##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D. C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    January 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Transition Period From
    
    to   0-12188
 Commission File Number
  Deb Shops, Inc.
 (Exact name of registrant as
    specified in its charter)
  Pennsylvania

23-1913593(State of
    Incorporation)

(IRS Employer
    Identification No.)   9401 BLUE GRASS ROAD, PHILADELPHIA, PA 19114
 (Address of principal executive
    offices and zip code)
  (Registrants telephone number, including area code)
    (215)
    676-6000
  Securities Registered Pursuant to Section 12(b) of the
    Act:
 Common Stock, par value $.01 per share.
  Securities Registered Pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 



Forward-Looking
    Statements
    PART I
  Item 1.Business
  General
    Merchandising
          Marketing
   2




---



##### 



www.debshops.com up-to-date
  Management
    Information Systems
  point-of-sale
  point-of-sale
  Seasonality
  Back-to-School End-of-season
  Stores
      Year Ended January 31,2007


2006


2005


2004


2003Open at beginning of fiscal year


327



323



332



327



309Opened during fiscal year


18



8



8



13



23Closed during fiscal year


(9
)


(4
)


(17
)


(8
)


(5
)Open at end of fiscal year


336



327



323



332



327  3




---



##### 



NumberRegion

of StoresMidwest


149East


112West


39New England


25South


11Total


336       Operations
           4




---



##### 



Competition
      Available
    Information
  www.debshops.com www.debshops.com www.sec.gov www.debshops.com
    
  Form 10-K,
  Item 1A.
    Risk
    Factors    We may
    not be able to anticipate or react to changes in merchandise
    trends and consumer demands and our failure to do so may lead to
    loss of sales and reduced profitability.
   5




---



##### 



We may
    not be able to attract or retain a sufficient number of
    customers in an extremely competitive retail business market,
    which would have an adverse effect on our business, financial
    condition and results of operations.
    If we
    are unable to implement our growth strategy, our ability to
    increase our sales, profitability and cash flow could be
    significantly impaired.
    
    Increase the number of stores we operate;
    Increase the productivity and profitability of our existing
    stores;
    Increase the number of plus-sized departments in existing stores;
    Continue our program of selectively remodeling existing
    stores; and
    Continue to selectively close those locations that we believe
    cannot become profitable or maintain profitability.      
    The costs of opening and operating new stores may offset the
    increased sales generated by the additional stores;
    The opening of additional stores in an existing market could
    reduce net sales from existing stores in that market;
    The opening of stores in new geographic markets may present
    competitive challenges that are different than those we face in
    our existing geographic markets; and
    The costs associated with increasing the number of plus-sized
    departments in existing stores may not be recouped by increases
    in sales volumes in those locations.  Our
    levels of sales and earnings growth have fluctuated, and any
    decline in our future growth or performance could have a
    material adverse effect on the market price of our common
    stock.
    Our
    business could be significantly disrupted if we cannot retain or
    replace members of our management team.
   6




---



##### 



We
    rely on foreign sources of production.
    
    Political instability;
    Increased security requirements applicable to imported goods;
    Imposition or increases of duties, taxes and other charges on
    imports;
    Imposition of quotas on imported merchandise;
    Currency and exchange risks;
    Delays in shipping; and
    Increased costs of transportation.    We
    depend on mall and strip shopping center customer
    traffic.
    A weak
    fourth quarter would have a material adverse effect on our
    operating results for the year.
    We
    depend on a single distribution center, a disruption in the
    operation of which could have a material adverse effect on our
    business, financial condition and results of
    operations.
   7




---



##### 



Our
    management information systems may prove
    inadequate.
    An
    increase in the cost of fuel oil could impact our earnings and
    margins.
    Weather
    conditions could adversely affect our results of
    operations.
    Labor
    conditions could adversely affect our results of
    operations.
      Our
    principal shareholders may effectively exercise control over
    matters requiring shareholder approval.
    Terrorist
    attacks and threats or actual war may impact all aspects of our
    operations, revenues, costs and stock price in unpredictable
    ways.
   8




---



##### 



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties        Number ofLeasesCalendar Years

Expiring2007 - 2008


842009 - 2010


812011 - 2012


492013 - 2014


462015 - 2016


362017 - 2018


292019 and thereafter


11Total


336   Item 13. Certain Relationships and Related Transactions
    and Director Independence
  Item 1. Business  Stores
  Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Executive
    Officers of the Registrant
  Form 10-K,
 9




---



##### 



OfficerName

Age

Position with Company

BeginningMarvin Rounick


66


Director, President and Chief
    Executive Officer


1973Warren Weiner


63


Director, Executive Vice
    President, Secretary and Treasurer


1973Allan Laufgraben


68


Senior Vice President,
    Merchandising


1995Barry J. Susson, CPA


44


Chief Financial Officer and
    Assistant Secretary


2003Stanley A. Uhr, Esq.


61


Vice President and Corporate
    Counsel


1988Stephen P. Smith


47


Vice President, Information Systems


1998John DeAngelis


38


Vice President, Real Estate


2005Lorraine K. Koc


49


Vice President, General Counsel


2006Joan M. Nolan


54


Controller


1998                    10




---



##### 



PART II
  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity
    Securities  Market
    Information
      2007

High


LowFirst Quarter

$
32.26


$
27.77Second Quarter

$
31.09


$
21.91Third Quarter

$
28.30


$
22.96Fourth Quarter

$
29.48


$
24.17   2006

High


LowFirst Quarter

$
30.08


$
23.49Second Quarter

$
30.85


$
23.91Third Quarter

$
25.29


$
21.30Fourth Quarter

$
32.39


$
25.28   Holders
    Dividends
   11




---



##### 



COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
    Among Deb Shops, Inc., The NASDAQ Composite Index
    And The Dow Jones US Apparel Retailers Index
  
     Issuer
    Purchases of Equity Securities
   12




---



##### 



Item 6.
    Selected
    Financial Data    Deb
    Shops, Inc. and Subsidiaries
    Consolidated Financial Highlights
  Year Ended January 31,2007


2006


2005


2004


2003(In thousands, except per share data)Net sales

$
324,741


$
324,964


$
303,778


$
298,646


$
317,722Gross profit

$
110,755


$
113,283


$
100,940


$
93,074


$
110,790Operating income

$
28,536


$
35,772


$
26,200


$
18,234


$
38,653Net income

$
21,413


$
25,290


$
17,944


$
12,601


$
25,284Net income per common
    share  basic

$
1.49


$
1.79


$
1.30


$
0.92


$
1.85Net income per common
    share  diluted

$
1.49


$
1.78


$
1.30


$
0.92


$
1.83Weighted average shares
    outstanding  basic


14,327



14,125



13,729



13,685



13,672Weighted average shares
    outstanding  diluted


14,343



14,195



13,753



13,685



13,815Total assets

$
202,677


$
187,669


$
242,880


$
231,697


$
221,153Deferred lease credits

$
12,655


$
11,511


$
11,114


$
10,920


$
9,748Shareholders equity

$
146,046


$
131,555


$
188,911


$
181,547


$
176,186Book value per share at year end*

$
10.19


$
9.19


$
13.73


$
13.27


$
12.87Cash dividends declared per share
    of common stock

$
0.500


$
6.500


$
0.900


$
0.525


$
0.425     *
    
    Calculated by dividing shareholders equity by the number
    of shares outstanding at each respective period end.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
     13




---



##### 



Store Data(1)Year Ended January 31,2007


2006


2005Stores open at end of the year


336



327



323Average number in operation during
    the year


334



325



327Average net sales per store (in
    thousands)

$
971


$
998


$
929Average operating income per store
    (in thousands)

$
85


$
110


$
80Comparable store
    sales(2)  percent change


(3.3
)%


7.0
%


1.0
%     (1)
    
    Includes Tops N Bottoms stores(2)
    
    Comparable store sales include stores opened for both periods. A
    store is added to the comparable store base in its
    13th month of operation. 14




---



##### 



Year Ended January 31,2007


2006


2005Net sales


100.0
%


100.0
%


100.0
%Gross profit


34.1
%


34.9
%


33.2
%Operating income


8.8
%


11.0
%


8.6
%Income before income taxes


10.1
%


12.3
%


9.4
%Income tax provision


3.5
%


4.5
%


3.5
%Net income


6.6
%


7.8
%


5.9
%   Fiscal
    2007 compared to Fiscal 2006
  Net
    sales
    Cost
    of sales, including buying and occupancy costs
    Selling
    and administrative expenses
    Depreciation
    and amortization
    Operating
    income
   15




---



##### 



Other
    income, principally interest
    Income
    tax provision
    Fiscal
    2006 compared to Fiscal 2005
  Net
    sales
    Cost
    of sales, including buying and occupancy costs
    Selling
    and administrative expenses
    Depreciation
    and amortization
    Operating
    income
   16




---



##### 



Other
    income, principally interest
    Income
    tax provision
    Liquidity
    and Capital Resources
  35-day
     17




---



##### 



Year Ended January 31,2007


2006


2005New stores


18



8



8Remodeled stores


7



12



11     point-of-sale
  Payments Due by PeriodLess Than


1 - 3


3 - 5


More ThanTotal


1 Year


Years


Years


5 YearsOperating leases

$
160,175,000


$
27,213,000


$
46,584,000


$
35,545,000


$
50,833,000Other commitments


434,000



434,000











Total

$
160,609,000


$
27,647,000


$
46,584,000


$
35,545,000


$
50,833,000     Seasonal
    Nature of Operations
    Critical
    Accounting Policies
  Item 8. Financial Statements and
    Supplementary Data
   18




---



##### 



Item 8. Financial
    Statements and Supplementary Data
  Revenue
    Recognition
    Inventories
  (first-in,
  Income
    Taxes
    Impairment
    of Long-Lived Assets
    Workers
    Compensation Insurance
   19




---



##### 



Recent
    Accounting Pronouncements
        Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Form 10-K
 20




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data MANAGEMENTS
    ANNUAL REPORT ON INTERNAL CONTROL
    OVER FINANCIAL REPORTING  Rules 13a-15(f) 15d-15(f)
       21




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL
    CONTROL OVER FINANCIAL REPORTING      Internal Control 
    Integrated Framework
            
    22




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Board of
    Directors and Shareholders
            Internal Control 
    Integrated Framework
  
    23




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Operations
  Year Ended January 31,2007


2006


2005Net sales

$
324,741,227


$
324,963,607


$
303,778,103Cost of sales, including buying
    
    and occupancy costs


213,985,749



211,680,152



202,837,874Gross profit


110,755,478



113,283,455



100,940,229Operating expenses:Selling and administrative


76,852,741



72,070,465



69,356,328Depreciation and amortization


5,366,252



5,441,096



5,384,28382,218,993



77,511,561



74,740,611Operating income


28,536,485



35,771,894



26,199,618Other income, principally interest


4,369,478



4,135,410



2,316,312Income before income taxes


32,905,963



39,907,304



28,515,930Income tax provision


11,493,000



14,617,000



10,572,000Net income

$
21,412,963


$
25,290,304


$
17,943,930Net income per common shareBasic

$
1.49


$
1.79


$
1.30Diluted

$
1.49


$
1.78


$
1.30Weighted average number of common
    shares outstandingBasic


14,326,704



14,125,484



13,729,100Diluted


14,343,173



14,195,078



13,753,461    24




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  Consolidated
    Balance Sheets
  January 31,2007


2006ASSETSCurrent AssetsCash and cash equivalents

$
25,779,592


$
26,520,757Marketable securities


101,950,000



91,000,000Merchandise inventories


34,473,012



32,902,705Prepaid expenses and other


3,270,411



3,247,389Deferred income taxes


1,256,258



1,180,154Total current assets


166,729,273



154,851,005Property, Plant and
    Equipment  at
    costLand


150,000



150,000Buildings


2,365,697



2,365,697Leasehold improvements


59,125,715



55,615,772Furniture and equipment


18,341,551



16,794,54279,982,963



74,926,011Less accumulated depreciation and
    amortization


54,238,784



51,600,719Net property, plant and equipment


25,744,179



23,325,292Other
    AssetsDeferred income taxes


8,491,788



7,780,844Other


1,712,223



1,712,223Total other assets


10,204,011



9,493,067Total assets

$
202,677,463


$
187,669,364LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent LiabilitiesTrade accounts payable

$
27,686,466


$
26,917,480Accrued expenses and other


12,982,386



13,173,334Income taxes payable


3,308,247



4,511,782Total current liabilities


43,977,099



44,602,596Deferred lease credits


12,654,669



11,511,430Total liabilities


56,631,768



56,114,026Shareholders
    EquitySeries A preferred stock, par
    value $1.00 per share:Authorized 
    5,000,000 sharesIssued and outstanding 
    460 shares, liquidation value $460,000


460



460Common stock, par value
    $.01 per share:Authorized 
    50,000,000 sharesIssued 
    15,688,290 shares


156,883



156,883Additional paid-in capital


14,447,128



14,187,841Retained earnings


139,878,726



125,684,867154,483,197



140,030,051Less common treasury shares, at
    cost:January 31, 2007: 1,360,482;
    January 31, 2006: 1,366,482


8,437,502



8,474,713Total shareholders equity


146,045,695



131,555,338Total liabilities and
    shareholders equity

$
202,677,463


$
187,669,364    25




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Shareholders Equity
  Preferred


Common


Additional


RetainedStock


Stock


Paid-In Capital


Earnings


Treasury Stock


TotalsBalances 
    February 1, 2004

$
460


$
156,883


$
5,864,790


$
187,949,432


$
(12,424,720
)

$
181,546,845Net income














17,943,930







17,943,930Dividends on preferred stock
    ($120 per share)














(55,200
)






(55,200
)Dividends on common stock
    ($0.90 per share)














(12,370,524
)






(12,370,524
)Stock options exercised










1,353,156







478,231



1,831,387Tax benefit from exercise of stock
    options










14,700











14,700Balances 
    January 31, 2005


460



156,883



7,232,646



193,467,638



(11,946,489
)


188,911,138Net income














25,290,304







25,290,304Dividends on preferred stock
    ($120 per share)














(55,200
)






(55,200
)Dividends on common stock
    ($6.50 per share)














(93,017,875
)






(93,017,875
)Stock options exercised










6,341,083







3,471,776



9,812,859Tax benefit from exercise of stock
    options










614,112











614,112Balances 
    January 31, 2006


460



156,883



14,187,841



125,684,867



(8,474,713
)


131,555,338Net income














21,412,963







21,412,963Dividends on preferred stock
    ($120 per share)














(55,200
)






(55,200
)Dividends on common stock
    ($0.50 per share)














(7,163,904
)






(7,163,904
)Stock options exercised










105,289







37,211



142,500Tax benefit from exercise of stock
    options










11,800











11,800Stock option expense










142,198











142,198Balances 
    January 31, 2007

$
460


$
156,883


$
14,447,128


$
139,878,726


$
(8,437,502
)

$
146,045,695    26




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Cash Flows
  Year Ended January 31,2007


2006


2005Cash flows from operating
    activities:Net income

$
21,412,963


$
25,290,304


$
17,943,930Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation and amortization


5,366,252



5,441,096



5,384,283Deferred income tax benefit


(787,000
)


(840,000
)


(235,000
)Loss on retirement of property,
    plant and equipment


123,435



69,060



70,401Stock compensation expense


142,198







Changes in operating assets and
    liabilities:Increase in merchandise inventories


(1,570,307
)


(2,342,529
)


(2,295,501
)Decrease (increase) in prepaid
    expenses and other


16,952



(631,204
)


351,618Increase (decrease) in trade
    accounts payable


768,986



(4,203
)


398,124(Decrease) increase in accrued
    expenses and other


(191,698
)


1,246,714



1,163,149(Decrease) increase in income
    taxes payable


(1,203,535
)


104,700



1,950,273Increase in deferred lease credits


1,143,239



397,206



194,137Net cash provided by operating
    activities


25,221,485



28,731,144



24,925,414Cash flows from investing
    activities:Purchases of property, plant and
    equipment


(7,948,596
)


(5,033,231
)


(4,220,861
)Purchases of investment securities


(44,075,000
)


(111,100,000
)


(79,600,000
)Sales of investment securities


33,125,000



166,200,000



65,700,000Net cash (used in) provided by
    investing activities


(18,898,596
)


50,066,769



(18,120,861
)Cash flows from financing
    activities:Preferred stock cash dividends paid


(55,200
)


(55,200
)


(55,200
)Common stock cash dividends paid


(7,163,154
)


(92,947,897
)


(12,360,887
)Proceeds from exercise of stock
    options


142,500



9,812,859



1,831,386Tax benefit from stock-based
    compensation


11,800



614,112



14,700Net cash used in financing
    activities


(7,064,054
)


(82,576,126
)


(10,570,001
)Decrease in cash and cash
    equivalents


(741,165
)


(3,778,213
)


(3,765,448
)Cash and cash equivalents at
    beginning of year


26,520,757



30,298,970



34,064,418Cash and cash equivalents at
    end of year

$
25,779,592


$
26,520,757


$
30,298,970Supplemental disclosures of
    cash flow information:Cash paid during the year for:Income taxes, net

$
13,524,000


$
14,185,000


$
8,991,000    27




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  - A -
    Summary of Significant Accounting Policies
  Operation:
  Consolidation:
  Management Estimates:
  Marketable Securities:
  Inventories: (first-in,
  Property, Plant and Equipment:
  98-1, point-of-sale
     28




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Other Assets:
  Lease Accounting:
    Revenue Recognition:
  Taxes Collected from Customers:
  Cost of Sales:
  Stock-based Compensation Plans:
 29




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       Year Ended January 31,2006


2005Net income as reported

$
25,290,304


$
17,943,930Stock-based employee compensation
    cost


(222,921
)


(662,316
)Pro forma net income

$
25,067,383


$
17,281,614Basic net income per common share,
    as reported

$
1.79


$
1.30Pro forma basic net income per
    common share

$
1.77


$
1.25Diluted net income per common
    share, as reported

$
1.78


$
1.30Pro forma diluted net income per
    common share

$
1.76


$
1.25   Statements of Cash Flows:
  Reclassifications:
  Recent
    Accounting Pronouncements:
       30




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    - B -
    Marketable Securities
  35-day
  - C -
    Earnings per Share
    Year Ended January 31,2007


2006


2005Net income

$
21,412,963


$
25,290,304


$
17,943,930Dividends on preferred stock


(55,200
)


(55,200
)


(55,200
)Income available to common
    shareholders

$
21,357,763


$
25,235,104


$
17,888,730Basic weighted average number of
    common shares outstanding


14,326,704



14,125,484



13,729,100Effect of dilutive stock options


16,469



69,594



24,361Diluted weighted average number of
    common shares outstanding


14,343,173



14,195,078



13,753,461   - D -
    Income Taxes
    Year Ended January 31,2007


2006


2005Current:Federal

$
10,484,000


$
12,676,000


$
8,749,000State


1,796,000



2,781,000



2,058,00012,280,000



15,457,000



10,807,000Deferred:Federal


(623,000
)


(674,000
)


(77,000
)State


(164,000
)


(166,000
)


(158,000
)(787,000
)


(840,000
)


(235,000
)$
11,493,000


$
14,617,000


$
10,572,000  31




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year Ended January 31,2007


2006


2005Tax provision at statutory rate

$
11,517,000


$
13,968,000


$
9,981,000State income taxes, net of federal
    income 
    tax benefit


1,186,000



1,826,000



1,094,000Permanent items, primarily tax
    exempt 
    interest income


(1,030,000
)


(991,000
)


(607,000
)Other


(180,000
)


(186,000
)


104,000$
11,493,000


$
14,617,000


$
10,572,000     January 31,2007


2006Deferred tax assets:Depreciation and amortization

$
9,065,000


$
8,122,000Accrued expenses and other


887,000



866,000Uniform cost capitalization


811,000



750,00010,763,000



9,738,000Deferred tax liabilities:Deferred lease credits


(574,000
)


(341,000
)Prepaid expenses


(441,000
)


(436,000
)(1,015,000
)


(777,000
)$
9,748,000


$
8,961,000   - E -
    Leases
     32




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     OperatingYear Ending January 31,

Leases2008

$
27,213,0002009


24,992,0002010


21,592,0002011


18,700,0002012


16,845,000Thereafter


50,833,000Total minimum rental commitments

$
160,175,000     Year Ended January 31,2007


2006


2005Base rent

$
28,122,000


$
26,633,000


$
26,413,000Contingent rent based on sales


2,394,000



2,418,000



2,142,000Landlord allowances recognized


(1,311,000
)


(1,367,000
)


(1,119,000
)Total rent expense

$
29,205,000


$
27,684,000


$
27,436,000   - F -
    Stock Option Plan
      WeightedAverageOptions


Exercise PriceOutstanding, February 1, 2004


1,380,000


$
23.77Granted


15,000



23.75Exercised


(77,111
)


23.75Cancelled


(123,500
)


23.75Outstanding, January 31, 2005


1,194,389



23.77Granted


15,000



25.28Exercised


(1,061,389
)


23.75Outstanding, January 31, 2006


148,000



23.91Exercised


(6,000
)


23.75Outstanding, January 31, 2007


142,000


$
23.91  33




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Fiscal 2006 Grants

Fiscal 2005 GrantsExpected life

Three to seven years

Five yearsRisk-free interest rate

5.0%

4.3%Volatility

34.7%

34.7%Dividend yield

2.0%

2.2%Estimated fair value of options
    granted

$7.94

$6.47         - G -
    Commitments and Contingencies
         34




---



##### 



DEB
    SHOPS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  - H -
    Quarterly Financial Information (Unaudited)
  First


Second


Third


Fourth(Amounts in thousands, except per share data)

Quarter


Quarter


Quarter


QuarterNet sales2007

$
81,458


$
75,658


$
82,526


$
85,100
(1)2006

$
77,485


$
75,966


$
83,126


$
88,386
(1)Cost of sales, including buying
    and 
    occupancy costs2007

$
58,573


$
47,163


$
59,809


$
48,4412006

$
55,683


$
46,934


$
59,705


$
49,358Net income2007

$
2,738


$
5,862


$
2,396


$
10,416
(1)2006

$
2,760


$
6,590


$
3,090


$
12,850
(1)Basic net income per share2007

$
0.19


$
0.41


$
0.17


$
0.732006

$
0.20


$
0.47


$
0.21


$
0.90Diluted net income per share2007

$
0.19


$
0.41


$
0.17


$
0.732006

$
0.20


$
0.46


$
0.21


$
0.89Cash dividends declared per 
    common share2007

$
0.125


$
0.125


$
0.125


$
0.1252006

$
0.125


$
6.125


$
0.125


$
0.125       (1)
    During fiscal 2007, approximately 26% and 49% of our net sales
    and net income occurred during the fourth quarter, as compared
    to 27% and 51% of our net sales and net income for fiscal 2006.
    The fourth quarter includes the Christmas selling season. 35




---



##### 



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Conclusion
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
  Rule 13a-15(e)
  Managements
    Annual Report on Internal Control Over Financial Reporting and
    Attestation Report of the Independent Registered Public
    Accounting Firm
  Form 10-K, Form 10-K,
  Changes
    in Internal Control over Financial Reporting
    Item 9B.
    Other
    Information    PART III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance  www.debshops.com Form 8-K Form 8-K www.debshops.com
  Form 10-K,
 36




---



##### 



Item 11.
    Executive
    Compensation  Form 10-K
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Form 10-K
    Equity
    Compensation Plan Information
  Number ofSecuritiesRemaining AvailableNumber of





for Future IssuanceSecurities to be





Under EquityIssued Upon


Weighted-Average


Compensation PlansExercise of


Exercise Price of


(ExcludingOutstanding


Outstanding


SecuritiesOptions, Warrants


Options, Warrants


Reflected inand Rights


and Rights


Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved
    by security holders


142,000


$
23.91



868,500Equity compensation plans not
    approved
    by security holders










Total


142,000


$
23.91



868,500   Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence  Form 10-K
  Item 14.
    Principal
    Accountant Fees and Services  Form 10-K
 37




---



##### 



PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules  Financial
    Statements and Financial Statement Schedules
  Document

Page(s)Managements
    report on internal control over financial reporting


21Reports of
    independent registered public accounting firm


22-23Consolidated
    statements of operations for the years ended 
    January 31, 2007, 2006 and 2005


24Consolidated
    balance sheets as of January 31, 2007 and 2006


25Consolidated
    statements of shareholders equity for the years
    ended January 31, 2007, 2006 and 2005


26Consolidated
    statements of cash flows for the years ended 
    January 31, 2007, 2006 and 2005


27Notes to
    consolidated financial statements


28-35Selected quarterly financial
    information (unaudited) for 
    the years ended January 31, 2007 and 2006


35      Exhibits
      Exhibit No.

Description of Document3-1

Restated Articles of Incorporation
    of the Company, as amended through May 29, 1984 (2003
    Form 10-K,
    Exhibit 3-1)3-2

By-Laws of the Company, as amended
    through February 2, 2004 (2004
    Form 10-K,
    Exhibit 3-2)10-1

Lease Agreement for property
    located at 9401 Blue Grass Road, Philadelphia, Pennsylvania
    19114 (Registration
    No. 2-82222,
    Exhibit 10-1)10-1.1

Amendment of Lease Agreement dated
    January 3, 1999 for property located at 9401 Blue Grass
    Road, Philadelphia, Pennsylvania 19114 (2005
    Form 10-K,
    Exhibit 10-1.1)10-1.2

Fourth Amendment of Lease
    Agreement dated June 12, 2006 for property located at 9401
    Blue Grass Road, Philadelphia, Pennsylvania 19114
    (Form 8-K
    filed June 14, 2006, Exhibit 10.1)10-2.1*

Life insurance policy for Marvin
    Rounick and Judy Rounick (2003
    10-K,
    Exhibit 10-2.1)10-2.2*

Split Dollar Insurance Agreement
    dated July 31, 1987 between the Company and Jack A. Rounick
    and Stuart Savett, Trustees under the Rounick Family Irrevocable
    Insurance Trust dated October 27, 1986 (2003
    Form 10-K
    Exhibit 10-2.2)10-2.3*

Collateral Assignment dated
    July 31, 1987 from Jack A. Rounick and Stuart Savett,
    Trustees under the Rounick Family Irrevocable Insurance Trust
    dated October 27, 1986, as assignor, and the Company, as
    assignee (2003
    Form 10-K
    Exhibit 10.2-3)10-2.4*

Agreement of Settlement and
    General Release dated May 5, 1998 between Jack A. Rounick
    and Stuart Savett, Trustees under the Rounick Family Irrevocable
    Insurance Trust dated October 27, 1986 and the
    Manufacturers Life Insurance Company
    (Form 10-Q
    for the quarter ended October 31, 1998,
    Exhibit 10-14.4) 38




---



##### 



Exhibit No.

Description of Document10
-2.5*

Amended and Restated Split Dollar
    Insurance Agreement dated July 31, 1998 between the Company
    and Jack A. Rounick and Stuart Savett, Trustees under the
    Rounick Family Irrevocable Insurance Trust dated
    October 27, 1986
    (Form 10-Q
    for the quarter ended October 31, 1998,
    Exhibit 10-14.5)10
-2.6*

Amended and Restated Collateral
    Assignment dated July 31, 1998 from Jack A. Rounick and
    Stuart Savett, Trustees under the Rounick Family
    Irrevocable Insurance Trust dated October 27, 1986
    (Form 10-Q
    for the quarter ended October 31, 1998,
    Exhibit 10-14.6)10
-3.1*

Life Insurance Policy for Warren
    Weiner and Penny Weiner (2003
    Form 10-K
    Exhibit 10-3.1)10
-3.2*

Split Dollar Insurance Agreement
    dated July 31, 1987 between the Company and Barry H. Frank
    and Robert Shein, Trustees under the Weiner Family Irrevocable
    Insurance Trust dated October 27, 1986 (2003
    Form 10-K
    Exhibit 10-3.2)10
-3.3*

Collateral Assignment dated
    July 31, 1987 from Barry H. Frank and Robert Shein,
    Trustees under the Weiner Family Irrevocable Insurance Trust
    dated October 27, 1986, as assignor, and the Company, as
    assignee (2003
    Form 10-K
    Exhibit 10-3.3)10
-3.4*

Agreement of Settlement and
    General Release dated May 5, 1998 between Barry H. Frank
    and Robert Shein, Trustees under the Weiner Family
    Irrevocable Insurance Trust dated October 27, 1986 and the
    Manufacturers Life Insurance Company
    (Form 10-Q
    for the quarter ended October 31, 1998,
    Exhibit 10-15.4)10
-3.5.1*

Amended and Restated Split Dollar
    Insurance Agreement dated July 31, 1998 between the Company
    and Barry H. Frank and Robert Shein, Trustees under the Weiner
    Family Irrevocable Insurance Trust dated October 27, 1986
    (Form 10-Q
    for the quarter ended October 31, 1998,
    Exhibit 10-15.5)10
-3.6*

Amended and Restated Collateral
    Assignment dated July 31, 1998 from Barry H. Frank and
    Robert Shein, Trustees under the Weiner Family Irrevocable
    Insurance Trust dated October 27, 1986
    (Form 10-Q
    for the quarter ended October 31, 1998,
    Exhibit 10-15.6)10
-4*

Deb Shops, Inc. Premium Conversion
    Plan (2003
    Form 10-K,
    Exhibit 10-4)10
-4.1*

Amendment No. I to Deb Shops,
    Inc. Premium Conversion Plan (1996
    Form 10-K,
    Exhibit 10-19.1)10
-5.1*

Deb Shops, Inc. Incentive Stock
    Option Plan, As Amended and Restated Effective January 1,
    2002 (2002
    Form 10-K,
    Exhibit 10-5.1)10
-6*

Employment Agreement dated
    December 20, 2001 between the Company and Allan Laufgraben
    (2002
    Form 10-K,
    Exhibit 10-6)10
-6.1*

Employment Agreement Modification
    and Extension Agreement dated January 15, 2007 between the
    Company and Allan Laufgraben
    (Form 8-K
    filed January 18, 2007,
    Exhibit 10-1)10
-7

Agreement and General Release
    dated April 23, 2004 between the Company and Barry Vesotsky
    (Form 10-Q
    for the quarter ended April 30, 2004,
    Exhibit 10-1)10
-8*

Employment Agreement by and
    between the Company and John DeAngelis dated September 26,
    2005
    (Form 8-K
    filed September 29, 2005,
    Exhibit 10-1)21


Subsidiaries of the Company23
.1

Consent of Independent Registered
    Public Accounting Firm31
.1

Certification of Chief Executive
    Officer, pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 193431
.2

Certification of Chief Financial
    Officer, pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 193432
.1

Certification of Chief Executive
    Officer, pursuant to 18 U.S.C. Section 135032
.2

Certification of Chief Financial
    Officer, pursuant to 18 U.S.C. Section 1350  39




---



##### 



SIGNATURES
    Deb Shops, Inc.
   By:
    /s/  Marvin
    Rounick   President
    /s/  Marvin
    RounickMarvin
    Rounick

President,
    Chief Executive Officer and Director (Principal Executive
    Officer)

April 13, 2007/s/  Warren
    WeinerWarren
    Weiner

Executive Vice President,
    Secretary, Treasurer and Director

April 13, 2007/s/  Jack
    A. RounickJack
    A. Rounick

Assistant Secretary and Director

April 13, 2007/s/  Ivan
    InerfeldIvan
    Inerfeld

Director

April 13, 2007/s/  Barry
    H. FeinbergBarry
    H. Feinberg

Director

April 13, 2007/s/  Barry
    H. FrankBarry
    H. Frank

Esq., Director

April 13, 2007/s/  Ned
    J. KaplinNed
    J. Kaplin

Director

April 13, 2007/s/  Barry
    J. SussonBarry
    J. Susson

CPA, Chief Financial Officer
    and
    Assistant Secretary

April 13, 2007/s/  Joan
    M. NolanJoan
    M. Nolan

Controller

April 13, 2007  40