Pacific Sunwear of California (PacSun) knows that teens aspire to the "swag" of the board sports world. The company operates more than 600 mall-based apparel stores (down from a peak of 950) in all 50 US states and Puerto Rico under the names Pacific Sunwear and PacSun, and an e-commerce site. It courts the young and active consumer by representing brands associated with surfing, skateboarding, and snowboarding, including apparel by Billabong, Volcom, and Quicksilver, as well as footwear by DC Shoes, and others. PacSun also sells its own private-label merchandise (Bullhead, Black Poppy, Kirra, and Nollie). Amid a steep decline in sales, the teen-focused chain is closing hundreds of stores.
All of PacSun's sales are rung up in the US and Puerto Rico. The company's largest markets are California (its home state), Texas, and Florida, which combined account for more than a quarter of its stores.
Sales and Marketing
The company reported advertising costs of about $12 million if fiscal 2014 (ended January), versus $14 million in each of the prior two fiscal years.
Excluding discontinued operations, the retailer reported $798 million in sales in fiscal 2014 (ended January), a 2% increase versus the prior year on a comparable 2% same-store sales gain. Sales of women's apparel and accessories rose 6% year over year, while men's apparel and footwear sales were flat.
When store closures are taken into account, Pac Sun's sales declined nearly 1% versus the prior year, and are down 37% over the past five years. The tepid US economy and defection by its young clientele to other retailers are blamed for the chain's poor financial results. Indeed, fiscal 2014 marked the seventh consecutive year of unprofitability, with the chain reporting a loss of $48.7 million. Pac Sun reported negative cash flow on $7.7 million in fiscal 2014, versus a surplus the prior year.
With sales and profits declining, the company has drastically trimmed its budget for capital expenditures to $12 million in fiscal 2014 from $23 million four years ago.
Historically fast-growing, PacSun skid to a halt as the US economy and its sales sputtered. Indeed, the retailer's store count has declined from a peak of 950 to about 600, with more closures planned in fiscal 2015. By closing underperforming shops and renegotiating lease agreements, the company aims to bolster its bottom line. PacSun is also taking steps to win back non-apparel sales lost to faster-growing brands, such as Zumiez. To reverse its slide and regain its street cred, PacSun is expanding the number of stores stocking footwear and accessories, which currently account for about 15% of total sales. Concurrently, in a bid to grow its business with young women, the chain has buffed up its tomboy image. PacSun has begun refurbishing its namesake stores to include bigger fitting rooms for women, and better lighting and displays. The company's proprietary brands account for a growing slice of its sales (49% fiscal 2014). Leading the turnaround effort at PacSun is CEO Gary Schoenfeld. In late 2011 Schoenfeld drove a successful $160 million financing deal, infusing the company with $100 million in revolving credit and $60 million loan.