• Net income of $1m versus a $12.4m loss last year
  • Sales climbed 1.4% to $137.2m 
  • Comparable store sales up 3.7%
  • Gross margin improved 680 basis points to 29.6%

Teen apparel retailer The Wet Seal has returned to profit during the second quarter, thanks to higher sales, improved margins and lower expenses. 

The company, which operates 525 stores, said net income reached US$1m during the 13 weeks to 3 August. This compares to a net loss of $12.4m in the same period last year, when results were weighed down by impairment charges and CEO severance costs.

Sales climbed 1.4% to $137.2m from $135.3m in the prior year. Comparable store sales were up 3.7%, including a 3.9% rise at Wet Seal and a 2% gain for Arden B.

Gross margin improved 680 basis points to 29.6% of sales versus 22.8% last year, due to lower markdown levels.

CEO John Goodman said: "During the second quarter we achieved strong year-over-year improvement across all of our key financial metrics. We delivered comparable store sales growth of 3.7%, expanded our merchandise margin, reduced expenses and attained profitability.

"Our performance reflects the benefits of our fast fashion operating model, ongoing progress against our turnaround strategies and strong inventory management."

Year-to-date net income reached $4.1m, compared to a $12.6m loss in the prior year period, while sales slipped 1.9% to $277.7m from $283.2m last year.

For the third quarter, The Wet Seal expects net loss per diluted share to be $0.02-0.03 - an improvement from $0.17 last year. Sales are forecast to range between $135m and $138m, and comparable store sales to increase in the mid-single digits.

The retailer plans to open 22 new Wet Seal stores between late October and early November, primarily in outlet centres.

"As we look at the second half of the year, we're encouraged by how the business is positioned from both a financial and operational perspective.

"Our product and merchandising initiatives are resonating with customers, and we believe these core strategies, along with new marketing programs and partnerships planned for back-to-school and holiday, will enable us to drive continued growth at both Wet Seal and Arden B," Goodman added.