Wet Seal files for bankruptcy

Wet Seal Inc filed for Chapter 11 protection late on Thursday, becoming the fourth apparel retailer to file for bankruptcy in two months, as the sector struggles with growing competition and a slowdown in spending among teen shoppers.

Wet Seal said in its bankruptcy filing it received $20 million in debtor-in-possession financing from B. Riley Financial Inc, and intends to reorganise its business around e-commerce and its remaining 173 stores.

The company, which sells apparel and accessories for teen girls and young women, laid off 3,700 employees and closed 338 stores last week.

A shift away from the fast-fashion segment, ventures into unprofitable businesses, liquidity crunch due to weak sales and changes in vendor credit agreements led to the bankruptcy filing, Wet Seal said.

Several teen apparel retailers have been struggling as their customers switch to fastfashion 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.

Wet Seal listed assets of $10 million-$50 million and liabilities of $100 million-$500 million, and hired FTI Consulting Inc as a restructuring adviser, according to the filing.

FTI Consulting is also advising electronics retailer RadioShack Corp, which is likely to file for Chapter 11 bankruptcy next month.

Wet Seal, which reported slowing yearon-year sales growth for the past five quarters, warned last month that it may seek to restructure under provisions of the US Bankruptcy Code if it fails to address liquidity in the near term.

Deb Shops, controlled by private equity firm Cerberus Capital Management, filed for its second bankruptcy in less than four years on Dec 4. Delia*s Inc followed a day after.

Mall-based apparel retailer Body Central Corp also shut shop this month.