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California

Pacific Sunwear Earnings Jump 48% in 4th Quarter

The Anaheim-based retailer says sales rose 23% as teens continued to snap up surf and skate clothing brands.

March 03, 2004|Leslie Earnest | Times Staff Writer

Pacific Sunwear of California Inc.'s profit swelled 48% in its fiscal fourth quarter, buoyed by the continuing popularity of surf and skate clothes and the edgy appeal of urban styles.

The Anaheim-based retailer said net income rose to $34.3 million, or 43 cents a share, for the quarter ended Jan. 31, compared with $23.2 million, or 31 cents, a year earlier. That was roughly in line with the 42 cents profit expected by a consensus of analysts polled by Thomson Financial.

Sales jumped nearly 23% to $326.3 million from $265.6 million as teens continued to snap up the surf wear and skateboarding brands sold in the company's namesake stores as well as its younger d.e.m.o. chain that peddles clothing inspired by devotees of hip-hop music.

For the first time, the company's full-year sales pushed past the $1-billion mark, increasing 22.9% to $1.04 billion in fiscal 2003.

Sales at stores open at least a year rose 12% in the quarter, the ninth consecutive quarter of positive same-store sales. Same-store sales are a key barometer of a retailer's health.

"We're clearly very, very pleased with the business," Chief Executive Greg Weaver told analysts during a conference call.

The company also struck a positive note for the current quarter, saying February's same-store sales rose 14% from a year earlier. And executives said they are comfortable with analysts' projections that the retailer will earn 14 cents a share in the first quarter, which would be a 40% increase over last year.

"Obviously they're hitting on all cylinders, both the core business and d.e.m.o.," said Robert Buchanan, an analyst with A.G. Edwards & Sons.

For the year, earnings increased 61% to $80.2 million, or $1.02 a share, from a year-earlier profit of $49.7 million, or 66 cents.

PacSun has wedged its way into the heart of Wall Streeters as it has logged same-store sales growth for 22 consecutive months. The company's share price has risen 111% in the last year. It closed Tuesday at $24.91, up 20 cents, on Nasdaq. The earnings were released after the market closed.

Not everyone, however, is bullish.

Eric Beder, an analyst with Northeast Securities, put a "sell" rating on the stock in January. He says fashion trends are shifting away from the sporty looks PacSun offers and that the company's planned expansion of its d.e.m.o. chain coincides with increasing competition in that niche.

But Pacific Sunwear's management is decidedly upbeat, emphasizing the potential of both divisions.

PacSun stores have continued to ride surfing's popularity by selling brands such as Quiksilver, Billabong and O'Neil while pushing new skate brands such as Element.

"The skate guys have really been dominating our business for the last year," Chief Financial Officer Carl Womack said. "It's not what most people would expect, but that's the truth."

And d.e.m.o. stores -- which sells brands such as Ecko, Phat Farm and Enyce -- are mining one of the "explosive growth areas in apparel today," CEO Weaver said. The d.e.m.o chain accounts for about 12% of the company's sales, a percentage that's expected to grow.

The company expects to have at least 400 d.e.m.o and 1,000 PacSun stores by the end of 2007. Currently, it operates 680 PacSun stores and 123 d.e.m.o stores nationwide.

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