By  on August 25, 2009

The Wet Seal Inc. matched analysts’ earnings expectations in the second quarter as the new lower-priced orientation of its Arden B. division helped limit the decline in second-quarter profits.

The Foothill Ranch, Calif.-based specialty store group posted net income of $3.1 million, or 3 cents a diluted share, off 69.4 percent from the $10.1 million, or 10 cents, registered during the comparable 2008 period. Sales slumped 8.5 percent to $136.4 million from $149.1 million in the year-ago quarter as same-store sales fell 10.6 percent, with Wet Seal’s 11.9 percent decline offset by Arden B.’s 4.1 percent drop.

Ed Thomas, chief executive officer, noted that inventory per square foot was down 15 percent from a year ago, 14 percent at Wet Seal and 21 percent at Arden B.

“At Arden B., we sustained performance improvement begun in the first quarter, with operating income of $3.3 million in the second quarter,” he said. “We have also gained further confidence in the lower-priced merchandise model we adopted at Arden B. at the beginning of this year. At Wet Seal, while we entered the second quarter with inventory mix issues that challenged our sales and margin performance, by the beginning of August we had remedied many of these issues and believe we are better positioned for the important back-to-school season.”

Although the company cut selling, general and administrative expenses by $5.6 million compared with last year’s quarter, gross margin fell to 28.7 percent of sales from 34.9 percent in the 2008 period.

The company projected third-quarter earnings of 2 to 5 cents a share, below the 6-cent consensus of analysts surveyed by Yahoo Finance.

In the six months, net income contracted 57.4 percent to $8.1 million, or 8 cents a diluted share, from $19.1 million, or 19 cents, in the first half of 2008. Revenues slid 7.9 percent to $268.4 million.

The company said Monday that Nick Dialynas will join the firm later this month as vice president of real estate, reporting to Thomas. Dialynas most recently was senior director of leasing at Liz Claiborne Inc. following positions with The Mills Corp. and The Rouse Co. As of Aug. 1, the company operated 415 Wet Seal units and 81 under the Arden B. nameplate.

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