Pacific Sunwear Stock Rises After Rosy Report

Shares of Pacific Sunwear of California Inc. rose 13% Tuesday following the company’s jump in first-quarter revenue and its forecast for continued strong sales this year.

The Anaheim teen clothing retailer’s stock rose $2.57 to close at $23.07 a share in Nasdaq trading of 7.5 million shares, almost six times the three-month daily average. Earlier in the day, the stock hit $23.77 a share.

The company’s forecast sparked ratings upgrades from equity analysts at Merrill Lynch & Co, UBS Warburg and Wedbush Morgan Securities Inc.

PacSun said late Monday that its fiscal first-quarter operating profit fell 39% to $3.5 million, or 11 cents a share, but met analyst expectations. Sales, though, rose 22% to $137.7 million for the quarter ended May 6.

PacSun also said it was comfortable with analysts’ estimates that the company will earn 26 cents a share in the second quarter and that it expected earnings in the second half to improve by at least 20%.

Despite its lower first-quarter earnings, PacSun said it has made strides in moving stagnant inventory out of its stores and pushing its girls’ and boys’ shorts and denim pants business in order to boost sales.

“This is a compelling growth story,” said Richard Jaffe at UBS Warburg who raised his rating on Pacific Sunwear to “strong buy” from “buy.” Jaffe forecasts the shares will reach $28 in the next 12 months.

“I believe there’s capacity for at least another 200 Pacific Sunwear stores in this country,” Jaffe said. The company’s d.e.m.o. chain is providing sales growth and the PacSun stores continue to sell to their typical customers, he said.

Pacific Sunwear also was raised to “strong buy” by Wedbush Morgan Securities and was raised to near term “accumulate” from near term “neutral” at Merrill Lynch & Co.

Pacific Sunwear has 631 stores in 48 states and Puerto Rico, consisting of 493 PacSun stores, 54 PacSun outlet stores and 84 d.e.m.o. stores.

Last week, Mark Hoffman resigned from his post as chief financial officer, the second top PacSun executive to depart in a month. Earlier, Michael Scandiffio, the company’s top merchandising executive, left the firm.

Bloomberg News, Reuters and Dow Jones Newswires were used in compiling this report.