Just as specialty retailer Wet Seal Inc. has begun to push its head above water, the company last week was grappling with the resignation of its longtime President and Chief Operating Officer Edmond Thomas.
Thomas’ announcement came while CEO Kathy Bronstein was in London on a business trip with her merchandise team that would also take them to other European cities and Asia, said Wet Seal Chairman Irving Teitelbaum, who was returning calls on her behalf last week. The company is dividing Thomas’ duties among several other executives while it searches for a replacement, he said.
“Ed decided it was time to move on to something more challenging, bigger and really expand his own horizons,” said Teitelbaum, chairman since 1984. “We see him leaving with a great deal of regret, both personally and from a business standpoint. We are losing a friend, an associate, a president and a COO, but we wish him well in his future endeavors.”
Teitelbaum, 61, is co-founding president, chairman and chief executive of Suzy Shier Ltd., a publicly held Canadian retailer with 460 women’s apparel stores. His company owns a 22% stake in Wet Seal.
Thomas, 46, who said in his statement that he has no immediate plans for a new job, joined Foothill Ranch-based Wet Seal as its chief operating officer in June 1992.
He came highly recommended by Teitelbaum. The two had met at the now-defunct Foxmore furniture chain in New York in the 1980s, where Thomas was president and Teitelbaum was chairman of the board. Later, Thomas spent a year as COO and director of Domain Inc., a Boston-based upscale home furnishings retailer, before joining the Wet Seal. Thomas added the title of president in March 1994.
The termination of Thomas’ employment contract will result in Wet Seal taking a third-quarter pre-tax charge of about $1.65 million or about 8 cents per share after the related tax benefit. Thomas, who owns a 1% stake in the company, earned a salary of $765,996 last year and total compensation valued at $2.6 million, according to SEC documents.
The resignation comes at a time when the 567-unit Wet Seal is starting to reverse a downturn.
“The key thing is that the merchandising area made good strides over the last nine months,” said analyst Dennis Van Zelfden, of Atlanta-based Robinson-Humphrey Co. Inc. “I don’t think (Kathy Bronstein) leaving is in the cards. They are close to a business turnaround to the positive in the next six months or so, as opposed to deteriorating. I don’t think she would leave. They have had a lot of issues in the past 15 months: fast growth, they bit off more than they could chew. But they are making strides in turning things around.”
Wet Seal, which operates stores under the names Wet Seal, Contempo Casuals, Arden B. and Limbo Lounge, has had a difficult year. The rapid rollout of the new Arden B. concept without key management in place led to serious fashion missteps at its larger Wet Seal chain that resulted in declines in same-store sales, according to analysts and Teitelbaum.
Also, profits were down 67% for the first six months of the year, compared with the previous year. The most recent quarterly earnings report showed earnings of less than $500,000 on sales of $128.1 million for the period ended July 29.
But the company’s stock price moved up roughly three points last week on the release of a monthly sales report showing a 10% increase overall to $51.4 million and same-store sales up 6.2% for the five-week period ended Sept. 30. The stock was trading at the 16 level last week, compared with about 11 in June.
Teitelbaum said he is sure that Wet Seal is embarking on a turnaround.
“We are confident that the new direction we set is taking hold because we are taking a more pragmatic approach with more wearable clothes, fashionable, closer attention to fit, but not sacrificing excitement,” he said.
Some of the key missteps this year were that the clothes were not durable, sizing was not consistent, fashions were too advanced in terms of colors and showed too much skin, Teitelbaum said. Also, customers were buying single items instead of outfits because the tops and bottoms were not as well matched as they should have been, he said.
The new Arden B. women’s chain rolled out the bulk of its stores in 1999 and quickly became an 83-unit chain, but it lacked distinct leadership, Teitelbaum said.
“Kathy was leading the charge, but we didn’t have a dedicated leader,” he said.
Wet Seal hired Greg Scott in May from bebe to head the Arden B. unit.
“If there was any error here it was the strategy,” he added. “It’s rolling out a business … without having leaders to thrust forward into the future and provide vision and be busy with the business morning and night.”
Teitlebaum said the company is prepared to expand the Arden B. chain if customer response picks up this year. n
