Wet Seal Said to Consider Sale or Bankruptcy as Business Falters

  • A bankruptcy would be the second in two years for teen chain
  • Investment firm Versa Capital acquired the brand in 2015

Wet Seal, the mall retailer owned by Versa Capital Management, is considering a sale or bankruptcy after struggling to turn around the business, according to people with knowledge of the situation.

A decision could come as soon as next week, said the people, who asked not to be identified because the matter isn’t public. The company would prefer an out-of-court deal, according to the people.

If Wet Seal decides instead on a bankruptcy, it would be the second in two years for the chain, which caters to women and girls ages 13 to 24. During its previous Chapter 11 in 2015, the company sold its assets to Versa in a deal that included $7.5 million in cash.

Wet Seal has already closed hundreds of stores, but sluggish mall traffic has continued to weigh on the chain’s remaining locations. Other apparel sellers have faltered in recent months: American Apparel filed for its second bankruptcy, and Limited Stores is shutting down all its brick-and-mortar locations. Though some pockets of retail are doing well, older chains have been squeezed by e-commerce and fast-fashion brands such as Zara.

In early 2015, Versa’s Mador Lending LLC won an auction for the Wet Seal’s inventory and some leases. As part of the deal, it provided $20 million in replacement bankruptcy financing and assumed certain liabilities.

The Irvine, California-based retailer has 171 locations in 42 states, according to its website.

A representative for Wet Seal didn’t immediately respond to a request for comment.

    Before it's here, it's on the Bloomberg Terminal.