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Wet Seal Annual Profit Nothing to Bark About : Earnings: Net income for 1992 dropped 19% from 1991 for the women's clothing chain. The recession is blamed for a poor 4th quarter.

March 20, 1993|SUSAN CHRISTIAN | TIMES STAFF WRITER

IRVINE — Meeting its own low expectations, Wet Seal Inc. on Friday reported that profits for 1992 dropped 19% from 1991.

The women's clothing chain posted earnings of $3.6 million, or 29 cents a share, for 1992. That contrasted with a profit of $4.2 million, or 35 cents a share, for the previous year.

In its otherwise respectable third-quarter earnings report in November, the Irvine company noted that it might finish the year on a weak note because sales were beginning to slip. Indeed, Wet Seal showed a loss of $410,000, or 3 cents a share, for the year's final quarter, contrasted with earnings of $1.3 million, or 10 cents a share, for the same period a year earlier.

For both the quarter and the year, Wet Seal saw an increase in revenue, however. The company rang up $149.7 million in sales for 1992, up from $119.9 million for the year before, and $35.5 million for the quarter, contrasted with $35.2 million a year earlier.

But those figures are deceiving, said Alan Weinstein, the company's chief financial officer. "The revenue came from an increased number of stores, but with that comes increased expenses," Weinstein said. Wet Seal, which operates 126 stores in California and six other states, added 15 outlets last year.

Further, Weinstein said, the chain aggressively marked down merchandise during the holidays. "When sales started to slow down, we wound up with too much inventory," he said.

Steve Schneider, an analyst with the brokerage Stifel Nicolaus in St. Louis, blamed the recession for Wet Seal's lackluster holiday sales.

"California sales continue to perform poorly, although Wet Seal stores outside of the state are doing OK," Schneider said. "The sales volumes for most retailers in California are depressed." Wet Seal has 80 stores in California, 11 of them in Orange County.

Schneider said he expects the company to rebound somewhat this year. "It's a good chain that does a terrific job of merchandising," he said.

In trading Friday on the NASDAQ market, Wet Seal stock closed at $6.50 a share, down 50 cents.

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