Wet Seal Issues Second Warning of Steep Falloff

In its second warning about financial results, retailer Wet Seal Inc. said Friday that it expects fourth-quarter earnings to drop at least 72% from the year-earlier period.

The Foothill Ranch maker of young women’s apparel also predicted that its annual profit will be off about 42% compared to the previous fiscal year. The company declined to comment on the downturn.

Wet Seal had said in December that net income for the three-month period, which ended Jan. 29, would be hurt because it had to mark down merchandise to clear inventory.

On Friday, the company said it expects to report quarterly earnings of 24 cents to 27 cents a share, compared with 95 cents a share earned in the year-earlier quarter.

For the year, Wet Seal said expects to earn $1.09 to $1.11 a share, compared to $1.91 per share in the previous year.

Both earnings estimates are far below what Wall Street had expected. Analysts had predicted the company would earn 69 cents a share for the quarter and $1.54 a share for the year.

Sales for the quarter slid slightly to $143.2 million, compared to $145.9 million for the previous year’s final three months. Quarterly sales at stores open at least a year, a key industry indicator, sunk 17%.

For the year, revenue rose 8% to $524.4 million from $485.4 in the previous fiscal year. Same-store sales dropped 9.8%. Over the year, Wet Seal opened 109 stores and closed 15.

Wet Seal has been struggling since last summer when it misjudged the fashion whims of its young buyers during the important back-to-school shopping season. Following that misstep, the company said it was addressing the issues, but would not say how it planned to change its apparel mix.

The company also said last August that it would scale back its expansion plans for this year by opening 40 to 50 new stores, instead of the 75 previously planned. The company said Friday it will open 45 stores this year.

Wet Seal’s stock also has taken a drubbing, losing 71% of its value over the past year. The company’s stock, which last May hit a high of $47 a share, closed Friday at $11, down 13 cents in Nasdaq trading.

Wet Seal operates 548 stores in 42 states, the District of Columbia and Puerto Rico. In addition to its namesake stores, the company operates Contempo Casuals, Limbo Lounge and Arden B. stores.