Wet Seal Proves the Retail Apocalypse is Far Worse than we thought

The retail apocalypse is far worse than many of us believed. Wet Seal LLC; a mall-based teen retailer, that operates 171 stores in 42 states is shutting down completely.

The 148 employees in Wet Seal’s headquarters in Irvine, California, a letter stating that their jobs were being eliminated on January 20, The Wall Street Journal reported. This apparently means that Wet Seal will be liquidated completely.

What is truly disturbing is that the Wet Seal closure came suddenly and without warning. To make matters worse Wet Seal’s owner Versa Capital was unable to find a buyer for the chain, nobody wanted it or its brand. That alone proves the size and scope of the retail apocalypse.

Brick and Mortar is Dying Faster than we thought

The truly disturbing part of the Wet Seal tragedy is the speed of its demise. Just two years ago in January 2015, Wet Seal operated 511 stores, Business Insider reported. It closed 338 locations then but tried to keep the rest open and failed.

The news of Wet Seal’s death comes right after another retailer, The Limited shut down all of its stores and laid off 4,000 people. The Limited’s brand name has apparently been sold to another company that will keep marketing clothes under that name.

The sudden demise of Wet Seal should have us concerned about department store brands like JC Penney (NYSE: JCP). If teen retailers; which have a far lower overhead than department stores, can collapse so fast – what chance does Penney have.

JC Penney reported a net income of -$322 million, a free cash flow of -$315 million and a profit margin of -2.35% on October 31, 2016. That led to a stock price of $6.65 a share on February 1, 2017; so one has to wonder if JC Penney is next on the death watch.

Is Income Inequality to blame?

A troubling question that needs to be asked here is income inequality to blame for Wet Seal’s demise? Did it collapse because middle class teens simply lacked the cash to buy its clothes?

In a troubling coincidence, economists led by Thomas Piketty and Emmanuel Saez released data indicating that the share of national economy owned by the bottom 50% of Americans fell from 20.8% in 1970 to 12.8% in 2017, The Economic Times reported on January 11. Just two weeks later on January 26, The Journal broke the news of Wet Seal’s sorry finale.

One has to wonder if any retailer can survive in today’s economy and how our nation will deal with such sudden and massive job losses. If this situation continues expect to see more social and political unrest across America.

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