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

L Brands Inc (NYSE:LTD) has expanded its stores base across its brands in international markets. It will increase company-owned stores along with its franchise stores, which are a major source of royalty revenues. It has increased its offerings in its Victoria’s Secret brand and added new categories such as shoes, handbags and accessories. It has also increased its promotions in the first quarter of this year to drive comp growth, though this has been at the expense of a loss in margins. It has returned more cash to its shareholders through increased dividends and a share buyback program in this fiscal year.

bebe stores, inc. (NASDAQ:BEBE) has a new team leading it through several changes to bring its numbers back to the positive. The company reported negative results in the first quarter of 2013, but it is looking forward to manage its margins with better vendor and inventory management. It will develop its merchandise according to customer reactions. This process will help it to deliver better products to its core customers. It will also come up with relevant visual marketing and promotion tactics to promote its products.

Source: Google Finance and Yahoo Finance

Wet Seal has reported operating margin of 2.28% but has the highest one-year forward price-to-earnings ratio of 21.39 among its peers. L Brands Inc (NYSE:LTD) has the highest operating margin of 13.71 among the peers with a price-to-sales ratio of 1.66. bebe stores, inc. (NASDAQ:BEBE) has a negative operating margin of -16.49% and a moderate price-to-sales ratio of 1.0.

Conclusion

The Wet Seal, Inc. (NASDAQ:WTSL) is expected to drive its comps growth with its focus on fast fashion and omni-channel initiatives. It will target its core 16-year-old girl customer group with initiatives to connect through social media and integrated platforms. It will also increase its stores base this year with new outlet stores, which are more suitable for fast fashion. Wet Seal’s overall initiatives will help it drive comps growth and margin levels. As a result, I will recommend a “buy.”

The article Can This Retailer Continue Its Upward Momentum? originally appeared on Fool.com and is written by Ash Sharma.

Ash Sharma has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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