Pacific Sunwear Preps Launch

The discussion of the company's plans for the new chain came during a conference call with financial analysts in which Pacific Sunwear executives discussed its fourth-quarter and full-year 2005 financial results, which it reported Tuesday. One Thousand Steps will be the third concept for the company, which operates under the PacSun and d.e.m.o. brands.

For the fourth quarter ended Jan. 28, Pacific Sunwear's net income increased 15% to $47 million, compared to $40.7 million for the fourth quarter of fiscal 2004. On a fully-diluted-per-share basis, the net increased 17% to 63 cents per share, compared to 54 cents per diluted share for the fourth quarter of fiscal 2004. Total sales for the fourth quarter rose 12% to $424.9 million, up from $379.7 million for the fourth quarter last year.

Net income for fiscal 2005 increased 18% to $126.2 million, compared to $106.9 million for fiscal 2004. Earnings per diluted share increased 21% to $1.67 compared to $1.38 per diluted share for fiscal 2004. Total sales for fiscal 2005 were $1.39 billion, an increase of 13% compared to total sales of $1.23 billion for fiscal 2004.

Same-store sales increased 2.2% for the quarter and 3.2% for the year. While company officials were generally pleased with most of the financial results, CEO Seth Johnson said he was disappointed with the same-store sales increase in the fourth quarter. Johnson highlighted the 15% quarterly income increase and the 18% increase for the year, which he attributed to "tight management of merchandise margins and effective expense control."

Johnson went on to say the company "chose not to be overly promotional before Christmas, and as a result we were able to achieve an improved merchandise margin for the quarter." With that said, Johnson continued, "I'm not at all satisfied with our volume trend. Our fourth-quarter comp was a disappointing 2.2%, and we got off to a weak start in 2006, with a negative 3.1% comp in February."

Regarding the new One Thousand Steps stores, Johnson said the company plans to open the first six in mid-April at a "diverse combination of malls" including the Mall of America in Minneapolis; the Galleria at Tyler in Riverside, CA: Los Cerritos Mall in Cerritos, CA; Fresno Fashion Fair in Fresno, CA; Melbourne Square in Melbourne, FL and Providence Place in Providence, RI. The three that will be opened later in the year will be at Garden State Plaza in Paramus, NJ; Northridge Mall in Northridge, CA and Smith Haven Mall in Long Island, NY.

The company previously announced its plans to open One Thousand Steps as a specialty footwear and accessories concept that could grow to between 600 and 800 locations. The new chain will target customers in the 18 to 24 age range. The stores are expected to average about 2,500 sf. Pacific Sunwear operates 1,105 stores, which include 811 PacSun stores, 96 PacSun Outlet stores and 198 d.e.m.o. locations.