Wet Seal Backs Current Board Amid Shareholder’s Call for OverhaulFriday, September 7, 2012
Foothill Ranch-based Wet Seal Inc. said it will evaluate a major shareholder’s calls to remove and replace four seats on the teen retailer's board.
New York-based asset management firm Clinton Group Inc. filed documents with the Securities and Exchange Commission last month that would seek to obtain written consent from Wet Seal stockholders to replace four board members and fill one vacant position.
The move follows the July firing of former Chief Executive Susan McGalla and a stream of disappointing sales this year at both of the company’s retail divisions.
Wet Seal operates 469 Wet Seal stores for teen girls and 82 Arden B stores for young women.
Wet Seal said in a statement yesterday that the current board knows the company well and would be “far more capable of managing a quick and seamless return to our historic and successful fast fashion model than a group of new directors, no matter how experienced they may be.”
The company said it believes the new business strategy will begin to show positively within a few months.
Clinton's suggested replacements on the board include a former co-chief executive of New York-based Aeropostale Inc. and former head of Pennsylvania-based Charming Shoppes Inc., both retailers.
Wet Seal Chair Hal Kahn, who is leading an interim Office of the Chairman, told analysts last month during the company's earnings call that the company had returned to a fast-fashion model since McGalla’s departure and believes it can get annual earnings before interest, taxes, depreciation and amortization to $45 million to $50 million.
The company had EBITDA of $25.2 million last year.
“We believe this is the wrong time to disrupt our business with a wholesale makeover of the board as we prepare for the critical fourth quarter and holiday season,” the board said in a statement. “We recognize the immediate need to improve our performance and enhance value for all of our shareholders.”