Pacific Sunwear’s Stock Clipped by 23%
Pacific Sunwear of California Inc. shares fell 23% after the retailer of clothing for teenagers warned that its quarterly profit may miss forecasts because of lower-than-expected sales.
Amid a general weakening in the clothing and retail sector, the Anaheim company’s shares plunged $3.63 Thursday to close at $12.44--the biggest percentage drop among apparel companies and eighth-steepest overall on Wall Street.
Sales at Pacific Sunwear and at competitors like Ross Stores Inc., Abercrombie & Fitch Co. and American Eagle Outfitters have been hurt by unseasonably cool weather, crimping demand for summer clothes..
Sales for teen-fashion companies also were hurt by a lack of any new trend driving young men’s fashion.
“Was it a demand issue or a weather issue or a fashion issue? It’s a little bit of each,” said Banc of America Securities analyst Thomas Tashjian.
Steven Richter, an analyst at Tucker Anthony Cleary Gull, said that although it has been a “tough spring from the weather point of view,” clothing retailers are facing other problems.
“The continuing series of interest rate increases is beginning to take a bit of a bite,” said Kurt Barnard, president of Barnard’s retail trend report. “We are beginning to see what I call a slowing of growth in the retail sector.”
The drop in the value of Pacific Sunwear stock follows last Friday’s 27% decline amid concerns about May sales. Through Thursday’s trading, the stock has fallen 50% this year.
Pacific Sunwear said Thursday that sales at stores open at least a year rose just 0.5% last month. It said that if same-store sales in June and July rise less than 6%, its fiscal second-quarter profit may fall short of the average estimate of 29 cents a share forecast by analysts polled by First Call/Thomson Financial.
The company’s same-store sales in May hit their lowest point since November 1998, when sales declined 1.6%.
Same-store sales are a key measure of a retailer’s business because they exclude new and closed stores. Pacific Sunwear has 518 mostly mall-based stores. It also sells accessories and footwear.
Ross Stores saw its shares fall 10% after the retailer of low-price clothing and accessories said May same-store sales were lower than expected. Shares fell $2.13 to close at $19 on Nasdaq.
The Newark, Calif.-based company said same-store sales rose only 3% last month, hurt by reduced TV advertising for summer dresses and a slow market in Texas, where it opened a large number of stores in the past year.
“The new stores were cannibalizing Ross’s existing stores” in Texas, said Deutsche Banc Alex. Brown analyst Marcia Aaron.
