One Day’s Notice: Wet Seal Under Fire For Surprise Layoffs

Former employees tell BuzzFeed News they got a day’s notice that they would be losing their jobs, even after repeatedly asking if their stores were closing.

Wet Seal’s store closure discussion script:

Part 1; parts 2 and 3 are below. Obtained by BuzzFeed News

“I have to advise you of a decision that will affect you.”

That’s one of the first lines in the script used for laying off employees of teen retail chain Wet Seal this past weekend. “Affect” was putting it lightly, given the decision was to close at least 60 stores within a week, offering hundreds of part-time employees just a day’s notice (managers got a few additional days) that they would be losing their jobs and, in many cases, their livelihood.

The document, obtained by BuzzFeed News and included in full below, illustrates the cold approach Wet Seal took to shuttering stores this month. The struggling retailer, which told investors in December that it planned to close 60 of its 528 stores by Jan. 31, waited until Friday to tell managers which stores would be closing after weeks of assuaging them that 80%-off discounts were normal, shipments were on their way, and the business was doing fine, according to BuzzFeed News interviews with staff.

The worst part: The stores would close just days later. Wet Seal is now at the center of a social media firestorm for ambushing its employees in a manner that former employees and customers have deemed unnecessary, disrespectful, and deeply misleading.

According to interviews and posts on Facebook and Instagram, store managers and assistant managers were instructed to dial into a 2:30 p.m. conference call on Friday, without any knowledge of what the call would be about. District managers delivered the news, and store personnel were left to inform associates they no longer had jobs. Some, including managers, are working into this week until the stores “vacate” — still less than seven days’ notice. The script for telling employees was emailed out after the call, and started with: “As you all know, the company has been struggling financially. We’ve tried cutting costs everywhere we can, but it has not been enough.” It included instructions on how to handle questions about severance — none — and a potential bankruptcy. “I recognize that this news is not easy to hear.”

The company has not replied to requests for comment.

This picture from a Wet Seal at Seattle’s Northgate Mall has gone viral. Redditor DevoidSauce told BuzzFeed News he took it at 4 p.m. on Sunday. Reddit: DevoidSauce / Via i.imgur.com

Employees were, understandably, stunned and deeply frustrated.

“We were seeing signs of 80% off and we knew we never did that in the store,” said Tiffany Alston, a 23-year-old who worked part-time at a Wet Seal in Arlington, Virginia, for 16 months. After Wet Seal began offering such discounts in December, Alston’s manager and an assistant manager asked their district head if the store was at risk of closing.

“Both times, the response was, ‘No, it’s just an awesome holiday sale, we’re not closing, there are several locations going through the same sales and everything,'” she said. “So we said, ‘OK, maybe she’s right.'”

The closing stores, whose supplies of new merchandise tapered off in the past two weeks, have been emptied quickly. Alston said kids hanging out at the mall stole some of her store’s mannequins on Friday; employees weren’t able to catch them. Valentina, 20, who was laid off from a Wet Seal in Chino, California, said her store sold mannequins for $25 and tables for $50. She noted the company didn’t provide boxes to send back leftover merchandise, so she and other part-time associates had to ask for spares from other mall stores and a nearby Walmart. Worse, two employees, who spoke on the condition of anonymity, said some stores received boxes and instructions for packing and mailing back IT items like cash registers before formally learning of the layoffs.

Wet Seal probably wasn’t expecting the jarring nature of its layoffs to go viral. On Sunday, Redditor DevoidSauce posted a banner from a Wet Seal window in Seattle’s Northgate Mall that criticized the chain. The sign, made by employees, displayed a litany of frustrations in the form of a checklist: unpaid and unused vacation and sick time, the abrupt notice for employees who’d spent as many as eight years at the company, the interim chief financial officer’s new $95,000 raise (disclosed, regretfully, in a regulatory filing the same day the closures were announced). The sign also noted the store’s No. 1 sales status in the district and gave thanks to customers.

Employees have posted similar signs in Wet Seal windows at other malls. The images and reprimands to Wet Seal have flooded the company’s Instagram and Facebook pages and are showing up on Twitter with hashtags such as #ClubWetSeal, #BoycottWetSeal and #ForgetWetSeal.

Norwood helped put this sign up at her Wet Seal in Arlington, Virginia. Facebook user Meg Guicciardini / Via facebook.com

Tyra Norwood, 20, helped put up a poster at the Ballston Common Mall in Arlington, Virginia, the same one Alston works at, that reads: “Go online and find out why we are closing. Sad story. Wet Seal sucks. Liars.” She said she worked at the store for roughly 15 to 20 hours a week beginning 9 or 10 months ago.

“I was trying to Google it because I was wondering why we were having all these huge sales — people kept asking us if we were closing, and I said, ‘No, we’re just getting ready for new inventory,’” she said in an interview. “There was never an announcement to the whole store. When they had their conference call, that was the announcement, basically, but there was no warning.”

Working at Wet Seal was a second job for a number of her colleagues, Norwood said. Valentina, who worked between 9 and 15 hours a week, said the job was her main source of income. She’s tried applying for other retail jobs “left and right,” but given chains just staffed up for the holiday season, it’s tough going. A part-time assistant manager in Missouri who spoke on the condition of anonymity told me she supported herself and her young son through her Wet Seal job. Her store also discovered the layoffs ahead of time through a FedEx delivery of boxes and packing instructions that were meant to arrive on Monday, she said.

Transfers weren’t an option, either. Although Wet Seal said it would close 60 locations, it may have shuttered even more. Laid-off employees “may apply for future positions at other store locations,” according to the firing script given to managers, though that comes without guarantees. For some, like Veronica Bohrer, that’s not possible anyway given the Wet Seal she worked at is in Bismarck, North Dakota.

Bohrer, 22, typically worked 20 hours a week, though that sometimes stretched to 30. She said heavy discounts compelled her managers to ask about closures once a week in December, but their bosses reassured them the store would be fine. (Store managers didn’t know, and it’s unclear if district managers did. All the employees believe staff in the corporate office knew in advance, though Wet Seal will not return messages to its CFO and external PR firm addressing these concerns.) She initially learned of the layoffs when another store called to ask if their store received “the box.” Bohrer is an art student and is concerned about finding another job to cover her bills.

“I’m just hoping I can make it in time — the short notice thing has made me feel very uneasy, because I do have bills to pay,” she said in an interview. “I’m also in the military so that’s one thing I can fall back on right now, but it’s not enough to pay all my bills.” She added that’s two to three day drills per month for the Army National Guard.

Those who worked after being notified of closures up to the store’s “vacate date” were offered “retention” bonuses of $150 for assistant managers and $300 for managers, according to a separate document sent to BuzzFeed News.

It’s unclear what awaits Wet Seal, a hot ’90s and early 2000s retailer that has struggled to appeal to its target customer in recent years. The stock continues to trade for pennies on the dollar, and the possibility of a bankruptcy looms. In the layoff script, the correct response for an inquiry about bankruptcy is to acknowledge the company has said it’s a consideration, followed by “I’m not permitted to discuss anything further on that topic.”

When the company announced its CFO’s nearly $100,000 raise on Jan. 2, it also said Wet Seal defaulted on an interest payment on senior convertible notes due on Dec. 31. It’s clearly in serious danger financially, and its actions regarding layoffs have seemingly incited the wrath of consumers as well as former employees, which could very well affect sales.

In the closing script, Wet Seal assistant managers were told to inform employees: “I understand that you may need some time to process this information and that you may have additional questions. I will be available to address any issues you may have. In addition, Human Resources will also be available to answer your questions. We are all here to support you during this transitional period.”

Employees spoke fondly of their store colleagues. One said she overheard her boss crying after the conference call. Another said she was furious she didn’t get a chance to say good-bye to a group that had become “like a family.”

“They should have given us a warning, like two weeks’ notice — I don’t know how they can give us a day’s warning,” Valentina said. “Corporate wasn’t telling us anything … we wanted answers but nobody would give us answers.”

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Part 2 of Wet Seal termination script:

Obtained by BuzzFeed News

Part 3 of Wet Seal termination script:

Obtained by BuzzFeed News

FAQ for Wet Seal store closures:

Obtained by BuzzFeed News

Obtained by BuzzFeed News

Obtained by BuzzFeed News

Management “retention program”:

Obtained by BuzzFeed News

Facebook user Zamir Iqbal / Via facebook.com

Read more: http://www.buzzfeed.com/sapna/one-days-notice-wet-seal-under-fire-for-surprise-layoffs


Retail’s Winter Of Death Has Claimed Thousands Of Stores

In the clothing and accessories business alone, eight big-name bankruptcies and closures have hit the retail industry the last two months, shutting more than 1,000 stores. The closed doors are symptoms of a bigger problem: America simply has too many stores.

BuzzFeed News

American retailers selling clothing and accessories have been through a grim winter death march of bankruptcies in the past two months: Wet Seal, Delia’s, DEB Shops, C. Wonder, Gap’s Piperlime, Kate Spade Saturday, Jones New York, and Caché.

If that feels like a lot of big-name bankruptcies, it’s because it is. In clothing and accessories alone, more than 1,000 stores have either ceased to exist or are in their final throes, and thousands of retail employees have lost their jobs. While each of these brands fell for different reasons — and some of their competitors have thrived — the closures are symptomatic of an underlying problem: America simply has too many stores. The current round of shuttered doors and bankruptcies is just the start.

“We have way too much retail space … we are way above any country in the world,” Hana Ben-Shabat, a partner in the retail practice of consultancy A.T. Kearney, told BuzzFeed News. “It was a matter of time after the recession. Everybody said: ‘We need to reduce the space.'”

Indeed, America has a staggering amount of real estate devoted to selling things, even when compared to the rest of the world’s most heavily retailed nations.

The New Rules of Retail – Competing in the World’s Toughest Marketplace / Via Palgrave Macmillan / Robin Lewis and Michael Dart / ICSC calculation from Cushman & Wakefield, KSA and other sources

There was 7.5 billion square feet of shopping-center space in the U.S. in 2013, up from 3.3 billion square feet in 1980, according to the International Council of Shopping Centers. That’s 20 square feet for every person in the United States; the U.K., with the second biggest amount of retail space, has just 3 square feet per person. And that calculation only includes gross leasable space and excludes freestanding retailers; the actual amount of all retail space is much higher.

Caché, best known for selling dresses for proms and other special occasions, said in a bankruptcy filing that one of its major missteps in recent years was expanding to 306 stores, saddling itself with money-losing locations and then struggling to downsize. C. Wonder, a “revenge retail” project out of Tory Burch’s ex-husband Chris Burch, also flailed after rapidly expanding to 32 stores, many in pricey locations.

And while RadioShack had been struggling for years leading up to its bankruptcy filing on Feb. 5, the fact that it had more than 4,000 stores was a giant problem. Its lenders wouldn’t let the chain shutter more than 200 per fiscal year, though the company sought to close many more than that, knowing it was saddled with hundreds upon hundreds of expensive and unproductive stores. Filing for bankruptcy enabled RadioShack to close up to 2,100 locations.

The past quarter “saw a higher level of bankruptcy activity than we’ve seen in many years,” CBL & Associates, a large mall developer and owner, said on a Feb. 4 earnings call. It’s spurred the company’s leasing division to form special teams focused on reducing the impact from 2015 bankruptcies “as much as possible,” CEO Stephen Lebovitz said on the call.

It’s not the cold weather that led to a spate of winter bankruptcies: Retailers tend to report closures and bankruptcies in their fiscal fourth quarter, which ends in January, to take advantage of the busiest shopping season. It could help them get in the black, or provide extra traffic for liquidation sales.

It’s also worth pointing out that claims of the death of the shopping mall, or of brick-and-mortar retail in general, are largely overblown. People are still making trips to top-tier malls, outlets, Wal-Marts, and off-pricers like T.J. Maxx and Nordstrom Rack. But the bar for survival for specialty stores has gotten higher in recent years, and those who can’t keep up with customer demands have been decimated.

“We’re adding very limited new space into the market, so when these stores close, there is still demand for that space, because there isn’t a lot of new space being pumped in, which is different from pre-recession,” ICSC spokesperson Jesse Tron said.

Teen retailers have been hit the hardest, pressured by the rise of fast-fashion companies like Forever 21, H&M, and Zara, where runway imitations are instantly available at $20 a shirt. Chains like Abercrombie and Aeropostale have been shuttering stores and adjusting their manufacturing schedules to keep up, while those like Delia’s, DEB and Wet Seal were simply unable to compete.

“They’re old business models compared to the way H&M, Zara, or Forever 21 do business,” said Allan Ellinger, co-founder and senior managing partner of MMG Advisors, an investment bank that focuses on the retail and fashion industries. “Those are quick response, quick turnover, quick to market retail models that are much more exciting for when a teenager walks into a store and sees something new every month, or in some cases, every week. They’re able to buy disposable-wear.”

Even though Wet Seal tried to play on price, with a well known five for $20 basics deal, it confused customers by jumping between targeting middle school students and college-age girls, and couldn’t produce stylish fashions at the pace of a company built to do that.

“Turning an existing or an older legacy business model into a new quick-response model is almost an impossible undertaking,” Ellinger added. “They don’t have the traction online, the culture, nor do they have the expertise in house.”

A chain like Delia’s, on the other hand, struggled to attract attention online, even listing its clothing on Amazon toward the end. Plus, its $40 dresses and almost $50 jeggings seemed almost absurdly expensive given the new normal of low prices created by the fast-fashion giants.

Gap’s Piperlime and Kate Spade Saturday suffered a different fate of serving as distractions for their large corporate owners, which are looking to double-down on their core businesses. That’s driven, in part, by investor impatience in a less-than-rosy retail environment, and pressure on executives to devote their attention to what they’re good at.

“All of these retailers got overstored, and many of them didn’t really have anything very special,” says Liz Dunn, founder and CEO of retail consulting firm Talmage Advisors. Kate Spade Saturday and Piperlime’s closures “show companies focusing and eliminating distractions, but it also speaks to an investor unwillingness to see huge investment spending on some of these initiatives and a real focus on profitability right now,” she said.

Underscoring such impatience, private-equity firm Sycamore Partners decided last month to shutter Jones New York’s wholesale operation and the label’s 127 outlet stores less than a year after purchasing it.

“Investor tolerance for losses and investment spending is lower than perhaps it would be in a really robust environment for retailers,” Dunn said.

Of course, the story of chains shutting down wouldn’t be complete without mention of the internet. While the web accounts for only somewhere around 15% of women’s clothing sales, it is forcing retailers to reconsider how much space they need to successfully operate their business.

“It’s having a major impact on what’s happening in brick-and-mortar,” MMG’s Ellinger said.

Read more: http://www.buzzfeed.com/sapna/retail-winter-of-death


Caché Follows Wet Seal And Delia’s In Filing For Bankruptcy

The almost 40-year-old purveyor of prom dresses filed for bankruptcy this morning.

Caché is the latest mall retailer to file for bankruptcy in a brutal quarter that’s already claimed Wet Seal, dELia*s, DEB Shops and C. Wonder.

The company, which has been working towards a turnaround for the past two years, said in a statement today that “the depressed brick and mortar retail market, the continued growth of online shopping, and rapidly changing consumer tastes and habits thwarted our efforts.” Caché said in December it was searching for a buyer but apparently couldn’t find one in time.

It plans to liquidate its inventory through going-out-of-business sales, according to bankruptcy filings, and also work to negotiate some leases. The chain said it’s “critical” to start liquidation sales by March 4 based on the cash drain from stores and because its inventory is seasonal.

The New York-based mall chain, which says it employs around 2,500 people, is best known for its special-occasion dresses, which account for more than half its sales, according to bankruptcy filings. The company, which sells more than 90% of its clothing under the Caché label, forecast just over $200 million in revenue for the latest fiscal year.

The company noted its two major missteps in recent years were a rapid expansion to 306 locations, leading to a number of underperforming stores, and a “reorientation” from core, high-margin, high-end dresses and accessories into “the lower-margin casual sportswear business.”

The first Caché was opened as a boutique in Miami in 1976 by a woman named Marilyn Rubinson. Rubinson, according to the company’s website, was the first to bring designs by Armani and Versace to the U.S.

“Marilyn’s Caché was more fashion club than retail operation,” the website says. “It was a place where shoppers were treated like girlfriends, fashion was fun and women were fabulous.”

The company filed for bankruptcy today “with the goal of securing Caché’s future,” Jay Margolis, Caché’s chairman and CEO said in today’s statement. “Ultimately, we have not had the time or capital to realize all of the benefits of our hard work.”

Read more: http://www.buzzfeed.com/sapna/cache-bankruptcy