On March 29, teen retailer The Wet Seal (NASDAQ:WTSLA) released earnings for the fourth quarter ended Feb. 3.

  • Revenue increased 17.7% to $166.4 million, with a 3.1% increase in comparable-store sales. 
  • Margins were a mixed bag, with stale gross margins and a drop in net margin. On a more positive note, operating margin showed an increase of 250 basis points.
  • The company opened 14 new stores -- net of closings -- for a total of 430 operating stores, and expects to open 58 to 62 new stores during fiscal 2007.
  • Wet Seal has been left on the clearance rack, along with Hot Topic (NASDAQ:HOTT), by the community in Motley Fool CAPS, our free interactive stock database, with each earning only a one-star rating. Meanwhile, dELiA*s (NASDAQ:DLIA) is the new teen trend, with a four-star rating, followed closely by three stars for Urban Outfitters (NASDAQ:URBN) and Tween Brands (NYSE:TWB).   

 (Figures in millions, except per-share data)

Income Statement Highlights

Q4 2006

Q4 2005

Change

Sales

$166.4

$141.4

17.7%

Net Profit

($5.7)

($2.9)

N/A

EPS

($0.07)

($0.06)

N/A

Diluted Shares

79.3

52.5

51.0%

Get back to basics with the income statement.

Margin Checkup

Q4 2006

Q4 2005

Change*

Gross Margin

33.6%

33.6%

0.0

Operating Margin

2.9%

0.4%

2.5

Net Margin

(3.4%)

(2.0%)

(1.4)

*Expressed in percentage points

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q4 2006

Q4 2005

Change

Cash + ST Invest.

$105.3

$96.8

8.7%

Accounts Rec.

N/A

N/A

N/A

Inventory

$34.2

$25.5

34.4%

Liabilities

Q4 2006

Q4 2005

Change

Total Accounts Payable

$21.2

$23.8

(11.0%)

Long-Term Debt

$0.0

$8.0

(100.0%)

The balance sheet reflects the company's health.

Cash Flow Highlights

Wet Seal must be trying on new spring merchandise because it forgot to include a cash flow statement in the press release.

Free cash flow is a Fool's best friend.

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