US: Wet Seal urges shareholders to postpone board change
The Wet Seal has called on shareholders to postpone making a decision on calls by the Clinton Group to replace its board before the holiday season.
Dissident shareholder Clinton Group is proposing five new board members at the troubled teen retailer, with the changes involving replacing four existing members of the US retailer's board, as well as filling a currently vacant position.
The Wet Seal yesterday (6 September) said it believes it is the wrong time to disrupt the business with a wholesale makeover of the board as it prepares for the critical fourth quarter and holiday season.
"We recognise the immediate need to improve our performance and enhance value for all of our shareholders," the board said.
"As we have previously announced, the board is in the process of returning to a tested fast fashion strategy that we believe will have a positive impact on results in a matter of months, not years.
"At this important juncture, bringing in a large number of new directors who are not familiar with the business will deleteriously affect the company's ability to improve its performance in the coming months. That would not be in the best interests of all of our shareholders," the board said.
The company on 21 August said it is taking steps to stabilise its business quickly by returning to its core expertise in fast fashion merchandising. It believes its performance will bottom out in the third quarter before seeing an improvement in sales and profitability in the fourth quarter.
"The current board knows Wet Seal and its strengths and weaknesses. It is far more capable of managing a quick and seamless return to our historic and successful fast fashion model than a group of new directors, no matter how experienced they may be," the board emphasised yesterday.
The Wet Seal posted a second-quarter loss of US$12.4m, swinging from a profit of $2.2m in the same period last year. Net sales were down 9.1% to $135.3m, while comparable store sales fell 11.1%.
The company has also adopted a "poison pill" shareholder rights plan to defend itself against a potential takeover, after the Clinton group urged the teen apparel retailer to sell the company following the departure of CEO Susan McGalla. The Clinton Group owns 4.25% of Wet Seal's common stock.
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