The Wet Seal, Inc. a leading specialty retailer to young women, 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, a portion of which 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.