CFO Mike Henry remarked that PacSun ended the quarter with 938 stores, as opposed to 957 stores last year, and faced a “challenging retail environment” in California, Florida and the desert southwest, which equates to 26% of the company’s sales for the quarter.  According to Henry, same-store sales in these regions decreased 10% for the second quarter, following an 8% decrease in the first. Outside of these difficult regions, same-store sales were up 3% for the second quarter.


Henry commented that one of the factors affecting these numbers is PacSun’s shift in inventory focus. “Weve been shrinking footwear and shrinking accessories, weve been funding that with the increased penetration of denim and certainly the key product categories that are working within our apparel assortment, particularly in juniors, but also denim on the guy’s side. So there are certain investments in inventory that we need to make to be able to drive better business going forward as we become more apparel focused.”


The company is revising its outlook for the back end of fiscal 2008, citing a difficult economic environment and challenging retail conditions in some of its key markets.  The company expects earnings from continuing operations of 0 to 5 cents per diluted share for the third quarter of 2008 and non-GAAP earnings from continuing operations of 11  to 16 cents per diluted share for the fourth quarter of fiscal 2008.
When discussing future plans for the company, much of the conversation revolved around PacSun’s denim line and where that product is expected to take the company.

 

Remarked chairman and CEO Sally Kasaks on the company’s plans for the back half of the year, “There’s a certain amount of size and back stock and fulfillment that needs to be done, so we also look at what proportion would be in our denim business, which is certainly one of the business drivers of the business today… Our denim business is strong.”