PacSun loss widens in Q3 loss; to close up to 200 stores
Anaheim, Calif. — Pacific Sunwear of California Inc. reported Wednesday that losses widened in the third quarter to $17.6 million, from $7.1 million a year earlier. The decline was due in large part to charges associated with store closures.
In a move to improve its position, the teen retailer also announced plans to close up to 200 underperforming stores over the next 14 months and said that it secured two multimillion-dollar loans. PacSun received a $60 million loan from Golden Gate Capital for two board seats and the right to buy a 20% stake in the company. It has also secured a five-year, $100 million revolver from Wells Fargo to replace an existing line.
"The combination of these transactions greatly enhances our financial and operating position, and is another critical step forward as we work to re-establish PacSun as a leading specialty retailer across the U.S.," president and CEO Gary H. Schoenfeld said in a statement.
The closures will allow PacSun to turn its full focus to the remaining 550 to 600 store locations. PacSun has agreed with landlords to buy out about 75 leases for a combined $13 million, and has negotiated short-term extensions for about 50. Leases for 115 stores are set to expire at the end of 2012.
Revenue declined in the period to $242 million from $257.9 million last year, beating Wall Street’s expected $233.2 million in sales. Same-store sales fell 3%.
ShopperTrak: Retail sales flat first week of December
Chicago — A report released Wednesday by ShopperTrak said that sales increased just 0.2% year-over-year for the week ending in Dec. 3, representing a 22.5% decline from the prior week, which held the largest Black Friday in history — both in terms of sales and traffic.
According to ShopperTrak, this sharp decline in retail sales is typical of the week following Thanksgiving. Although shoppers have an initial burst of activity spurred on by Black Friday sales promotions, they often stay home during the following week.
“After the ‘Black’ weekend promotions play out, shoppers settle back and shop online for Cyber Monday deals,” ShopperTrak founder Bill Martin said. “They assess their holiday shopping lists and budgets, and over the next few weeks they will head back to stores in increasing numbers to finish shopping.”
As ShopperTrak reported earlier this month, Black Friday weekend seems to be shifting to encompass days prior to the big shopping event. Stores saw more foot-traffic before Black Friday this year, indicating consumers shopped earlier in the season and possibly contributing to the drop-off last week.
Chanukah also started later this year than last, and Cyber Monday was the largest in its history. Both of these shifts contributed to a lackluster week in retail sales at brick-and-mortar stores.
“Our records indicate Monday through Wednesday for each of the first two weeks after Thanksgiving historically have the lowest shopper traffic of the entire shopping period between Thanksgiving and Christmas,” Martin said. “These days offer the best shopping experience for holiday season shoppers who don’t like crowds but still want a good merchandise selection. There is still a lot of holiday shopping left to be done.”
Dollar stores offer continued competition
Walmart faces increased competition from dollar stores, as their value proposition still resonates with cash-strapped consumers. Dollar General, for example reported that net income for its third quarter was $171 million, 50 cents per diluted share, compared with net income of $128 million, or diluted EPS of 37 cents, in the third of fiscal 2010. The company reported that same-store sales increased 6.3% for the quarter.
According to the company, the same-store sales growth was due to increases in customer traffic and average transaction amount. Sales for the third quarter increased 11.5% to $3.6 billion in the 2011 third quarter compared with $3.22 billion in the 2010 third quarter. Consumables sales continued to increase at a higher rate than non-consumables in the 2011 quarter, with the most significant growth in candy and snacks, perishables, packaged foods, health care and pet supplies, the company said. Sales were down in apparel due to continued weakness in discretionary spending by consumers, Dollar General said.
“Dollar General delivered another great quarter, and we expect to continue to build upon our strong track record of delivering excellent results for our shareholders,” said Rick Dreiling, chairman and CEO.
“For the holiday season and into 2012, we expect our customers to remain very interested in value and in ways to make their dollars go further. November sales were strong. Our Thanksgiving week and Black Friday sales suggest that we are well positioned to meet our customers’ expectations," Dreiling said.
Dollar General is raising its outlook for the fiscal year ending Feb. 3, 2012 and now expects to report adjusted diluted earnings per share in the range of $2.29 to $2.32. The company said it now expects full-year sales to increase by approximately 13% Same-store sales are now expected to increase in a range of approximately 5.6% to 5.8%. Same-store sales in the 2011 fourth quarter are expected to increase approximately 5%.
Dollar General’s confidence is echoed by the investor community. Deutsche Bank Securities is recommending Dollar General as a stock to buy on the company’s growing traffic thanks to its commitment to low prices.