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Tiffany Montgomery
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PacSun reducing footwear, adding snow

By Tiffany Montgomery
November 21, 2007 7:02 AM

There was some news that came out of PacSun's third quarter earnings conference call yesterday.

Footwear

PacSun is eliminating footwear at about 50 to 60 underperforming stores. Those stores will carry more apparel to boost margins.


In the next tier of stores, about 100, PacSun will carry a smaller selection of footwear.


Some good news: Sneakers are rebounding and trending well.


(I asked Don Brown of Sole Technology about how PacSun's change of direction could impact sales).


Snow

PacSun has added Burton to all stores in guys and girls. Burton tested well and "is off to a good start," said CEO Sally Frame Kasaks.


PacSun is now sponsoring the U.S. Amateur Snowboard Team, adding to its sponsorship of the amateur surf team.


Juniors

Kasaks' strategy of focusing on fashionable, private label clothes for girls continues to pay off. Juniors comps rose close to 30 percent in the quarter. "This girl is looking for trend-right products that go beyond T-shirts and fleece," Kasaks said.


PacSun's revamped Bullhead denim line was the "big win" in fall.


Tops are growing mainly with private label brands. Kasaks said the investment in in-house designers is paying off.


Some good news for action sports brands: Branded, fashion right fleece is a big part of the assortment and doing well.


For more on PacSun's junior strategy, here's an interview I had with Kasaks that ran in OC METRO.


Guys

Guys comp rose nearly 10 percent in the third quarter.


Performance was driven by leading board sport brands.


Strong categories included branded fleece, branded T-shirts, swim and shorts.


Denim was a disappointment but picking up as the weather gets colder.


Kasaks said PacSun was "fairly happy" with its mix of branded versus proprietary brands in guys. "Guys are more brand loyal," she said.


Accessories and footwear

Previously, the categories combined accounted for about 35 percent of sales. PacSun now wants it to be in the 25 percent range.


Store openings/closings

For the full year, PacSun will have opened 17 new stores and closed 105 to 115. Most of the closures include One Thousand Steps and demo stores.


Store remodels

For 2007, PacSun will have refreshed 50 stores.


It will increase the pace to 75 per year going forward.


The goal is a 15 percent sales left after stores are refreshed. Kasaks said the company is "mostly seeing that," especially since the stores are designed to appeal more to juniors.


Financials

Same-store sales at PacSun stores rose 7.7 percent.


Total company sales down 0.6 percent to $373.1 million.


Earnings per share, excluding One Thousand Steps and demo, were 24 cents versus 17 cents in same period last year. The company previously announced it is closing One Thousand Steps and exploring "strategic alternatives" for demo.

The company is forecasting a low-single digit comp store increase for the fourth quarter for PacSun stores.


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