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Wet Seal Loss Widens, Outlook Weak; Stock Down - Update

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Wet Seal Inc (WTSL: Quote), a specialty apparel retailer for women, Tuesday reported a slip to loss in the first quarter, hurt mainly by weak sales and margins. While the loss was lower than what Wall Street estimated, sales fell short of expectations.

Moving forward, Wet Seal provided a weak outlook for the second quarter, dragging its shares down nine percent in after-hours trade on the Nasdaq.

Chief Executive John Goodman said the results were impacted by factors that have for the past months been a bane for retailers - soft mall traffic, elevated promotional activity and disruptive weather. "Our performance trend improved during the last month of the quarter and was highlighted by a strong Easter week," Goodman added.

Wet Seal reported first-quarter net loss of $21.8 million or $0.26 per share compared with net earnings of $3.1 million or $0.03 per share last year.

Excluding items, adjusted loss for the quarter was $15.1 million or $0.18 per share compared with earnings of $1.3 million or $0.01 per share a year ago.

On average, five analysts polled by Thomson Reuters estimated a loss of $0.18 per share for the quarter. Analysts' estimates typically exclude special items.

The company, which operates 532 stores, said sales for the quarter were lower at $116.7 million compared with $140.4 million in the prior year. Analysts estimated sales of $117.46 million for the quarter.

On a same store basis, revenues for the quarter declined 16.9 percent, including a decline of 16.5 percent at Wet Seal and 19.4 percent at Arden B, the company said.

Results were also impacted by a decline in gross margin to 19.8 percent from 30.1 percent last year.

Looking ahead to the second quarter, the Foothill Ranch, California-based company expects adjusted loss of $0.12 to $0.09 per share, while analysts currently project a loss of $0.04 per share.

Wet Seal expects same store sales to decline 8 percent to 11 percent for the quarter.

Meanwhile, the company expects to complete the planned conversion of 54 Arden B store locations to Wet Seal and Wet Seal Plus merchandise by the end of the second quarter.

Wet Seal stock closed Tuesday at $1.01, up about $0.06 or 5.96%, on a volume of 1.5 million shares on the Nasdaq. In after hours, the stock dropped $0.09 or 8.91%.

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by RTT Staff Writer

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