##### Table of Contents





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 29,
    2011oro

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 Global Select Market(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
  12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o

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
  
    our failure to identify and respond to new and changing fashion
    trends, customer preferences and other related factors;
    our failure to successfully execute our growth strategy, due to
    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 third party domestic and foreign vendors, including the
    risk that current or prospective vendors may be unable or
    unwilling to supply us with adequate quantities of their
    merchandise in a timely manner or at acceptable prices;
    our level of success in gaining and maintaining broad market
    acceptance of our exclusive brands;
    our failure to protect our brand image;
    economic conditions, and 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 raw materials for our merchandise, 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.   1




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Form 10-K. Form 10-K Form 10-K
 2




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##### 



rue21,
    inc.
    2010 ANNUAL REPORT ON
    FORM 10-K
    TABLE OF CONTENTS
   
 PagePART IItem 1.


Business


4Item 1A.


Risk Factors


13Item 1B.


Unresolved Staff Comments


27Item 2.


Properties


27Item 3.


Legal Proceedings


28Item 4.


Reserved


28PART IIItem 5.


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


28Item 6.


Selected Financial Data


30Item 7.


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


31Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


44Item 8.


Financial Statements and Supplementary Data


45Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


66Item 9A.


Controls and Procedures


66Item 9B.


Other Information


68PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


68Item 11.


Executive Compensation


68Item 12.


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


68Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


68Item 14.


Principal Accountant Fees and Services


68PART IVItem 15.


Exhibits, Financial Statement Schedules


68EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   3




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##### Table of Contents



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, and
    accessories, including footwear, jewelry and fragrances.
    Flexible Real Estate strip centers, regional
    malls, outlet centers. As of January 29, 2011 approximately
    52% of our 638 stores were located in strip centers, 31% in
    regional malls and 17% in outlet centers.
    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. 4




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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.
    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.
    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.
    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, the company has
    experienced 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. Following a
    disciplined real estate strategy, we have increased our
    geographic presence by opening 105 new retail stores in fiscal
    2010. We operated 638 locations as of January 29, 2011, and
    believe there is significant opportunity to expand to over 1,000
    stores. 5




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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
    5,000 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 29, 2011, more than 70% of our store base was in
    the rue21 etc! layout. We converted 31 stores to the rue21 etc!
    layout in fiscal year 2010 and plan to convert 35 stores in
    fiscal year 2011. Historically, these conversions result in
    increased store profitability and generate return on investment
    in excess of 30% over a twelve-month period.  
    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 higher
    margin accessories and footwear categories, both of which have
    been recent drivers of comparable store sales growth. 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, implementation of advanced planning and allocation
    systems and business processes, 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 increasing
    efficiencies in our supply chain and distribution systems to
    achieve better product flow and a leaner inventory position. We
    believe the expansion of our higher margin categories, such as
    accessories and footwear, will increase our overall margins over
    time.  Our
    Stores
     6




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Store
    Locations
    Total NumberState

of StoresAlabama


28Arizona


16Arkansas


10California


23Colorado


7Connecticut


1Delaware


1Florida


26Georgia


45Idaho


2Illinois


18Indiana


16Iowa


8Kansas


6Kentucky


13Louisiana


23Maine


1Maryland


6Massachusetts


7Michigan


17Minnesota


5Mississippi


21Missouri


16Nebraska


3Nevada


5New Hampshire


2New Jersey


5New Mexico


8New York


14North Carolina


40Ohio


20Oklahoma


17Oregon


7Pennsylvania


27South Carolina


18Tennessee


27Texas


73Utah


13Vermont


2Virginia


16Washington


8 7




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Total NumberState

of StoresWest Virginia


8Wisconsin


8Wyoming


1Total


638     Distinctive
    Store Experience
      Store
    Growth and Store Conversions
        2010


2009


2008Stores at beginning of period


535



449



352Stores opened during period(1)


105



88



99Stores closed during period


(2
)


(2
)


(2
)Stores at end of period


638



535



449Store conversions during the period


31



26



21     (1)
    
    Stores opened during period do not include existing stores that
    have been converted. 8




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rueCulture
    and rueCommunity
    Customer
    Connection
    Associate
    Development
    Our
    Products and Brands
      Fiscal Year2010


2009


2008GirlsApparel


55.9
%


56.7
%


58.3
%Accessories


25.7
%


24.3
%


23.5
%Guys Apparel and Accessories


18.4
%


19.0
%


18.2
%Total


100.0
%


100.0
%


100.0
%  9




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Merchandising
    and Sourcing
    Merchandising
    Sourcing
      order-by-order
    Marketing
    and Advertising
  
 10




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e-blasts e-blasts
      Distribution
    Management
    Information Systems
    Competition
   11




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Intellectual
    Property
    Regulation
    and Legislation
  and/or
  Insurance
   12




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Employees
    Seasonality
  back-to-school back-to-school back-to-school
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
    c/o Vice
  1-800-SEC-0330.
  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.     14




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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.
        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
    current merchandise planning and allocation strategies may not
    improve sales and merchandise margins.
    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.
   16




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
    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.    We
    could face increased competition from other retailers that could
    adversely affect us and our growth strategy.
         17




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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.
    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.     20




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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.
  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.
  back-to-school back-to-school build-up
 21




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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
    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.
   22




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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,
  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.
   24




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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
    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.
      We may
    be unable to protect our trademarks or other intellectual
    property rights.
   25




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Failure
    to comply with regulatory requirements could negatively impact
    our business.
    Concentration
    of ownership among our existing executive officers, directors
    and principal stockholders may prevent new investors from
    influencing significant corporate decisions.
       26




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Our
    stock price may be volatile or may decline regardless of our
    operating performance or other factors.
      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.    Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.  state-of-the-art
   27




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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    Fiscal Year 2010High

Low1st Quarter (January 31, 2010)

$
37.63


$
26.452nd Quarter (May 2, 2010)

$
36.57


$
27.753rd Quarter (August 1, 2010)

$
30.64


$
20.284th Quarter (October 31, 2010)

$
33.80


$
25.50  28




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


1/30/2010


1/29/2011Rue21, inc.



100.00




147.53




155.26NASDAQ Stock Market (US securities only)



100.00




98.17




126.48NASDAQ Retail Trade Index



100.00




102.71




128.08   (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
   29




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Item 6.
    Selected
    Consolidated Financial Data.    Fiscal Year EndedJanuary 29,


January 30,


January 31,


February 2,


February 3,2011


2010


2009


2008


2007(In thousands, except per share and operating data)Consolidated Statement of Income DataNet sales

$
634,728


$
525,600


$
391,414


$
296,887


$
225,559Cost of goods sold


399,896



337,693



257,853



195,034



150,163Gross profit


234,832



187,907



133,561



101,853



75,396Selling, general and administrative expense


163,006



134,078



99,886



76,039



57,575Depreciation and amortization expense


21,852



16,898



11,532



8,241



5,926Income from operations


49,974



36,931



22,143



17,573



11,895Interest expense, net


202



532



1,477



2,520



2,645Provision for income taxes


19,528



14,382



8,027



5,920



1,452Net income

$
30,244


$
22,017


$
12,639


$
9,133


$
7,798Net income per common shareBasic

$
1.25


$
0.99


$
0.58


$
0.42


$
0.39Diluted

$
1.21


$
0.96


$
0.55


$
0.40


$
0.36Weighted average common shares outstandingBasic


24,277



22,267



21,914



21,705



19,782Diluted


25,002



23,037



22,814



22,842



21,888Operating Data (unaudited):Comparable store sales change


2.1
%


7.8
%


3.7
%


7.8
%


(4.7
)%Number of stores open at end of period


638



535



449



352



278Total gross square feet end of period (in thousands)


2,989



2,390



1,949



1,448



1,095Store conversions during period


31



26



21



20



18Capital expenditures (in thousands)

$
40,480


$
33,630


$
26,464


$
20,265


$
16,586   As ofJanuary 29,

January 30,

January 31,

February 2,

February 3,2011

2010

2009

2008

2007(In thousands)Consolidated Balance Sheet DataCash and cash equivalents

$
50,111


$
26,751


$
4,611


$
3,343


$
2,525Working capital (deficit)


49,723



21,604



798



3,946



(622
)Total assets


260,791



188,431



141,200



102,285



79,092Total long-term debt










19,476



27,968



23,317Stockholders equity (deficit)


102,129



67,448



18,393



5,753



(3,537
)Cash Flow DataCash from operations

$
61,643


$
48,779


$
36,589


$
21,512


$
17,480  30




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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 2010 refer to the fiscal year ended January 29,
    2011. Our fiscal year 2006 consisted of a 53-week period and
    ended on February 3, 2007.
  Overview
  store-in-store
         31




---



##### Table of Contents



How We
    Assess the Performance of Our Business
    Net
    Sales
    Comparable
    Store Sales
  Form 10-K
  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. 32




---



##### Table of Contents



back-to-school
  Gross
    Profit
      Selling,
    General and Administrative Expense
   33




---



##### Table of Contents



Results
    of Operations
    Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands, except operating data)Net Sales

$
634,728


$
525,600


$
391,414Cost of goods sold


399,896



337,693



257,853Gross profit


234,832



187,907



133,561Selling, general and administrative expenses


163,006



134,078



99,886Depreciation and amortization expense


21,852



16,898



11,532Income from operations


49,974



36,931



22,143Interest expense, net


202



532



1,477Income before income taxes


49,772



36,399



20,666Provision for income taxes


19,528



14,382



8,027Net income

$
30,244


$
22,017


$
12,639Operating Data (unaudited)Number of stores open at the end of the period


638



535



449Gross square feet at the end of the period (in thousands)


2,989



2,390



1,949Comparable store sales change


2.1
%


7.8
%


3.7
%   Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Net Sales


100.0
%


100.0
%


100.0
%Cost of goods sold


63.0
%


64.2
%


65.9
%Gross profit


37.0
%


35.8
%


34.1
%Selling, general and administrative expenses


25.7
%


25.5
%


25.5
%Depreciation and amortization expense


3.4
%


3.2
%


2.9
%Income from operations


7.9
%


7.0
%


5.7
%Interest expense, net


0.0
%


0.1
%


0.4
%Income before income taxes


7.8
%


6.9
%


5.3
%Provision for income taxes


3.1
%


2.7
%


2.1
%Net income


4.8
%


4.2
%


3.2
%     Fiscal Year2010


2009


2008GirlsApparel


55.9
%


56.7
%


58.3
%Accessories


25.7
%


24.3
%


23.5
%Guys Apparel and Accessories


18.4
%


19.0
%


18.2
%Total


100.0
%


100.0
%


100.0
%  34




---



##### Table of Contents



2010


2009


2008Stores at beginning of period


535



449



352Stores opened during period(1)


105



88



99Stores closed during period


(2
)


(2
)


(2
)Stores at end of period


638



535



449Store conversions during the period


31



26



21     (1)
    
    Stores opened during period do not include existing stores that
    have been converted.  Fiscal
    Year 2010 Compared to Fiscal Year 2009
  Net
    Sales
      Gross
    Profit
  mark-up
  Selling,
    General and Administrative Expense
     35




---



##### Table of Contents



Depreciation
    and Amortization Expense
    Provision
    for Income Taxes
    Net
    Income
    Fiscal
    Year 2009 Compared to Fiscal Year 2008
  Net
    Sales
      Gross
    Profit
   36




---



##### 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
       37




---



##### Table of Contents



Gross
    Profit
    Selling,
    General and Administrative Expense
        Depreciation
    and Amortization Expense
    Interest
    Expense, Net
    Provision
    for Income Taxes
    Net
    Income
    Liquidity
    and Capital Resources
   38




---



##### Table of Contents



Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Provided by operating activities

$
61,643


$
48,779


$
36,859Used for investing activities


(40,480
)


(33,630
)


(26,464
)Provided by (used for) for financing activities


2,197



6,991



(9,127
)Increase in cash and cash equivalents

$
23,360


$
22,140


$
1,268   Operating
    Activities
    Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Net income

$
30,244


$
22,017


$
12,639Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


21,852



16,994



11,624Deferred taxes


664



1,158



1,900Share-based compensation


2,240



410



Merchandise inventory


(23,358
)


(5,855
)


(19,685
)Accounts payable


22,112



(486
)


24,134Other working capital components


8,994



14,544



5,679All other


(1,105
)


(3
)


568Net cash provided by operating activities

$
61,643


$
48,779


$
36,859      39




---



##### Table of Contents



Investing
    Activities
    Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Capital expenditures, net of tenant allowances

$
(25,462
)

$
(24,297
)

$
(17,555
)Tenant allowances


(15,018
)


(9,333
)


(8,909
)Net cash used for investing activities

$
(40,480
)

$
(33,630
)

$
(26,464
)       Financing
    Activities
    Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Net (payments) borrowings under revolver

$



$
(19,476
)

$
14,645Payments on long-term debt










(23,326
)Proceeds from initial public offering, net






26,242



Proceeds from stock options exercised


688



110



1Excess tax benefits from stock-based award activities


1,509



276



Debt financing costs






(161
)


(447
)Net cash provided by (used for) financing activities

$
2,197


$
6,991


$
(9,127
)         Senior
    Secured Credit Facility
   40




---



##### Table of Contents



Off
    Balance Sheet Arrangements
    Contractual
    Obligations
    Payments Due by PeriodTotal


Less than 1 Year


1 - 3 Years


4 - 5 Years


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


291,469



51,342



89,413



63,613



87,101Merchandise inventory purchase commitments


109,195



109,195











$
400,664


$
160,537


$
89,413


$
63,613


$
87,101     (1)
    
    Excludes common area maintenance (CAM) charges, real estate
    taxes and certain other expenses which amounted to approximately
    22% of minimum lease obligations in fiscal year 2010 which we
    expect to be consistent for the next three years.  Impact of
    Inflation
    Critical
    Accounting Policies
   41




---



##### Table of Contents



Revenue
    Recognition
    Inventory
    Valuation
  (first-in,
      Asset
    Impairment
    Income
    Taxes
   42




---



##### Table of Contents



Stock-Based
    Compensation
  5-year
      Recent
    Accounting Pronouncements
   43




---



##### Table of Contents



2010-06, 2010-6). 2010-6 2010-6
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.   44




---



##### 



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


46Consolidated Balance Sheets as of
    January 29, 2011 and January 30, 2010


47Consolidated Statements of Income for the fiscal
    years ended January 29, 2011, January 30, 2010, and
    January 31, 2009


48Consolidated Statements of Stockholders
    Equity for the fiscal years ended January 29, 2011,
    January 30, 2010, and January 31, 2009


49Consolidated Statements of Cash Flows for the
    fiscal years ended January 29, 2011, January 30, 2010,
    and January 31, 2009


50Notes to Consolidated Financial Statements


51   45




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm    
        Ernst &
    Young LLP
    46




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Consolidated Balance Sheets
 January 29,


January 30,2011


2010(In thousands, except share and per share data)ASSETSCurrent assets:Cash and cash equivalents

$
50,111


$
26,751Accounts receivable


6,733



3,834Merchandise inventory, net


96,051



72,693Prepaid expenses and other current assets


10,580



6,783Deferred tax assets


5,024



4,286Total current assets


168,499



114,347Property and equipment, net


91,371



73,147Other assets


921



937Total assets

$
260,791


$
188,431LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
82,075


$
59,963Accrued expenses and other current liabilities


15,616



14,384Accrued payroll and related taxes


12,053



10,486Deferred rent and tenant allowances, current portion


7,033



5,509Accrued income and franchise taxes


1,999



2,401Total current liabilities


118,776



92,743Long-term liabilities:Deferred rent, tenant allowances and other long-term liabilities


34,235



23,991Deferred tax liabilities


5,651



4,249Total long-term liabilities


39,886



28,240Total liabilities


158,662



120,983Commitments and ContingenciesStockholders equity:Common stock par value $0.001 per share;
    200,000 shares authorized; 24,380 shares issued and
    outstanding at January 29, 2011; 24,237 shares issued
    and outstanding at January 30, 2010


24



24Additional paid in capital


31,552



27,115Retained earnings


70,553



40,309Total stockholders equity


102,129



67,448Total liabilities and stockholders equity

$
260,791


$
188,431    47




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Consolidated Statements of Income
  Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands, except share andper share data)Net sales

$
634,728


$
525,600


$
391,414Cost of goods sold (includes certain buying, occupancy and
    distribution center expenses)


399,896



337,693



257,853Gross profit


234,832



187,907



133,561Selling, general, and administrative expense


163,006



134,078



99,886Depreciation and amortization expense


21,852



16,898



11,532Income from operations


49,974



36,931



22,143Interest expense, net


202



532



1,477Income before income taxes


49,772



36,399



20,666Provision for income taxes


19,528



14,382



8,027Net income

$
30,244


$
22,017


$
12,639Basic income per common share

$
1.25


$
0.99


$
0.58Diluted income per common share

$
1.21


$
0.96


$
0.55Weighted average basic common shares outstanding


24,277



22,267



21,914Weighted average diluted common shares outstanding


25,002



23,037



22,814    48




---



##### Table of Contents



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


Common Stock


Additional$0.004 Par Value


$0.001 Par Value


Paid-in


RetainedShares


Amount


Shares


Amount


Capital


Earnings


Total(In thousands, except per share data)Balance 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



22,017Stock-based compensation expense


















410







410Stock issued for stock option exercises










497







110







110Excess tax benefits from stock-based award activities


















276







276Balance January 30, 2010










24,237



24



27,115



40,309



67,448Net income






















30,244



30,244Stock-based compensation expense


















2,240







2,240Stock issued for stock option exercises










142







688







688Excess tax benefits from stock-based award activities


















1,509







1,509Balance January 29, 2011





$




24,379


$
24


$
31,552


$
70,553


$
102,129    49




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Consolidated Statements of Cash
    Flows
  Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Operating activitiesNet income

$
30,244


$
22,017


$
12,639Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


21,852



16,994



11,624Loss on fixed asset disposals


183







349Impairment of long-lived assets


221



273



219Deferred taxes


664



1,158



1,900Share based compensation


2,240



410



Excess tax benefits from stock-based award activities


(1,509
)


(276
)


Changes in:Accounts receivable


(2,899
)


(1,307
)


122Merchandise inventory, net


(23,358
)


(5,855
)


(19,685
)Prepaid expenses and other current assets


(3,797
)


(146
)


(3,180
)Accounts payable


22,112



(486
)


24,134Accrued payroll and related taxes


1,567



2,954



1,433Accrued expenses and other current liabilities


1,232



3,846



987Deferred rent and tenant allowances


11,768



6,903



6,259Accrued income and franchise taxes


1,107



2,401



Other


16



(107
)


58Net cash provided by operating activities


61,643



48,779



36,859Investing activitiesAcquisition of property and equipment


(40,480
)


(33,630
)


(26,464
)Net cash used for investing activities


(40,480
)


(33,630
)


(26,464
)Financing activitiesBorrowings under revolver






98,381



125,371Payments under revolver






(117,857
)


(110,726
)Payments on long-term debt










(23,326
)Deferred financing costs






(161
)


(447
)Excess tax benefits from stock-based award activities


1,509



276



Proceeds from initial public offering, net






26,242



Proceeds from stock options exercised


688



110



1Net cash provided by (used for) financing activities


2,197



6,991



(9,127
)Increase in cash and cash equivalents


23,360



22,140



1,268Cash and cash equivalents, beginning of period


26,751



4,611



3,343Cash and cash equivalents, end of period

$
50,111


$
26,751


$
4,611Supplemental disclosure of cash flow informationInterest paid

$
360


$
417


$
2,771Income taxes paid

$
18,052


$
13,510


$
7,935    50




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to Consolidated Financial
    Statements
 For the Year Ended January 29, 2011
 (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
 51




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
  back-to-school back-to-school
  Segment
    Reporting
    Fair
    Value of Financial Instruments
    Cash and
    Cash Equivalents
    Accounts
    Receivable
    Merchandise
    Inventory
  (first-in,
   52




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
      Property
    and Equipment
    Furniture and fixtures

7 yearsLeasehold improvements

Lesser of 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
   53




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
  30-day
    Cost of
    Goods Sold
    Selling,
    General and Administrative Expense
    Income
    Taxes
       54




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
  Stock
    Based Compensation
      Store
    Preopening Costs
    Advertising
    Costs
    Repairs
    and Maintenance
    Legal
    Proceedings and Claims
    Earnings
    per Share
   55




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
      Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands, except per share data)Net income

$
30,244


$
22,017


$
12,639Weighted average basic common shares outstanding


24,277



22,267



21,914Impact of dilutive securities


725



770



900Weighted average diluted common shares outstanding


25,002



23,037



22,814Per common share:Basic income per common share

$
1.25


$
0.99


$
0.58Diluted income per common share

$
1.21


$
0.96


$
0.55     Recent
    Accounting Pronouncements
    2010-06, 2010-6). 2010-6 2010-6
  2010-09, 2010-09
 56




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
  2010-09
  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 $50,111 and $26,751
    as of January 29, 2011 and January 30, 2010,
    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.
    Level 3:  Unobservable inputs reflecting
    managements own assumptions about the inputs used in
    pricing the asset or liability. The Company determined that the
    fair value measurements related to the impaired long lived
    assets disclosed in Note 1 are derived from significant
    unobservable inputs. These non-financial assets are measured on
    a non-recurring basis when events and circumstances warrant.    Fair Value Measurements at January 29, 2011Quoted MarketPrices in Active





SignificantMarkets for


Significant Other


UnobservableCarrying


Identical Assets


Observable


InputsCash and cash Equivalents

Amount


(Level 1)


Inputs (Level 2)


(level 3)Cash

$
50,111


$
50,111


$



$
Total

$
50,111


$
50,111


$



$
   Fair Value Measurements at January 30, 2010Quoted MarketPrices in Active





SignificantMarkets for


Significant Other


UnobservableCarrying


Identical Assets


Observable


InputsCash and cash Equivalents

Amount


(Level 1)


Inputs (Level 2)


(level 3)Cash

$
26,751


$
26,751


$



$
Total

$
26,751


$
26,751


$



$
  57




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
  Note 3 
    Property and Equipment
    January 29,


January 30,2011


2010Furniture and fixtures

$
73,635


$
58,518Leasehold improvements


75,445



54,715Computer equipment, software and other


18,044



15,937167,124



129,170Less accumulated depreciation and amortization


(75,753
)


(56,023
)$
91,371


$
73,147     Note 4 
    Long-Term Debt
    Note 5 
    Stock-Based Compensation
     58




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
    Stock
    Option Activity
    WeightedWeighted-


AverageCommon


Average


Remaining


AggregateStock


Exercise


Contractual


IntrinsicOptions


Price


Term


Value(In thousands)


(Per share)


(In years)Outstanding January 30, 2010


1,170


$
7.84



8.13


$
23,615Granted


438


$
32.97Exercised


(143
)

$
4.84Expired or forfeited


(24
)

$
16.36Outstanding January 29, 2011


1,441


$
15.63



7.83


$
21,349Vested at January 29,2011


560


$
5.62



6.48


$
13,245       Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Risk-free interest rate(1)


1.52%-2.46%



2.6%-3.3%



4.7%Dividend yield










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


55.0%



53.0%-60.0%



55.0%Weighted average expected term(3)


6.3 years



6.3 years



6.3 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 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. 59




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
     WeightedAveraged Fair ValueShares


at Grant Date(In thousands)


(Per share)Non-vested as of January 30, 2010


689


$
4.70Granted


438


$
17.37Vested


(222
)

$
3.76Cancelled


(24
)

$
9.23Non-vested as of January 29, 2011


881


$
11.16     Restricted
    Stock Activity
    Weighted-AverageNumber of


Grant DateRestricted Stock Units

Shares


Fair Value(In thousands)


(Per share)Non-vested at January 30, 2010





$
Granted


25


$
30.49Vested





$
Forfeited






Non-vested at January 29, 2011


25


$
30.49     Note 6 
    Lease Commitments
   60




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
    Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Store Rent:Fixed minimum

$
44,276


$
35,665


$
28,057Contingent


2,700



2,425



1,039Total store rent, excluding common maintenance charges,real estate taxes and certain other expenses


46,976



38,090



29,096Offices, distribution facilities and equipment


3,320



3,165



3,050Total Rent Expense

$
50,296


$
41,255


$
32,146       Fiscal Year2011

$
51,3422012


47,5952013


41,8182014


34,8132015


28,800Thereafter


87,101Total future lease obligations

$
291,469   Note 7 
    401(k) Profit Sharing Plan
   61




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##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
  Note 8 
    Income Taxes
    Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Current:Federal

$
15,834


$
10,943


$
4,693State


3,030



2,281



1,434Total current


18,864



13,224



6,127Deferred:Federal


939



1,238



1,967State


(275
)


(80
)


(67
)Total deferred


664



1,158



1,900Total provision for income taxes

$
19,528


$
14,382


$
8,027     Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Effective RateStatutory rate


35.0
%


35.0
%


35.0
%State taxes


3.8
%


3.8
%


4.4
%Non-deductible expenses


0.7
%


0.7
%


0.4
%Other


(0.3
%)






(1.0
)%Total


39.2
%


39.5
%


38.8
%  62




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##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
    Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Deferred tax assets:Fin 48  temporary differences

$
42


$
42


$
169Deferred Rent


15,925



11,371



8,618Accrued Compensation


1,675



959



740Accrued Reserve


192



162



143Inventory


1,127



941



547Other










24Total deferred tax assets


18,961



13,475



10,241Deferred tax liabilities:Fixed assets


(19,588
)


(13,438
)


(9,046
)Net deferred tax (liability) asset

$
(627
)

$
37


$
1,195   Fiscal Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Current-deferred tax assets

$
5,024


$
4,286


$
3,135Noncurrent-deferred tax liabilities


(5,651
)


(4,249
)


(1,940
)Total

$
(627
)

$
37


$
1,195     Gross 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


35Prior period tax positions  (decrease)


(1
)Gross balance as of January 29, 2011

$
34        63




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
  Note 9 
    Commitments and Contingencies
    Note 10 
    Related Party Transactions
  out-of-pocket
    Note 11 
    Selected Quarterly Financial Data 
    (Unaudited)
    Thirteen Weeks EndedMay 1,

July 31,

October 30,

January 29,2010

2010

2010

2011Fiscal Year 2010Net Sales

$
137,772


$
142,950


$
163,913


$
190,093Gross profit


52,231



54,544



60,053



68,003Net income


5,821



6,391



7,143



10,889Basic income per common share


0.24



0.26



0.29



0.45Diluted income per common share


0.23



0.26



0.29



0.44Weighted average basic common shares outstanding


24,248



24,277



24,310



24,335Weighted average diluted common shares outstanding


25,044



25,044



24,972



25,029   64




---



##### Table of Contents



rue21,
    inc. and subsidiary
  Notes to
    Consolidated
    Financial Statements  (continued)
  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  65




---



##### 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
  Rules 13a-15(f)
  Internal Control  Integrated
    Framework
    Changes
    in Internal Control over Financial Reporting
   66




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
                Ernst &
    Young LLP
    67




---



##### Table of Contents



Item 9B.
    Other
    Information.   Part III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Proposal No. 1-Election
  Regulation S-K
  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.  Form 10-K:
  1. Financial Statements:   See
    Index to Consolidated Financial Statements in
    Part II, Item 8 of this
    Form 10-K
    for a list of the Financial Statements required to be filed
    herewith.
  2. Financial Statement Schedule:   All
    Schedules are omitted because they are not required or because
    the information is immaterial or provided elsewhere in the
    Consolidated Financial Statements or Notes thereto.
  3. Exhibits:   See Exhibit Index
    following the signature page of this Annual Report on
    Form 10-K.
 68




---



##### 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 29, 2011/s/  Keith
    A. McDonoughKeith
    A. McDonough

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

March 29, 2011/s/  Arnold
    S. BarronArnold
    S. Barron

Director

March 29, 2011/s/  Macon
    F. Brock Jr.Macon
    F. Brock Jr.

Director

March 29, 2011/s/  Douglas
    E. ColtharpDouglas
    E. Coltharp

Director

March 29, 2011/s/  Bruce
    A. HartmanBruce
    A. Hartman

Director

March 29, 2011/s/  John
    F. Megrue, Jr.John
    F. Megrue, Jr.

Director

March 29, 2011/s/  Alex
    S. PellegriniAlex
    S. Pellegrini

Director

March 29, 2011  69




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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

Amended and Restated Employment Agreement, dated as of
    December 17, 2010, by and between Robert Fisch and rue 21,
    inc., incorporated by reference to Exhibit 10.1 to
    Registrants
    Form 8-K
    filed on December 21, 2010.10
.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

Second Amendment to Lease, dated June 11, 2010, by and
    between West Virginia Economic Development Authority and rue21,
    inc., incorporated by reference to Exhibit 10.1 to
    Registrants
    Form 10-Q
    filed on September 3, 2010.10
.14

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. 70




---



##### Table of Contents



10
.15

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
.16

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
.17

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
.18

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
.19

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. 71