The writing was on the wall for the teen retailer when on January 7 of this year, Wet Seal announced the closing of 338 stores and a lay-off of 3,695 employees.
On January 16, 2015, Wet Seal announced that it had filed for chapter 11 bankruptcy. Ed Thomas, Wet Seal’s CEO said, “After careful consideration, the Board of Directors unanimously concluded that filing for Chapter 11 was the appropriate course of action for the company. Overall, we continue to believe in The Wet Seal and remain committed to executing on the strategic steps that we already started. We are thrilled to be working with B. Riley and other constituencies toward the successful and prompt emergence of the Company from Chapter 11.”
Wet Seal arranged a debtor-in-possession (DIP) arrangement with B. Riley Financial Inc. This DIP will provide $20 million loan. However it is challenging to come out from under bankruptcy. T now has 173 stores left, and mass closing and firing from in January 7th will cost the company an estimated $5.4 million.
Many teen-based retailers have been struggling over the past few years, including American Eagle, Abercrombie & Fitch, and Aeropostale. Blame tends to stem around the popularity of fast-fashion retailers such as H&M, Forever 21, and Uniqlo.
However, there are other reasons for the many woes for the former kingpins of teen retailer, including heavy discounting, loss of credibility, lack of trendsetting collections, seasonal challenges, and changes in what teens really want which can also include wearable technologies rather than new tops.
H&M and Zara for example, have been successful among today’s youth marketplace because they are on trend, incorporate interesting collaborations for various designers and celebrities, and have pricing that matches the marketplace’s needs. In addition, with H&M and Uniqlo, their sustainability strategies and sponsorships have been front and center, which taps into the new ways young consumers consider spending their money.
Wet Seal may just be one example of a teen retailer hemorrhaging into the new year, but 2015 will probably include many more shake-downs before the year is done.
