Wet Seal Gains As Results Roll In As Expected

NEW YORK (AP) — Wet Seal Inc. shares rose Friday after the teen retailer's second-quarter results and third-quarter outlook met analysts' expectations.

On Thursday, the Foothill Ranch, Calif., company said profit fell 69 percent in the second quarter from the previous year, while sales fell 9 percent.

Brean Murray Carret analyst Eric Beder advised investors to be patient. A turnaround is in effect at Arden B., he said. Its same-store sales fell 4 percent in the third quarter, and operating profit margin rose to 13.1 percent, the highest in 10 quarters. That's due to cheaper suppliers and more sales at full price.

Meanwhile, September will be the key month for the Wet Seal shops to show improvement, Beder said, as stores gear up for the holiday season. Same-store sales, a key retail industry metric, fell 11.9 percent for Wet Seal in the second quarter — the worst in more than three years.

However, the company believes it has fixed Wet Seal's problems with too-basic tops for sale, Beder added, and has hired experienced merchandising managers.

Wet Seal is in "excellent" financial shape, said Raymond James analyst Samantha Panella, but she said she is still looking for improvement at the Wet Seal division, which makes up 82 percent of sales. She rates the shares "Market Perform."