Shares of teen retailer Pacific Sunwear (Nasdaq: PSUN) rode a big wave at the end of last week, as the company reported that same-store sales rose a whopping 9.6% in August. That figure easily wiped out the 1.8% estimate analysts had predicted.
Yet the company's shares have seemingly crashed back on the beach, marooned at the $14 range they occupied before the announcement. Why the rise and fall? Like an unseen riptide that drags unwary swimmers out to sea, those comps numbers weren't all that they seemed.
New CEO Sally Kasaks has been on the job less than a year at the Motley Fool Stock Advisor recommendation, trying to improve the company's image as it competes against Aeropostale (NYSE: ARO) and American Eagle Outfitters (NYSE: AEO). Such a sizable comps jump would suggest that those changes are starting to take hold.
Yet a rising tide lifts many boats, and teen retailers in particular have been floating upward. American Eagle also posted 9% comps growth, and Abercrombie & Fitch (NYSE: ANF) saw same-store sales rise 6% year over year. Heck, even Wet Seal (Nasdaq: WTSLA) had a better-than-1% increase in comps.
We're seeing external forces at work here. PacSun admits that the dramatic rise owed to a later start in the back-to-school year in both Florida and Texas. Later tax-free shopping days also enhanced this month's results. We've heard a similar story from most retailers this month, so it's hard to attribute PacSun's successful results to any turnaround strategy management may be implementing.
The euphoria investors first felt at the comps numbers pushed the company's shares higher. But digging into those numbers a little more, you can see that while the namesake PacSun stores were doing well, its demo brand stores continued to perform abysmally, with comps down more than 17%. That tells me PacSun has a lot more work to do.
Despite the clouds hovering over PacSun, I think it's too early to consign the company to the market's Goodwill box. Still, I'd have to see more than one month of rising comps to believe that a turnaround has taken hold, and I'd need more than a quarter of improvement to want to put my money here.
One good month is a solid start for Kasaks, but that tide still contains undertows that might drag PacSun down.
Hang ten with further Foolishness:
- Foolish commentator Seth Jayson still sees a dim outlook for the retailer.
- Rich Smith recently asked whether PacSun is ascendant.
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