Low Tide

The Wet Seal Inc. (Foothills Ranch, Calif.) reported that same-store sales plunged 18 percent in its fiscal fourth quarter 2002, resulting in a fourth-quarter loss in earnings.

The casual apparel and accessories retailer posted a loss of $5.6 million for the quarter ending Feb. 1, 2003. Revenue in the quarter fell 12.5 percent and same-store sales dropped 18 percent.

For the year, net income dropped 86 percent, sales fell 1 percent and same-store sales fell 5.6 percent.

The company said it expects same-store sales to decline 23 to 28 percent this month and 8 to 14 percent next month.

Executives admitted that Wet Seal moved away from its core teen customer to appeal to a wider age group, and teens rejected the company's more sophisticated merchandise for the key back-to-school and holiday shopping seasons. As it searched for a new fashion trend to replace the faded bohemian look, it placed orders late with vendors, who then could not deliver goods in time, leaving stores without enough inventory.

At the company's more upscale Arden B. stores, the merchandise focused on too many different looks, executives said.

It was “a much more difficult year than we believed possible,” admitted executive vp Walter Parks.

“Our customer voted 'no' on our holiday merchandise,” said Susan O'Toole, president of the Wet Seal division.

To turn around the business, the company said it has stocked stores with colorful, retro looks and sexy active wear. Knit tops, screen T-shirts and casual bottoms are currently performing well, though the company won't have enough bottoms inventory for two more weeks. Wet Seal isn't expecting a significant improvement in its business until the 2003 back-to-school season.

In the meantime, the company said, it has been cutting expenses. It has eliminated its catalog for 2003, cut its print advertising budget and will use ground transportation instead of air freight to get inventory to stores. Wet Seal will also reduce new store openings from last year's 69 to 35, slashing capital expenditures in half to $17.5 million.

The Wet Seal operates about 590 shops in the U.S. and Puerto Rico, selling moderately priced casual clothing, accessories, and its own line of cosmetics. Most of its stores are mall-based, operating under the Contempo Casuals and Wet Seal names. Its Arden B. stores target women ages 18-40. To capture the tween market, the company bought Gymboree's Zutopia chain of 30 stores.