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**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**WASHINGTON,        D.C. 20549**

**FORM        10-Q**

**x        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF        THE SECURITIES EXCHANGE ACT OF 1934**

**Or**

**o        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF        THE SECURITIES EXCHANGE ACT OF 1934**

**Commission        File No. 000-07258**

**CHARMING        SHOPPES, INC.**

|   | **PENNSYLVANIA**                                                                |   | **23-1721355**                                        |   |
|--------|---------------------------------------------------------------------------------|--------|-------------------------------------------------------|--------|
|   | (State                  or other jurisdiction of incorporation or organization) |   | (I.R.S.                  Employer Identification No.) |   |

|   | **450                  WINKS LANE, BENSALEM, PA 19020**              |   | **(215)                  245-9100**                                         |   |
|--------|----------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|
|   | (Address                  of principal executive offices) (Zip Code) |   | (Registrant’s                  telephone number, including Area Code) |   |

**NOT        APPLICABLE**

| Large                  Accelerated Filer x | Accelerated                  Filer o | Non-accelerated                  Filer o |
|--------------------------------------------|--------------------------------------|------------------------------------------|

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**CHARMING        SHOPPES, INC. AND SUBSIDIARIES**

**TABLE        OF CONTENTS**

|                          |                                                                                                                              | **Page** |
|-------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|----------|
| **PART                  I.**  | **FINANCIAL                  INFORMATION**                                                                                        |     |
|                          |                                                                                                                              |     |
| **Item                  1.**  | **Financial                  Statements (Unaudited)**                                                                             | 2        |
|                          |                                                                                                                              |     |
|                          | Condensed                  Consolidated Balance Sheets                                                                            |     |
|                          | July                  29, 2006 and January 28,                  2006                                                              | 2        |
|                          |                                                                                                                              |     |
|                          | Condensed                  Consolidated Statements of Operations and Comprehensive                  Income                        |     |
|                          | Thirteen                  weeks ended July 29,                  2006 and July 30, 2005                                            | 3        |
|                          | Twenty-six                  weeks ended July 29,                  2006 and July 30, 2005                                          | 4        |
|                          |                                                                                                                              |     |
|                          | Condensed                  Consolidated Statements of Cash Flows                                                                  |     |
|                          | Twenty-six                  weeks ended July 29,                  2006 and July 30, 2005                                          | 5        |
|                          |                                                                                                                              |     |
|                          | Notes                  to Condensed Consolidated Financial Statements                                                             | 6        |
|                          |                                                                                                                              |     |
| **Item                  2.**  | **Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations** | 17       |
|                          |                                                                                                                              |     |
|                          | Forward-looking                  Statements                                                                                       | 17       |
|                          |                                                                                                                              |     |
|                          | Critical                  Accounting Policies                                                                                     | 19       |
|                          |                                                                                                                              |     |
|                          | Recent                  Developments                                                                                              | 21       |
|                          |                                                                                                                              |     |
|                          | Results                  of Operations                                                                                            | 21       |
|                          |                                                                                                                              |     |
|                          | Liquidity                  and Capital Resources                                                                                  | 28       |
|                          |                                                                                                                              |     |
|                          | Financing                                                                                                                         | 31       |
|                          |                                                                                                                              |     |
|                          | Market                  Risk                                                                                                      | 32       |
|                          |                                                                                                                              |     |
|                          | Impact                  of Recent Accounting Pronouncements                                                                       | 32       |
|                          |                                                                                                                              |     |
| **Item                  3.**  | **Quantitative                  and Qualitative Disclosures About Market Risk**                                                   | 32       |
|                          |                                                                                                                              |     |
| **Item                  4.**  | **Controls                  and Procedures**                                                                                      | 33       |
|                          |                                                                                                                              |     |
| **PART                  II.** | **OTHER                  INFORMATION**                                                                                            |     |
|                          |                                                                                                                              |     |
| **Item                  1.**  | **Legal                  Proceedings**                                                                                            | 34       |
|                          |                                                                                                                              |     |
| **Item                  1A.** | **Risk                  Factors**                                                                                                 | 34       |
|                          |                                                                                                                              |     |
| **Item                  2.**  | **Unregistered                  Sales of Equity Securities and Use of Proceeds**                                                  | 35       |
|                          |                                                                                                                              |     |
| **Item                  4.**  | **Submission                  of Matters to a Vote of Security Holders**                                                          | 36       |
|                          |                                                                                                                              |     |
| **Item                  6.**  | **Exhibits**                                                                                                                      | 36       |
|                          |                                                                                                                              |     |
|                          | **SIGNATURES**                                                                                                                    | 37       |
|                          |                                                                                                                              |     |
|                          | **Exhibit                  Index**                                                                                                | 38       |

----

**PART        I. FINANCIAL INFORMATION**

**Item        1. Financial Statements**

**CHARMING        SHOPPES, INC. AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

|                                                                                                                             |   | **July                  29,** |          | **January                  28,** |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------------|----------------------------------|--------|
| ***(In                  thousands, except share amounts)***                                                                      |   | **2006**                      |          | **2006**                         |   |
|                                                                                                                             |   | **(Unaudited)**               |          |                             |   |
| **ASSETS**                                                                                                                       |   |                          |          |                             |   |   |   |
| **Current                  assets**                                                                                              |   |                          |          |                             |   |   |   |
| Cash                  and cash equivalents                                                                                       |   | **$**                         | **211,819**   |                             | $      | 130,132 |   |
| Available-for-sale                  securities                                                                                   |   |                          | **22,200**    |                             |   | 20,150 |   |
| Accounts                  receivable, net of allowances of $2,044 and $6,588                                                     |   |                          | **3,145**     |                             |   | 38,603 |   |
| Investment                  in asset-backed securities                                                                           |   |                          | **64,535**    |                             |   | 66,828 |   |
| Merchandise                  inventories                                                                                         |   |                          | **381,533**   |                             |   | 376,409 |   |
| Deferred                  advertising                                                                                            |   |                          | **16,080**    |                             |   | 20,591 |   |
| Deferred                  taxes                                                                                                  |   |                          | **18,550**    |                             |   | 13,848 |   |
| Prepayments                  and other                                                                                           |   |                          | **100,133**   |                             |   | 89,245 |   |
| **Total                  current                  assets**                                                                       |   |                          | **817,995**   |                             |   | 755,806 |   |
|                                                                                                                             |   |                          |          |                             |   |   |   |
| Property,                  equipment, and leasehold improvements – at cost                                                 |   |                          | **911,384**   |                             |   | 888,481 |   |
| Less                  accumulated depreciation and amortization                                                                  |   |                          | **537,926**   |                             |   | 525,882 |   |
| **Net                  property, equipment, and                  leasehold improvements**                                        |   |                          | **373,458**   |                             |   | 362,599 |   |
|                                                                                                                             |   |                          |          |                             |   |   |   |
| Trademarks                  and other intangible assets                                                                          |   |                          | **249,606**   |                             |   | 250,074 |   |
| Goodwill                                                                                                                         |   |                          | **154,020**   |                             |   | 154,553 |   |
| Other                  assets                                                                                                    |   |                          | **50,994**    |                             |   | 43,963 |   |
| **Total                  assets**                                                                                                |   | **$**                         | **1,646,073** |                             | $      | 1,566,995 |   |
|                                                                                                                             |   |                          |          |                             |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS’ EQUITY**                                                                  |   |                          |          |                             |   |   |   |
| **Current                  liabilities**                                                                                         |   |                          |          |                             |   |   |   |
| Short-term                  borrowings                                                                                           |   | **$**                         | **20,000**    |                             | $      | 50,000 |   |
| Accounts                  payable                                                                                                |   |                          | **173,659**   |                             |   | 133,236 |   |
| Accrued                  expenses                                                                                                |   |                          | **195,215**   |                             |   | 217,421 |   |
| Income                  taxes payable                                                                                            |   |                          | **8,528**     |                             |   | 1,743 |   |
| Current                  portion – long-term debt                                                                          |   |                          | **12,672**    |                             |   | 14,765 |   |
| **Total                  current                  liabilities**                                                                  |   |                          | **410,074**   |                             |   | 417,165 |   |
|                                                                                                                             |   |                          |          |                             |   |   |   |
| Deferred                  taxes                                                                                                  |   |                          | **51,147**    |                             |   | 45,046 |   |
| Other                  non-current liabilities                                                                                   |   |                          | **108,751**   |                             |   | 98,457 |   |
| Long-term                  debt                                                                                                  |   |                          | **186,472**   |                             |   | 191,979 |   |
|                                                                                                                             |   |                          |          |                             |   |   |   |
| **Stockholders’                  equity**                                                                                  |   |                          |          |                             |   |   |   |
| Common                  Stock $.10 par value:                                                                                    |   |                          |          |                             |   |   |   |
| Authorized–300,000,000                  shares                                                                             |   |                          |          |                             |   |   |   |
| Issued–134,829,765                  shares and                  133,954,852 shares                                         |   |                          | **13,483**    |                             |   | 13,395 |   |
| Additional                  paid-in capital                                                                                      |   |                          | **271,642**   |                             |   | 261,077 |   |
| Treasury                  stock at cost – 12,265,993 shares                                                                |   |                          | **(84,136**   | **)**                            |   | (84,136 | ) |
| Accumulated                  other comprehensive loss                                                                            |   |                          | **1**         |                             |   | (3 | ) |
| Retained                  earnings                                                                                               |   |                          | **688,639**   |                             |   | 624,015 |   |
| **Total                  stockholders’                  equity**                                                           |   |                          | **889,629**   |                             |   | 814,348 |   |
| **Total                  liabilities and stockholders’ equity**                                                            |   | **$**                         | **1,646,073** |                             | $      | 1,566,995 |   |
|                                                                                                                             |   |                          |          |                             |   |   |   |
| Certain                  prior-year amounts have been reclassified to conform to the current-year                  presentation. |
|                                                                                                                             |
| ***See                  Notes to Condensed Consolidated Financial                  Statements***                                 |

----

**CHARMING        SHOPPES, INC. AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF OPERATIONS**

**AND        COMPREHENSIVE INCOME**

**(Unaudited)**

|                                                                                                                                            |   | **Thirteen                  Weeks Ended** |        |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|-------------|
|                                                                                                                                            |   | **July                  29,**             |        | **July                  30,** |   |
| ***(In                  thousands, except per share amounts)***                                                                                 |   | **2006**                                  |        | **2005** |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| **Net                  sales**                                                                                                                  |   | **$**                                     | **763,353** |   | $ | 689,075 |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| Cost                  of goods sold, buying, catalog, and occupancy expenses                                                                    |   |                                      | **532,244** |   |   | 467,014 |   |
| Selling,                  general, and administrative expenses                                                                                  |   |                                      | **178,941** |   |   | 157,067 |   |
| **Total                  operating expenses**                                                                                                   |   |                                      | **711,185** |   |   | 624,081 |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| **Income                  from operations**                                                                                                     |   |                                      | **52,168**  |   |   | 64,994 |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| Other                  income                                                                                                                   |   |                                      | **2,866**   |   |   | 1,985 |   |
| Interest                  expense                                                                                                               |   |                                      | **(3,811**  | **)** |   | (4,712 | ) |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| Income                  before income taxes                                                                                                     |   |                                      | **51,223**  |   |   | 62,267 |   |
| Income                  tax provision                                                                                                           |   |                                      | **18,660**  |   |   | 22,843 |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| **Net                  income**                                                                                                                 |   |                                      | **32,563**  |   |   | 39,424 |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| **Other                  comprehensive income, net of tax**                                                                                     |   |                                      |        |   |   |   |   |
| Unrealized                  gains on available-for-sale securities, net of income tax provision                  of $1                  in 2006 |   |                                      | **1**       |   |   | 0 |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| **Comprehensive                  income**                                                                                                       |   | **$**                                     | **32,564**  |   | $ | 39,424 |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| **Basic                  net income per share**                                                                                                 |   | **$**                                     | **.27**     |   | $ | .33 |   |
|                                                                                                                                            |   |                                      |        |   |   |   |   |
| **Diluted                  net income per share**                                                                                               |   | **$**                                     | **.24**     |   | $ | .30 |   |
|                                                                                                                                            |
| Certain                  prior-year amounts have been reclassified to conform to the current-year                  presentation.                |
|                                                                                                                                            |
| ***See                  Notes to Condensed Consolidated Financial                  Statements***                                                |

----

**CHARMING        SHOPPES, INC. AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF OPERATIONS**

**AND        COMPREHENSIVE INCOME**

**(Unaudited)**

|                                                                                                                                            |   | **Twenty-six                  Weeks Ended** |          |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|---------------|
|                                                                                                                                            |   | **July                  29,**               |          | **July                  30,** |   |
| ***(In                  thousands, except per share amounts)***                                                                                 |   | **2006**                                    |          | **2005** |   |
|                                                                                                                                            |   |                                        |          |   |   |
| **Net                  sales**                                                                                                                  |   | **$**                                       | **1,498,275** |   | $ | 1,292,428 |   |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| Cost                  of goods sold, buying, catalog, and occupancy expenses                                                                    |   |                                        | **1,031,532** |   |   | 869,717 |   |
| Selling,                  general, and administrative expenses                                                                                  |   |                                        | **362,173**   |   |   | 308,005 |   |
| **Total                  operating expenses**                                                                                                   |   |                                        | **1,393,705** |   |   | 1,177,722 |   |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| **Income                  from operations**                                                                                                     |   |                                        | **104,570**   |   |   | 114,706 |   |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| Other                  income                                                                                                                   |   |                                        | **4,414**     |   |   | 3,581 |   |
| Interest                  expense                                                                                                               |   |                                        | **(7,935**    | **)** |   | (8,637 | ) |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| Income                  before income taxes                                                                                                     |   |                                        | **101,049**   |   |   | 109,650 |   |
| Income                  tax provision                                                                                                           |   |                                        | **36,425**    |   |   | 40,209 |   |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| **Net                  income**                                                                                                                 |   |                                        | **64,624**    |   |   | 69,441 |   |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| **Other                  comprehensive income, net of tax**                                                                                     |   |                                        |          |   |   |   |   |
| Unrealized                  gains on available-for-sale securities, net of income tax provision                  of $3                  in 2006 |   |                                        | **4**         |   |   | 0 |   |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| **Comprehensive                  income**                                                                                                       |   | **$**                                       | **64,628**    |   | $ | 69,441 |   |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| **Basic                  net income per share**                                                                                                 |   | **$**                                       | **.53**       |   | $ | .58 |   |
|                                                                                                                                            |   |                                        |          |   |   |   |   |
| **Diluted                  net income per share**                                                                                               |   | **$**                                       | **.48**       |   | $ | .53 |   |
|                                                                                                                                            |
| Certain                  prior-year amounts have been reclassified to conform to the current-year                  presentation.                |
|                                                                                                                                            |
| ***See                  Notes to Condensed Consolidated Financial                  Statements***                                                |

----

**CHARMING        SHOPPES, INC. AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                             |   | **Twenty-six                  Weeks Ended** |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                                                                                             |   | **July                  29,**               |   | **July                  30,** |   |
| ***(In                  thousands)***                                                                                            |   | **2006**                                    |   | **2005** |   |
|                                                                                                                             |   |                                   |   |    |   |
| **Operating                  activities**                                                                                        |   |                                   |   |    |   |
| Net                  income                                                                                                      |   | **$****64,624**                             |   | $69,441 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities               |   |                                   |   |    |   |
| Depreciation                  and                  amortization                                                                  |   |  **45,129**                            |   |  38,982 |   |
| Deferred                  income                  taxes                                                                          |   |  **1,290**                             |   |  889 |   |
| Stock-based                  compensation                                                                                        |   |  **5,015**                             |   |  2,913 |   |
| Excess                  tax benefits related to                  stock-based compensation                                        |   |  (2,516)                               |   |  2,178 |   |
| Net                  (gain)/loss from disposition                  of capital assets                                             |   |  **139**                               |   |  (939) |   |
| Net                  gain from sale of                  available-for-sale securities                                            |   |  (57)                                  |   |  0 |   |
| Net                  gain from securitization                  activities                                                        |   |  (451)                                 |   |  (3,577) |   |
| Changes                  in operating assets and                  liabilities                                                    |   |                                   |   |    |   |
| Accounts                  receivable                                                                                             |   |  **35,458**                            |   |  0 |   |
| Merchandise                  inventories                                                                                         |   |  (5,124)                               |   |  (36,717) |   |
| Accounts                  payable                                                                                                |   |  **40,423**                            |   |  34,821 |   |
| Deferred                  advertising                                                                                            |   |  **4,511**                             |   |  (2,766) |   |
| Prepayments                  and                  other                                                                          |   |  (10,888)                              |   |  10,143 |   |
| Income                  taxes                  payable                                                                           |   |  **9,301**                             |   |  10,164 |   |
| Accrued                  expenses and                  other                                                                     |   |  (11,273)                              |   |  7,757 |   |
| **Net                  cash provided by operating activities**                                                                   |   |  **175,581**                           |   |  133,289 |   |
|                                                                                                                             |   |                                   |   |    |   |
| **Investing                  activities**                                                                                        |   |                                   |   |    |   |
| Investment                  in capital assets                                                                                    |   |  (54,971)                              |   |  (37,393) |   |
| Proceeds                  from sales of capital assets                                                                           |   |  **0**                                 |   |  2,432 |   |
| Gross                  purchases of securities                                                                                   |   |  (17,127)                              |   |  (48,064) |   |
| Proceeds                  from sales of securities                                                                               |   |  **17,885**                            |   |  11,078 |   |
| Acquisition                  of Crosstown Traders, Inc., net of cash acquired                                                    |   |  **0**                                 |   |  (256,467) |   |
| Purchase                  of Catherines receivables portfolio                                                                    |   |  **0**                                 |   |  (56,582) |   |
| Securitization                  of Catherines receivables portfolio                                                              |   |  **0**                                 |   |  56,582 |   |
| Securitization                  of Crosstown apparel-related receivables                                                         |   |  **0**                                 |   |  50,000 |   |
| Increase                  in other assets                                                                                        |   |  (7,719)                               |   |  (2,220) |   |
| **Net                  cash used by investing activities**                                                                       |   |  (61,932)                              |   |  (280,634) |   |
|                                                                                                                             |   |                                   |   |    |   |
| **Financing                  activities**                                                                                        |   |                                   |   |    |   |
| Proceeds                  from short-term borrowings                                                                             |   |  **131,410**                           |   |  177,880 |   |
| Repayments                  of short-term borrowings                                                                             |   |  (161,410)                             |   |  (117,880) |   |
| Proceeds                  from long-term borrowings                                                                              |   |  **0**                                 |   |  50,000 |   |
| Repayments                  of long-term borrowings                                                                              |   |  (7,600)                               |   |  (8,413) |   |
| Payments                  of deferred financing costs                                                                            |   |  **0**                                 |   |  (850) |   |
| Excess                  tax benefits related to stock-based compensation                                                         |   |  **2,516**                             |   |  0 |   |
| Proceeds                  from issuance of common stock                                                                          |   |  **3,122**                             |   |  5,007 |   |
| **Net                  cash provided/(used) by financing activities**                                                            |   |  (31,962)                              |   |  105,744 |   |
|                                                                                                                             |   |                                   |   |    |   |
| **Increase                  (decrease) in cash and cash equivalents**                                                            |   |  **81,687**                            |   |  (41,601) |   |
| Cash                  and cash equivalents, beginning of period                                                                  |   |  **130,132**                           |   |  273,049 |   |
| **Cash                  and cash equivalents, end of period**                                                                    |   | **$****211,819**                            |   | $231,448 |   |
|                                                                                                                             |   |                                   |   |    |   |
| **Non-cash                  financing and investing activities**                                                                 |   |                                   |   |    |   |
| Equipment                  acquired through capital leases                                                                       |   | **$**                                       | **0**  |   | **$** | **0** |   |
|                                                                                                                             |   |                                        |   |   |   |   |   |
| Certain                  prior-year amounts have been reclassified to conform to the current-year                  presentation. |
|                                                                                                                             |
| ***See                  Notes to Condensed Consolidated Financial                  Statements***                                 |

----

**CHARMING SHOPPES, INC. AND      SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL          STATEMENTS**

**(Unaudited)**

**Note        1. Condensed Consolidated Financial        Statements**

***Segment        Reporting***

**, **
**“Note 11. Segment Reporting”**

***Stock-based        Compensation***

**“Item 8.        Financial Statements and Supplementary Data; Note 10. Stock Option and Stock        Incentive Plans”**
**“Note 11. Employee Stock Purchase Plan”**

----

**CHARMING SHOPPES, INC. AND SUBSIDIARIES**

**NOTES            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS            (Continued)**

**(Unaudited)**

**Note        1. Condensed Consolidated Financial Statements (Continued)**

|                                                                    |   |       |      | **Average** |   |                               |   |
|-------------------------------------------------------------------------|--------|------------|-----------|-------------|--------|------------------------------------|--------|
|                                                                    |   | **Option** |      | **Option**  |   | **Option                  Prices** |   |
|                                                                    |   | **Shares** |      | **Price**   |   | **Per                  Share**     |   |
|                                                                    |   |       |      |        |   |                               |   |
| **Outstanding                  at January 28, 2006**                    |   |       | 3,672,108 |        | $      | 5.82                               |   | $ | 1.00 |   |   | – |   | $ | 12.48 |   |
| Granted                  **–**option price equal to market price  |   |       | 61,233    |        |   | 11.33                              |   |   | 11.28 |   |   | – |   |   | 13.84 |   |
| Granted                  **–**option price less than market price |   |       | 31,600    |        |   | 1.00                               |   |   | 1.00 |   |   | – |   |   | 1.00 |   |
| Canceled/forfeited                                                      |   |       | (6,902    | )           |   | 3.21                               |   |   | 1.00 |   |   | – |   |   | 6.65 |   |
| Exercised                                                               |   |       | (658,410  | )           |   | 5.93                               |   |   | 1.00 |   |   | – |   |   | 9.10 |   |
| **Outstanding                  at July 29, 2006**                       |   |       | 3,099,629 |        | $      | 5.86                               |   | $ | 1.00 |   |   | – |   | $ | 13.84 |   |
| **Exercisable                  at July 29, 2006**                       |   |       | 2,858,963 |        | $      | 5.86                               |   | $ | 1.00 |   |   | – |   | $ | 13.84 |   |

*“Accounting for Stock Issued to Employees,”*
*“Accounting for Stock-Based Compensation.”*

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        1. Condensed Consolidated Financial Statements (Continued)**

**“**
**Item 8. Financial Statements and Supplementary        Data;        Note 1. Summary of Significant Accounting Policies; **
***Common        Stock Plans***
**” **

*“Share-Based        Payment”*

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        1. Condensed Consolidated Financial Statements (Continued)**

*“Accounting for Stock-based        Compensation:”*

|                                                                                                  |   | **Thirteen**                     |   | **Twenty-six**                   |   |
|-------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|----------------------------------|--------|
|                                                                                                  |   | **Weeks                  Ended** |   | **Weeks                  Ended** |   |
|                                                                                                  |   | **July                  30,**    |   | **July                  30,**    |   |
| ***(In                  thousands, except per share amounts)***                                       |   | **2005**                         |   | **2005**                         |   |
|                                                                                                  |   |                             |   |                             |   |
| Net                  income as reported                                                               |   | $                                | 39,424 |                             | $      | 69,441 |   |
| Add                  stock-based employee compensation using intrinsic value                  method, |   |                             |   |                             |   |   |   |
| net                  of income                  taxes                                                 |   |                             | 940    |                             |   | 1,737 |   |
| Less                  stock-based employee compensation using fair value method,                      |   |                             |   |                             |   |   |   |
| net                  of income                  taxes                                                 |   |                             | (1,107 | )                                |   | (2,164 | ) |
| Pro                  forma net income                                                                 |   | $                                | 39,257 |                             | $      | 69,014 |   |
|                                                                                                  |   |                             |   |                             |   |   |   |
| Basic                  net income per share:                                                          |   |                             |   |                             |   |   |   |
| As                  reported                                                                          |   | $                                | .33    |                             | $      | .58 |   |
| Pro                  forma                                                                            |   |                             | .33    |                             |   | .58 |   |
| Diluted                  net income per share:                                                        |   |                             |   |                             |   |   |   |
| As                  reported                                                                          |   |                             | .30    |                             |   | .53 |   |
| Pro                  forma                                                                            |   |                             | .29    |                             |   | .52 |   |

**Note        2. Acquisition of Crosstown Traders, Inc.**

*“Business Combinations,”*

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        2. Acquisition of Crosstown Traders, Inc. (Continued)**

*“Recognition of Liabilities in Connection with a Purchase Business        Combination.”*

|                                                 |   |                             |   | **Twenty-six                  Weeks Ended** |   |                            |   |
|------------------------------------------------------|--------|----------------------------------|--------|---------------------------------------------|--------|---------------------------------|--------|
|                                                 |   | **Balance                  at**  |   | **July                  29, 2006**          |   | **Balance                  at** |   |
|                                                 |   | **January                  28,** |   |                                        |   | **Payments/**                   |   | **July                  29,** |   |
| ***(In                  thousands)***                |   | **2006**                         |   | **Adjustments**                             |   | **Settlements**                 |   | **2006** |   |
|                                                 |   |                             |   |                                        |   |                            |   |   |   |   |   |   |   |
| Severance                  and related costs         |   | $                                | 4,380  |                                        | $      | (982                            | )      | $ | (1,041 | ) | $ | 2,357 |   |
| Lease                  termination and related costs |   |                             | 2,180  |                                        |   | 564                             |   |   | (30 | ) |   | 2,714 |   |
| Unfavorable                  contract costs          |   |                             | 900    |                                        |   | (900                            | )      |   |   |   |   | 0 |   |
| Other                  costs                         |   |                             | 1,154  |                                        |   | (62                             | )      |   | (193 | ) |   | 899 |   |
| Total                                                |   | $                                | 8,614  |                                        | $      | (1,380                          | )      | $ | (1,264 | ) | $ | 5,970 |   |

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        2. Acquisition of Crosstown Traders, Inc. (Continued)**

|                                                            |   | **Thirteen**                     |    | **Twenty-six**                   |   |
|-----------------------------------------------------------------|--------|----------------------------------|---------|----------------------------------|--------|
|                                                            |   | **Weeks                  Ended** |    | **Weeks                  Ended** |   |
|                                                            |   | **July                  30,**    |    | **July                  30,**    |   |
| ***(In                  thousands, except per share amounts)*** |   | **2005**                         |    | **2005**                         |   |
|                                                            |   |                             |    |                             |   |   |   |
| Net                  sales                                      |   | $                                | 729,677 |                             | $      | 1,441,443 |   |
| Net                  income                                     |   |                             | 36,984  |                             |   | 66,388 |   |
|                                                            |   |                             |    |                             |   |   |   |
| Net                  income per share:                          |   |                             |    |                             |   |   |   |
| Basic                                                           |   | $                                | .31     |                             | $      | .56 |   |
| Diluted                                                         |   |                             | .28     |                             |   | .50 |   |

**Note        3. Accounts Receivable**

|                                             |   | **July                  29,** |   | **January                  28,** |   |
|--------------------------------------------------|--------|-------------------------------|--------|----------------------------------|--------|
| ***(In                  thousands)***            |   | **2006**                      |   | **2006**                         |   |
|                                             |   |                          |   |                             |   |
| Due                  from customers              |   | $                             | 5,189  |                             | $      | 45,191 |   |
| Allowance                  for doubtful accounts |   |                          | (2,044 | )                                |   | (6,588 | ) |
| Net                  accounts receivable         |   | $                             | 3,145  |                             | $      | 38,603 |   |

**Note        4. Trademarks and Other Intangible Assets**

|                                                                                 |   | **July                  29,** |    | **January                  28,** |   |
|--------------------------------------------------------------------------------------|--------|-------------------------------|---------|----------------------------------|--------|
| ***(In                  thousands)***                                                |   | **2006**                      |    | **2006**                         |   |
|                                                                                 |   |                          |    |                             |   |
| Trademarks,                  tradenames, and internet domain names                   |   | $                             | 240,300 |                             | $      | 238,800 |   |
| Customer                  lists, customer relationships, and covenant not to compete |   |                          | 16,400  |                             |   | 16,400 |   |
| Total                  at cost                                                       |   |                          | 256,700 |                             |   | 255,200 |   |
| Less                  accumulated amortization of customer lists, customer           |   |                          |    |                             |   |   |   |
| relationships,                  and covenant not                  to compete         |   |                          | 7,094   |                             |   | 5,126 |   |
| Net                  trademarks and other intangible assets                          |   | $                             | 249,606 |                             | $      | 250,074 |   |

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        5. Short-term Borrowings and Long-term Debt**

|                                                           |   | **July                  29,** |    | **January                  28,** |   |
|----------------------------------------------------------------|--------|-------------------------------|---------|----------------------------------|--------|
| ***(In                  thousands)***                          |   | **2006**                      |    | **2006**                         |   |
|                                                           |   |                          |    |                             |   |
| **Short-term                  borrowings**                     |   |                          |    |                             |   |
| Revolving                  credit facility                     |   | $                             | 20,000  |                             | $      | 50,000 |   |
|                                                           |   |                          |    |                             |   |   |   |
| **Long-term                  debt**                            |   |                          |    |                             |   |   |   |
| 4.75%                  Senior Convertible Notes, due June 2012 |   | $                             | 150,000 |                             | $      | 150,000 |   |
| Capital                  lease obligations                     |   |                          | 18,591  |                             |   | 24,825 |   |
| 6.07%                  mortgage note, due October 2014         |   |                          | 11,989  |                             |   | 12,261 |   |
| 6.53%                  mortgage note, due November 2012        |   |                          | 8,750   |                             |   | 9,450 |   |
| 7.77%                  mortgage note, due December 2011        |   |                          | 8,778   |                             |   | 9,050 |   |
| Other                  long-term debt                          |   |                          | 1,036   |                             |   | 1,158 |   |
| Total                  long-term debt                          |   |                          | 199,144 |                             |   | 206,744 |   |
| Less                  current portion                          |   |                          | 12,672  |                             |   | 14,765 |   |
| Long-term                  debt                                |   | $                             | 186,472 |                             | $      | 191,979 |   |

**Note        6. Stockholders’ Equity**

|                                                                           |   | **Twenty-six**                   |    |
|--------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                           |   | **Weeks                  Ended** |    |
|                                                                           |   | **July                  29,**    |    |
| ***(Dollars                  in thousands)***                                  |   | **2006**                         |    |
|                                                                           |   |                             |    |
| Total                  stockholders’ equity, beginning of period         |   | $                                | 814,348 |   |
| Net                  income                                                    |   |                             | 64,624  |   |
| Issuance                  of common stock (874,913 shares)                     |   |                             | 3,122   |   |
| Stock-based                  compensation expense                              |   |                             | 5,015   |   |
| Excess                  tax benefits related to stock-based compensation       |   |                             | 2,516   |   |
| Unrealized                  gains on available-for-sale securities, net of tax |   |                             | 4       |   |
| Total                  stockholders’ equity, end of period               |   | $                                | 889,629 |   |

**Note        7. Customer Loyalty Card Programs**

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        8. Net Income Per Share**

|                                                                        |   | **Thirteen                  Weeks Ended** |    | **Twenty-six                  Weeks Ended** |   |
|-----------------------------------------------------------------------------|--------|-------------------------------------------|---------|---------------------------------------------|--------|
|                                                                        |   | **July                  29,**             |    | **July                  30,**               |   | **July                  29,** |   | **July                  30,** |   |
| ***(In                  thousands, except per share amounts)***             |   | **2006**                                  |    | **2005**                                    |   | **2006** |   | **2005** |   |
|                                                                        |   |                                      |    |                                        |   |   |   |   |   |
| Basic                  weighted average common shares outstanding           |   |                                      | 122,125 |                                        |   | 119,452 |   |   | 121,969 |   |   | 119,219 |   |
| Dilutive                  effect of assumed conversion of                   |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| convertible                  notes                                          |   |                                      | 15,182  |                                        |   | 15,182 |   |   | 15,182 |   |   | 15,182 |   |
| Dilutive                  effect of stock options and awards                |   |                                      | 2,047   |                                        |   | 1,975 |   |   | 2,240 |   |   | 1,775 |   |
| Diluted                  weighted average common shares and                 |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| equivalents                  outstanding                                    |   |                                      | 139,354 |                                        |   | 136,609 |   |   | 139,391 |   |   | 136,176 |   |
|                                                                        |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| Net                  income                                                 |   | $                                         | 32,563  |                                        | $      | 39,424 |   | $ | 64,624 |   | $ | 69,441 |   |
| Decrease                  in interest expense from assumed                  |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| conversion                  of notes, net of                  income taxes  |   |                                      | 1,128   |                                        |   | 1,128 |   |   | 2,257 |   |   | 2,257 |   |
| Net                  income used to determine diluted                       |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| net                  income per                  share                      |   | $                                         | 33,691  |                                        | $      | 40,552 |   | $ | 66,881 |   | $ | 71,698 |   |
|                                                                        |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| Options                  with weighted average exercise price               |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| greater                  than market price,                  excluded from  |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| computation                  of net income per                  share:      |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| Number                  of shares                                           |   |                                      | 4       |                                        |   | 0 |   |   | 1 |   |   | 11 |   |
| Weighted                  average exercise price                  per share |   | $                                         | 12.87   |                                        | $      | 0.00 |   | $ | 13.84 |   | $ | 9.10 |   |

**Note        9. Income Taxes**

**Note        10. Asset Securitization**

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        11. Segment Reporting**

**, **

**“**
**Item 8. Financial Statements and Supplementary        Data;        Note 1. Summary of Significant Accounting Policies” **

|                                                                                                                                                                                                                                                                            |   | **Retail**    |      | **Direct-to-** |   | **Corporate**                  |   |             |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-----------|----------------|--------|--------------------------------|--------|------------------|---------|
| ***(In                  thousands)***                                                                                                                                                                                                                                           |   | **Stores(1)** |      | **Consumer**   |   | **and                  Other** |   | **Consolidated** |    |
|                                                                                                                                                                                                                                                                            |   |          |      |           |   |                           |   |             |    |
| **Thirteen                  weeks ended July 29, 2006**                                                                                                                                                                                                                         |   |          |      |           |   |                           |   |             |    |
| Net                  sales                                                                                                                                                                                                                                                      |   | $             | 669,808   |           | $      | 92,348                         |   | $                | 1,197   |   | $ | 763,353 |   |
| Depreciation                  and amortization                                                                                                                                                                                                                                  |   |          | 15,383    |           |   | 755                            |   |             | 8,833   |   |   | 24,971 |   |
| Income                  before interest and taxes                                                                                                                                                                                                                               |   |          | 55,186    |           |   | 424                            |   |             | (576    | ) |   | 55,034 |   |
| Interest                  expense                                                                                                                                                                                                                                               |   |          |      |           |   |                           |   |             | (3,811  | ) |   | (3,811 | ) |
| Income                  tax provision                                                                                                                                                                                                                                           |   |          |      |           |   |                           |   |             | (18,660 | ) |   | (18,660 | ) |
| Net                  income                                                                                                                                                                                                                                                     |   |          | 55,186    |           |   | 424                            |   |             | (23,047 | ) |   | 32,563 |   |
| Capital                  expenditures                                                                                                                                                                                                                                           |   |          | 22,698    |           |   | 2,030                          |   |             | 6,389   |   |   | 31,117 |   |
|                                                                                                                                                                                                                                                                            |   |          |      |           |   |                           |   |             |    |   |   |   |   |
| **Twenty-six                  weeks ended July 29, 2006**                                                                                                                                                                                                                       |   |          |      |           |   |                           |   |             |    |   |   |   |   |
| Net                  sales                                                                                                                                                                                                                                                      |   | $             | 1,297,212 |           | $      | 199,753                        |   | $                | 1,310   |   | $ | 1,498,275 |   |
| Depreciation                  and amortization                                                                                                                                                                                                                                  |   |          | 26,477    |           |   | 1,300                          |   |             | 17,352  |   |   | 45,129 |   |
| Income                  before interest and taxes                                                                                                                                                                                                                               |   |          | 115,473   |           |   | 3,396                          |   |             | (9,885  | ) |   | 108,984 |   |
| Interest                  expense                                                                                                                                                                                                                                               |   |          |      |           |   |                           |   |             | (7,935  | ) |   | (7,935 | ) |
| Income                  tax provision                                                                                                                                                                                                                                           |   |          |      |           |   |                           |   |             | (36,425 | ) |   | (36,425 | ) |
| Net                  income                                                                                                                                                                                                                                                     |   |          | 115,473   |           |   | 3,396                          |   |             | (54,245 | ) |   | 64,624 |   |
| Capital                  expenditures                                                                                                                                                                                                                                           |   |          | 38,111    |           |   | 2,990                          |   |             | 13,870  |   |   | 54,971 |   |
| ____________________                                                                                                                                                                                                                                                       |
| *(1)Includes                  76 LANE BRYANT OUTLET stores opened in July 2006 (see **“Item 2.                  Management’s Discussion and Analysis of Financial Condition and Results of                  Operations; RECENT DEVELOPMENTS”** below).*  |
|                                                                                                                                                                                                                                                                            |
| *(Table                  continued on next page)*                                                                                                                                                                                                                               |

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        11. Segment Reporting (Continued)**

|                                                                                                        |   | **Retail** |      | **Direct-to-**  |   | **Corporate**                  |   |             |    |
|-------------------------------------------------------------------------------------------------------------|--------|------------|-----------|-----------------|--------|--------------------------------|--------|------------------|---------|
| ***(In                  thousands)***                                                                       |   | **Stores** |      | **Consumer(1)** |   | **and                  Other** |   | **Consolidated** |    |
|                                                                                                        |   |       |      |            |   |                           |   |             |    |
| **Thirteen                  weeks ended July 30, 2005**                                                     |   |       |      |            |   |                           |   |             |    |
| Net                  sales                                                                                  |   | $          | 638,813   |            | $      | 49,439                         |   | $                | 823     |   | $ | 689,075 |   |
| Depreciation                  and amortization                                                              |   |       | 10,327    |            |   | 277                            |   |             | 9,650   |   |   | 20,254 |   |
| Income                  before interest and taxes                                                           |   |       | 74,594    |            |   | 66                             |   |             | (7,681  | ) |   | 66,979 |   |
| Interest                  expense                                                                           |   |       |      |            |   |                           |   |             | (4,712  | ) |   | (4,712 | ) |
| Income                  tax provision                                                                       |   |       |      |            |   |                           |   |             | (22,843 | ) |   | (22,843 | ) |
| Net                  income                                                                                 |   |       | 74,594    |            |   | 66                             |   |             | (35,236 | ) |   | 39,424 |   |
| Capital                  expenditures                                                                       |   |       | 13,939    |            |   | 297                            |   |             | 5,460   |   |   | 19,696 |   |
|                                                                                                        |   |       |      |            |   |                           |   |             |    |   |   |   |   |
| **Twenty-six                  weeks ended July 30, 2005**                                                   |   |       |      |            |   |                           |   |             |    |   |   |   |   |
| Net                  sales                                                                                  |   | $          | 1,242,080 |            | $      | 49,439                         |   | $                | 909     |   | $ | 1,292,428 |   |
| Depreciation                  and amortization                                                              |   |       | 20,821    |            |   | 277                            |   |             | 17,884  |   |   | 38,982 |   |
| Income                  before interest and taxes                                                           |   |       | 132,242   |            |   | 66                             |   |             | (14,021 | ) |   | 118,287 |   |
| Interest                  expense                                                                           |   |       |      |            |   |                           |   |             | (8,637  | ) |   | (8,637 | ) |
| Income                  tax provision                                                                       |   |       |      |            |   |                           |   |             | (40,209 | ) |   | (40,209 | ) |
| Net                  income                                                                                 |   |       | 132,242   |            |   | 66                             |   |             | (62,867 | ) |   | 69,441 |   |
| Capital                  expenditures                                                                       |   |       | 27,851    |            |   | 297                            |   |             | 9,245   |   |   | 37,393 |   |
| ____________________                                                                                   |
| *(1)From                  date of acquisition of Crosstown Traders, Inc. on June 2,                  2005.* |

**Note        12. Impact of Recent Accounting Pronouncements**

*“Inventory Costs – an Amendment        of Accounting Research Bulletin No. 43, Chapter 4.”*

*“Accounting Changes and Error        Corrections.” *
*“Accounting        Changes,”*
*“Reporting Accounting Changes in        Interim Financial Statements – an amendment of APB Opinion No. 28.”*

*“Accounting for Rental Costs Incurred during a Construction Period.”*

----

**CHARMING      SHOPPES, INC. AND SUBSIDIARIES**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          (Continued)**

**(Unaudited)**

**Note        12. Impact of Recent Accounting Pronouncements (Continued)**

*“How Taxes        Collected from Customers and Remitted to Governmental Authorities Should        Be        Presented in the Income Statement (That Is, Gross versus Net        Presentation).”*

*“*
*Accounting for Uncertainty in Income Taxes—an interpretation of        FASB Statement No. 10*
*9.”*

*“*
*Accounting for Income Taxes.”*

----

**Item        2. Management’s        Discussion and Analysis of Financial Condition and Results of        Operations**

**FORWARD-LOOKING        STATEMENTS**

|   | · | Our                  business is dependent upon our ability to accurately predict rapidly                  changing fashion trends, customer preferences, and other fashion-related                  factors, which we may not be able to successfully accomplish in                  the                  future. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                  slowdown in the United States economy, an uncertain economic outlook,                  and                  escalating energy costs could lead to reduced consumer demand for                  our                  products in the future. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                  women’s specialty retail apparel and direct-to-consumer markets are highly                  competitive and we may be unable to compete successfully against                  existing                  or future competitors. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be unable to successfully integrate the operations of Crosstown                  Traders, Inc. (“Crosstown Traders”) with the operations of Charming                  Shoppes, Inc. In addition, we cannot assure the successful implementation                  of our business plan for Crosstown                  Traders. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  cannot assure the successful implementation of our business plans                  for                  entry into the outlet store distribution channel and expansion                  of our                  CACIQUE® product line through new store                  formats. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  cannot assure the successful implementation of our business plan                  for                  increased profitability and growth in our Retail Stores or                  Direct-to-Consumer segments. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our                  business plan is largely dependent upon continued growth in the                  plus-size                  women’s apparel market, which may not                  occur. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | We                  depend on key personnel, particularly our Chief Executive Officer,                  Dorrit                  J. Bern, and we may not be able to retain or replace these employees                  or                  recruit additional qualified                  personnel. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  depend on our distribution and fulfillment centers, and could incur                  significantly higher costs and longer lead times associated with                  distributing our products to our stores and shipping our products                  to our                  E-commerce and catalog customers if operations at any of these                  distribution and fulfillment centers were to be disrupted for any                  reason. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  depend on the availability of credit for our working capital needs,                  including credit we receive from our suppliers and their agents,                  and on                  our credit card securitization facilities. If we were unable to                  obtain                  sufficient financing at an affordable cost, our ability to merchandise                  our                  stores, E-commerce, or catalog businesses would be adversely                  affected. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Natural                  disasters, as well as war, acts of terrorism, or the threat of                  either may                  negatively impact availability of merchandise and customer traffic                  to our                  stores, or otherwise adversely affect our                  business. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  rely significantly on foreign sources of production and face a                  variety of                  risks generally associated with doing business in foreign markets                  and                  importing merchandise from abroad. Such risks include (but are                  not                  necessarily limited to) political instability; imposition of, or                  changes                  in, duties or quotas; trade restrictions; increased security requirements                  applicable to imports; delays in shipping; increased costs of                  transportation; and issues relating to compliance with domestic                  or                  international labor standards. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our                  Retail Stores and Direct-to-Consumer segments experience seasonal                  fluctuations in net sales and operating income. Any decrease in                  sales or                  margins during our peak sales periods, or in the availability of                  working                  capital during the months preceding such periods, could have a                  material                  adverse effect on our business. In addition, extreme or unseasonable                  weather conditions may have a negative impact on our                  sales. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be unable to obtain adequate insurance for our operations at                  a                  reasonable cost. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be unable to protect our trademarks and other intellectual                  property                  rights, which are important to our success and our competitive                  position. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be unable to hire and retain a sufficient number of suitable                  sales                  associates at our stores. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our                  manufacturers may be unable to manufacture and deliver merchandise                  to us                  in a timely manner or to meet our quality                  standards. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our                  Retail Stores segment sales are dependent upon a high volume of                  traffic in                  the strip centers and malls in which our stores are located, and                  our                  future retail store growth is dependent upon the availability of                  suitable                  locations for new stores. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Successful                  operation of our E-commerce websites and our catalog business is                  dependent                  on our ability to maintain efficient and uninterrupted customer                  service                  and fulfillment operations. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be unable to manage significant increases in certain costs                  vital to                  catalog operations, including postage, paper, and acquisition of                  prospects, which could adversely affect our results of                  operations. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Response                  rates to our catalogs and access to new customers could decline,                  which                  would adversely affect our net sales and results of                  operations. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | We                  may be unable to successfully implement our plan to improve merchandise                  assortments in our Retail Stores or Direct-to-Consumer                  segments. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | We                  make certain significant assumptions, estimates, and projections                  related                  to the useful lives of our property, plant, and equipment and the                  valuation of intangible assets related to acquisitions. The carrying                  amount and/or useful life of these assets are subject to periodic                  valuation tests for impairment. Impairment results when the carrying                  value                  of an asset exceeds the undiscounted (or for goodwill and indefinite-lived                  intangible assets the discounted) future cash flows associated                  with the                  asset. If actual experience were to differ materially from the                  assumptions, estimates, and projections used to determine useful                  lives or                  the valuation of property, plant, equipment, or intangible assets,                  a                  write-down for impairment of the carrying value of the assets,                  or                  acceleration of depreciation or amortization of the assets, could                  result.                  Such a write-down or acceleration of depreciation or amortization                  would                  have an adverse impact on our reported results of                  operations. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Changes                  to existing accounting rules or the adoption of new rules could                  have an                  adverse impact on our reported results of                  operations. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Pursuant                  to Section 404 of the Sarbanes-Oxley Act of 2002, we are required                  to                  include our assessment of the effectiveness of our internal control                  over                  financial reporting in our annual reports. Our independent registered                  public accounting firm is also required to attest to whether or                  not our                  assessment is fairly stated in all material respects and to separately                  report on whether or not they believe that we maintained, in all                  material                  respects, effective internal control over financial reporting.                  If we are                  unable to maintain effective internal control over financial reporting,                  or                  if our independent registered public accounting firm is unable                  to timely                  attest to our assessment, we could be subject to regulatory sanctions                  and                  a possible loss of public confidence in the reliability of our                  financial                  reporting. Such a failure could result in our inability to provide                  timely                  and/or reliable financial information and could adversely affect                  our                  business. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**CRITICAL        ACCOUNTING POLICIES**

***Stock-based        Compensation***

*“Accounting for Stock Issued to Employees,”*
*“Accounting for Stock-Based Compensation.”*

----

*“Share-Based        Payment”*

**“Item 1. Financial Statements (Unaudited); Notes to Condensed        Consolidated Financial Statements; Note 1. Condensed Consolidated Financial        Statements; **
***Stock-based        Compensation***
**”**
**“Part II, Item 8. Financial Statements and Supplementary        Data; Notes to Consolidated Financial Statements; Note 1. Summary of Significant        Accounting Policies; **
***Common Stock        Plans***
**”**

----

**RECENT        DEVELOPMENTS**

**RESULTS        OF OPERATIONS**

|                                                                                                                                                                |   |                                         |   | **Percentage**                |   |                                           |   | **Percentage**                |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|-------------------------------|--------|------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                                                                                |   | **Thirteen                  Weeks Ended(1)** |   | **Change**                    |   | **Twenty-six                  Weeks Ended(1)** |   | **Change**                    |   |
|                                                                                                                                                                |   | **July                  29,**                |   | **July                  30,** |   | **From                  Prior**                |   | **July                  29,** |   | **July                  30,** |   | **From                  Prior** |   |
|                                                                                                                                                                |   | **2006**                                     |   | **2005(2)**                   |   | **Period**                                     |   | **2006**                      |   | **2005(2)** |   | **Period** |   |
|                                                                                                                                                                |   |                                         |   |                          |   |                                           |   |                          |   |   |   |   |   |
| Net                  sales                                                                                                                                          |   |                                         | 100.0  | %                             |   | 100.0                                          | %      |                          | 10.8   | % |   | 100.0 | % |   | 100.0 | % |   | 15.9 | % |
| Cost                  of goods sold, buying, catalog,                                                                                                               |   |                                         |   |                          |   |                                           |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| and                  occupancy                  expenses                                                                                                            |   |                                         | 69.7   |                          |   | 67.8                                           |   |                          | 14.0   |   |   | 68.8 |   |   | 67.3 |   |   | 18.6 |   |
| Selling,                  general, and                                                                                                                              |   |                                         |   |                          |   |                                           |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| administrative                  expenses                                                                                                                            |   |                                         | 23.4   |                          |   | 22.8                                           |   |                          | 13.9   |   |   | 24.2 |   |   | 23.8 |   |   | 17.6 |   |
| Income                  from operations                                                                                                                             |   |                                         | 6.8    |                          |   | 9.4                                            |   |                          | (19.7  | ) |   | 7.0 |   |   | 8.9 |   |   | (8.8 | ) |
| Other                  income                                                                                                                                       |   |                                         | 0.4    |                          |   | 0.3                                            |   |                          | 44.4   |   |   | 0.3 |   |   | 0.3 |   |   | 23.3 |   |
| Interest                  expense                                                                                                                                   |   |                                         | 0.5    |                          |   | 0.7                                            |   |                          | (19.1  | ) |   | 0.5 |   |   | 0.7 |   |   | (8.1 | ) |
| Income                  tax provision                                                                                                                               |   |                                         | 2.4    |                          |   | 3.3                                            |   |                          | (18.3  | ) |   | 2.4 |   |   | 3.1 |   |   | (9.4 | ) |
| Net                  income                                                                                                                                         |   |                                         | 4.3    |                          |   | 5.7                                            |   |                          | (17.4  | ) |   | 4.3 |   |   | 5.4 |   |   | (6.9 | ) |
| ____________________                                                                                                                                           |
| *(1)Results                  may not add due to rounding.*                                                                                                     |
| *(2)Includes                  the results of operations of Crosstown Traders, Inc. from the date                  of                  acquisition on June 2, 2005.* |

|                                                                                                                                                                      |   | **Thirteen                  Weeks Ended** |   | **Twenty-six                  Weeks Ended** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|---------------------------------------------|--------|
|                                                                                                                                                                      |   | **July                  29,**             |   | **July                  30,**               |   | **July                  29,** |   | **July                  30,** |   |
| ***(In                  millions)***                                                                                                                                      |   | **2006**                                  |   | **2005**                                    |   | **2006** |   | **2005** |   |
|                                                                                                                                                                      |   |                                      |   |                                        |   |   |   |   |   |
| FASHION                  BUG                                                                                                                                              |   | $                                         | 292.7  |                                        | $      | 292.9 |   | $ | 548.5 |   | $ | 549.4 |   |
| LANE                  BRYANT(1)                                                                                                                                           |   |                                      | 281.2  |                                        |   | 252.9 |   |   | 558.3 |   |   | 510.4 |   |
| CATHERINES                                                                                                                                                                |   |                                      | 95.9   |                                        |   | 93.0 |   |   | 190.4 |   |   | 182.3 |   |
| Total                  Retail Stores segment sales                                                                                                                        |   |                                      | 669.8  |                                        |   | 638.8 |   |   | 1,297.2 |   |   | 1,242.1 |   |
| Total                  Direct-to-Consumer segment sales(2)                                                                                                                |   |                                      | 92.3   |                                        |   | 49.4 |   |   | 199.8 |   |   | 49.4 |   |
| Corporate                  and other(3)                                                                                                                                   |   |                                      | 1.2    |                                        |   | 0.9 |   |   | 1.3 |   |   | 0.9 |   |
| Total                  net sales                                                                                                                                          |   | $                                         | 763.3  |                                        | $      | 689.1 |   | $ | 1,498.3 |   | $ | 1,292.4 |   |
| ____________________                                                                                                                                                 |
| *(1)Includes                  76 LANE BRYANT OUTLET stores opened in July 2006 (see **“RECENT                  DEVELOPMENTS”** above).*                  |
| *(2)Includes                  the results of operations of Crosstown Traders, Inc. from the date                  of                  acquisition on June 2, 2005.*  |
| *(3)Revenue                  related to loyalty card                  fees.*                                                                                              |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Thirteen                  Weeks Ended** |    | **Twenty-six                  Weeks Ended** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|---------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **July                  29,**             |    | **July                  30,**               |   | **July                  29,** |   | **July                  30,** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **2006**                                  |    | **2005**                                    |   | **2006** |   | **2005** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                      |    |                                        |   |   |   |   |   |
| **Retail                  Stores segment**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                      |    |                                        |   |   |   |   |   |
| Increase                  (decrease) in comparable store sales(1) :                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                      |    |                                        |   |   |   |   |   |
| Consolidated                  retail                  stores                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      | 2       | %                                           |   | 3 | % |   | 1 | % |   | 1 | % |
| FASHION                  BUG                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      | (1      | )                                           |   | 1 |   |   | (1 | ) |   | 0 |   |
| LANE                  BRYANT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      | 4       |                                        |   | 2 |   |   | 3 |   |   | 1 |   |
| CATHERINES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                      | 2       |                                        |   | 10 |   |   | 4 |   |   | 7 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| Sales                  from new stores as a percentage                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| of                  total consolidated                  prior-period sales:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| FASHION                  BUG                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      | 2       |                                        |   | 2 |   |   | 2 |   |   | 1 |   |
| LANE                  BRYANT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      | 4       |                                        |   | 4 |   |   | 5 |   |   | 4 |   |
| CATHERINES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                      | 1       |                                        |   | 1 |   |   | 1 |   |   | 1 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| Prior-period                  sales from closed stores as a percentage                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| of                  total consolidated                  prior-period sales:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| FASHION                  BUG                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      | (1      | )                                           |   | (2 | ) |   | (1 | ) |   | (2 | ) |
| LANE                  BRYANT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      | (1      | )                                           |   | (1 | ) |   | (1 | ) |   | (1 | ) |
| CATHERINES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                      | (1      | )                                           |   | (1 | ) |   | (1 | ) |   | (1 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| Increase                  in Retail Stores segment sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                      | 5       |                                        |   | 4 |   |   | 4 |   |   | 3 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| **Direct-to-Consumer                  segment**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| Increase                  in Direct-to-Consumer segment sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                      | — | (2)                                         |   | — |   |   | — | (2) |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                      |    |                                        |   |   |   |   |   |   |   |   |   |
| **Increase                  in consolidated total net sales**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                      | 11      |                                        |   | 13 |   |   | 16 |   |   | 7 |   |
| *____________________*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *(1)“Comparable                  store sales” is not a measure that has been defined under generally                  accepted accounting principles. The method of calculating comparable                  store                  sales varies across the retail industry and, therefore, our calculation                  of                  comparable store sales is not necessarily comparable to similarly-titled                  measures reported by other companies. We define comparable store                  sales as                  sales from stores operating in both the current and prior-year                  periods.                  New stores are added to the comparable store sales base 13 months                  after                  their open date. Sales from stores that are relocated within the                  same mall                  or strip-center, remodeled, or have a legal square footage change                  of less                  than 20% are included in the calculation of comparable store sales.                  Sales                  from stores that are relocated outside the existing mall or strip-center,                  or have a legal square footage change of 20% or more, are excluded                  from                  the calculation of comparable store sales until 13 months after                  the                  relocated store is opened. Stores that are temporarily closed for                  a period                  of 4 weeks or more are excluded from the calculation of comparable                  store                  sales for the applicable periods in the year of closure and the                  subsequent                  year. Non-store sales, such as catalog and internet sales, are                  excluded                  from the calculation of comparable store sales.*  |
| *(2)Comparison                  not meaningful, as prior-year periods include sales from Crosstown                  Traders, Inc. from the date of acquisition on June 2, 2005 (approximately                  8 weeks).*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

----

|                                                                                                                                                                                 |   |        |   |       |   |           |   |      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|------------|--------|----------------|--------|-----------|--------|
|                                                                                                                                                                                 |   | **FASHION** |   | **LANE**   |   |           |   |      |   |
|                                                                                                                                                                                 |   | **BUG**     |   | **BRYANT** |   | **CATHERINES** |   | **Total** |   |
|                                                                                                                                                                                 |   |        |   |       |   |           |   |      |   |
| **Fiscal                  2007 Year-to-Date(1):**                                                                                                                                    |   |        |   |       |   |           |   |      |   |
| Stores                  at January 28, 2006                                                                                                                                          |   |        | 1,025  |       |   | 748            |   |      | 463    |   |   | 2,236 |   |
|                                                                                                                                                                                 |   |        |   |       |   |           |   |      |   |   |   |   |   |
| Stores                  opened                                                                                                                                                       |   |        | 4      |       |   | 95             | (2)    |      | 6      |   |   | 105 |   |
| Stores                  closed                                                                                                                                                       |   |        | (8     | )          |   | (13            | )      |      | (3     | ) |   | (24 | ) |
| Net                  change in stores                                                                                                                                                |   |        | (4     | )          |   | 82             |   |      | 3      |   |   | 81 |   |
|                                                                                                                                                                                 |   |        |   |       |   |           |   |      |   |   |   |   |   |
| Stores                  at July 29, 2006                                                                                                                                             |   |        | 1,021  |       |   | 830            |   |      | 466    |   |   | 2,317 |   |
|                                                                                                                                                                                 |   |        |   |       |   |           |   |      |   |   |   |   |   |
| Stores                  relocated during period                                                                                                                                      |   |        | 14     |       |   | 14             |   |      | 4      |   |   | 32 |   |
|                                                                                                                                                                                 |   |        |   |       |   |           |   |      |   |   |   |   |   |
| **Fiscal                  2007(3):**                                                                                                                                                 |   |        |   |       |   |           |   |      |   |   |   |   |   |
| Planned                  store openings                                                                                                                                              |   |        | 13     |       |   | 134            | (4)    |      | 8      |   |   | 155 |   |
| Planned                  store closings                                                                                                                                              |   |        | 20     |       |   | 16             |   |      | 8      |   |   | 44 |   |
| Planned                  store relocations                                                                                                                                           |   |        | 26     |       |   | 35             |   |      | 11     |   |   | 72 |   |
| *____________________*                                                                                                                                                          |
| *(1)Excludes                  2 Crosstown Traders outlet stores.*                                                                                                               |
| *(2)Includes                  76 LANE BRYANT OUTLET stores opened in July 2006 (see **“RECENT                  DEVELOPMENTS”** above).*                             |
| *(3)Does                  not include approximately 45 PETITE SOPHISTICATE OUTLET stores                  (see                  **“RECENT DEVELOPMENTS”** above).*  |
| *(4)Includes                  83 LANE BRYANT OUTLET stores (see **“RECENT DEVELOPMENTS”**                  above).*                                                      |

**Comparison        of Thirteen Weeks Ended July 29, 2006 and July 30, 2005**

***Net        Sales***

----

***Cost        of Goods Sold, Buying, Catalog, and Occupancy***

----

***Selling,        General, and Administrative***

**“CRITICAL        ACCOUNTING POLICIES”**

***Other        Income***

***Income        Tax Provision***

----

**Comparison        of Twenty-six Weeks Ended July 29, 2006 and July 30, 2005**

***Net        Sales***

***Cost        of Goods Sold, Buying, Catalog, and Occupancy***

----

***Selling,        General, and Administrative***

**“Item 1. Financial Statements (Unaudited); Notes to        Condensed Consolidated Financial Statements; Note 10. Asset        Securitization”**

**“CRITICAL ACCOUNTING POLICIES”**

***Other        Income***

----

***Income        Tax Provision***

**LIQUIDITY        AND CAPITAL RESOURCES**

|                                            |   | **July                  29,** |   | **January                  28,** |   |
|-------------------------------------------------|--------|-------------------------------|--------|----------------------------------|--------|
| ***(Dollars                  in millions)***    |   | **2006**                      |   | **2006**                         |   |
|                                            |   |                          |   |                             |   |
| Cash                  and cash equivalents      |   | $                             | 211.8  |                             | $      | 130.1 |   |
| Available-for-sale                  securities  |   |                          | 22.2   |                             |   | 20.2 |   |
| Working                  capital                |   | $                             | 407.9  |                             | $      | 338.6 |   |
| Current                  ratio                  |   |                          | 2.0    |                             |   | 1.8 |   |
| Long-term                  debt to equity ratio |   |                          | 21.0   | %                                |   | 23.6 | % |

**“CRITICAL        ACCOUNTING POLICIES”**

***Capital        Expenditures***

----

***Dividends***

***Off-Balance-Sheet        Financing***

| **(Dollars                  in millions)**                                                                                                                                                                                                                                                                                                                                                                                                                 | **Series                  1999-2** | **Series                  2002-1** | **Series                  2004**   | **Series                  2004-1** | **2005-RPA**(1)                    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|------------------------------------|------------------------------------|------------------------------------|------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                               |                               |                               |                               |                               |
| Date                  of facility                                                                                                                                                                                                                                                                                                                                                                                                                          | May                  1999          | November                  2002     | January                  2004      | August                  2004       | May                  2005          |
| Type                  of facility                                                                                                                                                                                                                                                                                                                                                                                                                          | Conduit                            | Term                               | Conduit                            | Term                               | Conduit                            |
| Maximum                  funding                                                                                                                                                                                                                                                                                                                                                                                                                           | $50.0                              | $100.0                             | $50.0                              | $180.0                             | $55.0                              |
| Funding                  as of July 29, 2006                                                                                                                                                                                                                                                                                                                                                                                                               | $27.9                              | $100.0                             | $00.0                              | $180.0                             | $51.5                              |
| First                  scheduled principal payment                                                                                                                                                                                                                                                                                                                                                                                                         | Not                  applicable    | August                  2007       | Not                  applicable    | April                  2009        | Not                  applicable    |
| Expected                  final principal payment                                                                                                                                                                                                                                                                                                                                                                                                          | Not                  applicable(2) | May                  2008          | Not                  applicable(2) | March                  2010        | Not                  applicable(2) |
| Renewal                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Annual                             | Not                  applicable    | Annual                             | Not                  applicable    | Annual                             |
| ____________________                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| *(1)Receivables                  Purchase Agreement (for the Crosstown Traders catalog proprietary                  credit                  card receivables program).*                                                                                                                                                                                                                                                                               |
| *(2)Series                  1999-2 and Series 2004 have scheduled final payment dates that                  occur in                  the twelfth month following the month in which the series begins                  amortizing. These series and 2005-RPA generally begin amortizing                  364 days                  after start of the purchase commitment by the series purchaser                  currently                  in effect.* |

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**“Part II, Item 7. Management’s Discussion and        Analysis of Financial Condition and Results of Operations” **
**“Part II, Item 8. Financial Statements and Supplementary        Data; Notes to        Consolidated Financial Statements; Note 17. Asset Securitization”**

**“Item 8. Financial Statements and        Supplementary Data; Notes to Consolidated Financial Statements; Note 18.        Leases”**

**FINANCING**

***Revolving        Credit Facility***

**“Part II,        Item 7. Management’s Discussion and Analysis of Financial Condition and Results        of Operations”**
**“Part II, Item 8. Financial Statements and        Supplementary Data; Notes to Consolidated Financial Statements; Note 8.        Short-term Borrowings and Long-term Debt”**

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**MARKET        RISK**

**IMPACT        OF RECENT ACCOUNTING PRONOUNCEMENTS**

**“Item 1. Notes To Condensed Consolidated Financial Statements        (Unaudited); Note 12. Impact of Recent Accounting Pronouncements”**

**Item        3. Quantitative and Qualitative Disclosures About Market        Risk**

**“Item 2. Management’s Discussion and Analysis of Financial Condition and        Results of Operations; MARKET RISK,”**

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**Item        4. Controls and Procedures**

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**PART        II. OTHER INFORMATION**

**Item        1. Legal Proceedings**

**Item        1A. Risk Factors**

**“Part I; Item 2. Management’s Discussion and Analysis of        Financial Condition and Results of Operations; **
**RECENT        DEVELOPMENTS**
**”**

**“Part I; Item 1A.        Risk Factors”**

**“Part I; Item 1A.        Risk Factors”**
**“Part I; Item 2. Management’s        Discussion and Analysis of Financial Condition and Results of Operations;        **
**FORWARD-LOOKING STATEMENTS**
**”**

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**Item        2. Unregistered Sales of Equity Securities and Use of        Proceeds**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                             |   |                              |   | **Total**                               |   | **Maximum**                        |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|-----------------------------------|--------|-----------------------------------------|--------|------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                             |   |                              |   | **Number**                              |   | **Number                    of**   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                             |   |                              |   | **of                    Shares**        |   | **Shares                    that** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                             |   |                              |   | **Purchased                    as**     |   | **May                    Yet be**  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **Total**                        |   |                              |   | **Part                    of Publicly** |   | **Purchased**                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **Number**                       |   | **Average**                       |   | **Announced**                           |   | **Under                    the**   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **of                    Shares** |   | **Price                    Paid** |   | **Plans                    or**         |   | **Plans                    or**    |   |
| **Period**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Purchased**                    |   | **per                    Share**  |   | **Programs**(2)                         |   | **Programs**(2)                    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                             |   |                              |   |                                    |   |                               |   |
| April                    30, 2006 through                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             |   |                              |   |                                    |   |                               |   |   |   |   |   |
| May                    27, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                             | 1,209  | (1)                               | $      | 13.96                                   |   |                               | -      |   |   | - |   |
| May                    28, 2006 through                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                             |   |                              |   |                                    |   |                               |   |   |   |   |   |
| July                    1, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                             | 7,052  | (1)                               |   | 11.48                                   |   |                               | -      |   |   | - |   |
| July                    2, 2006 through                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                             |   |                              |   |                                    |   |                               |   |   |   |   |   |
| July                    29, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                             | 861    | (1)                               |   | 10.93                                   |   |                               | -      |   |   | - |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             | 9,122  |                              | $      | 11.75                                   |   |                               | -      |   |   | - |   |
| ____________________                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| *(1)* *Shares                    withheld for the payment of payroll taxes on employee stock awards                    that                    vested during the period.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| *(2)* *In                    Fiscal 1998, we publicly announced that our Board of Directors                    granted                    authority to repurchase up to 10,000,000 shares of our common                    stock. In                    Fiscal 2000, we publicly announced that our Board of Directors                    granted                    authority to repurchase up to an additional 10,000,000 shares                    of our                    common stock. In Fiscal 2003, the Board of Directors granted                    an additional                    authorization to repurchase 6,350,662 shares of common stock                    issued to                    Limited Brands in connection with our acquisition of LANE BRYANT.                    From                    Fiscal 1998 through Fiscal 2003, we repurchased a total of 21,370,993                    shares of common stock, which included shares purchased on the                    open market                    as well as shares repurchased from Limited Brands. As of July                    30, 2005,                    4,979,669 shares of our common stock remain available for repurchase                    under                    these programs. Our revolving credit facility allows the repurchase                    of our                    common stock subject to maintaining a minimum level of Excess                    Availability                    (as defined in the facility agreement) immediately before and                    after such                    repurchase. As conditions may allow, we may from time to time                    acquire                    additional shares of our common stock under these programs. Such                    shares,                    if purchased, would be held as treasury shares. No shares were                    acquired                    under these programs during the thirteen weeks ended July 29,                    2006. The                    repurchase programs have no expiration                    date.* |

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**Item        4. Submission of Matters to a Vote of        Security Holders**

| **Name**                                | **Votes                  For** | **Votes                  Withheld** |
|-----------------------------------------|--------------------------------|-------------------------------------|
| William                  O. Albertini   | 113,385,288                    |  2,380,714                     |
| Charles                  T. Hopkins     | 101,717,914                    | 14,048,088                          |
| Yvonne                  M. Curl         | 113,622,693                    |  2,143,309                     |
| M.                  Jeannine Strandjord | 113,619,877                    |  2,146,125                     |

**Item        6. Exhibits**

| 2.1    | Stock                  Purchase Agreement dated May 19, 2005 by and among Chestnut Acquisition                  Sub, Inc., Crosstown Traders, Inc., the Securityholders of Crosstown                  Traders, Inc. whose names are set forth on the signature pages                  thereto,                  and J.P. Morgan Partners (BHCA), L.P., as the Sellers’ Representative,                  incorporated by reference to Form 8-K of the Registrant dated June                  2,                  2005, filed on June 8, 2005. (Exhibit 2.1).                                                                                                                                                                                                                     |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1    | Restated                  Articles of Incorporation, incorporated by reference to Form 10-K                  of the                  Registrant for the fiscal year ended January 29, 1994 (File No.                  000-07258,                  Exhibit 3.1).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.2    | Bylaws,                  as Amended and Restated, incorporated by reference to Form 10-Q                  of the                  Registrant for the quarter ended July 31, 1999 (File No. 000-07258,                  Exhibit 3.2).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 31.1   | Certification                  by Principal Executive Officer Pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 31.2   | Certification                  by Principal Financial Officer Pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 32     | Certification                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                  906 of                  the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 99.1   | Amendment                  No. 1, dated as of May 17, 2006, to Second Amended and Restated                  Loan and                  Security Agreement, dated July 28, 2005, by and among Charming                  Shoppes,                  Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc.,                  FB                  Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc.,                  and                  Crosstown Traders, Inc. as borrowers; a syndicate of banks and                  other                  financial institutions as lenders, including Wachovia Bank, National                  Association as agent for the lenders; and certain of the Company’s                  subsidiaries as guarantors.   |

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**SIGNATURES**

|                                  | **CHARMING                  SHOPPES, INC.**            |
|---------------------------------------|--------------------------------------------------------|
|                                  | (Registrant)                                           |
|                                  |                                                   |
|                                  |                                                   |
|                                  |                                                   |
| Date:August                  31, 2006 | **/S/                  DORRIT J. BERN**                |
|                                  | Dorrit                  J. Bern                        |
|                                  | Chairman                  of the Board                 |
|                                  | President                  and Chief Executive Officer |
|                                  |                                                   |
|                                  |                                                   |
|                                  |                                                   |
| Date:August                  31, 2006 | **/S/                  ERIC M. SPECTER**               |
|                                  | Eric                  M. Specter                       |
|                                  | Executive                  Vice President              |
|                                  | Chief                  Financial Officer               |

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**Exhibit        Index**

| **Exhibit                  No.** | **Item**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                    | Stock                  Purchase Agreement dated May 19, 2005 by and among Chestnut Acquisition                  Sub, Inc., Crosstown Traders, Inc., the Securityholders of Crosstown                  Traders, Inc. whose names are set forth on the signature pages                  thereto and                  J.P. Morgan Partners (BHCA), L.P., as the Sellers’ Representative,                  incorporated by reference to Form 8-K of the Registrant dated June                  2,                  2005, filed on June 8, 2005. (Exhibit 2.1).                                                                                                                                                                                                                |
| 3.1                         | Restated                  Articles of Incorporation, incorporated by reference to Form 10-K                  of the                  Registrant for the fiscal year ended January 29, 1994 (File No.                  000-07258,                  Exhibit 3.1).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 3.2                         | Bylaws,                  as Amended and Restated, incorporated by reference to Form 10-Q                  of the                  Registrant for the quarter ended July 31, 1999 (File No. 000-07258,                  Exhibit 3.2).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 31.1                        | Certification                  By Principal Executive Officer Pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2                        | Certification                  By Principal Financial Officer Pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32                               | Certification                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                  906 of                  the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 99.1                             | Amendment                  No. 1, dated as of May 17, 2006, to Second Amended and Restated                  Loan and                  Security Agreement, dated July 28, 2005, by and among Charming                  Shoppes,                  Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc.,                  FB                  Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc.,                  and                  Crosstown Traders, Inc. as borrowers; a syndicate of banks and                  other                  financial institutions as lenders, including Wachovia Bank, National                  Association as agent for the lenders; and certain of the Company’s                  subsidiaries as guarantors.  |