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Wet Seal Sees Earnings Soar as Denim Succeeds

Apparel: The Foothill Ranch company has one of the industry's sunniest quarters.


Wet Seal Inc. said Thursday that its earnings surged nearly eightfold in the second quarter as its trendy denim offerings struck a chord with girls and young women.

In one of the rosiest reports from an apparel retailer recently, the Foothill Ranch company said earnings shot up to almost $3.6 million, or 18 cents a share, from $461,000, or 2 cents a share, for the comparable period last year. Analysts had expected earnings of 15 cents a share.

Sales for the quarter ended Aug. 4 rose 5.8% to nearly $135.6 million. Sales at stores open at least a year, a key industry indicator, increased 3.4% and have exceeded expectations so far this month, the company said.

"It was one of the best reports, if not the best earnings report, in the second quarter among apparel retailers," said Dennis Van Zelfden, an analyst with SunTrust Robinson Humphrey.

Wall Street also was pleased. Wet Seal's stock gained $1.76 a share, closing at $18.25 in Nasdaq trading.

Wet Seal's results were tied partly to brisk sales of trendy denim pants. While analysts are concerned that many retailers have too much denim in stock, they say the jazzier versions, such as glitter denim or pants with studs down the sides, are hot sellers.

"In all my 17 years with Wet Seal Inc., I have never seen a fashion denim business this strong," Chief Executive Kathy Bronstein said during a conference call with analysts.

While the company benefited from stronger demand for its women's apparel, some retailers have been beset by weak sales of clothing for men and boys.

Anaheim-based Pacific Sunwear of California Inc., for example, posted a 50% earnings decline for the quarter on weak sales of summer apparel. Earnings slumped 52% at San Francisco-based Gap Inc., which operates Gap, Old Navy and Banana Republic stores.

Also reporting earnings:

* Comarco Inc., an Irvine wireless-technologies company, reported second-quarter net income of $1.6 million, or 21 cents a share, up from $774,000, or 10 cents a share, a year ago, which included $1.3 million in severance costs. Revenue increased 17% to $14 million.

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