Why Wet Seal Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Wet Seal (NASDAQ: WTSL  ) were pushing higher today, gaining as much as 12% after a solid quarterly report.

So what: The women's fashion retailer reported an adjusted per-share profit of a penny, in line with estimates, while revenues declines less than expected, falling 5% to $140.4 million. Analysts had expected sales of $137.2 million. Overall, same-store sales dropped 2.9%. However, comps at its Arden B. chain gained 0.9%. Still, analysts seemed to interpret the results and outlook as evidence that Wet Seal's turnaround plan is working. CEO John Goodman said the company "has effectively stabilized the business," and noted improvements in merchandise, marketing, and inventory management.

Now what: While the results weren't great, Wall Street seemed encouraged by the current quarter's outlook as both revenue and earnings projections were ahead of analysts'. Wet Seal sees EPS for the second quarter between breakeven and $0.02, while the Street had expected a loss of $0.02. Expected revenue of $138 million to $141 million was also well above the consensus of $131.9 million, and management projected a comparable-sales increase in the mid-single digits. I'm not yet convinced of the strength of the turnaround, but positive comps is certainly a step in the right direction.

For more on Wet Seal, just add the company to your Watchlist here.


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