US: Wet Seal adds directors and drops rights plan
By Leonie Barrie | 21 September 2012
Teen fashion retailer The Wet Seal Inc has ended a "poison pill" shareholder rights plan recently adopted to defend itself against potential takeovers, and says it hopes to reach a "reasonable compromise" with dissident stockholder Clinton Group.
Clinton Group, which owns more than 5% of The Wet Seal's outstanding stock, had been calling for the sale of the troubled retailer as well as proposing five new board members for the company. The move came after The Wet Seal announced a second quarter loss of US$12.4m, with sales down 9.1%.
But Wet Seal says it is confident it can to return to a strong performance by focusing on a fast fashion strategy beginning in the fourth quarter.
It has also expanded its board to include two new independent directors who both have "significant" fast fashion retail experience.
Kathy Bronstein is a former CEO of Wet Seal and John Goodman was most recently executive vice president of apparel and home at Sears as well as former CEO of Charlotte Russe.
The Wet Seal, Inc. Elects Two New Independent Directors to Board
Kathy Bronstein and John Goodman Bring Significant Fast Fashion Retail Experience to Wet Seal
Company Will Consider Adding Two Additional Independent Directors With Retail Experience to the Board in the Near Term
Board Terminates Shareholder Rights Plan, Reduces Board Compensation and Sets Advanced Timetable for Annual Meeting
RELATED QUOTES Symbol Price Change WTSLA 3.11
FOOTHILL RANCH, Calif.--(BUSINESS WIRE)--
The Wet Seal, Inc. (WTSLA), a leading specialty retailer to young women, today announced that Kathy Bronstein, retail consultant and former CEO of Wet Seal, and John Goodman, most recently Executive Vice President of Apparel and Home at Sears and former CEO of Charlotte Russe, have joined the company’s Board of Directors, effective immediately. Ms. Bronstein and Mr. Goodman bring extensive retail experience including expertise in fast fashion merchandising.
“We are very pleased to welcome Kathy and John to our Board of Directors,” said Hal Kahn, Chairman of the Board, and Sid Horn, Chairman of the Nominating and Corporate Governance Committees. “We’re excited to have new additions to the Board who have demonstrated significant success leading companies that sell to Wet Seal’s specific young teen customer demographic. Kathy and John’s insights will bring great value to the company as we continue to work to revitalize the business and build value for shareholders.”
Ms. Bronstein spent eighteen years at The Wet Seal, including 11 as CEO, and under her leadership the company increased its number of stores from just over 100 to over 600 and revenues grew from approximately $150 million to over $600 million. Most recently, Ms. Bronstein has advised numerous large public and venture capital-backed businesses, including Guess, Inc., Charlotte Russe Holdings, Seven for All Mankind Jeans and Brighton.
“I am excited to be returning to Wet Seal as a Director,” said Ms. Bronstein. “I look forward to helping the Board and our great management team strengthen the brand and restore positive comparable store sales and profitability at the company.”
Mr. Goodman also has direct women’s junior apparel and fast fashion experience as the CEO of Charlotte Russe from 2008 to 2009, when the share price more than doubled during his tenure. His additional experience includes numerous senior leadership positions at various large retail companies, including Sears, Kmart, Levi Strauss and Gap. Most recently, he served as Executive Vice President of Apparel and Home at Sears Holdings Corporation from 2009 to 2012.
Mr. Goodman said, “As a Director, I look forward to using the experience I gained leading Charlotte Russe and during my time at numerous other retail companies to help Wet Seal stabilize its business, return to a fast fashion merchandising approach and build long-term shareholder value.”
Possible Addition of Two Other New Board Members
The Wet Seal also announced today that two additional independent Directors have indicated they are prepared to join the Board in the coming months, both of whom have excellent retail backgrounds. The two new Director candidates have been approved by the company’s Nominating and Corporate Governance Committees and have been reviewed by the full Board. One potential new Director is prepared to join the Board as soon as a non-compete agreement with her most recent employer expires or a waiver can be obtained. The other potential new Director is prepared to join the Board after Clinton Group’s consent solicitation is terminated or otherwise resolved.
Mr. Kahn and Mr. Horn said, “During the last few weeks we actively pursued a dialogue with our shareholders to listen to their concerns and explain our strategy. We heard from our shareholders that they would like to see an expanded Board with additional retail experience to bolster our effective stewardship of the company. We worked diligently to recruit highly qualified candidates, and we believe that with the immediate addition of Kathy and John, growing to seven members, and the possible near-term addition of two more solid candidates, this Board will contribute a strong combination of retail experience and fresh perspectives to the company. Together with our existing Board members, we will have the necessary stability and continuity to carry out the execution of our strategy to return The Wet Seal to our historically successful fast fashion business model.”
Changes to Board Committee Structure and Compensation
With the addition of Ms. Bronstein and Mr. Goodman as new Board members, the company announced several changes to Board structure and compensation.
The company announced that it has disbanded the Board’s Strategic Oversight Committee and rescinded previously announced additional compensation for the Committee’s members. The full Board, including the new members, is empowered to determine and execute upon an effective capital allocation plan and evaluate all strategic initiatives to enhance shareholder value.
The Board also has reviewed the compensation and responsibilities for Chairman Hal Kahn in his increased role during this interim period while it searches for a CEO. The Board and Mr. Kahn have determined that it is appropriate to reduce Mr. Kahn’s overall compensation to reflect an expectation of a reduced level of Mr. Kahn’s direct oversight during the last 90 days of this fiscal year. Further details on these changes are available in the Form 8-K filed today, which can be found on the company’s website.
In addition, each Board member’s annual retainer will be reduced by $25,000 beginning in Fiscal 2013.
Shareholder Rights Plan Terminated
The Wet Seal also announced today that it has terminated its temporary shareholder rights plan, reflecting feedback from shareholders and the Board’s confidence in the company’s stabilizing share price and its ability to return to strong performance under the fast fashion strategy beginning in the fourth quarter.
Timetable for Annual Meeting
The Board has decided to move up the next shareholder meeting, which will now be held no later than April 19, 2013. All Board members are elected annually to one year terms.
CEO Search Continues
The Board is working actively with leading recruiter Korn/Ferry to find a new CEO for The Wet Seal. The Board already has been approached by a number of qualified candidates and is confident it can successfully fill the role in the near-term.
Discussions with Clinton Group
In a separate filing today, the company referenced recent discussions held between representatives of Clinton Group and the company to determine whether a reasonable compromise could be reached to avoid a long and protracted consent solicitation.
Following these discussions, the Board proposed to:
Expand the Board to include two new independent Clinton Group nominees and two new independent Wet Seal nominees, all with significant retail expertise; Reorganize the CEO Search Committee to include a Clinton Group nominee, a new Wet Seal nominee and a current Board member; Reconstruct the Nominating Committee to include Clinton Group nominees; and Disband the Strategic Oversight Committee and transfer the responsibilities to the entire Board, including new members.
“Neither the Board nor Wet Seal investors believe that a prolonged proxy fight is in the best interests of the company or our shareholders,” said Mr. Kahn. “Clinton Group’s unwillingness to date to agree to a fair and reasonable compromise indicates that it is not acting in the best long-term interests of all shareholders.”
Mr. Kahn added, “We believe that our newly expanded board is comprised of the right individuals with strong retail and business experience to work with management to guide the company’s return to its previously successful fast fashion model.”
For more information, please see the company’s investor presentation that will be made available today on our website www.wetsealinc.com.
About The Wet Seal, Inc.
Headquartered in Foothill Ranch, California, The Wet Seal, Inc. is a leading specialty retailer of fashionable and contemporary apparel and accessory items. As of August 25, 2012, the Company operated a total of 551 stores in 47 states and Puerto Rico, including 469 Wet Seal stores and 82 Arden B stores. The Company's products can also be purchased online at www.wetseal.com or www.ardenb.com.
For more company information, visit www.wetsealinc.com.
Original source: www.wetsealinc.com
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