Pacific Sunwear of California, Inc. posted a strong sales gain for the fourth quarter, but saw weakness in girls offset what could have been decent gains at the PacSun concept. Much of this weakness was attributed to Junkfood Ts and fashion denim, along with sneakers. Total sales for the fourth quarter ended January 28 were $424.9 million, an increase of 12% over total sales of $379.7 million in the year-ago period. Same-store sales increased 2.2% for the quarter. Comp store sales at the PacSun format increased 2.4% for Q4, with guys up in the “mid-singles,” but girls down in “low-singles.” At the d.e.m.o. concept, same-store sales increased 0.5%, with girls leading the charge up low-doubles, but the guys business slightly offset the gain with comps down in the high-singles.
Bad news for the guys at Delta Apparel as their recently acquired Junkfood brand failed to follow up the 30% comp increase in girls short-sleeve Ts that it drove during the third quarter this time around. The decline caused PacSun division President Tom Kennedy to comment, “we were caught off guard at how quickly [Junkfood] eroded.” The company plans to get back to the basics by filling in with surf and skate brands to replace the Junkfood business it has exited.
During the holiday season, PacSun experimented with carrying home products in their stores. The most successful were branded luggage and smaller items like bulletin boards and notebooks. Management said they plan to move forward with the program, but hope to find a sweet spot where the new categories are adding on sales and not cannibalizing from other areas.
Gross margin was down 120 basis points in Q4 to 36.3%. However, the GM decline was more than offset by a 150 point improvement in SG&A expenses as a percentage of net sales to 19.0% from 20.5% last year. The back-end efficiencies, combined with the sales increase, delivered a 15% net income gain for the quarter to a record $47.0 million, or 63 cents per diluted share, from $40.7 million, or 54 cents per diluted share, during last years fourth quarter.
For the full year, sales were running at $373 per square foot with PacSun at $366 per square foot, PacSun Outlet at $393 per square foot, and d.e.m.o. at $379 per square foot.
Looking ahead, PSUN expects earnings per share in the range of 19 cents to 21 cents which includes 3 cents attributable to adjustments for stock option expenses for the first quarter. For the full fiscal year 2006, the company said it is comfortable with net income growth estimates of 10% to 15% versus the prior year.
Looking at February sales, PSUN reported that total sales for the month increased 7.0% to $89.0 million from $83.2 million in February last year. Total company same-store sales decreased 3.1% during the period following a 10.5% increase in the year-ago period. By concept, PacSun comps decreased 4.0% after jumping 10.7% last year, while d.e.m.o. comps rose 0.8% for the month.
At the PacSun concept, guys sales were driven by denim, shorts, track jackets, and Ts, but saw weakness in sneakers, while the girls business was driven by knit tops, shorts, sweaters, and capris, but were “more than offset” by weakness in fleece, fashion denim, sneakers, and Ts. Girls again was the driver for business at d.e.m.o., but were offset by weak sales in guys.
>>> PSUN rarely talks about brand sales The Junkfood situation must have been interesting, to say the least…
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