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THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended November 2, 2002

OR

Commission file number 0-18632

THE WET SEAL, INC.
(Exact name of registrant as specified in its charter)

(949) 583-9029
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý    No o

        The number of shares outstanding of the registrant's Class A Common Stock and Class B Common Stock, par value $.10 per share, at December 16, 2002 were 24,732,947 and 4,804,249 respectively. There were no shares of Preferred Stock, par value $.01 per share, outstanding at December 16, 2002.

THE WET SEAL, INC.
FORM 10-Q

Index

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THE WET SEAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

(IN THOUSANDS)

See accompanying notes to consolidated condensed financial statements

3

THE WET SEAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE DATA)

See accompanying notes to consolidated condensed financial statements

4

THE WET SEAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE DATA)

See accompanying notes to consolidated condensed financial statements

5

THE WET SEAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

See accompanying notes to consolidated condensed financial statement

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THE WET SEAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1—Basis of Presentation:

        The information set forth in these consolidated condensed financial statements is unaudited. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

        In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation have been included. The results of operations for the quarter and nine months ended November 2, 2002 are not necessarily indicative of the results that may be expected for the year ending February 1, 2003 (fiscal 2002). For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report of The Wet Seal, Inc. (the "Company") for the year ended February 2, 2002.

NOTE 2—Revolving Credit Arrangement:

        Under a revolving line-of-credit arrangement with a major financial institution, the Company may borrow up to a maximum of $50 million on a revolving basis through January 1, 2004. The cash borrowings under the arrangement bear interest at the bank's prime rate or, at the Company's option, LIBOR plus 1.5%.

        The credit arrangement imposes quarterly and annual financial covenants requiring us to maintain certain financial ratios and achieve certain levels of income. In addition, the credit arrangement requires that the bank approve the payment of dividends and restricts the level of capital expenditures. At November 2, 2002, the Company was in compliance with these covenants. The Company had no borrowings outstanding under the credit arrangement at November 2, 2002. There were $14.7 million in open letters of credit related to imported inventory orders as of that date.

NOTE 3—Net Income (Loss) Per Share:

        Net income (loss) per share, basic, is computed based on the weighted average number of shares of Class A and Class B common stock outstanding for the period.

        Net income (loss) per share, diluted, is computed based on the weighted average number of shares of Class A and Class B common stock and potentially dilutive common stock equivalents outstanding for the period. Stock options were not included in the computation of diluted net income and loss per share for the quarter ended November 2, 2002 because to do so would have been antidilutive.

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        A reconciliation of the numerators and denominators used in basic and diluted net income per share is as follows:

        The Company affected a three-for-two stock split on May 9, 2002 on both the Class A and Class B common stock. Earnings per share and share outstanding amounts have been restated to give retroactive effect to the stock split in this report.

NOTE 4—Treasury Stock:

        In September 1998, the Company's Board of Directors authorized the repurchase of up to 20% of the outstanding shares of the Company's Class A common stock. As of November 2, 2002, 3,077,100 shares (split adjusted) had been repurchased under this plan at a cost of $20.3 million. Such repurchased shares are reflected as Treasury Stock in the Company's consolidated condensed balance sheets.

        On October 1, 2002, the Company's Board of Directors authorized the repurchase of up to 5.4 million of the outstanding common stock of the Company's Class A common shares. This amount includes the remaining shares previously authorized for repurchase by the Company's Board of Directors. All shares repurchased under this plan will be retired as authorized by the Company's Board of Directors. During October 2002, the Company repurchased 947,400 shares for $8.2 million and retired the shares.

NOTE 5—Statements 141, 142, 143, 144 and 146

        In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting, and broadens the criteria for recording intangible assets apart from goodwill. Under SFAS No. 142, goodwill and intangible assets that have indefinite useful lives will no longer be amortized but will be tested at least annually for impairment.

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The goodwill test for impairment consists of a two-step process that begins with an estimation of the fair value of the reporting unit. The first step of the test is a screen for potential impairment and the second step measures the amount of impairment, if any. SFAS No. 142 requires an entity to complete the first step of the transitional goodwill impairment test within nine months of adopting the Statement. The Company adopted SFAS No. 142 on February 3, 2002. Upon completion of the first step of the test, the Company determined that there was no impairment of goodwill.

        The following table provides the Company's net income (loss) and net income (loss) per share had the non-amortization provisions of SFAS No. 142 been adopted for all periods presented:

        Amortization of goodwill for the full fiscal year 2001 was $394,000 before income taxes.

        In November 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We do not believe the adoption of SFAS No. 143 will have a material impact on our consolidated results of operations, financial position or cash flows.

        In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of either by sale or other than by sale. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144 did not have a material impact on our consolidated results of operations, financial position or cash flows.

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        In July 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes Emerging Issues Task Force (EITF) Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity's commitment to an exit plan. SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. We will adopt the provisions of SFAS 146 for exit or disposal activities that are initiated after December 31, 2002.

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Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

        Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated condensed financial statements and the notes thereto.

        We are one of the largest national mall-based specialty retailers focusing primarily on young women's apparel and accessories, and currently operate 622 retail stores in 46 states, Washington D.C. and Puerto Rico. Of the 622 stores, 457 are Wet Seal stores and 31 are Contempo Casuals stores, 100 are Arden B. stores and 34 are Zutopia stores.

        As of November 2, 2002, we operated 610 stores compared to 568 stores as of November 3, 2001, the end of the third quarter of fiscal 2001. We opened 77 stores and closed 35 stores during the period from November 3, 2001 to November 2, 2002.

Critical Accounting Policies and Estimates

        We prepared our consolidated condensed financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The preparation of financial statements requires the appropriate application of certain accounting policies, some of which require us to make estimates and assumptions about future events and their impact on amounts reported in our financial statements. Since future events and their impact cannot be determined with absolute certainty, the actual results will inevitably differ from our estimates.

        We believe the application of our accounting policies, and the estimates inherently required therein, are reasonable. Our accounting policies and estimates are reevaluated on an ongoing basis, and adjustments are made when facts and circumstances dictate a change is warranted. Our accounting policies and those deemed critical accounting policies are more fully described in Note 1 to the consolidated financial statements and in Management's Discussion and Analysis, respectively, included in our Annual Report for the year ended February 2, 2002.

Current Trends and Outlook

        Sales in the third quarter were weak in all three divisions. Due to weak sales in all divisions, markdowns in October were higher than originally expected, as we continued to clear fall inventory and leave room for fresh receipts. The resulting pressure on gross margin as well as weak sales led to an operating loss for the quarter. We believe that a shift from a very strong fashion trend in the first and second quarters to an unclear fashion direction in the third quarter has made for a more difficult retail environment.

        We believe that we are taking the steps necessary to shift our product offering at the Wet Seal stores to feature a broader age range assortment, at the Arden B stores to reflect the shift toward a simpler, cleaner key fashion item assortment, and at Zutopia to capitalize on the strongest categories. However, there can be no assurance that these efforts will result in higher sales or increased gross margins. If sales trends experienced in the third quarter continue in the fourth quarter, we can expect lower sales and gross margins than achieved in the fourth quarter of last year.

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        The holiday catalog that is now in-home is performing better than we had most recently anticipated, although the results continue to fail to meet our initial expectations and therefore we continue to assess our catalog plans for next year. In addition to reviewing the profitability of our "direct to customer" business, we continue to review our expense structure. Within certain departments we have recently reduced staffing levels and do not plan on increasing either the staffing at our home office next year or the salaries of those employees for the balance of this year.

        Interest income will likely be lower for the fourth quarter than it was last year, a result of lower cash and investment balances and the reduction in the market interest rates earned on our cash and cash equivalents and short and long-term investments.

        We anticipate opening approximately 12 new stores and closing approximately 16 stores in the fourth quarter of fiscal 2002. We have been successful in leveraging our occupancy costs by opening appropriately sized stores with better than average sales per square foot, and by closing under-performing stores. In a press release dated February 28, 2002, we stated that the average new store will be approximately 3,300 square feet and each will require an investment of approximately $300,000. Although there can be no assurance, we believe we can achieve average sales of $300 per square foot in these stores.

        During fiscal 2003 we anticipate opening approximately 75 new locations, consisting of 15 to 20 Arden B. locations, 3 to 10 Zutopia locations with the remainder of the openings being Wet Seal locations. We expect about 35% of the new locations to open in the spring season and the remainder to open before Thanksgiving. Total capital expenditures anticipated for Fiscal 2003 will be approximately $45 million. This capital expenditure estimate includes the anticipated costs of renovating 55 stores whose leases have expired but that we expect to renew.

Inventory Valuation

        Merchandise inventories are stated at the lower of cost (first in, first out) or market. Cost is calculated using the retail inventory method. Inventories include items that have been marked down to management's best estimate of their fair market value. Management's decision to mark down merchandise is based on maintaining the freshness of our product offering. Markdowns are taken regularly to affect the rapid sale of slow moving inventory and to make room for new merchandise arriving daily at the stores. To the extent that actual sales results are lower than management's estimates, additional markdowns may be required which could reduce both gross margin and operating income. Our success is largely dependent upon our ability to anticipate the changing fashion tastes of our customers and to respond to those changing tastes in a timely manner. If we fail to anticipate, identify or react appropriately to changing styles, trends or brand preferences of our customers, we may experience lower sales, excess inventories and more frequent markdowns which would adversely affect our operating results.

Results of Operations

The quarter ended November 2, 2002 as compared to the quarter ended November 3, 2001.

        Sales for the quarter ended November 2, 2002 were $144.5 million compared to sales for the quarter ended November 3, 2001 of $146.9 million, a decrease of $2.4 million or 1.6%. The decrease in

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sales was due primarily to the comparable store sales decline of 9.6% for the quarter ended November 2, 2002. In the quarter ended November 3, 2001 comparable store sales increased 4.4%. Comparable store sales are defined as sales in stores that were open throughout the preceding 14 month period.

        Cost of sales (including buying, distribution and occupancy costs) was $104.8 million for the quarter ended November 2, 2002 compared to $99.6 million for the quarter ended November 3, 2001, an increase of $5.2 million or 5.2%. As a percentage of sales, cost of sales was 72.5% for the quarter ended November 2, 2002 compared to 67.8% for the quarter ended November 3, 2001, an increase of 4.7%. The increase in cost of sales as a percentage of sales was primarily due to the loss of leverage on occupancy expense and warehouse and buying costs due to the decrease in sales. A portion of the change was also due to an increase in markdowns in the quarter ended November 2, 2002 in order to assure a clean conversion of inventory in preparation for the holiday season.

        Selling, general and administrative expenses were $44.4 million for the quarter ended November 2, 2002 compared to $37.7 million for the quarter ended November 3, 2001, an increase of $6.7 million. As a percentage of sales, selling, general and administrative expenses was 30.7% for the quarter ended November 2, 2002 compared to 25.7% for the quarter ended November 3, 2001, an increase of 5.0%. The increase as a percentage of sales was related to the loss of leverage, caused by the comparable store sales decline, for store wages and general and administrative costs, combined with a recent investment in field management to improve the customers' experience in our stores. The increase was also due to the implementation of a "Back to School' catalog this year which was not in place in the prior year. In addition, advertising costs increased in the quarter ended November 2, 2002 due to both the catalog as well as for general media coverage compared to the quarter ended November 3, 2001.

        Interest income, net, was $0.7 million for the quarter ended November 2, 2002 compared to $1.2 million for the quarter ended November 3, 2001, a decrease of $0.5 million. This decrease was due primarily to a reduction in market interest rates on the invested balance. In addition, the total balance available for investment dropped $17 million in the last month of the quarter ended November 2, 2002, resulting from $8.2 million paid for share repurchases and an increase in net owned inventory.

        The income tax provision reflected a $1.5 million benefit for the quarter ended November 2, 2002 compared to a $3.9 million charge for the quarter ended November 3, 2001. The effective income tax rate for the quarter ended November 2, 2002 was 37.5% compared to 36.6% for the quarter ended November 3, 2001. The lower effective rate in the quarter ended November 3, 2001 reflected a drop from previous quarters, leading to an effective tax rate for all of fiscal 2001 of 37.5%.

        Based on the factors noted above, we had a net loss of $2.5 million for the quarter ended November 2, 2002 compared to net income of $6.8 million for the quarter ended November 3, 2001, a decrease of $9.3 million. This equates to a net loss of 1.7% of sales for the quarter ended November 2, 2002 compared to net income of 4.6% of sales for the quarter ended November 3, 2001.

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Results of Operations

The nine months ended November 2, 2002 as compared to the nine months ended November 3, 2001.

        Sales in the first nine months of fiscal 2002 were $447.3 million compared to sales for the nine months ended November 3, 2001 of $420.4 million, an increase of $26.9 million or 6.4%. The dollar increase in sales was due to the net increase of 42 stores; 610 stores were open and operating at the end of the first nine months of fiscal 2001 compared to 568 stores at the end of the first nine months of fiscal 2002. Comparable store sales decreased 0.2% for the first nine months of fiscal 2002. This compares to a comparable store sales increase of 3.8% for the first nine months of fiscal 2001.

        Cost of sales, including buying, distribution and occupancy costs, were $310.2 million in the first nine months of fiscal 2002 compared to $291.4 million in the first nine months of fiscal 2001, an increase of $18.8 million or 6.5%. This increase reflects the sales increase of 6.4% over the same period. Cost of sales was 69.3% of sales in the first nine months of fiscal 2002, identical to the 69.3% of sales in the first nine months of fiscal 2001.

        Selling, general and administrative expenses were $123.9 million in the first nine months of fiscal 2002 compared to $107.6 million in the first nine months of fiscal 2001, an increase of $16.3 million or 15.1%. The dollar increase in selling, general and administrative expenses was primarily due to the increase in the number of stores and in total sales, driving store payroll and volume-related costs. Selling, general and administrative expenses were 27.7% of sales in the first nine months of fiscal 2002, 2.1% above the 25.6% of sales for the first nine months of fiscal 2001. This percentage increase was primarily caused by investments made this year in store staffing and general and administrative staff, as well as higher advertising costs and investment in the catalog program.

        Interest income, net, was $2.6 million in the first nine months of fiscal 2002 compared to $4.0 million in the first nine months of fiscal 2001, a decrease of $1.4 million. As with the quarter ended November 2, 2002, this year-to-date decrease was due primarily to a reduction in market interest rates.

        The income tax provision was $5.9 million in the first nine months of fiscal 2002 compared to $9.6 million in the first nine months of fiscal 2001. The effective tax rate for the first nine months of fiscal 2002 was 37.5% compared to 38.0% in the first nine months of fiscal 2001. The decrease in the effective tax rate largely reflects an increase in income generated from states with lower effective tax rates.

        Based on the factors noted above, net income was $9.9 million in the first nine months of fiscal 2002 compared to $15.8 million in the first nine months of fiscal 2001, a decrease of $5.9 million or 37.3%. As a percentage of sales, net income was 2.2% in the first nine months of fiscal 2002 compared to 3.7% in the first nine months of fiscal 2001.

Liquidity and Capital Resources

        Net cash provided by operating activities for the first nine months of fiscal 2002 was $1.9 million compared to $29.6 million in the first nine months of fiscal 2001. This decrease in net cash provided by operating activities is due to the amount of owned inventory (inventory net of payables) being $9 million higher at November 2, 2002 than at November 3, 2001. Additionally, the first nine months of fiscal 2002 operating cash flows have also been negatively impacted by an increase in prepaid catalog, insurance, and holiday gift bags and boxes.

        Working capital at November 2, 2002 was $52.7 million compared to $77.2 million at February 2, 2002, a decrease of $24.5 million. This decrease in working capital was due to a number of factors, including a shift of $10.5 million out of short-term investments into long-term investments. In addition, capital improvements were $2.8 million higher in the first nine months of fiscal 2002 compared to the

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same period of the prior year, and there were $8.2 million of treasury stock purchases in the first nine months of fiscal 2002.

        During the first nine months of fiscal 2002 the Company invested $36.2 million in equipment and leasehold improvements, compared to $33.5 million in the same period of the prior year. The $36.2 million invested in the first nine months of fiscal 2002 was for 58 new stores already opened, and includes approximately $4.5 million for construction in progress for another 12 new stores scheduled to open in the fourth quarter and upgrades and renovations in progress. In the same period of the prior year, there was $33.5 million in capital expenditures for 32 new store openings and the acquisition of 18 Zutopia stores. We currently estimate that the capital expenditures for the remainder of fiscal 2002 will be approximately $9 million. These planned expenditures relate primarily to completing the new store and remodel construction already underway or expected to start in January for the first wave of next year's new stores.

        On October 1, 2002, the Company's Board of Directors authorized the repurchase of up to 5.4 million shares of the Company's outstanding Class A common stock. This amount includes the remaining shares previously authorized for repurchase by the Company's Board of Directors. As of November 2, 2002, 3,077,100 shares (split adjusted) that were repurchased under the previous plan at a cost of $20.3 million were reflected as Treasury Stock in the Company's consolidated condensed balance sheets. During October 2002, the Company repurchased 947,400 shares under the new repurchase plan for $8.2 million. These repurchased shares under the new plan were immediately retired as authorized by the Company's Board of Directors. There are approximately 4.5 million shares remaining for future repurchases under the October 1, 2002 authorization. As of the date of this report, all treasury shares have been retired.

        We have a revolving line-of-credit arrangement with Bank of America, N.A. in an aggregate principal amount of $50 million, maturing on January 1, 2004. At November 2, 2002, there were no outstanding borrowings under the credit arrangement and there were $14.7 million in open letters of credit related to imported inventory orders. As of November 2, 2002, we were in compliance with all financial covenants of the credit arrangement.

        We invest our excess funds in short-term investment grade money market funds, investment grade commercial paper and U.S. Treasury and Agency obligations. The long-term marketable securities consist of high credit quality municipal and corporate bonds. We believe that our working capital and cash flows from operating activities will be sufficient to meet our operating and capital requirements in the foreseeable future.

        Our principal contractual obligations consist of minimum annual rental commitments under non-cancelable leases, including our corporate office and warehouse facility lease. At November 2, 2002, our contractual obligations under these leases were as follows (in thousands):

        Our principal commercial commitments consist of open letters of credit, related to imported inventory orders, against our revolving line-of-credit arrangement. At November 2, 2002, our contractual commercial commitments under these letters of credit arrangements were as follows (in thousands):

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Seasonality and Quarterly Operating Results

        Our business is seasonal by nature, with the Christmas season (beginning the week of Thanksgiving and ending the first Saturday after Christmas) and the back-to-school season (beginning the last week of July and ending the first week of September) historically accounting for the largest percentage of sales volume. In our three fiscal years ended February 2, 2002, the Christmas and back-to-school seasons together accounted for an average of approximately 30% of our annual sales, after adjusting for sales increases related to new stores. We do not believe that inflation has had a material effect on the results of operations during the past three years. However, there can be no assurance that our business will not be affected by inflation in the future.

Statement Regarding Forward-Looking Disclosure

        Certain sections of this Quarterly Report on Form 10-Q, including the preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations," may contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations or beliefs concerning future events.

        Forward-looking statements include statements that are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "believes," "plans," "anticipates," "estimates," "expects" or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects, and possible future actions, which may be provided by our management, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our company, economic and market factors and the industry in which we do business, among other things. These statements are not guaranties of future performance and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

        Actual events and results may differ from those expressed in any forward-looking statements due to a number of factors. Factors that could cause our actual performance, future results, and actions to differ materially from any future-looking statements include, but are not limited to, those discussed in Exhibit 99.1 attached to this report and elsewhere in this report. We strongly urge you to review and consider the risk factors set forth in Exhibit 99.1.

New Accounting Pronouncements

        In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible Assets," which, among other things, establishes new standards for goodwill acquired in a business combination, eliminates the amortization of goodwill and requires the carrying value of goodwill and identifiable intangibles to be evaluated for impairment on, at least, an annual basis. Identifiable intangible assets with a determinable useful life will continue to be amortized over that period. The Company adopted SFAS No. 142 on February 3, 2002. Net income for the quarter and year-to-date ended November 3, 2001 would have been increased by $62,000 and $183,000 respectively had goodwill amortization been discontinued effective February 4, 2001. Net income per common share for the quarter and year-to-date ended November 3, 2001, after adjusting for the impact of discontinued goodwill amortization, would not have changed. Upon completion of the first step of the impairment test, the Company determined that there was no impairment of goodwill at that time.

        In November 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. SFAS No. 143 is effective for fiscal years

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beginning after June 15, 2002. We do not believe the adoption of SFAS No. 143 will have a material impact on our consolidated results of operations, financial position or cash flows.

        In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of either by sale or other than by sale. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144 did not have a material impact on our consolidated results of operations, financial position or cash flows.

        In July 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes Emerging Issues Task Force (EITF) Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity's commitment to an exit plan. SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. We will adopt the provisions of SFAS 146 for exit or disposal activities that are initiated after December 31, 2002.

Item 3—Quantitative and Qualitative Disclosures About Market Risk

        To the extent that we borrow under our credit facility, we would be exposed to market risk related to changes in interest rates. At November 2, 2002 no borrowings were outstanding under our credit facility. We are not a party to any derivative financial instruments. Additionally, we are exposed to market risk related to interest rate risk on the short-term investment of excess cash in short-term investment grade interest-bearing securities. If there are changes in interest rates, those changes would affect the investment income we earn on those investments.

        We have certain investments that generate interest income. These investments have carrying values that are subject to interest rate changes that could impact our earnings to the extent that we did not hold the investments to maturity.

Item 4—Controls and Procedures

        As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), within the 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Vice Chairman and Chief Executive Officer along with the Company's Senior Vice President and Chief Financial Officer. Based upon that evaluation, the Company's Vice Chairman and Chief Executive Officer along with the Company's Senior Vice President and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls, or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

        Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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PART II—OTHER INFORMATION

Item 1—Legal Proceedings.

        We are not party to any material legal proceedings. We anticipate that we will be subject to litigation (and arbitration) in the ordinary course of business.

Item 2—Changes in Securities.

        Not Applicable

Item 3—Defaults Upon Senior Securities.

        Not Applicable

Item 4—Submission of Matters to a Vote of Security Holders.

        Not Applicable

lItem 5—Other Information.

        Not Applicable

Item 6(a)—Exhibits.

10.1

Employment agreement, dated September 19, 2002 between the Company and William B. Langsdorf



99.1

Factors Affecting Future Financial Results.

Item 6(b)—Reports on Form 8-K.

        On October 4, 2002, we filed a current report on Form 8-K reporting that we had issued a press release to announce that the Company's Board of Directors authorized the repurchase of up to 5.4 million shares of the Company's Class A Stock. In addition, the Company announced comparable store sales trends for the third quarter of fiscal 2002 and also announced expected earnings for the third and fourth quarters of fiscal 2002.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATIONS

I, Kathy Bronstein, certify that:

        1.    I have reviewed this quarterly report on Form 10-Q of The Wet Seal, Inc.;

        2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

        3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

        4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

        b)    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

        c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

        5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

        a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

        b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

        6.    The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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I, William B. Langsdorf, certify that:

        1.    I have reviewed this quarterly report on Form 10-Q of The Wet Seal, Inc.;

        2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

        3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

        4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

        b)    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

        c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

        5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

        a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

        b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

        6.    The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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