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Is PacSun Set for a Pounding?

If you own Pacific Sunwear, Cramer told viewers on Thursday, it’s time to take profits. The stock already has run 256% in the past year, and he thinks there’s a better way to play teen retail.

As Cramer pointed out this week, these teen-targeted stores have been ramping. And over the past year, Pacific Sunwear has been one of the best performers in the group, returning more than Bebe , American Eagle and Aeropostale . That alone would be reason to trim back your position, but PSUN investors have to keep this in mind, too: The business’ fundamentals don’t support a continued move higher.

Last quarter PacSun delivered a loss of 26 cents a share on a 17% decline in revenues, along with a 19% drop in same-store sales. Management doesn’t expect much better this time around either, with an even bigger loss to come on top of falling same-store sales of between 13% and 18%. And FBR Capital Markets released a report after the quarter that said Pacific Sunwear offered little sign of any imminent product turnarounds, had high clearance levels and deep markdowns.

PacSun knows it needs a turnaround, Cramer said, as evidenced by the unwinding of several big strategic decisions make over the last couple years. But there’s no proof yet that the attempted turn in working.

“And until we get that proof,” he said, “I think owning this stock may be a bad bet.”

Investors are better off buying Hot Topic , Cramer said, if they want to play this space. He endorsed the stock this week for its new special and regular dividends, important changes to the business plan and its laggard status in the group. While PacSun’s return has run well into the triple digits in the past 12 months, HOTT is actually down 34%. But that just means HOTT has much more room to move once it takes off.

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