Wet Seal may file for bankruptcy

Wet Seal may file for bankruptcy protection if it fails to immediately resolve its liquidity issues, the company said.

That warning came with the company’s third-quarter earnings report, which showed that total sales dropped more than 9% to $104 million and same-store sales fell by nearly 15%. The teen retailer announced last month it hired outside advisers, including investment bank Houlihan Lokey, “to assist it in analyzing potential strategic and financial alternatives.” The advisory team also includes William Langsdorf, who most recently was the chief financial officer and senior vice president of Tilly’s, another teen-focused retailer.

Wet Seal, which previously reported it has engaged outside advisers to seek strategic alternatives, indicated it may consider filing for bankruptcy to recapitalize or restructure its debt and obligations. In addition, the company plans to close 60 stores in the fourth quarter of fiscal 2014 as the lease term expires. Other steps Wet Seal is taking to address financial issues include repositioning the merchandise assortment with a greater emphasis on fashion product, refocusing its marketing program on target customers, and driving growth in its e-commerce business. Net sales dropped 9% to $104.3 million from $114.9 million. Same-store sales plunged 14.5%.

“While our results came in at the low end of our expectations during the third quarter, we continue to take important steps in our efforts to address our financial position and our ongoing challenges,” said CEO Ed Thomas. Thomas said solving Wet Seal's cash crunch is crucial "in the very near term" so it can launch new initiatives to "recapture our target customer."

As of November 1, the company operated 528 stores.