July 23 (Bloomberg) -- Wet Seal Inc., the women’s apparel chain, fired Chief Executive Officer Susan McGalla amid declining sales.
McGalla’s departure is effective immediately, the Foothill Ranch, California-based company said in a statement. While the board searches for a replacement, Chief Operating Officer Ken Seipel and Chief Financial Officer Steve Benrubi will serve as co-principal executive officers. McGalla joined Wet Seal in January 2011 after 14 years at American Eagle Outfitters Inc.
Comparable-store sales in the current quarter are expected to decline as much as 11 percent, the company said. So-called same-store sales are a key benchmark for retailers’ growth because closed and new stores are excluded. The second-quarter loss will be as much as 7 cents a share before one-time costs such as CEO severance costs, trailing a previous forecast of 3 cents to 6 cents.
Wet Seal declined 10 percent to $2.66 at the close in New York for the biggest drop since Nov. 3. Shares have declined 18 percent this year.
“While respectful of the fact that the Board apparently has a different vision for the direction of the company, I am proud of what we have accomplished,” McGalla said in an e-mailed statement from spokeswoman Lisa Cohen. “Over the past eleven months we have been executing on the turn-around plan that we collectively developed.”
The retailer, which operates more than 550 stores in the U.S. and Puerto Rico, increased sales 2.1 percent to $612 million in the 12 months through April 28. Profit declined 61 percent to $6.8 million in the same period.
The best way to maximize shareholder value is by putting the retailer up for sale, according to Joseph De Perio, a senior portfolio manager at Clinton Group, a Wet Seal investor that has played activist in the past. De Perio, who wrote a letter to the board today calling for a sale, said Clinton started investing in Wet Seal two months ago and owns 4.3 percent of the company.
While Clinton wasn’t pleased with McGalla’s performance, the board has shown they can’t run the company well, De Perio said in a telephone interview. If Wet Seal isn’t put up for sale, Clinton will file a proxy contest early next year to replace the board and pursue its agenda, De Perio said.
“This board isn’t doing right by shareholders, and we plan to change that,” De Perio said.
CFO Benrubi didn’t respond to a request for comment.
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