Wet Seal, Inc. (WTSLA), a specialty retailer to young women, came up with a diminutive comparable store sales and revenue results for the four-week period ended May 29, 2010.
Total sales for the four-week period ended May 29, 2010 fell 4.3% to $40 million, and comparable same-store sales declined 5.3%. The revenue is categorized into two divisions, Wet Seal and Arden B.
Net sales of Wet Seal division dipped 2.8% to $33 million while comparable sales slid 4.6% versus a 12.4% dip in the comparable period of the prior year. For the Arden B division, net sales went down by 10.5% to $7 million while the comparable same-store sales decreased 7.8% in comparison to increase of 11% in May 2009.
The soft sales results in May for both Wet Seal and Arden B did not come as a surprise. In the fist first-quarter release, management expected both sales and comparable stores for May to remain sluggish largely due to anticipated weakness in mall traffic resulting from unfavorable weather patterns in much of the country. It may also be fallout of the exhausted customers taking a break after a frenetic buying spree in February and March 2010. With little visibility into expected near-term sales trends, the company is cautious about its outlook for the ongoing quarter.
We believe consumer spending still shows scars from the recession. Unemployment, fear in the stock market and the Euro crisis are some of the factors that could have led to cautious spending by consumers in the month of May. We think the late Memorial Day shifted the weekend holiday-related sales to June 2010, further weakening the sales for the month. Moreover, the cool weather early in the month dampened the demand for swimsuits and other seasonal merchandise.
As per the guidance issued during the first quarter earnings release, Wet Seal expects total net sales for the three months quarter ending September 1, 2010 to be in the range of $134 million to $137 million and comparable store sales to decline by 3% or become flat versus a decrease of 10.6% in the prior-year second quarter. It plans to open 9 Wet Seal store and close down 2 Arden B stores during the current quarter.
For the second quarter of fiscal 2010, it expects earnings to be in the range of 2 to 4 cents per diluted share, which falls short of the current Zacks Consensus Estimate of 5 cents for the second quarter of fiscal 2010.
Comparable store sales at Gap Inc. (GPS) went up 1%, while store sales at Hot Topic Inc. (HOTT) went down 9% and at American Eagle Outfitters Inc. (AEO) decreased 3%.
As of May 29, 2010, Foothill Ranch, California-based Wet Seal operated a total of 501 stores in 47 states, the District of Columbia and Puerto Rico, including 422 Wet Seal stores and 79 Arden B stores.
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