Wet Seal comparable sales drop in July

07 Aug '09

2 min read

The Wet Seal Inc, a leading specialty retailer to young women, reported net sales and comparable store sales for the four-week period ended August 1, 2009, or fiscal July, and the fiscal second quarter ended August 1, 2009.

The Company estimates that the shift in retail “sales tax holidays” in 10 states, from fiscal July last year to fiscal August this year, negatively affected the Wet Seal division comparable store sales decline by slightly more than 1% in July.

The Company now estimates fiscal second quarter earnings per diluted share will be between $0.02 and $0.03. This includes $1.6 million in non-cash asset impairment charges, partially offset by the $1.2 million of breakage benefits, which were not anticipated in the Company's initial guidance. These expected results are within the lower end of the Company's initial guidance.

The Company also estimates it had year-over-year declines in inventory per square foot at Wet Seal and Arden B of approximately 15% and 21%, respectively, as of the end of the second quarter.

Ed Thomas, chief executive officer of The Wet Seal, Inc., commented: “While we are pleased with the progress we are making on the merchandising front at both divisions, the effects of the challenging economic environment continued to hamper sales. This, combined with the highly aggressive promotional environment throughout the second quarter, led to our current earnings expectations. That said, we were pleased to have achieved cost savings greater than we initially anticipated, and inventory levels remain well- aligned with the challenging environment.”

Mr. Thomas continued, “At Wet Seal, we made significant progress addressing inventory mix issues we had at the start of the second quarter. We began to see improved results in our tops business in late July due to these efforts. While we know we still have work to do in certain categories, we believe we are beginning the third quarter with an improved assortment.

“At Arden B, we are managing inventories conservatively as we continue to evaluate ideal levels under our new, lower-price selling model. This likely challenged comparable store sales results, but has also helped us maintain the merchandise margin improvements we began to demonstrate in the first quarter and improve operating income at this division in the second quarter as compared to the same period in the prior year.”

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