The Wet Seal, Inc. (Nasdaq:WTSL), a leading specialty retailer to young women, announced results for its fiscal fourth quarter and full year ended February 2, 2013. The Company noted that fiscal 2012 had 53 weeks versus 52 weeks in fiscal 2011; results for the fourth quarter and fiscal year 2012 include the additional week.
Fourth Quarter 2012
- Net sales for the 14-week fourth quarter were $161.7 million compared to net sales of $163.2 million for the 13-week fourth quarter in fiscal 2011.
- Consolidated comparable store sales declined 8.3%, including a comparable store sales decline of 9.1% at Wet Seal and 3.1% at Arden B. Comparable store sales for the current year quarter are versus the comparable fourteen weeks from the prior year.
- Operating loss was $25.5 million, or 15.8% of net sales, compared to operating income of $2.2 million, or 1.4% of net sales, in the prior year quarter.
- The current year and prior year quarters included $8.0 million and $2.5 million, respectively, in non-cash asset impairment charges. The current year quarter also included (i) a $6.6 million charge to accrue loss contingencies for several litigation matters, (ii) a $0.2 million benefit to adjust the amount of professional fees incurred to defend against a shareholder proxy solicitation to replace certain of the Company’s board members, which ultimately led to an agreement to replace four of the Company’s seven board members during the third quarter, (iii) $1.3 million in severance charges for a previously announced workforce reduction, and (iv) a $0.5 million charge for the early termination of two investment banker retention agreements. Non-GAAP adjusted operating loss, excluding the impact of the aforementioned adjustment and charges, was $9.3 million, or 5.8% of net sales in the 2012 fourth quarter, compared to operating income of $4.7 million, or 2.9% of net sales, in the prior year quarter (see reconciliation below of GAAP to non-GAAP financial measures).
- In the fourth quarter of fiscal 2012, the Company recorded a non-cash provision for income taxes of $71.1 million to establish a valuation allowance against its net deferred income tax assets.
- Net loss was $85.8 million, or $0.97 per diluted share, as compared to net income of $1.1 million, or $0.01 per diluted share, in the prior year quarter. Non-GAAP adjusted net loss in the fourth quarter of 2012, excluding the after-tax effect of the proxy solicitation cost adjustment, as well as the asset impairment, loss contingency, severance and investment banker early termination charges, and the provision for income taxes to establish the deferred tax asset valuation allowance, was $4.8 million, or $0.06 per diluted share, which equaled the Company’s most recent guidance for the quarter. For the fourth quarter of fiscal 2011, non-GAAP adjusted net income, excluding the after-tax effect of the asset impairment charges, was $2.6 million, or $0.03 per diluted share.
John D. Goodman, chief executive officer of The Wet Seal, Inc., stated, “Fiscal 2012 was a challenging year for the Company, marked by changes in leadership, strategic direction and brand positioning, which had a significant impact on our financial performance. During the past two months, our team has moved quickly to begin stabilizing the business, get back to Wet Seal’s fast fashion roots and prepare for growth. Additionally, we have taken meaningful action to reduce expenses, control inventories and leverage the core strengths of our team members.
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