Wet Seal Earnings Warning Hurts Stock

Wet Seal Inc. shares tumbled Wednesday after the Foothill Ranch fashion retailer for young women warned its fiscal first-quarter earnings will fall below analysts’ estimates.

The stock fell $3.25, or 18%, to $15 on the Nasdaq market, after trading as low as $12.38 earlier in the session. The stock has lost about two-thirds of its value over the last 52 weeks, but it is up about 22% so far this year.

The retailer said earnings for the quarter ended April 29 fell 16 cents to 18 cents a share from 34 cents a year earlier. Analysts were estimating quarterly earnings of 23 cents a share.

The company’s earnings were hurt as it lowered prices to clear out leftover inventory from unsuccessful merchandising campaigns that included too-dressy back-to-school clothes and too-casual Christmas clothes, said analyst Dennis Van Zelfden at Robinson-Humphrey Co., who rates the stock “outperform.”

Van Zelfden said he expects the company’s sales and earnings to turn around in the second half. The company’s moves to reduce its private-label merchandise and replace it with name-brand teen apparel, such as Bubble Gum and Hot Kiss, will also help with sales later this year, he said.

The company said it plans to disclose final results May 18.