LOS ANGELES — Wet Seal, fresh out of bankruptcy at the age of 53, won’t blame fast fashion for its demise in recent years as much as some like to say the segment killed teen retail.
This story first appeared in the April 24, 2015 issue of WWD. Subscribe Today.
“We’ve competed with Forever 21 for several years,” said chief executive officer Ed Thomas. “They’re really good at what they do….I think our challenges in the last few years were more self-inflicted.”
Thomas rejoined the retailer — for a third time — in September after the former company had already gone through an interim management team followed by two ceos and just about as many strategies for improving the business. But too many pivots resulted in losses and by the time Thomas returned, it was too late.
The company began exploring strategic alternatives and then shuttered some 338 stores. It filed for Chapter 11 bankruptcy protection in January and was acquired in an auction by private equity firm Versa Capital Management to emerge as Wet Seal LLC with 173 stores. The legacy company was renamed Seal 123 Inc.
Steps taken to shore up operations prior to the bankruptcy “became part of a plan that was salable,” according to Thomas Hillebrandt, who was hired in November to be cfo.
“That, I think, was the key swing factor in our ability to go into bankruptcy with a sponsor instead of going in naked,” Hillebrandt said.
That the brand emerged and managed to attract a buyer speaks to a combination of factors, Thomas said. “There’s a reason why we were lucky enough to come out of bankruptcy in three months….The brand is not dead and has not been dead,” he said.
The focus in the near-term has been putting the right product in stores and Thomas said the company is about 70 percent there and will have fully turned a leaf on the merchandise mix side by July.
The company, with a swing back to a focus on fashion, has a chance to nab back the Arden B customer who went away when that business, which skewed older, was wound down beginning roughly a year ago. The company currently attracts shoppers in their early teens to mid-20s.
“We think over the last four years the company went too young [and] focused on too young of a customer, which is not what it was when I left in early 2011, and so we think that there’s a big opportunity to recapture some of that customer base that we had for a while in the 18 to 24 range,” Thomas said.
The new strategy appears to be working, according to Thomas. He declined to provide specifics on financial performance so far this year but said same-store sales on the e-commerce and store side are expected to be positive in the back half of 2015.
The last time the now defunct Wet Seal Inc. reported financial results was for the November quarter in which it saw comparable sales of 14.5 percent and a net loss that widened from $12.4 million a year earlier to $36 million. Net sales were also down, by about 9 percent from the year-ago period, to $104.3 million.
If the retailer is successful in its turnaround bid it may have cracked the code — or at least part of it — on what teens want from the brands they shop.
“Teens still like to shop in stores. It’s still a social event but certainly with the growth of e-commerce there are a lot of Web sites out there catering to young women or just somebody in their 20s,” Thomas said. “What we’ve seen over the last few years is a permanent shift across the board. I don’t think it makes the store experience obsolete, but I think you’re going to see much greater growth out of e-commerce than out of stores.”
Wet Seal, while not in major growth mode, is apparently hiring, according to Thomas and Hillebrandt. That’s at the store and headquarters level across multiple functions, the two said.
“The hardest part was all the store closings,” Thomas said. “That obviously was very difficult, so we’re kind of obsessed with making this [turnaround] work.”