Wet Seal: Earnings Preview

Mar.21.12 | About: The Wet (WTSL)

Wet Seal Inc. (WTSLA), that sells fashionable and contemporary apparel and accessory items to the female customers, is scheduled to report its fourth-quarter and fiscal year 2011 financial results on March 22, 2012.

The current Zacks Consensus Estimate for the quarter is pegged at 3 cents a share, which is within the company guidance range of 3 to 5 cents. For the fiscal year, the Zacks Consensus Estimate is 19 cents per share. The Zacks Consensus Estimate projects revenues for the quarter to be $165 million and $622 million for the fiscal year.

Third Quarter 2011 Recap

Wet Seal, one of the leaders in specialty retailing, posted a decent third-quarter 2011 earnings of 5 cents per share that climbed 25.0% from both the year-ago period and the Zacks Consensus Estimate. Wet Seal’s quarterly net sales also grew 3.9% to $152.1 million compared with $146.4 million in the prior-year period. Sales were also ahead of the Zacks Consensus Estimate of $148.0 million, driven by a strong ‘back to school’ sales season.

(Read our full coverage on this earnings report: Wet Seal Beats Estimates).

Agreement of Estimate Revisions

Over the past seven days, most of the analysts covering Wet Seal have left their earnings estimates unchanged for the current quarter as well as the fiscal year 2011. However, over the past 30 days, only one of the seven analysts has revised his estimate upwards for fiscal 2011. There were no estimate revisions for the current quarter of 2011 over the past 30 days.

Magnitude of Estimate Revisions

Given the lack of revisions by analysts, earnings estimates for the fourth quarter and full year 2011 have remained unchanged over the last 7 and 30 days.

For fiscal year 2012, the Zacks Consensus Estimates have declined from 23 cents to 21 cents per share over the past 30 days. Three out of eight analysts have made downward revisions for 2012. Wet Seal reported negative 5.8% comparable sales for the month of February, as compared to the prior-year period’s 7.0% increase. We believe the weak comparable sales figures may have prompted analysts to reduce estimates for 2012. Besides, the company’s seasonality remains a concern for the analysts.

Earnings Surprise History

With respect to earnings surprises, Wet Seal has topped the Zacks Consensus Estimate in the preceding four quarters. Over the last four quarters, the earnings surprise ranged from a 0.00% to 75.00%, with the average earnings surprise being an impressive 50.00%.

Currently Wet Seal, which faces stiff competition from American Eagle Outfitters Inc. (NYSE:AEO) and Gap Inc. (NYSE:GPS), holds a Zacks #4 Rank (short-term Sell rating). On a long-term basis, we maintain a Neutral rating on the stock.

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WET SEAL INC -A (WTSLA): Free Stock Analysis Report