PacSun Shares Soar on 200 Stores Closures, Narrowed Loss
Shares of Pacific Sunwear (NASDAQ:PSUN) opened up more than 37% Thursday morning a day after the apparel company announced it will close 200 stores and receive financing from Wells Fargo (NYSE:WFC) and private equity firm Golden Gate Capital.
The Anaheim, Calif.-based maker of teen clothes, targeting action sports, fashion and music influences, also reported a third-quarter loss of 10 cents a share late Wednesday, ahead of average analyst estimates polled by Thomson Reuters of a 14-cent loss.
Revenue for the three months ended Oct. 29 was $242 million, down from $257.9 million a year ago, but trumping the Street’s view of $233.
The company, which has seen its stock price fall about 69% since January, said it plans to close between 175 to 200 underperforming stores within the next 14 months.
The company worked with several landlords to buy out approximately 75 leases at a cost of $13 million, extend better performing stores, and terminate upon lease expiration 115 stores by the end of fiscal 2012.
By closing the less successful shops, PacSun says it can now focus on a targeted base of 550 to 600 better performing stores and enhance merchandising and marketing strategy.
Pacific Sunwear also announced on Wednesday the completion of two new credit facilities, including a five-year $100 million revolving credit facility from Wells Fargo and a $50 million senior secured term loan funded by Golden Gate Capital.
“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.," said CEO Gary Schoenfeld.
Looking toward the fourth quarter, PacSun sees a GAAP loss in the range of 44 cents to 58 cents a share, which includes one-time buyout charges related to the store closures and other tax impacts.
Excluding those special items, the retailer expects to lose just 18 cents to 27 cents a share, which is far ahead of average analyst estimates of a 26-cents loss.