The Wet Seal Inc. said Thursday that its first-quarter net income fell 43.7 percent, but the women’s retailer was still able to top analysts’ estimates by a penny, due in part to improvements in its Arden B. division and tight inventory management.
The Foothill Ranch, Calif.-based firm said profits fell to $5 million, or 5 cents a diluted share, in the period ended May 2, compared with income of $8.9 million, or 9 cents a share, in the year-ago quarter. Net sales slid 7.3 percent to $132 million, from $142.4 million in 2008. By division, Wet Seal’s sales receded 6.7 percent to $108.4 million, while Arden B.’s revenue declined 9.8 percent to $23.6 million. Total comparable-store sales slid 7.3 percent, while comps were down 7.9 percent and 4.1 percent at Wet Seal and Arden B., respectively.
Arden B., the more problematic of the two divisions, is showing “early signs of a turnaround,” said chief executive officer Ed Thomas, who pointed to its 6 percent increase in April comps. But at the larger Wet Seal, results were “pressured” by a difficult retail environment and “inventory mix issues,” which included an excess of basics, Thomas said on the company call. This imbalance should be cleared up by the back-to-school selling season, he said, adding, “We believe we have a competitive advantage in respect to ever-changing fashion trends.” The Wet Seal division’s comps fell 4 percent in April.
For the second quarter, the retailer said it anticipates earnings per share of between 2 and 5 cents on sales of between $135 million and $140 million. Comps are expected to decline by between 7 and 10 percent.
Analysts were looking for EPS of 8 cents on revenue of $140.7 million. During the quarter, the company also said it plans to open five Wet Seal stores and close one Arden B.