NEW YORK (TheStreet) -- Pacific Sunwear (PSUN - Get Report) shares are dropping, down -18.4% to $2.40, on Friday after lowering its second-quarter guidance below analysts' expectations.
The action sports retailer announced second-quarter revenue guidance between $200 million and $210 million, below analysts' expectations of $211.8 million, according to Thomson Reuters. The company set its net loss guidance between -8 cents and -2 cents per diluted share. Analysts were expecting a net loss of 1 cent per share for the quarter.
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TheStreet Ratings team rates PACIFIC SUNWEAR CALIF INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PACIFIC SUNWEAR CALIF INC (PSUN) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Specialty Retail industry. The net income has decreased by 13.5% when compared to the same quarter one year ago, dropping from -$19.86 million to -$22.54 million.
- The debt-to-equity ratio is very high at 4.78 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.24, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, PACIFIC SUNWEAR CALIF INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for PACIFIC SUNWEAR CALIF INC is rather low; currently it is at 22.77%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -10.31% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $13.39 million or 52.30% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: PSUN Ratings Report