Greg Taxin‘s Clinton Group has revealed, in a newly amended filing with the SEC, that it has further slightly reduced its position in The Wet Seal, Inc. (NASDAQ:WTSL). Wexford currently owns 6.24 million shares of the company, versus 6.43 million disclosed previously. The activist stake amasses 7.4% of the class A stock, slightly down from 7.6% held earlier. At the same time the fund disclosed a letter sent to the company’s management.
In the letter sent to the Chief Executive Officer of The Wet Seal, Inc. (NASDAQ:WTSL), Mr. John Goodman, the investor commented the financial results of the company that have been announced yesterday, on March 21, as well as the recent financing announcement disclosed by the company. The Wet Seal posted net sale of $530.1 million for the last fiscal year, versus $580.4 million in the fiscal 2012. The company reported a net loss of $0.45 per share, significantly down from $1.28 reported a year ago, and slightly down from the estimate of -$0.31 per share.
Clinton Group in its letter stated that it understands that the weak results disclosed by the company are caused mainly by the market forces, which will change to the best in future. The results of other companies from the industry of retail stores operators have also been weak, and even worse than those reported by Wet Seal.
“As Wet Seal’s competitors aim to be more like Wet Seal, we know that Wet Seal itself continues to evolve and remain ahead of the pack. Indeed, we believe you have made many smart moves in last fifteen months — improving merchandising, store operations, real estate strategy, technology, loyalty programs and the use of social media — that will keep you ahead of the competition even as they attempt to emulate the Wet Seal fast fashion model,” the letter stated.
The Wet Seal, Inc. (NASDAQ:WTSL) is also optimistic regarding its future performance. According to a statement, the company expects its net loss to climb to $0.16-$0.19 in the first quarter of its fiscal 2014. The company also plans to open 10 new stores and closed another 17 after the lease expires. Overall, The Wet Seal plans to have capital expenditures in the range of $10.5 to $11.5 million.
Moreover, in a separate press release, The Wet Seal, Inc. (NASDAQ:WTSL) disclosed about entering into an agreement with an institutional investor, under the terms of which, the company will issue $27 million worth of convertible notes and warrants for purchase of class A stock. The proceeds from the offering will be used for general corporate purposes.
Clinton Group commented the financing as well, stating that it will improve the company’s situation and will increase the confidence of suppliers. The shareholder also says that it is pleased with the management’s attempts to “address an altering landscape,” such as the building of stores with a large return of capital, and more focus on plus-sized clothing, as well as rationalizing stores in underperforming malls.
“With some additional spending by teenage girls, which is inevitable, the Company will emerge from this market downturn stronger and better than it was when the stock was at $5,” the letter concluded.
The full text of the letter can be accessed below:
Last week, Clinton Group revealed reducing its stake in The Wet Seal, Inc. (NASDAQ:WTSL) to 6.4 million class A shares, from 6.6 million held previously. Aside from Clinton Group, another shareholder of the company is Another fund holding The Wet Seal, Inc. (NASDAQ:WTSL) is Cliff Asness‘ Aqr Capital Management, which owns 1.17 million shares, as at the end of 2013.