The Wet Seal swings to profit in Q2, guides Q3

18 Aug '06

4 min read

Joel Waller, CEO, said, "Although results for the first two months of the quarter were disappointing, we saw an encouraging rebound in sales and gross product margins with both concepts in July. At Wet Seal, we were able to quickly correct for a prior shortage in fashion tops and dresses and adjust our inventory mix for the all important back-to-school season. We also saw a significant improvement in sales results at Arden B as it began to receive our fall collection starting in the third week of July, with the complete collection arriving in stores by August 3rd.

"The senior management additions in both merchant organizations make us confident in our ability to deliver comparable store sales growth and operating income improvements for the back half of the year.

"Finally, we remain on track to open 20 to 25 net new stores this year, with the expectation we can accelerate square footage growth beginning in 2007."

The company opened five Wet Seal stores during the second quarter. At July 29, 2006, it operated 406 stores, consisting of 314 Wet Seal stores and 92 Arden B stores.

During the second quarter, the company repurchased 975,000 shares of its common stock under an existing share repurchase program for a total cost of $4,470,800.

For the third quarter, earnings are estimated in the range of $0.06 to $0.07 per diluted share, including $1.9 million or $0.02 per diluted share for non-cash stock compensation. The guidance is based on the following major assumptions:

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