Specialty retailer, Wet Seal Inc. (WTSL) plans to wrap up its Arden B business to reduce its cost of operation. The decision follows the comprehensive review of the business carried out by the company to improve business fundamentals.
Wet Seal expects to record pre-tax cost savings of about $1.3 million starting with the July quarter, while also booking charges for severance.
Wet Seal plans to shutter all the 54 Arden B stores by the back-to-school season in late Jul 2014. The retailer of women apparels plans to convert 31 Arden B locations to Wet Seal Plus (stores aimed for plus size women) merchandise. The remaining 23 locations are scheduled to convert to regular Wet Seal merchandise.
Unlike Wet Seal stores, which target teens aged 13 to 23 years, Arden B targeted an older clientele, aged 21 to 39 years. However, in the last fiscal year, Arden B performed poorly in comparison to Wet Seal.
The decision closely follows Wet Seal’s March announcement to focus on plus-size-only stores. Wet Seal opened its first plus-size store last fall and now plans to grow this segment through an expanded online assortment and store openings. The company plans to open two stores in fiscal 2014.
As part of the strategy to boost top line, Wet Seal also has also upgraded its e-Commerce platform and resorted to Demandware Commerce platform to support omni-channel operations. The company can now provide optimal online and mobile shopping services in a secure environment, integrated with its larger merchandising strategy.
Wet Seal is slated to report first-quarter fiscal 2014 results on May 27. Along with the announcement of exiting the Arden B business, Wet Seal also reiterated its previously announced financial guidance for the to-be-reported quarter and expects to report net loss in the 16 to 19 cents per share range.
For fiscal 2014, the apparel retailer expects to open 10 and close 17 Wet Seal stores upon lease expiration. Net capital expenditures are expected between $10.5 million and $11.5 million. Approximately $6.0 to $7.0 million is expected to be used for remodeling existing stores upon lease renewals and/or store relocations or construction of new ones.
Wet Seal currently carries a Zacks Rank #4 (Sell). Other better-ranked stocks worth considering in the retail sector include American Apparel, Inc. (APP), Kate Spade & Co. (KATE) and Foot Locker, Inc. (FL). All these stocks carry a Zacks Rank # 2 (Buy).
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