California Apparel News

The Wet Seal Inc. will start the Back-to-School season under new leadership with the Foothill Ranch, Calif.–based retailer’s second major change in 18 months.

The 532-store mall-based retailer for teens and young women announced on Sept. 3 that John D. Goodman, who led the company as its chief executive officer since January 2013, resigned on Aug. 26. He will be replaced by Edmond Thomas, who is returning to Wet Seal for a second term. Thomas had previously served as Wet Seal’s CEO and a director of the company from 2007 to 2011. Goodman joined the company after a bruising proxy battle that led to the ouster of CEO Susan McGalla, who resigned in July 2012.

Thomas said he hopes to improve Wet Seal’s performance. “While I understand fully the complexities of navigating today’s dynamic retail landscape, I am convinced there is an opportunity to strengthen the Wet Seal brand and look forward to sharing my vision for an improved Wet Seal with our shareholders, team members and customers,” he said in a statement.

Wet Seal also announced that Adam Rothstein was named chairman of its board of directors. He replaces Lynda Davey and will start his job on Oct. 1. On the Wet Seal investors site, it was noted that Rothstein serves as the chairman of Big Idea Brands, a New York apparel company, and has more than 15 years of investment experience.

During a day of big announcements, Wet Seal also reported preliminary results for its second quarter, which ended on Aug. 3. Same-store sales declined 12.4 percent. The quarter’s net sales were $121.2 million compared with net sales of $137.2 million for the same quarter in the previous year. The retailer’s stock slid 28.57 percent to $0.75 a share from $1.05 a share. On Sept. 3, Wet Seal also announced that it entered into an agreement to sell shares of its Class A common stock to a limited number of institutional investors. Wet Seal expects to receive $18.5 million from the sale.

Goodman’s tenure at Wet Seal was marked by new directions for the company as well as reversals. In April, the company announced that it would shutter its Arden B division. The contemporary store maintained a fleet of 54 mall-based stores. On Aug. 12, it announced the debut of 30 Wet Seal + Plus shops for plus-size women. In July, it reported that Christine Lee, who had received acclaim as general merchandising manager for Pacific Sunwear of California, would join Wet Seal as its chief merchandising officer. The company has reported only one quarter of positive same-store sales in two years. In the third quarter of the 2013 fiscal year, Wet Seal reported a 0.8 percent increase in same-store sales for the entire company and a 1.7 percent increase at its Wet Seal division.

Forecasts for Wet Seal might remain mixed, said Howard Davidowitz, a veteran retail consultant and investment banker for Davidowitz & Associates, based in New York. The teen segment of retail is currently having a tough time, Davidowitz said, and he predicted that a management change at Wet Seal will not push its performance past teen mall retailers such as Abercrombie & Fitch and Aeropostale, which also are going through tough times.

Davidowitz recommended that the new management invest in its merchandising team. “If they have the right team of merchants, they have a shot,” he said. “The whole business is about merchandising. At the end of the day, the whole business is about who has the right merchandise, at the right time and at the right price.”

Goodman, the former CEO, will receive $819,200 in cash as part of his severance agreement. He also was vested with 100,000 shares of restricted stock, according to Wet Seal’s financial documents.

Thomas will receive a base salary of $975,000 and also gets a signing bonus of $75,000. Before his first stint at Wet Seal, Thomas worked as president and co-chief executive at Tilly’s Inc. from 2005 to 2007. After exiting Wet Seal in 2011, he served as a partner at KarpReillyLLC, a private investment firm that worked with small- to mid-size growth companies.