Pacific Sunwear of California, Inc. rode the strength of new stores to post a sales gain for the first quarter, but saw comps decline slightly. The good news is that warm weather categories performed well for the retailer as winter thawed and shoppers started to think of the summer ahead.
At PacSun, guys comps were said to be up “low-single digits” while girls were down “high-single digits.” Warm weather product like shorts, swim, tees, polos, and sandals, drove the guys gain, while girls were strong in swim and shorts, but were still bothered by weakness in tees and denim. Footwear showed strength in sandals for guys and girls, but weakness in sneakers offset the sandals gains. Management was excited on a conference call with analysts, though, about the launch of Nike skate shoes into 400 stores in June after a “very favorable” response to a test run. Despite the Nike launch, the company still expects footwear to be a “slight drag” to second quarter comp results.
The d.e.m.o. concept posted the lone positive comps for the company in the first quarter, where a mid-singles increase in girls was able to compensate for a mid-singles decrease in guys. Footwear and accessories comps were “very strong.”
For the first quarter, average sale per comp store was up in the low-singles driven by a mid-singles increase in average units sold, but was slightly offset by a flat average unit retail. Total transactions for comp stores were down mid-singles.
The 240 basis point gross margin decrease came as a result of an inability of the company to leverage fixed expenses on negative comps.
First quarter net earnings were 16 cents per diluted share, including 3 cents related to stock option and pre-opening rent expenses. On a comparable non-GAAP basis, earnings per diluted share were 20 cents in the first quarter of 2005.
Assuming a low- to mid-single digit comp store sales increase during the second quarter, the company expects earnings per share in the range of 26 cents to 28 cents, which includes three cents attributable to adjustments for stock option expenses and pre-opening rent expenses. For the full fiscal year 2006, the company expects 10% to 15% EPS growth.
| Pacific Sunwear | |||
| First Quarter Results | |||
| (in $ millions) | 2006 | 2005 | Change |
| Total Sales | $299.9 | $280.0 | +7.1% |
| GM% | 32.4% | 34.8% | -233 bps |
| Net Income | $11.9 | $17.6 | -32.6% |
| Diluted EPS | 16¢ | 23¢ | -30.4% |
| Comp Sales | -1.8% | +3.0% | |
| PacSun | -2.2% | +3.0% | |
| d.e.m.o. | +1.0% | +3.2% | |
| Inventory* | $222.2 | $172.1 | +29.1% |
| * at quarter-end | |||
