Surf and Turf Retailer Pacific Sunwear Wipes Out -- Again

PacSunTeens can be fickle, and Pacific Sunwear of California (PSUN) knows that all too well.

The retailer, which specializes in surf and skate apparel for the active youth, saw its shares wipe out on Wednesday after it posted disappointing results for the holiday quarter. Revenue dipped slightly to $234.2 million, but analysts were expecting a small gain. The struggling specialty retailer did manage to post a narrower loss than Wall Street was targeting, but a deficit is still a deficit.

The red ink comes naturally here. PacSun has now posted a loss in 13 consecutive quarters.

How did the once trendy PacSun get here, and will the undertow be forgiving?

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Investors can't blame CEO Gary Schoenfeld for the entire streak of misery. He came on board just two years ago, well into the chain's downward spiral.

Several years ago, PacSun was doing well under Seth Johnson, a 12-year veteran of the surprisingly timeless Abercrombie & Fitch (ANF). After he resigned for "personal reasons," Sally Kasaks took over as CEO.

Sensing weakness at some of the retailer's smaller concepts, Kasaks shuttered the money-munching d.e.m.o. and One Thousand Steps stores. Getting rid of distractions can be a good thing for a multiconcept operator, but it also means putting all of your eggs in one basket.

Unfortunately for PacSun, the strategy shift came at a time when surfers and shredders were moving away from the trendy brands that the retailer was stocking.

Former Vans helmsman Schoenfeld seemed like the right choice to lead the company. He saw that Forever 21, H&M, Zumiez (ZUMZ), and Aeropostale (ARO) were eating its lunch. He was dismayed to find PacSun lacking brand authenticity. The excessive discounting and cluttered selling space didn't help, either.

Bringing back classic surf and skate brands for the guys and improving girl fashions to halt the Forever 21 exodus was a reasonable one-two punch, but it's just not working.

There may be some relief to find comps during the fiscal fourth quarter clocking in flat, but that's after a 7% decline a year earlier and a whopping 19% slide the year before that. If we keep going back -- before Schoenfeld's watch -- holiday quarter comps fell by 10% and 8% during the two prior years. Put another way, the average store is selling less than two-thirds as much as it was five years ago.

Not Even a Skateboarding Dog Can Save You Now

PacSun is in retreat.

It closed 119 stores during fiscal 2011, leaving it with 733 stores. The shredding will continue. PacSun is targeting another 110 stores to close this year, and even then the company will keep backpedaling. There will be more units shuttered in 2013 as PacSun works its way down to between 550 and 600 stores.

As you can imagine, it probably isn't easy working under this kind of environment. Employees wonder if their store will be next. Shoppers see the concept close down and assume the worst for the other locations in neighboring malls.

There seemed to be a glimmer of hope during the holiday quarter. The company proudly proclaimed that comps that began the fourth quarter with a decline of 3% were flat by the end of the period. Could it be? Was momentum finally coming around after years of going in the wrong direction?

Well, PacSun's guidance for the current quarter calls for same-store sales to clock in between a decline of 4% and a gain of 1%. Things aren't getting any better on the bottom line, as the company's looking at a wider loss than analysts were forecasting.

PacSun won't provide guidance beyond the current quarter, but the trend is not its friend. PacSun will continue to diminish in scope and rentable mall space. By the time it hits 550 stores, don't be surprised if the target is whittled away to an even lower number.

That's assuming that PacSun even gets that far. You can't keep posting consistent quarterly losses for three years and expect to stick around forever.

There's always the chance that PacSun catches a break and its extreme sports theme catches fire.

It can happen. Hot Topic (HOTT) seemed left for dead as emo and goth fashions faded away, but then the Twilight movies made dark clothing and counterculture clothing and accessories popular again. So, yes, PacSun has a shot, but the smart money has to be on it running out of money before a chance at redemption.

The sun sets. Killer waves crash.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Aeropostale.

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Surf and Turf Retailer Pacific Sunwear Wipes Out -- Again

Japanese retailer Uniqlo has set out to make utilitarian clothing -- with features like milk protein softening fibers -- cool, whether you're 16 or 60.

Uniqlo's concept is sort of like an Apple Store (AAPL) for fashion; it showcases affordable apparel in a modernist setting, with items like $12.90 camisoles featuring Heattech, its exclusive heat-retaining and moisture-resistant technology.

Showcasing high-performance, stylish clothing in a sleek setting is how Uniqlo hopes to "revolutionize" mass retailing in the U.S., Shin Odake, CEO of Uniqlo USA, told DailyFinance during a tour of its new 64,000-square foot outlet in New York City.

"Think American Apparel, but done a little better." That describes Joe Fresh, according to Craig Johnson, CEO of retail consultancy Customer Growth Partners. The Canadian retailer is expanding in the U.S., and is on a mission to "solve the family's fashion needs," with an affordable range of "accessible, of the moment style," for women, men and children, as well as beauty products, says the Joe Fresh Facebook page.

Adds Joe Feldman, managing director of retail consultancy Telsey Advisory Group: "Joe Fresh is the new kid on the block in the fast-fashion space. It has a clean look and attractive pricing."

Watch out H&M, Mango and Zara: The British are coming. U.K. retailer Topshop is quietly making a mark on the U.S. retail scene, bringing its twist on fast-fashion to the States.

The retailer is "an upscale -- but not luxury -- fashion-driven business which imports tremendous fashion and shoe merchandise from the U.K.," Gilbert Harrison, founder and chairman of Financo, the boutique investment firm, tells DailyFinance. Now the chain is expanding in the U.S. and Canada.

The retailer opened in-store boutiques in 14 of Nordstrom's department stores in September.

But while Topshop's merchandise is edgy in the fast-fashion tradition, "It appeals to a broader swath of customers than either Zara or Mango, and is a little higher priced, but better quality, than H&M," for example, Johnson says.

GAP) might be struggling, but it's online division Piperlime has been a bright spot for the retailer.

Unlike the mother chain that sells clothing exclusively under the Gap brand, Piperlime features apparel, shoes, handbags and accessories from a host of fashion brands, ranging from 7 For All Mankind and Calvin Klein, to Anne Klein, BCBG, Badgley Mischka and Kenneth Cole to Naturalizer and Nine West.

Piperlime also plays the role of your personal stylist. The site features guest editors like stylist Rachel Zoe, who dispense fashion advice and offer their picks of hot trends and products available on the site.

The retailer expanded with the addition of men's clothing this fall.

Glenn Murphy, Gap's CEO, has said the retailer is a growth vehicle for the chain. And there are whispers that Gap might open Piperlime stores.

Charming Charlie sells affordably priced earrings, necklaces, bracelets, handbags, scarves and belts for women of all ages in a variety of looks, from vintage, modern, glamorous and global fare to bohemian and punk rocker-inspired styles. Named "hot retailer of the year" by the International Council of Shopping Centers in 2010, it's reminiscent of Claire's, the teen accessories chain, but for a broader audience, Johnson says. And it's "very hot and expanding right now."

Chris Burch opened his first C. Wonder store in New York City's trendy Soho neighborhood this year, selling upscale clothing, jewelry, handbags, accessories and home decor "at astonishing values," according the retailer's web site.

C. Wonder, which is now expanding to mall locations, features classically designed fashion and accessories in some unexpected colors, like chartreuse and ecru. Merchandise is showcased in a store designed to delight the senses, featuring ever-changing floor and window displays.

While C. Wonder "may look a bit like Tory Burch, only with a green versus orange motif, [but it's] more than a bit less expensive," Johnson says.

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