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But to continue to grow, PacSun executives knew they had to push into additional niches. In 1998 the company, based in Anaheim, Calif., opened a new chain of stores called D.E.M.O. to pull in the hip-hop crowd. With their highly polished chrome-and-black decor, d.e.m.o. outlets aren't exactly street. The stores are designed to fit into shopping malls but carry merchandise from P. Diddy's clothing line Sean John and Eminem's line Shady Limited, as well as Phat Farm, Ecko and Enyce--brands that appeal to both blacks and middle-class whites. Company officials had planned to boost d.e.m.o. outlets, now numbering 114 stores, to 200 by 2007. But d.e.m.o. has performed so well, they expect to add double that number.
The architect for Pacific Sun's expansion is CEO Greg Weaver, previously at retailer Jaeger Sportswear Ltd., who was brought on board in 1987 when the venture capitalists moved in. Though originally from Connecticut, Weaver has acquired the tanned skin and relaxed manner of an Orange County native. His laid-back appearance belies his intense mastery of all aspects of PacSun operations; he can recall in an instant, for example, that store No. 39 opened in Paramus, N.J.
Weaver passes off some of the decisions he has made as almost simplistic ("Retail 101," he calls them). But, in fact, his strategies can be quite the opposite. The company has a knack for employing tactics that seem to fly in the face of convention.
For example, Pacific Sun tends to downplay rather than call attention to its house brand. PacSun stores carry the company's private-label clothing, called Tilt, but instead of stitching the name prominently on the outside of clothes, the retailer hides the logos on inside tags. The strategy provides insurance against the inevitable moment when a brand goes from In to "losers only" with customers. "When a teen decides a brand is dead," Weaver says, "they don't kill it slowly. They put it immediately out of its misery." That is also the reason PacSun stocks a wide variety of brands besides Tilt, which accounts for 35% of all merchandise. As soon as a brand cools, it gets moved out, and another is brought in to replace it.
Though the chain's mer chandise looks cutting edge, Weaver is quite care ful to avoid fashion extremes. Unlike competitor Abercrombie & Fitch, which plays up the libidinous elements of its teen offerings, PacSun sells clothes that would pass muster at any high school with a dress code. Weaver says he avoids resorting to sexual advertising messages to move merchandise. "Many teenagers love it," he says, "but why would I alienate the parents? I can't forget my customer is 15 and doesn't have a credit card."
But Weaver has not avoided all the pitfalls. In 2001 the company misjudged demand, and weaker-than-expected sales hurt earnings, which fell to a disappointing $8.9 million in the third quarter of 2001. Weaver chalked it up to the growing pains of a rapidly expanding chain. "Suddenly I realized that all the things I was able to do with 150 stores, I couldn't do at 650," he says.