Shares of Foothill Ranch-based Wet Seal Inc. plummeted 19% on Thursday after the retailer lowered same-store sales in September and cut guidance for October as well as third quarter profit.
The mall retailer, which operates the Wet Seal and Arden B. store chains for teens and young women, said September same-store sales should fall 7.5% to 8.5% from a year earlier. The company previously had given guidance of a 1% decline to 3% rise for the month’s sales.
Wet Seal cited a slowing in overall sales at its stores, and lower-than-expected sales of full-priced items.
“During September, we have continued to experience lower year-over-year average store transaction counts,” said Chief Executive Joel Waller. “This, along with higher than originally expected promotional activity, has resulted in lowered comparable store sales and earnings expectations for the third quarter.”
The company now expects profit to either break even in the third-quarter or to post a gain of about $1.9 million. That’s down from an earlier forecast of $6.5 million to $9.3 million in profit.
Analysts were looking for a profit of about $8.4 million in the quarter.
Wet Seal also said it anticipates a 2% to 6% drop in same-store sales for October.
The retailer has been working on a turnaround the past few years under Waller, who didn’t seek a renewal of his contract earlier this year.
The company recently said it was hiring back its former president to replace Waller. Edmond Thomas, who hails from Irvine-based Tilly’s Inc. as president and co-chief executive, is expected it join Wet Seal sometime this month. Tilly’s runs some 70 stores selling surf-inspired clothes.
Waller largely has been seen as Wet Seal’s turnaround guy.
The company saw troubles begin in the late 1990s, when its styles fell out of favor with teen fashionistas. Many expected Wet Seal to file bankruptcy, which it didn’t.
With the help of turnaround consultant Michael Gold, Waller closed unprofitable stores, switched up management and cut costs.
Things have been tougher of late. Wet Seal has seen mixed same-store sales the past few months. Earnings also have been a bit of a mixed bag, with the company posting a mix of losses and small profits during the past year. Wet Seal counted a recent market value of about $300 million.
