Canadian retail company YM made a $1.5 million bid for bankrupt Southern California retailer Wet Seal's intellectual property, including its brand and e-commerce site, the Orange County Register reports, citing court filings.
YM, which owns Canadian chains Stitches, Sirens and Suzy Shier, submitted a bid that establishes a minimum stalking horse bid for the upcoming bankruptcy auction. Bids were due by end of day Tuesday, according to the report.
As Wet Seal winds down, it has one final message to customers — “Thanks babe, it’s been real.”
That's the message that currently appears on its website, which has recently ceased all sales. The teen apparel retailer, known for a surf-and-sun aesthetic, has struggled for well over a decade and now it’s time is up. Ahead of its bankruptcy in 2015, the retailer had lost more than $150 million in a span of two years and defaulted on $27 million in senior convertible notes. At the time, it abruptly closed more than 330 of its mall-based stores, leaving just 171 stores in 42 states. Now, those are gone too.
The retailer was given a second life when it emerged as a private company two years ago, but its turnaround attempt never gained traction. Private equity firm Versa bought the beleaguered Wet Seal brand in April 2015 for $7.5 million in cash. But the private equity demands placed on the company led it into even deeper water, Howard Davidowitz, chairman of New York City-based retail consulting and investment banking firm Davidowitz & Associates, recently told Retail Dive.
“Now private equity is there with billions in debt — and goodbye,” Davidowitz warned. “The first thing they do is borrow billions, and retailers can’t function that way because the business is too volatile and it’s too unpredictable. These poor apparel chains end up one way or another in the hands of private equity — and in the end, there’s no company, no stores, no employees, and the private equity made money.”
Many of the same problems haunting so many teen apparel brands — among them increasing competition with fast-fashion players like Zara and H&M, a lack of merchandise differentiation and falling mall traffic — continued to plague Wet Seal. CEO Melanie Cox, who took the role in December 2015, tried to shift focus to a slightly older demographic, while making its style both "fashion forward" and "California casual,” but the effort stalled. The company had sold off its more adult Arden B brand in 2014 in an effort to streamline operations and keep the focus on Wet Seal.
“The whole apparel market is very challenged. It’s overstored and oversaturated,” Shelley E. Kohan, VP of retail consulting at store analytics firm RetailNext, recently told Retail Dive. “Meanwhile, fast-fashion is trend-right and price-right — they hit it right 80% of the time — while [in the cases of] Wet Seal, Gap and some of these other markets, I don’t know what the call to action is for the consumer. And that’s what you have to have today — something that pulls the shopper into the store.”