##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended May 1, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from

 to
 Commission File Nos. 1-8899 and 333-148108
 Claires Stores, Inc.
  Florida
    
    59-0940416(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 2400 West Central Road,Hoffman Estates, Illinois
    
    60195(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (847) 765-1100
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



CLAIRES STORES, INC. AND SUBSIDIARIES
INDEX
 PAGE NO.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial StatementsUnaudited Condensed Consolidated Balance Sheets as of May 1,
2010 and January 30, 2010
    
    
    3Unaudited Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) for the Three Months Ended May 1,
2010 and May 2, 2009
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for
the Three Months Ended May 1, 2010 and May 2, 2009
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market
Risk
    
    
    24Item 4(T). Controls and Procedures
    
    
    25PART II.OTHER INFORMATION
    
    
    27Item 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 6. Exhibits
    
    
    27SIGNATURE PAGE
    
    
    28Ex-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32.1 Section 906 Certification of CEOEx-32.2 Section 906 Certification of CFOEX-31.1EX-31.2EX-32.1EX-32.2
  2




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PART I. FINANCIAL INFORMATION
CLAIRES STORES, INC. AND SUBSIDIARIES
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 May 1, 2010
    
    
    January 30, 2010(In thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    220,011
    
    
    $
    198,708Inventories
    
    
    110,031
    
    
    
    110,338Prepaid expenses
    
    
    31,264
    
    
    
    32,873Other current assets
    
    
    21,328
    
    
    
    28,236Total current assets
    
    
    382,634
    
    
    
    370,155Property and equipment:Land and building
    
    
    
    
    
    
    19,318Furniture, fixtures and equipment
    
    
    165,335
    
    
    
    162,602Leasehold improvements
    
    
    228,475
    
    
    
    228,503393,810
    
    
    
    410,423Less accumulated depreciation and amortization
    
    
    (190,539
    )
    
    
    (182,439
    )203,271
    
    
    
    227,984Leased property under capital leases:Building
    
    
    18,055
    
    
    
    Less accumulated depreciation and amortization
    
    
    (226
    )
    
    
    17,829
    
    
    
    Intangible assets, net of accumulated amortization of $35,436 and
$32,532, respectively
    
    
    573,931
    
    
    
    580,027Deferred financing costs, net of accumulated amortization of $32,949
and $29,949, respectively
    
    
    44,641
    
    
    
    47,641Other assets
    
    
    55,805
    
    
    
    58,242Goodwill
    
    
    1,550,056
    
    
    
    1,550,0562,224,433
    
    
    
    2,235,966Total assets
    
    $
    2,828,167
    
    
    $
    2,834,105LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Trade accounts payable
    
    $
    50,028
    
    
    $
    45,660Current portion of long-term debt
    
    
    14,500
    
    
    
    14,500Current portion of obligations under capital leases
    
    
    352
    
    
    
    Income taxes payable
    
    
    7,601
    
    
    
    10,272Accrued interest payable
    
    
    27,371
    
    
    
    14,644Accrued expenses and other current liabilities
    
    
    89,760
    
    
    
    96,436Total current liabilities
    
    
    189,612
    
    
    
    181,512Long-term debt
    
    
    2,297,603
    
    
    
    2,313,378Revolving credit facility
    
    
    194,000
    
    
    
    194,000Obligations under capital leases
    
    
    17,290
    
    
    
    Deferred tax liability
    
    
    121,156
    
    
    
    122,145Deferred rent expense
    
    
    22,680
    
    
    
    22,082Unfavorable lease obligations and other long-term liabilities
    
    
    34,070
    
    
    
    35,6302,686,799
    
    
    
    2,687,235Commitments and contingenciesStockholders deficit:Common stock
par value $0.001 per share; authorized 1,000 shares; issued and outstanding 100 shares
    
    
    
    
    
    
    Additional paid-in capital
    
    
    617,306
    
    
    
    616,086Accumulated other comprehensive income (loss), net of tax
    
    
    103
    
    
    
    2,625Retained deficit
    
    
    (665,653
    )
    
    
    (653,353
    )(48,244
    )
    
    
    (34,642
    )Total liabilities and stockholders deficit
    
    $
    2,828,167
    
    
    $
    2,834,105
  3




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CLAIRES STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedMay 1, 2010
    
    
    May 2, 2009Net sales
    
    $
    322,077
    
    
    $
    293,098Cost of sales, occupancy and buying
expenses
    
    
    158,751
    
    
    
    152,355Gross profit
    
    
    163,326
    
    
    
    140,743Other expenses:Selling, general and administrative
    
    
    118,804
    
    
    
    107,293Depreciation and amortization
    
    
    16,366
    
    
    
    18,155Severance and transaction-related costs
    
    
    102
    
    
    
    349Other expense, net
    
    
    445
    
    
    
    414135,717
    
    
    
    126,211Operating income
    
    
    27,609
    
    
    
    14,532Gain on early debt extinguishment
    
    
    4,487
    
    
    
    Interest expense, net
    
    
    42,763
    
    
    
    45,234Loss before income tax expense (benefit)
    
    
    (10,667
    )
    
    
    (30,702
    )Income tax expense (benefit)
    
    
    1,633
    
    
    
    (1,679
    )Net loss
    
    $
    (12,300
    )
    
    $
    (29,023
    )Net loss
    
    $
    (12,300
    )
    
    $
    (29,023
    )Foreign currency translation and interest
rate swap adjustments, net of tax
    
    
    (2,522
    )
    
    
    5,185Comprehensive loss
    
    $
    (14,822
    )
    
    $
    (23,838
    )
  4




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CLAIRES STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedMay 1, 2010
    
    
    May 2, 2009Cash flows from operating activities:Net loss
    
    $
    (12,300
    )
    
    $
    (29,023
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Depreciation and amortization
    
    
    16,366
    
    
    
    18,155Amortization of lease rights and other assets
    
    
    1,028
    
    
    
    494Amortization of debt issuance costs
    
    
    2,535
    
    
    
    2,632Payment in kind interest expense
    
    
    9,651
    
    
    
    9,549Net accretion of favorable (unfavorable) lease obligations
    
    
    (476
    )
    
    
    (615
    )Loss on sale/retirement of property and equipment, net
    
    
    236
    
    
    
    4Gain on early debt extinguishment
    
    
    (4,487
    )
    
    
    Stock compensation expense
    
    
    1,220
    
    
    
    521(Increase) decrease in:Inventories
    
    
    (792
    )
    
    
    3,642Prepaid expenses
    
    
    1,439
    
    
    
    (11,874
    )Other assets
    
    
    6,052
    
    
    
    2,046Increase (decrease) in:Trade accounts payable
    
    
    3,799
    
    
    
    6,139Income taxes payable
    
    
    (2,329
    )
    
    
    (1,551
    )Accrued interest payable
    
    
    12,727
    
    
    
    14,771Accrued expenses and other liabilities
    
    
    (25
    )
    
    
    (3,349
    )Deferred income taxes
    
    
    474
    
    
    
    (108
    )Deferred rent expense
    
    
    787
    
    
    
    (784
    )Net cash provided by operating activities
    
    
    35,905
    
    
    
    10,649Cash flows from investing activities:Acquisition of property and equipment, net
    
    
    (8,218
    )
    
    
    (5,185
    )Acquisition of intangible assets/lease rights
    
    
    (189
    )
    
    
    (340
    )Proceeds from sale of property
    
    
    16,765
    
    
    
    Net cash provided by (used in) investing activities
    
    
    8,358
    
    
    
    (5,525
    )Cash flows from financing activities:Credit facility payments
    
    
    (3,625
    )
    
    
    (3,625
    )Note purchases
    
    
    (16,849
    )
    
    
    Principal payments on capital leases
    
    
    (765
    )
    
    
    Net cash used in financing activities
    
    
    (21,239
    )
    
    
    (3,625
    )Effect of foreign currency exchange rate changes on cash and
cash equivalents
    
    
    (1,721
    )
    
    
    630Net increase in cash and cash equivalents
    
    
    21,303
    
    
    
    2,129Cash and cash equivalents at beginning of period
    
    
    198,708
    
    
    
    204,574Cash and cash equivalents at end of period
    
    $
    220,011
    
    
    $
    206,703Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    2,721
    
    
    $
    423Interest paid
    
    
    17,838
    
    
    
    18,356Property acquired under capital lease
    
    
    18,055
    
    
    
    
  5




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CLAIRES STORES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
     2. Significant Accounting Policies
 Update to Significant Accounting Policies
  Capital Leases
  6




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3. Segment Information
   Three Months
    
    
    Three MonthsEnded
    
    
    EndedMay 1, 2010
    
    
    May 2, 2009Net sales:North America
    
    $
    212,599
    
    
    $
    196,444Europe
    
    
    109,478
    
    
    
    96,654Total net sales
    
    
    322,077
    
    
    
    293,098Depreciation and amortization:North America
    
    
    10,507
    
    
    
    12,567Europe
    
    
    5,859
    
    
    
    5,588Total depreciation and amortization
    
    
    16,366
    
    
    
    18,155Operating income (loss) for reportable segments:North America
    
    
    24,403
    
    
    
    16,129Europe
    
    
    3,308
    
    
    
    (1,248
    )Total operating income for reportable
segments
    
    
    27,711
    
    
    
    14,881Severance and transaction-related costs
    
    
    102
    
    
    
    349Net consolidated operating income
    
    
    27,609
    
    
    
    14,532Gain on early debt extinguishment
    
    
    4,487
    
    
    
    Interest expense, net
    
    
    42,763
    
    
    
    45,234Net consolidated loss before income tax expense
(benefit)
    
    $
    (10,667
    )
    
    $
    (30,702
    )
  4. Debt
 Capital Leases
  7




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Note Purchases
  Principal
    
    
    PurchaseNote Purchased
    
    Amount
    
    
    PriceSenior Subordinated Notes
    
    $
    15,625
    
    
    $
    11,864Senior Toggle Notes
    
    
    6,000
    
    
    
    4,985$
    21,625
    
    
    $
    16,849
  5. Stock Options and Stock-Based Compensation
  WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Exercise
    
    Contractual
    
    IntrinsicOptions
    
    Shares
    
    Price
    
    Life (Years)
    
    ValueOutstanding at January 30,
2010
    
    
    6,272,110
    
    
    $
    10.00
    
    
    
    4.1
    
    
    
    Options granted
    
    
    279,750
    
    
    $
    10.00
    
    
    
    6.9
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options forfeited or expired
    
    
    (76,066
    )
    
    $
    10.00
    
    
    
    4.2
    
    
    
    Outstanding at May 1, 2010
    
    
    6,475,794
    
    
    $
    10.00
    
    
    
    4.2
    
    
    
    Exercisable at May 1, 2010
    
    
    1,777,063
    
    
    $
    10.00
    
    
    
    4.7
    
    
    
    
   6. Income Taxes
  8




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7. Fair Value Measurements and Derivative Instruments
      9




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##### Table of Contents



Fair Value Measurements at May 1, 2010 UsingQuoted Prices inActive Markets for
    
    Significant
    
    SignificantIdentical Assets
    
    Other Observable
    
    Unobservable(Liabilities)
    
    Inputs
    
    InputsCarrying Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Debt and Credit Facility
    
    $
    (2,506,103
    )
    
    $
    (2,145,437
    )
    
    $
    
    
    
    $
    Interest rate swaps
    
    $
    (3,592
    )
    
    $
    
    
    
    $
    (3,592
    )
    
    $
    
 Fair Value Measurements at January 30, 2010 UsingQuoted Prices inActive Markets for
    
    Significant
    
    SignificantIdentical Assets
    
    Other Observable
    
    Unobservable(Liabilities)
    
    Inputs
    
    InputsCarrying Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Debt and Credit Facility
    
    $
    (2,521,878
    )
    
    $
    (1,952,832
    )
    
    $
    
    
    
    $
    Interest rate swaps
    
    $
    (8,752
    )
    
    $
    
    
    
    $
    (8,752
    )
    
    $
    
  Amount of Gain or (Loss)Amount of Gain or (Loss)
    
    
    
    
    
    Reclassified fromRecognized in OCI on
    
    Location of Gain
    
    Accumulated OCI intoDerivative
    
    or (Loss)
    
    IncomeDerivatives in
    
    (Effective Portion)
    
    Reclassified from
    
    (Effective Portion)(1)Cash
    
    Three months ended
    
    Accumulated OCI
    
    Three months endedFlow Hedging
    
    May 1,
    
    May 2,
    
    into Income
    
    May 1,
    
    May 2,Relationships
    
    2010
    
    2009
    
    (Effective Portion)
    
    2010
    
    2009Interest rate swaps
    
    $
    5,159
    
    
    $
    433
    
    
    Interest expense, net
    
    $
    (5,332
    )
    
    $
    (4,050
    )
 
 (1)
    
    Represents reclassification of amounts from accumulated other comprehensive income (loss) to earnings as interest
expense is recognized on the senior secured term loan facility. No ineffectiveness is associated with these interest rate
cash flow hedges.   10




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##### Table of Contents



8. Commitments and Contingencies
  9. Related Party Transactions
  10. Supplemental Financial Information
   11




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##### Table of Contents



Condensed Consolidating Balance Sheet
May 1, 2010
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    144,707
    
    
    $
    (8,486
    )
    
    $
    83,790
    
    
    $
    
    
    
    $
    220,011Inventories
    
    
    
    
    
    
    71,292
    
    
    
    38,739
    
    
    
    
    
    
    
    110,031Prepaid expenses
    
    
    606
    
    
    
    14,430
    
    
    
    16,228
    
    
    
    
    
    
    
    31,264Other current assets
    
    
    28
    
    
    
    14,946
    
    
    
    6,354
    
    
    
    
    
    
    
    21,328Total current assets
    
    
    145,341
    
    
    
    92,182
    
    
    
    145,111
    
    
    
    
    
    
    
    382,634Property and equipment:Land and building
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Furniture, fixtures and equipment
    
    
    2,065
    
    
    
    111,351
    
    
    
    51,919
    
    
    
    
    
    
    
    165,335Leasehold improvements
    
    
    1,048
    
    
    
    138,898
    
    
    
    88,529
    
    
    
    
    
    
    
    228,4753,113
    
    
    
    250,249
    
    
    
    140,448
    
    
    
    
    
    
    
    393,810Less accumulated depreciation and amortization
    
    
    (1,714
    )
    
    
    (122,101
    )
    
    
    (66,724
    )
    
    
    
    
    
    
    (190,539
    )1,399
    
    
    
    128,148
    
    
    
    73,724
    
    
    
    
    
    
    
    203,271Leased property under capital leases:Building
    
    
    
    
    
    
    18,055
    
    
    
    
    
    
    
    
    
    
    
    18,055Less accumulated depreciation and amortization
    
    
    
    
    
    
    (226
    )
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    
    17,829
    
    
    
    
    
    
    
    
    
    
    
    17,829Intercompany receivables
    
    
    
    
    
    
    259,858
    
    
    
    
    
    
    
    (259,858
    )
    
    
    Investment in subsidiaries
    
    
    2,231,918
    
    
    
    (67,975
    )
    
    
    
    
    
    
    (2,163,943
    )
    
    
    Intangible assets, net
    
    
    286,000
    
    
    
    11,908
    
    
    
    276,023
    
    
    
    
    
    
    
    573,931Deferred financing costs, net
    
    
    44,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,641Other assets
    
    
    147
    
    
    
    19,775
    
    
    
    35,883
    
    
    
    
    
    
    
    55,805Goodwill
    
    
    
    
    
    
    1,235,650
    
    
    
    314,406
    
    
    
    
    
    
    
    1,550,0562,562,706
    
    
    
    1,459,216
    
    
    
    626,312
    
    
    
    (2,423,801
    )
    
    
    2,224,433Total assets
    
    $
    2,709,446
    
    
    $
    1,697,375
    
    
    $
    845,147
    
    
    $
    (2,423,801
    )
    
    $
    2,828,167LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Trade accounts payable
    
    $
    1,962
    
    
    $
    21,442
    
    
    $
    26,624
    
    
    $
    
    
    
    $
    50,028Current portion of long-term debt
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,500Current portion of obligations under capital leases
    
    
    
    
    
    
    352
    
    
    
    
    
    
    
    
    
    
    
    352Income taxes payable
    
    
    
    
    
    
    118
    
    
    
    7,483
    
    
    
    
    
    
    
    7,601Accrued interest payable
    
    
    27,371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,371Accrued expenses and other current liabilities
    
    
    14,683
    
    
    
    33,603
    
    
    
    41,474
    
    
    
    
    
    
    
    89,760Total current liabilities
    
    
    58,516
    
    
    
    55,515
    
    
    
    75,581
    
    
    
    
    
    
    
    189,612Intercompany payables
    
    
    207,571
    
    
    
    
    
    
    
    52,287
    
    
    
    (259,858
    )
    
    
    Long-term debt
    
    
    2,297,603
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,297,603Revolving credit facility
    
    
    194,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,000Obligations under capital leases
    
    
    
    
    
    
    17,290
    
    
    
    
    
    
    
    
    
    
    
    17,290Deferred tax liability
    
    
    
    
    
    
    106,003
    
    
    
    15,153
    
    
    
    
    
    
    
    121,156Deferred rent expense
    
    
    
    
    
    
    15,651
    
    
    
    7,029
    
    
    
    
    
    
    
    22,680Unfavorable lease obligations and other long-term
liabilities
    
    
    
    
    
    
    32,146
    
    
    
    1,924
    
    
    
    
    
    
    
    34,0702,699,174
    
    
    
    171,090
    
    
    
    76,393
    
    
    
    (259,858
    )
    
    
    2,686,799Stockholders equity (deficit):Common stock
    
    
    
    
    
    
    367
    
    
    
    2
    
    
    
    (369
    )
    
    
    Additional paid in capital
    
    
    617,306
    
    
    
    1,445,795
    
    
    
    876,799
    
    
    
    (2,322,594
    )
    
    
    617,306Accumulated other comprehensive income (loss),
net of tax
    
    
    103
    
    
    
    11,532
    
    
    
    (13,384
    )
    
    
    1,852
    
    
    
    103Retained earnings (deficit)
    
    
    (665,653
    )
    
    
    13,076
    
    
    
    (170,244
    )
    
    
    157,168
    
    
    
    (665,653
    )(48,244
    )
    
    
    1,470,770
    
    
    
    693,173
    
    
    
    (2,163,943
    )
    
    
    (48,244
    )Total liabilities and stockholders equity (deficit)
    
    $
    2,709,446
    
    
    $
    1,697,375
    
    
    $
    845,147
    
    
    $
    (2,423,801
    )
    
    $
    2,828,167
 12




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##### Table of Contents



Condensed Consolidating Balance Sheet
January 30, 2010
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    109,138
    
    
    $
    (10,604
    )
    
    $
    100,174
    
    
    $
    
    
    
    $
    198,708Inventories
    
    
    
    
    
    
    73,902
    
    
    
    36,436
    
    
    
    
    
    
    
    110,338Prepaid expenses
    
    
    509
    
    
    
    14,217
    
    
    
    18,147
    
    
    
    
    
    
    
    32,873Other current assets
    
    
    1,030
    
    
    
    19,527
    
    
    
    7,679
    
    
    
    
    
    
    
    28,236Total current assets
    
    
    110,677
    
    
    
    97,042
    
    
    
    162,436
    
    
    
    
    
    
    
    370,155Property and equipment:Land and building
    
    
    
    
    
    
    19,318
    
    
    
    
    
    
    
    
    
    
    
    19,318Furniture, fixtures and equipment
    
    
    2,137
    
    
    
    109,405
    
    
    
    51,060
    
    
    
    
    
    
    
    162,602Leasehold improvements
    
    
    1,113
    
    
    
    138,706
    
    
    
    88,684
    
    
    
    
    
    
    
    228,5033,250
    
    
    
    267,429
    
    
    
    139,744
    
    
    
    
    
    
    
    410,423Less accumulated depreciation and amortization
    
    
    (1,746
    )
    
    
    (117,101
    )
    
    
    (63,592
    )
    
    
    
    
    
    
    (182,439
    )1,504
    
    
    
    150,328
    
    
    
    76,152
    
    
    
    
    
    
    
    227,984Intercompany receivables
    
    
    
    
    
    
    148,072
    
    
    
    
    
    
    
    (148,072
    )
    
    
    Investment in subsidiaries
    
    
    2,200,694
    
    
    
    (7,069
    )
    
    
    
    
    
    
    (2,193,625
    )
    
    
    Intangible assets, net
    
    
    286,000
    
    
    
    13,017
    
    
    
    281,010
    
    
    
    
    
    
    
    580,027Deferred financing costs, net
    
    
    47,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,641Other assets
    
    
    18,099
    
    
    
    3,230
    
    
    
    36,913
    
    
    
    
    
    
    
    58,242Goodwill
    
    
    
    
    
    
    1,235,651
    
    
    
    314,405
    
    
    
    
    
    
    
    1,550,0562,552,434
    
    
    
    1,392,901
    
    
    
    632,328
    
    
    
    (2,341,697
    )
    
    
    2,235,966Total assets
    
    $
    2,664,615
    
    
    $
    1,640,271
    
    
    $
    870,916
    
    
    $
    (2,341,697
    )
    
    $
    2,834,105LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Trade accounts payable
    
    $
    2,335
    
    
    $
    19,202
    
    
    $
    24,123
    
    
    $
    
    
    
    $
    45,660Current portion of long-term debt
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,500Income taxes payable
    
    
    
    
    
    
    101
    
    
    
    10,171
    
    
    
    
    
    
    
    10,272Accrued interest payable
    
    
    14,644
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,644Accrued expenses and other current liabilities
    
    
    22,380
    
    
    
    33,559
    
    
    
    40,497
    
    
    
    
    
    
    
    96,436Total current liabilities
    
    
    53,859
    
    
    
    52,862
    
    
    
    74,791
    
    
    
    
    
    
    
    181,512Intercompany payables
    
    
    137,913
    
    
    
    
    
    
    
    10,159
    
    
    
    (148,072
    )
    
    
    Long-term debt
    
    
    2,313,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,313,378Revolving credit facility
    
    
    194,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,000Deferred tax liability
    
    
    
    
    
    
    106,386
    
    
    
    15,759
    
    
    
    
    
    
    
    122,145Deferred rent expense
    
    
    107
    
    
    
    14,957
    
    
    
    7,018
    
    
    
    
    
    
    
    22,082Unfavorable lease obligations and other long-term
liabilities
    
    
    
    
    
    
    33,347
    
    
    
    2,283
    
    
    
    
    
    
    
    35,6302,645,398
    
    
    
    154,690
    
    
    
    35,219
    
    
    
    (148,072
    )
    
    
    2,687,235Stockholders equity (deficit):Common stock
    
    
    
    
    
    
    367
    
    
    
    2
    
    
    
    (369
    )
    
    
    Additional paid in capital
    
    
    616,086
    
    
    
    1,445,795
    
    
    
    876,798
    
    
    
    (2,322,593
    )
    
    
    616,086Accumulated other comprehensive income (loss),
net of tax
    
    
    2,625
    
    
    
    2,101
    
    
    
    (4,134
    )
    
    
    2,033
    
    
    
    2,625Retained deficit
    
    
    (653,353
    )
    
    
    (15,544
    )
    
    
    (111,760
    )
    
    
    127,304
    
    
    
    (653,353
    )(34,642
    )
    
    
    1,432,719
    
    
    
    760,906
    
    
    
    (2,193,625
    )
    
    
    (34,642
    )Total liabilities and stockholders equity (deficit)
    
    $
    2,664,615
    
    
    $
    1,640,271
    
    
    $
    870,916
    
    
    $
    (2,341,697
    )
    
    $
    2,834,105
 13




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##### Table of Contents



Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Three Months Ended May 1, 2010
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    355,789
    
    
    $
    123,485
    
    
    $
    (157,197
    )
    
    $
    322,077Cost of sales, occupancy and buying expenses
    
    
    1,275
    
    
    
    253,184
    
    
    
    61,489
    
    
    
    (157,197
    )
    
    
    158,751Gross profit
    
    
    (1,275
    )
    
    
    102,605
    
    
    
    61,996
    
    
    
    
    
    
    
    163,326Other expenses (income):Selling, general and administrative
    
    
    8,432
    
    
    
    61,365
    
    
    
    49,007
    
    
    
    
    
    
    
    118,804Depreciation and amortization
    
    
    132
    
    
    
    9,638
    
    
    
    6,596
    
    
    
    
    
    
    
    16,366Severance and transaction-related costs
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Other (income) expense
    
    
    (5,875
    )
    
    
    2,312
    
    
    
    4,008
    
    
    
    
    
    
    
    4452,791
    
    
    
    73,315
    
    
    
    59,611
    
    
    
    
    
    
    
    135,717Operating income (loss)
    
    
    (4,066
    )
    
    
    29,290
    
    
    
    2,385
    
    
    
    
    
    
    
    27,609Gain on early debt extinguishment
    
    
    4,487
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,487Interest expense, net
    
    
    42,745
    
    
    
    7
    
    
    
    11
    
    
    
    
    
    
    
    42,763Income (loss) before income taxes
    
    
    (42,324
    )
    
    
    29,283
    
    
    
    2,374
    
    
    
    
    
    
    
    (10,667
    )Income tax expense
    
    
    23
    
    
    
    616
    
    
    
    994
    
    
    
    
    
    
    
    1,633Income (loss) from continuing operations
    
    
    (42,347
    )
    
    
    28,667
    
    
    
    1,380
    
    
    
    
    
    
    
    (12,300
    )Equity in earnings of subsidiaries
    
    
    30,047
    
    
    
    (47
    )
    
    
    
    
    
    
    (30,000
    )
    
    
    Net income (loss)
    
    
    (12,300
    )
    
    
    28,620
    
    
    
    1,380
    
    
    
    (30,000
    )
    
    
    (12,300
    )Foreign currency translation and interest rate swap
adjustments, net of tax
    
    
    (2,522
    )
    
    
    9,432
    
    
    
    (9,251
    )
    
    
    (181
    )
    
    
    (2,522
    )Comprehensive income (loss)
    
    $
    (14,822
    )
    
    $
    38,052
    
    
    $
    (7,871
    )
    
    $
    (30,181
    )
    
    $
    (14,822
    )
 Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Three Months Ended May 2, 2009
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    325,983
    
    
    $
    107,467
    
    
    $
    (140,352
    )
    
    $
    293,098Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    235,180
    
    
    
    57,527
    
    
    
    (140,352
    )
    
    
    152,355Gross profit
    
    
    
    
    
    
    90,803
    
    
    
    49,940
    
    
    
    
    
    
    
    140,743Other expenses (income):Selling, general and administrative
    
    
    6,270
    
    
    
    57,332
    
    
    
    43,691
    
    
    
    
    
    
    
    107,293Depreciation and amortization
    
    
    744
    
    
    
    11,073
    
    
    
    6,338
    
    
    
    
    
    
    
    18,155Severance and transaction-related costs
    
    
    349
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    349Other (income) expense
    
    
    (2,667
    )
    
    
    4,602
    
    
    
    (1,521
    )
    
    
    
    
    
    
    4144,696
    
    
    
    73,007
    
    
    
    48,508
    
    
    
    
    
    
    
    126,211Operating income (loss)
    
    
    (4,696
    )
    
    
    17,796
    
    
    
    1,432
    
    
    
    
    
    
    
    14,532Interest expense (income), net
    
    
    45,280
    
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    45,234Income (loss) before income taxes
    
    
    (49,976
    )
    
    
    17,796
    
    
    
    1,478
    
    
    
    
    
    
    
    (30,702
    )Income tax expense (benefit)
    
    
    
    
    
    
    378
    
    
    
    (2,057
    )
    
    
    
    
    
    
    (1,679
    )Income (loss) from continuing operations
    
    
    (49,976
    )
    
    
    17,418
    
    
    
    3,535
    
    
    
    
    
    
    
    (29,023
    )Equity in earnings of subsidiaries
    
    
    20,953
    
    
    
    566
    
    
    
    
    
    
    
    (21,519
    )
    
    
    Net income (loss)
    
    
    (29,023
    )
    
    
    17,984
    
    
    
    3,535
    
    
    
    (21,519
    )
    
    
    (29,023
    )Foreign currency translation and interest rate swap
adjustments, net of tax
    
    
    5,185
    
    
    
    1,734
    
    
    
    7,510
    
    
    
    (9,244
    )
    
    
    5,185Comprehensive income (loss)
    
    $
    (23,838
    )
    
    $
    19,718
    
    
    $
    11,045
    
    
    $
    (30,763
    )
    
    $
    (23,838
    )
 14




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
Three Months Ended May 1, 2010
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (12,300
    )
    
    $
    28,620
    
    
    $
    1,380
    
    
    $
    (30,000
    )
    
    $
    (12,300
    )Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Equity in earnings of subsidiaries
    
    
    (30,047
    )
    
    
    47
    
    
    
    
    
    
    
    30,000
    
    
    
    Depreciation and amortization
    
    
    132
    
    
    
    9,638
    
    
    
    6,596
    
    
    
    
    
    
    
    16,366Amortization of lease rights and other assets
    
    
    
    
    
    
    13
    
    
    
    1,015
    
    
    
    
    
    
    
    1,028Amortization of debt issuance costs
    
    
    2,535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,535Payment in kind interest expense
    
    
    9,651
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,651Net accretion of favorable (unfavorable) lease
obligations
    
    
    
    
    
    
    (571
    )
    
    
    95
    
    
    
    
    
    
    
    (476
    )Loss on sale/retirement of property and equipment, net
    
    
    
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    236Gain on early debt extinguishment
    
    
    (4,487
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,487
    )Stock compensation expense
    
    
    917
    
    
    
    
    
    
    
    303
    
    
    
    
    
    
    
    1,220(Increase) decrease in:Inventories
    
    
    
    
    
    
    2,610
    
    
    
    (3,402
    )
    
    
    
    
    
    
    (792
    )Prepaid expenses
    
    
    (96
    )
    
    
    137
    
    
    
    1,398
    
    
    
    
    
    
    
    1,439Other assets
    
    
    1,197
    
    
    
    4,684
    
    
    
    171
    
    
    
    
    
    
    
    6,052Increase (decrease) in:Trade accounts payable
    
    
    (373
    )
    
    
    1,081
    
    
    
    3,091
    
    
    
    
    
    
    
    3,799Income taxes payable
    
    
    
    
    
    
    96
    
    
    
    (2,425
    )
    
    
    
    
    
    
    (2,329
    )Accrued interest payable
    
    
    12,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,727Accrued expenses and other liabilities
    
    
    (2,535
    )
    
    
    43
    
    
    
    2,467
    
    
    
    
    
    
    
    (25
    )Deferred income taxes
    
    
    
    
    
    
    504
    
    
    
    (30
    )
    
    
    
    
    
    
    474Deferred rent expense
    
    
    (107
    )
    
    
    694
    
    
    
    200
    
    
    
    
    
    
    
    787Net cash provided by (used in) operating activities
    
    
    (22,786
    )
    
    
    47,832
    
    
    
    10,859
    
    
    
    
    
    
    
    35,905Cash flows from investing activities:Acquisition of property and equipment, net
    
    
    (26
    )
    
    
    (3,052
    )
    
    
    (5,140
    )
    
    
    
    
    
    
    (8,218
    )Acquisition of intangible assets/lease rights
    
    
    
    
    
    
    (58
    )
    
    
    (131
    )
    
    
    
    
    
    
    (189
    )Proceeds from sale of property
    
    
    
    
    
    
    16,765
    
    
    
    
    
    
    
    
    
    
    
    16,765Net cash provided by (used in) investing activities
    
    
    (26
    )
    
    
    13,655
    
    
    
    (5,271
    )
    
    
    
    
    
    
    8,358Cash flows from financing activities:Credit facility payments
    
    
    (3,625
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,625
    )Note purchases
    
    
    (16,849
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,849
    )Principal payments on capital leases
    
    
    
    
    
    
    (765
    )
    
    
    
    
    
    
    
    
    
    
    (765
    )Intercompany activity, net
    
    
    78,855
    
    
    
    (60,818
    )
    
    
    (18,037
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    58,381
    
    
    
    (61,583
    )
    
    
    (18,037
    )
    
    
    
    
    
    
    (21,239
    )Effect of foreign currency exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    2,214
    
    
    
    (3,935
    )
    
    
    
    
    
    
    (1,721
    )Net increase (decrease) in cash and cash equivalents
    
    
    35,569
    
    
    
    2,118
    
    
    
    (16,384
    )
    
    
    
    
    
    
    21,303Cash and cash equivalents at beginning of period
    
    
    109,138
    
    
    
    (10,604
    )
    
    
    100,174
    
    
    
    
    
    
    
    198,708Cash and cash equivalents at end of period
    
    $
    144,707
    
    
    $
    (8,486
    )
    
    $
    83,790
    
    
    $
    
    
    
    $
    220,011
 15




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
Three Months Ended May 2, 2009
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (29,023
    )
    
    $
    17,984
    
    
    $
    3,535
    
    
    $
    (21,519
    )
    
    $
    (29,023
    )Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Equity in earnings of subsidiaries
    
    
    (20,953
    )
    
    
    (566
    )
    
    
    
    
    
    
    21,519
    
    
    
    Depreciation and amortization
    
    
    744
    
    
    
    11,073
    
    
    
    6,338
    
    
    
    
    
    
    
    18,155Amortization of lease rights and other assets
    
    
    
    
    
    
    12
    
    
    
    482
    
    
    
    
    
    
    
    494Amortization of debt issuance costs
    
    
    2,632
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,632Payment in kind interest expense
    
    
    9,549
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,549Net accretion of favorable (unfavorable) lease
obligations
    
    
    
    
    
    
    (760
    )
    
    
    145
    
    
    
    
    
    
    
    (615
    )(Gain) loss on sale / retirement of property and
equipment, net
    
    
    
    
    
    
    7
    
    
    
    (3
    )
    
    
    
    
    
    
    4Stock compensation expense
    
    
    (22
    )
    
    
    
    
    
    
    543
    
    
    
    
    
    
    
    521(Increase) decrease in:Inventories
    
    
    
    
    
    
    3,177
    
    
    
    465
    
    
    
    
    
    
    
    3,642Prepaid expenses
    
    
    (84
    )
    
    
    (259
    )
    
    
    (11,531
    )
    
    
    
    
    
    
    (11,874
    )Other assets
    
    
    812
    
    
    
    (1,202
    )
    
    
    2,436
    
    
    
    
    
    
    
    2,046Increase (decrease) in:Trade accounts payable
    
    
    (1,732
    )
    
    
    (3,615
    )
    
    
    11,486
    
    
    
    
    
    
    
    6,139Income taxes payable
    
    
    
    
    
    
    10
    
    
    
    (1,561
    )
    
    
    
    
    
    
    (1,551
    )Accrued interest payable
    
    
    14,774
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    14,771Accrued expenses and other liabilities
    
    
    (5,101
    )
    
    
    (1,175
    )
    
    
    2,927
    
    
    
    
    
    
    
    (3,349
    )Deferred income taxes
    
    
    
    
    
    
    386
    
    
    
    (494
    )
    
    
    
    
    
    
    (108
    )Deferred rent expense
    
    
    (140
    )
    
    
    765
    
    
    
    (1,409
    )
    
    
    
    
    
    
    (784
    )Net cash provided by (used in) operating activities
    
    
    (28,544
    )
    
    
    25,837
    
    
    
    13,356
    
    
    
    
    
    
    
    10,649Cash flows from investing activities:Acquisition of property and equipment, net
    
    
    (141
    )
    
    
    (3,046
    )
    
    
    (1,998
    )
    
    
    
    
    
    
    (5,185
    )Acquisition of intangible assets/lease rights
    
    
    (13
    )
    
    
    (17
    )
    
    
    (310
    )
    
    
    
    
    
    
    (340
    )Net cash used in investing activities
    
    
    (154
    )
    
    
    (3,063
    )
    
    
    (2,308
    )
    
    
    
    
    
    
    (5,525
    )Cash flows from financing activities:Credit facility payments
    
    
    (3,625
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,625
    )Intercompany activity, net
    
    
    7,075
    
    
    
    (7,090
    )
    
    
    15
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    3,450
    
    
    
    (7,090
    )
    
    
    15
    
    
    
    
    
    
    
    (3,625
    )Effect of foreign currency exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (255
    )
    
    
    885
    
    
    
    
    
    
    
    630Net increase (decrease) in cash and cash equivalents
    
    
    (25,248
    )
    
    
    15,429
    
    
    
    11,948
    
    
    
    
    
    
    
    2,129Cash and cash equivalents at beginning of period
    
    
    154,414
    
    
    
    211
    
    
    
    49,949
    
    
    
    
    
    
    
    204,574Cash and cash equivalents at end of period
    
    $
    129,166
    
    
    $
    15,640
    
    
    $
    61,897
    
    
    $
    
    
    
    $
    206,703
 
 Item2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   16




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Business Overview
        
    
    Accessories  includes fashion accessories for year-round use, including legwear,
headwear, attitude glasses, scarves, armwear, and belts, and seasonal use, including
sunglasses, sandals, scarves, boots and slippers; and other accessories, including
hairgoods, handbags, and small leather goods, as well as cosmetics
    
    Jewelry  includes earrings, necklaces, bracelets, body jewelry and rings, as well as
ear piercing
  17




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##### Table of Contents



Current Market Conditions
  Consolidated Results of Operations
  Three Months
    
    Three MonthsEnded
    
    EndedMay 1, 2010
    
    May 2, 2009Net sales
    
    $
    322,077
    
    
    $
    293,098Increase (decrease) in same store sales
    
    
    7.6
    %
    
    
    (2.3
    )%Gross profit percentage
    
    
    50.7
    %
    
    
    48.0
    %Selling, general and administrative expenses as a percentage of
net sales
    
    
    36.9
    %
    
    
    36.6
    %Depreciation and amortization as a percentage of net sales
    
    
    5.1
    %
    
    
    6.2
    %Operating income
    
    $
    27,609
    
    
    $
    14,532Gain on early debt extinguishment
    
    $
    4,487
    
    
    $
    Net loss
    
    $
    (12,300
    )
    
    $
    (29,023
    )Number of stores at the end of the period (1)
    
    
    2,955
    
    
    
    2,970
 
 (1)
    
    Number of stores excludes stores operated under franchise agreements and joint venture stores. Net sales
    Three Months
    
    Three MonthsEnded
    
    Ended% of Total
    
    May 1, 2010
    
    May 2, 2009Accessories
    
    
    52.1
    
    
    
    48.7Jewelry
    
    
    47.9
    
    
    
    51.3100.0
    
    
    
    100.0
 18




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##### Table of Contents



Gross profit
   Selling, general and administrative expenses
  Depreciation and amortization expense
  Other (income) expense, net
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedMay 1, 2010
    
    
    May 2, 2009Equity loss
    
    $
    1,116
    
    
    $
    866Royalty income
    
    
    (191
    )
    
    
    (447
    )Other income
    
    
    (480
    )
    
    
    (5
    )$
    445
    
    
    $
    414
 Interest expense, net
  19




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##### Table of Contents



Income taxes
  Segment Operations
  North America
  Three Months
    
    Three MonthsEnded
    
    EndedMay 1, 2010
    
    May 2, 2009Net sales
    
    $
    212,599
    
    
    $
    196,444Increase (decrease) in same store sales
    
    
    8.9
    %
    
    
    (2.9
    )%Gross profit percentage
    
    
    51.7
    %
    
    
    49.4
    %Number of stores at the end of the period (1)
    
    
    1,990
    
    
    
    2,024
 
 (1)
    
    Number of stores excludes stores operated under franchise agreements and joint venture stores.     Three Months
    
    Three MonthsEnded
    
    Ended% of Total
    
    May 1, 2010
    
    May 2, 2009Accessories
    
    
    47.3
    
    
    
    43.2Jewelry
    
    
    52.7
    
    
    
    56.8100.0
    
    
    
    100.0
 20




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##### Table of Contents



Europe
  Three Months
    
    Three MonthsEnded
    
    EndedMay 1, 2010
    
    May 2, 2009Net sales
    
    $
    109,478
    
    
    $
    96,654Increase (decrease) in same store sales
    
    
    5.0
    %
    
    
    (0.9
    )%Gross profit percentage
    
    
    48.8
    %
    
    
    45.2
    %Number of stores at the end of the
period (1)
    
    
    965
    
    
    
    946
 
 (1)
    
    Number of stores excludes stores operated under franchise agreements and joint venture stores.     Three Months
    
    Three MonthsEnded
    
    Ended% of Total
    
    May 1, 2010
    
    May 2, 2009Accessories
    
    
    61.3
    
    
    
    59.7Jewelry
    
    
    38.7
    
    
    
    40.3100.0
    
    
    
    100.0
 Financial Resources and Liquidity
  Three Months
    
    Three MonthsEnded
    
    EndedMay 1, 2010
    
    May 2, 2009Operating activities
    
    $
    35,905
    
    
    $
    10,649Investing activities
    
    
    8,358
    
    
    
    (5,525
    )Financing activities
    
    
    (21,239
    )
    
    
    (3,625
    )
 Cash flows from operating activities
  21




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Cash flows from investing activities
  Cash flows from financing activities
    Cash position
   Credit Facility and Notes
  22




---



##### Table of Contents




    
    incur additional indebtedness;
    
    pay dividends or distributions on our capital stock, repurchase or retire our capital
stock and redeem, repurchase or defease any subordinated indebtedness;
    
    make certain investments;
    
    create or incur certain liens;
    
    create restrictions on the payment of dividends or other distributions to us from our
subsidiaries;
    
    transfer or sell assets;
    
    engage in certain transactions with our affiliates; and
    
    merge or consolidate with other companies or transfer all or substantially all of our
assets.
  Critical Accounting Policies and Estimates
  Cautionary Note Regarding Forward-Looking Statements and Risk Factors
  23




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Cash and Cash Equivalents
  Foreign Currency
   24




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##### Table of Contents



Interest Rates
   General Market Risk
  
 Item 4(T). Controls and Procedures
   25




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26




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 6. Exhibits
 31.1
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a).32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 Items 2, 3, 4 and 5 of Part II are not applicable and have been omitted.
 27




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##### Table of Contents



SIGNATURES
  CLAIRES STORES, INC.May 28, 2010
    By:

/s/ Eugene S. KahnEugene S. Kahn, Chief Executive Officer (principal executive officer) May 28, 2010
    By:

/s/ J. Per BrodinJ. Per Brodin, Senior Vice President and Chief
Financial Officer (principal financial and
accounting officer) 
 28




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##### Table of Contents



INDEX TO EXHIBITS
 EXHIBIT NO.
    
    DESCRIPTION31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).32.1
    
    Certification of Chief Executive Officer pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 29