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Retailer Wet Seal Gets Back on Track

Apparel: It expects to easily beat estimates in its fourth quarter. Word sends its shares to a 52-week high.

February 21, 2001|LESLIE EARNEST | TIMES STAFF WRITER

Wet Seal Inc., regaining its footing after earlier fashion missteps, said Tuesday it expects to report a fiscal fourth-quarter jump in earnings that will easily surpass analysts' expectations.

The announcement sent Wet Seal's stock surging to a 52-week high of $34.94 during Tuesday's trading session. The shares, which have more than tripled over the last year, pulled back a bit to close at $33.19, up $2.44, in trading on Nasdaq.

The Foothill Ranch-based company said earnings should be 96 cents to 98 cents a share for the quarter ended Feb. 3, compared with 27 cents a share for the same period last year. Analysts were expecting earnings of 74 cents a share.

Sales at stores open at least a year rose 14.6% for the 13-week period ended Jan. 27. In the prior year's final quarter, same-store sales had fallen 17.1%.

Chief Executive Kathy Bronstein said a variety of factors have helped turn the company around, including a beefed-up management team and a move to refocus on more fashionable clothes after veering off into more casual offerings.

"It was about being too casual and not having enough fashion-forward merchandise," Bronstein said. "We have our feet back on the ground. We know what we're good at and we refocused on that."

Wet Seal also faced a "philosophical turning point" last October when then-President Edmond Thomas resigned after being with the company since 1992, Bronstein said. At that point, Wet Seal began allowing its management team a stronger voice in its operations, she said.

Thomas had been responsible for the company's financial management, merchandise distribution, real estate and other matters.

The new management team arrangement freed Bronstein to concentrate on running the overall company.

Wet Seal hit a snag in the summer of 1999 when it failed to predict what young shoppers wanted during the important back-to-school season that year.

Analysts said at the time that Wet Seal was "on the outs" with teenage fashion mavens, offering casual clothes that were too fancy and holiday clothes that weren't fancy enough.

In a move Bronstein thinks will spur growth, Wet Seal announced last month that it planned to buy Zutopia, a chain that caters to girls about 5 to 12 years old. It is buying the 19-store chain from Gymboree Corp., which operates apparel stores for infants and young children. The deal is expected to be finalized next month.

It will give Wet Seal a chance to snag a new piece of the retail pie, young girls who are becoming increasingly savvy about fashion, partly because of pop singers such as Britney Spears and Christina Aguilera.

Wet Seal operates 552 stores in 42 states, the District of Columbia and Puerto Rico. In addition to its signature brand, it operates Contempo Casuals, which carries the same products as Wet Seal stores, and Arden B. stores, which cater to slightly older customers.

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