In Re Wet Seal, Inc. Securities Litigation

ORDER REGARDING DEFENDANTS’ MOTIONS TO DISMISS AND PLAINTIFFS’ MOTION TO STRIKE EXHIBITS AND PORTIONS OF DEFENDANTS’ MOTIONS

I.

INTRODUCTION

Wet Seal, Inc. (“Wet Seal”) is a specialty retailer that sells clothing to young women, specifically teenagers. For some period of time, Wet Seal managed successfully to navigate the choppy seas of this marketplace. By mid-2002, however, it started losing money, and by early 2003 its overall same store sales were declining. Indeed, Wet Seal’s stock price dropped by almost 75% by the beginning date of the class period in this case. The continuing declines, the potential risks associated with those declines and with the fundamentals of its business, and the vagaries of its marketplace were regularly disclosed in its 10-Q and 10-K filings with the SEC from mid-2002 through late 2004. The record before this Court clearly describes a company that, by late 2003, could best be described as a “turn around” candidate and that would properly have been characterized as a speculative investment.

In 2003, as its difficulties mounted, Wet Seal made changes in its management and hired a new designer and, in the second half of the year, implemented new…