The Wet Seal Inc. said it will begin winding down the Arden B. brand.
Arden B. operates 54 mall-based stores and an e-commerce site. In the year ended Feb. 1, Arden B. generated net sales of $60.4 million and represented 11 percent of consolidated net sales. At its peak, the operation had as many as 106 doors back in 2004.
John D. Goodman, chief executive officer of Wet Seal, said, “This was a difficult decision that followed a comprehensive review of the business and market dynamics.”
The ceo added that with the “process under way,” the management team and board will focus on growth for the Wet Seal nameplate.
Of the 54 Arden B. sites, 31 will transition to Wet Seal Plus locations and the remaining 23 will become Wet Seal stores. The changes are expected to be completed by the end of July, in time for the back-to-school selling season.
The wind-down is expected to result in annualized pretax cost savings of $1.3 million beginning in the second quarter of fiscal 2014.
The company said it expects to incur $100,000 in charges for severance costs in the first quarter of fiscal 2014 and $300,000 in charges for store employee retention programs in each of the second and third quarters of the fiscal year.
In addition, Wet Seal said it expects noncash asset impairment charges of up to $3 million in the first quarter of 2014, and 2015 is expected to result in $500,000 of payments related to unamortized tenant allowances. The company disclosed that some leases are set to expire, and that it also will exercise early termination provisions where it can.
Wet Seal reiterated prior guidance of a net loss per diluted share of between 16 cents and 19 cents, along with comparable-store sales, including e-commerce, in the negative mid- to high teens. The company will report first-quarter results on May 27.
Brean Capital’s analyst Eric Beder viewed the closing of Arden B. as a positive for the teen retailer, and reiterated his “buy” rating and $2 price target for Wet Seal shares. “We continue to believe in the company’s shift to the fast-fashion model and that the potential for a turn at Wet Seal could be as early as the second quarter,” he said.
Shares of Wet Seal on Friday rose 5 percent to close at $1.25 in Nasdaq trading.
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