Return of Brands Fuels Q1 Comps Growth at Pacific Sunwear

The company reported net sales from continuing operations inched up 1.1 percent to $173.8 million in the quarter ended April 28. Same-store sales grew one percent in both men’s and women’s. Merchandize margins were up 160 basis points and gross margin jumped 430 basis points to 23.6 percent. Sales, general and administrative expenses declined 2.8 percent resulting in an operating loss of $18.3 million, compared to $27.8 million in the first quarter ended April 30.

“We had a strong second half of the quarter that led to sales at the high end of our guidance and gross margins which exceeded plan,” said Gary H. Schoenfeld, who said he would return PSUN to its Southern California action sports roots when he took the reins as president and CEO in July 2009. “Shorts and denim, including chinos and casual pants, were among our strongest categories. Our reentry into footwear and accessories continues to be a growth opportunity for us, and for the first time Nike has become the top-selling footwear brand at PacSun.”

Brands are playing a more important role with male customers than with women, who are inclined to switch brands to save money when they can get similar product. Schoenfeld said sales of technical board shorts were “okay,” but growth likely peaked two years ago.

PSUN shaved its net loss for the quarter to $15.6 million, or 23 cents per share, compared with a net loss of $28.7 million, or 43 cents per share a year earlier.

PSUN ended the quarter with $103.9 million in inventory, down 10.3 percent from the first quarter of 2011. For the second quarter, PSUN is forecasting same-store sales of negative 1 to plus 4 percent, gross margin rate of 24 to 26 percent and a non-GAAP net loss from continuing operations of between 11 and 16 cents, compared to 20 cents in the first quarter.