Pacific Sunwear Posts Narrower-than-Expected Loss - Analyst Blog

Shares of Pacific Sunwear of California Inc. PSUN rallied more than 7% on the index in the aftermarket trading hours, following the company's narrower-than-expected loss for fourth-quarter fiscal 2013. The quarterly loss came in at 17 cents per share, a penny better than the Zacks Consensus Estimate of loss of 18 cents, and remained flat year over year.

For the full year, the company reported loss of 34 cents that fared better than the Zacks Consensus Estimate of loss of 36 cents and loss of 49 cents delivered in the prior-year quarter.

On a reported basis, the company posted a loss of 32 cents per share from continuing operations, in line with the year-ago quarter. For the full year, the company posted loss of 69 cents as against loss of 78 cents in 2012.

Detailed Performance

This Anaheim, CA-based specialty retailer reported net sales of $218.6 million, which beat the Zacks Consensus Estimate of $214 million but was down 1.9% year over year. Sales were primarily impacted by the calendar shift.

For fiscal 2013, net sales came in at $797.8 million, lagging the Zacks Consensus Estimate of $806 million but up 1.7% year over year.

However, same-store sales for the quarter rose 2%, marking the 8th consecutive quarter of positive same-store sales.

Gross profit decreased 7.3% to $43.7 million with the gross margin contracting 100 basis points to 20.0%.

Operating loss was $14.6 million compared with an operating loss of $15 million in the prior-year quarter.

Selling, general and administrative (SG&A) expenses in the reported quarter were approximately $58.3 million, down 6.2% year over year.

Financial Update

Pacific Sunwear ended the quarter with cash and cash equivalents of $27.8 million, long-term debt of $86.1 million and shareholders' equity of $18.1 million.

Store Update

During the fourth quarter, this sports and fashion retailer closed 17 stores, taking the total closures for the year to 30. During fiscal 2013 the company opened 4 stores. At the end of the year, the company had 618 outlets as against 644 a year ago.

Going Forward

In the first quarter of fiscal 2014, the company expects to post loss between 12–17 cents.  Management projects revenues between $169 million and $174 million.

Moreover, management forecasts same-store sales in the band of 1%–4%, gross margin (including buying, distribution and occupancy) to be 25%–27% and SG&A to range from $54 million to $55 million in the coming quarter.

Pacific Sunwear currently has a Zacks Rank #4 (Sell).

Key Picks from the Sector

Other better-ranked stocks in the retail sector include Hanesbrands Inc. HBI, Michael Kors Holdings Ltd. KORS and G-III Apparel Group, Ltd. GIII. Hanesbrands and Michael Kors sport a Zacks Rank #1 (Strong Buy) while G-III Apparel carries a Zacks Rank #2 (Buy).