It's a new day at Pacific Sunwear (PSUN) , and it's not too late to enjoy it.

The mall-based retail chain, which sells surf-styled apparel to teens, announced Monday that its CEO, Seth Johnson, resigned to pursue other interests. Johnson, who took the helm just last year, will be replaced temporarily by Sally Frame Kasaks, a lead director who served as CEO of

Ann Taylor


from 1992 to 1996. The company is searching for a permanent replacement.

The beaten-down shares of the struggling retailer came back to life after the announcement, rising $1.09, or 7.2%, to close at $16.17. Investors were speculating that the company's board forced Johnson out, and that mistakes made under his leadership were a thing of the past.

Those who missed Monday's wave might be assuming now that the groundswell is over, but not so fast.

"It's silly to look at this as a missed opportunity if you don't own the stock yet because it's still cheap," says Jeff Van Sinderen, analyst with B. Riley & Co. "You're looking at a stock that was really priced for disaster, and it's really just bouncing off its bottom here.

"I'm more optimistic about the company's prospects under a new CEO," he adds. "I'm pleased by the fact that the board took action. They needed to take action."

While Van Sinderen doesn't personally own shares of Pacific Sunwear, his firm makes a market in the stock, and he has received compensation from the company in the last 12 months.

Monday's gain was unusual, but shares of Pacific Sunwear were priced at about $25 at the beginning of the year, 55% higher than current prices. Given the macroeconomic challenges that all retailers are facing, nobody should assume that the stock can get back to that level. But Pacific Sunwear's slide largely can be attributed to merchandising mistakes that can be rectified.

"Clearly they did not have the right stuff in their stores at the right time, and we feel like some of those mistakes should not have happened," says Van Sinderen. "Those kinds of mistakes can present big opportunities because they can be fixed by some good decision-making."

In early August, shares of Pacific Sunwear dropped 10% in one day to a three-year low after the retailer said its second-quarter earnings dropped 54% to $9.7 million, or 14 cents a share, from $21.1 million, or 28 cents, a year earlier. Its total sales rose 1.5% to $313.7 million, but its same-store sales, or sales at stores open at least a year, fell 5.5%.

On top of that, the company forecast third-quarter earnings of 22 cents to 30 cents a share, well below the 49 cents that Wall Street had estimated.

These days, investors in the retail sector view any signs of deterioration as evidence that a widely predicted consumer spending slowdown is underway, as the housing market slumps and interest rates rise. But Pacific Sunwear's direct competitors, such as

American Eagle Outfitters

( AEOS) and

Abercrombie & Fitch

(ANF) - Get Report

, showed no such sales drop-off in the all-important back-to-school shopping season.

Pacific Sunwear had stocked its stores with cold-weather threads when the summer heat was still at large. Denim sales have dropped off this year, and same-store sales results were slightly positive in its boy's business, but its girl's business dropped off precipitously, suggesting tough competition from the likes of Abercrombie's Hollister chain. Also, the company's large sneaker business took a hit as its merchandisers failed to anticipate shifting fashions.

"Tops and bottoms are now longer and skinnier, and if you have that look, you can't really wear a clunky sneaker," says Christine Chen, analyst with Pacific Growth Equities. "That's been a big change, and I don't think PacSun acted quickly enough to address that."

Pacific Sunwear's business model offers it some long-term flexibility when it comes to merchandising. The company sells a variety of branded products, such as Quiksilver and Hurley, alongside its private label. That gives it an edge over rivals like



, which only offer products under their own brand names.

Meanwhile, its three main retail concepts -- PacSun, the Pacific Sunwear Outlet and d.e.m.o. -- have room to grow, and they offer the company an opportunity to sell board-sport-inspired products to a variety of demographics. Its new specialty footwear and accessory chain, One Thousand Steps, could also have some growth potential.

In the meantime, Pacific Sunwear's balance sheet is clean, with no debt, and the business is generating cash.

"Even though this company is struggling, this isn't a company that's going bankrupt, and it trades like one that is going bankrupt," says Chen. "There's been a lot of speculation that private equity firms may want to take a look at it because it's so cheap."

Chen doesn't own shares of Pacific Sunwear, and her firm does not have an investment banking relationship with the company.

Private equity players have been active in the retail industry lately, and any company whose stock takes a plunge is vulnerable to a buyout. Trading at just 13 times Wall Street's earnings estimates through 2007, Pacific Sunwear could be a ripe target, especially if its troubles can be remedied over time by better management.

"If private equity was going to come in here, they'd have to pay a premium that would be reasonable, and they could probably make a lot of money turning the business around," says Van Sinderen. "But we're not betting on that. This company can improve its prospects with a new CEO."