Bloomberg News

Wet Seal Shares Have Biggest Drop Since '04 on Profit

October 04, 2007

Wet Seal Inc. (WTSLA:US), the apparel chain for teenage girls, fell the most in more than three years in U.S. trading after lowering its third-quarter earnings forecast and reporting an unexpected drop in September sales.

The stock dropped 74 cents, or 19 percent, to $3.25 at 4 p.m., for the biggest decline since August 2004. It has slumped 51 percent this year.

The Foothill Ranch, California-based retailer said yesterday that third-quarter net income (WTSLA:US) will probably be breakeven to 2 cents a share, down from an earlier forecast of 7 cents to 10 cents.

``We keep getting negative surprises from the company,'' Anna Andreeva, an analyst at JPMorgan Chase & Co., said in a research note today.

Comparable-store sales in September dropped 7.5 percent to 8.5 percent. The company had predicted a decline of 1 percent to a gain of 3 percent.

``We would be buyers on today's weakness,'' said Paul Lejuez, an analyst at Credit Suisse, in a research note. ``We have a hard time pulling the plug at this stage of the game.''

The retailer may sell or close its Arden B chain to invest in new stores and increase marketing at Wet Seal, said Jeffrey Klinefelter, an analyst at PiperJaffray, in a research note today.

To contact the reporter on this story: Joseph Galante in New York at at jgalante3@bloomberg.net.

To contact the editor responsible for this story: Michael Nol at mnol@bloomberg.net.


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