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STEPPING OUT

One Thousand Steps helps Pacific Sunwear graduate from high school

By Molly Knight

With a sandaled foot already planted in the beach-casual teen apparel market, Pacific Sunwear expresses hope that One Thousand Steps, the surf-wear giant’s new specialty footwear and accessories concept, will prove equally popular with the college-age crowd.

Since 1981, when its first store opened at Santa Monica Place, on the south end of the West Coast city’s famous Third Street Promenade, PacSun has all but cornered the California cool, flip-flop-friendly teen demographic.

At press time the Anaheim, Calif.-based chain had expanded to 815 Pacific Sunwear stores, 96 Pacific Sunwear Outlets and 198 D.e.m.o. units (D.e.m.o. is PacSun’s urban, hip-hop-inspired concept) in the U.S. and Puerto Rico.

One Thousand Steps is aimed squarely at 18-to-24-year-olds, slightly older than PacSun’s middle and high school devotees, says Gar Jackson, PacSun’s director of investment relations. Even so, there is room for crossover, says Jackson. “We’re trying to differentiate the new stores’ offerings so as not to cannibalize PacSun,” he said.

The first One Thousand Steps shops opened in early April at the Gallery at Tyler, in Riverside, Calif., and Los Cerritos (Calif.) Center, both owned by The Macerich Co., and at Mall of America, near Minneapolis. Since then, six more have opened in shopping centers in Northridge and Fresno, Calif.; Lake Grove, N.Y.; Melbourne, Fla.; Paramus, N.J.; and Providence, R.I. PacSun says it ultimately plans to open between 600 and 800 One Thousand Steps stores.

Obververs say the launch of One Thousand Steps couldn’t come at a better time for the company, whose earnings have been down. PacSun posted first-quarter net profit of $11.9 million — down 32.4 percent from $17.6 million for last year’s comparable quarter. Same-store sales, meanwhile, were down 1.8 percent over the period. When this was made public at the end of April, PacSun stock fell 5 percent. In November the stock hovered between $26 and $28 per share; by the end of May, shares had dropped below $22.

This is due in large part to an overall sales decline for teen clothing, says Wendy Liebmann, president of WSL Strategic Retail, a New York City-based consulting firm. She says a newfound footwear focus will help the bruised company rebound. Any company selling a diversity of product categories is less vulnerable to the ups and downs of a particular category, Liebmann says.

“Right now clothes are out and shoes are in,” said Liebmann. “Customers are saying, ‘I can get denim or sweats anywhere,’ ” she said. “Poor clothing sales will be balanced out by strong shoe sales. While we’re seeing a devaluation of clothes, shoes are a category where people will pay a premium. If the design is right, the stores will be a hit.”

Luckily, PacSun has the brand recognition to stay the course, Liebmann says. “PacSun certainly has the credibility,” she said. “Sometimes it’s about finding a new customer, but in this case it’s about looking for a way to hold onto people you know. They feel their core brand is strong enough for them to leverage a new concept. They’re saying, ‘We know our customers, and we know what they want.’ ”

Unlike PacSun’s traditionally economical offerings, One Thousand Steps offers moderate-to-high-price shoes from such trendy names as Diesel, Puma and Steve Madden. The chain is jumping on the belt bandwagon with timely offerings from Kenneth Cole, Lucky and celebrity-friendly designer Ben Sherman. The stores also offer handbags from Guess and accessories from Betseyville by Betsey Johnson.

Given the fickleness of the teen consumer, creating this new concept is a thousand steps in the right direction, says Robert Passikoff, president of Brand Keys, a New York City-based retail consulting firm. “They’re looking for ways to further engage and retain their customers by offering a lot of different shoes,” said Passikoff. “There is a touch of glamour there, with Madden, Kenneth Cole, Diesel. They’re clearly looking to create a broader, slightly more elegant image for themselves — maybe to compete with PacSun’s traditional competitors, like Abercrombie & Fitch and Urban Outfitters. This gives them something new to build on.”

The store at Los Cerritos Center has been a hit with affluent and trendy customers, says Annette Bryant, the mall’s marketing manager. “One Thousand Steps carries a lot of brands not found in your typical shoe store,” said Bryant. “It’s unusual to have a store that offers everything from athletic to casual to dressy shoes. Their handbags are distinct and trendy, and the store just elevates our center in general.”

Bryant says the buzz surrounding One Thousand Steps has grown to a roar. Community officials in the Los Angeles suburb of Cerritos know their local store is one of only a few in existence, and they are excited. “Top city people want to come by and see what all the hoopla’s about,” said Bryant. “The feedback has been outstanding with our shoppers. Word gets around.”

Los Cerritos Center is also home to PacSun and D.e.m.o. stores, but One Thousand Steps is not located near either of its brand mates. Perhaps not coincidentally, the store sits directly across from the retailer Passikoff listed as one of its main competitors: Abercrombie & Fitch. Insiders say PacSun hopes One Thousand Steps will pay handsome dividends not only by tapping into the lucrative footwear market, but by encouraging its customers to return to PacSun.

“They’ve already carved a niche, and offering footwear and accessories moves them up a notch,” said Passikoff. “The thing you’re always looking to do is raise the engagement levels of folks who looked but didn’t buy. Now they have reason to buy, and they have reason to visit the other stores in your portfolio as well.”

Sometimes companies run the risk of confusing customers or diluting market share potential by creating clashing new concepts, but Pacific Sunwear has done a good job of avoiding that issue so far, Passikoff says. “They’re not muddying their brand,” said Passikoff. “They’ve always had their toe in the water of shoes and accessories. Now they’re just expanding.”

Even though One Thousand Steps is elevating the PacSun brand with glossier offerings, Passikoff says they should continue to ride the wave that’s brought them here.“For this to be successful, it still has to be consistent with their surfer dude image,” said Passikoff. “And traditionally, they’ve been pretty good with that.”