PacSun Shares Surge on New Financing, Plan to Trim StoresWednesday, December 7, 2011
Shares of Anaheim-based action sports retailer Pacific Sunwear of California Inc. jumped on news of new financing and its plans to shutter as many as 200 stores.
Investors sent the chain’s shares up as much as 37% in afterhours trading, to a market value of about $90 million.
Pacific Sunwear said it arranged a five-year, $60 million loan with San Francisco-based Golden Gate Capital. The loan gives Golden Gate two seats on the board plus the option to buy as much as 20% of the company.
The retailer also got a five-year, $100 million credit facility with Wells Fargo Capital Finance, which replaces a previous loan with Wells Fargo that was set to expire in April 2013.
Pacific Sunwear also said it will close as many as 200 underperforming stores over the next 14 months. About 115 of those stores have leases due to expire next year.
The stores closures would leave the chain with about 600 stores, down from the 819.
Investors welcomed the news given the chain’s struggle for a turnaround for the better part of three years now. It has reworked its fashion mix and played up big-name action sports brands over that time, and still faces stiff competition from fast-fashion discounters.
The news of its latest plans came as Pacific Sunwear reported better-than-expected results for the three months through October.
The chain reported a loss of $7.1 million, which excludes charges related to the store closures. Wall Street analysts on average expected a $9.9 million loss.
The company also beat analyst estimates on revenue, with $242 million, down 6% from a year earlier.
Analysts expected revenue of $232.8 million.
Sales of stores open at least a year during the October quarter fell 3%. That halts a two-quarter streak of same-store increases, the chain’s first such gains since 2007.
Pacific Sunwear said it expects to see a loss for the current quarter of $12.8 million to $19.2 million.
Analysts on average expect a loss of $18.5 million for the period.