Pacific Sunwear Q4 Comp Sales Increased 2%

Pacific Sunwear Sees Eighth Straight Quarter of Positive Comparable Store Sales

ANAHEIM, Calif., March 18, 2014 (GLOBE NEWSWIRE) — Pacific Sunwear of California, Inc. (Nasdaq:PSUN) (the “Company”), announced today that net sales from continuing operations for the fourth quarter of fiscal 2013 ended February 1, 2014, were $218.6 million versus net sales from continuing operations of $222.8 million for the fourth quarter of fiscal 2012 ended February 2, 2013. Comparable store sales for the fourth quarter of fiscal 2013 increased 2%. The 53rd week in fiscal 2012 caused a decrease in net sales of approximately $9 million for the fourth quarter of fiscal 2013, compared to the fourth quarter last year. The Company ended the fourth quarter of fiscal 2013 with 618 stores versus 644 stores a year ago.

“We continue to be encouraged by our positive momentum within a challenging retail environment throughout the year, marked by eight straight quarters of positive comparable store sales, sustained gross margins, and reduced operating costs, all contributing to a significant improvement in our operating performance compared to fiscal 2012,” said Gary H. Schoenfeld, President and Chief Executive Officer. “Looking ahead to fiscal 2014, our key priorities include showcasing our premium brand portfolio through curated assortments, managing inventory with on-trend fashion and speed to market, and continuing to elevate both our in-store and digital experience. Through our Golden State of Mind brand identity, we continually strive to deliver the creativity, diversity and optimism that is quintessentially California and unique to PacSun across all facets of our business.”

To read the full report, including charts on consolidated operating statements, balance sheets, and store operating data, visit PacSun’s investor relations page.

Fourth Quarter Results

On a GAAP basis, the Company reported a loss from continuing operations of $22.0 million, or $(0.32) per diluted share, for the fourth quarter of fiscal 2013, compared to a loss from continuing operations of $22.2 million, or $(0.32) per diluted share, for the fourth quarter of fiscal 2012. The loss from continuing operations for the Company’s fourth quarter of fiscal 2013 included a non-cash loss of $3.6 million, or $0.05 per diluted share, compared to a non-cash loss of $3.7 million, or $0.05 per diluted share, for the fourth quarter of fiscal 2012, related to the derivative liability that resulted from the issuance of Convertible Series B Preferred Stock (the “Series B Preferred”) in connection with the term loan financing the Company completed in December 2011. The Company’s operating loss for the fourth quarter of fiscal 2013 was $14.6 million, compared to $15.0 million for the same period a year ago.

On a non-GAAP basis, excluding the non-cash loss on the derivative liability, and assuming a tax benefit of approximately $6.3 million, the Company would have incurred a loss from continuing operations for the fourth quarter of fiscal 2013 of $11.8 million, or $(0.17) per diluted share, as compared to a loss from continuing operations of $11.6 million, or $(0.17) per diluted share, for the same period a year ago. Adjusting for the 53rd week retail calendar shift, the Company would have incurred a non-GAAP loss from continuing operations of $0.03 better than the same period a year ago.

Full Year Results

Total net sales from continuing operations for fiscal 2013 were $797.8 million versus net sales from continuing operations of $784.7 million for fiscal 2012. Comparable store sales increased 2% during fiscal 2013.

On a GAAP basis, the Company reported a loss from continuing operations of $47.0 million, or $(0.69) per diluted share, for the 2013 fiscal year, compared to a loss from continuing operations of $52.6 million, or $(0.78) per diluted share, for the 2012 fiscal year. The Company’s operating loss for fiscal 2013 was $21.4 million, as compared to a fiscal 2012 operating loss of $38.4 million.

On a non-GAAP basis, excluding the non-cash loss on derivative liability, and assuming a tax benefit of approximately $12.5 million, the Company would have incurred a loss from continuing operations for fiscal 2013 of $23.1 million, or $(0.34) per diluted share, as compared to a loss from continuing operations of $33.0 million, or $(0.49) per diluted share, for the same period a year ago.

Financial Outlook for First Quarter of Fiscal 2014

The Company’s guidance range for the first quarter of fiscal 2014 contemplates a non-GAAP loss per diluted share from continuing operations of between negative $0.17 and negative $0.12, compared to negative $0.14 in the first quarter of fiscal 2013.

The forecasted first quarter non-GAAP loss from continuing operations per diluted share guidance range is based on the following assumptions:

Comparable store sales from 1% to 4%;

Revenue from $169 million to $174 million;

Gross margin rate, including buying, distribution and occupancy, of 25% to 27%;

SG&A expenses in the range of $54 million to $55 million; and

Applicable non-GAAP adjustments are tax effected using a normalized annual income tax rate.

The Company’s first quarter of fiscal 2014 guidance range excludes the quarterly impact of the change in the fair value of the derivative liability due to the inherently variable nature of this financial instrument.

Discontinued Operations

In accordance with applicable accounting literature and consistent with the Company’s financial statement presentation in its fiscal 2012 annual report, the Company has reclassified the results of operations of its closed stores as discontinued operations for all periods presented, as applicable.

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 represents 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 March 18, 2014, the Company operates 617 stores in all 50 states and Puerto Rico. PacSun’s website address is www.pacsun.com.

The Company will be hosting a conference call today at 4:30 p.m. Eastern time to review the results of its fourth fiscal quarter. A telephonic replay of the conference call will be available, beginning approximately two hours following the call, for one week and can be accessed in the United States and Canada at (855) 859-2056 or internationally at (404) 537-3406; passcode: 8519739. For those unable to listen to the live Web broadcast or utilize the call-in replay, an archived version will be available on the Company’s investor relations website through midnight, May 28, 2014.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles, please see the accompanying table titled “Reconciliation of Selected GAAP Measures to Non-GAAP Measures” and the section following such table titled “About Non-GAAP Financial Measures.”