The best things in life might be free, but retail turnarounds are expensive.

Wet Seal


, the teen retailer whose stock has enjoyed a renaissance this year amid rebounding sales, detailed a rich compensation package Tuesday for one of its key architects.

The mall-based specialty apparel retailer will shell out $2.8 million in cash this year to Michael Gold, a part-time consultant to the company. Gold will also get $1.2 million next year. He will also be awarded 2 million shares of restricted stock and two tranches of performance shares of 1.75 million each, contingent on stock performance, the company said.

Gold, a well-known figure in Canadian retailing, owns a discount retailer based in that country called YM Inc. According to B. Riley & Co. analyst Jeff Van Sinderen, Gold is known for his tight-fisted management style and purchasing know-how.

"The company had a merchant problem, and Gold is a great merchant," Van Sinderen says (he does not own shares of Wet Seal and his firm has no investment banking relationship with the company). "He's done a good job, but this is a huge amount of money. Investors are seeing now that his services didn't come for free."

The stock was down 20 cents to $5.73 early Wednesday. Still, the shares have more than doubled this year.

Wet Seal expects to take "significant" charges in the current quarter and in all future quarters through January 2007 related to Gold's compensation agreement.

Gold's skill as a consultant has shown up recently in the retailer's results. This spring, Wet Seal posted big margin improvements and a quarterly sales increase despite having closed a third of its chain early this year. It has also reported strong monthly sales gains, including a 59% jump in same-store sales recorded in June.

"I thought Gold was going to get a bigger piece of the company, or perhaps even fold the Wet Seal chain into his company, YM Inc.," says Kevin Starke, analyst with Weeden & Co. "This is a good deal, and investors should be encouraged that there are incentives here for him to bring the stock up much further in the next few years."

(Starke does not own shares of Wet Seal, and his company has no investment banking relationship with the company.)