Struggling apparel retailer Wet Seal Inc said on Wednesday it laid off about 3,700 full- and part-time employees as it closed 338 stores.
Shares of the company, which last month warned that it could file for bankruptcy protection if it failed to meet immediate liquidity needs, more than doubled to 13 cents in afternoon trading.
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Many teen apparel retailers have been struggling with their customers' switch to fast-fashion brands such as H&M, Forever 21 and Inditex's Zara, which bring the latest styles from the runway to their stores within weeks.
Online retailers such as Amazon.com Inc have also been luring customers by offering deeper discounts.
Delia*s Inc and private equity-owned Deb Shops filed for Chapter 11 bankruptcy protection last month.
A U.S. Bankruptcy Court on Wednesday granted Deb Shops approval to initiate going-out-of-business sales, which would result in the closure of about 300 stores, the Wall Street Journal reported. (http://on.wsj.com/1BIvvja)
Wet Seal, which has reported slowing year-on-year sales growth for the past five quarters, said the closures follow the failure to re-negotiate meaningful concessions from landlords.
A year ago, Wet Seal had 7,413 full- and part-time employees.
The closed stores accounted for almost half of Wet Seal's net sales of about $317 million in the nine months to Nov. 1.
The retailer, which is also exploring strategic and financial alternatives, is now expected to operate 173 stores.
The closures will result in pre-tax charges of $5.4 million-$6.4 million, the company said.
California-based Wet Seal's stock had lost about 98 percent of its value in 2014.
(Reporting by Nayan Das in Bengaluru; Editing by Simon Jennings and Sriraj Kalluvila)