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Same-store sales at Wet Seal Inc. , a specialty retailer of fashionable and contemporary apparel and accessory items, plunged 8.8% year over year in the four-week period ended May 26, 2012. This compares unfavorably with the 2.9% increase in same-store sales in the year-ago period. Total sales slipped 7.0% in May 2012 to $41.3 million from the year-ago period.

Comparable sales in the Wet Seal stores declined 8.7% year over year, compared to a 2.8% increase in the year-ago period. Arden B stores reported a year-over-year decline of 9.3% versus a 3.2% increase in May 2011.

While total sales in May 2012 in the Wet Seal stores slipped 7.0% year over year to $33.8 million, that in the Arden B stores slipped 6.9% to $7.5 million in May 2012.

However, e-commerce performed better than last year and sales declined 5% in May 2012 versus a 6% decrease in the year-ago period.

May’s comparable-store sales came in line with management’s guidance. Soft sales in the fashion knit tops and screen tee businesses offset the growth in several other categories.

Store Update

As of May 26, 2012, Wet Seal operated a total of 554 stores in 47 states and Puerto Rico, including 470 Wet Seal stores and 84 Arden B stores.

Future Planning

Wet Seal plans to further enrich its stock with its strong performing categories, including woven tops, jeans, dresses and shoes. This will boost sales in the upcoming back-to-school season. Moreover, it will focus on the bottoms category in the Arden B stores as it has performed satisfactorily for the past few months.

At the time of announcing first quarter results, Wet Seal said that its expects its second-quarter 2012 earnings per share to be in the range of 3 cents to 6 cents compared with earnings of 2 cents in the prior-year quarter.

For fiscal 2012, the company plans a net 20 – 22 store openings at Wet Seal, down  from previously announced plan of opening 25 –30 stores. The company also plans to bring down Arden B store base from the current 84 stores to approximately 64 to 69 stores by the end of fiscal 2012.

Conclusion

Wet Seal faces stiff competition from American Eagle Outfitters Inc. (AEO - Analyst Report) and Gap Inc. (GPS - Analyst Report). Currently, Wet Seal carries a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

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