On Feb 3, 2015, Zacks Investment Research upgraded Pacific Sunwear of California Inc. (PSUN), the specialty branded footwear retailer, to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Pacific Sunwear has been witnessing rising earnings estimates since it posted solid comparable store sales (comps) data for Dec 2014 and upgraded its outlook for the fourth quarter of fiscal 2014. Shares of the company have climbed 2.9% since these announcements.
This Anaheim, CA-based specialty retailer’s comps jumped 9% year over year, on the back of stupendous performance at both the men’s and women’s categories, coupled with an enhancement in gross margins, estimated at 400–500 basis points.
Following the spectacular numbers, management upgraded its outlook for the fourth quarter of fiscal 2014. It now expects adjusted loss from continuing operations to narrow down to 11–12 cents per share as against the earlier guided range of a loss of 12–17 cents a share.
This in turn triggered an uptrend in the Zacks Consensus Estimate, as analysts became more constructive on the stock’s performance. The Zacks Consensus Estimate of a loss of 27 cents for fiscal 2014 and a loss of 14 cents for fiscal 2015 narrowed down from the estimate of a loss of 29 cents and 17 cents, respectively, over the past 30 days.
Apart from this, Pacific Sunwear’s third-quarter fiscal 2014 results remained impressive as it reported a loss of 3 cents a share that fared better than both the Zacks Consensus Estimate and the prior-year quarter loss of 5 cents a share.
Also, a 4% improvement in quarterly comps drove revenues, which advanced 4.7% to $212.3 million, beating the Zacks Consensus Estimate of $207 million. This is the 11th straight quarter that the company has registered comps growth. Efficient inventory management also contributed to improved results.
We believe that all these aforementioned factors speak positively about the company and highlight its growth prospects.
Other Stocks to Consider
Other top-ranked stocks in the retail space include Bebe Stores, Inc. (BEBE), Stage Stores Inc. (SSI), each carrying the same Zacks Rank as Pacific Sunwear and L Brands, Inc. (LB), with a Zacks Rank #2 (Buy).
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