Stocks to Watch: Retailers Rally, but Retek Plummets

The Day's Winners

Several retail stocks were gaining ground in morning trading on more optimistic earnings forecasts. Pacific Sunwear (PSUN) was climbing 8% to $24.30 after saying its same-store sales for June were up 10% and it expects second-quarter earnings of 18 cents, above the consensus analyst estimate of 15 cents. Shares of Nautica (NAUT) were up 12.3% to 13.04 after the company predicted a robust recovery in the second half of the year. Women's apparel retailer J. Jill Group (JILL) also boosted its second-quarter forecast, saying its results will be ahead of estimates on strong sales of full-priced merchandise. Shares were up 10% to $26.48 on the news.

Igen International (IGEN) shot up 13% after the company said it has made progress in its settlement discussions with Roche and that the two companies may be approaching a "satisfactory conclusion." In April, a federal judge reaffirmed its $505 million judgment in favor of Igen in a license dispute with Roche. The companies now say they have made progress in bridging their differences and wish to continue their partnership if a satisfactory outcome can be reached.

Digital imaging and speech product maker ScanSoft (SSFT) tacked on 6% to $6.26 after the company said it will meet or exceed the current consensus estimate for the second quarter. Excluding charges, the company said it will earn more than 4 cents a share on revenue greater than $24.6 million. The company said it has seen increasing sales momentum despite the economic downturn.

The Day's Losers

Software and services firm Citrix Systems (CTXS) was dropping 15% to $5.05 after the company warned of a second-quarter shortfall and impending job cuts. Citrix now expects to earn 6 cents to 7 cents a share, excluding charges, compared with the consensus estimate of 11 cents. Revenue is expected to be $116 million to $118 million, down from $147 million a year ago. The company said its shortfall was caused by slower sales of its prepackaged starter software, usually purchased by first adopters. Citrix also plans to cut its workforce by about 190 jobs to keep its expenses in line with revenue.

Automatic Data Processing (ADP) slid 3% to $40.96 on a downgrade from Thomas Weisel. The firm cut its rating on ADP to attractive from buy to reflect the lack of visibility in the current economic environment. Weisel said there is potential for ADP's EPS growth to fall below 10% in the first half of 2003, and the firm added that the fundamentals of the payroll industry usually lag behind the economy. Weisel cut its 2003 estimates on the company to $1.90 a share on revenue of $7.26 billion, below the current consensus.

Siebel Systems (SEBL) shed 1.5% to $13 after Bear Stearns initiated coverage of the company with an unattractive rating. The firm said Siebel's enterprise applications software business may not improve this year or even next, and the current Wall Street consensus estimate for Siebel is too optimistic. Bear estimates 2002 EPS of 34 cents and 2003 EPS of 37 cents, well below the consensus of 44 cents and 52 cents, respectively. The firm also set a price target of $9 on the stock.

Software company Retek(RETK) was plunging 59% to $7.11 after the company slashed its third-quarter and full-year expectations. Retek expects to earn 2 cents to 4 cents a share in the third quarter on revenue of $52 million to $54 million, missing the consensus estimate of 12 cents on revenue of $65 million. For the year, Retek sees 25 cents to 30 cents a share on revenue of $215 million to $230 million, compared with the consensus estimate of 43 cents on revenue of $249.6 million. The company added that it has withdrawn its 2003 guidance until it "can determine the future trend and volume of deal closings."

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