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Pacific Sunwear of California Inc. Message Board

  • blue_devil_ninetynine blue_devil_ninetynine Sep 2, 2011 2:04 PM Flag

    PSUN will beat next earnings

    Here's what I think was behind the "negative high single digit comps" outlook that the PSUN CEO provided on the last earnings call:
    1. I think they probably experienced negative mid single digits in the first half of August based on losing the denim promotions game.
    2. Secondly, I think they were seeing the possibility of macro conditions getting worse rather than better, and decided to buy themselves some breathing room on the outlook by predicting negative high single digit comps. The logic is that if you're going to lower guidance anyway, lower it enough that you have very high confidence you will beat.

    However, based on what other retailers have reported in the past few days, as well as articles by industry analysts, it seems that back to school is actually going pretty well, and consumers are continuing to spend on clothing at a healthy pace.

    Combine PSUN's pessimism/conservatism in providing the outlook with what's turning out to be pretty decent macro conditions (assuming those continue to hold), and we should see PSUN easily beat its low-balled targets for Q3.

    This is just my opinion, and I've backed it up by building a substantial long position. I certainly hope I'm right, but we'll all know in about three months.

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