The Wet Seal, Inc. Announces First Quarter Fiscal 2013 Financial Results

  The Wet Seal, Inc. Announces First Quarter Fiscal 2013 Financial Results

               Provides Second Quarter 2013 Financial Guidance;

   Expects to Achieve Positive Mid-Single Digit Comp Store Sales in Q2 2013

Business Wire

FOOTHILL RANCH, Calif. -- May 28, 2013

The Wet Seal, Inc. (Nasdaq: WTSL), a leading specialty retailer to young
women, today announced results for the first quarter of fiscal 2013 ended May
4, 2013.

First Quarter 2013

  *Net sales for the quarter ended May 4, 2013, were $140.4 million compared
    to net sales of $147.9 million for the quarter ended April 28, 2012.
  *Consolidated comparable store sales decreased 2.9%, including a decrease
    of 3.4% at Wet Seal and an increase of 0.9% at Arden B.
  *Operating income was $3.2 million compared to operating loss of $0.4
    million in the first quarter of fiscal 2012. The current year and prior
    year quarters include $1.6 million and $3.6 million, respectively, of
    non-cash asset impairment charges. Operating income in the 2013 period
    also includes a $3.5 million benefit to adjust a loss contingency.
    Non-GAAP adjusted operating income, excluding the effect of the
    aforementioned charges and benefits, was $1.3 million in the first quarter
    of fiscal 2013 compared to $3.2 million in the prior year period.
  *Operating income in the 2013 period also includes $1.7 million of
    incremental legal defense costs versus a year ago.
  *Net income was $3.1 million, or $0.03 per diluted share, compared to net
    loss of $0.3 million, or $0.00 per diluted share, in the prior year
    quarter. Non-GAAP adjusted net income in the first quarter of fiscal 2013,
    excluding the after-tax effect of the asset impairment charges and benefit
    to adjust a loss contingency accrual, was $1.3 million, or $0.01 per
    diluted share. Non-GAAP adjusted net income in the first quarter of fiscal
    2012, excluding the after-tax effect of the asset impairment charges, was
    $1.9 million, or $0.02 per diluted share.
  *At quarter’s end, the Company’s inventory per square foot was down 7.7%
    versus a year ago, with Wet Seal down 7.6% and Arden B down 6.3%.

“We are pleased with the operating and financial momentum we’re beginning to
experience,” said John D. Goodman, Chief Executive Officer. “We have made good
progress in a short period of time throughout the organization. Our teams have
executed well and delivered improvement in virtually every aspect of the
business, including product, inventory management, merchandising, marketing,
in-store presentation and customer engagement. This allowed us to exceed our
financial guidance in the first quarter and forecast a return to positive comp
store sales earlier than planned in the second quarter of 2013.

“We have effectively stabilized the business,” continued Goodman. “We are
seeing an increasingly strong response to our product offerings and customer
engagement strategies, while at the same time, we have closely managed
inventory and significantly improved our merchandise margin. We believe the
Company has the people, processes and brand strength to enable us to begin
driving consistent performance, and we are enthusiastic about the opportunity
to better position both Wet Seal and Arden B for long-term growth.”

Balance Sheet and Share Repurchase Program

As of May 4, 2013, the Company was in strong financial condition, with cash
and cash equivalents and short-term investments of $111.7 million and no debt.
Inventory totaled $36.3 million compared to $40.1 million a year ago.

During the first quarter ended May 4, 2013, the Company repurchased a total of
1,206,649 shares of its common stock under its current $25 million share
repurchase program. The purchases were made at a weighted average cost of
$3.00 per share for a total cost of approximately $3.6 million. The Company
also repurchased a total of 46,872 shares of its common stock to satisfy
employee tax obligations, upon restricted stock vesting, for a total cost of
approximately $0.2 million.

Goodman concluded, “We are pleased to be able to utilize the Company’s strong
cash position to return value to our shareholders. We are also investing in
Wet Seal’s real estate portfolio through a combination of remodels and new
store openings, with an emphasis on highly productive outlet center growth in
fiscal 2013.”

Real Estate

During the first quarter of fiscal 2013, the Company opened 2 and closed 6 Wet
Seal stores. As of May 4, 2013, the Company operated 526 stores in 47 states
and Puerto Rico, including 464 Wet Seal stores and 62 Arden B stores.

Second Quarter Fiscal 2013 Guidance

For the second quarter of fiscal 2013, the Company expects earnings per
diluted share to be in the range of $0.00 to $0.02. The guidance is based on
the following major assumptions:

  *Total net sales between $138 million and $141 million versus $135.3
    million in the second quarter of fiscal 2012.
  *Comparable store sales increase in the positive mid-single digits, versus
    an 11.1% decrease in the prior year quarter.
  *Gross margin rate between 29.0% and 30.2% of net sales versus 22.8% in the
    prior year quarter, reflecting improvement in merchandise margin and
    leveraging benefits of positive comparable store sales on occupancy costs.
  *SG&A expense between 28.8% and 28.9% of net sales versus 30.6% in the
    prior year quarter.
  *Operating income ranging from $0.1 million to $2.1 million. In the second
    quarter of 2012, operating loss was $19.5 million, including non-cash
    asset impairment charges and CEO severance costs.

First Quarter Conference Call Information

The Company will host a conference call to discuss first quarter fiscal 2013
financial results today, Tuesday, May 28, 2013, at 1:30 p.m. Pacific Time. The
call will be hosted by John D. Goodman, Chief Executive Officer, and Steve
Benrubi, Executive Vice President and Chief Financial Officer.

To participate in the call, please dial (877) 407-3982 or (201) 493-6780. A
broadcast of the call will also be available on the Company’s web site at
www.wetsealinc.com. A replay of the call will be available through June 11,
2013. To access the replay, please dial (877) 870-5176 or (858) 384-5517 and
provide pin number 413830.

About The Wet Seal, Inc.

Headquartered in Foothill Ranch, California, The Wet Seal, Inc. is a leading
specialty retailer of fashionable and contemporary apparel and accessory
items. As of May 4, 2013, the Company operated a total of 526 stores in 47
states and Puerto Rico, including 464 Wet Seal stores and 62 Arden B stores.
The Company's products can also be purchased online at www.wetseal.com or
www.ardenb.com. For more Company information, visit www.wetsealinc.com.

Safe Harbor

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: This news release contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to, statements that
relate to the Company's estimated fiscal 2013 second quarter earnings
guidance, as well as the intent, belief, plans or expectations of the Company
or its management. All forward-looking statements made by the Company involve
material risks and uncertainties and are subject to change based on factors
beyond the Company's control. Accordingly, the Company's future performance
and financial results may differ materially from those expressed or implied in
any such forward-looking statements. Such factors include, but are not limited
to, those described in the Company's filings with the Securities and Exchange
Commission. This news release contains results reflecting partial year data
and non-fiscal data that may not be indicative of results for similar future
periods or for the full year. The Company will not undertake to publicly
update or revise its forward-looking statements even if experience or future
changes make it clear that any projected results expressed or implied therein
will not be realized.

                                                                 
Exhibit A

The Wet Seal, Inc.
Condensed Consolidated Balance Sheets
(000’s Omitted)
(Unaudited)
                                                                     
                                           May 4,      February 2,   April 28,
                                                       2013
                                           2013                      2012
ASSETS
Cash and cash equivalents                  $ 50,320    $  42,279     $ 148,108
Short-term investments                       61,342       67,694       -
Merchandise inventories                      36,341       33,788       40,080
Other current assets                         16,258       15,467       16,206
Deferred taxes                              -           -           20,133
                                                       
Total current assets                         164,261      159,228      224,527
Net equipment and leasehold improvements     63,569       64,225       86,606
Deferred taxes                               -            -            23,927
Other assets                                3,040       3,053       3,054
Total assets                               $ 230,870   $  226,506    $ 338,114
                                                                     
                                                                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable – merchandise             $ 20,644    $  16,978     $ 23,802
Accounts payable – other                     17,470       18,116       11,747
Accrued liabilities                          27,970       26,347       23,410
Current portion of deferred rent            2,717       2,289       2,619
                                                                     
Total current liabilities                    68,801       63,730       61,578
Deferred rent                                31,674       32,136       33,057
Other long-term liabilities                 1,871       1,908       1,889
                                                                     
Total liabilities                            102,346      97,774       96,524
Total stockholders’ equity                  128,524     128,732     241,590
                                                                     
Total liabilities and stockholders’        $ 230,870   $  226,506    $ 338,114
equity
                                                                     

                                             
Exhibit A (continued)

The Wet Seal, Inc.
Condensed Consolidated Statements of Operations
(000’s Omitted, Except Share and Per Share Data)
(Unaudited)
                                               
                                               13 Weeks Ended
                                               May 4, 2013     April 28, 2012
Net sales                                      $ 140,445        $ 147,945
Gross margin                                     42,231           43,603
Selling, general & administrative expenses       37,437           40,438
Asset impairment                                 1,596            3,606
                                                               
Operating income (loss)                          3,198            (441       )
Interest expense, net                           (6         )    (10        )
                                                                
Income (loss) before provision (benefit) for     3,192            (451       )
income taxes
Provision (benefit) for income taxes            82             (178       )
                                                                
Net income (loss)                              $ 3,110         $ (273       )
                                                               
Net income (loss) per share, basic             $ 0.03          $ (0.00      )
                                                               
Net income (loss) per share, diluted           $ 0.03          $ (0.00      )
                                                               
Weighted average shares outstanding, basic      88,501,179     88,486,977 
                                                               
Weighted average shares outstanding, diluted    88,503,407     88,486,977 
                                                                             

Calculation of the Company’s earnings per share requires the allocation of net
income among common shareholders and participating security holders. The net
income available to common shareholders used to calculate basic and diluted
earnings per share was $3,079 for the 13 weeks ended May 4, 2013.

                                                        
Exhibit A (continued)

The Wet Seal, Inc.
Condensed Consolidated Statements of Cash Flows
(000’s Omitted)
(Unaudited)
                                                          
                                                          13 Weeks Ended
                                                          May 4,    April 28,
                                                          2013       2012
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)                                         $ 3,110    $ (273)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization                             3,338      4,691
Amortization of premium on investments                    152        -
Amortization of deferred financing costs                  27         27
Asset impairment                                          1,596      3,606
Loss on disposal of equipment and leasehold               18         286
improvements
Deferred income taxes                                     -          (147)
Stock-based compensation                                  369        994
Changes in operating assets and liabilities:
Income tax receivable                                     -          (310)
Other receivables                                         (2,874)    218
Merchandise inventories                                   (2,553)    (8,246)
Prepaid expenses and other assets                         2,056      (9,926)
Other non-current assets                                  13         8
Accounts payable and accrued liabilities                  3,950      3,987
Deferred rent                                             (34)       24
Other long-term liabilities                               (37)       (35)
                                                                     
Net cash provided by (used in) operating activities       9,131      (5,096)
                                                                     
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements          (3,603)    (3,778)
Proceeds from maturity of marketable securities           6,200      -
                                                                     
Net cash provided by (used in) investing activities       2,597      (3,778)
                                                                     
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options                   94         19
Repurchase of common stock                                (3,781)    (222)
                                                                     
Net cash used in financing activities                     (3,687)    (203)
                                                                     
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS          8,041      (9,077)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD            42,279     157,185
                                                                     
CASH AND CASH EQUIVALENTS, END OF PERIOD                  $ 50,320   $ 148,108
                                                                     

                                                                     Exhibit B

Segment Reporting (Unaudited)

The Company operates exclusively in the retail apparel industry in which it
sells fashionable and contemporary apparel and accessories items, primarily
through mall-based chains of retail stores, to female consumers with a young,
active lifestyle. The Company has identified two operating segments (“Wet
Seal” and “Arden B”) as defined under applicable accounting standards.
E-commerce operations for Wet Seal and Arden B are included in their
respective operating segments. Information for the 13 weeks ended May 4, 2013,
and April28, 2012, for the two reportable segments is set forth below (in
thousands, except number of stores as of period end and sales per square
foot):

Thirteen Weeks Ended    Wet Seal      Arden B     Corporate   Total
May 4, 2013
Net sales                $ 122,799      $ 17,646       n/a        $ 140,445
% of total sales           87      %      13     %     n/a          100     %
Comparable store sales     (3.4    )%     0.9    %     n/a          (2.9    )%
% (decrease) increase
Operating income         $ 9,553        $ 558        $ (6,913 )   $ 3,198
(loss)
Interest expense, net    $ —            $ —          $ (6     )   $ (6      )
Income (loss) before
provision (benefit)      $ 9,553        $ 558        $ (6,919 )   $ 3,192
for income taxes
Depreciation             $ 2,584        $ 260        $ 494        $ 3,338
Number of stores as of     464            62           n/a          526
period end
Sales per square foot    $ 62           $ 81           n/a        $ 64
Square footage as of       1,856          192          n/a          2,048
period end
                                                                  

                                                             
Thirteen Weeks Ended    Wet Seal       Arden B       Corporate    Total
April 28, 2012
Net sales               $ 126,175      $ 21,770        n/a        $ 147,945
% of total sales          85      %      15     %      n/a          100     %
Comparable store          (7.0    )%     (11.4  )%     n/a          (7.7    )%
sales % decrease
Operating income        $ 9,324        $ (1,304 )    $ (8,461 )   $ (441    )
(loss)
Interest expense, net   $ —            $ —           $ (10    )   $ (10     )
Income (loss) before
provision (benefit)     $ 9,324        $ (1,304 )    $ (8,471 )   $ (451    )
for income taxes
Depreciation            $ 3,856        $ 454         $ 381        $ 4,691
Number of stores as       469            84            n/a          553
of period end
Sales per square foot   $ 64           $ 76            n/a        $ 65
Square footage as of      1,881          261           n/a          2,142
period end
                                                                  

The “Corporate” column is presented to allow for reconciliation of store
contribution amounts to consolidated operating income (loss), interest
expense, net, and income (loss) before provision (benefit) for income taxes.
Wet Seal and Arden B segment results include net sales, cost of sales, asset
impairment and other direct store and field management expenses, with no
allocation of corporate overhead or interest income and expense.

Wet Seal operating segment results for the 13 weeks ended May 4, 2013, and
April 28, 2012, include $1.1 million and $2.7 million, respectively, of
non-cash asset impairment charges.

Arden B operating segment results for the 13 weeks ended May 4, 2013, and
April 28, 2012, include $0.5 million and $0.9 million, respectively, of
non-cash asset impairment charges.

Corporate expenses for the 13 weeks ended May 4, 2013, include a $3.5 million
benefit to adjust a loss contingency related to legal matters.

                                                                     Exhibit C

Reconciliation of Non-GAAP Financial Measures to Most Directly Comparable
Financial Measures (Unaudited)

Included within this press release are references to non-GAAP financial
measures (“non-GAAP” or “adjusted”), including operating income (loss), net
income (loss) and net income (loss) per diluted share before certain benefits
and charges. These financial measures are not in compliance with U.S.
generally accepted accounting principles (“GAAP”) and are not necessarily
comparable to similar measures presented by other companies. The Company
believes that this non-GAAP information is useful as an additional means for
investors to evaluate the Company’s operating performance, when reviewed in
conjunction with its GAAP financial statements. These amounts are not
determined in accordance with GAAP and therefore should not be used
exclusively in evaluating the Company’s business and operations. For further
information, see “Company Statement on Disclosure of Non-GAAP Financial
Measures” within the Investor Relations section of the Company’s corporate web
site, www.wetsealinc.com.

The following is a reconciliation of the applicable GAAP financial measures to
these non-GAAP financial measures (in millions, except for net income (loss)
per diluted share):

               13 Weeks Ended                      13 Weeks Ended

                 May 4, 2013                            April 28, 2012
                                        Net                                    Net
                 Operating              Income          Operating   Net        (Loss)
                            Net       Per                        (Loss)    Income
                 Income      Income     Diluted         (Loss)      Income     Per
                                        Share           Income                 Diluted
                                                                               Share
                                                                               
GAAP
financial        $  3.2      $ 3.1      $ 0.03          $  (0.4 )   $ (0.3 )   $ (0.00 )
measure
                                                                               
Benefits:
Adjustment
to loss
contingency,
net of              (3.5 )     (3.4 )     (0.04 )          -          -          -
income taxes
where
applicable
                                                                               
Charges:                                                                  
Non-cash
asset
impairment                                                 
charges, net       1.6      1.6      0.02                    2.2      0.02  
of income                                                  3.6
taxes where
applicable
                                                                               
Non-GAAP
financial        $  1.3     $ 1.3     $ 0.01         $  3.2     $ 1.9     $ 0.02  
measure
                                                                               

Contact:

The Wet Seal, Inc.
Steven H. Benrubi, (949) 699-3947
 
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