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Deb Shops, Inc.

Deb Shops, Inc. July 2006. Deb Shops, Inc. Company Overview. Description. Established in 1932, Deb Shops (the “Company”) was originally known as Joy Hosiery, a leading retailer of foundation garments in and around Philadelphia.

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Deb Shops, Inc.

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  1. Deb Shops, Inc. July 2006

  2. Deb Shops, Inc. Company Overview Description • Established in 1932, Deb Shops (the “Company”) was originally known as Joy Hosiery, a leading retailer of foundation garments in and around Philadelphia. • Today, the Company is a leading teen / junior apparel retailer operating under the brand names DEB, CSO, and Tops 'N Bottoms targeting customers ages 13 -25. • Deb Shops is actively repositioning itself to be a destination for a plus size female teenager. • 332 stores in 42 states; principally regional mall and strip center locations in the East and Midwest regions of the United States. • The merchandising team remains focused on staying ahead of trends and fashion direction while responding to the ever changing needs of their consumer. • Management has maintained strong momentum since that its founding, fueled by a prudent strategy of new unit growth, strategic store remodeling, and the ability to give its core consumer the merchandise that she wants at the right price. Products Stores Midwest – 145 stores New England – 24 stores East – 112 stores South – 11 stores * Outlined, white indicates states with no Deb Shops locations. West – 35 stores | Wachovia Securities Consumer & Retail Investment Banking Source: Company filings as of January 2006.

  3. Deb Shops, Inc. Merchandising Products • Deb Shops specializes in junior-sized merchandise and offer an extensive selection of colors and styles. • The merchandise offered in its plus-sized departments caters to the plus-size customer between the ages of 13 and 25. • Tops ‘N Bottoms caters primarily to young men and junior-sized women - - much of the merchandise is brand named and unisex. Fashionable • Merchandise is displayed in an array of different colors and styles and is presented in various ways to help customers put together outfits. • Store inventories are replenished at least twice each week to provide a constantly changing and updated choice of merchandise. Reasonable Prices • Almost all merchandise is non-branded, with the exception of denim. • The Company has been placing its own private label into much of the merchandise from domestic importers. • It is estimated that Deb Shops’ private label represents roughly 25% of merchandise. | Wachovia Securities Consumer & Retail Investment Banking

  4. Deb Shops, Inc. Key Investment Highlights • Deb Shops is a significantly under-penetrated specialty apparel chain that targets growing teen demographics. • According to Packaged Facts, overall teenagers’ spending is expected to grow at a 5% CAGR between 2001 and 2006 to $190 billion. • The growth is due to an increase in teens’ own wages as well as an increase in parents’ income. • In addition, it is also estimated that the US teen population will grow from 32.2 million in 2000 to 34.6 million in 2006. • Deb Shops is rapidly expanding its plus-size departments across its chain to take advantage of attractive demographics. • Its stores with plus-size departments have expanded from 20% of the chain in FY 2000 to 50% of the chain as of January 2006. • Virtually untapped teen plus-size sector captures a fast growing market segment. • The Company has very attractive new store economics. • From FY 2001 – FY 2003, first-year cash flow return on investment was at or just above 10%, for FY 2005, this ratio was 88%, implying 13.5 months payback time. • Company has not pursued rapid growth due to a management team that is conservative and selective in opening new locations. The growth potential for Deb Shops is significant (800+ store potential). • According to the Population Division of the US Census Bureau, as of July 1, 2004, 26% of the total population aged 14-24 lived in California, Texas and Florida - - in these markets, Deb Stores is significantly under-penetrated. | Wachovia Securities Consumer & Retail Investment Banking

  5. Deb Shops, Inc. Financial Summary Stock Price Source: Company filings, equity research and Capital IQ. Source: Capital IQ as of 6/29/2006. Ownership Valuation Statistics Source: Company filings and Capital IQ. | Wachovia Securities Consumer & Retail Investment Banking

  6. Deb Shops, Inc. Financial Projections – Base Case LBO Analysis – Base Case Ownership Analysis | Wachovia Securities Consumer & Retail Investment Banking

  7. Deb Shops, Inc. Financial Projections – Growth Case LBO Analysis – Growth Case Ownership Analysis | Wachovia Securities Consumer & Retail Investment Banking

  8. Growing plus-size population. 127 million American adults are overweight, another 60 million are considered obese and 9 million more are severely obese. 30.6 percent of white American adults were obese in 2004, as were 45 percent of African American adults and 37 percent of Hispanic adults. Plus-size apparel category is one of the fastest-growing segments in women’s retail. Growth for the plus size customer is more than 2.5 times that of the average population. According Mintel research group, the plus-size clothing market reached close to $32 billion last year. Consumers’ bodies are getting bigger, but their need to stay stylish isn’t shrinking. Deb Shops, Inc. America’s Growing Waistline Prevalence in Overweight and Obesity Among US Adults Aged 20-74 Source: Mintel Research Group. Source: Mintel Research Group. | Wachovia Securities Consumer & Retail Investment Banking

  9. Deb Shops, Inc. Changing Attitudes: Celebrating the Fuller Figured • Popular culture is increasingly more accepting of different body types. • Icons like Queen Latifah, Oprah Winfrey, Emme and Mandisa from American Idol are driving this acceptance. • In September 2004, Dove launched the Campaign for Real Beauty with a much-talked-about ad campaign featuring women whose appearances are outside the stereotypical norms of beauty.  • The Campaign is part of a global effort intended to serve as a starting point for societal change and act as a catalyst for widening the definition and discussion of beauty. | Wachovia Securities Consumer & Retail Investment Banking

  10. Deb Shops, Inc. The Generation Y Demographic: Growing Segment with Propensity to Spend • Large and growing market • The Gen. Y population in the U.S., encompassing ages 5 to 24, totaled 82 million in ’04. • 20 – 24 yr. olds make up the fastest growing segment, increasing nearly 10% over the last four years. • Teens continue to wield significant spending power. • $159 billion in teen spending in 2005. • Today spend more than any previous generation. • Continue to prefer shopping malls and discount stores. • Name brand driven but still cost conscious. Growth in Teen Spending ($ in billions) Source: Teenage Research Unlimited Young Adult Spending 2005 Apparel Sales by Age Where do they Shop? Source: NPD Group: Buying Habits of Teens.Red indicates category preference. 1Teens and young adults ages 13 to 34 2Baby boomers ages 35 to 54 3Seniors ages 55 and up 4Children ages 0 to 12 Source: Teen Research Unlimited and NPD Group | Wachovia Securities Consumer & Retail Investment Banking

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