Stock Alert for The Wet Seal Inc. (WTSLA)
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    Stock Alert for The Wet Seal Inc. (WTSLA)

    The Wet Seal Inc. (WTSLA) is a national specialty retailer of fashionable and contemporary apparel and accessory items for young women. As of May 28, 2011, the Company operated a total of 538 stores in 47 states and Puerto Rico, including 456 Wet Seal stores and 82 Arden B stores.  WTSLA maintains a Web-based store located at www.wetseal.com and at at www.ardenb.com, offering merchandise comparable to that carried in its stores to customers over the Internet. The Company’s online stores are designed to serve as an extension of the in-store experience and offer a wide selection of merchandise, with the goal of expanding in-store sales.

    WTSLA is headquartered in Foothill Ranch, California.

    Share Statistics (17-June-11) FY 

    2010

    FY 

    2011

    Chg

    Q2 

    2010

    Q2 

    2011

    %
    Chg
    Symbol WTSLA Revenue, $Mn 560.92 581.19 3.6% 137.76 156.04 13.3%
    Current price $4.30 Gross marg. 29.7% 31.0% 4.4% 32.8% 34.3% 4.6%
    52wk Range: $2.77-$4.94 Oper. margin 4.3% 8.5%
    Avg Vol (3m): 2,433,630 Net margin 15.5% 2.16% -86.1% 2.3% 5.1% 121.7%
    Market Cap. 436.60M
    Shares Outstanding 101.54M EPS, $ 0.87 0.15 -82.8% 0.03 0.08 166.7%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    WTSLA jumped 3.61% to close Friday at $4.30.  Over 2 million shares have traded hands during the session, versus the 10-day average volume of 1.96 million. It has a 52-week high of $4.94 and a low of $2.77. WTSLA is currently below its 50-day moving average of $4.32 and above its 200-day moving average of $3.97.  Market capitalization currently stands at $436.60 million and it has 101.54 million outstanding shares.

    Early this month, the teen-focused apparel retailer reported a 2.9% increase in comparable store sales for the month of May, as against a 5.3% decrease last year.  However, the figure fell short of analysts’ expectation of an increase of 3.5%, according to a poll by Thomson Reuters.  Comparable store sales is a key metric used by retailers to gauge sales performance of stores opened for at least one year.

    WTSLA CEO Susan McGalla commented in the press release, “May comparable store sales results were in line with our expectations. We were pleased to have delivered our sixth positive comparable store sales result in the past seven months, and we are comfortable with our current inventory levels in both divisions as we enter the summer months.”

    For the four-week period ended May 28, 2011, the Company reported a 10.6% increase to $44.5 million in total revenue, as net sales of Wet Sales and Arden B rose 11.9% and 5.3%, respectively.  E-commerce sale dropped 6% for the fiscal month. These sales are not included in revenue at stores open at least a year.

    CEO McGalla said the Company had reduced online promotions and intends to rebalance inventories more toward regular price versus clearance items to drive merchandise margins higher.  According to her, the Company’s e-commerce sales may come in below last year’s results in the near term as the Company continues to focus on more full-price selling.

    Second Quarter Results

    WTSLA reported net sale of $156.0 million for the fiscal first quarter ended April 30, 2011, compared to net sales of $137.8 million for the quarter ended May 1, 2010.  Operating income was $13.3 million, or 8.5% of net sales, compared to $10.0 million, or 7.2% of net sales, in the first quarter of fiscal 2010.

    Net income came in at $8.0 million, or $0.08 per diluted share, up from the year ago quarter’s $3.1 million, or $0.03 per diluted share.  Excluding the impact of the interest charges, net income for the prior year quarter would have been $5.9 million, or $0.06 per diluted share.

    The Company generated cash flows from operations of $17.5 million during the 13 weeks ended April 30, 2011, and ended the quarter with $183.5 million of cash, cash equivalents and short-term investments, and no long-term debt.

    Visit WTSLA at www.wetsealinc.com

    Financial Strength (17-June-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 3.39 1.47 0.47 0.71
    Current Ratio (MRQ) 3.96 2.02 0.62 1.04
    LT Debt to Equity (MRQ) 0.00 15.12 20.22 136.03
    Total Debt to Equity (MRQ) 0.00 28.05 32.43 182.03
    Interest Coverage (TTM) 8.19 4.49 0.28 18.17

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among eight polled investment analysts. Against the Wet Seal Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 2 4 2 0 0 0
    4 weeks ago 2 4 2 0 0 0
    2 months ago 2 4 2 0 0 0
    3 months ago 2 3 3 0 0 0
    Last year 3 2 2 0 0 0

    The six analysts offering 12-month price targets for WTSLA have a median target of 5.75, with a high estimate of 7.00 and a low estimate of 4.00. The median estimate represents a 38.55% increase from the last price of 4.15.

    Source: markets.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Jul-11 7 146.16 147.29 144.07 141.03
    Quarter Ending Oct-11 7 160.61 163.40 158.10 164.33
    Year Ending Jan-11 8 580.37 581.24 574.90
    Year Ending Jan-12 8 644.62 653.10 636.37 645.79
    Year Ending Jan-13 8 707.29 718.05 698.69 681.00
    EARNINGS (per share)
    Quarter Ending Jul-11 8 0.02 0.03 0.02 0.05
    Quarter Ending Oct-11 8 0.04 0.05 0.02 0.06
    Year Ending Jan-11 9 0.18 0.22 0.15
    Year Ending Jan-12 9 0.22 0.30 0.18 0.29
    Year Ending Jan-13 8 0.29 0.43 0.24 0.39
    LT Growth Rate (%) 2 21.50 28.00 15.00 27.00

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=WTSLA.O

    Technical Analysis


    Source: http://stockcharts.com

    WTSLA is within its Bollinger Bands. This is a normal condition suggesting that it is neither overbought nor oversold relative to the recent price action.

    WTSLA’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    June-17-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Aeropostale Inc. ARO 17.36 1.40B 10.85 8.99 0.57 0.54
    Abercrombie & Fitch Co. ANF 65.48 2.64B 20.53 14.05 0.64 0.55
    American Eagle Outfitters Inc. AEO 12.55 2.45B 13.21 11.51 0.82 0.79
    Pacific Sunwear of California Inc. PSUN 2.57 170.38M n/a n/a 0.19 0.18
    Gap Inc. GPS 17.83 9.81B 12.38 10.43 0.66 0.65
    Apparel Stores Median 15.35 n/a 0.69 n/a
    Wet Seal Inc. WTSLA 4.30 436.60M 20.48 15.93 0.68 0.62

    Source: Thomson Financial

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