The Wet Seal, Inc. (WTSL): Can This Retailer Continue Its Upward Momentum?

The Wet Seal, Inc. (NASDAQ:WTSL) has gone back to its old core customer group this year, and its stock price has shown upside trends as a result. Share prices have increased by 80% in the last six months. The company has taken steps to improve its lead time with more space for open-to-buy categories of merchandise. It has also made an effort to reach out to its customers and respond to their demands as quickly as possible. The Wet Seal, Inc. (NASDAQ:WTSL)’s online channel will drive comps with its efforts to connect with customers through various e-commerce platforms. Now, let’s discuss a few of these points in detail.

Focus on the core customer and fast changing fashion will help it to upturn its comps positive

The Wet Seal, Inc. (NASDAQ:WTSL) had deviated a bit from its core customers in the last one or two years,but now it is back to that core and its fashion heritage, realizing the importance of delivering value to its core customer group – the 16-year-old girl. It has put merchandise and strategies in place to serve its loyal customers.

The company has re-imaged its in-store visual appearance and lowered its merchandise to eye level. It will stick to the strategy of fast fashion where it will observe and react quickly according to fashion trends and demand. Wet Seal intends to provide trendy categories of clothes with minimum lead time for stocking. Its overall emphasis will be to serve its core customers with best value propositions, something that will help it to drive comp growth.

Increased use of social and digital media will help it to drive online sales

The Wet Seal, Inc. (NASDAQ:WTSL)’s online sales are just 6% of the company’s total sales, a figure that is very low compared to its peers. It has the potential to increase online sales to 20% in the long term through its omni-channel initiatives. The company will emphasize more on social media for connecting with its customers.

The average 16-year-old-girl is very active on social platforms such as Internet, mobile and malls. As a result, Wet Seal will organize in-store promotions and contests which can be accessed through these platforms. It has also entered into partnerships with musical artists such as Olly Murs and Emblem3 for promotional programs. The company will have one integrated platform that can be accessed through multiple devices to provide a smooth customer experience.

New outlets, store remodel and relocation will drive growth in the long term

The Wet Seal, Inc. (NASDAQ:WTSL) has an opportunity to increase its stores base with its fast fashion concept in place. It is expected to open 19 stores this fiscal year, with most of the stores being in outlet centers. It has strong growth opportunities across its three store formats – traditional, outlets and off-mall locations.

The company also has long term plans to increase its current base from 465 stores to 700-750 stores. The company’s capital expenditure plan for the year is around $22 million to $24 million. It will spend 75% of this on store modeling and relocations. Its new outlet stores and other key investments in second half of this fiscal year will drive its growth in the long term.

Peer analysis

In the specialty women’s apparel segment, The Wet Seal, Inc. (NASDAQ:WTSL)’s primary peers are L Brands Inc (NYSE:LTD) and bebe stores, inc. (NASDAQ:BEBE).