California Apparel News

Less than one year after The Wet Seal Inc. hired New York designer Victor Alfaro to help turn the beleaguered juniors retailer into a fashion leader, the designer, who has dressed such stars as Madonna and Demi Moore, resigned as creative director on Aug. 9.

A statement from Foothill Ranch, Calif.–based Wet Seal announced Alfaro’s departure and stated the change will not affect the company’s future financial performance. Analysts following the company, however, said Alfaro’s action signaled a vote of no confidence in the company.

Liz Pierce, senior vice president of equity research in the Los Angeles office of the Sanders Morris Harris Group, downgraded her recommendation on Wet Seal’s stock from buy to hold.

“It changes everything,” Pierce said. “I don’t know what direction they’re going now or how they’ll manage short term.”

To define its future, Wet Seal also announced on Aug. 9 that it will open a design office in September in the Gerry Building of downtown Los Angeles. The office will service both Wet Seal and its profitable Arden B. division.

A representative for the Gerry Building confirmed Wet Seal’s interest in taking a three-year lease for a 12,090-square-foot space on the building’s ninth floor. “We’re in the process of getting leases executed,” said Larry Hudson, director of asset management for Gerry’s landlord, MJW Investments Inc.

Hudson said his company is currently reviewing Wet Seal’s financials.

“We’re committed to making it happen,” he said. “It’s about being comfortable with the risk.”

Wet Seal faced strong criticism over 25 consecutive months of double-digit declines in same-store sales. The retailer, however, coasted this summer on cautious optimism as analysts anticipated Alfaro’s Back-to-School collection. A private placement of $27.2 million of equity securities on July 1 made the company more liquid.

The mid-July debut of Alfaro’s Back-to- School designs did little to change the company’s luck. Wet Seal posted -14.7 percent same-store sales for July. —A.A.