US: Wet Seal swings to $3.3m Q3 loss
The Wet Seal has slipped to a loss in its third quarter as the specialty retailer said that it took "aggressive markdowns" on inventories to ensure it entered the holiday season with a fresh merchandise assortment.
In a statement, The Wet Seal said that its net sales for the 13-week period ended 3 November, were US$150.3m compared to net sales of $143.3m for the same period in 2006.
However, comparable store sales for the 2007 period decreased 3.4%. The company reported a 7.3% comparable store sales increase for the 13-week period in 2006.
Net loss for the quarter was $3.3m. Results include an asset impairment charge of $1.6m. This compares to prior year third quarter net income of $2.4m.
The prior year results include non-cash stock compensation charges of $4.4m related to performance shares granted to a merchandise consultant formerly used by the company and a non-cash interest charge of $0.1 million associated with conversions of the company's convertible notes.
Ed Thomas, chief executive officer, said: "While we were within our comparable stores sales expectation as updated in early October, earnings were below plan as we took aggressive markdowns on inventories to ensure we entered the holiday season with a fresh and clean merchandise assortment.
"From an aging perspective, our inventories began the holiday season much better positioned than they were in the past two years.
"We continue to monitor inventory levels carefully as we expect the retail environment to remain highly competitive during the holiday season."
Thomas continued: "Among other areas, we are reviewing our net store count growth plans and, preliminarily, intend to slow our growth rate from approximately 15% in the current year to approximately 5% in fiscal 2008."
For the fourth quarter, earnings are estimated in the range of $0.03 to $0.06 per diluted share. The guidance is based on the assumption that total net sales will reach between $168m and $171m versus $166m in the prior year fourth quarter.
The current year fourth quarter includes 13 weeks while the prior year fourth quarter included 14 weeks.
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