Wet Seal Q2 Loss Widens, Sales Decline

In Industry News, Reports, What's New by Jeff Prine

New fall fashions at Wet Seal stores

New fall fashions at Wet Seal stores

Foothill Ranch, CA—Wet Seal reported after hours Wednesday a bigger-than-expected second quarter loss. Still shares rose almost 9% earlier today despite the disappointing numbers.

The teen specialty retailer reported a net loss of $22 million, or 26 cents a share, versus net income of $1 million, or 1 cent a share, for the same period last year. Analysts expected a loss of 9 cents a share for the quarter.

Net revenue was down 11.6% to $121.2 million, missing analysts’ estimate for $123.8 million in sales. Although Wet Seal’s e-commerce business was up 11.4%, its comp store sales declined 12.4%, which included an 11.1% drop at Wet Seal brand, and a decline of 22.8% at its now-defunct Arden B stores.

‘Challenging Environment’

The company said it expects to shutter 48 Wet Seal locations this year, including 15 former Arden B shops that are operated temporarily as Wet Seal or Wet Seal Plus stores.

“Our second-quarter results were impacted by underperformance in several merchandise categories, ongoing weakness in mall traffic and the challenging promotional environment,” said CEO Ed Thomas, who began his job on Monday.

Thomas worked for Wet Seal in the same role from 2007 to 2011 and as a president, chief operating officer and a director of the company from 1992 to 2000. “I am pleased to be back at Wet Seal. I plan to move quickly to analyze the business and develop an action plan to restore growth. In fact, those steps are already in motion,” he added.

Wet Seal’s guidance for third quarter includes a per-share loss in the range of 22 cents to 28 cents. It also said it anticipates the e-commerce and same-store sales to decline in double digits. Analysts expect the company to report a loss of 12 cents a share for the third quarter.

Wet Seal received a warning from the NASDAQ exchange, which said the company’s stock could be delisted unless it reaches $1 or more and trades above the threshold for 10 consecutive days before Feb. 17.