Pacific Sunwear of California, Inc. (PSUN)
Q2 2009 Earnings Call Transcript
August 20, 2009 4:30 p.m. ET

Executives

Gar Jackson – Vice President of Investor Relations
Gary H. Schoenfeld – Chief Executive Officer
Michael L. Henry – Chief Financial Officer

Analysts

Paul Lejuez - Credit Suisse
Adrienne Tennant - Friedman, Billings, Ramsey & Co.
Janet Kloppenburg - JJK Research
Nick Genova - B. Riley & Company, Inc.
Sean Naughton – Piper Jaffray & Co.
Christine Chen - Needham & Company, LLC
Liz Dunn - Thomas Weisel Partners
Janice Ong – UBS
Alicia Reese - Wedbush Morgan Securities

Presentation

Operator

Good afternoon. My name is Julianne and I will be your conference operator today. At this time, I would like to welcome everyone to the Pacific Sunwear of California second quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you have already done so, please press the pound sign now, then press star one again to ensure your question is registered. Thank you.

I would now like to turn the conference over to Mr. Gar Jackson, Vice President of Investor Relations. Please go ahead, sir.

Gar Jackson

Thank you. Good afternoon and welcome to the Pacific Sunwear of California conference call announcing the company’s fiscal second quarter financial results. This is Gar Jackson, Vice President of Investor Relations. This call is being recorded and the playback will be available starting today approximately two hours after the call through midnight August 27, 2009. It can be accessed at 800-642-1687 or 706-645-9291, pass code 23201193. The call will also be archived on the PacSun website at www.pacsun.com through midnight November 16, 2009.

Your speakers today are Gary Schoenfeld, Chief Executive Officer and Mike Henry, Chief Financial Officer. Today’s call will be limited to one hour and questions will be limited to one per participant.

Before I turn the call over to Gary, I’d like to note that statements and discussions during today’s call will contain forward-looking information including forecasts of future financial performance and statements about our future prospects and proposed developments or business strategies. Actual results could differ materially from those projected or reflected in our forward-looking statements and reported results should not be considered an indication of future performance. The potential risks and uncertainties that could cause the company’s business and financial results to differ materially from those in the forward-looking statements are included in the company’s Form 10-K for the fiscal year ended January 30, 2009, as well as in the earnings press release included as an exhibit to the Form 8-K that we furnished to the SEC today. Both of these documents can also be found in the Investor Relations section of our corporate website at pacsun.com. All information discussed on the call is as of today, August 20, 2009. Pacific Sunwear does not intend and undertakes no duty to update this information to reflect future events or circumstances. This call, the webcast and its replay are the property of Pacific Sunwear. It is not for rebroadcast or use by any other party without the prior written consent of Pacific Sunwear.

With that said, I will now turn the call over to Gary.

Gary H. Schoenfeld

Thank you, Gar. Good afternoon everyone. It’s been a few years since I’ve done this and I know that the intro certainly has gotten a little bit longer, but it’s great to be here and I appreciate having the chance to speak with you all. What I’d like to do is take a few minutes and share with you some of my thoughts and early impressions about several aspects of our business.

But let me begin by I think talking about two of the biggest reasons why I’m excited to be here as the company’s new CEO. First, as I’ve said to several of you, I’ve been a long time admirer of PacSun and as we said in the press release believe that we can truly once again become teens’ favorite place to shop. For many years PacSun championed the action sports market and brought a number of great brands to malls and consumers across the country. And I think over the last several years we’ve lost shares, vertical retailers have taken on a bigger part of the youth fashion market, but PacSun remains in this unique position of being able to compete both with our own proprietary product and at the same time once again be a champion for great brands.

Second, I believe the company’s win over the long term with a combination of distinctive strategy and just as importantly an empowering corporate culture. Internally, I think it’s fair to say that PacSun has endured its fair share of challenges and hurdles over the past three, four, five years. And I’m equally excited about re-energizing the passion, creativity and a relentless customer focus within our team.

So with that let me talk a bit then about the question I think you’re all wanting to ask is really about how are we going to navigate our way through the current environment and turn around this business? First, from a product standpoint, I think of our business in terms of really three distinct opportunities in terms of brands. Our heritage brands, which are those that I think PacSun is readily identified with, our own proprietary brands and then new and creative youth market brands that expand beyond what PacSun has historically been identified with perhaps here in Orange County and around action sports.

Let me start with what I like to call our heritage brands. One of the things that’s always drawn me to PacSun is that our stores carry a great branded assortment with a focus towards California lifestyle. Unfortunately it feels like we’ve lost our way with some of the heritage brands and a key ingredient to what made PacSun a leader for so many years. I can say over the past month I’ve had the opportunity to meet with teams at many of these brands and I’m delighted to say that their response has been very positive to the direction of where we want to go moving forward. I think it’s accurate to say they’re eager to work with us and reestablish these critical partnerships, both with great product as well as with great marketing support.