Wet Seal CEO says retailer can improve
The Wet Seal, Inc. (Nasdaq: WTSLA) CEO Edmond Thomas said the struggling women’s clothing retailer can drive sales and other improvements through merchandise changes. Thomas made the comments during a midday conference call.
“We see a number of opportunities to improve our assortment planning and size optimization,” Thomas said. “In addition, we can increase average dollar sales by improving our tops to bottoms ratio.”
The chief executive said the company plans to modify store designs and alter its employee compensation plan in an effort to increase sales. Wet Seal also plans to slow its store growth plan from a current 15% to about 5%, with more openings planned for the second half of fiscal 2008, he said. Thomas also said the company is reviewing its IT infrastructure as part of the company growth plan.
“We realize that we have work to do and we are operating in an uncertain macro environment,” Thomas said. “However, I am confident that we are moving in the right direction that will enable us to improve sales and earnings results.”
Before the opening, Wet Seal reported that it swung to a third-quarter loss of $3.3 million, or $0.04 per share, down 238% from a profit of $2.4 million, or $0.02 per share, a year earlier. Analysts were expecting a loss of $0.02 per share. The company said an asset impairment charge of $1.6 million, or $0.02 per share, contributed to the quarterly loss.
“Our earnings per share were below our expectations as a result of aggressive markdowns taken on late summer and fall transitional merchandise,” Thomas said. “While we were disappointed with the earnings performance for the quarter, we felt it was important to enter the fourth quarter with clean inventory levels. Our inventory levels are cleaner than they have been upon entering the holiday season versus the past two years.”
Net sales for the 13 weeks ended Nov. 3 were $150.3 million, 5% above net sales of $143.3 million during the 13-week period ended Oct. 28, 2006. Wall Street was projecting $152.74 million in quarterly sales. Comparable store sales for the period fell 3.4%.
Going forward, Wet Seal said it expects fourth-quarter earnings in the range of $0.03 to $0.06 per share, compared with analyst estimates of $0.07 per share. The guidance assumes net sales between $168 million and $171 million, below Wall Street projections of $174.6 million.
“We believe that if we execute our strategy at this time, we could be better positioned to compete more effectively in the fashion retail market space,” Thomas said.
In midday trading, WTSLA shares are down 8.15%, or $0.19, at $2.14. Over the last 52 weeks, shares have ranged from $2.10 to $7.60.
