Report Sees Upside in Wet Seal Results

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.”