Brand Equity Key to Wet Seal Turnaround If Buyout Takes Place
By Elaine Misonzhnik/Retail Traffic
Struggling specialty apparel retailer Wet Seal has become the latest in a long string of chains looking to orchestrate a buyout. But it remains to be seen whether Wet Seal’s brand value is strong enough to allow a private owner to manage a successful turnaround.
On July 24, Wet Seal executives announced they’ve received letters from The Clinton Group, a New York City-based private equity firm that is one of its largest shareholder, urging them to sell the company. The retailer has been posting a dismal performance for some time—in June, its same-store sales fell 9 percent and same-store sales for the second quarter are projected to fall between 7 and 11 percent—and it also recently announced the departure of its latest CEO, Susan McGalla, two years before her contract was set to run out. It has not yet found a permanent replacement.
“Wet Seal has kind of lost it, whatever ‘it’ was,” says Bob Phibbs, The Retail Doctor, an industry consultant based in West Coxsackie, N.Y. “You go by their stores and they are okay, but they’ve just had so many management changes in the past five years. Women’s retail is really hard right now; you have the pressure from H&M and Forever 21 on the low end and from boutiques on the high end. Wet Seal was somewhere in between and that’s a punishing place to be… What does that brand represent? I don’t think anybody could give you a good answer.”
At more than 500 stores, the retailer might offer a potential buyer high transaction volume, but “it’s not as high as it should be,” says Jeff Green, president of Jeff Green Partners, a Phoenix-based retail real estate consulting firm. “It’s because of sheer store count.”
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