Struggling apparel retailer Wet Seal Inc (NASDAQ:WTSL) changed its chief executive for the second time in just over two years as it battles falling same-store sales and mounting losses.
The company's shares closed down 28.6 percent at 75 cents on the Nasdaq after it also estimated a bigger-than-expected adjusted quarterly loss.
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Wet Seal said it had replaced CEO John Goodman with former CEO Edmond Thomas.
Thomas, 61, was Wet Seal's CEO from 2007 to 2011 and its chief operating officer from 1992 to 2000. He was most recently a partner at private investment firm KarpReilly LLC and is on the board of women's apparel retailer New York & Co Inc.
Wet Seal's sales have been hurt by lower mall traffic and intense competition from fast fashion chains such as H&M , Inditex's Zara, TopShop, Brandy Melville and Forever 21.
The company reported a double-digit fall in same-store sales in the previous two quarters.
Wet Seal hired Goodman, a former Sears Holding Corp executive, in January 2013, five months after firing its then CEO Susan McGalla, under pressure from activist investor Clinton Group to stem its sliding sales. (http://reut.rs/1Cqw1V8)
Goodman will receive $819,200 in cash as severance, minus required legal deductions, and 100,000 shares of restricted stock.
Clinton Group is one of the company's largest shareholders and owns about 5.9 million shares, or about a 7 percent stake.
Clinton Group said Thomas had "proven leadership skills" and helped the company achieve growth in revenue and profitability during his previous tenure. (http://1.usa.gov/1pJo8pu)
The returning CEO will have little time to influence the business this year, but is likely to begin a widespread restructuring of the company in 2015, Piper Jaffray analyst Stephanie Wissink wrote in a note.
"While we believe a turnaround will require tremendous effort, we do think Mr. Thomas brings experience in reconciling the operating structure, aligning capital toward stability strategies, and eliminating underperforming assets," Wissink wrote.
Wet Seal said on Wednesday that Gregory Taxin, president of Clinton Group, would join its board.
The company also appointed Adam Rothstein as chairman of the board in place of Lynda Davey, who has resigned.
Wet Seal also estimated a net loss in the second quarter, marking its fourth straight quarter without a profit.
The company estimated a second-quarter adjusted loss of 15 cents per share, bigger than the average analyst estimate of a loss of 10 cents per share, according to Thomson Reuters I/B/E/S.
The company said sales for the quarter ended Aug. 2 fell nearly 12 percent, to $121.2 million, due to a 12.4 percent fall in same-store sales.
Wet Seal's shares have lost about 61 percent of their value this year.
(Reporting by Shailaja Sharma in Bangalore; Editing by Joyjeet Das and Simon Jennings)