PacSun Earnings Up 48%

The teen retailer raised guidance twice during the quarter and still surpassed the numbers.
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Per-share earnings at

Pacific Sunwear

(PSUN)

jumped 48% on a combination of strong sales and expense controls.

In its quarter ended Nov. 1, the apparel chain earned $24.5 million, or 31 cents a share. That was up from the third quarter last year, when Pacific Sunwear earned $15.9 million, or 21 cents a share.

The company reported last week that third-quarter sales rose 23% from the year-ago period to $281.3 million.

That result topped both Wall Street's expectations and the company's own forecast.

Analysts polled by Thomson First Call were expecting Pacific Sunwear to earn 29 cents a share in the quarter on sales of $277.5 million. The company raised its earnings guidance twice during the quarter, most recently to 29 cents a share last month.

For the fourth quarter, Pacific Sunwear said it was "comfortable" with Wall Street's forecast that it will earn 37 cents a share. Wall Street is also projecting sales of $306.17 million in the quarter. The company did not project total sales in the quarter, but said it expected its same-store sales, which compare results at like outlets open more than one year, to grow by 5% to 6% in the quarter.

Pacific Sunwear said it expects its earnings to grow 20% next year. Analysts have projected that per-share earnings will grow 18.8% to $1.11 next year from 94 cents this year.

The company's third quarter benefited from big same-store sales increases. For the quarter, Pacific Sunwear's comparable store sales grew by 13.8%. While same-store sales at the company's eponymous chain of surf apparel outlets grew by 13.2%, comparable-store sales at Demo, its new chain offering hip-hop fashions, grew at a torrid 19.9% annual rate.

Also helping the company's bottom line were tight cost controls. Pacific Sunwear's gross profit margin, which represents the difference between what it charges customers for its clothes and what it pays suppliers for them, rose 1.2 percentage points to 35.8% of sales.

Meanwhile, the company's operating margin expanded by 2.6 percentage points to 14% of sales. Boosting the company's bottom line margin: a decline in marketing, general and administrative costs as a portion of sales. Such expenses fell 1.4 percentage points to 21.8% of revenue.

Shares in the apparel retailer closed down 58 cents, or 2.6%, to $21.60 on Monday. Shares were higher in after-hours trading however, rising 3.5%.