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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, 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 30, 2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) 
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number 1-34536
 rue21, inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of 
    Incorporation or Organization)

25-1311645(I.R.S. Employer 
    Identification No.)800 Commonwealth Drive
    Suite 100
    Warrendale, Pennsylvania(Address of principal
    executive offices)

15086(Zip Code)   Registrants telephone number, including area code:
 (724) 776-9780
  Securities registered pursuant to Section 12(b) of the
    Act:
  Common Stock, par value $0.001 per share(Title of class)

The NASDAQ Stock Market LLC(Name of each exchange where registered)   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ

Smaller
    reporting company o(Do not check if a smaller
    reporting company)   Rule 12b-2 o þ
      Documents Incorporated by Reference




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Special
    Note on Forward-looking Statements
  Form 10-K Form 10-K
  
    failure to successfully execute our growth strategy, including
    delays in store growth and store conversions, difficulties
    executing sales and operating profit margin initiatives and
    inventory shrinkage prevention;
    the failure of our new stores or the conversion of our existing
    stores to achieve sales and operating levels consistent with our
    expectations;
    risks and challenges in connection with sourcing merchandise
    from domestic and foreign vendors;
    our level of success in gaining and maintaining broad market
    acceptance of our exclusive brands;
    our failure to protect our brand image;
    our debt levels and restrictions in our senior secured credit
    facility and in agreements for other indebtedness we may incur;
    economic conditions, including their effect on the financial and
    capital markets, our vendors and business partners, employment
    levels, consumer demand, spending patterns, inflation and the
    cost of goods;
    our loss of key personnel or our inability to hire additional
    personnel;
    seasonality of our business;
    increases in costs of fuel, or other energy, transportation or
    utilities costs and in the costs of labor and employment;
    the impact of governmental laws and regulations and the outcomes
    of legal proceedings;
    disruptions in our supply chain and distribution facility;
    damage or interruption to our information systems;
    changes in the competitive environment in our industry and the
    markets in which we operate;
    natural disasters, unusually adverse weather conditions,
    pandemic outbreaks, boycotts and geo-political events;
    the incurrence of material uninsured losses or excessive
    insurance costs; and our failure to maintain effective internal
    controls.  Form 10-K.
 1




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Form 10-K Form 10-K
 2




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##### 



rue21,
    inc.
    2009 ANNUAL REPORT ON
    FORM 10-K
    TABLE OF CONTENTS
  PagePART IItem 1.


Business


4Item 1A.


Risk Factors


13Item 1B.


Unresolved Staff Comments


31Item 2.


Properties


31Item 3.


Legal Proceedings


31Item 4.


Reserved


31PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


31Item 6.


Selected Financial Data


33Item 7.


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


34Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


48Item 8.


Financial Statements and Supplementary Data


49Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


69Item 9A.


Controls and Procedures


69Item 9B.


Other Information


69PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


69Item 11.


Executive Compensation


70Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


70Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


70Item 14.


Principal Accountant Fees and Services


70PART IVItem 15.


Exhibits, Financial Statement Schedules


70EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   3




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Part I  Item 1.
    Business.  Our
    Company
  Do you rue? I do!
    
    Diversified Product girls, guys, rue21 etc!
    We offer a broad range of girls and guys apparel, accessories,
    footwear, jewelry and fragrances. Over the last few years, we
    have expanded and developed a number of product categories to
    complement our extensive apparel offerings, including rue21
    etc!, our girls jewelry and accessories category; tarea by
    rue21, our intimate apparel category; Carbon, our guys apparel
    and accessories category; rueKicks, one of our footwear lines
    and a full line of fragrances for both girls and guys. While our
    girls apparel category currently represents the majority of our
    net sales, we believe the expansion of our guys apparel and
    accessories category presents a significant opportunity for us.
    Flexible Real Estate strip centers, regional
    malls, outlet centers. As of January 30, 2010 approximately
    52% of our stores were located in strip centers, 27% in regional
    malls and 21% in outlet centers. Our stores are located
    primarily in small- and middle-market communities that we
    believe have been underserved by traditional specialty apparel
    retailers. As a result, we are often the only junior and young
    mens specialty apparel retailer in such communities and
    face limited direct competition. In these markets, our limited
    competition comes from large value retailers and department
    stores.
    Balanced Growth  new stores, store
    conversions, comparable store sales. We drive sales growth
    through opening new stores, converting existing stores into our
    new, larger rue21 etc! layout, and increasing our comparable
    store sales. In fiscal year 2010 , we plan to open 100 new
    stores, including 11 new stores opened as of March 2, 2010.
    We also plan to convert 30 stores, including 1store converted as
    of March 2, 2010, to a larger layout that includes a
    separate rue21 etc!
    store-in-store.
    In fiscal year 2009, we opened 88 new stores and converted 26
    stores. We believe our merchandising initiatives and new
    category introductions will further enhance our comparable store
    sales growth.    Our
    Competitive Strengths
    
    Compelling fashion meets value
    proposition.  We offer the newest fashion to girls
    and guys at prices lower than many other similar apparel
    retailers. Our broad product assortment, ranging from apparel to
    accessories to footwear, enables our customers to create a
    complete look. In addition, we provide our customers with a
    distinctive shopping experience in a
    fun-to-shop
    environment, further enhancing our branded value proposition. 4




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
    Flexible, fast-fashion business model.  Our
    merchandising model allows us to quickly identify and respond to
    trends and bring proven concepts and styles to our stores. Our
    sourcing model is designed to achieve lower cost, faster
    turnaround and lower inventory levels. Our vendor network
    consists of domestic importers and domestic suppliers. Our
    collaborative relationship with our vendors allows us to test
    small quantities of new products in select stores before broadly
    distributing them to our stores which, in turn, reduces markdown
    risk. By carrying the newest styles and regularly updating our
    floor sets, we provide our customers with a reason to frequently
    shop our stores.
    Presence in locations with limited direct
    competition.  We focus on small- and middle-market
    communities, which we define as communities with populations
    between 25,000 and 200,000 people, where household incomes
    do not typically support higher-priced retailers. As a result,
    we often are the only junior and young mens specialty
    apparel retailer in a shopping center and face limited direct
    competition in these communities. We have a prominent, central
    location in many of our strip centers and regional malls to
    further drive traffic to our stores. We believe we are a highly
    attractive tenant and, as such, we are able to negotiate
    competitive and favorable lease terms and low construction costs.
    Attractive new store economics.  We operate a
    proven and efficient store model that delivers strong cash flow.
    Not only do our stores provide a distinctive shopping experience
    and compelling merchandise assortment, but with low store
    build-out costs, competitive lease terms and a low-cost
    operating model, our stores also generate a strong return on
    store investment. All of our new stores feature our rue21 etc!
    store-in-store
    layout, showcasing an expanded accessories offering. Our new
    stores average approximately 4,700 square feet, which is
    larger than our historical store layout, and historically pay
    back our investment in less than one year.
    Distinct company and customer culture.  We have
    a strong core culture that emanates from our employees, many of
    whom are high school and college students who live in the
    community and are rue21 customers. Through our viral marketing
    efforts and the support of our online rueCommunity, we bring the
    rue21 culture to our customer base. We believe our culture
    enables us to connect to our employees and customers,
    differentiate our in-store shopping experience and ultimately
    strengthen our brand image and drive customer loyalty.
    Strong and experienced management team.  Our
    senior management team has extensive experience across a broad
    range of disciplines in the specialty retail industry, including
    merchandising, real estate, supply chain and finance. Bob Fisch,
    our President and Chief Executive Officer, has more than
    30 years of experience in the apparel industry. Since being
    named President and Chief Executive Officer, he has overseen
    consistent growth in net sales and income from operations.  Our
    Growth Strategy
    
    Increase Square Footage.  We intend to drive
    our square footage growth by opening new stores and converting
    existing stores to our larger rue21 etc! layout. We believe
    there is a significant opportunity to expand our store base from
    535 locations as of January 30, 2010 to over 1,000 stores
    within the next five years. We expect to open 100 stores in
    fiscal year 2010. Most of our new stores will be opened in strip
    centers and regional malls in small- and middle-market
    communities. In addition, we plan to continue to convert our
    existing stores into our larger rue21 etc! layout, which
    averages approximately 4,700 square feet. This store layout
    allows us to offer an increased proportion of higher margin
    categories, such as accessories, intimate apparel, footwear and
    fragrances. As of January 30, 2010, more than 55% of our
    store base was in the rue21 etc! layout. We converted 26 stores
    to the rue21 etc! layout in fiscal year 2009 and plan to convert
    30 stores in fiscal year 2010. These conversions result in
    increased store profitability and generate return on investment
    in excess of 30% over a twelve-month period. 5




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
    Drive Comparable Store Sales.  We seek to
    maximize our comparable store sales by increasing the
    penetration of our diversified product categories, increasing
    our rue21 brand awareness, continuing to provide our distinctive
    store experience and converting existing stores to our larger
    rue21 etc! layout. We believe that our fashionable merchandise
    selections and affordable prices create more shopping excitement
    for our customers, increase our brand loyalty and drive sales.
    We believe significant opportunities exist to grow our guys
    apparel and accessories category, as there is limited specialty
    competition in guys apparel at value prices, and our highly
    attractive footwear category, both of which have been recent
    drivers of comparable store sales. We also believe that our
    ability to quickly and consistently introduce the newest
    fashions into our stores keeps our shopping experience fresh and
    exciting and drives repeat customer visits.
    Improve Profit Margins.  We believe we have the
    opportunity to drive margin expansion through scale
    efficiencies, continued cost discipline and changes in
    merchandise mix. We believe our strong expected store growth
    will permit us to take advantage of economies of scale in
    sourcing and to leverage our existing infrastructure, corporate
    overhead and fixed costs. We are focused on reducing costs
    throughout our organization and believe further cost reduction
    opportunities exist in inventory and supply chain management. We
    believe the expansion of our higher margin categories, such as
    accessories and footwear, will increase our overall margins over
    time.  Our
    Stores
      2009

2008

2007Strip Centers


278



215



148Regional Malls


146



118



90Outlet Centers


111



116



114Total Stores


535



449



352Total gross square feet at end of period (in thousands)


2,390



1,949



1,148Average gross square feet per store


4,468



4,341



4,113   store-in-store
  Store
    Locations
    Total NumberState

of StoresAlabama


27Arizona


13Arkansas


8California


17Colorado


7 6




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Total NumberState

of StoresConnecticut


1Delaware


1Florida


21Georgia


37Illinois


16Indiana


14Iowa


7Kansas


4Kentucky


8Louisiana


22Maine


1Maryland


6Massachusetts


3Michigan


14Minnesota


4Mississippi


19Missouri


14Nebraska


2Nevada


4New Hampshire


2New Jersey


3New Mexico


7New York


13North Carolina


34Ohio


14Oklahoma


14Oregon


4Pennsylvania


24South Carolina


16Tennessee


23Texas


69Utah


10Vermont


1Virginia


11Washington


4West Virginia


7Wisconsin


8Wyoming


1Total


535   Distinctive
    Store Experience
   7




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Store
    Growth and Store Conversions
            2009

2008

2007Stores at beginning of period


449



352



278Stores opened during period (1)


88



99



74Stores closed during period


(2
)


(2
)


Stores at end of period


535



449



352Store conversions during the period


26



21



20     (1)
    
    Stores opened during period do not include existing stores that
    have been converted.  rueCulture
    and rueCommunity
    Customer
    Connection
   8




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Associate
    Development
    Our
    Products and Brands
      Fiscal Year2009


2008


2007GirlsApparel


56.7
%


58.3
%


61.6
%Accessories


24.3
%


23.5
%


21.9
%Guys Apparel and Accessories


19.0
%


18.2
%


16.5
%Total


100.0
%


100.0
%


100.0
%     Merchandising
    and Sourcing
   9




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Merchandising
    Sourcing
      order-by-order
    Marketing
    and Advertising
  e-blasts e-blasts
 10




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Distribution
    Management
    Information Systems
      Competition
   11




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Intellectual
    Property
    Regulation
    and Legislation
    Insurance
    Employees
   12




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Seasonality
  back-to-school
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
    c/o Vice
    Form 10-K.
  Item 1A.
    Risk
    Factors.  Our
    business is highly dependent upon our ability to identify and
    respond to new and changing fashion trends, customer preferences
    and other related factors.
   13




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Our
    growth strategy depends upon our ability to successfully open
    and operate a significant number of new stores each year in a
    timely and cost-effective manner without affecting the success
    of our existing store base.
      
    identify suitable store locations primarily in strip centers and
    regional malls, the availability of which is largely outside of
    our control;
    negotiate acceptable lease terms, desired tenant allowances and
    assurances from operators and developers that they can complete
    the project, which depend in part on the financial resources of
    the operators and developers;
    obtain or maintain adequate capital resources on acceptable
    terms;
    source sufficient levels of inventory at acceptable costs;
    hire, train and retain an expanded workforce of store managers
    and other personnel;
    successfully integrate new stores into our existing control
    structure and operations, including information system
    integration;
    maintain adequate distribution facility, information system and
    other operational system capabilities;
    identify and satisfy the merchandise and other preferences of
    our customers in new geographic areas and markets; and
    address competitive, merchandising, marketing, distribution and
    other challenges encountered in connection with expansion into
    new geographic areas and markets.      Our
    growth strategy will require us to expand and improve our
    operations and could strain our existing resources and cause the
    performance of our existing stores to suffer.
   14




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Our
    business depends in part on a strong brand image, and if we are
    not able to maintain and enhance our brand, particularly in new
    markets where we have limited brand recognition, we may be
    unable to attract a sufficient number of customers to our stores
    or sell sufficient quantities of our products.
  word-of-mouth e-blasts
     15




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Our
    inability to maintain or improve levels of comparable store
    sales could cause our stock price to decline.
  quarter-to-quarter
  Our
    business is sensitive to global, national and regional consumer
    spending and economic conditions.
    Our
    plans to convert our existing stores and expand our product
    offerings may not be successful, and implementation of these
    plans may divert our operational, managerial and administrative
    resources, which could impact our competitive
    position.
    
    implementation of these plans may be delayed or may not be
    successful;
    we may be unable to identify locations for conversion of
    existing stores to our larger rue21 etc! layout;
    if our expanded product offerings fail to maintain and enhance
    our distinctive brand identity, our brand image may be
    diminished and our sales may decrease;
    if we fail to expand our infrastructure, including by securing
    desirable store locations at reasonable costs and hiring and
    training employees, we may be unable to manage our expansion
    successfully; and
    implementation of these plans may divert managements
    attention from other aspects of our business and place a strain
    on our management, operational and financial resources, as well
    as our information systems.   16




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We
    could face increased competition from other retailers that could
    adversely affect us and our growth strategy.
          We
    depend on key personnel and may not be able to retain or replace
    these individuals or recruit additional personnel, which could
    harm our business.
   17




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Our
    ability to attract customers to our stores that are located in
    strip centers, regional malls and outlet centers depends heavily
    on the success of the shopping centers in which our stores are
    located, and any decrease in customer traffic in these shopping
    centers could cause our net sales to be less than
    expected.
    We
    plan to use cash from operations to fund our expanding business
    and execute on our growth strategy and may require additional
    financing, which may not be available to us.
       18




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We
    have many important vendor relationships and our ability to
    obtain merchandise at competitive prices could suffer as a
    result of any deterioration or change in those relationships or
    events that adversely affect our vendors or their ability to
    obtain financing for their operations.
    
    choose to discontinue selling non-exclusive or exclusive
    products to us;
    refuse to allow us to return merchandise purchased from them;
    raise the prices they charge us;
    sell similar or identical products to certain of our
    competitors, many of whom purchase products in significantly
    greater volume and, in some cases, at lower prices than we do;
    enter into arrangements with competitors that could impair our
    ability to sell their products, including by giving our
    competitors exclusive licensing arrangements or exclusive access
    to styles, brands and products or limiting our access to such
    arrangements or styles, brands or products;
    initiate or expand sales of their products through their own
    stores or through the Internet to the retail market and
    therefore compete with us directly; or
    sell their products through outlet centers or discount stores,
    increasing the competitive pricing pressure we face.     19




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We are
    subject to risks associated with leasing substantial amounts of
    space, including future increases in occupancy
    costs.
      
    requiring that a substantial portion of our available cash be
    applied to pay our rental obligations, thus reducing cash
    available for other purposes;
    increasing our vulnerability to general adverse economic and
    industry conditions;
    limiting our flexibility in planning for or reacting to changes
    in our business or in the industry in which we compete; and
    limiting our ability to obtain additional financing.      Our
    failure to find store employees that reflect our brand image and
    embody our culture, especially in light of our growth strategy,
    could adversely affect our business.
   20




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back-to-school
  Our
    net sales and inventory levels fluctuate on a seasonal basis or
    due to store events or promotions, leaving our operating results
    particularly susceptible to changes in seasonal shopping
    patterns and related risks.
  build-up
  We
    only have one distribution facility and have not yet implemented
    disaster recovery procedures, and if we encounter difficulties
    associated with our distribution facility or if it were to shut
    down for any reason, we could face shortages of inventory that
    would have a material adverse affect on our business operations
    and harm our reputation.
  out-of-stock
   21




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We
    rely upon independent third-party transportation providers for
    substantially all of our product shipments.
    Our
    ability to source our merchandise profitably or at all could be
    hurt if new trade restrictions are imposed or existing trade
    restrictions become more burdensome.
    We
    rely significantly on information systems and any failure,
    inadequacy, interruption or security failure of those systems
    could harm our ability to effectively operate our
    business.
  point-of-sale,
 22




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System
    security risk issues could disrupt our internal operations or
    information technology services, and any such disruption could
    harm our net sales, increase our expenses, and harm our
    reputation and stock price.
    We may
    suffer risks if our vendors fail to follow our vendor
    guidelines, including the risk we could acquire merchandise
    without full rights to sell it and the risks that a vendor or a
    manufacturer may fail to use acceptable labor practices, comply
    with other applicable laws or face interruption with its
    operations.
     23




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and/or
      There
    are claims made against us from time to time that can result in
    litigation or regulatory proceedings which could distract
    management from our business activities and result in
    significant liability or damage to our brand
    image.
    We may
    be subject to liability if we infringe upon the trademarks or
    other intellectual property rights of third
    parties.
    Changes
    in laws, including employment laws and laws related to our
    merchandise, could make conducting our business more expensive
    or otherwise change the way we do business.
  truth-in-advertising, and/or
 24




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We may
    incur indebtedness in the future and that indebtedness could
    adversely affect our financial health and harm our ability to
    react to changes to our business. Any future indebtedness may
    contain covenants that limit our business
    activities.
      
    require us to use a substantial portion of our cash flow from
    operations to pay interest and principal on our debt, which
    would reduce the funds available to us for working capital,
    capital expenditures and other general corporate purposes;
    limit our ability to pay future dividends;
    limit our ability to obtain additional financing for working
    capital, capital expenditures, expansion plans and other
    investments, which may limit our ability to implement our
    business strategy;
    result in higher interest expense if interest rates increase on
    any floating rate borrowings;
    heighten our vulnerability to downturns in our business, the
    industry or in the general economy and limit our flexibility in
    planning for or reacting to changes in our business and the
    retail industry; or
    prevent us from taking advantage of business opportunities as
    they arise or successfully carrying out our plans to expand our
    store base and product offerings.     25




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The
    terms of our senior secured credit facility may restrict our
    current and future operations, which would adversely affect our
    ability to respond to changes in our business and to manage our
    operations.
    
    place liens on our or our direct or indirect subsidiaries
    assets;
    make investments other than permitted investments;
    incur additional indebtedness, subject to certain exceptions;
    prepay or redeem certain indebtedness;
    merge, consolidate and dissolve;
    sell assets;
    engage in transactions with affiliates;
    change the nature of our business;
    change our or our direct or indirect subsidiaries fiscal
    year or organizational documents; and
    make restricted payments, including certain equity issuances and
    payment of dividends in a form other than in common stock.    We may
    be unable to protect our trademarks or other intellectual
    property rights.
     26




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We may
    be subject to unionization, work stoppages, slowdowns or
    increased labor costs, especially if the Employee Free Choice
    Act is adopted.
    Maintaining
    and improving our financial controls and the requirements of
    being a public company may strain our resources, divert
    managements attention and affect our ability to attract
    and retain qualified board members.
       27




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Concentration
    of ownership among our existing executive officers, directors
    and principal stockholders may prevent new investors from
    influencing significant corporate decisions.
        We
    were a controlled company within the meaning of The NASDAQ Stock
    Market rules, and, as a result, relied upon exemptions from
    certain corporate governance requirements that provide
    protection to stockholders of other companies.
    
    that a majority of our board of directors consist of independent
    directors, as defined under the rules of The NASDAQ Stock Market;
    that we have a corporate governance and nominating committee
    that is composed entirely of independent directors with a
    written charter addressing the committees purpose and
    responsibilities; and
    that we have a compensation committee that is composed entirely
    of independent directors with a written charter addressing the
    committees purpose and responsibilities. 28




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Our
    stock price may be volatile or may decline regardless of our
    operating performance or other factors.
    
    fashion trends and changes in consumer preferences;
    market conditions or trends in our industry or the economy as a
    whole and, in particular, in the retail sales environment;
    the timing of new store openings and the relative proportion of
    our new stores to existing stores;
    the performance and successful integration of any new stores
    that we open;
    changes in our merchandise mix;
    timing of promotional events;
    changes in key personnel;
    entry into new markets;
    our levels of comparable store sales;
    announcements by us or our competitors of new product offerings
    or significant acquisitions;
    actions by competitors or other strip center, regional mall and
    outlet center tenants;
    weather conditions, particularly during the holiday shopping
    period;
    the level of pre-opening expenses associated with our new stores;
    the level of expenses associated with our store conversions;
    inventory shrinkage beyond our historical average rates;
    changes in operating performance and stock market valuations of
    other retail companies;
    the publics response to press releases or other public
    announcements by us or third parties, including our filings with
    the Securities and Exchange Commission, or SEC, and
    announcements relating to litigation;
    the financial projections we may provide to the public, any
    changes in these projections or our failure to meet these
    projections;
    changes in financial estimates by any securities analysts who
    follow our common stock, our failure to meet these estimates or
    failure of those analysts to initiate or maintain coverage of
    our common stock;
    ratings downgrades by any securities analysts who follow our
    common stock;
    the development and sustainability of an active trading market
    for our common stock;
    future sales of our common stock by our officers, directors and
    significant stockholders; 29




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
    other events or factors, including those resulting from war,
    acts of terrorism, natural disasters or responses to these
    events; and
    changes in accounting principles.    Anti-takeover
    provisions in our charter documents and Delaware law might
    discourage or delay acquisition attempts for us that you might
    consider favorable.
    
    establish a classified board of directors so that not all
    members of our board of directors are elected at one time;
    authorize the issuance of undesignated preferred stock, the
    terms of which may be established and the shares of which may be
    issued without stockholder approval, and which may include super
    voting, special approval, dividend, or other rights or
    preferences superior to the rights of the holders of common
    stock;
    prohibit stockholder action by written consent, which requires
    all stockholder actions to be taken at a meeting of our
    stockholders;
    provide that the board of directors is expressly authorized to
    make, alter, or repeal our amended and restated bylaws; and
    establish advance notice requirements for nominations for
    elections to our board of directors or for proposing matters
    that can be acted upon by stockholders at stockholder meetings.    If
    securities or industry analysts do not publish research or
    publish inaccurate or unfavorable research about our business,
    our stock price and trading volume could decline.
    We do
    not expect to pay any cash dividends for the foreseeable
    future.
   30




---



##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.  state-of-the-art
        Item 3.
    Legal
    Proceedings.      Item 4.
    Reserved. Part II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities      Fiscal Year 2009High

Low4th Quarter (Commencing November 13, 2009)

$
32.82


$
22.26  31




---



##### Table of Contents



Dividends
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Stock
    Price Performance Graph
         
  Measurement Period(1)11/13/2009



11/30/2009



12/31/2009



1/30/2010rue21, inc.



100.00




130.05




147.84




147.53NASDAQ Stock Market (US securities only)



100.00




99.03




104.75




98.17NASDAQ Retail Trade Index



100.00




99.15




103.83




102.71   (1)
    
    Returns are based upon the premise that $100 is invested in each
    of (a) our common stock, (b) NASDAQ Stock Market (US
    securities only), and (c) the index of NASDAQ Retail Trade
    Stocks on November 13, 2009, and that all dividends (if
    any) were reinvested. Stockholder returns over the indicated
    period should not be considered indicative of future shareholder
    returns.  Unregistered
    Sales of Equity Securities
   32




---



##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data.    Fiscal Year EndedJanuary 30,


January 31,


February 2,


February 3,


January 28,2010


2009


2008


2007


2006(In thousands, except per share and operating data)Consolidated Statement of Income DataNet Sales

$
525,600


$
391,414


$
296,887


$
225,559


$
192,818Cost of goods sold


337,693



257,853



195,034



150,163



129,214Gross profit


187,907



133,561



101,853



75,396



63,604Selling, general and administrative expense


134,078



99,886



76,039



57,575



48,703Depreciation and amortization expense


16,898



11,532



8,241



5,926



3,945Income from operations


36,931



22,143



17,573



11,895



10,956Interest expense, net


532



1,477



2,520



2,645



1,959Provision for income taxes


14,382



8,027



5,920



1,452



1,638Net income

$
22,017


$
12,639


$
9,133


$
7,798


$
7,359Net income per common shareBasic

$
0.99


$
0.58


$
0.42


$
0.39


$
0.38Diluted

$
0.96


$
0.55


$
0.40


$
0.36


$
0.33Weighted average common shares outstandingBasic


22,267



21,914



21,705



19,782



19,217Diluted


23,037



22,814



22,842



21,888



22,184Operating Data (unaudited):Sales per gross square foot

$
244


$
235


$
236


$
234


$
245Comparable store sales change


7.8
%


3.7
%


7.8
%


(4.7
)%


10.9
%Number of stores open atend of period


535



449



352



278



229Total gross square feetend of period (in thousands)


2,390



1,949



1,448



1,095



896Store conversions during period


26



21



20



18



6Capital expenditures (in thousands)

$
33,630


$
26,464


$
20,265


$
16,586


$
12,098   33




---



##### Table of Contents



As ofJanuary 30,


January 31,


February 2,


February 3,


January 28,2010


2009


2008


2007


2006(In thousands)Consolidated Balance Sheet DataCash and cash equivalents

$
26,751


$
4,611


$
3,343


$
2,525


$
4,075Working capital (deficit)


21,604



798



3,946



(622
)


37Total assets


188,431



141,200



102,285



79,092



52,716Total long-term debt






19,476



27,968



23,317



25,279Stockholders equity (deficit)


67,448



18,393



5,753



(3,537
)


(11,174
)Cash Flow DataCash from operations

$
48,779


$
36,589


$
21,512


$
17,480


$
16,195   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  You should read the following discussion together with
    Selected Consolidated Financial Data, and the
    historical financial statements and related notes included
    elsewhere in this Annual Report on
    Form 10-K.
    The statements in this discussion regarding industry outlook,
    our expectations regarding our future performance, liquidity and
    capital resources and other non-historical statements in this
    discussion are forward-looking statements within the meaning of
    the Private Securities Litigation Reform Act of 1995. These
    forward-looking statements are subject to numerous risks and
    uncertainties, including, but not limited to, the risks and
    uncertainties described in Part I  Item 1A
    Risk Factors. Our actual results may differ
    materially from those contained in or implied by any
    forward-looking statements.
  We operate on a fiscal calendar widely used by the retail
    industry that results in a given fiscal year consisting of a 52-
    or 53-week period ending on the Saturday closest to January 31
    of the following year. For example, references to fiscal
    year 2009  refer to the fiscal year ended January 30,
    2010. Our fiscal year 2006 consisted of a 53-week period and
    ended on February 3, 2007.
  Overview
  store-in-store
     34




---



##### Table of Contents



How We
    Assess the Performance of Our Business
    Net
    Sales
    Comparable
    Store Sales
  Form 10-K
 35




---



##### Table of Contents



year-over-year
  
    consumer preferences, buying trends and overall economic trends;
    our ability to identify and respond effectively to fashion
    trends and customer preferences;
    competition;
    changes in our merchandise mix;
    pricing;
    the timing of our releases of new merchandise and promotional
    events;
    the level of customer service that we provide in our stores;
    our ability to source and distribute products efficiently; and
    the number of stores we open, close and convert in any period.      back-to-school
  Gross
    Profit
      Selling,
    General and Administrative Expense
   36




---



##### Table of Contents



Results
    of Operations
    Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(In thousands, except operating data)Net Sales

$
525,600


$
391,414


$
296,887Cost of goods sold


337,693



257,853



195,034Gross profit


187,907



133,561



101,853Selling, general and administrative expenses


134,078



99,886



76,039Depreciation and amortization expense


16,898



11,532



8,241Income from operations


36,931



22,143



17,573Interest expense, net


532



1,477



2,520Income before income taxes


36,399



20,666



15,053Provision for income taxes


14,382



8,027



5,920Net income

$
22,017


$
12,639


$
9,133Operating Data (unaudited)Number of stores open at the end of the period


535



449



352Total gross square feet at the end of the period (in thousands)


2,390



1,949



1,448Sales per average gross square foot

$
244


$
235


$
236Comparable store sales change


7.8
%


3.7
%


7.8
%   Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008Net Sales


100.0
%


100.0
%


100.0
%Cost of goods sold


64.2
%


65.9
%


65.7
%Gross profit


35.8
%


34.1
%


34.3
%Selling, general and administrative expenses


25.5
%


25.5
%


25.6
%Depreciation and amortization expense


3.2
%


2.9
%


2.8
%Income from operations


7.0
%


5.7
%


5.9
%Interest expense, net


0.1
%


0.4
%


0.8
%Income before income taxes


6.9
%


5.3
%


5.1
%Provision for income taxes


2.7
%


2.1
%


2.0
%Net income


4.2
%


3.2
%


3.1
%  37




---



##### Table of Contents



Fiscal Year2009


2008


2007GirlsApparel


56.7
%


58.3
%


61.6
%Accessories


24.3
%


23.5
%


21.9
%Guys Apparel and Accessories


19.0
%


18.2
%


16.5
%Total


100.0
%


100.0
%


100.0
%     2009


2008


2007Stores at beginning of period


449



352



278Stores opened during period(1)


88



99



74Stores closed during period


(2
)


(2
)


Stores at end of period


535



449



352Store conversions during the period


26



21



20     (1)
    
    Stores opened during period do not include existing stores that
    have been converted.  Fiscal
    Year 2009 Compared to Fiscal Year 2008
  Net
    Sales
      Gross
    Profit
   38




---



##### Table of Contents



Selling,
    General and Administrative Expense
      Depreciation
    and Amortization Expense
    Provision
    for Income Taxes
    Net
    Income
    Fiscal
    Year 2008 Compared to Fiscal Year 2007
  Net
    Sales
       39




---



##### Table of Contents



Gross
    Profit
    Selling,
    General and Administrative Expense
        Depreciation
    and Amortization Expense
    Interest
    Expense, Net
    Provision
    for Income Taxes
    Net
    Income
    Fiscal
    Year 2007 Compared to Fiscal Year 2006
  Net
    Sales
     40




---



##### Table of Contents



Gross
    Profit
    Selling,
    General and Administrative Expense
        Depreciation
    and Amortization Expense
    Interest
    Expense, Net
    Provision
    for Income Taxes
   41




---



##### Table of Contents



Net
    Income
    Liquidity
    and Capital Resources
        Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(In thousands)Provided by operating activities

$
48,779


$
36,859


$
21,512Used for investing activities


(33,630
)


(26,464
)


(20,265
)Provided by (used for) for financing activities


6,991



(9,127
)


(429
)Increase in cash and cash equivalents

$
22,140


$
1,268


$
818   Operating
    Activities
    42




---



##### Table of Contents



Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(In thousands)Net income

$
22,017


$
12,639


$
9,133Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


16,994



11,624



8,241Deferred taxes


1,158



1,900



(522
)Share-based compensation


410







34Merchandise inventory


(5,855
)


(19,685
)


(8,977
)Accounts payable


(486
)


24,134



5,141Other working capital components


14,544



5,679



8,405All other


(3
)


568



57Net cash provided by operating activities

$
48,779


$
36,859


$
21,512       Investing
    Activities
    Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(In thousands)Capital expenditures, net of tenant allowances

$
(24,297
)

$
(17,555
)

$
(14,304
)Tenant allowances


(9,333
)


(8,909
)


(5,961
)Capital expenditures

$
(33,630
)

$
(26,464
)

$
(20,265
)    43




---



##### Table of Contents



Financing
    Activities
    Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(In thousands)Net (payments) borrowings under revolver

$
(19,476
)

$
14,645


$
1,573Payments on long-term debt






(23,326
)


(2,002
)Proceeds from initial public offering, net


26,242







Proceeds from stock options exercised


110



1



Excess tax benefits from stock-based award activities


276







Debt financing costs


(161
)


(447
)


Net cash provided by (used for) financing activities

$
6,991


$
(9,127
)

$
(429
)         Senior
    Secured Credit Facility
       44




---



##### Table of Contents



Related
    Party Transactions
  out-of-pocket
    Off
    Balance Sheet Arrangements
    Contractual
    Obligations
    Payments Due by PeriodTotal


Less than 1 Year


1 - 3 Years


3 - 5 Years


More than 5 Years(In thousands)Operating lease obligations(1)


217,668



41,564



99,288



20,760



56,056Merchandise inventory purchase commitments


83,345



83,345











Contract for upgrade of distribution center


890



890











$
301,903


$
125,799


$
99,288


$
20,760


$
56,056     (1)
    
    Excludes common area maintenance (CAM) charges, real estate
    taxes and certain other expenses which amounted to approximately
    21% of minimum lease obligations in fiscal year 2009 which we
    expect to be consistent for the next three years. 45




---



##### Table of Contents



Impact of
    Inflation
    Critical
    Accounting Policies
      Revenue
    Recognition
    Inventory
    Valuation
  (first-in,
      Asset
    Impairment
   46




---



##### Table of Contents



Income
    Taxes
        Share-Based
    Compensation
  5-year
     47




---



##### Table of Contents



Recent
    Accounting Pronouncements
          Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.   48




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data.  rue21,
    inc. and subsidiary
    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
   
 PageReport of Independent Registered Public
    Accounting Firm


50Consolidated Balance Sheets as of
    January 30, 2010 and January 31, 2009


51Consolidated Statements of Income for the fiscal
    years ended January 30, 2010, January 31, 2009, and
    February 2, 2008


52Consolidated Statements of Stockholders
    Equity (Deficit) for the fiscal years ended January 30,
    2010, January 31, 2009, and February 2, 2008


53Consolidated Statements of Cash Flows for the
    fiscal years ended January 30, 2010, January 31, 2009,
    and February 2, 2008


54Notes to Consolidated Financial Statements


55   49




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm           
    50




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Consolidated Balance Sheets
 January 30,


January 31,2010


2009(In thousands, except per share data)ASSETSCurrent assets:Cash and cash equivalents

$
26,751


$
4,611Accounts receivable


3,834



2,527Merchandise inventory, net


72,693



66,838Prepaid expenses and other current assets


6,783



6,637Deferred tax assets


4,286



3,135Total current assets


114,347



83,748Property and equipment, net


73,147



56,687Other assets


937



765Total assets

$
188,431


$
141,200LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
59,963


$
60,449Accrued expenses and other current liabilities


14,384



10,812Accrued payroll and related taxes


10,486



7,532Deferred rent and tenant allowances, current portion


5,509



4,157Accrued income and franchise taxes


2,401



Total current liabilities


92,743



82,950Long-term liabilities:Long-term debt






19,476Deferred rent, tenant allowances and other long-term liabilities


23,991



18,440Deferred tax liabilities


4,249



1,941Total long-term liabilities


28,240



39,857Total liabilities


120,983



122,807Commitments and ContingenciesStockholders equity:Common stock par value $0.001 per share;
    200,000 shares authorized; 24,237 shares issued and
    outstanding at January 30, 2010, par value $0.004 per
    share; 50,000 shares authorized; 22,090 shares issued
    and outstanding at January 31, 2009


24



88Additional paid in capital


27,115



13Retained earnings


40,309



18,292Total stockholders equity


67,448



18,393Total liabilities and stockholders equity

$
188,431


$
141,200    51




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Consolidated Statements of Income
  Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(In thousands, except per share data)Net sales

$
525,600


$
391,414


$
296,887Cost of goods sold (includes certain buying, occupancy and
    distribution center expenses)


337,693



257,853



195,034Gross profit


187,907



133,561



101,853Selling, general, and administrative expense


134,078



99,886



76,039Depreciation and amortization expense


16,898



11,532



8,241Income from operations


36,931



22,143



17,573Interest expense, net


532



1,477



2,520Income before income taxes


36,399



20,666



15,053Provision for income taxes


14,382



8,027



5,920Net income

$
22,017


$
12,639


$
9,133Basic income per common share

$
0.99


$
0.58


$
0.42Diluted income per common share

$
0.96


$
0.55


$
0.40Weighted average basic common shares outstanding


22,267



21,914



21,705Weighted average diluted common shares outstanding


23,037



22,814



22,842    52




---



##### Table of Contents



rue21,
    inc. and subsidiary
 Consolidated
    Statements of Stockholders Equity (Deficit)  Common Stock


Common Stock


Additional


Retained$0.004 Par Value


$0.001 Par Value


Paid-in


EarningsShares


Amount


Shares


Amount


Capital


(Deficit)


Total(In thousands)Balance February 3, 2007


21,695


$
87






$



$
(144
)

$
(3,480
)

$
(3,537
)Net income






















9,133



9,133Share-based compensation and other


















157







157Stock issued for stock option exercises


174



1



















1Balance February 2, 2008


21,869



87











13



5,653



5,753Net income






















12,639



12,639Stock issued for stock option exercises


221



1



















1Balance January 31, 2009


22,090



88











13



18,292



18,393Conversion of common stock, $0.004 par value to common
    stock, $.001 par value


(22,090
)


(88
)


22,090



22



66







Issuance of common stock in initial public offering (net of
    issuance costs)










1,650



2



26,240







26,242Net income






















22,017



22,017Share-based compensation expense


















410







410Stock issued for stock option exercises










497







110







110Excess tax benefits from share-based award activities


















276







276Balance January 30, 2010





$




24,237


$
24


$
27,115


$
40,309


$
67,448    53




---



##### Table of Contents



rue21,
    inc. and subsidiary
 Consolidated
    Statements of Cash Flows  Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(In thousands)Operating activitiesNet income

$
22,017


$
12,639


$
9,133Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


16,994



11,624



8,241Loss on fixed asset disposals






349



44Impairment of long-lived assets


273



219



13Deferred taxes


1,158



1,900



(522
)Share based compensation


410







34Excess tax benefits from stock-based award activities


(276
)






Changes in:Accounts receivable


(1,307
)


122



(36
)Merchandise inventory, net


(5,855
)


(19,685
)


(8,977
)Prepaid expenses and other current assets


(146
)


(3,180
)


(1,041
)Accounts payable


(486
)


24,134



5,141Accrued payroll and related taxes


2,954



1,433



1,966Accrued expenses and other current liabilities


6,247



987



3,587Deferred rent and tenant allowances


6,903



6,259



3,300Other


(107
)


58



629Net cash provided by operating activities


48,779



36,859



21,512Investing activitiesAcquisition of property and equipment


(33,630
)


(26,464
)


(20,265
)Net cash used for investing activities


(33,630
)


(26,464
)


(20,265
)Financing activitiesBorrowings under revolver


98,381



125,371



66,799Payments under revolver


(117,857
)


(110,726
)


(65,226
)Payments on long-term debt






(23,326
)


(2,002
)Deferred financing costs


(161
)


(447
)


Excess tax benefits from stock-based award activities


276







Proceeds from initial public offering, net


26,242







Proceeds from stock options exercised


110



1



Net cash provided by (used for) financing activities


6,991



(9,127
)


(429
)Increase in cash and cash equivalents


22,140



1,268



818Cash and cash equivalents, beginning of period


4,611



3,343



2,525Cash and cash equivalents, end of period

$
26,751


$
4,611


$
3,343Supplemental disclosure of cash flow informationInterest paid

$
417


$
2,771


$
1,907Income taxes paid

$
13,510


$
7,935


$
7,053    54




---



##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial Statements
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)  Note 1
    
    Business and Summary of Significant Accounting
    Policies
  Organization
        Principles
    of Consolidation
    Fiscal
    Year
    Estimates
    Seasonality
  back-to-school
 55




---



##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
  Segment
    Reporting
    Fair
    Value of Financial Instruments
    Cash and
    Cash Equivalents
    Accounts
    Receivable
    Merchandise
    Inventory
  (first-in,
   56




---



##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
    Property
    and Equipment
    Furniture and fixtures

7 yearsLeasehold improvements

Lesser of 5 to 10 years or lease termAutomobiles

5 yearsComputer equipment and software

3 to 5 years     Deferred
    Rent and Tenant Allowances
    Insurance
    and Self-Insurance
    Revenue
    Recognition
  30-day
 57




---



##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
      Cost of
    Goods Sold
    Selling,
    General and Administrative Expense
    Income
    Taxes
       58




---



##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
  Share
    Based Compensation
      Store
    Preopening Costs
    Advertising
    Costs
    Repairs
    and Maintenance
    Legal
    Proceedings and Claims
   59




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
  Earnings
    per Share
      Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(In thousands, except per share data)Net income

$
22,017


$
12,639


$
9,133Weighted average basic common shares outstanding


22,267



21,914



21,705Impact of dilutive securities


770



900



1,137Weighted average diluted common shares outstanding


23,037



22,814



22,842Per common share :Basic income per common share

$
0.99


$
0.58


$
0.42Diluted income per common share

$
0.96


$
0.55


$
0.40     Reclassifications
    Recent
    Accounting Standards
       60




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
      Subsequent
    Events
      Note 2 
    Fair Value Measurements
    
    Level 1:  Unadjusted quoted prices in
    active markets for identical assets and liabilities. The
    Companys cash and cash equivalents of $26,751 and $4,611
    as of January 30, 2010 and January 31, 2009,
    respectively, are reported at fair value utilizing Level 1
    inputs.
    Level 2:  Observable inputs other than
    those included in Level 1. For example, quoted prices for
    similar assets or liabilities in active markets or quoted prices
    for identical assets or liabilities in inactive markets. The
    Company determined that the fair value measurements related to
    the impaired long lived assets disclosed in Note 1 are
    derived from significant other observable inputs. These
    non-financial assets are measured on a non-recurring basis when
    events and circumstances warrant.
    Level 3:  Unobservable inputs reflecting
    managements own assumptions about the inputs used in
    pricing the asset or liability. 61




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
   Note 3 
    Property and Equipment
    January 30,


January 31,2010


2009Furniture and fixtures

$
58,518


$
43,327Leasehold improvements


54,715



42,284Computer equipment, software and other


15,937



11,278129,170



96,889Less accumulated depreciation and amortization


(56,023
)


(40,202
)$
73,147


$
56,687   Note 4 
    Long-Term Debt
    Note 5 
    Share-Based Compensation
   62




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
      WeightedWeighted-


AverageCommon


Average


Remaining


AggregateStock


Exercise


Contractual


IntrinsicOptions


Price


Term


Value(In thousands)


(Per share)


(In years)Outstanding January 31, 2009


1,214


$
2.91



7.50


$
2,143Granted


454


$
12.68Exercised


(498
)

$
0.22Expired or forfeited






Outstanding January 30, 2010


1,170


$
7.84



8.13


$
23,615Vested at January 30, 2010


481


$
3.19



6.91


$
11,946       Fiscal Year EndedJanuary 30,

January 31,

February 2,2010

2009

2008Risk-free interest rate(1)


2.6%-3.3%



4.7%



4.7%Dividend yield










Volatility factors for the expected market price of the
    Companys common stock(2)


53%-60%



55.0%



55.0%Weighted average expected term(3)


6.3 years



6.3 years



7.5 years      (1)
    
    Based on the U.S. Treasury yield curve in effect at the time of
    grant with a term consistent with the expected life of stock
    options.(2)
    
    Expected stock price volatility is based on comparable
    volatilities of peer companies within rue21s industry.(3)
    
    Represents the period of time options are expected to be
    outstanding. The weighted-average expected option term was
    determined using the simplified method, as allowed
    by Staff Accounting Bulletin Topic 14. The 63




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
  expected term used to value a share option grant under the
    simplified method is the midpoint between the vesting date and
    the contractual term of the share option.    WeightedAveraged Fair ValueShares


at Grant Date(In thousands)


(Per share)Non-vested as of January 31, 2009


810


$
0.18Granted


454


$
6.92Vested


(575
)

$
0.10Cancelled






Non-vested as of January 30, 2010


689


$
4.70     Note 6 
    Lease Commitments
      Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008Store Rent :Fixed minimum

$
35,665


$
28,057


$
20,649Contingent


2,425



1,039



1,027Total store rent, excluding common maintenance charges, real
    estate taxes and certain other expenses


38,090



29,096



21,676Offices, distribution facilities and equipment


3,165



3,050



2,712Total rent expense

$
41,255


$
32,146


$
24,388    64




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
    Fiscal Year2010

$
41,5642011


38,0392012


33,2812013


27,9692014


20,759Thereafter


56,056Total future lease obligations

$
217,668   Note 7 
    401(k) Profit Sharing Plan
    Note 8 
    Income Taxes
    Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008Current:Federal

$
10,943


$
4,693


$
5,422State


2,282



1,434



1,020Total current


13,225



6,127



6,442Deferred:Federal


1,237



1,967



(536
)State


(80
)


(67
)


14Total deferred


1,157



1,900



(522
)Total provision for income taxes

$
14,382


$
8,027


$
5,920  65




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
    Fiscal Year EndedJanuary 30,

January 31,

February 2,2010

2009

2008Effective RateStatutory rate


35.0
%


35.0
%


35.0
%State taxes


3.8
%


4.4
%


4.5
%Non-deductible expenses


0.7
%


0.4
%


0.3
%Other






(1.0
)%


(0.5
)%Total


39.5
%


38.8
%


39.3
%     Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008Deferred tax assets:Fin 48  temporary differences

$
42


$
169


$
241Deferred Rent


11,371



8,618



6,016Accrued Compensation


959



740



499Accrued Reserve


162



143



552Inventory


941



547



435Other






24



40Total deferred tax assets


13,475



10,241



7,783Deferred tax liabilities:Fixed assets


(13,438
)


(9,047
)


(4,689
)Net deferred tax asset

$
37


$
1,194


$
3,094   Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008Current-deferred tax assets

$
4,286


$
3,135


$
2,595Noncurrent-deferred tax assets (liabilities)


(4,249
)


(1,941
)


499Total

$
37


$
1,194


$
3,094  66




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
    Gross balance as of February 3, 2007

$
Prior period tax positions  increase


228Gross balance as of February 2, 2008


228Prior period tax positions  (decrease)


(82
)Gross balance as of January 31, 2009


146Prior period tax positions  (decrease)


(111
)Gross balance as of January 30, 2010

$
35         Note 9 
    Commitments and Contingencies
    Note 10 
    Related Party Transactions
  out-of-pocket
   67




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##### Table of Contents



rue21,
    inc. and subsidiary
    Notes to Consolidated Financial
    Statements  (Continued)
    For the Fiscal Years Ended January 30, 2010,
    January 31, 2009 and February 2, 2008
    (Dollars in thousands, unless otherwise indicated)
   Note 11 
    Selected Quarterly Financial Data (Unaudited)
    Thirteen Weeks EndedMay 2,


August 1,


October 31,


January 30,2009


2009


2009


2010Fiscal Year 2009Net Sales

$
107,998


$
125,106


$
137,110


$
155,386Gross profit


37,918



44,992



49,571



55,426Net income


2,989



5,328



5,978



7,722Basic income per common share


0.14



0.24



0.27



0.33Diluted income per common share


0.13



0.23



0.26



0.32Weighted average basic common shares outstanding


22,090



22,090



22,201



23,530Weighted average diluted common shares outstanding


23,006



23,008



23,058



24,281   Thirteen Weeks EndedMay 3,


August 2,


November 1,


January 31,2008


2008


2008


2009Fiscal Year 2008Net Sales

$
76,779


$
98,058


$
97,464


$
119,113Gross profit


25,218



34,714



35,149



38,480Net income


836



4,315



2,890



4,598Basic income per common share


0.04



0.20



0.13



0.21Diluted income per common share


0.04



0.19



0.13



0.20Weighted average basic common shares outstanding


21,873



21,895



21,953



22,046Weighted average diluted common shares outstanding


22,849



22,850



22,822



22,846  68




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##### Table of Contents



Item 9.
    Changes
    In and Disagreements with Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
  Rule 13(a)-15(e), Form 10-K Rule 13a-15(b) Form 10-K
  Managements
    Report on Internal Control over Financial Reporting
    Changes
    in Internal Control over Financial Reporting
    Item 9B.
    Other
    Information.   Part III Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Proposal No. 1-Election
  Regulation S-K
 69




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##### Table of Contents



Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.   Part IV  Item 15.
    Exhibits,
    Financial Statement Schedules.  1. Financial Statements:   See
    Index to Consolidated Financial Statements in
    Part II, Item 8 of this
    Form 10-K.
  2. Financial Statement
    Schedule:   Schedules are included in the
    Consolidated Financial Statements or notes of this
    Form 10-K
    or are not required.
  3. Exhibits:   The exhibits listed in the
    accompanying index to exhibits are filed or incorporated by
    reference as part of this
    Form 10-K.
 70




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##### Table of Contents



SIGNATURES
    rue21, inc.
  By:
    /s/  Robert
    N. Fisch   Title:
    President and Chief Executive Officer      By:
    /s/  Keith
    A. McDonough   Title:
    Senior Vice President and Chief Financial Officer        Signature

Title

Date/s/  Robert
    N. FischRobert
    N. Fisch

President, Chief Executive Officer and Chairman (principal
    executive 
    officer)

March 31, 2010/s/  Keith
    A. McDonoughKeith
    A. McDonough

Senior Vice President and Chief Financial Officer (principal
    financial officer and principal accounting 
    officer)

March 31, 2010/s/  Arnold
    S. BarronArnold
    S. Barron

Director

March 31, 2010/s/  Macon
    F. Brock Jr.Macon
    F. Brock

Director

March 31, 2010/s/  Douglas
    E. ColtharpDouglas
    E. Coltharp

Director

March 31, 2010/s/  John
    F. Megrue, Jr.John
    F. Megrue, Jr.

Director

March 31, 2010/s/  Alex
    S. PellegriniAlex
    S. Pellegrini

Director

March 31, 2010  71




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##### Table of Contents



Exhibit Index
  3
.1

Registrants Amended and Restated Certificate of
    Incorporation, incorporated by reference to Exhibit 4.1 to the
    Registrants Post-Effective Amendment No. 1 to Registration
    Statement on Form S-8 (SEC File No. 333-164401) filed on
    February 19, 2010.3
.2

Registrants Amended and Restated By-laws, incorporated by
    reference to Exhibit 4.2 to the Registrants Post-Effective
    Amendment No. 1 to Registration Statement on Form S-8 (SEC File
    No. 333-164401) filed on February 19, 2010.4
.1

Specimen Common Stock Certificate, incorporated by reference to
    Exhibit 4.1 to the Registrants Form S-1/A (File No.
    333-161850) filed on November 10, 2009.10
.1

Employment Agreement dated as of January 1, 2008, by and between
    Robert Fisch and rue21, inc., incorporated by reference to
    Exhibit 10.1 to Registrants Form S-1 (File No. 333-161850)
    filed on September 10, 2009.10
.2

Shareholders Agreement, dated as of May 15, 2003, between
    rue21, inc., SKM Equity Fund II, L.P., SKM Investment Fund II,
    funds advised by Apax Partners, L.P., BNP Paribas of North
    America, Inc., UnionBalCal Equities, Inc. and National City Bank
    of Pennsylvania, incorporated by reference to Exhibit 10.2 to
    Registrants Form S-1 (File No. 333-161850) filed on
    September 10, 2009.10
.3

rue21, inc. Second Amended and Restated 2003 Ownership Incentive
    Plan, incorporated by reference to Exhibit 4.3 to the
    Registrants Post-Effective Amendment No. 1 to Registration
    Statement on Form S-8 (SEC File No. 333-164401) filed on
    February 19, 2010.10
.4

rue21, inc. 2009 Omnibus Incentive Plan, incorporated by
    reference to Exhibit 4.4 to the Registrants Post-Effective
    Amendment No. 1 to Registration Statement on Form S-8 (SEC File
    No. 333-164401) filed on February 19, 2010.10
.5

Credit Agreement, dated April 10, 2008, among rue21, inc., as
    lead borrower, the borrowers named therein, r services llc, as
    guarantor and Bank of America, N.A. as administrative agent,
    collateral agent, swing line lender and letter of credit issuer,
    and the other lender parties thereto, incorporated by reference
    to Exhibit 10.5 to Registrants Form S-1  (File No.
    333-161850) filed on October 13, 2009.10
.6

Security Agreement, dated April 10, 2008, by and among rue21,
    inc., as lead borrower, r services llc, as guarantor, and Bank
    of America, N.A., as collateral agent, incorporated by reference
    to Exhibit 10.6 to Registrants Form S-1 (File No.
    333-161850) filed on September 10, 2009.10
.7

Guaranty, dated April 10, 2008, by r services llc, as guarantor,
    in favor of Bank of America, N.A., as administrative agent and
    collateral agent, incorporated by reference to Exhibit 10.7 to
    Registrants Form S-1 (File No. 333-161850) filed on
    September 10, 2009.10
.8

First Amendment to Credit Agreement by and among rue21, inc., as
    the Lead Borrower, r services llc, as Guarantor, and Bank of
    America, N.A., as Lender, Administrative Agent, Collateral
    Agent, Swing Line Lender and Letter of Credit Issuer, dated
    November 24, 2009, incorporated by reference to Exhibit 10.1 of
    the Current Report on Form 8-K filed on December 1, 2009.10
.9

First Amendment to Security Agreement by and among rue21, inc.,
    as the Lead Borrower, r services llc, as Guarantor, and Bank of
    America, N.A. as Collateral Agent, dated November 24, 2009,
    incorporated by reference to Exhibit 10.2 of the Current Report
    on Form 8-K filed on December 1, 2009.10
.10

First Amendment to Intellectual Property Security Agreement by
    and among rue21, inc., as the Lead Borrower, r services llc, as
    Guarantor, and Bank of America, N.A. as Collateral Agent, dated
    November 24, 2009, incorporated by reference to Exhibit 10.3 of
    the Current Report on Form 8-K filed on December 1, 2009.10
.11

Lease Agreement, dated June 28, 1999, by and between West
    Virginia Economic Development Authority, as landlord, and
    Pennsylvania Fashions, Inc., as tenant, incorporated by
    reference to Exhibit 10.8 to Registrants Form S-1 (File
    No. 333-161850) filed on September 10, 2009.10
.12

First Amendment to Lease, dated April 1, 2002, by and between
    West Virginia Economic Development Authority, as landlord, and
    Pennsylvania Fashions, Inc., as tenant, incorporated by
    reference to Exhibit 10.8.1 to Registrants Form S-1
    (File No. 333-161850) filed on October 13, 2009.10
.13

Letter Agreement, dated May 15, 2003, by and between Apax
    Partners, L.P., as successors to Saunders Karp & Megrue,
    LLC and rue21, inc., incorporated by reference to Exhibit 10.10
    to Registrants Form S-1 (File No. 333-161850), filed on
    September 10, 2009. 72




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##### Table of Contents



10
.14

Termination Agreement , by and between rue21, inc. and Apax
    Partners, L.P. incorporated by reference to Exhibit 10.11 to
    Registrants Form S-1 (File No. 333-161850) filed on
    October 13, 2009.10
.15

Form of Indemnification Agreement for Directors, incorporated by
    reference to Exhibit 10.12 to Registrants Form S-1/A (File
    No. 333-161850) filed on November 9, 2009.10
.16

Form of Indemnification Agreement for Officers, incorporated by
    reference to Exhibit 10.17 to Registrants Form S-1/A (File
    No. 333-161850) filed on November 9, 2009.10
.17

Form of Non-Qualified Stock Option Agreement, incorporated by
    reference to Exhibit 10.13 to Registrants Form S-1/A (File
    No. 333-161850) filed on November 2, 2009.10
.18

Form of Stock Appreciation Rights Agreement, incorporated by
    reference to Exhibit 10.14 to Registrants Form S-1/A (File
    No. 333-161850) filed on November 2, 2009.10
.19

Form of Restricted Stock Unit Agreement, incorporated by
    reference to Exhibit 10.15 to Registrants Form S-1/A (File
    No. 333-161850) filed on November 2, 2009.10
.20

Form of Restricted Stock Agreement, incorporated by reference to
    Exhibit 10.16 to Registrants Form S-1/A (File No.
    333-161850) filed on November 2, 2009.21
.1*

List of subsidiaries of rue21, inc.23
.1*

Consent of Ernst & Young LLP, independent registered public
    accounting firm.31
.1*

Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive
    Officer of rue21 inc. (Section 302 of the Sarbanes-Oxley Act of
    2002).31
.2*

Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial
    Officer of rue21 inc.  (Section 302 of the Sarbanes-Oxley Act of
    2002).32
.1*

Certification of the Chief Executive Officer of rue21 inc.
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2*

Certification of the Chief Financial Officer of rue21 inc.
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith. 73