Foothill Ranch, CA—Wet Seal Inc. reported late Thursday afternoon that its fourth quarter loss narrowed as overhead expenses fell and despite nearly a 23% drop in sales.
For the quarter ended Feb. 1, the young women and teen retail company posted a loss of $27.5 million, or 33 cents a share, compared with a loss of $85.8 million, or 97 cents a share, a year ago. Excluding impairment charges, adjusted loss was 23 cents a share, just beating analysts estimate for a loss of 24 cents.
Net revenue fell 22.8% to $124.8 million, missing analysts’ estimate for $131 million in sales. Comparable store sales fell 16.5% consisting of a 15.4% decline in comps at its Wet Seal stores and a 25% decline at Arden B.
‘Implemented a Strategic Plan’
Gross profit dipped 41.6% to $23.4 million compared with $40.1 million a year ago. And gross margin shrank 600 basis points to 18.8% versus 24.8% a year ago due to soft sales. Operating loss widened to $27.3 million compared to $25.5 million in the prior-year quarter as lower selling, general and administrative expenses were more than offset by lower sales, the company said.
“Although we concluded fiscal 2013 with a difficult fourth quarter, we made substantial progress during the year against our turnaround strategies, which provides a strong foundation for the business. In light of the difficulties we faced, and which continue to impact us in the first quarter, we are taking action to respond to ongoing macro pressures and the changing retail environment,” CEO John D. Goodman said. “We recently enhanced our board of directors with the addition of three members who have tremendous experience in social, digital and e-commerce–key areas of focus within our business. Additionally, we improved our financial position through the financing transaction announced separately today. Most important, we’ve developed and begun implementing a strategic plan designed to restore comparable store sales growth, improve merchandise margins and strengthen our market position.”
The company has also undergone a substantial leadership transition after hedge fund Clinton Group pressured for changes, gaining gained several board seats in the process.
Wet Seal forecast a first quarter loss of 16 cents to 19 cents a share, larger than the loss of 5 cents a share that analysts expect. Comp store sales are expected to decline in the mid- to-high teens.
“We are moving quickly to execute and believe the new strategic direction will put us on a path to improving our financial results, stabilizing our operating cash flow and achieving long-term growth,” Goodman added.