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Wet Seal Inc. 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 - Analyst Report) and Gap Inc. are a matter of concern.

Currently, Wet Seal has a Zacks #3 Rank implying a short-term Hold recommendation.

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