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5 Stocks Under $5 for 2013

The usual caveats apply, but these low-cost shares could net you big upside

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Wet Seal

I am a big believer in a surge of consumer spending in 2013. That means retail stocks could be on the rise, and Wet Seal (NASDAQ:WTSLA) is a hot name that’s worth watching.

This specialty retailer operates about 550 stores that sell clothes and accessories to young women. The company has had occasional bright moments, but the stock has been a volatile play, swinging between $3 and $5 for the better part of four years. Right now shares are at the bottom of that range thanks to recent troubles, but bluer skies may be ahead.

The specifics behind Wet Seal’s slide — down about 12% so far in 2012 — includes a big fight earlier this year when the Clinton Group won a proxy battle to name new directors to the board of the company. That distraction didn’t just weigh on shares, but also on strategy and performance. Wet Seal most recently posted a same-store sales decline of 5.4% and an operating loss for its fiscal third quarter to follow up a loss in Q2 as well.

But as the dust settles, there’s reason to be hopeful. Revenue is back to pre-recession levels, though admittedly tracking a year-over decline thanks to the drama, and a board shakeup could be just what Wet Seal needs to energize the company in 2013 as the company closes unproductive stores and looks to replace members of the previous management regime with better leaders.

It’s risky and it’s a turnaround, but I think the convergence of a secular consumer recovery and a new strategy bodes well for Wet Seal in 2013. Buying in 2012 amid the chaos was certainly a risky endeavor, but it looks like stability is finally coming to Wet Seal.

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