 million to $60 million.