Wet Seal Inc.
) reported fourth quarter fiscal 2012 adjusted loss of 6 cents
per share compared to adjusted earnings of 3 cents per share in
the year-ago quarter. The loss resulted from a decline in sales
The loss was in line with the Zacks Consensus Estimate and the
most recent guidance provided by the company.
Consolidated Revenue and Margins
Wet Seal's net sales in the reported quarter slipped nearly 1%
to $161.7 million from $163.2 million in the prior-year
period. Lower sales at both Arden B and Wet Seal stores led
to this decline. Sales, however, exceeded the Zacks Consensus
Estimate of $159.0 million.
E-Commerce sales improved 19.5% during the quarter backed by
ongoing refinements and new strategic initiatives.
During the fourth quarter, comparable store sales declined
8.3% compared to a decline of 5.5% in the prior-year
quarter. The comparable store sales decline was in line
with management's expectation provided during the third quarter
earnings conference call.
The significant decline in total sales and comparable sales
from the year-ago period is due to the slower pace of economic
recovery and lower spending by domestic customers.
Transactions per store declined although traffic was on the rise
implying that window shoppers increased. Since ecommerce sales
increased significantly, this could also be an indication of
showrooming by customers.
After opening four Wet Seal stores and closing eight and
nineteen Wet Seal and Arden B stores respectively, during the
fourth quarter, the company has 530 stores in 47 states and
Puerto Rico. These include 468 Arden B stores and 62 Wet Seal
stores as of February 2, 2013.
The gross margin shrank 560 basis points to 24.8% from 30.4%
in the prior-year quarter, due to increased spending on improving
merchandise and occupancy deleverage. Operating loss was $25.5
million in the quarter compared to operating income of $2.2
million in the prior-year quarter.
The company operates through two nationwide, primarily
mall-based chains of retail stores -"Wet Seal" and "Arden B."
Wet Seal Stores
: These stores offer apparel for girls aged between 13 to 19
years. The products in these stores are trendy and competitively
priced. Net sales at Wet Seal Stores declined 1.1% to $137.2
million from $138.8 million in the year-ago quarter. Same-store
sales declined 9.1% compared with a decline of 4.6% in the
These stores offer apparel for women aged between 25 to 39 years.
The products usually featured in these stores include dresses of
contemporary fashion, sportswear and accessories suitable for any
occasion. Net sales of $24.4 million at the Arden B stores were
almost flat with the year-ago quarter. Same-store sales declined
3.1% year over year compared with a decline of 11.0% in the
Full Year Results
For fiscal 2012, the company reported adjusted loss of 22
cents per share compared to adjusted earnings of 19 cents per
share in the year-ago quarter. The loss was, was in line
with Zacks Consensus Estimate and the most recent guidance
provided by the company.
Consolidated Revenue and Margins
Wet Seal's net sales in the reported quarter slipped 6.4% to
$580.4 million from $620.1 million in the prior-year
period. Lower sales at both Arden B as well as Wet Seal
stores led to this decline. Sales, however, exceeded the
Zacks Consensus Estimate of $578.0 million.
Other Financial Updates
The company had cash and cash equivalents of $110.0 million as
of February 2, 2013 compared with $126.3 million as of October
The company used $12.4 million of cash in operations during
the quarter compared with $14.9 million in the last quarter.
Capital expenditure amounted to $20.4 million, out of which the
company spent $15.0 million on new stores and remodeling of
Following the sluggish fourth quarter results, Wet Seal
estimates its first-quarter 2013 loss per share to be in the
range of 3 cents to 6 cents. The Zacks Consensus Estimate is
currently pegged at a loss of 1 cent for the first quarter of
For the first quarter, net sales are expected to be between
$139.0 million and $147.9 million and comparable store sales are
expected to decline in mid-single digits.
Gross margin is expected to be between 26.2% and 27.7% of net
sales and operating loss is expected to be between $2.7 million
and $5.4 million.
The company expects to open 19 new Wet Seal stores and close
nine Arden B stores at the end of the first quarter.
Wet Seal posted a loss in the fourth quarter compared to an
income earned a year ago due to lower revenues and higher
merchandise expense. Revenues also declined due to low comparable
store sales and macroeconomic headwinds.
Wet Seal currently carries a Zacks Rank #3 (Hold). Other
) both with a Zacks Rank #2 (Buy), are worth considering.
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