The Wet Seal introduces fiscal 2011 store growth plans
The Wet Seal, Inc., a leading specialty retailer to young women, announced results for its fiscal second quarter ended July 31, 2010, and introduced guidance for the third quarter of fiscal 2010.
For the second quarter:
• Net sales for the quarter were $131.5 million compared to net sales of $136.4 million for the prior year second quarter.
• Consolidated comparable store sales decreased 4.3%. Comparable store sales for Wet Seal decreased 4.3% and for Arden B decreased 4.5%.
• Operating income was $2.6 million, or 2.0% of net sales, compared to $3.3 million, or 2.4% of net sales, in the prior year second quarter.
• The current year quarter included $1.0 million in non-cash asset impairment charges. The prior 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.
• Net income was $1.6 million, or $0.02 per diluted share, as compared to $3.1 million, or $0.03 per diluted share, in the prior year quarter. Presented on a fully-taxed basis, similarly to the second quarter fiscal 2010 presentation, second quarter fiscal 2009 earnings would have been approximately $1.9 million, or $0.02 per diluted share.
• As of quarter-end, the Company's inventory per square foot was flat versus the prior year quarter, with Wet Seal down approximately 1% and Arden B up approximately 8%.
• The Company generated cash flows from operations of $3.6 million during the second quarter, and ended the quarter with $165.5 million of cash and cash equivalents and no debt.
Ed Thomas, chief executive officer of The Wet Seal, Inc., commented, "A very competitive promotional environment and volatile consumer spending patterns presented challenges to both of our operating divisions in the second quarter. In spite of these factors, we improved merchandise margins at Wet Seal as a result of better inventory content versus the prior year, and we sustained strong merchandise margin performance at Arden B, which helped offset much of the impact of our comparable store sales declines. We have also maintained strong discipline over costs as we continue operating in this very challenging retail climate.
"We feel good about inventory levels and merchandise assortment heading into the back half of the year at both Wet Seal and Arden B."
Mr. Thomas continued, "In the first half of August, we have been encouraged by improvements in comparable store sales trends in both divisions versus our second quarter results. Noting that the vast majority of state sales tax holidays occurred in the first two weeks of August, we continue to see that consumers are shopping when these tax events and other special shopping occasions occur. We are maintaining a cautious view on the third quarter given the volatility in shopping patterns we've seen for almost two years now, but we are certainly pleased with our early August results."