WET SEAL’S FASHIONABLE REDO

Byline: Kristin Young

FOOTHILL RANCH, Calif. — For Wet Seal, “back to basics” just didn’t cut it.
After two years of trying its hand at khakis and polo shirts, the retailer, which has a focus on young consumers, has decided that the key to a successful future lies in fashion merchandise, and it’s now rolling out prototype formats for its Wet Seal and Arden B. units to reflect that strategy.
The company is revamping some of its 225 core Wet Seal stores to include brighter interiors, open ceilings, high-gloss white, pink and blue walls, added logos and mannequins. Some stores will see the debut of a shoe department, while visual props like video screens, which Wet Seal popularized in the Eighties, will be in others.
“It’s so fun, it’s so girlie,” said Steven Strickland, senior vice president of marketing and creative services.
Three of the new stores are slated to open at the end of this month in Pennsylvania, Texas and Idaho. Another 22 stores will be built across the country.
Meanwhile, 27 units will get floor-to-ceiling remodels, and 60 more stores that will undergo a retrofit — incorporating elements of the prototype — by yearend.
Wet Seal also is developing a new concept for its 85-unit contemporary Arden B. division, to be completed by next spring.
After witnessing the success of its peer retailers like Abercrombie & Fitch and American Eagle Outfitters, Wet Seal tried to reorient its assortment toward the preppy. But its customer balked, and sent earnings skidding 45 percent, to $14.2 million from $25.9 million in fiscal 1999. In the fourth quarter of 1999, same-store sales fell 17.1 percent.
So the company knew it had to go back to fashion and it seems to be paying off: Wet Seal posted an increase of 23.3 percent in sales for the fourth quarter of 2000, ended Feb. 3, 2001 — 14.6 percent on a comparable-store basis — with earnings more than tripled for the quarter.
Wet Seal is also phasing out more than 200 Contempo Casuals and 26 Limbo Lounge stores and turning them into Wet Seal stores, a process that should be complete by mid-July.
Kathy Bronstein, chief executive officer, said the decision to convert the stores came about because the divisions weren’t clearly defined and, in some cases, were cannibalizing each other.
“You cannot have one vision for three concepts,” she said. “Strategically, it’s our vision to pick [a customer up when she’s [age] five or six and drop her off somewhere between 50 and 60.”
Wet Seal said in January it would acquire the 19-unit Zutopia chain from Gymboree Corp. to gain a foothold with ‘tweens — girls age five to 12.
Wet Seal targets girls age 12 to 18 while Arden B., the company’s young contemporary division, skews slightly older.
In theory, Contempo was meant to pick up a customer that was too sophisticated for Wet Seal but not quite at the Arden B. level. The concept ended up being too similar to Wet Seal, said Strickland.
“It quickly became apparent that Wet Seal was the dominant Gen Y retailer and we wondered how quickly we could convert the Contempo chain into Wet Seal,” he said.
Another consideration was geography. The Wet Seal brand had a better stronghold in Southern California, Florida and the Northeast, while Contempo had greater market share in the Midwest.
Ultimately, Wet Seal intends to hold on to about 60 Contempo Casuals stores in key locations like South Coast Plaza in Costa Mesa, Calif., and The Mall of America in Minneapolis. The company is also considering a Contempo Casuals brand relaunch sometime next year.
Bronstein said axing Limbo Lounge, the unisex, urban concept, was an easy decision. “Limbo Lounge was the last priority in the company’s strategy to refocus on female fashion,” she said. “We had trouble putting our hands around it, and therefore, our customers couldn’t get their hands around it.”
Elizabeth Pierce, a research analyst for the investment firm Wedbush Morgan, said Wet Seal’s strategy makes sense. “Limbo was kind of an interesting concept, but it didn’t really ever get the core competency — which is fashion.”
And, in the interest of fashion, Wet Seal is relaunching its Blue Asphalt private brand for back-to-school. The collection has morphed from surf-inspired denim to more of a fashion-denim line.

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