Denim & bottoms business remain strong at Wet Seal
The Wet Seal Inc, a leading specialty retailer to young women, announced results for its fiscal fourth quarter and full year ended January 28, 2012, and introduced guidance for the first quarter of fiscal 2012.
For the fourth quarter:
• Net sales were $163.2 million compared to net sales of $165.5 million for the prior year fourth quarter.
• Consolidated comparable store sales declined 5.5%. Comparable store sales for Wet Seal declined 4.6% and for Arden B declined 11.0%.
• Operating income was $2.2 million, or 1.4% of net sales, compared to $7.6 million, or 4.6% of net sales, in the prior year fourth quarter.
• The current year quarter included $2.5 million in non-cash asset impairment charges and the prior year quarter included $1.5 million in non-cash asset impairment charges. The prior year quarter also included $0.9 million in charges comprised of transition agreement fees for the Company's former chief executive officer and professional fees for hiring the Company's new chief executive officer. Excluding the impact of these charges, operating income would have been $4.7 million, or 2.9% of net sales, in the current year quarter, compared to $10.0 million, or 6.0% of net sales, in the prior year quarter.
• Net income was $1.1 million, or $0.01 per diluted share, as compared to $5.3 million, or $0.05 per diluted share, in the prior year quarter. Excluding the after-tax effect of the asset impairment charges, net income in the current year quarter would have been $2.6 million, or $0.03 per diluted share. For the fourth quarter of fiscal 2010, excluding the after-tax effect of the $0.9 million charge related to CEO transition costs and the after-tax effect of the $1.5 million asset impairment charge, net income would have been $6.7 million, or $0.07 per diluted share. The fourth quarter of fiscal 2010 also included an effective income tax rate of 32%, which was less than the originally planned effective income tax rate of 40%, resulting in a $0.01 benefit to diluted EPS.
• As of quarter-end, the Company's inventory per square foot declined 10% versus the prior year quarter, with Wet Seal down 8% and Arden B down 21%.
• The Company generated cash flows from operations of $31.5 million during the fourth quarter, and ended the fiscal year with $157.2 million of cash and cash equivalents, and no debt. Due to the relatively early timing of its year-end date, the Company had not yet paid its February rents and other landlord costs at that time. Typically, including at the end of fiscal 2010, the Company had made such payments as of the fiscal year-end date. Had the Company made these payments as of the end of fiscal 2011, its cash balance would have been approximately $147.7 million.
Susan McGalla, the Company's chief executive officer, commented, "While sales were challenged during the fourth quarter, we drove merchandise margin improvement through a disciplined promotional strategy and diligent inventory control. At Wet Seal, denim and other elements of our bottoms business remained strong. Our tops business and other categories did not meet expectations, especially in the post-holiday period. At Arden B, we maintained tight inventory controls as we identify ways to improve our merchandise offering."
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The Wet Seal Inc