Wet Seal Inc. (WTSLA), a leading specialty retailer, reported fourth quarter and full year 2010 financial results. The company reported earnings of 7 cents a share which surpassed the Zacks Consensus Estimate of 4 cents by 75%. Earnings also outpaced the prior year’s profit of 6 cents a share.

Net sales for the quarter grew 9.6% year over year to $165.5 million. Consolidated comparable-store sales increased 2.3% during the quarter.

Net sales of the Wet Seal segment surged 9.5% to $138.7 million for the quarter, while comparable sales increased 1.9%. For the Arden B segment, net sales grew 10.0% to $26.8 million, while comparable same-store sales increased 4.8%.

Gross margin for the quarter was almost flat year over year to 31.4%, declining marginally by 6 cents from the prior-year quarter. Selling, general and administrative expenses for the quarter grew 14.6% during the quarter.

For fiscal 2010, net cash from operating activities increased 23.8% year over year to $50 million. In fiscal 2010, the company incurred capital expenditures of $30.7 million, of which $23.1 million was for construction of new stores and remodels of existing stores.

In fiscal 2010, the company’s inventory per square foot increased 6%, with Wet Seal up 8%, partially offset by an 8% decline at Arden B. During fourth quarter, the company opened 8 and closed 2 stores and opened 6 and closed 1 Arden B stores. At January 29, 2011, the company operated 533 stores in 47 states and Puerto Rico, including 450 Wet Seal stores and 83 Arden B stores.

Concurrent with the earnings release, management provided guidance for fiscal 2011. For the first quarter of fiscal 2011, earnings are estimated in the range of 5 cents to 7 cents per diluted share.

Total net sales are expected to be in the range of $151 million and $155 million versus $137.8 million in the first quarter of fiscal 2010. Comparable store sales are expected to increase in the mid to high single-digits. Gross margin is expected to be in the 31.2% and 32.8% of net sales range.

Wet Seal currently has a Zacks #4 Rank, which translated into short term Sell rating. On a long-term basis we are Neutral on the stock.

 
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