Piper Jaffray Reiterates “Neutral” Rating on Wet Seal (WTSLA)

Piper Jaffray is out with an analyst note this morning that reiterated their “Neutral” rating on Wet Seal WTSLA. The stock has a $4.50 price target as well. Wet Seal reported earnings yesterday after the bell that slightly beat the Street estimates. Piper said that they are pleased with the steady progress to stabilize margin levels, though top-line trends remain inconsistent, which does create some concern that near-term results will remain under pressure. Piper analysts added that “in a scarcity of growth industry, Wet Seal is finding some opportunity to reengage its square footage expansion plans, especially in high volume centers where Wet Seal had a presence in the early- to mid-2000s.” They closed by saying “The implementation of markdown optimization, size optimization, and POS enhancements underway stand to drive merchandise margin past prior peak, creating a better leverage point for the model. These initiatives are still early in their cycle, but signs of benefit are beginning to emerge. We think an incremental 50-100bps of margin expansion is possible.” Wet Seal is currently lower on the session by 1.99% to $3.95.