Gloomy Q1 for Pacific Sunwear

NEW YORK – Pacific Sunwear of California late Monday reported a first quarter loss on lower same-store sales, but reiterated guidance for a rebound in both profitability and sales progress in the current period.

In the three months ended May 5, the net loss totaled $5.1 million, or $0.07 a diluted share, versus net income of $11.9 million, or $0.16, in the year-ago quarter. The more recent period’s loss included charges of $0.03 a share to cover the cost of charges associated with its closure of 74 of its Demo units, putting the first quarter performance in line with analysts’ expectations of a loss of $0.04 a diluted share.

Sales were up 6.9% to $320.6 million from $299.9 million during the comparable 2006 period. Comparable-store sales declined 1.2% as PacSun was down 0.5% and Demo comps slid 12.1%.

Gross margin plummeted to 25.8% of sales from 32.4% in the year-ago period.

“Although we ended the quarter with a difficult April, we exited the month with an improved inventory position and an encouraging juniors business trend,” said Sally Frame Kasaks, interim chief executive officer of the Anaheim, California-based teen and young adult specialty chain.

Pac Sun said it “remained comfortable” with its projections of second quarter EPS of $0.18 to $0.20 a diluted share, excluding charges tied to the Demo closures. That’s in line with the current analyst consensus estimate for earnings of $0.18 a diluted share. The guidance assumes a low-single digit increase in comps.

Pac Sun finished the quarter with a total of 1183 units, including 845 PacSun stores, 117 outlets, 212 Demo units and nine of its new One Thousand Steps shops. As of 5 May, the company had closed 14 of the 74 Demo stores slated for phasing out. The other 60 are expected to close during the early part of the current second quarter.