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Pacific Sunwear Reports Sharp Drop In Quarterly Earnings

Teen retailer Pacific Sunwear of California on Thursday reported an 80% decline in quarterly net profit that matched Wall Street estimates, hurt by store closure costs and higher markdowns during the quarter.

But shares dropped 1% in after-hours trading after the company gave an outlook for the first half of fiscal 2007 that was below analysts' average expectations.

The operator of the chain of surf-inspired clothing said that quarterly net income was $9.1 million, or 13 cents a share, compared with $47.0 million, or 63 cents a share,
a year earlier.

Pacific Sunwear -- which is searching for a new chief executive -- said it incurred a 24 cents a share charge related to the closure of 74 underperforming demo stores, its struggling chain that sells urban clothing styles. Excluding those charges, adjusted earnings were 37 cents.

Analysts, on average, had been expecting earnings of 13 cents on a net basis and 37 cents excluding items, according to Reuters Estimates.

Sales rose 8% in the quarter to $458.2 million, above the Wall Street consensus estimate of $441.2 million.

Pacific Sunwear, which also operates a small chain of shoe boutiques called One Thousand Steps, said that earnings per share in the first half of fiscal 2007 would range between 23 cents and 27 cents, excluding the impact of lease termination and severance charges. That estimate is based on same-store sales being flat or rising in the low single digits.

The company said it did not yet know about the specific amount and timing of those costs.

Wall Street, on average, has been expecting earnings, excluding items, of 31 cents for the first half of the year.

Shares fell 18 cents to $18.01 after closing at $18.19 on Nasdaq.