PacSun Stock Tumbles on Downgrade

Shares of Pacific Sunwear of California Inc. fell 8% on Wednesday as two analysts downgraded the stock a day after the retailer presented a disappointing profit projection for the current quarter.

The stock dropped $1.88 to $21.93 and is down 12% this year.

Analyst Lyn Rhoads Walther of Wachovia Securities downgraded shares of the Anaheim-based parent of the PacSun and d.e.m.o. chains to “market perform” from “outperform.” She cited problems such as a fashion miss with its mix of denim, as well as weak sneaker sales and intensifying competition from Zumiez Inc. and Hollister, Abercrombie & Fitch Co.’s surf-themed division.

“If there were only one issue, we may give PSUN a pass,” the analyst wrote in a report. But given the struggles in a variety of areas, “we fear this may not be a one-quarter problem.”

Stacy Pak of Prudential Equity Group downgraded the stock to “underweight” from “neutral weight,” noting a worsening girls business and weakness at the urban-themed d.e.m.o. division. Further, she said, weakness in PacSun’s girls’ sneaker business does not bode well for the company’s One Thousand Steps footwear chain, due to launch next month.

On Tuesday, Pacific Sunwear reported fiscal fourth-quarter earnings that were up 15%, in line with expectations. But the company said profit in the current first quarter should be 19 cents to 21 cents a share, less than the 27 cents analysts were expecting.

Pacific Sunwear also said sales at stores open at least a year fell 3.1% last month, on weakness at its PacSun division, which sells surf and skate apparel brands. It was the company’s first negative monthly same-store sales report since April and only the second since April 2002.

Chief Executive Seth Johnson said Tuesday that PacSun’s girls business was “very difficult” in the fourth quarter and discussed strategies for “getting our underperforming business back on track.”