Wet Seal Warns Quarterly Profit Likely to Fall

Wet Seal Inc. warned Thursday that second-quarter earnings are likely to fall sharply, coming in far below analysts’ expectations.

The Foothill Ranch specialty retailer has been struggling since last summer after misjudging the apparel desires of its fickle customers--mostly young females.

With less than two weeks remaining in the current quarter, sales at stores open at least a year have dipped 3%. Same-store sales were off 8.5% for the full second quarter last year.

Wet Seal said, however, that the sales trend has improved in recent weeks.

“We have experienced positive comparable store sales for the last four weeks and that trend appears to be continuing,” Chief Executive Officer Kathy Bronstein said. “We have taken the necessary markdowns to clear the summer inventory and we are optimistic about our fall merchandise assortment, which is currently arriving in our stores.”

Wet Seal estimated that earnings for the three months ending July 29 will total 3 to 7 cents a share, compared to 29 cents for the second quarter last year. Analysts had predicted earnings of 26 cents a share for the current quarter.

Company officials could not be reached for further comment.

As Wet Seal’s bottom line sagged in recent quarters, some analysts questioned what they said was the company’s shift from more stylish “club wear” toward more casual clothing.

Other retailers have also been struggling. U.S. retail sales rose 3.4% in June, the smallest increase in almost three years, and some analysts are predicting a gradual downturn for the rest of the year. Some experts say mounting consumer debt, the gyrating stock market and even rising gasoline prices have made consumers more cautious about opening their wallets.

Wet Seal’s stock closed at $11.13, down 13 cents, in Nasdaq trading. The warning was issued after the market closed.

The company operates Wet Seal, Contempo Casuals and Arden B. stores.