Wet Seal generates positive earnings results

19 Nov '10

5 min read

The Wet Seal Inc, a leading specialty retailer to young women, announced results for its fiscal third quarter ended October 30, 2010, and introduced guidance for the fourth quarter of fiscal 2010.

For the third quarter:

• Net sales were $146.4 million compared to net sales of $141.5 million for the prior year third quarter.
• Consolidated comparable store sales decreased 0.1%. Comparable store sales for Wet Seal increased 0.4% and for Arden B decreased 2.9%.
• Consolidated e-commerce sales increased 24.4% over the prior year quarter.
• Operating income was $5.1 million, or 3.5% of net sales, compared to $4.7 million, or 3.3% of net sales, in the prior year third quarter.
• The current year and prior year quarters included $1.6 million and $0.3 million, respectively, in non-cash asset impairment charges. Excluding the impact of these charges, operating income would have been $6.7 million, or 4.5% of net sales, in the current year quarter, compared to $5.0 million, or 3.6% of net sales, in the prior year quarter.
• The current year quarter included a $0.5 million non-cash income tax charge due to a decrease in deferred tax assets related to a tax method change elected upon filing the 2009 federal tax return.
• Net income was $2.6 million, or $0.03 per diluted share, as compared to $4.5 million, or $0.04 per diluted share, in the prior year quarter. Excluding the effects of non-cash asset impairment charges and the non-cash charge to decrease deferred tax assets, net income was $4.0 million, or $0.04 per diluted share. Excluding the effects of non-cash asset impairment charges, and presented on a fully-taxed basis, similarly to the third quarter fiscal 2010 presentation, third quarter fiscal 2009 earnings would have been approximately $3.0 million, or $0.03 per diluted share.

Ed Thomas, the Company's president and chief executive officer, commented, "We were pleased to exceed our initial earnings expectations for the third quarter. Through essentially flat comparable store sales, continuing year-over-year merchandise margin improvement and disciplined cost management, we continued to generate positive earnings results in spite of the difficult retail environment.

"We are also pleased with the execution of our store growth plan. We opened twelve new Wet Seal stores and three new Arden B stores in the third quarter, and we remain positioned for accelerated growth in fiscal 2011. We also are very encouraged by the initial results of additional inventory and marketing investments we've made in our e-commerce business."

Mr. Thomas concluded, "Our inventories in both operating divisions were well-positioned at the end of the quarter. In November month-to-date, our consolidated comparable store sales are positive, which we hope bodes well for the upcoming holiday selling period."

As of quarter-end, the Company's inventory per square foot declined 5% versus the prior year quarter, with Wet Seal down 5% and Arden B up less than 1%.

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