Red ink was splashed across all financial parameters, including revenue and net loss at womenswear apparel retailer The Wet Seal in the fiscal second quarter ended August 2, 2014. The
Net sales were down 11.2% to $121.2 million in the second quarter of 2014 versus $137.2 million in the second quarter of 2013.
In the same period, consolidated comparable store sales declined 12.4% from a year ago quarter, including a decline of 11.1% at Wet Seal and a decline of 22.8% at Arden B during the wind down of that business.
However, the ecommerce business at Wet Seal bucked the sales downtrend and generated a sales increase of 25.1% year-on-year in the second quarter of 2014.
In the second quarter of 2014, gross profit plunged 35% to $26.4 million compared to $40.7 million a year ago, while gross margin declined 780 basis points to 21.8% versus 29.6%.
Wet Seal said the year-over-year decrease is due to lower merchandise margins and higher occupancy costs as a percentage of sales.
Operating loss at the womenswear retailer which operates 531 stores in 47 US states crashed to $23.3 million in the quarter under preview from operating income of $1.0 million in the second quarter of 2013.
According to Wet Seal, the current year and prior year quarters include $12.7 million and $0.2 million, respectively, of non-cash asset impairment charges.
The retailer added that operating loss in the 2014 period also includes a charge of $0.2 million for Arden B exit costs and a $0.7 million benefit for the settlement of the its Supplemental Employee Retirement Plan liability.
Wet Seal also reported a massive net loss at $22.0 million, or a negative $0.26 per diluted share in the second quarter of 2014 down from net income of $1.0 million, or $0.01 per diluted share, in the prior year quarter.
As of August 2, 2014, it had cash and cash equivalents of $40.3 million and $22.2 million in convertible debt, net of discount.
Inventories amounted to $38.4 million compared to $40.9 million a year ago. Wet Seal explained that giving effect to final conversion of Arden B stores to Wet Seal and Wet Seal Plus stores inventory per square foot was down 7.9% versus a year ago.
CEO Ed Thomas said, "We recognize that current operating results and near-term outlook are disappointing to our shareholders. We're committed to creating shareholder value and expect to report back on our findings and new strategic direction in the coming weeks."
