The Wet Seal (WTSL) Begins Strealining Plan; Plans Job Cuts

The Wet Seal, Inc. (Nasdaq: WTSL) announced that it has begun the initial steps to reduce the Company’s overall cost structure. As part of this initiative, the Company instituted a workforce reduction resulting in the elimination of a combination of 78 filled and open positions. These include 66 positions at the Company’s corporate office, representing a 24% reduction in headcount, and 12 positions at the field management level, representing a 20% decrease.

As a result of this workforce reduction, the Company expects to incur a one-time severance charge of approximately $0.6 million in the third quarter of 2014. These measures, net of certain replacement costs, are expected to yield annualized pre-tax cost savings of approximately $5.7 million beginning in the fourth quarter of 2014. The Company also expects to benefit from an additional $1.3 million in annualized cost savings associated with the implementation of operating efficiencies across the organization, primarily focused on its distribution center.

The Company also announced that the loss per share for the third quarter of fiscal 2014 is now expected to be approximately $0.28, or at the low end of its previously stated outlook of between $0.22 and $0.28, before non-cash asset impairments, severance, Arden B exit costs and fair value adjustment for warrants and embedded derivatives. Comparable store sales, including e-commerce, is now expected to decline in the high teens.

*** The Street sees Q3 loss of $0.26 per share.

Ed Thomas, Chief Executive Officer, stated, “We have quickly begun to develop an action plan to stabilize the business, restore Wet Seal to profitable growth and create long-term value for our shareholders. While always a difficult decision to make, aligning our workforce to our current needs was one of the first steps in this process. I want to thank the affected employees for their dedication to Wet Seal during their tenure, and wish them the best in their future endeavors.”

Mr. Thomas continued, “We have also taken a deep dive across the organization and identified ways to increase efficiencies and reduce operating costs. We are moving swiftly to evaluate the entire organization and develop a strategic plan centered around enhancing our merchandising and marketing initiatives, building our e-commerce business and continuing to focus on cost savings opportunities. That said, the changes we plan to make to our merchandising and brand positioning will not be fully reflected in our stores and online until the first quarter of fiscal 2015. We look forward to providing you with an update on our strategic plan in the near-term.”

Additional details regarding these actions will be provided as part of the Company's next quarterly earnings release.

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