Improve Merchandise Margin   In our Wet Seal division, we have identified opportunities to improve our planning and allocation function, merchandise mix and markdown cadence. During fiscal 2008, we will complete merchandising profiles of each Wet Seal store and integrate them into our planning and allocation function. We plan to improve our assortment planning and size optimization, increase our focus on key merchandise item categories, expand our bottoms offering and add denim brands to the merchandise mix. In our Arden B division, we have identified opportunities to improve inventory management, merchandise mix, and sourcing and to modify price points, where appropriate. We plan to better align our merchandise mix with customer needs through improving the balance of wear-to-work, everyday and occasion apparel, and adding fashion basics across key merchandise item categories. Additionally, we will reassess our sourcing process and employ more consistent pricing practices and improved promotional disciplines.

Improve Store Operations  Our store operation opportunities include an improved alignment of incentive compensation with selling performance, better utilization of customer feedback and improved performance in under-producing new stores. We plan to establish stronger accountability by developing incentive plans aligned with store sales growth and store profitability. We will evaluate store tasks to determine if excess tasks can be eliminated to facilitate greater focus on sales. We will realign operations management of both the Wet Seal and Arden B divisions to reduce costs. Finally, we plan to employ more detailed analysis and monitoring of new store performance.

Improve Real Estate  We will seek to improve our new store economics and address pressure from rising occupancy and store construction costs. Additionally, we plan to test off-mall locations by opening a small number of stores in regional “power centers” during fiscal 2008. We plan to rebuild the pipeline for store growth and rationalize current deals in the pipeline, which we estimate will reduce fiscal 2008 store openings to approximately 20 to 25 stores.

Improve Marketing  We believe we have opportunity to improve our marketing planning and alignment of our messages to the divisional merchandising strategies. We are developing specific plans for each division for fiscal 2008. We intend to place more emphasis on visual merchandising, direct marketing and grass roots marketing, while reducing our magazine advertising, as we believe there is a much better return on investment in the grass roots approach. We also intend to increase emphasis on direct mail and heighten our focus on customer acquisition. Additionally, we intend to increase our use of internet marketing to drive increased store traffic.

Improve Information Systems  We believe we have opportunity to reduce costs and improve the efficiency of our information systems. We will conduct an independent review of our information systems infrastructure to determine immediate cost savings. Additionally, we will develop short term and long term information systems strategies and install improved project management and cost controls.

Improve Physical Distribution and Transport   Our physical distribution and transport opportunities include facilitating more efficient store operations by resuming daily shipping to stores and, eventually, delivering merchandise to stores that is “floor-ready.”

Resume Our Positive Comparable Store Sales Trend   From fiscal 2005 through 2006, we experienced seven out of eight quarters of positive comparable store sales results, on a consolidated basis, versus the negative comparable store sales trends of fiscal 2004. These improvements resulted primarily from increased transaction counts and the number of items purchased per customer, partially offset by a decrease in average retail price per item sold due to a change in pricing strategy. After positive comparable store sales results in the first quarter of fiscal 2007, we have experienced three consecutive quarters of comparable store sales declines, on a consolidated basis, in the low single digits. In fiscal 2007, we experienced a 1.1% decrease in comparable store sales principally due to decreases in the number of transactions generated per store and the number of items purchased per customer.

Revive Arden B  In February 2008, we engaged Sharon Hughes as a consultant to serve as the chief merchandise officer for Arden B under the direction and supervision of Mr. Thomas. We believe our primary opportunity for the Arden B division is in the adjustment of our merchandise mix. We are adjusting our assortments at Arden B to include more fashion basic and wear-to-work merchandise. We believe Arden B has yet to achieve its full potential with its core young contemporary customer. We aim to drive sales and profitability at Arden B through distinctive, quality merchandise, unified apparel and accessory assortments and an improved in-store customer experience.

Expand our Online Business   We plan to continue to grow our internet business through several initiatives, including a focus on integrated branding, targeted marketing programs utilizing our customer database and our customer loyalty programs. Although our internet sales are modest compared to consolidated net sales, we are experiencing substantial growth. A combination of several changes contributed to the improvement, including hiring the right staff with internet marketing experience, changing processes to make them scalable, aligning the online sites to the look of the stores and implementing appropriate targeted marketing. We are optimizing inventory allocated to the internet business to better meet demand and have strengthened our buying and planning staff to meet the anticipated sales growth in this area. We plan to continue to grow our internet business through continued improvements to inventory planning, fulfillment, and customer service. The growth in website traffic continues to be substantial and the internet is a key component for driving store traffic. Prior to the 2007 holiday season, we launched a new website platform for both divisions. The new websites support advanced merchandising capabilities, personalization based on browsing behavior and past purchase history, and testing tools to measure and determine the most effective content and promotion strategies.