<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-Q
 
  /X/    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER PERIOD ENDED
         APRIL 30, 1998
 
  / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
                         COMMISSION FILE NUMBER 0-22289
                         WHEREHOUSE ENTERTAINMENT, INC.
             (Exact name of registrant as specified in its charter)
 
                                    DELAWARE
                        (State or other jurisdiction of
                         incorporation or organization)
 
                                   95-4608339
                    (I.R.S. Employer Identification Number)
 
                             19701 HAMILTON AVENUE
                        TORRANCE, CALIFORNIA 90502-1334
                        (Address of principal executive
                          offices including ZIP code)
 
                                 (310) 538-2314
              (Registrant's telephone number, including area code)
 
       SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
                         COMMON STOCK, $0.01 PAR VALUE
 
    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
registrants were required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/  No / /
 
    Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes /X/  No / /
 
    As of April 30, 1998, 10,650,643 shares of the registrant's common stock
were issued and outstanding and 171,923 additional shares are expected to be
issued pursuant to the bankruptcy plan of reorganization discussed in Item 1
below.
 
--------------------------------------------------------------------------------
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<PAGE>
                                     INDEX
                         WHEREHOUSE ENTERTAINMENT, INC.
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
FORWARD LOOKING STATEMENTS.................................................................................           3
 
Part I. FINANCIAL INFORMATION
 
  Item 1. Financial Statements
 
    Condensed Balance Sheets--
    April 30, 1998 (Unaudited) and January 31, 1998........................................................           4
 
    Condensed Statements of Operations--
    Three Months Ended April 30, 1998 and 1997 (Unaudited).................................................           5
 
    Condensed Statements of Cash Flows--
    Three Months Ended April 30, 1998 and 1997 (Unaudited).................................................           6
 
    Notes to Condensed Financial Statements................................................................           7
 
  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation.............           9
 
Part II. OTHER INFORMATION
 
  Item 1. Legal Proceedings................................................................................          12
 
  Item 6. Exhibits and Reports on Form 8-K.................................................................          12
 
SIGNATURES.................................................................................................          13
</TABLE>
 
                                       2
<PAGE>
                           FORWARD-LOOKING STATEMENTS
 
    This Quarterly Report on Form 10-Q includes certain statements that may be
deemed to be "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Sections of this Report containing
such forward-looking statements include "Management's Discussion and Analysis of
Financial Condition and Results of Operation," under Item 2 of Part I below.
Statements in this Report which address activities, events or developments that
the registrant expects or anticipates will or may occur in the future, including
such things as the future issuance of shares, future capital expenditures
(including the amount and nature thereof), expansion and other developments and
technological trends of industry segments in which the registrant is active,
business strategies, growth of the registrant's and its competitors' business
and operations and other such matters are forward-looking statements. Although
the registrant believes the expectations expressed in such forward-looking
statements are based on reasonable assumptions within the bounds of its
knowledge of its business, a number of factors could cause actual results to
differ materially from those expressed in any forward-looking statements,
whether oral or written, made by or on behalf of the registrant.
 
    The registrant's operations are subject to factors outside its control. Any
one, or a combination, of these factors could materially affect the results of
the registrant's operations. These factors include: (a) changes in levels of
competition from current competitors and potential new competition from both
retail stores and alternative methods or channels of distribution such as
electronic and telephone shopping services and mail order; (b) loss of a
significant vendor or prolonged disruption of product supply; (c) the presence
or absence of popular new releases and products in the product categories the
registrant represents; (d) changes in levels of consumer spending, especially
during seasonally significant periods; (e) changes in the Federal and state
income tax rules and regulations or interpretations of existing legislation; (f)
changes in the general economic conditions in the United States, and in
particular the eight major markets served by the registrant, including, but not
limited to consumer sentiment about the economy in general; (g) changes in
availability or terms of working capital financing from vendors and lending
institutions; (h) adverse results in significant litigation matters; and (i) the
ability to attract and retain key personnel. The foregoing should not be
construed as an exhaustive list of all factors which could cause actual results
to differ materially from those expressed in forward-looking statements made by
the registrant. Forward-looking statements made by or on behalf of the
registrant are based on a knowledge of its business and the environment in which
it operates, but because of the factors listed above, actual results may differ
from those anticipated results described in those forward-looking statements.
Consequently, all of the forward-looking statements made are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated by the registrant will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the registrant or its business or operations.
 
                                       3
<PAGE>
                                    PART I.
ITEM I.                        FINANCIAL INFORMATION
                         WHEREHOUSE ENTERTAINMENT, INC.
                            CONDENSED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                    APRIL 30,   JANUARY 31,
                                                                      1998         1998
                                                                   -----------  -----------
                                                                   (UNAUDITED)
                                          ASSETS
<S>                                                                <C>          <C>
 
Current Assets
  Cash...........................................................  $44,597,000  $54,720,000
  Receivables....................................................      870,000    1,296,000
  Merchandise inventory..........................................   66,683,000   62,472,000
  Other current assets...........................................    1,206,000    1,237,000
  Rental inventory, net..........................................    3,744,000    4,278,000
  Deferred taxes.................................................    1,799,000    1,799,000
                                                                   -----------  -----------
    Total current assets.........................................  118,899,000  125,802,000
 
Equipment and improvements, net..................................   16,586,000   17,627,000
Reorganization value in excess of amounts allocable to
  identifiable assets, net.......................................   13,959,000   14,358,000
Deferred taxes...................................................    2,983,000    2,952,000
Other assets.....................................................      358,000      255,000
                                                                   -----------  -----------
    Total assets.................................................  $152,785,000 $160,994,000
                                                                   -----------  -----------
                                                                   -----------  -----------
 
                           LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current Liabilities
  Accounts payable and accrued expenses..........................  $50,380,000  $60,339,000
  Current maturities of capital lease obligations and long-term
    debt.........................................................      197,000      193,000
                                                                   -----------  -----------
    Total current liabilities....................................   50,577,000   60,532,000
 
Capital lease obligations and long-term debt.....................      289,000      294,000
Notes payable....................................................    4,014,000    4,048,000
Other long-term liabilities......................................    4,798,000    4,648,000
 
Shareholders' equity
  Common stock, $.01 par value, 24,000,000 authorized, 10,650,643
    and 10,619,201 issued and outstanding at April 30, 1998 and
    January 31, 1998, respectively...............................      106,000      106,000
  Additional paid-in capital.....................................   89,377,000   89,377,000
  Retained earnings..............................................    9,429,000    7,702,000
  Notes receivable...............................................   (5,805,000)  (5,713,000)
                                                                   -----------  -----------
    Total shareholders' equity...................................   93,107,000   91,472,000
                                                                   -----------  -----------
    Total liabilities and shareholders' equity...................  $152,785,000 $160,994,000
                                                                   -----------  -----------
                                                                   -----------  -----------
</TABLE>
 
            See accompanying notes to Condensed Financial Statements
 
                                       4
<PAGE>
                         WHEREHOUSE ENTERTAINMENT, INC.
 
                       CONDENSED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                         THREE MONTHS ENDED
                                                                                   ------------------------------
                                                                                     APRIL 30,       APRIL 30,
                                                                                       1998            1997
                                                                                   -------------  ---------------
<S>                                                                                <C>            <C>
Sales............................................................................  $  61,274,000   $  59,929,000
Rental revenue...................................................................      9,258,000      13,254,000
                                                                                   -------------  ---------------
                                                                                      70,532,000      73,183,000
Cost of sales....................................................................     38,153,000      38,281,000
Costs of rentals, including amortization.........................................      4,772,000       7,831,000
                                                                                   -------------  ---------------
                                                                                      42,925,000      46,112,000
Selling, general and administrative expenses.....................................     23,626,000      25,979,000
Depreciation and amortization....................................................      1,643,000       1,616,000
                                                                                   -------------  ---------------
Income (loss) from operations....................................................      2,338,000        (524,000)
 
Interest expense.................................................................         94,000         111,000
Interest income..................................................................       (697,000)       (189,000)
                                                                                   -------------  ---------------
Income (loss) before income taxes................................................      2,941,000        (446,000)
                                                                                   -------------  ---------------
Provision (benefit) for income taxes.............................................      1,214,000        (160,000)
                                                                                   -------------  ---------------
Net income (loss)................................................................  $   1,727,000   $    (286,000)
                                                                                   -------------  ---------------
                                                                                   -------------  ---------------
Basic net income per share.......................................................  $        0.16  $        (0.03 )
                                                                                   -------------  ---------------
                                                                                   -------------  ---------------
Diluted net income per share.....................................................  $        0.15  $        (0.03 )
                                                                                   -------------  ---------------
                                                                                   -------------  ---------------
Weighted average number of common shares outstanding--Basic......................     10,624,500      10,257,808
                                                                                   -------------  ---------------
                                                                                   -------------  ---------------
Weighted average number of common shares and common equivalent shares
  outstanding--Diluted...........................................................     11,209,545      10,257,808
                                                                                   -------------  ---------------
                                                                                   -------------  ---------------
</TABLE>
 
            See accompanying notes to Condensed Financial Statements
 
                                       5
<PAGE>
                         WHEREHOUSE ENTERTAINMENT, INC.
 
                       CONDENSED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                                     ----------------------------
                                                                                       APRIL 30,      APRIL 30,
                                                                                         1998           1997
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
OPERATING ACTIVITIES:
  Net income (loss)................................................................  $   1,727,000  $    (286,000)
  Adjustments to reconcile net income (loss) to net cash (used in) provided by
    operating activities:
        Depreciation and amortization..............................................      1,643,000      1,617,000
        Rental amortization, included in cost of rental............................      3,760,000      6,544,000
        Book value of rental inventory dispositions, included in cost of rental....        937,000      1,397,000
        Changes in operating assets and liabilities
          Receivables..............................................................        426,000        618,000
          Prepaid inventory deposits...............................................              0      4,192,000
          Merchandise inventory....................................................     (4,211,000)     3,273,000
          Other current assets.....................................................        (31,000)       599,000
          Accounts payable, accrued expenses and other liabilities.................     (9,778,000)     1,388,000
          Rental inventory purchases...............................................     (4,163,000)    (6,271,000)
                                                                                     -------------  -------------
              Net cash (used in) provided by operating activities..................     (9,690,000)    13,071,000
INVESTING ACTIVITIES:
  Acquisition of property, equipment and improvements..............................       (203,000)      (553,000)
  (Increase) decrease in other assets..............................................       (103,000)        10,000
                                                                                     -------------  -------------
              Net cash used in investing activities................................       (306,000)      (543,000)
FINANCING ACTIVITIES:
  Interest on Notes receivables....................................................        (92,000)      --
  Principal payments on capital lease obligations and long-term debt...............        (35,000)      (214,000)
                                                                                     -------------  -------------
              Net cash used in financing activities................................       (127,000)      (214,000)
Net (decrease) increase in cash....................................................    (10,123,000)    12,314,000
Cash at beginning of the period....................................................     54,720,000      6,178,000
                                                                                     -------------  -------------
Cash at end of the period..........................................................  $  44,597,000  $  18,492,000
                                                                                     -------------  -------------
                                                                                     -------------  -------------
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
      Interest.....................................................................  $      16,000  $      26,000
      Income taxes.................................................................  $   6,879,000  $    --
</TABLE>
 
            See accompanying notes to Condensed Financial Statements
 
                                       6
<PAGE>
                         WHEREHOUSE ENTERTAINMENT, INC.
 
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
1. BASIS OF PRESENTATION
 
    The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended April 30, 1998
are not necessarily indicative of the results that may be expected for the year
ended January 31, 1999. Certain reclassifications of balances have been made to
the 1997 amounts to conform to the 1998 presentation. For further information,
refer to the financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended January 31, 1998.
 
2. REORGANIZATION UNDER CHAPTER 11
 
    The Company's Plan of Reorganization, (the "Plan") was confirmed by an order
of the Bankruptcy Court entered on January 7, 1997. The effective date of the
Plan occurred on January 31, 1997.
 
    Since the Plan Effective Date, the Bankruptcy Court has retained
jurisdiction over certain claims and other matters relating to the Bankruptcy
estates of the company's predecessor, but the Company has been and is free to
carry out its business without oversight by the Bankruptcy Court.
 
    For a summary of the Plan of Reorganization, reference is made to the
Company's Annual Report on Form 10-K for the year ended January 31, 1998.
 
    On January 31, 1997, the Company implemented the recommended accounting
principles for entities emerging from Chapter 11 set forth in the American
Institute of Certified Public Accountants Statement of Position 90-7 on
Financial Reporting by Entities in Reorganization under the Bankruptcy Code (SOP
90-7). This resulted in the use of fresh start reporting, since the
reorganization value, as defined, was less than the total of all post-petition
liabilities and pre-petition claims, and holders of voting shares immediately
before confirmation of the Plan received less than fifty percent of the voting
shares of the emerging entity. Under this concept, all assets and liabilities
were restated to reflect the reorganization value of the reorganized entity,
which approximated its fair value at the date of reorganization. In addition,
the accumulated deficit of the Company was eliminated and its capital structure
was recast in conformity with the Plan.
 
3. REVOLVING CREDIT FACILITY
 
    Pursuant to the Plan, the Company entered into a loan and security agreement
with Congress Financial Corporation (Western) (the "Congress Facility"), which
provides a borrowing capacity of up to $30,000,000 with a letter of credit
subfacility of $10,000,000, subject to borrowing base limitations based upon,
among other things, the value of certain eligible merchandise inventory. The
Congress facility prohibits the Company from declaring or paying dividends on
its classes of capital stock, including the common stock, in excess of an
aggregate of $6.0 million, unless certain financial performance targets set
forth in the Congress Facility are met. As of April 30, 1998, there were no
borrowings outstanding under the Congress Facility, although $700,000 of letters
of credit were outstanding.
 
                                       7
<PAGE>
                         WHEREHOUSE ENTERTAINMENT, INC.
 
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                            (UNAUDITED) (CONTINUED)
 
4. NET INCOME PER SHARE
 
    During the fiscal year ended January 31, 1998, the Company adopted Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share". In
accordance with SFAS 128, primary earnings per share have been replaced with
basic earnings per share, and fully diluted earnings per share have been
replaced with diluted earnings per share which includes potentially dilutive
securities such as outstanding options. Prior periods have been presented to
conform to SFAS 128. There is no established trading market for the voting stock
of the Company. The Company, in order, to arrive at an average market price for
the diluted earnings per share computation obtains market data of stock
transactions from an independent stock broker including the number of shares and
the bid or asked price of the shares during the period.
 
                                       8
<PAGE>
                         WHEREHOUSE ENTERTAINMENT, INC.
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION
 
INTRODUCTION
 
    This discussion should be read in conjunction with the financial statements,
related notes and Management's Discussion and Analysis of Financial Condition
and Results of Operation contained in the Company's Annual Report on Form 10-K
for the year ended January 31, 1998.
 
RESULTS OF OPERATIONS
 
    FOR THE QUARTERS ENDED APRIL 30, 1998 AND APRIL 30, 1997
 
    Net revenues were $70.5 million and $73.2 million for the quarters ended
April 30, 1998 and 1997, respectively. The decrease of $2.7 million or 3.6% in
total revenue results from an increase in merchandise sales of $1.4 million
combined with a decrease in rental revenue of $4.1 million. The Company believes
that the decrease in rental revenue was attributable to continued competition,
reduction in the number of stores offering rental product and a general
softening in rental consumer spending nationwide.
 
    A summary of total net merchandise sales and rental revenues, by product
category, is provided below:
 
                   NET MERCHANDISE SALES AND RENTAL REVENUES
                            BY MERCHANDISE CATEGORY
                          (DOLLAR AMOUNTS IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                                                      QUARTER ENDED
                                                                                                        APRIL 30,
                                                                                                   --------------------
                                                                                                     1998       1997
                                                                                                   ---------  ---------
<S>                                                                                                <C>        <C>
Net Merchandise Sales:
  Music..........................................................................................  $    53.8  $    51.8
  Other, principally sales of new video cassettes, video game software and hardware, general
    merchandise and ticket commissions...........................................................        7.5        8.1
                                                                                                   ---------  ---------
      Total merchandise sales....................................................................  $    61.3  $    59.9
Videocassette and other rental revenue...........................................................        9.2       13.3
                                                                                                   ---------  ---------
        Total revenues...........................................................................  $    70.5  $    73.2
                                                                                                   ---------  ---------
                                                                                                   ---------  ---------
</TABLE>
 
    The sale of pre-recorded music, new video cassettes, digital versatile disks
(DVD's), video game software and hardware and general merchandise continue to
represent the greatest portion of the Company's revenues. For the quarter ended
April 30, 1998, net merchandise sales represented 86.9% of aggregate revenues.
Net merchandise sales were $61.3 million versus $59.9 million for the quarters
ended April 30, 1998 and April 30, 1997, respectively, representing an overall
increase of 2.2%. Management believes that the increase of 2.2% was largely the
result of an expanded catalog offering and the favorable impact of competitor's
store closures. On a same store sales basis net merchandise sales increased by
6.0% during the quarter ended April 30, 1998, as compared to the quarter ended
April 30, 1997. Merchandise sales as a percentage of aggregate net revenues
increased 5.0% to 86.9% during the quarter ended April 30, 1998 versus 81.9%
during the quarter ended April 30, 1997.
 
    Rental revenue includes the rental of videocassettes, video games and game
players, audiocassette books, and sales of previously viewed videocassettes and
used video games. Approximately 160 of the Company's stores currently offer
rental products. Rental revenue was $9.2 million versus $13.3 million
 
                                       9
<PAGE>
during the quarters ended April 30, 1998 and April 30, 1997, respectively,
representing a decrease of $4.0 million or 30.1%. The Company believes that the
decrease in rental revenue was attributable to continued competition, reduction
in the number of Company stores offering rental product and general softening in
rental consumer spending nationwide. This trend may continue and it is
anticipated the Company may, in future periods, experience increased competition
and that such competition may result in continued pressure on revenues and gross
profit margins.
 
    Cost of sales decreased $0.1 million to $38.2 million for the quarter ended
April 30, 1998 versus $38.3 million for the quarter ended April 30, 1997,
representing a decrease of 0.4%. As a percentage of net merchandise sales, costs
of sales decreased 1.6% to 62.3% during the quarter ended April 30, 1998 versus
63.9% during the quarter ended April 30, 1997. The 1.6% decrease in cost of
sales as a percentage of net merchandise sales was principally due to higher
initial gross margins and an increase in prompt payment discounts.
 
    Cost of rentals, including amortization, decreased to $4.8 million during
the quarter ended April 30, 1998, a decrease of $3.1 million or 39.1%, versus
$7.8 million during the quarter ended April 30, 1997. As a percentage of rental
revenue, cost of rentals decreased to 51.5% during the quarter ended April 30,
1998 versus 59.1% during the quarter ended April 30, 1997, representing a
decrease of 7.6%. The decrease is due to lower rental amortization resulting
from a reduction in rental purchases versus the quarter ended April 30, 1997.
 
    Selling, general and administrative expenses, were $23.6 million versus
$26.0 million for the quarters ended April 30, 1998 and April 30, 1997,
respectively, a decrease of $2.4 million or 9.0%. As a percentage of net
revenues, selling, general and administrative expenses, were 33.5% during the
quarter ended April 30, 1998 versus 35.5% during the quarter ended April 30,
1997, representing a decrease of 2.0%. The 2.0% decrease was principally due to
reductions in payroll, advertising and administrative expenses.
 
    Income from operations for the quarter ended April 30, 1998 was $2.3 million
as compared to a $0.5 million loss for the quarter ended April 30, 1997, an
improvement of $2.8 million. The improvement in income from operations was
primarily the result of lower cost of sales, lower cost of rental revenue, and
lower payroll and SG&A expenses which resulted from the successful
implementation of expense reduction initiatives. During the quarter ended April
30, 1998 the Company closed three additional stores. As of April 30, 1998 the
Company operated 220 stores in seven states.
 
    EBITDA represents income from operations, plus depreciation and
amortization. It is management's belief that due to the combined format of
rental product and sale merchandise, a more appropriate calculation of EBITDA
(hereafter referred to as Adjusted EBITDA) should include the net difference
between rental amortization plus the book value of rental dispositions, versus
rental inventory purchased during the period. The Company has included certain
information concerning Adjusted EBITDA because management believes it would be
useful information for certain investors and analysts to analyze operating
performance and to determine the Company's ability to service debt. Adjusted
EBITDA for the quarter ended April 30, 1998, is $4.3 million versus $3.3 million
for the quarter ended April 30, 1997. Adjusted EBITDA excludes the non-cash
impact of rent expense accrued to recognize minimum rents in a straight-- line
basis over the term of the lease. Adjusted EBITDA for the quarter ended April
30, 1997, includes a non-recurring cash benefit of $0.9 million resulting from
the impact of one-time credits received from landlord concessions. The method of
calculating Adjusted EBITDA set forth above may be different from calculations
of EBITDA employed by other companies and, accordingly may not be directly
comparable to such other computations. Adjusted EBITDA should not be viewed as a
substitute for Generally Accepted Accounting Principles (GAAP) measurements such
as net income or cash flow from operations. Rather it is presented as
supplementary information.
 
    The Company recorded a tax provision of $1.2 million for the quarter ended
April 30, 1998 and $0.2 million tax benefit for the quarter ended April 30,
1997. The provision represents an effective tax rate of 41.3% which the Company
estimates will be its effective tax rate for the year ended January 31, 1999.
 
                                       10
<PAGE>
    The Company is currently under audit by the California Franchise Tax Board
("FTB") for tax years January 31, 1992, 1993 and 1994. The Company believes that
it has made adequate provision in the financial statements for this audit.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    During the quarter ended April 30, 1998, the Company's net cash used in
operating activities was $9.7 million as compared to $13.1 million being
provided by operations for the corresponding quarter of the prior fiscal year.
Net cash used in operating activities for the quarter ended April 30, 1998 is
principally due to a reduction in trade payables and increases in merchandise
inventory levels.
 
    Cash used in investing activities decreased by $0.2 million to $0.3 million
during the quarter ended April 30, 1998 from $0.5 million during the quarter
ended April 30, 1997, principally due to lower acquisitions of property,
equipment and improvements.
 
    Cash used in financing activities decreased $0.1 million to $0.1 million
during the quarter ended April 30, 1998 as compared to $0.2 million in prior
corresponding quarter.
 
    While the Company believes that cash balances and the current borrowing
facility (see Note 3 under Notes to Condensed Financial Statements) is adequate
to support operations for the remainder of the current fiscal year, there can be
no assurance as to the effect which any future changes in the Company's
operations may have on its liquidity.
 
    As of April 30, 1998 the Company had signed 4 lease commitments to open new
stores during the next twelve months.
 
INFLATION
 
    The Company believes that, except for changes in the minimum wage mandated
by the Federal government, inflation has not had a material effect on its
operations and its internal and external sources of liquidity and working
capital.
 
SEASONALITY
 
    The Company's business is seasonal in nature, with the highest sales and
earnings occurring in the fourth quarter of its fiscal year, ending January
31st, which includes the Christmas selling season.
 
IMPACT OF 2000
 
    The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, issue purchase
orders, or engage in similar normal business activities.
 
    The Company has determined that it will be required to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The Company also has
initiated formal communications with its significant suppliers and large
customers to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. The Company is in the process of completing estimates and confirming its
systems strategy. Based upon information available at this time, the Company
estimates that the cost associated with replacing or modifying its systems in
order to comply with Year 2000 requirements will be between $2.0 million and
$3.0 million. This estimate is subject to further revision based on facts and
circumstances encountered during the project. The Company presently believes
that with modifications to existing software and conversions to new software,
the Year 2000 issue will not pose
 
                                       11
<PAGE>
significant operational problems for its computer systems. The Company will use
both internal and external resources to reprogram, or replace, and test the
software for Year 2000 modifications. The Company anticipates completing the
Year 2000 project prior to any anticipated impact on its operating systems.
However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 issue could have a material effect on the
operations of the Company. Likewise, there can be no assurance that the systems
of other companies on which the Company's systems rely will be timely converted
and would not have a material adverse effect on the Company's systems.
 
                                    PART II
                               OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
    The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of its business. In the opinion of management,
all such matters are without merit or involve such amounts that unfavorable
disposition will not have a material impact on the financial position and
results of operations of the Company.
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
        (a) Exhibits
           27.0 Financial Data Schedule
 
        (b) Current Reports on Form 8-K
 
            None.
 
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<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized.
 
<TABLE>
<S>                             <C>
                                WHEREHOUSE ENTERTAINMENT, INC.
 
Date: June 15, 1998                       /s/ ANTONIO C. ALVAREZ
                                ------------------------------------------
                                          ANTONIO C. ALVAREZ, II
                                     CHAIRMAN OF THE BOARD AND CHIEF
                                     EXECUTIVE OFFICER, AND DIRECTOR
                                      (PRINCIPAL EXECUTIVE OFFICER)
 
Date: June 15, 1998                       /s/ ROBERT S. KELLEHER
                                ------------------------------------------
                                            ROBERT S. KELLEHER
                                        SENIOR VICE PRESIDENT AND
                                         CHIEF FINANCIAL OFFICER
                                   (PRINCIPAL FINANCIAL AND ACCOUNTING
                                                 OFFICER)
</TABLE>
 
                                       13