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Pacific Sunwear Slumps on Outlook, Predicted Slow Recovery

Shares of Anaheim-based mall retailer Pacific Sunwear of California Inc. were down sharply Friday as investors reacted to a lower outlook for the current quarter and predictions of a slow recovery.

The company’s shares were off more than 10% in afternoon New York trading with a market value of $230 million.

On Thursday, Pacific Sunwear forecast a loss of $10.4 million to $15 million for the three months through October.

Analysts on average had been expecting a $5.9 million loss.

In the current quarter, the company expects a charge of about $10 million for markdowns and writeoffs of unsold clothes.

The outlook was the first under Chief Executive Gary Schoenfeld, who took over in June for Sally Frame Kasaks, who had led Pacific Sunwear since 2006 and remains as a director.

Schoenfeld is best known locally for turning around Cypress-based shoe and clothing maker Vans Inc., leading to its 2004 sale to North Carolina’s VF Corp.

“Clearly, we have a lot of work to do to stem our decline in sales and ultimately return to profitability,” Schoenfeld said.

He said he’s looking to rely more on brand name clothes, many from local clothing makers, and sell more shoes as a way to keep shoppers from going elsewhere.

“We think this is the right strategy, but it will likely take time to pay dividends,” analyst Mitch Kummetz of Robert W. Baird & Co. said.

Pacific Sunwear’s outlook came on the heels of results for the three months through Aug. 2.

For the recently ended quarter, the company reported a loss of $14.2 million, better than the $15 million analysts projected.

Sales came in at $243 million, ahead of the $239 million Wall Street was expecting.

The company runs 916 stores that sell clothes inspired by surfing, skateboarding and other California fashions.

Pacific Sunwear is wrestling with the overall retail downturn and shifting tastes among its mostly young shoppers.

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