Ahead of the Bell: Upgrade boosts Pacific Sunwear

Pacific Sunwear shares up in premarket as analyst upgrades to "Outperform," predicts growth

Associated Press

NEW YORK (AP) -- Pacific Sunwear shares rose before Friday's opening bell after a Wedbush analyst upgraded the retailer's rating to "Outperform" from "Neutral," saying that it appears poised for growth.

Betty Chen said the chain stands to benefit from the increasing popularity of the skate and surf life style, the expansion of its women's business and possibly better-than-expected financial results.

She noted that women's fashions in particular are moving away from the preppy look and more toward the California style associated with Pacific Sunwear. She likewise credited the trend shift with boosting sales at fellow retailers Tilly's and Zumiez in recent months.

Chen expects Pacific Sunwear's comparable sales to continue to improve, helped by an 8 percent increase in comparable sales of women's products stemming from a sequential pickup in key trends and higher demand for the company's exclusive brands. More full-price sales will also help improve profit margins, the analyst said.

She increased her estimate for second-quarter earnings per share to a penny, from breakeven, and raised her price target to $4 from $3.75 per share. Her earnings estimate now matches the penny-per-share average from analysts surveyed by FactSet.

In premarket trading, Pacific Sunwear of California Inc. shares rose 16 cents, or 4.8 percent, to $3.49. The stock has traded between $1.36 and $3.62 in the past 52 weeks, and has more than doubled in the first half of the year.

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