Hal Kahn — the former Macy’s executive who is serving as the very active chairman of Wet Seal Inc. — is doing more than a little multitasking right now.
Kahn said Tuesday that the embattled chain is getting back to its fast-fashion roots. The firm not only logged steep second-quarter losses, but it is contending with activist shareholders, looking for a new chief executive officer, exploring strategic options with an investment bank and has instituted a poison pill.
“The end of the second quarter was the beginning of an important transition period for Wet Seal, as we made the decision to return to our core expertise of fast-fashion merchandising,” Kahn said. “We are returning to merchandising to a broader demographic, including the young teen customer, sourcing a wider variety of product more directly from fast-fashion vendors, committing to merchandise purchases closer to time of need, and focusing our price points on our core customer.”
Kahn said it would take several more months, and another weak quarter, for the changes to take hold.
“This trend will bottom out in the coming months and we will begin to see clear signs of improvement in the fourth quarter,” Kahn said.
The company, which has been pressured to sell by activist investor The Clinton Group, is being run by a board-appointed office of the chairman, which includes Kahn, president and chief operating officer Ken Seipel and chief financial officer Steve Benrubi. The former ceo, Susan McGalla, was ousted last month and Korn/Ferry International has been hired to look for a replacement.
Wet Seal hired Guggenheim Securities and Peter J. Solomon Co. to advise it on its capital needs and strategic options. The chain also put in place a shareholder rights plan, or poison pill, that it said is designed to give the board “sufficient time to consider any proposal and make sure that all stockholders receive fair and equal treatment in the event of any proposed takeover.”
Wet Seal’s losses totaled $12.4 million, or 14 cents a share, in the second quarter and compared with year-ago earnings of $2.2 million, or 2 cents a share. Sales for the three months ended July 28 fell 9.1 percent to $135.3 million from $148.8 million, with an 11.1 percent comparable-store sales drop.
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