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Wet Seal announces Q2 2008 results

22 Aug '08

5 min read

The Wet Seal Inc, a leading specialty retailer to young women, announced results for its fiscal second quarter ended August 2, 2008, and introduced guidance for its fiscal third quarter.

For the second quarter:
• Net sales for the 13-week period ended August 2, 2008, were $149.1 million compared to net sales of $143.3 million for the 13-week period ended August 4, 2007.

• Consolidated comparable store sales declined 4.4%. Comparable store sales for Wet Seal declined 1.8% and for Arden B declined 13.8%.

• Operating income was $11.8 million, or 7.9% of net sales, compared to $5.8 million, or 4.0% of net sales, in the second quarter of fiscal 2007, an increase of 104% year over year.

• The current year second quarter included new store pre-opening expenses of $0.1 million versus $0.7 million in the prior year second quarter.

• The current year second quarter included $1.9 million in non-cash interest charges associated with a June 2008 conversion of $3.4 million of the Company's Secured Convertible Notes into Class A common stock.

• Net income in the current year second quarter was $10.1 million, or $0.10 per diluted share, as compared to net income of $6.8 million, or $0.07 per diluted share, in the prior year second quarter. Excluding the effect of the $1.9 million in non-cash interest charges noted above, net income in the current year second quarter was $12.0 million, or $0.12 per diluted share.

• The second quarter earnings per diluted share of $0.10, or $0.12 before the effect of the non-cash interest charges, exceeded the Company's previously announced guidance for the quarter of between $0.07 and $0.09 per diluted share, or between $0.09 and $0.11 per diluted share before the effect of the non-cash interest charges.

Ed Thomas, chief executive officer, commented, "We were pleased with our second quarter financial results, which are significantly improved over the prior year in spite of an increasingly difficult retail environment. Through our ongoing cost and inventory management initiatives, we generated an operating margin of nearly 8% of net sales, with operating income improvements in both our Wet Seal and Arden B business segments.

In spite of continued comparable store sales challenges at Arden B during its merchandising turnaround, its infrastructure downsizing earlier this year and cautious inventory management efforts during the remerchandising have reversed an operating loss to operating income, prior to corporate cost allocations, in the second quarter and for the first half of fiscal 2008 in that segment."

Mr. Thomas continued, "With many economic factors continuing to pressure the consumer as we entered the back to school selling season, we are staying the course with highly disciplined cost and inventory management under the assumption that the retail environment will remain challenging at least through year-end. At the same time, we will continue to phase in merchandise mix changes at Arden B through mid-September and remain focused on efforts to drive sales productivity improvements in both divisions."

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