Dimmer Profits for PacSun

The retailer continues to struggle with declining sales.
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Pacific Sunwear

(PSUN)

posted a big drop in fourth-quarter earnings as the surf-clothing retailer continues to struggle with declining sales, though results met Wall Street's expectations.

The company's fourth-quarter profit slid to $9.1 million, or 13 cents a share, from $47 million, or 63 cents a share, a year earlier.

The results for the latest quarter included charges of 24 cents a share related to asset impairments and writedowns from store closures in its "demo" division. Excluding charges, earnings were 37 cents a share, down from 60 cents on a comparable basis a year ago.

The earnings before the charges matched Thomson First Call's average analyst estimate and were in line with Pacific Sunwear's February projection of 36 cents to 38 cents.

Total sales rose 7.8% to $424.9 million but missed Wall Street's estimate of $456 million. Same-store sales, or sales at stores open at least a year, dropped 4.3%.

The quarter caps a year in which Pacific Sunwear grappled with declining same-store sales, which eventually resulted in the departure of its chief executive, Seth Johnson. So far, a turnaround has yet to bear fruit, as the company had a weaker-than-expected holiday and cut its guidance last month.

"Although fiscal 2006 was disappointing from an earnings standpoint, we have moved aggressively to get the company back on track and positioned for future growth," said interim CEO Sally Frame Kasaks. "Key to this effort has been decreasing the inventory density in our stores to enable us to offer a clearer and more compelling merchandise presentation to our customers."

For the first half of the year, Pacific Sunwear sees earnings of 23 cents to 27 cents a share, before charges. Analysts' average forecasts call for earnings of 31 cents a share for the first two quarters.