Orange County Business Journal

Wet Seal Lowers Outlook for Current Quarter

Kari Hamanaka Thursday, November 17, 2011

Foothill Ranch-based teen retailer Wet Seal Inc. issued a revenue forecast below Wall Street analyst expectations for the current quarter, which includes the holiday sales season.

The lowered guidance came as the chain reported third-quarter results that met expectations on profits but missed on revenue.

Wet Seal operates 464 stores under its namesake chain geared to teen girls. Another 86 stores are under the company’s Arden B. division for young women.

The company said it expects a profit of $2.8 million to $4.6 million for the three months through January.

Wall Street had pegged the company to come in at the high end of that range.

The company’s revenue forecast for the current quarter is $166 million to $168 million.

Analysts had expected $173.4 million in sales.

New clothing styles for the holidays hit sales floors earlier this month at Wet Seal and Arden B. and are expected to help “stabilize sales trends,” according to Chief Executive Susan McGalla.

“We are mindful, though, that we continue to be up against a highly promotional calendar for ourselves in the prior year,” McGalla said.

A sales increase at stores open at least a year is expected to be low-single digits for the January quarter.

Wet Seal saw momentum behind a turnaround strategy slow in recent months.

“As we transitioned to fall, the Wet Seal business became more challenging as our sportswear and outerwear assortments for the season did not perform to our expectations,” McGalla said.

Profit for the October quarter was $3.7 million, in line with Wall Street analysts.

Revenue was up 4% from a year earlier to $152.1 million but below the $157.7 million analysts expected.