Despite ending the final quarter of fiscal 2014 on a high note, Pacific Sunwear of California Inc. PSUN had a soft start to fiscal 2015 and provided a bleak outlook for the second quarter. Consequently, the company’s shares nosedived 12.2% during after-market trading hours yesterday.
The company posted adjusted loss of 12 cents a share for the first quarter of fiscal 2015, wider than both the Zacks Consensus Estimate and the year-ago quarter loss per share of 11 cents.
Pacific Sunwear of California Inc. – Earnings Surprise | FindTheCompany
On a GAAP basis, the company reported loss of 5 cents per share from continuing operations compared with a loss of 15 cents per share reported in the year-ago quarter.
Detailed Performance
Net sales of this Anaheim, CA-based specialty retailer were $166.5 million, down 2.7% year over year and short of the Zacks Consensus Estimate of $171 million. Both Men’s and Women’s categories displayed deterioration.
Comparable-store sales (comps), including e-commerce, fell 2%. E-commerce sales declined 3% year over year while it represented 7% of total sales in the first-quarter.
Gross profit remained almost flat at $44.6 million with gross margin expanding 100 basis points to approximately 27%, owing to an increase in merchandise margins partially offset by store occupancy charges.
Operating loss slightly increased to $7.5 million from a loss of $7.4 million in the prior-year quarter.
West Coast port unrest and unfavorable weather conditions impacted the company’s performance. Pacific Sunwear, under its President and CEO Gary H. Schoenfeld, has undertaken several initiatives to strengthen and grow its brand with a hope to turnaround the company’s performance.
Financial Update
Pacific Sunwear ended the quarter with cash and cash equivalents of $15.2 million along with long-term debt of nearly $95.3 million.
Store Update
At quarter end, the company operated 605 stores as against 618 outlets a year ago. Going ahead, management intends to open nearly 10 stores and shut down approximately 10-20 stores during the rest of fiscal 2015 with the bulk closures happening in the fourth quarter.
Guidance
The company estimates bottom lines between a loss of 5 cents per share and earnings of 1 cent per share for second-quarter fiscal 2015, compared with a loss of 3 cents in second-quarter fiscal 2014. Currently, the Zacks Consensus Estimate for the quarter is pegged at a loss of 11 cents a share, which may witness upward revision. Management projects revenues between $201 million and $209 million.
Moreover, management expects comps to be in the range of negative 4% to flat. Gross margin (including buying, distribution and occupancy) is projected at around 27%–29% while SG&A is anticipated to range from $54 million to $56 million in the second quarter.
Other Stocks to Consider
Pacific Sunwear currently has a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include American Eagle Outfitters, Inc. AEO, Boot Barn Holdings Inc. BOOT and Bebe Stores Inc. BEBE. While American Eagle sports a Zacks Rank #1 (Strong Buy), Boot Barn Holdings and Bebe Stores carries a Zacks Rank #2 (Buy).
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