Wet Seal Strategy Working: Profit Increases by 35% : Apparel: Same-store sales up 8% since chain responded to recession by cutting prices on its clothes for young women.

Adapting to the recession by lowering prices, the Wet Seal Inc. young women’s apparel chain reported Thursday that earnings increased 35% to $1.4 million, or 12 cents a share, for its fiscal second quarter.

In the middle of the recession last year, the company posted second-quarter earnings of $1.1 million, or 9 cents a share. Sales for the quarter ended Aug. 1 rose 41% to $38.6 million from last year’s $27.5 million.

Same-store sales--which measures changes in revenue over a period without taking new stores into account--were up 8% for the second quarter.

“All regions have shown increases and are experiencing positive comparable store sales,” said Kathy Bronstein, Wet Seal’s president.

For the first six months of the year, Wet Seal earned $2.3 million, or 19 cents a share, up 32% over $1.7 million, or 15 cents a share, for the same period last year. Revenue for the period grew 42%, to $72.6 million from $51.3 million last year.

Wet Seal’s increase in same-store sales and its quarterly hike in profits “frankly give a clear indication that the company’s strategies are working,” said Tom Tashjian, a retail analyst for First Manhattan Co. brokerage in New York.

The Irvine-based chain with 118 stores advertises little, instead depending primarily on foot traffic at malls to interest shoppers in its moderately priced sportswear, accessories and other apparel for young women.

But the company has been hurt because many of its stores are in California, one of the states hit hardest by the recession. And since the stores are mostly in malls, its real estate costs are somewhat higher than some off-price retail chains which locate in strip centers.

Still, Wet Seal managed to cut its prices 18% to 20% recently, said Alan Weinstein, the chief financial officer.

He said the improved earnings are a combination of lower prices and an easing of the recession. The company also helped itself by wangling better deals from its suppliers, allowing the chain to maintain or improve its profit margins. In addition, signs placed at store entrances call shoppers’ attention to the bargains.

“We believe that customers see the value,” Weinstein said. “Customers are not dumb. They know what the prices of Bongo Jeans are.”

Weinstein said that corporate executives believe the new strategy is “right” and that it will return the company to “the real high profitability” of two years ago when per-share earnings rose to 22 cents.

“We are very bullish on the balance of the year,” Weinstein said.