Word of layoffs at Anaheim-based Pacific Sunwear of California Inc. is likely intended to reassure investors about the retailer’s ability to stay in business, according to an analyst.
The mall store operator’s survival “seems to have been called into question by
the market,” Mitch Kummetz of Robert W. Baird & Co. said in a report.
Shares of Pacific Sunwear are down 75% in the past six months with a recent market value of $75 million.
On Wednesday, Pacific Sunwear said it cut 47 people at its headquarters and 10 field management positions, an 11% reduction in its management staff.
Pacific Sunwear, which sells surf-inspired apparel, also expects to cut the amount of clothes it carries by 20% per square foot for the 12 months through January 2010.
The cuts are designed to save $5 million for the 12 months through January 2010.
Pacific Sunwear expects to take a charge of $1.5 million for the its current quarter through January.
“Much of the information in the release really wasn’t new news,” Kummetz said.
The company expects to end the 12 months through January with about $20 million in cash and borrowing capacity under a $150 million revolving credit line, he said.
Pacific Sunwear is working on a turnaround that has been hampered by the worst retail downturn in recent memory.
“We think this is a broken story for the time being,” Kummetz said.
The county’s other local mall retailer, Foothill Ranch-based Wet Seal Inc., also announced job cuts after the market’s close on Wednesday.
Wet Seal, which runs stores for teen girls and young women, is cutting 41 management and corporate jobs and expects to save about $3.3 million for the 12 months through January 2010.
Most of the cuts, 37, came in Foothill Ranch. The others were in operations management outside its headquarters.
The company expects to take a charge of $200,000 to $300,000 for its current quarter through January.
“We will continue to manage our business conservatively as we begin what we expect to be a very challenging new fiscal year in the retail sector,” said Chief Executive Ed Thomas in a statement.
