Wet Seal Says It Closed 338 Stores, Laid Off Almost 3,700 Workers

The teen fashion retailer, under fire for giving workers a day’s notice they would lose their jobs, finally issued a statement on the layoffs this morning.

This photo from redditor DevoidSauce, taken Sunday at a Wet Seal in Seattle, has gone viral. Redditor DevoidSauce / Via i.imgur.com

Wet Seal, which has refused to respond to press inquiries regarding the abrupt closures and layoffs, said in a statement today it closed 338 stores — or 64% of the 528 stores it operated as of Nov. 1, 2014.

Last month, Wet Seal told investors it planned to close just 60 stores by Jan. 31.

The teen fashion retailer also said it terminated 3,695 full- and part-time employees, some of whom received just one day’s notice before losing their jobs, and despite weeks of reassurances from the company that stores would not close.

“This was a very difficult decision to make, but after reviewing many other options since I returned to the company in September, our financial condition leaves us no other alternative than to close these stores,” Chief Executive Officer Ed Thomas said in today’s statement. “This is an extremely difficult time for the entire Wet Seal team, and we are doing everything we can to protect the interests of all of our stakeholders, including our employees. We acknowledge and sympathize with how hard these recent events have been on our employees, both those staying with the company and especially those who are leaving the company this week.”

Wet Seal said following the closures it will now run 173 stores and its web business.

The struggling chain has been criticized roundly for convincing employees the business was doing fine throughout the month of December, then abruptly firing thousands of employees via a surprise Friday conference call, giving workers a day’s notice in many cases.

Former employees told BuzzFeed News that many of them learned of the layoffs from other stores, or from receiving boxes to mail back IT equipment such as cash registers. Higher-ups assured employees that inventory was on its way and that massive sales were typical.

Wet Seal said its severance and “one-time termination” costs will be about $700,000. The company has also been criticized for giving its CFO a nearly $100,000 raise the day the layoffs were communicated to store managers.

The chain said the closing stores accounted for nearly half of its sales, which are typically in the range of half a billion dollars a year. Wet Seal has been struggling, in recent years, to identify its target customer, fluctuating between selling to middle-schoolers and college students.

Full statement from Wet Seal:

Wet Seal Announces Store Closures

FOOTHILL RANCH, Calif.—(BUSINESS WIRE)— The Wet Seal, Inc. (Nasdaq: WTSL, the “Company”), a leading specialty retailer to young women, today announced that it was closing 338 retail stores effective on or about January 7, 2015. The Company decided to proceed with the store closures after assessing its overall financial condition and the Company’s inability to successfully negotiate meaningful concessions from its landlords. The store closures unfortunately resulted in the termination of approximately 3,695 full and part-time employees. The Company estimates that the 338 retail stores which were closed represented approximately 48 percent of its net sales for the nine months ending on November 1, 2014. Following the store closures, the Company expects to operate approximately 173 retail stores and its Internet business.

Ed Thomas, CEO of The Wet Seal, Inc., stated, “This was a very difficult decision to make, but after reviewing many other options since I returned to the Company in September, our financial condition leaves us no other alternative than to close these stores. This is an extremely difficult time for the entire Wet Seal team, and we are doing everything we can to protect the interests of all of our stakeholders, including our employees. We acknowledge and sympathize with how hard these recent events have been on our employees, both those staying with the Company and especially those who are leaving the Company this week.”

In connection with the Store Closures, the Company expects to incur estimated pre-tax charges ranging from an aggregate of $5.4 million to $6.4 million, including costs associated with inventory write-off, asset impairments and employee terminations. Charges associated with inventory write-off are estimated to range from $2.5 million to $3.5 million. Charges associated with asset impairments (consisting primarily of write-offs of fixtures, furniture and equipment at the impacted stores) are estimated to be approximately $2.2 million. Charges associated with employee severance and other one-time termination costs arising from the Store Closures are estimated to be approximately $0.7 million. Such estimates do not include any claims or demands which may be made by the landlords of the impacted stores for unpaid rent or otherwise.

The above charges are estimates and the actual charges may vary materially based on various factors, some of which may be beyond the Company’s control. See “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995” below.

About The Wet Seal, Inc.

The Wet Seal, Inc., a pioneer in fast fashion retailing, sells apparel, footwear and accessories designed for teen girls and young women of all sizes through retail stores nationwide, as well as an e-commerce website. After the store closings, the Company expects as of January 9, 2015 to operate a total of 173 stores in 42 states and Puerto Rico and an e-commerce business at www.wetseal.com. For more company information, visit www.wetsealinc.com.

Via ir.wetsealinc.com

Read more: http://www.buzzfeed.com/sapna/wet-seal-says-it-closed-338-stores-laid-off-almost-3700-work


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.”

facebook.com

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