Orange County Business Journal

Wet Seal Shareholder Wants Board Nominees In Loop

Kari Hamanaka Monday, September 17, 2012

Foothill Ranch-based Wet Seal Inc. shareholder Clinton Group Inc. has asked for its suggested board replacements for the teen retailer to be involved in the company’s current discussions with investment bankers and candidates for the chief executive’s position.

Clinton Group, a New York-based asset management firm with a 6.87% stake in Wet Seal, has begun the process of soliciting shareholders for consent to remove and replace four board members and fill one vacant seat.

Clinton's board suggestions include a number of former chief executives at retailers, including New York-based Aeropostale Inc. and Pennsylvania-based Charming Shoppes Inc.

A letter sent to Wet Seal on Thursday stated that Clinton’s board nominees have begun meeting and analyzing strategies for the company. The letter also stated that some of the nominees have been contacted by individuals interested in the vacant chief executive position left open following the July firing of former Wet Seal Chief Executive Susan McGalla.

The Wet Seal Board filed a letter to shareholders with the Securities and Exchange Commission on Friday asking stockholders to reject Clinton Group’s effort to replace the board.

“We believe restoring stability to our operations in the fourth quarter is imperative for the near term to allow the company to execute its ‘fast fashion’ business plan for the critical holiday selling season,” the board said in its letter.

Wet Seal hired Guggenheim Securities LLC and Peter J. Solomon Co. LP to be its financial advisors and analyze the company’s cash reserves.

The review, which the company said it does on a regular basis, is in response to shareholder inquiries. Wet Seal had cash and cash equivalents of $148.1 million at the end of the April quarter and a recent market value of $295 million.

Wet Seal also is searching for a new chief executive.

Steve Benrubi, Wet Seal’s chief financial officer and co-principal executive officer, could not be reached for comment on the Clinton Group’s request to give its board candidates information on the company.

Wet Seal expects a loss of $11.52 million to $14.17 million for the October quarter in a year marked by same-store sales declines.

Wet Seal operates 469 Wet Seal stores for teen girls and 82 Arden B stores for young women.