The Wet Seal in cost-cutting mode, announces headcount reductions

Foothill Ranch, Calif. --The Wet Seal announced a workforce reduction resulting in the elimination of a combination of 78 filled and open positions, including 66 positions at the company’s corporate office, or a 24% reduction in headcount, and 12 positions at the field management level, representing a 20% decrease. The cuts are the first steps in the retailer’s initiative to reduce its overall cost structure.



“We have quickly begun to develop an action plan to stabilize the business, restore Wet Seal to profitable growth and create long-term value for our shareholders,” said CEO Ed THomas. “While always a difficult decision to make, aligning our workforce to our current needs was one of the first steps in this process."



The Wet Seal expects the headcount cuts to incur a one-time severance charge of approximately $0.6 million in the third quarter of 2014. The measures, net of certain replacement costs, are expected to yield annualized pre-tax cost savings of approximately $5.7 million beginning in the fourth quarter of 2014.



The company also expects to benefit from an additional $1.3 million in annualized cost savings associated with the implementation of operating efficiencies across the organization, primarily focused on its distribution center.



“We have also taken a deep dive across the organization and identified ways to increase efficiencies and reduce operating costs. “We are moving swiftly to evaluate the entire organization and develop a strategic plan centered around enhancing our merchandising and marketing initiatives, building our e-commerce business and continuing to focus on cost savings opportunities,” Thomas added. "That said, the changes we plan to make to our merchandising and brand positioning will not be fully reflected in our stores and online until the first quarter of fiscal 2015.”



The Wet Seal also announced that the loss per share for the third quarter of fiscal 2014 is now expected to be approximately $0.28, or at the low end of its previously stated outlook of between $0.22 and $0.28, before non-cash asset impairments, severance, Arden B exit costs and fair value adjustment for warrants and embedded derivatives.



Same-store sales, including e-commerce, is now expected to decline in the high teens.