FOOTHILL RANCH, CA-Improving results at teen girls clothing retailer Wet Seal have prompted Cowen and Co. to initiate coverage of the publicly held company’s stock and to issue a report that calls Wet Seal a “compelling turnaround story.” Cowen has assigned Wet Seal an “outperform” rating, saying the company represents “a highly attractive opportunity for investors to participate in a compelling turnaround story.”

The Cowen and Co. report follows recent news from the Wet Seal Inc. that the company’s comparable store sales climbed 10.9% for the five-week period ended April 7, compared with the five-week period ended April 8 last year, when Wet Seal reported a 16.2% increase in comparable store sales. Net sales for the five-week period increased to $57.6 million from $47.3 million the year before.

Cowen and Co.’s analysis says that significant appreciation of Wet Seal’s stock “could hinge on indications of improving profitability contribution from the Arden B. division.” The research firm believes that the company faces a long-term “opportunity to grow square footage and expand operating margins under the completely reconstituted management team.” It also believes that other factors, including changes to pricing strategies at the core Wet Seal brand and improving traffic trends “should drive further operating profitability gains and modest comp store sales growth.”

Cohen and Co.’s bottom line is that it expects Wet Seal shares to “outperform the market by at least 20% in the next 12 months.” It also says that the company “is well positioned for several years of at least double-digit annual square footage growth.”

Wet Seal still posted a loss for its most recent financial reporting period, the fourth quarter and fiscal year ended Feb. 3. However, it attributed much of the $5.7 million fourth-quarter loss to a non-cash interest charge of $11.0 million associated with the conversion of the company’s convertible notes as well as other one-time charges.

Before the effect of these items, net income was $9.2 million, or nine cents per per diluted share. For the full year, the company reported a loss of $12.8 million, but once again, the loss was primarily the result of one-time non-cash charges. Before the effect of these items, net income was $27.1 million for the year.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.