Wet Seal reports operating income of $10 mn, exceeding guidance
22 May '10
5 min read
Store Openings and Closings The Company opened 1 Wet Seal store and closed 3 Wet Seal stores and 1 Arden B store during the first quarter. At May 1, 2010, the Company operated 501 stores in 47 states, the District of Columbia and Puerto Rico, including 422 Wet Seal stores and 79 Arden B stores.
Capital Expenditures and Depreciation During the first quarter of fiscal 2010, the Company incurred capital expenditures of $6.8 million, of which $3.4 million was for construction of new stores and remodels of existing stores. Depreciation in the first quarter of fiscal 2010 totaled $4.0 million as compared to $3.6 million in the first quarter of fiscal 2009.
Capital Transactions During the first quarter, the Company repurchased 1,394,162 shares of its Class A common stock at a total cost, including commissions, of approximately $5.2 million, which utilized all remaining capacity under a $12.5 million share repurchase program approved by the Company's Board of Directors in November 2009. During the first quarter, an investor converted Notes into 3,111,111 shares of the Company's Class A common stock and converted Preferred Stock into 537,000 shares of the Company's Class A common stock. As a result of these conversions, no Notes or Preferred Stock remain outstanding as of May 1, 2010.
During the quarter, investors exercised warrants that resulted in issuance of 1,160,715 shares of the Company's Class A common stock, generating approximately $4.3 million in proceeds to the Company. As of May 1, 2010, Series E Warrants (the "Warrants") exercisable into approximately 4.9 million shares of the Company's Class A common stock, at an exercise price of $3.68 per share, remain outstanding. Exercise of all remaining outstanding Warrants via cash payment by the Warrant holders would result in proceeds to the Company of $18.1 million. The Warrants expire on November 3, 2010.
Second Quarter Fiscal 2010 Guidance Mr. Thomas commented, "We note that, in May, business has been soft month-to-date at both Wet Seal and Arden B. We believe this has largely been due to weakness in mall traffic resulting from unfavorable weather patterns in much of the country, a shift in buying due to a later Memorial Day weekend this year, and, possibly, a pause by consumers after relatively strong buying in February and March. With little visibility into expected near-term sales trends, we are cautious about our outlook for the second quarter."
For the second quarter of fiscal 2010, earnings are estimated in the range of $0.02 to $0.04 per diluted share versus $0.03 per diluted share in the prior year second quarter. Presented on a fully-taxed basis, similarly to the presentation for fiscal 2010, the prior year second quarter earnings would have been $0.02 per diluted share.
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