Wet Seal closing 338 stores, laying off nearly 3,700 employees

Foothill Ranch, Calif. -- The Wet Seal announced it would close 338 stores, or about 66% of its total portfolio, “on or about” Jan. 7, resulting in the termination of some 3,695 full- and part-time employees. The struggling teen apparel retailer said the decision to close the stores was based on its overall financial condition and an inability to negotiate meaningful concessions from its landlords.



The company said the 338 stores represented approximately 48% of its sales for the nine months ending on November 1, 2014. Following the closures, Wet Seal will be left with approximately 173 stores and its Internet business



Similar to many other teen apparel retailers, Wet Seal has been hurt by a combination of slowing mall traffic and increased competition from such fast-fashion players as Forever 21 and H&M, and online upstarts. The company lost more than $150 million during the past two years.



In December, the retailer warned that it could file for bankruptcy protection if it was unsuccessful in addressing short-term liquidity needs. The retailer had previously engaged Houlihan Lokey and FTI Consulting to help it explore financing alternatives.



“This was a very difficult decision to make, but after reviewing many other options since I returned to the company in September, our financial condition leaves us no other alternative than to close these stores,” said Wet Seal CEO Ed Thomas. “This is an extremely difficult time for the entire Wet Seal team, and we are doing everything we can to protect the interests of all of our stakeholders, including our employees.”



The retailer expects to incur estimated pre-tax charges ranging from an aggregate of $5.4 million to $6.4 million related the closings, including costs associated with inventory write-off, asset impairments and employee terminations. The estimates do not include any claims or demands which may be made by the landlords of the impacted stores for unpaid rent or otherwise.