To continue distinguishing itself from other teen retailers and sustain its turnaround, Pacific Sunwear of California will continue adding California-inspired lifestyle brands, the company’s CEO said last week.


“Having just come back from Magic and PROJECT yesterday in Las Vegas, there's additional brands that we think fit well within our California lifestyle, and the heritage of PacSun that we look forward to adding going forward,” said CEO Gary Schoenfeld
PSUN reported last week that its widening selection of emerging brands – including Diamond, Crooks and Castles, Young and Reckless and Modern Amusement – helped drive comp store sales of Men’s apparel up 7 percent at its PacSun stores in the second quarter ended July 30. That marked the biggest such increase since 2004.


The company reported its overall sales reached $210.3 million in the quarter, up 4.7 percent from the $200.9 million for the second quarter of fiscal 2011. The growth was driven primarily by a 5 percent increase in comp stores sales, including a 2 percent increase in comp sales of Women’s and a 15 percent increase in e-commerce sales. Average unit retail rose, while units per transaction declined during the quarter.


On a GAAP basis, losses from continuing operations came in even with a year earlier at $17.5 million, or 26 cents per share. On a non-GAAP basis, excluding a non-cash paper loss related to a derivative liability and assuming a normalized annual income tax rate of approximately 37 percent, the company's loss from continuing operations would have been $5.8 million, or 8 cents per share, compared to a $11.1 million, or 17 cents per share, for the same period a year ago. The company generated $18 million in positive cash flow during the quarter compared to a negative $8 million in the same period a year earlier.


Gross margin improved 380 basis points to 27.5 percent, thanks in part to a 260 basis point boost in merchandise margins. SG&A as a percentage of net sales reached 30.2 percent, down 160 basis points.


PSUN closed three stores and opened one, ending the quarter with a total of 727 core and outlet stores, versus 821 a year ago. It remains on track to close approximately 100 stores in the fourth quarter to end the year with approximately 625 stores. The company ended the quarter with 6 percent less inventory on a comp store basis.


Schoenfeld said that the back-to-school season had started slowly, but that sales had improved since the end of the Olympics and the company was on track for its fourth consecutive quarter of profit growth. Comp store sales could either shrink or grow by 2 percent in the third quarter.