Wet Seal Shrinks Board to Cut Costs - Analyst Blog

The Wet Seal Inc. WTSL is geared to reduce its operating costs after posting wider year-over-year losses in the fourth quarter of fiscal 2013. As part of this strategy, the company is reducing the compensation paid to its board of directors. Moreover, it has decided to shrink the size of its Board in the upcoming election to be held during the annual meeting.

Wet Seal, which currently carries a Zacks Rank #4 (Sell) has been witnessing lower traffic in its stores for the past few months. In fact, the company has reduced its fiscal 2013 guidance twice in view of thebcontinued under-average performance of its stores. Moreover, it posted loss of 23 cents much wider than management's guidance of a loss of 14 to 17 cents per share during the fourth quarter.

Net sales missed year-ago results and the Zacks Consensus Estimate by 22.8% and 4.7%, respectively, due to 16.5% lower comparable store sales (comps) during the quarter. Gross margin shrank 600 basis points due to soft sales.

Ice storms that affected the Southeast region of America resulted in extreme cold weather during January and February. The after-effect continued well into March, which disrupted shopping trends. Moreover, continued sluggishness in consumer discretionary spending, increased unemployment among youth and unseasonably cold weather are lowering comps.

Wet Seal has undertaken several cost cutting initiatives to turn around its margins. The company has been successful in reducing its cost by approximately $2.5 million  in fiscal 2013 for store labor through staffing efficiency measures and about $2.1 million for several other cost savings plans.

Some better-ranked stock in the consumer staples sector worth considering are Supervalu Inc. SVU, Diamond Foods Inc. DMND and Hanesbrands Inc. HBI.  All the stocks carry a Zacks Rank #2 (Buy).