Pacific Sunwear Q3 Sales Drop 5% to $341.9 M

Pacific Sunwear of California, Inc. said that total sales for the third quarter ended Nov. 1, 2008, were $323.6 million, a 5% decrease from total sales of $341.9 million for the third quarter ended Nov. 3, 2007. Total company same-store sales decreased 7% during the third quarter of fiscal 2008.

The company recorded a loss from continuing operations of $3.5 million, or 5 cents per diluted share, for the third quarter of fiscal 2008 compared to income from continuing operations of $17.1 million, or 25 cents per diluted share, for the third quarter of fiscal 2007. Third quarter results for each period exclude the income statement impact of demo and One Thousand Steps due to the designation of these operations as discontinued operations during the first quarter of fiscal 2008 and the fourth quarter of fiscal 2007, respectively. Results for the third quarter of fiscal 2008 include an after-tax, non-cash goodwill impairment charge of approximately $4.2 million, or 6 cents per diluted share.

“It's been well reported that consumer spending decelerated significantly in the September/October period, and we certainly saw this in our own results for the quarter. To strengthen our financial position in this economic downturn, we are focused on reducing our inventory, capital expenditures, and other expenses,” commented Sally Frame Kasaks, CEO. “We remain encouraged by our e-commerce business, which continues to experience strong growth supported, in part, by enhancements to our website and supply chain.”

Total sales for the first three quarters ended Nov. 1, 2008 were $903.2 million, a 2% decrease from total sales of $921.7 million during the first three quarters ended Nov. 3, 2007. Same-store sales decreased 3% during the same period. For the first three quarters of fiscal 2008, the company recorded a loss from continuing operations of $11.8 million, or 18 cents per diluted share, compared to income from continuing operations of $26.1 million, or 37 cents per diluted share, in the first three quarters of fiscal 2007. Earnings results for the first three quarters include the asset impairment charge of 7 cents per diluted share incurred in the first quarter related to the materials handling equipment in the company's closed Anaheim distribution center and the non-cash goodwill impairment charge of 6 cents per diluted share incurred in the third quarter.

Financial Outlook

Given the significant downturn in the economic climate in recent months, the company is updating its fiscal 2008 fourth quarter earnings forecast. As a result of additional promotional activity, and assuming a same-store sales decrease in the negative high-single digit range for the fourth quarter of fiscal 2008, the company currently expects to report a fourth quarter loss of 3 cents to 8 cents per diluted share, including an estimated gain of approximately 11 cents per diluted share from the previously-announced sale of its Anaheim distribution center.

  PACIFIC SUNWEAR OF CALIFORNIA, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
      (unaudited, in thousands except share and per share data)

                                                      First Three
                            Third Quarter Ended      Quarters Ended
                           --------------------- ---------------------
                             Nov. 1,    Nov. 3,    Nov. 1,    Nov. 3,
                              2008       2007       2008       2007
                           ---------- ---------- ---------- ----------
 Net sales                   $323,612   $341,874   $903,204   $921,754
 Gross margin                  92,776    114,726    263,499    291,770
 Selling, G&A expenses         95,308     88,325    281,163    251,963
                           ---------- ---------- ---------- ----------
 Operating (loss) income
  from continuing
  operations                   (2,532)    26,401    (17,664)    39,807
 Other expense (income),
  net                           1,100       (652)       461     (2,162)
                           ---------- ---------- ---------- ----------
 Income (loss) from
  continuing operations
  before income taxes          (3,632)    27,053    (18,125)    41,969
 Income tax (benefit)
  expense                        (112)     9,910     (6,344)    15,906
                           ---------- ---------- ---------- ----------
 Income (loss) from
  continuing operations        (3,520)    17,143    (11,781)    26,063
 Discontinued operations,
  net of tax                    1,046    (37,180)   (24,999)   (61,660)
                           ---------- ---------- ---------- ----------
 Net loss                     $(2,474)  $(20,037)  $(36,780)  $(35,597)
                           ========== ========== ========== ==========

 Income (loss) from
  continuing operations
  per share:
   Basic                       $(0.05)     $0.25     $(0.18)     $0.37
                           ========== ========== ========== ==========
   Diluted                     $(0.05)     $0.25     $(0.18)     $0.37
                           ========== ========== ========== ==========

 Net loss per share:
   Basic                       $(0.04)    $(0.29)    $(0.55)    $(0.51)
                           ========== ========== ========== ==========
   Diluted                     $(0.04)    $(0.29)    $(0.55)    $(0.51)
                           ========== ========== ========== ==========

 Weighted average shares
  outstanding:
   Basic                   64,968,707 69,765,113 67,182,918 69,635,543
                           ========== ========== ========== ==========
   Diluted                 64,968,707 69,949,070 67,182,918 69,986,773