Pacific Sunwear of California Inc. (PSUN), together with its subsidiaries, is a specialty retailer rooted in the action sports, fashion and music influences of the California lifestyle. The Company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults.  As of December 7, 2011, the Company operated 819 stores in all 50 states and Puerto Rico.

Source: Reuters.com, SEC Filings.

Investment Highlights

Shares of PSUN jumped as much as 43% in Thursday trade, a day after the company announced closure of its underperforming stores, new financing from Wells Fargo Capital Finance and Golden Gate Capital, and its latest quarterly results. Shares added $0.14 to close the session at $1.49. Over 6.37 million shares traded hands during the session, versus the 10-day average of 1.07 million.  The stock is currently above its 50-day moving average of $1.29 and below its 200-day moving average of $1.94.

Shares of the Anaheim, CA-based teen apparel retailer rose 14.5% in the last five days and 15.4% in the last month.  Year-to-date, the  stock is down 74.7%.

The Company on Wednesday said it had completed talks with landlords that will result in the company closing between 175 to 200 underperforming stores within the next 14 months. The deals reached with the landlords include the buyout of about 75 leases at a cost of $13 million, short-term extensions for about 50 better performing stores, and termination upon lease expiration of approximately 115 stores by the end of fiscal 2012.

The Company also said it entered into a new five year $100 million revolving credit facility with Wells Fargo Capital Finance, replacing the previous revolving credit facility that would have expired in April 2013. It also completed a five-year, $60 million senior secured term loan funded by private equity firm Golden Gate Capital.

“The combination of these transactions greatly enhances our financial and operating position, and is another critical step forward as we work to re-establish PacSun as a leading specialty retailer across the U.S.,” Gary H. Schoenfeld, president and CEO of PSUN, said in a statement.

With the support from all of its major landlords, Schoenfeld said the Company can now focus on its targeted base of 550 to 600 better performing stores and its enhanced merchandising and marketing strategies for becoming the preferred destination among teens and young adults for great style and great brands.

Source: http://phx.corporate-ir.net/phoenix.zhtml?c=83185&p=irol-newsArticle&ID=1637580&highlight=

Financial Summary

PSUN reported net sales of $242.0 million for the third quarter of fiscal 2011, down from net sales of $257.9 million reported in the comparable period last  year. Meanwhile, total company same-store sales dropped 3% during the period.

On a GAAP basis, including real estate buyout costs of $1.9 million and non-cash asset impairment charges of $4.4 million related to store closures, the Company realized a net loss of $17.6 million, or $(0.26) per share.  This compares to a net loss of $7.0 million, or $(0.11) per share, for the third quarter of fiscal 2010, which included non-cash asset impairment charges of $0.6 million related to store closures.

On a non-GAAP basis, excluding store closure charges, and using a normalized annual income tax rate of approximately 37%, the Company’s net loss for the third quarter would have been $7.1 million, or $(0.10) per share, as compared to a net loss of $3.9 million, or $(0.06) per share, for the same period a year ago.

PSUN expects one-time buyout charges related to store closures of $11 million and a GAAP net loss per share of $(0.44) to $(0.58) for the fourth quarter. On a non-GAAP basis, excluding such one-time charges along with a normalized annual income tax rate of approximately 37%, the Company anticipates a net loss of $(0.18) to $(0.27) per share for the current quarter.

Source: http://phx.corporate-ir.net/phoenix.zhtml?c=83185&p=irol-newsArticle&ID=1637580&highlight=

Technical Analysis

Source: http://stockcharts.com

PSUN is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

The MACD for PSUN currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Source: Thomson Financial

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority.  We are neither licensed nor qualified to provide investment advice.

The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.  The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.  We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company.  An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report.  Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Any individual who chooses to invest in any securities should do so with caution.  Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.  Subscribers are cautioned not to place undue reliance upon these forward looking statements.  These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.  Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC.  You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled.  However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions.  We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.  Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

Related Articles

1. Leading Healthcare Stock in Focus; Pacific Biosciences of California
2. Stock Alert for Pacific Ethanol Inc. (PEIX)
3. Stock Alert for Pacific Ethanol Inc. (PEIX)

WTSLA is headquartered in Foothill Ranch, California.

Source: Reuters.com, SEC Filings.

Investment Highlights

WTSLA jumped 3.61% to close Friday at $4.30.  Over 2 million shares have traded hands during the session, versus the 10-day average volume of 1.96 million. It has a 52-week high of $4.94 and a low of $2.77. WTSLA is currently below its 50-day moving average of $4.32 and above its 200-day moving average of $3.97.  Market capitalization currently stands at $436.60 million and it has 101.54 million outstanding shares.

Early this month, the teen-focused apparel retailer reported a 2.9% increase in comparable store sales for the month of May, as against a 5.3% decrease last year.  However, the figure fell short of analysts’ expectation of an increase of 3.5%, according to a poll by Thomson Reuters.  Comparable store sales is a key metric used by retailers to gauge sales performance of stores opened for at least one year.

WTSLA CEO Susan McGalla commented in the press release, “May comparable store sales results were in line with our expectations. We were pleased to have delivered our sixth positive comparable store sales result in the past seven months, and we are comfortable with our current inventory levels in both divisions as we enter the summer months.”

For the four-week period ended May 28, 2011, the Company reported a 10.6% increase to $44.5 million in total revenue, as net sales of Wet Sales and Arden B rose 11.9% and 5.3%, respectively.  E-commerce sale dropped 6% for the fiscal month. These sales are not included in revenue at stores open at least a year.

CEO McGalla said the Company had reduced online promotions and intends to rebalance inventories more toward regular price versus clearance items to drive merchandise margins higher.  According to her, the Company’s e-commerce sales may come in below last year’s results in the near term as the Company continues to focus on more full-price selling.

Second Quarter Results

WTSLA reported net sale of $156.0 million for the fiscal first quarter ended April 30, 2011, compared to net sales of $137.8 million for the quarter ended May 1, 2010.  Operating income was $13.3 million, or 8.5% of net sales, compared to $10.0 million, or 7.2% of net sales, in the first quarter of fiscal 2010.

Net income came in at $8.0 million, or $0.08 per diluted share, up from the year ago quarter’s $3.1 million, or $0.03 per diluted share.  Excluding the impact of the interest charges, net income for the prior year quarter would have been $5.9 million, or $0.06 per diluted share.

The Company generated cash flows from operations of $17.5 million during the 13 weeks ended April 30, 2011, and ended the quarter with $183.5 million of cash, cash equivalents and short-term investments, and no long-term debt.

Visit WTSLA at www.wetsealinc.com

Source: Reuters.com, SEC Filings.

Analyst Consensus

This is the consensus forecast among eight polled investment analysts. Against the Wet Seal Inc company.

The six analysts offering 12-month price targets for WTSLA have a median target of 5.75, with a high estimate of 7.00 and a low estimate of 4.00. The median estimate represents a 38.55% increase from the last price of 4.15.

Source: markets.ft.com

Consensus Estimates Analysis

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=WTSLA.O

Technical Analysis

Source: http://stockcharts.com

WTSLA is within its Bollinger Bands. This is a normal condition suggesting that it is neither overbought nor oversold relative to the recent price action.

WTSLA’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

Comparative Analysis

Source: Thomson Financial

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority.  We are neither licensed nor qualified to provide investment advice.

The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.  The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.  We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company.  An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report.  Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Any individual who chooses to invest in any securities should do so with caution.  Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.  Subscribers are cautioned not to place undue reliance upon these forward looking statements.  These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.  Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC.  You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled.  However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions.  We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.  Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

Related Articles

1. Stock Alert for The Wet Seal Inc. (WTSLA)