Pacific Sunwear of California Inc.'s shares fell sharply Friday after the surf-and-skate-inspired retailer issued a modest forecast for its fourth quarter.
THE SPARK: The retailer reported Thursday that it earned $948,000, or 1 cent per share, for its fiscal third quarter that ended Oct. 27. That is compared with a loss of $17.6 million, or 21 cents per share, in the third quarter last year. After adjusting for a number of one-time items, it posted a loss of 3 cents per share versus a loss 11 cents per share.
Revenue inched up to $228.4 million from $226.8 million.
The quarter met analyst expectations of an adjusted loss of 3 cents on revenue of $226.3 million, according to data from FactSet.
Pacific Sunwear also said that it expects to post a loss of 9 to 17 cents per share for its fourth quarter on an adjusted basis with revenue of $225 million to $235 million. Analysts had forecast a loss of 9 cents per share on revenue of $221.7 million.
THE BIG PICTURE: Pacific Sunwear, like many retailers focused on teenage consumers, has struggled with intense competition for teen's limited dollars amid the weak economy. It has adjusted its product lineup to draw the fickle shoppers and closed underperforming stores to help its future performance, but recovery takes time.
THE ANALYSIS: B. Riley & Co. analyst Jeff Van Sinderen said that the retailer's merchandise has improved but its key sales trends remain lackluster, due in part to store closures. The company has overcome fierce competition to make some gains. However, Sinderen said the company needs to make larger gains in its profitability for its stock to merit a higher valuation in his eyes. The analyst reiterated a "Neutral" rating on the company's shares.
SHARE ACTION: Shares fell 26 cents, nearly 14 percent, to $1.63 in afternoon trading. Its stock has traded between $1.17 and $2.73 in the past 52 weeks.