Wet Seal’s Creative Exec Out
Four weeks after his apparel line made a grand entrance in stores, Wet Seal Inc.’s creative director is making his exit.
Victor Alfaro, heralded as the fashion rainmaker who could end Wet Seal’s sales drought, has been released from his contract effective Aug. 15, the Foothill Ranch-based company said in a statement Monday. The decision to part company was mutual, a spokeswoman for the firm said. Alfaro couldn’t be reached for comment.
The 41-year-old -- who designed under his own label in the 10 years before signing with Wet Seal and launched a ready-to-wear line called VIC in 1999 -- was hired last summer to shore up the company’s comeback bid. The chain, struggling to reconnect with teenage girls, had pinpointed this back-to-school season, with Alfaro’s collection leading the way, as pivotal.
But early sales of what Alfaro characterized as “Granny Chic” and “Vintage Angels” fashions, which featured three-layer pleated skirts, patchwork jackets, colorful crocheted scarves and bejeweled brooches, have been disappointing, analysts said.
“The turnaround they were looking for does not appear to be happening,” said Jeffrey Van Sinderen, an analyst with B. Riley & Co.
The owner of 563 Wet Seal and Arden B. stores around the country, Wet Seal has been battered by a steady stream of bad news in recent months, as it debuted its fall line and then hustled the ensembles into stores.
In July, La Sensa Corp., a Canadian lingerie retailer headed by Irving Teitelbaum, then Wet Seal’s chairman, filed to sell its entire stake of 3.1 million Wet Seal shares. Last week Wet Seal announced that Teitelbaum was retiring as chairman after 20 years with the company. A day later, the company reported that sales at stores open at least a year fell 14.7% in July -- the 25th consecutive month of same-store sales declines.
The dreary drumbeat has taken its toll. Wet Seal shares fell to a 52-week low of $1.71 on Monday in Nasdaq trading before closing at $1.77, down 68 cents -- a 28% decline.The 52-week high, on Oct. 16, was $12.50.
“I think what [investors] are saying today is that, however good the rest of the season is, it may not be good enough,” said Adrienne Tennant, an analyst with Wedbush Morgan Securities who downgraded the stock to “hold” last week.
For some, Alfaro’s resignation heightened the possibility that Wet Seal would eventually file for Chapter 11 bankruptcy protection. “It’s obviously a very, very bad sign,” said Marc Bettinger, an analyst with Whitaker Securities. “I think it would be reasonable to assume there’s some level of disarray and chaos going on inside the company.”
Wet Seal said it didn’t expect Alfaro’s departure to materially affect its financial performance. A search for his replacement is underway, the company said.
“We have already identified a number of excellent candidates and look forward to announcing a new designer in the near future,” said Allan Haims, Wet Seal division president. “This does not change our strategy of creating a unique fashion statement for our target customer by bringing together market goods with merchandise that has been designed in-house.”
At Santa Monica Place mall Monday, young shoppers didn’t give Wet Seal high grades. Stephani Cannon, 15, favors Abercrombie & Fitch and American Eagle. A Wet Seal item “will have something on it that will just, like, throw it off,” the Los Angeles resident said.
Her pal Kelly Wu, from Pacific Palisades, concurred. A skirt will have something “weird attached” to it, such as a stitched-on flower, the 16-year-old complained. “Their clothes are close to being cute but not quite there,” she added, saying she preferred Pacific Sunwear, BCBG or Forever 21, a formidable competitor for Wet Seal.
Analyst Van Sinderen said it was “still early” in the season to draw conclusions: “This is not a hopeless situation.”
For example, Wet Seal’s Arden B. division, which caters to a slightly older customer and charges higher prices, remains solid, analysts said. Some have suggested that the company could convert Wet Seal sites into Arden B. stores. But that would be an expensive proposition, Van Sinderen said.
Further, Wet Seal is likely to have $50 million to $60 million in cash at the end of the second quarter, analysts projected. And there are no creditors to force it into Chapter 11 bankruptcy, Tennant noted.
On Monday, Wet Seal announced the appointment of Gary White to a new position, senior vice president of stores and operations. White has worked for retailers including Gymboree, Mervyn’s and Target.
