Pacific Sunwear Shares Fall 32% With Cloudy Holiday Forecast

Shares of Pacific Sunwear of California Inc. tumbled 32% Tuesday amid concerns that November sales at its stores open for more than a year were little changed, perhaps foreshadowing a weak holiday season.

The percentage drop was the second largest in U.S. markets.

The stock of the Anaheim-based casual apparel retailer, which targets the young-adult market, dropped $7.69 a share to $16.50. Volume totaled 10.43 million shares, more than 12 times the average daily volume over the last three months.

The flat same-store sales for the first three weeks of November prompted a sell-off that two analysts called an “overreaction.” Holiday sales could be weaker than forecast due to weak demand for young men’s denim pants, one said.

“The merchandise is in transition right now, but the company has a solid management team and a powerful store base, although it doesn’t look like a great holiday season,” said Joseph Grillo, an analyst at BT Alex. Brown Inc.

He downgraded Pacific Sunwear to “market perform” from “buy” and reduced his per-share earnings estimate for the fiscal year to $1.11 from $1.13.

For the first three weeks in November, Pacific Sunwear was expected to show an increase in sales of about 4% to 5% over the same period a year ago.

Pacific Sunwear had 1997 sales of $155.3 million. The fast-growing retail chain said earlier this month it plans to open six new stores during the current quarter, bringing to 70 its net new stores for the year. The retail chain expects to add 100 stores next year, bringing its total to 442.