Earnings Preview: Wet Seal - Analyst Blog
May 18 2011 - 1:56PM
Zacks
Wet Seal Inc. (WTSLA) is scheduled to announce
its first quarter 2011 results on May 19, 2011. Currently, the
Zacks Consensus Estimate is 8 cents per share and the sales
estimate is $155 million.
Fourth Quarter Overview
Wet Seal Inc. registered fourth-quarter earnings of 7 cents a
share which surpassed the Zacks Consensus Estimate of 4 cents by
75%. Earnings also outpaced the prior year’s profit of 6 cents a
share.
Net sales for the quarter grew 9.6% year over year to $165.5
million. Consolidated comparable-store sales increased 2.3% during
the quarter. Net sales of the Wet Seal segment surged 9.5% to
$138.7 million for the quarter, while comparable sales increased
1.9%. For the Arden B segment, net sales grew 10.0% to $26.8
million, while comparable same-store sales increased 4.8%.
Concurrent with the earnings release, management provided
guidance for fiscal 2011. For the first quarter of fiscal 2011,
earnings are estimated in the range of 5 cents to 7 cents per
diluted share.
Total net sales are expected to be in the range of $151 million
and $155 million versus $137.8 million in the first quarter of
fiscal 2010. Comparable store sales are expected to increase in the
mid to high single-digits. Gross margin is expected to be in the
range of 31.2%-32.8% of net sales.
First-Quarter 2011 Zacks Consensus
Analysts covered by Zacks expect Wet Seal to post first-quarter
2011 earnings of 8 cents a share. The current Zacks Consensus
climbed up by 33.3% from the year ago period.
Magnitude of Estimate Revisions
The first quarter estimates moved up a penny in the last thirty
days as four analysts revised their estimates.
Mixed Earnings Surprise History
With respect to earnings surprises, Wet Seal has outpaced the
Zacks Consensus Estimate by an average 75% over the last four
quarters, ranging from 0.00% to a positive 75.00%.
Recommendation
We remain encouraged as Wet Seal is focusing on improving its
current stores which should lead to more profitable results in the
coming quarters. Moreover, Wet Seal launched several strategic new
internet features.
But, the company operates in a highly competitive women’s retail
apparel industry. The primary competitive factors in the industry
are fashion, quality, price, location and service. Tough
competitors like American Eagle Outfitters, Inc.
(AEO) and Gap Inc. (GAP) are a matter of
concern.
Currently, Wet Seal has a Zacks #3 Rank implying a short-term
Hold recommendation.
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