The Wet Seal is winding down its Arden B brand. Arden B currently operates 54 mall-based stores and an e-commerce site. In the fiscal year ended Feb. 1, the brand generated net sales of $60.4 million and represented 11% of consolidated net sales.
“This was a difficult decision that followed a comprehensive review of the business and market dynamics. We would like to thank all of our Arden B team members for their hard work and dedication to the brand, and also extend our gratitude to our loyal customers,” said CEO John D. Goodman.
Thirty-one Arden B locations will now carry Wet Seal Plus merchandise and the remaining 23 locations will carry Wet Seal merchandise. Where permissible, signs will change from Arden B to either Wet Seal or Wet Seal Plus. The company expects to complete this conversion by the start of the back-to-school selling season in late July.
Through lease expirations and the exercise of early termination provisions, the company will close 15 Arden B locations through the remainder of 2014 and 16 locations in 2015.
Effective immediately, the Wet Seal merchandising organization assumes responsibility for Arden B stores. The buying, planning and allocation team for Arden B will be impacted by the wind-down. The release of some employees and reduction in other expenses will result in annualized pre-tax cost savings of approximately $1.3 million beginning in the second quarter of 2014.
“With this process underway, our management team and board of directors will be focusing greater attention on our sweeping strategic initiatives, and this change positions us to take advantage of opportunities for growth within the Wet Seal brand,” said Goodman. “We are making progress against our strategic plan to enhance Wet Seal’s product, merchandising, customer engagement and overall store performance, as well as drive growth in our e-commerce business. Importantly, our transition strategy for Arden B accelerates our opportunity to expand in the growing junior plus market.”
The company expects to incur approximately $0.1 million of charges for severance costs in the first quarter of fiscal 2014 and approximately $0.3 million of charges for store employee retention programs in the second and third quarters of fiscal 2014. The company also anticipates non-cash asset impairment charges of up to approximately $3 million in the first quarter of fiscal 2014 pertaining to Arden B store assets. In addition, the exercise of early lease termination provisions in fiscal years 2014 and 2015 is expected to result in approximately $0.5 million of payments related to unamortized tenant allowances. Wet Seal intends to negotiate with landlords and pursue alternatives to expedite the transition and exit of the remaining 23 Arden B locations where leases do not expire prior to its fiscal 2015 year end.
The company also reiterated its previously announced financial guidance for the first quarter of fiscal 2014, which includes net loss per diluted share, before non-cash asset impairments and charges related to the wind-down of Arden B operations, of between $0.16 and $0.19, and comparable store sales, including e-commerce, in the negative mid- to high- teens.