Impressed by Pacific Sunwear of California Inc.'s strong earnings report, analysts were tripping over each other to congratulate the retailer of teens' casual clothing during a conference call last week.
Almost all of them gave the company's executives a verbal back pat for what one called "a good finish to a great year." The meaty discussion, however, focused on Pacific Sunwear's d.e.m.o. stores, which it launched 22 months ago to target ethnic and urban youth. With 10 of the 40 d.e.m.o. stores now pulling in sales of more than $1 million a year, the company plans to have 40 more operating by the year's end and maybe 200 by 2003.
Buying for more stores makes it easier to improve profit margins. And analysts are beginning to consider d.e.m.o. a viable growth vehicle for the Anaheim-based company, said Elizabeth Pierce, with Wedbush Morgan Securities.
The company also told Wall Streeters that its young men's business, which accounts for 57% of its sales, has improved over the previous year, when it lost ground by having too many baggy-legged pants in its stores after guys had already cooled to the look. The new pant styles are selling well, the company said, as are young men's shorts and short-sleeved T-shirts.