Wet Seal Inc. (WTSLA), a specialty apparel retailer catering to young women, has posted weak comparable-store sales and revenues for the five-week period ended July 3, 2010.
Comparable-store sales for June declined 3.6% compared with a decline of 11.1% in the same month last year. Wet Seal had been registering a negative comparable-store sales growth for the past two months.
Total sales for the month under review slipped 2.6% to $50.3 million from the comparable month last year. The results fell behind management’s expectation, partly due to lower traffic.
Segment Results
Net sales of the Wet Seal segment dipped 1.7% to $41.8 million for the month, while comparable sales slid 3.7% versus an 11.3% fall in the comparable period of the prior year. For the Arden B segment, net sales fell 6.9% to $8.5 million, while comparable same-store sales decreased 3.2% in comparison to a drop of 10.3% in June 2009.
Wet Seal requires aggressive marketing to clear out its summer merchandise inventory. A slow recovery in the economy, persistently high levels of unemployment and the euro crisis are some of the factors that could have led to cautious spending by consumers in the month of June. The company is adopting measures to deliver positive sales results by the end of July 2010.
Guidance
Wet Seal expects second quarter fiscal 2010 total sales to be in the range of $134 million to $137 million and comparable-store sales to decline 3% or be flat versus a decrease of 10.6% in the prior-year second quarter.
The company also plans to open 9 Wet Seal stores and close down 2 Arden B stores during the second quarter.
For the upcoming quarter, the retailer expects earnings to be at the lower end of the previous provided guidance range of 2 to 4 cents a share. The current Zacks Consensus Estimate for the quarter is 3 cents. An aggressive cost and inventory management helped Wet Seal to re-affirm its earnings forecast.
Wet Seal’s rivals have also delivered negative same store sales growth. Same-store sales at Gap Inc. (GPS) were flat, while sales at Hot Topic Inc. (HOTT) went down 2.1% and at American Eagle Outfitters Inc. (AEO) decreased 1%.
As of July 3, 2010, Wet Seal operated a total of 503 stores in 47 states, the District of Columbia and Puerto Rico, including 425 Wet Seal stores and 78 Arden B stores.
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