'Q4 is a difficult period for retail industry' - Wet Seal CEO
The Wet Seal Inc, a leading specialty retailer to young women, announced results for its fiscal fourth quarter and full year ended January 31, 2009, and introduced guidance for the first quarter of fiscal 2009. The Company provided segment information on Wet Seal and Arden B in Exhibit B.
For the fourth quarter:
• Net sales for the fourth quarter ended January 31, 2009, were $154.9 million compared to net sales of $179.6 million for the fourth quarter ended February 2, 2008. Net sales in the current year included a $0.3 million "breakage" benefit resulting from a reduction to deferred revenues for unredeemed gift cards, gift certificates and store credits. In the prior year, net sales included a $3.7 million "breakage" benefit.
• Comparable store sales decreased 13.4%. Comparable store sales for Wet Seal decreased 8.6% and for Arden B decreased 32.1%.
• Operating income was $4.6 million, or 3.0% of revenues, compared to $11.3 million, or 6.3% of revenues, in the fourth quarter of fiscal 2007. Operating income in the current year quarter included $4.8 million in non-cash fixed asset impairment charges, primarily related to Arden B stores, and the $0.3 million "breakage" benefit noted above. Operating income in the prior year quarter included the $3.7 million "breakage" benefit noted above offset by $3.7 million in non-cash asset impairment charges, primarily to fully impair goodwill associated with Arden B.
• Net income was $4.3 million, or $0.04 per diluted share, as compared to $12.2 million, or $0.13 per diluted share, in the prior year quarter. Excluding the $4.8 million asset impairment charge and the $0.3 million "breakage" benefit, net income for the fourth quarter of 2008 was $8.8 million, or $0.09 per diluted share, which exceeded the Company's prior guidance of net income excluding non-cash asset impairment charges in the range of $0.07 to $0.08 per diluted share. In the fourth quarter of 2007, the $3.7 million impairment charge was offset by the $3.7 million "breakage" benefit and, therefore, excluding these two items, net income remained $12.2 million, or $0.13 per diluted share.
• The Company generated cash flows from operations of $22.1 million during the 13 weeks ended January 31, 2009, and ended the year with $142.1 million of cash and marketable securities and $2.7 million of long-term debt, comprised of Convertible Notes, net of discount.
Edmond Thomas, chief executive officer, commented, "The fourth quarter was a difficult period for the retail industry. We were operating in a highly promotional environment with consumers reluctant to spend. We reacted early to these challenges by reducing inventory levels and cutting costs while maintaining a pristine balance sheet."
Mr. Thomas continued, "We will continue to carefully monitor inventory and operating expenses while moving ahead on strategic initiatives that will position us to compete effectively during this economic downturn as well as drive long term sales and earnings growth."