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Zutopia: No Utopia

The Wet Seal announced strategic initiatives involving the potential sale or closure of all 31 of the company’s preteen Zutopia stores.

LOS ANGELES — Struggling junior retailer The Wet Seal Inc. said late Wednesday it would sell off or close its 31-unit Zutopia division, which caters to tweens. If no buyer is found, all stores will be closed by the end of the first quarter of fiscal 2004.

In addition, Greg Scott, president of the Arden B. contemporary division, resigned on Wednesday. He will be succeeded by Jennifer Pritchard, president of Zutopia. There has been speculation that Scott was interviewing at Bebe Stores, based in Brisbane, Calif., as reported last November. Bebe currently does not have a president.

Calls to Scott were not returned Wednesday, and a Bebe spokeswoman would not comment. A Wet Seal spokeswoman said Scott is planning to take some time off.

Wet Seal chief executive Peter D. Whitford called the Zutopia move a “strategic initiative” in his statement. “Zutopia stores continued to struggle in the highly-competitive pre-teen 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.”

Commenting on Pritchard’s new assignment, Whitford said: “Jennifer has made a significant contribution to the company since she joined in September 2002. Her depth of experience in specialty retailing and her success in building a merchant-led organization will help us continue to build the Arden B. brand.” Prior to joining Wet Seal, Pritchard held senior merchandising positions with Urban Outfitters and The Limited.

The company is planning to absorb as many Zutopia employees as possible, according to a Wet Seal spokeswoman.

Wet Seal has been battling less than stellar sales caused by fashion and merchandising missteps. Sources also said that some internal management issues were to blame.

For the quarter ended Nov. 1, 2003, the company’s sales decreased 5.8 percent to $136.1 million compared with the same quarter a year earlier. Comparable-store sales declined 10.2 percent. Losses increased to $7.5 million, compared with $2.5 million a year earlier.

Closing Zutopia is a “smart move,” according to former Wet Seal ceo and vice chairman Kathy Bronstein, who grew Wet Seal into a retail force through a series of acquisitions but was dismissed last February after two weak quarters. “Greg was a great talent and I think his departure from Arden B. will be a huge loss for the company,” she said.

This story first appeared in the January 8, 2004 issue of WWD.  Subscribe Today.

Another high-level source close to the company offered bleaker comments, noting that new management, including an influx of executives from The Disney Store Inc. have not been well received. “A lot of people have left in the last 10 months, and a lot of people have been fired.”

If Scott ended up at Bebe, he would join his former colleague, Walter Parks, who left Wet Seal to become Bebe’s chief financial officer in early December.

If Zutopia closes down, the Foothill Ranch, Calif.-based company expects to record a $5.5 million charge in the fourth quarter to write down the value of Zutopia assets. Wet Seal would be left with 485 Wet Seal stores, 19 Contempo Casuals and 105 Arden B. stores.