Key questions from the fourth quarter earnings call conducted by Pacific Sunwear of California, Inc. on March 13, 2008.

Lauren Levitan (SG Cowen & Co.): Could you give your thoughts on the strategies that will enable you to drive the higher productivity target?

Sally Frame Kasaks: There are a couple of fronts we will be looking at. First of all, the issue of density is one that you will begin to see greater quantities, particularly as we have gotten more and more confident in the junior business but also in young men’s, so that is part of it. In addition, we will be expanding a category such as dorm wear, for example. During the holiday season we had some strong success there. We are not looking to add a lot of new categories but we think we have plenty of opportunity to build within our existing denim business, particularly in young men’s, where we left some money on the table. We also think in young men’s we may have been conservative in some of the fleece hoodie categories. We will see a greater emphasis on certain dimensions of outerwear in certain parts of the country, particularly in the November/December period, so we are looking at targeted opportunities over the next few months. We do see the junior business continuing to grow at a higher rate and there you will see a combination of price point discussion but more a matter of just density and the addition of a half a dozen styles. We are not talking about adding a lot of new categories to do this. We still feel we are under penetrated in those units.

Liz Pierce (Roth Capital): What things are you thinking about in terms of design and marketing talent?

Sally Frame Kasaks: Our young men’s design team has been well-established over the past year. We have now a new design director in juniors and we have begun to put some muscle behind the whole design talent for our proprietary brands. We also made some additions in our sourcing areas, so we are at least for that part of the business, which is our proprietary, we are in much better shape in terms of being more efficient, faster to market on new styles and so forth. That is where that effort is there. In fact, we are starting to build a space for our designers. In the past, they were sitting in cubicles that looked more like Mike’s accounting area, so what we are trying to do is give them the space and create an environment where the design talent can work. We are starting to add more to our marketing arena as well.

Liz Pierce (Roth Capital): Could you expand on the store organization?

Sally Frame Kasaks: The supply chain initiatives are important because so many of our store associates have been engaged in a lot of tasks day-in, day-out tasks and once we begin to remove footwear from the stores and begin to organize our back room so that the floor ready product can be housed properly instead of in cartons throughout the back room, on shelves, tagged, labeled - a lot of things we can do to make the back room more efficient. We can spend more time with them. They will spend more time on the selling floor. In the past there were just too many tasks and these are the things we are looking to eliminate. We are also looking for technology improvements, which will start, speed up transactions, for example, get information to our store associates on a timelier basis. There is a whole series of initiatives where last year, we were more focused on product, planning, allocation and those aspects. Our focus is much more going to be directed towards stores - hiring, recruiting. I think this will be exciting out there over the next 12 months.

Jeffrey Van Sinderen (B. Riley & Co.): You have a great polo shirt display from Volcom. How your business with Volcom is evolving in both genders?

Sally Frame Kasaks: Volcom is one of our key vendors and we have started working with them, that polo was an example. We also have a great short in the young men’s business. This season the young men’s is stronger than our juniors but we found the center of gravity with them and I must say that polo program, and particularly that short and polo program has been strong, and the Ryan Sheckler in-store events has been strong. We are continuing to forge our business with them. I know it was difficult for a couple of years as we were sorting through things but we are on steady ground right now.

Christine Chen (Needham and Company): Pac Bucks was moved up because of Easter. Can you go through that for the second quarter and back to school?

Sally Frame Kasaks: There is a certain cadence that was moved up because Easter and spring break is a key driver, so our marketing efforts do align around those key holiday or those key activities, so yes, those are always moved in relationship. You sort of count the days and work it. On the other hand, last year we were just trying to get caught up with floorsets. Our goal now is to do one at the beginning of almost every month. Every month will have a floorset and then some kind of mid-month update from time to time because we are flowing goods. We are much more in control of the flow of product. We are much more in control of the unit sales planning we are doing, so our floor sets are different from last year but only because last year we were just trying figure it out. We were initiating a new effort. This year we finally are in a cadence that allows us to receive, process, get goods into the store, and achieve our sales goals.

John Morris (Wachovia Capital Markets): The men’s business is getting up to about 75% branded product. What would that be up from last year?

Sally Frame Kasaks: Our men’s branded business has been at 70% to 75% range, so we would imagine growth commensurate with the comp growth, but that has been about the center of gravity for us. Juniors may have been more branded but the growth is coming from the blend also, so it is 50-50 proprietary to national brand. We are not looking to roll out brands, particularly some of these new emerging brands to all stores at this point. We see that there are some regional variations and we think that by providing some of the smaller brands, a showcase without trying to put too much burden on their growth. We want them because they are selective, because they have an emerging trend, for example. In the old days we would try to scale them all out. You come in, we get a sell-through and we try to run them to all stores. I think along the way that did create some problems with our relationships with our brands and it is not the right way to do it anymore. Over time some will become all stores but that is not our efforts as we start off cultivating and curating these new brands.

Marni Shapiro (The Retail Tracker): You talked about some smaller brands. You brought one of these brands in footwear that is seen in a bunch of skate and surf stores. If you are bringing in these smaller brands is there risk in their delivery?

Sally Frame Kasaks: First of all, we are not adding more brands. Our mix has been typically in young men’s at 70% to 75%. The growth we are getting is in our own. One of our major proprietary brands is Bullhead, which is denim for guys and gals, so do not read too much into this. We are taking this in a direction that might lead us to a certain things that are not correct, so our margin goals remain consistent with what we have talked over time. By having less inventory, we are getting more productive, better sell-through, so there are many ways to skin this margin gain. The significant change to our business totally is that 50-50 guys, juniors, and young men’s. That is reducing the footwear, which did not have the margin we needed and tightening up on accessories. We are not trying to scale these smaller brands to all stores. That was the old model. The new model is if they are smaller brands, we want to cultivate them, we want to help them grow. We recognize that some of them may miss a delivery but it is not going to impact our business and we do not want to hurt them.

Marni Shapiro (The Retail Tracker): How do you reconcile this as you renegotiate leases?

Sally Frame Kasaks: If our sales per square foot can begin to achieve the numbers we know they can, our landlords will be happy, we will be happy, and the margins will be where they need to be. We are encouraged initially in February by what is happening in apparel. When we get that 80-20 mix and put the complexity of footwear behind us, we will have a much simpler model with higher margin potential all the way around.

Janet Kloppenburg (JJK Research): You said 50% would be branded and 50% would be your proprietary labels. Could break out that?

Sally Frame Kasaks: Those are Lilu, Kirra Girl, and Bullhead.

Janet Kloppenburg (JJK Research): Do you see an opportunity for those brands to go into different categories than they are now, or just for deeper penetration of those brands within their existing categories?

Sally Frame Kasaks: For the time being, we think that Kirra Girl speaks more to the surf lifestyle and will stay there. Over the next year some of that will evolve. We see broader assortments. Particularly in Lilu, there tends to be more top driven. We think that we may be able to add a few more SKUs there but we are not talking about building a much, much larger assortment.