- Comparable store sales up
6%
- Twelfth straight quarter of positive
comparable store sales
Pacific Sunwear of California, Inc. (Nasdaq:PSUN) (the "Company"),
announced today that net sales for the fourth quarter of fiscal
2014 ended January 31, 2015, were $231.6 million versus net sales
of $218.6 million for the fourth quarter of fiscal 2013 ended
February 1, 2014. Comparable store sales for the fourth quarter of
fiscal 2014 increased 6%. The Company ended the fourth quarter of
fiscal 2014 with 605 stores versus 618 stores a year ago.
"We are very pleased with our Q4 results led by a 6% increase in
same-store sales and a $7 million improvement in our operating
results," said Gary H. Schoenfeld, President and CEO. "This also
marks our 12th straight quarter of positive comparable store sales
and for fiscal 2014, a 500 basis point increase in gross margins
over this same three year period which has been characterized as a
highly promotional environment for our industry."
"Building on a strong finish to 2014, we continue to believe in
the distinct positioning that we are creating for PacSun which
includes developing the most relevant Men's and Women's brands for
our targeted 17-24 year old customers and showcasing the
creativity, diversity and optimism that embodies Southern
California lifestyle," Mr. Schoenfeld said. "We are excited as we
begin the new year and believe that our brand initiatives for 2015
have never been more compelling in the 35 year history of
PacSun."
Mr. Schoenfeld added, "Looking ahead, we are similarly focused
on our financial goals for fiscal 2015 which include: continuing to
achieve positive comparable store sales; furthering our gross
margins through elevated merchandising and inventory productivity;
and incrementally leveraging expenses. This year will also include
investments in key omni-channel initiatives which we believe will
further strengthen our position for the long-term."
Fourth Quarter Results
On a GAAP basis, the Company reported a loss from continuing
operations of $26.0 million, or $(0.38) per diluted share, for the
fourth quarter of fiscal 2014, compared to a loss from continuing
operations of $22.0 million, or $(0.32) per diluted share, for the
fourth quarter of fiscal 2013. The loss from continuing operations
for the Company's fourth quarter of fiscal 2014 included a non-cash
loss of $14.3 million, or $(0.21) per diluted share, compared to a
non-cash loss of $3.6 million, or $(0.05) per diluted share, for
the fourth quarter of fiscal 2013, related to the derivative
liability that resulted from the issuance of Convertible Series B
Preferred Stock (the "Series B Preferred") in connection with the
term loan financing the Company completed in December 2011.
On a non-GAAP basis, excluding the non-cash loss on the
derivative liability, other one-time charges, and assuming a tax
benefit of approximately $4.0 million, the Company would have
incurred a loss from continuing operations for the fourth quarter
of fiscal 2014 of $7.1 million, or $(0.10) per diluted share, as
compared to a loss from continuing operations of $11.8 million, or
$(0.17) per diluted share, for the same period a year ago.
Full Year Results
Net sales for fiscal 2014 were $826.8 million versus net sales
of $797.8 million for fiscal 2013. Comparable store sales increased
3% during fiscal 2014.
On a GAAP basis, the Company reported a loss from continuing
operations of $29.4 million, or $(0.42) per diluted share, for the
2014 fiscal year, compared to a loss from continuing operations of
$47.0 million, or $(0.69) per diluted share for the 2013 fiscal
year. The loss from continuing operations for the 2014 fiscal year
included a non-cash gain of $2.3 million, or $0.03 per diluted
share, compared to a non-cash loss of $10.6 million, or $(0.16) per
diluted share for the 2013 fiscal year, related to the derivative
liability.
On a non-GAAP basis, excluding the non-cash gain on derivative
liability, and assuming a tax benefit of approximately $10.9
million, the Company would have incurred a loss from continuing
operations for the 2014 fiscal year of $18.5 million, or $(0.27)
per diluted share, as compared to a loss from continuing operations
of $23.1 million, or $(0.34) per diluted share, for the 2013 fiscal
year.
Financial Outlook for First Quarter of Fiscal
2015
The Company's guidance range for the first quarter of fiscal
2015 contemplates a non-GAAP loss per diluted share from continuing
operations of between $(0.14) and $(0.11), compared to $(0.11) in
the first quarter of fiscal 2014. The Company stated that it
believes the disruption at the Southern California ports, coupled
with severe cold weather in many parts of the country has adversely
affected comparable store sales by 2-3% and its first quarter
non-GAAP loss per diluted share by approximately $(0.03) to
$(0.04).
The first quarter non-GAAP guidance range is based on the
following assumptions:
- Comparable store sales from minus 1% to plus 2%;
- Revenue from $167 million to $173 million;
- Gross margin rate, including buying, distribution and
occupancy, of 26% to 28%;
- SG&A expenses in the range of $51 million to $53 million;
and
- Applicable non-GAAP adjustments are tax effected using a
normalized annual income tax rate.
The Company's first quarter of fiscal 2015 guidance range
excludes the quarterly impact of the change in the fair value of
the derivative liability due to the inherently variable nature of
this financial instrument.
Derivative Liability
In fiscal 2011, as a result of the issuance of the Series B
Preferred in connection with the Company's $60 million senior
secured term loan financing with an affiliate of Golden Gate
Capital, the Company recorded a derivative liability equal to
approximately $15 million, which represented the fair value of the
Series B Preferred upon issuance. In accordance with applicable
U.S. GAAP, the Company has marked this derivative liability to fair
value through earnings and will continue to do so on a quarterly
basis until the shares of Series B Preferred are either converted
into shares of the Company's common stock or until the conversion
rights expire (December 2021).
About Pacific Sunwear of California, Inc.
Pacific Sunwear of California, Inc. and its subsidiaries
(collectively, "PacSun" or the "Company") is a leading specialty
retailer rooted in the action sports, fashion and music influences
of the California lifestyle. The Company sells a combination of
branded and proprietary casual apparel, accessories and footwear
designed to appeal to teens and young adults. As of March 25, 2015,
the Company operates 605 stores in all 50 states and Puerto Rico.
PacSun's website address is www.pacsun.com.
The Company will be hosting a conference call today at 4:30 p.m.
Eastern time to review the results of its fourth fiscal quarter. A
telephonic replay of the conference call will be available,
beginning approximately two hours following the call, for one week
and can be accessed in the United States and Canada at (855)
859-2056 or internationally at (404) 537-3406; passcode: 8519739.
For those unable to listen to the live Web broadcast or utilize the
call-in replay, an archived version will be available on the
Company's investor relations website through midnight, May 27,
2015.
About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP
financial measures. For a description of these non-GAAP financial
measures and reconciliations of these non-GAAP financial measures
to the most directly comparable financial measures prepared in
accordance with Generally Accepted Accounting Principles ("GAAP"),
please see the accompanying table titled "Reconciliation of
Selected GAAP Measures to Non-GAAP Measures" and the section
following such table titled "About Non-GAAP Financial
Measures."
Pacific Sunwear Safe Harbor
This press release contains "forward-looking statements"
including, without limitation, the statements made by Mr.
Schoenfeld in the second, third and fourth paragraphs, and the
statements made by the Company under the heading "Financial Outlook
for First Quarter of Fiscal 2015." In each case, these statements
are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The Company intends that
these forward-looking statements be subject to the safe harbors
created thereby. These statements are not historical facts and
involve estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed in such
forward-looking statements. Uncertainties that could adversely
affect the Company's business and results include, among others,
the following factors: increased sourcing and product costs;
adverse changes in U.S. and world economic conditions generally;
adverse changes in consumer spending; changes in consumer demands
and preferences; adverse changes in same-store sales; higher than
anticipated markdowns and/or higher than estimated selling, general
and administrative costs; currency fluctuations; competition from
other retailers and uncertainties generally associated with apparel
retailing; merchandising/fashion risk; lower than expected sales
from private label merchandise; reliance on key personnel; economic
impact of natural disasters, terrorist attacks or war/threat of
war; shortages of supplies and/or contractors as a result of
natural disasters or terrorist acts, which could cause unexpected
delays in store relocations, renovations or expansions; reliance on
foreign sources of production; and other risks outlined in the
Company's filings with the Securities and Exchange Commission
("SEC"), including but not limited to the Company's Annual Report
on Form 10-K for the fiscal year ended February 1, 2014, and
subsequent periodic reports filed with the SEC. Historical results
achieved are not necessarily indicative of future prospects of the
Company. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
The Company assumes no obligation to update or revise any such
forward-looking statements to reflect events or circumstances that
occur after such statements are made. Nonetheless, the Company
reserves the right to make such updates from time to time by press
release, periodic report or other method of public disclosure
without the need for specific reference to this press release. No
such update shall be deemed to indicate that other statements not
addressed by such update remain correct or create an obligation to
provide any other updates.
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(Unaudited, in
thousands, except per share data) |
|
|
|
|
|
|
For the Fourth
Quarter Ended |
For the Fiscal
Year Ended |
|
January 31,
2015 |
February 1,
2014 |
January 31,
2015 |
February 1,
2014 |
|
|
|
|
|
Net sales |
$ 231,593 |
$ 218,591 |
$ 826,777 |
$ 797,792 |
Gross margin |
60,348 |
43,704 |
223,233 |
199,244 |
SG&A expenses |
67,766 |
58,260 |
238,374 |
220,677 |
Operating loss |
(7,418) |
(14,556) |
(15,141) |
(21,433) |
Loss (gain) on derivative liability |
14,268 |
3,638 |
(2,272) |
10,638 |
Interest expense, net |
3,939 |
3,556 |
15,759 |
14,108 |
Loss from continuing operations before income
taxes |
(25,625) |
(21,750) |
(28,628) |
(46,179) |
Income taxes |
365 |
283 |
727 |
797 |
Loss from continuing operations |
(25,990) |
(22,033) |
(29,355) |
(46,976) |
Loss from discontinued operations, net of tax
effects |
— |
(504) |
— |
(1,745) |
Net loss |
$ (25,990) |
$ (22,537) |
$ (29,355) |
$ (48,721) |
|
|
|
|
|
Loss from continuing operations per
share: |
|
|
|
|
Basic and diluted |
$ (0.38) |
$ (0.32) |
$ (0.42) |
$ (0.69) |
Loss from discontinued operations per
share: |
|
|
|
|
Basic and diluted |
$ — |
$ (0.01) |
$ — |
$ (0.02) |
Net loss per share: |
|
|
|
|
Basic and diluted |
$ (0.38) |
$ (0.33) |
$ (0.42) |
$ (0.71) |
Weighted-average shares outstanding: |
|
|
|
|
Basic and diluted |
69,261 |
68,586 |
69,079 |
68,465 |
|
|
|
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Unaudited, in
thousands) |
|
|
|
|
January 31,
2015 |
February 1,
2014 |
|
|
|
ASSETS |
Current assets: |
|
|
Cash and cash equivalents |
$ 22,588 |
$ 27,769 |
Inventories |
81,658 |
83,073 |
Prepaid expenses |
12,692 |
13,404 |
Other current assets |
3,992 |
6,089 |
Total current assets |
120,930 |
130,335 |
Property and equipment, net |
88,751 |
96,797 |
Other assets |
42,598 |
45,507 |
Total assets |
$ 252,279 |
$ 272,639 |
|
|
|
LIABILITIES AND
SHAREHOLDERS' (DEFICIT) EQUITY |
Current liabilities: |
|
|
Accounts payable |
$ 36,775 |
$ 46,034 |
Derivative liability |
28,448 |
30,720 |
Other current liabilities |
48,183 |
37,286 |
Total current liabilities |
113,406 |
114,040 |
Deferred lease incentives |
10,804 |
12,889 |
Deferred rent |
14,694 |
15,440 |
Long-term debt |
94,424 |
86,075 |
Other liabilities |
28,368 |
26,046 |
Total liabilities |
261,696 |
254,490 |
Total shareholders' (deficit) equity |
(9,417) |
18,149 |
Total liabilities and shareholders' (deficit)
equity |
$ 252,279 |
$ 272,639 |
|
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited, in
thousands) |
|
|
|
|
For the Fiscal
Year Ended |
|
January 31,
2015 |
February 1,
2014 |
Cash flows from operating activities: |
|
|
Net loss |
$ (29,355) |
$ (48,721) |
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |
|
|
Depreciation and amortization |
24,013 |
25,511 |
Asset impairment |
3,323 |
3,204 |
Non-cash stock-based compensation |
1,621 |
2,643 |
Amortization of debt discount |
2,997 |
2,164 |
(Gain) loss on derivative liability |
(2,272) |
10,638 |
Loss on disposal of property and
equipment |
278 |
150 |
Gain on lease terminations |
(191) |
(209) |
Changes in assets and liabilities: |
|
|
Inventories |
1,415 |
7,608 |
Accounts payable and other
current liabilities |
1,503 |
(11,175) |
Other assets and
liabilities |
7,400 |
463 |
Net cash provided by (used in)
operating activities |
10,732 |
(7,724) |
Cash flows from investing activities: |
|
|
Purchases of property,
equipment, and intangible assets |
(15,595) |
(12,337) |
Cash flows from financing activities: |
|
|
Proceeds from credit facility
borrowings |
15,000 |
— |
Payments under credit facility
borrowings |
(15,000) |
— |
Proceeds from mortgage
borrowings |
618 |
— |
Principal payments under
mortgage borrowings |
(554) |
(576) |
Payments for debt issuance
costs |
(116) |
— |
Principal payments under
capital lease obligations |
(639) |
(569) |
Proceeds from exercise of stock
options |
373 |
242 |
Net cash used in financing
activities |
(318) |
(903) |
Net decrease in cash and cash
equivalents |
(5,181) |
(20,964) |
Cash and cash equivalents, beginning of
period |
27,769 |
48,733 |
Cash and cash equivalents, end of period |
$ 22,588 |
$ 27,769 |
|
|
|
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
SELECTED STORE
OPERATING DATA |
|
|
|
|
|
|
January 31,
2015 |
February 1,
2014 |
Stores open at beginning of year |
618 |
644 |
Stores opened during the period |
5 |
4 |
Stores closed during the period |
(18) |
(30) |
Stores open at end of period |
605 |
618 |
|
|
|
|
|
|
January 31,
2015 |
February 1,
2014 |
|
|
Square Footage |
|
Square Footage |
|
# of Stores |
(000s) |
# of Stores |
(000s) |
PacSun Core stores |
485 |
1,907 |
502 |
1,965 |
PacSun Outlet stores |
120 |
485 |
116 |
467 |
Total stores |
605 |
2,392 |
618 |
2,432 |
|
|
|
|
|
|
|
|
|
|
PACIFIC SUNWEAR OF
CALIFORNIA, INC. |
RECONCILIATION OF
SELECTED GAAP MEASURES TO NON-GAAP MEASURES |
(Unaudited, in
thousands, except per share data) |
|
|
|
|
|
|
For the Fourth
Quarter Ended |
For the Fiscal
Year Ended |
|
January 31,
2015 |
February 1,
2014 |
January 31,
2015 |
February 1,
2014 |
|
|
|
|
|
GAAP loss from continuing operations |
$ (25,990) |
$ (22,033) |
$ (29,355) |
$ (46,976) |
Store closure charge (markdown
allowance) |
(171) |
— |
— |
— |
Software impairment |
— |
— |
987 |
— |
Termination benefits |
442 |
— |
442 |
— |
Derivative liability |
14,268 |
3,638 |
(2,272) |
10,638 |
Deferred tax valuation
allowance |
4,369 |
6,624 |
11,670 |
13,271 |
Non-GAAP loss from continuing operations |
$ (7,082) |
$ (11,771) |
$ (18,528) |
$ (23,067) |
|
|
|
|
|
GAAP loss from continuing operations per
share |
$ (0.38) |
$ (0.32) |
$ (0.42) |
$ (0.69) |
Store closure charge (markdown
allowance) |
— |
— |
— |
— |
Software impairment |
— |
— |
0.01 |
— |
Termination benefits |
0.01 |
— |
— |
— |
Derivative liability |
0.21 |
0.05 |
(0.03) |
0.16 |
Deferred tax valuation
allowance |
0.06 |
0.10 |
0.17 |
0.19 |
Non-GAAP loss from continuing operations per
share |
$ (0.10) |
$ (0.17) |
$ (0.27) |
$ (0.34) |
Shares used in calculation |
69,261 |
68,586 |
69,079 |
68,465 |
|
|
|
|
|
ABOUT NON-GAAP FINANCIAL MEASURES
The accompanying press release dated March 25, 2015
contains non-GAAP financial measures. These non-GAAP financial
measures include non-GAAP loss from continuing operations and
non-GAAP loss from continuing operations per diluted share for the
fourth quarters and fiscal years 2014 and 2013, respectively, and
non-GAAP loss from continuing operations per diluted share guidance
for the first quarter of fiscal 2015. Non-GAAP financial measures
should not be considered as a substitute for, or superior to,
measures of financial performance prepared in accordance with GAAP.
These non-GAAP financial measures do not reflect a comprehensive
system of accounting, differ from GAAP measures with the same names
and may differ from non-GAAP financial measures with the same or
similar names that are used by other companies. The Company
computes non-GAAP financial measures using the same consistent
method from quarter to quarter and year to year. The Company may
consider whether other significant items that arise in the future
should be excluded from the non-GAAP financial measures. The
Company has excluded the following items from all of its non-GAAP
financial measures:
- Store closure charge (markdown allowance)
- Software impairment
- Termination benefits
- Derivative liability
- Deferred tax valuation allowance
The Company believes that these non-GAAP financial measures
provide meaningful supplemental information regarding the Company's
operating results primarily because they exclude amounts that are
not considered part of ongoing operating results when planning and
forecasting and when assessing the performance of the organization,
individual operating segments or its senior management. In
addition, the Company believes that non-GAAP financial information
is used by analysts and others in the investment community to
analyze the Company's historical results and in providing estimates
of future performance and that failure to report these non-GAAP
measures, could result in confusion among analysts and others and
create a misplaced perception that the Company's results have
underperformed or exceeded expectations.
CONTACT: Michael W. Kaplan
Chief Financial Officer
(714) 414-4003