Loading...
Loading...
The Wet Seal, Inc.
, a leading specialty retailer to young
women, today announced a corporate workforce reduction and certain other
cost-saving and investment initiatives. The Company also announced the
resignation of President and Chief Operating Officer Ken Seipel and
implementation of a $25 million share repurchase program.
Workforce Reduction and Other Cost-Saving and Investment Initiatives
As part of a strategic business review, the Company has implemented a
workforce reduction of 35 positions, of which a portion are currently vacant
positions, to align with its current business requirements. Thirty-two
positions were eliminated in the Company's corporate offices and three were
eliminated in the field. Including the additional impact of eliminating the
Chief Operating Officer position, as discussed further below, the workforce
reductions are expected to result in annualized pre-tax savings of
approximately $3.8 million beginning in fiscal 2013, and the Company expects
to incur one-time severance charges of approximately $1.3 million in its
fiscal 2012 fourth quarter.
The Company also announced planned fiscal 2013 cost reductions of
approximately $2.5 million for store labor through staffing efficiency
measures and approximately $2.1 million for several other cost savings plans.
In the fourth quarter of fiscal 2012, the Company also executed early lease
terminations for two Arden B stores that had lease terms extending beyond
fiscal 2013. As a result, these stores will close at the end of fiscal 2012.
These stores incurred fiscal 2012 operating losses of approximately $1.0
million.
Beginning in late fiscal 2012, in collaboration with the U.S. Equal Employment
Opportunity Commission, the Company also initiated new investments in its
Human Resources function, which are expected to bring many needed, value-added
services to the Company's field and corporate teams in the areas of hiring,
training and development and employee relations. Such investments include the
addition of HR field generalist positions, development and execution of
training programs, and implementation of automated application tracking and
performance review systems, diversity initiatives and other employment
administration tools. The Company estimates these investments will be at a
recurring annual cost of $1.9 million, beginning in fiscal 2013. The Company
also expects to incur approximately $2.0 million in incremental legal fees in
fiscal 2013 for its defense in certain employment-related litigation that
arose in prior years. These legal fees do not include the cost, if any, that
the Company would incur to settle such legal matters.
Resignation of President and Chief Operating Officer
Ken Seipel, the Company's President and Chief Operating Officer, has resigned,
effective immediately, to pursue other professional opportunities.
Concurrently, the Company has eliminated the Chief Operating Officer position.
John Goodman, the Company's Chief Executive Officer, will assume direct
leadership over the store operations, e-commerce and construction functions,
while Steve Benrubi, the Company's Chief Financial Officer, will assume direct
leadership over the information technology and real estate functions.
Summary of Cost-Saving and Investment Initiatives
The Company expects the above initiatives to generate fiscal 2013 net pre-tax
savings of $5.5 million, as follows ($ in millions):
Fiscal 2013
Savings
(Costs)
Workforce Reductions $ 3.8
Store Labor Efficiencies $ 2.5
Other Cost Reductions $ 2.1
Elimination of Operating Losses
Upon Two Arden B Store
Early Lease Terminations $ 1.0
Human Resources Investments $(1.9)
Increased Legal Defense Costs $(2.0)
Net Savings $ 5.5
Assuming the Company's forecasted effective income tax rate of 39%, the
Company estimates the above net cost savings will benefit fiscal 2013 diluted
earnings per share by $0.04.
The Company's organizational review continues and could lead to identifying
additional investment needs at a later date. If made, such investments would
reduce the net savings noted above.
Implementation of $25 million Share Repurchase Program
The Company today announced that its Board of Directors has authorized a $25
million share repurchase program, to be executed through open market or
privately negotiated transactions. The timing and number of shares repurchased
will be determined by the Company's management based on its evaluation of
market conditions and other factors. The repurchase program may be suspended
or discontinued at any time.
Based on the Company's closing share price on January 31, 2013, the $25
million under the share repurchase program represents approximately 10% of the
Company's total market capitalization. The repurchase program will be funded
using existing cash and cash equivalents on hand, which the Company estimates
will be approximately $113 million at the end of fiscal 2012 on February 2,
2013. This cash position reflects payment of February rents and other landlord
costs by that time, which is typical. At the end of fiscal 2011, however, due
to the relatively early timing of that fiscal year-end date, the Company had
not yet paid its February rents and other landlord costs of approximately $9.5
million. As a result, the Company incurred cash payments for thirteen months
of rents and other landlord costs in Fiscal 2012.
CEO Comments
Mr. Goodman commented: "The Company is in process of reviewing various
business strategies and practices, with the goal of increasing operational
efficiency and profitability and aligning our workforce to our current
business needs. We are in the early stages of implementation. We very much
appreciate the past contributions of the affected team members.
“I would also like to thank Ken Seipel for his efforts over the past two
years, especially in his leadership role in the second half of 2012. During
that time, Ken partnered with Steve Benrubi to successfully begin restoring
our fast fashion model in the midst of Board leadership change and a vacancy
in the Chief Executive Officer position. We appreciate Ken's stewardship
during that challenging period for the Company, and we wish him well in his
future professional endeavors.
"With these actions addressed, we now have a leaner and more nimble and
entrepreneurial organization. Our team is now better structured to take quick
and decisive actions to improve merchandising and increase efficiencies
throughout all functional areas. To that end, we continue to work diligently
towards restoring profitability and positioning the Company to make additional
investments to drive future growth.
“Lastly, we are also pleased to be announcing our $25 million share repurchase
program. We believe this amount and our execution plans for this program
strike an appropriate balance between maintaining a more efficient capital
structure for our shareholders and ensuring our financial strength while we
stabilize our operating cash flows.”
Loading...
Loading...
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in