Pacific Sunwear Shares Drop 14% on May Results

Pacific Sunwear of California Inc. shares dropped 14% Thursday after the company’s May retail sales results apparently disappointed investors.

The stock fell $5.31 to $33.13 on Nasdaq volume of 1.8 million shares, compared with average daily turnover of 412,300. The stock had hit a 52-week high of $39.63 during trading on Wednesday.

Early last month, the company told analysts during a conference call that same-store sales for the first week of May rose 7% to 8% from the same period a year ago, said BT Alex. Brown Inc. analyst Joe Grillo.

Based on those first-week figures for stores open at least a year, company observers projected a full month of the same swift growth. When that didn’t happen, investors began unloading the stock.

“People shot first and asked questions later,” Grillo said.

But Pacific Sunwear, a chain of 342 stores selling clothes geared to teenagers, ended up reporting May same-store sales growth of 5.8%. That surpassed some analysts’ estimates of 5%, but was below other, more optimistic projections on Wall Street. Robinson-Humphrey Co., for one, predicted same-store sales gains of 7% for May, according to a retail sales research note issued by the firm Thursday.

As May unfolded, “the company sold out of best-selling items . . . which impacted sales as the month progressed,” BankBoston Robertson Stephens & Co. said in its Thursday roundup of retail sales.

Pacific Sunwear spokesman James K. White agreed that disappointment over same-store sales prompted the stock’s decline.

“We feel they are quite good compared to the rest of the industry,” he said. “Obviously, some people didn’t think so.”

Analysts also noted that Memorial Day took a bite out of Pacific Sunwear’s May sales, as it did for most all retailers. Last year, the holiday fell earlier in the month, putting sales of seasonal items in May’s sales reports. This year, some retailers won’t record the benefits of those summer-happy holiday sales until June.

Grillo characterized Thursday’s decline in Pacific Sunwear stock as an overreaction. “We’re advising investors to use weakness to get involved,” he said.

He maintains his earnings forecast of 29 cents a share for the second quarter ending in July, in line with estimates of analysts surveyed by First Call Corp. The company earned 23 cents a share a year earlier.

Grillo said the company’s same-store sales for the last week of May rose 9%, a turnaround that “bodes well” for June.

In addition to May same-store sales, Pacific Sunwear said total sales for the month rose 36.5% to $27.3 million from $20 million a year earlier.

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Pacific Sunwear Eclipsed

Disappointed investors clipped 14% from Pacific Sunwear of California’s stock value Thursday, apparently reacting to the company’s May retail-sales results. The stock had more than doubled since Jan. 1. Weekly closing stock prices:

Jan. 1 $16.38

Jan. 8 23.00

Jan. 15 22.56

Jan. 22 24.25

Jan. 29 25.31

Feb. 5 26.75

Feb. 12 26.75

Feb. 19 26.00

Feb. 26 28.50

March 5 30.31

March 12 31.50

March 19 31.75

March 26 31.13

April 2 33.75

April 9 37.25

April 16 35.88

April 23 37.00

April 30 37.09

May 7 34.13

May 14 37.63

May 21 38.63

May 28 37.50

Thursday close $33.13

Source: Bloomberg News