10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: January 31, 2004

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                  

Commission file number 0-21296

PACIFIC SUNWEAR OF CALIFORNIA, INC.

(Exact name of registrant as specified in its charter)

California
(State or other jurisdiction of
incorporation or organization) 95-3759463
(I.R.S. Employer
Identification No.)

3450 E. Miraloma Avenue, Anaheim, California
(Address of principal executive offices) 92806
(Zip Code)

Registrant’s telephone number, including area code: (714) 414-4000

Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Preferred Stock Purchase Rights
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [  ].

The aggregate market value of Common Stock held by non-affiliates of the registrant as of August 2, 2003, the end of the most recently completed second quarter, was approximately $1.5 billion. All outstanding shares of voting stock, except for shares held by executive officers and members of the Board of Directors and their affiliates, are deemed to be held by non-affiliates.

On March 24, 2004, the registrant had 78,462,485 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive Proxy Statement for the 2004 Annual Meeting of Shareholders, to be filed with the Commission no later than 120 days after the end of the registrant’s fiscal year covered by this Form 10-K.

TABLE OF CONTENTS

PART I
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN, AND DISAGREEMENTS WITH, ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
SIGNATURES
INDEPENDENT AUDITORS’ REPORT
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO EXHIBITS
EXHIBIT 10.15
EXHIBIT 10.16
EXHIBIT 23.1
EXHIBIT 31
EXHIBIT 32

PART I

ITEM 1. BUSINESS

Pacific Sunwear of California, Inc. and its wholly owned subsidiaries (the “Company” or the “Registrant”) is a leading specialty retailer of everyday casual apparel, accessories and footwear designed to meet the needs of active teens and young adults. The Company operates three nationwide, primarily mall-based chains of retail stores under the names “Pacific Sunwear” (also “PacSun”), “Pacific Sunwear (PacSun) Outlet,” and “d.e.m.o.” PacSun and PacSun Outlet stores specialize in board-sport inspired casual apparel, footwear and related accessories catering to teenagers and young adults. d.e.m.o. specializes in hip-hop inspired casual apparel and related accessories catering to teenagers and young adults. In addition, the Company operates a website through a subsidiary that sells PacSun merchandise online, provides content and community for its target customers and provides information about the Company.

The Company’s fiscal year is the 52- or 53-week period ending on the Saturday closest to January 31. Fiscal 2003 was the 52-week period ended January 31, 2004. Fiscal 2002 was the 52-week period ended February 1, 2003. Fiscal 2001 was the 52-week period ended February 2, 2002. Fiscal 2004 will be the 52-week period ending January 29, 2005.

The Company, a California corporation, was incorporated in August 1982. At the end of fiscal 2003, the Company operated 677 PacSun stores, 79 PacSun Outlet stores and 121 d.e.m.o. stores for a total of 877 stores in 50 states and Puerto Rico. As of March 26, 2004, the Company operated 682 PacSun stores, 79 PacSun Outlet stores and 127 d.e.m.o. stores for a total of 888 stores in 50 states and Puerto Rico.

The Company’s executive offices are located at 3450 East Miraloma Avenue, Anaheim, California, 92806; the telephone number is (714) 414-4000; and the Company’s internet address is www.pacsun.com. Through the Company’s website, the Company makes available free of charge, as soon as reasonably practicable after such information has been filed or furnished to the Securities and Exchange Commission (the “Commission”), its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Store Formats

PacSun stores - The Company’s original and primary store format, located primarily in regional malls, offers a selection of board-sport inspired casual apparel, footwear and related accessories to satisfy the casual wardrobe needs of its customers. PacSun targets both male and female customers between the ages of 12 and 22. PacSun stores offer a broad wardrobe selection, with the goal of being viewed by its customers as the dominant retailer in its niche. PacSun stores average approximately 3,500 square feet in size. The Company currently seeks locations of approximately 3,500 to 4,000 square feet for its new PacSun stores. At the end of fiscal 2003, the Company operated 677 PacSun stores totaling approximately 2,380,000 square feet.

PacSun Outlet - These stores average approximately 4,100 square feet and are located in value-oriented outlet malls, both open-air and enclosed. This format carries a selection similar to the PacSun mall stores, with an emphasis on value pricing. The merchandise offerings at PacSun Outlets consist primarily of off-price branded merchandise, private brand merchandise and a smaller selection of full-priced branded merchandise. At the end of fiscal 2003, the Company operated 79 PacSun Outlet stores totaling approximately 323,000 square feet.

d.e.m.o. - d.e.m.o. stores, located in regional malls, average approximately 2,400 square feet and offer a broad assortment of hip-hop inspired casual apparel and related accessories. d.e.m.o. targets both male and female customers between the ages of 16 and 24. d.e.m.o. stores have no merchandise overlap with PacSun or PacSun Outlet stores, and many d.e.m.o. stores are located in the same malls as PacSun stores. The Company currently seeks locations of approximately 2,500 to 3,000 square feet for its new d.e.m.o. stores.

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At the end of fiscal 2003, the Company operated 121 d.e.m.o. stores totaling approximately 294,000 square feet.

Strategy

The Company’s mission is to be the leading lifestyle retailer of casual fashion apparel, footwear and accessories for teens. The Company’s target customers are young men and women between the ages of 12 and 24. The Company believes its customers want to stay current with, or ahead of, fashion trends and continually seek newness in their everyday wear. The Company offers a complete wardrobe selection representing fashion trends considered timely by the Company’s target customers. The key elements of the Company’s strategy are as follows:

Offer Popular Name Brands Supplemented by Private Brands. In each of its store formats, the Company offers a carefully edited selection of popular name brands supplemented by private brands, with the goal of being seen by its teenage and young adult customers as the source for wardrobe choices appropriate to their lifestyle. The Company believes that its merchandising strategy differentiates its stores from competitors who may offer 100% private labels, greater than 80% name brands, or seek to serve a wider customer base and age range. See “Merchandising.”

Promote the PacSun Brand Image. The Company promotes the PacSun brand through national print advertising in major magazines that target teens and young adults. In the past, the Company has sponsored sporting events consistent with the PacSun brand image and lifestyle and has conducted PacSun television advertising campaigns. The Company’s current promotional efforts are focused exclusively on national print advertising, a trend that the Company expects to continue through fiscal 2004. The Company also maintains a private label credit card through a third party to promote the PacSun brand image and lifestyle.

Actively Manage Merchandise Trends. The Company does not attempt to dictate fashion, but instead devotes considerable effort to identifying emerging fashion trends and brand names. By using focus groups, listening to its customers and store employees, monitoring sell-through trends, testing small quantities of new merchandise in a limited number of stores, and maintaining domestic and international sourcing relationships, the Company enhances its ability to identify and respond to emerging fashion trends and brand names as well as develop new private brand styles in order to capitalize on existing fashion trends.

Maintain Strong Vendor Relationships. The Company views its vendor relationships as important to its success and promotes frequent personal interaction with its vendors. The Company believes many of its vendors view PacSun, PacSun Outlet and d.e.m.o. stores as important distribution channels, in many cases as one of their largest customers, which enhance their own brand image in the eyes of the customer.

Provide Attentive Customer Service. The Company is committed to offering courteous, professional and non-intrusive customer service. The Company strives to give its young customers the same level of respect that is generally given to adult customers at other retail stores, and to provide friendly and informed customer service for parents. Responding to the expressed preferences of its customers, the Company trains its employees to greet each customer, to give prompt and courteous assistance when asked, and to thank customers after purchases are made, but to refrain from giving extensive unsolicited advice. PacSun and PacSun Outlet stores display large assortments of name brands and private brands, merchandised by category. d.e.m.o. merchandise is displayed by brand accompanied by vendor logo signage. Additionally, the stores provide a friendly and social atmosphere for teens with appropriate background music, while also providing a comfortable environment for parents and other adults. The Company believes the combination of its attentive customer service and its unique store environments is key to its success.

Store Growth Strategy. The Company intends to continue its store growth through the opening of new stores under its three formats in the next four years. The Company has previously announced its plans to operate 1,400 total stores by the end of 2007, of which approximately 900 will be PacSun stores, approximately 100 will be PacSun Outlet stores, and approximately 400 will be d.e.m.o. stores. In each of the last three fiscal years in the period ended January 31, 2004, the Company opened 86, 73, and 129 net

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new stores, respectively. See “Store Expansion” within the “Stores” section of this document for further details regarding plans for fiscal 2004.

Internet Strategy. The Company sells merchandise over the internet at www.pacsun.com. The website offers a selection of the same merchandise carried in PacSun stores. In addition, the website offers content including videos, contests, advice columns and lifestyle articles. The Company maintains a substantial database of e-mail names that it uses for marketing purposes. The Company also advertises its website as a shopping destination on major internet portals and search engines and markets its website in its PacSun stores using in-store signage, merchandise bags and receipts. The Company’s internet strategy benefits from the nationwide retail presence of its stores, the strong brand recognition of PacSun, a loyal and internet-savvy customer base, the participation of PacSun’s key brands and the ability to return merchandise to PacSun stores.

Merchandising

Merchandise. PacSun, PacSun Outlet and d.e.m.o. stores offer a broad selection of casual apparel, related accessories and footwear for young men (“guys”) and young women (“girls”), with the goal of being viewed by their customers as the dominant retailer for their lifestyle.

The following table sets forth the Company’s merchandise assortment as a percentage of net sales for the periods shown:

	Fiscal Year Ended
	Jan. 31,			Feb. 1,			Feb. 2,
	2004			2003			2002
Guys apparel		38	%		41	%		46	%
Girls apparel		31			31			28
Accessories		19			18			17
Footwear		12			10			9
Total		100	%		100	%		100	%

The Company offers many name brands best known by its target customers. PacSun offers a wide selection of well-known board-sport inspired name brands, such as Quiksilver, Billabong, Hurley and O’Neill. d.e.m.o. offers well-known name brands sought by its target customers, such as Ecko, Phat Farm/Baby Phat, Enyce, Rocawear and Sean John. In addition, the Company continuously adds and supports up-and-coming new brands in both PacSun and d.e.m.o. No vendor accounted for more than 8% of total net sales during fiscal 2003.

The Company supplements its name brand offerings with private brands. The Company believes that offering high-quality private brands contributes to its status as a key fashion resource for the casual lifestyle and differentiates the Company from its competitors. In addition, private brands provide the Company an opportunity to broaden its customer base by providing merchandise of comparable quality to brand name merchandise at lower prices, to capitalize on emerging fashion trends when branded merchandise is not available in sufficient quantities, and to exercise a greater degree of control over the flow of its merchandise. A product design group, in collaboration with the Company’s buying staff, designs the Company’s private brand merchandise internally. The Company has a sourcing group that oversees the manufacture and delivery of its private label merchandise, with manufacturing contracted both domestically and internationally. Private label merchandise sales accounted for 32% and 33% of the Company’s net sales in fiscal 2003 and fiscal 2002, respectively.

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Vendor and Contract Manufacturer Relationships. The Company views its vendor relationships as important to its success and promotes frequent personal interaction with its vendors. The Company believes many of its vendors view PacSun, PacSun Outlet and d.e.m.o. stores as important distribution channels, in many cases as one of their largest customers, which enhance their own brand image in the eyes of the customer. The Company’s vendor base currently includes more than 100 vendors. The Company maintains strong and interactive relationships with its vendors, many of whose philosophies of controlled distribution and merchandise development are consistent with the Company’s strategy. The Company generally purchases merchandise from vendors who prefer distributing through specialty retailers, small boutiques and, in some cases, better department stores, rather than distributing their merchandise through mass-market channels.

To encourage the design and development of new merchandise, the Company frequently shares ideas regarding fashion trends and merchandise sell-through information with its vendors. The Company also suggests merchandise design and fabrication to certain vendors. The Company encourages the development of new vendor relationships by attending trade shows and through its weekly “Open-house Wednesday” program, during which new vendors are encouraged to make presentations of their merchandise to the Company’s buying staff.

The Company has cultivated its private brand sources with a view toward high-quality merchandise, production reliability and consistency of fit. The Company sources its private label merchandise both domestically and internationally in order to benefit from the lower costs associated with foreign manufacturing and the shorter lead times associated with domestic manufacturing.

The Company’s business is dependent upon its ability to offer current season, brand name apparel at competitive prices and in adequate quantities. Some of the Company’s vendors have limited resources, production capacities and operating histories and some have intentionally limited the distribution of their merchandise. The inability or unwillingness on the part of key vendors to expand their operations to keep pace with the anticipated growth of PacSun, PacSun Outlet and d.e.m.o. stores, or the loss of one or more key vendors or private brand sources for any reason, could have a material adverse effect on the Company’s business.

Purchasing, Allocation and Distribution. The Company’s merchandising department oversees the purchasing and allocation of the Company’s merchandise. The Company’s buyers are responsible for reviewing branded merchandise lines from new and existing vendors, identifying emerging fashion trends, and selecting branded and private label merchandise styles in quantities, colors and sizes to meet inventory levels established by management. The Company’s planning and allocation department is responsible for management of inventory levels by store and by class, allocation of merchandise to stores and inventory replenishment based upon information generated by the Company’s merchandise management information systems. These systems provide the planning department with current inventory levels at each store and for the Company as a whole, as well as current selling history within each store by merchandise classification and by style. See “Information Systems.”

All merchandise is delivered to the Company’s distribution facility, where it is inspected, received into the Company’s computer system, allocated to stores, ticketed when necessary, and boxed for distribution to the Company’s stores. Each store is typically shipped merchandise three to five times a week, providing it with a steady flow of new merchandise. The Company uses a national and a regional small package carrier to ship merchandise to its stores and occasionally uses airfreight during peak selling periods.

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Stores

Locations. The Company has expanded from 11 stores in California at the end of fiscal 1986 to 877 stores in 50 states and Puerto Rico at the end of fiscal 2003. The table below sets forth the number of stores located in each state as of the end of fiscal 2003:

			PacSun
STATE	PacSun		Outlets		d.e.m.o		Total
Alabama		10		2				12
Alaska		3						3
Arizona		13		2		3		18
Arkansas		1						1
California		72		14		26		112
Colorado		12		3		1		16
Connecticut		10				1		11
Delaware		3		1				4
Florida		49		6		15		70
Georgia		19		1		6		26
Hawaii		6				1		7
Idaho		4						4
Illinois		21		1		5		27
Indiana		14		2		3		19
Iowa		8						8
Kansas		6						6
Kentucky		7				1		8
Louisiana		10				4		14
Maine		2		2		1		5
Maryland		14		2		4		20
Massachusetts		20		1		3		24
Michigan		24		3		4		31
Minnesota		14		1		2		17
Mississippi		2						2
Missouri		9		3				12
Montana		4						4
Nebraska		4						4
Nevada		5		2				7
New Hampshire		5		1				6
New Jersey		20		3		6		29
New Mexico		6						6
New York		29		6		5		40
North Carolina		17		2		3		22
North Dakota		4						4
Ohio		31		2		5		38
Oklahoma		4						4
Oregon		7		2				9
Pennsylvania		42		4		7		53
Rhode Island		2						2
South Carolina		9		2		3		14
South Dakota		2						2
Tennessee		9		2		1		12
Texas		44		3		6		53
Utah		10		1				11
Vermont		3		1				4
Virginia		18		2		2		22
Washington		19		1				20
West Virginia		7						7
Wisconsin		14						14
Wyoming		1						1
Puerto Rico		8		1		3		12
Total		677		79		121		877

Store Expansion. During fiscal 2003, the Company opened 86 net new stores, which included 65 PacSun stores, 7 PacSun Outlet stores and 14 d.e.m.o. stores. In addition, the Company expanded or relocated 27 existing stores during fiscal 2003. During fiscal 2004, the Company plans to open approximately 110 net new stores, of which approximately 65 will be PacSun stores, approximately five will be PacSun Outlet stores and approximately 40 will be d.e.m.o. stores. The Company also plans to expand or relocate approximately 35 existing smaller stores during fiscal 2004. As of the date of this filing, approximately 75% of the leases for the approximately 110 net new stores the Company expects to open in fiscal 2004 have been executed.

The Company’s site selection strategy is to locate its stores primarily in regional malls serving markets that meet its demographic criteria, including average household income and population density. The Company also considers mall sales per square foot, the performance of other retail tenants serving teens and young adult customers, anchor tenants and occupancy costs. The Company currently seeks PacSun store locations of approximately 3,500 to 4,000 square feet and d.e.m.o. store locations of approximately 2,500 to 3,000

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square feet primarily in high-traffic locations within regional malls. The Company currently seeks PacSun Outlet store locations of approximately 4,000 square feet primarily in high-traffic value-oriented outlet malls, both open-air and enclosed. For details concerning average costs to build and stock new and relocated stores in fiscal 2003, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources.”

The Company’s continued growth depends upon its ability to open and operate stores on a profitable basis. The Company’s ability to expand successfully will be dependent upon a number of factors, including sufficient demand for the Company’s merchandise in its existing and new markets, the ability of the Company to locate and obtain favorable store sites, negotiate acceptable lease terms, obtain adequate merchandise supply, and hire and train qualified management and other employees.

Store Operations. Each store has a manager, one or more co-managers or assistant managers, and approximately six to twelve part-time sales associates. District managers supervise approximately seven to twelve stores and approximately six to ten district managers report to a regional manager. Regional, district, store managers and store co-managers participate in a bonus program based on achieving predetermined levels of sales and inventory shrinkage. Company stores are open during mall shopping hours. The Company has well-established store operating policies and procedures and an extensive in-store training program for new store managers and co-managers. The Company places great emphasis on its loss prevention program in order to control inventory shrinkage. This program includes the installation of electronic article surveillance systems in all stores, education of store personnel on loss prevention, and monitoring of returns, voids and employee sales. In each fiscal year since fiscal 1991, the Company has achieved an inventory shrinkage rate of 1.3% or less of net sales at retail, or .6% or less of net sales at cost.

Information Systems

The Company’s merchandise, financial and store computer systems are fully integrated and operate using primarily IBM equipment. The software, which is primarily provided by one of the largest vendors to the retail trade, is regularly upgraded or modified as needs arise or change. The Company’s information systems provide management, buyers and planners comprehensive data that helps them identify emerging trends and manage inventories. The systems include purchase order management, electronic data interchange, open order reporting, open-to-buy, receiving, distribution, merchandise allocation, basic stock replenishment, inter-store transfers, inventory and price management. Management uses weekly best/worst item sales reports to enhance the timeliness and effectiveness of purchasing and markdown decisions. Merchandise purchases are based on planned sales and inventories and are frequently revised to reflect changes in demand for a particular item or classification.

All of the Company’s stores have a point-of-sale system operating on IBM in-store computer hardware. The system features bar-coded ticket scanning, automatic price look-up, dial-out check and credit authorization and automatic nightly transmittal of data between the store and the Company’s corporate offices. Each of the regional and district managers uses a laptop computer and can instantly access appropriate or relevant Company-wide information, including actual and budgeted sales by store, district and region, transaction information and payroll data. The Company believes its management information systems are adequate to support its planned expansion at least through fiscal 2004.

Competition

The retail apparel, footwear and accessory business is highly competitive. PacSun stores, PacSun Outlets and d.e.m.o. stores compete on a national level with certain leading department stores and national chains that offer the same or similar brands and styles of merchandise. The Company’s stores also compete with a wide variety of regional and local specialty stores, such as Abercrombie and Fitch, American Eagle Outfitters, The Gap, Aeropostale and Hot Topic. Many of the Company’s competitors are larger and have significantly greater resources than the Company. The Company believes the principal competitive factors in its industry are fashion, merchandise assortment, quality, price, store location, environment and customer service.

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Trademarks and Service Marks

The Company is the owner in the United States of the marks “Pacific Sunwear of California,” “PacSun,” “Pacific Sunwear,” and “d.e.m.o.” The Company also uses and has registered, or has a pending registration on, a number of other marks. The Company has also registered many of its marks outside of the United States. The Company believes its rights in its marks are important to its business and intends to maintain its marks and the related registrations.

Employees

At the end of fiscal 2003, the Company had approximately 12,200 employees, of whom approximately 8,800 were part-time. Of the total employees, approximately 450 were employed at the Company’s corporate headquarters and distribution center. A significant number of seasonal employees are hired during peak selling periods. None of the Company’s employees is represented by a labor union, and the Company believes that its relationships with its employees are good.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the names, ages and titles of persons serving as executive officers of the Company as of March 26, 2004:

Executive Officers	Age		Position
Greg H. Weaver		50	Chairman of the Board and Chief Executive Officer
Timothy M. Harmon		52	President and Chief Merchandising Officer
Carl W. Womack		52	Senior Vice President, Chief Financial Officer and Secretary

Set forth below is certain information with respect to the executive officers of the Company:

Greg H. Weaver, who joined the Company in July 1987, has served as Chairman of the Board and Chief Executive Officer since November 1997. He served as President and Chief Executive Officer from October 1996 to November 1997 and as a director since February 1996. Prior to October 1996, Mr. Weaver served in various senior level executive positions since joining the Company. Prior to joining the Company, he was employed for 13 years by Jaeger Sportswear Ltd. in both operational and merchandising capacities for the U.S. and Canadian stores.

Timothy M. Harmon, who joined the Company in September 1991, has served as President and Chief Merchandising Officer since November 1997. Prior to November 1997, he served in various senior level executive merchandising positions since joining the Company. Prior to joining the Company, Mr. Harmon served in various merchandising positions at Wideworld/MTV Sportswear, a domestic apparel manufacturer, Chauvin International, an import apparel manufacturer, Anchor Blue, a teen apparel retailer, and Federated Department Stores.

Carl W. Womack, who joined the Company in May 1986, has served as Senior Vice President and Chief Financial Officer since October 1994. He served as Vice President of Finance and Chief Financial Officer from May 1986 to September 1994. He has served as Secretary of the Company since November 1992. Prior to joining the Company, Mr. Womack served in several positions in public and private accounting. Mr. Womack is a certified public accountant.

ITEM 2. PROPERTIES

In January 2002, the Company completed construction of and relocated to its current corporate office and distribution center located in Anaheim, California. The Company’s facilities encompass approximately

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550,000 square feet. The Company believes the current facilities are capable of servicing approximately 1,500 stores.

The Company continues to lease its former facilities under an operating lease covering approximately 176,000 square feet. The lease expires in February 2008. The Company is currently seeking a tenant to sublease the remaining square footage of its former facilities for the remainder of the lease term (see note 7 to the consolidated financial statements).

The Company leases substantially all of its stores under operating lease agreements with initial terms ranging from approximately eight to ten years (see note 7 to the consolidated financial statements). Substantially all leases for the Company’s stores provide for percentage rent, in excess of specified minimums, based upon net sales.

ITEM 3. LEGAL PROCEEDINGS

During fiscal 2003, the Company reached an agreement to settle all claims related to two lawsuits concerning overtime pay for a total of $4.0 million. The Company had accrued $3.9 million related to these matters at the end of fiscal 2002. The suits are Auden v. Pacific Sunwear of California, Inc., which was filed September 17, 2001, and Adams v. Pacific Sunwear of California, Inc., which was filed August 2, 2002. The complaints alleged that the Company improperly classified certain California-based employees as “exempt” from overtime pay. In February 2004, the Company made a $3.1 million payment on the aggregate settlement amount with the remaining amounts expected to be paid in the first half of fiscal 2004. The settlement did not have a material impact on results of operations for fiscal 2003.

The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not have a material adverse effect upon the results of operations or financial condition of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company’s shareholders during the fourth quarter of the fiscal year covered by this report.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s common stock trades on the NASDAQ National Market under the symbol “PSUN”. The following table sets forth for the quarterly periods indicated the high and low bid prices per share of the common stock as reported by NASDAQ (as adjusted to reflect the Company’s 3-for-2 stock splits in December 2002 and August 2003):

Fiscal 2003	High		Low
1st Quarter	$	15.67	$	10.74
2nd Quarter		20.43		13.07
3rd Quarter		24.22		19.00
4th Quarter		24.56		19.49

Fiscal 2002	High		Low
1st Quarter	$	11.91	$	8.92
2nd Quarter		11.05		7.21
3rd Quarter		11.19		7.21
4th Quarter		13.41		10.15

As of March 26, 2004, the number of holders of record of common stock of the Company was approximately 140, and the number of beneficial holders of the common stock was in excess of 24,000.

The Company has never declared or paid any dividends on its common stock. The Company’s current credit facility prohibits the payment of cash dividends on its capital stock.

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ITEM 6. SELECTED FINANCIAL DATA

The selected balance sheet and income statement data as of January 31, 2004, and February 1, 2003, and for each of the three fiscal years in the period ended January 31, 2004, are derived from audited consolidated financial statements of the Company included herein and should be read in conjunction with such financial statements. Such data and the selected consolidated operating data below should also be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report. The consolidated balance sheet data as of February 2, 2002, February 4, 2001 (“fiscal 2000”), and January 30, 2000 (“fiscal 1999”), and the consolidated income statement data for each of the two fiscal years in the period ended February 4, 2001, are derived from audited consolidated financial statements of the Company, which are not included herein.

	Fiscal Year Ended (1)
	Jan. 31,			Feb. 1,			Feb. 2,			Feb. 4,			Jan. 30,
	2004			2003			2002			2001			2000
	(in thousands, except per share and selected operating data)
Consolidated Income Statement Data:
Net sales	$	1,040,294		$	846,393		$	684,840		$	589,438		$	436,808
Cost of goods sold (including buying, distribution and occupancy costs)		676,977			562,710			464,660			391,816			284,187
Gross margin		363,317			283,683			220,180			197,622			152,621
Selling, general and administrative expenses		235,068			202,445			175,898			133,999			96,117
Operating income		128,249			81,238			44,282			63,623			56,504
Net interest income/(expense)		732			(594	)		470			1,344			916
Income before income tax expense		128,981			80,644			44,752			64,967			57,420
Income tax expense		48,768			30,967			17,186			25,213			22,119
Net income	$	80,213		$	49,677		$	27,566		$	39,754		$	35,301
Net income per share, diluted (2)	$	1.02		$	0.66		$	0.37		$	0.54		$	0.49
Weighted average shares outstanding, diluted (2)		78,850			75,147			74,488			73,234			72,427
Selected Consolidated Operating Data:
Stores open at end of period		877			791			718			589			450
Stores opened during period		90			85			135			142			111
Stores closed during period		4			12			6			3			3
Capital expenditures (000’s)	$	40,211		$	40,423		$	92,936		$	61,869		$	40,219
Average net sales per gross square foot (3) (4)	$	363		$	330		$	321		$	368		$	398
Average net sales per store (000’s) (3) (4)	$	1,229		$	1,102		$	1,031		$	1,082		$	1,084
Square footage of gross store space		2,996,635			2,647,343			2,319,149			1,764,123			1,254,373
Comparable store net sales increase/ (decrease) (4) (5)		13.1	%		9.7	%		(2.5	)%		3.5	%		7.8	%
Consolidated Balance Sheet Data:
Working capital	$	242,992		$	109,305		$	78,899		$	79,799		$	67,351
Total assets		575,261			399,743			355,440			277,453			209,342
Long-term debt		228			1,102			24,597			—			—
Shareholders’ equity	$	428,762		$	302,391		$	247,955		$	213,131		$	161,826

(1)	Except for the fiscal year ended February 4, 2001, which included 53 weeks, all fiscal years presented included 52 weeks. Effective February 1, 2002, the Company changed its fiscal year end from the Sunday closest to the end of January to the Saturday closest to the end of January. As a result, the last day of fiscal 2001 was Saturday, February 2, 2002.
(2)	Adjusted to give effect to the three-for-two stock splits effected as of August 25, 2003, December 18, 2002, and June 8, 1999.

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(3)	For purposes of calculating these amounts, the number of stores and the amount of square footage reflect the number of months during the period that new stores and closed stores were open.
(4)	These amounts have been adjusted to exclude the fifty-third week in the fiscal year ended February 4, 2001.
(5)	Stores are deemed comparable stores on the first day of the first month following the one-year anniversary of their opening, relocation, expansion or conversion. In conjunction with the expansion or relocation of certain stores to a larger format with a square footage increase of 15% or more or with the conversion of certain PacSun stores to the d.e.m.o. format, the Company excludes each such store’s net sales results from the first day of the month of its expansion, relocation or conversion.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto of the Company included elsewhere in this Form 10-K. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements and Risk Factors” in this section.

Executive Overview

Management of the Company considers the following items to be key performance indicators in evaluating Company performance:

Comparable (or “same store”) sales - Stores are deemed comparable stores on the first day of the month following the one-year anniversary of their opening or expansion/relocation. Management of the Company considers same store sales to be an important indicator of current Company performance. Same store sales results are important in achieving operating leverage of certain expenses such as store payroll, store occupancy, depreciation, general and administrative expenses, and other costs that are somewhat fixed. Positive same store sales results generate greater operating leverage of expenses while negative same store sales results negatively impact operating leverage. Same store sales results also have a direct impact on the Company’s total net sales, cash, and working capital.

Net merchandise margins - Management analyzes the components of net merchandise margins, specifically initial markup and markdowns as a percentage of net sales. Any inability to obtain acceptable levels of initial markups or any significant increase in the Company’s use of markdowns could have an adverse impact on the Company’s gross margin results and results of operations.

Operating margin - Management views operating margin as a key indicator of the Company’s success. The key drivers of operating margins are comparable store net sales, net merchandise margins, and the Company’s ability to control operating expenses. Operating margin for fiscal 2003, 2002 and 2001, was 12.3%, 9.6% and 6.5%, respectively. The Company’s highest historical operating margin was 12.9% for fiscal 1999.

Store sales trends - Management evaluates store sales trends in assessing the operational performance of the Company’s store expansion strategies. Important store sales trends include average net sales per store, average net sales per square foot, and average trend sales for new stores. Average net sales per store (in thousands) for fiscal 2003, 2002 and 2001 were $1,229, $1,102 and $1,031, respectively. Average net sales per square foot were $363, $330 and $321, respectively.

Cash flow and liquidity (working capital) - Management evaluates cash flow from operations, liquidity and working capital to determine the Company’s short-term operational financing needs. Cash flows from operations were significantly higher in fiscal 2003 as compared to fiscal 2002, primarily due to higher net income driven by the 13.1% comparable store net sales increase in fiscal 2003. Management expects cash flows from operations will be sufficient to finance operations without borrowing under the Company’s credit facility.

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Critical Accounting Policies

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reported period. Actual results could differ from these estimates. The accounting policies that the Company believes are the most critical to aid in fully understanding and evaluating reported financial results include the following:

Revenue Recognition - Sales are recognized upon purchase by customers at the Company’s retail store locations or upon shipment for orders placed through the Company’s website. The Company records the sale of gift cards as a current liability and recognizes a sale when a customer redeems a gift card. The amount of the gift card liability is determined taking into account the Company’s estimate of the portion of gift cards that will not be redeemed or recovered. The Company accrues for estimated sales returns by customers based on historical sales return results. Actual return rates have historically been within management’s expectations and the reserves established. However, in the event that the actual rate of sales returns by customers increased significantly, the Company’s operational results could be adversely affected. The Company accrued $.6 million at the end of fiscal 2003 for estimated sales returns by customers based on historical sales return results.

Inventory Valuation - Merchandise inventories are stated at the lower of cost (first-in, first-out method) or market. Cost is determined using the retail inventory method. At any one time, inventories include items that have been marked down to management’s best estimate of their fair market value. Management bases the decision to mark down merchandise primarily upon its current rate of sale and the age of the item, among other factors. To the extent that management estimates differ from actual results, additional markdowns may have to be recorded, which could reduce the Company’s gross margins and operating results.

Long-Lived Assets - In the normal course of business, the Company acquires tangible and intangible assets. The Company periodically evaluates the recoverability of the carrying amount of its long-lived assets (including property, plant and equipment, and other intangible assets) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Impairment is assessed when the undiscounted expected future cash flows derived from an asset or asset group are less than its carrying amount. Impairments are recognized in operating earnings. The Company uses its best judgment based on the most current facts and circumstances surrounding its business when applying these impairment rules to determine the timing of the impairment test, the undiscounted cash flows used to assess impairments, and the fair value of a potentially impaired asset. Changes in assumptions used could have a significant impact on the Company’s assessment of recoverability. Numerous factors, including changes in the Company’s business, industry segment, and the global economy, could significantly impact management’s decision to retain, dispose of, or idle certain of its long-lived assets.

Goodwill and Other Intangible Assets - The Company evaluates the recoverability of goodwill at least annually based on a two-step impairment test. The first step compares the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds fair value, then the second step of the impairment test is performed to measure the amount of any impairment loss. Fair value is determined based on estimated future cash flows, discounted at a rate that approximates the Company’s cost of capital. Such estimates are subject to change and the Company may be required to recognize impairment losses in the future.

Insurance Reserves - The Company is responsible for workers’ compensation insurance claims up to a specified aggregate stop loss amount. The Company maintains a reserve for estimated claims, both reported and incurred but not reported, based on historical claims experience and other estimated assumptions. Actual claims activity has historically been within management’s expectations and the reserves established. To the extent claims experience or management’s estimates change, additional charges may be recorded in the future up to the aggregate stop loss amount for each policy year.

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Accrued Sublease Loss Charges - The Company remains liable under two operating leases covering its former corporate offices and a former store location. These facilities remain vacant as of the date of this filing. At the end of fiscal 2002, the Company had accrued $3.6 million to account for the difference between the Company’s remaining contractual lease obligations and the rate and timeframe within which the Company expected to be able to sublease these properties. During fiscal 2003, based on a review of real estate market conditions and on-going negotiations, the Company revised its sublease assumptions and increased its accrued sublease loss charges by $1.9 million to a total of $5.5 million. To the extent management’s estimates relating to the Company’s ability to sublease these facilities at the assumed rates or within the assumed timeframes changes or is incorrect, additional charges or reversals of previous charges may be recorded in the future. At January 31, 2004, the aggregate remaining obligations under these leases were approximately $5.4 million for the former corporate offices and approximately $6.7 million for the former store location. These amounts are included in the contractual obligations table within Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources.”

Income Taxes - Current income tax expense is the amount of income taxes expected to be payable for the current year. The combined federal and state income tax expense was calculated using estimated effective annual tax rates. A deferred income tax asset or liability is established for the expected future consequences of temporary differences in the financial reporting and tax bases of assets and liabilities. The Company considers future taxable income and ongoing prudent and feasible tax planning in assessing the value of its deferred tax assets. Evaluating the value of these assets is necessarily based on the Company’s judgment. If the Company determines that it is more likely than not that these assets will not be realized, the Company would reduce the value of these assets to their expected realizable value through a valuation allowance, thereby decreasing net income. If the Company subsequently determined that the deferred tax assets, which had been written down, would be realized in the future, the value of the deferred tax assets would be increased, thereby increasing net income in the period when that determination was made.

Litigation - The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not have a material adverse effect upon the results of operations or financial condition of the Company and, from time to time, may make provisions for potential litigation losses. Depending on the actual outcome of pending litigation, charges in excess of any provisions could be recorded in the future, which may have an adverse effect on the Company’s operating results (see note 7 to the consolidated financial statements).

Results of Operations

The following table sets forth selected income statement data of the Company expressed as a percentage of net sales for the fiscal years indicated. The discussion that follows should be read in conjunction with the following table:

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	As a Percentage of Net Sales,
	Fiscal Year Ended
	Jan. 31,			Feb. 1,			Feb. 2,
	2004			2003			2002
Net sales		100.0	%		100.0	%		100.0	%
Cost of goods sold (including buying, distribution and occupancy costs)		65.1			66.5			67.8
Gross margin		34.9			33.5			32.2
Selling, general and administrative expenses		22.6			23.9			25.7
Operating income		12.3			9.6			6.5
Interest income/(expense), net		0.1			(0.1	)		0.1
Income before income tax expense		12.4			9.5			6.6
Income tax expense		4.7			3.6			2.6
Net income		7.7	%		5.9	%		4.0	%
Number of stores open at end of period		877			791			718

Fiscal 2003 Compared to Fiscal 2002

Net Sales

Net sales increased to $1.04 billion in fiscal 2003 from $846.4 million in fiscal 2002, an increase of $193.9 million, or 22.9%. The components of this $193.9 million increase in net sales are as follows:

Amount	Attributable to
$104.3 million	13.1% increase in comparable store net sales in fiscal 2003 compared to fiscal 2002
49.2 million	90 new stores opened in fiscal 2003 not yet included in the comparable store base
25.1 million	Net sales from stores opened in fiscal 2002 while not yet included in the comparable store base
20.0 million	Other non-comparable sales (net sales from expanded or relocated stores not yet included in the comparable store base and internet net sales)
(4.7) million	4 closed stores in fiscal 2003 and 12 closed stores in fiscal 2002
$193.9 million	Total

Of the 13.1% increase in comparable store net sales in fiscal 2003, PacSun and PacSun Outlet comparable store net sales increased a combined 12.3% and d.e.m.o. comparable store net sales increased 21.0%. The increase in comparable store net sales within PacSun and PacSun Outlet was primarily attributable to increases in comparable store net sales of footwear, accessories, juniors and, to a lesser extent, young men’s merchandise. The increase in comparable store net sales within d.e.m.o. was primarily attributable to increases in comparable store net sales of juniors, accessories, footwear and, to a lesser extent, young men’s merchandise. Average retail prices of merchandise sold remained relatively unchanged in fiscal 2003 compared to fiscal 2002 and had no significant impact on the net sales increase for fiscal 2003.

Gross Margin

Gross margin, after buying, distribution and occupancy costs, increased to $363.3 million in fiscal 2003 from $283.7 million in fiscal 2002, an increase of $79.6 million, or 28.1%. As a percentage of net sales, gross margin was 34.9% for fiscal 2003 compared to 33.5% for fiscal 2002. The components of this 1.4% increase in gross margin as a percentage of net sales are as follows:

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%	Attributable to
1.4 %	Decrease in occupancy costs, primarily due to leveraging these costs over higher total sales
.1 %	Increase in net merchandise margins, primarily due to a higher initial markup rate partially offset by a higher markdown rate
.1 %	Decrease in distribution costs
(.2)%	Increase in buying costs
1.4%	Total

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $235.1 million in fiscal 2003 from $202.4 million in fiscal 2002, an increase of $32.7 million, or 16.2%. As a percentage of net sales, these expenses decreased to 22.6% from 23.9%. The components of this 1.3% net decrease as a percentage of net sales are as follows:

%	Attributable to
1.1 %	Decrease in store payroll, primarily due to leveraging these costs over higher total sales
.7 %	Decrease in other store expenses due to leveraging these costs over higher total sales
.2 %	Decrease in store closing, expansion and relocation expenses
(.7)%	Increase in general and administrative expenses, primarily due to $5.1 million restricted stock expense (see note 9 to the consolidated financial statements)
1.3%	Total

Net Interest Income/Expense

Net interest income was $.7 million in fiscal 2003 compared to net interest expense of $.6 million in fiscal 2002, an increase of $1.3 million in net interest income. This increase was primarily the result of higher average cash balances in fiscal 2003. Average cash balances were higher in fiscal 2003 primarily due to higher net income driven by the comparable store net sales increase in fiscal 2003 as well as the absence of the construction loan related to the Company’s new corporate offices and distribution center that was outstanding for a portion of fiscal 2002.

Income Tax Expense

Income tax expense was $48.8 million in fiscal 2003 compared to $31.0 million in fiscal 2002. The effective income tax rate was 37.8% in fiscal 2003 and 38.4% in fiscal 2002. The lower effective income tax rate for fiscal 2003 was primarily attributable to a lower weighted effective state income tax rate for the Company. The weighted effective state income tax rate of the Company will vary depending on a number of factors, such as differing income tax rates and net sales by state.

Fiscal 2002 Compared to Fiscal 2001

Net Sales

Net sales increased to $846.4 million in fiscal 2002 from $684.8 million in fiscal 2001, an increase of $161.6 million, or 23.6%. The components of this $161.6 million increase in net sales are as follows:

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Amount	Attributable to
$61.0 million	9.7% increase in comparable store net sales in fiscal 2002 compared to fiscal 2001
50.6 million	85 new stores opened in fiscal 2002 not yet included in the comparable store base
40.9 million	Net sales from stores opened in fiscal 2001 while not yet included in the comparable store base
13.7 million	Other non-comparable sales (net sales from expanded or relocated stores not yet included in the comparable store base and internet net sales)
1.4 million	Additional shopping day in fiscal 2002 due to the one day change in fiscal year end from Sunday to Saturday at the end of fiscal 2001
(6.0) million	12 closed stores in fiscal 2002 and 6 closed stores in fiscal 2001
$161.6 million	Total

Of the 9.7% increase in comparable store net sales in fiscal 2002, PacSun and PacSun Outlet comparable store net sales increased 9.4% and d.e.m.o. comparable store net sales increased 12.4%. The increase in comparable store net sales within PacSun and PacSun Outlet was primarily attributable to increases in comparable store net sales of footwear, juniors, and accessories. The increase in comparable store net sales within d.e.m.o. was primarily attributable to increases in comparable store net sales of juniors and accessories merchandise. Average retail prices of merchandise sold remained relatively unchanged in fiscal 2002 compared to fiscal 2001 and had no significant impact on the net sales increase for fiscal 2002.

Gross Margin

Gross margin, after buying, distribution and occupancy costs, increased to $283.7 million in fiscal 2002 from $220.2 million in fiscal 2001, an increase of $63.5 million, or 28.8%. As a percentage of net sales, gross margin was 33.5% for fiscal 2002 compared to 32.2% for fiscal 2001. The components of this 1.3% increase in gross margin are as follows:

%	Attributable to
.4 %	Decrease in occupancy costs, primarily due to leveraging these costs over higher total sales
.4 %	Decrease in buying costs, primarily due to leveraging these costs over higher total sales
.3 %	Decrease in distribution costs, primarily due to freight and labor efficiencies in the new distribution center as well as leveraging these costs over higher total sales
.2 %	Increase in net merchandise margins, primarily due to a higher initial markup rate partially offset by a higher markdown rate
1.3%	Total

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $202.4 million in fiscal 2002 from $175.9 million in fiscal 2001, an increase of $26.5 million, or 15.1%. As a percentage of net sales, these expenses decreased to 23.9% from 25.7%. The components of this 1.8% net decrease as a percentage of net sales are as follows:

%	Attributable to
.8 %	Decrease in advertising expenses, primarily due to the elimination of television advertising and a sports game sponsorship
.6 %	Decrease in store closing, expansion and relocation expenses
.4 %	Decrease in store payroll, primarily due to leveraging these costs over higher total sales
1.8%	Total

Selling, general and administrative expenses include provisions made by the Company for the wage and hour litigation (see Item 3, “Legal Proceedings,” and note 7 to the consolidated financial statements). These amounts are included in store payroll.

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Net Interest Expense/Income

Net interest expense was $.6 million in fiscal 2002 compared to interest income of $.5 million in fiscal 2001, a decrease of $1.1 million. This decrease was primarily the result of interest expense arising from a construction loan related to the construction of the Company’s new corporate offices and distribution center in fiscal 2002 as well as lower average cash balances during fiscal 2002 as compared to fiscal 2001.

Income Tax Expense

Income tax expense was $31.0 million in fiscal 2002 compared to $17.2 million in fiscal 2001. The effective income tax rate in fiscal 2002 and fiscal 2001 was 38.4%.

Liquidity and Capital Resources

The Company has financed its operations primarily from internally generated cash flow, with occasional short-term and long-term borrowings and equity financing in past years. The Company’s primary capital requirements have been for the construction of new stores, remodeling, expansion, or relocation of selected stores, financing of inventories and, in fiscal 2001, construction of the Company’s new corporate offices and distribution center. Management believes that the Company’s working capital, cash flows from operating activities and credit facility will be sufficient to meet the Company’s operating and capital expenditure requirements for fiscal 2004.

Operating Cash Flows

Net cash provided by operating activities for fiscal 2003, fiscal 2002 and fiscal 2001 was $151.6 million, $76.6 million and $58.4 million, respectively. The $75.0 million increase in cash provided by operations in fiscal 2003 as compared to fiscal 2002 was attributable to the following:

Amount	Attributable to
$30.5 million	Increase in net income
24.9 million	Increase in accrued income taxes and deferred income taxes
15.9 million	Increase in accounts payable leverage compared to fiscal 2002 (1)
3.7 million	Other items netting to a cash flow increase
$75.0 million	Total

(1) Accounts payable as a percentage of inventories increased to 26.2% at January 31, 2004, as compared to 23.1% at February 1, 2003, primarily due to timing of payments.

The Company’s success is largely dependent upon its ability to gauge the fashion tastes of its customers and provide merchandise that satisfies customer demand. Any inability to provide appropriate merchandise in sufficient quantities in a timely manner could have a material adverse effect on the Company’s business, operating results, cash flows from operations and financial condition. Any economic downturn that affects the retail industry as a whole could also adversely affect the Company’s business, operating results, cash flows from operations and financial condition.

Working Capital

Working capital at the end of fiscal 2003, fiscal 2002 and fiscal 2001 was $243.0 million, $109.3 million and $78.9 million, respectively. The $133.7 million increase in working capital at January 31, 2004 as compared to February 1, 2003 was attributable to the following:

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Amount	Attributable to
$139.4 million	Increase in cash and short-term investments, primarily due to higher net income driven by the 13.1% comparable store net sales increase for fiscal 2003
14.1 million	Increase in inventories, net of accounts payable, primarily due to square footage growth of 13%, as well as inventory increases in comparable stores
.6 million	Other items netting to a working capital increase
(20.4) million	Increase in accrued liabilities, primarily due to increased accruals for restricted stock expenses, sales taxes, capital expenditures for stores not yet open, bonus expense and store closing expenses
$133.7 million	Total

Investing Cash Flows

Net cash used in investing activities in fiscal 2003, fiscal 2002 and fiscal 2001 was $73.2 million, $40.4 million and $92.9 million, respectively. The components of the $73.2 million of net cash used in investing activities in fiscal 2003 are as follows:

Amount	Attributable to
$33.0 million	Purchases of short-term investments classified as held-to-maturity
22.9 million	Capital expenditures for 90 new stores and 27 expansions/relocations in fiscal 2003
8.5 million	Construction costs of new, expanded and relocated stores to open in fiscal 2004
2.4 million	Maintenance capital expenditures on existing stores
6.4 million	Other capital expenditures, including computer hardware and software
$73.2 million	Total

In fiscal 2004, capital expenditures are expected to be approximately $56 million, of which approximately $48 million will be for opening new and relocated/expanded stores, and approximately $8 million will be used for other capital expenditures, including maintenance capital on existing stores and computer hardware and software.

On January 27, 2004, the Board of Directors of the Company adopted a resolution authorizing the Company to purchase up to 2.5 million shares of the Company’s common stock in open market transactions. As of January 31, 2004, no purchases had been made pursuant to the resolution. Subsequent to January 31, 2004, the Company repurchased shares as follows:

					# of Shares		Maximum # of Shares
					Purchased as Part		that May Yet be
	# of Shares				of Publicly		Purchased Under the
Period	Purchased		Average Price/Share		Announced Plan		Plan
February 23, 2004		75,000	$	23.99		75,000		2,425,000

Financing Cash Flows

Net cash provided by financing activities in fiscal 2003 was $28.0 million as compared to cash used of $22.9 million in fiscal 2002 and cash provided of $28.7 million in fiscal 2001, respectively. Of the $28.0 million of net cash provided by financing activities in fiscal 2003, $30.4 million was due to proceeds received from the exercise of stock options, offset by principal payments under capital lease and long-term debt obligations of $2.4 million.

The Company has a credit facility with a bank, which expires April 1, 2007. The credit facility provides for a $45.0 million line of credit (the “Credit Line”) through March 31, 2005 to be used for cash advances, commercial letters of credit and shipside bonds. The Credit Line increases to $50.0 million from April 1, 2005 through March 31, 2006, and $60.0 million from April 1, 2006 through expiration on April 1, 2007. Interest on the Credit Line is payable monthly at the bank’s prime rate (4.0% at January 31, 2004) or at optional interest rates that are primarily dependent upon the London Inter-bank Offered Rates for the time

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period chosen. The Company did not borrow under the credit facility at any time during fiscal 2003. The Company had $13.1 million outstanding in letters of credit at January 31, 2004. The credit facility subjects the Company to various restrictive covenants, including maintenance of certain financial ratios, and prohibits payment of cash dividends on common stock. At January 31, 2004, the Company was in compliance with all of the covenants.

A significant decrease in the Company’s operating results could adversely affect the Company’s ability to maintain the required financial ratios under the Company’s credit facility. Required financial ratios include total liabilities to tangible net worth, limitations on capital expenditures and achievement of certain rolling four-quarter EBITDA requirements. If these financial ratios are not maintained, the bank will have the option to require immediate repayment of all amounts outstanding under the credit facility, if any. The most likely result would require the Company to renegotiate certain terms of the credit agreement, obtain a waiver from the bank, or obtain a new credit agreement with another bank, which may contain different terms. At January 31, 2004, the Company had no borrowings outstanding under its credit facility.

Contractual Obligations

The Company has minimum annual rental commitments under existing store leases, the lease for its former corporate offices and distribution center, capital leases for computer equipment, and other long-term debt obligations for multi-year computer maintenance contracts. The Company’s financial obligations under these arrangements are approximately $83.0 million in fiscal 2004 and similar amounts annually thereafter. The Company leases all of its retail store locations under operating leases. The Company leases equipment, from time to time, under capital leases. In addition, at any time, the Company is contingently liable for open letters of credit with foreign suppliers of merchandise. At January 31, 2004, the Company’s future financial commitments under these arrangements are as follows:

	Payments Due by Period
Contractual Obligations			Less than						More than
(in millions)	Total		1 year		1-3 years		3-5 years		5 years
Operating lease obligations	$	615.8	$	81.1	$	164.3	$	157.8	$	212.6
Capital lease obligations		2.2		1.0		1.2		—		—
Long-term debt obligations		1.1		0.9		0.2		—		—
Letters of credit		13.1		13.1		—		—		—
Total	$	632.2	$	96.1	$	165.7	$	157.8	$	212.6

The Company reviews the operating performance of its stores on an ongoing basis to determine which stores, if any, to expand, relocate or close. Most leases contain cancellation or kick-out clauses in the Company’s favor that relieve the Company of any future obligation under a lease if specified sales levels are not achieved by a specified date. The Company closed four stores in fiscal 2003 and anticipates closing approximately five stores in fiscal 2004.

New Store Costs

The Company’s average cost to build a new store in fiscal 2003, including leasehold improvements, furniture and fixtures, and net of landlord allowances, was approximately $241,000 for PacSun stores, approximately $247,000 for PacSun Outlet stores, and approximately $248,000 for d.e.m.o. stores. The average cost of expanding or relocating a PacSun store was approximately $407,000 and the average cost of expanding or relocating a d.e.m.o. store was approximately $369,000 in fiscal 2003. The average total cost to build new stores and relocate or expand stores will vary in the future depending on various factors, including square footage, changes in store design, local construction costs and landlord allowances. The Company’s average cost for initial inventory for new stores opened in fiscal 2003 was approximately $128,000 for PacSun stores, approximately $202,000 for PacSun Outlet stores, and approximately $167,000 for d.e.m.o. stores. The Company’s initial inventory for new stores will vary in the future depending on various factors, including store concept and square footage.

19

New Accounting Pronouncements

Information regarding new accounting pronouncements is contained in note 1 to the consolidated financial statements for the year ended January 31, 2004, which note is incorporated herein by this reference.

Inflation

The Company does not believe that inflation has had a material effect on the results of operations in the recent past. There can be no assurance that the Company’s business will not be affected by inflation in the future.

Seasonality and Quarterly Results

The Company’s business is seasonal by nature, with the Christmas and back-to-school periods historically accounting for the largest percentage of annual net sales. The Company’s first quarter historically accounts for the smallest percentage of annual net sales. In each of fiscal 2003 and fiscal 2002, excluding sales generated by new and relocated/expanded stores, the Christmas and back-to-school periods together accounted for approximately 36% of the Company’s annual net sales and a higher percentage of the Company’s operating income. In fiscal 2003, excluding net sales generated by new and relocated/expanded stores, approximately 43% of the Company’s annual net sales occurred in the first half of the fiscal year and approximately 57% in the second half. The Company’s quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including the timing of store openings; the amount of revenue contributed by new stores; the timing and level of markdowns; the timing of store closings, expansions and relocations; competitive factors; and general economic conditions.

Cautionary Note Regarding Forward-Looking Statements and Risk Factors

This report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. The Company is hereby providing cautionary statements identifying important factors that could cause the Company’s actual results to differ materially from those projected in forward-looking statements of the Company herein. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events or performance (often, but not always through the use of words or phrases such as “will result,” “expects to,” “will continue,” “anticipates,” “plans,” “intends,” “estimated,” “projects” and “outlook”) are not historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. All forward-looking statements included in this report, including forecasts of fiscal 2004 planned new store openings, are based on information available to the Company as of the date hereof, and the Company assumes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur after such statements are made. Such uncertainties include, among others, the following factors:

Merchandising/Fashion Sensitivity. The Company’s success is largely dependent upon its ability to gauge the fashion tastes of its customers and to provide merchandise that satisfies customer demand in a timely manner. The Company’s failure to anticipate, identify or react appropriately in a timely manner to changes in fashion trends could have a material adverse effect on the Company’s same store sales results, operating margins, financial condition and results of operations. Misjudgments or unanticipated fashion changes could also have a material adverse effect on the Company’s image with its customers. See Item 1, “Business - Merchandising.”

Private Label Merchandise. Sales from private label merchandise accounted for approximately 32% and 33% of net sales in fiscal 2003 and fiscal 2002, respectively. The Company may increase the percentage of net sales in private label merchandise in the future, although there can be no assurance that the Company will be able to achieve increases in private label merchandise sales as a percentage of net sales. Because

20

the Company’s private label merchandise generally carries higher merchandise margins than its other merchandise, the Company’s failure to anticipate, identify and react in a timely manner to fashion trends with its private label merchandise, particularly if the percentage of net sales derived from private label merchandise increases, may have a material adverse effect on the Company’s same store sales results, operating margins, financial condition and results of operations. See Item 1, “Business - Merchandising.”

Fluctuations in Comparable Store Net Sales Results. The Company’s comparable store net sales results have fluctuated significantly in the past on a monthly, quarterly, and annual basis, and are expected to continue to fluctuate in the future. A variety of factors affect the Company’s comparable store net sales results, including changes in fashion trends, changes in the Company’s merchandise mix, calendar shifts of holiday periods, actions by competitors, weather conditions and general economic conditions. The Company’s comparable store net sales results for any particular fiscal month, fiscal quarter or fiscal year in the future may decrease. As a result of these or other factors, the Company’s future comparable store net sales results are likely to have a significant effect on the market price of the Company’s common stock.

Expansion and Management of Growth. PacSun’s continued growth depends to a significant degree on its ability to open and operate stores on a profitable basis and on management’s ability to manage the Company’s planned expansion. The Company has previously announced plans to operate 1,400 stores by the end of 2007, of which approximately 900 will be PacSun stores, approximately 100 will be PacSun Outlet stores, and approximately 400 will be d.e.m.o. stores. As of March 26, 2004, the Company operated 888 stores, of which 682 were PacSun stores, 79 were PacSun Outlet stores, and 127 were d.e.m.o. stores. The Company’s planned expansion is dependent upon a number of factors, including the ability of the Company to locate and obtain favorable store sites, negotiate acceptable lease terms, obtain adequate supplies of merchandise and hire and train qualified management level and other employees. Factors beyond the Company’s control may also affect the Company’s ability to expand, including general economic and business conditions affecting consumer spending. There can be no assurance that the Company will achieve its planned expansion, that such expansion will be profitable, or that the Company will be able to manage its growth effectively. Any failure to manage growth could have a material adverse effect on the Company’s business, financial condition and results of operations.

Reliance on Key Personnel. The continued success of the Company is dependent to a significant degree upon the services of its key personnel, particularly its executive officers. The loss of the services of any member of senior management could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company’s success in the future will also be dependent upon the Company’s ability to attract and retain qualified personnel. The Company’s inability to attract and retain qualified personnel in the future could have a material adverse effect on the Company’s business, financial condition and results of operations.

Dependence on Single Distribution Facility. The Company’s distribution functions for all of its stores and for internet sales are handled from a single facility in Anaheim, California. Any significant interruption in the operation of the distribution facility due to natural disasters, accidents, system failures or other unforeseen causes would have a material adverse effect on the Company’s business, financial condition and results of operations. There can be no assurance that the Company’s new corporate office and distribution center will be adequate to support the Company’s future growth.

Internet Sales. The Company’s internet operations are subject to numerous risks that could have a material adverse effect on the Company’s operational results, including unanticipated operating problems, reliance on third party computer hardware and software providers, system failures and the need to invest in additional computer systems. Specific risks include: (i) diversion of sales from PacSun stores; (ii) rapid technological change; (iii) liability for online content; and (iv) risks related to the failure of the computer systems that operate the website and its related support systems, including computer viruses, telecommunication failures and electronic break-ins and similar disruptions. In addition, internet operations involve risks which are beyond the Company’s control that could have a material adverse effect on the Company’s operational results, including: (i) price competition involving the items the Company intends to sell; (ii) the entry of the Company’s vendors into the internet business, in direct competition with the Company; (iii) the level of merchandise returns experienced by the Company; (iv) governmental

21

regulation; (v) online security breaches; (vi) credit card fraud; and (vii) competition and general economic conditions specific to the internet, online commerce and the apparel industry.

Economic Impact of Terrorist Attacks or War/Threat of War. The majority of the Company’s stores are located in regional shopping malls. Any threat of terrorist attacks or actual terrorist events, particularly in public areas, could lead to lower customer traffic in regional shopping malls. In addition, local authorities or mall management could close regional shopping malls in response to any immediate security concern. Mall closures, as well as lower customer traffic due to security concerns, could result in decreased sales. Additionally, war or the threat of war could significantly diminish consumer spending, resulting in decreased sales for the Company. Decreased sales would have a material adverse effect on the Company’s business, financial condition and results of operations.

Reliance on Foreign Sources of Production. The Company purchases merchandise directly in foreign markets for its private label brands. In addition, the Company purchases merchandise from domestic vendors, some of which is manufactured overseas. The Company does not have any long-term merchandise supply contracts and its imports are subject to existing or potential duties, tariffs and quotas. The Company faces competition from other companies for production facilities and import quota capacity. The Company also faces a variety of other risks generally associated with doing business in foreign markets and importing merchandise from abroad, such as: (i) political instability; (ii) enhanced security measures at United States ports, which could delay delivery of imports; (iii) imposition of new legislation relating to import quotas that may limit the quantity of goods which may be imported into the United States from countries in a region that the Company does business; (iv) imposition of duties, taxes, and other charges on imports; (v) delayed receipt or non-delivery of goods due to the failure of foreign-source suppliers to comply with applicable import regulations; and (vi) local business practice and political issues, including issues relating to compliance with domestic or international labor standards which may result in adverse publicity. New initiatives may be proposed that may have an impact on the trading status of certain countries and may include retaliatory duties or other trade sanctions that, if enacted, would increase the cost of products purchased from suppliers in countries that the Company does business with. The inability of the Company to rely on its foreign sources of production due to any of the factors listed above could have a material adverse effect on the Company’s business, financial condition and results of operations.

Credit Facility Financial Covenants. A significant decrease in the Company’s operating results could adversely affect the Company’s ability to maintain required financial ratios under the Company’s credit facility. Required financial ratios include a rolling four-quarter EBITDA requirement, total liabilities to tangible net worth ratio, and limitations on capital expenditures. If these financial ratios are not maintained, the bank will have the option to require immediate repayment of all amounts outstanding under the credit facility, if any. The most likely result would require the Company to renegotiate certain terms of the credit agreement, obtain a waiver from the bank, or obtain a new credit agreement with another bank, which may contain different terms.

Stock Options. A number of publicly traded companies have recently announced that they will begin expensing stock option grants to employees. In addition, the FASB and the Commission have indicated that possible rule changes requiring expensing of stock options may be adopted in the near future. Currently, the Company includes such expenses on a pro forma basis in the notes to the Company’s quarterly and annual financial statements in accordance with accounting principles generally accepted in the United States of America but does not include compensation expense related to stock options in the Company’s reported financial statements. If accounting standards are changed to require the Company to expense stock options, the Company’s reported earnings will decrease and its stock price could decline.

Litigation. The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not have a material adverse effect upon the results of operations or financial condition of the Company. However, management’s assessment of the Company’s current litigation could change in light of the discovery of facts with respect to legal actions pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which do not accord with management’s evaluation of the possible liability or outcome of such litigation.

22

Volatility of Stock Price. The market price of the Company’s common stock has fluctuated substantially in the past and there can be no assurance that the market price of the common stock will not continue to fluctuate significantly. Future announcements or management discussions concerning the Company or its competitors, net sales and profitability results, quarterly variations in operating results or comparable store net sales, changes in earnings estimates by analysts or changes in accounting policies, among other factors, could cause the market price of the common stock to fluctuate substantially. In addition, stock markets have experienced extreme price and volume volatility in recent years. This volatility has had a substantial effect on the market prices of securities of many smaller public companies for reasons frequently unrelated to the operating performance of the specific companies. See Item 5, “Market for Registrant’s Common Equity and Related Stockholder Matters.”

*************

The Company cautions that the risk factors described above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements of the Company made by or on behalf of the Company. Further, management cannot assess the impact of each such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

To the extent the Company borrows under its credit facility, the Company is exposed to market risk related to changes in interest rates. At January 31, 2004, there were no borrowings outstanding under the Company’s credit facility. Based on the weighted average interest rate of 3.67% on the Company’s credit facility during fiscal 2002, if interest rates on the credit facility were to increase by 10%, and to the extent borrowings were outstanding, for every $1,000,000 outstanding on the Company’s credit facility, net income would be reduced by approximately $3,000 per year. See “Summary of Significant Accounting Policies” and “Nature of Business.” The Company is not a party with respect to derivative financial instruments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information with respect to this item is set forth in “Index to Financial Statements.”

ITEM 9.  CHANGES IN, AND DISAGREEMENTS WITH, ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Chief Executive Officer and Chief Financial Officer of the Company (collectively, the “certifying officers”) evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). These disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in its periodic reports filed with the Commission is recorded, processed, summarized and reported within the time periods specified by the Commission’s rules and forms, and that the information is communicated to the certifying officers on a timely basis.

The certifying officers concluded, based on their evaluation, that the Company’s disclosure controls and procedures were effective for the Company as of the end of the period covered by this report, taking into consideration the size and nature of the Company’s business and operations.

No change in the Company’s internal control over financial reporting occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over

23

financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to this item is incorporated by reference from the Registrant’s definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrant’s fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to this item is incorporated by reference from the Registrant’s definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrant’s fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to this item is incorporated by reference from the Registrant’s definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrant’s fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to this item is incorporated by reference from the Registrant’s definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrant’s fiscal year.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information with respect to this item is incorporated by reference from the Registrant’s definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrant’s fiscal year.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)	1.	The financial statements listed in the “Index to Consolidated Financial Statements” at page F-1 are filed as a part of this report.
	2.	Financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
	3.	Exhibits included or incorporated herein:
		See Index to Exhibits.
(b)		Reports on Form 8-K:

On November 10, 2003, the Company filed an 8-K furnishing a press release announcing results of operations for the third quarter and 39 weeks ended November 1, 2003.

24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on March 23, 2004, on its behalf by the undersigned, thereunto duly authorized.

PACIFIC SUNWEAR OF CALIFORNIA, INC.
By:	/s/ GREG H. WEAVER
Greg H. Weaver Chairman of the Board and Chief Executive Officer

Each person whose signature appears below hereby authorizes Greg H. Weaver and Carl W. Womack or either of them, as attorneys-in-fact to sign on his behalf, individually, and in each capacity stated below and to file all amendments and/or supplements to the Annual Report on Form 10-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ GREG H. WEAVER Greg H. Weaver	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	March 23, 2004
/s/ CARL W. WOMACK Carl W. Womack	Sr. Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 23, 2004
/s/ JULIUS JENSEN III Julius Jensen III	Director	March 23, 2004
/s/ PEARSON C. CUMMIN III Pearson C. Cummin III	Director	March 23, 2004
/s/ SALLY FRAME KASAKS Sally Frame Kasaks	Director	March 23, 2004
/s/ PETER STARRETT Peter Starrett	Director	March 23, 2004
/s/ THOMAS M. MURNANE Thomas M. Murnane	Director	March 23, 2004

25

PACIFIC SUNWEAR OF CALIFORNIA, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JANUARY 31, 2004, FEBRUARY 1, 2003, AND FEBRUARY 2, 2002:

CONSOLIDATED FINANCIAL STATEMENTS:

Independent Auditors’ Report	F - 2
Consolidated Balance Sheets as of January 31, 2004 and February 1, 2003	F - 3
Consolidated Statements of Income and Comprehensive Income for each of the three fiscal years in the period ended January 31, 2004	F - 4
Consolidated Statements of Shareholders’ Equity for each of three fiscal years in the period ended January 31, 2004	F - 5
Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended January 31, 2004	F - 6
Notes to Consolidated Financial Statements	F - 7

F-1

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders
Pacific Sunwear of California, Inc.
Anaheim, California

We have audited the accompanying consolidated balance sheets of Pacific Sunwear of California, Inc. and its subsidiaries as of January 31, 2004 and February 1, 2003, and the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows for each of the three fiscal years in the period ended January 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pacific Sunwear of California, Inc. and its subsidiaries as of January 31, 2004 and February 1, 2003, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for goodwill and other intangible assets during the year ended February 1, 2003, as a result of adopting Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” effective February 3, 2002.

DELOITTE & TOUCHE LLP
Costa Mesa, California
March 19, 2004

F-2

PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	January 31,			February 1,
	2004			2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	142,840		$	36,438
Short-term investments		33,035			—
Accounts receivable		5,194			2,916
Merchandise inventories		147,751			123,433
Prepaid expenses, includes $10,711 and $9,664 of prepaid rent, respectively		16,492			14,871
Deferred income taxes		8,224			4,975
Total current assets		353,536			182,633
PROPERTY AND EQUIPMENT:
Land		12,156			12,156
Buildings and building improvements		26,686			26,680
Leasehold improvements		119,210			111,431
Furniture, fixtures and equipment		173,222			148,377
Total property and equipment		331,274			298,644
Less accumulated depreciation and amortization		(127,630	)		(97,131	)
Net property and equipment		203,644			201,513
OTHER ASSETS:
Goodwill		6,492			6,492
Deferred compensation and other assets		11,589			9,105
Total other assets		18,081			15,597
Total assets	$	575,261		$	399,743
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	38,668		$	28,456
Accrued liabilities		54,966			34,522
Current portion of capital lease obligations		1,008			1,521
Current portion of long-term debt		878			829
Income taxes payable		15,024			8,000
Total current liabilities		110,544			73,328
LONG-TERM LIABILITIES:
Long-term debt, net of current portion		228			1,102
Long-term capital lease obligations, net of current portion		1,227			2,236
Deferred compensation		10,925			7,097
Deferred rent		12,046			10,574
Deferred income taxes		11,529			3,015
Total long-term liabilities		35,955			24,024
Commitments and contingencies (Note 7)
SHAREHOLDERS’ EQUITY:
Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued and Outstanding		—			—
Common stock, $.01 par value; 170,859,375 shares authorized; 78,351,302 and 74,233,146 shares issued and outstanding, respectively		784			742
Additional paid-in capital		138,877			92,761
Retained earnings		289,101			208,888
Total shareholders’ equity		428,762			302,391
Total liabilities and shareholders’ equity	$	575,261		$	399,743

See notes to consolidated financial statements

F-3

PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except share and per share amounts)

	Fiscal Year Ended
	January 31,		February 1,			February 2,
	2004		2003			2002
Net sales	$	1,040,294	$	846,393		$	684,840
Cost of goods sold, including buying, distribution and occupancy costs		676,977		562,710			464,660
Gross margin		363,317		283,683			220,180
Selling, general and administrative expenses		235,068		202,445			175,898
Operating income		128,249		81,238			44,282
Interest income/(expense), net		732		(594	)		470
Income before income tax expense		128,981		80,644			44,752
Income tax expense		48,768		30,967			17,186
Net income	$	80,213	$	49,677		$	27,566
Comprehensive income	$	80,213	$	49,677		$	27,566
Net income per share, basic	$	1.05	$	0.67		$	0.37
Net income per share, diluted	$	1.02	$	0.66		$	0.37
Weighted average shares outstanding, basic		76,595,758		73,931,520			73,532,687
Weighted average shares outstanding, diluted		78,849,651		75,146,991			74,488,048

See notes to consolidated financial statements

F-4

PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

	Common			Common		Additional
	Stock			Stock		Paid-in			Retained
	Shares			Amount		Capital			Earnings		Total
BALANCE, February 4, 2001		72,993,230		$	730	$	80,755		$	131,645	$	213,130
Exercise of stock options and shares sold under employee stock purchase plan and restricted stock grant		740,400			7		4,254			—		4,261
Restricted stock award, vesting of shares		—			—		290			—		290
Tax benefits related to exercise of stock options		—			—		2,708			—		2,708
Net income		—			—		—			27,566		27,566
BALANCE, February 2, 2002		73,733,630			737		88,007			159,211		247,955
Exercise of stock options and shares sold under employee stock purchase plan		500,704			5		3,439			—		3,444
Cancellation of fractional shares due to 3-for-2 stock split		(1,188	)		—		(14	)		—		(14	)
Restricted stock award, vesting of shares		—			—		291			—		291
Tax benefits related to exercise of stock Options		—			—		1,038			—		1,038
Net income		—			—		—			49,677		49,677
BALANCE, February 1, 2003		74,233,146			742		92,761			208,888		302,391
Exercise of stock options and shares sold under employee stock purchase plan		4,119,753			42		30,339			—		30,381
Cancellation of fractional shares due to 3-for-2 stock split		(1,597	)		—		(33	)		—		(33	)
Tax benefits related to exercise of stock options		—			—		15,810			—		15,810
Net income		—			—		—			80,213		80,213
BALANCE, January 31, 2004		78,351,302		$	784	$	138,877		$	289,101	$	428,762

See notes to consolidated financial statements

F-5

PACIFIC SUNWEAR OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Fiscal Year Ended
	January 31,			February 1,			February 2,
	2004			2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	80,213		$	49,677		$	27,566
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		36,246			32,453			27,146
Loss on disposal of equipment		1,834			4,240			7,451
Tax benefits related to exercise of stock options		15,810			1,038			2,708
Change in operating assets and liabilities:
Accounts receivable		(2,278	)		128			(290	)
Merchandise inventories		(24,318	)		(20,921	)		(19,819	)
Prepaid expenses		(1,621	)		(1,949	)		(1,669	)
Deferred compensation and other assets		1,344			231			(127	)
Accounts payable		10,212			(9,037	)		5,861
Accrued liabilities		20,444			16,751			4,492
Income taxes payable and deferred income taxes		12,289			2,197			3,495
Deferred rent		1,472			1,815			1,548
Net cash provided by operating activities		151,647			76,623			58,362
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment		(40,211	)		(40,423	)		(92,936	)
Purchases of short-term investments		(33,035	)		—			—
Net cash used in investing activities		(73,246	)		(40,423	)		(92,936	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		30,381			3,444			4,260
Cash paid in lieu of fractional shares due to 3-for-2 stock split		(33	)		(14	)		—
(Repayments)/borrowings under long-term debt obligations		(825	)		(25,504	)		24,998
Principal payments under capital lease obligations		(1,522	)		(824	)		(519	)
Net cash provided by/(used in) financing activities		28,001			(22,898	)		28,739
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS:		106,402			13,302			(5,835	)
CASH AND CASH EQUIVALENTS, beginning of fiscal year		36,438			23,136			28,971
CASH AND CASH EQUIVALENTS, end of fiscal year	$	142,840		$	36,438		$	23,136
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest, including $428 of capitalized interest paid in fiscal 2001	$	226		$	944		$	515
Income taxes	$	20,669		$	27,732		$	10,983

Supplemental disclosures of non-cash transactions: During the fiscal years ended February 1, 2003 and February 2, 2002, the Company recorded an increase to additional paid-in capital of $291 and $290, respectively, related to the issuance of stock to satisfy certain deferred compensation liabilities. During the year ended February 1, 2003, the Company purchased a three-year computer maintenance agreement under a long-term debt obligation for $2,413. During the years ended February 1, 2003 and February 2, 2002, the Company acquired property pursuant to capital lease obligations in the amount of $3,016 and $493, respectively. Additionally, during the year ended February 2, 2002, the Company financed the purchase of a vehicle for $24.

See notes to consolidated financial statements

F-6

PACIFIC SUNWEAR OF CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended January 31, 2004, February 1, 2003, and February 2, 2002
(all amounts in thousands, except share and per share amounts, unless otherwise indicated)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS

Nature of Business — Pacific Sunwear of California, Inc. and its subsidiaries (the “Company”) is a leading specialty retailer of everyday casual apparel, footwear and accessories designed to meet the needs of active teens and young adults. The Company operates three nationwide, primarily mall-based chains of retail stores, under the names “Pacific Sunwear” (as well as “PacSun”), “Pacific Sunwear Outlet” and “d.e.m.o.” Pacific Sunwear and Pacific Sunwear Outlet stores specialize in board-sport inspired casual apparel, footwear and related accessories catering to teens and young adults. d.e.m.o. specializes in hip-hop inspired casual apparel and related accessories catering to teens and young adults. In addition, the Company operates a website through a subsidiary which sells PacSun merchandise online, provides content and community for its target customers, and provides information about the Company.

The Company’s fiscal year is the 52- or 53-week period ending on the Saturday closest to January 31. Fiscal 2003 was the 52-week period ended January 31, 2004. Fiscal 2002 was the 52-week period ended February 1, 2003. Fiscal 2001 was the 52-week period ended February 2, 2002. Fiscal 2004 will be the 52-week period ending January 29, 2005.

Principles of Consolidation —The consolidated financial statements include the accounts of Pacific Sunwear of California, Inc. and its subsidiaries, Pacific Sunwear Stores Corp. and ShopPacSun.com Corp. All intercompany transactions have been eliminated in consolidation.

Basis of Presentation — The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported revenues and expenses during the reporting period. Actual results could differ from these estimates.

Fair Value of Financial Instruments — Statement of Financial Accounting Standards No. 107 (“SFAS 107”), “Disclosures about Fair Value of Financial Instruments,” requires management to disclose the estimated fair value of certain assets and liabilities defined by SFAS 107 as financial instruments. Financial instruments are generally defined by SFAS 107 as cash, evidence of ownership interest in an entity, or a contractual obligation that both conveys to one entity a right to receive cash or other financial instruments from another entity and imposes on the other entity the obligation to deliver cash or other financial instruments to the first entity. At January 31, 2004, management believes that the carrying amounts of cash, short-term investments, receivables and payables approximate fair value because of the short maturity of these financial instruments.

Cash and Cash Equivalents — The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.

Short-term Investments – Short-term investments are classified as held-to-maturity and consist of marketable corporate and U.S. agency debt instruments with original maturities of three months to one year and are carried at amortized cost. Cost is determined by specific identification. At January 31, 2004, the market value of the Company’s portfolio is $32.7 million, consisting of U.S. agency debentures of $16.8 million and corporate debentures of $15.9 million.

Merchandise Inventories — Merchandise inventories are stated at the lower of cost (first-in, first-out method) or market. Cost is determined using the retail inventory method. At any one time, inventories include items that have been marked down to management’s best estimate of their fair market value. Management bases the decision to mark down merchandise primarily upon its current rate of sale and the age of the item, among other factors.

Property and Equipment — Leasehold improvements and furniture, fixtures and equipment are stated at cost. Amortization of leasehold improvements is computed on the straight-line method over the lesser of an asset’s estimated useful life or the life of the related store’s lease (generally 10 years). Depreciation on furniture, fixtures and equipment is computed on the straight-line method over five years.

F-7

Goodwill and Other Intangible Assets — On February 3, 2002, the Company adopted SFAS 142, “Goodwill and Intangible Assets,” which revised the accounting for purchased goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized but are tested for impairment annually and also in the event of an impairment indicator. The Company completed the required transitional impairment test and the annual test and determined that no impairment existed. Any subsequent impairment losses will be reflected in operating income. With the adoption of SFAS 142, the Company discontinued amortization of goodwill.

The Company evaluates the recoverability of goodwill at least annually based on a two-step impairment test. The first step compares the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount exceeds fair value, then the second step of the impairment test is performed to measure the amount of any impairment loss. Fair value is determined based on estimated future cash flows, discounted at a rate that approximates the Company’s cost of capital. Such estimates are subject to change and the Company may be required to recognize impairment losses in the future.

Other Long-Lived Assets — On February 3, 2002, the Company adopted SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which superseded previous guidance on financial accounting and reporting for the impairment or disposal of long-lived assets and for segments of a business to be disposed of. Upon adoption of SFAS 144, the Company reviewed long-lived assets and determined that no impairment existed. Under SFAS 144, long-lived assets, including amortizing intangible assets, will be tested for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

Insurance Reserves — The Company is responsible for workers’ compensation insurance claims up to a specified aggregate stop loss amount. The Company maintains a reserve for estimated claims, both reported and incurred but not reported, based on historical claims experience and other estimated assumptions.

Income Taxes — Current income tax expense is the amount of income taxes expected to be payable for the current year. The combined federal and state income tax expense was calculated using estimated effective annual tax rates. A deferred income tax asset or liability is established for the expected future consequences of temporary differences in the financial reporting and tax bases of assets and liabilities. The Company considers future taxable income and ongoing prudent and feasible tax planning in assessing the value of its deferred tax assets. Evaluating the value of these assets is necessarily based on the Company’s judgment. If the Company determines that it is more likely than not that these assets will not be realized, the Company would reduce the value of these assets to their expected realizable value through a valuation allowance, thereby decreasing net income. If the Company subsequently determined that the deferred tax assets, which had been written down, would be realized in the future, the value of the deferred tax assets would be increased, thereby increasing net income in the period when that determination was made.

Litigation — The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not have a material adverse effect upon the results of operations or financial condition of the Company and, from time to time, may make provisions for potential litigation losses. Depending on the actual outcome of pending litigation, charges in excess of any provisions could be recorded in the future, which may have an adverse affect on the Company’s operating results (see note 7).

Stock Split — On August 25, 2003, the Company effected a three-for-two stock split. Shareholders’ equity was restated to give retroactive recognition to the stock split in prior periods by reclassifying the par value ($247) of the additional shares arising from the split from additional paid-in capital to common stock. Additionally, all share and per share amounts were restated to give effect to the stock split in prior periods.

Revenue Recognition — Sales are recognized upon purchase by customers at the Company’s retail store locations or upon shipment for orders placed through the Company’s website. The Company records the sale of gift cards as a current liability and recognizes a sale when a customer redeems a gift card. The amount of the gift card liability is determined taking into account the Company’s estimate of the portion of gift cards that will not be redeemed or recovered. The Company accrues for estimated sales returns by customers based on historical sales return results. Sales return accrual activity for each of the three fiscal years in the period ended January 31, 2004 is as follows:

F-8

	Fiscal 2003			Fiscal 2002			Fiscal 2001
Beginning balance	$	460		$	113		$	113
Provisions		20,629			17,363			13,657
Usage		(20,508	)		(17,016	)		(13,657	)
Ending balance	$	581		$	460		$	113

Advertising Costs — Costs associated with the production of advertising, such as photography, design, creative talent, editing and other costs, are expensed the first time the advertising becomes publicly available. Costs associated with placing advertising that has been produced, such as television and magazine advertising, are expensed when the advertising becomes publicly available. Advertising costs were $10,430, $8,897 and $12,967 in fiscal 2003, 2002 and 2001, respectively.

Earnings per Share — The Company reports earnings per share in accordance with the provisions of SFAS 128, “Earnings Per Share.” Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per common share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to outstanding options to purchase common stock. Incremental shares of 2,253,893, 1,215,471 and 955,362, in fiscal 2003, 2002 and 2001, respectively, were used in the calculation of diluted earnings per common share. Options to purchase 31,996, 2,033,399 and 2,377,778 shares of common stock in fiscal 2003, 2002 and 2001, respectively, were not included in the computation of diluted earnings per common share because the option exercise price was greater than the average market price of the common stock during the respective period.

Stock-Based Compensation — The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25 (APB 25). In March 2000, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 44 of APB 25, “Accounting for Certain Transactions Involving Stock Compensation,” which, among other things, addressed accounting consequences of a modification that reduces the exercise price of a fixed stock option award (otherwise known as repricing). The adoption of this interpretation did not impact the Company’s consolidated financial statements.

In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” SFAS 148 amends SFAS 123, “Accounting for Stock-Based Compensation,” to provide alternative methods for voluntary transition to SFAS 123’s fair value method of accounting for stock-based employee compensation (“the fair value method”). SFAS 148 also requires disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income (loss) and earnings (loss) per share in annual and interim financial statements. The Company is required to follow the prescribed disclosure format and has provided the additional disclosures required by SFAS 148 for fiscal 2003, 2002 and 2001 below.

SFAS 123, “Accounting for Stock-Based Compensation,” requires the disclosure of pro forma net income and earnings per share. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of option-pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company’s calculations were made using the Black-Scholes option-pricing model with the following weighted average assumptions: expected life, 5 years from option date; stock volatility, 37.1% in fiscal 2003, 55.2% in fiscal 2002 and 71.4% in fiscal 2001; risk-free interest rates, 3.2% in fiscal 2003, 3.0% in fiscal 2002 and 4.4% in fiscal 2001; and no dividends during the expected term. The Company’s calculations are based on a single-option valuation approach and forfeitures are recognized as they occur. If the computed fair values of the fiscal 2003, 2002 and 2001 awards had been amortized to expense over the vesting period of the awards, pro forma net income and earnings per share would have been reduced to the pro forma amounts indicated in the following table:

F-9

	Fiscal 2003			Fiscal 2002			Fiscal 2001
Net Income
As reported	$	80,213		$	49,677		$	27,566
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(5,785	)		(5,589	)		(5,153	)
Pro forma	$	74,428		$	44,088		$	22,413
Net Income Per Share, Basic
As reported	$	1.05		$	0.67		$	0.37
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(0.08	)		(0.07	)		(0.07	)
Pro forma	$	0.97		$	0.60		$	0.30
Net Income Per Share, Diluted
As reported	$	1.02		$	0.66		$	0.37
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(0.07	)		(0.07	)		(0.07	)
Pro forma	$	0.95		$	0.59		$	0.30

Comprehensive Income — The Company reports comprehensive income in accordance with the provisions of SFAS 130, “Reporting Comprehensive Income.” SFAS 130 established standards for the reporting and display of comprehensive income. Components of comprehensive income include net earnings (loss), foreign currency translation adjustments and gains/losses associated with investments available for sale. There was no difference between net income and comprehensive income for fiscal 2003, 2002 and 2001.

Segment Information – The Company operates exclusively in the retail apparel industry in which the Company distributes, designs and produces clothing, accessories and related products. Operating results of the Company’s retail concepts and sales channels have been aggregated due to the similarities of economic and operating characteristics among the retail concepts and sales channels as well as their reliance on shared operating functions, including the sourcing, merchandising and distribution functions.

Merchandise Risk — The Company’s success is largely dependent upon its ability to gauge the fashion tastes of its customers and provide merchandise that satisfies customer demand. Any inability to provide appropriate merchandise in sufficient quantities in a timely manner could have a material adverse effect on the Company’s business, operating results and financial condition.

New Accounting Pronouncements — In April 2002, the FASB issued SFAS 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS 145 amended certain provisions of SFAS 13 and requires the fair value recognition of guarantee obligations under which the Company may become secondarily liable. The Company adopted SFAS 145 during fiscal 2002. The adoption of SFAS 145 resulted in the recognition of a $.5 million liability related to the Company’s guarantee of an assignee’s performance under a lease obligation (see note 7).

In June 2002, the FASB issued SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which requires that costs associated with exit or disposal activities be recognized when they are incurred rather than at the date of commitment to an exit or disposal plan. SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. The Company adopted the provisions of SFAS 146 for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS 146 has not had a material impact on the Company’s financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees and Indebtedness of Others.” FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002; while the provisions of the disclosure requirements are effective for financial statements of interim or annual reports ending after December 15, 2002. The adoption of FIN 45 has not had a material impact on the Company’s financial position or results of operations.

F-10

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities” and in December 2003, issued FIN 46(R) (revised December 2003) “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51.” In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46(R) clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements” (ARB 51), to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without subordinated financial support from other parties. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. FIN 46(R) applies immediately to variable interest entities created after December 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies no later than the first reporting period ending after December 15, 2004, to variable interest entities in which an enterprise holds a variable interest (other than special purpose) that it acquired before January 1, 2004. FIN 46(R) applies to public enterprises as of the beginning of the applicable interim or annual period. The Company believes that the adoption of FIN 46 and FIN 46(R) will not have a material impact on its financial position or results of operations because the Company has no variable interest entities.

On February 2, 2003, the Company adopted EITF 02-16, “Accounting by a Reseller for Cash Consideration Received from a Vendor.” The consensus reached by the EITF addressed the accounting for cash consideration received from a vendor, which includes vendor allowances, rebates, cooperative advertising payments, etc. The consensus of the EITF establishes an overall presumption that cash received from a vendor is a reduction in the price of a vendor’s products and should be recognized accordingly as a reduction in cost of sales at the time the related inventory is sold. Some consideration could be characterized as a reduction of expense if the cash received represents a reimbursement of specific, incremental, identifiable costs incurred by the retailer to sell the vendor’s products. The adoption of EITF 02-16 did not have a material impact on the Company’s financial position or results of operations.

Reclassifications — Certain prior year amounts have been reclassified to conform to the current year presentation.

2. DEFERRED COMPENSATION AND OTHER ASSETS

The Company maintains an Executive Deferred Compensation Plan (the “Executive Plan”) covering Company officers that is funded by participant contributions and periodic Company discretionary contributions. For fiscal 2003, 2002 and 2001, the Company made contributions of $256, $206 and $175, respectively, to the Executive Plan. The deferred compensation asset balance represents the investments held by the Company to cover the vested participant balances in the Executive Plan, which is represented by the deferred compensation liability of $10,925 and $7,097 in long-term liabilities as of January 31, 2004 and February 1, 2003, respectively. For a description of other employee compensation arrangements, see note 9. Deferred compensation and other assets consist of the following:

	January 31,		February 1,
	2004		2003
Deferred compensation	$	10,919	$	7,565
Long-term maintenance contracts		502		1,359
Other assets		168		181
	$	11,589	$	9,105

3. GOODWILL

On February 3, 2002, the Company adopted SFAS 142, “Goodwill and Other Intangible Assets,” which eliminated amortization of goodwill and other intangible assets with indefinite useful lives. SFAS 142 requires, among other items, disclosure of the after-tax impact to reported net income and earnings per share of the adoption of the statement for all periods presented. The following table recognizes the after-tax impact to the Company’s operating results of the adoption of SFAS 142 as if the non-amortization provisions of the standard had been in effect for all periods presented:

F-11

	Fiscal 2003		Fiscal 2002		Fiscal 2001
Reported net income	$	80,213	$	49,677	$	27,566
Add back goodwill amortization (tax effected)		—		—		192
Adjusted net income	$	80,213	$	49,677	$	27,758
Basic earnings per share:
Reported net income		1.05		0.67		0.37
Add back goodwill amortization (tax effected)		0.00		0.00		0.01
Adjusted net income	$	1.05	$	0.67	$	0.38
Diluted earnings per share:
Reported net income		1.02		0.66		0.37
Add back goodwill amortization (tax effected)		0.00		0.00		0.00
Adjusted net income	$	1.02	$	0.66	$	0.37

4. CREDIT FACILITY

The Company has a credit facility with a bank, which expires April 1, 2007. The credit facility provides for a $45.0 million line of credit (the “Credit Line”) through March 31, 2005 to be used for cash advances, commercial letters of credit and shipside bonds. The Credit Line increases to $50.0 million from April 1, 2005 through March 31, 2006, and $60.0 million from April 1, 2006 through expiration on April 1, 2007. Interest on the Credit Line is payable monthly at the bank’s prime rate (4.0% at January 31, 2004) or at optional interest rates that are primarily dependent upon the London Inter-bank Offered Rates for the time period chosen. The Company did not borrow under the credit facility at any time during fiscal 2003. The Company had $13.1 million outstanding in letters of credit at January 31, 2004. The credit facility subjects the Company to various restrictive covenants, including maintenance of certain financial ratios, and prohibits payment of cash dividends on common stock. At January 31, 2004, the Company was in compliance with all of the covenants.

5. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	January 31,		February 1,
	2004		2003
Accrued compensation and benefits	$	17,578	$	14,420
Accrued capital expenditures		6,489		2,775
Accrued sales tax payable		6,189		2,290
Accrued sublease loss charges (Note 7)		5,543		3,550
Accrued restricted stock compensation (Note 9)		5,118		—
Accrued gift cards and store merchandise credits		4,618		5,967
Other		9,431		5,520
	$	54,966	$	34,522

F-12

6. INCOME TAXES

The components of income tax expense are as follows:

	Fiscal 2003			Fiscal 2002		Fiscal 2001
Current income taxes:
Federal	$	38,134		$	23,938	$	18,040
State		5,369			3,396		2,659
		43,503			27,334		20,699
Deferred income taxes:
Federal		5,318			3,231		(3,066	)
State		(53	)		402		(447	)
		5,265			3,633		(3,513	)
	$	48,768		$	30,967	$	17,186

A reconciliation of income tax expense to the amount of income tax expense that would result from applying the federal statutory rate to income before income taxes is as follows:

	Fiscal 2003		Fiscal 2002		Fiscal 2001
Provision for income taxes at statutory rate	$	45,143	$	28,225	$	15,663
State income taxes, net of federal income tax benefit		3,455		2,469		1,438
Other		170		273		85
	$	48,768	$	30,967	$	17,186

The major components of the Company’s overall net deferred tax liability of $3,305 at January 31, 2004 and net deferred tax asset of $1,960 at February 1, 2003, respectively, are as follows:

	January 31,			February 1,
	2004			2003
Current net deferred tax asset	$	8,224		$	4,975
Long-term net deferred tax liability		(11,529	)		(3,015	)
Overall net deferred tax (liability)/asset	$	(3,305	)	$	1,960
Components:
Depreciation	$	(20,691	)	$	(10,127	)
State income taxes		549			468
Inventory cost capitalization		1,992			2,189
Reserve for store expansion/relocation and closing costs		2,866			1,745
Deferred rent		4,712			4,198
Deferred compensation		6,275			2,817
Other		992			670
	$	(3,305	)	$	1,960

7. COMMITMENTS AND CONTINGENCIES

Operating Leases — The Company leases its retail stores, former corporate offices and distribution facilities, and certain equipment under operating lease agreements expiring at various dates through December 2016. Substantially all of the leases require the Company to pay maintenance, insurance, property taxes and percentage rent ranging from 5% to 7% based on sales volumes exceeding certain minimum sales levels.

F-13

Minimum future annual rental commitments under non-cancelable operating leases are as follows:

Fiscal year ending:
January 29, 2005	$	81,091
January 28, 2006		82,291
February 3, 2007		81,970
February 2, 2008		81,978
February 1, 2009		75,867
Thereafter		212,627
	$	615,824

Rental expense, including common area maintenance, was $129,269, $117,847 and $91,480, of which $4,608, $2,151 and $1,062 was paid as percentage rent based on sales volume for fiscal 2003, 2002 and 2001, respectively.

Capital Leases — During each of fiscal 2002, 2001 and the fiscal year ended February 4, 2001 (“fiscal 2000”), the Company acquired computer equipment pursuant to capital lease obligations. The leases bear interest at average rates of 3.8%, 6.0% and 6.6%, respectively; require monthly principal and interest payments of $90, $22 and $51, respectively; and expire at various dates through March 2006. The net book value of capital lease assets was $3,318 and $4,356, respectively, at January 31, 2004, and February 1, 2003. Future commitments under capital lease obligations are as follows:

Fiscal year ending:
January 29, 2005	$	1,077
January 28, 2006		1,076
February 3, 2007		179
Total payments, including interest		2,332
Less interest portion		(97	)
Total principal payments remaining at January 31, 2004	$	2,235
Current portion of capital lease obligations from balance sheet	$	1,008
Long-term portion of capital lease obligations from balance sheet		1,227
Total capital lease obligations outstanding at January 31, 2004	$	2,235

Letters of Credit — The Company was contingently liable for $13.1 million in open letters of credit with foreign suppliers at January 31, 2004.

Other Long-Term Debt Obligations — During fiscal 2002, the Company purchased a three-year computer maintenance agreement under a long-term debt obligation for $2,413. The debt obligation bears interest at 6.2% and requires quarterly principal and interest payments of $231 through March 2005. Future commitments under this long-term debt obligation are as follows:

Fiscal year ending:
January 29, 2005	$	927
January 28, 2006		231
Total payments, including interest		1,158
Less interest portion		(52	)
Total principal payments remaining at January 31, 2004	$	1,106
Current portion of long-term debt from balance sheet	$	878
Long-term portion of long-term debt from balance sheet		228
Total long-term debt outstanding at January 31, 2004	$	1,106

F-14

Litigation — During fiscal 2003, the Company reached an agreement to settle all claims related to two lawsuits concerning overtime pay for a total of $4.0 million. The Company had accrued $4.0 million and $3.9 million related to these matters at the end of fiscal 2003 and fiscal 2002, respectively. The suits are Auden v. Pacific Sunwear of California, Inc., which was filed September 17, 2001, and Adams v. Pacific Sunwear of California, Inc., which was filed August 2, 2002. The complaints alleged that the Company improperly classified certain California-based employees as “exempt” from overtime pay. In February 2004, the Company made a payment of $3.1 million on the aggregate settlement amount with the remaining amounts expected to be paid in the first half of fiscal 2004. The settlement did not have a material impact on results of operations for fiscal 2003.

The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not have a material adverse effect upon the results of operations or financial condition of the Company.

Indemnities, Commitments, and Guarantees — During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include those given to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of California. The Company has issued guarantees in the form of standby letters of credit as security for merchandise shipments from overseas. There were $13.1 million of these letters of credit outstanding at January 31, 2004. The Company has also issued a guarantee within a sublease on one of its store locations under which the Company remains secondarily liable on the sublease should the sublessee default on its lease payments. The term of the sublease ends December 31, 2014. The Company has recorded $.5 million in accrued liabilities to recognize the estimated fair value of this guarantee, assuming that another sublessee would be found within one year should the original sublessee default. The aggregate rental payments remaining on the master lease agreement at January 31, 2004, were $6.0 million. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets other than as noted.

The Company maintains a private label credit card through a third party to promote the PacSun brand image and lifestyle. The third party services the customer accounts and retains all risk and financial obligation associated with any outstanding balances on customer accounts. The Company has no financial obligation and does not provide any guarantee related to any outstanding balances resulting from the use of these private label credit cards by its customers.

Sublease Loss Charges — The Company remains liable under two operating leases covering its former corporate offices and a former store location. These facilities remain vacant at January 31, 2004. At the end of fiscal 2002, the Company had accrued $3.6 million to account for the difference between the Company’s remaining contractual lease obligations and the rate and timeframe within which the Company expected to be able to sublease these properties. During fiscal 2003, based on a review of real estate market conditions and on-going negotiations, management of the Company revised its sublease assumptions and increased its accrued sublease loss charges by $1.9 million to a total of $5.5 million. To the extent management’s estimates relating to the Company’s ability to sublease these facilities at the assumed rates or within the assumed timeframes changes or is incorrect, additional charges or reversals of previous charges may be recorded in the future. At January 31, 2004, the aggregate remaining obligations under these leases were approximately $5.4 million for the former corporate offices and approximately $6.7 million for the former store location. These amounts are included in the minimum future rental commitments table above within this note 7.

8. COMMON STOCK

Stock Split — On August 25, 2003, the Company effected a three-for-two stock split. Shareholders’ equity was restated to give retroactive recognition to the stock split in prior periods by reclassifying the par value ($247) of the additional shares arising from the split from additional paid-in capital to common stock. Additionally, all share and per share amounts were restated to give effect to the stock split in prior periods.

Common Stock Purchase and Retirement — On January 27, 2004, the Board of Directors of the Company adopted a resolution authorizing the Company to purchase up to 2.5 million shares of the Company’s common stock in open market transactions. As of January 31, 2004, no purchases had been made pursuant to the resolution. Subsequent to January 31, 2004, the Company repurchased shares as follows:

F-15

					# of Shares Purchased		Maximum # of Shares that
	# of Shares		Average		as Part of Publicly		May Yet be Purchased
Period	Purchased		Price/Share		Announced Plan		Under the Plan
February 23, 2004		75,000	$	23.99		75,000		2,425,000

Shareholder Rights Plan — In December 1998, the Board of Directors approved the adoption of a Shareholder Rights Plan (“the Rights Plan”). The Rights Plan provides for the distribution to the Company’s shareholders of one preferred stock purchase “Right” for each outstanding share of the Company’s common stock. The Rights have an exercise price of $75 per Right, subject to subsequent adjustment. Initially, the Rights will trade with the Company’s common stock, and will not be exercisable until the occurrence of certain takeover-related events, as defined. The Rights Plan provides that if a person or group acquires more than 15% of the Company’s stock without prior approval of the Board of Directors, holders of the Rights will be entitled to purchase the Company’s stock at half of market value. The Rights Plan also provides that if the Company is acquired in a merger or other business combination after a person or group acquires more than 15% of the Company’s stock without prior approval of the Board of Directors, holders of the Rights will be entitled to purchase the acquirer’s stock at half of market value. The Rights were distributed to holders of the Company’s common stock of record on December 29, 1998, as a dividend, and will expire, unless earlier redeemed, on December 29, 2008.

9. STOCK OPTION AND RETIREMENT PLANS

Under the Company’s stock option plans, incentive and nonqualified options have been granted to employees and directors to purchase common stock at prices equal to the fair value of the Company’s shares at the grant dates.

At January 31, 2004, outstanding incentive and nonqualified options had exercise prices ranging from $.68 to $23.97 per share, with an average exercise price of $10.47 per share, and generally begin vesting one year after the grant date. On the initial vesting date, 25% of the options vest and, thereafter, options generally continue to vest at 2.08% each calendar month. The options generally expire ten years from the date of grant or 90 days after employment or services are terminated.

At January 31, 2004, incentive and nonqualified options to purchase 5,473,087 shares were outstanding and 4,066,804 shares were available for future grant under the Company’s stock option plans. During fiscal 2003, 2002 and 2001, the Company recognized tax benefits of $15,810, $1,038 and $2,708, respectively, resulting from the exercise of certain nonqualified stock options.

Stock option (incentive and nonqualified) activity for each of the three fiscal years ended January 31, 2004, was as follows:

	Fiscal 2003			Fiscal 2002			Fiscal 2001
Beginning options outstanding		8,691,197			7,198,026			6,194,601
Options granted		1,101,351			2,289,238			2,458,125
Options canceled		(254,921	)		(354,282	)		(775,543	)
Options exercised		(4,064,540	)		(441,785	)		(679,157	)
Ending options outstanding		5,473,087			8,691,197			7,198,026
Ending options exercisable		2,272,058			4,576,850			3,488,505
Beginning weighted average exercise price	$	8.56		$	7.98		$	7.79
Options granted		13.92			10.23			8.54
Options canceled		10.65			9.91			10.38
Options exercised		7.31			6.68			5.50
Ending weighted average exercise price	$	10.47		$	8.56		$	7.98
Ending weighted average exercise price of exercisable options	$	9.68		$	7.59		$	6.89
Weighted average fair value of options granted during the fiscal year	$	5.27		$	5.09		$	5.24

F-16

Additional information regarding options outstanding as of January 31, 2004, is as follows:

		Options Outstanding						Options Exercisable
		Number						Number
		Outstanding		Weighted Average		Weighted		Exercisable		Weighted
Range of		as of Jan. 31,		Remaining		Average		as of Jan. 31,		Average
Exercise Prices		2004		Contractual Life		Exercise Price		2004		Exercise Price
$	0.68 - $8.92		1,446,270		6.30	$	7.13		677,332	$	6.65
	9.00 - 10.58		1,561,297		6.88		9.76		858,443		9.95
	10.61 - 12.50		1,821,621		8.39		12.03		535,133		11.56
	12.67 - 23.97		643,899		8.08		15.31		201,150		13.71
$	0.68 - $23.97		5,473,087		7.37	$	10.47		2,272,058	$	9.68

During the year ended February 1, 1998, the Company granted a restricted stock award of 427,141 shares with a purchase price of $0.01 per share to its Chief Executive Officer (“CEO”). The award vested 25% on each of March 31, 1999, 2000, 2001 and 2002, as, in each instance, certain cumulative earnings per share growth targets had been satisfied. The Company recorded $40 and $240 of deferred compensation expense for this award during fiscal 2002 and 2001, respectively.

During the year ended January 30, 2000, the Company granted a restricted stock award of 112,500 shares with a purchase price of $0.01 per share to its CEO. The award is scheduled to vest 25% on each of September 17, 2001, 2002, 2003 and 2004, if, in each instance, certain cumulative annual earnings per share growth targets have been satisfied. Under the award agreement, shares that do not vest at a given vesting date due to the cumulative annual earnings per share growth targets not being met remain available for future vesting if the cumulative annual earnings per share growth targets are met as of a subsequent vesting date. During fiscal 2003, the Company recorded compensation expense of $2.3 million to recognize the cumulative vested value of the award as of January 31, 2004. This expense accrual is included in accrued liabilities (see Note 5) on the balance sheet. The Company will be required to adjust compensation expense related to this award in future quarters based on additional vesting of the shares and changes in the market price of the Company’s stock. For example, based on the closing market price of the Company’s stock at January 31, 2004 of $23.05, the Company would be required to record additional compensation expense of approximately $.1 million per quarter based on additional vesting of the shares until September 17, 2004. Additionally, based on any change in the market price of the Company’s stock in future quarters, the cumulative compensation expense recognized for this award will continue to be adjusted for any shares not yet delivered to the CEO. The CEO became immediately vested in and received 75% of the total share award, or 84,375 shares, in March 2004. The remaining 25%, or 28,125 shares, will vest and be received by the CEO in September 2004.

During the year ended February 4, 2001, the Company granted a restricted stock award of 168,750 shares with a purchase price of $0.01 per share to its Chief Executive Officer. The award is scheduled to vest 25% on each of March 15, 2002, 2003, 2004 and 2005, if, in each instance, certain cumulative annual earnings per share growth targets have been satisfied. Under the award agreement, shares that do not vest at a given vesting date due to the cumulative annual earnings per share growth targets not being met remain available for future vesting if the cumulative annual earnings per share growth targets are met as of a subsequent vesting date. During fiscal 2003, the Company recorded compensation expense of $2.8 million to recognize the cumulative vested value of the award as of January 31, 2004. This expense accrual is included in accrued liabilities (see Note 5) on the balance sheet. The Company will be required to adjust compensation expense related to this award in future quarters based on additional vesting of the shares and changes in the market price of the Company’s stock. For example, based on the market price of the Company’s stock at January 31, 2004 of $23.05, the Company would be required to record additional compensation expense of approximately $.2 million per quarter based on additional vesting of the shares until March 15, 2005. Additionally, based on any change in the market price of the Company’s stock in future quarters, the cumulative compensation expense recognized for this award will continue to be adjusted for any shares not yet delivered to the CEO. The CEO became immediately vested in and received 75% of the total share award, or 126,563 shares, in March 2004. The remaining 25%, or 42,187 shares, will vest and be received by the CEO in March 2005 upon confirmation by the Board of Directors that the fiscal 2004 cumulative earnings per share growth target has been met by the Company.

The Company accounts for its stock-based awards issued to employees using the intrinsic value method in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related interpretations. Accordingly, no compensation expense has been recognized in the financial statements for employee stock arrangements, other than described above.

The Company maintains an Employee Stock Purchase Plan (the “ESPP”), which provides a method for Company employees to voluntarily purchase Company common stock at a 10% discount from fair market value as of the beginning or the end of each six-

F-17

month purchasing period, whichever is lower. The ESPP covers substantially all employees, except officers, who have three months of service with the Company. The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended, and therefore the Company does not recognize compensation expense related to the ESPP. In fiscal 2003 and 2002, 55,293 and 59,091 shares were issued at an average price of $12.46 and $8.36, respectively, under the ESPP.

The Company also maintains an Employee Savings Plan (the “401(k) Plan”). The 401(k) Plan is a defined contribution plan covering substantially all employees who have reached age 21 and have one year of service with the Company. The 401(k) Plan is funded by employee contributions and periodic Company discretionary contributions, which are subject to approval by the Company’s Board of Directors. For fiscal 2003, 2002 and 2001, the Company made contributions, net of forfeitures, of $516, $328 and $364, respectively, to the 401(k) Plan.

F-18

10. QUARTERLY FINANCIAL DATA (UNAUDITED)

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Fiscal year ended January 31, 2004:
Net sales	$	198,331	$	234,392	$	281,253	$	326,318
Gross margin		63,855		79,834		100,617		119,011
Operating income		12,893		21,654		39,259		54,442
Net income		7,979		13,380		24,509		34,346
Net income per share, basic	$	0.11	$	0.18	$	0.32	$	0.44
Net income per share, diluted	$	0.10	$	0.17	$	0.31	$	0.43
Wtd. avg. shares outstanding, basic (Note 1)		74,524,548		75,885,641		77,685,516		78,287,219
Wtd. avg. shares outstanding, diluted (Note 1)		76,472,511		78,104,037		79,876,426		80,226,072
Fiscal year ended February 1, 2003:
Net sales	$	161,710	$	190,854	$	228,239	$	265,590
Gross margin		49,166		60,605		78,915		94,997
Operating income		5,453		12,151		25,956		37,677
Net income		3,269		7,296		15,902		23,209
Net income per share, basic	$	0.04	$	0.10	$	0.22	$	0.31
Net income per share, diluted	$	0.04	$	0.10	$	0.21	$	0.31
Wtd. avg. shares outstanding, basic (Note 1)		73,795,705		73,886,061		73,955,606		74,088,657
Wtd. avg. shares outstanding, diluted (Note 1)		75,176,161		74,766,990		74,923,747		75,765,821

Earnings per basic and diluted share are computed independently for each of the quarters presented based on diluted shares outstanding per quarter and, therefore, may not sum to the totals for the year. Additionally, the sum of the four quarterly amounts for any line item may not agree to the fiscal year total in the consolidated financial statements due to rounding.

F-19

INDEX TO EXHIBITS

Exhibit Number		Description of Exhibit
	3.1	Third Amended and Restated Articles of Incorporation of the Company (1)
	3.2	Certificate of Amendment, dated December 17, 2002, of Third Amended and Restated Articles of Incorporation of the Company (9)
	3.3	Certificate of Correction, dated February 28, 2003, of Third Amended and Restated Articles of Incorporation of the Company (9)
	3.4	Certificate of Determination of Preferences of Series A Junior Participating Preferred Stock of the Company (4)
	3.5	Second Amended and Restated Bylaws of the Company (1)
	3.6	Amendment, dated March 25, 2003, to the Second Amended and Restated Bylaws of the Company (9)
	4.1	Specimen stock certificate (1)
	10.1	Form of Indemnity Agreement between the Company and each of its executive officers and directors (1) *
	10.2	1986-87 Stock Option Plan dated as of December 11, 1986, as amended (the “Option Plan”) (1) *
	10.3	Amended and Restated 1992 Stock Award Plan dated June 8, 1999 (the “Award Plan”) (8) *
	10.4	Amended and Restated 1999 Stock Award Plan dated December 31, 2002 (9) *
	10.5	Pacific Sunwear of California, Inc. Executive Deferred Compensation Plan and Trust Agreement (2) *
	10.6	Amended and Restated Pacific Sunwear of California, Inc. Employee Stock Purchase Plan dated December 31, 2002 (9) *
	10.7	Restricted Stock Award Agreement dated September 18, 1996, by and between the Company and Greg H. Weaver (8) *
	10.8	Restricted Stock Award Agreement dated September 17, 1999, by and between the Company and Greg H. Weaver (7) *
	10.9	Restricted Stock Award Agreement dated January 3, 2001, by and between the Company and Greg H. Weaver (8) *
	10.10	Amended and Restated Employment Agreement dated February 5, 2001, between the Company and Greg H. Weaver (8) *
	10.11	Severance Agreements, dated October 27, 1997, and November 6, 1996, by and between Pacific Sunwear of California, Inc. and Timothy M. Harmon and Carl W. Womack, respectively (3) *
	10.12	Standard Industrial Lease - Net, dated September 30, 1997, between the Company and Bank of America National Trust and Savings Association, as amended, and Standard Industrial Lease - Net, dated January 12, 1998 between the Company and The Realty Associates Fund IV, L.P., a Delaware limited partnership, as amended for the Company’s former corporate headquarters and distribution center located in Anaheim, California (3)
	10.13	Standard Sublease - dated December 22, 1998, between the Company and Bekins Moving and Storage Company, LLC (6)
	10.14	Rights Agreement, dated as of December 16, 1998, between the Company and U.S. Stock Transfer Corporation (5)

Exhibit Number		Description of Exhibit
	10.15	Master Continuing and Unconditional Guaranty to Bank of America N.A. from Pacific Sunwear Stores Corp. and ShopPacSun.com Corp.
	10.16	Business Loan Agreement, dated January 30, 2004 between the Company and Bank of America, N.A.
	21	Subsidiaries of the Registrant (9)
	23.1	Consent of Deloitte & Touche LLP
	31	Written statements of Greg H. Weaver and Carl W. Womack pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
	32	Written statement of Greg H. Weaver and Carl W. Womack pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

(1)	Incorporated by reference from the Company’s Form S-1 Registration Statement (No. 33-57860) as filed with the Securities and Exchange Commission on February 4, 1993.
(2)	Incorporated by reference from the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 17, 1995.
(3)	Incorporated by reference from the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 9, 1998.
(4)	Incorporated by reference from the Company’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 24, 1998.
(5)	Incorporated by reference from the Company’s Form 8-A Registration Statement as filed with the Securities and Exchange Commission on December 24, 1998.
(6)	Incorporated by reference from the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 8, 1999.
(7)	Incorporated by reference from the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 6, 2000.
(8)	Incorporated by reference from the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 2001.
(9)	Incorporated by reference from the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 28, 2003.
*	Management contract or compensatory plan or arrangement.

EX-10.15

                                                                   EXHIBIT 10.15

                                   BORROWER: Pacific Sunwear of California, Inc.

                                   GUARANTOR: Pacific Sunwear Stores Corp.
                                                      Shoppacsun.com Corp.

                                LIMITED GUARANTY

To: Bank of America, N.A.

                  1. The Guaranty. For valuable consideration, the undersigned
("Guarantor") hereby unconditionally guarantees and promises to pay promptly to
Bank of America, N.A. ("Bank"), or order, in lawful money of the United States,
any and all Indebtedness of Pacific Sunwear of California, Inc. ("Borrower") to
Bank when due, whether at stated maturity, upon acceleration or otherwise, and
at all times thereafter, subject to such limitations on Guarantor's liability as
are set forth below. This Guaranty is cumulative and does not supersede any
other outstanding guaranties, and the liability of Guarantor under this Guaranty
is exclusive of Guarantor's liability under any other guaranties signed by
Guarantor. If more than one individual or entity sign this Guaranty, their
obligations under this Guaranty shall be joint and several.

The liability of Guarantor under this Guaranty shall be limited to the
Indebtedness under the Loan Documents and shall not exceed at any one time the
sum of (a) the principal amount of the Indebtedness under such Loan Documents
plus (b) all interest, fees, indemnities (including, without limitation,
hazardous waste indemnities), and other costs and expenses relating to or
arising out of the Indebtedness under such Loan Documents and all swap, option,
or forward obligations now or hereafter owing from Borrower to Bank.

Notwithstanding the limitations on Guarantor's liability set forth above,
Guarantor's liability hereunder shall not exceed at any one time the Maximum
Guaranteed Amount. "Maximum Guaranteed Amount" shall mean the largest amount
during the period commencing with Guarantor's execution of this Guaranty and
thereafter that would not render Guarantor's obligations hereunder subject to
avoidance under Section 548 of the Bankruptcy Code (Title 11, United States
Code) or any comparable provisions of any applicable state law.

                  2. Definitions.

                           (a) "Borrower" shall mean the individual or the
         entity named in Paragraph 1 of this Guaranty and, if more than one,
         then any one or more of them.

                           (b) "Guarantor" shall mean the individual or the
         entity signing this Guaranty and, if more than one, then any one or
         more of them.

                           (c) "Indebtedness" shall mean any and all debts,
         liabilities, and obligations of Borrower to Bank arising under or
         related to the Loan Documents, now or hereafter existing, whether
         voluntary or involuntary and however arising, whether direct or
         indirect or acquired by Bank by assignment, succession, or otherwise,
         whether due or not due, absolute or contingent, liquidated or
         unliquidated, determined or undetermined, held or to be held by Bank
         for its own account or as agent for another or others, whether Borrower
         may be liable individually or jointly with others, whether recovery
         upon such

                                       1


         debts, liabilities, and obligations may be or hereafter become barred
         by any statute of limitations, and whether such debts, liabilities, and
         obligations may be or hereafter become otherwise unenforceable.
         Indebtedness includes, without limitation, any and all obligations of
         Borrower to Bank for reasonable attorneys' fees and all other costs and
         expenses incurred by Bank in the collection or enforcement of any
         debts, liabilities, and obligations of Borrower to Bank. Indebtedness
         also includes, without limitation, all swap, option, or forward
         obligations now or hereafter owing from Borrower to Bank.

                           (d) "Loan Documents" shall mean that certain Business
         Loan Agreement of even date herewith between Borrower and Bank,
         promissory notes from Borrower in favor of Bank, and all other
         agreements, documents, and instruments evidencing any of the
         Indebtedness, and other agreements, documents, and instruments executed
         by Borrower in connection with such loan agreement, promissory notes,
         and other agreements, documents, and instruments evidencing any of the
         Indebtedness, all as now in effect and as hereafter amended, restated,
         renewed, or superseded.

                  3. Obligations Independent. The obligations hereunder are
independent of the obligations of Borrower or any other guarantor, and a
separate action or actions may be brought and prosecuted against Guarantor
whether action is brought against Borrower or any other guarantor or whether
Borrower or any other guarantor be joined in any such action or actions. Anyone
executing this Guaranty shall be bound by its terms without regard to execution
by anyone else.

                  4. Rights of Bank. Guarantor authorizes Bank, without notice
or demand and without affecting its liability hereunder, from time to time to:

                           (a) renew, compromise, extend, accelerate, or
         otherwise change the time for payment, or otherwise change the terms,
         of the Indebtedness or any part thereof, including increase or decrease
         of the rate of interest thereon, or otherwise change the terms of any
         Loan Documents;

                           (b) receive and hold security for the payment of this
         Guaranty or any Indebtedness and exchange, enforce, waive, release,
         fail to perfect, sell, or otherwise dispose of any such security;

                           (c) apply such security and direct the order or
         manner of sale thereof as Bank in its discretion may determine;

                           (d) release or substitute any Guarantor or any one or
         more of any endorsers or other guarantors of any of the Indebtedness;
         and

                           (e) permit the Indebtedness to exceed Guarantor's
         liability under this Guaranty, and Guarantor agrees that any amounts
         received by Bank from any source, other than from Guarantor, shall be
         deemed to be applied first to any unguaranteed portion of the
         Indebtedness.

                  5. Guaranty to be Absolute. Guarantor agrees that until the
Indebtedness has been paid in full and any commitments of Bank or facilities
provided by Bank with respect to the Indebtedness have been terminated,
Guarantor shall not be released by or because of the taking, or failure to take,
any action that might in any manner or to any extent vary the risks of Guarantor
under this Guaranty or that, but for this paragraph, might discharge or
otherwise reduce, limit, or

                                       2


modify Guarantor's obligations under this Guaranty. Guarantor waives and
surrenders any defense to any liability under this Guaranty based upon any such
action, including but not limited to any action of Bank described in the
immediately preceding paragraph of this Guaranty. It is the express intent of
Guarantor that Guarantor's obligations under this Guaranty are and shall be
absolute and unconditional.

                  6. Guarantor's Waivers of Certain Rights and Certain Defenses.
Guarantor waives:

                           (a) any right to require Bank to proceed against
         Borrower, proceed against or exhaust any security for the Indebtedness,
         or pursue any other remedy in Bank's power whatsoever;

                           (b) any defense arising by reason of any disability
         or other defense of Borrower, or the cessation from any cause
         whatsoever of the liability of Borrower;

                           (c) any defense based on any claim that Guarantor's
         obligations exceed or are more burdensome than those of Borrower; and

                           (d) the benefit of any statute of limitations
         affecting Guarantor's liability hereunder.

No provision or waiver in this Guaranty shall be construed as limiting the
generality of any other waiver contained in this Guaranty.

                  7. Waiver of Subrogation. Until the Indebtedness has been paid
in full and any commitments of Bank or facilities provided by Bank with respect
to the Indebtedness have been terminated, even though the Indebtedness may be in
excess of Guarantor's liability hereunder, Guarantor waives any right of
subrogation, reimbursement, indemnification, and contribution (contractual,
statutory, or otherwise) including, without limitation, any claim or right of
subrogation under the Bankruptcy Code (Title 11, United States Code) or any
successor statute, arising from the existence or performance of this Guaranty,
and Guarantor waives any right to enforce any remedy which Bank now has or may
hereafter have against Borrower, and waives any benefit of, and any right to
participate in, any security now or hereafter held by Bank.

                  8. Waiver of Notices. Guarantor waives all presentments,
demands for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor, notices of intent to accelerate, notices of
acceleration, notices of any suit or any other action against Borrower or any
other person, any other notices to any party liable on any Loan Document
(including Guarantor), notices of acceptance of this Guaranty, and notices of
the existence, creation, or incurring of new or additional Indebtedness to which
this Guaranty applies or any other Indebtedness of Borrower to Bank.

                  9. General Partner Liability and Waivers of Other Rights and
Defenses.

                           (a) If Borrower is a partnership and Guarantor is a
         general partner of that partnership, then Guarantor shall not be liable
         under this Guaranty for any portion of the Indebtedness which is
         secured by real property; provided, however, that Guarantor shall
         remain liable under partnership law for all the Indebtedness.

                                       3


                           (b) Guarantor waives any rights and defenses that are
         or may become available to Guarantor by reason of Sections 2787 to
         2855, inclusive, of the California Civil Code.

                           (c) Guarantor waives all rights and defenses that
         Guarantor may have because any of the Indebtedness is secured by real
         property. This means, among other things: (i) Bank may collect from
         Guarantor without first foreclosing on any real or personal property
         collateral pledged by Borrower; and (ii) if Bank forecloses on any real
         property collateral pledged by Borrower: (1) the amount of the
         Indebtedness may be reduced only by the price for which that collateral
         is sold at the foreclosure sale, even if the collateral is worth more
         than the sale price, and (2) Bank may collect from Guarantor even if
         Bank, by foreclosing on the real property collateral, has destroyed any
         right Guarantor may have to collect from Borrower. This is an
         unconditional and irrevocable waiver of any rights and defenses
         Guarantor may have because any of the Indebtedness is secured by real
         property. These rights and defenses include, but are not limited to,
         any rights or defenses based upon Section 580a, 580b, 580d, or 726 of
         the California Code of Civil Procedure.

                           (d) Guarantor waives any right or defense it may have
         at law or equity, including California Code of Civil Procedure Section
         580a, to a fair market value hearing or action to determine a
         deficiency judgment after a foreclosure.

                  10. Security. To secure all of Guarantor's obligations
hereunder, Guarantor assigns and grants to Bank a security interest in all
moneys, securities, and other property of Guarantor now or hereafter in the
possession of Bank, all deposit accounts of Guarantor maintained with Bank, and
all proceeds thereof. Upon default or breach of any of Guarantor's obligations
to Bank, Bank may apply any deposit account to reduce the Indebtedness, and may
foreclose any collateral as provided in the Uniform Commercial Code and in any
security agreements between Bank and Guarantor.

                  11. Subordination. Any obligations of Borrower to Guarantor,
now or hereafter existing, including but not limited to any obligations to
Guarantor as subrogee of Bank or resulting from Guarantor's performance under
this Guaranty, are hereby subordinated to the Indebtedness. In addition to
Guarantor's waiver of any right of subrogation as set forth in this Guaranty
with respect to any obligations of Borrower to Guarantor as subrogee of Bank,
Guarantor agrees that, if Bank so requests, Guarantor shall not demand, take, or
receive from Borrower, by setoff or in any other manner, payment of any other
obligations of Borrower to Guarantor until the Indebtedness has been paid in
full and any commitments of Bank or facilities provided by Bank with respect to
the Indebtedness have been terminated. If any payments are received by Guarantor
in violation of such waiver or agreement, such payments shall be received by
Guarantor as trustee for Bank and shall be paid over to Bank on account of the
Indebtedness, but without reducing or affecting in any manner the liability of
Guarantor under the other provisions of this Guaranty. Any security interest,
lien, or other encumbrance that Guarantor may now or hereafter have on any
property of Borrower is hereby subordinated to any security interest, lien, or
other encumbrance that Bank may have on any such property.

                  12. Revocation of Guaranty.

                           (a) This Guaranty may be revoked at any time by
         Guarantor in respect to future transactions, unless there is a
         continuing consideration as to such transactions which Guarantor does
         not renounce. Such revocation shall be effective upon actual

                                       4


         receipt by Bank, at the address shown below or at such other address as
         may have been provided to Guarantor by Bank, of written notice of
         revocation. Revocation shall not affect any of Guarantor's obligations
         or Bank's rights with respect to transactions committed or entered into
         prior to Bank's receipt of such notice, regardless of whether or not
         the Indebtedness related to such transactions, before or after
         revocation, has been incurred, renewed, compromised, extended,
         accelerated, or otherwise changed as to any of its terms, including
         time for payment or increase or decrease of the rate of interest
         thereon, and regardless of any other act or omission of Bank authorized
         hereunder. Revocation by Guarantor shall not affect any obligations of
         any other guarantor.

                           (b) Guarantor acknowledges and agrees that this
         Guaranty may be revoked only in accordance with the foregoing
         provisions of this paragraph and shall not be revoked simply as a
         result of any change in name, location, or composition or structure of
         Borrower, the dissolution of Borrower, or the termination, increase,
         decrease, or other change of any personnel or owners of Borrower.

                  13. Reinstatement of Guaranty. If this Guaranty is revoked,
returned, or canceled, and subsequently any payment or transfer of any interest
in property by Borrower to Bank is rescinded or must be returned by Bank to
Borrower, this Guaranty shall be reinstated with respect to any such payment or
transfer, regardless of any such prior revocation, return, or cancellation.

                  14. Stay of Acceleration. In the event that acceleration of
the time for payment of any of the Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower or otherwise, all such Indebtedness
guaranteed by Guarantor shall nonetheless be payable by Guarantor immediately if
requested by Bank.

                  15. No Deductions. All payments by Guarantor hereunder shall
be paid in full, without setoff or counterclaim or any deduction or withholding
whatsoever, including, without limitation, for any and all present and future
taxes. In the event that Guarantor or Bank is required by law to make any such
deduction or withholding, Guarantor agrees to pay on behalf of Bank such amount
directly to the appropriate person or entity, or if the Guarantor cannot legally
comply with the foregoing, Guarantor shall pay to Bank such additional amounts
as will result in the receipt by Bank of the full amount payable hereunder.
Guarantor shall promptly provide Bank with evidence of payment of any such
amount made on Bank's behalf.

                  16. Information Relating to Borrower. Guarantor acknowledges
and agrees that it shall have the sole responsibility for, and has adequate
means of, obtaining from Borrower such information concerning Borrower's
financial condition or business operations as Guarantor may require, and that
Bank has no duty, and Guarantor is not relying on Bank, at any time to disclose
to Guarantor any information relating to the business operations or financial
condition of Borrower.

                  17. Borrower's Authorization. Where Borrower is a corporation,
partnership, or limited liability company, it is not necessary for Bank to
inquire into the powers of Borrower or of the officers, directors, partners,
members, managers, or agents acting or purporting to act on its behalf, and any
Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder, subject to any limitations on Guarantor's
liability set forth herein.

                  18. Information Relating to Guarantor. Guarantor authorizes
Bank to verify or

                                       5


check any information given by Guarantor to Bank, check Guarantor's credit
references, verify employment, and obtain credit reports. Guarantor acknowledges
and agrees that the authorizations provided in this paragraph apply to any
individual general partner of Guarantor and to Guarantor's spouse and any such
general partner's spouse if Guarantor or such general partner is married and
lives in a community property state.

                  19. Change of Status. Guarantor shall not enter into any
consolidation, merger, or other combination unless Guarantor is the surviving
business entity. Further, Guarantor shall not change its legal structure unless
(a) Guarantor obtains the prior written consent of Bank and (b) all Guarantor's
obligations under this Guaranty are assumed by the new business entity.

                  20. Notices. All notices required under this Guaranty shall be
personally delivered or sent by first class mail, postage prepaid, or by
overnight courier, to the addresses on the signature page of this Guaranty, or
sent by facsimile to the fax numbers listed on the signature page, or to such
other addresses as Bank and Guarantor may specify from time to time in writing.
Notices sent by (a) first class mail shall be deemed delivered on the earlier of
actual receipt or on the fourth business day after deposit in the U.S. mail,
postage prepaid, (b) overnight courier shall be deemed delivered on the next
business day, and (c) telecopy shall be deemed delivered when transmitted.

                  21. Successors and Assigns. This Guaranty (a) binds Guarantor
and Guarantor's executors, administrators, successors, and assigns, provided
that Guarantor may not assign its rights or obligations under this Guaranty
without the prior written consent of Bank, and (b) inures to the benefit of Bank
and Bank's indorsees, successors, and assigns. Bank may, without notice to
Guarantor and without affecting Guarantor's obligations hereunder, sell, assign,
grant participations in, or otherwise transfer to any other person, firm, or
corporation the Indebtedness and this Guaranty, in whole or in part. Guarantor
agrees that Bank may disclose to any assignee or purchaser, or any prospective
assignee or purchaser, of all or part of the Indebtedness any and all
information in Bank's possession concerning Guarantor, this Guaranty, and any
security for this Guaranty.

                  22. Amendments, Waivers, and Severability. No provision of
this Guaranty may be amended or waived except in writing. No failure by Bank to
exercise, and no delay in exercising, any of its rights, remedies, or powers
shall operate as a waiver thereof, and no single or partial exercise of any such
right, remedy, or power shall preclude any other or further exercise thereof or
the exercise of any other right, remedy, or power. The unenforceability or
invalidity of any provision of this Guaranty shall not affect the enforceability
or validity of any other provision of this Guaranty.

                  23. Costs and Expenses. Guarantor agrees to pay all reasonable
attorneys' fees, including allocated costs of Bank's in-house counsel, and all
other costs and expenses which may be incurred by Bank (a) in the enforcement of
this Guaranty or (b) in the preservation, protection, or enforcement of any
rights of Bank in any case commenced by or against Guarantor or Borrower under
the Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute.

                  24. Governing Law and Jurisdiction. This Guaranty shall be
governed by and construed under the laws of the State of California. Guarantor
irrevocably (a) submits to the non-exclusive jurisdiction of any federal or
state court sitting in the State of California in any action or proceeding
arising out of or relating to this Guaranty and (b) waives to the fullest extent
permitted by law any defense asserting an inconvenient forum in connection
therewith.

                                       6


Service of process by Bank in connection with such action or proceeding shall be
binding on Guarantor if sent to Guarantor by registered or certified mail at its
address specified below.

                  25. Arbitration and Waiver of Jury Trial.

                           (a) This paragraph concerns the resolution of any
         controversies or claims between the parties, whether arising in
         contract, tort or by statute, including but not limited to
         controversies or claims that arise out of or relate to: (i) this
         agreement (including any renewals, extensions or modifications); or
         (ii) any document related to this agreement (collectively a "Claim").
         For the purposes of this arbitration provision only, the term "parties"
         shall include any parent corporation, subsidiary or affiliate of the
         Bank involved in the servicing, management or administration of any
         obligation described or evidenced by this agreement.

                           (b) At the request of any party to this agreement,
         any Claim shall be resolved by binding arbitration in accordance with
         the Federal Arbitration Act (Title 9, U. S. Code) (the "Act"). The Act
         will apply even though this agreement provides that it is governed by
         the law of a specified state.

                           (c) Arbitration proceedings will be determined in
         accordance with the Act, the applicable rules and procedures for the
         arbitration of disputes of JAMS or any successor thereof ("JAMS"), and
         the terms of this paragraph. In the event of any inconsistency, the
         terms of this paragraph shall control.

                           (d) The arbitration shall be administered by JAMS and
         conducted, unless otherwise required by law, in any U. S. state where
         real or tangible personal property collateral for this credit is
         located or if there is no such collateral, in the state specified in
         the governing law section of this agreement. All Claims shall be
         determined by one arbitrator; however, if Claims exceed $5,000,000,
         upon the request of any party, the Claims shall be decided by three
         arbitrators. All arbitration hearings shall commence within 90 days of
         the demand for arbitration and close within 90 days of commencement and
         the award of the arbitrator(s) shall be issued within 30 days of the
         close of the hearing. However, the arbitrator(s), upon a showing of
         good cause, may extend the commencement of the hearing for up to an
         additional 60 days. The arbitrator(s) shall provide a concise written
         statement of reasons for the award. The arbitration award may be
         submitted to any court having jurisdiction to be confirmed and
         enforced.

                           (e) The arbitrator(s) will have the authority to
         decide whether any Claim is barred by the statute of limitations and,
         if so, to dismiss the arbitration on that basis. For purposes of the
         application of the statute of limitations, the service on JAMS under
         applicable JAMS rules of a notice of Claim is the equivalent of the
         filing of a lawsuit. Any dispute concerning this arbitration provision
         or whether a Claim is arbitrable shall be determined by the
         arbitrator(s). The arbitrator(s) shall have the power to award legal
         fees pursuant to the terms of this agreement.

                           (f) This paragraph does not limit the right of any
         party to: (i) exercise self-help remedies, such as but not limited to,
         setoff; (ii) initiate judicial or non-judicial foreclosure against any
         real or personal property collateral; (iii) exercise any judicial or
         power of sale rights, or (iv) act in a court of law to obtain an
         interim remedy, such as but not limited to, injunctive relief, writ of
         possession or appointment of a receiver, or additional or supplementary
         remedies.

                                       7


                           (g) The procedure described above will not apply if
         the Claim, at the time of the proposed submission to arbitration,
         arises from or relates to an obligation to the Bank secured by real
         property. In this case, all of the parties to this agreement must
         consent to submission of the Claim to arbitration. If both parties do
         not consent to arbitration, the Claim will be resolved as follows: The
         parties will designate a referee (or a panel of referees) selected
         under the auspices of JAMS in the same manner as arbitrators are
         selected in JAMS administered proceedings. The designated referee(s)
         will be appointed by a court as provided in California Code of Civil
         Procedure Section 638 and the following related sections. The referee
         (or presiding referee of the panel) will be an active attorney or a
         retired judge. The award that results from the decision of the
         referee(s) will be entered as a judgment in the court that appointed
         the referee, in accordance with the provisions of California Code of
         Civil Procedure Sections 644 and 645.

                           (h) The filing of a court action is not intended to
         constitute a waiver of the right of any party, including the suing
         party, thereafter to require submittal of the Claim to arbitration.

                           (i) By agreeing to binding arbitration, the parties
         irrevocably and voluntarily waive any right they may have to a trial by
         jury in respect of any Claim. Furthermore, without intending in any way
         to limit this agreement to arbitrate, to the extent any Claim is not
         arbitrated, the parties irrevocably and voluntarily waive any right
         they may have to a trial by jury in respect of such Claim. This
         provision is a material inducement for the parties entering into this
         agreement.

         Executed this _______ day of _______________________, _____.

         Pacific Sunwear Stores Corp.

         By: _________________________________________________
         Printed Name: _______________________________________
         Title: ______________________________________________

         Shoppacsun.com Corp.

         By: _________________________________________________
         Printed Name: _______________________________________
         Title: ______________________________________________

Address for notices to Bank:                   Address for notices to Guarantor:

675 Anton Boulevard, 2nd Floor                 5200 East La Palma Avenue
Costa Mesa, CA 92626                           Anaheim, CA 92807

                                       8

EX-10.16

                                                                   EXHIBIT 10.16

                             BUSINESS LOAN AGREEMENT

         This Agreement dated as of January 30, 2004, is between Bank of
America, N.A. (the "Bank") and Pacific Sunwear of California, Inc., a California
corporation (the "Borrower").

         1.       LINE OF CREDIT AMOUNT AND TERMS

                  1.1      Line of Credit Amount.

                           (a)      During the availability period described
below, the Bank will provide a line of credit to the Borrower. The amount of the
line of credit (the Commitment") is equal to the amount indicated for each
period specified below:



                 PERIOD                          AMOUNT
- --------------------------------------------- ------------
                                           
From the date of this Agreement through       $45,000,000
March 31, 2005

From April 1, 2005 through March 31, 2006     $50,000,000

From April 1, 2006 through April 1, 2007      $60,000,000


                           (b)      This is a revolving line of credit providing
for cash advances, letters of credit, and shipside bonds. During the
availability period, the Borrower may repay principal amounts and reborrow them.

                           (c)      The Borrower agrees not to permit the
outstanding principal balance of the line of credit, shipside bonds and letters
of credit, including amounts drawn on letters of credit and not yet reimbursed,
to exceed the Commitment. If the Borrower exceeds this limit, the Borrower will
immediately pay the excess to the Bank upon the Bank's demand. The Bank may
apply payments received from the Borrower under this Paragraph to the
obligations of the Borrower to the Bank in the order and manner as the Bank, in
its discretion, may determine.

                  1.2      Availability Period. The line of credit is available
between the date of this Agreement and April 1, 2007, or such earlier date as
the availability may terminate as provided in this Agreement (the "Expiration
Date").

                  1.3      Interest Rate.

                           (a)      Unless the Borrower elects an optional
interest rate as described below, the interest rate is a rate per year equal to
the Bank's Prime Rate.

                           (b)      The Prime Rate is the rate of interest
publicly announced from time to time by the Bank as its Prime Rate. The Prime
Rate is set by the Bank based on various factors, including the Bank's costs and
desired return, general economic conditions and other

                                       1


factors, and is used as a reference point for pricing some loans. The Bank may
price loans to its customers at, above, or below the Prime Rate. Any change in
the Prime Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in the Bank's Prime Rate.

                  1.4      Repayment Terms.

                           (a)      The Borrower will pay interest on February
1, 2004, and then monthly thereafter until payment in full of any principal
outstanding under this line of credit.

                           (b)      The Borrower will repay in full all
principal and any unpaid interest or other charges outstanding under this line
of credit no later than the Expiration Date. Any amount bearing interest at an
optional interest rate (as described below) may be repaid at the end of the
applicable interest period, which shall be no later than the Expiration Date.

                  1.5      Optional Interest Rates. Instead of the interest rate
based on the Bank's Prime Rate, the Borrower may elect the optional interest
rate listed below during interest periods agreed to by the Bank and the
Borrower. The optional interest rate shall be subject to the terms and
conditions described later in this Agreement. Any principal amount bearing
interest at an optional rate under this Agreement is referred to as a "Portion."
The following optional interest rate is available:

                           (a)      the LIBOR Rate plus 1.0 percentage point.

                  1.6      Letters of Credit.

                           (a)      This line of credit may be used for
financing:

                                    (i)      commercial letters of credit with a
maximum maturity of 180 days but not to extend more than 120 days beyond the
Expiration Date; provided, however, that each commercial letter of credit
outstanding after the Expiration Date must be secured with collateral acceptable
to the Bank. Each commercial letter of credit will require drafts payable at
sight.

                                    (ii)     standby letters of credit with a
maximum maturity of 365 days but not to extend more than 365 days beyond the
Expiration Date; provided, however, that each standby letter of credit
outstanding after the Expiration Date must be secured with collateral acceptable
to the Bank.

                                    (iii)    The amount of letters of credit
outstanding at any one time (including amounts drawn on letters of credit and
not yet reimbursed) may not exceed the Commitment.

                                    (iv)     The letters of credit set forth on
Schedule 1.6 are outstanding from the Bank for the account of the Borrower. As
of the date of this Agreement, these letters of credit shall be deemed to be
outstanding under this Agreement, and shall be subject to all the terms and
conditions stated in this Agreement.

                                       2


                           (b)      The Borrower agrees:

                                    (i)      any sum drawn under a letter of
credit may, at the option of the Bank, be added to the principal amount
outstanding under this Agreement. The amount will bear interest and be due as
described elsewhere in this Agreement.

                                    (ii)     if an Event of Default has occurred
and is continuing under this Agreement, to immediately prepay and make the Bank
whole for any outstanding letters of credit.

                                    (iii)    the issuance of any letter of
credit and any amendment to a letter of credit is subject to the Bank's written
approval and must be in form and content satisfactory to the Bank and in favor
of a beneficiary acceptable to the Bank.

                                    (iv)     to sign the Bank's form Application
and Agreement for Commercial Letter of Credit or Application and Agreement for
Standby Letter of Credit, as applicable.

                                    (v)      to pay any issuance and/or other
fees that the Bank notifies the Borrower will be charged for issuing and
processing letters of credit for the Borrower.

                                    (vi)     to allow the Bank to automatically
charge its checking account for applicable fees, discounts, and other charges.

                                    (vii)    to pay the Bank a non-refundable
fee equal to the greater of (aa) 1.50% per annum of the outstanding undrawn
amount of each standby letter of credit or (bb) Three Hundred Dollars ($300.00),
payable quarterly in advance, calculated on the basis of the face amount
outstanding on the day the fee is calculated. If there is an Event of Default
which has occurred and is continuing under this Agreement, at the Bank's option
upon written notice to the Borrower, the amount of the fee shall be increased to
3.50% per annum, effective starting on the day the Bank provides notice of the
increase to the Borrower.

                  1.7      Shipside Bonds. This line of credit up to a maximum
face value outstanding of Five Million Dollars ($5,000,000) may be used for
financing shipside bonds. The shipside bonds set forth on Schedule 1.7 are
outstanding from the Bank for the account of the Borrower. As of the date of
this Agreement, these shipside bonds shall be deemed to be outstanding under
this Agreement, and shall be subject to all the terms and conditions stated in
this Agreement. The Borrower agrees:

                           (a)      any sum owed to the Bank under a shipside
bond may, at the option of the Bank, be added to the principal amount
outstanding under this Agreement. The amount will bear interest and be due as
described elsewhere in this Agreement.

                           (b)      if an Event of Default has occurred and is
continuing under this Agreement, to immediately prepay and make the Bank whole
for any outstanding shipside bonds.

                                       3


                           (c)      the issuance of any shipside bond is subject
to the Bank's express approval and must be in form and content satisfactory to
the Bank.

                           (d)      to sign the Bank's application, security
agreement and other standard forms for shipside bonds, and to pay any issuance
and/or other fees that the Bank notifies the Borrower will be charged for
issuing and processing shipside bonds for the Borrower.

                           (e)      to allow the Bank to automatically charge
its checking account for applicable fees, discounts, and other charges.

         2.       OPTIONAL INTEREST RATES

                  2.1      Optional Rates. Each optional interest rate is a rate
per year. Interest will be paid on the last day of each interest period, and, if
the interest period is longer than one month, then on the first day of each
month during the interest period. At the end of any interest period, the
interest rate will revert to the rate based on the Prime Rate, unless the
Borrower has designated another optional interest rate for the Portion. No
Portion will be converted to a different interest rate during the applicable
interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of optional interest rates
for interest periods commencing after the default occurs.

                  2.2      LIBOR Rate. The election of LIBOR Rates shall be
subject to the following terms and requirements:

                           (a)      The interest period during which the LIBOR
Rate will be in effect will be one, two, three, six or twelve months. The first
day of the interest period must be a day other than a Saturday or a Sunday on
which the Bank is open for business in New York and London and dealing in
offshore dollars (a "LIBOR Banking Day"). The last day of the interest period
and the actual number of days during the interest period will be determined by
the Bank using the practices of the London inter-bank market.

                           (b)      Each LIBOR Rate Portion will be for an
amount not less than One Million Dollars ($1,000,000). Borrower may not elect to
have more than six (6) LIBOR Rate Portions outstanding at any time.

                           (c)      The "LIBOR Rate" means the interest rate
determined by the following formula, rounded upward to the nearest 1/100 of one
percent. (All amounts in the calculation will be determined by the Bank as of
the first day of the interest period.)

                      LIBOR Rate =  London Inter-Bank Offered Rate
                                    ------------------------------
                                     (1.00 - Reserve Percentage)

Where,

                                    (i)      "London Inter-Bank Offered Rate"
means the average per annum interest rate at which U.S. dollar deposits would be
offered for the applicable interest period by major banks in the London
inter-bank market, as shown on the Telerate Page 3750 (or

                                       4


any successor page) at approximately 11:00 a.m. London time two (2) London
Banking Days before the commencement of the interest period. If such rate does
not appear on the Telerate Page 3750 (or any successor page), the rate for that
interest period will be determined by such alternate method as reasonably
selected by the Bank. A "London Banking Day" is a day on which the Bank's London
Banking Center is open for business and dealing in offshore dollars.

                                    (ii)     "Reserve Percentage" means the
total of the maximum reserve percentages for determining the reserves to be
maintained by member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D, rounded upward to
the nearest 1/100 of one percent. The percentage will be expressed as a decimal,
and will include, but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.

                           (d)      The Borrower shall irrevocably request a
LIBOR Rate Portion no later than 12:00 noon California time on the LIBOR Banking
Day preceding the day on which the London Inter-Bank Offered Rate will be set,
as specified above. For example, if there are no intervening holidays or weekend
days in any of the relevant locations, the request must be made at least three
days before the LIBOR Rate takes effect.

                           (e)      The Borrower may not elect a LIBOR Rate with
respect to any principal amount which is scheduled to be repaid before the last
day of the applicable interest period.

                           (f)      Each prepayment of a LIBOR Rate Portion,
whether voluntary, by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date earlier than
the scheduled payment date for such amount as required by this Agreement.

                           (g)      The prepayment fee shall be in an amount
sufficient to compensate the Bank for any loss, cost or expense incurred by it
as a result of the prepayment, including any loss of anticipated profits and any
loss or expense arising from the liquidation or reemployment of funds obtained
by it to maintain such Portion or from fees payable to terminate the deposits
from which such funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Bank in connection with the foregoing. For
purposes of this paragraph, the Bank shall be deemed to have funded each Portion
by a matching deposit or other borrowing in the applicable interbank market,
whether or not such Portion was in fact so funded.

                           (h)      The Bank will have no obligation to accept
an election for a LIBOR Rate Portion if any of the following described events
has occurred and is continuing:

                                    (i)      Dollar deposits in the principal
amount, and for periods equal to the interest period, of a LIBOR Rate Portion
are not available in the London inter-bank market; or

                                    (ii)     the LIBOR Rate does not accurately
reflect the cost of a LIBOR Rate Portion.

                                       5


         3.       FEES AND EXPENSES

                  3.1      Fees.

                           (a)      Unused Commitment Fee. The Borrower agrees
to pay a fee on any difference between Commitment and the amount of credit it
actually uses, determined by the weighted average credit outstanding during the
specified period. The fee will be calculated at 0.20% per year. The calculation
of credit outstanding shall include undrawn amounts of letters of credit and
shipside bonds. The fee will be payable quarterly in arrears until expiration of
the availability period.

                           (b)      Waiver Fee. If the Bank, at its discretion,
agrees to waive or amend any terms of this Agreement, the Borrower will, at the
Bank's option, pay the Bank a fee for each waiver or amendment in an amount
advised by the Bank at the time the Borrower requests the waiver or amendment.
Nothing in this paragraph shall imply that the Bank is obligated to agree to any
waiver or amendment requested by the Borrower. The Bank may impose additional
requirements as a condition to any waiver or amendment.

                           (c)      Late Fee. To the extent permitted by law,
the Borrower agrees to pay a late fee in an amount not to exceed two percent
(2%) of any payment that is more than fifteen (15) days late. The imposition and
payment of a late fee shall not constitute a waiver of the Bank's rights with
respect to the default.

                  3.2      Expenses. The Borrower agrees to immediately repay
the Bank for expenses that include, but are not limited to, filing, appraisal
and search fees, and documentation fees.

                  3.3      Reimbursement Costs. The Borrower agrees to reimburse
the Bank for any expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement. Expenses include, but are
not limited to, reasonable attorneys' fees, including any allocated costs of the
Bank's in-house counsel.

         4.       DISBURSEMENTS, PAYMENTS AND COSTS

                  4.1      Requests for Credit. Each request for an extension of
credit will be made in writing in a manner acceptable to the Bank, or by another
means acceptable to the Bank.

                  4.2      Disbursements and Payments.

                           (a)      Each payment by the Borrower will be made in
immediately available funds by direct debit to deposit account number
14585-25065 as specified below or, for payments not required to be made by
direct debit, by mail to the address shown on the Borrower's statement or at one
of the Bank's banking centers in the United States.

                           (b)      Each disbursement by the Bank and each
payment by the Borrower will be evidenced by records kept by the Bank. In
addition, the Bank may, at its discretion, require the Borrower to sign one or
more promissory notes.

                                       6


                  4.3      Telephone and Telefax Authorization.

                           (a)      The Bank may honor telephone or telefax
instructions for advances or repayments or for the designation of optional
interest rates and telefax requests for the issuance of letters of credit given,
or purported to be given, by any one of the individuals authorized to sign loan
agreements on behalf of the Borrower, or any other individual designated by any
one of such authorized signers.

                           (b)      Advances will be deposited in and repayments
will be withdrawn from the Borrower's account number 14585-25065, or such other
of the Borrower's accounts with the Bank as designated in writing by the
Borrower.

                           (c)      The Borrower will indemnify and hold the
Bank harmless from all liability, loss, and costs in connection with any act
resulting from telephone or telefax instructions the Bank reasonably believes
are made by any individual authorized by the Borrower to give such instructions.
This paragraph will survive this Agreement's termination, and will benefit the
Bank and its officers, employees, and agents.

                  4.4      Direct Debit (Pre-Billing).

                           (a)      The Borrower agrees that the Bank will debit
the Borrower's deposit account number 14585-25065, or such other of the
Borrower's accounts with the Bank as designated in writing by the Borrower (the
"Designated Account") on the date each payment of principal and interest and any
fees from the Borrower becomes due (the "Due Date").

                           (b)      Prior to each Due Date, the Bank will mail
to the Borrower a statement of the amounts that will be due on that Due Date
(the "Billed Amount"). The bill will be mailed a specified number of calendar
days prior to the Due Date, which number of days will be mutually agreed upon
from time to time by the Bank and the Borrower. The calculation will be made on
the assumption that no new extensions of credit or payments will be made between
the date of the billing statement and the Due Date, and that there will be no
changes in the applicable interest rate.

                           (c)      The Bank will debit the Designated Account
for the Billed Amount, regardless of the actual amount due on that date (the
"Accrued Amount"). If the Billed Amount debited to the Designated Account
differs from the Accrued Amount, the discrepancy will be treated as follows:

                                    (i)      If the Billed Amount is less than
the Accrued Amount, the Billed Amount for the following Due Date will be
increased by the amount of the discrepancy. The Borrower will not be in default
by reason of any such discrepancy.

                                    (ii)     If the Billed Amount is more than
the Accrued Amount, the Billed Amount for the following Due Date will be
decreased by the amount of the discrepancy.

                                       7


         Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without compounding. The
Bank will not pay the Borrower interest on any overpayment.

                           (d)      The Borrower will maintain sufficient funds
in the Designated Account to cover each debit. If there are insufficient funds
in the Designated Account on the date the Bank enters any debit authorized by
this Agreement, the Bank may reverse the debit.

                  4.5      Banking Days. Unless otherwise provided in this
Agreement, a banking day is a day other than a Saturday, Sunday or other day on
which commercial banks are authorized to close, or are in fact closed, in the
state where the Bank's lending office is located, and, if such day relates to
amounts bearing interest at an offshore rate (if any), means any such day on
which dealings in dollar deposits are conducted among banks in the offshore
dollar interbank market. All payments and disbursements which would be due on a
day which is not a banking day will be due on the next banking day. All payments
received on a day which is not a banking day will be applied to the credit on
the next banking day.

                  4.6      Taxes.

                           (a)      If any payments to the Bank under this
Agreement are made from outside the United States, the Borrower will not deduct
any foreign taxes from any payments it makes to the Bank. If any such taxes are
imposed on any payments made by the Borrower (including payments under this
paragraph), the Borrower will pay the taxes and will also pay to the Bank, at
the time interest is paid, any additional amount which the Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
taxes had not been imposed. The Borrower will confirm that it has paid the taxes
by giving the Bank official tax receipts (or notarized copies) within thirty
(30) days after the due date.

                           (b)      Payments made by the Borrower to the Bank
will be made without deduction of United States withholding or similar taxes. If
the Borrower is required to pay U.S. withholding taxes, the Borrower will pay
such taxes in addition to the amounts due to the Bank under this Agreement. If
the Borrower fails to make such tax payments when due, the Borrower indemnifies
the Bank against any liability for such taxes, as well as for any related
interest, expenses, additions to tax, or penalties asserted against or suffered
by the Bank with respect to such taxes.

                           (c)      Any assignee or successor to the Bank that
is not incorporated under the laws of the United States of America or a state
thereof (each a "Non-U.S. Lender") agrees that it will, on or before the
effective date of any assignment pursuant to which it becomes a successor or
assign to the Bank and on the request of the Borrower, (i) deliver to the
Borrower two duly completed copies of United States Internal Revenue Service
Form W-8ECI or W-8BEN or any successor form, certifying in either case that such
Person is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, and (ii) deliver to the
Borrower a United States Internal Revenue Form W-8 or W-9, as the case may be,
and certify that it is entitled to an exemption from United States backup
withholding tax. Each Non-U.S. Lender further undertakes to deliver to the
Borrower (1)

                                       8


renewals or additional copies of such form (or any successor form) on or before
the date that such form expires or becomes obsolete, and (2) after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, such additional form or amendments thereto as may be reasonably requested
by the Borrower. All forms or amendments described in the preceding sentence
shall certify that such Person is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred after the relevant date and prior to the date on
which any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Person from duly completing and
delivering any such form or amendment with respect to it and such Person advises
the Borrower that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.

                           (d)      For any period during which a Non-U.S.
Lender has failed to provide the Borrower with an appropriate form pursuant to
clause (c) above (unless such failure is due to a change after the relevant date
in any treaty, law or regulation, or any change in the interpretation or
administration thereof by any governmental authority, occurring subsequent to
the date on which a form originally was required to be provided), such Non-U.S.
Lender shall not be entitled to receive any payment or indemnification under
this Agreement with respect to taxes; provided that, should a Non-U.S. Lender
which is otherwise exempt from or subject to a reduced rate of withholding tax
become subject to taxes because of its failure to deliver a form required under
clause (c) above, the Borrower shall take (at the expense of such person) such
steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S.
Lender to recover such taxes.

                           (e)      Any Person that is entitled to an exemption
from or reduction of withholding tax with respect to payments under this
Agreement pursuant to the law of any relevant jurisdiction or any treaty shall
deliver to the Borrower at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate.

                           (f)      If the U.S. Internal Revenue Service or any
other governmental authority of the United States or any other country or any
political subdivision thereof asserts a claim that the Borrower did not properly
withhold tax from amounts paid to or for the account of any successor or assign
of the Bank (because the appropriate form was not delivered or properly
completed, because such Person failed to notify the Borrower of a change in
circumstances which rendered its exemption from withholding ineffective, or for
any other reason), such Person shall indemnify the Borrower fully for all
amounts paid, directly or indirectly, by the Borrower as tax, withholding
therefor, or otherwise, including penalties and interest, and including taxes
imposed by any jurisdiction on amounts payable to the Borrower under this
subsection, together with all costs and expenses related thereto.

                  4.7      Additional Costs. The Borrower will pay the Bank, on
demand, for the Bank's costs or losses arising from any statute or regulation,
or any request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The

                                       9


costs and losses will be allocated to the loan in a manner determined by the
Bank, using any reasonable method. The costs include the following:

                           (a)      any reserve or deposit requirements; and

                           (b)      any capital requirements relating to the
Bank's assets and commitments for credit.

                  4.8      Interest Calculation. Except as otherwise stated in
this Agreement, all interest and fees, if any, will be computed on the basis of
a 360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used. Installments of
principal which are not paid when due under this Agreement shall continue to
bear interest until paid.

                  4.9      Default Rate. Upon the occurrence and during the
continuance of any Event of Default under this Agreement, following written
notice from the Bank, principal amounts outstanding under this Agreement will at
the option of the Bank bear interest at a rate which is 2.0 percentage point(s)
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any default.

                  4.10     Interest Compounding. At the Bank's sole option in
each instance, any interest, fees or costs which are not paid when due under
this Agreement shall bear interest from the due date at the Bank's Prime Rate
plus 2.0 percentage point(s). This may result in compounding of interest.

         5.       CONDITIONS

                  The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement:

                  5.1      Authorizations. Evidence that the execution, delivery
and performance by the Borrower and each guarantor of this Agreement and any
instrument or agreement required under this Agreement have been duly authorized.

                  5.2      Governing Documents. A copy of the articles of
incorporation or organization for the Borrower and each guarantor.

                  5.3      Guaranty. A limited guaranty ("Guaranty") signed by
Pacific Sunwear Stores Corp. and Shoppacsun.com Corp.

                  5.4      Good Standing. Certificates of good standing for the
Borrower and each guarantor from its state of formation and from any other state
in which the Borrower and each guarantor is required to qualify to conduct its
business.

                  5.5      Payment of Fees. Payment of all accrued and unpaid
expenses incurred by the Bank as required by the paragraph entitled
"Reimbursement Costs."

                                       10


                  5.6      Other Items. Any other items that the Bank reasonably
requires.

         6.       REPRESENTATIONS AND WARRANTIES

                  When the Borrower signs this Agreement, and until the Bank is
repaid in full, the Borrower makes the following representations and warranties.
Each request for an extension of credit constitutes a renewal of these
representations and warranties as of the date of the request:

                  6.1      Organization of Borrower. The Borrower is a
corporation duly formed and existing under the laws of the state where
organized. Each subsidiary of the Borrower, including without limitation, the
subsidiaries set forth on Exhibit A hereto (individually a "Subsidiary" and
collectively, the "Subsidiaries"), is a corporation or a limited liability
company duly formed and existing under the laws of the state where organized.
Each Guarantor is a corporation or limited liability company duly formed and
existing under the laws of the state where organized.

                  6.2      Authorization. This Agreement, and any instrument or
agreement required hereunder, are within the Borrower's powers, have been duly
authorized, and do not conflict with any of its organizational papers. The
execution, delivery and performance of each guarantor of the Guaranty is within
its corporate powers, has been duly authorized and does not conflict with any of
its organizational papers.

                  6.3      Enforceable Agreement. This Agreement is a legal,
valid and binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, and any instrument or agreement required hereunder
from the Borrower or any guarantor, when executed and delivered, will be
similarly legal, valid, binding and enforceable, except as enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws relating
to or affecting enforcement of creditors' rights generally or by general
equitable principles.

                  6.4      Good Standing. In each state in which the Borrower,
each guarantor and each Subsidiary does business, it is properly licensed, in
good standing, and, where required, in compliance with fictitious name statutes,
except where the failure to do so would not have a material adverse effect on
the Borrower and its Subsidiaries taken as a whole.

                  6.5      No Conflicts. This Agreement does not conflict with
any law, agreement, or obligation by which the Borrower, any guarantor or any
Subsidiary is bound.

                  6.6      Financial Information. All financial and other
information that has been or will be supplied to the Bank is sufficiently
complete to give the Bank accurate knowledge of the Borrower's (and any
guarantor's) financial condition, including all material contingent liabilities.
Since the date of the most recent financial statement provided to the Bank,
there has been no material adverse change in the business condition (financial
or otherwise), operations, properties or prospects of the Borrower (or any
guarantor).

                  6.7      Lawsuits. There is no lawsuit, tax claim or other
dispute pending or threatened against the Borrower or any Subsidiary which, if
lost, would impair the Borrower's

                                       11


and its Subsidiaries financial condition taken as a whole or ability to repay
the loan, except as have been disclosed in writing to the Bank.

                  6.8      Permits, Franchises. The Borrower and each Subsidiary
possesses all permits, memberships, franchises, contracts and licenses required
and all trademark rights, trade name rights, patent rights and fictitious name
rights necessary to enable it to conduct the business in which it is now
engaged, except where the failure to own or possess any of the foregoing would
not have a material adverse effect on the financial condition or operations of
the Borrower and its Subsidiaries taken as a whole.

                  6.9      Other Obligations. Neither the Borrower nor any
Subsidiary is in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract, instrument
or obligation.

                  6.10     Tax Matters. The Borrower has no knowledge of any
pending assessments or adjustments of its income tax in excess of Two Hundred
Fifty Thousand Dollars ($250,000) for any year and all taxes due have been paid,
except as have been disclosed in writing to the Bank.

                  6.11     No Tax Avoidance Plan. The Borrower's obtaining of
credit from the Bank under this Agreement does not have as a principal purpose
the avoidance of U.S. withholding taxes.

                  6.12     No Event of Default. There is no event which is, or
with notice or lapse of time or both would be, a default under this Agreement.

                  6.13     Insurance. The Borrower has obtained, and maintained
in effect, the insurance coverage required in the "Covenants" section of this
Agreement.

                  6.14     Location of Borrower. The Borrower's place of
business (or, if the Borrower has more than one place of business, its chief
executive office) is located at the address listed under the Borrower's
signature on this Agreement.

                  6.15     ERISA Plans.

                           (a)      Each Plan (other than a multiemployer plan)
is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other federal or state law, except to the extent that any
non-compliance would not result in a material liability of Borrower. Each Plan
has received a favorable determination letter from the IRS and to the best
knowledge of the Borrower, nothing has occurred which would cause the loss of
such qualification in any case where the failure to be qualified would result in
a material liability of Borrower. The Borrower has fulfilled its obligations, if
any, under the minimum funding standards of ERISA and the Code with respect to
each Plan, except to the extent that any failure to fulfill such obligation
would not result in a material liability of Borrower, and has not incurred any
material liability with respect to any Plan under Title IV of ERISA.

                                       12


                           (b)      There are no claims, lawsuits or actions
(including by any governmental authority), and there has been no prohibited
transaction or violation of the fiduciary responsibility rules, with respect to
any Plan which has resulted or could reasonably be expected to result in a
material adverse effect.

                           (c)      With respect to any Plan subject to Title IV
of ERISA:

                                    (i)      No reportable event has occurred
under Section 4043(c) of ERISA for which the PBGC requires 30-day notice, which
would result in a material liability of Borrower.

                                    (ii)     No action by the Borrower or any
ERISA Affiliate to terminate or withdraw from any Plan has been taken and no
notice of intent to terminate a Plan has been filed under Section 4041 of ERISA,
which termination or withdrawal would result in a material liability of
Borrower.

                                    (iii)    No termination proceeding has been
commenced with respect to a Plan under Section 4042 of ERISA, and to Borrower's
knowledge, no event has occurred or condition exists which might constitute
grounds for the commencement of such a proceeding.

                           (d)      The following terms have the meanings
indicated for purposes of this Agreement:

                                    (i)      "Code" means the Internal Revenue
Code of 1986, as amended from time to time.

                                    (ii)     "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended from time to time.

                                    (iii)    "ERISA Affiliate" means any trade
or business (whether or not incorporated) under common control with the Borrower
within the meaning of Section 414(b) or (c) of the Code.

                                    (iv)     "PBGC" means the Pension Benefit
Guaranty Corporation.

                                    (v)      "Plan" means a pension,
profit-sharing, or stock bonus plan intended to qualify under Section 401(a) of
the Code, maintained or contributed to by the Borrower or any ERISA Affiliate,
including any multiemployer plan within the meaning of Section 4001(a)(3) of
ERISA.

         7.       COVENANTS

                  The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:

                                       13


                  7.1      Use of Proceeds. To use the proceeds of the credit
only for working capital, capital expenditures, general corporate purposes and
for the issuance of letters of credit and shipside bonds.

                  7.2      Financial Information. To provide the following
financial information and statements in form and content acceptable to the Bank,
and such additional information as requested by the Bank from time to time:

                           (a)      Within 90 days of the Borrower's fiscal year
end, the Borrower's annual financial statements or Form 10-K Annual Report filed
with the Securities and Exchange Commission. These financial statements must be
audited (with an unqualified opinion) by Deloitte & Touche or other Certified
Public Accountant acceptable to the Bank. The statements shall be prepared on a
consolidated basis.

                           (b)      Within 45 days of the period's end, the
Borrower's quarterly financial statements or Form 10-Q Quarterly Report filed
with the Securities and Exchange Commission, certified and dated by an
authorized officer of the Borrower. These financial statements may be company
prepared and shall be prepared on a consolidated basis.

                           (c)      Within 120 days of the Borrower's fiscal
year end, projections of the Borrower's consolidated financial statements for
the succeeding calendar years (through the maturity of the credit facilities
provided under this Agreement) on a quarterly basis for the next fiscal year and
annually thereafter. These projections may be Borrower prepared.

                           (d)      Within the period(s) provided in (a) and (b)
above, a compliance certificate of the Borrower signed by an authorized
financial officer of the Borrower in substantially the form of Exhibit B hereto,
setting forth (i) the information and computations (in sufficient detail) to
establish that the Borrower is in compliance with all financial covenants at the
end of the period covered by the financial statements then being furnished and
(ii) whether there existed as of the date of such financial statements and
whether there exists as of the date of the certificate, any default under this
Agreement and, if any such default exists, specifying the nature thereof and the
action the Borrower is taking and proposes to take with respect thereto.

                           (e)      Promptly upon the Bank's request, such other
books, records, statements, lists of property and accounts, budgets, forecasts
or reports as to the Borrower and as to each guarantor of the Borrower's
obligations to the Bank as the Bank may request.

                  7.3      EBITDA. To maintain on a consolidated basis EBITDA
equal to at least $85,000,000.

"EBITDA" means net profit before taxes, plus interest expense, depreciation,
amortization and any impairment of goodwill as required by generally accepted
accounting principles. This covenant will be calculated at the end of each
quarter, using the results of that quarter and each of the 3 immediately
preceding quarters.

                                       14


                  7.4      Total Liabilities to Tangible Net Worth. To maintain
on a consolidated basis a ratio of Total Liabilities (excluding Subordinated
Liabilities) to Tangible Net Worth not exceeding 0.80:1.0. This covenant will be
calculated at the end of each fiscal quarter.

"Total Liabilities" means the sum of current liabilities plus long term
liabilities.

"Subordinated Liabilities" means liabilities subordinated to the Borrower's
obligations to the Bank in a manner acceptable to the Bank, using the Bank's
standard form.

"Tangible Net Worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
unamortized debt discount and expense, capitalized or deferred research and
development costs, deferred marketing expenses, deferred receivables, and other
like intangibles and monies due from affiliates, officers, directors, employees,
or shareholders of the Borrower), plus Subordinated Liabilities, less Total
Liabilities, including but not limited to accrued and deferred income taxes, and
any reserves against assets.

                  7.5      Paydown Period. To reduce the amount of advances
outstanding under this Agreement to zero for at least 30 consecutive days during
any rolling twelve-month period. For purposes of this paragraph, "advances" does
not include undrawn amounts of outstanding letters of credit or shipside bonds.

                  7.6      Other Debts. The Borrower shall not and shall not
permit any Subsidiary to have outstanding or incur any Indebtedness (other than
those to the Bank), or become liable for the liabilities of others, without the
Bank's written consent. This does not prohibit:

                           (a)      Acquiring goods, supplies, or merchandise on
normal trade credit.

                           (b)      Endorsing negotiable instruments received in
the usual course of business.

                           (c)      Obtaining surety bonds in the usual course
of business.

                           (d)      Additional capital lease obligations for the
acquisition of fixed assets not to exceed Fifteen Million Dollars ($15,000,000)
in the aggregate.

                           (e)      Indebtedness of Borrower to any of its
wholly-owned Subsidiaries, and any wholly-owned Subsidiary of Borrower may
become and remain liable with respect to indebtedness to Borrower or other
wholly-owned Subsidiaries of Borrower.

                           (f)      Additional Indebtedness for business
purposes that does not exceed Fifteen Million Dollars ($15,000,000) in the
aggregate.

For purposes hereof "Indebtedness", as applied to Borrower and any Subsidiary,
means (i) all indebtedness for borrowed money, (ii) that portion of obligations
with respect to capital leases that is properly classified as a liability on a
balance sheet in conformity with generally accepted accounting principles, (iii)
notes payable and drafts accepted representing extensions of credit whether or
not representing obligations for borrowed money, (iv) any obligation owed for
all or

                                       15


any part of the deferred purchase price of property or services (excluding any
such obligations incurred under ERISA), which purchase price is (a) due more
than six months from the date of incurrence of the obligation in respect thereof
or (b) evidenced by a note or similar written instrument, and (v) all
indebtedness secured by any lien on any property or asset owned or held by such
party regardless of whether the indebtedness secured thereby shall have been
assumed by such party or is nonrecourse to the credit of such party.

                  7.7      Other Liens. The Borrower shall not, and shall not
permit any Subsidiary to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower or any Subsidiary now or
later owns, except: (a) deeds of trust and security agreements in favor of the
Bank; (b) liens for taxes, assessments, levies or other governmental charges not
yet due (subject to applicable grace periods) or which are being contested in
good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Borrower or such Subsidiary, as the
case may be, in accordance with generally accepted accounting principles; (c)
carriers', warehousemen's, mechanics', landlords', vendor's, materialmen's,
repairmen's, sureties' or other like liens arising in the ordinary course of
business (or deposits to obtain the release of any such lien); (d) pledges or
deposits in connection with worker's compensation, unemployment insurance and
other social security legislation; (e) deposits to secure insurance in the
ordinary course of business, the performance of bids, tenders, contracts (other
than contracts for the payment of money), leases, licenses, franchises,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business; (f)
easements, rights-of-way, covenants, reservations, exceptions, encroachments,
zoning and similar restrictions and other similar encumbrances or title defects
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrower and its Subsidiaries taken as a whole;
and (g) liens securing Indebtedness permitted under Section 7.6(d) and (f). The
Borrower hereby acknowledges and agrees that it will not enter into any
agreement with any other creditor, lender or other person that would have the
effect of prohibiting or otherwise limiting the ability of the Borrower at any
time to pledge any or all of its assets to the Bank without first obtaining the
prior written consent from the Bank.

                  7.8      Loans to Officers or Affiliates. Not to make any
loans, advances or other extensions of credit (including extensions of credit in
the nature of accounts receivable or notes receivable arising from the sale or
lease of goods or services) to any of the Borrower's executives, officers,
directors or shareholders (or any relatives of any of the foregoing), or to any
affiliated entities, in excess of One Million Dollars ($1,000,000) in the
aggregate outstanding at anytime, or to any affiliated entities of the Borrower
or any subsidiary, except for intercompany loans permitted under Section 7.6(e).

                  7.9      Capital Expenditures. Not to spend more than One
Hundred Million Dollars ($100,000,000) in any fiscal year to acquire fixed
assets.

                  7.10     Dividends. Not to declare or pay any dividends on any
of its shares, and not to purchase, redeem or otherwise acquire for value any of
its shares, or create any sinking fund in relation thereto, except:

                                       16


                           (a)      dividends payable in its capital stock;

                           (b)      restricted stock purchases in accordance
with any of Borrower's stock plans, not in excess of Ten Thousand Dollars
($10,000) in any one fiscal year.

                           (c)      capital stock repurchases not in excess of
Fifty Million Dollars ($50,000,000) in the aggregate at any time; provided that,
after giving effect to such stock repurchase (i) no Event of Default under this
Agreement has occurred and is continuing, and (ii) Borrower has not less than
Fifty Million Dollars ($50,000,000) in Unencumbered Liquid Assets. For the
purposes of this Agreement, "Unencumbered Liquid Assets" means the following
assets (excluding assets of any retirement plan) which (1) are not the subject
of any lien, pledge, security interest or other arrangement with any creditor to
have his claim satisfied out of the asset (or proceeds thereof) prior to the
general creditors of the Borrower, and (2) may be converted to cash within five
(5) days:

                                    (A)      Cash or cash equivalents held in
                                    the United States;

                                    (B)      United States Treasury or
                                    governmental agency obligations which
                                    constitute full faith and credit of the
                                    United States of America;

                                    (C)      Commercial paper rated P-1 or A1 by
                                    Moody's or S & P, respectively;

                                    (D)      Medium and long-term securities
                                    rated investment grade by one of the rating
                                    agencies described in (C) above;

                                    (E)      Eligible Stocks;

                                    (F)      Mutual funds quoted in The Wall
                                    Street Journal which invest primarily in the
                                    assets described in (A) - (E) above.

                                    "Eligible Stocks" includes any common or
                                    preferred stock which (i) is not subject to
                                    statutory or contractual restrictions on
                                    sales, (ii) is traded on a U. S. national
                                    stock exchange or included in the National
                                    Market tier of NASDAQ, and (iii) has, as of
                                    the close of trading on the applicable
                                    exchange (excluding after hours trading), a
                                    per share price of at least Fifteen Dollars
                                    ($15.00).

                                    If more than 25% of the value of
                                    Unencumbered Liquid Assets is represented by
                                    margin stock, the Borrower will, upon the
                                    Bank's request, provide the Bank a Form U-1
                                    Purpose Statement confirming that none of
                                    the proceeds of the loan will be used to buy
                                    or carry any margin stock.

                  7.11     Notices to Bank. To promptly notify the Bank in
writing of:

                                       17


                           (a)      any lawsuit over Five Million Dollars
($5,000,000) against the Borrower, any Subsidiary or any guarantor.

                           (b)      any substantial dispute involving a claim of
Two Million Dollars ($2,000,000) or more between the Borrower, any Subsidiary or
any guarantor and any government authority.

                           (c)      any event of default under this Agreement,
or any event which, with notice or lapse of time or both, would constitute an
event of default.

                           (d)      any material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of the
Borrower and its Subsidiaries taken as a whole, or in the Borrower's ability to
repay the credit.

                           (e)      any change in the Borrower's name, legal
structure, place of business, or chief executive office if the Borrower has more
than one place of business.

                           (f)      any actual contingent liabilities of the
Borrower (or any guarantor), and any such contingent liabilities which are
reasonably foreseeable, where such liabilities are in excess of Five Million
Dollars ($5,000,000) in the aggregate.

                           (g)      the receipt of any notice or communication
which could reasonably be expected to have a material adverse effect on the
financial condition or operations of the Borrower and its Subsidiaries taken as
a whole, regarding (i) any threatened or pending investigation or enforcement
action by any governmental authority or any other claim relating to health,
safety, the environment, or any hazardous substances with regard to the
property, activities, or operations of the Borrower or any Subsidiary or (ii)
any belief or suspicion of the Borrower or any Subsidiary that hazardous
substances exist on or under the real property of the Borrower or any
Subsidiary.

                  7.12     Books and Records. To maintain adequate books and
records.

                  7.13     Audits. To allow the Bank and its agents to inspect
the Borrower's properties and examine, audit, and make copies of books and
records at any reasonable time. Prior to the occurrence and continuance of any
Event of Default, the Bank agrees to give reasonable prior notice to Borrower of
its desire to conduct any inspection or audit. If any of the Borrower's
properties, books or records are in the possession of a third party, the
Borrower authorizes that third party to permit the Bank or its agents to have
access to perform inspections or audits and to respond to the Bank's requests
for information concerning such properties, books and records.

                  7.14     Compliance with Laws. To comply, and cause each
Subsidiary to comply, with the laws (including any fictitious name statute),
regulations, and orders of any government body with authority over the
Borrower's business and the business of each Subsidiary, except where the
failure to comply will not have a material adverse effect on the Borrower and
its Subsidiaries taken as a whole.

                                       18


                  7.15     Preservation of Rights. To maintain and preserve all
rights, privileges, and franchises the Borrower and each subsidiary now has,
except where the failure to maintain the foregoing will not have a material
adverse effect on the Borrower and its Subsidiaries taken as a whole.

                  7.16     Maintenance of Properties. To make any repairs,
renewals, or replacements to keep the Borrower's properties and the properties
of its Subsidiaries in good working condition, except where the failure to do so
will not have a material adverse effect on the Borrower and its Subsidiaries
taken as a whole.

                  7.17     Cooperation. To take any action reasonably requested
by the Bank to carry out the intent of this Agreement.

                  7.18     Insurance.

                           (a)      General Business Insurance. To maintain
insurance satisfactory to the Bank as to amount, nature and carrier covering
property damage (including loss of use and occupancy) to any of the Borrower's
and its Subsidiaries properties, public liability insurance including coverage
for contractual liability, product liability and workers' compensation, and any
other insurance which is usual for the Borrower's and its Subsidiaries business.

                           (b)      Marine and War Insurance. To maintain a
marine and war insurance policy for any shipment where the seller is not
insuring the goods in transit. The insurance must be issued by an insurance
company acceptable to the Bank and must include a lender's loss payable
endorsement in favor of the Bank in form acceptable to the Bank.

                           (c)      Evidence of Insurance. Upon the request of
the Bank, to deliver to the Bank a copy of each insurance policy, or, if
permitted by the Bank, a certificate of insurance listing all insurance in
force.

                  7.19     Additional Negative Covenants. The Borrower shall not
and shall not permit any Subsidiary to, without the Bank's written consent:

                           (a)      engage in any business activities
substantially different from the present business of the Borrower and its
Subsidiaries.

                           (b)      liquidate or dissolve the business of the
Borrower or any Subsidiary, except with or into Borrower or its wholly-owned
Subsidiaries.

                           (c)      enter into any consolidation, merger, or
other combination, or become a partner in a partnership, a member of a joint
venture, or a member of a limited liability company involving a capital
contribution in excess One Million Dollars ($1,000,000) in any fiscal year,
except any Subsidiary of the Borrower may be merged with or into the Borrower or
any Subsidiary of Borrower and in connection with any acquisitions permitted
under Section 7.20.

                                       19


                           (d)      sell, assign, lease, transfer or otherwise
dispose of any assets for less than fair market value, or enter into any
agreement to do so, except as permitted in (f) below. For the purpose of this
Paragraph, "fair market value" shall mean the fair market value of such assets
as reasonably determined by the Board of Directors of Borrower, provided that at
the time of such disposition no such Event of Default shall exist or shall
result from such disposition.

                           (e)      sell, assign, lease, transfer or otherwise
dispose of all or a substantial part of the business or the assets of the
Borrower and its Subsidiaries, taken as a whole.

                           (f)      except as permitted by (d) above, sell,
assign, lease, transfer or otherwise dispose of any assets, or enter into any
agreement to do so, except:

                                    (i)      dispositions of inventory, or used,
worn-out or surplus equipment, all in the ordinary course of business;

                                    (ii)     the sale of equipment to the extent
that such equipment is exchanged for credit against the purchase price of
similar replacement equipment, or the proceeds of such sale are reasonably
promptly applied to the purchase price of such replacement equipment;

                           (g)      enter into any sale and leaseback agreement
covering any of its fixed assets; and

                           (h)      voluntarily suspend all or a substantial
part of its business operations.

                  7.20     Acquisitions.

                           (a)      The Borrower shall not, and shall not permit
any Subsidiary to, without the Bank's written consent, acquire or purchase a
business or all or substantially all of its assets for a consideration including
assumption of direct or contingent debt, and the up-front purchase price
(including stock and cash portions), in excess of Twenty Million Dollars
($20,000,000) in any fiscal year, provided that the revenues of the entity being
acquired do not exceed One Hundred Million Dollars ($100,000,000.00) in any
fiscal year.

                           (b)      Notwithstanding anything to the contrary set
forth herein, Borrower shall not, and shall not use the proceeds of any credit
facilities under this Agreement, to purchase or otherwise acquire any shares of
any corporation or association or any interest in any other business entity (i)
if such entity is not engaged in a business similar to the businesses of the
Borrower and its Subsidiaries and (ii) if such purchase or acquisition is
opposed by such entity's board of directors or other governing body or by a
shareholder or shareholders controlling a significant portion of the voting
shares of such entity or to make such purchase or acquisition with knowledge of
facts or circumstances that such purchase or acquisition is likely to be hostile
or unfriendly.

                                       20


                           (c)      Prior to the consummation of any acquisition
otherwise permitted under this Section 7.20, Bank shall receive the following,
in form and substance satisfactory to Bank: (aa) a certificate of the Borrower
stating (i) that no Event of Default has occurred and is continuing, and (ii)
information and computations (in sufficient detail) to establish compliance by
the Borrower with all financial covenants after giving effect to such
acquisition.

                  7.21     Investments. Not to have any existing, or make any
new, investments in any individual or entity, or make any capital contributions
or other transfers of assets to any individual or entity, except for:

                           (a)      Existing investments disclosed to the Bank
in writing.

                           (b)      Investments in the Borrower's current
subsidiaries.

                           (c)      Investments in any of the following:

                                    (i)      certificates of deposit;

                                    (ii)     U.S. treasury bills and other
obligations of the federal government;

                                    (iii)    readily marketable securities
(including commercial paper, but excluding restructured stock and stock subject
to the provisions of Rule 144 of the Securities and Exchange Commission).

                           (d)      Investments that do not exceed an aggregate
amount of Ten Million Dollars ($10,000,000.00) outstanding at any one time.

                  7.22     ERISA Plans. Promptly during each year, to pay and
cause any subsidiaries to pay contributions adequate to meet at least the
minimum funding standards under ERISA with respect to each and every Plan; file
each annual report required to be filed pursuant to ERISA in connection with
each Plan for each year; and notify the Bank within ten (10) days of the
occurrence of any Reportable Event that might constitute grounds for termination
of any capital Plan by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time. Capitalized terms in this paragraph shall
have the meanings defined within ERISA.

                  7.23     Additional Guarantors. Promptly notify the Bank at
the time that any entity becomes a subsidiary, and promptly thereafter (and in
any event within 30 days), cause such entity to (a) become a guarantor by
executing and delivering to the Bank a counterpart of the Guaranty and (b)
deliver to the Bank evidence of the legality, validity, binding effect and
enforceability of the documentation referred to in clause (a), all in form and
content acceptable to the Bank.

         8.       HAZARDOUS SUBSTANCES

                                       21


                  8.1      Indemnity Regarding Hazardous Substances. The
Borrower will indemnify and hold harmless the Bank from any loss or liability
the Bank incurs in connection with or as a result of this Agreement, which
directly or indirectly arises out of the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence of a hazardous substance. This indemnity will apply whether the
hazardous substance is on, under or about the Borrower's property or operations
or property leased to the Borrower. The indemnity includes but is not limited to
attorneys' fees (including the reasonable estimate of the allocated cost of
in-house counsel and staff). The indemnity extends to the Bank, its parent,
subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns.

                  8.2      Definition of Hazardous Substances. "Hazardous
substances" means any substance, material or waste that is or becomes designated
or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar
designation or regulation under any federal, state or local law (whether under
common law, statute, regulation or otherwise) or judicial or administrative
interpretation of such, including without limitation petroleum or natural gas.
This indemnity will survive repayment of the Borrower's obligations to the Bank.

         9.       DEFAULT

                  If any of the following events (each an "Event of Default")
occurs, the Bank may do one or more of the following: declare the Borrower in
default, stop making any additional credit available to the Borrower, and
require the Borrower to repay its entire debt immediately and without prior
notice. If an Event of Default occurs under the paragraph entitled "Bankruptcy,"
below, with respect to the Borrower, then the entire debt outstanding under this
Agreement will automatically be due immediately.

                  9.1      Failure to Pay. The Borrower fails to make any
principal payment when due under this Agreement or fails to make a payment of
interest, any fee or other sum under this Agreement within five (5) days of the
date when due.

                  9.2      False Information. The Borrower or any guarantor has
given the Bank information or representations that are false or misleading in
any material respect.

                  9.3      Bankruptcy. The Borrower, any guarantor or any
Subsidiary files a bankruptcy petition, a bankruptcy petition is filed against
the Borrower or any guarantor or any Subsidiary or the Borrower or any guarantor
or any Subsidiary makes a general assignment for the benefit of creditors. The
default will be deemed cured if any bankruptcy petition filed against the
Borrower or any guarantor or any Subsidiary is dismissed within a period of 30
days after the filing; provided, however, that the Bank will not be obligated to
extend any additional credit to the Borrower during that period.

                  9.4      Receivers. A receiver or similar official is
appointed for a substantial portion of the Borrower's or any guarantor's or any
Subsidiary's business, or the business is terminated, or any guarantor is
liquidated or dissolved.

                                       22


                  9.5      Judgments. Any judgments or arbitration awards are
entered against the Borrower (or any guarantor), or the Borrower (or any
guarantor) enters into any settlement agreements with respect to any litigation
or arbitration, in an aggregate amount of One Million Dollars ($1,000,000) or
more in excess of any insurance coverage, and shall remain undischarged,
unvacated, unbonded or unstayed for a period of sixty (60) days.

                  9.6      Government Action. Any government authority takes
action that the Bank believes materially adversely affects the Borrower's (or
any guarantor's) financial condition or ability to repay.

                  9.7      Material Adverse Change. A material adverse change
occurs, or is reasonably likely to occur, in the Borrower's (or any guarantor's)
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.

                  9.8      Cross-default. Any default occurs and is continuing
under any agreement in connection with any credit the Borrower or any guarantor
or any Subsidiary has obtained from anyone else or which the Borrower or any
guarantor or any of the Borrower's Subsidiaries has guaranteed, in the aggregate
amount of One Million Dollars ($1,000,000) or more, if the effect of such
default is to cause, or to permit the holder or holders of that indebtedness to
cause such indebtedness to become or be declared due and payable prior to its
stated maturity (upon the giving of notice, lapse of time, or both, or
otherwise).

                  9.9      Default under Related Documents. Any default occurs
under any guaranty, or other document required by or delivered in connection
with this Agreement or any such document is no longer in effect, or any
guarantor purports to revoke or disavow the guaranty.

                  9.10     Other Bank Agreements. The Borrower or any guarantor
or any Subsidiary fails to meet the conditions of, or fails to perform any
obligation under any other agreement the Borrower or any guarantor or any of the
Borrower's Subsidiaries has with the Bank or any affiliate of the Bank, and such
default shall not have been remedied or waived within 30 days after receipt by
the Borrower of written notice from the Bank of such default.

                  9.11     ERISA Plans. Any one or more of the following events
occurs with respect to a Plan of the Borrower subject to Title IV of ERISA,
provided such event or events could reasonably be expected, in the judgment of
the Bank, to subject the Borrower to any tax, penalty or liability (or any
combination of the foregoing) which, in the aggregate, could have a material
adverse effect on the financial condition of the Borrower:

                           (a)      A reportable event shall occur under Section
4043(c) of ERISA with respect to a Plan.

                           (b)      Any Plan termination (or commencement of
proceedings to terminate a Plan) or the full or partial withdrawal from a Plan
by the Borrower or any ERISA Affiliate.

                  9.12     Other Breach Under Agreement.

                                       23


                           (a)      Failure of Borrower to perform or comply
with any term or condition contained in Sections 7.2, 7.3, 7.4, 7.5, 7.6, 7.7,
7.8, 7.9, 7.10, 7.19 or 7.20 of this Agreement; or

                           (b)      Borrower shall default on the performance of
or compliance with any term contained in this Agreement, other than any such
term referred to in any other subsection of this Section 9, and such default
shall not have been remedied or waived within 30 days after receipt by Borrower
of written notice from the Bank of such default; provided, however, that the
Bank will not be obligated to extend any additional credit to the Borrower
during that period.

                  9.13     Change of Control. There occurs any Change of Control
with respect to the Borrower. For the purposes of this Section 9.13, "Change of
Control" means, with respect to the Borrower, an event or series of events by
which:

                           (a)      any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding any employee benefit plan of such person or its subsidiaries, and any
person or entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have "beneficial ownership" of all securities
that such person or group has the right to acquire (such right, an "option
right"), whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 30% or more of the equity securities of the
Borrower entitled to vote for members of the board of directors or equivalent
governing body of the Borrower on a fully diluted basis (and, taking into
account all such securities that such person or group has the right to acquire
pursuant to any option right); or

                           (b)      during any period of 12 consecutive months,
other than by reason of removal and/or replacement of any member(s) upon death,
retirement, or disability, a majority of the members of the board of directors
or other equivalent governing body of the Borrower cease to be composed of
individuals: (i) who were members of that board or equivalent governing body on
the first day of such period, (ii) whose election or nomination to that board or
equivalent governing body was approved by individuals referred to in clause (i)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body or (iii) whose election or
nomination to that board or other equivalent governing body was approved by
individuals referred to in clauses (i) and (ii) above constituting at the time
of such election or nomination at least a majority of that board or equivalent
governing body (excluding, in the case of both clause (ii) and clause (iii), any
individual whose initial nomination for, or assumption of office as, a member of
that board or equivalent governing body occurs as a result of an actual or
threatened solicitation of proxies or consents for the election or removal of
one or more directors by any person or group other than a solicitation for the
election of one or more directors by or on behalf of the board of directors).

         10.      ENFORCING THIS AGREEMENT; MISCELLANEOUS

                                       24


                  10.1     GAAP. Except as otherwise stated in this Agreement,
all financial information provided to the Bank and all financial covenants will
be made under generally accepted accounting principles, consistently applied.

                  10.2     California Law. This Agreement is governed by
California law.

                  10.3     Successors and Assigns. This Agreement is binding on
the Borrower's and the Bank's successors and assignees. The Borrower agrees that
it may not assign this Agreement without the Bank's prior consent. The Bank may
sell participations in or assign this loan, and may exchange financial
information about the Borrower with actual or potential participants or
assignees; provided that such actual or potential participants or assignees
shall agree to treat all financial information exchanged as confidential. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.

                  10.4     Arbitration and Waiver of Jury Trial.

                           (a)      This paragraph concerns the resolution of
any controversies or claims between the Borrower and the Bank, whether arising
in contract, tort or by statute, including but not limited to controversies or
claims that arise out of or relate to: (i) this Agreement (including any
renewals, extensions or modifications); or (ii) any document related to this
Agreement (collectively a "Claim").

                           (b)      At the request of the Borrower or the Bank,
any Claim shall be resolved by binding arbitration in accordance with the
Federal Arbitration Act (Title 9, U. S. Code) (the "Act"). The Act will apply
even though this Agreement provides that it is governed by the law of a
specified state.

                           (c)      Arbitration proceedings will be determined
in accordance with the Act, the applicable rules and procedures for the
arbitration of disputes of JAMS or any successor thereof ("JAMS"), and the terms
of this paragraph. In the event of any inconsistency, the terms of this
paragraph shall control.

                           (d)      The arbitration shall be administered by
JAMS and conducted in any U. S. state where real or tangible personal property
collateral for this credit is located or if there is no such collateral, in
California. All Claims shall be determined by one arbitrator; however, if Claims
exceed Five Million Dollars ($5,000,000), upon the request of any party, the
Claims shall be decided by three arbitrators. All arbitration hearings shall
commence within ninety (90) days of the demand for arbitration and close within
ninety (90) days of commencement and the award of the arbitrator(s) shall be
issued within thirty (30) days of the close of the hearing. However, the
arbitrator(s), upon a showing of good cause, may extend the commencement of the
hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide
a concise written statement of reasons for the award. The arbitration award may
be submitted to any court having jurisdiction to be confirmed and enforced.

                           (e)      The arbitrator(s) will have the authority to
decide whether any Claim is barred by the statute of limitations and, if so, to
dismiss the arbitration on that basis. For purposes of the application of the
statute of limitations, the service on JAMS under

                                       25


applicable JAMS rules of a notice of Claim is the equivalent of the filing of a
lawsuit. Any dispute concerning this arbitration provision or whether a Claim is
arbitrable shall be determined by the arbitrator(s). The arbitrator(s) shall
have the power to award legal fees pursuant to the terms of this Agreement.

                           (f)      This paragraph does not limit the right of
the Borrower or the Bank to: (i) exercise self-help remedies, such as but not
limited to, setoff; (ii) initiate judicial or nonjudicial foreclosure against
any real or personal property collateral; (iii) exercise any judicial or power
of sale rights, or (iv) act in a court of law to obtain an interim remedy, such
as but not limited to, injunctive relief, writ of possession or appointment of a
receiver, or additional or supplementary remedies.

                           (g)      The procedure described above will not apply
if the Claim, at the time of the proposed submission to arbitration, arises from
or relates to an obligation to the Bank secured by real property. In this case,
both the Borrower and the Bank must consent to submission of the Claim to
arbitration. If both parties do not consent to arbitration, the Claim will be
resolved as follows: The Borrower and the Bank will designate a referee (or a
panel of referees) selected under the auspices of JAMS in the same manner as
arbitrators are selected in JAMS administered proceedings. The designated
referee(s) will be appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections. The referee (or the
presiding referee of the panel) will be an active attorney or a retired judge.
The award that results from the decision of the referee(s) will be entered as a
judgment in the court that appointed the referee, in accordance with the
provisions of California Code of Civil Procedure Sections 644 and 645.

                           (h)      The filing of a court action is not intended
to constitute a waiver of the right of the Borrower or the Bank, including the
suing party, thereafter to require submittal of the Claim to arbitration.

                                    (i)      By agreeing to binding arbitration,
the parties irrevocably and voluntarily waive any right they may have to a trial
by jury in respect of any Claim. Furthermore, without intending in any way to
limit this agreement to arbitrate, to the extent any Claim is not arbitrated,
the parties irrevocably and voluntarily waive any right they may have to a trial
by jury in respect of such Claim. This provision is a material inducement for
the parties entering into this Agreement.

                  10.5     Severability; Waivers. If any part of this Agreement
is not enforceable, the rest of the Agreement may be enforced. The Bank retains
all rights, even if it makes a loan after default. If the Bank waives a default,
it may enforce a later default. Any consent or waiver under this Agreement must
be in writing.

                  10.6     Administration Costs. The Borrower shall pay the Bank
for all reasonable costs incurred by the Bank in connection with administering
this Agreement, promptly upon receipt of written notification of such costs from
the Bank.

                                       26


                  10.7     Attorneys' Fees. The Borrower shall reimburse the
Bank for any reasonable costs and attorneys' fees incurred by the Bank in
connection with the enforcement or preservation of any rights or remedies under
this Agreement and any other documents executed in connection with this
Agreement, and in connection with any amendment, waiver, "workout" or
restructuring under this Agreement. In the event of a lawsuit or arbitration
proceeding, the prevailing party is entitled to recover costs and reasonable
attorneys' fees incurred in connection with the lawsuit or arbitration
proceeding, as determined by the court or arbitrator. In the event that any case
is commenced by or against the Borrower under the Bankruptcy Code (Title 11,
United States Code) or any similar or successor statute, the Bank is entitled to
recover costs and reasonable attorneys' fees incurred by the Bank related to the
preservation, protection, or enforcement of any rights of the Bank in such a
case. As used in this paragraph, "attorneys' fees" includes the allocated costs
of the Bank's in-house counsel.

                  10.8     One Agreement. This Agreement and any related
security or other agreements required by this Agreement, collectively:

                           (a)      represent the sum of the understandings and
agreements between the Bank and the Borrower concerning this credit;

                           (b)      replace any prior oral or written agreements
between the Bank and the Borrower concerning this credit; and

                           (c)      are intended by the Bank and the Borrower as
the final, complete and exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.

                  10.9     Indemnification. The Borrower will indemnify and hold
the Bank harmless from any loss, liability, damages, judgments, and costs of any
kind relating to or arising directly or indirectly out of (a) this Agreement or
any document required hereunder, (b) any credit extended or committed by the
Bank to the Borrower hereunder, and (c) any litigation or proceeding related to
or arising out of this Agreement, any such document, or any such credit;
provided that this Section 10.9 shall not apply to loss, liability, damages,
judgments and costs of any kind resulting from the gross negligence or willful
misconduct of the Bank. This indemnity includes but is not limited to attorneys'
fees (including the allocated cost of in-house counsel). This indemnity extends
to the Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys, and assigns. This indemnity will
survive repayment of the Borrower's obligations to the Bank. All sums due to the
Bank hereunder shall be obligations of the Borrower, due and payable immediately
without demand.

                  10.10    Confidentiality. The Bank shall hold all nonpublic
information obtained pursuant to the requirements of this Agreement from the
Borrower in accordance with such Bank's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
lending practices, and shall use such nonpublic information only in connection
with the negotiation, execution, administration, enforcement, assignment and

                                       27


participation of the transactions contemplated hereunder and the matters
contemplated hereby and by the other loan documents or in connection with other
business now or hereafter existing or contemplated with the Borrower or any of
its Subsidiaries, provided that the Bank in any event may make disclosure (a) if
such information was or becomes generally available to the public other than by
disclosure by the Bank, (b) was or becomes available on from a non-confidential
basis from a source other than the Borrower, (c) to any of its legal or
financial advisors or as reasonably required by a bona fide offeree, transferee
or participant in connection with any contemplated transfer or participation or
any recipient reasonably acceptable to the Borrower or as required or requested
by an governmental or regulatory agency or representative thereof or pursuant to
legal process or other requirement of law or order or as reasonably required in
any litigation to which the Bank is a party, (d) to the extent reasonably
required in connection with the enforcement of this Agreement or any other loan
document and (e) to their affiliates, so long as any such legal or financial
advisor, offeree, transferee or participant or other approved recipient shall be
made aware of the provisions of this Section 10.10 and shall undertake to comply
(and undertake to each of any of its offerees, transferees or participants or
other approved recipient to comply) with this Section 10.10.

                  10.11    Notices. Unless otherwise provided in this Agreement
or in another agreement between the Bank and the Borrower, all notices required
under this Agreement shall be personally delivered or sent by first class mail,
postage prepaid, or by overnight courier, to the addresses on the signature page
of this Agreement, or sent by facsimile to the fax numbers listed on the
signature page, or to such other addresses as the Bank and the Borrower may
specify from time to time in writing. Notices and other communications sent by
(a) first class mail shall be deemed delivered on the earlier of actual receipt
or on the fourth business day after deposit in the U.S. mail, postage prepaid,
(b) overnight courier shall be deemed delivered on the next business day, and
(c) telecopy shall be deemed delivered when transmitted.

                  10.12    Headings. Article and paragraph headings are for
reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement.

                  10.13    Counterparts. This Agreement may be executed in as
many counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.

                  10.14    Prior Agreement Superseded. This Agreement supersedes
the Business Loan Agreement entered into as of April 3, 2001, as amended,
between the Bank and the Borrower, and any credit outstanding thereunder shall
be deemed to be outstanding under this Agreement.

                                       28


This Agreement is executed as of the date stated at the top of the first page.

Bank of America, N.A.                     Pacific Sunwear of California, Inc.

By_______________________                 By_________________________
Typed Name_______________                 Typed Name_________________
Title____________________                 Title__________________________

                                          By_________________________
                                          Typed Name_________________
                                          Title__________________________

Address where notices to                  Address where notices to
the Bank are to be sent:                  the Borrower are to be sent:

675 Anton Boulevard, 2nd Floor            3450 East Miraloma Avenue
Costa Mesa, California  92626             Anaheim, California  92806

                                       29

EX-23.1

EXHIBIT 23.1

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in Registration Statement Nos. 333-107555, 333-101569, 333-86595, 333-65721, 333-40697, 333-34677, 33-65412, 33-97512, 33-65414, and 33-88114, of Pacific Sunwear of California, Inc. on Form S-8 of our report dated March 19, 2004 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to a change in accounting for goodwill and other intangible assets during the year ended February 1, 2003), appearing in this Annual Report on Form 10-K of Pacific Sunwear of California, Inc. for the year ended January 31, 2004.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Costa Mesa, California
March 25, 2004

EX-31

EXHIBIT 31

CERTIFICATIONS

I, Greg H. Weaver, certify that:

1. I have reviewed this annual report on Form 10-K of Pacific Sunwear of California, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2004

/s/ Greg H. Weaver

Greg H. Weaver
Chairman of the Board and Chief Executive Officer

I, Carl W. Womack, certify that:

1. I have reviewed this annual report on Form 10-K of Pacific Sunwear of California, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2004

/s/ Carl W. Womack

Carl W. Womack
Senior Vice President, Chief Financial Officer and Secretary

EX-32

EXHIBIT 32

WRITTEN STATEMENT
PURSUANT TO
18 U.S.C. SECTION 1350

The undersigned, Greg H. Weaver, the Chairman of the Board and Chief Executive Officer of Pacific Sunwear of California, Inc. (the “Company”), and Carl W. Womack, the Chief Executive Officer of Pacific Sunwear of California, Inc., pursuant to 18 U.S.C. Section 1350, hereby certify that:

(i)	the Annual Report of the Company, on Form 10-K for the period ended January 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of section 13(a) and 15(d) of the Securities Exchange Act of 1934; and
(ii)	the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 23, 2004	/s/ Greg H. Weaver
	Greg H. Weaver
	Chairman of the Board and Chief Executive Officer Pacific Sunwear of California, Inc.

Dated: March 23, 2004	/s/ Carl W. Womack
	Carl W. Womack
	Senior Vice President, Chief Financial Officer and Secretary Pacific Sunwear of California, Inc.

This certification accompanies this Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Pacific Sunwear of California, Inc. and will be retained by Pacific Sunwear of California, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.