If

Pacific Sunwear

(PSUN)

is giving investors a sunburn, the analysts who follow the stock must be feeling positively scorched.

The stock plunged 27% Tuesday as investors reacted to the surf-and-skate retailer's Monday afternoon announcement of a weak 1.6% gain in April

same-store sales. But looking even worse than holders were the analysts who follow the stock, most of whom had recently projected April comp-sales growth of between 5% and 8%.

PacSun's selloff illustrates how slippery a company's near-term prospects can be, and points to the vulnerability of highflying stocks, particularly in beaten-down areas such as retail. Now, even as analysts insist PacSun's story remains substantially intact, some investors are deserting the stock and questioning its prospects, which could lengthen the odds against a return to prior heights.

Caught Off-Guard

Just last Wednesday,

Tucker Anthony Cleary Gull

analyst Steven Richter issued a research note on the heels of a meeting with PacSun management the previous day. "We continue to remain very confident in the company's growth strategy and potential going forward," wrote Richter, adding that he estimated above-plan sales trends for April "in the 5% to 7% range." (His firm hasn't done recent underwriting for PacSun.)

Richter says PacSun has a policy of not directly commenting on business trends during the month, so that even if management were aware of nasties to come, it most likely wouldn't have said anything. "It clearly caught a lot of people off-guard," says Richter, who still rates the company a strong buy.

Richter wasn't the only analyst to get sand kicked in the face.

Robertson Stephens

analyst Janet Kloppenburg, who rates PacSun shares a buy, issued a note on Thursday in which she estimated PacSun's monthly comp-sales growth at 7%. (Her firm has done recent underwriting for the company.) In an April 26 research note launching coverage on PacSun with a buy rating,

Credit Suisse First Boston

analysts said they expected near-term sales and earnings momentum to continue "with upside surprise possible." (The firm hasn't done recent underwriting for PacSun.)

Late Easter

How'd they get it wrong? PacSun moved Pac Bucks, its spring break promotion, from April to March in response to the late Easter holiday (it racked up an above-plan, same-store sales gain of 9.8% during March). PacSun wasn't immediately available to comment on what guidance it gave investors and analysts about the promotion shift.

The company also said bad weather in the East may have contributed to lower sales. The rain that fell, however, wasn't exactly a secret, and the impact of weather on sales has been

well-flagged. Why didn't analysts figure out the weather impact on their own? Moreover, weather in the final week of the month was pretty nice on the East Coast. So why didn't all those little surf-and-skate rats go shopping?

How Soon Is Now?

To be sure, PacSun's news may not have been as bad as first glance would indicate. Total same-store sales for the first quarter rose 7%, above the company's plans. And PacSun did say earnings for the first quarter likely would be 18 cents a share, in line with the

First Call/Thomson Financial

consensus.

Analysts are now saying it's a good time to buy PacSun on the cheap. "I'm absolutely a strong buyer," says Richter. "This has nothing to do with merchandise or management. It's an external factor."

Richter says there's big potential for PacSun's newer

d.e.m.o.

concept, which showed 13.3% same-store sales growth during the month. While PacSun addresses the board-sport market, d.e.m.o. brings hip-hop styles to the 'burbs (didn't James Toback just make a movie about that?). In a research note,

First Union Securities

analyst Kelly Armstrong likens this buying opportunity to one in November 1998, when PacSun posted disappointing sales and the stock fell to 9. Within three months, she says, the stock touched 22. (She rates PacSun shares a strong buy, and her firm hasn't done any recent underwriting for the company.)

But three hedge fund managers who follow retail say that by no means are they buyers (indeed, one is maintaining a short position). Even after Tuesday's haircut, PacSun still trades at 31 times earnings. And this isn't 1998: Fundamentals for retailers remain poor. With strong economic data coming out of Washington, the

Fed

will keep raising interest rates until consumer demand slows. Plus, retailers such as PacSun are victims of their own success; after posting same-store sales growth of 8.6% in fiscal 1999 and 7.8% in fiscal 2000, it's hard to keep topping those old gains.

And that, some say, means that PacSun shares aren't likely to shine any time soon.