The Wet Seal Inc. said Friday it is exiting its Arden B business, converting its stores that target adults back to its flagship brand that mainly focuses on teens.
The Foothill Ranch-based company has 54 Arden B stores and plans to initially convert them to either Wet Seal flagship or Wet Seal Plus stores by late July. Then, the company plans to close 31 of the stores by the end of its fiscal year 2015 and negotiate lease exits of the remaining stores.
Unlike Wet Seal stores, which target teens ages 13 to 23, Arden B had aimed for an older clientele, ages 21 to 39. But in the last fiscal year, Arden B performed poorly compared to Wet Seal.
"This was a difficult decision that followed a comprehensive review of the business and market dynamics," said CEO John D. Goodman in a press release.
Sales at Arden B stores opened at least a year plunged 25 percent in the company's fourth quarter, Wet Seal said.
Arden B's target customers hurt by recession
Britt Beemer, CEO of America's Research Group, said Arden B's target customers were among those hard hit by the recession. Some recent grads are living with their parents and struggling to earn enough money, he said.
"They are trying to scrimp and save all they can just to get by," Beemer said.
He said it makes sense that Wet Seal is sticking to its flagship business of targeting teens.
"Teenagers have more money to spend than consumers in their twenties because they're still using their parents' money to shop and buy things," Beemer said.
Overall, Wet Seal corporate has struggled over the years to compete with fast-fashion brands like Forever 21. In fiscal year 2013, the company reported a net loss of $38.4 million, which was an improvement from the prior year's net loss of $113.2 million.
Arden B had $60.4 million in sales, which represented 11 percent of the company's revenues in its last fiscal year.
Wet Seal said it expects to have a pre-tax cost savings of $1.3 million in the second quarter of its fiscal year 2014. The company also said it will incur charges and payments totaling roughly $4 million over its fiscal 2014 and 2015 years relating to its exit of the Arden B business.
Wet Seal stock closed at $1.25 a share, up six cents on Friday.