Wet Seal (WTSLA)

Segment Information

The following is a discussion of the operating results of our business segments. We consider each of our operating divisions to be a segment. In the tables below, Wet Seal and Arden B reportable segments include data from their respective stores and Internet operations. Operating segment results include net sales, cost of sales and other direct store and field management expenses, with no allocation of corporate overhead or interest income or expense.

Segment Information

The following is a discussion of the operating results of our business segments. We consider each of our operating divisions to be a segment. In the tables below, Wet Seal and Arden B reportable segments include data from their respective stores and Internet operations. Operating segment results include net sales, cost of sales, asset impairment and store closure costs, and other direct store and field management expenses, with no allocation of corporate overhead, interest income or expense.

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Wet Seal comparable stores sales decreased 4.5% during fiscal 2008, compared to a prior year increase of 1.2%. Wet Seal comparable store sales decreased 6.1% during the second half of fiscal 2008, which coincided with a further decline in the U.S. economy. The decrease during fiscal 2008 was due primarily to a 4.2% decline in comparable store average dollar sale and a 1.2% decrease in comparable store average transaction counts per store. The decrease in comparable store average dollar sale resulted from a 4.2% decrease in our average unit retail prices, partially offset by a 2.0% increase in units purchased per customer. The net sales increase was attributable primarily to the increase in number of stores open, from 399 stores as of February 2, 2008, to 409 stores as of January 31, 2009, and a $5.7 million increase in net sales in our Internet business, partially offset by the comparable store sales decline.

Wet Seal’s operating income, before allocation of corporate general and administrative expenses, was 14.5% of its net sales for both fiscal 2008 and fiscal 2007. Wet Seal’s operating income rate, as a percentage of sales, remained stable in spite of the comparable store sales decline due primarily to a decrease in store payroll costs as a result of improved store labor management and reduced nonselling tasks, partially offset by a decrease in merchandise margin as a result of higher markdown rates due to the competitive retail environment compared to the prior year and an increase in occupancy costs resulting from the deleveraging effect of the decrease in comparable store sales. Additionally, during fiscal 2008 and fiscal 2007, operating income included $0.6 million and $2.9 million, respectively, of additional net sales resulting from the recognition of breakage on gift cards, gift certificates, and store credits and noncash asset impairment charges of $0.5 million and $0.2 million, respectively, to write down the carrying value of long-lived assets that were identified during our quarterly evaluations of the carrying value of long-lived assets in excess of forecasted undiscounted cash flows.

Segment Information

The following is a discussion of the operating results of our business segments. We consider each of our operating divisions to be a segment. In the tables below, Wet Seal and Arden B reportable segments include data from their respective stores and Internet operations. Operating segment results include net sales, cost of sales, asset impairment and store closure costs, and other direct store and field management expenses, with no allocation of corporate overhead, interest income or expense.

Segment Information

In accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” which establishes standards for reporting information about a company’s operating segments, the Company has

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THE WET SEAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the fiscal years ended January 31, 2009, February 2, 2008, and February 3, 2007

NOTE 1:    Summary of Significant Accounting Policies (Continued)

two operating segments representing its two retail divisions (“Wet Seal” and “Arden B”). Internet operations for Wet Seal and Arden B are included in their respective operating segments. Prior to fiscal 2007, the Company had aggregated these segments into one reportable segment due to the similarities of the economic and operating characteristics of the operations represented by the Company’s two divisions. However, in fiscal 2007, due to the poor profit performance of the Arden B division, and the disparity in financial performance between the two segments, the Company determined it no longer considered the operating segments economically similar under the aggregation criteria of SFAS No. 131.

Segment Information

The following is a discussion of the operating results of our business segments. We consider each of our operating divisions to be a segment. In the tables below, Wet Seal and Arden B reportable segments include data from their respective stores and internet operations. Operating segment results include net sales, cost of sales, asset impairment, and other direct store and field management expenses, with no allocation of corporate overhead, interest income or interest expense.

Segment Information

The following is a discussion of the operating results of our business segments. We consider each of our operating divisions to be a segment. In the tables below, Wet Seal and Arden B reportable segments include data from their respective stores and internet operations. Operating segment results include net sales, cost of sales, asset impairment, and other direct store and field management expenses, with no allocation of corporate overhead, interest income or interest expense.

Segment Information

The following is a discussion of the operating results of our business segments. We consider each of our operating divisions to be a segment. In the tables below, Wet Seal and Arden B reportable segments include data from their respective stores and internet operations. Operating segment results include net sales, cost of sales, asset impairment, and other direct store and field management expenses, with no allocation of corporate overhead, interest income or expense.

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Segment Information

In accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” which establishes standards for reporting information about a company’s operating segments, the Company has two operating segments representing its two retail divisions (“Wet Seal” and “Arden B”). Internet operations for Wet Seal and Arden B are included in their respective operating segments. Prior to fiscal 2007, the Company had aggregated these segments into one reportable segment due to the similarities of the economic and operating characteristics of the operations represented by the Company’s two divisions. However, in fiscal 2007, due to the poor profit performance of the Arden B division, and the disparity in financial performance between the two segments, the Company no longer considers the operating segments economically similar under the aggregation criteria of SFAS No. 131.

Segment Information

The Company has one reportable segment representing the aggregation of its two retail brands and its Internet business due to the similarities of the economic and operating characteristics of the operations represented by the Company’s two store concepts and its Internet business.

Segment Information

The Company has one reportable segment representing the aggregation of its two retail brands and its Internet business due to the similarities of the economic and operating characteristics of the operations represented by the Company’s two store concepts and its Internet business.

Segment Information

The Company has one reportable segment representing the aggregation of its two retail brands and its Internet business due to the similarities of the economic and operating characteristics of the operations represented by the Company’s two store concepts and its Internet business.

Segment Information

The Company has one reportable segment representing the aggregation of its two retail brands due to the similarities of the economic and operating characteristics of the operations represented by the Company’s two continuing store formats.

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THE WET SEAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended January 29, 2005, January 31, 2004 (as restated), and February 1, 2003 (as restated)

NOTE 1:    Summary of Significant Accounting Policies (continued)