SEC Investigating Wet Seal Results
The Securities and Exchange Commission has opened an informal inquiry into struggling teen apparel retailer Wet Seal Inc. relating to the company’s 2004 second-quarter earnings results, the retailer said Tuesday.
The SEC has also requested documents related to the 2004 sale of Wet Seal stock by Canadian lingerie retailer La Senza Corp. and some affiliates, the Foothill Ranch-based retailer said.
Wet Seal declined to comment further.
La Senza sold its 3.1 million shares of Wet Seal in several transactions from July 13 through July 19 for prices ranging from $4.05 to $6.51 a share.
On Tuesday, shares of Wet Seal closed at $2.46, up 24 cents, on Nasdaq.
La Senza Chairman and Chief Executive Irving Teitelbaum stepped down as Wet Seal’s chairman in August after two decades with the retailer. Teitelbaum could not be reached for comment Tuesday.
Wet Seal said the SEC inquiry concerned the chronology, events and announcements in the period from Aug. 5 through Aug. 19 last year related to its second-quarter 2004 earnings. The company posted a $102.8-million quarterly loss Aug. 19. Sales at stores open at least a year dropped 10.9% in that quarter. Investors reacted quickly, pushing Wet Seal shares down to an all-time low of 85 cents by the next day and prompting speculation about a possible bankruptcy filing.
In November, Wet Seal announced it had cut a $55.9-million deal with S.A.C. Capital Associates, an investment firm managed by S.A.C. Capital and other investors. Shareholders approved the plan last month.
But falling sales amid lackluster demand for its teen-oriented fashions took a toll. In December it announced plans to shutter 150 of its namesake, but underperforming, stores and lay off 2,000 employees. The closures in Southern California included stores in Cerritos, West Covina, Laguna Hills, Mission Viejo and Escondido.
The retailer also saw considerable shifting in its executive ranks as it struggled through nine consecutive quarters of losses. Joel Waller, who took over as chief executive Feb. 1, is the third CEO in two years.
In 2004, Wet Seal stock plunged 77% as it suffered through not only poor sales but also the defection of its creative director in August, shortly after his first line hit the stores. Victor Alfaro, whose resignation was effective Aug. 15, had been heralded as the fashion rainmaker who could end Wet Seal’s sales drought.
The company, which said Tuesday that it intended to fully cooperate with the SEC, operates 359 Wet Seal stores nationwide and 94 Arden B. stores.
