PacSun fumbles with earnings, flag

Pacific Sunwear of California Inc. reported a loss of $3.5 million in the first quarter in the same week the retailer found itself in the middle of a national controversy over one of its best-selling T-shirts.

The teen clothing retailer posted revenue of $166.5 million in the first quarter ended May 2. Same-store sales dropped 2%. And then earlier in the week, PacSunremoved a T-shirt emblazoned with an upside-down American flag from its stores after people bombarded the retailer’s Facebook page and said it was disrespectful.

"Continued increases in merchandise margins offset our first quarterly negative sales comp in more than three years," said Gary H. Schoenfeld, president and CEO. "Some key categories including shorts and non-apparel have underperformed, which is also reflected in our near-term outlook for the second quarter. Yet as we look ahead to the back half of this year, we believe the strength of several key brand initiatives, coupled with anticipated growth in long bottoms will get us back to positive comp store sales along with further increases in margins.”

PacSun operates nearly 700 stores in all 50 states.