NEW YORK — Capping off a year that saw its executives turn over quicker than its clothing, The Wet Seal Inc. said late Thursday that its losses ballooned in its fourth quarter.
“As our financial results indicate, the fourth quarter was another difficult quarter,” Peter Whitford, chief executive officer, told investors on an afternoon conference call. “Our performance was clearly unacceptable.”
The contemporary retailer, which is based in Foothill Ranch, Calif., and operates a fleet of 605 stores under the Wet Seal and Arden B. nameplates, said its losses mounted to $17.8 million, or 60 cents a diluted share, for the three months ended Jan. 31. Results include a loss of 15 cents a share from the soon-to-be-discontinued Zutopia operations. Excluding Zutopia, which the retailer said it will sell or close by the end of the first quarter, the net loss was $13.4 million, or 45 cents, which is ahead of consensus estimates of 48 cents. Last year, the firms reported a loss of $5.6 million, or 20 cents a share and 15 cents on a continuing basis.
Overall sales depleted 8.1 percent to $143.1 million from $155.6 million, while same-store sales declined 9.9 percent. Gross margins as percentage of sales from continuing operations plunged 910 basis points to 16.7 percent of sales from 25.8 percent.
In guidance, the company said there are early signs of improvement in both divisions. Still, management said it anticipates a loss from continuing operations in the first quarter of between 54 cents to 59 cents a share, a far cry from Wall Street’s forecast for a loss of 21 cents, excluding Zutopia. Wet Seal said it estimates the loss from the Zutopia discontinued operations for the quarter to range between 15 cents and 20 cents a share.
In 2003, the firm reported a loss of $47.3 million, or $1.59 a diluted share, compared with a profit of $4.2 million, or 14 cents. Sales for the year tapered 12.3 percent to $517.6 million from $590.3 million, while comps withered 16.4 percent.
Joseph Deckop, interim chief financial officer, said the sales decline reflected merchandise that was “too holiday specific and didn’t provide enough transitional style.” In addition, he said, the company was not prepared with enough sweaters and outerwear in January for the cold weather in much of the nation. On the other hand, he said, Arden B. finished the year on a high note.Allan Haims, president of the Wet Seal division, said early spring merchandise has performed in-line with expectations, noting the stores will be refreshed with a wider assortment of spring and summer offerings that will be dressier. He also said he expects to do well in bottoms, especially with miniskirts and denim.
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