Apparel retailer Wet Seal replaces four board members
October 10, 2012 08:39 AM
Apparel retailer Wet Seal Inc.’s struggle to appease investor Clinton Group Inc. has ended with the merchant agreeing to appoint four Clinton-backed directors to Wet Seal’s board of directors following a majority of shareholders supporting the action. To make room for the new board members, four previous board members have resigned.
Clinton Group, which owns approximately 6.9% of Wet Seal stock, said in documents filed Aug. 20 with the U.S. Securities and Exchange Commission it sought the change because of its disappointment with the retailer’s stock performance. Wet Seal’s stock, which closed at $3.04 on Oct. 9, is down 41.1% from its $4.29 closing price on Oct. 10, 2011. Wet Seal’s e-commerce sales decreased 10.9% last year to an Internet Retailer-estimated $27.9 million in 2011, from $31.3 million in 2010, according to the Internet Retailer Top 500 guide. Wet Seal is No. 376 in the Internet Retailer Top 500 guide.
Clinton Group had until Oct. 5--60 days since it submitted its proposal--for shareholders to vote on it. By Oct. 4 the measure had garnered more than 60% of shareholder support, says Greg Taxin, a managing director at Clinton Group. Wet Seal subsequently chose to settle, he says.
The new board members nominated by Clinton Group are Dorrit M. Bern, former chairman of the board, CEO and president of Charming Shoppes Inc.; Mindy C. Meads, former president and co-CEO of Aeropostale Inc.; and John S. Mills, former president and chief operating officer at Aeropostale and former president of SDE, a consulting firm that specializes in the retail sector; and Lynda J. Davey, former chairman and CEO of Avalon Group Ltd., an investment bank;
Ken Seipel, Wet Seal president and chief operating officer, says the company is pleased it has reached a settlement. “This settlement will provide for a smooth and orderly transition of the board’s responsibilities, as well as a level of continuity for our employees,” he says.
SEC documents shed some light on the clash between Wet Seal and Clinton Group.
“We believe the company’s poor performance was not inevitable, but rather a direct result of the current board’s failure to attract and retain the right executives and adopt the right strategy and optimize the balance sheet,” according to a document filed in August by the Clinton Group. In July, Wet Seal fired its CEO, Susan McGalla, citing declining sales.
In September, Wet Seal and Clinton Group sparred over the shareholder’s request to replace board members. Wet Seal initially opposed Clinton Group’s request. However, later that month Wet Seal added two independent board members: Kathy Bronstein, a former Wet Seal CEO and John Goodman, a former CEO of teen apparel and accessories retailer Charlotte Russe.
Wet Seal on Oct. 3 urged shareholders to resist the Clinton Group initiative, just two days before announcing a settlement agreeing to replace four board members with the Clinton Group directors.
Wet Seal could not be reached for immediate comment.