Shares of Foothill Ranch-based teen retailer Wet Seal Inc. plunged nearly 11% in midday trading Monday after its board of directors announced a search for a new chief executive.
The news comes after the company said its board terminated the employment of former Chief Executive Susan McGalla, effective immediately.
Board Chair Hal Kahn is leading a newly formed Office of the Chairman, which includes President and Chief Operating Officer Ken Seipel and Chief Financial Officer Steve Benrubi. Seipel and Benrubi also will hold the title of co-principal executive officer while the chief executive search is underway.
Wet Seal operates two retail divisions. Its Wet Seal chain for teen girls totals 470 stores, while its Arden B division for young women totals 83.
The company’s same-store sales for the first three weeks of July were down between 13% and 14%, the company said.
"With the understanding that the company has been dealing with longer term challenges, I am confident that we have made significant progress and believe that the fundamentals are in place for the company to fulfill the turnaround plan that we anticipated from the beginning would require a 2-3 year process to fully transition the company," McGalla said in a statement.
McGalla said she was informed of the Board's decision on Friday, according to an email she sent to Wet Seal staff Monday morning.
McGalla said in staff email that she was proud of the steps taken to improve the business, pointing out strides made with customer research and branding efforts for both divisions as well as product mix improvements.
Wet Seal lowered its guidance for the July quarter following Monday’s news.
Wet Seal said it expects a loss of $5.3 million to $6.2 million for the July quarter as a result of chief executive severance costs for the quarter and costs related to some Wet Seal and Arden B stores.
This compares with original guidance of a $2.7 million to $5.3 million loss.
Same-store sales are expected to fall 10% to 11% for the July quarter. The company’s original guidance indicated a decline of between 7% and 11%.
McGalla’s dismissal comes as Wet Seal struggles with a turnaround now a few years in the making.
Both of the company’s divisions have missed the fashion mark and have seen sales slumps so far this year.
Wet Seal said earlier this month that it hired an investment banking firm to review its cash reserves, which totaled $148.1 million at the end of the April quarter. Wet Seal has market value of about $235 million.
McGalla joined the company at the beginning of last year, replacing former Chief Executive Ed Thomas. Thomas chose not to renew his contract when it expired in late 2010.
McGalla came to Wet Seal with 14 years spent at Pittsburgh-based teen clothing retailer American Eagle Outfitters Inc., where she had most recently served as president and chief merchandising officer.