Analysts Say Wet Seal Faces Identity Crisis

When analysts weren’t congratulating Pacific Sunwear last week, they were scratching their heads over Wet Seal Inc., a retailer of young women’s clothes that has been struggling since last summer.

The Foothill Ranch-based company last month warned that it expects fourth-quarter earnings to drop at least 72% below earnings in the same period the previous year. It was the company’s second warning for the quarter.

Analysts say Wet Seal is wrestling with an identity crisis of sorts and should undergo, as one put it, “real deep self-analysis” to determine which direction to go in the future.

“Teen fashion is fickle, and they seem to be sort of on the outs with that demographic group,” said Kelly Armstrong, with First Union Securities. “With a 17% dip in [sales at stores open a year or more], they need to look at what does Wet Seal, what does Contempo Casual and especially what does Blue Asphalt . . . stand for.”

(The company operates Wet Seal, Contempo Casuals and Arden B. stores. Blue Asphalt is its new line of casual wear.)

Analysts are now questioning what they say is Wet Seal’s shift toward casual clothing and away from the snazzier club wear. The company has not yet clearly defined its new vision, they say.

Wet Seal had no comment on Wall Street’s diagnosis.