Wet Seal stock up, analyst sees Arden B turnaround

Eric Beder of Brean Murray, Carret & Co. said in a note Tuesday he met with executives at Wet Seal who are "extremely excited" about the changes in store for Arden B., a chain which targets more upscale women up to 35 years old.

Same-store sales at Wet Seal rose 15.2 percent last month but plunged 17.6 percent at Arden B. Same-store sales, or sales in stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones.

Arden B. posted an operating loss of about $15 million last year, Beder said, but management believes it can return the division to profitability.

Formerly, "the color palette and focus registered drastic shifts every two weeks, leading to what can only be seen as a 'hit or miss' business model, which, unfortunately, produced too many misses in 2007," Beder wrote.

The Foothill Ranch, Calif., company now plans to return Arden B. to its roots with less trendy looks and more casual clothing. Management has been streamlined, Beder said, and the company plans to carry less inventory and sell more full-price merchandise.

"We believe Arden B. is salvageable and the new looks have the opportunity to resonate with the Arden B. customer," Beder wrote, adding, "We believe there have already been material reductions in costs and inventory investment at the chain, which should allow for higher productivity and potential profitability."

He reiterated his estimates and $5 target and "Buy" rating.

In afternoon trading, the stock rose 16 cents, or 4.2 percent, to $4.02.