Thursday morning's barrage of same-store-sales press releases overwhelmingly surprised to the upside. Standouts included Zumiez (ZUMZ), Abercrombie (ANF), PacSun (PSUN), Wet Seal (WTSLA), and Dillard's (DDS).
Some of these stock jumps look extreme in relation to 2010 and 2011 earnings estimates. Abercrombie is trading at 17x 2011 numbers, and look at PacSun, up 9% today even though they're expected to post massive losses this coming year, even WITH these positive sales reports.
I think it helps to take a look at what these "former glory" retailers previously earned, as that can explain investor optimism. Pull out Abercrombie's cash per share and it trades at 8 times the five year peak earnings of 5.20; I'm not saying that is the right way to value it, but it is important to consider.
Another one to look at is Pacific Sunwear (PSUN), a stock trading at just three times its five year maximum earnings per share. Granted, they're expected to post huge losses this year, but this list is a good place to look for "former glory" possibilities (far right column below). The most critical component of these possible turnarounds is management, and you can get a partial feel for their skill and level of shareholder commitment by listening to their quarterly conference calls.
Happy hunting... (Click chart for clearer view.)
Disclosure: Long GPS