Sales down almost 11% at Wet Seal in Q3 FY'12

Store Openings and Closings

The Company had 5 store openings and 1 store closing at Wet Seal and no store openings and one store closing at Arden B during the third quarter. At October 27, 2012, the Company operated 553 stores in 47 states and Puerto Rico, including 472 Wet Seal stores and 81 Arden B stores.

Capital Expenditures and Depreciation

The Company invested $5.2 million in capital expenditures during the quarter, including $4.0 million for construction of new stores and remodels of existing stores. The Company recognized tenant improvement allowances of $0.8 million associated primarily with new store construction, resulting in net capital expenditures for the quarter of $4.4 million.

Depreciation in the quarter totaled $4.3 million as compared to $4.9 million in the prior year quarter.

Income Taxes

The Company had a benefit for income taxes of $10.0 million for the quarter, for an effective income tax rate of 40.5%. The Company expects its effective rate for the fiscal year to be approximately 38.8%, which is an increase over its prior estimate of 37.6% mainly due to higher than previously estimated benefits from federal and state job tax credits. The increase in estimated effective tax rate over the prior estimate resulted in additional benefit for income taxes for the quarter of $0.7 million.

Fourth Quarter Fiscal 2012 Financial Outlook

For the fourth quarter of fiscal 2012, the Company estimates net loss per diluted share in the range of $0.03 to $0.06 versus net income of $0.01 per diluted share in the prior year fourth quarter.

For all of fiscal 2012, the Company now expects to have four net Wet Seal store closings and twenty net Arden B store closings. The Company forecasts fiscal 2012 net capital expenditures will be approximately $20 million to $21 million, of which approximately $14 million to $15 million will be for construction of new stores or remodeling of existing stores upon lease renewals and/or store relocations.

Wet Seal Inc