FOOTHILL RANCH, Calif. (AP) — Wet Seal Inc. said Thursday that its revenue at stores open at least a year fell 2.9 percent in the first-quarter as the company tries to match the changing tastes of fickle teens.
Despite the decline in the key revenue indicator, the results exceeded expectations and the company raised its guidance. The company also said it is resolving a discrimination lawsuit with a $7.5 million settlement.
Wet Seal announced in February a broad restructuring Including cutting jobs and underperforming stores and restructuring management. The changes are being made under new CEO John Goodman, who came aboard in January after the company fired former CEO Susan McGalla in July amid falling sales.
Revenue fell 5 percent to $140.4 million during the quarter ended May 4. The company said those results exceeded its expectations for revenue of $135 million to $139 million and for revenue in stores open at least one year down in the mid-single digits. That latter measure is a key area of focus because it excludes stores that open or close during the year.
Analysts had expected lower total revenue of $136.9 million, according to FactSet.
"The customer is responding well and returning to the Wet Seal brand more quickly than anticipated, which has enabled us to stabilize the business and exceed our financial forecasts in the first quarter," the CEO Goodman said.
The company now expects first-quarter net income of break-even to a penny per share, excluding one-time costs, from prior guidance of a loss of 3 cents to 6 cents per share. Analysts expect a loss of 2 cents per share, according to FactSet.
Meanwhile, the company said it filed paperwork on Wednesday settling a lawsuit against it by three former employees of Wet Seal for $7.5 million.
The employees filed a federal racial discrimination lawsuit in California against the teen clothing store operator in July, claiming management set out to fire African-American employees because they didn't fit the retailer's "brand image." The former employees said that from 2008 on the company had a practice of discriminating against African-American store management employees at its namesake stores as well as its Arden B shops.
Goodman said that the resolution is no-fault and the company has worked with the plaintiffs to come up with better policies about equal opportunity employment.
"We appreciate the insights we have gained from plaintiffs' counsel and the Equal Employment Opportunity Commission for our best-practices initiatives," Goodman said.
Wet Seal shares rose 18 cents, or 5.1 percent, to $3.71 in morning trading Thursday. They are up 28 percent since the beginning of the year.