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It seems another teen retailer has turned to bankruptcy. Wet Seal has announced its plans to reorganize itself in Chapter 11 bankruptcy.

Chapter 11 Bankruptcy

Under Chapter 11 bankruptcy a company reorganizes its business affairs and assets in order to repay its debts. during a Chapter 11 a company is required to submit a plan of reorganization to the bankruptcy court that outlines how the business will be conducted in order to repay debt owed to lenders and shareholders.

Wet Seal’s Plans

Wet Seal has plans to keep its doors open while operating under a $20 million financing agreement secured with investment bank B. Riley Financial. Going into 2015 the company was already under heavy competitive pressure, having suffered a net loss of $36 million during the third quarter of last year as sales plunged nearly 15%.

The bankruptcy filing followed less than two weeks after the company announced its plans to close 338 stores, leaving just 173 stores open in addition to its online business. The closings lead to the termination of 3,695 full- and part-time employees.

“We continue to believe in The Wet Seal and remain committed to executing on the strategic steps that we already started,” Wet Seal CEO Ed Thomas said.

Wet Seal has about $31 million (in addition to the $20 million loan) on its balance sheet to fund its business.

Retail Industry Hurting

“That whole industry has been shaken to its core by the fast fashion guys” like Forever 21 and H&M, said Paula Rosenblum, retail analyst at RSR Research. She went on to say that stores like Forever 21 and H&M, so-called “faster competitors “are really good at doing cool and doing cheap.”

Source: CNN Money, Wet Seal sinks into Chapter 11 bankruptcy, January 16, 2015

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