The Company also modified the terms of its Arden B customer loyalty program, resulting in recognition of sales previously deferred of $2.3 million. The amount of the sales increase associated with the credit was not included in determining comparable store sales for the quarter.
Gross profit increased to $46.8 million from $32.6 million in the prior year, and as a percent of sales, increased 6.0 percentage points to 37.4 percent. Excluding the impact of the loyalty program adjustment, gross profit as a percent of sales was 36.2 percent.
The Company had net interest expense of $18.2 million for the current year period, compared to $1.8 million for the comparable prior year period. Net interest expense for the current year period includes $18.1 million to write-off a ratable portion of unamortized debt discount, deferred financing costs and accrued interest associated with notes converted to common stock in the quarter.
Included within non-cash stock compensation charges for the current period is $0.6 million of stock option expense resulting from the Company's adoption of Statement of Financial Accounting Standards (SFAS) No. 123R, "Share-Based Payment," as of the beginning of fiscal 2006.
The Company has discontinued recognizing income tax benefits until it determines it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets.
The Company will host a live conference call and question and answer session at 2:00 p.m. Pacific Daylight Time.
Headquartered in Foothill Ranch, California, The Wet Seal Inc is a leading specialty retailer of fashionable and contemporary apparel and accessory items.
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