Pacific Sunwear of California Inc. in Anaheim plans to close 46 stores as it emerges from bankruptcy in October, and another 75 over the course of the next year or so.
The trim would bring its store count to 475 by 2018, down from the 593 it had prior to filing for Chapter 11 protection on April 7, according to documents filed with the U.S. Bankruptcy Court for the District of Delaware.
The retailer sent its landlords across the U.S. “lease cure amounts”—proposals to pay a portion of back rent and other expenses owed, and is renegotiating the leases going forward.
Most landlords have objected to the amounts, including Dallas-based Centennial Real Estate Co., which owns MainPlace in Santa Ana.
PacSun owes $89,239 in back rent and expenses for the store there, and has offered to pay $32,722, according to Centennial. It’s not clear how much of a break PacSun has sought going forward on the nearly $17,000 monthly rent.
The retailer also is “negotiating a resolution to the disputed cure amounts” with landlord Simon Property Group Inc., a major national operation that leases more than 100 stores to PacSun. Simon also has filed an objection to all offers—for example, the retailer proposed paying $27,280 for back expenses on its store at the Shops at Mission Viejo, while Simon is looking to recoup $34,758.
PacSun, whose stock was delisted from Nasdaq on July 15, said it expects to finish the year with an estimated $728 million in revenue, about 87% coming from brick-and-mortar stores and the rest from e-commerce. That would accelerate a years-long trend of declines in revenue for the retail chain, whose sales fell 3% last year to $800.9 million.
The various moves by PacSun come with San Francisco-based private-equity firm Golden Gate Capital set to acquire all of the retailer’s assets, pending the bankruptcy court’s approval of its plan of reorganization, which is expected on Aug. 10.
Golden Gate will write off $88 million it is owed by the retailer in exchange for a 100% stake in the company. The private-equity firm has offered another $20 million upon PacSun’s emergence from Chapter 11 to “support its long-term growth objectives.”
PacSun also got $100 million in debtor-in-possession financing from Wells Fargo Bank and is able to “draw capital as needed to manage seasonal swings in cash flow,” the retailer has said. Wells Fargo also has committed to a five-year, $100 million revolving line of credit effective upon the company’s emergence from bankruptcy.
PacSun employs 1,995 full time and 7,054 part time and hasn’t offered any indication regarding layoffs connected to its plans to close stores.
The chain did recently announce a shift in duties for former Chief Financial Officer Ernie Sibal, who became vice president of real estate and store optimization. The company has retained “an experienced financial executive as a part-time consultant” who started July 25, and has hired a full-time controller who was scheduled to start Monday.
It appears that PacSun’s locations in Orange County have been spared in the first round of store cuts, but the chain plans to close its store at Outlets at Hillsboro, a Texas mall owned by Newport Beach-based Craig Realty Group.
