PacSun Faces Wave of Challenges
Beleaguered mallretailer Pacific Sunwear of California Inc. recently unveiled its Golden State of Mindmarketing campaign, featuring some of the most up-to-date media technology andimages of beatific youth wearing PacSun brands at sun-dappled Californialocales. The images are on a new campaign website at www.gsom.com.
Golden State of Mindevokes the California ideals of youth, beauty, and, yes, boardsports andsurfwear, but some people question whether this campaign arrived in time tosave the Anaheim, Calif.–based retail chain, which runs 733 mall-based storesaround the United States.
In PacSun’s recentlyreleased annual report for its 2011 fiscal year, the retailer’s president andchief executive, Gary H. Schoenfeld, conceded that a number of tough challenges continued to facePacSun throughout the fiscal year.
Competing retailersoffered promotions at unprecedented levels, Schoenfeld said. Skyrocketingcotton prices and a growing sales disparity between the highest- andlowest-performing PacSun stores made business tough. “We had to continue towork with a high degree of urgency in making changes to our business,”Schoenfeld wrote in the annual report.
Financial news andopinion site 24/7 Wall Street recently published a provocative articlepredicting PacSun will be one of the big companies to fold in 2013. Others onthis list were American Airlines and Research in Motion, maker of the Blackberry communications device, which has beenovershadowed by the iPhone.
24/7 Wall St. was alarmed by a risk statement in PacSun’s 10Q,dated June 6, which stated if PacSun experiences the same-store-sales declinesit suffered in 2010 and 2009, its current credit facility might not be enoughto keep the company operating.
In fiscal 2011, fiscal2010 and fiscal 2009, PacSun experienced declines of 1 percent, 8 percent and20 percent, respectively, in new comparable-store sales.
Schoenfeld expressedconfidence that PacSun will ride out this storm. The company secured $60million of mezzanine financing with Golden Gate Capital and a $100 million working capital facility with Wells Fargo Bank due toits recent real estate restructuring. In 2012, it will close 100 to 120underperforming stores, resulting in a cumulative net cash savings of approximately$9 million.—Andrew Asch
