Wet Seal Plans to Acquire Britches Stores

Furthering already ambitious expansion plans, Wet Seal Inc. said Tuesday it plans to buy 83 Britches Great Outdoors Stores in the Northeast and convert them into a new retailing format it’s calling Arden B.

The deal, if completed, gives the 411-store Wet Seal chain the large number of mall-based locations that it has been seeking for more than two years.

Last year, the Foothill Ranch-based company failed in an attempt to buy Rampage Clothing Co. of Los Angeles out of bankruptcy. And in 1996, Wet Seal tried unsuccessfully to buy the 508-store County Seat chain, which also was operating in bankruptcy.

“I think it’s a terrific acquisition for them,” said Kelly Armstrong, an analyst with Wheat First Butcher Singer in Virginia. “They weren’t willing to settle for something they thought was maybe second-best for them.”

Wet Seal, which has more than a third of its young women’s apparel stores in California, declined to disclose the purchase price or say when the deal might be completed. The bulk of the Britches stores Wet Seal is buying are in the Northeast, where Wet Seal is trying to beef up its presence.

Armstrong said Wet Seal has about $90 million in cash that it needs to use to boost shareholder value. She expects the Britches acquisition to be finalized later this year.

The deal still requires the approval of both companies’ boards of directors.

Even before the Britches acquisition, Wet Seal had planned to open 75 new stores this year.

The company said Tuesday that it plans to convert most of the Britches stores to its new Arden B. format, which targets slightly older and more affluent women than its typical 13- to 18-year-old female customer.

Wet Seal plans to open seven Arden B. stores this fall and, with the help of the Britches acquisition, more than 50 by the end of next year, said Chief Executive Kathy Bronstein, in a statement.

The remaining Britches stores will be converted to Wet Seals, Contempo Casuals or Limbo Lounges, the company’s unisex clothing, accessories and home furnishings concept.

Wet Seal is coming off its best year ever, with annual profits rising 39%, to a record $21.2 million in 1997. But sales slowed early this year, a problem the company blamed on California’s unusually cool weather. Net income was unchanged in the first quarter ended May 2.

The company’s stock closed Tuesday at $34.06, up 56 cents, in Nasdaq trading.

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A Deluge

By the end of the year, Wet Seal will own more than four times as many stores as five years ago. Here’s how the number of stores has grown:

1998*: 569

* Projection

Very Casual

More than half of the 407 stores owned by Wet Seal are Contempo Casuals. Current store breakdown:

Contempo Casuals: 59%

Wet Seal: 40

Limbo Lounge: 1

Expanding Reach

Wet Seal has attempted four acquisitions since it went public in 1990:

1995: Acquires 237-store Contempo Casuals chain from Neiman Marcus Group for $1 million in stock.

1996: Attempts to acquire 508 County Seat clothing stores but offer is rejected.

1997: Outbid by another firm in effort to purchase 18 stores from the ailing Rampage Retailing chain.

1998: Purchases 83 Britches Great Outdoors stores for undisclosed amount. Most will be converted to Arden B. stores, a chain Wet Seal plans to launch this fall.

Sources: Wet Seal, Times reports; Researched by JANICE JONES DODDS / Los Angeles Times