California Apparel News

Pacific Sunwear of California, a decades-old retail chain that specializes in action sportswear and fashion items, had a tough second quarter.

On Sept. 8, PacSun reported its financial results for the quarter ending Aug. 2, showing that net sales declined to $195.6 million from $211.7 million during the same period last year. However, net income for the second quarter climbed to $8.3 million compared with $7.5 million last year.

Same-store sales for the quarter declined 6 percent.

“Key seasonal categories—including shorts, swim and sandals—were down in both genders and were the primary causes of disappointing results in the second quarter,” said Gary H. Schoenfeld, president and chief executive of the Anaheim, Calif.–based venture. “As we moved through Labor Day, we are seeing some improvement in overall trends for the third quarter, and we continue to believe that our distinctive mix of brands and merchandising can drive further improvement through the back half of the year.”

Second-quarter sales probably weren’t helped by PacSun’s disastrous Memorial Day rollout of a T-shirt displaying an upside-down American flag against a black backdrop. Shoppers immediately took to social media, criticizing the company as being disrespectful to the country’s veterans. The retailer immediately pulled the T-shirt off shelves and its online shopping site.

With shifting trends in consumer spending and shopping patterns, Schoenfeld said that meant the company would have to reduce its operating expenses and improve its customer connections through a more seamless omni-channel experience.

The CEO outlined some steps that would be undertaken to reduce costs by at least $15 million during fiscal 2016. “Approximately one-half of the savings will come through more streamlined execution in our stores, and the other half through the restructuring of operations at our corporate headquarters and the reconfiguration of certain positions and departments,” he said.

At the same time the company’s financial results were released, PacSun announced the departure of Michael Kaplan, the retailer’s senior vice president and chief financial officer. In his place, Chris Tedford, formerly senior director and controller, was promoted to vice president and interim chief financial officer while Ernie Sibal, formerly senior director of real estate, construction and strategy, was promoted to vice president of real estate, construction and strategy.

For the third quarter, PacSun expects net sales to be from $196 million to $203 million with a gross margin rate—including buying, distribution and occupancy—of 24 percent to 26 percent.

Same-store sales will again be in negative territory, declining somewhere between 3 percent and 6 percent.

PacSun operates 609 stores in all 50 states and Puerto Rico, compared with 618 stores a year ago.