Wet Seal hit with bankruptcy rumours following 338 store closures

Struggling fashion retailer Wet Seal is believed to be slipping closer to a bankruptcy following the closure of 338 stores and the discharge of nearly 3,700 full and part time employees on Wednesday.

The store closures came about after "assessing its overall financial condition" and its inability to re-negotiate significant concessions from the landlords, according to Wet Seal. The number of unit shut, effective from either Wednesday or today, reportedly accounted for 48 percent of the retailer's net sales of 317 million dollars for the nine months ended November 1, 2014. The fashion retailer will continue to operate 173 stores as well as its online storefront.

"This was a very difficult decision to make, but after reviewing many other options since I returned to the Company in September, our financial condition leaves us no other alternative than to close these stores," said Ed Thomas, chief executive officer at Wet Seal. "This is an extremely difficult time for the entire Wet Seal team, and we are doing everything we can to protect the interests of all of our stakeholders, including employees."

"We acknowledge and sympathize with how hard these recent events have been on our employees, both those staying with the Company and especially those who are leaving the Company this week." The fashion retailer, which is mainly known for its young womenswear ranges, previously revealed last month that it was exploring strategic and financial alternatives and may file for bankruptcy if it fails to meet immediate liquidity needs.

Wet Seal has reported declining year-on-year sales for the past five years and revealed on Wednesday that it expects to incur estimated pre-tex charges ranging from 5.4 million dollars to 6.4 million dollars, which include costs associated with inventory write-off, asses impairments and employee terminations. The retailer added that the "estimates do not include any claims or demands which may be made by the landlords of the impacted stores for unpaid rent or otherwise."