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ANAHEIM, CA-Faced with earnings that slipped and income that plunged in the third quarter that ended Oct. 28, teen and young adult clothing retailer Pacific Sunwear says it will slow the pace of store openings. PacSun will now open about 40 new stores and expand or relocate approximately 35 stores during fiscal 2007, a substantial reduction from the company’s recent pace of expansion.

In each of the past three fiscal years, for example, Pacific Sunwear has opened 115 new stores, 113 new stores and 86 stores, respectively. In addition to opening the new stores under its existing formats, Pacific Sunwear has said in public filings that it envisioned a big expansion of its One Thousand Steps concept. “We believe the One Thousand Steps concept can reach 600-800 stores in the future,” the company said in one public filing.

The outlook at the latest PacSun conference call was considerably more subdued. The company said that it will now focus its store openings on its PacSun concept, one of three store formats it operates. The others are its d.e.m.o. stores and the One Thousand Steps concept. Pacific Sunwear outlined store growth plans as part of a conference call in which executives discussed the financial results for the third quarter, in which sales and earnings both fell, along with same store sales.

Sales dipped to $375.4 million, compared with $377.5 million for the third quarter of 2005. Same-store sales decreased 6.7% for the comparable third quarter period and net income plunged to $9 million, down from last year’s $38.4 million. On a per-share basis, the earnings dropped to 13 cents per diluted share, versus 51 cents for the third quarter of last year.

A number of one-time items dragged down earnings in the latest quarter, including an inventory write-down charge of 10 cents per share, along with a hit of three cents per share for stock compensation expenses and other costs. Pacific Sunwear’s interim CEO, Sally Frame Kasaks, said the company is “moving aggressively in an effort to reverse the trend” that produced the disappointing quarterly results. “One of my first goals as interim CEO has been to improve the appearance of our stores,” Kasaks said.

Pacific Sunwear’s store count at the end of the third quarter stood at 835 PacSun locations, 110 PacSun Outlet stores, 215 d.e.m.o. stores and nine One Thousand Steps stores for a total of 1,169 locations in 50 states and Puerto Rico.

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