How did it come to this?
Pacific Sunwear of California Inc. filed for bankruptcy protection from creditors Thursday, hoping a restructuring could help turn around the 36-year-old surf retailer’s fortunes.
Once a staple merchant of California cool, PacSun wasn’t able to adapt as fashion trends left surfwear behind and overexpansion sapped its resources. It amassed crippling debt as it recorded losses each year since 2008. Executives couldn’t figure out how to stop the bleeding.
Back in 2005, surf sellers could do no wrong.
That year, when PacSun’s shares were at an all-time high, the retailer boasted nearly 1,000 stores across America. Executives promised continued mass expansion, adding 400 stores over the next three years.
“I think the PacSun business is a very strong business,” CEO Seth Johnson said in January of that year. “So it’s not been in need of anybody to come in and fix it.”
PacSun soon brought somebody in to fix it. Johnson left after a year at the helm. Sally Frame Kasaks, a lauded retail veteran, was hired and tasked with winning back teens lost to Hollister and Zumiez.
The plan was to relinquish the beach vibe and become a Southern California cool-girl destination, pushing its own private-label clothes alongside such traditional surf brands as Billabong and Volcom.
That didn’t work either. PacSun had too many underperforming stores and was selling too many unfamiliar brands. Enter Gary Schoenfeld, the former Vans CEO, in 2009.
Two years in, he started closing 200 PacSun shops while trying out collaborations to get girls excited again, signing on Kendall and Kylie Jenner in 2012 to sell a fashion line for juniors. It wasn’t enough.
Now about 40 percent of those stores are gone. Annual revenue has plunged to about $800 million from $1.44 billion a decade ago.
Under the bankruptcy restructuring plan, PacSun will solicit bids to be acquired or will be taken private by Golden Gate Capital.
Golden Gate hopes the retailer has put its beach bum past behind it.
“PacSun has successfully transitioned beyond its historical base of action sports brands to what we believe is the most relevant and coveted mix of brands celebrating the California lifestyle,” managing director Josh Olshansky said.
