Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549



FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934for the quarterly period ended July 31, 2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934for the transition period
from                             to           
                  .


COMMISSION FILE NUMBER: 1-32315

NEW YORK & COMPANY, INC.(Exact name of registrant as specified in its charter)

DELAWARE(State of incorporation)

33-1031445(I.R.S. Employer Identification No.)450 West 33rd Street
5th Floor
New York, New York 10001(Address of Principal Executive Offices,
including Zip Code)

(212) 884-2000(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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

As of August 27, 2010, the registrant had 59,994,854 shares of common stock outstanding.



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Table of Contents

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATIONItem 1.

Financial Statements


1Item 2.

Management's Discussion and Analysis of Financial Condition and
Results of Operations


13Item 3.

Quantitative and Qualitative Disclosures About Market
Risk


23Item 4.

Controls and Procedures


24PART II. OTHER INFORMATIONItem 1.

Legal Proceedings


25Item 1A.

Risk Factors


25Item 2.

Unregistered Sales of Equity Securities and Use of
Proceeds


25Item 3.

Defaults Upon Senior Securities


25Item 4.

Removed and Reserved


25Item 5.

Other Information


25Item 6.

Exhibits


26


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Table of Contents

PART I.  FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

New York & Company, Inc. and Subsidiaries        Condensed Consolidated Statements of Operations        (Unaudited)

(Amounts in thousands, except per share amounts)

Three months
ended
July 31, 2010

Three months
ended
August 1, 2009

Six months
ended
July 31, 2010

Six months
ended
August 1, 2009Net sales

$
243,317

$
247,820

$
480,299

$
480,680Cost of goods sold, buying and occupancy costs


223,247


191,726


401,684


365,734Gross profit


20,070


56,094


78,615


114,946Selling, general and administrative expenses


84,864


64,000


152,112


131,368Restructuring charges


1,218





1,218


Operating loss


(66,012
)

(7,906
)

(74,715
)

(16,422
)Interest expense, net of interest income of $13, $59, $25, and $77, respectively


164


169


350


389Loss from continuing operations before income taxes


(66,176
)

(8,075
)

(75,065
)

(16,811
)Provision (benefit) for income taxes


22,297


(3,246
)

18,267


(7,094
)Loss from continuing operations


(88,473
)

(4,829
)

(93,332
)

(9,717
)Income from discontinued operations, net of taxes











3Net loss

$
(88,473
)
$
(4,829
)
$
(93,332
)
$
(9,714
)Basic loss per share:Basic loss per share from continuing operations

$
(1.49
)
$
(0.08
)
$
(1.57
)
$
(0.16
)Basic earnings per share from discontinued operations











Basic loss per share

$
(1.49
)
$
(0.08
)
$
(1.57
)
$
(0.16
)Diluted loss per share:Diluted loss per share from continuing operations

$
(1.49
)
$
(0.08
)
$
(1.57
)
$
(0.16
)Diluted earnings per share from discontinued operations











Diluted loss per share

$
(1.49
)
$
(0.08
)
$
(1.57
)
$
(0.16
)Weighted average shares outstanding:Basic shares of common stock


59,396


59,320


59,367


59,681Diluted shares of common stock


59,396


59,320


59,367


59,681


See
accompanying notes.

1

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Table of Contents

New York & Company, Inc. and Subsidiaries        Condensed Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)

July 31,
2010

January 30,
2010

August 1,
2009(Unaudited)

(Audited)

(Unaudited)AssetsCurrent assets:Cash and cash equivalents

$
19,995

$
87,296

$
53,059Accounts receivable


17,589


9,447


13,155Income taxes receivable


3,000


3,000


Inventories, net


91,510


87,059


87,277Prepaid expenses


21,682


22,608


24,371Other current assets


1,120


1,417


2,109Current assets of discontinued operations


108


108


109Total current assets


155,004


210,935


180,080Property and equipment, net


159,092


187,079


202,372Intangible assets


14,879


14,879


14,879Deferred income taxes


3,361


22,637


22,534Other assets


848


997


1,174Total assets

$
333,184

$
436,527

$
421,039Liabilities and stockholders' equityCurrent liabilities:Current portionlong-term debt

$
6,000

$
6,000

$
6,000Accounts payable


75,408


72,019


61,138Accrued expenses


49,728


58,932


48,480Income taxes payable


2,265


991


Deferred income taxes


3,361


4,774


2,899Current liabilities of discontinued operations


265


265


268Total current liabilities


137,027


142,981


118,785Long-term debt, net of current portion


4,500


7,500


10,500Deferred rent


70,220


72,020


74,393Other liabilities


5,533


5,862


6,971Total liabilities


217,280


228,363


210,649Stockholders' equity:Common stock, voting, par value $0.001; 300,000 shares authorized; 59,744, 59,396 and 59,177 shares issued and outstanding at July 31, 2010,
January 30, 2010, and August 1, 2009, respectively


60


60


60Additional paid-in capital


155,567


154,495


153,335Retained (deficit) earnings


(34,655
)

58,677


62,444Accumulated other comprehensive loss


(1,671
)

(1,671
)

(2,052
)Treasury stock at cost; 1,000 shares at July 31, 2010, January 30, 2010 and August 1, 2009


(3,397
)

(3,397
)

(3,397
)Total stockholders' equity


115,904


208,164


210,390Total liabilities and stockholders' equity

$
333,184

$
436,527

$
421,039


See
accompanying notes.

2

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Table of Contents

New York & Company, Inc. and Subsidiaries        Condensed Consolidated Statements of Cash Flows        (Unaudited)

(Amounts in thousands)

Six months
ended
July 31, 2010

Six months
ended
August 1, 2009Operating activitiesNet loss

$
(93,332
)
$
(9,714
)Less: Income from discontinued operations, net of taxes





3Loss from continuing operations


(93,332
)

(9,717
)Adjustments to reconcile net loss to net cash (used in) provided by operating activities of continuing operations:Depreciation and amortization


21,096


20,886Loss from impairment charges


16,283


Amortization of deferred financing costs


108


108Share-based compensation expense


1,056


945Deferred income taxes


17,863


(6,758
)Changes in operating assets and liabilities:Accounts receivable


(8,142
)

(1,162
)Income taxes receivable





10,202Inventories, net


(4,451
)

17,584Prepaid expenses


926


239Accounts payable


3,389


(7,293
)Accrued expenses


(9,204
)

(12,641
)Income taxes payable


1,274


Deferred rent


(1,800
)

(1,455
)Other assets and liabilities


(39
)

125Net cash (used in) provided by operating activities of continuing operations


(54,973
)

11,063Investing activitiesCapital expenditures


(9,344
)

(5,944
)Net cash used in investing activities of continuing operations


(9,344
)

(5,944
)Financing activitiesRepayment of debt


(3,000
)

(3,000
)Purchase of treasury stock





(3,417
)Proceeds from exercise of stock options


16


58Excess tax benefit from exercise of stock options





22Net cash used in financing activities of continuing operations


(2,984
)

(6,337
)Cash flows from discontinued operationsOperating cash flows





(4
)Investing cash flows





Financing cash flows





Net cash used in discontinued operations





(4
)Net decrease in cash and cash equivalents


(67,301
)

(1,222
)Cash and cash equivalents at beginning of period (including cash at discontinued operations of $0 and $1, respectively)


87,296


54,281Cash and cash equivalents at end of period (continuing operations only)

$
19,995

$
53,059


See
accompanying notes.

3

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Table of Contents

New York & Company, Inc.        Notes to Condensed Consolidated Financial Statements        July 31, 2010        (Unaudited)

1. Organization and Basis of Presentation

New York & Company, Inc. (together with its subsidiaries, collectively the "Company") is a leading specialty retailer of women's fashion apparel and accessories offering
"NY Style" at Great Deals. The Company's proprietary branded New York & Company® merchandise is sold exclusively through its national network of retail stores and
E-commerce store atwww.nyandcompany.com. The target customers for the Company's merchandise are fashion-conscious, value-sensitive women
between the ages of 25 and 45. As of July 31, 2010, the Company operated 581 stores in 43 states.

The
accompanying condensed consolidated financial statements include the accounts for New York & Company, Inc. and Lerner New York Holding, Inc. ("Lerner Holding")
and its wholly owned
subsidiaries, which include Lerner New York, Inc. (and its wholly owned subsidiaries, which includes Lerner New York Outlet, Inc.), Lernco, Inc. and Nevada Receivable
Factoring, Inc. On a stand alone basis, without the consolidation of Lerner Holding and its subsidiaries, New York & Company, Inc. has no significant independent assets or
operations. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying condensed consolidated financial statements
reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the financial condition, results of operations and cash flows for the interim periods.

The
condensed consolidated financial statements as of July 31, 2010 and August 1, 2009 and for the 13 weeks ("three months") and 26 weeks ("six months") ended
July 31, 2010 and August 1, 2009 are unaudited and are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). Accordingly, these
unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the 52-week fiscal year ended
January 30, 2010 ("fiscal year 2009"), which were filed with the Company's Annual Report on Form 10-K with the SEC on April 6, 2010. The 52-week fiscal
year ending January 29, 2011 is referred to herein as "fiscal year 2010." The Company's fiscal year is a 52- or 53-week year that ends on the Saturday closest to
January 31.

Due
to seasonal variations in the retail industry, the results of operations for any interim period are not necessarily indicative of the results expected for the full fiscal year.

2. Restructuring

On January 8, 2009, the Company announced the launch of a multi-year restructuring and cost reduction program that is expected to generate approximately
$175 million in pre-tax savings over a five-year period. This program is designed to streamline the Company's organization by reducing costs and eliminating
underperforming assets while enhancing efficiency and profitability.

The
key components of the restructuring and cost reduction program include:



4

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Table of Contents

New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2010

(Unaudited)

2. Restructuring (Continued)



In
total, the Company recorded pre-tax restructuring charges of $24.5 million during the fourth quarter of fiscal year 2008, which includes a non-cash
charge of $22.9 million related to the impairment of store assets and a $1.7 million cash charge related primarily to severance and other costs necessary to implement the restructuring
and cost reduction program. In addition, during the third and fourth quarters of fiscal year 2009, the Company recorded additional pre-tax restructuring charges totaling
$2.4 million, which includes a non-cash charge of $1.2 million related to the impairment of store assets and $1.2 million of cash charges related to severance.

As
previously announced, the Company is exiting an underperforming test accessories concept consisting of five stores. In connection with the exit of this concept, during the second
quarter of fiscal year 2010, the Company recorded pre-tax restructuring charges totaling $2.1 million, which consists of non-cash charges of $1.1 million related
to the impairment of store assets, $0.8 million related to the write-off of inventory and $0.1 million of severance costs. The asset impairment charges and severance costs
totaling $1.2 million are reported in "Restructuring charges" and the inventory write-off of $0.8 million is reported in "Cost of goods sold, buying and occupancy costs" on
the Company's condensed consolidated statements of operations.

As
of July 31, 2010 and January 30, 2010, severance related accruals of approximately $0.6 million and $1.0 million, respectively, are included in accrued
expenses on the condensed consolidated balance sheets. As of July 31, 2010, the Company had paid approximately $2.5 million in total for severance liabilities related to the
restructuring and cost reduction program.

The
Company does not currently expect to record any material restructuring charges for these matters during the remainder of fiscal year 2010.

3. Earnings Per Share

Basic (loss) earnings per share are computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding for the period. Except when the effect
would be anti-dilutive at the continuing operations level, diluted (loss) earnings per share are calculated based on the weighted average number of outstanding shares of common stock plus
the dilutive effect of share-based awards (stock options, unvested restricted stock, stock appreciation rights and performance

5

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Table of Contents

New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2010

(Unaudited)

3. Earnings Per Share (Continued)

awards)
calculated under the treasury stock method. A reconciliation between basic and diluted (loss) earnings per share is as follows:

Three months
ended
July 31, 2010

Three months
ended
August 1, 2009

Six months
ended
July 31, 2010

Six months
ended
August 1, 2009(Amounts in thousands, except per share amounts)Loss from continuing operations

$
(88,473
)
$
(4,829
)
$
(93,332
)
$
(9,717
)Income from discontinued operations, net of taxes











3Net loss

$
(88,473
)
$
(4,829
)
$
(93,332
)
$
(9,714
)Basic loss per shareWeighted average shares outstanding:Basic shares of common stock


59,396


59,320


59,367


59,681Basic loss per share from continuing operations

$
(1.49
)
$
(0.08
)
$
(1.57
)
$
(0.16
)Basic earnings per share from discontinued operations











Basic loss per share

$
(1.49
)
$
(0.08
)
$
(1.57
)
$
(0.16
)Diluted loss per shareWeighted average shares outstanding:Basic shares of common stock


59,396


59,320


59,367


59,681Plus impact of share-based awards











Diluted shares of common stock


59,396


59,320


59,367


59,681Diluted loss per share from continuing operations

$
(1.49
)
$
(0.08
)
$
(1.57
)
$
(0.16
)Diluted earnings per share from discontinued operations











Diluted loss per share

$
(1.49
)
$
(0.08
)
$
(1.57
)
$
(0.16
)


The
calculation of diluted loss per share for the three and six months ended July 31, 2010 excludes 4,993,626 and 4,340,495 potential shares, respectively, due to their
anti-dilutive effect. The calculation of diluted loss per share for the three and six months ended August 1, 2009 excludes 3,937,819 and 3,834,762 potential shares, respectively,
due to their anti-dilutive effect.

4. Share-Based Compensation

The Company accounts for all share-based payments in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards CodificationTM ("ASC") Topic 718,
"CompensationStock Compensation" ("ASC 718"). ASC 718 requires that the cost resulting from all share-based

6

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Table of Contents

New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2010

(Unaudited)

4. Share-Based Compensation (Continued)

payment
transactions be treated as compensation and recognized in the consolidated financial statements.

The
Company recorded share-based compensation expense in the amount of $0.6 million and $0.5 million for the three months ended July 31, 2010 and August 1,
2009, respectively, and $1.1 million and $0.9 million for the six months ended July 31, 2010 and August 1, 2009, respectively.

On
April 1, 2010, in connection with the Company's annual performance review process for all associates, the Company issued 540,000 shares of restricted stock and 770,000 stock
appreciation rights ("SAR"), all of which are scheduled to vest on April 1, 2013, subject to continued employment with the Company through such date. In connection with the appointment of
Gregory Scott as the Company's President on June 1, 2010, Mr. Scott received an award of 750,000 SARs that vest in four equal annual installments through June 1, 2014, subject to
continued employment with the Company through such date. Each SAR represents the right to receive a payment measured by the increase in the fair market value of one share of common stock from the date
of grant of the SAR to the date of exercise of the SAR. Upon exercise, the SARs will be settled in stock.

The
fair value of restricted stock is based on the closing stock price of an unrestricted share of the Company's common stock on the grant date, which on April 1, 2010 was $4.79.
The fair value of a SAR is calculated using the Black-Scholes option-pricing model, which for the April 1, 2010 SARs resulted in a fair value of $2.90 per SAR and for the June 1, 2010
SARs resulted in a fair value of $2.40 per SAR.
Total compensation expense related to the restricted stock and SARs granted will be recognized in the consolidated financial statements on a straight-line basis over the requisite service
period of the awards.

During
the six months ended July 31, 2010, 82,769 shares of common stock were issued upon exercise of stock options.

5. Pension Plan

The Company sponsors a single employer defined benefit pension plan (the "plan") covering substantially all union employees. Employees covered by collective bargaining agreements are
primarily non-management store associates, representing approximately 9% of the Company's total employees. The collective bargaining agreement with the Local 1102 unit of the Retail,
Wholesale and Department Store Union ("RWDSU") AFL-CIO has been extended indefinitely, subject to 30 days advance notice by either party to negotiate a modification to the agreement
or to terminate the agreement.

The
plan provides retirement benefits for union employees who have attained the age of 21 and complete 1,000 or more hours of service in any calendar year following the date of
employment. The plan provides benefits based on length of service. The Company's funding policy for the pension plan is to contribute annually the amount necessary to provide for benefits based on
accrued service. The

7

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Table of Contents

New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2010

(Unaudited)

5. Pension Plan (Continued)

Company
anticipates contributing approximately $0.8 million to the plan during fiscal year 2010. Net periodic benefit cost includes the following components:

Three months
ended
July 31, 2010

Three months
ended
August 1, 2009

Six months
ended
July 31, 2010

Six months
ended
August 1, 2009(Amounts in thousands)Service cost

$
83

$
67

$
166

$
134Interest cost


126


139


252


278Expected return on plan asset


(120
)

(103
)

(240
)

(206
)Amortization of unrecognized losses


32


36


64


72Net periodic benefit cost

$
121

$
139

$
242

$
278


6. Income Taxes

The Company files U.S. federal income tax returns and income tax returns in various state and local jurisdictions. In November 2008, the Internal Revenue Service ("IRS") began its
examination of the Company's U.S. federal income tax return for the 2006 tax year. During the third and fourth quarters of fiscal year 2009, the IRS communicated its intention to audit the Company's
2007 and 2008 federal income tax returns, as well as the Company's previously settled 2005 federal income tax return as a result of the Company's refund claims carrying back the Company's net
operating losses. In addition, the Company is subject to U.S. federal income tax examinations for the Company's 2009 tax year and each year thereafter and state and local income tax examinations for
the 2006 tax year and each year thereafter.

At
January 30, 2010, the Company reported a total liability of $2.5 million for unrecognized tax benefits, including interest and penalties, all of which would impact the
Company's effective tax rate if reversed. There were no material changes to the liability for unrecognized tax benefits during the six months ended July 31, 2010. The Company does not
anticipate any significant increases or decreases to the balance of unrecognized tax benefits during the next 12 months.

The
effective tax rate for the three months ended July 31, 2010 reflects a provision of 33.7%, as compared to a benefit of 40.2% for the three months ended August 1, 2009.
The effective tax rate for the six months ended July 31, 2010 reflects a provision of 24.3%, as compared to a benefit 42.2% for the six months ended August 1, 2009.

The
change in the effective tax rate during the three and six months ended July 31, 2010, as compared to the same periods last year, is primarily due to a $48.5 million
non-cash charge to income tax expense during the three months ended July 31, 2010, which includes a $48.0 million valuation allowance against the Company's deferred tax
assets and a $0.5 million reserve for uncertain tax positions. The valuation allowance at July 31, 2010 is comprised of a $17.9 million valuation allowance provided on the balance
of net deferred taxes at January 30, 2010 and a $30.1 million valuation allowance provided on the tax benefit resulting from the net operating losses and other deferred tax assets
generated during the six months ended July 31, 2010. The Company concluded that a full

8

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Table of Contents

New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2010

(Unaudited)

6. Income Taxes (Continued)

valuation
allowance against the Company's deferred tax assets was necessary in order to reflect the Company's assessment of its ability to realize the benefits of those deferred tax assets. The
Company made this determination after weighing both negative and positive evidence in accordance with FASB ASC Topic 740, "Income Taxes" ("ASC 740") which requires that deferred tax assets be reduced
by a valuation allowance, if based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in a future
period. The evidence weighed included a historical three-year cumulative loss related to earnings before taxes in addition to an assessment of sources of taxable income, existing tax
planning strategies, and future projections of earnings. The Company will continue to maintain a valuation allowance against its deferred tax assets until the Company believes it is more likely than
not that these assets will be realized in the future. If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more likely than not
standard under ASC 740, the valuation allowance would be reversed accordingly in the period that such determination is made.

7. Long-Term Debt and Credit Facilities

The Company's credit facilities currently consist of a term loan, of which $10.5 million was outstanding at July 31, 2010, and a $90.0 million revolving credit
facility (which includes a sub-facility available for issuance of letters of credit of up to $75.0 million), both having a maturity date of March 17, 2012. As of
July 31, 2010 and January 30, 2010, the Company had no borrowings outstanding under its revolving credit facility.

The
maximum borrowing availability under the Company's revolving credit facility is determined by a monthly borrowing base calculation that is based on the application of specified
advance rates against inventory and certain other eligible assets. As of July 31, 2010, the Company had availability under its revolving credit facility of $63.1 million, net of letters
of credit outstanding of $7.3 million, as compared to availability of $55.9 million, net of letters of credit outstanding of $7.9 million, as of August 1, 2009.

The
revolving loans under the credit facilities bear interest, at the Company's option, either at a floating rate equal to the Eurodollar rate plus a margin of between 1.00% and 1.25%
per year, depending upon the Company's financial performance, or the Prime rate. The Company pays the lenders under the revolving credit facility a monthly fee on outstanding commercial letters of
credit at a rate of 0.625% per year and on standby letters of credit at a rate of between 1.00% and 1.25% per year, depending upon the Company's financial performance, plus a monthly fee on a
proportion of the unused commitments under that facility at a rate of 0.20% per year. The term loan bears interest at a floating rate equal to the Eurodollar rate plus 2.50% per year. If any default
were to exist under the revolving credit facility and for so long as such default were to continue, at the option of the agent or lenders, the monthly fee on outstanding standby letters of credit may
increase to 3.25% per year, interest on the revolving loans may increase to 3.25% per year above the Eurodollar rate for Eurodollar rate loans and 2.00% per year above the Prime rate for all Prime
rate loans, and interest on the term loan may increase to the Eurodollar rate plus 4.50% per year.

The
Company's credit facilities contain certain covenants, including restrictions on the Company's ability to pay dividends on its common stock, incur additional indebtedness and to
prepay, redeem,

9

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Table of Contents

New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2010

(Unaudited)

7. Long-Term Debt and Credit Facilities (Continued)

defease
or purchase other debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, stock repurchases, acquisitions and for other purposes. The
terms of the Company's credit facilities also subject it to a minimum fixed charge coverage ratio of 1.00 to 1.00, if the Company's borrowing availability under its revolving credit facility plus
qualified cash falls below $30.0 million ($20.0 million during March and November). Should the Company fully repay its existing term loan, the Company will only be subject to the minimum
fixed charge coverage ratio in the event that borrowing availability under its revolving credit facility falls below $12.5 million. In addition, the Company is required at all times to maintain
minimum borrowing availability under its credit facility of $10.0 million. The Company is currently in compliance with the financial covenants referred to above.

The
lenders have been granted a pledge of the common stock of Lerner Holding and certain of its subsidiaries, and a first priority security interest in substantially all other tangible
and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the credit facilities. In addition, New York &
Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the credit facilities, and such guarantees are joint and several.

8. Fair Value Measurements

FASB ASC Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820") establishes a common definition for fair value to be applied to United States generally accepted accounting
principles ("GAAP") guidance requiring the use of fair value, establishes a framework for measuring fair value, and expands the disclosure about such fair value measurements. ASC 820 establishes a
three-level fair value hierarchy that requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs used
to measure fair value are as follows:

Level 1:

Observable inputs such as quoted prices in active markets;Level 2:

Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; andLevel 3:

Unobservable inputs in which there is little or no market data and require the reporting entity to develop its own assumptions.


The
Company's financial instruments consist of cash and cash equivalents, short-term trade receivables, accounts payable and long-term debt. The carrying values
on the balance sheet for cash and cash equivalents, short-term trade receivables, and accounts payable approximate their fair values due to the short-term maturities of such
items. The carrying value on the balance sheet for the Company's long-term debt approximates its fair value due to the variable interest rate it carries, and as such it is classified
within level 2 of the fair value hierarchy.

In
accordance with the provisions of FASB ASC Topic 360, "Property, Plant and Equipment" ("ASC 360"), during the three months ended July 31, 2010, certain long-lived
store assets held and used with a carrying value of $24.3 million were written down to their fair value of $8.0 million, resulting in a pre-tax non-cash
impairment charge of $16.3 million, of which $15.2 million relates to

10

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Table of Contents

New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2010

(Unaudited)

8. Fair Value Measurements (Continued)

underperforming
New York & Company stores and is reported in "Selling, general and administrative expenses" and $1.1 million relates to a test accessories concept and is reported in
"Restructuring charges" on the Company's condensed consolidated statements of operations. Refer to Note 2, "Restructuring" for other charges incurred in connection with exiting the
underperforming test accessories concept. The Company classifies these store assets within Level 3 of the fair value hierarchy. The Company evaluates long-lived assets for
recoverability in accordance with ASC 360 whenever events or changes in circumstances indicate that an asset may have been impaired. In evaluating an asset for recoverability, the Company estimates
the future cash flow expected to result from the use of the asset and eventual disposition and market data assumptions. If the sum of the expected future undiscounted cash flow is less than the
carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized.

9. Share Repurchases

On November 26, 2008, the Company announced that its board of directors had authorized the repurchase of up to 3,750,000 shares over a 12 month period. During fiscal year
2009, the Company repurchased 1,000,000 shares of its common stock at a cost of approximately $3.4 million.

On
November 18, 2009, the Company's board of directors authorized the extension of the share repurchase program for an additional 12 month period ending on
November 23, 2010. Repurchases, if any, will be made from time to time in the manner the Company believes appropriate, through open market or private transactions, including through
pre-established trading plans. During the six months ended July 31, 2010, the Company did not repurchase any shares of the Company's common stock under the Company's authorized
share repurchase program.

10. New Accounting Pronouncements

In May 2009, the FASB issued ASC Topic 855, "Subsequent Events" ("ASC 855"), which establishes general standards of accounting for the disclosure of events that occur after the balance
sheet date but before financial statements are issued or available to be issued. ASC 855 is effective for interim or
annual financial periods ending after June 15, 2009 and is applied prospectively. The Company adopted the provisions of ASC 855 effective August 1, 2009, with no material impact on its
financial position or results of operations. In February 2010, the FASB issued Accounting Standards Update ("ASU") No. 2010-09, "Subsequent Events" ("ASU 2010-09"),
which amends certain provisions of ASC 855 by removing the requirement for SEC filers to disclose the date through which subsequent events have been evaluated. ASU 2010-09 is effective
upon its issuance in February 2010, and its provisions have been adopted by the Company by the removal of the date subsequent events were evaluated in the footnotes to the Company's consolidated
financial statements. The adoption of ASU 2010-09 did not have any impact on the Company's financial position and results of operations.

In
January 2010, the FASB issued ASU No. 2010-06, "Improving Disclosures about Fair Value Measurements" ("ASU 2010-06"), which amends ASC 820 by providing
new disclosures and clarifying existing disclosures. ASU 2010-06 requires reporting entities to disclose separately the amounts of significant transfers in and out of Level 1 and
Level 2 fair value measurements and describe the

11

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

July 31, 2010

(Unaudited)

10. New Accounting Pronouncements (Continued)

reasons
for the transfers. In addition, ASU 2010-06 requires the presentation of separate information regarding purchases, sales, issuances, and settlements for Level 3 fair value
measurements. ASU 2010-06 also clarifies the existing disclosures about the level of disaggregation to require fair value measurement disclosures for each class of assets and liabilities
and clarifies that a description of inputs and valuation techniques used to measure fair value is required for both recurring and nonrecurring fair value measurements classified as Level 2 or
Level 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for disclosures
about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years. Except for the detailed Level 3 roll forward disclosures, the guidance in ASU 2010-06 was adopted by the Company on
January 31, 2010 with no material impact on its financial position and results of operations. The Company does not anticipate that the adoption of the remaining provisions of ASU
2010-06 regarding detailed Level 3 roll forward disclosures will have a material impact on its financial position or results of operations.

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS    (Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

This Quarterly Report on Form 10-Q includes forward looking statements. Certain matters discussed in "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations" and other sections of this Quarterly Report on
Form 10-Q are forward looking statements intended to qualify for safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Some of these
statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "may," "plan," "project," "predict" and similar expressions and
include references to assumptions that the Company believes are reasonable and relate to its future prospects, developments and business strategies. Factors that could cause the Company's actual
results to differ materially from those expressed or implied in such forward looking statements, include, but are not limited to those discussed under the heading "Item 3. Quantitative and
Qualitative Disclosures About Market Risk" in this Quarterly Report on Form 10-Q and:



13

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Table of Contents



The
Company undertakes no obligation to revise the forward looking statements included in this Quarterly Report on Form 10-Q to reflect any future events or
circumstances. The Company's actual results, performance or achievements could differ materially from the results expressed or implied by these forward looking statements.

Overview

The Company is a leading specialty retailer of women's fashion apparel and accessories offering "NY Style" at Great Deals. The
Company's proprietary branded New York & Company® merchandise is sold exclusively through its national network of retail stores and E-commerce store at www.nyandcompany.com. The target
customers for the
Company's merchandise are fashion-conscious, value-sensitive women between the ages of 25 and 45. As of July 31, 2010, the Company operated 581 stores in 43 states.

Net
sales for the three months ended July 31, 2010 decreased by 1.8% to $243.3 million, as compared to $247.8 million for the three months ended August 1,
2009. Comparable store sales decreased 1.8% for the three months ended July 31, 2010, as compared to a comparable store sales decrease of 16.4% for the three months ended August 1, 2009.
Despite a modest decrease in comparable store sales during the three months ended July 31, 2010, the Company experienced a 1,370 basis point decrease in merchandise margins resulting
from increased levels of promotional activity in order to drive sales and clear inventory in preparation for the fall season. The Company's net loss from continuing operations for the three months
ended July 31, 2010 was $88.5 million, or

14

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Table of Contents

$1.49
per diluted share, inclusive of a loss of $1.00 per diluted share attributable to the following pre-tax non-cash charges:



Capital
spending for the six months ended July 31, 2010 was $9.3 million, as compared to $5.9 million for the six months ended August 1, 2009. The
$9.3 million of capital spending represents $6.9 million related to the construction of 17 new stores, including 16 New York & Company Outlet stores, and the remodeling of two
existing stores, and $2.4 million related to non-store capital projects. Capital spending during the six months ended August 1, 2009 represents $2.6 million related to
the construction of six new stores and $3.4 million related to non-store capital projects.

The
Company views the retail apparel market as having two principal selling seasons: spring (first and second quarter) and fall (third and fourth quarter). The Company's business
experiences seasonal fluctuations in net sales and operating income, with a significant portion of its operating income typically realized during the fourth quarter. Seasonal fluctuations also affect
inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period in the fourth quarter.

General

Net Sales.Net sales consist of sales from comparable and non-comparable stores and the Company's E-commerce store. A store
is included in the comparable store sales calculation after it has completed 13 full fiscal months of operation from the store's original opening date or once it has been reopened after remodeling.
Beginning in February 2008, sales from the Company's E-commerce store are included in comparable store sales. Non-comparable store sales include stores which have not completed
13 full fiscal months of operations, sales from closed stores, and sales from stores closed or in temporary locations during periods of remodeling. In addition, in a year with 53 weeks, sales
in the last week of the year are not included in determining comparable store sales. Net sales from the sale of merchandise at the Company's stores are recognized when the customer takes possession of
the merchandise and the purchases are paid for, primarily with either cash or credit card. Net sales from the sale of merchandise at the Company's E-commerce store are recognized when the
merchandise is shipped to the customer. A reserve is provided for projected merchandise returns based on prior experience.

The
Company issues gift cards which do not contain provisions for expiration or inactivity fees. The portion of the dollar value of gift cards that ultimately is not used by customers to
make purchases is known as breakage. The Company estimates gift card breakage and records such amount as revenue as gift cards are redeemed. The Company's estimate of gift card breakage is based on
analysis of

15

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Table of Contents

historical
redemption patterns, as well as the remaining balance of gift cards for which the Company believes the likelihood of redemption to be remote.

Cost of Goods Sold, Buying and Occupancy Costs.Cost of goods sold, buying and occupancy costs is comprised of direct inventory costs
for merchandise
sold, distribution, payroll and related costs for design, sourcing, production, merchandising, planning and allocation personnel, and store occupancy and related costs.

Gross Profit.Gross profit represents net sales less cost of goods sold, buying and occupancy costs.

Selling, General and Administrative Expenses.Selling, general and administrative expenses include selling, store management and
corporate expenses,
including payroll and employee benefits, employment taxes, management information systems, marketing, insurance, legal, store pre-opening and other corporate level expenses. Store
pre-opening expenses include store level payroll, grand opening event marketing, travel, supplies and other store opening expenses.

Results of Operations

The following tables summarize the Company's results of operations as a percentage of net sales and selected store operating data for
the three and six months ended July 31, 2010 and August 1, 2009:

As a % of net sales

Three months
ended
July 31, 2010

Three months
ended
August 1, 2009

Six months
ended
July 31, 2010

Six months
ended
August 1, 2009Net sales


100.0
%

100.0
%

100.0
%

100.0
%Cost of goods sold, buying and occupancy costs


91.8
%

77.4
%

83.6
%

76.1
%Gross profit


8.2
%

22.6
%

16.4
%

23.9
%Selling, general and administrative expenses


34.8
%

25.8
%

31.7
%

27.3
%Restructuring charges


0.5
%


%

0.3
%


%Operating loss


(27.1
)%

(3.2
)%

(15.6
)%

(3.4
)%Interest expense, net


0.1
%

0.1
%

0.1
%

0.1
%Loss from continuing operations before income taxes


(27.2
)%

(3.3
)%

(15.7
)%

(3.5
)%Provision (benefit) for income taxes


9.2
%

(1.4
)%

3.7
%

(1.5
)%Loss from continuing operations


(36.4
)%

(1.9
)%

(19.4
)%

(2.0
)%Income from discontinued operations, net of taxes



%


%


%


%Net loss


(36.4
)%

(1.9
)%

(19.4
)%

(2.0
)%




Selected operating data:

Three months
ended
July 31, 2010

Three months
ended
August 1, 2009

Six months
ended
July 31, 2010

Six months
ended
August 1, 2009(Dollars in thousands, except square foot data)Comparable store sales (decrease) increase


(1.8
)%

(16.4
)%

0.5
%

(15.7
)%Net sales per average selling square foot(1)

$
76

$
75

$
151

$
146Net sales per average store(2)

$
420

$
420

$
830

$
815Average selling square footage per store(3)


5,481


5,587


5,481


5,587


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Three months
ended
July 31, 2010

Three months
ended
August 1, 2009

Six months
ended
July 31, 2010

Six months
ended
August 1, 2009Store count and selling square feet:

Store
Count

Selling
Square Feet

Store
Count

Selling
Square Feet

Store
Count

Selling
Square Feet

Store
Count

Selling
Square FeetStores open, beginning of period


579


3,197,637


588


3,289,949


576


3,193,602


589


3,294,779New stores


11


37,101


6


25,427


17


57,662


6


25,427Closed stores


(9
)

(49,452
)

(3
)

(13,168
)

(12
)

(62,863
)

(4
)

(17,998
)Net impact of remodeled stores on selling square feet





(989
)










(4,104
)




Stores open, end of period


581


3,184,297


591


3,302,208


581


3,184,297


591


3,302,208


Three Months Ended July 31, 2010 Compared to Three Months Ended August 1, 2009

Net Sales.Net sales for the three months ended July 31, 2010 decreased 1.8% to $243.3 million, as compared to
$247.8 million
for the three months ended August 1, 2009. The decrease in net sales is primarily driven by a 1.8% decrease in comparable store sales for the three months ended July 31, 2010, as
compared to a decrease of 16.4% for the three months ended August 1, 2009. In the comparable store base, average dollar sales per transaction decreased by 5.4%, while the number of transactions
per average store increased by 3.8%, as compared to the same period last year.

Gross Profit.Gross profit for the three months ended July 31, 2010 was $20.1 million, or 8.2% of net sales, as compared to
$56.1 million, or 22.6% of net sales, for the three months ended August 1, 2009. The decrease in gross profit as a percentage of net sales during the three months ended July 31,
2010 is primarily due to a 1,370 basis point decrease in merchandise margins resulting from increased levels of promotional activity in order to drive sales and clear inventory in preparation for the
fall season. In addition, the Company experienced a 70 basis point increase in buying and occupancy costs, primarily attributable to the loss of leverage due to negative comparable store sales.

Selling, General and Administrative Expenses.Selling, general and administrative expenses were $84.9 million, or 34.8% of net
sales, for the
three months ended July 31, 2010, as compared to $64.0 million, or 25.8% of net sales, for the three months ended August 1, 2009. The increase in selling, general and
administrative expenses as a percentage of net sales is primarily a result of non-cash charges totaling $15.7 million, of which $15.2 million relates to the impairment of New
York & Company store assets and $0.5 million relates to the disposal of certain information technology assets. In addition, the Company recorded charges totaling $2.1 million in
connection with state sales and use tax and payroll tax audits during the three months ended July 31, 2010. Also contributing to the increase in selling, general and administrative expenses as
a percentage of net sales during the three months ended July 31, 2010 is the 1.8% decrease in comparable store sales during the quarter.

Restructuring charges.As previously announced, the Company is exiting an underperforming test accessories concept consisting of five
stores. In
connection with the exit of this concept, during the three months ended July 31, 2010, the Company recorded $1.1 million of non-cash charges related to the impairment of
store assets and $0.1 million of severance costs, which are reported in "Restructuring charges" on the condensed consolidated statements of operations. In addition, the Company recorded a
$0.8 million charge related to the write-off of inventory, which is reported in "Cost of goods sold, buying and occupancy costs" on the condensed consolidated statements of
operations.

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Operating Loss.For the reasons discussed above, operating loss for the three months ended July 31, 2010 was $66.0 million, or
27.1% of
net sales, as compared to an operating loss of $7.9 million, or 3.2% of net sales, for the three months ended August 1, 2009.

Interest Expense, Net.Net interest expense was flat for the three months ended July 31, 2010, as compared to the three months
ended
August 1, 2009, at $0.2 million.

Provision (Benefit) for Income Taxes.The effective tax rate for the three months ended July 31, 2010 reflects a provision of 33.7%,
 as
compared to a benefit of 40.2% for the three months ended August 1, 2009. The change in the effective tax rate is primarily the result of a $48.5 million non-cash charge
recorded during the three months ended July 31, 2010, which includes a $48.0 million valuation allowance against the Company's deferred tax assets and a $0.5 million reserve for
uncertain tax positions. For further information related to the deferred tax valuation allowance, please refer to Note 6, "Income Taxes" in the Notes to Condensed Consolidated Financial
Statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Loss from Continuing Operations.For the reasons discussed above, loss from continuing operations for the three months ended
July 31, 2010 was
$88.5 million, or 36.4% of net sales, as compared to a loss from continuing operations of $4.8 million, or 1.9% of net sales, for the three months ended August 1, 2009.

Income from Discontinued Operations, Net of Taxes.Income from discontinued operations, net of taxes, represents the Company's
discontinued
JasmineSola business.

Six Months Ended July 31, 2010 Compared to Six Months Ended August 1, 2009

Net Sales.Net sales for the six months ended July 31, 2010 decreased 0.1% to $480.3 million, as compared to
$480.7 million for
the six months ended August 1, 2009. Comparable store sales for the six months ended July 31, 2010 increased by 0.5%, as compared to a decrease of 15.7% for the six months ended
August 1, 2009. In the comparable store base, average dollar sales per transaction decreased by 4.7%, while the number of transactions per average store increased by 5.5%, as compared to the
same period last year.

Gross Profit.Gross profit for the six months ended July 31, 2010 was $78.6 million, or 16.4% of net sales, as compared to
$114.9 million, or 23.9% of net sales, for the six months ended August 1, 2009. The decrease in gross profit as a percentage of net sales during the six months ended July 31, 2010
is due to a 810 basis point decrease in merchandise margins resulting from increased levels of promotional activity in order to drive sales and clear inventory in preparation for the fall season,
partially offset by a 60 basis point decrease in buying and occupancy costs, primarily attributable to the increase in comparable store sales combined with savings recognized from the Company's
restructuring and cost reduction program.

Selling, General and Administrative Expenses.Selling, general and administrative expenses were $152.1 million, or 31.7% of net
sales, for the
six months ended July 31, 2010, as compared to $131.4 million, or 27.3% of net sales, for the six months ended August 1, 2009. The increase in selling, general and administrative
expenses as a percentage of net sales is primarily a result of non-cash charges totaling $15.7 million, of which $15.2 million relates to the impairment of New York &
Company store assets and $0.5 million relates to the disposal of certain information technology assets. In addition, the Company recorded charges totaling $2.1 million in connection with
state sales and use tax and payroll tax audits during the three months ended July 31, 2010.

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Restructuring charges.As previously announced, the Company is exiting an underperforming test accessories concept consisting of five
stores. In
connection with the exit of this concept, during the three months ended July 31, 2010, the Company recorded $1.1 million of non-cash charges related to the impairment of
store assets and $0.1 million of severance costs, which is reported in "Restructuring charges" on the condensed consolidated statements of operations. In addition, the Company recorded a
$0.8 million charge related to the write-off of inventory, which is reported in "Cost of goods sold, buying and occupancy costs" on the condensed consolidated statements of
operations.

Operating Loss.For the reasons discussed above, operating loss for the six months ended July 31, 2010 was $74.7 million, or
15.6% of
net sales, as compared to an operating loss of $16.4 million, or 3.4% of net sales, for the six months ended August 1, 2009.

Interest Expense, Net.Net interest expense was flat for the six months ended July 31, 2010, as compared to the six months ended
August 1, 2009, at $0.4 million.

Provision (Benefit) for Income Taxes.The effective tax rate for the six months ended July 31, 2010 reflects a provision of 24.3%,
as compared
to a benefit of 42.2% for the six months ended August 1, 2009. The change in the effective tax rate is primarily the result of a $48.5 million non-cash charge recorded during
the three months ended July 31, 2010, which includes a $48.0 million valuation allowance against the Company's deferred tax assets and a $0.5 million reserve for uncertain tax
positions. For further information related to the deferred tax valuation allowance, please refer to Note 6, "Income Taxes" in the Notes to Condensed Consolidated Financial Statements appearing
elsewhere in this Quarterly Report on Form 10-Q.

Loss from Continuing Operations.For the reasons discussed above, loss from continuing operations for the six months ended July 31,
 2010 was
$93.3 million, or 19.4% of net sales, as compared to a loss from continuing operations of $9.7 million, or 2.0% of net sales, for the six months ended August 1, 2009.

Income from Discontinued Operations, Net of Taxes.Income from discontinued operations, net of taxes, represents the Company's
discontinued
JasmineSola business.

Non-GAAP Financial Measure

A reconciliation of the Company's GAAP to non-GAAP net loss from continuing operations and loss per diluted share for the
three and six months ended July 31, 2010 is indicated below. The Company has provided non-GAAP adjusted net loss and loss per diluted share information for the three and six months
ended July 31, 2010, in addition to providing financial results in accordance with GAAP. This information reflects, on a non-GAAP adjusted basis, the Company's net loss and loss per
diluted share after excluding the effects of charges incurred in connection with the Company's restructuring and cost reduction program in addition to certain non-cash charges incurred
during the three months ended July 31, 2010 that affect comparability to the prior year results. This non-GAAP financial information is provided to enhance the user's overall
understanding of the Company's current financial performance. Specifically, the Company believes the non-GAAP adjusted results provide useful information to both management and investors
by excluding expenses that the Company believes are not indicative of the Company's continuing operating results. The non-GAAP financial information should be considered in addition to,
not as a substitute for or as being superior to, measures of financial performance prepared in accordance with GAAP.

19

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Table of Contents

Reconciliation of GAAP to Non-GAAP Net Loss From Continuing Operations  and Loss Per Diluted Share

Three months ended
July 31, 2010

Six months ended
July 31, 2010Amounts in
thousands

Loss Per
Diluted Share

Amounts in
thousands

Loss Per
Diluted ShareGAAP net loss from continuing operations

$
(88,473
)
$
(1.49
)
$
(93,332
)
$
(1.57
)Add back charges affecting comparability:Restructuring charges(a)


1,234


0.02


1,234


0.02New York & Company asset impairments and disposals(b)


9,404


0.16


9,404


0.16Deferred tax valuation allowance and reserve for uncertain tax positions(c)


48,494


0.82


48,494


0.82Non-GAAP adjusted net loss from continuing operations(d)

$
(29,341
)
$
(0.49
)
$
(34,200
)
$
(0.58
)


---

Liquidity and Capital Resources

The Company's primary uses of cash are to fund working capital, operating expenses, debt service and capital expenditures related
primarily to the construction of new stores, remodeling of existing stores and development of the Company's information technology infrastructure. Historically, the Company has financed these
requirements from internally generated cash flow. The Company intends to fund its ongoing capital and working capital requirements, as well as debt service obligations, primarily through cash flows
from operations, supplemented by borrowings under its credit facilities, if needed. The Company is in compliance with all debt covenants as of July 31, 2010.

The
following tables contain information regarding the Company's liquidity and capital resources:

July 31,
2010

January 30,
2010

August 1,
2009(Amounts in thousands)Cash and cash equivalents

$
19,995

$
87,296

$
53,059Working capital

$
17,977

$
67,954

$
61,295


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Six months
ended
July 31, 2010

Six months
ended
August 1, 2009(Amounts in thousands)Net cash (used in) provided by operating activities of continuing operations

$
(54,973
)
$
11,063Net cash used in investing activities of continuing operations

$
(9,344
)
$
(5,944
)Net cash used in financing activities of continuing operations

$
(2,984
)
$
(6,337
)Net cash used in discontinued operations

$


$
(4
)Net decrease in cash and cash equivalents

$
(67,301
)
$
(1,222
)


Operating Activities of Continuing Operations

Net cash used in operating activities of continuing operations was $55.0 million for the six months ended July 31, 2010,
as compared to net cash provided by operating activities of continuing operations of $11.1 million for the six months ended August 1, 2009. The increase in net cash used in operating
activities for the six months ended July 31, 2010 is primarily due to the net loss from continuing operations during the six months ended July 31, 2010 and changes in accounts
receivable, income taxes receivable, inventories, deferred rent and other assets and liabilities, partially offset by changes in prepaid expenses, accounts payable, accrued expenses and income taxes
payable.

Investing Activities of Continuing Operations

Net cash used in investing activities of continuing operations was $9.3 million for the six months ended July 31, 2010,
as compared to $5.9 million of net cash used in investing activities of continuing operations for the six months ended August 1, 2009. Net cash used in investing activities during the
six months ended July 31, 2010 reflects capital expenditures of $6.9 million related to the construction of 17 new stores, including 16 New York & Company Outlet stores, and the
remodeling of two existing stores, and $2.4 million related to non-store capital projects. Net cash used in investing activities during the six months ended August 1, 2009
represents capital expenditures of $2.6 million related to the construction of six new stores and $3.4 million for non-store capital projects.

As
previously announced, the Company plans to open approximately 20 to 25 New York & Company Outlet stores during fiscal year 2010. As of July 31, 2010, the Company had
opened 16 New York & Company Outlet stores. The Company's future capital requirements will depend primarily on the number of new stores it opens, the number of existing stores it remodels and
the timing of these expenditures.

Financing Activities of Continuing Operations

Net cash used in financing activities of continuing operations was $3.0 million for the six months ended July 31, 2010,
as compared to $6.3 million of net cash used in financing activities of continuing operations for the six months ended August 1, 2009. Net cash used in financing activities for the six
months ended July 31, 2010 consists primarily of quarterly payments against the Company's outstanding term loan totaling $3.0 million. Net cash used in financing activities for the six
months ended August 1, 2009 consists of quarterly payments against the Company's outstanding term loan totaling $3.0 million plus $3.4 million used for the repurchase of 1,000,000
shares of the Company's common stock under its authorized share repurchase program, partially offset by $0.1 million of proceeds from the exercise of stock options and the related tax benefit
to the Company.

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Discontinued Operations Cash Flows

There were no material payments or receipts during the six months ended July 31, 2010 and August 1, 2009 that related to
the discontinued operations of JasmineSola.

Long-Term Debt and Credit Facilities

The Company's credit facilities currently consist of a term loan, of which $10.5 million was outstanding at July 31,
2010, and a $90.0 million revolving credit facility (which includes a sub-facility available for issuance of letters of credit of up to $75.0 million), both having a maturity
date of March 17, 2012. As of July 31, 2010 and January 30, 2010, the Company had no borrowings outstanding under its revolving credit facility.

The
maximum borrowing availability under the Company's revolving credit facility is determined by a monthly borrowing base calculation that is based on the application of specified
advance rates against inventory and certain other eligible assets. As of July 31, 2010, the Company had availability under its revolving credit facility of $63.1 million, net of letters
of credit outstanding of $7.3 million, as compared to availability of $55.9 million, net of letters of credit outstanding of $7.9 million, as of August 1, 2009.

The
revolving loans under the credit facilities bear interest, at the Company's option, either at a floating rate equal to the Eurodollar rate plus a margin of between 1.00% and 1.25%
per year, depending upon the Company's financial performance, or the Prime rate. The Company pays the lenders under the revolving credit facility a monthly fee on outstanding commercial letters of
credit at a rate of 0.625% per year and on standby letters of credit at a rate of between 1.00% and 1.25% per year, depending upon the Company's financial performance, plus a monthly fee on a
proportion of the unused commitments under that facility at a rate of 0.20% per year. The term loan bears interest at a floating rate equal to the Eurodollar rate plus 2.50% per year. If any default
were to exist under the revolving credit facility and for so long as such default were to continue, at the option of the agent or lenders, the monthly fee on outstanding standby letters of credit may
increase to 3.25% per year, interest on the revolving loans may increase to 3.25% per year above the Eurodollar rate for Eurodollar rate loans and 2.00% per year above the Prime rate for all Prime
rate loans, and interest on the term loan may increase to the Eurodollar rate plus 4.50% per year.

The
Company's credit facilities contain certain covenants, including restrictions on the Company's ability to pay dividends on its common stock, incur additional indebtedness and to
prepay, redeem, defease or purchase other debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, stock repurchases, acquisitions and for other
purposes. The terms of the Company's credit facilities also subject it to a minimum fixed charge coverage ratio of 1.00 to
1.00, if the Company's borrowing availability under its revolving credit facility plus qualified cash falls below $30.0 million ($20.0 million during March and November). Should the
Company fully repay its existing term loan, the Company will only be subject to the minimum fixed charge coverage ratio in the event that borrowing availability under its revolving credit facility
falls below $12.5 million. In addition, the Company is required at all times to maintain minimum borrowing availability under its credit facility of $10.0 million. The Company is
currently in compliance with the financial covenants referred to above.

The
lenders have been granted a pledge of the common stock of Lerner Holding and certain of its subsidiaries, and a first priority security interest in substantially all other tangible
and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the credit facilities. In addition, New York &
Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the credit facilities, and such guarantees are joint and several.

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Critical Accounting Policies

Management has determined that the Company's most critical accounting policies are those related to inventory valuation, impairment of
long-lived assets, goodwill and other intangible assets, and income taxes. Management continues to monitor these accounting policies to ensure proper application of current rules and
regulations. There have been no significant changes to these policies as discussed in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2010.

Adoption of New Accounting Standards

In May 2009, the FASB issued ASC Topic 855, "Subsequent Events" ("ASC 855"), which establishes general standards of accounting for the
disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. ASC 855 is effective for interim or annual financial periods ending
after June 15, 2009 and is applied prospectively. The Company adopted the provisions of ASC 855 effective August 1, 2009, with no material impact on its financial position or results of
operations. In February 2010, the FASB issued ASU No. 2010-09, "Subsequent Events" ("ASU 2010-09"), which amends certain provisions of ASC 855 by removing the
requirement for SEC filers to disclose the date through
which subsequent events have been evaluated. ASU 2010-09 is effective upon its issuance in February 2010, and its provisions have been adopted by the Company by the removal of the date
subsequent events were evaluated in the footnotes to the Company's consolidated financial statements. The adoption of ASU 2010-09 did not have any impact on the Company's financial
position and results of operations.

In
January 2010, the FASB issued ASU No. 2010-06, "Improving Disclosures about Fair Value Measurements" ("ASU 2010-06"), which amends ASC 820 by providing
new disclosures and clarifying existing disclosures. ASU 2010-06 requires reporting entities to disclose separately the amounts of significant transfers in and out of Level 1 and
Level 2 fair value measurements and describe the reasons for the transfers. In addition, ASU 2010-06 requires the presentation of separate information regarding purchases, sales,
issuances, and settlements for Level 3 fair value measurements. ASU 2010-06 also clarifies the existing disclosures about the level of disaggregation to require fair value
measurement disclosures for each class of assets and liabilities and clarifies that a description of inputs and valuation techniques used to measure fair value is required for both recurring and
nonrecurring fair value measurements classified as Level 2 or Level 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting
periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements,
which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Except for the detailed Level 3 roll forward disclosures, the
guidance in ASU 2010-06 was adopted by the Company on January 31, 2010 with no material impact on its financial position and results of operations. The Company does not anticipate
that the adoption of the remaining provisions of ASU 2010-06 regarding detailed Level 3 roll forward disclosures will have a material impact on its financial position or results of
operations.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates.The Company's market risks relate primarily to changes in interest rates. The Company's credit facilities carry
floating interest
rates that are tied to the Eurodollar rate and the Prime rate and therefore, the consolidated statements of operations and the consolidated statements of cash flows will be exposed to changes in
interest rates. A 1.0% interest rate increase would increase interest expenses by approximately $0.1 million annually. The Company historically has not engaged in interest rate hedging
activities.

Currency Exchange Rates.The Company historically has not been exposed to currency exchange rate risks with respect to inventory
purchases as such
expenditures have been, and continue to be,

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denominated
in U.S. Dollars. The Company purchases some of its inventory from suppliers in China, for which the Company pays U.S. Dollars. Since July 2005, China has been slowly increasing the value
of the Chinese Yuan, which is now linked to a basket of world currencies. If the exchange rate of the Chinese Yuan to the U.S. Dollar continues to increase, the Company may experience fluctuations in
the cost of inventory purchased from China and the Company would adjust its supply chain accordingly.

ITEM 4.    CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures.The Company carried out an evaluation, as of
July 31, 2010, under the supervision and with the participation of the Company's management, including the Company's Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934, as amended. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective in ensuring
that all information required to be filed in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time period specified in the
Securities and Exchange Commission's rules and forms (ii) and that the disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its
Principal Executive and Principal Financial Officers, as appropriate to allow timely decisions regarding required disclosure.

(b)Changes in internal control over financial reporting.There has been no change in the Company's internal
control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 or 15d-15 that occurred during
the Company's last fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

There have been no material changes in the Company's legal proceedings from what was reported in its Annual Report on
Form 10-K filed with the SEC on April 6, 2010.

ITEM 1A.    RISK FACTORS

There have been no material changes in the Company's risk factors from what was reported in its Annual Report on
Form 10-K filed with the SEC on April 6, 2010.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

As indicated in the table below, the Company did not make any purchases of the Company's common stock during the three months ended
July 31, 2010.

Period

Total Number
of Shares
Purchased

Average
Price Paid
Per Share

Total
Number of
Shares
Purchased as
Part of
Publicly
Announced
Program(1)

Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Program(1)May 2, 2010 to May 29, 2010











2,750,000May 30, 2010 to July 3, 2010











2,750,000July 4, 2010 to July 31, 2010











2,750,000Total











2,750,000


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ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    REMOVED AND RESERVED

ITEM 5.    OTHER INFORMATION

None.

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ITEM 6.    EXHIBITS

The following exhibits are filed with this report and made a part hereof.

31.1

Certification by the Chairman and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated September 1, 2010.31.2

Certification by the Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated September 1, 2010.32.1

Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated September 1, 2010.


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SIGNATURES

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

NEW YORK & COMPANY, INC./s/ SHEAMUS TOALBy:

Sheamus ToalIts:

Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)Date:

September 1, 2010


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