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The Wet Seal swings to profit in Q2, guides Q3

18
Aug '06

The Wet Seal Inc, a leading specialty retailer to young women, announced results for its second fiscal quarter ended July 29, 2006 and provided guidance for its third fiscal quarter.

Net income for the quarter was $4.4 million, or $0.04 per diluted share. The results included a credit to sales of $1.4 million associated with a customer loyalty program, non-cash stock compensation charges of $0.2 million and a store closure reserve adjustment that reduced expense by $0.2 million. Before the effect of these items, net income was $3.0 million, or $0.03 per diluted share, and operating income was $2.6 million, or 2.0% of adjusted net sales.

These results compare to a prior year second quarter net loss of $11.7 million and a quarterly operating loss of $10.4 million. The results for the second quarter last year included non-cash stock compensation charges of $14.6 million, an asset impairment charge of $0.3 million and a store closure reserve adjustment that reduced expense by $0.5 million. Before the effect of these items, net income was $2.7 million, or $0.07 per diluted share and operating income was $4.0 million, or 3.1% of net sales.

Net sales for the thirteen week period ended July 29, 2006 were $129.5 million compared with net sales of $126.3 million for the same period last year, a 2.5% increase. Comparable store sales for the quarter decreased 2.2% versus a 55.9% increase in the same period a year ago.

In April 2006, the company revised its Arden B customer loyalty program and added expiration dates on awards earned. Included in net sales for the quarter is $1.4 million of sales recognized as a result of expired program awards in excess of previous estimates.

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