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Wet Seal’s Shares Fall on Revised Outlook

Wet Seal Inc.’s shares tumbled Friday, a day after the Foothill Ranch-based mall retailer reported quarterly profits that were 44% off from a year earlier and said its second-quarter earnings would be below Wall Street expectations.

The company’s shares were down about 16% in late Friday trading.

Like other retailers, Wet Seal, which sells trendy clothes to young women, is dealing with the industry? worst downturn in recent memory as shoppers cut back purchases during the recession.

For the three months through May, Wet Seal earned $5 million, down 44% from $8.9 million a year earlier.

Sales at the company, which owns Wet Seal and Arden B. stores, were $132 million, down 7% from a year earlier and just shy of the $133.8 million analysts expected.

Same-store sales, or sales at locations open at least a year, a key measure of a retailer’s strength, fell 7.3%.

The decline was 7.9% at Wet Seal stores and 4.1% at Arden B stores.

The company said that it would report profits of $1.9 million to $4.9 million, down from the $7.8 million analysts had been expecting.

Wet Seal was hurt in the first quarter by a difficult retail environment and “inventory mix issues” that the company identified early in the period, said Ed Thomas, chief executive at Wet Seal.

He said the company saw early signs of a turnaround at Arden B., where same-store sales were positive in April. That’s a triumph for the company who had to restructure Arden B.’s inventory and pricing after the store, which caters to women in their 20s and 30s with slightly more expensive clothes, had been a drag on sales.

The company opened one Wet Seal and closed four Arden B. stores in the first quarter, leaving it with 410 Wet Seals and 83 Arden B. locations.

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