Wet Seal announces Q2 2008 results

22 Aug '08

5 min read

The Company generated cash flows from operations of $13.1 million during the second quarter of fiscal 2008 and ended the quarter with $123.6 million of cash and cash equivalents and $2.4 million of long-term debt, comprised of convertible notes, net of discount. As of the end of the prior year second quarter, the Company had cash, cash equivalents and marketable securities of $93.4 million and long-term debt, comprised of convertible notes, net of discount, of $3.1 million.

The Company ended the second quarter with inventories of $44.6 million, representing a 12.5% decrease in inventory per square foot versus the end of the prior year second quarter.

First Six Months Financial Results:
Net sales for the 26 weeks ended August 2, 2008, were $291.5 million compared to net sales of $281.3 million for the 26 weeks ended August 4, 2007. Comparable store sales for the 26 weeks ended August 2, 2008 declined 5.9%, comprised of a 2.5% decline at Wet Seal and a 17.8% decline at Arden B.

Net income for the 26 weeks ended August 2, 2008 was $19.1 million, or $0.19 per diluted share. These results compare to net income of $14.3 million, or $0.14 per diluted share, for the 26 weeks ended August 4, 2007.

The current year results included $1.9 million in non-cash interest charges associated with a June 2008 conversion of $3.4 million of the Company's Secured Convertible Notes into Class A common stock. Excluding the effect of these non-cash interest charges, net income for the 26 weeks ended August 2, 2008 was $21.0 million, or $0.21 per diluted share.

Cash flows from operations for the 26 weeks ended August 2, 2008 was $26.1 million compared to cash flows from operations of $22.0 million for the 26 weeks ended August 4, 2007.

Store Openings:
The Company opened one net new store during the second quarter. At August 2, 2008, the Company operated 497 stores in 47 states, the District of Columbia and Puerto Rico, including 404 Wet Seal stores and 93 Arden B stores.

Capital Expenditures and Depreciation:
During the second quarter, the Company incurred capital expenditures of $6.1 million of which $5.0 million was for construction of new stores and remodels of existing stores.

The Company recognized tenant improvement allowances in the second quarter of fiscal 2008 of $1.1 million associated primarily with new store construction, resulting in net capital expenditures for the quarter of $5.0 million.

Depreciation in the second quarter totaled $3.6 million as compared to $3.4 million in the second quarter of 2007.

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Wet Seal Inc

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