Pacific Sunwear of California, Inc. (PSUN)

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Pacific Sunwear of California (PSUN)

Q4 2010 Earnings Call

March 15, 2011 4:30 pm ET


Michael Henry - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Secretary

Craig Gosselin - Senior Vice President of Human Resources and General Counsel

Gary Schoenfeld - Chief Executive Officer, President and Director


Lee Giordano - Imperial Capital

Dorothy Lakner - Caris & Company

Adrienne Tennant - Janney Montgomery Scott LLC

Betty Chen - Wedbush Securities Inc.

Charu Sharma - KeyBanc Capital Markets Inc.

Sean Naughton - Piper Jaffray Companies

Mitchel Kummetz - Robert W. Baird & Co. Incorporated

Marni Shapiro - The Retail Tracker

Andrew Burns - D.A. Davidson & Co.

David Griffith - Cobia Capital

Jeffrey Van Sinderen - B. Riley & Co., LLC

Janet Kloppenburg - JJK Research


Craig Gosselin

Good afternoon and welcome to the Pacific Sunwear of California Conference Call announcing the company's fiscal fourth quarter and year end 2010 financial results. This is Craig Gosselin, Senior Vice President, General Counsel and Head of Human Resources. This call is being recorded and the playback will be available starting today, approximately two hours after the call, through midnight on March 22, 2011. It can be accessed at (800) 642-1687 or (706) 645-9291, passcode 48775011. The call will also be archived on the PacSun website at through midnight on May 18, 2011.

The speakers today are Gary Schoenfeld, Chief Executive Officer; and Mike Henry, Chief Financial Officer. Today's call will be limited to one hour and questions will be limited to one per participant. Before I turn the call over to Gary, I'd like to note that statements and discussions during today's call will contain forward-looking information about our future financial performance and prospects. Our actual results could differ materially from those contained in our forward-looking statements. Risks and uncertainties that could cause our business and financial results to differ materially from those in the forward-looking statements are included in our fiscal 2010 Form 10-K and in subsequent filings we made with the SEC, as well as in the earnings press release we issued today. These documents can be found in the Investor Relations section on our website at All information discussed on the call is as of today, March 15, 2011. Pacific Sunwear undertakes no duty to update this information to reflect future events or circumstances. This call, the webcast and its replay are the property of PacSun. It is not for rebroadcast or use by any other party without the prior written consent of PacSun. With that said, I'll now turn the call over to Gary.

Gary Schoenfeld

Good afternoon and thank you for joining us today. I will cover some of the key points from our fourth quarter and then discuss our priorities for 2011 before turning the call over to Mike to review the financial details. Obviously, our fourth quarter results were very disappointing. After seeing the trend improvement in our business over the first three quarters of the year, with Men's turning to a positive comp and Women's improving from a trend perspective in the third quarter, we went into the fourth quarter believing we had a good shot at getting back to a positive comp. Yet, as we indicated in early January, while Men has achieved a low single-digit comp for the quarter and the year, Women's reverted to earlier trends with negative a 20% comp, resulting in total sales for the quarter of $263 million and a comp store sales decline of 7% for the fourth quarter. Our GAAP EPS loss was $0.53. On a comparable non-GAAP basis using a normalized tax rate, our EPS loss would've been $0.33, which was in line with our revised guidance of a loss of $0.31 to $0.34.

So as we begin 2011, regaining our position as the leading spring summer destination for college and high school, guys and girls is among our highest priorities. Importantly, this has been a critical piece to our strategy for the past year and is not just a knee-jerk reaction to a tough fourth quarter. PacSun, in conjunction with our key heritage brands, has to win at this time of the year. I believe our branded and proprietary assortment across a range of merchandise categories, including swim, shorts, sandals, tees, tanks, lace and summer dresses should be among the best in the mall. For our Women's business, we obviously don't expect to secure the top position in one season, but I do believe that all of the internal changes we've been making over the past 15 months will result in positive momentum for Women's in the first half of this year and the initial response to our new women's merchandising for spring has been very encouraging.

Other key priorities for the year include continuing to improve the connection with our existing customers, in store and online, and attracting new customers to PacSun. Having changed 100% of our field leadership team over the past year and more than 50% of our district managers, we remain deeply committed to shifting from a, what I used to call a fold-the-T-shirt culture, to one that truly eventually wakes up everyday passionate about our customers, our brands and our product. Customers are giving us positive feedback that they are noticing the difference. Yet, we still have a number of opportunities for further improvement with product knowledge and digital merchandising, two critical areas of focus for our team in 2011. Similarly, we have a number of key initiatives underway online, including the launch of our first mobile app and a significant refresh to our website, both targeted for completion by the end of the first quarter. Additionally, as the year unfolds, our customers will begin to see some more advertising from PacSun both online and through traditional media.

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