Any retail chain that can close 100 stores in two months and still post a 5% rise in companywide sales must be doing something right. That's just what

Wet Seal

(WTSLA)

did in March.

Wet Seal said overall sales rose 5% to $41 million in March despite the closures, which came amid a management shake-up, capital restructuring and the implementation of a new merchandising plan. March same-store sales trounced Wall Street's expectations, adding a whopping 36.3%.

Granted, results were boosted by the shift of Easter into March from April last year, and came against one of the worst months of its 2004 sales implosion. That, combined with the lingering overhang of the company's heretofore delayed fourth-quarter earnings report, left investors unimpressed, and the stock fell 9% to $3.76.

Wet Seal gave no reason for the delay when it made the announcement in late March, but many observers believe it's related to an informal investigation by the

Securities and Exchange Commission

into its second-quarter results and the timing of a stock sale made by

La Senza Corp.

, a Montreal retailer headed by Wet Seal's former chairman, Irving Teitelbaum.

Both Wet Seal and its hedge fund benefactor, Steve Cohen's SAC Capital, would not return phone calls from

TheStreet.com

. SAC disclosed a 6.4% stake in the company, and the hedge fund bailed it out of a cash crunch in November in a financing deal worth $40 million. SAC also has taken an active role in fixing the broken company, ousting Peter Whitford, the former chief executive, and replacing him with Joel Waller. It also hired a third-party liquidator to manage the store closings.

"They've done all the right things by shrinking their store base and adopting a lower-risk merchandising strategy, and it's apparently working for them," said Katharine Galligan, an analyst with Aperion Group LLC (she does not own Wet Seal shares and her firm has no investment banking relationship with the company). "I think everyone's just waiting to see what comes out of this upcoming earnings call."

While the retailer has posted a string of impressive monthly sales comps, March marked its first increase in net sales in 2005. Next Tuesday, Wet Seal is expected to report a fourth-quarter loss of 51 cents a share, which would mark a widening over last year's loss of 45 cents a share in the same quarter. Still, fourth-quarter earnings are relatively old news compared with its sales surge in March.

The stock, meanwhile, has languished below $5 for almost a year. Richard Hastings, an independent retail analyst with SpendingSpending.com, said that's a critical support level for the stock, and he would not buy it until it gets there.

"The jury is still out on this turnaround," said Hastings (he does not own shares in Wet Seal). "We need to see strong comps continue for six to nine months, and we need the stock to get above $5 to be attractive from a technical standpoint."

Wet Seal now operates more than 300 Wet Seal stores and 93 Arden B. stores, which market to a slightly older customer. When SAC revealed its interest in the company, analysts thought the hedge fund likely saw value in the Arden B. stores.

"They may have been on to something," Galligan said about SAC. "Wet Seal's new management team is a definite improvement. We'll just have to wait and see if they can keep making it work."