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Wet Seal Wins Court Order Against Executive at Rival Bebe

March 02, 2004|Dana Calvo | Special to The Times

Retailer Wet Seal Inc. has won a temporary restraining order against a former company employee who two weeks ago was named chief executive of a key rival in the coveted young women's apparel market.

The court order against Greg Scott, former president of Wet Seal's Arden B. division, prohibits him from luring Wet Seal workers to his new employer, Bebe Stores Inc., or disclosing Wet Seal trade secrets.

That, analysts say, means Scott cannot attempt to raid Arden B.'s staff by outbidding salaries he was privy to as a former officer of the company.

"At this stage, we're focusing on the information he's using to solicit employees," Wet Seal spokeswoman Helen Rotherham said. "We believe he's solicited four people already."

Bebe Stores executives didn't return calls for comment.

Scott resigned from Wet Seal in early January and was hired by Bebe on Feb. 17. Wet Seal contends that he breached his employment agreement when he joined a rival retailer.

Scott was credited with turning Arden B. into an impressive player in the young women's apparel niche and into Wet Seal's strongest division. The chain of 99 stores caters to young, fashion-conscious working women -- the same customers targeted by the 172-store Bebe chain.

Nonetheless, Foothill Ranch-based Wet Seal has been struggling for more than a year to regain sales and earnings growth and reconnect with the teenage girls who shop in its namesake chain of stores.

In Wet Seal's 2003 annual report, Chairman Irving Teitelbaum told shareholders that 2004 held the challenges of "recovery and rebuilding." Also in the report was a paragraph on retailers Wet Seal considers formidable competition. Bebe was one of them.

Adrienne Tennant, an analyst at Wedbush Morgan Securities in Los Angeles, said the restraining order, which was granted Thursday, is Wet Seal's way of marking its territory.

It's a bid by a company "that's sending a message that just because they're in turnaround, they're not going to roll over and die," she said.

Wet Seal is seeking a preliminary injunction against Scott and Bebe. A hearing is scheduled for March 26 in Orange County Superior Court. The temporary restraining order will be in effect until then.

Shares of Wet Seal rose 24 cents to $8.56. Shares of Brisbane, Calif.-based Bebe rose 68 cents to $28.98. Both trade on Nasdaq.

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