Retail glut? (Wall Street West).

Will cool weather and a high level of existing inventories chill summer retail sales?

A report by Wachovia Securities International Ltd. projects that mall-based retailers may have the worst second quarter in a decade.

Wachovia says retail inventories as a percentage of square feet are up 10 to 12 percent, rivaling the 5.8 percent rise that overwhelmed retailers in the second quarter of 2000. That was seen as a recent low point in the industry, reminiscent of the 1992 recession.

Southern California companies that could be affected include teen mall retailer Hot Topic Inc. of Industry; Santa Fe Springs-based footwear maker Vans Inc.; Anaheim-based Pacific Sunwear of California Inc.; Foothill Ranch-based Wet Seal Inc.; and Carlsbad-based Charlotte Russe Holdings Inc., which owns the youth apparel brand Rampage.

Wachovia analyst Joseph Tekilts said consumers are forgoing summer clothing purchases because weather in May and the beginning of June has been cooler than years past.

"A cold start is similar to May 2000 but hopefully there is more pent-up demand this year," Teklits wrote. "May is basically the only full-price selling month; if inventories are bloated going into June, markdown mania could ensue and earnings could be pressured."

Apparel consultant Bruce Berton, director of international business consulting for Santa Monica-based apparel accountant and consulting firm Stonefield Josephson Inc., took a different view. He said retailers are placing orders during the typically dry months of July and August to rush more apparel to market in time for back-to-school sales.

Berton said retailers held off placing orders until the outcome of hostilities in Iraq was clear. Now that the war has ended, retailers are feeling positive about the upcoming months.

"There's orders flowing in right now for fall goods," he said. "The next few months are going to be unusually busy."