Struggling teen apparel retailer Wet Seal Inc. (WTSL)  was plunging Tuesday after hiring investment bank Houlihan Lokey to aid in a strategic review. Shares of the Foothill Ranch., Calif.-based retailer were sinking 12% to 34 cents.

Houlihan Lokey was described as joining a larger team, including previously retained strategic adviser FTI Consulting Inc., to help Wet Seal "identify and analyze potential strategic and financial alternatives." In addition to hiring Houlihan Lokey, the company retained William Langsdorf as a senior adviser to the finance team. Langsdorf was most recently CFO of Tilly's Inc. (TLYS - Get Report) .

The retailer said the strategic review began months ago; it has set no timetable to finish it. The company said it would not update the situation until a specific action is taken or the process is concluded.

Ed Thomas, the company's CEO, in a statement said, "I'm proud of the progress we have made to date in light of the ongoing difficult macro environment and state of affairs at the Company when I joined in September. Given our struggles and challenges, it is prudent for us to continue the review of alternatives. We welcome the addition of these advisors to our team."

The Deal previously reported that Wet Seal's poor balance sheet and deteriorating results combined with tough competition and changing consumer tastes give it a small margin for error headed into the holiday season, a time of the year when most retailers generate most of their profit. The company had opportunities to potentially sell itself on two occasions, but passed, likely because potential offers were not enticing enough, preferring to attempt a turnaround instead, sources previously told The Deal.

Wet Seal recently warned in a regulatory filing that its cash had plummeted to below $20 million, a notification it was required to make to the holder of the company's senior convertible note. The retailer had cash and cash equivalents of about $40 million for the quarter ended Aug. 2, and debt of about $22 million, according to filings.

Those more recent balance sheet figures compare to the prior quarter ended May 3, in which the teen retailer had nearly $52 million in cash and cash equivalents, as well as almost $3 million in short term investments, while debt was similar at almost $22 million.

But with an operating loss of over $23 million for the latest quarter, and almost $45 million in operating losses as of the year's halfway mark, Wet Seal has burned through, and continues to burn through, a substantial amount of cash.

The losses over the first six months caused Wet Seal to sell $27 million of senior convertible notes, generating net proceeds of $25 million. Close to $24 million of that amount helped to fund operations over the first half.

Wet Seal has a $35 million revolver, of which close to $29 million is available as of Aug. 2, virtually flat compared to the prior quarter, while total liquidity has been reduced to $69 million from about $84 million, also for the quarter ended Aug. 2.

The company announced a private placement and rights offering that could raise over $38 million, but its success is not guaranteed.

There is an outside chance that Wet Seal could find a buyer, according to one source, as the retailer formed a committee to review offers. The teen pit-stop has shopped itself on and off for the past couple of years, as activist hedge fund Clinton Group Inc., an investor in Wet Seal, has tried to facilitate a turnaround and realize a return on its investment in the beleaguered retailer.

But negative Ebitda for the 12 months ended Aug. 2 of nearly $75 million, and negative Ebitda of close to $63 million projected for its fiscal year ending Jan. 31, according to Bloomberg, mean the retailer's position is increasingly precarious.

There is an outside chance that Wet Seal could find a so-called white knight. Wet Seal hired Thomas who not only is a former CEO of the teen apparel company but was also at private equity firm KarpReilly LLC. Sources have indicated that there is an outside chance KarpReilly could be that white knight, stepping in as a buyer or with some needed financing.

But industry watchers fear that the opportunity to attract that rescuer may have passed, and that Clinton Group should have pushed for or agreed to a sale first in the fall of 2012, and then a year later in 2013, rather than attempting a turnaround.

In early October 2012, Wet Seal's stock traded around $3 per share. Over the next nine months, the stock ran up to near $5 per share by June 2013. But it recently hit a 52-week low of 22 cents per share on Nov. 17. On Monday the stock closed at 38 cents.

The news of the company's rapidly declining cash continued to rattle investors after revelations that Clinton Group had increased its stake to 7% from 6%, according to regulatory fiilngs, and that Wet Seal's chief financial officer Steven Benrubi would leave his position on Dec. 1. In addition, the company is eliminating 78 filled and open positions to realize annual cost savings of $5.7 million as it scrambles to keep its doors open.