By Maria Armental
Pacific Sunwear of California Inc. swung to a loss in the third
quarter, dragged down by a large charge associated with a 2011 loan
deal with Golden Gate Capital.
Excluding that charge, the company's results topped analysts'
expectations, sending shares up 15%, to $1.96, in recent
after-hours trading.
For the period ended Nov. 1, the company reported that sales at
existing stores, a key metric that looks at sales across stores
open for at least a year, rose 4%, the 11th consecutive quarter of
growth, company officials said.
The company's results buck a recent trend of weak or declining
sales at retailers, largely blamed on higher promotional events.
Teen retailers in particular--Pacific Sunwear targets 17- to
24-year-olds--have been hardest hit by increasing competition from
so-called fast-fashion peers, such as Hennes & Mauritz AB,
better known as H&M, and Forever 21 Inc.
In 2011, the Anaheim, Calif., retailer turned to San Francisco
private-equity firm Golden Gate Capital for help. The equity firm
had helped other retailers, including Eddie Bauer Holdings Inc. and
Express Inc.
Under the deal, Pacific Sunwear received a five-year $60 million
secured-term loan to help buyout leases and close stores while
Golden Gate Capital got two board seats and an option to buy 19.9%
of Pacific Sunwear's shares at $1.75.
Pacific Sunwear ended the three-month period through Nov. 1 with
620 stores, down 15 stores from the year-ago period.
Overall, the company reported a loss of $469,000, or a penny a
share, compared with a year-earlier profit of $17.2 million, or 24
cents a share. Excluding certain items, the loss from continuing
operations was three cents a share, compared with five cents a
share a year earlier.
Revenue rose to $212.3 million from $202.8 million a year
earlier.
Analysts surveyed by Thomson Reuters had expected a loss of four
cents a share on $208 million in sales.
For the current quarter, the company expects to lose 12 cents to
17 cents a share on sales between $218 million and $227 million,
compared with the Wall Street consensus of a loss of 12 cents a
share and sales of $221.7 million, according to Thomson
Reuters.
Pacific Sunwear expects sales at existing stores to stay flat or
increase up to 4%.
Through Wednesday's closing, the company's stock was down 49%
for the year.
Write to Maria Armental at maria.armental@wsj.com
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