Wet Seal Q2 posts wider-than-expected loss; sales miss

Foothill Ranch, Calif. – Teen retailer The Wet Seal reported a new loss of $22 million for its second quarter, up from $1 million to $22 million in the year-ago period. Lower merchandise margins, higher occupancy costs, costs related to exiting its Arden B business, and non-cash asset impairment charges all helped increase Wet Seal’s net loss.



Net sales decreased 11.6% to $121.2 million, from $137.2 million. One bright spot was e-commerce, where sales rose 25%.



“Our second-quarter results were impacted by underperformance in several merchandise categories, ongoing weakness in mall traffic and the challenging promotional environment,” said Ed Thomas, CEO. Thomas took back the reins of Wet Seal on Monday, having previously served in the same role at the company from 2007 to 2011. “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.”



In fiscal 2014, the company expects to open nine new Wet Seal stores, primarily in outlet centers and off-mall locations. It plans to close 48 Wet Seal locations, primarily upon lease expirations. These store closures include 15 stores converted from Arden B that will be operated temporarily as Wet Seal or Wet Seal Plus stores until late fiscal 2014.



During the third quarter, Wet Seal expects continuing net loss per share and a same-store sales decline, including e-commerce, in the mid-to-high teens.



“We have an enduring brand and a talented team of operators to execute our plans in the near-term,” said Thomas. “Our executive management team and board of directors recognize that current operating results and near-term outlook are disappointing to our shareholders. We’re committed to creating shareholder value and expect to report back on our findings and new strategic direction in the coming weeks.”