Pacific Sunwear Announces First Quarter Earnings


ANAHEIM, Calif., May 11, 2006 (PRIMEZONE) -- Pacific Sunwear of California, Inc. (Nasdaq:PSUN) today announced that sales for the first quarter were $299.9 million, an increase of 7.1 percent over total sales of $280.0 million for the first quarter ended April 30, 2005. First quarter net earnings were $0.16 per diluted share, including $0.03 related to stock option and pre-opening rent expenses. On a comparable non-GAAP basis, earnings per diluted share were $0.20 in the first quarter of 2005. Net income for the first quarter of fiscal 2006 was $11.9 million compared to $17.6 million for the first quarter of fiscal 2005. Same-store sales decreased 1.8 percent for the comparable thirteen-week period ended April 29, 2006.

"Although the quarter was difficult, I'm encouraged with the improvement we achieved in our sales trend in April. In April, we also successfully launched our latest retail concept, One Thousand Steps. We now have six stores open and are pleased with the initial customer response to our merchandise assortment and store design," commented Seth Johnson, Chief Executive Officer.

Stock Repurchase Program

During the first quarter of fiscal 2006, the Company repurchased a total of 1.7 million shares of its common stock at an average price of $22.45. These repurchases occurred under the $100.0 million share repurchase authorization approved by the Company's board of directors on May 12, 2005. At the end of the first quarter, $11.7 million remained available for future repurchases.

Fiscal 2006 Outlook

Assuming a low to mid single digit comp store sales increase during the second quarter, the Company is comfortable with earnings per share estimates for the second quarter in the range of $0.26 to $0.28 per diluted share, which includes $0.03 attributable to adjustments for stock option expenses as related to FAS 123R and pre-opening rent expenses as related to FASB Staff Position 13-1, Accounting for Rental Costs Incurred during a Construction Period. For year-over-year comparison purposes, this compares to second quarter 2005 non-GAAP earnings of $0.24 per diluted share, which includes the adjustments above. For the full fiscal year 2006, the Company is comfortable with E.P.S. growth estimates of 10 to 15 percent.

A reconciliation of first and second quarter fiscal 2005 reported GAAP earnings to the non-GAAP measures contained in this press release is set forth below.



 Reconciliation of Fiscal 2005 Q1 Earnings to Non-GAAP Disclosure

 GAAP EPS as originally reported for Q1 2005                   $0.23
 Less impact of stock option and pre-opening 
  rent expenses                                                (0.03)
                                                             -------
 Adjusted non-GAAP EPS for Q1 2005                             $0.20
                                                             =======

 GAAP net income as reported for Q1 2005,
   in $000's                                                 $17,607
 Less stock option expenses, tax-effected                     (1,819)
 Less pre-opening rent, tax-effected                            (535)
                                                             -------
 Adjusted non-GAAP net income for Q1 2005                    $15,253
                                                             =======

 Reconciliation of Fiscal 2005 Q2 Earnings to Non-GAAP Disclosure

 GAAP EPS as originally reported for Q2 2005                   $0.28
 Less impact of stock option and pre-opening 
  rent expenses                                                (0.04)
                                                             -------
 Adjusted non-GAAP EPS for Q2 2005                             $0.24
                                                             =======
                                                             
 GAAP net income as reported for Q2 2005, 
  in $000's                                                  $21,112
 Less stock option expenses, tax-effected                     (2,170)
 Less pre-opening rent, tax-effected                            (418)
                                                             -------
 Adjusted non-GAAP net income for Q2 2005                    $18,524
                                                             =======

About Pacific Sunwear of California, Inc.

Pacific Sunwear, operating under three distinct retail concepts, is a leading specialty retailer of everyday casual apparel, accessories and footwear designed to meet the needs of active teens and young adults. As of April 29, 2006, the Company operated 820 PacSun stores, 97 PacSun Outlet stores, 200 d.e.m.o. stores and 5 One Thousand Steps stores for a total of 1,122 stores in 50 states and Puerto Rico. PacSun's website address is www.pacsun.com, merchandise carried at d.e.m.o. stores can be found at www.demostores.com and information about One Thousand Steps can be found at www.onethousandsteps.com.

The Pacific Sunwear of California logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2087

Conference Call Information

The Company will be hosting a conference call today at 1:30 pm Pacific Time. 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/Canada at (800) 642-1687 or internationally at (706) 645-9291; pass code: 8345064. For those unable to listen to the live Web broadcast on the Company's investor relations website www.pacsun.com, or utilize the call-in replay, an archived version will be available on the Company's investor relations Web site through midnight, May 11, 2007.

Pacific Sunwear Safe Harbor

This press release contains "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements (specifically the statements concerning first quarter and fiscal year earnings guidance) be subject to the safe harbors created thereby. The Company is hereby providing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in such forward-looking statements. These statements are not historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in such forward-looking statements. Such uncertainties include, among others, the following factors: our new concept is untested and may not be profitable or successful; changes in consumer demands and preferences, higher than estimated costs of goods sold or selling, general and administrative costs, competition from other retailers and uncertainties generally associated with apparel retailing; merchandising/fashion sensitivity; lower than expected sales from private label merchandise; fluctuations in comparable store net sales results; expansion and management of growth; reliance on key personnel; dependence on a single distribution facility; economic impact of natural disasters, terrorist attacks or war/threat of war; shortages of supplies and/or contractors, as a result of natural disasters or terrorist acts, could cause unexpected delays in new store openings, relocations or expansions; reliance on foreign sources of production; and other risks outlined in the company's SEC filings, including but not limited to the Annual Report on Form 10-K for the year ended January 28, 2006 and subsequent periodic reports filed with the Securities and Exchange Commission. Historical results achieved are not necessarily indicative of future prospects of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.



                 PACIFIC SUNWEAR OF CALIFORNIA, INC.
                     SUMMARY STATEMENTS OF INCOME
       (unaudited, in thousands except share and per share data)

                                               First Quarter Ended
                                           --------------------------
                                              APR. 29,       APR. 30, 
                                                2006           2005
                                           --------------------------
 Net sales                                     $299,888      $279,985
 Gross margin                                    97,282        97,350
 Selling, G&A expenses                           79,939        70,123
                                           ------------    ----------
 Operating income                                17,343        27,227
 Interest income, net                             1,795         1,086
                                           ------------    ----------
 Income before taxes                             19,138        28,313
 Income tax expense                               7,273        10,706
                                           ------------    ----------
 Net income                                     $11,865       $17,607
                                           ============    ==========
 Net income per share, basic                      $0.16         $0.23
                                           ============    ==========
 Net income per share, diluted                    $0.16         $0.23
                                           ============    ==========
 Wtd avg shares outstanding, basic           73,144,277    75,292,587
                                           ============    ==========
 Wtd avg shares outstanding, diluted         73,711,710    76,579,259
                                           ============    ==========
                                       

                 PACIFIC SUNWEAR OF CALIFORNIA, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                       (unaudited, in thousands)

                                        APR. 29,   JAN. 28,   APR. 30,
                                         2006        2006       2005
                                        --------   --------   --------
 ASSETS

 Current assets:

 Cash & cash equivalents                 $57,867    $95,185    $79,964
 Short-term investments                   49,795     74,911     81,431
 Inventories                             222,204    215,140    172,128
 Other current assets                     41,072     41,485     34,135
                                        --------   --------   --------
      Total current assets               370,938    426,721    367,658
 Property and equipment, net             376,642    355,822    313,917
 Other long-term assets                   25,210     25,018     22,017
                                        --------   --------   --------  
 Total assets                           $772,790   $807,561   $703,592
                                        ========   ========   ========
                                        
 LIABILITIES AND SHAREHOLDERS' EQUITY

 Current liabilities:
 Accounts payable                        $45,408    $47,550    $33,528
 Other current liabilities                65,770     74,921     52,177
                                        --------   --------   --------
      Total current liabilities          111,178    122,471     85,705
 Deferred lease incentives                82,129     81,440     72,739
 Deferred rent                            29,557     28,748     27,115
 Other long-term liabilities              22,704     28,112     31,075
                                        --------   --------   --------
 Total liabilities                       245,568    260,771    216,634
 Total shareholder's equity              527,222    546,790    486,958
                                        --------   --------   --------
 Total liabilities and 
  shareholders' equity                  $772,790   $807,561   $703,592
                                        ========   ========   ========

                  PACIFIC SUNWEAR OF CALIFORNIA, INC.
                   CONDENSED CONSOLIDATED CASH FLOWS
                       (unaudited, in thousands)

                                                 FOR THE FIRST QUARTER 
                                                         ENDED
                                                  APR. 29,    APR. 30, 
                                                    2006        2005
                                                 ---------   ---------
 Cash flows from operating activities:

 Net income                                        $11,865     $17,607
 Depreciation & amortization                        16,905      15,001
 Non-cash stock based compensation                   1,944        --
 Tax benefits related to exercise of 
  stock options                                      1,149       3,754
 Loss on disposal of property and 
  equipment                                              6        --
 Changes in operating assets and
   liabilities:                    
   Inventories                                      (7,064)      2,953
   Accounts payable and other current
    liabilities                                    (19,386)    (10,528)
   Other assets and liabilities                     (3,990)      4,851
                                                 ---------   ---------
                                                 
                                          
     Net cash provided by operating activities       1,429      33,638
 Cash flows from investing activities:
   Purchases of short-term investments            (163,150)   (250,158)
   Maturities of short-term investments            188,266     247,950
   Capital expenditures                            (29,096)    (21,648) 
                                                 ---------   ---------
   Net cash used in investing activities            (3,980)    (23,856)
 Cash flows from financing activities:
   Repurchases of common stock                     (38,162)        --
   Proceeds from exercise of stock options           3,637       6,421
   Repayments under long-term debt and 
    capital leases                                    (242)       (547)
                                                 ---------   ---------
        Net cash used in financing activities      (34,767)      5,874
                                                 ---------   ---------
 Net (decrease) increase in cash and cash 
  equivalents                                      (37,318)     15,656
 Cash and cash equivalents, beginning of period     95,185      64,308
                                                 ---------   ---------
 Cash and cash equivalents, end of period          $57,867     $79,964
                                                 =========   =========


                  PACIFIC SUNWEAR OF CALIFORNIA, INC.
                     SELECTED STORE OPERATING DATA

                                                 APR. 29,    APR. 30,
                                                   2006        2005
                                                 -------     -------

 Stores open at beginning of fiscal year           1,105         990
 Stores opened during the fiscal year                 20          27
 Stores closed during the fiscal year                 (3)         (4)
                                                 -------     -------
 Stores open at end of period                      1,122       1,013

 PacSun stores                                       820         754
 Outlet stores                                        97          86
 d.e.m.o. stores                                     200         173
 One Thousand Steps stores                             5         --
                                                 -------     -------
 Total stores                                      1,122       1,013

 Total square footage at end of 
  period (in 000's)                                4,004       3,548


            

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