Wet Seal shareholder nominates slate for board
NEW YORK (AP) — A Wet Seal shareholder said Monday that it believes the teen retailer can perform better and made a formal request to shareholders to replace most of the company's board.
The Clinton Group Inc., which owns about 7 percent of the company's stock, said in August that it intended to solicit written consent from other shareholders to remove four of Wet Seal's board members and replace them, as well as fill one vacant seat. The firm said that it wants to install new independent directors who will maximize Wet Seal's value.
In a letter to shareholders on Monday, the Clinton Group repeated its view that Wet Seal's results have been disappointing even though it is in a strong position to succeed in the "fast fashion" category.
"We believe — and we mean no disrespect by this — that the current Board simply does not have the skills set and experience required to expertly manage the strategy of the Company or to reliably hire talented managers," Clinton Group senior portfolio manager Joseph A. DePerio said in a letter to shareholders.
Wet Seal, based in Foothill Ranch, Calif., did not immediately respond to a request for comment.
Two weeks ago, Wet Seal said in response to discussions with the Clinton Group that it recognizes the need to improve the company's performance, but that it is the wrong time to make major changes ahead of the fourth quarter and the holiday season. The holidays are a critical period for many retailers, since it can account for up to 40 percent of sales.
The Clinton Group's board nominees include: Raphael Benaroya, founder of the United Retail Group; Dorrit Bern, former chairman, president and CEO of Charming Shoppes Inc.; Lynda Davey, chairman and CEO of investment bank Avalon Group Ltd. and Avalon Securities Ltd.; Mindy Meads, former president and co-CEO of Aeropostale Inc.; and John Mills, president of consulting firm SDE.
Wet Seal has struggled to find the right product lineup to lure young women. Its sales trends worsened this summer, and the retailer fired its CEO in July and started looking for a new one. Susan McGalla had led the company since January 2011.
Shortly after McGalla's firing, Clinton Group urged the company's board to sell rather than look for a new CEO. Clinton Group said at the time that depending on the board to hire another CEO charged with turning the business around was too uncertain.
In August, Wet Seal announced that it hired financial advisers and adopted a shareholder rights plan to protect itself from any takeover attempt. A day later the retailer reported a second-quarter adjusted loss of 7 cents per share on revenue of $135.3 million. Analysts polled by FactSet expected a loss of 7 cents per share on revenue of $136.7 million.
The company has appointed a committee of three board members who will make recommendations on the company's spending and look for ways to boost shareholder value. The board also hired Guggenheim Securities LLC and Peter J. Solomon Co. as financial advisers on a variety of issues.
Shares fell 2 cents to $3.11 in midday trading. The stock is down about 4 percent since the beginning of the year.