Orange County Business Journal

Wet Seal Trims New-Store Plans After ‘Disappointing’ Quarter

Kari Hamanaka Tuesday, May 22, 2012

Foothill Ranch-based Wet Seal Inc. came in below Wall Street expectations on its July quarter guidance as the teen retailer looks to pull back on store growth this year.

Wet Seal operates a chain of 533 stores, with 469 Wet Seal stores geared to teen girls and 84 Arden B stores aimed at young women.

The company said it expects a loss of $2.9 million to $5.7 million in the current quarter, missing the $950,000 profit Wall Street analysts estimated on average.

Wet Seal said it expects revenue of $136 million to $141 million for the quarter.

Analysts on average expected $148.2 million.

Sales of stores open at least a year are expected to decline between 7% and 11%, the company said.

The guidance followed a tough April quarter, marked by weak sales in Wet Seal’s tops business.

The company reported a profit, excluding charges, of $1.9 million, which was on par with analyst estimates. Wet Seal reported a loss of $273,000, including charges.

Wet Seal reported a 5.2% decline in revenue to $147.9 million.

Wall Street analysts expected revenue of $149.9 million.

Same-store sales for the recently ended quarter declined 7.7% companywide, led by an 11.4% decline at Arden B.

“We are disappointed with our first quarter results and recent sales trends at both Wet Seal and Arden B,” Wet Seal Chief Executive Susan McGalla said in a statement. “We are taking immediate actions to rebalance the assortments towards stronger selling categories.”

The plan with Arden B will continue to focus on building a better bottoms inventory, while the company hopes to continue the trend of strong sales in Wet Seal denim, shorts, dresses and accessories among other categories.

The lackluster first-quarter performance prompted the company to pull back on store growth plans for Wet Seal this year.

The company said that it will open between 20 and 22 Wet Seal stores this year. That’s down from original plans to open between 25 and 30 stores this year.

The company’s Arden B division is expected to cut as many as 20 stores under a strategy that calls for exits or short-term extensions on leases that come due this year.