On a GAAP basis, the Company reported net income of $8.3 million, or $0.12 per diluted share for the second quarter of fiscal 2015, compared to net income of $7.5 million, or $0.10 per diluted share for the second quarter of fiscal 2014.
The net income for the Company's second quarter of fiscal 2015 included a non-cash gain of $15.7 million, or $0.22 per diluted share, compared to a non-cash gain of $10.4 million, or $0.14 per diluted share, for the second quarter of fiscal 2014 related to the derivative liability that resulted from the issuance of the Convertible Series B Preferred Stock (the "Series B Preferred") in connection with the term loan financing the Company completed in December 2011.
"Key seasonal categories including shorts, swim and sandals were down in both genders and were the primary causes of disappointing results in the second quarter," said Gary H. Schoenfeld, President and CEO. "As we moved through Labor Day, we are seeing some improvement in overall trends for the third quarter and we continue to believe that our distinctive mix of brands and merchandising can drive further improvement through the back half of this year."
Mr. Schoenfeld continued, "Shifting trends in consumer spending and shopping patterns necessitate that we further reduce operating expenses, while at the same time strengthening our customer connections through a more seamless omni-channel experience. This has meant some important investments in POS which will roll out in Spring of 2016 and the enabling of customer loyalty and CRM initiatives which we just launched, gaining over one million members in the first month."
"The expense reduction initiative we are implementing is targeted at eliminating $15 million from our current expenses in fiscal 2016," said Mr. Schoenfeld. "Approximately one-half of the savings would come through more streamlined execution in our stores, and the other half through the restructuring of operations at our corporate headquarters and the reconfiguration of certain positions and departments."
In connection with its expense reduction initiative, the Company announced the promotion of Chris Tedford to Vice President and Interim Chief Financial Officer and Ernie Sibal to Vice President of Real Estate, Construction and Strategy. Mr. Tedford has been with PacSun since 2011 as the Company's Senior Director and Controller, having previously been Controller at Clean Energy Fuels Corp. and Multi-Fineline Electronix, Inc., both public companies, as well as a Senior Manager at Deloitte & Touche LLP. He is a certified public accountant and has a Masters in Accounting from the University of Southern California. Mr. Sibal has been with PacSun since 2008 as the Company's Senior Director of Real Estate, Construction and Strategy, and has been instrumental in the restructuring and management of its real estate portfolio. He has a B.S. in Civil Engineering from Stanford University.
As a result of these promotions, Michael Kaplan has departed as the Company's Senior Vice President and Chief Financial Officer.
Financial Outlook for Third Fiscal Quarter of 2015
The Company's guidance range for the third quarter of fiscal 2015 contemplates a non-GAAP net loss per diluted share of between $(0.13) and $(0.05), compared to $(0.03) in the third quarter of fiscal 2014.
The forecasted third quarter non-GAAP net loss per diluted share guidance range is based on the following assumptions:
- Comparable store sales from -6% to -3%;
- Net sales from $196 million to $203 million;
- Gross margin rate, including buying, distribution and occupancy, of 24% to 26%;
- SG&A expenses in the range of $55 million to $56 million; and
- Applicable non-GAAP adjustments are tax effected using a normalized annual income tax rate.
Derivative Liability
In fiscal 2011, as a result of the issuance of the Series B Preferred in connection with the Company's $60 million senior secured term loan financing with an affiliate of Golden Gate Capital, the Company recorded a derivative liability equal to approximately $15 million, which represented the fair value of the Series B Preferred upon issuance. In accordance with applicable U.S. GAAP, the Company has marked this derivative liability to fair value through earnings and will continue to do so on a quarterly basis until the shares of Series B Preferred are either converted into shares of the Company's common stock or until the conversion rights expire (December 2021).
About Pacific Sunwear of California, Inc.
Pacific Sunwear of California, Inc. and its subsidiaries (collectively, "PacSun" or the "Company") is a leading specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle. The Company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults. As of September 8, 2015, the Company operates 609 stores in all 50 states and Puerto Rico.
PacSun's website address is www.pacsun.com.
Source Pacsun through GLOBE NEWSWIRE via COMTEX by press release ©
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