Pacific Sunwear Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of teen-oriented retailer Pacific Sunwear (NAS: PSUN) were covered in clouds today as investors hit the stock with a big thunderbolt. Shares tumbled as much as 42% after the company gave a disappointing earnings report.

So what: As the results fromAmerican Eagle Outfitters (NYS: AEO) and other competitors have shown, it's simply a tough time to be a teen retailer. But for PacSun, which has its own challenges in addition to the broader economic issues, the environment is murder.

On the bright side, the company topped analysts' earnings estimates for the second quarter, as it reported a non-GAAP loss per share of $0.18 versus the anticipated $0.24 loss. It also managed positive same-store-sales growth of 1%. However, guidance for the third quarter has same-store sales falling in the mid- to high single-digit range, and the loss per share coming in between $0.10 and $0.18. Wall Street had been expecting the loss per share to improve to $0.05.

Now what: I can't sum it up better than PacSun CEO Gary Schoenfeld: "Until recently we had expected this positive momentum to continue, yet we are now more cautious in our near term outlook due to a combination of factors including macroeconomic pressure, along with a highly promotional start to the back to school season."

And that, ladies and gents, is, in a nutshell, why the stock is getting absolutely shellacked today. Want to keep up to date on these stocks?

At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferdoes not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter@KoppTheFoolorFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

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