Wet Seal Hires Financial Advisers, Adopts Poison Pill

Tuesday, 21 Aug 2012 05:30 PM

 

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Wet Seal Inc., the women’s apparel chain under pressure by an activist investor to sell the company, hired financial advisers and adopted a so-called poison pill to block an amassing of shares.

The pill, which expires June 2013, discourages an investor from acquiring more than 10 percent of the company, the Foothill Ranch, California-based chain said in a statement. The board has also engaged Guggenheim Securities LLC and Peter J. Solomon Co. to pursue strategic options to increase shareholder value.

The retailer fired CEO Susan McGalla on July 23 after a year and a half amid declining sales. On the same day, Clinton Group Inc., a Wet Seal investor with a 3.9 percent stake in the company, published a letter it sent to the board pushing for a sale to maximize shareholder value. That came after a letter in June criticizing the performance of McGalla and the company.

Wet Seal, which operates 550 stores in the U.S. and Puerto Rico, reported a net loss of $12.4 million for the quarter ended July 28, or 14 cents a share, compared with net income of $2.2 million, or two cents, a year earlier. The company reported an 11 percent decline in second-quarter same-store sales, a key measure of a retailer’s growth. Such revenue may fall as much as 18 percent in this quarter, Wet Seal said.

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