US young fashion retailer The Wet Seal has filed for bankruptcy, just more than a week after Drapers reported the closure of 338 retail stores and the loss of around 3,695 full- and part-time jobs.
The struggling retailer blamed growing competition from fast-fashion brands such as H&M, Forever 21 and Zara as well as discounts from online retailers including Amazon for the Chapter 11 (bankruptcy) claim.
In a statement The Wet Seal said it will continue to trade from 173 US stores and online as “debtors-in-possession.”
It added that it has secured a finance arrangement worth $20m (£13.1m) from investment bank B. Riley Financial to enable it to pay employee wages and other obligations such as benefits, honour gift cards and accept returns on purchases made prior to the filing.
If The Wet Seal emerges from the Chapter 11 filing, B. Riley will hold equity in the business as a result of the cash injection.
The Wet Seal chief executive Ed Thomas said: “After careful consideration, the Board of Directors unanimously concluded that filing for Chapter 11 was the appropriate course of action for the company. Overall, we continue to believe in The Wet Seal and remain committed to executing on the strategic steps that we already started. We are thrilled to be working with B. Riley and other constituencies toward the successful and prompt emergence of the company from Chapter 11.”
As of January 12, 2015 the company had approximately $31m (£20.4m) on the balance sheet, including nearly $11m (£7.2m) used to “collateralise letters of credit.”
In its most recent trading update for the three months to November 1, 2014, The Wet Seal reported a loss of $36m (£23.7m), with a significant slump across gross profit, margin and store sales.