* Analysts say company likely to be sold
* Chairman Harold Kahn among those who resigned
* Shares up less than 1 percent
By Juhi Arora
Oct 5 (Reuters) – Wet Seal Inc replaced four board
members with Clinton Group nominees, putting the activist
investor in a stronger position to push for a sale of the
struggling clothing retailer.
Chairman Harold Kahn was among those who resigned but he
will stay on as a consultant with the company, whose monthly
same-store sales have been on a relentless decline.
Clinton Group holds about 7 percent of Wet Seal and has
called for a sale of the company, saying its performance over
the last five years has been unnecessarily poor and that the
board made missteps in hiring and strategy.
“This will be a much more aggressive board in terms of
exploring potential sale of the company,” said Eric Beder of
Brean Murray, Carrt & Co.
“They don’t have majority (on the board) but they can get
much more aggressive in making the board move forward.”
The retailer, which caters primarily to young women, fired
Chief Executive Susan McGalla in July as Clinton stepped up
pressure on the company to turn around its business. The company
has set up a search committee to find a new CEO.
Kathy Bronstein, who was the company’s CEO from 1992 to
2003, and retail industry veteran John Goodman were appointed to
the board in September.
Under the new team, Wet Seal has been trying to return to a
fast-fashion model by maintaining light inventories to respond
faster to new styles and trends.
PROXY BATTLE
As much as 63 percent of the outstanding shares were voted
in favor of the removal of the directors, the New York Post
reported, citing a person with knowledge of the proxy vote.
“This means that the shareholders have not only been
frustrated with executive management and the existing board, but
also the composition of the board,” said Piper Jaffray analyst
Stephanie Wissink, who expects the company to be sold.
The company’s stock rose less than 1 percent in early
trading on Friday, valuing it at about $287 million.
Wet Seal had adopted a shareholder rights plan in response
to Clinton Group’s demands for board seats and a sale. The
company later withdrew the “poison pill” and offered to nominate
two of Clinton’s nominees to the board.
The talks between Clinton Group and Wet Seal appeared to
collapse earlier this week when the investor said that the
retailer had backtracked on an offer to give it five seats on
the board.
Clinton nominees Dorrit Bern, Lynda Davey, Mindy Meads and
John Mills will join Bronstein, Goodman and Ken Reiss on the
board.
The company, which operates 554 Wet Seal and Arden B stores
in the United States and Puerto Rico, has reported declines in
monthly same-store sales for more than a year.
Revenue fell 9 percent to $135 million in the second
quarter.
