Teen retailer Pacific Sunwear of California Inc posted a narrower-than-expected loss for the fourth quarter, helped by higher merchandise margins.

However, the company, which sells clothing inspired by the fashion and lifestyle of California, forecast a bigger-than-expected loss for the first quarter as gross margins are likely to fall.

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Fourth-quarter loss widened to $38.1 million, or 56 cents a share, from $35.2 million, or 53 cents a share, last year.

Excluding items, Anaheim, California-based PacSun posted a loss of 19 cents a share.

Sales fell about a percent to $234.2 million.

Analysts polled by Thomson Reuters I/B/E/S expected a loss of 22 cents a share on revenue of $245.4 million.

The cash-strapped company, which has grappled with falling sales and margins , received a $60 million loan from private equity firm Golden Gate Capital last December.

PacSun sees a first-quarter loss of 26 to 34 cents a share. Analysts were expecting a loss of 24 cents a share.

The company said gross margins are likely to come in at 17 to 20 percent in the quarter, compared with 19 percent in the year-ago period.

PacSun's shares, which have lost more than 45 percent of their value in the past year, closed at $2.51 on Tuesday on the Nasdaq. (Reporting by Ranjita Ganesan; Editing by Joyjeet Das)