This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Deal: Wet Seal Sale Awaits as Turnaround Continues

NEW YORK (The Deal) -- Wet Seal (WTSL - Get Report), the teen apparel retailer, will continue its turnaround efforts for the next six months and then eye a sale of the company, said a source familiar with the situation. 

Those recent turnaround efforts include increasing square footage through new store openings, particularly in outlet stores, and launching a plus-size apparel offering. 

Though some of those efforts have paid off, success is not guaranteed. After reporting that consolidated comparable stores sales increased 3.7% for the fiscal second quarter ended Aug. 3, with net income at $1 million compared to a loss of $12 million year-over-year, Wet Seal also on Oct 15 lowered its third-quarter guidance, saying it expected a net loss of between 10 cents and 12 cents per share, as compared to previously announced 2 cents and 3 cents per share. 

But that should be taken against a backdrop of a year when most youth clothing retailers came off of poorer than expected back-to-school results. 

Wet Seal did not immediately respond to a request for comment. 

Activist hedge fund Clinton Group Inc. holds the keys to a possible sale of the company with four board seats that it snagged last year after the company settled a bitterly contested consent solicitation. 

With the hedge fund firmly ensconced on the board, the company chose its new chief executive John Goodman, who led The Gap's (GPS) outlet business at one point in his 20-plus-year apparel retail career. He was brought on board in January to resuscitate the purveyor of teen clothing, replacing Susan McGalla, who was sacked the previous July because of falling sales. 

And Goodman may be, once again, trying to dress up a retailer for sale. 

The chief executive oversaw the recent sale process of Charlotte Russe Holding Inc. as its CEO. The retailer announced a strategic review at the beginning of 2009, shortly after Goodman joined to run it in November of 2008, ending with a buyout deal with private equity firm Advent International Corp. for $380 million in Aug. 2009. 

Wet Seal's uneven financial performance in recent years is due not only to the vicissitudes of an industry susceptible to consumer spending trends, but also because of the highly competitive nature of the teen apparel sector, which has heated up with fast fashion entrants such as Forever 21 Inc., H&M and Zara. 

Wet Seal had revenues of $580 million and negative EBITDA of nearly $26 million for its fiscal year ended Feb. 2, 2013, compared to the previous year's results of $620 million in revenues and EBITDA of nearly $49 million. For next year, analysts estimate that revenues will be about $574 million and nearly $13 million in EBITDA, according to Bloomberg

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
WTSL $0.03 -10.76%
AAPL $129.59 -0.63%
FB $79.74 -0.83%
GOOG $560.46 0.90%
TSLA $204.70 -1.20%

Markets

DOW 18,183.51 -30.91 -0.17%
S&P 500 2,108.53 -2.21 -0.10%
NASDAQ 4,982.2220 -5.6680 -0.11%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs