Foothill Ranch-based retailer Wet Seal Inc.’s Arden B chain is showing progress on a turnaround but faces a tough retail market and holds the prospect of a sale or closure, an analyst said Tuesday.
Wet Seal, which runs mall clothing stores, “is making strides in fixing Arden B, (but) the environment remains challenging and we are unsure as to whether this concept will be able to return to its heyday,” Raymond James analyst Samantha Panella said in a report starting coverage on the company.
The company runs 408 Wet Seal stores for teen girls and 91 Arden B stores for young women.
Panella said she expects operating profits at Arden B to remain “well below” Wet Seal’s.
In August, Arden B saw a 24.7% drop in sales at stores open at least a year. Wet Seal was off 5.4%.
The analyst said she doesn’t expect Wet Seal to sell off Arden B, but if the chain “returns to being a significant drag on earnings, we believe management may eventually discontinue this operation.”
Shares of Wet Seal closed down 3.5% Tuesday on a market value of $375 million.
