Wet Seal moves to 2nd-quarter profit as sales rise

Wet Seal reports improved sales, fewer markdowns in 2nd quarter and posts to a profit

Associated Press

FOOTHILLS RANCH, Calif. (AP) -- The Wet Seal Inc. reported Tuesday that it moved to a profit for its fiscal second quarter on improved sales and fewer markdowns. The teen retailer also forecast a better-than-expected profit for its third quarter and plans to add more stores.

The Foothills Ranch, Calif.-based retailer, which runs the Wet Seal and Arden B chains, has been trying to turn around its business after an extended period of weak sales. It brought in a new CEO, cut jobs and has closed weaker performing stores.

Wet Seal reported after the market closed Tuesday that it earned $958,000, or 1 cent per share, for the quarter that ended Aug. 3. That compared with a loss of $12.4 million, or 14 cents per share, for the second quarter last year. It posted a loss of 7 cents per share last year on an adjusted basis.

The results reflect fewer shares outstanding in the most recent quarter.

The company's total revenue edged up to $137.2 million from $135.3 million.

Analysts polled by FactSet, on average, were anticipating earnings of 1 cent per share on revenue of $136.5 million.

Wet Seal said that its revenue for stores open at least a year increased 3.7 percent, which includes a 3.9 percent increase for Wet Seal and 2 percent at Arden B. This is considered a key indicator of financial performance, because it strips away the impact of recently opened or closed stores.

The company operated 525 stores across the U.S. as of the end of the quarter, down from 550 at the same time last year.

Wet Seal CEO John Goodman said that the quarter's improvement reflects the benefits of its fast-fashion operating model, progress on the company's turnaround efforts and strong inventory management.

Goodman said that he is encouraged by how the business is positioned for the second half of the year, from both a financial and operations perspective. He said the company's products and marketing planned for back-to-school and holiday periods should enable gains at both Wet Seal and Arden B.

The company also said that it plans to open 22 new Wet Seal stores, primarily in outlet centers, in the late-October to November time frame. Goodman said the company is planning on a more aggressive plan for unit growth beginning in fiscal 2014.

Wet Seal said that it expects a loss of 2 to 3 cents per share for the third quarter on revenue between $135 million and $138 million. Analysts were anticipating the quarter's results to be breakeven on a per share basis, with revenue of $137.1 million.

Shares of Wet Seal initially jumped nearly 6 percent in after-hours trading before falling back to down a half penny from their regular session close, at $3.89.

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