During the third quarter, the Company incurred capital expenditures of $6.4 million, of which $4.9 million was for construction of new stores and remodels of existing stores. The Company recognized tenant improvement allowances of $0.6 million associated primarily with new store construction, resulting in net capital expenditures for the quarter of $5.8 million.
Depreciation in the third quarter totaled $3.9 million as compared to $3.6 million in the prior year third quarter.
Executive Appointment and Departure
The Company announced today that Sharon Hughes has been appointed President and Chief Merchandise Officer for the Arden B division. Mr. Thomas commented, "Since Sharon joined us as a consultant to lead the Arden B merchant team in February 2008, she has been instrumental to the turn-around of that business. I am very pleased to have Sharon join our executive team to continue to build upon our recent success at Arden B."
The Company also announced that Maria Comfort has resigned from her position as President and Chief Merchandise Officer for the Wet Seal division to pursue other interests. Mr. Thomas commented, "We appreciate Maria's contributions to Wet Seal since joining us in August 2008, and we wish her well in her future endeavors. We have begun a search for her replacement. In the meantime, the Wet Seal merchant team will report directly to me through two very experienced divisional merchandise managers, and I am confident we have the talent and leadership skills within this group to build upon the recent progress we've made in this division."
Fourth Quarter Fiscal 2009 Guidance
For the fourth quarter of fiscal 2009, earnings are estimated in the range of $0.03 to $0.07 per diluted share. The guidance is based on the following major assumptions:
• Total net sales between $149 million and $155 million versus $154.9 million in the fourth quarter of fiscal 2008.
• Comparable store sales decline between 2% and 6% versus a 13.4% decrease in the prior year fourth quarter.
• Gross margin rate between 28.5% and 30.2% of net sales versus 30.9% in the prior year fourth quarter.
• SG&A expense between 25.4% and 26.2% of net sales versus 24.8% in the prior year fourth quarter.
• Operating income between $3.4 million and $7.5 million versus operating income of $4.6 million in the prior year fourth quarter. Operating income in the prior year fourth quarter included $4.8 million in non-cash asset impairment charges.
• Interest expense of $0.2 million versus interest income of less than $0.1 million in the prior year fourth quarter.
• Income tax expense of between $0.1 million and $0.2 million versus income tax expense of $0.3 million in the prior year fourth quarter.
• Net store closings of 2 stores at Wet Seal and 2 store closings at Arden B.
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