The warmer weather in late October may have put a damper on some hot “cool weather” categories for Pacific Sunwears two retail concepts, but November is starting to shape up again, with the fleece category driving increases at both PacSun and d.e.m.o. November month-to-date comps were said to be back up in the “low teens”, driven by hooded fleece and denim.
In addition to established brands like Hurley, Billabong and Quiksilver, the PacSun stores have added newer brands line Atticus, MacBeth, Shortys and Osiris to the mix. The surf/skate-inspired chain is also moving some of the skate brand and young mens product into the girls area this year. Denim was driven by brands on the guys side, with Hurley, Quiksilver, Billabong and Element all mentioned, while the girls business continues to be driven by Private Label.
The chains shift in its outerwear focus this year is paying off, with more casual outerwear on the floor rather than ski or snowboard outerwear. The real surprise on the product side is the success the PacSun chain is seeing with the Western shirt business for the guys. They have also added flannel shirts for Q4.
Private label is about a third of the guys business at PacSun and just under 50% for the girls business, down “a little bit” from last year. The company will expand its new private label fragrance brand into apparel in Q4, which is expected to push the percentage higher.
Footwear represents about 13% of sales at PacSun, with the skate shoe business driven by newer brands on the floor. They do see some “retro athletic” inspired looks doing well from Etnies, but said tests with real retro product from Converse and Puma “have not been successful”.
Management did say they are having success with Puma in screened fleece and t-shirts in the girls area.
Accessories are almost 19% of the business at PacSun and the company feels they can get that into the “low 20s” over the next couple of years.
At d.e.m.o., key brands are led by Ecko, Phat Farm, and Enyce on the men's side and Ecko Red, Baby Phat and J. Lo in the ladies area.
Footwear is just one percent of the business at d.e.m.o., but the company sees the category achieving “mid-single-digit” penetration in the next few years. Accessories are 11% of the business here, but the company sees it getting to the mid- to high-teens level in the next two to three years.
On the operating side, PSUN said they are “nearly a year ahead of schedule” in forecasted operating margins, and have upped their goal for 2004 to 13% from the 12% they have already achieved. They see the increase through “same-store sales growth and improvement in merchandise margins and leverage of store occupancy and store payroll”.
The company points to d.e.m.o.s $400 per square foot sales metric as a key contributor, with the 121 stores averaging $1.1 million in sales. PSUN sees long-term profit contribution to be in the 17% range at hip-hop-inspired chain, while PacSun store margin contributions are seen in the 22%+ range. Both chains average around two items per transaction, but the higher average price points at d.e.m.o. push the average transaction there to about $70 versus just $40 at PacSun.
Overall transaction count for the year is actually up 10%, with the value of each transaction up 3%.
The Footwear and Accessories categories at PacSun each comped up 20% in the third quarter. Young mens comps were up mid-single-digits and girls apparel showed low- double-digit comp sales increases. At d.e.m.o., girls and Accessories generated very strong comparable sales of 20%+, while guys were up mid-single-digits.
PSUN will add 30 d.e.m.o. stores in 2004 and it expects to have 400 doors by the end of 2007. The company plans 65 new PacSun stores in 2004, with a goal of 1,000 doors by the end of 2007.
PSUN is forecasting same-store sales growth in the 5% to 6% range for the fourth quarter and plans to open 13 PacSun stores and one PacSun outlet store, giving the company a total of 877 stores by year-end.
The company said they remain “comfortable with the mean consensus earnings per share estimate of analysts of 37 cents” for the fourth quarter and expects 2004 earnings to be 20% higher than 2003.
>>> PSUN made a strong point that while overall mall traffic was off, mall traffic for the all-important teen consumer was up
>>> With Licensed Apparel on sale all over the mall, will we see the Athletic Specialty guys go “Western” next???
