Despite the temptation, I've decided there's no need for me to club this baby. Management's doing a fine job of killing this little cutie all on its own.
After all, only at TheWet Seal (NASDAQ:WTSLA) -- or perhaps, getting away from clothes, Pier 1 (NYSE:PIR) or Bombay Company (NYSE:BBA) -- does an 8% drop in same-store sales look like a good thing.
But swatting analysts' expectations for a 15% comps decline doesn't do shareholders much good when management mortgaged the future just to drag teenyboppers into the front door. Yet, those are the wages of Wet Seal's sins: "higher than anticipated promotional activity in September, which negatively impacted margins."
Translation: "We figured we'd have a fire sale to juice revenues, but that means we're going to lose even more money than you expected. How's $0.83 per share sound for next quarter?"
Not so good. I mean, the stock's only worth a buck and change.
It's hard to imagine how things can get worse for the poor souls who've tried to cuddle this sick pup for the past year. About the only positive sign is that recent sales decreases haven't been as dramatic as last year's. Hey, and there's no long-term debt.
But it doesn't take a genius to figure out that a firm with $36 million in cash that's burning $20 million per quarter is going to run out of money pretty quickly. And it's going to have to sell stock or pay the same interest rates that Fast Eddie gives all his high-risk borrowers. Either way, it's not going to be cheap for shareholders.
The real problem is that neither the Britney-Christina wannabes nor the Hillary Duff crowd seems to want what The Wet Seal is shoveling. And you can't blame a sector-wide slowdown. Despite the headlines predicting the demise of retail, other specialty clothing hawkers, such as Abercrombie & Fitch (NYSE:ANF) and American Eagle Outfitters (NASDAQ:AEOS) are doing OK. Heck, even neo-Goth nightmare Hot Topic (NASDAQ:HOTT) turned things around.
When you invest in damaged goods, you need to at least believe that management can turn things around. The Wet Seal's team has a lot of work to do before it can command that trust.
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Seth Jayson swears he heard undisturbed crickets singing in his local Wet Seal. At the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here. Fool rules are here.
