PacSun Chief Resigns, Stock Jumps

On Sept. 29, Pacific Sunwear of California chief Seth Johnson resigned from his posts as chief executive and director of the company. Johnson, who joined the mall-based specialty surf retailer in 2004 as chief operating officer and was named chief executive in April 2005, will receive approximately $1.127 million as part of his resignation package. The package includes Johnson’s $1.04 million base annual salary, which he will receive through Oct. 31, 2007. No reason was given for his abrupt departure.

The company’s stock closed up 7.23 percent to $16.17 on the news, but rose by as much as 12 percent to $16.82 on the Nasdaq. The stock’s upward leap is PacSun’s biggest single-day percentage advance in more than two years.

Johnson, along with Tom Kennedy, PacSun division president, was hailed as the company’s new guard after the departure of longtime chiefs Greg Weaver and Tim Harmon. “Greg and Tim created the successful [PacSun] business model, and almost in one fell swoop there was a new regime in the form of Seth and Tom,” said Dick Baker, chief executive of Ocean Pacific and president of the Surf Industry Manufacturers Association. “PacSun is the behemoth of the surf retail industry and when they came on board there was a lot of concern, not in a necessarily negative or positive way, but just because they are so important,” he said.

As part of an effort to reinvent the brand as a cool “core” shop, Johnson led a marketing campaign that featured authentic lifestyle-driven photography meant to appeal to true skaters and surfers. Store environments too have been targeted for an overhaul. At SIMA’s annual Surf Summit in May, Johnson discussed the evolution of PacSun from a down-scale retailer to one that needs to compete with the more upscale and sophisticated merchandising of the Hollisters of the world. The brand has begun to test a new, more heavily merchandised store concept that appeals to girls and core shoppers, he said.

The teen retailer has come under heavy scrutiny of late. In August PacSun announced its quarterly net profit fell by more than half after its product mix failed to appeal to customers. On Oct. 2 it announced that its same-store sales for the five-week fiscal period ended Sept. 30 declined 2.4 percent from the same period last year.

The company, which operates approximately 1,100 stores under the PacSun, d.e.m.o. and One Thousand Steps banners, has struggled with its juniors and urban apparel business. One Thousand Steps, the company’s new footwear concept, has the potential to grow Pac- Sun’s lagging business, but some analysts warn that the shoe business could carry slimmer margins than its apparel business. PacSun plans to open 18 One Thousand Steps stores by 2008.

The company appointed its lead director and former Ann Taylor Stores executive, Sally Frame Kasaks, as interim chief executive officer on Oct. 1 while it conducts a search for a permanent replacement for Johnson. —Erin Barajas