Pacific Sunwear Of California, Inc. (PSUN) Maintains Neutral Rating

Analyst Linda Tsai at MKM Partners has released an update on Pacific Sunwear of California, Inc. (NASDAQ: PSUN). The company reported its fourth-quarter results on Thursday, March 11.

Pacific Sunwear of California reported a loss of $0.26 per share in its fourth-quarter, which was lower than the loss of $0.28 per share estimated by MKM Partners and the consensus of a loss of $0.30 per share. The loss was lower than estimates mainly due to higher sales and expense leverage, which was partially offset by weaker-than-expected gross margins. Same-store sales were down by 19% in the fourth-quarter. However, this was lower than MKM’s forecast of a 21% decline. The company closed 10 stores in its fourth-quarter, which was again lower than MKM’s expectations of 17.

MKM Partners believes that the key to results in 2010 will be how improved the merchandise is at the company in the second half of this year. MKM Partners has revised its forecast for first-quarter. It now expects Pacific Sunwear to make a loss of $0.30 per share. The previous estimate was for a loss of $0.25 per share. MKM cites the weakness in gross margins as a reason for revision in estimate.

MKM Partners continues to rate Pacific Sunwear of California, Inc. as Neutral as it expects volatility in the company’s stock and would like to wait on the sidelines until there are clearer indications that the company has fixed all its merchandising issues. The fair value estimate for Pacific Sunwear stock is of $5.