Same-store sales at
Wet Seal Inc.
(
WTSLA
), a specialty retailer of fashionable and contemporary apparel and
accessory items, plunged 9.0% year over year in the five-week
period ended June 30, 2012. This compares unfavorably with the 7.3%
increase in same-store sales in the year-ago period. Total sales
slipped 7.5% in June 2012 to $53.6 million from the year-ago
period.
Comparable sales in the Wet Seal stores declined 8.5% year over
year, compared to a 7.5% increase in the year-ago period. Arden B
stores reported a year-over-year decline of 11.9% versus a 6.6%
increase in June 2011.
Total sales in Wet Seal stores slipped 7.1% year over year to
$45.6 million and Arden B stores' total sales declined 9.9% to $8.0
million in June 2012.
The decline in total sales and comparable sales from the
previous year period could be attributable to the slower pace of
economic recovery and lower spending by domestic customers.
However, e-commerce performed better than last year and sales
declined 5% in June 2012 versus a 17% decrease in the year-ago
period. The improvement resulted from the company's efforts to
increase sales through expanding its online business and realigning
e-commerce merchandising with its stores.
Comparable-store sales in June were in line with management's
guidance. The company continues to promote its sales to keep
inventory at manageable levels.
Store Update
As of June 30, 2012, Wet Seal operated a total of 553 stores in
47 states and Puerto Rico, including 470 Wet Seal stores and 83
Arden B stores. The company had closed one Arden B store during the
month of June 2012.
As of fiscal 2011, the company operated 558 retail stores in 47
states and Puerto Rico.
Future Planning
Wet Seal announced that it is conducting a capital planning
review, which includes the review of the company's cash
position.
Wet Seal expects second-quarter fiscal 2012 loss per share to be
in the range of 3 cents to 6 cents compared to prior-year quarter's
earnings of 2 cents a share.
The Zacks Consensus Estimate is pegged at a loss of 5 cents a
share for second quarter of fiscal 2012.
During its first-quarter earnings conference call, the company
announced its plans to open a 20 - 22 Wet Seal stores, for fiscal
2012, down from the previously announced plan of opening 25
-30 stores. The company also plans to bring down the number of
Arden B stores from the current 84 stores to approximately 64 to 69
stores by the end of fiscal 2012.
Conclusion
Management is geared up to make its women's tops stocks more
trendy and increase the variety available in its stores. We are
encouraged by the company's efforts to increase its penetration in
the e-commerce business and transition into full-price online
selling.
However, declining operating income in the recent quarters on
the back of higher SG&A expenses and promotion activities,
limited infrastructure, highly competitive nature of the women's
apparel industry and seasonal nature of the same are matters of
concern.
Wet Seal faces stiff competition from
American Eagle Outfitters Inc.
(
AEO
) and
Gap Inc.
(
GPS
). Currently, Wet Seal carries a Zacks #4 Rank, which translates
into a short-term Sell rating with a long term Neutral
recommendation.
Headquartered in Foothill Ranch, California, Wet Seal is a
specialty retailer of fashionable and contemporary apparel and
accessory items.
AMER EAGLE OUTF (AEO): Free Stock Analysis
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GAP INC (GPS): Free Stock Analysis Report
WET SEAL INC -A (WTSLA): Free Stock Analysis
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