WTSLA gains confidence in lower-priced merchandise model at Arden B
The Wet Seal, Inc.a leading specialty retailer to young women, announced results for its fiscal second quarter ended August 1, 2009, and introduced guidance for the third quarter of fiscal 2009. The Company provides segment information on Wet Seal and Arden B in Exhibit B to this press release.
For the second quarter:
- Net sales for the quarter were $136.4 million compared to net sales of $149.1 million for the prior year second quarter. Consolidated comparable store sales decreased 10.6%.
- Comparable store sales for Wet Seal decreased 11.9% and for Arden B decreased 4.1%.
- Operating income was $3.3 million, or 2.4% of net sales, compared to $11.8 million, or 7.9% of net sales, in the prior year second quarter.
- The current year quarter included $1.6 million in non-cash asset impairment charges and $1.2 million of benefits resulting from a change in estimated breakage for unredeemed gift cards, gift certificates and store credits. The prior year quarter included $0.3 million in non-cash asset impairment charges and $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.
- Net income was $3.1 million, or $0.03 per diluted share, as compared to $10.1 million, or $0.10 per diluted share, in the prior year quarter. Excluding the effect of the prior year interest charges noted above, net income in the prior year quarter was $12.0 million, or $0.12 per diluted share.
Ed Thomas, chief executive officer, commented, "We have made some progress at both divisions, but we are disappointed with our overall results for the second quarter. At Arden B, we sustained performance improvement begun in the first quarter, with operating income of $3.3 million in the second quarter. We have also gained further confidence in the lower-priced merchandise model we adopted at Arden B at the beginning of this year.
"At Wet Seal, while we entered the second quarter with inventory mix issues that challenged our sales and margin performance, by the beginning of August we had remedied many of these issues and believe we are better positioned for the important back-to-school season."
As of quarter-end, the Company's inventory per square foot declined 15% versus the prior year quarter, with Wet Seal down 14% and Arden B down 21%.
The Company generated cash flows from operations of $11.0 million
during the second quarter, and ended the quarter with $144 million of cash and cash equivalents and $3.1 million of long-term debt, comprised of Convertible Notes, net of discount.
Store Openings and Closings
The Company had five Wet Seal net store openings and two Arden B net store closures during the second quarter. At August 1, 2009, the Company operated 496 stores in 47 states, the District of Columbia and Puerto Rico, including 415 Wet Seal stores and 81 Arden B stores.