Shares of Pacific Sunwear (PSUN) took off during Tuesday's trading session. Shares traded up 11% to close at $1.72. The company has been in the spotlight after a recent SEC filing disclosed Chief Executive Officer George Mrkonic making a large insider purchase.
In May, Chief Executive Officer Gary H. Shoenfield purchased over 150,000 shares of Pacific Sunwear. The purchases, made on the non-open market, were done at a range of $1.45 to $1.47 on two separate occasions. On May 29th, Board of Directors member George Mrkonic purchased 100,000 shares of Pacific Sunwear at an average price of $1.48. The transaction gave the board member a new total of 221,851 shares of the teen retailer. Director Thomas Murnane also acquired 50,000 shares of Pacific Sunwear in May at a price of $1.55 per share. Insider buying is usually a positive sign, especially for a company in turnaround mode.
In May, Pacific Sunwear reported first quarter earnings. The company reported net sales of $173.8 million, versus $171.9 million in the prior year's first quarter. Earnings per share (GAAP) improved to a loss of $0.23, against a loss of $0.43 per share in last year's same period. Same store sales for locations open more than a year improved by 1%.
The company is forecasting a net loss (non-GAAP) between $0.11 and $0.16 per share for its second quarter. Same stores sales are forecasted to be in a range of -1% to +4%. Analysts on Yahoo Finance are expecting the company to report a loss of $0.12 in the second quarter. Analysts see the retailer earning a loss of $0.46 for this fiscal year. The following year, analysts see the company getting closer to a profit with a loss of $0.27. If the company can continue to show positive same store sales, then perhaps they can return to profitability sooner than expected.
At the end of the company's first quarter (May 17th, 2012), Pacific Sunwear had 729 stores in all of the United States and the country of Puerto Rico. In last year's first quarter, Pacific Sunwear had 827 stores in operation. During this year's first quarter, Pacific Sun closed five stores and opened one. Of the existing 729 stores, 610 are core Pacific Sunwear stores and 119 operate as Outlet stores.
Back in November, I recommended staying clear of shares of Pacific Sunwear in my mall preview series. Shares were trading at $1.32 at the time of that article. Shares of Pacific Sunwear have traded under $1.50 in September, October, November, and May. Shares are now trending up for the start of June. Shares traded as high as $2.50 in March, before diving after reported earnings.
I think taking a flyer on Pacific Sunwear shares is well worth the chance below $2. The Board of Directors is backing the company and perhaps you should too. The company has beaten analysts' estimated earnings each of the last four quarters. In August, an earnings beat could send shares up even further. My price target is $2.50 by the end of 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.