There are two things I really like about PacSun’s 10K annual report (read it here) which was filed last Friday. The first is that they are more or less through closing stores. From a peak of 950 stores in 2008, they ended their February 3rd fiscal year with 644 stores. They closed 38 stores in fiscal 2008, 40 in 2009, 44 in fiscal 2010, 119 in 2011 and 92 in 2012. This fiscal year, they expect to close 20 to 30 due to lease expirations or kick-out rights (where they have a lease they can get out from under if, for example, certain sales levels aren’t reached).
So what have we got here? Well, we’ve got a focused strategy that seems to make sense. Whether it’s the right one will become known in the fullness of time. We’ve got financial results that are improving but still poor. Losing $52 million, even though it’s less than last year just isn’t success quite yet. And we’ve got a weakening balance sheet. The questions seems to be, as it’s been for PacSun before, can the strategy be successful enough quickly enough before the balance sheet deteriorates further. If not, what other sources of capital will be available to them?