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Pacific Sunwear of California (PSUN)

Q1 2011 Earnings Call

May 24, 2011 4:30 pm ET


Michael Kaplan - Chief Financial Officer and Senior Vice President

Gary Schoenfeld - Chief Executive Officer, President and Director

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


Lee Giordano - Imperial Capital

Dorothy Lakner - Caris & Company

Travis Williams - Stephens Inc.

Christine Chen - Needham & Company, LLC

Betty Chen - Wedbush Securities Inc.

Paul Lejuez - Nomura Securities Co. Ltd.

Charu Sharma - KeyBanc Capital Markets Inc.

Pamela Quintiliano - Oppenheimer & Co. Inc.

Andrew Burns - D.A. Davidson & Co.

Jeffrey Klinefelter - Piper Jaffray Companies

David Griffith - Roth Capital Partners, LLC

Unknown Analyst -



Good evening. My name is Zatania, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2011 Earnings Conference Call. [Operator Instructions] Mr. Craig Gosselin, you may begin your conference.

Craig Gosselin

Thank you. Good afternoon, everyone, and welcome to the Pacific Sunwear of California Conference Call announcing our fiscal first quarter 2011 financial results. My name is Craig Gosselin. I'm the Senior Vice President, General Counsel and Head of Human Resources. This call is being recorded, and a playback will be available starting today, approximately 2 hours after the call through midnight on May 30, 2011. It can be accessed at (800) 642-1687 or (706) 645-9291, passcode 67094074. The call will also be archived on the PacSun website at through midnight on August 24, 2011.

Your speakers today are Gary Schoenfeld, Chief Executive Officer; and Michael Kaplan, 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 also be found in the Investor Relations section on our website at

All information discussed on the call is as of today, May 24, 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 Pacific Sunwear. It is not for rebroadcast or use by any other party without the written prior consent of PacSun.

With that said, I'll now turn the call over to Gary.

Gary Schoenfeld

Thank you, and good afternoon, and thanks for joining us as we discuss our results for the first quarter and our outlook for Q2. I think in many cases, 2 of the toughest parts of any turnaround have to do with the challenging cultures and reversing, what by definition, is a systemic decline in sales. I'm pleased to say over the past 18 months, we've hired 8 new executives across multiple functions, and I have the opportunity today on this call to introduce you to Michael Kaplan, who just joined us as CFO 3 weeks ago.

During this period, we've also completely transformed our Women's merchandising and design, our vast field leadership team and several other functions within the business, including marketing, online and human resources. We've closed nearly 100 stores, rebuilt critical brand relationships and perhaps, most importantly, we are creating a new culture within PacSun based upon creativity, collaboration, trust and a huge desire to win.

We have succeeded in attracting a broad range of passionate, creative and experienced people who all share our high aspirations for PacSun, once again becoming a favorite place to shop for girls and guys in high school and college, featuring great brands and a strong sense of style, grounded in our third year heritage of California and action sports.

So as we look at our first quarter results, we are still a long way from popping any champagne, but I have to say it felt pretty good to end the quarter with a plus sign in the comp sales column for the first time since Q4 2007. The biggest change during the quarter was in our Women's business, which had a positive 4% comp. I said previously that I believe it's critical that we reestablish ourselves as the top destination for spring and summer, and we are beginning to see progress towards that objective.

Within our Men's business, we had a negative 3% comp, which fell short of our expectations, largely due to softness in our most seasonal categories of board shorts and sandals. Those of you who know me know that in general, I hate to talk about weather, but the reality is that it does affect our business at certain seasonal times, and there was a clear difference in the performance of our Men's business, with positive comps in the southern half of the country compared to the northern half, where the kickoff for spring and summer has yet to really materialize.

So I'll sum up by saying that I'm generally pleased with the progress for our business in the first quarter and hope that we can continue to build momentum as the year progresses. There's no question that the merchandising and execution in our stores has vastly improved, yet we know we still have a lot of work ahead of us. Customers have many choices. We still have real estate challenges to resolve. Consumer response to higher prices this fall is hard to predict, and having made so many organizational changes internally, it will still take some time for our team to consistently execute at the levels that I believe we are capable of.

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