QUOTE AND NEWS
TheStreet.com  Jul 30  Comment 
NEW YORK (TheStreet) -- Pacific Sunwear of California  was downgraded to "neutral" from "buy" at B. Riley.The firm lowered the apparel company's price target to $2.10 from $4.25 citing promotional environment of its stores and reduced EBITDA...
SeekingAlpha  Jun 24  Comment 
By MTF Investing: Pacific Sunwear of California Inc. (PSUN) saw a major pullback after releasing the 1Q14 results, based mainly on the guidance for the next quarter. In spite of challenges the company faces in the sector, I believe the pullback...
SeekingAlpha  Jun 6  Comment 
ByBrett Moll: Just last week, both Pacific Sunwear of California Inc. (PSUN) and Tilly's, Inc. (TLYS) reported earnings and by no means were they as pretty as the assortment of clothes they offer. The ensuing day following the reports resulted in...
StreetInsider.com  May 30  Comment 
52-Week High: Omnivision Technologies, Inc. (Nasdaq: OVTI) $23.08. Omnivision Technologies up 14.6 percent Friday after it reported Q4 EPS of $0.40 and revenue of $331 million, versus the analyst EPS estimate of $0.27 and revenue of $292.11...
TheStreet.com  May 30  Comment 
NEW YORK (TheStreet) -- Pacific Sunwear shares are dropping, down -18.4% to $2.40, on Friday after lowering its second-quarter guidance below analysts' expectations.The action sports retailer announced second-quarter revenue guidance between $200...
Benzinga  May 30  Comment 
Infoblox (NYSE: BLOX) shares tumbled 38.84% to reach a new 52-week low of $12.55 after the company reported that its CEO Robert Thomas is stepping down. The company also issued a downbeat forecast for the fiscal fourth quarter. Analysts at...
SeekingAlpha  May 29  Comment 
Pacific Sunwear of California, Inc. (PSUN) Q1 2014 Earnings Conference Call May 29, 2014 4:30 PM ET Executives Craig Gosselin - Senior VP, General Counsel and Head of HR Gary Schoenfeld - President and CEO Michael Kaplan - SVP and...
TheStreet.com  Mar 19  Comment 
NEW YORK (TheStreet) -- Pacific Sunwear of California , more commonly known as PacSun, rose 5.33% to $3.16 at 3:21 p.m. on Wednesday after the company reported its fourth-quarter earnings after the market closed on Tuesday. The apparel retailer...
Benzinga  Mar 18  Comment 
On Tuesday after the bell, Pacific Sunwear (NYSE: PSUN) reported mixed fourth quarter results that initially sent the stock soaring 15 percent to $3.45, but since have given back some gains and are currently trading at $3.20. The company missed...
MarketWatch  Mar 18  Comment 
Oracle Corp. shares drop by as much as 5% in after-hours trading Tuesday, and Pacific Sunwear of California Inc. is on the rise as those companies got the attention of many investors in the wake of their quarterly results.




 

Pacific Sunwear of California (NYSE: PSUN) is a retailer that sells surf-styled apparel and accessories to teenagers and young adults throughout malls in the U.S. Pacific Sunwear sells some of its own private label branded merchandise, but most of its product offerings are branded merchandise from companies such as Quiksilver and Billabong; branded items generate 52% of the company's revenue, with the other 48% being generated from the company's proprietary brand merchandise.[1] Private label offerings typically have the dual benefit of being higher margin and establishing brand loyalty. The company generated $1 billion in net sales but incurred a net loss of $70 million in 2009.[2]

In a sluggish economy, retailers like Pacific Sunwear suffer because consumers cut back on spending on discretionary items. Rather than spending money on full-priced brand name items, consumers can find the same items for lower prices at discount retailers like TJX Companies (TJX). This is particularly relevant Pac Sun because its target customers are teens who most likely rely on their parents to purchase clothing. In 2009, the company's comparable-store sales fell by 20% due to the weak economy.[2]

Company Overview

PacSun sells surf and extreme sports styled clothing and accessories in its PacSun stores and outlets. The company operates 894 stores in all 50 US states and Puerto Rice, with 30% of its stores located in California, Florida, and Texas.[3]

Merchandise[4]

Pacific Sunwear sells merchandise in three different categories:

  • Young Mens Apparel - 46% of net sales
  • Juniors Apparel - 43% of net sales
  • Accessories and Footwear - 12% of net sales

Brands[1]

48% of Pacific Sunwear's revenue comes from the sale of its proprietary brand merchandise. The company has increased its effort to sell its own private labeled items since the mid-2000s as private label offerings typically have the dual benefit of being higher margin and establishing brand loyalty. Branded items generate the other 52% of the company's revenue -- the company sells branded merchandise from names including Fox Racing, DC Shoes, Roxy, Quiksilver, Hurley, and Billabong.

Business Growth

FY 2009 (ended January 30, 2010)[2]

  • Net sales fell 18% to $1 billion. The company attributes the decline to a 20% decrease in comparable store sales and a decrease in average net sales/square foot from $339 to $275. Total transactions declined 13% and the average sale declined 8%. The company attributes this to the weak US economy.
  • The company closed 38 net stores in 2009 and finished the year with 894 stores.
  • Net loss for the year was $70 million compared to a net loss of $30 million in the previous year.

Trends and Forces

Sluggish Economy Hampers Pac Sun's Sales

In a sluggish economy, retailers like Pacific Sunwear suffer because consumers cut back on spending on discretionary items. Rather than spending money on full-priced brand name items, consumers can find the same items for lower prices at discount retailers like TJX Companies (TJX). This is particularly relevant Pac Sun because its target customers are teens who most likely rely on their parents to purchase clothing. In 2009, the company's comparable-store sales fell by 20% due to the weak economy.[2]

Competition

Pacific Sunwear is one of the main competitors in the youth apparel retail market, generating over $1 billion in sales. However unlike other teen apparel retailers, such as Abercrombie & Fitch and American Eagle Outfitters which sell only their own private label products, Pacific Sunwear's sales rely heavily upon third-party branded merchandise. As private label goods have significantly higher profit margins than their branded counterparts, Pacific Sunwear's profit margins are considerably lower than its competitors. Also, Pacific Sunwear's extreme-sports culture based stores do not appeal to as wide of a range of customers as the more generic, "preppy" teen styled merchandise of some of the PacSun's competitors.

Pacific Sunwear's competitors include:

  • Abercrombie & Fitch Company (ANF): Abercrombie & Fitch is the leader of the youth apparel retail market by nearly all measures. ANF is a larger company than PSUN in terms of sales and profits, although PSUN operates more stores than ANF. Abercrombie & Fitch also operates four brands: Abercrombie & Fitch, Hollister, abercrombie, and RUEHL; all of which target different subsets of the 8-30 age range. While Pacific Sunwear's namesake stores compete with A&F and Hollister stores, PSUN has no match for A&F's kids apparel or post-college merchandise concepts: abercrombie and RUEHL. Although ANF is one of PSUN's competitors, the two companies operate with different strategies: Abercrombie maintains a premium brand with high price points and private label products while Pacific Sunwear focuses on providing its customers with surf- and snowboard-inspired merchandise that is mostly sourced from branded manufacturers. Importantly, Abercrombie & Fitch's core fashion designs focus on classic and "preppy" apparel while PacSun provides its customers with extreme sports-inspired merchandise.
  • American Eagle Outfitters (AEO): American Eagle competes for the same customers (young men and women between the ages of 15 and 25) with PacSun's namesake stores; however, PacSun does not have a direct match for AE's new aerie and Martin + OSA sub brands. AEO is larger than PacSun in terms of total sales and profits, and AEO has exhibited much stronger growth recently than PacSun. However, it is hard to directly compare the two retailers because of AEO only sells its own private label merchandise while PacSun relies heavily on branded apparel and accessories. Also, AEO's core fashion designs focus on classic and "preppy" apparel while PacSun provides its customers with extreme sports-inspired merchandise.
  • Aeropostale (ARO): Aeropostale is a slightly smaller company than PSUN, with slightly less sales and a considerably smaller number of stores. Also the overwhelming majority of ARO's revenue comes from its namesake brand of stores that targets 14 to 17 year olds. Aeropostale's only sells private label merchandise, while PSUN relies heavily on branded apparel from third-party manufacturers.
  • Urban Outfitters (URBN): Urban Outfitters is a relatively young retailer that operates three different branded store chains, Urban Outfitters (18 to 30 year olds), Anthropologie (30 to 45 year old women), and Free People (16 to 35 year old women). Urban Outfitters is not as directly comparable to Pacific Sunwear due to its slight differentiation in targeted customer segments.
  • Gap (GPS): Gap is a much larger company than ARO in terms of sales, stores and customer segments targeted. Through variations on Gap (Gap Kids, babyGap, Gap Maternity) the retailer serves a wide range of customers; also, Banana Republic and Old Navy stores serve different socio-economic segments.Because of the wider range of customers, Gap doesn't match up with PSUN as closely as some other competitors, however there is some overlap.
  • Quiksilver (ZQK): Quiksilver is a conglomerate that has been formed through multiple acquisitions and mergers. The company not owns and manufactures apparel, accessories and footwear for surfers, skateboarders and snowboarders under the Quiksilver, Roxy and DC brands. Also, Quiksilver (ZQK) manufactures ski and snowboard equipment under the Rossignol, Dynastar and Lange brands. It is hard to make a direct comparison between Pacific Sunwear and Quiksilver on a competitive basis, particularly because PSUN sells Quiksilver merchandise. However, it is important to note that Quiksilver owns nearly 280 retail stores through which the company sells its apparel and equipment and these stores directly compete with PacSun. Unfortunately the company does not break out financial figures for these stores so it is difficult to make an accurate comparison.
  • Zumiez (ZUMZ): Zumiez is a mall based specialty retailer of action sports related apparel, footwear, equipment and accessories operating under the Zumiez brand name. ZUMZ stores cater to young men and women between the ages of 12 and 24 who seek popular brands representing a lifestyle centered on activities that include skateboarding, surfing, snowboarding, BMX and motocross.

References

  1. 1.0 1.1 PSUN 2009 10-K "Brands" pg. 4
  2. 2.0 2.1 2.2 2.3 PSUN 2009 10-K "Selected Financial Data" pg. 18
  3. PSUN 2009 10-K "Properties" pg. 15
  4. PSUN 2009 10-K "Merchandise" pg. 3
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