By  on August 30, 2005

NEW YORK — Even after taking a hefty charge relating to its turnaround efforts, teen specialty retailer Wet Seal Inc. delivered a narrower second-quarter loss on strong sales and a significantly higher gross margin rate.

The Foothill Ranch, Calif., company posted a net loss in the quarter ended July 30 of $35 million, which compares with $106.2 million in the same period of the prior year. Results include a previously announced $16.1 million charge for the services of turnaround specialist Michael Gold.

On a per-share basis, the net loss came in at 87 cents in the quarter, compared with $3.31 in the prior year. The net loss from continuing operations for the most recent quarter was $11.7 million.

Sales for the quarter climbed 19.5 percent to $126.3 million from $105.7 million in the prior year.

During the retailer's fiscal 2004 fourth quarter and fiscal 2005 first quarter, 153 Wet Seal stores were closed. Notwithstanding the closures, Wet Seal was able to post same-store sales growth from continuing operations of 55.9 percent during the second quarter.

Regarding its gross margin rate, the retailer said it skyrocketed to 32.87 percent in the second quarter from 10.25 percent in the prior year.

In its quarterly report, the company said the gain in the gross margin rate was due to "significantly lower markdown volume in the Wet Seal division," as well as the shuttering of "low-volume, unprofitable stores." The retailer also said its gross margin rate experienced "leverage benefits, primarily on occupancy costs, due to increased sales volumes."

During the quarter, the retailer reopened three Wet Seal stores and closed five. At the end of the quarter, the company had 305 Wet Seal stores and 91 Arden B. stores.

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