Dive Brief:

• Wet Seal, the largely mall-based apparel retailer taken over by private equity firm Versa Capital Management in 2015, is considering a sale or bankruptcy, people with knowledge of the situation have told Bloomberg. A spokesperson from Versa declined to comment to Retail Dive, and a request for comment from Wet Seal was not immediately returned.

• Philadelphia-based Versa bought Wet Seal for $7.5 million in cash after it had filed for Chapter 11 bankruptcy protection in January 2015. In the fall of 2014 shortly before its bankruptcy filing, the retailer abandoned its Arden B brand and brought back former CEO Edmond S. Thomas, who was Wet Seal president and CEO from 2007 to 2011. 

• A decision about a sale or another bankruptcy could come as soon as next week, sources told Bloomberg. Those people, who asked not to be named, said that Versa would prefer an out-of-court deal rather than bankruptcy protection.​

​Dive Insight:

Wet Seal is a beloved but beleaguered California apparel brand that has struggled to regain its footing in the face of fierce competition from fast-fashion and e-commerce, a glut of specialty apparel stores and the resultant slowing of traffic to malls. In August 2015 after Versa's takeover, Melanie Cox came on as CEO, and said then that company’s reversal of fortune would be found in the California vibe that won over its fans more than 10 years ago, rather than the parade of styles found at fast-fashion retailers like H&M or Forever 21.

With so many teen-focused apparel retailers aiming for a similar demographic, though, that path was fraught with risk, and not even a move to a more definitive look seems to have recaptured consumers’ attention. As with Abercrombie & Fitch, one of Cox’s ideas was to provide clothing more likely to appeal to older young people — older teens and college kids — who are more likely to have a fashion sense of their own and are less driven by fast-fashion trends (and also are more likely to have more money to spend). But that has only seemed to muddle the focus of the brand.

Should the retailer end up in bankruptcy court, it will be its second bankruptcy in two years. It won't be the only teen apparel retailer to have done so recently: American Apparel similarly filed for bankruptcy in November, just over a year after a previous bankruptcy that brought it to private ownership by private equity. This time, Canadian T-shirt company Gildan bought the American Apparel brand and some of its inventory (but no stores or manufacturing capacity) at auction for $88 million.