Wet Seal Attempts to Avoid Bankruptcy With Cash Infusion
The new executive at the helm of troubled teen retailer Wet Seal Inc. believes the company has to react faster to trends and change merchandise more rapidly to survive.
That may mean using merchandise from Los Angeles apparel manufacturers to get goods on shelves and racks quicker.
“We have to move faster in all facets of business,” said Joseph Deckop, the executive vice president of Wet Seal who recently was named interim chief executive officer. “The history of Wet Seal is being first to market. We need to get back to that.”
Deckop recently replaced Peter D. Whitford who, after 17 months on the job, decided on Nov. 4 to resign as chairman and CEO. He officially stepped down on Nov. 9.
The change of executives comes as the Foothill Ranch, Calif., company tries to stave off filing Chapter 11 bankruptcy after two years of declining same-store sales.
To do that, Wet Seal has found a group of investors to inject more than $50 million into the retail chain, which has 464 Wet Seal stores and 95 Arden B. stores. The company recently shuttered all its Zutopia stores.
The executive shuffle occurred the same day New York–based hedge fund S.A.C. Capital Advisors LLC agreed to issue a $10 million bridge loan and $40 million in cash to the company in exchange for convertible notes.
In addition, Wet Seal announced that retail executive Michael Gold, chief executive of YM Inc. in Toronto, Canada, which owns 400 teen-oriented stores, will act as a consultant, forming an action plan to turn around this company.
Deckop said the retail chain, which has been in the economic doldrums with net losses for the past eight quarters, would be considering a variety of measures to guide the company back to financial health.
“Our chairman said it best,” Deckop said of Henry Winterstern, appointed chairman of the board on Nov. 9. “If you’ve got a good idea, don’t keep it a secret. We’re anxious to move and move fast.”
Deckop said a comprehensive plan would be formulated in the near future, although he gave no specific dates as to when the comeback plan would be made public.
Deckop did say that speed was of utmost importance. Measures to improve speed could include buying more product from the Los Angeles market. Deckop also confirmed the company would not be changing the successful business of its Arden B. chain of contemporary stores during this period when they concentrate on reviving the fortunes of Wet Seal.
While changes at the company came at a lightning quick pace this week, analysts such as Jeffrey Van Sinderen, of Los Angeles–based B. Riley & Co. said these changes would have to be one of many.
“The business has been so poor, it’s not going to be easy to turn around quickly, even if they reduce the number of stores,” Van Sinderen said. “Clearly they didn’t have the right merchandise assortment.”
Deckop, who would not comment on whether he is being considered to become the permanent CEO, said he thought that Wet Seal still had the ability to turn its fortunes around because they have two big cards they can play: the company’s strong brand recognition and the fact it has more than 445 stores across the United States.
—Andrew Asch
