Registration No. 333-13399
Rule 424(b)(3)
200,000 Shares
THE WET SEAL, INC.
Class A Common Stock, $.10 par value
This Prospectus relates to 200,000 shares (the "Class A Shares" or
"Shares") of Class A Common Stock, $.10 par value ("Class A Common Stock"), of
The Wet Seal, Inc. (the "Company"). The Class A Shares being offered hereby are
being offered by La Senza Inc., a Canadian corporation which is a wholly-owned
subsidiary of Suzy Shier Limited, a Canadian corporation which indirectly is a
principal stockholder of the Company. La Senza Inc. is referred to herein as the
"Selling Stockholder." The offering of the Shares by the Selling Stockholder is
referred to herein as the "Offering." The Company will not receive any of the
proceeds from the sale of Class A Shares offered hereby. The Class A Shares will
be offered as such upon the automatic conversion into Class A Common Stock of
200,000 shares of Class B Common Stock, $.10 par value ("Class B Common Stock")
held by the Selling Stockholder. The Company's Restated Certificate of
Incorporation provides certain restrictions on the ownership and transfer of
Class B Common Stock, including that shares of Class B Common Stock may not be
transferred by sale or otherwise to any person other than a Permitted Transferee
(as defined in the Company's Restated Certificate of Incorporation, see "Selling
Stockholder") without first being converted to Class A Common Stock. All of the
Shares being offered hereby were issued by the Company in private transactions
not involving any public offering and may not be resold in a public distribution
except in compliance with the Securities Act of 1933, as amended (the "Act"),
and except upon conversion into Class A Common Stock. Holders of Class A Common
Stock are entitled to one vote per share and holders of Class B Common Stock are
entitled to two votes per share on matters submitted to a vote of stockholders.
The Class A Common Stock is traded on the Nasdaq National Market under
the symbol "WTSLA." On October 7, 1996, the last reported sale price of the
Class A Common Stock on the Nasdaq National Market was $38.125 per share.
See "Risk Factors" beginning on page 3 of this Prospectus for a
discussion of certain factors that should be considered by prospective
purchasers of the Shares offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
October 8, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files, reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Commission at prescribed rates from the Public Reference Section of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding the
Company at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Act, with respect to the Shares offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement and exhibits filed as a part thereof and otherwise
incorporated therein and which may be inspected and copied in the manner and at
the sources described above. Statements contained in this Prospectus as to the
contents of any document referred to are not necessarily complete, and in each
instance reference is made to such exhibit for a more complete description and
each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Commission are incorporated by reference into this Prospectus.
1) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 3, 1996.
2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended May 4, 1996.
3) The Company's Annual Report on Form 10-K for the fiscal year ended
February 3, 1996.
4) The Company's Current Report on Form 8-K dated June 11, 1996.
-2-
<PAGE>
5) The Company's Proxy Statement dated May 31, 1996.
6) The description of the Company's Class A Common Stock, $.10 par
value share, contained in the Company's Registration Statement on Form S-1 under
the Securities Act filed with the Commission on July 30, 1990 (File No.
33-34895); and
7) All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
such documents.
Any statement contained herein or in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for the purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus, except as so modified or superseded. The
Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the information that has been incorporated by reference in this
Prospectus (excluding exhibits to such information which are not specifically
incorporated by reference into such information). Requests for such documents
should be directed to the Company at its principal executive offices, 64
Fairbanks, Irvine, California 92718, Attention: Corporate Secretary, telephone
(714) 583-9029.
RISK FACTORS
Potential purchasers of the Class A Common Stock should carefully
consider the following factors, as well as the other information contained in
this Prospectus, before deciding to purchase the Class A Shares offered hereby.
Historical Decline in Comparable Store Sales; Prior Losses
Although the Company's comparable store sales have increased by 10.5%
through the twenty-six weeks ended August 3, 1996 and 16.5% in the 13 weeks
ended August 3, 1996, comparable store sales declined by 14.2%, 9.2% and 4.1%
during fiscal years 1993, 1994 and 1995, respectively. The Company believes
these declines were primarily attributable to an industry-wide decrease in sales
of women's apparel, due in part to a shift in consumer discretionary spending.
This resulted in reduced profitability for many women's apparel retailers and
led a large number of retailers, including a number of specialty retailers, to
close stores or go out of business. There can be no assurance that these and
other factors will not again result in declining comparable store sales, which
could adversely affect the Company's profitability.
The Company incurred net losses in fiscal 1993 and 1994 of $2.4
million and $1.0 million, respectively. Those losses were due to a combination
-3-
<PAGE>
of factors, including adverse economic conditions in the Southern California
market and declines in the Company's comparable store sales. Following the
Company's acquisition of Contempo Casuals on July 1, 1995, the Company achieved
greater economies of scale and improved margins, which resulted in the Company's
return to profitability in fiscal 1995 and for the first six months of the
current fiscal year. There can be no assurance that the Company will continue to
be profitable in the current fiscal year or in future years.
Changes in Fashion Trends
The Company's profitability is largely dependent upon its ability to
anticipate the changing fashion tastes of its customers and to respond to those
changing tastes in a timely manner. The failure of the Company to anticipate,
identify or react appropriately to changing styles, trends or brand preferences
could lead to, among other things, lower sales, excess inventories and more
frequent markdowns, which could have a material adverse effect on the Company's
financial condition and results of operations. In addition, fashion misjudgments
could adversely affect the Company's image with its customers, which could
materially adversely affect the Company's long-term sales, profitability and
growth.
Duplicate Store Locations
As a result of the acquisition of Contempo Casuals, the Company
currently operates both a Contempo Casuals store and a Wet Seal store in 66
malls, which contain approximately 134 of the Company's stores. Such duplicate
locations may compete for the same sales, which has resulted in a decrease in
sales volume and profitability at these stores. The Company has attempted to
reduce the level of competition between its duplicate stores by differentiating
the merchandise mix in such stores or by closing duplicate locations. The
Company is also converting certain duplicate stores to test new retail concepts.
There can be no assurance that the Company will be able to reduce comparable
store sales declines or improve the profitability of its duplicate stores.
Competition
The young women's retail apparel industry is highly competitive. The
Company competes for sales primarily with specialty apparel retailers,
department stores and certain other apparel retailers, many of which have
significantly greater financial, marketing and other resources available to
them. In addition, the Company competes for favorable site locations and lease
terms in shopping malls. Competition may significantly increase in the future,
which could adversely affect the Company.
Economic Conditions and Consumer Spending
As with other retail businesses, the Company's business is sensitive
to consumer spending patterns and preferences. The Company's growth, sales and
profitability may be adversely affected by unfavorable local, regional or
national economic conditions. The Company is especially affected by economic
conditions in California, where approximately 35% of its stores are located.
-4-
<PAGE>
Substantially all of the Company's stores are located in regional
shopping malls. The Company's sales are derived, in part, from the high volume
of traffic in such malls. The Company therefore benefits from the ability of
mall "anchor" tenants and other area attractions to generate consumer traffic in
the vicinity of the Company's stores and the continuing popularity of malls as
shopping destinations. Sales volume and mall traffic may be adversely affected
by economic downturns in a particular area, competition from non-mall retailers
and other malls, the closing of anchor department stores, and declines in the
desirability of the shopping environment in a particular mall, all of which
could adversely affect the Company's sales and profitability.
The Company's sales and profitability also depend upon the continued
demand by the Company's customers for fashionable, casual apparel. If the demand
for apparel and related merchandise were to decline, the Company's financial
condition and results of operations could be materially and adversely affected.
Shifts in consumer discretionary spending to other goods such as electronic
equipment, computers and music could also adversely affect the Company.
Seasonality
The retail apparel industry is highly seasonal. The Company generates
its highest level of sales during the Christmas season (beginning the week of
Thanksgiving and ending the first Saturday after Christmas) and the "back to
school" season (beginning the last week of July and ending the first week of
September). The Company's profitability depends, to a significant degree, on the
sales generated during these peak periods. Any decrease in sales or margins
during these periods, whether as a result of then current economic conditions,
poor weather or other factors beyond the control of the Company, could have a
material adverse effect on the Company.
Dependence on Key Personnel
The Company's success depends to a significant extent upon the
performance of its senior management, particularly Kathy Bronstein, Vice
Chairman and Chief Executive Officer, and Edmond Thomas, President and Chief
Operating Officer. While the Company has employment agreements with Ms.
Bronstein and Mr. Thomas that extend through January 30, 2001, there can be no
assurance that the services of either of such executives will remain available
to the Company pursuant to such employment agreements. The employment agreements
of each of Ms. Bronstein and Mr. Thomas contain non-competition covenants. The
Company maintains "key man" life insurance on the life of each of Ms. Bronstein
and Mr. Thomas in the amount of $5 million.
-5-
<PAGE>
Voting Rights of Common Stock; Control by Selling Stockholder
The voting rights of Class A Common Stock are limited by the Company's
Restated Certificate of Incorporation (the "Restated Certificate"). On all
matters with respect to which the Company's stockholders have a right to vote,
including for the election of directors, a holder of Class A Common Stock is
entitled to one vote per share, while a holder of Class B Common Stock is
entitled to two votes per share. Except as otherwise required by law, Class A
Common Stock and Class B Common Stock vote together as a single class.
Prior to the Offering, the holders of Class B Common Stock (including
the Selling Stockholder) represented 35.9% of the voting power of all classes of
the Company's capital stock, of which shares representing 30.2% of the voting
power were owned in the aggregate by 3254127 Canada Inc., 3254143 Canada Inc.,
Los Angeles Express Fashions Inc. (collectively, the "GT Stockholders") and the
Selling Stockholder. The GT Stockholders and the Selling Stockholders are
controlled, directly or indirectly, by Irving Teitelbaum, Chairman of the Board,
and Stephen Gross, Secretary and a Director of the Company.
Following consummation of the Offering, the holders of Class B Common
Stock will own shares representing 33.9% of the voting power of all classes of
the Company's capital stock, and 28.1% of the voting power will be owned by the
GT Stockholders. As a result, after the Offering, the GT Stockholders may be
able to direct the election of all the directors of the Company and determine
the outcome of any matter submitted to a vote of stockholders, including any
merger, consolidation or sale of all or substantially all of the Company's
assets, except as otherwise provided by law.
Anti-Takeover Proposals
The Board of Directors has approved a resolution proposing certain
amendments to its Restated Certificate of Incorporation which would (i) create a
classified Board of Directors consisting of three classes each serving a three
year term and (ii) provide for a 75% super-majority voting in the event of
certain unsolicited takeover offers. These proposals will be the subject of a
proxy solicitation to be presented to the stockholders for adoption. If adopted
by the stockholders, the proposals would make the Company less vulnerable to
hostile bidders and would possibly prevent stockholders from realizing the
premium price usually associated with such bids.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholder.
-6-
<PAGE>
SELLING STOCKHOLDER
The Selling Stockholder is a wholly-owned subsidiary of Suzy Shier
Limited, a public company whose shares are traded on the Montreal and Toronto
Stock Exchanges. Suzy Shier Limited is also the indirect parent of Los Angeles
Express Fashions Inc., holder of 1,300,000 shares of Class B Common Stock of the
Company. These companies are controlled, directly or indirectly, by Irving
Teitelbaum, Chairman of the Board, and Stephen Gross, Secretary and a Director
of the Company. Messrs. Teitelbaum and Gross are brothers-in-law.
Except for sales to Permitted Transferees, any sale or transfer of
shares of Class B Common Stock will result in the automatic conversion of such
shares of Class B Common Stock into an equal number of Class A Shares. A
Permitted Transferee is defined in the Company's Restated Certificate of
Incorporation as (i) an original holder of Class B Common Stock (an "Original
Holder"), (ii) an immediate family member of an Original Holder that is a
natural person, or (iii) a corporation, trust, partnership, limited partnership,
association or similar entity which is directly or indirectly wholly-owned by an
Original Holder or his family members. The Shares being registered hereby by the
Selling Stockholder will be issued upon the conversion of 200,000 shares of
Class B Common Stock currently held by the Selling Stockholder.
The Selling Stockholder, a Permitted Transferee, received its shares
as a result of a transaction with Los Angeles Express Fashions Inc., also a
Permitted Transferee.
The following table sets forth, as of October 1, 1996, (i) the
ownership of the outstanding shares of Common Stock held by the Selling
Stockholder before the Offering, (ii) the number of shares of Class A Common
Stock being sold by the Selling Stockholder in the Offering, and (iii) the
number of shares held by the Selling Stockholder after the Offering.
<TABLE>
<CAPTION>
Number of
Shares of Number of Shares
Class A Number of Shares of Class A Common
Common Stock of Class B Common Number of Shares Stock and Class B
Owned Before Stock Owned Before of Class A Common Common Stock Owned
Offering Offering Stock Being Offered After Offering
<S> <C> <C> <C> <C>
La Senza Inc. 0 200,000 200,000 0
</TABLE>
PLAN OF DISTRIBUTION
The Selling Stockholder may elect, from time to time, to sell Shares
in the over-the-counter market, on any other exchange on which the Class A
Common Stock is listed or traded, in negotiated transactions or through a
combination of such methods of sale, at market prices prevailing at the time of
-7-
<PAGE>
sale, prices related to the then-current market price or at negotiated prices,
including pursuant to an underwritten offering or one or more of the following
methods: (a) purchases by a broker-dealer as principal and resale by such broker
or dealer for its account pursuant to this Prospectus; (b) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (c)
block trades in which the broker-dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction. The Selling Stockholder may also pledge Shares as
collateral for margin accounts and such Shares could be resold pursuant to the
terms of such accounts. In effecting sales, broker-dealers engaged by the
Selling Stockholder may arrange for other broker-dealers to participate. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholder and/or the purchasers of the Shares for
which such broker-dealers may act as agent or to whom they may sell as
principal, or both (which compensation shall be negotiated immediately prior to
sale and which, as to a particular broker- dealer, may be in excess of customary
compensation). Any broker-dealer may act as broker- dealer on behalf of the
Selling Stockholder in connection with the offering of certain of the Shares by
the Selling Stockholder.
Under the Exchange Act, and the regulations thereunder, any person
engaged in a distribution of the Shares offered by this Prospectus may not
simultaneously engage in market making activities with respect to the Class A
Common Stock of the Company during the applicable "cooling off" periods prior to
the commencement of such distribution. In addition, and without limiting the
foregoing, the Selling Stockholder will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder including, without
limitation, Rules 10b-6 and 10b-7, which provisions may limit the timing of
purchases and sales of Shares by the Selling Stockholder.
EXPERTS
The financial statements incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended February 3,
1996 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report, which financial statements are incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in auditing and accounting.
LEGAL MATTERS
The validity of the Class A Shares offered hereby will be passed upon
for the Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York, New
York. Alan Siegel, a director of the company, is a member of the firm of Akin,
Gump, Strauss, Hauer & Feld, L.L.P. and holds options to purchase 6,000 shares
of Class A Common Stock.
-8-
<PAGE>
No dealer, salesperson or other individual has
been authorized to give any information or make
any representations not contained in this
Prospectus in connection with the offering
covered by this Prospectus. If given or made,
such information or representations must not be
relied upon as having been authorized by the
Company. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to THE WET SEAL, INC.
buy, any securities in any jurisdiction where,
or to any person to whom, it is unlawful to make
such offer or solicitation. Neither the delivery
of this Prospectus nor any sale made hereunder 200,000 Shares
shall, under any circumstances, create an Class A Common Stock,
implication that there has not been any change $.10 par value
in the facts set forth in this Prospectus or in
the affairs of the Company since the date
hereof.
TABLE OF CONTENTS
__________
Page P R O S P E C T U S
Available Information.........................2
Incorporation of Certain Documents __________
by Reference.............................2
Risk Factors..................................3
Use of Proceeds...............................6
Selling Stockholder...........................7
Plan of Distribution..........................7
Experts.......................................8
Legal Matters.................................8
October 8, 1996
