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Wet Seal CEO Fit for Tough Business

Kathy Bronstein's eye for trends has led to solid sales.


Wet Seal Inc. Chief Executive Kathy Bronstein prowls the room, surveying peasant blouses, ruffled skirts and slinky dresses being considered for Wet Seal stores this summer. She moves from one piece to another, fingering material, her face fixed in concentration. Mostly, she is pleased. But a striped dress doesn't fit in.

"Go away," she says, yanking it from the wall and tossing it on the floor.

This is, by any definition, a hands-on chief executive, a woman with a keen sense of style who hurls directives like fast balls. Those who have worked with her say she's a formidable leader--confident, determined, demanding.

"She doesn't suffer fools gladly," Wet Seal Chairman Irving Teitelbaum said.

Such intensity and style sense may be just what is needed, because Foothill Ranch-based Wet Seal faces challenges maintaining its momentum in the brutally competitive niche that targets girls and young women. Though its stock has been surging amid solid sales and earnings gains as Wet Seal's trendy styles hit the mark with customers, there are still hurdles ahead.

The retailer is in a race that never ends, trying to stay ahead of a fashion curve that's constantly shifting. It also is continuing to expand in a niche where some analysts think there already are too many stores.

"We typically refer to retail as a zero-sum game," said Elizabeth Pierce, an analyst with Wedbush Morgan Securities, who credits Wet Seal with deftly leaping ahead of the current "hippy, dippy bohemian" fashion trend.

"Somebody wins when somebody loses," she said.

Such challenges are nothing new for Bronstein. At 50, she is one of the few women heading a publicly held company--in this case, a onetime bikini shop that grew to what is now about 570 stores nationwide. Wet Seal had sales in 2001 of just under $600 million.

In addition to its namesake brand, the company operates Contempo Casuals and Zutopia stores. Its Arden B. chain was named after Bronstein's 10-year-old daughter.

At the moment, the retailer is in a groove. It recently announced a 19% jump in fourth-quarter earnings, and its stock, which repeatedly has been hitting 52-week highs, is up 61% for the year. The stock closed Friday at $37.87, up $2.31, in Nasdaq trading.

Wet Seal also is in the midst of a major marketing push. It has begun striking deals with record companies to create videos it can show first in its stores, and it is relaunching a catalog that will hit 1.3 million households this summer. It also has just launched a line of cosmetics.

"The business seems to be on fire," said Brian Tunick, an analyst with Bear, Stearns & Co.

But it is tough to keep such fires flaming, he cautions, since Wet Seal and its competitors--including Charlotte Russe Holdings Inc., Bebe Stores Inc. and Forever 21--are at the mercy of some very tough customers: young shoppers who want trendy clothes at moderate prices.

Further, some competitors have given Wet Seal migraines by selling their own products at lower prices than Wet Seal sells its own, analysts say.

To compete in this niche, companies must regularly anticipate the whims of fiercely fickle females and cut their losses quickly if they blow it.

Bronstein does both, industry insiders say. She is as quick to make decisions as she is to cut her losses, a woman who snuggles into bed at night with sales reports to keep track of what's selling.

"She is probably the most proactive retailer I've heard of in terms of acting upon a suggestion, a piece of advice, news," said Ilse Metchek, director of the California Fashion Assn. "That's been the key to her success. Nothing really winds up a dismal failure for a long time."

Bronstein's standout skill is her ability to spot a trend and translate it into something shoppers will buy, said those who know her. She's "the best in the business" at selecting merchandise, said Steve Schoenholz, owner of Tempted Apparel Inc. in Los Angeles, which makes clothes for Wet Seal and other companies.

"She's able to predict trends and jump on them," Schoenholz said. "She's very fast."

She also can be tough to do business with, some in the industry said.

Because Wet Seal is so tuned in to fashion shifts, it sometimes tries to backtrack on an order if a style starts to cool, which can be especially hard on small vendors. But such tactics aren't unusual in the garment industry, others said.

"It's a very tough business on the small guy," said one supplier who asked not to be named. "There's no humanity in it."

"The fashion game is a very volatile business," Wet Seal's Teitelbaum said. "I think Kathy is as demanding as the best of them."

Some vendors said they cannot talk openly about Wet Seal if they want the company's business in the future, which most of them do, especially since Wet Seal seems to be flourishing at the moment.

"[Bronstein] is a tough businesswoman," said one analyst, who asked not to be named. "You can get away with this when times are good. They need to do business with her now."

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