Event Brief of Q2 2003 The Wet Seal, Inc. Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

CORPORATE PARTICIPANTS

. Walter Parks, The Wet Seal Inc., EVP and CAO . Peter Whitford, The Wet Seal Inc., CEO

OVERVIEW

WTSLA reported a 2Q03 net loss of $0.45 per share vs. net income of $0.12 per share for 2Q02. Sales were $126m vs. $146m for 2Q02. Comp store sales declined 19.8% vs. 1.6% increase for 2Q02. Guidance: If comp store sales do not show further improvement, WTSLA expects a net loss for 3Q of between $0.22-0.26 per share. Q&A focus: pricing, comps, guidance, cost savings, merchandise mix, mgt. changes, competitors, store closures, repositioning.

FINANCIAL DATA

A. Key Data From Call 1. 2Q03 net earnings = a loss of $0.45 per diluted share. 2. 2Q03 net sales = $126m. 3. 2Q03 comp store sales = down 19.8%. 4. 2Q03 SG&A expenses = $39.4m. 5. 1H03 net earnings = a loss of $0.74 per diluted share. 6. 1H03 comp store sales = down 22.8%. 7. 1H03 total sales = $249.7m. 8. 1H03 SG&A expenses = $77.6m.

PRESENTATION SUMMARY

S1. Opening Remarks (W.P.) 1. 2Q03 Financial Review: 1. Net loss posted of $0.45 per share vs. net income of $0.12 per share for 2Q02. 2. Sales = $126m vs. $146m for 2Q02. 3. Comp store sales declined 19.8% vs. 1.6% increase for 2Q02. 1. Comp store sales trend improved month over month during the quarter. 4. Transaction count for July was almost flat with July 2002. 5. Units per transaction also built in each month of the quarter, with nearly a 10% increase this July over last July and a 3.5% increase for 2Q03 over 2Q02. 6. Favorable trends offset by an approx. 12.5% decline in avg. unit retail from 2Q02. 1. Primarily due to aggressive mark-downs taken on late Spring and early Summer receipts and selected price reductions. 7. GM as a percent of sales decreased 15.8% from 2Q02. 8. SG&A expenses = $39.4m vs. $39.3m for 2Q02.

1. Reflects lower advertising expenditures and central office

payroll expense. 2. WTSLA achieved additional saving and distribution center expenses where the cost per unit process dropped approx. 9%

from 2Q02. 3. Store payroll as a percentage of sales increased over prior year, but there were less payroll dollars per store.

9. Capex = $11m. 1. This reflects the costs for 26 new stores and 17 remodels completed during first two quarters and remodels and new stores under construction for 3Q. 2. 1H03 Review: 1. Net loss reported of $0.74 per share vs. net income of $0.39 per share for 1H02. 2. Comp store sales declined 22.8% vs. an increase of 4.9% for 1H02. 3. Total sales = $249.7m vs. $302.8m for 1H02. 4. GM as a percentage of sales = 17.2% vs. 32% a year ago. 1. Reflects leveraging of expenses and higher mark down activity. 5. Inventory freshness at end of 2Q better than a year ago and in line with inventory levels at July 2001.

6. SG&A expenses = $77.6m vs. $78.9m for 1H02. 1. Reflects reduction in advertising costs, savings from elimination of central office positions and reduction in bonus expenses, offset by an increase in store mgt. positions. 7. Inventory at cost = $48.7m at end of quarter, 9% higher than a year ago on a per sq. ft. basis, but approx. flat to inventory per sq. ft. two years ago. 8. Cash and investment balance at end of quarter = approx. $90m,

in line with balance at end of 1Q and at the end of fiscal

2002. 9. WTSLA and Ms. Bronstein have arrived at an amicable

settlement. The amount paid was covered in the reserve at

Feb. 1, 2003. Therefore, there are no additional charges

against income. 10. To date, WTSLA has repurchased nearly 1,072,000 shares. 3. Store Openings and Closings: 1. During 2Q opened WTSLA opened four Wet Seal stores and two Arden B. stores. 2. WTSLA closed four Wet Seal stores and one Arden B. stores. 3. WTSLA ended the quarter with a total 622 stores vs. 588 stores in 2Q02. 4. Total square footage rose 4% to 2,350,000 from 2,260,000 at end of 2Q02. 5. Average store size for the chain at end of 2Q = approx. 3,800 sq. ft. per store, similar to the prior year. 4. 3Q03 Guidance: 1. WTSLA has seen modest improvement in comp store sales following close of 2Q. 2. If comp store sales do not show further improvement, WTSLA expects a net loss for 3Q of between $0.22-0.26 per share. 3. GM as a percentage of sales to be in the range 20-24%. 4. SG&A expense to be similar to or below 3Q02. 5. WTSLA plans to open two new Wet Seal stores and three new Arden B. stores in 3Q. 6. WTSLA expects inventory at end of 3Q to be approx. 5% above 3Q02. 5. FY04 Guidance:

1. WTSLA anticipates spending approx. $15m in capital expenditures.

1. This includes 15 new locations and investments in 20-25 renewals. 2. WTSLA plans to close 10-15 Wet Seal stores and approx. five Arden B. stores. 1. These all correspond with lease expirations of under-performing locations.

S2. Business Update (P.W.) 1. Review Since Becoming CEO: 1. A lot of work ahead to complete successful turnaround of company.

2. During first few weeks Mr. Whitford has visited stores across

the country. 3. Wet Seal has a loyal customer base that is returning to the stores as merchandising mix improvements are made. 4. Co. has made significant improvements in freshness, fit and quality over past few quarters. 2. Management of Wet Seal Strengthened: 1. Allan Haims and Victor Alfaro have been added to the team. 2. Allan Haims has clear mandate to improve operating performance of the division. 3. Susan O'Toole will focus on enhancing the merchandising mix. 4. Victor Alfaro will produce the fashion that WTSLA customers demand and play a large role in revitalizing internal design team. 3. Business Segments:

1. Bottoms business continues to improve with positive reception

to relaunch of Blue Asphalt denim line, supported by TV

advertising campaign. 2. Hot items during Back to School period have been active wear and particularly track jackets. 3. Knit tops has performed well but there has been tough selling

in woven tops and synthetic fashion. 4. Sweaters are showing early signs of success, especially in the newer Luxe yarn.

5. There has been a strong response to initials trend in jewelry

and handbags. 4. Arden B.: 1. Pleased with repositioning that Greg Scott has achieved. 2. Tops business is strong and there has been a positive response to boucle and cashmere. 3. Woven bottoms have also shown positive results for early Fall. 5. Zutopia: 1. Fashion offering have been good, but …