Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Foolish Forecast: PacSun Toweling Off, or All Wet?

After a brief dip in the "red" sea, Pacific Sunwear (Nasdaq: PSUN  ) emerged into profitability and toweled itself off last quarter. Will Tuesday's earnings news bask in the bright sun of continued profits, or will it take another dip?

What analysts say:

  • Buy, sell, or waffle? Twenty analysts remain PacSun worshipers, down two from last quarter. Eight of them still rate it a buy, 11 more say hold, and one counsels selling.
  • Revenues. On average, they're looking for less than a 1% sales decline, to $373.1 million.
  • Earnings. Profits are predicted to gain a penny to $0.14 per share.

What management says:
It's been a quarter of ebbs and flows at PacSun. The flows came from its eponymous stores where same-store sales have held up nicely; the ebbs cluster around PacSun's ill-considered demo and One Thousand Steps brands. Ultimately, the pain became too much to bear. As fellow Fool Rich Duprey describes in "A Ray of Sunshine at PacSun," management decided last month to throw in the towel on both concepts and stick to surfing instead.

What management does:
Adjusting our telescope to examine PacSun from a wider angle, we soon see the spots in this story. At every level -- gross, operating, and net -- PacSun's margins continue to decline. You have to walk long and far to find a clothier in more dire straits than PacSun, farther than a thousand steps, I'll wager. I checked Aeropostale (NYSE: ARO  ) , Zumiez (Nasdaq: ZUMZ  ) , and Abercrombie & Fitch (NYSE: ANF  ) -- they're earning double-digit operating margins. Gap (NYSE: GPS  ) , Wet Seal (Nasdaq: WTSLA  ) , and Hot Topic (Nasdaq: HOTT  ) -- just single digits, but they're still doing better than PacSun.





























Data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
In an attempt to move the margins upward again, PacSun's moves to "explore strategic alternatives" (corporate-speak for "sell or shutter") at its demo stores, and subject One Thousand Steps to closure promises to hurt these margins in the short term. Management told us to expect as much as $52 million in charges for its announced restructuring this quarter.

And the pain ain't over. Management further warned that it "may incur additional charges, both cash and non-cash, in the future related to potential lease terminations and related costs, inventory liquidation costs, employee retention and severance obligations, and/or agency fees associated with the evaluation or implementation of potential strategic alternatives."

For more beach-reading Foolishness:

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 540431, ~/Articles/ArticleHandler.aspx, 10/21/2016 5:15:06 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 7 hours ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 -4.58 -0.09%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
PSUNQ $0.00 Down +0.00 +0.00%
Pacific Sunwear CAPS Rating: *
ANF $15.74 Up +0.29 +1.88%
Abercrombie and Fi… CAPS Rating: *
AROPQ $0.04 Up +0.00 +1.99%
Aeropostale CAPS Rating: *
GPS $26.48 Down -0.03 -0.11%
Gap CAPS Rating: **
HOTT.DL $0.00 Down +0.00 +0.00%
Hot Topic CAPS Rating: No stars
WTSLQ $0.00 Down +0.00 +0.00%
The Wet Seal CAPS Rating: *
ZUMZ $22.30 Down -0.15 -0.67%
Zumiez CAPS Rating: **