The Wet Seal Inc, a leading specialty retailer to young women, reported net sales and comparable store sales for the five-week period ended July 5, 2008.
Including the effect of the $1.9 million in non-cash interest charges described below, the Company now estimates earnings for its fiscal second quarter will range from $0.07 to $0.09 per diluted share. Before the effect of such charges, the Company now estimates earnings will range from $0.09 to $0.11 per diluted share. This estimate represents an increase over the Company's previous earnings guidance before any such charges, which ranged from $0.08 to $0.10 per diluted share.
Ed Thomas, chief executive officer of The Wet Seal Inc, commented: "Comparable store sales for June were in line with our expectations, and we continue to be encouraged by the early customer response to the improved merchandise we began delivering to Arden B stores in May.
I am pleased with the slight improvement in our earnings expectations before non-cash interest charges. This reflects greater than previously expected benefits from our ongoing cost and inventory management efforts in this difficult, and very promotional, retail environment."
The Company announced that, during fiscal June, investors converted $3.4 million of the Company's Secured Convertible Notes into approximately 2.3 million shares of the Company's Class A Common Stock. As a result, the Company incurred non-cash interest charges of $1.9 million, or $0.02 per diluted share, for the accelerated write-off of net unamortized debt discount, deferred financing costs and capitalized interest.
The Company's previously issued earnings guidance for the second quarter did not include any such charges due to an inability to predict the timing of Note conversions.
After the effect of the Note conversions, $4.7 million of Notes, convertible into approximately 3.1 million shares of Class A Common Stock, remain outstanding. There is approximately $2.6 million of net unamortized debt discount, deferred financing costs and capitalized interest associated with the remaining outstanding Notes.