Wet Seal (NASDAQ:WTSL) announced it has assembled a team to identify and analyze potential strategic and financial alternatives, a sign that the teen apparel retailer could file for Chapter 11 bankruptcy protection.
The company has hired Houlihan Lokey as an investment banker and retained William Langsdorf as a senior advisor to the finance team.
"We have assembled a team to help us analyze potential strategic and financial alternatives which include, among other things, consideration of out of court restructurings as well as bankruptcy court proceedings to recapitalize or restructure our indebtedness and our other obligations," said CEO Ed Thomas during a conference call to discuss third quarter results. "It is clear that we must successfully address these needs in the very near term in order for us to have time and resources to be able to address our operating challenges going forward."
Sales at Wet Seal fell 9 percent to $104.3 million and same store sales plunged 14.5 percent during the quarter.
Wet Seal has appointed several new executives, including Thomas, in the past few months to orchestrate a turnaround. It has also been closing stores, eliminating brands and cutting costs.
"On the operating side, our primary focus is to get Wet Seal back to its roots as a destination for young women looking for fashion forward merchandise at great value. Historically, a major part of our customer base was between 18 and 24 years old and passionate about fashion," said Thomas. "In the last four years, I believe the company got off track, skewing towards a younger customer with heavy reproduce of basic product that was too deep and too narrow."
"We are working hard to focus again on what had been successful for us historically. Our number one priority is to return to a fast fashion model with emphasis on fashion product and a broader and more shallow assortment that provides constant newness."
Management is focused on new merchandise strategies including adding more fashion-oriented merchandise to its mix of basics, adding new brands, updating Wet Seal's private label program and reintroducing the Contempo Casuals label.
Most of these changes won't be evident in stores until spring 2015.
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