Orange County Business Journal

Wet Seal Chairman Says Retailer Back to Fast-Fashion

Kari Hamanaka Thursday, August 2, 2012

The head of Foothill Ranch-based Wet Seal Inc. said the retailer is returning to a fast-fashion strategy that will aim to compete with competitors on price.

Wet Seal has been trying for a turnaround for several years at its 468 Wet Seal stores geared to teens and 82 Arden B stores for young women.

The new strategy is already in effect, according to Wet Seal Chairman Hal Kahn, who is leading an Office of the Chairman that’s been established to lead the company while it searches for a new chief executive following the firing of former Chief Executive Susan McGalla.

“We believe the company’s performance in recent quarters is due in part to a move away from some of our fast fashion merchandising practices at Wet Seal that had been successful in the past,” Kahn said in a statement. “Price points were elevated in many product categories, and we believe the company ceded a key part of its customer base.”

The new strategy marks a return to the retailer’s “prior core strategy, which included improving the speed and agility of our buying practices, expanding assortment breadth and adjusting practices to ensure we offer fast fashion at a value,” Kahn said. “We believe these initiatives will result in improved sales performance and enable us to, again, attract a broader customer demographic to Wet Seal, including the younger teen, which we may have lost during the past year.”

Going back to the fast-fashion strategy reverses a plan set into motion by McGalla when she joined the company last January that sought to wean customers off heavy promotions in stores and online. The company has seen same-stores sales declines so far this year.

The declines continued in July, when same-store sales fell 15.6%. Analysts on average had expected a drop of 14% on sales.

The Wet Seal division’s same-store sales in July dropped 15.9%, while Arden B was off 14.1%.

Wet Seal adjusted its guidance for the second-quarter to a loss of between $7.96 million and $8.85 million, which accounts for chief executive severance costs and some store-related charges. That’s widened from an estimated loss of between $5.3 million and $6.2 million in guidance given last week.

Wet Seal shares were down 3.61% to $2.67 in midday trading. The company had a recent market value of $241 million.