Pacsun once held a solidified position in the clothing market for it's uniquely California-inspired style. Like many other major industry names, the retailer mostly catered towards teens and younger demographics with their clothing lines. Pacsun currently operates a staggering 593 nationwide store locations and it's clothing can be spotted nearly anywhere. So the real question is: where did Pacsun go wrong?
On April 7, the major retailer filed for bankruptcy protection. This will then lead to a filing for Chapter 11 bankruptcy.
Pacsun CEO Gary Schoenfeld shed important light to the situation as to how the company met its downfall. The retailer mistakenly expanded rapidly to nearly 1,000 locations right before the 2008 recession hit. Rent skyrocketed for a majority of the store locations, quickly racking up enormous debt. It is important to note that during recessions, essential goods are bought up significantly more compared to a luxury consumer good such as higher end clothing. Therefore, Pacsun generated fewer sales during those years while liability costs spiked.
Another reason the retailer suffered was due to style changes. The clothing giant was known for California inspired beachwear. Yet, over the past few years Pacsun began switching to street wear. In 2012, Kylie and Kendall Jenner introduced their own lines of clothing to little success. In addition,influence from popular rap artists were mixed amongst the clothing style, causing significant critic backlash and boycotting. Poor marketing strategies and corporate decision making undoubtably contributed to their fall.
Stock value of the retailer has free fallen since the recent news emerged. Exactly one year ago displayed a stock value of around $2.50 a share. As of now, their share is valued at a astonishing $0.05. Investors everywhere that held shares of the company may have lost significant amounts of money had they not pulled out of the trade in time. However, the effects of Pacsun's bankruptcy extend farther than just this.
As stated, Pacsun currently operates roughly 600 retail locations. Many corporations create a formula to calculate the correct number of workers per location. The normal rule is one worker per 1,000 square feet. After researching, the average square footage for Pacsun stores is 4,000, with the largest location holding 10,000 square feet. The exact amount of workers per location obviously varies, yet it may be safe to assume that at least four workers per location is realistic. Thus, with the retail giant closing, an estimated 2,400 workers will be displaced of work.
After closer examination, the retailer blatantly showed signs of deterioration for years leading up to now. For example, in 2011 Pacsun owned nearly 800 locations. Over the past five years the retailer thus closed around 200 stores. Sales displayed signs of worry as well. While it may not be a drastic statistic, sales dropped 2.5% from last year. This data is still significant to investors and overall profits.
Due to this, other major retailers have begun to make significant adjustments to avoid Pacsun's status.
It is safe to say that Pacsun will be missed by many.
