By  on December 2, 2004

NEW YORK — Amid work to turn around its sagging business, Wet Seal Inc. delivered third-quarter results that showed declining sales, a wider loss and eroding gross margins.

The Foothill Ranch, Calif.-based specialty retailer posted net sales that declined 15.9 percent in the quarter ended Oct. 30 to $110.8 million from $131.8 million in the same period last year, while the loss swelled to $24.6 million, or 68 cents a diluted share, from a loss of $7.5 million, or 25 cents a share.

Same-store sales for the third quarter declined 12.6 percent.

The retailer did not hold a conference call with investors. Instead, the company had a prerecorded call, which detailed its quarterly results.

On the call, the retailer said year-over-year average units sold dropped 7 percent while transactions fell 20.1 percent. The average units purchased showed a gain of 26.7 percent, year-over-year.

As a result of softer same-store sales and lower sales volume, the retailer’s gross margin as a percent of sales suffered a steep decline, falling to 16.2 percent in the quarter from 21.9 percent in the prior year.

On the balance sheet, Wet Seal posted higher inventory levels at the end of the quarter. As a percent of quarterly sales, inventories jumped to 37.2 percent in the most recent quarter, which compares with 22 percent for the fiscal 2003 year-end period. The retailer listed cash and cash equivalents of $22.8 million, which compares with $13.5 million in the previously reported period.

On Nov. 9, the retailer inked a deal led by S.A.C. Capital Associates to provide financing totaling $55.8 million. That same day, the company said chairman and chief executive officer Peter Whitford had resigned. And on Nov. 23, Allan Haims, president of the Wet Seal Stores division, resigned.

Currently, Wet Seal is in the process of seeking “strategic alternatives” for its business. The retailer operates 559 stores in 47 states.

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