I agree with the analysts that too many positives had already been priced in to WTSLA stock.
1) decent second half of 2008 retail environment. * that is an assumption which is looking less likely as each week passes.
2) Arden B liquidation. * on this point I disagree with the Piper analyst. During the past few Quarters Ed Thomas has been optimistic about the chances of a turnaround for Arden B. At the very least he said that beginning June Arden B will have completed the merchandise transformation bak to more basic style offerings, and that the chain will need some months aftr that to evcaluate whether the Arden B plan is working. Regardless, the Piper analyst implied that closing Arden B is expected, and that Wall Street would like that scenario. I completely disagree and believe that any plan to close Arden B stores would have a seriously negative impact on the WTSLA stock price.
Piper Jaffray downgrades Wet Seal (NASDAQ: WTSLA) from Buy to Neutral with a $6 price target.
The firm said, "We are moving to a Neutral rating given our belief that shares fairly reflect cost cuts and expense disciplines put into effect in 1H. Trading ranges also appear to be factoring in a 2H comp sales recovery, which is possible, although we think traffic declines, cost inflation, and increased price competition may limit the degree to which upside is possible. We also think there is a distinct market bias that mgmt will exit the Arden B. division in whole or in part by year-end, a view we believe is premature near-term."
The Wet Seal, Inc. and its subsidiaries operate as a specialty retailer of apparel and accessory items for women in the United States.