Wet Seal – The Burning Platform

Yeah. Major retailers always close stores when sales and profits are great. Funny how they decided to announce this one day after the 20% surge in their stock price based on a miniscule increase in comp store sales. The avalanche of store closing announcements from other retailers to follow.

JC Penney to close 40 stores in 2015

Krystina Gustafson |

J.C. Penney said Thursday it will close about 40 stores over the next year.

The closures, which represent nearly 4 percent of the 1,060 Penney U.S. stores, will affect about 2,250 employees, according to spokesman Joey Thomas.

Penney’s stock was down 1.8 percent in morning trading Thursday.

Most locations will close on or about April 4, Thomas said.

“We continually evaluate our store portfolio to determine whether there’s a need to close or relocate underperforming stores,” Thomas said. “Reviews such as these are essential in meeting our long-term goals for future company growth.”

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The announcement comes one day after the retailer said that its same-store sales rose 3.7 percent during the crux of the holiday season.

Analysts have been calling for J.C. Penney, along with other retailers that they consider to have too many locations, to downsize their store counts.

By shuttering underperforming stores, retailers are able to cut costs in an environment when more sales are taking place online.

Just Wednesday, struggling teen company Wet Seal said it is closing 338 retail stores effective immediately. Last month, Sears announced that it would accelerate its store closing plan from 130 underperforming stores to 235.

Belus Capital Advisors analyst Brian Sozzi said these announcements would be far from the last.

“You will hear more, big-time store closure announcements within the next month,” he wrote in an email.

Retailers typically announce pending store closings in January. Last year, Penney’s announced 33 closings during the month.

Thomas said that eligible employees who do not remain with the company will receive benefits and, when possible, assistance in finding a job at a nearby store. The retailer will also offer an on-site career training class.

Delia’s and Deb Shops filed for bankruptcy in December. That’s 438 more vacant storefronts across America. Now Wet Seal will close at least 338 more stores, and likely all 500 when they file for bankruptcy in the next couple weeks. Then the biggie. RadioShack will end up closing 5,000 locations when they file for bankruptcy in the very near future. Once the financial results are reported in February for all the major retailers you will see announcements from Sears, JC Penney, Macys and many others closing hundreds or thousands of more stores. Sure sounds like a consumer driven economic recovery.

Wet Seal may be too late to stave off bankruptcy

By Andria Cheng

Published: Jan 7, 2015 12:16 p.m. ET

Teen retailer is closing most of its stores and laying off staff

NEW YORK (MarketWatch)—Teen retailer Wet Seal Inc. said Wednesday it is shutting two-thirds of its stores as it races to shore up liquidity and keep its operations afloat. But it may be too late to avoid the fate of former rivals Delia’s and Deb Shops, which filed for bankruptcy protection in December.

Already, a lender on some of the company’s senior convertible notes has issued a default notice with a deadline of Jan. 12. Unless Wet Seal meets its obligations or strikes a new agreement, the company is facing bankruptcy, said former bankruptcy attorney David Tawil of hedge fund Maglan Capital.

“I don’t think that there is a good chance (of it surviving) unless there is a trick up someone’s sleeve that we haven’t seen yet,” Tawil told MarketWatch. “It has been a long time coming.”

Wet Seal didn’t respond to a request seeking comment.

Wet Seal said the store closings came after it failed to get concessions from its landlords. The retailer, once a destination for teen and college girls, has lost sales to other fast-fashion players such as Forever 21 and H&M.

The teen sector has generally underperformed the broader retail segment, and other companies including Aéropostale Inc. ARO, +2.23% and Pacific Sunwear PSUN, +4.55% also are expected to shut stores this year. The sector is battling the trend in which teens are shifting spending to electronics and other items over fashion.

Read: here are some fashion stocks to buy and to avoid in 2015.

Wet Seal CEO Ed Thomas, who returned in September after heading the company from 2007 to 2011, has admitted the company has gotten “off-track,” skewing toward a younger customer with too much basic merchandise.

Thomas has promised to return the chain to “a fast-fashion model with emphasis on fashion product” that provides “constant newness.” The company will focus on fashion assortments over basics and define its target customer as 18-24-year-old women.

But that may be too late. Wet Seal has lost money in eight of the past 10 quarters, and is expected to lose money the next two quarters, according to Retail Metrics. Its comparable sales dropped 11 of the past 13 quarters. Holiday-quarter sales are expected to slump another 9.7%, after a 14.% drop in the third quarter, Retail Metrics data showed. Cash and cash equivalents tumbled 37% to $19.1 million as of Nov. 1 from a year earlier.

Some employees on Wednesday posted signs in store windows, with the hashtag #forgetwetseal, complaining that the company didn’t give them any prior notice of the closures and they weren’t paid for unused vacation and sick time.

“It’s possible but very unlikely” it will survive, said Retail Metrics President Ken Perkins.

It will be an uphill battle, he said.