Foothill Ranch, California-based teen-apparel retailer, The Wet Seal, Inc. (NASDAQ:WTSLA), said today that its chairman Hal Kahn and three directors – Henry Winterstern, Jonathan Duskin, and Sidney Horn – have left the board, ending the proxy contest with Clinton Group.
The activist investor, Clinton Group, which owns a 6.9 percent stake in Wet Seal, will replace the exiting members with four of its own nominees. They are: John Mills, former COO of Aeropostale, Mindy Meads, a former co-CEO of Aeropostale, Inc. (NYSE:ARO), Dorrit Bern, the ex-chairman and chief executive of Charming Shoppes, and Lynda Davey.
The resignation has put an end to the drama that has been going on for the past five months. On October 3, Clinton Group said in an SEC filing that Wet Seal’s banker told it that four of Wet Seal board members were ready to step down, if Clinton agreed to settle the proxy contest. But, within a few hours, Clinton said in another statement that the board members had changed their mind, and they won’t resign.
Clinton had been criticizing the struggling retailer since June, saying that the frequent personnel changes, shifting strategies, and operational mismanagement have hurt Wet Seal’s results. Greg Taxin, a director at Clinton said that shareholders were highly dissatisfied with the company’s performance, and owners of more than 60 percent of shares voted in support of removing the board members. Wet Seal’s same store sales declined 13 percent in September, and they had already fallen 18 percent in August.
Clinton now wants the board to buy back shares, bring in a new CEO who can improve results, and then sell the company. Earlier in June, The Wet Seal, Inc. (NASDAQ:WTSLA) had to fire its then-CEO, Susan McGalla, in July due to pressure from Clinton Group. Soon Clinton announced that it was looking for a buyer that could revive the struggling retail chain. In August, Wet Seal proposed a turnaround plan to avoid a potential takeover, but the very next day Clinton announced that it was planning to replace board members. The company’s revenues have been declining for four quarters. Wet Seal reported a loss of $12.4 million in second quarter.
