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NEW YORK — Same-store sales declines of 18 percent made a fourth-quarter loss inescapable for teen retailer Wet Seal Inc.
This story first appeared in the March 21, 2003 issue of WWD. Subscribe Today.
Weak sales and an aftertax charge of $5.7 million, or 19 cents a share, for inventory write-downs drove the Foothill Ranch, Calif.-based operator of 610 stores under the Wet Seal, Arden B. and Zutopia nameplates to a loss of $5.6 million, or 19 cents a share. The retailer reported earnings of $15.3 million, or 49 cents, in the prior-year quarter. Results were in line with company guidance as well as Wall Street’s consensus estimates. Sales fell to $161.2 million, a drop of 11.2 percent from $181.5 million a year earlier. The comp decline was against a comp increase of 7 percent in 2001.
“We believe our success a year ago with bohemian or peasant looks, which brought in new customers, inadvertently led us away from the core of Wet Seal’s customer, the junior customer,” Walter Parks, chief administrative officer, said during a conference call. “As a result, when the older customers drifted away as the bohemian look faded, we didn’t have all the merchandise we needed for our core customers for back-to-school and the holiday selling period, which contributed to the poor performance in the later half.”
Investors sent shares of WS down 44 cents, or 5.6 percent, to close Thursday at $7.46 in Nasdaq trading. It hit its 52-week low of $6.10 on March 6.
Wet Seal’s February comps declined an astonishing 31.5 percent, and the firm expects a drop of between 23 and 28 percent in March and 8 and 14 percent in April. It also sees a net loss for the quarter of 21 cents to 27 cents a share.
On Feb. 6, Wet Seal dismissed chief executive officer Kathy Bronstein, who joined the company in 1985 as merchandise manager and became ceo in 1992. Irv Teitelbaum, chairman, became interim ceo.
“Fiscal 2002, without a question, turned out to be a much more difficult year than we believed possible following a successful 2001 and first-quarter 2002,” Parks said.
For the year, net income plummeted 86.3 percent to $4.2 million, or 14 cents a diluted share, versus prior-year income of $31 million, or $1.02. Sales for the 12 months increased 1.1 percent to $608.5 million over prior-year sales of $601.9 million, but fell 5.6 percent on a comp basis versus a 4.7 percent increase in 2001.
“This will be a rebuilding year as we look to not only improve sales performance, but to reduce our selling, general and administrative costs to levels at or below those of fiscal 2002, as well as to effectively manage our inventory to continue to run at industry-leading turnover rates,” Teitelbaum said in a statement.