I had Pacific Sun (PSUN) on a solid balance sheet, low P/Sales screen, but failed to act on it as other retailers with similar characteristics started moving (CHS, CHIC). But a little bit belatedly, PSUN has been getting a re-rating lately. It has gone from $1.39 on April 8th to a high of $4.25 today (205%).
Unlike Talbots which rallied inexplicably last year when it got a little debt relief (but who was going to buy their lousy clothes) and provided a decent short opportunity, the same is not necessarily true for PSUN because it has a better balance sheet.
But having a decent balance sheet in the retail space is no guarantee that hard times won't catch you out. Select Comfort (SCSS) is a great example of a once "market darling" with a little bit of cash set aside for a rainy day, failing to provision sufficiently for when the rains came. It was amazing how quickly its financial position changed from one of relative strength to one of "where's the cash going to come from."
Incidentally, SCSS has had a nice rally from $0.19 to as high as $1.40 (636%) - wow, wish I had been on that one.
Disclosure: No personal or professional position in any stocks mentioned.
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