THE WET SEAL INC

Pubescent mall rats are likely to get hooked at The Wet Seal. The company operates about 555 shops across the US, and Puerto Rico (down from some 600 stores in 2004), that sell moderate- to value-priced casual clothing and accessories under brand name and private labels. Most of the 475 Wet Seal stores are mall-based and target teenage girls. A contemporary fashion Arden B chain runs some 80 stores that cater to women age 25 to 39 years old. The Wet Seal also sells apparel through its two banner websites. Amid slumping sales, the company has refocused on its Wet Seal and Arden B formats and is working to cut costs.

Geographic Reach

Geographically, the company operates 558 retail stores (as of January 2012) in 47 states and Puerto Rico. About 25% of stores are in California, Florida, and Texas.

Operations

The Wet Seal's operations consist of two nationwide specialty retail stores: Wet Seal and Arden B. Both are primarily mall-based chains, with similar products, value price points, and production and distribution processes. The stores are distinct from each other in terms of the target shopper's age and apparel lifestyle -- trend-right and fashion-basic lines are the focus of Wet Seal; differentiated contemporary fashion for any occasion is offered at Arden B. To shore up resources, The Wet Seal shut its 'tween-oriented Zutopia (acquired from Gymboree in 2001) and Contempo chain stores in early 2004.

Financial Analysis

The Wet Seal's earnings plunged more than 86% in 2011 from the prior year only to manage a meager improvement in 2012. The results reflect sales that have struggled the last five years amid a tough economy that has slowed consumer spending. Demand at Wet Seal stores, which generate 85% of all sales, helped drive a year-over-year single digit rise in revenues in 2011 and 2012. Sales at Arden B, however, declined for a third consecutive year in 2012, burdened by poor same-store sales (a retail metric referring to stores open more than one year). To shore up business and cut costs, the company has simultaneously shut underperforming stores as it opens new stores in what are anticipated to be more favorable locations. The Wet Seal opened 28 and closed six Wet Seal stores and opened four and closed one Arden B store in 2011.

Strategy

Wet Seal is struggling to turn its ailing retail business around. In 2013 the company named a new CEO, John Goodman, to lead the effort. (The firm fired its previous chief executive in mid-2012 after only 18 months on the job.) A retail veteran, Goodman joined Wet Seal's board in fall 2012. Previously, he led the turnaround at rival chain Charlotte Russe. Soon after Goodman joined the company, more than 30 jobs were cut at headquarters, including the COO position, whose duties Goodman is assuming.

Strategically, the company's initiatives have included a customer research project to further understand and cater to its target shopper. As a result, The Wet Seal is taking steps to improve customer service as it shifts the Arden B chain to a quicker and more flexible merchandiser of lower-priced, fashionable dress and social occasion wear (similar to H&M and Zara). It also plans to extend the business into sportswear. The Wet Seal chain is taking a page from its rival teen retailer Forever 21's playbook. Both Wet Seal and Arden B will be flexed to handle frequent shipments of new merchandise along with regular markdowns that shed slow-moving inventory. Included in its strategy, the company looks to open 25 to 30 mall-based Wet Seal stores during 2012 as it monitors its inventory mix to capitalize on up-to-the-minute trends.

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THE WET SEAL INC


26972 Burbank
Foothill Ranch, CA 92610-2506
Phone: 1 (949) 699-3900
Fax: 1 (949) 2064977
www.wetsealinc.com

STATS


  • Employer Type: Public
  • Stock Symbol: WTSL,
  • Stock Exchange: , NASDAQ
  • CEO: Edmond Thomas
  • Vice Chairman: John Mills
  • CEO: Edmond Thomas

Major Office Locations

  • Foothill Ranch, CA

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