Orange County Business Journal

Wet Seal Narrows Q2 Loss, Looks to Store Growth

Kari Hamanaka Wednesday, August 28, 2013

Results for Wet Seal Inc.’s August quarter show continued improvement in the company’s business.

The Foothill Ranch-based company operates the 464-store Wet Seal chain for teens and the 61-store Arden B for young women.

The company posted adjusted net income for the August quarter of $1.2 million, in-line with consensus estimates.

Net sales for the recently ended quarter rose about 1% from the year-ago period to $137.2 million. That’s about on par with Wall Street estimates of $137.88 million for the quarter.

Companywide same-store sales rose 3.7% during the quarter, led by a 3.9% gain in the Wet Seal division. Arden B saw same-store sales rise 2%.

Wet Seal shares were up less than 1% in afternoon trading Wednesday, to a market value of $347.9 million.

"As we look at the second half of the year, we're encouraged by how the business is positioned from both a financial and operational perspective,” said Chief Executive John Goodman in a statement. “Our product and merchandising initiatives are resonating with customers, and we believe these core strategies, along with new marketing programs and partnerships planned for back-to-school and holiday, will enable us to drive continued growth at both Wet Seal and Arden B.”

Wet Seal said it expects a net loss between $1.72 million and $2.58 million in the current quarter, compared with $14.62 million loss in the year-ago period.

The company expects net sales for the October quarter to be between $135 million to $138 million and same-store sales growth in the mid-single digits.

Wet Seal's also expanding sizes with its Wet Seal Plus Collection being rolled out to 36 Wet Seal stores this week. The line, which offers sizes 14 to 24 in bottoms and 1X to 3X in tops, had previously only been available online.

Retailers have posted mixed second-quarter results for the second quarter, highlighting challenges such as weak foot traffic and heavy discounting during the back-to-school selling season.

Teen retailers’ shares in particular have been on a rollercoaster ride over the course of the latest earnings releases, hit hard on disappointing results from Pittsburgh-based American Eagle Outfitters Inc. and Abercrombie & Fitch Co. of Ohio.

Meantime, Philadelphia-based Urban Outfitters Inc.—whose namesake chain is geared to teens—posted better-than-expected results earlier this month.

Irvine-based Tilly’s Inc. and Pacific Sunwear of California Inc. are expected to second-quarter results this week.