Hit by Q1 Sales Declines, Wet Seal to Close 20 Arden B. Stores

In Industry News, Reports, What's New by Accessories Staff1 Comment

Long known as a source for dresses, Wet Seal's Arden B. is being positioned with emphasis on other categories, too.

Foothills Ranch, CA—Wet Seal Inc. said Tuesday that it may close 20 Arden B. stores and open fewer Wet Seal stores after swinging into a first quarter loss amid sales declines.

For the quarter ended April 28, the teen specialty retail company posted a net loss of $300,000, or breakeven per share, compared to net income of $8 million, or 8 cents a share, a year ago. Excluding an after-tax effect of non-cash asset impairment charges, net income would have been $1.9 million, or 2 cents a share.

Net sales were down 5.2% to $147.9 million. Total comparable store sales decreased 7.7% with Wet Seal posting a 7% decline in its comparable store sales. Arden B.’s comp sales decreased 11.4%.

While Wet Seal’s earnings were in line with analysts’ average estimate, the company missed on their sales projection of $149.98 million. Gross margin narrowed to 29.5% from 34.3%.

“We are disappointed with our first quarter results and recent sales trends at both Wet Seal and Arden B,” said Susan McGalla, ceo. “We are taking immediate actions to rebalance the assortments towards stronger selling categories.”

McGalla announced that the company would be modifying real estate plans for its Arden B. stores to “focus entirely” on turning around its merchandising and sales. “As Arden B leases come up for renewal this year, we will either seek short-term extensions or allow the lease to expire and close the store,” McGallas said. “As a result, we expect the Arden B store base will decline from the current 84 stores to approximately 64 to 69 stores by the end of this fiscal year. This will allow us to put all efforts toward repositioning the brand.”

But Among Key Trending Categories: Accessories

At its Wet Seal stores, the company is reducing store opening plans to 20 to 22 stores, down from its previous plan to open 25 to 30 stores. McGalla said progress had been made in Wet Seal’s merchandising.

“Our fashion trend and color execution is relevant and strong,” McGalla said. “We are seeing strength and consistency in several key trending categories, including woven tops, fashion denim, shorts, dresses, blazers, shoes and accessories, and we look to build upon their success through the second quarter and into the third quarter.”

The company’s e-commerce business, which is in the process of transitioning into full price selling in line with in stores, is “seeing signs of stabilization,” McGalla said.

For the second quarter, Wet Seal estimates a net loss of 3 to 6 cents. Total sales are projected at $136 to $141 million with comparable store sales down between 7% to 11%.

Analysts’ consensus forecast revenue of $148 million.



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