USA: Wet Seal Faces Series Of Class-Action Lawsuits
Teen retailer Wet Seal is facing a barrage of class-action lawsuits filed by disgruntled shareholders who accuse the company and its top executives of distorting and withholding information about the company's shaky financial situation.
Law firm Schatz & Nobel PC said in a statement that Wet Seal failed to disclose that its "strategic initiatives plan was not strengthening its corporate standing; that demand for Wet Seal's products was based on deep-discounting and that without deep-discounting its products, demand for such was at an all time low."
It also said that "Wet Seal's projections, outlooks, and positive statements, were lacking in any reasonable basis when made.
"On August 19, 2004, Wet Seal reported a net loss from continuing operations of $3.20 per share for the second quarter ended July 31, 2004. Following this announcement, shares of Wet Seal fell almost 60 per cent to close at $0.85 per share on August 20, 2004.
Murray, Frank & Sailer LLP added that the company's strategic initiatives plan was not strengthening its corporate standing.
"In fact," it said, "the company's strategic initiatives plan was a complete and total disaster that was leading the company into financial ruin."
New York-based Milberg Weiss Bershad & Schulman LLP, and Schiffrin & Barroway, a Pennsylvania law firm, have also filed class-action suits against Wet Seal in the US District Court for the Central District of California.
In July, Montreal-based lingerie firm La Senza Corp sold its 3.1 million shares in Wet Seal. Last week the clothing firm posted a second-quarter loss $102.8 million and said its board had established a special committee to look at its options.
Earlier this month, Wet Seal's creative director Victor Alfaro resigned after just a year with the company and only a few weeks after his first clothing line hit the stores.
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