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SECURITIES AND EXCHANGE COMMISSION
Washington D.C 20549

FORM 10-Q



|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the quarterly period ended May 4, 2002

OR



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

Commission file number 0-21296

PACIFIC SUNWEAR OF CALIFORNIA, INC.

|                                    |  |                                               
|----------------------------------- |  | ----------------------------------------------
|CALIFORNIA
(State of Incorporation) |  | 95-3759463
(I.R.S Employer Identification No.)

|                                                                                       |  |                 
|-------------------------------------------------------------------------------------- |  | ----------------
|3450 East Miraloma Avenue
Anaheim, California
(Address of principal executive offices) |  | 92806
(Zip code)

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

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   [   ]

The number of shares outstanding of the registrants Common Stock, par
value $.01 per share, at May 15, 2002, was 32,827,148.





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TABLE OF CONTENTS



|                          |                                                                                                    |                                                            |  |  |  |  |  | 
|------------------------- | -------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|                          |                                                                                                    | CONSOLIDATED BALANCE SHEETS                               
|                          |                                                                                                    | CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|                          |                                                                                                    | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                          |                                                                                                    | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|                          | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONSOLIDATED OPERATIONS
|                          | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                        
|PART II-OTHER INFORMATION
|                          | Item 1  Legal Proceedings                                                                        
|                          | Item 2  Changes in Securities and Use of Proceeds                                                
|                          | Item 3  Defaults Upon Senior Securities                                                          
|                          | Item 4  Submission of Matters to a Vote of Security Holders                                      
|                          | Item 5  Other Information                                                                        
|                          | Item 6  Exhibits and Reports on Form 8-K                                                         
|SIGNATURES               
|EXHIBIT INDEX            
|EXHIBIT 10.1             



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##### Table of Contents



PACIFIC SUNWEAR OF CALIFORNIA, INC.

FORM 10-Q
For the Quarter Ended May 4, 2002

Index

|         |  |                                                                                       |  |                |                                                                                                                                 |  |      |     | 
|-------- |  | ------------------------------------------------------------------------------------- |  | -------------- | ------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|         |  |                                                                                       |  |                |                                                                                                                                 |  | Page
|         |  |                                                                                       |  |                |                                                                                                                                 |  |     
|PART I.  |  | FINANCIAL INFORMATION                                                                 |  |                |                                                                                                                                 | 
|Item 1.  |  | Consolidated Financial Statements:                                                    |  |                |                                                                                                                                 | 
|         |  |                                                                                       |  |                | Consolidated Balance Sheets as of May 4, 2002 (unaudited)
and February 2, 2002                                                  |  |      | 3   | 
|         |  |                                                                                       |  |                | Consolidated Statements of Income and Comprehensive Income
(unaudited) for the thirteen weeks ended May 4, 2002 and May 6, 2001 |  |      | 4   | 
|         |  |                                                                                       |  |                | Consolidated Statements of Cash Flows (unaudited) for
the thirteen weeks ended May 4, 2002 and May 6, 2001                      |  |      | 5   | 
|         |  |                                                                                       |  |                | Notes to Consolidated Financial Statements                                                                                      |  |      | 6-8 | 
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  |                | 9-15                                                                                                                            | 
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                | 15                                                                                                                              | 
|PART II. |  | OTHER INFORMATION                                                                     |  |                |                                                                                                                                 | 
|Item 1.  |  | Legal Proceedings                                                                     |  |                | 16                                                                                                                              | 
|Item 2.  |  | Changes in Securities and Use of Proceeds                                             |  |                | 16                                                                                                                              | 
|Item 3.  |  | Defaults Upon Senior Securities                                                       |  |                | 16                                                                                                                              | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  |                | 16                                                                                                                              | 
|Item 5.  |  | Other Information                                                                     |  |                | 16                                                                                                                              | 
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  |                | 16                                                                                                                              | 
|         |  |                                                                                       |  | SIGNATURE PAGE |                                                                                                                                 |  | 17   |    

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PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

ASSETS

|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |             |         |         |         | 
|---------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | -------------------------- | ---------------------------- | ------------------------------------------ | ------- | ----------- | ------- | ----------- | ------- | ------- | ------- | 
|                                                                                                                                   |                                                                            |                            |                              |                                            |         | May 4,      |         |             |         |        
|                                                                                                                                   |                                                                            |                            |                              |                                            |         | 2002        |         | February 2,
|                                                                                                                                   |                                                                            |                            |                              |                                            |         | (unaudited) |         | 2002       
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|CURRENT ASSETS:                                                                                                                    |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   | Cash and cash equivalents (Note 2)                                         |                            | $                            | 2,028                                      |         |             | $       | 23,136      |        
|                                                                                                                                   | Accounts receivable                                                        |                            |                              | 3,363                                      |         |             |         | 3,044       |        
|                                                                                                                                   | Merchandise inventories                                                    |                            |                              | 111,427                                    |         |             |         | 102,512     |        
|                                                                                                                                   | Prepaid expenses, includes $8,662 and $8,410 of prepaid rent, respectively |                            |                              | 13,051                                     |         |             |         | 11,856      |        
|                                                                                                                                   | Deferred taxes                                                             |                            |                              | 4,282                                      |         |             |         | 4,282       |        
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   |                                                                            |                            | Total current assets         |                                            |         | 134,151     |         |             |         | 144,830 |        
|PROPERTY AND EQUIPMENT:                                                                                                            |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   | Land                                                                       |                            |                              | 12,156                                     |         |             |         | 12,156      |        
|                                                                                                                                   | Buildings and building improvements                                        |                            |                              | 26,475                                     |         |             |         | 26,475      |        
|                                                                                                                                   | Leasehold improvements                                                     |                            |                              | 106,318                                    |         |             |         | 102,075     |        
|                                                                                                                                   | Furniture, fixtures and equipment                                          |                            |                              | 130,526                                    |         |             |         | 125,706     |        
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   |                                                                            |                            | Total property and equipment |                                            |         | 275,475     |         |             |         | 266,412 |        
|                                                                                                                                   | Less accumulated depreciation and amortization                             |                            |                              | (78,085                                    | )       |             |         | (71,412     | )      
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   |                                                                            |                            | Net property and equipment   |                                            |         | 197,390     |         |             |         | 195,000 |        
|OTHER ASSETS:                                                                                                                      |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   | Goodwill, net of accumulated amortization of $1,608 (Note 3)               |                            |                              | 6,492                                      |         |             |         | 6,492       |        
|                                                                                                                                   | Deferred compensation and other assets (Note 4)                            |                            |                              | 8,035                                      |         |             |         | 7,807       |        
|                                                                                                                                   | Deferred taxes  noncurrent                                                |                            |                              | 1,311                                      |         |             |         | 1,311       |        
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   |                                                                            |                            | Total other assets           |                                            |         | 15,838      |         |             |         | 15,610  |        
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   |                                                                            |                            |                              | Total assets                               |         | $           | 347,379 |             |         | $       | 355,440 | 
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                              
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|                                                                                                                                  
|CURRENT LIABILITIES:                                                                                                               |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   | Line of credit (Note 5)                                                    |                            | $                            |                                           |         |             | $       |            |        
|                                                                                                                                   | Current portion of long-term debt (Note 5)                                 |                            |                              | 841                                        |         |             |         | 425         |        
|                                                                                                                                   | Current portion of capital lease obligations                               |                            |                              | 834                                        |         |             |         | 834         |        
|                                                                                                                                   | Accounts payable                                                           |                            |                              | 29,405                                     |         |             |         | 37,493      |        
|                                                                                                                                   | Accrued liabilities (Notes 6 and 9)                                        |                            |                              | 20,728                                     |         |             |         | 17,743      |        
|                                                                                                                                   | Income taxes payable                                                       |                            |                              | 1,262                                      |         |             |         | 9,436       |        
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   |                                                                            |                            | Total current liabilities    |                                            |         | 53,070      |         |             |         | 65,931  |        
|Long-term debt (Note 5)                                                                                                            |                                                                            |                            | 24,178                       |                                            |         |             | 24,597  |            
|Long-term capital lease obligations                                                                                                |                                                                            |                            | 485                          |                                            |         |             | 731     |            
|Deferred compensation                                                                                                              |                                                                            |                            | 7,524                        |                                            |         |             | 7,439   |            
|Deferred rent                                                                                                                      |                                                                            |                            | 9,207                        |                                            |         |             | 8,759   |            
|Other long-term liabilities                                                                                                        |                                                                            |                            | 28                           |                                            |         |             | 28      |            
|SHAREHOLDERS EQUITY:                                                                                                              |                                                                            |                            |                              |                                            |         |             |         |            
|Preferred stock, par value $.01; authorized, 5,000,000; none issued and outstanding                                                |                                                                            |                            |                             |                                            |         |             |        |            
|Common stock, par value $.01; authorized 75,937,500 shares; issued and outstanding,
32,827,106 and 32,770,502 shares, respectively |                                                                            |                            | 328                          |                                            |         |             | 328     |            
|Additional paid-in capital                                                                                                         |                                                                            |                            | 90,079                       |                                            |         |             | 88,416  |            
|Retained earnings                                                                                                                  |                                                                            |                            | 162,480                      |                                            |         |             | 159,211 |            
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   |                                                                            | Total shareholders equity |                              |                                            | 252,887 |             |         |             | 247,955 |        
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            
|                                                                                                                                   |                                                                            |                            |                              | Total liabilities and shareholders equity |         | $           | 347,379 |             |         | $       | 355,440 | 
|                                                                                                                                   |                                                                            |                            |                              |                                            |         |             |         |            

See accompanying notes

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

|                                                                       |  |                              |            |             |  |   |            |  
|---------------------------------------------------------------------- |  | ---------------------------- | ---------- | ----------- |  | - | ---------- | -
|                                                                       |  | For the Thirteen Weeks Ended
|                                                                       |  |                             
|                                                                       |  | May 4, 2002                  |            | May 6, 2001
|                                                                       |  |                              |            |            
|Net sales                                                              |  | $                            | 161,710    |             |  | $ | 137,698    |  
|Cost of goods sold, including buying,
distribution and occupancy costs |  |                              | 112,544    |             |  |   | 95,742     |  
|                                                                       |  |                              |            |             |  |   |            |  
|Gross margin                                                           |  |                              | 49,166     |             |  |   | 41,956     |  
|Selling, general and administrative expenses                           |  |                              | 43,713     |             |  |   | 40,602     |  
|                                                                       |  |                              |            |             |  |   |            |  
|Operating income                                                       |  |                              | 5,453      |             |  |   | 1,354      |  
|Interest expense/(income), net                                         |  |                              | 147        |             |  |   | (235       | )
|                                                                       |  |                              |            |             |  |   |            |  
|Income before income tax expense                                       |  |                              | 5,306      |             |  |   | 1,589      |  
|Income tax expense (Note 7)                                            |  |                              | 2,037      |             |  |   | 610        |  
|                                                                       |  |                              |            |             |  |   |            |  
|Net income                                                             |  | $                            | 3,269      |             |  | $ | 979        |  
|                                                                       |  |                              |            |             |  |   |            |  
|Comprehensive income (Note 1)                                          |  | $                            | 3,269      |             |  | $ | 979        |  
|                                                                       |  |                              |            |             |  |   |            |  
|Net income per share, basic (Notes 3, 8 and 9)                         |  | $                            | 0.10       |             |  | $ | 0.03       |  
|                                                                       |  |                              |            |             |  |   |            |  
|Net income per share, diluted (Notes 3, 8 and 9)                       |  | $                            | 0.10       |             |  | $ | 0.03       |  
|                                                                       |  |                              |            |             |  |   |            |  
|Weighted average shares outstanding, basic (Note 8)                    |  |                              | 32,798,091 |             |  |   | 32,518,814 |  
|                                                                       |  |                              |            |             |  |   |            |  
|Weighted average shares outstanding, diluted (Note 8)                  |  |                              | 33,411,627 |             |  |   | 33,197,724 |  
|                                                                       |  |                              |            |             |  |   |            |  

See accompanying notes

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PACIFIC SUNWEAR OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

|                                                                                  |  |                                                     |                                        |                                           |         |                              |         |             |         |        |         |  
|--------------------------------------------------------------------------------- |  | --------------------------------------------------- | -------------------------------------- | ----------------------------------------- | ------- | ---------------------------- | ------- | ----------- | ------- | ------ | ------- | -
|                                                                                  |  |                                                     |                                        |                                           |         | For the Thirteen Weeks Ended
|                                                                                  |  |                                                     |                                        |                                           |         |                             
|                                                                                  |  |                                                     |                                        |                                           |         | May 4, 2002                  |         | May 6, 2001
|                                                                                  |  |                                                     |                                        |                                           |         |                              |         |            
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                                     |                                        |                                           |         |                              |         |            
|Net income                                                                        |  | $                                                   | 3,269                                  |                                           |         | $                            | 979     |            
|Adjustments to reconcile net income to net cash provided by
operating activities: |  |                                                     |                                        |                                           |         |                              |         |            
|                                                                                  |  | Depreciation and amortization                       |                                        |                                           | 7,823   |                              |         |             | 6,128   |       
|                                                                                  |  | Loss on disposal of equipment (Note 9)              |                                        |                                           |        |                              |         |             | 4,179   |       
|                                                                                  |  | Change in operating assets and liabilities:         |                                        |                                           |         |                              |         |             |         |       
|                                                                                  |  |                                                     | Accounts receivable                    |                                           |         | (319                         | )       |             |         | (2,418 | )      
|                                                                                  |  |                                                     | Merchandise inventories                |                                           |         | (8,915                       | )       |             |         | (7,334 | )      
|                                                                                  |  |                                                     | Prepaid expenses                       |                                           |         | (1,195                       | )       |             |         | 918    |        
|                                                                                  |  |                                                     | Deferred compensation and other assets |                                           |         | 136                          |         |             |         | 191    |        
|                                                                                  |  |                                                     | Accounts payable                       |                                           |         | (8,088                       | )       |             |         | (7,947 | )      
|                                                                                  |  |                                                     | Accrued liabilities                    |                                           |         | 2,985                        |         |             |         | 2,960  |        
|                                                                                  |  |                                                     | Income taxes and deferred taxes        |                                           |         | (7,575                       | )       |             |         | (343   | )      
|                                                                                  |  |                                                     | Deferred rent                          |                                           |         | 448                          |         |             |         | 279    |        
|                                                                                  |  |                                                     |                                        |                                           |         |                              |         |            
|                                                                                  |  |                                                     |                                        | Net cash used in operating activities     |         |                              | (11,431 | )           |         |        | (2,408  | )
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                                     |                                        |                                           |         |                              |         |            
|                                                                                  |  | Investment in property and equipment                |                                        |                                           | (10,201 | )                            |         |             | (17,116 | )     
|                                                                                  |  |                                                     |                                        |                                           |         |                              |         |            
|                                                                                  |  |                                                     |                                        | Net cash used in investing activities     |         |                              | (10,201 | )           |         |        | (17,116 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                                     |                                        |                                           |         |                              |         |            
|                                                                                  |  | Proceeds from exercise of stock options             |                                        |                                           | 773     |                              |         |             | 3,297   |       
|                                                                                  |  | Principal payments under capital lease obligations  |                                        |                                           | (246    | )                            |         |             | (127    | )     
|                                                                                  |  | Principal payments under long-term debt obligations |                                        |                                           | (3      | )                            |         |             |        |       
|                                                                                  |  |                                                     |                                        |                                           |         |                              |         |            
|                                                                                  |  |                                                     |                                        | Net cash provided by financing activities |         |                              | 524     |             |         |        | 3,170   |  
|                                                                                  |  |                                                     |                                        |                                           |         |                              |         |            
|NET DECREASE IN CASH AND CASH EQUIVALENTS:                                        |  |                                                     | (21,108                                | )                                         |         |                              | (16,354 | )          
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                                                     | 23,136                                 |                                           |         |                              | 28,971  |            
|                                                                                  |  |                                                     |                                        |                                           |         |                              |         |            
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                                                   | 2,028                                  |                                           |         | $                            | 12,617  |            
|                                                                                  |  |                                                     |                                        |                                           |         |                              |         |            
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:                                |  |                                                     |                                        |                                           |         |                              |         |            
|Cash paid during the period for:                                                  |  |                                                     |                                        |                                           |         |                              |         |            
|                                                                                  |  | Interest                                            |                                        | $                                         | 272     |                              |         | $           | 25      |       
|                                                                                  |  | Income taxes                                        |                                        | $                                         | 9,612   |                              |         | $           | 953     |       

Supplemental disclosures of non-cash transactions (in thousands): During the
thirteen weeks ended May 4, 2002 and May 6, 2001, the Company recorded an
increase to additional paid-in capital of $599 and $2,255, respectively,
related to tax benefits associated with the exercise of non-qualified stock
options. In addition, during each of the thirteen week periods ended May 4,
2002 and May 6, 2001, the Company recorded an increase to additional paid-in
capital of $291 and $290, respectively, related to the issuance of restricted
stock to satisfy certain deferred compensation liabilities.

See accompanying notes

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PACIFIC SUNWEAR OF CALIFORNIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in thousands unless otherwise indicated)

NOTE 1  Basis of Presentation

The accompanying consolidated financial statements are unaudited except for the
February 2, 2002 balance sheet. These statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America (GAAP) for complete financial statements. The consolidated financial
statements include the accounts of Pacific Sunwear of California, Inc. and its
wholly owned subsidiaries (the Company). All significant intercompany
transactions have been eliminated in consolidation.

The Companys fiscal year is the 52- or 53-week period, which ends on the
Saturday closest to January 31. Fiscal 2002 is a 52-week period that ends
February 1, 2003. Fiscal 2001 was a 52-week period that ended on February 2,
2002.

In the opinion of management, all adjustments consisting only of normal
recurring entries necessary for a fair presentation have been included. The
preparation of the consolidated financial statements in conformity with GAAP
necessarily requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
reported expenses during the reported period. Actual results could differ from
these estimates. The results of operations for the thirteen weeks ended May 4,
2002 are not necessarily indicative of the results that may be expected for the
fiscal year ending February 1, 2003. For further information, refer to the
financial statements and notes thereto as of and for the years ended February
2, 2002, February 4, 2001 and January 30, 2000.

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

NOTE 2  Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and marketable securities with
original maturities of three months or less.

NOTE 3  Goodwill

On February 3, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which eliminated the amortization of goodwill and other
intangible assets with indefinite useful lives. Upon adoption of SFAS No. 142,
the Company performed an impairment test of its goodwill and intangible assets
and determined that no impairment existed. Under SFAS No. 142, goodwill and
intangible assets will be tested for impairment at least annually and more
frequently if an event occurs which indicates the goodwill or intangible assets
may be impaired.

|                        |       |   |                   |       |                        |   |                |       |              |   |       |       |  |   |       |       | 
|----------------------- | ----- | - | ----------------- | ----- | ---------------------- | - | -------------- | ----- | ------------ | - | ----- | ----- |  | - | ----- | ----- | 
|                        |       |   | As of
May 4, 2002 |       | As of February 2, 2002
|                        |       |   |                   |       |                       
|                        |       |   | Gross Carrying    |       | Accumulated            |   | Gross Carrying |       | Accumulated 
|                        |       |   | Amount            |       | Amortization           |   | Amount         |       | Amortization
|                        |       |   |                   |       |                        |   |                |       |             
|Goodwill                |       | $ | 8,100             |       |                        | $ | 1,608          |       |              | $ | 8,100 |       |  | $ | 1,608 |      
|Covenant not to
compete |       |   | 250               |       |                        |   | 233            |       |              |   | 250   |       |  |   | 221   |      
|                        |       |   |                   |       |                        |   |                |       |              |   |       |       |  |   |       |      
|                        | Total |   | $                 | 8,350 |                        |   | $              | 1,841 |              |   | $     | 8,350 |  |   | $     | 1,829 | 
|                        |       |   |                   |       |                        |   |                |       |              |   |       |       |  |   |       |      

SFAS No. 142 also requires 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 operational results of the adoption of SFAS No. 142 as if the
standard had been in effect for all periods presented:

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|                       |                                |                                |   |        |      |        |   |       |      | 
|---------------------- | ------------------------------ | ------------------------------ | - | ------ | ---- | ------ | - | ----- | ---- | 
|                       |                                |                                |   | May 4, |      | May 6,
|For the Quarter Ended: |                                | 2002                           |   | 2001  
|                       |                                |                                |   |       
|                       | Reported net income            |                                | $ | 3,269  |      |        | $ | 979   |     
|                       | Add back goodwill amortization |                                |   |       |      |        |   | 48    |     
|                       |                                |                                |   |        |      |        |   |       |     
|                       | Adjusted net income            |                                | $ | 3,269  |      |        | $ | 1,027 |     
|                       | Basic earnings per share:      |                                |   |        |      |        |   |       |     
|                       |                                | Reported net income            |   | $      | 0.10 |        |   | $     | 0.03 | 
|                       |                                | Add back goodwill amortization |   |        | 0.00 |        |   |       | 0.00 | 
|                       |                                |                                |   |        |      |        |   |       |     
|                       |                                | Adjusted net income            |   | $      | 0.10 |        |   | $     | 0.03 | 
|                       | Diluted earnings per share:    |                                |   |        |      |        |   |       |     
|                       |                                | Reported net income            |   | $      | 0.10 |        |   | $     | 0.03 | 
|                       |                                | Add back goodwill amortization |   |        | 0.00 |        |   |       | 0.00 | 
|                       |                                |                                |   |        |      |        |   |       |     
|                       |                                | Adjusted net income            |   | $      | 0.10 |        |   | $     | 0.03 | 
|                       |                                |                                |   |        |      |        |   |       |     

The covenant not to compete will be completely amortized during fiscal 2002.
No additional amortization expense on existing assets will be recorded in
future fiscal years.

NOTE 4  Deferred Compensation and Other Assets

Deferred compensation and other assets consist of the following:

|                        |  |        |       |             |  |   |       | 
|----------------------- |  | ------ | ----- | ----------- |  | - | ----- | 
|                        |  | May 4, |       | February 2,
|                        |  | 2002   |       | 2002       
|                        |  |        |       |            
|Deferred compensation   |  | $      | 7,828 |             |  | $ | 7,587 | 
|Security deposits       |  |        | 180   |             |  |   | 181   | 
|Covenant not-to-compete |  |        | 17    |             |  |   | 29    | 
|Other assets            |  |        | 10    |             |  |   | 10    | 
|                        |  |        |       |             |  |   |       | 
|                        |  | $      | 8,035 |             |  | $ | 7,807 | 
|                        |  |        |       |             |  |   |       | 

NOTE 5  Credit Facility

The Company has a credit facility of $55.0 million with a bank, which provides
for a $30.0 million line of credit (the Credit Line) to be used for cash
advances, commercial letters of credit and shipside bonds, and an additional
$25.0 million line of credit (the Construction Facility) that was used to
finance the construction of the Companys new corporate office and distribution
center. The Credit Line expires March 31, 2004. At any time until September
30, 2002, the Company can, at its option, convert the outstanding borrowings
under the Construction Facility to a term loan due April 30, 2006. As of the
date of this filing, the Company had not converted the Construction Facility to
a term loan. Interest on each of the Credit Line and Construction Facility is
payable monthly at the banks prime rate (4.75% at May 4, 2002) or at optional
interest rates that are primarily dependant upon the London Inter-bank Offered
Rates for the time period chosen. The Companys weighted average interest rate
on its outstanding borrowings was 3.62% at May 4, 2002. At May 4, 2002, the
Company had no borrowings outstanding under the Credit Line and $25.0 million
outstanding under the Construction Facility. The Companys intent is to
convert the outstanding borrowings under the Construction Facility to a term
loan by September 30, 2002. Upon conversion, the Company would be required to
make minimum principal payments of $.8 million in the next twelve months under
the term loan. Accordingly, this principal payment amount of the Construction
Facility has been classified as current portion of long-term debt.
Additionally, the Company had $10.5 million in letters of credit outstanding at
May 4, 2002. 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 May 4, 2002, the Company was in
compliance with all of the covenants.

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NOTE 6  Accrued Liabilities

Accrued liabilities consist of the following:

|                                                               |  |        |        |             |  |   |        | 
|-------------------------------------------------------------- |  | ------ | ------ | ----------- |  | - | ------ | 
|                                                               |  | May 4, |        | February 2,
|                                                               |  | 2002   |        | 2002       
|                                                               |  |        |        |            
|Accrued compensation and benefits                              |  | $      | 6,647  |             |  | $ | 4,620  | 
|Accrued gift certificates and store merchandise credits        |  |        | 3,043  |             |  |   | 4,160  | 
|Sales tax payable                                              |  |        | 2,616  |             |  |   | 1,647  | 
|Reserve for store expansion/relocation and closing costs       |  |        | 1,980  |             |  |   | 2,094  | 
|Reserve for corporate rent  old corporate facilities (Note 8) |  |        | 1,396  |             |  |   | 1,396  | 
|Accrued medical insurance costs                                |  |        | 1,081  |             |  |   | 855    | 
|Other accrued liabilities                                      |  |        | 3,965  |             |  |   | 2,971  | 
|                                                               |  |        |        |             |  |   |        | 
|                                                               |  | $      | 20,728 |             |  | $ | 17,743 | 
|                                                               |  |        |        |             |  |   |        | 

NOTE 7  Federal and State Income Tax Expense

The combined federal and state income tax expense was calculated using
estimated effective annual tax rates.

NOTE 8  Net Income per Share, Basic and Diluted

The following table summarizes the computation of EPS (all amounts in thousands
except share and per share amounts):

|                                 |  |             |       |             |  |        |            |            |  |           |      |        |  |   |     |  |  |  |            |           |  |   |      | 
|-------------------------------- |  | ----------- | ----- | ----------- |  | ------ | ---------- | ---------- |  | --------- | ---- | ------ |  | - | --- |  |  |  | ---------- | --------- |  | - | ---- | 
|                                 |  | May 4, 2002 |       | May 6, 2001
|                                 |  |             |       |            
|                                 |  |             |       |             |  |        |            |            |  | Per Share |      |        |  |   |     |  |  |  |            | Per Share
|First Quarter Ended:             |  | Net Income  |       | Shares      |  | Amount |            | Net Income |  | Shares    |      | Amount
|                                 |  |             |       |             |  |        |            |            |  |           |      |       
|Basic EPS:                       |  | $           | 3,269 |             |  |        | 32,798,091 |            |  | $         | 0.10 |        |  | $ | 979 |  |  |  | 32,518,814 |           |  | $ | 0.03 | 
|Diluted EPS:                     |  |             |       |             |  |        | 613,536    |            |  |           |      |        |  |   |     |  |  |  | 678,910    |           |  |   |      | 
|Effect of dilutive stock options |  | $           | 3,269 |             |  |        | 33,411,627 |            |  | $         | 0.10 |        |  | $ | 979 |  |  |  | 33,197,724 |           |  | $ | 0.03 | 

Options to purchase 469,024 and 203,059 shares of common stock in the first
thirteen weeks of fiscal 2002 and the first thirteen weeks of fiscal 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

NOTE 9  Corporate Relocation-Related Charges

During the first quarter of fiscal 2001, the Company recorded a one-time
non-cash charge of $2.5 million after tax ($4.2 million pre-tax), or $.08 per
basic and diluted share, related to the disposal of most of the materials
handling equipment in the Companys former distribution center as part of its
relocation to its new distribution facility in Anaheim, California at the end
of fiscal 2001. The $4.2 million pre-tax charge is included in selling,
general and administrative expenses.

During the second half of fiscal 2001, the Company recorded a $1.4 million
charge to reserve for rent expense associated with the Companys former
corporate offices, which remain unused after the Companys relocation to its
new corporate offices and distribution center at the end of fiscal 2001. The
reserve is approximately the amount of rent expense for one year, within which
time the Company currently believes a tenant will be identified to sublease the
premises. The Company recorded an additional three months of expenses during
the first quarter of 2002 to maintain the one-year reserve of $1.4 million. To
the extent this time frame changes, additional charges may be recorded in the
future from $1.4 million per year up to the net remaining obligation under the
lease depending on the facts and circumstances in existence at the time. As of
May 4, 2002, the aggregate net remaining obligation under this lease is
approximately $7.2 million.

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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF CONSOLIDATED OPERATIONS

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 through the Companys website. The Company
has recorded reserves to estimate 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
unlikely event that the actual rate of sales returns by customers increased
significantly, the Companys operational results could be adversely affected.

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 based upon the age of
the item and its current rate of sale. 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. 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 increase future markdown rates.

Corporate Rent Reserve- During the second half of fiscal 2001, the Company
recorded a $1.4 million charge to reserve for rent expense associated with the
Companys former corporate offices, which remain unused after the Companys
relocation to its new corporate offices and distribution center at the end of
fiscal 2001. The reserve is approximately the amount of rent expense for one
year, within which time the Company currently believes a tenant will be
identified to sublease the premises. The Company recorded an additional three
months of expenses during the first quarter of 2002 to maintain the one-year
reserve of $1.4 million. To the extent this time frame changes, additional
charges may be recorded in the future from $1.4 million per year up to the net
remaining obligation under the lease depending on the facts and circumstances
in existence at the time. As of May 4, 2002, the aggregate net remaining
obligation under this lease was approximately $7.2 million.

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 would be recorded in the future
that may have an adverse affect on the Companys operating results.

Results of Operations

The thirteen weeks ended May 4, 2002 (first quarter) as compared to the
thirteen weeks ended May 6, 2001 (first quarter)

Net Sales

Net sales increased to $161.7 million for the first thirteen weeks of fiscal
2002 from $137.7 million for the first thirteen weeks of fiscal 2001, an
increase of $24.0 million, or 17.4%. Of this $24.0 million increase, $19.4
million was attributable to net sales generated by 112 new stores opened in
fiscal 2001 and not yet included in the comparable store base, $3.3 million was
attributable to net sales generated by 34 new stores opened in fiscal 2002 and
not yet included in the comparable store base, $1.8 million was attributable to
other non-comparable store net sales and $.8 million was attributable to a .6%
increase in comparable store net sales in the first thirteen weeks of

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fiscal 2002 compared to the comparable thirteen weeks ended May 6, 2001.
Offsetting these increases was a $1.3 million decrease attributable to the
closing of three and six stores during fiscal 2002 and fiscal 2001,
respectively. Other non-comparable store net sales consist primarily of sales
from stores that have been expanded or relocated and not yet included in the
comparable store base as well as merchandise sold over the internet. Of the
..6% increase in comparable store net sales in the first thirteen weeks of
fiscal 2002, PacSun and PacSun Outlet comparable store net sales increased 1.2%
and d.e.m.o. comparable store net sales decreased 3.7%. Stores are deemed
comparable stores on the first day of the first month following the one-year
anniversary of their opening or expansion/relocation. Retail prices of the
Companys merchandise remained relatively unchanged in the first thirteen weeks
of fiscal 2002 compared to the first thirteen weeks of fiscal 2001 and had no
significant impact on the net sales increase for the first thirteen weeks of
fiscal 2002.

Gross Margin

Gross margin, after buying, distribution and occupancy costs, increased to
$49.2 million for the first thirteen weeks of fiscal 2002 from $42.0 million
for the first thirteen weeks of fiscal 2001, an increase of $7.2 million, or
17.1%. As a percentage of net sales, gross margin was 30.4% for the first
thirteen weeks of fiscal 2002 compared to 30.5% for the first thirteen weeks of
fiscal 2001. Of this .1% decrease, occupancy costs increased 1.3% as a
percentage of net sales compared to the first thirteen weeks of fiscal 2001,
which was related to opening 34 new stores in the first thirteen weeks of
fiscal 2002 and the residual impact from opening 129 net new stores in fiscal
2001. Occupancy costs as a percentage of net sales for new stores are generally
higher than for mature stores. Offsetting this increase was a .7% decrease in
buying costs as a percentage of net sales due to lower salaries and travel
expenses in the first thirteen weeks of fiscal 2002 as compared to the first
thirteen weeks of fiscal 2001 and a .5% increase in net merchandise margins as
a percentage of net sales due to a higher initial markup partially offset by a
higher markdown rate.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $43.7 million for the
first thirteen weeks of fiscal 2002 from $40.6 million for the first thirteen
weeks of fiscal 2001, an increase of $3.1 million, or 7.6%. These expenses
increased to 27.0% as a percentage of sales in the first thirteen weeks of
fiscal 2002 from 26.5% in the first thirteen weeks of fiscal 2001, excluding
the one-time non-cash charge incurred in the first quarter of fiscal 2001. Of
this .5% net increase as a percentage of net sales, .4% was due to moving the
timing of physical inventories to the first quarter of fiscal 2002 from the
second quarter of fiscal 2001, .3% was due to an increase in the corporate
occupancy reserve due to our former corporate offices not yet subleased, .3%
was due to an increase in depreciation and .2% was due to an increase in store
payroll expenses. These increases were partially offset by a .7% decrease in
advertising expenses as a percentage of sales. Store payroll and selling
expenses as a percentage of net sales for new stores are generally higher than
for mature stores.

Income Tax Expense

Income tax expense was $2.0 million for the first thirteen weeks of fiscal 2002
compared to $0.6 million for the first thirteen weeks of fiscal 2001. The
effective income tax rate was 38.4% in each of the first thirteen weeks of
fiscal 2002 and fiscal 2001.

Liquidity and Capital Resources

The Company has financed its operations from internally generated cash flow,
short-term and long-term borrowings and equity financing. 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.

Net cash used in operating activities for the first thirteen weeks of fiscal
2002 was $11.4 million as compared to $2.4 million for the first thirteen weeks
of fiscal 2001. This $9.0 million increase in cash used was primarily
attributable to a decrease in accrued income taxes and deferred income taxes of
$7.2 million and the $4.2 million one-time non-cash charge for the disposal of
most of the materials handling equipment in the Companys former distribution
center incurred during fiscal 2001, offset by an increase in net income of $2.3
million and other items

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netting to $.1 million. Working capital at May 4, 2002 was $81.1 million
compared to $78.9 million at February 2, 2002, an increase of $2.2 million.
Inventories at May 4, 2002 were $111.4 million compared to $102.5 million at
February 2, 2002, an increase of $8.9 million. This increase was primarily
related to opening 31 net new stores and expanding/relocating 6 stores with
over 50% larger average square footage than their previous locations. The
Companys average store inventories vary throughout the year and increase in
advance of the peak selling periods of spring break, back-to-school and
Christmas.

Net cash used in investing activities was $10.2 million for property and
equipment for the first thirteen weeks of fiscal 2002 compared to $17.1 million
for property and equipment for the first thirteen weeks of fiscal 2001. Of the
$10.2 million of net cash used for investment in property and equipment in the
first thirteen weeks of fiscal 2002, $9.5 million was used for new and existing
stores, $.5 million was used for other capital expenditures including computer
hardware and software and $.2 million was used for costs related to the new
distribution center.

Net cash provided by financing activities for the first thirteen weeks of
fiscal 2002 was $.5 million compared to $3.2 million for the first thirteen
weeks of fiscal 2001. Of the $.5 million of net cash provided by financing
activities in the first thirteen weeks of fiscal 2002, $.8 million was due to
proceeds received from the exercise of stock options, offset by $.3 million of
payments under capital lease and long-term debt obligations.

The Company has a credit facility of $55.0 million with a bank, which provides
for a $30.0 million line of credit (the Credit Line) to be used for cash
advances, commercial letters of credit and shipside bonds, and an additional
$25.0 million line of credit (the Construction Facility) that was used to
finance the construction of the Companys new corporate office and distribution
center. The Credit Line expires March 31, 2004. At any time until September
30, 2002, the Company can, at its option, convert the outstanding borrowings
under the Construction Facility to a term loan due April 30, 2006. As of the
date of this filing, the Company had not converted the Construction Facility to
a term loan. Interest on each of the Credit Line and Construction Facility is
payable monthly at the banks prime rate (4.75% at May 4, 2002) or at optional
interest rates that are primarily dependant upon the London Inter-bank Offered
Rates for the time period chosen. The Companys weighted average interest rate
on its outstanding borrowings was 3.62% at May 4, 2002. At May 4, 2002, the
Company had no borrowings outstanding under the Credit Line and $25.0 million
outstanding under the Construction Facility. The Companys intent is to
convert the outstanding borrowings under the Construction Facility to a term
loan. Upon conversion, the Company would be required to make minimum principal
payments of $.8 million in fiscal 2002 under the term loan. Accordingly, this
principal payment amount of the Construction Facility has been classified as
current portion of long-term debt. Additionally, the Company had $10.5 million
in letters of credit outstanding at May 4, 2002. 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
May 4, 2002, the Company was in compliance with all of the covenants.

During the remainder of fiscal 2002, the Company plans to open approximately 44
net new stores, of which approximately 35 will be PacSun stores, approximately
5 will be PacSun Outlet stores and approximately 4 will be d.e.m.o. stores.
The Company also plans to expand or relocate approximately 30 existing smaller
stores during fiscal 2002. The Company estimates that capital expenditures
during the remainder of fiscal 2002 will be approximately $30 million, of which
approximately $26 million will be for opening, expanding, and relocating stores
and approximately $4 million will be used for other capital expenditures,
including computer hardware and software.

The Company reviews the operating performance of its stores on an ongoing basis
to determine which stores, if any, to expand, relocate or close. Some leases
contain cancellation or kick-out clauses in the Companys favor if specified
sales levels are not achieved. The Company closed six stores in fiscal 2001
and anticipates closing approximately ten stores in fiscal 2002.

The Company leases all of its retail store locations under operating leases.
The Company also leases equipment from time to time under capital leases.
Also, at any time, the Company is contingently liable for open letters of
credit with foreign suppliers of merchandise. For details concerning the
Companys financial commitments under these arrangements, please see Note 6 to
the consolidated financial statements contained in the Companys Form 10-K for
the year ended February 2, 2002.

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The Company relies primarily on internally generated cash flows to finance its
operations. In addition, to the extent necessary, the Company relies on its
credit facility to finance operations and provide additional resources for
capital expenditures. 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 through the
end of fiscal 2002.

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.

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 total liabilities
to tangible net worth ratio, 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. The
most likely result would require the Company to either 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.

New Accounting Pronouncements

Business Combinations, Goodwill and Other Intangible Assets  The Company
has adopted Statement of Financial Accounting Standards (SFAS) No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 prospectively prohibits the pooling of interest method
of accounting for business combinations initiated after June 30, 2001. SFAS
No. 142 requires companies to cease amortizing goodwill that existed at June
30, 2001 and, therefore, the Companys amortization of existing goodwill ceased
on February 2, 2002. In addition, under SFAS No. 142, any goodwill resulting
from acquisitions completed after June 30, 2001 will not be amortized. Upon
adoption of SFAS No. 142, the Company performed an impairment test of its
goodwill and intangible assets and determined that no impairment existed. In
the absence of any impairment issues, the Company expects the impact of these
statements to increase pre-tax income by approximately $.3 million per year
through 2022.

Accounting for the Impairment or Disposal of Long-Lived Assets  The Company
has adopted SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which supersedes 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. The adoption of SFAS No. 144 did not
have a significant impact on the Companys financial position or results of
operations. However, future impairment reviews may result in charges against
earnings if we are required to write down the value of long-lived assets.

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 2001 and fiscal
2000, excluding sales generated by new and relocated/expanded stores, the
Christmas and back-to-school periods together accounted for approximately 34%
of the Companys annual net sales and a higher percentage of the Companys
operating income. In fiscal 2001, excluding net sales generated by new and
relocated/expanded stores, approximately 45% of the Companys annual net sales
occurred in the first half of the fiscal year and 55% in the second half. The
Companys quarterly results of

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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-Q contains forward-looking statements within the
meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, 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 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
business, 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.

Private Label Merchandise.Sales from private label merchandise accounted for
approximately 34% and 36% of net sales in fiscal 2001 and fiscal 2000,
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 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 affect on the Companys business, financial condition
and results of operations.

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.
During fiscal 2002, the Company plans to open approximately 75 net new stores,
of which approximately 58 will be PacSun stores, approximately seven will be
PacSun Outlet stores and approximately 10 will be 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
or that such expansion will be profitable. As the Companys operations grow,
there could be increasing

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strain on the Companys resources, and the Company could experience
difficulties relating to a variety of operational matters, including hiring,
training and managing an increasing number of employees, having sufficient
working capital, bank line of credit and cash flow from operating activities
for the Companys future operating and capital requirements, obtaining
sufficient quantities of merchandise from its preferred vendors, obtaining
sufficient materials and contract manufacturers to produce its private brand
products and enhancing its distribution, financial and operating systems.
There can be no assurance 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.

Stores in the d.e.m.o. format.Comparable store results for d.e.m.o. stores
did not meet managements expectations during the first quarter of fiscal 2002
(-3.7%) or during fiscal 2001 (1.6%). There can be no guarantee that d.e.m.o.
stores will achieve acceptable levels of sales or profitability in the future.
Continued disappointing sales results for d.e.m.o. stores may have a material
adverse affect on the Companys business, financial condition and results of
operations and may result in a greater number of store closings.

Internet Sales. The Company began selling merchandise over the internet in
June 1999. The Companys internet operations are subject to numerous risks,
including unanticipated operating problems, reliance on third party computer
hardware and software providers, system failures and the need to invest in
additional computer systems. There can be no assurance that the internet
operations will achieve sales and profitability levels that justify the
Companys investment therein. The internet operations also involve other risks
that could have a material adverse effect on the Company, including (i) the
failure to reach acceptable levels of profitability within the foreseeable
future, (ii) difficulties with hiring, retention and training of key personnel
to conduct the Companys internet operations, (iii) diversion of sales from
PacSun stores, (iv) rapid technological change, (v) liability for online
content and (vi) risks related to the failure of the computer systems that
operate the web site and its related support systems, including computer
viruses, telecommunication failures and electronic break-ins and similar
disruptions. In addition, the internet operations involve risks which are
beyond the Companys control that could have a material adverse effect on the
Company, 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 regulation,
(v) online security breaches, (vi) credit card fraud and (vii) competition and
general economic conditions and economic conditions specific to the internet,
online commerce and the apparel industry.

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, internet sales results, d.e.m.o. 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.

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Economic Impact of Recent Terrorist Attacks.The majority of the Companys
stores are located in regional shopping malls. In response to the terrorist
attacks of September 11, 2001, security is being heightened in public areas.
Any further 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. For
example, on September 11, 2001, a substantial number of the Companys stores
were closed early due to closure of the malls in response to the terrorist
attacks. Mall closures, as well as lower customer traffic due to security
concerns, could result in decreased sales that would have a material adverse
affect 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) 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 with; (iii)
imposition of duties, taxes, and other charges on imports; and (iv) 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 which, 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 affect 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 total liabilities to tangible net worth ratio,
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. The most likely result would
require the Company to either 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.

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

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.




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 May 4, 2002,
$25.0 million in borrowings were outstanding under the Companys credit
facility. Based on the weighted average interest rate of 3.62% on the
Companys credit facility during the thirteen weeks ended May 4, 2002, if
interest rates on the credit facility were to increase by 10%, and to the
extent borrowings were outstanding, for every $1.0 million outstanding on the
Companys credit facility, net income would be reduced by approximately $3,000
per year. A discussion of the Companys accounting policies for financial
instruments and further disclosures relating to financial instruments is
included in the Summary of Significant Accounting Policies and Nature of
Business in the Notes to Consolidated Financial Statements in the Companys
Form 10-K for the year ended February 2, 2002. The Company is not a party with
respect to derivative financial instruments.

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PART II-OTHER INFORMATION




Item 1  Legal Proceedings  Not Applicable




Item 2  Changes in Securities and Use of Proceeds  Not Applicable




Item 3  Defaults Upon Senior Securities  Not Applicable




Item 4  Submission of Matters to a Vote of Security Holders  Not Applicable




Item 5  Other Information  Not Applicable




Item 6  Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits:
| | --- |  | ---------



| | 10.1 |  | Revised Second Amendment to Business Loan
Agreement, dated as of August 1, 2001, between the Company and
Bank of America, N.A. This exhibit is being filed to correct a
clerical error in section 2.2 of the EDGAR version of the
document filed as an exhibit to our Form 10-Q for the quarter
ended August 5, 2001.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | Reports on Form 8-K:                                                                
| | --- |  | ------------------------------------------------------------------------------------
|
| |     |  | No reports were filed on form 8-K during the quarter for which this report
is filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



| | Pacific Sunwear of California, Inc.
(Registrant)
| | ------------------------------------------------



|Date: May 24, 2002 | /s/   GREG H. WEAVER
Greg H. Weaver
Chairman of the Board
and Chief Executive Officer
|------------------ | -------------------------------------------------------------------------------------



|Date: May 24, 2002 | /s/   CARL W. WOMACK
Carl W. Womack
Senior Vice President, Chief
Financial Officer and Secretary
|------------------ | ------------------------------------------------------------------------------------------------

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EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.1    |  | Revised Second Amendment to Business Loan
Agreement, dated as of August 1, 2001, between the Company and
Bank of America, N.A. This exhibit is being filed to correct a
clerical error in section 2.2 of the EDGAR version of the
document filed as an exhibit to our Form 10-Q for the quarter
ended August 5, 2001.