Wet Seal CEO Fit for Tough Business

Wet Seal Inc. Chief Executive Kathy Bronstein prowls the room, surveying peasant blouses, ruffled skirts and slinky dresses being considered for Wet Seal stores this summer. She moves from one piece to another, fingering material, her face fixed in concentration. Mostly, she is pleased. But a striped dress doesn’t fit in.

“Go away,” she says, yanking it from the wall and tossing it on the floor.

This is, by any definition, a hands-on chief executive, a woman with a keen sense of style who hurls directives like fast balls. Those who have worked with her say she’s a formidable leader--confident, determined, demanding.

“She doesn’t suffer fools gladly,” Wet Seal Chairman Irving Teitelbaum said.

Such intensity and style sense may be just what is needed, because Foothill Ranch-based Wet Seal faces challenges maintaining its momentum in the brutally competitive niche that targets girls and young women. Though its stock has been surging amid solid sales and earnings gains as Wet Seal’s trendy styles hit the mark with customers, there are still hurdles ahead.

The retailer is in a race that never ends, trying to stay ahead of a fashion curve that’s constantly shifting. It also is continuing to expand in a niche where some analysts think there already are too many stores.

“We typically refer to retail as a zero-sum game,” said Elizabeth Pierce, an analyst with Wedbush Morgan Securities, who credits Wet Seal with deftly leaping ahead of the current “hippy, dippy bohemian” fashion trend.

“Somebody wins when somebody loses,” she said.

Such challenges are nothing new for Bronstein. At 50, she is one of the few women heading a publicly held company--in this case, a onetime bikini shop that grew to what is now about 570 stores nationwide. Wet Seal had sales in 2001 of just under $600 million.

In addition to its namesake brand, the company operates Contempo Casuals and Zutopia stores. Its Arden B. chain was named after Bronstein’s 10-year-old daughter.

At the moment, the retailer is in a groove. It recently announced a 19% jump in fourth-quarter earnings, and its stock, which repeatedly has been hitting 52-week highs, is up 61% for the year. The stock closed Friday at $37.87, up $2.31, in Nasdaq trading.

Wet Seal also is in the midst of a major marketing push. It has begun striking deals with record companies to create videos it can show first in its stores, and it is relaunching a catalog that will hit 1.3 million households this summer. It also has just launched a line of cosmetics.

“The business seems to be on fire,” said Brian Tunick, an analyst with Bear, Stearns & Co.

But it is tough to keep such fires flaming, he cautions, since Wet Seal and its competitors--including Charlotte Russe Holdings Inc., Bebe Stores Inc. and Forever 21--are at the mercy of some very tough customers: young shoppers who want trendy clothes at moderate prices.

Further, some competitors have given Wet Seal migraines by selling their own products at lower prices than Wet Seal sells its own, analysts say.

To compete in this niche, companies must regularly anticipate the whims of fiercely fickle females and cut their losses quickly if they blow it.

Bronstein does both, industry insiders say. She is as quick to make decisions as she is to cut her losses, a woman who snuggles into bed at night with sales reports to keep track of what’s selling.

“She is probably the most proactive retailer I’ve heard of in terms of acting upon a suggestion, a piece of advice, news,” said Ilse Metchek, director of the California Fashion Assn. “That’s been the key to her success. Nothing really winds up a dismal failure for a long time.”

Bronstein’s standout skill is her ability to spot a trend and translate it into something shoppers will buy, said those who know her. She’s “the best in the business” at selecting merchandise, said Steve Schoenholz, owner of Tempted Apparel Inc. in Los Angeles, which makes clothes for Wet Seal and other companies.

“She’s able to predict trends and jump on them,” Schoenholz said. “She’s very fast.”

She also can be tough to do business with, some in the industry said.

Because Wet Seal is so tuned in to fashion shifts, it sometimes tries to backtrack on an order if a style starts to cool, which can be especially hard on small vendors. But such tactics aren’t unusual in the garment industry, others said.

“It’s a very tough business on the small guy,” said one supplier who asked not to be named. “There’s no humanity in it.”

“The fashion game is a very volatile business,” Wet Seal’s Teitelbaum said. “I think Kathy is as demanding as the best of them.”

Some vendors said they cannot talk openly about Wet Seal if they want the company’s business in the future, which most of them do, especially since Wet Seal seems to be flourishing at the moment.

“[Bronstein] is a tough businesswoman,” said one analyst, who asked not to be named. “You can get away with this when times are good. They need to do business with her now.”

Bronstein said she’s tough but fair. “We don’t cancel orders unless terms of the orders have not been adhered to--that is deliver date, quality and fit.”

Moshe Tsabag, a Los Angeles clothing maker who has known Bronstein for 20 years, said she is “very hard-hitting because she knows exactly what she wants.”

“She’s one of the greatest merchants I know in the industry,” said Tsabag, owner of HotKiss Inc. “She knows fabric, color, styles. She breathes, she eats, this juniors business.”

Bronstein says her knack for knowing what will sell stems from instinct and experience. She also gets plenty of help. Wet Seal subscribes to at least four trend-predicting services. She regularly visits Europe to stay plugged in to global trends.

Last fall, she and Wet Seal design director Lenny Parrella were walking in Rome when a young Italian woman strolled past wearing a shirt crocheted at the wrist and neckline that caught Bronstein’s eye. This year, sweaters with crocheted details were selling briskly in Wet Seal stores, Parrella said.

Even as a child, Bronstein exuded self-confidence, said her brother Chris Korge, a Miami attorney who still chuckles at the memory of his hard-charging sister as a debutante.

“Growing up, she always knew what she wanted and she found a way to get it,” he said. “She was always a high achiever. Always.”

The Korge clan was a noisy, happy family that ate dinner together nightly, precisely at 6 p.m. Their 3,000-square-foot home in Miami was carefully decorated with ornate touches, unlike the casual furnishings of homes in the surrounding neighborhood. A maid kept things tidy.

“I think it was one of the first homes I ever saw where things matched,” said Anne Schrott, a longtime friend of Bronstein who met her when they were high school freshmen. If Bronstein simply had to vent some anger, she would dump out a dresser drawer, her friend said.

Bronstein was a smart, serious student who was miffed when she didn’t make cheerleader her junior year, Schrott said. But she wasn’t given to typical teenage angst and didn’t seek peer approval. “She didn’t necessarily want to fit in,” Schrott said.

Bronstein’s career in retail began a quarter of a century ago after she earned a bachelor’s degree in advertising from the University of Florida in Gainesville. Unable to quickly find work in her field, she packed up for Philadelphia and landed a job as an assistant buyer for Deb Shops Inc., a women’s specialty clothing chain.

Soon, she was back in Miami, buying belts for Jordan Marsh department stores.

In 1979, she moved to California when she got a job buying tops for clothing store Fashion Conspiracy in San Diego.

Bronstein immersed herself in a grueling work schedule at home and on the road, said Kathleen Buckley, her assistant at Fashion Conspiracy.

“Many times I would spend the night at her place and we would work until we could no longer keep our eyes open,” Buckley said. “She can outlast most people.”

Bronstein said she wasn’t particularly trying to climb the corporate ladder.

“I always focused on doing what I enjoyed and being as good as I could be at it,” she said.

A growing Wet Seal hired Bronstein as general merchandise manager in 1985. Seven years later, she was chief executive.

“Kathy stepped up to the plate and, in the main, has hit home runs,” Teitelbaum said. As he sees it, Wet Seal has had three major shifts in its 40-year history.

The first was its initial public offering in 1990. The second was five years later when it bought the much larger Contempo Casuals from Neiman Marcus Group Inc., instantly adding 237 stores to its stable. The most recent was a management reorganization of the last 18 months, which followed a difficult period for Wet Seal during which sales stumbled.

The company fell out of step with its customers in 1999 as it began to build the Arden B. division. While Bronstein concentrated on the new brand, the company’s signature stores floundered. Analysts grumbled that Wet Seal’s casual clothes were too dressy and its dressy clothes too casual. Bronstein had taken her eye off the ball, they said.

The tide turned as she beefed up the company’s management ranks.

“I think the real sea change that has occurred over the last year or two is that [Bronstein] realized she can’t do everything,” said Steven Richter, an analyst with RBC Capital Markets.

When Bronstein did go after fresh talent, she wasn’t shy about it. When she found people she wanted, she “chased them all over town,” she said. She “hounded” Greg Scott, who had helped build the Bebe brand and whom Bronstein was determined to make Arden B.’s president.

“The first time I met him, I handed him an offer letter on the spot,” she said. “I called him constantly on his cell phone.” Scott has since signed on with the company.

In another shift for the company, Wet Seal lately has become more “shareholder friendly,” willing to chat up the stock to investors, analysts said. After a recent trip to Europe, executives flew into New York to woo analysts, giving a presentation about Seal TV--the new in-store videos--and Seal Cosmetics.

Bronstein said she has had little inclination to schmooze much with Wall Street, or even in her industry. She said she’d rather spend her time with her daughter. They go to church together, take tennis lessons and eat at Ruby’s Diner.

“We are really good friends,” said Bronstein, who is divorced. “She is my biggest supporter and my biggest fan, of everybody I know. She always says the nicest things to me.”

In November, Bronstein completed a major personal project, building a home at Newport Coast.

Bronstein sold 426,500 shares of Wet Seal stock last year for between $10.7 and $11.1 million, records show. It was not immediately clear what Bronstein netted from the sales.

For the moment, Bronstein said she’s very happy with her life, and she gives no thought to retirement. But Schrott is hoping Bronstein at least will slow down eventually so they can squeeze in “a girls’ weekend” together.

“Maybe when she’s 80, she’ll be able to put a couple things on ice and relax a bit,” Schrott said. “But I don’t know.”

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Times researcher Lois Hooker contributed to this report.

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Shiny Seal

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