Pacific Sunwear of California, Inc. (PSUN)
Q2 2010 Earnings Call Transcript
August 24, 2010 5:00 pm ET
Craig Gosselin – Senior Vice President of Human Resources and General Counsel
Gary Schoenfeld – Chief Executive Officer, President and Director
Michael Henry – Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Secretary
Adrienne Tennant – FBR Capital
Janet Kloppenburg – JJK Research
Mitch Kummetz – Robert W. Baird
Dana Telsey – Telsey Advisory Group
Moni Shapiro [ph]
Stacy Pak – SP Research
Christine Chen – Needham and Company
Dorothy Lakner – Caris & Company
Jeff Van Sinderen – B. Riley & Company
Linda Tsai – MKM Partners
Lee Giordano – Imperial Capital
Charu Sharma – KeyBanc Capital Markets
Connie Wong – Wedbush Securities
Previous Statements by PSUN
» Pacific Sunwear of California Q1 2010 Earnings Call Transcript
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Good afternoon. My name is Kasey, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2010 earnings conference call. (Operator instructions) Thank you, Mr. Gosselin. You may begin.
Good afternoon, everyone, and welcome to the Pacific Sunwear of California conference call announcing the company’s fiscal second quarter 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 August 31, 2010. It can be accessed at (800)642-1687 or (706)645-9291, pass code 93436717. The call will also be archived on the PacSun website at www.pacsun.com through midnight on November 15, 2010.
Your 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 2009 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, pacsun.com. All information discussed on the call is as of today, August 24, 2010. Pacific Sunwear undertakes no duty to update this information to reflect future events or circumstances. This call, the web cast and this replay are the property of Pacific Sunwear. It is not for rebroadcast or use by any other party without the prior written consent of Pacific Sunwear. With that said, I'll now turn the call over to Gary.
Good afternoon, and thank you for joining us today. I will start with a few comments about our Q2 results and the mortgage transactions outlined in the press release, comment on the separate press release regarding our exclusive license of the Modern Amusement brand, and continue to provide some overall perspective of having completed my first year as CEO of PacSun. Mike will then provide you with more of the second quarter financial details and our guidance for Q3 of 2010, and then we will look forward to your questions.
Total sales for the second quarter were $218 million, reflecting a comp store sales decline of 10%. Our GAAP EPS loss was $0.36, which on a non-GAAP basis using a normalized 37% tax rate would have been a loss of $0.22.
Highlights during the quarter were the continued improvements in the trending of our Young Men's business, which has improved in each of the last four quarters, and I’m pleased to say it turned the corner to achieve a 2% positive comp for the quarter along with higher merchandise margins.
Our branded board and surf presentation was arguably the best in the mall, and a major shift from 2009 giving us a great platform during the spring and summer, as consumers have clearly shifted to a wear now shopping pattern. Additionally, our select number of shop in shops and collections merchandising are giving brands new opportunities to showcase themselves, and further open the door for emerging brands to once again be featured at PacSun.
With respect to our Juniors business, I noted previously four key elements that we needed to address to create a sustainable growth business for PacSun. Those were strategy, having the right people on the Juniors’ team in place, speed to market and in-store experience. We are making substantial changes and progress in each of these critical areas, and began to have a few small wins in our Juniors business, improving from a negative high 20s comp in Q1 to a negative low 20s comp for the second quarter.
Christine Lee, our GMM of Juniors has now been with us for six months, and our initial efforts to target an older teen girl with a more fashionable aesthetic might be best summed up by a blog posting that Robert noticed last week, which I would like to briefly share with you in case you happened to have missed it. “I have always had a love hate relationship with PacSun. I have just come through about a year of exasperation with them over the preponderance of neon, plaid and neon plaid they insisted on stocking. I get it, the brand is very trend based, but their commitment to trend sometimes means nothing they offer suits my slightly sophisticated late 20s style. I’m sorry if I don’t think hot pink and lime green gida [ph] print hoodies an appropriate item for my lifestyle, but that is the way it goes. A 14-year-old is free to snatch that up, but it is not for me. So imagine my surprise to discover a few weeks ago that I suddenly want to buy everything PacSun is stocking for fall, rich colors, pretty patterns, sweet but simple dresses, and the skirt I’m wearing above. It is just what I’ve been looking for lately.”
She continues on, and I won’t read the rest of the blog, and I will admit that a blog is not quite like having the cover of Vogue magazine, but I think girls are beginning to notice the changes at PacSun. We recognize they have got a myriad of shopping alternatives, so we know we have a lot still to do to become one of their favorite destinations, but I continue to believe in the progress we can make over the next 6 to 12 months.