Wet Seal Puts Zutopia Up for Sale
All 31 of The Wet Seal Inc.’s Zutopia preteen specialty shops will close if the company does not find a buyer by the end of the first quarter of fiscal 2004, according to Peter D. Whitford, chief executive officer of the Foothill Ranch, Calif.–based retailer.
“As the Zutopia stores continued to struggle in this highly competitive preteen market, the board felt our efforts and resources would be better directed toward a more streamlined focus on our core strengths in the teen and better juniors categories,” Whitford said.
On the same day Whitford announced the potential closures, Greg Scott, the well-regarded chief of Wet Seal’s Arden B. division, announced his resignation. The company named Jennifer Pritchard as Scott’s replacement. Arden B. retails sophisticated clothes for women between the ages of 20 and 30.
Jeffrey Van Sinderen, an analyst with Los Angeles–based B. Riley & Co., said Scott’s departure was a loss for Wet Seal.
“Greg has been instrumental in turning around this business,” he said. “He’s well thought of in the industry, and he’s going to be hard to replace.”
As for Zutopia’s future, Van Sinderen considered it hazy.
“I don’t know who would buy Zutopia,” he said. “Another retailer could buy them for their locations or for their brand. I think they’d buy it for the locations.”
Whitford said he hopes the changes will reverse the company’s trend of plummeting sales. According to analysts from New York–based Multex NET, Wet Seal’s net sales fell 14 percent to $385.8 million for the 39 weeks that ended Nov. 1, 2003.
Whitford said Wet Seal will make serious efforts to offer Zutopia’s employees jobs in the Wet Seal organization.
He also confirmed the company expects to record an approximate $5.5 million pre-tax, non-cash charge in the fourth quarter. The charge will reflect the write-down of fixed assets at the Zutopia stores to their estimated fair value.
—Andrew Asch
