Wet Seal To Terminate 3695 Employees Amid Plans To Close 338 Stores

(RTTNews) - Apparel retailer Wet Seal, Inc. (WTSL) announced Wednesday that it is set to terminate thousands of full and part-time employees as it plans to close 338 retail stores, effective on or about January 7, 2015. The move comes after an assessment of the company's overall financial condition and its inability to successfully negotiate meaningful concessions from its landlords.

"This was a very difficult decision to make, but after reviewing many other options since I returned to the Company in September, our financial condition leaves us no other alternative than to close these stores. This is an extremely difficult time for the entire Wet Seal team, and we are doing everything we can to protect the interests of all of our stakeholders, including our employees," CEO Ed Thomas said in a statement.

Wet Seal, which has engaged outside advisors to seek strategic and financial alternatives, indicated in December that it may file for bankruptcy protection upon failure to meet its immediate liquidity needs. Wet Seal has been posting successive losses.

As of November 1, the company operated 528 stores and expects to close about 60 of those stores by the end of the fourth quarter as their lease terms expire.

The Foothill Ranch, California-based company has now announced the closure of 338 retail stores, effective on or about January 7, 2015. The move will also see the termination of about 3,695 full and part-time employees.

"We acknowledge and sympathize with how hard these recent events have been on our employees, both those staying with the Company and especially those who are leaving the Company this week," Thomas added.

The company said the 338 retail stores represent about 48 percent of its net sales for the nine months ending on November 1, 2014.

After the store closings, the Company expects as of January 9, 2015 to operate a total of 173 stores in 42 states and Puerto Rico and an e-commerce business at www.wetseal.com.

The store closures will also see Wet Seal incur estimated pre-tax charges in a range of $5.4 million to $6.4 million. These charges include costs associated with inventory write-off in the range of $2.5 million to $3.5 million, asset impairments of about $2.2 million, and employee severance and other one-time termination costs of about $0.7 million.

The company noted that the estimates do not include any claims or demands which may be made by the landlords of the impacted stores for unpaid rent or otherwise.

In Wednesday's regular trading session, WTSL is currently trading at $0.07, down $0.02 or 35.82% on a volume of 3.50 million shares.