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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 --------------

                                    FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                   For the fiscal year ended January 31, 2004

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

        For the transition period from _______________ to _____________ .

                        Commission file number 000-07258

                             CHARMING SHOPPES, INC.
                             ----------------------
             (Exact Name of Registrant as Specified in Its Charter)

         Pennsylvania                                           23-1721355
         ------------                                           ----------
(State or Other Jurisdiction of                                (IRS Employer
 Incorporation or Organization)                               IdentificationNo.)

 450 Winks Lane, Bensalem, Pennsylvania                             19020
 --------------------------------------                             -----
(Address of Principal Executive Offices)                          (Zip Code)

        Registrant's telephone number, including area code (215) 245-9100

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock (par value $.10 per share)
                     ---------------------------------------
                                (Title of Class)

                              Stock Purchase Rights
                              ---------------------
                                (Title of Class)

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] YES [ ] NO

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

================================================================================
<PAGE>
     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). [X] YES [ ] NO

     The aggregate market value of the outstanding common stock of the
registrant held by non-affiliates as of August 2, 2003 (the last day of the
registrant's most recently completed second fiscal quarter), based on the
closing price on August 1, 2003, was approximately $576,208,000.

     As of April 1, 2004, 114,495,415 shares of the registrant's common stock
were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain information required by Part III of Form 10-K is incorporated by
reference herein from the registrant's definitive proxy statement for its annual
shareholders meeting, which is expected to be filed within 120 days after the
end of the fiscal year covered by this Annual Report.


<PAGE>


                             CHARMING SHOPPES, INC.
                          2004 FORM 10-K ANNUAL REPORT

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

PART I                                                                     Page
<S>                                                                         <C>

Item 1    Business
          General..........................................................   1
          Stores...........................................................   2
          Merchandising and Buying.........................................   3
          Marketing and Promotions.........................................   5
          Proprietary Credit Card Programs.................................   5
          Sourcing.........................................................   6
          Distribution and Logistics.......................................   6
          Competition......................................................   7
          MONSOON and ACCESSORIZE Joint Venture............................   7
          Employees........................................................   7
          Trademarks and Servicemarks......................................   7
          Executive Offices................................................   8
          Available Information............................................   8
Item 2    Properties.......................................................   8
Item 3    Legal Proceedings................................................   9
Item 4    Submission of Matters to a Vote of Security Holders..............   9
Additional Part I Information - Our Executive Officers.....................  10

PART II
Item 5    Market for the Registrant's Common Equity and Related
              Stockholder Matters..........................................  11
Item 6    Selected Financial Data..........................................  12
Item 7    Management's Discussion and Analysis of Financial Condition
               and Results of Operations...................................  14
          Forward-Looking Statements.......................................  14
          Overview.........................................................  16
          Critical Accounting Policies.....................................  17
          Results of Operations............................................  23
          Financial Condition..............................................  32
          Market Risk......................................................  38
          Impact of Recent Accounting Pronouncements.......................  39
Item 7A   Quantitative and Qualitative Disclosures About Market Risk.......  39
Item 8    Financial Statements and Supplementary Data......................  40
Item 9    Changes In and Disagreements With Accountants on Accounting
               and Financial Disclosure....................................  81
Item 9A   Controls and Procedures..........................................  81

PART III
Item 10   Directors and Executive Officers of the Registrant...............  82
Item 11   Executive Compensation...........................................  82
Item 12   Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters.............................  82
Item 13   Certain Relationships and Related Transactions...................  83
Item 14   Principal Accountant Fees and Services...........................  83

PART IV
Item 15   Exhibits, Financial Statement Schedules and Reports on Form 8-K..  84

SIGNATURES.................................................................  92
</TABLE>



<PAGE>


                                     PART I


Item 1.  Business

General

     We are a leading specialty apparel retailer primarily focused on plus-size
women's apparel through our three distinct brands: LANE BRYANT(R), FASHION
BUG(R), and CATHERINES Plus Sizes(R). During the year ended January 31, 2004
("Fiscal 2004"), the sale of plus-size apparel represented approximately 77% of
our total net sales. Through our fashion content, store layouts, and broad
merchandise assortments, we seek to appeal to customers from a broad range of
socioeconomic, demographic, and cultural profiles. As of January 31, 2004, we
operated 2,227 stores in 48 states.

     In the late 1990's, our management team initiated a strategic plan aimed at
capitalizing on the anticipated growth in the market for plus-size women's
apparel. We began this process by increasing the floor space allocated to
plus-size apparel in our FASHION BUG stores. In August 1999, we acquired the
MODERN WOMANTM chain of 136 stores, which specialized in plus-size women's
apparel. In January 2000, we acquired the CATHERINES(R) chain of 436 stores,
which also specialized in plus-size women's apparel. We have since converted the
MODERN WOMAN chain into CATHERINES stores. In August 2001, we acquired the Lane
Bryant chain of 651 stores. LANE BRYANT is a premier brand in the plus-size
market with an established customer base and proprietary-branded labels. The
acquisition of LANE BRYANT significantly accelerated our long-term growth
strategy of becoming a leader in the sale of plus-size women's apparel.

     Each of our brands is designed to attract a distinct customer:

          LANE BRYANT. LANE BRYANT is a widely recognized name in plus-size
     fashion. Through private labels, such as VENEZIA(R) and CACIQUE(R) (a line
     of intimate apparel), LANE BRYANT offers fashionable and sophisticated
     apparel in plus-sizes 14 - 28, including wear-to-work and casual
     sportswear, as well as accessories for the plus-size customer. LANE BRYANT
     has a loyal customer base, generally ranging in age from 25 to 45 years
     old, that shops for fashionable merchandise in the moderate price range.
     Primarily a mall-based destination store for the plus-size woman, LANE
     BRYANT currently operates 710 stores in 46 states that average
     approximately 6,100 square feet. In March 2003, we began e-commerce
     operations on our LANE BRYANT website.

          FASHION BUG and FASHION BUG PLUS. FASHION BUG and FASHION BUG PLUS
     stores specialize in selling a wide variety of plus-size, misses and junior
     apparel, accessories, and casual footwear. FASHION BUG customers generally
     range in age from 20 to 49 years old and shop in the low-to-moderate price
     range. Our 1,051 FASHION BUG stores are located in 45 states, primarily in
     strip shopping centers, and average approximately 9,000 square feet.
     FASHION BUG currently operates a marketing website offering fashion
     advisories, promotional information, and a store locator. We plan to
     introduce e-commerce operations on this website during the fiscal year
     ending January 29, 2005 ("Fiscal 2005").

          CATHERINES PLUS SIZES. CATHERINES specializes in plus-sizes and is
     particularly known for extended sizes (over size 28) and petite plus-sizes.
     CATHERINES offers classic apparel and accessories for wear-to-work and
     casual lifestyles. CATHERINES customers generally range in age from 40 to
     65 years old, shop in the moderate price range, and are concerned with fit
     and value when purchasing clothes. Our 466 CATHERINES stores are located in
     44 states, primarily in strip shopping centers in the Southeast,
     Mid-Atlantic, and Eastern Central regions of the United States, and average
     approximately 4,100 square feet. In March 2002, we began e-commerce
     operations on our CATHERINES website.

                                       1
<PAGE>

     On March 18, 2003, we announced a cost reduction plan, designed to take
advantage of the centralization of all corporate administrative services
throughout the Company and to realize certain efficiencies, in order to improve
our profitability. During Fiscal 2004, we realized cost reductions of more than
$30 million as a result of this plan. We expect this cost reduction plan to
improve annualized pre-tax earnings by a total of approximately $45 million.
Execution of the cost reduction plan resulted in a pre-tax charge of $11.5
million in Fiscal 2004. Components of the charge included a $4.2 million
non-cash charge, primarily for accelerated depreciation of the net book value of
the assets at our Memphis, Tennessee distribution center, and $7.3 million of
cash items, primarily related to lease termination costs and severance. The
costs related to the plan did not have a material after-tax cash impact in
Fiscal 2004. Additional details of the plan are included in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations; Results of Operations; Comparison of Fiscal 2004 to Fiscal 2003;
Expenses Related to Cost Reduction Plan" and "Item 8. Financial Statements and
Supplementary Data; Notes to Consolidated Financial Statements; Note 14.
Expenses Related to Cost Reduction Plan" below.

Stores

     Our 2,227 stores (as of January 31, 2004) are primarily located in suburban
areas and small towns. Approximately 70% of these stores are located in strip
shopping centers, while the balance are located in community and regional malls.
The majority of our FASHION BUG and CATHERINES stores are strip-center based.
Most of our LANE BRYANT stores are in malls. Over the past few years, LANE
BRYANT has expanded into strip centers, and has demonstrated success in strip
center locations. Approximately 20% of our LANE BRYANT stores are currently
located in strip shopping centers.

     We believe that our customers visit strip shopping centers frequently as a
result of the tenant mix and convenience of strip shopping centers. Our
long-term store growth plans are to expand both LANE BRYANT and CATHERINES into
additional strip center locations. Availability of strip center retail space
continues to significantly outpace mall expansion. In addition, we benefit in
strip centers from substantially lower occupancy costs as compared to occupancy
costs in malls.

     Our merchandise displays enable our customers to assemble coordinated and
complete outfits that satisfy many of their lifestyle needs. We relocate or
remodel our stores as appropriate to convey a fresh and contemporary shopping
environment. We frequently test and implement new store designs and fixture
packages that are aimed at providing an effective merchandise presentation. In
particular, we intend, on a targeted basis, to continue remodeling certain of
our FASHION BUG stores to present a bright, well-defined, easy-to-shop layout.
In addition, we emphasize customer service, including the presence of helpful
salespeople in the stores, layaway plans, and acceptance of merchandise returns
for cash or credit within a reasonable time period. Typically, our stores are
open seven days per week, eleven hours per day Monday through Saturday, and
seven hours on Sunday.

     We continue to seek additional new locations that meet our financial and
operational objectives. We currently plan to open approximately 55 stores during
Fiscal 2005. The breakdown by brand is approximately: 35 LANE BRYANT stores, 15
CATHERINES stores, and 5 FASHION BUG stores. Additionally, we currently plan to
relocate approximately 55 stores during Fiscal 2005.

                                       2
<PAGE>

     Our store openings and closings and number of locations over the past five
fiscal years are set forth in the following table:

<TABLE>
<CAPTION>
                                                                   Year Ended
                                               ------------------------------------------------
                                               Jan. 31,   Feb. 1,    Feb. 2,   Feb. 3,  Jan. 29,
                                                 2004      2003       2002      2001      2000
                                                 ----      ----       ----      ----      ----
<S>                                            <C>       <C>        <C>       <C>       <C>
Store Activity:
Number of stores open at beginning of period    2,248     2,446      1,755     1,740     1,135
Opened during period .......................       50        57        125       106        75
Acquired during period .....................        0         0        651         0       572
Closed during period .......................      (71)     (255)       (85)      (91)      (42)
                                               ------    ------     ------    ------    ------
                                                                                            (2)
Number of stores open at end of period .....    2,227     2,248      2,446     1,755     1,740
                                               ======    ======     ======    ======    ======

Number of Stores by Brand:
FASHION BUG and FASHION BUG PLUS ...........    1,051     1,083      1,252     1,230     1,185
LANE BRYANT ................................      710       689        647         0         0
CATHERINES .................................      466       467        461       414       452(3)
THE ANSWER(R)/ADDED DIMENSIONS(R) ..........        0         0         77       110       103
MONSOON/ACCESSORIZE(4) .....................        0         9          9         1         0
                                               ------    ------     ------    ------    ------
Number of stores open at end of period .....    2,227     2,248      2,446     1,755     1,740
                                               ======    ======     ======    ======    ======
--------------------
<FN>

(1)  Includes 124 FASHION BUG stores and 68 ADDED DIMENSIONS stores that were
     closed in connection with a restructuring plan announced on January 28,
     2002.

(2)  Includes 35 MODERN WOMAN stores that were closed in connection with the
     conversion of MODERN WOMAN stores into CATHERINES stores during the year
     ended February 3, 2001.

(3)  Includes 122 MODERN WOMAN stores that were closed or converted to the
     CATHERINES formats during the year ended February 3, 2001.

(4)  We closed these stores during Fiscal 2004 (see "MONSOON and ACCESSORIZE
     Joint Venture" below).
</FN>
</TABLE>

     All stores are operated under our direct management. Each store has a
manager and an assistant manager or supervisor, who are in daily operational
control of their location. We employ district managers, who travel to all stores
in their district on a frequent basis, to supervise store operations. Each
district manager has responsibility for an average of 12 stores. Regional
managers, who report to a Director of Stores, supervise the district managers.
Generally, we appoint store managers from the group of assistant managers, and
district managers are appointed from the group of store managers. We seek to
motivate our store personnel through internal advancement and promotion,
competitive wages and various incentive, medical, and retirement plans. We
centrally develop store operations, merchandising, and buying policies,
assigning to individual store management the principal duties of display,
selling, and reporting through point-of-sale terminals.

Merchandising and Buying

     We employ a merchandising and buying strategy that is focused on providing
an attractive selection of apparel and accessories that reflect the fashion
preferences of the target customer for each of our brands. Separate merchandise
groups for each of our brands conduct merchandise purchasing, using buyers
supervised by one or more merchandise managers. We believe that specialization
of buyers within our brands enhances the distinctiveness of the brands and their
offerings. In addition, we use domestic and international fashion market
guidance, fashion advisory services, proprietary design, and in-store testing to
determine the optimal product assortments for each of our brands. We believe
that this approach results in greater success in predicting customer preferences
while reducing our inventory investment and risk. We also seek to maintain high
quality standards with respect to merchandise fabrication, construction, and
fit.

                                       3
<PAGE>

     We continually refine our merchandise assortments to reflect the needs and
demands of our diverse customer groups and the demographics of each store
location. At LANE BRYANT, we offer a combination of fashion basics, seasonal
fashions, and high fashion in casual and wear-to-work merchandise, intimate
apparel, and accessories. We strive to translate current trends into plus-sizes
and to be first to market with our merchandise. At FASHION BUG, we offer an
assortment of both casual and wear-to-work apparel, in plus, misses, junior, and
girls sizes as well as maternity, at low-to-moderate prices. FASHION BUG's plus-
and misses-size merchandise typically reflects established fashion trends and
includes a broad offering of ready-to-wear apparel, including knit and woven
tops, dresses, shorts, pants, and skirts, as well as footwear, accessories,
intimate apparel, and seasonal items, such as outerwear. FASHION BUG's junior
merchandise reflects the latest fashion trends and includes a significant amount
of well-recognized third-party national brands. At CATHERINES, we offer a broad
assortment of plus-size merchandise in classic styles designed to provide
"head-to-toe" dressing for the 40- to 65-year-old customer. CATHERINES features
sportswear, dresses, intimate apparel, suits, and accessories in a variety of
plus-sizes, including petites and extended sizes. CATHERINES has developed a
unique expertise in the fit, design, and manufacturing of extended sizes, making
it one of the few retailers to emphasize these sizes.

     For stores that are identified as having certain profiles, we have
distribution systems in place that can stock the stores with products
specifically targeted to such profiles. Our merchandising staffs obtain store
and brand-wide inventory information generated by merchandise information
systems that use point-of-sale terminals. Through these terminals, merchandise
can be followed from the placement of our initial order for the merchandise to
the actual sale to our customer. Based upon this data, our merchandise managers
compare budgeted-to-actual sales and make merchandising decisions as needed,
including re-order, markdowns, and changes in the buying plans for upcoming
seasons. In addition, we continue to work to improve inventory turnover by
better managing the flow of seasonal merchandise to our stores across all
geographic regions.

     Our merchandising and buying philosophy, coupled with enhancements in
inventory management, helps facilitate the timely and orderly purchase and flow
of merchandise. This enables our stores to offer fresh product assortments on a
regular basis.

     We employ a realistic pricing strategy that is aimed at setting the initial
price markup of fashion merchandise in order to increase the percentage of sales
at the original ticketed price. We believe this strategy has resulted in a
greater degree of credibility with the customer, reducing the need for
aggressive price promotions. However, our pricing strategy typically does allow
sufficient margin to permit merchandise discounts in order to stimulate customer
purchases when necessary.

     Our stores experience a normal seasonal sales pattern for the retail
apparel industry, with peak sales occurring during the spring and Christmas
seasons. We generally build inventory levels before these peak sales periods. To
keep inventory current and fashionable, we reduce the price of slow-moving
merchandise throughout the year. Much of our merchandise is developed for one or
more of our six seasons: spring, summer, summer-fall transitional, fall,
holiday, and holiday-spring transitional. End-of-season sales are conducted with
the objective of carrying a minimal amount of seasonal merchandise over from one
season to another. Sales for the four quarters of Fiscal 2004, as a percent of
total sales, were 24.7%, 26.5%, 23.2%, and 25.6%, respectively.

     During the second half of Fiscal 2003 and the first half of Fiscal 2004,
LANE BRYANT experienced poor customer acceptance of, and fit and quality issues
with, certain of its products, which resulted in higher levels of promotional
pricing. In addition, certain basic products were under-stocked during the
second half of Fiscal 2003, resulting in missed sales opportunities. As a result
of these issues, we initiated a plan to re-establish growth at LANE BRYANT. Due
to product lead times, these issues negatively affected LANE BRYANT results into
the first half of Fiscal 2004. Although LANE BRYANT continued to experience
negative comparable store sales during Fiscal 2004, the brand experienced
quarter-to-quarter improvement in comparable store sales. LANE BRYANT


                                       4
<PAGE>

comparable store sales increased 1% in the fourth quarter of Fiscal 2004, as
compared to comparable store sales decreases in the first three quarters of
Fiscal 2004.

Marketing and Promotions

     We use several types of advertising to stimulate customer traffic. We use
targeted direct mail advertising to preferred customers selected from a database
of approximately 29 million proprietary credit card, third-party credit card,
and cash customers. We may also use radio, television, and newspaper advertising
and fashion shows to stimulate traffic at certain strategic times of the year.
We also use pricing policies, displays, store promotions, and convenient store
hours to attract customers. We believe that, with the planning and guidance of
our specialized home office personnel, each brand provides such displays and
advertising as may be necessary to feature certain merchandise or certain
promotional selling prices from time to time.

     We maintain websites for our LANE BRYANT, FASHION BUG, and CATHERINES
brands that provide information regarding current fashions and promotions. Our
LANE BRYANT website enjoys more than 900,000 unique visitors per month and an
established on-line community. In March 2002, we began e-commerce operations on
our CATHERINES website, and in March 2003, we began e-commerce operations on our
LANE BRYANT website. We plan to introduce e-commerce operations on our FASHION
BUG website during Fiscal 2005.

     During Fiscal 2004, we launched FIGURE(TM) magazine, a periodic fashion and
lifestyle magazine for women. The magazine features clothing and fashions from
our LANE BRYANT, FASHION BUG, and CATHERINES brands, and also covers beauty,
health and fitness, home, food and entertaining, relationships, social, and
community issues. The magazine is available by subscription, and is also sold in
all of our stores and at selected newsstands and supermarkets, including certain
national booksellers. Since its inception in August 2003, the magazine has grown
to a circulation of more than 400,000 copies.

     We offer our customers various loyalty card programs. Customers that join
these programs are entitled to various benefits, including discounts and rebates
on purchases during the membership period. Customers generally join these
programs by paying an annual membership fee. Additional information on our
loyalty card programs is included in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations; Critical Accounting
Policies; Revenue Recognition" below.

Proprietary Credit Card Programs

     We seek to encourage sales through the promotion of our proprietary credit
cards. We believe that our credit cards act as promotional vehicles by
engendering customer loyalty, creating a substantial base for targeted direct
mail promotion, and encouraging incremental sales.

     Our FASHION BUG credit card program accounted for approximately 27% of
FASHION BUG retail sales in Fiscal 2004, and has approximately two million
active accounts. We control credit policies and service the FASHION BUG
proprietary credit card file, and, through various agreements, we securitize and
sell the credit card receivables generated by this program.

     Our LANE BRYANT and CATHERINES brands also offer customers the convenience
of proprietary credit card programs. The LANE BRYANT credit card program
accounted for approximately 29% of LANE BRYANT retail sales during Fiscal 2004,
and has approximately one million active accounts. The CATHERINES credit card
program accounted for approximately 30% of CATHERINES retail sales during Fiscal
2004, and has approximately 500,000 active accounts. We use third-party banks to
finance and service the LANE BRYANT and CATHERINES credit card programs. These
third-party banks provide new account approval, credit authorization, billing,
and


                                       5
<PAGE>

account collection services. Under non-recourse agreements with the third-party
banks, we are reimbursed with respect to sales generated by the credit cards.

     A more comprehensive description of our asset securitization process and
our commitments under the third-party bank agreements is included in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations; Financial Condition; Off-Balance-Sheet Arrangements" and "Item 8.
Financial Statements and Supplementary Data: Notes to Consolidated Financial
Statements; Note 16. Asset Securitization" below.

Sourcing

     To meet the demands of our customers, we access both the domestic wholesale
and overseas apparel markets for our merchandise purchases. This allows us to
maintain flexible lead times, respond quickly to current fashion trends, and
quickly replenish merchandise inventory as necessary. During Fiscal 2004, we
purchased merchandise from approximately 1,000 suppliers and factories located
throughout the world. We use our overseas sourcing operations, which generally
require longer lead times, primarily to purchase fashion-basic merchandise. In
Fiscal 2004, overseas sourcing accounted for approximately 19% of consolidated
merchandise purchases. Overseas sourcing as a percent of merchandise purchases
by brand, was approximately 26% for FASHION BUG, 13% for LANE BRYANT, and 12%
for CATHERINES. During Fiscal 2004, we purchased a portion of LANE BRYANT
merchandise from Mast Industries, Inc. ("Mast"). Mast, a contract manufacturer
and apparel importer, is a wholly-owned subsidiary of Limited Brands, Inc.
("Limited Brands"). These purchases from Mast accounted for approximately 17% of
our total merchandise purchases and approximately 40% of merchandise purchases
for LANE BRYANT during Fiscal 2004. No other vendor accounted for more than 4%
of total merchandise purchases during Fiscal 2004.

     We pay for merchandise purchases outside the United States using letters of
credit with third-party vendors where we are the importer of record. To date, we
have not experienced difficulties in purchasing merchandise overseas or
importing such merchandise into the United States. Should political instability
result in a disruption of normal activities in any single country with which we
do business, we believe that we would have adequate alternative sources of
supply.


Distribution and Logistics

     We currently operate two distribution centers. For our FASHION BUG stores,
we operate a distribution center in Greencastle, Indiana. Located on a 150-acre
tract of land, this facility contains a building of approximately 1,000,000
square feet. We estimate that this facility has the capacity to service up to
approximately 1,800 stores. For our LANE BRYANT stores and CATHERINES stores, we
operate a distribution center in White Marsh, Maryland. Located on 29 acres of
land, the White Marsh facility contains a building of approximately 393,000
square feet, which is currently designed to service up to approximately 1,400
stores.

     We acquired the 393,000 square foot White Marsh distribution center during
Fiscal 2003 at a cost of $17.3 million to replace LANE BRYANT's leased
distribution center in Columbus, Ohio. We completed the relocation of the
Columbus distribution center to our White Marsh distribution center in February
2004. The lease for the Columbus, Ohio distribution center and a related
logistics and transportation services agreement were terminated effective as of
February 29, 2004 in accordance with early cancellation provisions of the lease
and agreement. As a result of the use of automated sorting systems and improved
facility design in the White Marsh facility, we were also able to consolidate
our 213,000 square foot Memphis, Tennessee distribution center into the White
Marsh facility during Fiscal 2004. We relocated the Memphis distribution center
in June 2003. We are currently evaluating alternative uses for the Memphis
facility. The consolidation of the Memphis distribution center into the


                                       6
<PAGE>

White Marsh facility was part of a cost reduction plan announced in March 2003.
See "General" above, and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations; Results of Operations; Comparison
of Fiscal 2004 to Fiscal 2003; Expenses Related to Cost Reduction Plan" and
"Item 8. Financial Statements and Supplementary Data; Notes to Consolidated
Financial Statements; Note 14. Expenses Related to Cost Reduction Plan" below
for details of the cost reduction plan.

     Substantially all of our merchandise purchases are received at our
distribution facilities, where they are prepared for distribution to our stores.
Automated sorting systems in the distribution centers enhance the flow of
merchandise from receipt to quality control inspection, receiving, ticketing,
packing, and final shipment. Merchandise is shipped to each store principally by
common carriers. We use computerized automated distribution profiles to combine
shipments when possible and improve the efficiency of the distribution
operations.

Competition

     The retail sale of women's apparel is a highly competitive business with
numerous competitors, including department stores, specialty apparel stores,
discount stores, and mail-order and e-commerce companies. We cannot reasonably
estimate the number of our competitors due to the large number of companies
selling women's apparel. The primary elements of competition are merchandise
style, size, selection, fit, quality, display, and price, as well as store
location, design, advertising, and promotion and personalized service to the
customers.

MONSOON and ACCESSORIZE Joint Venture

     In October 2000, we announced the signing of a joint venture agreement with
MONSOON plc., in order to bring the United Kingdom's apparel and accessories
concepts of MONSOON(R) and ACCESSORIZE(R) stores to the United States. We tested
the concept in the United States during 2001 and 2002. The performance of the
stores opened during the test period did not meet our expectations.
Higher-than-anticipated lease costs led to our decision, announced on March 18,
2003 as part of our cost reduction plan, to discontinue the operation of these
stores. We closed our nine MONSOON/ACCESSORIZE stores during Fiscal 2004. See
"General" above, and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations; Results of Operations; Comparison of Fiscal
2004 to Fiscal 2003; Expenses Related to Cost Reduction Plan" and "Item 8.
Financial Statements and Supplementary Data; Notes to Consolidated Financial
Statements; Note 14. Expenses Related to Cost Reduction Plan" below for details
of the cost reduction plan.

Employees

     As of the end of Fiscal 2004, we employed approximately 25,000 associates,
which included approximately 16,000 part-time employees. In addition, we hire a
number of temporary employees during the Christmas season. Approximately 25 of
our employees are represented by unions. We believe that overall our
relationship with these unions, and our employees in general, is satisfactory.

Trademarks and Servicemarks

     We own, or are in the process of obtaining, all rights to the trademarks
and trade names we believe are necessary to conduct our business as presently
operated. "FASHION BUG(R)", "FASHION BUG PLUS(R)", "BUNDLE OF JOY(TM)", "FIGURE
(TM)", "L.A. BLUES(R)", "CATHERINES(R)", "CATHERINES PLUS SIZES(R)", "C.S.T.
STUDIO(R)", "C.S.T. SPORT(R)", "MAGGIE BARNES(R)", "ANNA MAXWELL(R)", "LIZ &
ME(R)", "SERENADA(R)", "CAPISTRANO(R)", "LANE BRYANT(R)", "VENEZIA(R)", "VENEZIA
JEANS CLOTHING CO.(R)", "CACIQUE(R)", "ELEMENTAL STRETCH(R)", and several other
trademarks and servicemarks of lesser importance to us have been registered or
are in the process of being registered with the United States Patent and
Trademark Office and in other countries.

                                       7
<PAGE>

     We also own the following domain name registrations: charming.com,
charmingshoppes.com, fashionbug.com, fashionbugplus.com, fashionbugcard.com,
catherines.com, lanebryant.com, figuremagazine.com, and others of lesser
importance.

Executive Offices

     Charming Shoppes, Inc., was incorporated in Pennsylvania in 1969. Our
principal offices are located at 450 Winks Lane, Bensalem, Pennsylvania 19020.
Our telephone number is (215) 245-9100.

Available Information

     We maintain an Internet website at www.charmingshoppes.com. As of March 25,
2003, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended, are available free of charge on or through this website as soon as
reasonably practicable after we electronically file such material with, or
furnish it to, the Securities and Exchange Commission ("SEC"). Our historical
filings can also be accessed directly from the SEC's website at www.sec.gov. See
"PART III; Item 10. Directors and Executive Officers of the Registrant" below
for additional information that is available on our Internet website.


Item 2.  Properties

     We lease all our stores, with the exception of four stores that we own.
Typically, store leases have initial terms of 5 to 20 years and generally
contain provisions for co-tenancies, renewal options, additional rentals based
on a percentage of sales, and payment of real estate taxes and common area
charges.

     With respect to leased stores open as of January 31, 2004, the following
table shows the number of store leases expiring during the calendar periods
indicated, assuming the exercise of our renewal options:


<TABLE>
<CAPTION>
                                              Number of
                    Period                 Leases Expiring
                    ------                 ---------------
<S>              <C>                             <C>
                 2004                             68(1)
                 2005 - 2009                     794
                 2010 - 2014                     386
                 2015 - 2019                     323
                 2020 - 2024                     459
                 2025 - 2029                     154
                 Thereafter                       39

---------------
<FN>

(1) Includes 32 stores on month-to-month leases
</FN>
</TABLE>

     We own a 1,000,000 square foot distribution center in Greencastle, Indiana
that services our FASHION BUG and FASHION BUG PLUS stores and a 393,000 square
foot distribution center in White Marsh, Maryland that services our LANE BRYANT
and CATHERINES stores. We acquired the White Marsh distribution center during
Fiscal 2003 to replace our leased distribution center in Columbus, Ohio. We
relocated the Columbus distribution center in February 2004. The lease for the
Columbus, Ohio distribution center and a related logistics and transportation
services agreement were terminated effective as of February 29, 2004 in
accordance with early


                                       8
<PAGE>

cancellation provisions of the lease and agreement. As a result of the use of
automated sorting systems and improved facility design in the White Marsh
facility, we were also able to consolidate our 213,000 square foot Memphis,
Tennessee distribution center into the White Marsh facility. We relocated the
Memphis distribution center in June 2003. We are currently evaluating
alternative uses for the Memphis facility.

     We lease 105,000 square feet of office space in Bensalem, Pennsylvania that
houses our corporate headquarters and certain FASHION BUG operations. We also
own approximately 22 acres in Bensalem with a 145,000 square foot office
building that houses our primary data processing facility and additional
administrative offices. We own a 63,000 square foot facility in Memphis,
Tennessee that houses our CATHERINES corporate offices. We also lease 130,000
square feet of office space near Columbus, Ohio that houses our LANE BRYANT
corporate offices. Our credit operations, including Spirit of America National
Bank, our wholly-owned credit card bank subsidiary, occupy 30,000 square feet of
leased office space in Miami Township, Ohio. We also maintain offices in New
York City that occupy 13,000 square feet of leased space, and we own or lease a
total of 43,000 square feet of office and warehouse space in Asia.


Item 3.  Legal Proceedings

     On December 22, 2003, the Superior Court of California, County of Los
Angeles dismissed a suit filed on April 17, 2003 by Donald Brown, Thomas Lamore,
and Sau Yeung against 109 entities, including Lane Bryant, Inc. The named
plaintiffs purported to represent a class of applicants for employment against
the 109 defendants, alleging, among other things, violations of California state
laws regarding the questioning of job applicants about certain illegal
drug-related criminal convictions.

     On March 13, 2003, a former employee of FASHION BUG filed a purported class
action suit in Los Angeles County Superior Court, California, against Charming
Shoppes and FASHION BUG of California, Inc. This case was settled on March 17,
2004, and did not have a material impact on our results of operations for the
year ended January 31, 2004.

     There have been no other material developments in legal proceedings
involving the Company or its subsidiaries since those reported in our Quarterly
Reports on Form 10-Q for the quarters ended May 3, 2003 and November 1, 2003.

     Other than ordinary routine litigation incidental to our business, there
are no other pending material legal proceedings that we or any of our
subsidiaries are a party to, and there are no other proceedings that are
expected to have a material adverse effect on our financial condition or results
of operations.


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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.


                                       9
<PAGE>

Additional Part I Information - Our Executive Officers

     The following list contains certain information relative to our executive
officers. There are no family relationships among any of our executive officers.

     Dorrit J. Bern, 53, has served as Chairman of the Board of Directors since
January 1997. She has also served as President and Chief Executive Officer since
September 1995. Ms. Bern's term as a Director expires in 2005.

     Joseph M. Baron, 56, has served as Executive Vice President and Chief
Operating Officer since March 2002. Before that, he served as President and
Chief Executive Officer of Homelife Corporation from February 1999 to October
2001, and as President of Sears Homelife Furniture from 1996 to February 1999.
Homelife Corporation filed a bankruptcy petition under Chapter 11 of the U. S.
Bankruptcy Code during July 2001.

     Michel Bourlon, 44, has served as Executive Vice President - Sourcing since
March 2004. Before that, he served as Managing Director of Eddie Bauer
International (Hong Kong) Ltd., from September 1997 to February 2004.

     Anthony A. DeSabato, 55, has served as Executive Vice President - Corporate
and Labor Relations, Business Ethics, and Loss Prevention since July 2003.
Before that, he served as Executive Vice President and Corporate Director of
Human Resources since 1990, and he has been employed by us since 1987.

     Eric M. Specter, 46, has served as Executive Vice President - Chief
Financial Officer since January 1997, and he has been employed by us since 1983.
He also served as Treasurer from February 1998 to March 2000.

     Colin D. Stern, 55, has served as Executive Vice President and General
Counsel since 1990, and he has been employed by us since 1989. He has also
served as Secretary since February 1998.

     Gale H. Varma, 53, has served as Executive Vice President - Human Resources
since July 2003. Before that, she served as Division Vice President - Human
Resources and Ethics Officer for the Prudential Institutional Employee Benefits
division of Prudential Financial Services, a division of Prudential Insurance
Company of America, from September 1997 to April 2003.

     Erna Zint, 60, has served as Executive Vice President - Sourcing since
January 1996, and will assume the position of Executive Vice President - Quality
Assurance/Control and Technical Design in June 2004.

     Jonathon Graub, 45, has served as Senior Vice President - Real Estate,
since December 1999, and he has been employed by us since 1981.

     John J. Sullivan, 57, has served as Vice President - Corporate Controller
since October 1998.



                                       10
<PAGE>



                                     PART II


Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

     Our common stock is traded on the over-the-counter market and quoted on the
NASDAQ National Market ("NASDAQ") under the symbol "CHRS," and is listed and
traded on the Chicago Board Options Exchange ("CBOE") under the symbol "QSR."
The following table sets forth the high and low sale prices for our common stock
during the indicated periods, as reported by NASDAQ.

<TABLE>
<CAPTION>
                  Fiscal 2004     Fiscal 2003
                  -----------     -----------
                  High    Low     High    Low

<S>              <C>     <C>     <C>     <C>
1st Quarter....  $4.75   $2.70   $9.14   $5.46
2nd Quarter....   5.72    3.94    8.90    5.74
3rd Quarter....   6.80    4.89    7.42    3.86
4th Quarter....   6.85    5.09    5.47    3.30
</TABLE>

     The approximate number of holders of record of our common stock as of April
1, 2004 was 2,259. This number excludes individual stockholders holding stock
under nominee security position listings.

     We have not paid any dividends since 1995, and we do not expect to declare
or pay any dividends on our common stock in the near future. In addition, our
existing credit facility and one of our agreements with Limited Brands restrict
the payment of dividends on our common stock. (See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations;
Financial Condition; Financing; Long-term Debt and Equity Financing" and "Item
8. Financial Statements and Supplementary Data; Notes to Consolidated Financial
Statements; Note 7. Debt" below).









                                       11
<PAGE>



Item 6.  Selected Financial Data

     The following table presents selected financial data for each of our five
fiscal years ended as of January 29, 2000 through January 31, 2004. The selected
financial data is taken from our audited financial statements and should be read
in conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and
accompanying notes included under "Item 8. Financial Statements and
Supplementary Data."


<TABLE>
<CAPTION>
                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                          FIVE-YEAR COMPARATIVE SUMMARY

                                                                             Year Ended
                                                  ----------------------------------------------------------------
                                                 Jan. 31,       Feb. 1,        Feb. 2,       Feb. 3,      Jan. 29,
(Dollars in thousands, except per share amounts)   2004          2003          2002(1)     2001(1)(2)      2000(1)
                                                   ----          ----          ------      ---------       ------
<S>                                             <C>           <C>           <C>           <C>            <C>
Operating Statement Data:
Net sales...................................... $2,285,680    $2,412,409    $1,993,843    $1,607,079     $1,196,529
                                                ----------    ----------    ----------    ----------     ----------
Cost of goods sold, buying, and occupancy
    expenses...................................  1,642,065     1,721,052     1,455,601     1,134,554        854,774
Selling, general, and administrative expenses..    554,884       603,502       486,204       382,398        281,637
Amortization of goodwill.......................          0             0         4,885         4,885              0
Expenses related to cost reduction plan........     11,534(3)          0             0             0              0
Restructuring charge (credit)..................          0        (4,813)(4)    37,708(4)          0         (3,471)(5)
Non-recurring gain from demutualization of
    insurance company..........................          0             0             0             0         (6,700)(6)
                                                ----------    ----------    ----------    ----------     ----------
Total operating expenses.......................  2,208,483     2,319,741     1,984,398     1,521,837      1,126,240
                                                ----------    ----------    ----------    ----------     ----------
Income from operations.........................     77,197        92,668         9,445        85,242         70,289
Other income, principally interest.............      2,050         2,328         4,730         8,304          9,594(7)
Interest expense...............................    (15,609)      (20,292)      (18,701)       (8,894)        (7,308)
                                                ----------    ----------    ----------    ----------     ----------
Income (loss) before income taxes, minority
    interest, and cumulative effect of
    accounting changes.........................     63,638        74,704        (4,526)       84,652         72,575
Income tax provision (benefit).................     23,141        29,055          (120)       33,014       27,516(7)
                                                ----------    ----------    ----------    ----------     ----------
Income (loss) before minority interest and
    cumulative effect of accounting changes....     40,497        45,649        (4,406)       51,638         45,059
Minority interest in net loss of consolidated
    subsidiary.................................        142           679             0             0              0
Cumulative effect of accounting changes,
    net of tax.................................          0     c (49,098)(8)         0          (540)(9)          0
                                                ----------    ----------    ----------    ----------     ----------
Net income (loss).............................. $   40,639    $   (2,770)   $   (4,406)   $   51,098     $   45,059
                                                ==========    ==========    ==========    ==========     ==========

Basic net income (loss) per share:
    Before cumulative effect of accounting
         changes...............................      $ .36         $ .41         $(.04)        $ .51          $ .46
    Net income (loss)..........................        .36          (.02)         (.04)          .50            .46
Basic weighted average common shares
     outstanding...............................    112,491       113,810       105,842       101,119         98,609

Net income (loss) per share, assuming dilution:
    Before cumulative effect of accounting
         changes...............................      $ .35         $ .39         $(.04)        $ .49          $ .43
    Net income (loss)..........................        .35           .01          (.04)          .48            .43
Diluted weighted average common shares and
    equivalents outstanding....................    128,558       130,937       105,842       115,027        115,888

Balance Sheet Data(10):
Total assets................................... $1,164,879    $1,131,886    $1,137,147      $846,772       $779,612
Current portion - long-term debt...............     17,278        12,595         9,379         4,954          1,920
Long-term debt.................................    202,819       203,045       208,491       113,540        105,213
Working capital................................    271,915       193,517       141,839       208,389        161,376
Stockholders' equity...........................    605,085       561,634       549,802       493,269        436,263
</TABLE>




                                       12
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                          FIVE-YEAR COMPARATIVE SUMMARY
                                   (Continued)


<TABLE>
<CAPTION>
                                                                               Year Ended
                                                    ----------------------------------------------------------------
                                                    Jan. 31,       Feb. 1,       Feb. 2,      Feb. 3,       Jan. 29,
                                                      2004          2003         2002(1)     2001(1)(2)      2000(1)
                                                      ----          ----         ------      ---------       -------

<S>                                                   <C>          <C>            <C>          <C>            <C>
Performance Data:
Including cumulative effect of accounting changes:
     Net return on average stockholders' equity..      7.0%         (0.5)%        (0.8)%        11.0%          11.0%
     Net return on average total assets..........      3.6          (0.2)         (0.4)          6.3            6.2

Before cumulative effect of accounting changes:
     Net return on average stockholders' equity..      6.4%          7.9%         (0.8)%        11.1%          11.0%
     Net return on average total assets..........      3.4           3.9          (0.4)          6.4            6.2
--------------------
<FN>

(1)  Includes the results of operations of Lane Bryant, Inc., acquired August
     16, 2001; Catherines Stores Corporation, acquired January 7, 2000; and
     Modern Woman Holdings, Inc., acquired August 2, 1999 from the dates of
     their respective acquisitions.

(2)  Fiscal 2001 consisted of 53 weeks.

(3)  In March 2003, we announced a cost reduction plan designed to take
     advantage of the centralization of corporate administrative services and to
     realize certain efficiencies, in order to improve profitability. For
     details of the program, see "Item 7. Management's Discussion and Analysis
     of Financial Condition and Results of Operations; Results of Operations;
     Comparison of Fiscal 2004 to Fiscal 2003; Expenses Related to Cost
     Reduction Plan" and "Item 8. Financial Statements and Supplementary Data;
     Notes to Consolidated Financial Statements; Note 14. Expenses Related to
     Cost Reduction Plan" below.

(4)  In January 2002, our Board of Directors approved a restructuring plan that
     included the closing of THE ANSWER/ADDED DIMENSIONS chain of 77 stores; the
     conversion of approximately 20% of the ADDED DIMENSIONS stores to
     CATHERINES stores; the closing of 130 under-performing FASHION BUG stores;
     and the conversion of 44 FASHION BUG stores to LANE BRYANT stores. This
     restructuring plan resulted in a pre-tax charge of $37,708,000 in Fiscal
     2002. We completed the restructuring plan by the end of Fiscal 2003, and
     recognized a pre-tax restructuring credit of $4,813,000, primarily as a
     result of favorable negotiations of lease terminations.

(5)  During Fiscal 2000, we revised our estimates of costs recognized during
     Fiscal 1999 relating to the closing of our Bensalem distribution center and
     the elimination of our men's business. As a result, we recognized pre-tax
     restructuring credits of $2,834,000 relating to the closing of our
     distribution center and $2,096,000 relating to the elimination of our men's
     business. In addition, we recognized a pre-tax restructuring charge of
     $1,459,000 in Fiscal 2000 in connection with the consolidation of the
     MODERN WOMAN chain of stores into the CATHERINES brand.

(6)  During Fiscal 2000, we received a stock distribution from one of our mutual
     insurance carriers in connection with the carrier's conversion to a
     publicly held corporation (demutualization). We recorded the distribution
     at its fair value and recognized the resulting non-recurring gain in income
     from operations.

(7)  During Fiscal 2003, the Financial Accounting Standards Board ("FASB")
     issued Statement of Financial Accounting Standards ("SFAS") No. 145,
     "Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB
     Statement No. 13, and Technical Corrections." SFAS No. 145 requires gains
     and losses on extinguishments of debt to be classified as income from
     continuing operations rather than as extraordinary items as previously
     required under SFAS No. 4. In accordance with the early adoption provisions
     of SFAS No. 145, we reclassified an extraordinary gain on early retirement
     of debt of $1,232,000, net of income taxes of $664,000, for Fiscal 2000 to
     income from continuing operations.





                                       13
<PAGE>



                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                          FIVE-YEAR COMPARATIVE SUMMARY
                                   (Continued)


(8)  In Fiscal 2003, we fully adopted the provisions of SFAS No. 142, "Goodwill
     and Other Intangible Assets." In accordance with the transition provisions
     of SFAS No. 142, we tested goodwill related to our CATHERINES acquisition
     for impairment, and recorded a write-down of $43,975,000 to reduce the
     carrying value of the goodwill to its estimated fair value. In addition, we
     recognized a charge of $5,123,000, net of income taxes of $2,758,000, in
     connection with the adoption of FASB Emerging Issues Task Force ("EITF")
     Issue 02-16, "Accounting by a Customer (Including a Reseller) for Certain
     Consideration Received from a Vendor." This charge represents a reduction
     in inventory cost for the cumulative effect of cash received from vendors
     as of the beginning of Fiscal 2003. Pro forma net income (loss) and per
     share information as if we had applied the provisions of EITF Issue 02-16
     for all years presented is as follows:
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                                                   Year Ended
                                                          -----------------------------
                                                          Feb. 2,     Feb. 3,   Jan. 29,
     (In thousands, except per share amounts)              2002        2001       2000
                                                           ----        ----       ----
<S>                                                      <C>         <C>        <C>
     Pro forma net income (loss)........................ $(5,189)    $51,309    $44,600
     Basic net income (loss) per share..................    (.05)        .51        .45
     Net income (loss) per share, assuming dilution.....    (.05)        .48        .43
</TABLE>

(9)  We changed our method of accounting for sales returns and layaway sales in
     accordance with the provisions of Securities and Exchange Commission Staff
     Accounting Bulletin No. 101 ("SAB 101") effective as of January 30, 2000.
     The cumulative effect of the change as of January 30, 2000 was a reduction
     in income of $540,000, net of a tax benefit of $334,000.

(10) Certain prior-year amounts reflect reclassifications to conform to the
     current-year presentation.


Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

     This Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") should be read in conjunction with the financial
statements and accompanying notes appearing elsewhere in this report. As used in
this report, the terms "Fiscal 2004," "Fiscal 2003," and "Fiscal 2002" refer to
our fiscal years ended January 31, 2004, February 1, 2003, and February 2, 2002,
respectively. The term "Fiscal 2005" refers to our fiscal year which will end on
January 29, 2005.


FORWARD-LOOKING STATEMENTS

     With the exception of historical information, the matters contained in the
following analysis and elsewhere in this report are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements may include, but are not limited to, projections of revenues, income
or loss, cost reductions, capital expenditures, liquidity, financing needs or
plans, and plans for future operations, as well as assumptions relating to the
foregoing. The words "expect," "project," "estimate," "predict," "anticipate,"
"plan," "believes," and similar expressions are also intended to identify
forward-looking statements. Forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results, performance, and achievements could differ materially
from those set forth in, contemplated by, or underlying the forward-looking
statements. We assume no obligation to update any forward-looking statement to
reflect actual results or changes in, or additions to, the factors affecting
such forward-looking statements.




                                       14
<PAGE>


     Factors that could cause our actual results of operations or financial
condition to differ from those described in this report include, but are not
necessarily limited to, the following:

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

o    A slowdown in the United States economy and an uncertain economic outlook
     could lead to reduced consumer demand for our apparel and accessories in
     the future.

o    The women's specialty retail apparel industry is highly competitive and we
     may be unable to compete successfully against existing or future
     competitors.

o    We cannot assure the successful implementation of our business plan for
     increased profitability and growth in our plus-size women's apparel
     business.

o    Our business plan is largely dependent upon the continued growth in the
     plus-size women's apparel market, which may not continue.

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

o    We depend on our distribution centers and could incur significantly higher
     costs and longer lead times associated with distributing our products to
     our stores if any of these distribution centers were to shut down for any
     reason.

o    We depend for our working capital needs on the availability of credit,
     including credit we receive from our suppliers and their agents, and on our
     credit card securitization program. If we were unable to obtain sufficient
     financing at affordable cost, our ability to merchandise our stores would
     be adversely affected.

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

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

o    War, acts of terrorism, or the threat of either may negatively impact
     availability of merchandise and customer traffic to our stores, or
     otherwise adversely affect our business.

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

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



                                       15
<PAGE>

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

o    We may be unable to successfully implement our cost reduction plan
     described elsewhere in this report.

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

o    Our sales are dependent upon a high volume of traffic in the strip centers
     and malls in which our stores are located, and our future growth is
     dependent upon the availability of suitable locations for new stores.

o    We may be unable to successfully implement our plan to re-establish growth
     and improve merchandise assortments in our LANE BRYANT brand.

o    The carrying amount and/or useful life of intangible assets related to
     acquisitions are subject to periodic valuation tests. An adverse change in
     interest rates or other factors could have a significant impact on the
     results of the valuation tests, resulting in a write-down of the carrying
     value or acceleration of amortization of acquired intangible assets.


OVERVIEW

     We are a specialty apparel retailer primarily focused on serving the
plus-size woman through three distinct brands: LANE BRYANT, FASHION BUG, and
CATHERINES PLUS SIZES. We currently represent 40% of the women's plus-size
specialty retail apparel market, and are the third largest specialty apparel
retailer in the United States based on store count. Through our varied plus-size
fashion concepts, we cater to customers from a broad range of socioeconomic,
demographic, and cultural profiles. As of January 31, 2004, we operated 2,227
stores in 48 states.

     The apparel industry is highly competitive and is continuously faced with
new and existing competitors seeking areas of growth to expand their business.
Our strategy of focusing on the growing plus-size market through our three
brands has allowed us to gain increased market share in the women's plus-size
apparel market. Americans continue to gain weight in all age groups, with an
estimated 65% of American adults being overweight and half of American women
wearing size 14 or larger. Through our three brands, we offer plus-size women's
apparel to all age groups, with varied fashion tastes and income levels, in
multiple shopping venues. By focusing on the plus-size market, we believe that
we are well-positioned to meet the demands of this growing segment. Our plans
are to increase our store base at our LANE BRYANT and CATHERINES brands through
expansion into under-penetrated markets, focusing primarily on strip and
lifestyle center formats. An important challenge for us will be to maintain and
increase our market share through growth in our store base as well as to extend
into other direct-to-consumer channels to reach our customers. We are further
challenged by competitors that enter into the plus-size market and offer similar
apparel at lower prices. We believe that our fit initiative will differentiate
us from our competitors. The goal of this initiative is to be the fit
specialists for plus-size women by offering products with improved fit.

     Our sales performance over the last three years has been negatively
affected by the general slowdown in the U. S. economy, reduced levels of
consumer confidence, and the unstable geopolitical climate. In addition, sales
performance at our LANE BRYANT brand during the second half of Fiscal 2003 and
the first half of Fiscal 2004 was negatively affected by a combination of poor
customer acceptance of, and fit and quality issues with, certain of its
products, and under-stocking of certain basic products. As a result, we had to
maintain higher levels of promotional pricing during those periods. We
implemented a plan in Fiscal 2003 to improve merchandise


                                       16
<PAGE>

assortments at LANE BRYANT, which began to show a positive impact in Fiscal
2004, with a 1.0% increase in comparable store sales in the fourth quarter,
following six quarters of negative comparable store sales performance. In
addition, we experienced increased unit sales and improved sales performance at
Lane Bryant during the latter half of Fiscal 2004. Our challenge will be to
continue improvements at LANE BRYANT in Fiscal 2005.

     We also expect the deflationary pricing environment to continue to impact
the apparel industry. In addition, the anticipated elimination of quota on
imports in 2005 may create further downward pressure on retail prices.

     In addition to our continued focus on controlling expenses, two other areas
of focus for us in Fiscal 2005 are maintaining control over inventories while
improving gross margins at our three brands.

     We estimate that our cost reduction initiative, which began in 2003, will
save us a total of approximately $45 million of expenses on an annualized basis.
The success of this initiative enabled us to reduce operating expenses by over
$30 million in Fiscal 2004. The expense savings from our cost reduction
initiative coupled with other cost control related savings enabled us to offset
declines in sales that we experienced in Fiscal 2004. We expect to achieve the
remaining $15 million of cost savings in Fiscal 2005. Of the remaining $15
million, approximately $8 million of the savings are anticipated from
efficiencies we expect to gain from the consolidation of our CATHERINES and LANE
BRYANT distribution centers into our new White Marsh distribution center, which
we completed in February 2004.

     We offer e-commerce at our CATHERINES and LANE BRYANT websites and plan to
offer e-commerce at our FASHION BUG website during Fiscal 2005. Our Fiscal 2005
plan is to double our Fiscal 2004 e-commerce sales volume through continuing to
broaden category offerings at our websites. Our e-commerce sales in Fiscal 2004
and our planned e-commerce sales in Fiscal 2005 are less than one percent of our
consolidated net sales. Our websites currently offer basic merchandise, and we
see opportunities to offer and provide expanded product offerings on our
websites, such as intimate apparel and hard-to-find sizes. This provides us
opportunities to offer more merchandise categories than we are able to provide
in our stores.


CRITICAL ACCOUNTING POLICIES

     We have prepared the financial statements and accompanying notes included
elsewhere in this report in conformity with accounting principles generally
accepted in the United States. This requires us to make estimates and
assumptions that affect the amounts reported in our financial statements and
accompanying notes. These estimates and assumptions are based on historical
experience, analysis of current trends, and various other factors that we
believe to be reasonable under the circumstances. Actual results could differ
from those estimates under different assumptions or conditions.

     We periodically reevaluate our accounting policies, assumptions, and
estimates and make adjustments when facts and circumstances warrant.
Historically, actual results have not differed materially from those determined
using required estimates. Our significant accounting policies are described in
the notes accompanying the financial statements included elsewhere in this
report. However, we consider the following accounting policies and related
assumptions to be more critical to, and involve the most significant management
judgments and estimates in, the preparation of our financial statements and
accompanying notes.

Revenue Recognition

     Our revenues from merchandise sales are net of returns and allowances and
exclude sales tax. Revenues from our e-commerce business include shipping and
handling fees billed to customers. We record a reserve for estimated future
sales returns based on an analysis of actual returns and we defer recognition of
layaway sales to


                                       17
<PAGE>

the date of delivery. A change in our actual rates of sales returns and layaway
sales experience would affect the level of revenue recognized.

     We offer our customers various loyalty card programs. Customers that join
these programs are entitled to various benefits, including discounts and rebates
on purchases during the membership period. Customers generally join these
programs by paying an annual membership fee. We recognize revenue from these
loyalty programs as sales over the life of the membership period based on when
the customer earns the benefits and when the fee is no longer refundable. Costs
we incur in connection with administering these programs are recognized in cost
of goods sold as incurred.

     During Fiscal 2004, we introduced a new FASHION BUG customer loyalty card
program that we operate under our FASHION BUG proprietary credit card program.
This program provides customers with the option to cancel their membership
within 90 days, entitling them to a full refund of their annual fee.
Additionally, after 90 days, customers that cancel their membership are entitled
to a pro rata fee refund based on the number of months remaining on the annual
membership. Accordingly, we recognize 25% of the annual membership fee as
revenue after 90 days, with the remaining fee recognized on a pro rata basis
over nine months.

     Under a previous FASHION BUG customer loyalty card program, we recognized
revenues from annual membership fees as sales over the life of the membership
based on discounts earned by the customer. For customers who did not earn
discounts during the membership period that exceeded the card fee, the
difference between the membership fee and discounts earned was recognized as
revenue upon the expiration of the annual membership period. Upon early
cancellation of the loyalty card, refunds of membership fees were reduced by the
amount of any discounts granted to the member under the program. We discontinued
the issuance of new cards under this program in December 2002, and we terminated
the program during the second quarter of Fiscal 2004.

Inventories

     We value our merchandise inventories at the lower of cost or market under
the retail inventory method (average cost basis), which is an averaging method
that is widely used in the retail industry. Under the retail inventory method
("RIM"), the valuation of inventories at cost, and the resulting gross margins,
are adjusted in proportion to markdowns and shrinkage on our retail inventories.
The use of the RIM will result in valuing inventories at the lower of cost or
market if markdowns are currently taken as a reduction of the retail value of
inventories. The RIM calculation involves certain significant management
judgments and estimates including, among others, merchandise markon, markup,
markdowns, and shrinkage, which significantly affect the ending inventory
valuation at cost, as well as the resulting gross margins. Events such as store
closings, liquidations, and a weak general economic environment for retail
apparel sales could result in an increase in the level of markdowns. Such an
increase in the level of markdowns could result in lower inventory values and
increases to cost of goods sold as a percentage of net sales in future periods
under the RIM. Also, failure to properly estimate markdowns currently can result
in an overstatement of inventory cost under the lower of cost or market
principle. At the end of Fiscal 2004 and Fiscal 2003, in addition to markdowns
that had been recorded in inventory, an additional $10.1 million and $9.6
million, respectively, of markdowns representing markdowns not yet taken on aged
inventory was recorded in order to properly reflect inventory at the lower of
cost or market.

     In connection with our restructuring plan announced on January 28, 2002
(see "RESULTS OF OPERATIONS; Comparison of Fiscal 2003 to Fiscal 2002;
Restructuring Charge/Credit" below), we recognized additional markdowns of $3.0
million in the fourth quarter of Fiscal 2002. The markdowns were related to the
valuation of inventory for THE ANSWER/ADDED DIMENSIONS stores that we closed
during the first half of Fiscal 2003.

                                       18
<PAGE>

     We elected to adopt the provisions of Financial Accounting Standards Board
("FASB") Emerging Issues Task Force ("EITF") Issue No. 02-16 (see "Accounting
for Cash Consideration Received From a Vendor" below) as of the beginning of
Fiscal 2003. As of January 31, 2004 and February 1, 2003, $9.5 million and $8.1
million, respectively, of cash received from vendors was deferred into inventory
to be recognized as inventory is sold.

Impairment of Long-Lived Assets

     Prior to Fiscal 2003, we evaluated the recoverability of our long-lived
assets in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." In August 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144
is effective for fiscal years beginning after December 15, 2001. SFAS No. 144
supersedes SFAS No. 121 and the accounting and reporting provisions of
Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
related to the disposal of a segment of a business. SFAS No. 144 also resolved
certain implementation issues related to SFAS No. 121. SFAS No. 144 retains the
fundamental provisions of SFAS No. 121 related to the recognition and
measurement of the impairment of long-lived assets to be held and used, and
provides additional guidance on estimating cash flows when testing for
recoverability. SFAS No. 141 also requires that long-lived assets to be disposed
of other than by sale (such as by abandonment) be classified as held and used
until disposal, and establishes more restrictive criteria for classifying assets
as held for sale.

     Under SFAS No. 144, we are required to assess our long-lived assets for
recoverability whenever events or changes in circumstances indicate that the
carrying amounts of long-lived assets may not be recoverable. We consider
historical performance and future estimated results in our evaluation of
potential impairment and then compare the carrying amount of the asset to the
estimated future undiscounted cash flows expected to result from the use of the
asset. If the estimated future undiscounted cash flows are less than the
carrying amount of the asset, we write down the asset to its estimated fair
value and recognize an impairment loss. Our estimate of fair value is generally
based on either appraised value or the present value of future cash flows, based
on a number of assumptions and estimates.

     In accordance with the provisions of SFAS No. 144, we recorded a $2.7
million write-down of under-performing assets related to our consolidated
MONSOON joint venture during Fiscal 2003. The write-down is included in
occupancy expenses in our consolidated statement of operations. The amount of
the write-down was the same as what we would have recorded under SFAS No. 121.
The adoption of SFAS No. 144 did not have a material impact on our financial
position or results of operations in Fiscal 2003. In connection with our
restructuring plan announced on January 28, 2002 (see "RESULTS OF OPERATIONS;
Comparison of Fiscal 2003 to Fiscal 2002; Restructuring Charge/Credit" below),
we recognized a write-down of store fixed assets of approximately $17.8 million
during Fiscal 2002 in accordance with the provisions of SFAS No. 121. We believe
that the estimates and assumptions used in determining these impairment charges
were reasonable and appropriate.

     We fully adopted SFAS No. 142, "Goodwill and Other Intangible Assets" as of
the beginning of Fiscal 2003. In accordance with the transition provisions of
SFAS No. 142, we performed a review of our goodwill and other intangible assets
for possible impairment. As a result, we determined that the carrying value of
goodwill related to our CATHERINES acquisition (which included the value of
intangible assets we did not separately account for at the date of the
CATHERINES acquisition) exceeded the estimated fair value of the goodwill under
SFAS No. 142. We determined the estimated fair value of the CATHERINES goodwill
using the present value of expected future cash flows associated with the
CATHERINES assets. We recorded a write-down, which was not deductible for income
tax purposes, of $44.0 million to reduce the carrying value of the goodwill to
its estimated fair value. The majority of the write-down was attributable to the
value of unrecorded trademarks. We also evaluated our goodwill, trademarks,
tradenames, and internet domain names related to our LANE BRYANT acquisition


                                       19
<PAGE>

as of February 3, 2002 in accordance with the provisions of SFAS No. 142, and
determined that there was no impairment of those assets. We have included the
write-down of the CATHERINES goodwill as the cumulative effect of an accounting
change as of February 3, 2002 in our Consolidated Statement of Operations and
Comprehensive Income (Loss) for Fiscal 2003. Our calculation of the estimated
fair value of the goodwill and other intangible assets required estimates,
assumptions, and judgments, and results might have been materially different if
different estimates, assumptions, and judgments had been used. We believe that
the estimates and assumptions we used were reasonable and appropriate.

     In accordance with the provisions of SFAS No. 142, we re-evaluate goodwill
and other intangible assets for impairment at least annually or more frequently
if there is an indication of possible impairment. We performed this annual
review during the fourth quarters of Fiscal 2003 and Fiscal 2004, and determined
that there has been no additional impairment of these assets.

Acquisitions - Purchase Price Allocation

     We account for acquisitions in accordance with the provisions of SFAS No.
141, "Business Combinations." We assign to all identifiable assets acquired
(including intangible assets), and to all identifiable liabilities assumed, a
portion of the cost of the acquired company equal to the estimated fair value of
such assets and liabilities at the date of acquisition. We record the excess of
the cost of the acquired company over the sum of the amounts assigned to
identifiable assets acquired less liabilities assumed, if any, as goodwill. We
make the initial purchase price allocation based on the evaluation of
information and estimates available at the date of the financial statements. As
final information regarding the fair value of assets acquired and liabilities
assumed is evaluated and estimates are refined, we make appropriate adjustments
to the amounts allocated to those assets and liabilities and make corresponding
changes to the amount allocated to goodwill. We use all available information to
make these fair value determinations and, for major business acquisitions,
typically engage an outside appraisal firm to assist in the fair value
determination of the acquired long-lived assets. We have, if necessary, up to
one year after the closing date of an acquisition to finish these fair value
determinations and finalize the purchase price allocation.

Asset Securitization

     Asset securitization is a practice commonly used in the retail industry
that allows companies with proprietary credit card programs to finance credit
card receivables at attractive rates. Asset securitization primarily involves
the sale of proprietary credit card receivables to a special purpose entity,
which in turn transfers the receivables to a trust (the "Trust") that is a
qualified special purpose entity ("QSPE") and is administered by an independent
trustee. We use asset securitization to fund the credit card receivables
generated by our FASHION BUG credit card program. The FASHION BUG credit cards
are issued by Spirit of America National Bank, one of our subsidiaries. Because
the Trust qualifies as a QSPE, its assets and liabilities are not consolidated
in our balance sheet.

     Investors purchase various forms of certificates or credit card receivable
interests (the "Certificates") issued by the Trust that represent undivided
interests in the Trust's underlying assets. The Trust pays to the Certificate
holders a portion of future scheduled cash flows from the credit card
receivables under preset terms and conditions. Payments to Certificate holders
are dependent upon actual cash flows generated by the underlying Trust assets.

     We retain certain subordinated interests in each securitization transaction
that effectively serve as a form of credit enhancement to the Certificates sold
to outside investors. To the extent that cash flows to the Trust from the credit
card receivables remain available after repayment of the outside investors'
interests, such amounts are paid to us. Neither the investors nor the Trust have
recourse against us beyond the combination of Trust assets and our subordinated
interests, other than for breaches of certain customary representations,
warranties, and covenants.


                                       20
<PAGE>

These representations, warranties, covenants, and related indemnities do not
protect the Trust or the outside investors against credit-related losses on the
receivables.

     In accordance with SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," we record an interest in
the estimated present value of cash flows we expect to receive over the period
the receivables are outstanding. These cash flows essentially represent finance
charges and late fees in excess of amounts paid to Certificate holders, credit
losses, and service fees, and are referred to as the interest-only strip ("I/O
strip"). In addition to the I/O strip, we recognize a servicing liability, since
the servicing fees we expect to receive from the securitizations do not provide
adequate compensation for servicing the receivables. The servicing liability
represents the present value of the excess of the costs of servicing over the
servicing fees we expect to receive, and is recorded at estimated fair value.
Since quoted market prices are generally not available, we determine the fair
value of the costs of servicing by calculating all costs associated with
billing, collecting, maintaining, and providing customer service during the
expected life of the securitized credit card receivable balances. We discount
the costs in excess of the servicing fees we expect to collect over the
estimated life of the receivables sold. The discount rate and estimated life
assumptions used in valuing the servicing liability are equivalent to those used
in valuing the I/O strip. We amortize the I/O strip and the servicing liability
on a straight-line basis over the expected life of the credit card receivables.

     We use certain key valuation assumptions related to the average life of the
receivables sold, the finance charges net of interest to be earned by
certificate holders, and anticipated credit losses, as well as the appropriate
market discount rate in determining the estimated value of the I/O strip and the
servicing liability. We estimate the values for these assumptions using
historical data, the impact of the current economic environment on the
performance of the receivables sold, and the impact of the potential volatility
of the current market for similar instruments in assessing the fair value of the
retained interests. Changes in the average life of the receivables sold,
discount rate, and credit-loss percentage could cause actual results to differ
materially from the estimates, and changes in circumstances could result in
significant future changes to the assumptions currently being used. The
following table presents the decrease in our I/O strip receivable that would
result from hypothetical adverse changes of 10% and 20% in the assumptions used
to determine the fair value of the I/O strip:

<TABLE>
<CAPTION>
(In millions)                             10% Change           20% Change
                                          ----------           ----------

<S>                                          <C>                  <C>
Payment rate............................     $0.7                 $1.3
Residual cash flows discount rate.......      0.1                  0.2
Credit loss percentage..................      1.1                  2.3
</TABLE>


Costs Associated With Exit or Disposal Activities

     We have traditionally recognized certain costs associated with
restructuring plans as of the date of commitment to the plan, in accordance with
EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred
in a Restructuring)." In July 2002, the FASB issued SFAS No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities," which nullified EITF
Issue No. 94-3. Under SFAS No. 146, we are required to recognize liabilities for
costs associated with an exit or disposal activity initiated after December 31,
2002 when the liabilities are incurred. Commitment to a plan, by itself, does
not create an obligation that meets the definition of a liability. Under SFAS
No. 146, we are required to recognize severance pay over time rather than "up
front" if the benefit arrangement requires employees to render future service
beyond a "minimum retention period." The liability for severance pay is
recognized as employees render service over the future service period, even if
the benefit formula used to calculate an employee's termination benefit is based
on length of service. Fair value should be used for initial measurement of
liabilities under SFAS No. 146. Adoption of SFAS No. 146 results in the deferral
of recognition of certain costs for restructuring plans


                                       21
<PAGE>

initiated subsequent to December 31, 2002, from the date of commitment to such a
plan to the date that costs are incurred under the plan.

     On March 18, 2003, we announced the implementation of a cost reduction plan
(see RESULTS OF OPERATIONS; Comparison of Fiscal 2004 to Fiscal 2003; Expenses
Related to Cost Reduction Plan" below). Costs incurred in connection with the
implementation of this plan are being accounted for in accordance with the
provisions of SFAS No. 146.

Accounting for Cash Consideration Received From a Vendor

     EITF Issue 02-16, "Accounting by a Customer (Including a Reseller) for Cash
Consideration Received from a Vendor," addresses the accounting for cash
consideration received from a vendor, including both a reseller of the vendor's
products and an entity that purchases the vendor's products from a reseller. We
adopted the provisions of EITF Issue No. 02-16 as of the beginning of Fiscal
2003. We recognized a charge of $5.1 million, net of income taxes of $2.8
million, for the cumulative effect of the deferral of cash received from vendors
as of the beginning of Fiscal 2003. The impact of the adoption of EITF 02-16 on
the year ended February 1, 2003 was an increase in cost of goods sold of $0.2
million. As of January 31, 2004 and February 1, 2003, $9.5 million and $8.1
million, respectively, of cash received from vendors has been deferred into
inventory and will be recognized as a reduction of cost of goods sold as
inventory is sold.

Stock-Based Compensation

     SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure,"
allows two alternatives for accounting for stock-based compensation: the
"intrinsic value method" in accordance with Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," or the "fair value"
method in accordance with SFAS No. 123. Companies electing to adopt the
intrinsic value method are required to provide pro forma disclosures of the
effect of adopting the fair value method.

     We account for stock-based compensation using the intrinsic value method.
We recognize compensation expense for stock options and stock awards that have
an exercise price less than the market price of our common stock at the date of
grant of the option or award. We measure compensation expense based on the
difference between the market price and the exercise price of an option or award
at the date of grant. This compensation expense is recognized on a straight-line
basis over the vesting period of each option or award. We do not recognize
compensation expense for options having an exercise price equal to the market
price on the date of grant or for shares purchased under our Employee Stock
Purchase Plan.

     Under the fair value method, we would be required to recognize compensation
expense for all stock options and stock awards. Compensation would be measured
based on an estimated fair value of the option or award, using an option pricing
model, such as the Black-Scholes or binomial pricing model. These models require
estimates or assumptions as to the dividend yield and price volatility of the
underlying stock, the expected life of the option or award, and a relevant
risk-free interest rate. For purposes of determining our pro forma disclosures
of the effect of adopting the fair value method, we use the Black-Scholes
option-pricing model and various assumptions that are detailed in "Item 8.
Financial Statements and Supplementary Data; Notes to Consolidated Financial
Statements; NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES; Common Stock
Plans" below. The use of different option-pricing models and different estimates
or assumptions could result in materially different estimates of compensation
expense under the fair value method.




                                       22
<PAGE>

Insurance Liabilities

     We use a combination of third-party insurance and/or self-insurance for
certain risks, including workers' compensation, medical, dental, automobile, and
general liability claims. Our insurance liabilities are a component of "Accrued
expenses" on our consolidated balance sheet, and represent our estimate of the
ultimate cost of uninsured claims incurred as of the balance sheet date. In
estimating our self-insurance liabilities, we use independent actuarial
estimates of expected losses, which are based on statistical analyses of
historical data. Loss estimates are adjusted based upon actual claim settlements
and reported claims. Although we do not expect the amounts ultimately paid to
differ significantly from our estimates, self-insurance liabilities could be
affected if future claim experience differs significantly from the historical
trends and the actuarial assumptions. We evaluate the adequacy of these
liabilities on a regular basis, modifying our assumptions as necessary, updating
our records of historical experience, and adjusting our liabilities as
appropriate.


RESULTS OF OPERATIONS

Financial Summary

     The following table shows our results of operations expressed as a
percentage of net sales and on a comparative basis:

<TABLE>
<CAPTION>
                                                                                     Percentage Increase
                                                                                         (Decrease)
                                                    Percentage of Net Sales            From Prior Year
                                                 Fiscal     Fiscal     Fiscal       Fiscal         Fiscal
                                                  2004       2003       2002       2004-2003      2003-2002
                                                  ----       ----       ----       ---------      ---------
<S>                                              <C>        <C>        <C>          <C>           <C>
Net sales......................................  100.0%     100.0%     100.0%        (5.3)%         21.0%
Cost of goods sold, buying, and occupancy......   71.8       71.3       73.0         (4.6)          18.2
Selling, general, and administrative...........   24.3       25.0       24.4         (8.1)          24.1
Expenses related to cost reduction plan........    0.5        --         --           --             --
Restructuring charge (credit)..................    --        (0.2)       1.9          **             **
Amortization of goodwill.......................    --         --         0.2          --          (100.0)
Income from operations.........................    3.4        3.8        0.5        (16.7)         881.1
Other income, principally interest.............    0.1        0.1        0.2        (11.9)         (50.8)
Interest expense...............................    0.7        0.8        0.9        (23.1)           8.5
Income tax provision (benefit).................    1.0        1.2        --         (20.4)           **
Minority interest in net loss of subsidiary....    0.0        0.0        --         (79.1)           **
Cumulative effect of accounting changes........    --        (2.0)       --           **             **
Net income (loss)..............................    1.8       (0.1)      (0.2)         **           (37.1)
--------------------
<FN>

**   Not meaningful
Results may not add due to rounding
</FN>
</TABLE>


                                       23
<PAGE>

     The following table shows our net sales by store brand:

<TABLE>
<CAPTION>
                                              Year Ended               Year Ended               Year Ended
                                           January 31, 2004         February 1, 2003         February 2, 2002
                                           ----------------         ----------------         ----------------
                                          Fiscal      Fourth       Fiscal      Fourth       Fiscal      Fourth
(In millions)                              Year       Quarter       Year       Quarter       Year       Quarter
                                           ----       -------       ----       -------       ----       -------
<S>                                      <C>           <C>        <C>           <C>        <C>           <C>
FASHION BUG...........................   $1,057.1      $259.2     $1,156.0      $288.9     $1,164.0      $303.4
LANE BRYANT...........................      903.6       251.0        906.9       236.1        445.3(1)    254.1
CATHERINES(2).........................      323.3        75.5        345.2        74.6        381.7        88.0
MONSOON/ACCESSORIZE(3)................        1.7         0.0          4.3         1.5          2.8         1.6
                                         --------      ------     --------      ------     --------      ------
Total net sales.......................   $2,285.7      $585.7     $2,412.4      $601.1     $1,993.8      $647.1
                                         ========      ======     ========      ======     ========      ======
--------------------
<FN>

(1)  Sales from the date of acquisition on August 16, 2001.

(2)  Includes sales of ADDED DIMENSIONS stores, which were closed or converted
     to CATHERINES stores during the first half of Fiscal 2003.

(3)  The MONSOON/ACCESSORIZE stores were closed during the first half of Fiscal
     2004.
</FN>
</TABLE>

     The following table shows additional information related to changes in our
net sales:

<TABLE>
<CAPTION>
                                                                       Year Ended                 Year Ended
                                                                    January 31, 2004           February 1, 2003
                                                                    ----------------           ----------------
                                                                   Fiscal       Fourth       Fiscal       Fourth
                                                                    Year        Quarter       Year        Quarter
<S>                                                                 <C>          <C>          <C>         <C>
 (Decrease) increase in comparable store sales(1):
     Consolidated Company......................................      (2)%         (1)%         (2)%         (5)%
     FASHION BUG...............................................       0           (4)           0            1
     CATHERINES(2).............................................      (1)           0            0            0
     LANE BRYANT(3)............................................      (6)           1           (6)         (12)

Sales from new stores as a percentage of total consolidated
     prior-period sales:
     FASHION BUG...............................................       1            1            2            1
     CATHERINES(2).............................................       1            1            2            1
     LANE BRYANT...............................................       3            2           25            2

Prior-period sales from closed stores as a percentage of
     total consolidated prior-period sales:
     FASHION BUG...............................................      (4)          (3)          (3)          (4)
     CATHERINES(2).............................................      (2)           0           (4)          (3)
     LANE BRYANT...............................................      (1)          (1)          (0)          (1)

Increase (decrease) in total sales.............................      (5)%         (3)%         21%          (7)%
--------------------
<FN>

(1)  Sales from stores in operation during both periods. Stores are added to the
     comparable store base after 13 full months of operation.

(2)  Includes sales of ADDED DIMENSIONS stores, which were closed or converted
     to CATHERINES stores during the first half of Fiscal 2003.

(3)  Comparable store sales for LANE BRYANT for fiscal year ended February 1,
     2003 are based on historical data, giving effect to our acquisition of LANE
     BRYANT as if it had occurred on February 4, 2001. Results may not be
     equivalent to the change in total sales.
</FN>
</TABLE>


                                       24
<PAGE>

     The following table sets forth information with respect to store activity
for Fiscal 2004 and planned store activity for Fiscal 2005:

<TABLE>
<CAPTION>
                                 FASHION     LANE                 MONSOON/
                                   BUG      BRYANT  CATHERINES  ACCESSORIZE    Total

<S>                              <C>       <C>       <C>         <C>          <C>
Fiscal 2004:
Stores at February 1, 2003 ...    1,083       689       467           9        2,248
                                 ------    ------    ------      ------       ------
Stores opened ................        2        34        10           0           46
Stores converted(1) ..........       (2)        8        (2)          0            4
Stores closed ................      (32)      (21)       (9)         (9)         (71)
                                 ------    ------    ------      ------       ------
Net changes in stores ........      (32)       21        (1)         (9)         (21)
                                 ------    ------    ------      ------       ------
Stores at January 31, 2004 ...    1,051       710       466           0        2,227
                                 ======    ======    ======      ======       ======

Stores relocated during period       19        21        16         --            56
Stores remodeled during period        3        10         1         --            14

Fiscal 2005:
Planned store openings .......        5        35        15         --            55
Planned store relocations ....       20        20        15         --            55
Planned store closings .......       25        10        15         --            50
--------------------
<FN>

(1)  Four FASHION BUG stores that were converted to LANE BRYANT stores during
     Fiscal 2004 were closed during Fiscal 2003.
</FN>
</TABLE>



Comparison of Fiscal 2004 to Fiscal 2003

Net Sales

     The decrease in net sales from Fiscal 2003 to Fiscal 2004 resulted
primarily from a decrease in the number of operating stores at our FASHION BUG
brand and the closing of our THE ANSWER/ADDED DIMENSIONS stores following our
Fiscal 2003 store restructuring initiative, and negative comparable store sales
results at our LANE BRYANT brand. We operated 2,227 retail stores at the end of
Fiscal 2004, as compared to 2,248 stores at the end of Fiscal 2003.

     FASHION BUG stores experienced mixed results in comparable store sales
during Fiscal 2004, with flat comparable store sales for the year. The average
number of transactions and average number of units sold per customer ("UPC")
increased 1% and 3%, respectively, in our FASHION BUG stores, while the average
dollar sale and average retail value per unit sold decreased 1% and 3%,
respectively. FASHION BUG stores experienced increases in sales of plus
sportswear, accessories, intimate apparel, and footwear, which were partially
offset by decreases in sales of junior sportswear and dresses.

     CATHERINES stores also experienced mixed results in comparable store sales
during Fiscal 2004, with a 1% decrease in comparable store sales for the year.
The average dollar sale and average UPC each increased 3% in our CATHERINES
stores, while the average number of transactions and average retail value per
unit sold decreased 2% and 1%, respectively. Increased sales of denim, which
performed strongly as a result of the brand's fit initiative, and intimate
apparel were offset by decreases in sales of dresses, career sportswear, suits,
sweaters, and hosiery.




                                       25
<PAGE>



     Although LANE BRYANT stores experienced quarter-over-quarter improvements
in comparable store sales during Fiscal 2004, they experienced an overall
decrease of 6% in comparable store sales for the year. Although the average UPC
increased 11% for LANE BRYANT stores, the average dollar sale and average retail
value per unit sold decreased 4% and 14% respectively, reflecting the brand's
higher level of promotional pricing. The average number of transactions at LANE
BRYANT stores decreased 3%. For LANE BRYANT, decreases in sales of sweaters,
casual woven tops, and denim separates were partially offset by increases in
sales of knit and active separates, intimate apparel, and casual woven
separates. The LANE BRYANT brand experienced poor customer acceptance of, and
fit and quality issues with, certain of its products during the second half of
Fiscal 2003 and the first half of Fiscal 2004, resulting in higher levels of
promotional pricing. In addition, certain basic products were under-stocked
during the second half of Fiscal 2003, resulting in missed sales opportunities.
Improved merchandise assortments resulted in increased unit sales and improved
sales performance for the LANE BRYANT brand during the second half of Fiscal
2004.

Cost of Goods Sold, Buying, and Occupancy

     The decrease in cost of goods sold, buying, and occupancy expenses from
Fiscal 2003 to Fiscal 2004 principally reflects the decrease in net sales. Cost
of goods sold as a percentage of net sales was unchanged from Fiscal 2003 to
Fiscal 2004. Improvements in merchandise margins in our FASHION BUG brand were
offset by lower merchandise margins in our LANE BRYANT and CATHERINES brands.
Higher levels of promotional activity and poor customer acceptance of certain
LANE BRYANT products, as discussed above, also negatively affected merchandise
margins in both years. Cost of goods sold for Fiscal 2003 included $5.1 million
of costs related to the valuation of LANE BRYANT inventories. The $5.1 million
related to markdowns for inventory on hand as a result of the poor customer
acceptance of, and fit and quality issues with, certain of LANE BRYANT's
products, which resulted in higher levels of promotional pricing to liquidate
the product. Cost of goods sold includes merchandise costs net of discounts and
allowances, freight, inventory shrinkage, and shipping and handling costs
associated with our e-commerce business. Net merchandise costs and freight are
capitalized as inventory costs.

     Buying and occupancy expenses as a percentage of net sales increased 0.5%
in Fiscal 2004 as compared to Fiscal 2003. The increase in buying and occupancy
expenses as a percentage of net sales was primarily attributable to the lack of
leverage on relatively fixed occupancy costs as a result of negative comparable
store sales, particularly in our LANE BRYANT brand. Occupancy expenses for
Fiscal 2003 included a $2.7 million write-down of under-performing assets
related to our MONSOON/ACCESSORIZE stores. Buying expenses include payroll,
payroll-related costs, and operating expenses for our buying departments and
warehouses. Occupancy expenses include rent, real estate taxes, insurance,
common area maintenance, utilities, maintenance, and depreciation for our stores
and warehouse facilities and equipment. Buying and occupancy costs are treated
as period costs and are not capitalized as part of inventory.

Selling, General, and Administrative

     The decrease in selling, general, and administrative expenses from Fiscal
2003 to Fiscal 2004 was primarily a result of reductions in store payroll and
the realization of cost reduction initiatives, including improved management of
controllable expenses (see "Expenses Related to Cost Reduction Plan" below).
Selling expenses decreased 0.2% as a percentage of net sales. General and
administrative expenses decreased 0.5% as a percentage of net sales. General and
administrative expenses for Fiscal 2003 were negatively affected by costs
associated with transitional service agreements related to the LANE BRYANT
acquisition. We completed the integration of LANE BRYANT's information systems
during Fiscal 2003.




                                       26
<PAGE>



Expenses Related to Cost Reduction Plan

     On March 18, 2003, we announced a cost reduction plan designed to take
advantage of the centralization of all corporate administrative services
throughout the Company and to realize certain efficiencies, in order to improve
profitability. See "Item 8. Financial Statements and Supplementary Data; Notes
to Consolidated Financial Statements; NOTE 14. EXPENSES RELATED TO COST
REDUCTION PLAN" below for details of this program. The cost reduction plan was
substantially completed during Fiscal 2004. We did not experience a material
after-tax cash impact from execution of this plan. e expect this cost reduction
plan to improve annualized pre-tax earnings by a total of approximately $45
million. During Fiscal 2004, we realized cost reductions of more than $30
million as a result of this plan. We expect to realize the remaining benefits of
the cost reduction plan by the end of Fiscal 2005.

     Expenses incurred in connection with the plan, payments/settlements of
those expenses for Fiscal 2004, and the remaining accrual at January 31, 2004,
were as follows:

<TABLE>
<CAPTION>
                                      Year Ended                     Accrued at
                                      January 31,     Payments/      January 31,
(In millions)                            2004        Settlements        2004
                                         ----        -----------        ----

<S>                                     <C>            <C>               <C>
Workforce reduction costs............    $ 3.0          $(3.0)            $0.0
Lease termination and related costs..      3.7           (1.1)             2.6
Accelerated depreciation costs
     (non-cash charge)...............      4.2           (4.2)             0.0
Other facility closure costs.........      0.6           (0.6)             0.0
                                         -----          -----             ----
Total................................    $11.5          $(8.9)            $2.6
                                         =====          =====             ====
</TABLE>

     Workforce reduction costs represent involuntary termination benefits and
retention bonuses. Employees affected by the plan were notified during the first
quarter of Fiscal 2004. During Fiscal 2004, we terminated 349 employees in
connection with workforce reductions at our corporate and divisional home
offices and the closing of our Memphis, Tennessee distribution center, our
Hollywood, Florida credit operations, and our remaining MONSOON stores. We
accrued the severance benefit in accordance with SFAS No. 146 and recognized
retention bonuses ratably over the employees' remaining service period. Lease
termination and related costs mainly represent the estimated fair value of the
remaining lease obligations at the Hollywood, Florida facility, reduced by
estimated sublease income. In accordance with SFAS No. 146, we recognized the
present value of the remaining lease obligation less estimated sublease income
related to the Hollywood, Florida facility in June 2003 when we closed the
facility. Accelerated depreciation costs represent the acceleration of
depreciation of the net book value of the assets at our Memphis distribution
center and our Hollywood credit operations, which were closed in June 2003, to
their estimated net realizable values.

     During the first quarter of Fiscal 2004, we made the decision to sell the
Memphis, Tennessee distribution center, and began accelerating the depreciation
of the asset to its estimated net realizable value as of its then-expected
cease-use date of June 2003. During the third quarter of Fiscal 2004, we began
to evaluate alternative uses for the facility, and began to depreciate the
then-current carrying amount of the asset over its estimated useful life.

Other Income/Interest Expense

     The decrease in other income from Fiscal 2003 to Fiscal 2004 resulted from
a $0.8 million decrease in interest income. Interest income decreased as a
result of a decrease in the average yield on investments during Fiscal 2004 as
compared to Fiscal 2003. The decrease in interest expense from Fiscal 2003 to
Fiscal 2004 resulted primarily from lower interest rates on borrowings during
Fiscal 2004 as compared to Fiscal 2003. Interest expense for Fiscal 2003 also
included a write-off of $1.0 million of unamortized deferred financing costs
related to a $67.5


                                       27
<PAGE>

million term loan that was repaid during Fiscal 2003. During Fiscal 2003, we
replaced a $67.5 million 11.5% term loan and $96.0 million of 7.5% Convertible
Subordinated Notes with $150.0 million of 4.75% Senior Convertible Notes (see
"Financing" below).

Income Tax Provision

     The effective income tax rate was 36.4% in Fiscal 2004 as compared to 38.9%
in Fiscal 2003. The lower effective tax rate in Fiscal 2004 was due primarily to
changes in previously estimated full-year amounts, including our tax liability
related to insurance programs.


Comparison of Fiscal 2003 to Fiscal 2002

Net Sales

     The increase in net sales from Fiscal 2002 to Fiscal 2003 was primarily a
result of our acquisition of LANE BRYANT in August 2001. We operated 2,248
stores at the end of Fiscal 2003, as compared to 2,446 stores at the end of
Fiscal 2002. Had we acquired LANE BRYANT as of the beginning of Fiscal 2002, we
would have experienced an overall comparable store sales decrease of 2.0% from
Fiscal 2002.

     In Fiscal 2003, LANE BRYANT stores experienced comparable store sales
decreases in sweaters, denim, and intimate apparel. In particular, the LANE
BRYANT brand experienced poor customer acceptance of, and fit and quality issues
with, certain of its products during the second half of Fiscal 2003, resulting
in higher levels of promotional pricing. In addition, certain basic products at
LANE BRYANT were under-stocked, resulting in missed sales opportunities. Due to
product lead times, these issues negatively affected LANE BRYANT results into
the first half of Fiscal 2004 (see "Comparison of Fiscal 2004 to Fiscal 2003;
Net Sales" above). For FASHION BUG stores, comparable store sales increases in
junior and plus sportswear, footwear, intimate apparel, and accessories were
offset by declines in other missy sportswear, dresses, and coats. For CATHERINES
stores, comparable store sales increases in casual sportswear were offset by
declines in other merchandise categories. During Fiscal 2003, we discontinued
the ADDED DIMENSIONS brand, closed the remaining ADDED DIMENSIONS stores, and
liquidated the remaining ADDED DIMENSIONS store inventory.

Cost of Goods Sold, Buying, and Occupancy

     Cost of goods sold, buying, and occupancy expenses increased from Fiscal
2002 to Fiscal 2003, primarily as a result of the increase in net sales, but
decreased as a percentage of net sales. Cost of goods sold as a percentage of
net sales decreased 3.0% in Fiscal 2003 as compared to Fiscal 2002. The higher
merchandise margins reflected improved inventory management in the FASHION BUG
and CATHERINES brands and benefits from our restructuring plan (see
"Restructuring Charge/Credit" below), partially offset by declining margins in
the LANE BRYANT brand. Markdowns taken in connection with liquidation of ADDED
DIMENSIONS inventories during Fiscal 2003 were offset by $3.0 million of costs
accrued at the end of Fiscal 2002 related to the valuation of inventory for
stores to be closed as the result of our restructuring plan. Merchandise margins
for Fiscal 2003 were negatively impacted by higher levels of promotional
activity during the second half of the fiscal year as a result of a generally
sluggish Christmas holiday season and poor customer acceptance of certain LANE
BRYANT products, as discussed above. Cost of goods sold for Fiscal 2003 included
$5.1 million of costs related to the valuation of LANE BRYANT inventories. The
$5.1 million related to markdowns for inventory on hand as a result of the poor
customer acceptance of, and fit and quality issues with, certain of LANE
BRYANT's products, which resulted in higher levels of promotional pricing to
liquidate the product. Cost of goods sold includes merchandise costs net of
discounts and allowances, freight, inventory shrinkage, and shipping and
handling costs associated with our e-commerce business. Net merchandise costs
and freight are capitalized as inventory costs.

                                       28
<PAGE>

     Buying and occupancy expenses increased as a percentage of net sales from
Fiscal 2002 to Fiscal 2003, primarily as a result of the lack of leverage on
relatively fixed occupancy costs caused by negative comparable store sales.
Occupancy expenses for Fiscal 2003, as a percentage of net sales, increased 1.2%
from Fiscal 2002. Relatively higher occupancy expenses for the LANE BRYANT
stores as compared to our other brands and a $2.7 million write-down of
under-performing assets related to our MONSOON/ACCESSORIZE stores contributed to
the increase in occupancy expenses as a percentage of net sales. Buying expenses
increased 0.1% as a percentage of sales from Fiscal 2002 to Fiscal 2003. Buying
expenses include payroll, payroll-related costs, and operating expenses for our
buying departments and warehouses. Occupancy expenses include rent, real estate
taxes, insurance, common area maintenance, utilities, maintenance, and
depreciation for our stores and warehouse facilities and equipment. Buying and
occupancy costs are treated as period costs and are not capitalized as part of
inventory.

Selling, General, and Administrative

     The increase in selling, general, and administrative expenses from Fiscal
2002 to Fiscal 2003 was principally a result of the acquisition of LANE BRYANT.
Selling expenses increased 0.4% as a percentage of net sales. The increase was
attributable to a number of factors, including higher store payroll and benefit
costs, new point-of-sales systems at FASHION BUG, and an increase in direct
marketing expenses in the CATHERINES and LANE BRYANT brands. General and
administrative expenses increased 0.2% as a percentage of net sales in Fiscal
2003, primarily as a result of increased employee benefits costs, costs
associated with transitional service agreements related to the LANE BRYANT
acquisition, and the lack of leverage on fixed costs, particularly at LANE
BRYANT. During Fiscal 2003, we completed the integration of LANE BRYANT's
information systems.

Restructuring Charge/Credit

     On January 28, 2002, we announced a restructuring plan, including a number
of initiatives designed to position us for increased profitability and growth in
the women's plus-size apparel business. The restructuring plan included the
closing or conversion of our THE ANSWER/ADDED DIMENSIONS stores, the closing of
130 under-performing FASHION BUG stores, and the conversion of 44 FASHION BUG
store locations to LANE BRYANT stores. The restructuring plan resulted in a
pre-tax charge of $37.7 million in the fourth quarter of Fiscal 2002. The
restructuring charge included a $17.8 million non-cash write-down of fixed
assets (primarily store fixtures and improvements) in the stores to be closed.
The restructuring charge also included $18.5 million of anticipated payments to
landlords for the early termination of existing store leases, $800 thousand for
severance costs, and $600 thousand for sign removal and other costs.

     We completed the restructuring plan and recognized a pre-tax restructuring
credit of $4.8 million during Fiscal 2003. The restructuring credit was
primarily a result of our ability to negotiate lease terminations on terms more
favorable than those used in our original estimates. Because a majority of the
store closings occurred during the second half of Fiscal 2003, the full benefit
of the restructuring plan was not realized until Fiscal 2004.

Amortization of Goodwill

     During Fiscal 2002, we recognized $4.9 million of amortization of goodwill
related to our CATHERINES acquisition. We adopted the provisions of SFAS No. 142
as of February 3, 2002, and discontinued the amortization of the CATHERINES
goodwill. However, the CATHERINES goodwill, and goodwill related to our
acquisition of LANE BRYANT, are subject to periodic impairment reviews in
accordance with the provisions of SFAS No. 142 (see "CRITICAL ACCOUNTING
POLICIES; Impairment of Long-Lived Assets" above and "Cumulative Effect of
Accounting Changes" below).

                                       29
<PAGE>

Other Income/Interest Expense

     The decrease in other income from Fiscal 2002 to Fiscal 2003 resulted
primarily from a $2.1 million decrease in interest income. The decrease in
interest income resulted from a lower average yield on investments during Fiscal
2003 as compared to Fiscal 2002. Interest expense increased primarily as a
result of amortization of fees related to our credit facility, and to a lesser
extent as a result of additional long-term mortgage borrowings and acquisitions
of point-of-sale equipment under long-term capital leases. In addition, interest
expense in Fiscal 2003 included a write-off of $1.0 million of unamortized
deferred financing costs related to a $67.5 million term loan that was repaid
during the period (see "Financing" below). These increases were partially offset
by reduced interest expense in Fiscal 2003 as a result of relatively lower
interest rates on borrowings and reduced levels of borrowings. During Fiscal
2003, we replaced the $67.5 million 11.5% term loan and $96.0 million of 7.5%
Convertible Subordinated Notes with $150.0 million of 4.75% Senior Convertible
Notes (see "Financing" below).

Income Tax Provision

     The effective tax rate for Fiscal 2003 was 38.9%, as compared to a (2.7)%
effective tax rate for Fiscal 2002. The unusual effective tax rate in Fiscal
2002 resulted from the effect of a $1.8 million provision related to one of our
employee insurance programs on a relatively small pre-tax loss.

Cumulative Effect of Accounting Changes

     We fully adopted the provisions of SFAS No. 142, "Goodwill and Other
Intangible Assets" as of February 3, 2002. In accordance with the transition
provisions of SFAS No. 142, we tested goodwill related to our CATHERINES
acquisition for impairment during Fiscal 2003, and recorded a write-down of
$44.0 million to reduce the carrying value of the goodwill to its estimated fair
value. We also elected to adopt the provisions of EITF Issue No. 02-16,
"Accounting by a Customer (Including a Reseller) for Cash Consideration Received
from a Vendor" as of the beginning of Fiscal 2003. The cumulative effect at the
beginning of Fiscal 2003 from deferring the recognition of cash received from
vendors was a charge of $5.1 million, net of income taxes of $2.8 million. The
write-down of goodwill and the deferral of cash received from vendors have been
presented as the cumulative effect of accounting changes as of February 3, 2002
in our Fiscal 2003 results of operations. See "Impairment of Long-Lived Assets"
and "Accounting for Cash Consideration Received From a Vendor" in "CRITICAL
ACCOUNTING POLICIES" above for additional discussion of these items.


Comparison of Fourth Quarter 2004 to Fourth Quarter 2003

Net Sales

     Net sales in the fourth quarter of Fiscal 2004 were $585.7 million, a
decrease of 2.6% from net sales of $601.2 million in the fourth quarter of
Fiscal 2003. Overall, comparable store sales decreased 1% in the fourth quarter
of Fiscal 2004. The decrease in sales was primarily attributable to a decrease
in the number of FASHION BUG operating stores following our Fiscal 2003 store
restructuring initiative and a 4% decrease in FASHION BUG comparable store
sales. As a result of lower levels of promotional activity in comparison to
competitors in the early part of the Christmas season, FASHION BUG stores
experienced comparable store sales decreases in all major product categories
except for accessories. Although the average number of units sold per customer
("UPC") at FASHION BUG increased 4%, the number of transactions, average retail
price per unit, and average dollars per sale decreased during the fourth quarter
of Fiscal 2004. LANE BRYANT stores experienced a 1% increase in comparable store
sales for the quarter, with comparable store sales increases in accessories,
intimate apparel, and casual sportswear, which were partially offset by
comparable store sales decreases in other product categories. For LANE BRYANT
stores, a 10% increase in both UPC and average dollars per sale were partially
offset by decreases


                                       30
<PAGE>

in the average retail price per unit and the number of transactions. CATHERINES
stores experienced flat comparable store sales for the quarter, with comparable
store sales increases in casual sportswear and intimate apparel offset by
decreases in other product categories. For CATHERINES stores, a 2% increase in
UPC was offset by slight decreases in the average retail price per unit and the
number of transactions, while average dollars per sale was flat.

Cost of Goods Sold, Buying, and Occupancy

     Cost of goods sold, buying, and occupancy expenses were $437.0 million in
the fourth quarter of Fiscal 2004, a decrease of 3.2% from $451.4 million in the
fourth quarter of Fiscal 2003. As a percentage of net sales, these costs
decreased by 0.5% in the fourth quarter of Fiscal 2004 as compared to the fourth
quarter of Fiscal 2003. Cost of goods sold, as a percentage of net sales,
decreased 0.9% in the fourth quarter of Fiscal 2004 as compared to the fourth
quarter of Fiscal 2003. Significantly improved margins in our LANE BRYANT stores
were partially offset by reduced gross margins in our CATHERINES stores. Cost of
goods sold for the fourth quarter of Fiscal 2003 included $5.1 million of costs
related to the valuation of LANE BRYANT inventories. The $5.1 million related to
markdowns for inventory on hand as a result of the poor customer acceptance of,
and fit and quality issues with, certain LANE BRYANT products, which resulted in
higher levels of promotional pricing in order to liquidate the product. Buying
and occupancy expenses, expressed as a percentage of net sales, increased 0.4%
in the fourth quarter of Fiscal 2004 as compared to the fourth quarter of Fiscal
2003. The increase in buying and occupancy expenses as a percent of sales was
primarily attributable to the lack of leverage on relatively fixed occupancy
costs as a result of negative overall comparable store sales.

Selling, General, and Administrative

     Selling, general, and administrative expenses were $131.0 million in the
fourth quarter of Fiscal 2004, a decrease of 9.4% from $144.6 million in the
fourth quarter of Fiscal 2003. As a percentage of net sales, these costs
decreased by 1.7% in the fourth quarter of Fiscal 2004 as compared to the fourth
quarter of Fiscal 2003. The decrease is primarily a result of the realization of
cost reduction initiatives, including improved management of controllable
expenses (see "Comparison of Fiscal 2004 to Fiscal 2003; Expenses Related to
Cost Reduction Plan" above). General and administrative expenses for the fourth
quarter of Fiscal 2004 also benefited from reduced medical benefits costs, as a
result of reduced medical claims by employees covered by our self-insured
employee benefit program.

Other Income/Interest Expense

     Other income in the fourth quarter of Fiscal 2004 was $0.7 million as
compared to $0.5 million for the fourth quarter of Fiscal 2003. Interest expense
was $3.8 million in the fourth quarter of Fiscal 2004, an increase from $3.1
million in the fourth quarter of Fiscal 2003.

Income Tax Provision

     The effective income tax rate was 27.5% in Fiscal 2004 as compared to 37.7%
in Fiscal 2003. The lower effective tax rate in Fiscal 2004 was due primarily to
changes in previously estimated full-year amounts, including our tax liability
related to insurance programs.





                                       31
<PAGE>


FINANCIAL CONDITION

Liquidity and Capital Resources

     Our primary sources of working capital are cash flow from operations, our
proprietary credit card receivables securitization agreements, our investment
portfolio, and our credit facility described below. The following table
highlights certain information related to our liquidity and capital resources:

<TABLE>
<CAPTION>
                                               Fiscal     Fiscal       Fiscal
(Dollars in thousands)                          2004       2003         2002
                                                ----       ----         ----

<S>                                           <C>         <C>         <C>
Cash and cash equivalents...................  $123,781    $102,026    $ 36,640
Long-term available-for-sale securities(1)..    14,521      16,202      15,245
Cash provided by operating activities.......    90,286     205,992     143,831
Working capital.............................   271,915     193,517     141,839
Current ratio...............................       1.9         1.6         1.4
Long-term debt to equity ratio..............      33.5%       36.2%       37.9%
--------------------
<FN>

(1)  At January 31, 2004, long-term liabilities related to our share of losses
     in our low-income housing partnerships were reclassified as a reduction of
     the cost of the investment in the partnerships. Prior-year amounts reflect
     reclassifications to conform to the current-year presentation.
</FN>
</TABLE>

Cash Provided by Operating Activities

     Our net cash provided by operating activities in Fiscal 2004 was $90.3
million, a decrease of $115.7 million from $206.0 million in Fiscal 2003. The
decrease was primarily a result of a $81.8 million increase in our investment in
inventories, net of accounts payable. Net cash provided by operating activities
also decreased as a result of a $10.7 million decrease in net income before
non-cash charges and the cumulative effect of accounting changes, a $29.8
million net change in prepaid and accrued expenses and other liabilities, and a
$13.2 million change in income taxes payable. These decreases were partially
offset by a $19.8 million decrease in accrued restructuring costs during Fiscal
2003.

     The increase in the net investment in inventories was primarily a result of
a combination of slightly higher levels of store inventories at the end of
Fiscal 2004 due to lower-than-planned sales in the fourth quarter of Fiscal 2004
and a one-time benefit from improved vendor terms received during Fiscal 2003
from conforming LANE BRYANT's vendor terms to our corporate terms. During Fiscal
2004, we reached a settlement with the Internal Revenue Service regarding its
audit of our corporate-owned life insurance ("COLI") program (see below). The
settlement resulted in a decrease in income taxes payable during Fiscal 2004
that more than offset accrued taxes payable for the period. The change in
prepaid and accrued expenses and other liabilities was primarily a result of the
timing of certain payments.

     Net cash provided by operating activities increased $62.2 million from
$143.8 million in Fiscal 2002 to $206.0 million in Fiscal 2003. The increase was
primarily a result of an increase in net income before non-cash charges and the
cumulative effect of accounting changes. In addition, our investment in
inventories, net of accounts payable, decreased during Fiscal 2003 as compared
to Fiscal 2002 as a result of improved vendor terms from conforming LANE
BRYANT's vendor terms to our corporate terms. These changes were partially
offset by the $19.8 million decrease in accrued restructuring costs during
Fiscal 2003.



                                       32
<PAGE>


     During Fiscal 2004, we reached a settlement with the Internal Revenue
Service regarding its audit of our corporate-owned life insurance ("COLI")
program. The settlement included $18.5 million of income taxes and $4.0 million
of interest, net of a tax benefit of $2.2 million. Of the $18.5 million of
income taxes, $16.1 million was satisfied through the use of existing operating
losses and tax credits. As part of the settlement, we surrendered our existing
life insurance policies and received their cash surrender value of $16.3
million. The settlement had no impact on our current results of operations, as
we had previously provided for taxes to cover the settlement. The settlement had
a net positive impact of approximately $7.8 million on our Fiscal 2004 cash
flows. The utilization of the operating losses and tax credits to satisfy income
taxes related to the COLI settlement resulted in a decrease in net deferred tax
assets.

Capital Expenditures

     Our capital expenditures were $45.0 million, $74.3 million, and $63.0
million in Fiscal 2004, 2003, and 2002, respectively. In Fiscal 2004, these
expenditures were primarily for the construction, remodeling, and fixturing of
new and existing retail stores and corporate systems technology. In addition,
pursuant to a program to replace point-of-sale ("POS") equipment in our FASHION
BUG stores and, in Fiscal 2004 our LANE BRYANT stores, we acquired $8.5 million,
$3.5 million, and $24.7 million of POS equipment under capital leases in Fiscal
2004, 2003, and 2002, respectively. These leases generally have an initial lease
term of 60 months and contain a bargain purchase option. During Fiscal 2002, we
re-negotiated the terms of certain of these capital leases. The re-negotiated
leases were combined into a new lease with a 60-month term and a lower interest
rate. We also acquired $9.0 million and $3.5 million of material handling
systems and related equipment and software for our White Marsh, Maryland
distribution center under capital leases in Fiscal 2004 and 2003, respectively.
These capital leases generally have an initial lease term of 60 months and
contain a bargain purchase option. Total investments in property, equipment, and
leasehold improvements, including cash expenditures and capital lease financing,
were $62.5 million, $81.3 million, and $87.7 million in Fiscal 2004, 2003, and
2002, respectively.

     During Fiscal 2003, we acquired the 393,000 square foot White Marsh
distribution center at a cost of $17.3 million to replace our leased
distribution center in Columbus, Ohio. We relocated the Columbus distribution
center in February 2004. The lease for the Columbus, Ohio distribution center
and a related logistics and transportation services agreement were terminated
effective as of February 29, 2004 in accordance with early cancellation
provisions of the lease and agreement. As a result of the use of automated
sorting systems and improved facility design in the White Marsh facility, we
were also able to consolidate our 213,000 square foot Memphis, Tennessee
distribution center into the White Marsh facility during Fiscal 2004. We
relocated the Memphis distribution center in June 2003. We are currently
evaluating alternative uses for the Memphis facility. The consolidation of the
Memphis distribution center into the White Marsh facility was part of a cost
reduction plan announced in March 2003. See "RESULTS OF OPERATIONS; Comparison
of Fiscal 2004 to Fiscal 2003; Expenses Related to Cost Reduction Plan" above
and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated
Financial Statements; NOTE 14. EXPENSES RELATED TO COST REDUCTION PLAN" below
for details of the cost reduction plan.

     We anticipate capital expenditures of approximately $70 million during
Fiscal 2005. These expenditures will primarily be for construction and fixturing
of new stores, remodeling and fixturing of existing stores, and improvements in
information technology and point-of-sale infrastructure. We expect to finance
these capital expenditures principally through internally generated funds and
capital lease financing.



                                       33
<PAGE>


Long-term Debt, Lease, Dividend, and Purchase Commitments

     At January 31, 2004, our commitments for future payments under our
long-term debt obligations, minimum lease payments under our capital leases and
operating leases, and payments due under our revolving credit facility, letters
of credit, long-term deferred compensation plans, and purchase obligations were
as follows:

<TABLE>
<CAPTION>
                                                      Payments Due by Period
                                      -----------------------------------------------------
                                                   Less      One to      Three      More
                                                   Than       Three     to Five   Than Five
(In millions)                            Total   One Year     Years      Years      Years
                                         -----   --------     -----      -----      -----

<S>                                   <C>         <C>        <C>        <C>         <C>
Long-term debt, including current
     portion(1).....................  $  192.2    $  6.9     $ 12.6     $  6.6      $166.1
Capital leases......................      42.5      14.6       21.6        6.2         0.1
Operating leases(2).................     768.1     202.1      282.5      163.4       120.1
Revolving credit facility(3)........       0.0       0.0        0.0        0.0         0.0
Letters of credit(3)................      70.7      70.7        0.0        0.0         0.0
Stand-by letters of credit(3).......       4.5       4.5        0.0        0.0         0.0
Long-term deferred compensation(4)..       3.2       1.1        1.1        0.7         0.3
Purchase commitments(5).............     457.8     457.8        0.0        0.0         0.0
                                      --------    ------     ------     ------      ------
Total...............................  $1,539.0    $757.7     $317.8     $176.9      $286.6
                                      ========    ======     ======     ======      ======
--------------------
<FN>

(1)  Amounts represent the expected cash payments of our long-term debt
     (including our convertible debt through maturity) and do not include any
     fair value adjustments, bond premiums, discounts or revolving credit
     facilities.

(2)  Commitments under operating leases include $50.5 million payable under the
     LANE BRYANT master sublease with Limited Brands, which we have guaranteed.

(3)  We currently have a $300 million revolving credit facility that expires on
     August 15, 2008, which provides for cash borrowings and the ability to
     issue up to $150 million of letters of credit. At January 31, 2004, there
     were no borrowings under this facility.

(4)  Long term compensation consists of our non-qualified deferred compensation
     plan and supplemental retirement plan, which are included in "Deferred
     taxes and other non-current liabilities" on our consolidated balance
     sheets. We have developed estimates of projected payment obligations for
     participant planned in-service distributions of the deferred compensation
     plan liability as of January 31, 2004. We have excluded $12.8 million of
     retirement/termination benefit distribution obligations as of January 31,
     2004 from the above estimates. This amount has been excluded because the
     value of the obligation and the timing of payments may vary annually due to
     changes in the fair value of the plan assets and/or assumptions for
     participant retirement/termination.

(5)  Purchase commitments include agreements to purchase goods or services in
     the ordinary course of business.
</FN>
</TABLE>

     We have not paid any dividends since 1995, and we do not expect to declare
or pay any dividends on our common stock in the foreseeable future. The payment
of future dividends is within the discretion of our Board of Directors and will
depend upon our future earnings, if any, our capital requirements, financial
condition and other relevant factors. Additionally, our existing credit facility
and one of our agreements with Limited Brands restrict the payment of dividends
on our common stock.

Off-Balance-Sheet Arrangements

     We have formed a trust called the Charming Shoppes Master Trust to which
Spirit of America National Bank, our credit card bank, has transferred, through
a special purpose entity, its interest in credit card receivables created under
our FASHION BUG proprietary credit card program. We, together with the trust,
have entered into various agreements under which the trust can sell, on a
revolving basis, interests in these receivables for a specified term. When the
revolving period terminates, an amortization period begins during which
principal payments are made to the parties with whom the trust has entered into
the securitization agreement. We securitized $331.7 million and $384.2 million
of credit card receivables in Fiscal 2004 and Fiscal 2003, respectively, and had
$269.4 million


                                       34
<PAGE>

of securitized credit card receivables outstanding as of January 31, 2004. We
held certificates and retained interests in our securitizations of $55.4 million
as of the end of Fiscal 2004, which were generally subordinated in right of
payment to certificates issued by the trust to third-party investors. Our
obligation to repurchase receivables sold to the trust is limited to those
receivables that, at the time of their transfer, fail to meet the trust's
eligibility standards under normal representations and warranties. To date, our
repurchases of receivables pursuant to this obligation have been insignificant.

     On November 22, 2002, we issued $100.0 million of new five-year
asset-backed certificates in a private placement, of which $80.0 million have
been sold to investors as of January 31, 2004. The weighted-average fixed
interest rate on the certificates sold is 4.68%. These certificates replaced an
$83.5 million securitization series that matured during the fourth quarter of
Fiscal 2003. On January 21, 2004, we closed a new conduit credit card
securitization facility of $132.0 million that will provide additional funding
of up to $100.0 million for a term of up to two years, subject to an annual
renewal. As of January 31, 2004, no credit card receivables were funded under
this facility. Subsequent to January 31, 2004, we sold to investors an
additional $9.5 million of certificates under the $100.0 million facility that
we were holding as a retained interest. As of January 31, 2004, these
certificates were included in short-term available-for-sale securities. To the
extent that remaining certificates under the $100.0 million facility are not
sold, we will hold them as a retained interest.

     Charming Shoppes Receivables Corp. and Charming Shoppes Seller, Inc., our
consolidated wholly owned indirect subsidiaries, are separate special purpose
entities created for the securitization program. At January 31, 2004, Charming
Shoppes Receivables Corp. held $28.8 million of Charming Shoppes Master Trust
certificates and retained interests and Charming Shoppes Seller, Inc. held
retained interests of $9.2 million (which are included in the $55.7 million of
short-term available-for-sale securities we held at January 31, 2004). These
assets are first and foremost available to satisfy the claims of the respective
creditors of these separate corporate entities, including certain claims of
investors in the Charming Shoppes Master Trust.

     We could be affected by certain events that would cause the trust to hold
proceeds of receivables, which would otherwise be available to be paid to us
with respect to our subordinated interests, within the trust as additional
enhancement. For example, if we fail or the trust fails to meet certain
financial performance standards, a credit enhancement condition would occur, and
the trust would be required to retain amounts otherwise payable to us. In
addition, the failure to satisfy certain financial performance standards could
further cause the trust to stop using collections on trust assets to purchase
new receivables, and would require such collections to be used to repay
investors on a prescribed basis, as provided in the trust agreements. If this
were to occur, it could result in our having insufficient liquidity; however, we
believe we would have sufficient notice to seek alternative forms of financing
through other third-party providers. As of January 31, 2004, the trust was in
compliance with all applicable financial performance standards. Amounts placed
into enhancement accounts, if any, that are not required for payment to other
certificate holders will be available to us at the termination of the
securitization series. We have no obligation to directly fund the enhancement
account of the trust, other than for breaches of customary representations,
warranties, and covenants and for customary indemnities. These representations,
warranties, covenants, and indemnities do not protect the trust or investors in
the trust against credit-related losses on the receivables. The providers of the
credit enhancements and trust investors have no other recourse to us.

     These securitization agreements are intended to improve our overall
liquidity by providing short-term sources of funding. The agreements provide
that we will continue to service the credit card receivables and control credit
policies. This control allows us, absent certain adverse events, to fund
continued credit card receivable growth and to provide the appropriate customer
service and collection activities. Accordingly, our relationship with our credit
card customers is not affected by these agreements. See "CRITICAL ACCOUNTING
POLICIES; Asset Securitizations" above, "MARKET RISK" below, and "Item 8.
Financial Statements and Supplementary Data; Notes to Consolidated Financial
Statements; Note 16. Asset Securitization" below for additional discussion of
our asset securitization program.

                                       35
<PAGE>

     We also have non-recourse agreements under which third parties provide
proprietary credit card sales accounts receivable funding programs for both our
CATHERINES and LANE BRYANT brands. These funding programs expire in January 2005
for CATHERINES and in January 2006 for LANE BRYANT. Under these agreements, the
third parties reimburse us daily for sales generated by the respective brand's
proprietary credit card accounts. Under the CATHERINES agreement, we may be
required to repurchase receivables from the third party under certain conditions
relating to a change in control of the Company. Under the LANE BRYANT agreement,
we may be required to repurchase receivables from the third party upon
termination of the agreement. The net balances of CATHERINES accounts receivable
held by the third party at January 31, 2004 and February 1, 2003 were
approximately $70.4 million and $85.8 million, respectively. The net balances of
LANE BRYANT accounts receivable held by the third party at January 31, 2004 and
February 1, 2003 were approximately $198.3 million and $195.3 million,
respectively.

     On January 28, 2004, in accordance with the terms of the Merchant Services
Agreement pursuant to which the CATHERINES proprietary credit cards are issued,
we gave notification of termination and election to purchase the CATHERINES
credit card portfolio to the third-party provider. In accordance with the terms
of the agreement, the purchase option required us to provide one year's notice
in order to terminate the agreement and to purchase the portfolio, subject to
the negotiation of the final purchase agreement.

     We lease substantially all of our operating stores under non-cancelable
operating lease agreements. Additional details on these leases, including
minimum lease commitments, are included in "Liquidity and Capital Resources"
above, and in "Item 8. Financial Statements and Supplementary Data; Notes to
Consolidated Financial Statements; Note 17. Leases" below.

Financing

Revolving Credit Facility

     On January 29, 2004, we amended and restated our existing $300.0 million
revolving credit facility that was scheduled to expire on August 16, 2004 and
extended the facility to August 15, 2008. The amended $300.0 million Facility
(the "Facility") provides for cash borrowings and enables us to issue up to
$150.0 million of letters of credit for purchases of merchandise and for standby
letters of credit. As of January 31, 2004, there were no borrowings outstanding
under the Facility. The availability of borrowings under the Facility is subject
to limitations based on eligible inventory and, under certain circumstances,
credit card receivables and in-transit cash. The Facility is secured by our
general assets, except for (i) all assets related to our credit card
securitization program, (ii) all real property, (iii) certain equipment subject
to other mortgages or capital leases, (iv) the assets of our non-U.S.
subsidiaries, and (v) certain other assets. As of January 31, 2004, we had $4.0
million of unamortized deferred debt acquisition costs related to the original
revolving credit facility and the amended and restated facility. We are
amortizing these deferred debt acquisition costs on a straight-line basis over
the life of the amended and restated facility as interest expense.

     The interest rate on borrowings under the Facility ranges from Prime to
Prime plus .50% per annum for Prime Rate Loans, and LIBOR plus 1.5% to LIBOR
plus 2.00% per annum for Eurodollar Rate Loans. The interest rate is determined
quarterly, based on our average excess and suppressed availability, as defined
in the Facility. As of January 31, 2004, the interest rate on borrowings under
the Facility was 4.00% for Prime Rate Loans and 2.60% for Eurodollar Rate Loans.

     The Facility includes limitations on sales and leasebacks, the incurrence
of additional liens and debt, capital lease financing, and other limitations.
The Facility also requires, among other things, that we not pay dividends on our
common stock and, if our excess and suppressed availability (as defined in the
Facility) is less than $50.0 million


                                       36
<PAGE>

at any time within a fiscal quarter, that we maintain consolidated 12-month
earnings before interest, taxes, depreciation, and amortization ("EBITDA")
(excluding non-recurring, non-cash charges as defined in the Facility), of
$115.0 million. As of January 31, 2004, the excess and suppressed availability,
including excess cash, under the revolving credit facility was $202.4 million.
We had outstanding letters of credit totaling $75.2 million as of January 31,
2004. As of the end of Fiscal 2004, we were not in violation of any of the
covenants included in the Facility.

Long-term Debt and Equity Financing

     During Fiscal 2003, we completed a private placement of $150.0 million of
4.75% Senior Convertible Notes due 2012 (the "Senior Notes"). We registered the
Senior Notes with the Securities and Exchange Commission for resale by the
initial purchasers during August 2002. Net proceeds received from the issuance
of the Senior Notes were $145.5 million. We used a portion of the net proceeds
to repay in full our $67.5 million 11.5% term loan due August 16, 2004, $3.5
million outstanding under our revolving credit facility, and $6.9 million of our
7.5% Convertible Subordinated Notes due 2006 called for redemption (see below).
We also used a portion of the proceeds to purchase 2,740,000 shares of our
common stock at a cost of $18.7 million. The remaining proceeds ($48.9 million)
were invested in cash and cash equivalents and were subsequently used for the
purchase of 9,525,993 shares of our common stock from Limited Brands (see
below).

     The Senior Notes will mature on June 1, 2012 and are convertible at any
time prior to maturity into shares of our common stock at a conversion price of
$9.88 per share, subject to adjustment upon certain events. The Senior Notes are
redeemable at our option, in whole or in part, at any time on or after June 4,
2007, at declining redemption prices, starting at 102.38% of principal and
decreasing to 100.48% of principal on or after June 1, 2011. Under certain
circumstances involving a change in control of the Company, holders of the
Senior Notes may require us to repurchase all or a portion of the Senior Notes
at 100% of the principal amount plus any accrued and unpaid interest. Also,
under such circumstances we have the option of paying the repurchase price in
shares of our common stock, valued at 95% of the average of the closing prices
of the common stock for a five-day trading period immediately before and
including the third trading day preceding the repurchase date. There is no
sinking fund for the Senior Notes.

     On May 29, 2002, we called our 7.5% Convertible Subordinated Notes due 2006
(the "Subordinated Notes") for redemption on June 28, 2002. The redemption price
was 102.5% of the principal amount of the Subordinated Notes, plus accrued and
unpaid interest up to the date of redemption. The Subordinated Notes had an
original maturity date of July 15, 2006, and could be converted into shares of
our common stock until the close of business on June 27, 2002 at a conversion
price of $7.46 per share. Between May 29, 2002 and June 27, 2002, the holders of
$89.1 million principal amount of the Subordinated Notes converted their
holdings into 11,944,338 shares of our common stock pursuant to the conversion
terms of the Subordinated Notes. Accrued interest expense of $2.0 million (net
of a tax benefit of $1.0 million) on the Subordinated Notes that were converted
was reclassified to additional paid-in capital. On June 28, 2002, the remaining
Subordinated Notes, with an aggregate principal amount of $6.9 million, were
redeemed for $7.4 million, including the 2.5% redemption premium and accrued
interest of $236 thousand to the date of redemption.

     On August 28, 2002, we purchased 3,175,331 shares of our common stock from
Limited Brands for $21.3 million ($6.705 per share). On September 17, 2002, we
purchased an additional 6,350,662 shares of our common stock from Limited Brands
for $44.1 million ($6.95 per share). The transactions were financed through the
use of existing cash and proceeds from the issuance of our 4.75% Senior
Convertible Notes. We had previously issued 9,525,993 shares of our common stock
to Limited Brands in connection with our acquisition of LANE BRYANT in August
2001. The purchased shares are being held as treasury shares.

                                       37
<PAGE>

     As of January 31, 2004, under authority granted by our Board of Directors
during prior fiscal years, we are authorized to repurchase approximately 5
million additional shares of our common stock. Our ability to exercise this
authority is currently subject to certain restrictions by the terms of our
revolving credit facility and an agreement with Limited Brands that we entered
into in conjunction with our acquisition of LANE BRYANT. Subject to obtaining
consent, and as conditions may allow, we may from time to time acquire
additional shares of our common stock. Such shares, if purchased, would be held
as treasury shares.

     In November 2001, we borrowed $10.9 million under a 7.77% mortgage note,
which is secured by land, buildings, and fixtures we own in Bensalem,
Pennsylvania and by leases and rents owned or received by us from tenants of the
Bensalem facility. The net proceeds from the mortgage note were used to repay a
portion of the borrowings outstanding under our revolving credit facility. In
December 2001, we borrowed $5.0 million under an 8.15% note, which is secured by
equipment and fixtures at our Greencastle, Indiana distribution center. The net
proceeds from the note were used to repay a portion of the borrowings
outstanding under our revolving credit facility. In October 2002, we borrowed
$14.0 million under a 6.53% mortgage note, which is secured by land, a building,
and certain fixtures at the White Marsh, Maryland distribution center. The net
proceeds were used to finance a substantial portion of the White Marsh
acquisition. In December 2002, we entered into two financing leases for the
purchase of material handling systems and related equipment and software for the
White Marsh distribution center (see "Liquidity and Capital Resources" above).

     As part of the acquisition of CATHERINES, we assumed a 7.5% mortgage note
of $6.9 million ($5.8 million of principal was outstanding on this note as of
January 31, 2004), which is secured by land and buildings at our CATHERINES
office and distribution center in Memphis, Tennessee. There is a pre-payment
penalty of 1% of the outstanding principal.


MARKET RISK

     We manage our FASHION BUG proprietary credit card program through various
operating entities that we own. The primary activity of these entities is to
service our proprietary credit card receivables portfolio, the balances of which
we sell under a credit card securitization program. Under the securitization
program, we can be exposed to fluctuations in interest rates to the extent that
the interest rates charged to our customers vary from the rates paid on
certificates issued by the trust. The finance charges on most of our proprietary
credit card accounts are billed using a floating rate index (the Prime lending
rate), subject to a floor and limited by legal maximums. The certificates issued
under the securitization include both floating and fixed interest rate
certificates. The floating rate certificates are based on an index of either
one-month LIBOR or the commercial paper rate, depending on the issuance.
Consequently, we have basis risk exposure to the extent that the movement of the
floating rate index on the certificates varies from the movement of the Prime
rate. Additionally, as of January 31, 2004, the floating finance charge rate on
the credit cards was below the contractual floor rate, thus exposing us to
interest rate risk on the portion of certificates that are funded at floating
rates. To the extent that short-term interest rates were to increase by one
percentage point by the end of Fiscal 2005, an increase of approximately $750
thousand in selling, general, and administrative expenses would result.

     As of January 31, 2004, there were no borrowings outstanding under our
revolving credit facility. To the extent that there are borrowings outstanding
under our revolving credit facility, such borrowings would be exposed to
variable interest rates. An increase in market interest rates would increase our
interest expense and decrease our cash flows. A decrease in market interest
rates would decrease our interest expense and increase our cash flows.

     We are not subject to material foreign exchange risk, as our foreign
transactions are primarily U.S. Dollar-denominated and our foreign operations do
not constitute a material part of our business.

                                       38
<PAGE>

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

     See "Item 8. Financial Statements and Supplementary Data; Notes to
Consolidated Financial Statements; Note 1. Summary of Significant Accounting
Policies; Impact of Recent Accounting Pronouncements."


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

     See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Market Risk" above.






























                                       39
<PAGE>


Item 8.  Financial Statements and Supplementary Data


                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


Stockholders and Board of Directors
Charming Shoppes, Inc.



     We have audited the accompanying consolidated balance sheets of Charming
Shoppes, Inc. and subsidiaries as of January 31, 2004 and February 1, 2003, and
the related consolidated statements of operations and comprehensive income
(loss), stockholders' equity, and cash flows for each of the three fiscal years
in the period ended January 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Charming
Shoppes, Inc. and subsidiaries at January 31, 2004 and February 1, 2003, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended January 31, 2004, in conformity with
accounting principles generally accepted in the United States.

     As discussed in Note 1 to the consolidated financial statements, in the
fiscal year ended February 1, 2003, the Company changed its method of accounting
for goodwill and indefinite-lived intangible assets, in accordance with SFAS No.
142, "Goodwill and Other Intangible Assets," and changed its method of
accounting for cash consideration received from vendors in accordance with EITF
Issue 02-16, "Accounting by a Customer (Including a Reseller) for Cash
Consideration Received from a Vendor."




                                              /S/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania
March 17, 2004



                                       40
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                January 31,      February 1,
(Dollars in thousands, except share amounts)                                       2004             2003
                                                                                   ----             ----
<S>                                                                              <C>            <C>
ASSETS
Current assets
Cash and cash equivalents.....................................................   $   123,781    $   102,026
Available-for-sale securities ................................................        55,688         50,286
Merchandise inventories ......................................................       309,995        286,472
Deferred taxes ...............................................................        19,902         11,726
Prepayments and other ........................................................        57,494         74,296
                                                                                 -----------    -----------
Total current assets .........................................................       566,860        524,806
                                                                                 -----------    -----------

Property, equipment, and leasehold improvements - at cost ....................       705,257        671,376
Less accumulated depreciation and amortization ...............................       386,633        348,295
                                                                                 -----------    -----------
Net property, equipment, and leasehold improvements ..........................       318,624        323,081
                                                                                 -----------    -----------

Trademarks and other intangible assets .......................................       170,478        171,138
Goodwill .....................................................................        66,956         68,594
Available-for-sale securities, including fair value adjustments of $(390)
       as of January 31, 2004 and $(134) as of February 1, 2003 ..............        14,521         16,202
Other assets .................................................................        27,440         28,065
                                                                                 -----------    -----------
Total assets .................................................................   $ 1,164,879    $ 1,131,886
                                                                                 ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable .............................................................   $   135,777    $   147,952
Accrued expenses .............................................................       138,166        163,598
Income taxes payable .........................................................         1,128          7,144
Current portion - long-term debt .............................................        17,278         12,595
Accrued expenses related to cost reduction plan ..............................         2,596              0
                                                                                 -----------    -----------
Total current liabilities ....................................................       294,945        331,289
                                                                                 -----------    -----------

Deferred taxes and other non-current liabilities .............................        62,030         35,918
Long-term debt ...............................................................       202,819        203,045

Stockholders' equity
Common stock $.10 par value
       Authorized - 300,000,000 shares
       Issued - 125,526,573 shares and 125,149,242 shares ....................        12,553         12,515
Additional paid-in capital ...................................................       201,798        200,040
Treasury stock at cost - 12,265,993 shares ...................................       (84,136)       (84,136)
Deferred employee compensation ...............................................        (2,539)        (3,370)
Accumulated other comprehensive income (loss) ................................          (365)          (550)
Retained earnings ............................................................       477,774        437,135
                                                                                 -----------    -----------
Total stockholders' equity ...................................................       605,085        561,634
                                                                                 -----------    -----------
Total liabilities and stockholders' equity ...................................   $ 1,164,879    $ 1,131,886
                                                                                 ===========    ===========
<FN>
Certain prior-year amounts have been reclassified to conform to the current-year
presentation.
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>




                                       41
<PAGE>



                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)


<TABLE>
<CAPTION>
                                                                                                 Year Ended
                                                                                   ---------------------------------------
                                                                                   January 31,   February 1,    February 2,
(In thousands, except per share amounts)                                              2004          2003           2002
                                                                                      ----          ----           ----
<S>                                                                               <C>            <C>            <C>
Net sales .....................................................................   $ 2,285,680    $ 2,412,409    $ 1,993,843
                                                                                  -----------    -----------    -----------
Cost of goods sold, buying, and occupancy expenses ............................     1,642,065      1,721,052      1,455,601
Selling, general, and administrative expenses .................................       554,884        603,502        486,204
Expenses related to cost reduction plan .......................................        11,534              0              0
Restructuring charge (credit) .................................................             0         (4,813)        37,708
Amortization of goodwill ......................................................             0              0          4,885
                                                                                  -----------    -----------    -----------
Total operating expenses ......................................................     2,208,483      2,319,741      1,984,398
                                                                                  -----------    -----------    -----------
Income from operations ........................................................        77,197         92,668          9,445
Other income, principally interest ............................................         2,050          2,328          4,730
Interest expense ..............................................................       (15,609)       (20,292)       (18,701)
                                                                                  -----------    -----------    -----------
Income (loss) before income taxes, minority interest, and cumulative
     effect of accounting changes .............................................        63,638         74,704         (4,526)
Income tax provision (benefit) ................................................        23,141         29,055           (120)
                                                                                  -----------    -----------    -----------
Income (loss) before minority interest and cumulative effect
     of accounting changes ....................................................        40,497         45,649         (4,406)
Minority interest in net loss of consolidated subsidiary ......................           142            679              0
                                                                                  -----------    -----------    -----------
Income (loss) before cumulative effect of accounting changes ..................        40,639         46,328         (4,406)
Cumulative effect of accounting changes, net of income tax benefit of $2,758 ..             0        (49,098)             0
                                                                                  -----------    -----------    -----------
Net income (loss) .............................................................        40,639         (2,770)        (4,406)
                                                                                  -----------    -----------    -----------
Other comprehensive income (loss), net of tax:
Unrealized (losses) gains on available-for-sale securities, net of income tax
      (expense) benefit of $100 in 2004, $46 in 2003, and $(66) in 2002 .......          (156)           (73)            70
Reclassification of realized gains on available-for-sale securities
     included in net income, net of income tax expense of $80 in 2002 .........             0              0           (151)
Unamortized deferred loss on termination of derivative, net of income tax
     benefit of $621 in 2002 ..................................................             0              0         (1,152)
Reclassification of amortization of deferred loss on termination of derivative,
     net of income tax benefit of $184 in 2004, 2003, and 2002 ................           341            341            341
                                                                                  -----------    -----------    -----------
Total other comprehensive income (loss) .......................................           185            268           (892)
                                                                                  -----------    -----------    -----------
Comprehensive income (loss)....................................................   $    40,824    $    (2,502)   $    (5,298)
                                                                                  ===========    ===========    ===========
Basic net income (loss) per share:
Before cumulative effect of accounting changes.................................         $ .36          $ .41          $(.04)
Cumulative effect of accounting changes........................................           .00           (.43)           .00
                                                                                        -----          -----          -----
Net income (loss)..............................................................         $ .36          $(.02)         $(.04)
                                                                                        =====          =====          =====
Diluted net income (loss) per share:
Before cumulative effect of accounting changes.................................         $ .35          $ .39          $(.04)
Cumulative effect of accounting changes........................................           .00           (.37)           .00
                                                                                        -----          -----          -----
Net income (loss)..............................................................         $ .35          $ .01(1)       $(.04)
                                                                                        =====          =====          =====
<FN>

(1)  Results do not add due to rounding.

See Notes to Consolidated Financial Statements.
</FN>
</TABLE>



                                       42
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                     Common Stock        Additional         Treasury Stock
                                                 ------------------        Paid-in       ---------------------
(Dollars in thousands)                           Shares       Amount       Capital       Shares         Amount
                                                 ------       ------       -------       ------         ------
<S>                                            <C>            <C>        <C>          <C>              <C>
Balance, February 3, 2001...................   110,731,483    $11,073    $ 80,977      (9,105,000)     $(41,537)
Issued to employees.........................       467,113         47       3,532
Exercise of stock options...................       284,165         28       1,112
Shares withheld for payment of employee
     payroll taxes due on shares issued
     under employee stock plans.............       (12,598)        (1)        (95)
Acquisition of Lane Bryant, Inc.............       420,993         42      17,721       9,105,000        41,537
Tax benefit - employee stock programs.......                                   20
                                               -----------    -------    --------      ----------       -------
Balance, February 2, 2002...................   111,891,156     11,189     103,267               0             0
Issued to employees.........................       189,266         19       1,329
Exercise of stock options...................     1,326,561        133       5,695
Shares withheld for payment of employee
     payroll taxes due on shares issued
     under employee stock plans.............       (25,801)        (2)       (148)
Shares received in payment of stock
     option exercises.......................      (176,278)       (18)     (1,485)
Shares issued on conversion of convertible
     debt...................................    11,944,338      1,194      89,877
Purchases of treasury stock.................                                          (12,265,993)      (84,136)
Tax benefit - employee stock programs.......                                1,505
                                               -----------    -------    --------      ----------      --------
Balance, February 1, 2003...................   125,149,242     12,515     200,040     (12,265,993)      (84,136)
Issued to employees.........................       179,506         18         991
Exercise of stock options...................       220,459         22         834
Shares withheld for payment of employee
     payroll taxes due on shares issued
     under employee stock plans.............       (22,634)        (2)        (90)
Tax benefit - employee stock programs.......                                   23
                                               -----------    -------    --------      ----------      --------
Balance, January 31, 2004...................   125,526,573    $12,553    $201,798     (12,265,993)     $(84,136)
                                               ===========    =======    ========      ==========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                  Accumulated
                                                   Deferred          Other
                                                   Employee      Comprehensive      Retained
                                                 Compensation    Income (Loss)      Earnings
                                                 ------------    -------------      --------

<S>                                                <C>                <C>           <C>
Balance, February 3, 2001.......................   $(1,629)           $  74         $444,311
Issued to employees.............................    (3,229)
Amortization....................................     1,117
Unrealized losses, net of tax benefit of $450...                       (892)
Net loss........................................                                      (4,406)
                                                   -------            -----         --------
Balance, February 2, 2002.......................    (3,741)            (818)         439,905
Issued to employees.............................      (844)
Amortization....................................     1,215
Unrealized gains, net of income taxes of $139...                        268
Net loss........................................                                      (2,770)
                                                   -------            -----         --------
Balance, February 1, 2003.......................    (3,370)            (550)         437,135
Issued to employees.............................      (600)
Amortization....................................     1,431
Unrealized gains, net of income taxes of $84....                        185
Net income......................................                                      40,639
                                                   -------            -----         --------
Balance, January 31, 2004.......................   $(2,539)           $(365)        $477,774
                                                   =======            =====         ========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>



                                       43
<PAGE>



                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        Year Ended
                                                                        -----------------------------------------
                                                                        January 31,     February 1,    February 2,
(In thousands)                                                             2004            2003           2002
                                                                           ----            ----           ----
<S>                                                                       <C>          <C>          <C>
Operating activities

Net income (loss) .....................................................   $  40,639    $  (2,770)   $  (4,406)
Adjustments to reconcile net income (loss) to net
     cash provided by operating activities:
     Depreciation and amortization ....................................      76,347       79,421       63,902
     Deferred income taxes, net of acquisitions .......................      12,049        5,327        9,212
     Write-down of Catherine's goodwill ...............................           0       43,975            0
     Cumulative effect of capitalization of cash received from vendors            0        7,881            0
     Write-down of capital assets due to restructuring ................           0            0       17,763
     Net loss from disposition of capital assets ......................       1,537        3,436        4,278
     Capitalized interest on conversion of convertible notes ..........           0        3,026            0
     Tax benefit related to stock plans ...............................          23        1,505           20
     Other, net .......................................................        (142)        (679)        (231)
     Changes in operating assets and liabilities, net of acquisitions:
         Merchandise inventories ......................................     (23,523)       6,054       66,671
         Accounts payable .............................................     (12,175)      40,061      (12,541)
         Prepayments and other ........................................      16,802       16,583       (9,866)
         Income taxes payable .........................................      (6,016)       7,144            0
         Accrued expenses and other ...................................     (17,851)      14,786      (10,356)
         Accrued expenses related to cost reduction plan ..............       2,596            0            0
         Accrued restructuring costs ..................................           0      (19,758)      19,385
                                                                          ---------    ---------    ---------
Net cash provided by operating activities .............................      90,286      205,992      143,831
                                                                          ---------    ---------    ---------

Investing activities
Gross purchases of available-for-sale securities ......................     (35,440)     (58,308)     (51,902)
Proceeds from sales of available-for-sale securities ..................      31,463       54,797      106,950
Acquisition of Lane Bryant, Inc., net of cash acquired ................           0            0     (280,841)
Investment in capital assets ..........................................     (45,014)     (74,303)     (63,046)
Proceeds from sales of capital assets .................................         500          801            0
Decrease (increase) in other assets ...................................      (6,704)      (4,150)       2,705
                                                                          ---------    ---------    ---------
Net cash used in investing activities .................................     (55,195)     (81,163)    (286,134)
                                                                          ---------    ---------    ---------

Financing activities
Proceeds from short-term borrowings ...................................     221,423      534,499      623,704
Repayments of short-term borrowings ...................................    (221,423)    (588,795)    (569,407)
Proceeds from long-term borrowings ....................................       1,557      164,000       90,950
Repayments of long-term borrowings ....................................     (14,566)     (84,122)     (16,251)
Payments of deferred financing costs ..................................      (1,500)      (5,568)      (7,991)
Purchases of treasury stock ...........................................           0      (84,136)           0
Proceeds from issuances of common stock ...............................       1,173        4,679        1,394
                                                                          ---------    ---------    ---------
Net cash provided by (used in) financing activities ...................     (13,336)     (59,443)     122,399
                                                                          ---------    ---------    ---------

Increase (decrease) in cash and cash equivalents ......................      21,755       65,386      (19,904)
Cash and cash equivalents, beginning of year ..........................     102,026       36,640       56,544
                                                                          ---------    ---------    ---------
Cash and cash equivalents, end of year ................................   $ 123,781    $ 102,026    $  36,640
                                                                          =========    =========    =========

Non-cash financing and investing activities
Common stock issued on conversion of convertible notes ................   $       0    $  89,105    $       0
                                                                          =========    =========    =========
Common stock issued for acquisition of Lane Bryant, Inc. ..............   $       0    $       0    $  59,300
                                                                          =========    =========    =========
Purchases of assets under capital leases ..............................   $  17,466    $   6,997    $  24,677
                                                                          =========    =========    =========

<FN>
Certain prior-year amounts have been reclassified to conform to the current-year
presentation. See Notes to Consolidated Financial Statements.
</FN>
</TABLE>


                                       44
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business
     We operate retail specialty stores located throughout the continental
United States that merchandise plus-size, misses, and junior sportswear,
dresses, coats, and intimate apparel, as well as accessories and casual
footwear, at a wide range of prices.

Principles of Consolidation
     The consolidated financial statements include the accounts of Charming
Shoppes, Inc. and our wholly-owned and majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated. We have
a 52 - 53 week fiscal year ending on the Saturday nearest to January 31. As used
herein, the terms "Fiscal 2004," "Fiscal 2003," and "Fiscal 2002" refer to the
fiscal years ended January 31, 2004, February 1, 2003, and February 2, 2002,
respectively. The term "Fiscal 2005" refers to the fiscal year which will end on
January 29, 2005. The terms "the Company," "we," "us," and "our" refer to
Charming Shoppes, Inc., and, where applicable, our consolidated subsidiaries.

     During Fiscal 2001, we entered into a joint venture agreement with MONSOON
plc. to open and operate MONSOON/ACCESSORIZE stores in the United States. We
invested $4,000,000 for an 80% controlling interest in the joint venture. We
began operating the joint venture as a consolidated operating unit and accounted
for MONSOON plc.'s investment as a minority interest. On March 18, 2003, we
announced that we would discontinue the operation of the 9 MONSOON/ACCESSORIZE
stores operated under the joint venture, and we closed the stores during Fiscal
2004 (see "Property and Depreciation" below).

Foreign Operations
     We use a December 31 fiscal year for our foreign subsidiaries in order to
expedite our year-end closing. There were no intervening events or transactions
with respect to our foreign subsidiaries during the period from January 1, 2004
to January 31, 2004 that would have a material effect on our financial position
or results of operations.

Use of Estimates
     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires that our management
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Cash Equivalents
     We consider all highly-liquid investments with a maturity of three months
or less when purchased to be cash equivalents. These amounts are stated at cost,
which approximates market value.

Available-for-Sale Securities
     Our investments are classified as available for sale. Securities traded on
an established market are carried at fair value, and unrealized gains and losses
are reported in a separate component of stockholders' equity. We adjust the cost
of these investments for amortization of premiums and the accretion of discounts
to maturity where applicable. Such adjustments are included in interest income.
We include interest income and realized gains and losses from investments in
other income. The cost of securities sold is based on the specific
identification method. Short-term available-for-sale securities include
investments with an original maturity of greater than three months and a
remaining maturity of less than one year, and consist primarily of retained
interests in our asset securitization program (see "Note 16. Asset
Securitization" below). Long-term available-for-sale securities include



                                       45
<PAGE>

                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


investments that have an original maturity of greater than one year, but are
available on an as-needed basis to support our working capital needs.

Inventories
     We value our merchandise inventories at the lower of cost or market, using
the retail inventory method (average cost basis). Under the retail inventory
method, the valuation of inventories at cost and the resulting gross margins are
adjusted in proportion to markdowns currently taken and shrinkage on the retail
value of inventories. In addition to markdowns that have been taken (i.e.,
selling price permanently reduced on the selling floor), we accrue an estimate
for markdowns not yet recorded that we believe will be necessary to sell
end-of-season inventory on hand at the end of the period. We purchase inventory
by season and distinguish aged inventory by tracking inventory quantities on
hand by season. We liquidate aged seasonal inventory through markdowns or sale
to liquidators. We base our inventory shrinkage on periodic physical inventories
on a store-by-store basis, with supplemental observations in locations
exhibiting high shrinkage rates. We determine interim shrinkage estimates on a
store-by-store basis, based on our most recent physical inventory results.

Property and Depreciation
     For financial reporting purposes, we compute depreciation and amortization
primarily using the straight-line method over the estimated useful lives of the
assets or, in the case of leasehold improvements, over the lives of the
respective leases. We use accelerated depreciation methods for income tax
reporting purposes. Depreciation and amortization of property, equipment
(including equipment acquired under capital leases), and leasehold improvements
was $68,354,000, $70,357,000, and $53,134,000 in Fiscal 2004, 2003, and 2002,
respectively.

     Prior to Fiscal 2003, we evaluated the recoverability of our long-lived
assets in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." In Fiscal 2003, we adopted the provisions of SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
superseded SFAS No. 121 and resolved certain implementation issues related to
SFAS No. 121. SFAS No. 144 also superseded the accounting and reporting
provisions of Accounting Principles Board ("APB") Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual, and Infrequently Occurring Events and
Transactions" related to the disposal of a segment of a business. SFAS No. 144
retained the fundamental provisions of SFAS No. 121 related to the recognition
and measurement of the impairment of long-lived assets to be held and used, and
provides additional guidance on estimating cash flows when testing for
recoverability. SFAS No. 141 also requires the classification of long-lived
assets to be disposed of other than by sale (such as by abandonment) as held and
used until disposal, and establishes more restrictive criteria for classifying
assets as held for sale.

     Under SFAS No. 144, we assess our long-lived assets for recoverability
whenever events or changes in circumstances indicate that the carrying amounts
of long-lived assets may not be recoverable. We consider historical performance
and future estimated results when evaluating an asset for potential impairment,
then compare the carrying amount of the asset to the estimated future
undiscounted cash flows expected to result from the use of the asset. If the
estimated future undiscounted cash flows are less than the carrying amount of
the asset, we write down the asset to its estimated fair value and recognize an
impairment loss. Our estimate of fair value is generally based on either
appraised value or the present value of future cash flows.



                                       46
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     Pursuant to SFAS No. 144, we recorded a $2,700,000 write-down of
under-performing assets related to our consolidated MONSOON joint venture during
Fiscal 2003. The amount of the write-down is included in occupancy expenses.

Goodwill and Intangible Assets
      In Fiscal 2002, we acquired trademarks, tradenames, internet domain names,
customer lists, and a covenant not to compete in connection with our acquisition
of LANE BRYANT (see "Note 2. LANE BRYANT Acquisition" below). The values of
these intangible assets were determined by an independent appraisal, using an
after-tax discounted cash flow method, based on the estimated future benefits to
be received from the assets. The LANE BRYANT trademarks, tradenames, and
internet domain names are well-recognized in the plus-size apparel market. We
expect to renew and protect these trademarks, tradenames, and internet domain
names indefinitely, and expect that they will generate positive cash flows for
the Company for the foreseeable future. Therefore, the appraised value of the
trademarks, tradenames, and internet domain names are not being amortized. We
periodically review the trademarks, tradenames, and internet domain names for
indicators of a limited useful life. We are amortizing the customer lists and
covenant not to compete over their estimated useful life of five years.

     We have allocated to goodwill the excess of the cost of the LANE BRYANT
acquisition over the estimated fair value of the identifiable tangible and
intangible net assets acquired. In accordance with the provisions of SFAS No.
142, we are not amortizing the goodwill.

     Prior to Fiscal 2003, we amortized goodwill related to our acquisition of
Catherines Stores, Inc. ("CATHERINES") on a straight-line basis over 20 years.
We recognized $4,885,000 of amortization of CATHERINES goodwill in Fiscal 2002.
As of the beginning of Fiscal 2003, we fully adopted SFAS No. 142, "Goodwill and
Other Intangible Assets." In accordance with the transition provisions of SFAS
No. 142, we discontinued the amortization of CATHERINES goodwill, and we review
the value of the LANE BRYANT and CATHERINES goodwill for impairment on an annual
basis.

     The pro forma effect of applying the non-amortization provisions of SFAS
No. 142 for Fiscal 2002 is as follows:

<TABLE>
<CAPTION>
(In thousands, except per-share amounts)                             2002
                                                                     ----
<S>                                                                 <C>
Net loss as reported..............................................  $(4,406)
Amortization of goodwill (1)......................................    4,885
                                                                    -------
Pro forma net income excluding goodwill amortization..............  $   479
                                                                    =======

Diluted net income per share as reported..........................    $(.04)
Pro forma per share effect of excluding goodwill amortization (1).      .05
                                                                      -----
Pro forma diluted net income per share............................    $ .00(2)
                                                                      =====
--------------------
<FN>
(1)  The goodwill amortization is not deductible for tax purposes and therefore
     has no related tax effect.

(2)  Results do not add due to rounding.
</FN>
</TABLE>



                                       47
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     In accordance with the transition provisions of SFAS No. 142, we performed
a review of our goodwill and other indefinite-lived intangible assets for
impairment during Fiscal 2003. As a result, we determined that the carrying
value of goodwill related to our CATHERINES acquisition (including the value of
intangible assets we did not separately account for at the date of the
CATHERINES acquisition) exceeded the estimated fair value of the CATHERINES
goodwill under SFAS No. 142. We determined the estimated fair value of the
CATHERINES goodwill using the present value of expected future cash flows
associated with the CATHERINES assets. We recorded a write-down (which was not
deductible for income tax purposes) of $43,975,000 to reduce the carrying value
of the goodwill to its estimated fair value. The majority of the write-down is
attributable to the value of unrecorded trademarks. We also evaluated the
goodwill, trademarks, tradenames, and internet domain names related to our LANE
BRYANT acquisition as of February 3, 2002 in accordance with the provisions of
SFAS No. 142, and determined that there had been no impairment of these assets.
The write-down of the CATHERINES goodwill is presented as the cumulative effect
of an accounting change, as of February 3, 2002, in our Consolidated Statement
of Operations and Comprehensive Income (Loss) for Fiscal 2003. The calculation
of the estimated fair value of the goodwill and other intangible assets required
estimates, assumptions, and judgments, and results might have been materially
different if different estimates, assumptions, and judgments had been used.

     In accordance with the provisions of SFAS No. 142, we are required to
re-evaluate goodwill and other indefinite-lived intangible assets annually, or
more frequently if there is an indication of possible impairment. We performed
this annual review during the fourth quarters of Fiscal 2003 and Fiscal 2004,
and determined that there has been no impairment of these assets.

Asset Securitization
     Asset securitization involves the sale of FASHION BUG proprietary credit
card receivables by our credit card bank to a special purpose entity, which in
turn transfers the receivables to a qualified special purpose entity (the
"Trust") created for the securitization. Asset-backed certificates issued by the
Trust represent undivided interests in those credit card receivables transferred
into the Trust. The Trust issues certificates which are sold to investors, and
we retain any undivided interests that remain unsold. We include these remaining
undivided interests, and any other retained interests, in short-term
available-for-sale securities in our accompanying consolidated balance sheet.
The carrying value of these retained interests approximates their fair value.
The assets and liabilities of the Trust are not included in our consolidated
balance sheet.

     Transaction expenses related to securitizations are deferred and amortized
over the reinvestment period of the transaction. Net securitization income is
included as a reduction of selling, general, and administrative expenses in our
accompanying consolidated statements of operations and comprehensive income
(loss). We have adopted the accounting requirements of SFAS No. 140 as of March
31, 2001, and we have applied these requirements to new beneficial interests
issued under our asset securitization program after that date. Adoption of the
accounting requirements of SFAS No. 140 did not have a material impact on our
results of operations or financial position. See "Impact of Recent Accounting
Pronouncements" below for a discussion of Financial Accounting Standards Board
("FASB") Interpretation No. 46, "Consolidation of Variable Interest Entities."

Deferred Debt Acquisition Costs
     Debt acquisition costs are deferred and amortized on a straight-line basis
over the life of the related debt agreement.



                                       48
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


Insurance Liabilities
     We use a combination of third-party insurance and/or self-insurance for
certain risks, including workers' compensation, medical, dental, automobile, and
general liability claims. Our insurance liabilities are a component of "Accrued
expenses" on our consolidated balance sheet, and represent an estimate of the
ultimate cost of uninsured claims incurred as of the balance sheet date. In
estimating our self insurance liabilities, we use independent actuarial
estimates of expected losses, which are based on statistical analyses of
historical data. Loss estimates are adjusted based upon actual claim settlements
and reported claims. Although we do not expect the amounts ultimately paid to
differ significantly from our estimates, self-insurance liabilities could be
affected if future claim experience differs significantly from the historical
trends and the actuarial assumptions. We evaluate the adequacy of these
liabilities on a regular basis, modifying our assumptions as necessary, updating
our records of historical experience, and adjusting our liabilities as
appropriate.

Common Stock Plans
     We account for stock-based compensation using the intrinsic value method,
in accordance with Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and its related interpretations. We
amortize deferred compensation expense attributable to stock awards and stock
options having an exercise price less than the market price on the date of grant
on a straight-line basis over the vesting period of the award or option. We do
not recognize compensation expense for options having an exercise price equal to
the market price on the date of grant or for shares purchased under our Employee
Stock Purchase Plan. We have elected to follow the disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based Compensation." We adopted the
disclosure requirements of SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," as of the beginning of Fiscal 2004.

     The following table reconciles net income (loss) and net income (loss) per
share as reported, using the intrinsic value method under APB No. 25, to pro
forma net income (loss) and pro forma net income (loss) per share using the fair
value method under SFAS No. 123:

<TABLE>
<CAPTION>
(In thousands, except per share amounts)                       2004       2003        2002
                                                               ----       ----        ----
<S>                                                          <C>        <C>         <C>
Net income (loss) as reported.............................   $40,639    $(2,770)    $(4,406)
Add stock-based employee compensation as reported,
     using intrinsic value method, net of income taxes....       930        790         725
Less stock-based employee compensation, using fair-value
     method, net of income taxes..........................    (3,298)    (5,864)     (3,364)
                                                             -------    -------     -------
Pro forma net income (loss)...............................   $38,271    $(7,844)    $(7,045)
                                                             =======    =======     =======

Basic net income (loss) per share:
     As reported..........................................      $.36      $(.02)      $(.04)
     Pro forma............................................       .34       (.07)       (.07)
Diluted net income (loss) per share:
     As reported..........................................       .35        .01        (.04)
     Pro forma............................................       .33       (.02)       (.07)
</TABLE>




                                       49
<PAGE>



                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     For purposes of determining the pro forma disclosures, we estimate the fair
value of each option grant on the date of grant using the Black-Scholes
option-pricing model. In applying the Black-Scholes model, we used an estimated
stock price volatility of 37.6, a dividend yield of 0.0%, expected lives of 3
months for the Employee Stock Purchase Plan, 3 to 5 years for stock award plans,
and 3 to 7 years for stock option and stock incentive plans, and the following
risk-free interest rates:

<TABLE>
<CAPTION>
(In percents)                              2004     2003     2002
                                           ----     ----     ----
<S>                                        <C>      <C>      <C>
Risk-free interest rate:
     Employee stock purchase plan........   0.9      1.1      1.7
     Stock award plans...................   2.8      3.1      3.8
     Stock option and incentive plans....   2.8      3.1      5.0
</TABLE>

Revenue Recognition
     Revenues from merchandise sales are net of returns and allowances, and
exclude sales tax. Revenues from our e-commerce business include shipping and
handling fees billed to customers. We record a reserve for estimated future
sales returns based on an analysis of actual returns received, and we defer
recognition of layaway sales to the date of delivery.

     We offer our customers various loyalty card programs (see "Note 12.
customer loyalty card programS" below). Customers that join these programs are
entitled to various benefits, including discounts and rebates on purchases
during the membership period. Customers generally join these programs by paying
an annual membership fee. We recognize revenue from these loyalty programs as
sales over the life of the membership period based on when the customer earns
the benefits and when the fee is no longer refundable. Costs we incur in
connection with administering these programs are recognized in cost of goods
sold as incurred.

Cost of Goods Sold, Buying, and Occupancy Expenses
     Cost of goods sold includes merchandise costs net of discounts and
allowances, freight, inventory shrinkage, and shipping and handling costs
associated with our e-commerce business. We capitalize net merchandise costs and
freight as inventory costs. Cost of goods sold also includes costs incurred in
connection with our customer loyalty card programs (see "Revenue Recognition"
above). Buying expenses include payroll, payroll-related costs, and operating
expenses for our buying departments and warehouses. Occupancy expenses include
rent, real estate taxes, insurance, common area maintenance, utilities,
maintenance, and depreciation for our stores and warehouse facilities and
equipment. Buying and occupancy costs are treated as period costs and are not
capitalized as part of inventory.

Advertising Costs
     We expense advertising costs as incurred. Advertising costs charged to
expense were $60,494,000, $63,943,000, and $47,310,000 in Fiscal 2004, 2003, and
2002, respectively.

Costs Associated With Exit or Disposal Activities
     We recognize liabilities for costs associated with exit or disposal
activities initiated after December 31, 2002 when the liabilities are incurred,
and value the liabilities at fair value, in accordance with SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." Severance
pay is recognized as employees render service over future periods if the
severance arrangement requires employees to render future service beyond a
minimum retention period.




                                       50
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


Income Taxes
     We use the liability method of accounting for income taxes as prescribed by
SFAS No. 109, "Accounting for Income Taxes." Under the liability method, we
adjust deferred tax assets and liabilities to reflect the effect of changes in
enacted tax rates on expected reversals of financial statement and income tax
basis differences.

     We have not provided U.S. income taxes on undistributed earnings of foreign
subsidiaries accumulated through January 31, 2004 because we intend to reinvest
such undistributed earnings in foreign operations.

Net Income (Loss) Per Share
     Net income (loss) per share is based on the weighted-average number of
common shares outstanding during each fiscal year. Net income per share assuming
dilution is based on the weighted-average number of common shares and share
equivalents outstanding. Common share equivalents include the effect of dilutive
stock options and stock awards, using the treasury stock method. Common share
equivalents also include the effect of assumed conversions of our convertible
debt, using the "if-converted" method, when the effect of such assumed
conversions is dilutive. Share equivalents are not included in the
weighted-average shares outstanding for determining net loss per share, as the
result would be anti-dilutive.

Comprehensive Income (Loss)
     The consolidated statements of operations and comprehensive income (loss)
include transactions from non-owner sources that affect stockholders' equity.
Unrealized gains and losses recognized in comprehensive income are reclassified
to net income upon their realization.

Business Segments and Related Disclosures
     Our LANE BRYANT, FASHION BUG, and CATHERINES stores are aggregated within a
single segment - retail sales of women's apparel, and within a single geographic
area - the continental United States. Our foreign sourcing operations do not
constitute a material geographic segment.

Costs of Computer Software Developed or Obtained for Internal Use
     Costs related to the development of internal-use software, other than those
incurred during the application development stage, are expensed as incurred.
Costs incurred during the application development stage are capitalized and
amortized over the estimated useful life of the software.

Cash Consideration Received from Vendors
     As of the beginning of Fiscal 2003, cash consideration received from
vendors is recorded as a reduction of inventory and is recognized in cost of
goods sold as inventory is sold, in accordance with EITF Issue 02-16,
"Accounting by a Customer (Including a Reseller) for Cash Consideration Received
from a Vendor." In Fiscal 2003, we recognized a charge of $5,123,000, net of
income taxes of $2,758,000, for the cumulative effect of the deferral of cash
received from vendors as of the beginning of Fiscal 2003. The impact of the
adoption of EITF 02-16 on the year ended February 1, 2003 was an increase in
cost of goods sold of $216,000. As of January 31, 2004 and February 1, 2003,
$9,456,000 and $8,097,000, respectively, of cash received from vendors has been
deferred into inventory and will be recognized as inventory is sold. We defer
the recognition of markdown allowances during interim periods in order to better
match the recognition of markdown allowances to the period the related markdown
expenses are recorded. Pro forma net loss and diluted net loss per share for
Fiscal 2002, assuming the change in accounting for the deferral of cash received
from vendors was retroactively applied to the beginning of Fiscal 2002, are
$5,189,000 and $.05, respectively.




                                       51
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


Impact of Recent Accounting Pronouncements
     We adopted SFAS No. 143, "Accounting for Asset Retirement Obligations," as
of the beginning of Fiscal 2004. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. Adoption of SFAS No. 143 did
not have a material impact on our financial position or results of operations.

     In January 2003, the FASB issued Financial Interpretation ("FIN") No. 46,
"Consolidation of Variable Interest Entities," an interpretation of Accounting
Research Bulletin ("ARB") No. 51, "Consolidated Financial Statements." A
variable interest entity ("VIE") is a corporation, trust, partnership, or other
legal entity used for business purposes that either does not have equity
investors with substantive voting rights or has equity investors that do not
provide sufficient financial resources for the entity to finance its activities
without additional subordinated financial support from other parties.
Consolidation of a VIE by a variable interest holder is required if the variable
interest holder is subject to a majority of the VIE's risk of loss, is entitled
to receive a majority of the VIE's residual returns, or both. The variable
interest holder that consolidates the VIE is the primary beneficiary. FIN No. 46
also requires that the primary beneficiary and all other enterprises with a
significant variable interest in a VIE provide certain additional disclosures.
FIN No. 46 provides certain exceptions to these rules, including qualifying
special purpose entities ("QSPEs") subject to the requirements of SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities."

     FIN No. 46 is effective for all VIEs created after January 31, 2003. The
disclosure provisions of FIN No. 46 apply to financial statements issued after
January 31, 2003, regardless of when the VIE was established. For VIEs created
before February 1, 2003, the consolidation provisions of FIN No. 46, as
originally issued, were to be applied in the first interim or annual reporting
period beginning after June 15, 2003. In October 2003, the FASB postponed the
implementation date for VIEs created before February 1, 2003 to the first
interim or annual period ending after December 15, 2003, provided that the
reporting entity has not issued financial statements reporting the VIE in
accordance with FIN No. 46. In December 2003, the FASB revised FIN No. 46 to
delay the required implementation date for entities that are not special purpose
entities ("SPEs"), such as equity method investments in operating companies.
Early adoption of the provisions of FIN No. 46 is permitted. We do not expect
that adoption of FIN No. 46 will have a material impact on our financial
position or results of operations.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 149 is generally effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after that date.

     We do not currently hold derivative instruments subject to the provisions
of SFAS No. 133, as amended. Adoption of SFAS No. 149 had no impact on our
financial position or results of operations.




                                       52
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that financial instruments within the scope of the statement be
classified as a liability (or an asset in some circumstances). Under previous
guidance, such instruments could be classified as equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities. On November 7, 2003, the FASB issued a FASB
Staff Position ("FSP") to defer indefinitely the application of various
provisions of SFAS No. 150 for certain mandatorily redeemable non-controlling
interests of all entities. The FSP also deferred indefinitely the classification
and measurement provisions for non-controlling interests in consolidated
limited-life entities.

     We have not issued financial instruments subject to the provisions of SFAS
No. 150. We do not expect that adoption of SFAS No. 150 will have a material
impact on our financial position or results of operations.

     In December 2003, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin ("SAB") No. 104, "Revenue Recognition." SAB No. 104 revises
or rescinds portions of the interpretive guidance on revenue recognition
included in Topic 13 of the codification of SEC Staff Accounting Bulletins in
order to make this interpretive guidance consistent with current authoritative
accounting and auditing guidance and SEC rules and regulations. The adoption of
SAB No. 104 did not have a material impact on our financial position or results
of operations.


NOTE 2.  LANE BRYANT ACQUISITION

     On August 16, 2001, we acquired 100% of the outstanding stock of Lane
Bryant, Inc. ("LANE BRYANT") from a subsidiary of Limited Brands, Inc. ("Limited
Brands") for cash of $286,223,000 and 8,688,784 shares of our common stock
valued at $55,000,000. As of the date of acquisition, LANE BRYANT operated 651
retail apparel stores in 46 states, specializing in fashion apparel and related
accessories for women wearing plus-sizes 14 and greater. The cash paid for the
acquisition was funded with the use of approximately $83,000,000 of our existing
cash and cash equivalents, a $75,000,000 term loan, and revolving loans under a
new credit facility we obtained in connection with the acquisition (see "Note 7.
Debt" below). In December 2001, based on the final determination of the fair
value of the LANE BRYANT net assets acquired, we issued to a subsidiary of
Limited Brands an additional 837,209 shares of our common stock valued at
$4,300,000. The aggregate total of 9,525,993 shares of common stock issued
included 9,105,000 shares of treasury stock that we had re-acquired before the
LANE BRYANT acquisition. During Fiscal 2002, we repurchased the 9,525,993 shares
of our common stock issued in connection with our acquisition of LANE BRYANT
(see "Note 8. Stockholders' Equity" below). In accordance with the terms of the
acquisition agreement, the numbers of shares of our common stock issued in
connection with the acquisition were based on the average closing market values
of our stock for the five-day period ending two days before the issuance of the
shares.

     Our acquisition of LANE BRYANT complements our long-term growth strategy of
becoming a leader in the sale of plus-size specialty apparel. LANE BRYANT is a
premier brand in the plus-size market with an established customer base and
proprietary brand names, and operates in multiple retail venues, primarily in
leading malls.



                                       53
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)



     We accounted for the acquisition under the purchase method of accounting,
and we included the results of operations of LANE BRYANT in our results of
operations from the date of acquisition. Prior-period results have not been
restated. Assets acquired and liabilities assumed were recorded at their
estimated fair values. In accordance with the provisions of SFAS No. 141, we
recognized certain intangible assets acquired, primarily trademarks, tradenames,
and internet domain names, separately from goodwill. The fair values of acquired
intangible assets were based on an independent appraisal. The fair values of
acquired property and equipment were based primarily on depreciated replacement
cost. Other assets acquired and liabilities assumed were recorded at their
estimated fair values. Concurrent with the acquisition of LANE BRYANT, we began
a detailed evaluation of LANE BRYANT's operations, resulting in a plan for the
closing of 14 under-performing LANE BRYANT stores and the involuntary
termination of approximately 140 store employees. As of February 2, 2002, we
finalized the plan to close the under-performing stores and to terminate the
store employees. As a result, we recorded a liability of $3,762,000 as part of
the purchase price allocation, which was primarily for estimated lease
termination payments. In addition, we recorded an accrual of $390,000 for
severance of store employees. As of the end of Fiscal 2004, we closed nine of
the under-performing stores. Of the remaining five stores, two stores will close
during Fiscal 2005 and three stores will not be closed. In connection with the
acquisition, we entered into a services agreement with Limited Brands and
certain affiliates of Limited Brands under which we received certain
transitional services. These transitional services included data center
processing of LANE BRYANT business applications, such as store polling and
support of store systems; continuation of contract services with vendors for
voice and data networks; and conversion services. We moved all of the LANE
BRYANT business applications and processes from the Limited Brands platform to
our platform by the end of Fiscal 2003.

     In accordance with the provisions of SFAS No. 142, the trademarks,
tradenames, and internet domain names acquired are not being amortized, but are
subject to annual reviews for impairment or for indicators of a limited useful
life. Other intangible assets acquired, consisting of customer lists and a
covenant not to compete, are being amortized over their estimated useful life of
five years.

     The excess of the cost of the acquisition over the estimated fair value of
the identifiable net assets acquired has been allocated to goodwill. In
accordance with the requirements of SFAS No. 142, the goodwill is not being
amortized, but is subject to an annual review for impairment.










                                       54
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     The following condensed balance sheet presents the financial position of
LANE BRYANT as of August 16, 2001 after giving effect to the acquisition:

<TABLE>
<CAPTION>
(In thousands)
<S>                                                          <C>
Cash and cash equivalents...............................     $  5,382
Merchandise inventories.................................      107,951
Deferred income taxes...................................       20,099
Prepayments and other...................................       11,504
                                                             --------
Total current assets....................................      144,936
Property, equipment, and leasehold improvements, net....       79,884
Tradenames and other intangibles........................      172,100
Goodwill................................................       23,038
                                                             --------
Total assets............................................     $419,958
                                                             ========

Accounts payable........................................     $ 25,551
Accrued expenses........................................       35,842
                                                             --------
Total current liabilities...............................       61,393
Deferred income taxes...................................       13,042
Total stockholders' equity..............................      345,523
                                                             --------
Total liabilities and equity............................     $419,958
                                                             ========
</TABLE>

     The following unaudited pro forma results of operations for Fiscal 2002 are
based on historical data, and give effect to our acquisition of LANE BRYANT as
if the acquisition had occurred on February 4, 2001. The pro forma information
includes adjustments having a continuing impact on the consolidated Company as a
result of using the purchase method of accounting for the acquisition.

<TABLE>
<CAPTION>
(In thousands except per share amounts)                      2002
                                                             ----
<S>                                                       <C>
Net sales...............................................  $2,486,178
Income before cumulative effect of accounting changes...       1,691
Net income..............................................       1,691
Net income per share:
         Basic..........................................        $.02
         Diluted........................................         .02
</TABLE>

     The unaudited pro forma results of operations are not necessarily
indicative of the actual results of operations that would have occurred if the
acquisition had occurred as of February 4, 2001, and are not necessarily
indicative of the results that may be achieved in the future. The unaudited pro
forma information does not reflect adjustments for operating synergies that we
have realized, or may realize, as a result of the acquisition. We can give no
assurances as to the amount and timing of any financial benefits that we may
ultimately realize as a result of the acquisition.




                                       55
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     During Fiscal 2003, we recorded certain adjustments to goodwill recognized
in connection with the LANE BRYANT acquisition, as follows:

o    At the date of acquisition in August 2001, there was an agreement for an
     unfavorable service contract for which we recorded a liability of
     $4,640,000 based on the estimated payment terms. During Fiscal 2003, the
     payment terms of the unfavorable service contract were finalized. As a
     result, we revised our estimate of costs related to the contract to
     $2,081,000, which resulted in a decrease of $1,561,000 in LANE BRYANT
     goodwill, net of deferred income taxes of $998,000.

o    We recorded adjustments to certain liabilities, which resulted in a
     decrease in LANE BRYANT goodwill of $438,000, net of deferred income taxes
     of $90,000.

o    We recorded a liability for severance in accordance with an agreement
     entered into at the time of the acquisition that allowed us to use the
     existing LANE BRYANT distribution center and receive related distribution
     services on a transition basis. This severance liability resulted in an
     increase in goodwill of $611,000, net of deferred income taxes of $389,000.

o    We reduced the acquisition value assigned to equipment and leasehold
     improvements in the existing LANE BRYANT distribution center, which we will
     abandon at the end of the transition period as a result of our acquisition
     of a replacement distribution center in White Marsh, Maryland. This
     adjustment, which had no deferred tax impact, resulted in an increase in
     goodwill of $971,000.

o    We increased a liability for future claims related to LANE BRYANT's
     pre-acquisition operations, which resulted in an increase in goodwill of
     $1,220,000, net of deferred income taxes of $780,000.

o    We decreased deferred tax assets as a result of a correction of the
     effective tax rate used to determine deferred taxes related to certain
     assets acquired, which resulted in an increase in goodwill of $1,524,000.

     During the fourth quarter of Fiscal 2004, we finalized the closing of
under-performing stores identified at LANE BRYANT's acquisition date and reduced
liabilities for estimated lease termination payments, severance of store
employees, and other liabilities, which resulted in a decrease in goodwill of
$1,638,000, net of deferred income taxes of $1,227,000.





                                       56
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 3.  PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS

<TABLE>
<CAPTION>
                                                           Lives
(Dollars in thousands)                                    (Years)       2004         2003
                                                          -------       ----         ----
<S>                                                       <C>         <C>          <C>
Land.....................................................             $  5,983     $  5,630
Buildings and improvements............................... 10 to 40      70,538       73,285
Store fixtures...........................................  5 to 10     124,018      127,682
Equipment................................................  3 to 10     195,195      176,477
Equipment acquired under capital leases..................    7          65,851       48,452
Leasehold improvements................................... 10 to 20     243,672      239,850
                                                                      --------     --------
Total at cost............................................              705,257      671,376
                                                                      --------     --------
Less:  Accumulated depreciation and amortization.........              364,143      331,629
       Accumulated amortization of capital lease assets..               22,490       16,666
                                                                      --------     --------
Total accumulated depreciation and amortization..........              386,633      348,295
                                                                      --------     --------
Net property, equipment, and leasehold improvements......             $318,624     $323,081
                                                                      ========     ========
</TABLE>


NOTE 4.  TRADEMARKS AND OTHER INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                                           Life
(Dollars in thousands)                                    (Years)       2004         2003
                                                          -------       ----         ----
<S>                                                         <C>       <C>          <C>
Trademarks, tradenames, and internet domain names........             $168,800     $168,800
Customer lists and covenant not to compete...............    5           3,300        3,300
                                                                      --------     --------
Total at cost............................................              172,100      172,100
Less:  accumulated amortization of customer lists and
       covenant not to compete...........................                1,622          962
                                                                      --------     --------
Net trademarks and other intangible assets...............             $170,478     $171,138
                                                                      ========     ========
</TABLE>

     Total amortization of other intangible assets was $660,000 in Fiscal 2004,
$656,000 in Fiscal 2003, and $306,000 in Fiscal 2002. Estimated amortization of
intangible assets for the next five fiscal years is: 2005 and 2006 - $660,000
per year; 2007 - $358,000; thereafter - $0.

     The trademarks and other intangible assets were acquired during Fiscal 2002
in connection with our acquisition of LANE BRYANT (see "Note 2. LANE BRYANT
Acquisition" above). We determined the values of the intangible assets through
an independent appraisal, using an after-tax discounted cash flow method, based
on the estimated future benefits to be received from the assets. In accordance
with the provisions of SFAS No. 142, the trademarks, tradenames, and internet
domain names acquired are not being amortized, but are subject to annual reviews
for impairment or for indicators of a limited useful life (see "NOTE 1. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES; Goodwill and Intangible Assets" above).




                                       57
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 5.  AVAILABLE-FOR-SALE SECURITIES

<TABLE>
<CAPTION>
                                                               Unrealized         Estimated
(In thousands)                                       Cost     Gains   Losses     Fair Value
                                                     ----     -----   ------     ----------
<S>                                                  <C>        <C>    <C>         <C>
January 31, 2004
Government agency bonds............................  $14,671    $ 0    $(390)      $14,281
Charming Shoppes Master Trust certificates and
     retained interests(1).........................   55,363      0        0        55,363
Other..............................................      565      0        0           565
                                                     -------    ---    -----       -------
                                                     $70,599    $ 0    $(390)      $70,209
                                                     =======    ===    =====       =======
February 1, 2003
Government agency bonds............................  $15,414    $13    $(147)      $15,280
Charming Shoppes Master Trust certificates and
     retained interests(1).........................   50,227      0        0        50,227
Low-income housing partnerships(2).................      682      0        0           682
Other..............................................      299      0        0           299
                                                     -------    ---    -----       -------
                                                     $66,622    $13    $(147)      $66,488
                                                     =======    ===    =====       =======
--------------------
<FN>
(1)  Includes Master Trust certificates of $44,345,000, Interest-only strip of
     $9,208,000, and retained interests of $1,810,000 at January 31, 2004, and
     Master Trust certificates of $38,132,000, Interest-only strip of
     $9,570,000, and retained interests of $2,525,000 at February 1, 2003.
     Subsequent to January 31, 2004, we sold $9,500,000 of certificates to
     third-party investors.

(2)  At January 31, 2004, long-term liabilities related to our share of losses
     in our low-income housing partnerships were reclassified as a reduction of
     the cost of the investment in the partnerships. February 1, 2003 amounts
     reflect a reclassification to conform to the current-year presentation.
</FN>
</TABLE>

     There were no realized gains or (losses) on available-for-sale securities
during Fiscal 2004 or Fiscal 2003. Gross realized gains and (losses) on
available-for-sale securities were $243,000 and ($12,000), respectively, during
Fiscal 2002.

     Contractual maturities of available-for-sale securities at January 31, 2004
were:

<TABLE>
<CAPTION>
                                                                    Estimated
(In thousands)                                         Cost        Fair Value
                                                       ----        ----------
<S>                                                   <C>             <C>
Due in one year or less(1)........................    $55,688         $55,688
Due after one year and before five years..........      5,130           5,055
Due after five years and before ten years.........      8,469           8,224
Due after ten years...............................      1,312           1,242
                                                      -------         -------
                                                      $70,599         $70,209
                                                      =======         =======
--------------------
<FN>
(1)  Includes Charming Shoppes Master Trust certificates and retained interests.
</FN>
</TABLE>





                                       58
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 6.  INCOME TAXES

     Income (loss) before income taxes, minority interest, and cumulative effect
of accounting changes:

<TABLE>
<CAPTION>
(In thousands)                            2004           2003           2002
                                          ----           ----           ----
<S>                                      <C>           <C>            <C>
Domestic..............................   $60,296       $71,479        $(7,166)
Foreign...............................     3,342         3,225          2,640
                                         -------       -------        -------
                                         $63,638       $74,704        $(4,526)
                                         =======       =======        =======
</TABLE>

     Income tax provision (benefit):

<TABLE>
<CAPTION>
(In thousands)                            2004           2003           2002
                                          ----           ----           ----
<S>                                       <C>           <C>            <C>
Current:
Federal...............................   $12,743       $ 2,346        $(6,037)
State.................................     1,013         1,265          1,296
Foreign...............................       529           418            288
                                         -------       -------        -------
.......................................    14,285         4,029         (4,453)
Deferred(1)...........................     8,856        25,026          4,333
                                         -------       -------        -------
                                         $23,141       $29,055        $  (120)
                                         =======       =======        =======
--------------------
<FN>
 (1)  Primarily Federal
</FN>
</TABLE>

     We made income tax payments of $10,147,000 and $5,624,000 during Fiscal
2004 and 2003, respectively, and received an income tax refund of $2,902,000
during Fiscal 2002.

     Reconciliation of the effective tax rate with the statutory Federal income
tax rate:

<TABLE>
<CAPTION>
                                                2004      2003      2002(1)
                                                ----      ----      ------
<S>                                             <C>       <C>       <C>
Statutory Federal income tax (benefit) rate...  35.0%     35.0%     (35.0)%
State income tax, net of Federal income tax...   2.0       2.4       18.6
Foreign income................................  (1.0)     (1.0)     (14.1)
Employee benefits.............................  (0.4)      1.9       21.1
Amortization of goodwill......................   0.0       0.0       37.8
Other, net....................................   0.8       0.6      (31.1)
                                                ----      ----      -----
                                                36.4%     38.9%      (2.7)%
                                                ====      ====      =====
--------------------
<FN>
(1)  Amounts are based on a small pre-tax loss for Fiscal 2002 and are not
     necessarily comparable to other fiscal years.
</FN>
</TABLE>





                                       59
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     Components of deferred tax assets and liabilities:

<TABLE>
<CAPTION>
                                                    Net Current    Net Long-Term
                                                      Assets          Assets
(In thousands)                                     (Liabilities)   (Liabilities)
                                                   -------------   -------------
<S>                                                   <C>           <C>
January 31, 2004
Property, equipment, and leasehold improvements...                   $(22,316)
Tax net operating loss and credit carryforwards...                      2,734
Prepaid and accrued expenses......................     $12,342
Inventory.........................................       4,320
Deferred compensation.............................                      6,111
Intangible assets.................................                    (22,914)
Investments.......................................                     (3,612)
Deferred rent.....................................       2,978
Other.............................................         262         (6,951)
                                                       -------       --------
                                                       $19,902       $(46,948)
                                                       =======       ========

February 1, 2003
Property, equipment, and leasehold improvements...                   $(13,367)
Tax net operating loss and credit carryforwards...                      7,075
Prepaid and accrued expenses......................     $ 1,941
Inventory.........................................       7,163
Deferred compensation.............................                      4,122
Intangible assets.................................                    (18,962)
Investments.......................................                     (2,016)
Deferred rent.....................................       2,880
Other.............................................        (258)        (1,736)
                                                       -------       --------
                                                       $11,726       $(24,884)
                                                       =======       ========
</TABLE>

     During Fiscal 2004, we reached a settlement with the Internal Revenue
Service regarding its audit of our corporate-owned life insurance ("COLI")
program. The settlement included $18,477,000 of income taxes and $4,038,000 of
interest, net of a tax benefit of $2,175,000. Of the $18,477,000 of income
taxes, $16,125,000 was satisfied through the use of existing operating losses
and tax credits. As part of the settlement, we surrendered our existing life
insurance policies and received their cash surrender value of $16,332,000. The
settlement had no impact on our current results of operations, as we had
previously provided for taxes to cover the settlement. The settlement had a net
positive impact of $7,767,000 on our Fiscal 2004 cash flows. The utilization of
the operating losses and tax credits to satisfy income taxes related to the COLI
settlement resulted in a decrease in net deferred tax assets.





                                       60
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 7.  DEBT

     Long-term debt at year end:

<TABLE>
<CAPTION>
(In thousands)                                      2004           2003
                                                    ----           ----
<C>                                               <C>            <C>
4.75% Senior Convertible Notes Due 2012.....      $150,000       $150,000
Capital lease obligations...................        37,934         31,703
6.53% mortgage note.........................        12,250         13,650
7.77% mortgage note.........................        10,039         10,478
7.5% mortgage note..........................         5,840          6,059
8.15% note..................................         2,494          3,750
Other long-term debt........................         1,540              0
                                                  --------       --------
Total long-term debt........................       220,097        215,640
Less current portion........................        17,278         12,595
                                                  --------       --------
                                                  $202,819       $203,045
                                                  ========       ========
</TABLE>

     On May 28, 2002, we completed a private placement of $130,000,000 of 4.75%
Senior Convertible Notes due 2012 (the "Senior Notes"). On June 20, 2002, the
initial purchasers in the private placement exercised their option to purchase
an additional $20,000,000 principal amount of the Senior Notes, resulting in the
private placement of Senior Notes in an aggregate principal amount of
$150,000,000. We registered the Senior Notes with the Securities and Exchange
Commission for resale by the initial purchasers during August 2002.

     The Senior Notes will mature on June 1, 2012 and are convertible at any
time prior to maturity into shares of our common stock at a conversion price of
$9.88 per share, subject to adjustment upon certain events. The Senior Notes are
redeemable at our option, in whole or in part, at any time on or after June 4,
2007, at declining redemption prices, starting at 102.38% of principal and
decreasing to 100.48% of principal on or after June 1, 2011. Under certain
circumstances involving a change in control of the Company, holders of the
Senior Notes may require us to repurchase all or a portion of the Senior Notes
at 100% of the principal amount plus accrued and unpaid interest, if any. Also,
under such circumstances, we have the option of paying the repurchase price in
shares of our common stock, valued at 95% of the average of the closing prices
of the common stock for the five-day trading period immediately before and
including the third trading day preceding the repurchase date. There is no
sinking fund for the Senior Notes.

     Net proceeds received from the issuance of the Senior Notes were
$145,500,000. We used a portion of the net proceeds to repay in full our
$67,500,000 term loan due August 16, 2004, $3,486,000 outstanding under our
revolving credit facility, and $6,942,000 of our 7.5% Convertible Subordinated
Notes due 2006 called for redemption (see below). We also used a portion of the
proceeds to purchase 2,740,000 shares of our common stock at a cost of
$18,708,000. The remaining proceeds were invested in cash and cash equivalents
and were subsequently used for the purchase of 9,525,993 shares of our common
stock from Limited Brands (see "Note 2. LANE BRYANT Acquisition" above and "Note
8. Stockholders' Equity" below). In addition, we wrote off $951,000 of
unamortized deferred financing costs related to the term loan (see "Note 1.
Summary Of Significant Accounting Policies; Impact of Recent Accounting
Pronouncements" above). The term loan that was repaid had an 11.5% interest rate
and various financial covenants.




                                       61
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     On May 29, 2002, we called our 7.5% Convertible Subordinated Notes due 2006
(the "Subordinated Notes") for redemption on June 28, 2002. The redemption price
was 102.5% of the principal amount of the Subordinated Notes, plus accrued and
unpaid interest to the date of redemption. The Subordinated Notes had an
original maturity date of July 15, 2006, and could be converted into shares of
our common stock until the close of business on June 27, 2002 at a conversion
price of $7.46 per share. Between May 29, 2002 and June 27, 2002, $89,105,000
principal amount of the Subordinated Notes were converted into 11,944,338 shares
of our common stock pursuant to the conversion terms of the Notes. Accrued
interest expense of $1,967,000, net of income taxes of $1,059,000, on the
Subordinated Notes that were converted was reclassified to additional paid-in
capital. On June 28, 2002, the remaining Subordinated Notes, with an aggregate
principal amount of $6,942,000, were redeemed for $7,351,000, including the 2.5%
redemption premium and accrued interest of $236,000 to the date of redemption.
The redemption premium of $174,000 has been included in continuing operations in
the Consolidated Statement of Operations and Comprehensive Income (Loss) for
Fiscal 2003 (see "Note 1. Summary Of Significant Accounting Policies; Impact of
Recent Accounting Pronouncements" above).

     On January 29, 2004, we amended and restated our existing $300,000,000
revolving credit facility that was scheduled to expire on August 16, 2004 and
extended the facility to August 15, 2008. The amended $300,000,000 revolving
credit facility (the "Facility") provides for cash borrowings and enables us to
issue up to $150,000,000 of letters of credit for purchases of merchandise and
for standby letters of credit. As of January 31, 2004, there were no borrowings
outstanding under the Facility. The availability of borrowings under the
Facility is subject to limitations based on eligible inventory and, under
certain circumstances, credit card receivables and in-transit cash. The Facility
is secured by our general assets, except for (i) all assets related to our
credit card securitization program, (ii) all real property, (iii) certain
equipment subject to other mortgages or capital leases, (iv) the assets of our
non-U.S. subsidiaries, and (v) certain other assets. As of January 31, 2004, we
had $4,047,000 of unamortized deferred debt acquisition costs related to the
original revolving credit facility and the amended and restated facility. We are
amortizing these deferred debt acquisition costs on a straight-line basis over
the life of the amended and restated facility as interest expense.

     The interest rate on borrowings under the revolving credit facility ranges
from Prime to Prime plus .50% per annum for Prime Rate Loans, and LIBOR plus
1.5% to LIBOR plus 2.00% per annum for Eurodollar Rate Loans. The interest rate
is determined quarterly, based on our average excess and suppressed
availability, as defined in the Facility. As of January 31, 2004, the interest
rate on borrowings under the revolving credit line was 4.00% for Prime Rate
Loans and 2.60% for Eurodollar Rate Loans. There is a fee of 1.0% to 1.25% per
annum on outstanding letters of credit and a fee of .375% per annum on the
unused portion of the revolving credit facility.

     The Facility includes limitations on sales and leasebacks, the incurrence
of additional liens and debt, capital lease financing, and other limitations.
The Facility also requires, among other things, that we not pay dividends on our
common stock and, if our excess and suppressed availability (as defined in the
Facility) is less than $50,000,000 at any time within a fiscal quarter, that we
maintain consolidated 12-month earnings before interest, taxes, depreciation,
and amortization ("EBITDA") (excluding non-recurring, non-cash charges), of
$115,000,000. As of January 31, 2004, the excess and suppressed availability,
including excess cash, under the revolving credit facility was $202,429,000. We
had outstanding letters of credit totaling $75,192,000 as of January 31, 2004.
As of January 31, 2004, we were not in default with respect to any of the
Facility's covenants.



                                       62
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     Pursuant to a program to replace point-of-sale ("POS") equipment in our
FASHION BUG stores and, in Fiscal 2004 our LANE BRYANT stores, we acquired
$8,468,000, $ 3,495,000, and $24,677,000 of POS equipment under capital leases
in Fiscal 2004, 2003, and 2002, respectively. These leases generally have an
initial lease term of 60 months and contain a bargain purchase option. As of
January 31, 2004, the imputed interest rates on the capital leases ranged from
4.48% to 10.87%.

     In December 2002, we entered into two financing leases for the purchase of
material handling systems and related equipment and software for the White Marsh
distribution center. The lease terms provide for the availability of funds as
the equipment and software is delivered and accepted. The first capital lease
obligation of $2,500,000 is payable over a term of 60 months at an interest rate
of 6.77%, and contains a bargain purchase option. We received all of the
equipment under this lease as of February 1, 2003. The second capital lease
obligation of $10,000,000 is payable over a term of 60 months at an interest
rate of 7.35% and contains a bargain purchase option. As of February 1, 2003, we
had acquired $1,002,000 of equipment under this lease. We received the remainder
of the equipment and related software under this lease during Fiscal 2004.

     In October 2002, we borrowed $14,000,000 under a 6.53% mortgage note. The
note has a ten-year term with 120 monthly installments of principal of $117,000
plus interest. The mortgage note is secured by land, a building, and certain
fixtures we own at our distribution center in White Marsh, Maryland, which we
acquired on September 24, 2002. The net proceeds were used to finance a
substantial portion of the White Marsh acquisition.

     The 7.77% mortgage note, dated November 1, 2001, has a ten-year term with
119 monthly installments of principal and interest of $103,000 commencing in
January 2002 and a final payment of any remaining unpaid principal and interest
in December 2011. The mortgage note is secured by land, buildings, and fixtures
we own at our offices in Bensalem, Pennsylvania and by leases and rents we own
or receive from tenants of the Bensalem facility. The net proceeds of
$10,851,000 from the mortgage note were used to repay a portion of the
borrowings outstanding under the $300,000,000 revolving credit facility,
discussed above.

     We assumed a 7.5% Mortgage Note in connection with our CATHERINES
acquisition. The mortgage financing agreement provides for a $6,919,000 mortgage
facility with a seven-year term and monthly payments based on a 20-year
amortization period. The mortgage includes a final principal payment of
$5,585,000 in Fiscal 2006. The mortgage is secured by land and buildings at our
CATHERINES office and distribution center in Memphis, Tennessee. There is a
pre-payment penalty of 1% of the outstanding principal.

     In December 2001, the Company borrowed $5.0 million under an 8.15% note.
The note has a three-year term with 35 monthly installments of principal and
interest of $126 thousand commencing in January 2002, and a final payment of any
remaining unpaid principal and interest in December 2004. The note is secured by
equipment and fixtures owned by the Company at its distribution center in
Greencastle, Indiana. The net proceeds from the note were used to repay a
portion of the borrowings outstanding under the Company's credit facility,
discussed above.

     During Fiscal 2004, 2003, and 2002, we made interest payments of
$13,572,000, $12,859,000, and $17,657,000, respectively. Interest expense
capitalized during Fiscal 2004 was $725,000. Interest expense capitalized in
Fiscal 2003 was immaterial. No interest expense was capitalized during Fiscal
2002.



                                       63
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     Aggregate maturities of long-term debt during the next five fiscal years
are as follows:

<TABLE>
<CAPTION>
(In thousands)                  2005       2006       2007      2008      2009
                                ----       ----       ----      ----      ----
<S>                           <C>        <C>        <C>        <C>       <C>
Capital lease obligations...  $12,464    $11,167    $ 8,376    $4,238    $1,580
Mortgage notes..............    4,604      7,518      1,955     1,999     2,048
Other long-term debt........      210        212        214       216       218
                              -------    -------    -------    ------    ------
                              $17,278    $18,897    $10,545    $6,453    $3,846
                              =======    =======    =======    ======    ======
</TABLE>

     Minimum lease payments under capital leases for the next five fiscal years
are: 2005 - $14,600,000; 2006 - $12,523,000; 2007 - $9,077,000; 2008 -
$4,503,000; 2009 - $1,644,000. Included in these minimum lease payments is
aggregate imputed interest of $4,522,000.


NOTE 8.  STOCKHOLDERS' EQUITY

     Our stockholders' equity consists of 1,000,000 shares of Series
Participating Preferred Stock, $1.00 par value, of which 500,000 shares of
Participating Series A Junior Preferred Stock, $1.00 par value, have been
authorized; and 300,000,000 shares of common stock, $.10 par value.

     During the fiscal years ended January 31, 1998 and January 30, 1999, our
Board of Directors authorized the repurchase of up to 20,000,000 shares of our
common stock. Prior to Fiscal 2002, we repurchased an aggregate total of
9,105,000 shares of our common stock at an aggregate cost of $41,537,000, which
we held as treasury stock. In August 2001, we re-issued these treasury shares to
Limited Brands in connection with our acquisition of LANE BRYANT (see "Note 2.
LANE BRYANT Acquisition" above).

     During August and September 2002, we repurchased 9,525,993 shares of our
common stock issued in connection with our acquisition of LANE BRYANT from
Limited Brands for $65,428,000. During Fiscal 2003, pursuant to the
authorization of our Board of Directors, we also repurchased an aggregate total
of 2,740,000 shares of our common stock on the open market for $18,708,000. The
transactions were financed through the use of existing cash and proceeds from
the issuance of our 4.75% Senior Convertible Notes (see "Note 7. Debt" above).
The repurchased shares are being held as treasury shares.


NOTE 9.  STOCK OPTION AND STOCK INCENTIVE PLANS

     Our Amended and Restated Non-Employee Directors Program was adopted by the
Board of Directors on July 1, 1999, and provided for the grant of options or
awards of up to an aggregate total of 700,000 shares of common stock. This
program includes an automatic annual grant of options to purchase 20,000 shares
of common stock to each non-employee director. The options vest in equal
installments over five years. The exercise price of such options may not be less
than the fair market value of the stock on the date of grant. As of January 31,
2004,




                                       64
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


February 1, 2003, and February 2, 2002, 282,400 options, 180,000 options, and
88,000 options, respectively, were exercisable under this plan. The program also
provided for a one-time grant of 10,000 shares of restricted common stock to
each newly elected non-employee director. The grants vest in equal amounts over
three years. During Fiscal 2004, 10,000 shares of restricted common stock were
granted as one-time grants and were outstanding as of January 31, 2004. The
weighted-average market value at date of grant for the Fiscal 2004 award was
$4.57. In June 2002, this plan was amended to provide for annual grants of 3,000
restricted stock units ("RSUs") to each non-employee director. The RSUs
generally vested in full one year after grant. During Fiscal 2004, RSUs
representing 24,000 shares that were granted during Fiscal 2003 were settled in
cash or deferred payment for $113,000, based on a market value of $4.72 per
share on the date of vesting. The weighted-average market value of common stock
at date of grant for the Fiscal 2003 RSU awards was $8.04.

     Our 2003 Non-Employee Directors Compensation Plan was approved by
shareholders on June 26, 2003. This plan is an additional amendment and
restatement of our Amended and Restated Non-Employee Directors Program adopted
on July 1, 1999 (see previous paragraph). Directors who are not employed by the
Company are eligible for participation in the plan. The Board of Directors
administers the plan and approves the form and amount of awards under the plan.
This plan provides for the grant of stock options, stock appreciation rights
("SARs"), restricted stock awards, RSUs, or deferred shares of up to an
aggregate total of 600,000 shares of our common stock. No more than 50% of the
shares reserved for issuance under the plan may be issued as restricted stock
awards or RSUs. The exercise price of options or SARs granted under the plan may
not be less than the fair market value of our common stock on the date of grant.
The maximum term of options and SARs issued under the plan is ten years.
Non-employee directors may also elect to receive deferred shares of common stock
of an equivalent market value instead of cash director's fees. The plan includes
a provision that options previously granted under the plan will not be amended
or replaced in a transaction that constitutes a "repricing" (as defined in the
plan) without shareholder approval. The plan provides for an initial restricted
stock award of 10,000 shares of common stock that vest in equal amounts over
three years to a newly elected or appointed non-employee director. The plan also
provides for annual grants of options for 6,500 shares of common stock that vest
in one year and annual grants of 3,000 RSUs that vest in one year to each
non-employee director serving at the date of our Annual Meeting of Shareholders.
Each RSU represents a right to receive one share of common stock, or cash of
equal value at the Company's option, at the date of vesting, or, if deferred by
the director, at a later date after termination of service. As of January 31,
2004, no options were exercisable under this plan and 21,000 RSUs were granted
and outstanding. The weighted-average market value of common stock at date of
grant for the Fiscal 2004 RSU awards was $4.78.

     Our Board of Directors adopted the 2000 Associates' Stock Incentive Plan on
January 27, 2000. The plan provides for the grant of options, SARS, restricted
stock awards, deferred stock, or other stock-based awards of up to an aggregate
total of 5,000,000 shares of our common stock. The form of the grants, exercise
price, and maximum term, where applicable, are at the discretion of the Board of
Directors and the Stock Option Committee of the Board of Directors. As of
January 31, 2004, February 1, 2003, and February 2, 2002, 1,891,271 options,
711,630 options, and 352,160 options, respectively, were exercisable under this
plan. As of January 31, 2004 and February



                                       65
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


1, 2003, restricted stock awards totaling 229,791 shares and 188,840 shares,
respectively, were outstanding under this plan. Additional information related
to this plan is as follows:

<TABLE>
<CAPTION>
                                                    2004      2003       2002
                                                    ----      ----       ----
<S>                                                <C>       <C>        <C>
Restricted stock awards granted..................  97,000    111,000    166,175
Weighted average market price at date of grant
     for awards granted..........................   $3.36      $5.98      $6.54
Shares issued under stock awards.................  27,599     30,545      1,960
Cancellations of restricted stock awards.........  28,450     35,180     20,650
</TABLE>

     Our Board of Directors adopted the 1999 Associates' Stock Incentive Plan in
February 1999. The plan provides for the grant of options to purchase up to an
aggregate total of 1,000,000 shares of our common stock. The exercise price of
such options may not be less than the fair market value at the date of grant.
The maximum term of options issued under the plan is ten years. As of January
31, 2004, February 1, 2003, and February 2, 2002, 321,800 options, 250,800
options, and 245,200 options, respectively, were exercisable under this plan.

     Our 1993 Employees' Stock Incentive Plan provides for the grant of options
or awards for up to an aggregate total of 10,899,000 shares of common stock and
any shares available but unissued under our discontinued 1990 Employees' Stock
Incentive Plan. The form of the grants and exercise price, where applicable, are
at the discretion of our Board of Directors and the Stock Option Committee of
the Board of Directors. The maximum term of options issued under the plan is ten
years. As of January 31, 2004, February 1, 2003, and February 2, 2002, 6,398,767
options, 4,681,587 options, and 4,931,030 options, respectively, were
exercisable under this plan. As of January 31, 2004, February 1, 2003, and
February 2, 2002, restricted stock awards totaling 506,280 shares, 560,740
shares, and 603,918 shares, respectively, were outstanding under this plan.
Additional information related to this plan is as follows:

<TABLE>
<CAPTION>
                                                    2004       2003      2002
                                                    ----       ----      ----
<S>                                                <C>        <C>       <C>
Restricted stock awards granted..................  52,500     54,500    394,800
Weighted average market price at date of grant
     for awards granted..........................   $3.48      $6.34      $5.73
Shares issued under stock awards.................  88,060     95,278    198,822
Cancellations of restricted stock awards.........  18,900      2,400     17,759
</TABLE>

     Our 1988 Key Employee Stock Option Plan provides for the grant of options
to our key employees to purchase up to an aggregate total of 3,000,000 shares of
our common stock. The exercise price of options granted under this plan is $1.00
per share. As of January 31, 2004, February 1, 2003, and February 2, 2002,
55,482 options, 60,982 options, and 53,702 options, respectively, were
exercisable under this plan.




                                       66
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     Our 1989 Non-Employee Director Stock Option Plan provided for the grant of
options to each member of our Board of Directors who is not an employee of the
Company to purchase up to 30,000 shares of common stock. The exercise price of
such options could not be less than the fair market value of the stock on the
date of grant. As of January 31, 2004, February 1, 2003, and February 2, 2002,
25,000 options, 49,000 options, and 78,000 options, respectively, were
exercisable under this plan. As a result of the adoption of the Amended and
Restated Non-Employee Directors Program on July 1, 1999, we no longer intend to
issue options under this plan.

     The table below summarizes the activity in all Stock Option Plans:

<TABLE>
<CAPTION>
                                                               Average         Option
                                                   Option      Option          Prices
                                                   Shares       Price         Per Share
                                                   ------       -----         ---------
<S>                                               <C>           <C>       <C>
Outstanding at February 3, 2001................   9,097,873     $5.724    $ .500 - $15.813
Granted - option price equal to market price...   2,661,200      6.380     4.730 -   6.710
Granted - option price less than market price..      22,800      1.000     1.000 -   1.000
Canceled/forfeited.............................    (427,578)     6.253     1.000 -  16.875
Exercised......................................    (284,165)     4.015      .500 -   6.000
                                                 ----------    -------    ----------------
Outstanding at February 2, 2002................  11,070,130      5.895      .500 -  15.813
Granted - option price equal to market price...   3,029,500      6.295     4.351 -   8.460
Granted - option price less than market price..      11,100      1.000     1.000 -   1.000
Canceled/forfeited.............................    (681,571)     8.156     1.000 -  15.813
Exercised......................................  (1,326,561)     4.393      .500 -   6.813
                                                 ----------    -------    ----------------
Outstanding at February 1, 2003................  12,102,598      6.028     1.000 -  15.813
Granted - option price equal to market price...   1,121,375      3.600     2.760 -   6.640
Granted - option price less than market price..      44,300      1.000     1.000 -   1.000
Canceled/forfeited.............................    (913,828)     8.517     1.000 -  15.125
Exercised......................................    (220,459)     3.882     1.000 -   6.000
                                                 ----------    -------    ----------------
Outstanding at January 31, 2004................  12,133,986     $5.637    $1.000 - $12.125
                                                 ==========     ======    ================
</TABLE>

     The weighted average grant date fair values for options granted, using the
Black-Scholes model and assumptions described under "Note 1. Summary Of
Significant Accounting Policies; Common Stock Plans" above, are as follows:

<TABLE>
<CAPTION>
                                            2004       2003        2002
                                            ----       ----        ----
<S>                                        <C>        <C>         <C>
Option price equal to market price......   $1.14      $2.34       $3.16
Option price less than market price.....    3.51       6.23        5.96
</TABLE>




                                       67
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     The table below summarizes information regarding weighted average exercise
price and weighted average remaining contractual life in years for options
outstanding and options exercisable as of January 31, 2004 for the ranges of
exercise prices shown:

<TABLE>
<CAPTION>
                                                               Weighted
                                               Weighted         Average
                                                Average        Remaining
                                   Option       Option           Life
Ranges of Option Prices            Shares        Price          (Years)
-----------------------            ------        -----           -----
<S>                             <C>             <C>              <C>
$0.00 - $1.00:
Options outstanding...........     129,588       $1.000           6.3
Options exercisable...........      55,482        1.000
$1.01 - $5.00:
Options outstanding...........   3,816,632       $3.824           3.2
Options exercisable...........   2,832,859        4.058
$5.01 - $10.00:
Options outstanding...........   7,795,916       $6.324           4.1
Options exercisable...........   5,694,529        6.346
$10.01 - $15.81:
Options outstanding...........     391,850      $11.154           0.1
Options exercisable...........     391,850       11.154
</TABLE>

     At January 31, 2004, the following shares were available for grant under
our various stock plans: 2000 Associates' Stock Incentive Plan - 758,906 shares;
2003 Non-Employee Directors Compensation Plan - 533,500 shares; Amended and
Restated Non-Employee Directors Program - 55,527 shares; 1999 Associates' Stock
Incentive Plan - 275,100 shares; 1993 Employees' Stock Incentive Plan -
2,136,189 shares; and 1988 Key Employee Stock Option Plan - 133,720 shares.

     The shares issued and options granted under the above plans are subject to
forfeiture if the employees do not remain employed by us for a specified period
of time. Under the 1989 Non-Employee Director Stock Option Plan and the 2003
Non-Employee Directors Program, shares issued and options granted are subject to
forfeiture if the individual does not remain a Director of the Company for a
specified period of time except, under certain circumstances, in the case of
retirement or voluntary termination.


NOTE 10.  EMPLOYEE STOCK PURCHASE PLAN

     Our 1994 Employee Stock Purchase Plan permits employees to purchase shares
of our common stock during quarterly offering periods at a price equal to 85% of
the lower of the stock's market price on the first day of, or the fifth business
day after the end of, the offering period. Employees purchase shares through
accumulation of payroll deductions of up to 10% of the employee's compensation
during each offering period. An aggregate total of 2,000,000 shares are reserved
for grant under this plan. During Fiscal 2004, 2003, and 2002, 106,457 shares,
109,269 shares, and 82,184 shares, respectively, were purchased under the plan.
The weighted average grant date market value for shares purchased during Fiscal
2004, 2003, and 2002 was $4.57, $7.13, and $5.52 per share, respectively. At
January 31, 2004, 1,376,054 shares were available for future purchases under
this plan.



                                       68
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 11.  SHAREHOLDER RIGHTS PLAN

     On April 12, 1999, pursuant to a Rights Agreement between the Company and
American Stock Transfer & Trust Company, as Rights Agent, our Board of Directors
declared a dividend distribution of one Right for each outstanding share of our
common stock, payable upon the close of business on April 26, 1999. Each Right
entitles the registered holder to purchase from us one three-hundredth of a
share of Series A Junior Participating Preferred Stock, or, under certain
circumstances, a combination of securities and assets of equivalent value, at a
purchase price of $20.00, subject to adjustment. The purchase price may be paid
in cash or, if we permit, by the delivery of Rights under certain circumstances.
The description and terms of the Rights are set forth in the Rights Agreement.

     Initially, ownership of the Rights will be evidenced by the certificates
representing shares of common stock then outstanding, and no separate Rights
certificates will be distributed. The Rights will separate from the common stock
and a "Distribution Date" will occur upon the earlier of: (i) 10 days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of our outstanding common stock (the "Stock
Acquisition Date"); or (ii) the close of business on such date as may be fixed
by the our Board of Directors after the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 20% or
more of our outstanding common stock. Until the Distribution Date: (i) the
Rights will be evidenced by the certificates representing shares of common stock
and will be transferred with and only with such certificates; (ii) certificates
issued after April 26, 1999 will contain a notation incorporating the Rights
Agreement by reference; and (iii) the surrender for transfer of any certificates
for our common stock outstanding will also constitute the transfer of the Rights
associated with the common stock represented by such certificate.

     In the event that at any time following the Distribution Date a person
becomes an Acquiring Person, each holder of a Right will thereafter have the
right to receive, upon exercise, our common stock (or, in certain circumstances,
cash, property, or other securities of the Company) having a value equal to two
times the exercise price of the Right. In lieu of requiring payment of the
purchase price upon exercise of the Rights following any such event, we may
permit the holders simply to surrender the Rights under certain circumstances,
in which event they will be entitled to receive our common stock (and other
property, as the case may be) with a value of 50% of what could be purchased by
payment of the full purchase price. Notwithstanding any of the foregoing, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by the Acquiring Person will be null and
void. Rights are not exercisable until such time as the Rights are no longer
redeemable by us as set forth in the Rights Agreement.

     In the event that, at any time following the Stock Acquisition Date: (i) we
are acquired in a merger or other business combination transaction in which we
are not the surviving corporation (other than a merger that is described in, or
that follows a tender offer or exchange offer described above); or (ii) 50% or
more of our assets or earning power is sold or transferred, each holder of a
Right (except Rights that previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the exercise price of the
Right. Again, provision is made to permit surrender of the Rights in exchange
for one-half of the value otherwise purchasable. The events set forth in this
paragraph and above are referred to as the "Triggering Events."



                                       69
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     The purchase price payable and the number of shares of our common stock or
other securities or property to be issued upon exercise of the Rights are
subject to certain anti-dilution adjustments. With certain exceptions, no
adjustment in the purchase price will be required until cumulative adjustments
amount to at least 1% of the purchase price. Instead of fractional shares of our
common stock, an adjustment in cash will be made based on the market price of
our common stock on the last trading date before the date of exercise.

     At any time until ten days following the Stock Acquisition Date, we may
redeem the Rights in whole, but not in part, at a redemption price of $.01 per
Right, subject to adjustment. Our Board of Directors may extend the ten-day
period as long as the Rights are still redeemable. Immediately upon the order of
our Board of Directors to redeem the Rights, the Rights will terminate and the
holders of Rights will only be able to receive the redemption price. Until a
Right is exercised, the holder of the Right will have no rights as a shareholder
of the Company, including, without limitation, the right to vote or to receive
dividends.


NOTE 12.  CUSTOMER LOYALTY CARD PROGRAMS

     During the first quarter of Fiscal 2004, we introduced a new FASHION BUG
customer loyalty card program that we operate under our FASHION BUG proprietary
credit card program. Like our other loyalty programs, this program entitles
customers to various rebates, discounts, and other benefits upon payment of an
annual membership fee. This program also provides customers with the option to
cancel their membership within 90 days, entitling them to a full refund of their
annual fee. Additionally, after 90 days, customers that cancel their membership
are entitled to a pro rata fee refund based on the number of months remaining on
the annual membership. Accordingly, we recognize 25% of the annual membership
fee as revenue after 90 days, with the remaining fee recognized on a pro rata
basis over nine months. During Fiscal 2004, we recognized revenues of $7,750,000
in connection with this program. As of the end of Fiscal 2004, we accrued
$1,200,000 for the estimated costs of discounts earned and coupons issued and
not redeemed.

     Under a previous FASHION BUG store loyalty card program, we recognized
revenues from annual membership fees as sales over the life of the membership
based on discounts earned by the customer. For customers who did not earn
discounts during the membership period that exceeded the card fee, the
difference between the membership fee and discounts earned was recognized as
revenue upon the expiration of the annual membership period. Upon early
cancellation of the loyalty card, refunds of membership fees were reduced by the
amount of any discounts granted to the member under the program. During Fiscal
2004, Fiscal 2003, and Fiscal 2002, we recognized revenues of $6,377,000,
$21,828,000, and $13,210,000, respectively, in connection with this program. We
discontinued the issuance of new cards under this program in December 2002, and
we terminated the program during the second quarter of Fiscal 2004.


NOTE 13.  EMPLOYEE RETIREMENT BENEFIT PLAN

     We provide a comprehensive retirement benefit program for our employees.
This program provides for a noncontributory profit-sharing plan that covers
substantially all full-time employees who meet age and service requirements.
Contributions to this plan are completely discretionary and are determined by
our Board of Directors on an annual basis.




                                       70
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     The program also includes a 401(k) employee savings plan under which
eligible participating employees may elect to contribute up to 80% of their
compensation to an investment trust. The 401(k) plan includes a matching Company
contribution of 50% of the participant's elective contribution on up to 6% of
the participant's compensation. Participating employees are immediately vested
in their own contributions. Full vesting in the matching Company contribution
occurs on the earlier of the participant's attainment of 6 years of service,
retirement, death, or disability, as defined in the plan. Company matching
contributions are made in cash, and the available trust investment options do
not include investment in our own common stock.

     The total expense for the above plans was $2,619,000, $2,582,000, and
$2,089,000 for Fiscal 2004, 2003, and 2002, respectively.

     We also provide a non-qualified deferred compensation plan to officers and
certain key executives. Under this plan, participants may contribute up to 77%
of their base compensation and 100% of bonus compensation. This plan includes a
matching Company contribution of 50% of the participant's contribution on up to
6% of the participant's compensation, less any matching contributions made for
the participant under our 401(k) plan. The total expense for this plan was
$1,155,000, $854,000, and $867,000 for Fiscal 2004, 2003, and 2002,
respectively.

     During Fiscal 2004, we established a non-qualified defined contribution
supplemental retirement plan for certain management and key executives. Under
this plan, we contribute amounts to participant accounts based on age and years
of plan service, as well as earnings as defined in the plan. The total expense
for this plan was $975,000 for Fiscal 2004.


NOTE 14.  EXPENSES RELATED TO COST REDUCTION PLAN

     On March 18, 2003, we announced a cost reduction plan, designed to take
advantage of the centralization of all corporate administrative services
throughout the Company and to realize certain efficiencies, in order to improve
profitability. The components of the cost reduction plan are as follows:

     o    Reduction in corporate operating expenses by streamlining processes
          and gaining optimal pricing through the consolidation of vendors and
          the continued centralization of finance, human resources, and other
          administrative functions in order to leverage the efficiency of our
          shared services organization.

     o    Workforce reduction at our corporate and divisional home offices.

     o    Consolidation of our Memphis, Tennessee distribution center into our
          distribution center in White Marsh, Maryland.

     o    Consolidation of our Hollywood, Florida credit operations into our
          Milford, Ohio facility.

     o    Closing of the nine MONSOON/ACCESSORIZE stores that we operate under a
          joint venture with MONSOON plc.





                                       71
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     We are accounting for the plan in accordance with the provisions of SFAS
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
Expenses incurred in connection with the plan and payments/ settlements of those
expenses for Fiscal 2004, and the remaining accrual at January 31, 2004, were as
follows:

<TABLE>
<CAPTION>
                                                          Year Ended
                                                       January 31, 2004
                                                    -----------------------    Accrual at
                                                    Expenses     Payments/     January 31,
(In thousands)                                      Incurred    Settlements       2004
                                                    --------    -----------       ----
<S>                                                  <C>          <C>           <C>
Workforce reduction costs.........................   $ 2,980      $(2,980)      $    0
Lease termination and related costs...............     3,691       (1,095)       2,596
Accelerated depreciation costs (non-cash charge)..     4,195       (4,195)           0
Other facility closure costs......................       668         (668)           0
                                                     -------      -------       ------
Total.............................................   $11,534      $(8,938)      $2,596
                                                     =======      =======       ======
</TABLE>

     Workforce reduction costs represent involuntary termination benefits and
retention bonuses. Employees affected by the plan were notified during the first
quarter of Fiscal 2004. During Fiscal 2004, we terminated 349 employees in
connection with workforce reductions at our corporate and divisional home
offices and the closing of our Memphis, Tennessee distribution center, our
Hollywood, Florida credit operations, and our remaining MONSOON stores. We
accrued the severance benefit in accordance with SFAS No. 146 and recognized
retention bonuses ratably over the employees' remaining service period. Lease
termination and related costs mainly represent the estimated fair value of the
remaining lease obligations at the Hollywood, Florida facility, reduced by
estimated sublease income. In accordance with SFAS No. 146, we recognized the
present value of the remaining lease obligation less estimated sublease income
related to the Hollywood, Florida facility in June 2003 when we closed the
facility. Accelerated depreciation costs represent the acceleration of
depreciation of the net book value of the assets at our Memphis distribution
center and our Hollywood credit operations, which were closed in June 2003, to
their estimated net realizable values.

     During the first quarter of Fiscal 2004, we made the decision to sell the
Memphis, Tennessee distribution center, and began accelerating the depreciation
of the asset to its estimated net realizable value as of its expected cease-use
date of June 2003. During the third quarter of Fiscal 2004, we began to evaluate
alternative uses for the facility, and began to depreciate the then-current
carrying amount of the asset over its estimated useful life.

     Expenses related to the plan accrued during the year ended January 31, 2004
are included in "Expenses related to cost reduction plan" in the accompanying
Consolidated Statements of Operations and Comprehensive Income (Loss).




                                       72
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 15.  NET INCOME (LOSS) PER SHARE

<TABLE>
<CAPTION>
(In thousands)                                                           2004       2003       2002
                                                                         ----       ----       ----
<S>                                                                    <C>        <C>         <C>
Basic weighted average common shares outstanding....................   112,491    113,810     105,842
Dilutive effect of assumed conversion of convertible notes..........    15,182     15,655           0
Dilutive effect of stock options....................................       885      1,472           0
                                                                       -------    -------     -------
Diluted weighted average common shares and equivalents outstanding..   128,558    130,937     105,842
                                                                       =======    =======     =======

Income (loss) before cumulative effect of accounting changes........   $40,639    $46,328     $(4,406)
Decrease in interest expense from assumed conversion of notes,
     net of income taxes............................................     4,334      4,700           0
                                                                       -------    -------     -------
Income (loss) before cumulative effect of accounting changes
     used to determine diluted earnings per share...................    44,973     51,028      (4,406)
Cumulative effect of accounting changes, net of income taxes........         0    (49,098)          0
                                                                       -------    -------     -------
Net income (loss) used to determine diluted earnings per share......   $44,973    $ 1,930     $(4,406)
                                                                       =======    =======     =======
</TABLE>

     Options with weighted average exercise price greater than market price,
excluded from computation of diluted earnings per share:

<TABLE>
<CAPTION>
(In thousands, except per-share amounts)         2004       2003      2002
                                                 ----       ----      ----
<S>                                              <C>       <C>       <C>
Number of shares..............................   8,255     4,583     5,805
Weighted average exercise price per share.....   $6.63     $7.66     $7.43
</TABLE>

     The effect of an assumed conversion of our Convertible Notes into 12.9
million shares of our common stock was excluded from the calculation of diluted
net loss per share for Fiscal 2002 because the effect would have been
anti-dilutive. All options to purchase shares of our common stock were excluded
from the calculation of diluted net loss per share for Fiscal 2002 because the
effect would have been anti-dilutive.

     Grants of stock awards under our restricted stock award programs generally
require continuing employment for a specified period of time as a condition for
vesting of the award. Grants that have not vested and are subject to a risk of
forfeiture are included in the calculation of diluted earnings per share using
the treasury stock method if the impact of the award is dilutive. Upon vesting,
shares issued under these award programs are included in the calculation of
basic earnings per share.





                                       73
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 16.  ASSET SECURITIZATION

     We record gains or losses on the securitization of our FASHION BUG credit
card receivables based on the estimated fair value of the assets retained and
liabilities incurred in the sale. Gains represent the present value of the
estimated cash flows that we have retained over the estimated outstanding period
of the receivables. This excess cash flow essentially represents an
"interest-only" ("I/O") strip, consisting of the present value of the finance
charges and late fees in excess of the amounts paid to certificate holders,
credit losses, and service fees. During Fiscal 2004, 2003, and 2002, we
recognized the following activity related to the I/O strip:

<TABLE>
<CAPTION>
(In thousands)                                 2004         2003         2002
                                               ----         ----         ----
<S>                                          <C>          <C>          <C>
Additions to the I/O strip..............     $13,638      $18,447      $14,074
Amortization and valuation adjustments..      14,000       14,856       12,763
Value of the I/O strip at end of year...       9,208        9,570        5,979
</TABLE>

     In addition, we recognized a servicing liability in Fiscal Years 2004,
2003, and 2002 because the servicing fees we expect to receive from the
securitizations do not provide adequate compensation for servicing the
receivables. The servicing liability represents the present value of the excess
of our cost of servicing over the servicing fees received, and is recorded at
its estimated fair value. Because quoted market prices are generally not
available for the servicing of proprietary credit card portfolios of comparable
credit quality, we determine the fair value of the cost of servicing by
calculating all costs associated with billing, collecting, maintaining and
providing customer service during the expected life of the securitized credit
card receivable balances. We discount the amount of these costs in excess of the
servicing fees over the estimated life of the receivables sold. The discount
rate and estimated life assumptions used for the present value calculation of
the servicing liability are consistent with those used for the I/O strip. During
Fiscal 2004, 2003, and 2002, we recognized the following activity related to the
servicing liability:

<TABLE>
<CAPTION>
(In thousands)                                       2004     2003      2002
                                                     ----     ----      ----
<S>                                                 <C>      <C>       <C>
Additions to the servicing liability.............   $4,011   $2,496    $3,950
Amortization of the servicing liability..........    2,141    3,375     3,993
Value of the servicing liability at end of year..    3,050    1,180     2,059
</TABLE>

     We amortize the I/O strip and servicing liability on a straight-line basis
over the expected life of the credit card receivables, which is generally less
than one year. We estimate the expected life primarily by using the historical
average of principal payments as a percent of outstanding trust receivables
sold.



                                       74
<PAGE>



                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     The following table presents additional information relating to the Trust
for Fiscal 2004, 2003, and 2002:

<TABLE>
<CAPTION>
(In thousands)                                                      2004        2003       2002
                                                                    ----        ----       ----
<S>                                                               <C>        <C>         <C>
Proceeds from sales of new receivables to Trust.................. $331,718   $384,162    $423,089
Collections reinvested in revolving-period securitizations.......  422,793    450,363     468,919
Cash flows received on retained interests........................   41,951     45,708      38,992
Servicing fees received..........................................    6,634      5,723       6,003
Net credit losses................................................   30,850     39,312      38,878
Investor certificates outstanding at end of year.................  269,425    301,300     303,659
Credit card accounts 90 or more days delinquent at end of year...    9,795     13,102      14,094
</TABLE>

     We are the servicer of the Trust, and we receive a servicing fee of
approximately 2% of the investor interest. The investor certificates outstanding
as of January 31, 2004 mature as follows: $169,425,000 in the fiscal year ending
January 29, 2005, $63,500,000 in the fiscal year ending February 2, 2008, and
$36,500,000 in the fiscal year ending January 31, 2009. Our certificates and
retained interests in our securitizations, which aggregated $55,363,000 and
$50,227,000 at January 31, 2004 and February 1, 2003, respectively, are
generally subordinated in right of payment to certificates issued by the Trust
to third-party investors. Our obligation to repurchase receivables sold to the
Trust is limited to those receivables that, at the time of their transfer, fail
to meet the Trust's eligibility standards under normal representations and
warranties. To date, our repurchases of receivables pursuant to this obligation
have been insignificant.

     On November 22, 2002, we issued $100,000,000 of new five-year asset-backed
certificates in a private placement, of which $80,000,000 have been sold to
investors as of January 31, 2004. The weighted-average fixed interest rate on
the certificates sold is 4.68%. These certificates replaced an $83,500,000
securitization series that matured during the fourth quarter of Fiscal 2003. On
January 21, 2004, we closed a new conduit credit card securitization facility of
$132,000,000 that will provide additional funding of up to $100,000,000 for a
term of up to two years, subject to an annual renewal. As of January 31, 2004,
no credit card receivables were funded under this facility. Subsequent to
January 31, 2004, we sold to investors an additional $9,500,000 of certificates
under the $100,000,000 facility that we were holding as a retained interest. As
of January 31, 2004, these certificates were included in short-term
available-for-sale securities. To the extent that remaining certificates under
the $100,000,000 facility are not sold, we will hold them as a retained
interest.

     Our management uses key valuation assumptions in determining the fair value
of our I/O strip. We estimate the values for these assumptions using historical
data, the impact of the current economic environment on the performance of the
receivables sold, and the impact of the potential volatility of the current
market for similar instruments in assessing the fair value of the retained
interests. The key assumptions used to value our retained interest were as
follows:

<TABLE>
<CAPTION>
                                         January 31, 2004    February 1, 2003
                                         ----------------    ----------------
<S>                                         <C>                 <C>
Payment rate..........................        11.4%               13.0%
Residual cash flows discount rate.....        13.5%                9.8%
Net credit loss percentage............        12.5%               13.0%
Average life of receivables sold......      0.7 years           0.6 years
</TABLE>




                                       75
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     The following table presents the decrease in our I/O strip receivable that
would result from hypothetical adverse changes of 10% and 20% in the assumptions
used to determine the fair value of the I/O strip. This information is presented
in accordance with the requirements of SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities."

<TABLE>
<CAPTION>
(In thousands)                            10% Change           20% Change
                                          ----------           ----------
<S>                                         <C>                   <C>
Payment rate.........................        $  732               $1,321
Residual cash flows discount rate....            76                  153
Credit loss percentage...............         1,143                2,268
</TABLE>

     Charming Shoppes Receivables Corp. and Charming Shoppes Seller, Inc., our
consolidated wholly-owned indirect subsidiaries, are separate special purpose
entities created for the securitization program. At January 31, 2004, Charming
Shoppes Receivables Corp. had $28,800,000 of Charming Shoppes Master Trust
certificates and Charming Shoppes Seller, Inc. held retained interests of
$9,208,000 (which are included in the $55,688,000 of short-term
available-for-sale securities at January 31, 2004 - see "Note 5.
Available-For-Sale Securities" above). These assets will be first and foremost
available to satisfy the claims of the respective creditors of these separate
corporate entities, including certain claims of investors in the Charming
Shoppes Master Trust.

     We also have non-recourse agreements pursuant to which third parties
provide accounts receivable proprietary credit card sales funding programs for
our CATHERINES and LANE BRYANT stores. These funding programs expire in January
2005 for CATHERINES and in January 2006 for LANE BRYANT. Under these agreements,
the third parties reimburse us daily with respect to the proprietary credit card
sales generated by the respective store's credit card accounts. Under the
CATHERINES agreement, we may be required to repurchase receivables from the
third party under certain conditions relating to a change in control. Under the
LANE BRYANT agreement, we may be required to repurchase receivables from the
third party upon termination of the agreement. Additional information for Fiscal
2004, 2003, and 2002 regarding these agreements is as follows:

<TABLE>
<CAPTION>
(In thousands)                                         2004        2003        2002
                                                       ----        ----        ----
<S>                                                 <C>         <C>         <C>
Net funding received from sales of receivables:
     LANE BRYANT..................................   $262,004    $251,619    $128,947(1)
     CATHERINES...................................    100,146     113,526     129,098

Net  accounts receivable balance held by third
     party at end of year:
     LANE BRYANT..................................    198,272     195,326     206,247
     CATHERINES...................................     70,416      85,754      98,388
--------------------
<FN>
(1)  Subsequent to our acquisition of LANE BRYANT on August 16, 2001.
</FN>
</TABLE>

     On January 28, 2004, in accordance with the terms of the Merchant Services
Agreement pursuant to which the CATHERINES proprietary credit cards are issued,
we gave notification of termination and election to purchase the CATHERINES
credit card portfolio to the third-party provider. In accordance with the terms
of the agreement, the purchase option required us to provide one year's notice
in order to terminate the agreement and to purchase the portfolio, subject to
the negotiation of the final purchase agreement.



                                       76
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 17.  LEASES

     We lease substantially all of our stores under non-cancelable operating
lease agreements. Generally, these leases have initial periods of 5 to 20 years
and contain provisions for co-tenancies, renewal options, additional rentals
based on a percentage of sales, and payment of real estate taxes and common area
charges. We also lease certain other buildings and equipment.

     Our rental expense was:

<TABLE>
<CAPTION>
(In thousands)          2004           2003         2002
                        ----           ----         ----
<S>                    <C>           <C>           <C>
Minimum rental.....    $200,128      $203,105      $158,878
Contingent rental..      31,846        32,179        26,201
                       --------      --------      --------
                       $231,974      $235,284      $185,079
                       ========      ========      ========
</TABLE>

     Minimum annual rental commitments for all non-cancelable leases for the
next five fiscal years and thereafter are: Fiscal 2005 - $202,067,000; Fiscal
2006 - $158,573,000; Fiscal 2007 - $123,922,000; Fiscal 2008 - $94,725,000;
Fiscal 2009 - $68,675,000; Thereafter - $120,136,000.

     Rental expense includes charges from Limited Brands for office and
distribution center space in Columbus, Ohio under agreements which expire in
December 2007 for the office space, and February 2004 for the distribution
center space, with the right to terminate the agreement for the office space
earlier upon notice. These charges approximate market rates. The minimum annual
rental commitments shown above include $1,750,000 for Fiscal 2005, Fiscal 2006,
and Fiscal 2007, and $1,604,000 for Fiscal 2008 to be paid under these
agreements. In September 2002, we acquired a distribution center in White Marsh,
Maryland that replaced the existing distribution center in Columbus, Ohio as of
February 2004.

     LANE BRYANT currently subleases 120 properties from Limited Brands pursuant
to a Master Sublease. The properties subject to the Master Sublease were
operated as LANE BRYANT stores prior to our acquisition of LANE BRYANT. We have
guaranteed the obligations of LANE BRYANT under the Master Sublease. In
connection with such guaranty, we have entered into an agreement with Limited
Brands that requires us to comply with certain financial covenants restricting
the incurrence of additional debt and payments to shareholders, and the
repurchase of our common stock. The minimum annual rental commitments shown
above include amounts payable under the LANE BRYANT master sublease with Limited
Brands which we have guaranteed, as follows: Fiscal 2005 - $18,089,000; Fiscal
2006 - $12,558,000; Fiscal 2007 - $8,482,000; Fiscal 2008 - $5,258,000; Fiscal
2009 - $4,333,000; Thereafter - $1,821,000.





                                       77
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 18.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following is a summary of the carrying amounts and estimated fair
values of our financial instruments:

<TABLE>
<CAPTION>
                                            January 31, 2004        February 1, 2003
                                            ----------------        ----------------
                                           Carrying     Fair       Carrying     Fair
(In thousands)                              Amount      Value       Amount      Value
                                            ------      -----       ------      -----
<S>                                       <C>        <C>          <C>        <C>
Assets:
Cash and cash equivalents................  $123,781   $123,781     $102,026   $102,026
Available-for-sale securities............    70,209     70,209       66,488     66,488

Liabilities:
4.75% Senior Convertible Notes due 2012..   150,000    150,164      150,000    112,920
6.53% mortgage note......................    12,250     12,205       13,650     13,650
7.77% mortgage note......................    10,039     10,531       10,478     10,625
7.5% mortgage note.......................     5,840      6,053        6,059      6,365
8.15% note...............................     2,494      2,526        3,750      3,827
Other long-term debt.....................     1,540      1,278          -          -
</TABLE>

     The fair value of cash and cash equivalents approximates their carrying
amount because of the short maturities of such instruments. The fair value of
available-for-sale securities is based on quoted market prices of the
securities, except for certain low-income housing partnerships that have no
available bid/ask or sales prices as they are not traded in the open market. The
carrying amount of these low-income housing partnerships ($0 at January 31, 2004
and $682,000 at February 1, 2003) was used to approximate fair value. The fair
values of our convertible notes are based on quoted market prices for the
securities. The fair values of the term loan, mortgage notes, and other
long-term debt are based on estimated current interest rates that we could
obtain on similar borrowings.


NOTE 19.  RESTRUCTURING CHARGE (CREDIT)

     On January 28, 2002, we announced a restructuring plan, including a number
of initiatives designed to position the Company for increased profitability and
growth in the plus-size businesses. The major components of the plan included:
(i) the closing of 77 THE ANSWER/ADDED DIMENSIONS stores and the conversion of
approximately 20% of the ADDED DIMENSIONS stores to CATHERINES stores; (ii) the
closing of 130 under-performing FASHION BUG stores; and (iii) the conversion of
44 FASHION BUG store locations to LANE BRYANT stores. The restructuring plan
resulted in a pre-tax charge of $37,708,000 in the fourth quarter of Fiscal
2002.

     The restructuring charge included a $17,763,000 non-cash write-down of
fixed assets (primarily store fixtures and improvements) in the stores to be
closed, $18,500,000 of anticipated payments to landlords for the early
termination of existing store leases, $829,000 for severance costs, and $616,000
for sign removal and other costs. The fixtures and improvements had no
alternative use or salvage value, and we scrapped them at the time the stores
were closed.




                                       78
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


     During Fiscal 2003, we closed 124 FASHION BUG stores, converted 30 FASHION
BUG stores to LANE BRYANT stores, closed 65 CATHERINES/ADDED DIMENSIONS stores,
and converted 12 ADDED DIMENSIONS stores to CATHERINES stores, in connection
with the restructuring plan. Upon completion of the closing and conversion of
THE ANSWER/ ADDED DIMENSIONS stores in the third quarter of Fiscal 2003, we
recognized a pre-tax restructuring credit of $1,351,000. Upon completion of the
closing of the FASHION BUG stores in the fourth quarter of Fiscal 2003, we
recognized a pre-tax restructuring credit of $3,462,000. The restructuring
credits were primarily a result of our ability to negotiate lease terminations
on terms more favorable than our original estimates. We completed the
restructuring plan as of the end of Fiscal 2003.

     The following is a summary of restructuring costs accrued in connection
with the plan and amounts charged against the accrual during Fiscal 2003:

<TABLE>
<CAPTION>
                                 Accrued At                     Revision       Accrued At
                                 February 2,                     of Cost      February 1,
(In thousands)                      2002       Settlements      Estimate          2003
                                    ----       -----------      --------          ----
<S>                               <C>           <C>             <C>               <C>
Lease terminations.............   $18,500       $(14,013)       $(4,487)          $ 0
Severance......................       829           (717)          (112)            0
Sign removal and other costs...       429           (215)          (214)            0
                                  -------       --------        -------           ---
                                  $19,758       $(14,945)       $(4,813)          $ 0
                                  =======       ========        =======           ===
</TABLE>





















                                       79
<PAGE>


                     CHARMING SHOPPES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           YEAR ENDED JANUARY 31, 2004
                                   (Continued)


NOTE 20.  QUARTERLY FINANCIAL INFORMATION (Unaudited)

<TABLE>
<CAPTION>
                                            First             Second         Third           Fourth
(In thousands, except per share amounts)   Quarter            Quarter        Quarter         Quarter
                                           -------            -------        -------         -------
<S>                                     <C>                <C>            <C>             <C>
Fiscal 2004
Net sales ............................   $ 564,286          $ 605,456      $ 530,291       $ 585,647
Gross profit .........................     168,798            177,031        149,137         148,649
Net income ...........................       9,689(1)          18,645(1)       2,159(1)       10,146
Basic net income per share ...........         .09                .17            .02             .09
Diluted net income per share .........         .08                .15            .02             .09

Fiscal 2003
Net sales ............................   $ 630,616          $ 638,307      $ 542,332       $ 601,154
Gross profit .........................     193,381            196,931        151,285         149,760
Income (loss) before cumulative effect
     of accounting changes ...........      17,272             25,470           (292)          3,878
Net income (loss) ....................     (31,826)(2)(3)      25,470           (292)(4)       3,878(4)
Basic net income (loss) per share ....        (.28)(2)(3)         .22            .00             .03
Diluted net income (loss) per share ..        (.24)(2)(3)         .20            .00             .03

-------------------
<FN>
(1)  Includes expenses related to cost reduction plan of $4,431 ($2,707
     after-tax) in First Quarter, $6,389 ($3,904 after-tax) in Second Quarter,
     $148 ($91 after-tax) in Third Quarter, and $566 ($410 after-tax) in Fourth
     Quarter.

(2)  Includes cumulative effect of accounting change of $(5,123) ($(.05) per
     basic share and $(.04) per diluted share), net of income taxes, for
     adoption of EITF 02-16, "Accounting by a Customer (Including a Reseller)
     for Cash Consideration Received from a Vendor," effective as of the
     beginning of Fiscal 2003.

(3)  Includes cumulative effect of accounting change of $(43,975) ($(.39) per
     basic share and $(.35) per diluted share) for impairment of goodwill
     related to our CATHERINES acquisition, in accordance with the transition
     provisions of SFAS No. 142.

(4)  Includes pre-tax restructuring credit of $1,351 ($825 after-tax) in Third
     Quarter and $3,462 ($2,116 after-tax) in Fourth Quarter.
</FN>
</TABLE>














                                       80
<PAGE>


Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

     Not applicable.


Item 9A.  Controls and Procedures

     We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in reports we file under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized,
and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer ("CEO")
and Chief Financial Officer ("CFO"), as appropriate and in such a manner as to
allow timely decisions regarding required disclosure. We have a Disclosure
Committee, which is made up of several key management employees and reports
directly to the CEO and CFO, to centralize and enhance these controls and
procedures and assist our management, including our CEO and CFO, in fulfilling
their responsibilities for establishing and maintaining such controls and
procedures and providing accurate, timely, and complete disclosure.

     As of the end of the period covered by this report on Form 10-K (the
"Evaluation Date"), our Disclosure Committee, under the supervision and with the
participation of management, including our CEO and CFO, carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our management, including our
CEO and CFO, has concluded that, as of the Evaluation Date, our disclosure
controls and procedures were effective. Furthermore, there has been no change in
our internal control over financial reporting that occurred during the fiscal
quarter ended January 31, 2004 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.














                                       81
<PAGE>


                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

     Information regarding our directors and executive officers is included
under the captions "Directors Standing for Election", "Biographies of
Directors", "Corporate Governance at Charming Shoppes", "Compensation of
Directors", and "Section 16(a) Beneficial Ownership Reporting Compliance" in our
definitive proxy statement to be filed with the Securities and Exchange
Commission within 120 days of the end of our fiscal year, which is incorporated
herein by reference. Information regarding Executive Officers is included under
"Additional Part I Information - Our Executive Officers," in Part I of this
Report.

     We have adopted the Charming Shoppes, Inc. Business Ethics and Standards of
Conduct Policy (the "Policy"), that applies to all of our directors, officers,
and associates, including our principal executive officer, principal financial
officer, and principal accounting officer. The Policy has been filed as Exhibit
14 to this report on Form 10-K. We have also adopted corporate governance
guidelines (the "Guidelines") and charters (the "Charters") for the audit
committee, the compensation and stock option committee, the corporate governance
and nominating committee, and the finance committee of our Board of Directors.
The Policy, Guidelines, and Charters are available on our Internet website,
www.charmingshoppes.com, in the "About Us" section. A copy of the Policy,
Guidelines, and Charters are also available, at no charge, upon written request
to Charming Shoppes, Inc., Attn. Director of Investor Relations, 450 Winks Lane,
Bensalem, PA, 19020.

     Our Board of Directors has sole authority for making any amendments to, or
granting waivers from, any provision of the Policy that affects our executive
officers or directors, including our principal executive officer, principal
financial officer, or principal accounting officer. We intend to satisfy the
disclosure requirement under Item 10 of Form 8-K regarding any such amendment or
waiver by disclosing the nature of such amendment or waiver in a report on Form
8-K within five days.


Item 11.  Executive Compensation

     Information regarding executive compensation is included under the captions
"Management Compensation" and "Report of the Compensation and Stock Option
Committees of the Board of Directors on Executive Compensation", in our
definitive proxy statement to be filed with the Securities and Exchange
Commission within 120 days of the end of our fiscal year, which is incorporated
herein by reference.


Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

     Information regarding the security ownership of certain beneficial owners
and management and securities authorized for issuance under equity compensation
plans is included under the captions "Equity Compensation Plan Information" and
"Principal Shareholders and Management Ownership" in our definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days of the end of our fiscal year, which is incorporated herein by reference.





                                       82
<PAGE>


Item 13.  Certain Relationships and Related Transactions

     Information regarding certain relationships and related transactions is
included under the captions "Certain Relationships and Related Transactions" and
"Compensation Committee Interlocks and Insider Participation" in our definitive
proxy statement to be filed with the Securities and Exchange Commission within
120 days of the end of our fiscal year, which is incorporated herein by
reference.


Item 14.  Principal Accountant Fees and Services

     Information regarding principal accountant fees and services is included
under the caption "Audit and Other Fees" in our definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days of the end of
our fiscal year, which is incorporated herein by reference.























                                       83
<PAGE>


                                     PART IV


Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K


(a)(1)   Financial Statements

     The following Consolidated Financial Statements of Charming Shoppes, Inc.
and its subsidiaries are included in Part II, Item 8:

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                         <C>
Report of Independent Auditors............................................  40

Consolidated Balance Sheets - January 31, 2004 and February 1, 2003.......  41

Consolidated Statements of Operations and Comprehensive Income (Loss) -
     Years Ended January 31, 2004, February 1, 2003, and February 2, 2002.  42

Consolidated Statements of Stockholders' Equity - Years Ended
     January 31, 2004, February 1, 2003, and February 2, 2002.............  43

Consolidated Statements of Cash Flows - Years Ended
     January 31, 2004, February 1, 2003, and February 2, 2002.............  44

Notes to Consolidated Financial Statements................................  45
</TABLE>

(a)(2)  Financial Statement Schedules

     All schedules required by Rule 5-04 of Regulation S-X have been omitted as
they are not applicable, not required, or the information is included in the
consolidated financial statements or notes thereto included in Part II, Item 8
of this Report on Form 10-K.

(b) Reports on Form 8-K

     On November 20, 2003, we filed a Current Report on Form 8-K to furnish,
under "Item 12. Results of Operations and Financial Condition" the text of our
press release, issued November 20, 2003, announcing our earnings for the quarter
ended November 1, 2003 (the third quarter of our fiscal year ending January 31,
2004).

     On February 4, 2004, we filed a Current Report on Form 8-K to report, under
"Item 5. Other Events and Regulation FD Disclosure" the text of our press
release, issued February 4, 2004, announcing that we have amended and restated
our $300 million revolving credit facility effective as of January 29, 2004.

     On March 18, 2004, we filed a Current Report on Form 8-K to furnish, under
"Item 12. Results of Operations and Financial Condition" the text of our press
release, issued March 18, 2004, announcing our earnings for the quarter and
fiscal year ended January 31, 2004.




                                       84
<PAGE>


(c) Exhibits, including those incorporated by reference

     The following is a list of Exhibits filed as part of this Annual Report on
Form 10-K. Where so indicated, Exhibits that were previously filed are
incorporated by reference. For Exhibits incorporated by reference, the location
of the Exhibit in the previous filing is indicated in parenthesis.


  Plan of Acquisition, Reorganization, Arrangement, Liquidation, or Succession

2.1 Stock Purchase Agreement, dated as of July 9, 2001, among Charming Shoppes,
Inc., Venice Acquisition Corporation, LFAS, Inc. and Limited Brands, Inc.,
incorporated by reference to Form 8-K of the Registrant dated August 16, 2001,
filed on August 31, 2001. (Exhibit 2.1).

2.2 Services Agreement, dated as of August 16, 2001, between LBH, Inc. and
Limited Brands, Inc., incorporated by reference to Form 8-K of the Registrant
dated August 16, 2001, filed on August 31, 2001. (Exhibit 2.2).

2.3 Covenant Agreement, dated as of August 16, 2001, between Charming Shoppes,
Inc. and Limited Brands, Inc., incorporated by reference to Form 8-K of the
Registrant dated August 16, 2001, filed on August 31, 2001. (Exhibit 2.3).

2.4 Master Sublease, dated as of August 16, 2001, between Limited Brands, Inc.
and Lane Bryant, Inc., incorporated by reference to Form 8-K of the Registrant
dated August 16, 2001, filed on August 31, 2001. (Exhibit 2.4).

2.5 Lease Agreement, dated as of August 16, 2001, by and between Distribution
Land Corp. and Lane Bryant, Inc., incorporated by reference to Form 8-K of the
Registrant dated August 16, 2001, filed on August 31, 2001. (Exhibit 2.5).

2.6 Agreement and Plan of Merger, dated as of November 15, 1999, by and among
Catherines Stores Corporation, Charming Shoppes, Inc., and Rose Merger Sub,
Inc., incorporated by reference to Schedule 14(D)-1 of the Registrant filed on
November 19, 1999. (Item 11(c)(1)).


                      Articles of Incorporation and By-Laws

3.1 Restated Articles of Incorporation, incorporated by reference to Form 10-K
of the Registrant for the fiscal year ended January 29, 1994. (File No.
000-07258, Exhibit 3.1).

3.2 By-Laws, as Amended and Restated, incorporated by reference to Form 10-Q of
the Registrant for the quarter ended July 31, 1999. (Exhibit 3.2).


    Instruments Defining the Rights of Security Holders, Including Indentures

4.1 Amended and Restated Rights Agreement, dated as of February 1, 2001, between
Charming Shoppes, Inc. and American Stock Transfer & Trust Company, as Rights
Agent, incorporated by reference to Form 10-K of the Registrant for the fiscal
year ended February 3, 2001. (Exhibit 4.1).

4.2 Registration Agreement, dated as of August 16, 2001, between Charming
Shoppes, Inc. and Limited Brands, Inc., incorporated by reference to Form 8-K of
the Registrant dated August 16, 2001, filed on August 31, 2001. (Exhibit 4.1).

                                       85
<PAGE>

4.3 Indenture, dated as of May 28, 2002, between Charming Shoppes, Inc. and
Wachovia Bank, National Association, incorporated by reference to Form 10-Q of
the Registrant for the quarter ended May 4, 2002. (Exhibit 4.1).

4.4 Registration Rights Agreement, dated as of May 28, 2002, by and among
Charming Shoppes, Inc., as Issuer, and J. P. Morgan Securities, Inc., Bear
Stearns & Co., Inc., First Union Securities, Inc., Lazard Freres & Co., LLC, and
McDonald Investments, Inc., as Initial Purchasers, incorporated by reference to
Form 10-Q of the Registrant for the quarter ended May 4, 2002. (Exhibit 4.2).

4.5 Amended and Restated Loan and Security Agreement, dated as of January 29,
2004, by and among Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc.,
CSI Industries, Inc., Catherine Stores Corporation, Lane Bryant, Inc. and FB
Apparel, Inc., as Borrowers; Charming Shoppes of Delaware, Inc., as Borrowers'
Agent; Congress Financial Corporation, as Administrative Agent, Collateral
Agent, and Joint Bookrunner; J.P. Morgan Business Credit Corp., as
Co-Documentation Agent, Joint Lead Arranger, and Joint Bookrunner; Wachovia
Bank, National Association, as Joint Lead Arranger; Bank of America, N.A. and
Fleet Retail Group, Inc., as Co-Documentation Agents; and The Financial
Institutions named therein, as Lenders, incorporated by reference to Form 8-K of
the Registrant dated February 4, 2004. (Exhibit 99.2).

     Our miscellaneous long-term debt instruments and credit facility
agreements, under which the underlying authorized debt is equal to less than 10%
of our consolidated total assets, may not be filed as exhibits to this report.
We agree to furnish to the Commission, upon request, copies of any such
instruments not filed.


                               Material Contracts

10.1.1 Second Amended and Restated Pooling and Servicing Agreement, dated as of
November 25, 1997, as amended on July 22, 1999, among Charming Shoppes
Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First
Union National Bank as Trustee, incorporated by reference to Form 8-K of
Charming Shoppes Master Trust and Charming Shoppes Receivables Corp., (No.
333-71757) dated July 22, 1999. (Exhibit No. 4.1).

10.1.2 Series 1999-1 Supplement, dated as of July 22, 1999, to Second Amended
and Restated Pooling and Service Agreement, dated as of November 25, 1997, as
amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller,
Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee,
for $150,000,000 Charming Shoppes Master Trust Asset-Backed Certificates Series
1999-1, incorporated by reference to Form 8-K of Charming Shoppes Master Trust
and Charming Shoppes Receivables Corp., (No. 333-71757) dated July 22, 1999.
(Exhibit No. 4.2).

10.1.3 Receivables Purchase Agreement, dated as of May 28, 1999, among Charming
Shoppes Seller, Inc. as Seller, Spirit of America, Inc., as Servicer, Clipper
Receivables Corporation, as Purchaser, State Street Capital Corporation, as
Administrator, and State Street Bank & Trust Company, as Relationship Bank,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 2, 2002. (Exhibit 10.1.4).




                                       86
<PAGE>


10.1.4 Series 1999-2 Supplement, dated as of May 28, 1999, to Second Amended and
Restated Pooling and Service Agreement, dated as of November 25, 1997, as
amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller,
Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee,
for $55,750,000 Charming Shoppes Master Trust Asset-Backed Certificates Series
1999-2, incorporated by reference to Form 10-K of the Registrant for the fiscal
year ended January 29, 2000. (Exhibit 10.1.23).

10.1.5 Series 2000-VFC Supplement, dated as of November 9, 2000, to Second
Amended and Restated Pooling and Service Agreement, dated as of November 25,
1997, among Charming Shoppes Receivables Corp., as Seller, Spirit of America,
Inc., as Servicer, and First Union National Bank, as Trustee, on behalf of the
Series 2000-VFC Certificateholders, for up to $60,122,700 Charming Shoppes
Master Trust Series 2000-VFC, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 3, 2001. (Exhibit 10.1.16).

10.1.6 Certificate Purchase Agreement, dated as of November 9, 2000, among
Charming Shoppes Receivables Corp. as Seller and as the Class B Purchaser,
Spirit of America, Inc. as Servicer, Monte Rosa Capital Corporation as the
Conduit Purchaser, and ING Baring (U.S.) Capital Markets LLC as Administrator
for the Conduit Purchaser, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 3, 2001. (Exhibit 10.1.17).

10.1.7 Merchant Services Agreement, between Hurley State Bank and Catherines,
Inc., incorporated by reference to Form 10-Q of Catherines Stores Corp. for the
quarter ended May 1, 1999. (File No. 000-19372, Item 6. (A)(1)).

10.1.8 Credit Card Processing Agreement, among World Financial Network National
Bank, Lane Bryant, Inc. and Sierra Nevada Factoring, Inc., dated as of January
31, 1996, incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended February 2, 2002. (Exhibit 10.1.9).

10.1.9 Purchase and Sale Agreement, among Spirit of America National Bank, as
Seller, and Charming Shoppes Receivables Corp., as Purchaser, dated as of
November 25, 1997, incorporated by reference to Form S-1/A of Charming Shoppes
Receivables Corp. (No. 333-71757) (Exhibit 10.1(a)).

10.1.10 First Amendment to Purchase and Sale Agreement, among Spirit of America
National Bank, as Seller, and Charming Shoppes Receivables Corp., as Purchaser,
dated as of July 22, 1999, incorporated by reference to Form 8-K of Charming
Shoppes Receivables Corp. (No. 333-71757) (Exhibit 10.1).

10.1.11 Series 2002-1 Supplement, dated as of November 20, 2002, to Second
Amended and Restated Pooling and Service Agreement, dated as of November 25,
1997, as amended on July 22, 1999 and on May 8, 2001, among Charming Shoppes
Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia
Bank, National Association, as Trustee, for $100,000,000 Charming Shoppes Master
Trust Asset-Backed Certificates Series 2002-1, incorporated by reference to Form
10-Q of the Registrant for the quarter ended November 2, 2002. (Exhibit 10.1).

10.1.12 Charming Shoppes Master Trust $63,500,000 Fixed Rate Class A Asset
Backed Certificates, Series 2002-1 and $16,500,000 Fixed Rate Class B Asset
Backed Certificates, Series 2002-1 Certificate Purchase Agreement, dated as of
November 22, 2002, incorporated by reference to Form 10-Q of the Registrant for
the quarter ended November 2, 2002. (Exhibit 10.2).




                                       87
<PAGE>


10.1.13 Certificate Purchase Agreement, dated as of November 22, 2002, among
Wachovia Bank, National Association, as Trustee, Charming Shoppes Receivables
Corp., as Seller, Spirit of America, Inc., as Servicer, and The Class C Holders
described therein, incorporated by reference to Form 10-Q of the Registrant for
the quarter ended November 2, 2002. (Exhibit 10.3).

10.1.14 Certificate Purchase Agreement, dated as of November 22, 2002, among
Wachovia Bank, National Association, as Trustee, Charming Shoppes Receivables
Corp., as Seller, Spirit of America, Inc., as Servicer, and The Class D Holders
described therein, incorporated by reference to Form 10-Q of the Registrant for
the quarter ended November 2, 2002. (Exhibit 10.4).

10.1.15 $14,000,000 Promissory Note, dated October 2002, between White Marsh
Distribution, LLC., as Borrower, and General Electric Capital Business Asset
Funding Corporation, as Payee and Holder, incorporated by reference to Form 10-Q
of the Registrant for the quarter ended November 2, 2002. (Exhibit 10.5).

10.1.16 Commercial Deed of Trust, Security Agreement, Assignment of Leases and
Rents, and Fixture Filing, made as of October 2002, among the Grantor, White
Marsh Distribution, LLC, as Borrower, in favor of James M. Smith, as Trustee,
for the benefit of the Beneficiary, General Electric Capital Business Asset
Funding Corporation, as Lender, incorporated by reference to Form 10-Q of the
Registrant for the quarter ended November 2, 2002. (Exhibit 10.6).

10.1.17 Certificate Purchase Agreement, dated as of January 21, 2004, among
Charming Shoppes Receivables Corp., as Seller and as the Class B Purchaser,
Spirit of America, Inc., as Servicer, Sheffield Receivables Corporation, as the
Conduit Purchaser, and Barclay's Bank PLC as Administrator for the Conduit
Purchaser.

10.1.18 Series 2004-VFC Supplement, dated as of January 21, 2004, to Second
Amended and Restated Pooling and Service Agreement, dated as of November 25,
1997 and amended as of July 22, 1999 and as of May 8, 2001, among Charming
Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and
Wachovia Bank, National Association, as Trustee on behalf of the Series 2004-VFC
Certificateholders, for up to $132,000,000 Charming Shoppes Master Trust
Asset-Backed Certificates Series 2004-VFC.


          Management Contracts and Compensatory Plans and Arrangements

10.2.1 The 1988 Key Employee Stock Option Plan of Charming Shoppes, Inc., as
amended, incorporated by reference to Form 10-K of the Registrant for the fiscal
year ended January 30, 1993. (File No. 000-07258, Exhibit 10.2.3).

10.2.2 The 1989 Non-Employee Director Stock Option Plan of Charming Shoppes,
Inc., as amended, incorporated by reference to Form 10-K of the Registrant for
the fiscal year ended January 30, 1993. (File No. 000-07258, Exhibit 10.2.5).

10.2.3 Non-Employee Directors' Restricted Stock Plan of Charming Shoppes, Inc.,
as amended, incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended January 30, 1993. (File No. 000-07258, Exhibit 10.2.6).

10.2.4 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program,
incorporated by reference to Registration Statement on Form S-8 of the
Registrant, dated February 25, 1997. (Registration No. 333-22323, Exhibit 4.1).

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10.2.5 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program,
As Amended and Restated, incorporated by reference to Form 10-Q of the
Registrant for the quarter ended July 31, 1999. (Exhibit 10.1).

10.2.6 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program,
As Amended and Restated at June 27, 2002, incorporated by reference to Form 10-K
of the Registrant for the fiscal year ended February 1, 2003. (Exhibit 10.2.6).

10.2.7 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program
Stock Option Agreement, incorporated by reference to Form 10-Q of the Registrant
for the quarter ended July 31, 1999. (Exhibit 10.2).

10.2.8 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program
Restricted Stock Agreement, incorporated by reference to Form 10-Q of the
Registrant for the quarter ended July 31, 1999. (Exhibit 10.3).

10.2.9 The 1993 Employees' Stock Incentive Plan of Charming Shoppes, Inc.,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended January 29, 1994. (File No. 000-07258, Exhibit 10.2.10).

10.2.10 The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan
Restricted Stock Agreement, dated as of February 11, 2002, incorporated by
reference to Form 10-K of the Registrant for the fiscal year ended February 2,
2002. (Exhibit 10.2.8).

10.2.11 The Charming Shoppes, Inc. Employee Stock Purchase Plan, as amended,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 3, 1996. (File No. 000-07258, Exhibit 10.2.10).

10.2.12 The Charming Shoppes, Inc. Restricted Stock Award Plan for Associates,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 3, 1996. (File No. 000-07258, Exhibit 10.2.11).

10.2.13 The Charming Shoppes, Inc. 1996 Restricted Stock Award Program,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 3, 1996. (File No. 000-07258, Exhibit 10.2.12).

10.2.14 The Charming Shoppes, Inc. 1996 Restricted Stock Award Program
Restricted Stock Agreement, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 3, 1996. (File No. 000-07258,
Exhibit 10.2.13).

10.2.15 Employment Agreement, dated as of October 12, 1999, by and between
Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form
10-Q of the Registrant for the quarter ended October 30, 1999. (Exhibit 10.1).

10.2.16 First Amendment, dated as of February 6, 2003, to Employment Agreement,
dated as of October 12, 1999, by and between Charming Shoppes, Inc. and Dorrit
J. Bern, incorporated by reference to Form 10-K of the Registrant for the fiscal
year ended February 1, 2003. (Exhibit 10.2.16).

10.2.17 Employment Agreement, dated as of March 12, 2003, by and between
Charming Shoppes, Inc. and Erna Zint, incorporated by reference to Form 10-K of
the Registrant for the fiscal year ended February 1, 2003. (Exhibit 10.2.17).

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10.2.18 The Charming Shoppes, Inc. 1998 Restricted Award Program, incorporated
by reference to Form 10-K of the Registrant for the fiscal year ended January
31, 1998. (Exhibit 10.2.22).

10.2.19 The Charming Shoppes Inc. 1999 Associates' Stock Incentive Plan,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended January 30, 1999. (Exhibit 10.2.24).

10.2.20 Charming Shoppes, Inc. 1999 Associates' Stock Incentive Plan Stock
Option Agreement, incorporated by reference to Form 10-K of the Registrant for
the fiscal year ended January 30, 1999. (Exhibit 10.2.25).

10.2.21 The Charming Shoppes, Inc. Amended and Restated 2000 Associates' Stock
Incentive Plan, incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended February 3, 2001. (Exhibit 10.2.29).

10.2.22 The Charming Shoppes, Inc. 2000 Associates' Stock Incentive Plan Stock
Option Agreement, incorporated by reference to Form 10-K of the Registrant for
the fiscal year ended January 29, 2000. (Exhibit 10.2.32).

10.2.23 The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan Stock
Option Agreement (regular vesting schedule), incorporated by reference to Form
10-K of the Registrant for the fiscal year ended February 2, 2002. (Exhibit
10.2.20).

10.2.24 The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan Stock
Option Agreement (accelerated vesting schedule), incorporated by reference to
Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (Exhibit
10.2.21).

10.2.25 The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan
Performance-Accelerated Stock Option Agreement, incorporated by reference to
Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (Exhibit
10.2.22).

10.2.26 The Charming Shoppes, Inc. Amended and Restated 2000 Associates' Stock
Incentive Plan Stock Option Agreement (regular vesting schedule) , incorporated
by reference to Form 10-K of the Registrant for the fiscal year ended February
2, 2002. (Exhibit 10.2.23).

10.2.27 The Charming Shoppes, Inc. Amended and Restated 2000 Associates' Stock
Incentive Plan Stock Option Agreement (accelerated vesting schedule),
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 2, 2002. (Exhibit 10.2.24).

10.2.28 The Charming Shoppes, Inc. Amended and Restated 2000 Associates' Stock
Incentive Plan Restricted Stock Agreement, incorporated by reference to Form
10-K of the Registrant for the fiscal year ended February 2, 2002. (Exhibit
10.2.25).

10.2.29 Forms of Executive Severance Agreements by and between Charming Shoppes,
Inc., the named executive officers in the company's Proxy Statement for the
Annual Meeting held on June 15, 2000, and certain other executive officers and
officers of Charming Shoppes, Inc. and its subsidiaries, incorporated by
reference to Form 10-K of the Registrant for the fiscal year ended January 29,
2000. (Exhibit 10.2.33).




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10.2.30 Forms of First Amendment, dated as of February 6, 2003, to Forms of
Executive Severance Agreements, dated July 15, 1999, by and between Charming
Shoppes, Inc., and the executive officers and officers named in the Agreements,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 1, 2003. (Exhibit 10.2.30).

10.2.31 Form of Executive Severance Agreement, dated February 6, 2003, by and
between Charming Shoppes, Inc. and certain executive officers and officers of
Charming Shoppes, Inc. and its subsidiaries, incorporated by reference to Form
10-K of the Registrant for the fiscal year ended February 1, 2003. (Exhibit
10.2.31).

10.2.32 Charming Shoppes, Inc. Supplemental Retirement Plan, effective February
1, 2003, incorporated by reference to Form 10-Q of the Registrant for the
quarter ended May 3, 2003. (Exhibit 10.1).


                                 Other Exhibits

14 Charming Shoppes, Inc. Business Ethics and Standards of Conduct Policy

21 Subsidiaries of Registrant

23 Consent of independent auditors

31.1 Certification by Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2 Certification by Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.


















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                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Charming Shoppes, Inc., has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                              CHARMING SHOPPES, INC.

Date:  April 8, 2004          /S/ DORRIT J. BERN
                              ------------------
                              By: Dorrit J. Bern
                              Chairman of the Board
                              President and Chief Executive Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Charming
Shoppes, Inc. and in the capacities and on the dates indicated:

/S/ DORRIT J. BERN                                 /S/ ERIC M. SPECTER
------------------                                 -------------------
Dorrit J. Bern                                     Eric M. Specter
Chairman of the Board                              Executive Vice President
President and Chief Executive Officer              Chief Financial Officer
April 8, 2004                                      April 8, 2004

/S/ JOHN J. SULLIVAN                               /S/ JOSEPH L. CASTLE II
--------------------                               -----------------------
John J. Sullivan                                   Joseph L. Castle II
Vice President, Corporate Controller               Director
Chief Accounting Officer                           April 8, 2004
April 8, 2004

/S/ ALAN ROSSKAMM                                  /S/ WILLIAM O. ALBERTINI
-----------------                                  ------------------------
Alan Rosskamm                                      William O. Albertini
Director                                           Director
April 8, 2004                                      April 8, 2004

/S/ KATHERINE M. HUDSON                            /S/ PAMELA S. LEWIS
-----------------------                            -------------------
Katherine M. Hudson                                Pamela S. Lewis
Director                                           Director
April 8, 2004                                      April 8, 2004

/S/ KENNETH S. OLSHAN                              /S/ CHARLES T. HOPKINS
---------------------                              ----------------------
Kenneth S. Olshan                                  Charles T. Hopkins
Director                                           Director
April 8, 2004                                      April 8, 2004




                                       92
<PAGE>



                                  Exhibit Index


Exhibit No. Item
----------  ----
2.1         Stock Purchase Agreement, dated as of July 9, 2001, among Charming
            Shoppes, Inc., Venice Acquisition Corporation, LFAS, Inc. and
            Limited Brands, Inc., incorporated by reference to Form 8-K of the
            Registrant dated August 16, 2001, filed on August 31, 2001. (Exhibit
            2.1).

2.2         Services Agreement, dated as of August 16, 2001, between LBH, Inc.
            and Limited Brands, Inc., incorporated by reference to Form 8-K of
            the Registrant dated August 16, 2001, filed on August 31, 2001.
            (Exhibit 2.2).

2.3         Covenant Agreement, dated as of August 16, 2001, between Charming
            Shoppes, Inc. and Limited Brands, Inc., incorporated by reference to
            Form 8-K of the Registrant dated August 16, 2001, filed on August
            31, 2001. (Exhibit 2.3).

2.4         Master Sublease, dated as of August 16, 2001, between Limited
            Brands, Inc. and Lane Bryant, Inc., incorporated by reference to
            Form 8-K of the Registrant dated August 16, 2001, filed on August
            31, 2001. (Exhibit 2.4).

2.5         Lease Agreement, dated as of August 16, 2001, by and between
            Distribution Land Corp. and Lane Bryant, Inc., incorporated by
            reference to Form 8-K of the Registrant dated August 16, 2001, filed
            on August 31, 2001. (Exhibit 2.5).

2.6         Agreement and Plan of Merger, dated as of November 15, 1999, by and
            among Catherines Stores Corporation, Charming Shoppes, Inc., and
            Rose Merger Sub, Inc., incorporated by reference to Schedule 14(D)-1
            of the Registrant filed on November 19, 1999. (Item 11(c)(1)).

3.1         Restated Articles of Incorporation, incorporated by reference to
            Form 10-K of the Registrant for the fiscal year ended January 29,
            1994. (File No. 000-07258, Exhibit 3.1).

3.2         By-Laws, as Amended and Restated, incorporated by reference to Form
            10-Q of the Registrant for the quarter ended July 31, 1999. (Exhibit
            3.2).

4.1         Amended and Restated Rights Agreement, dated as of February 1, 2001,
            between Charming Shoppes, Inc. and American Stock Transfer & Trust
            Company, as Rights Agent, incorporated by reference to Form 10-K of
            the Registrant for the fiscal year ended February 3, 2001. (Exhibit
            4.1).

4.2         Registration Agreement, dated as of August 16, 2001, between
            Charming Shoppes, Inc. and Limited Brands, Inc., incorporated by
            reference to Form 8-K of the Registrant dated August 16, 2001, filed
            on August 31, 2001. (Exhibit 4.1).




                                       93
<PAGE>


4.3         Indenture, dated as of May 28, 2002, between Charming Shoppes, Inc.
            and Wachovia Bank, National Association, incorporated by reference
            to Form 10-Q of the Registrant for the quarter ended May 4, 2002.
            (Exhibit 4.1).

4.4         Registration Rights Agreement, dated as of May 28, 2002, by and
            among Charming Shoppes, Inc., as Issuer, and J. P. Morgan
            Securities, Inc., Bear Stearns & Co., Inc., First Union Securities,
            Inc., Lazard Freres & Co., LLC, and McDonald Investments, Inc., as
            Initial Purchasers, incorporated by reference to Form 10-Q of the
            Registrant for the quarter ended May 4, 2002. (Exhibit 4.2).

4.5         Amended and Restated Loan and Security Agreement, dated as of
            January 29, 2004, by and among Charming Shoppes, Inc., Charming
            Shoppes of Delaware, Inc., CSI Industries, Inc., Catherine Stores
            Corporation, Lane Bryant, Inc. and FB Apparel, Inc., as Borrowers;
            Charming Shoppes of Delaware, Inc., as Borrowers' Agent; Congress
            Financial Corporation, as Administrative Agent, Collateral Agent,
            and Joint Bookrunner; J.P. Morgan Business Credit Corp., as
            Co-Documentation Agent, Joint Lead Arranger, and Joint Bookrunner;
            Wachovia Bank, National Association, as Joint Lead Arranger; Bank of
            America, N.A. and Fleet Retail Group, Inc., as Co-Documentation
            Agents; and The Financial Institutions named therein, as Lenders,
            incorporated by reference to Form 8-K of the Registrant dated
            February 4, 2004. (Exhibit 99.2).

10.1.1      Second Amended and Restated Pooling and Servicing Agreement, dated
            as of November 25, 1997, as amended on July 22, 1999, among Charming
            Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as
            Servicer, and First Union National Bank as Trustee, incorporated by
            reference to Form 8-K of Charming Shoppes Master Trust and Charming
            Shoppes Receivables Corp., (No. 333-71757) dated July 22, 1999.
            (Exhibit No. 4.1).

10.1.2      Series 1999-1 Supplement, dated as of July 22, 1999, to Second
            Amended and Restated Pooling and Service Agreement, dated as of
            November 25, 1997, as amended on July 22, 1999, among Charming
            Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as
            Servicer, and First Union National Bank, as Trustee, for
            $150,000,000 Charming Shoppes Master Trust Asset-Backed Certificates
            Series 1999-1, incorporated by reference to Form 8-K of Charming
            Shoppes Master Trust and Charming Shoppes Receivables Corp., (No.
            333-71757) dated July 22, 1999. (Exhibit No. 4.2).

10.1.3      Receivables Purchase Agreement, dated as of May 28, 1999, among
            Charming Shoppes Seller, Inc. as Seller, Spirit of America, Inc., as
            Servicer, Clipper Receivables Corporation, as Purchaser, State
            Street Capital Corporation, as Administrator, and State Street Bank
            & Trust Company, as Relationship Bank, incorporated by reference to
            Form 10-K of the Registrant for the fiscal year ended February 2,
            2002. (Exhibit 10.1.4).

10.1.4      Series 1999-2 Supplement, dated as of May 28, 1999, to Second
            Amended and Restated Pooling and Service Agreement, dated as of
            November 25, 1997, as amended on July 22, 1999, among Charming
            Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as
            Servicer, and First Union National Bank, as Trustee, for $55,750,000
            Charming Shoppes Master Trust Asset-Backed Certificates Series
            1999-2, incorporated by reference to Form 10-K of the Registrant for
            the fiscal year ended January 29, 2000. (Exhibit 10.1.23).

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<PAGE>

10.1.5      Series 2000-VFC Supplement, dated as of November 9, 2000, to Second
            Amended and Restated Pooling and Service Agreement, dated as of
            November 25, 1997, among Charming Shoppes Receivables Corp., as
            Seller, Spirit of America, Inc., as Servicer, and First Union
            National Bank, as Trustee, on behalf of the Series 2000-VFC
            Certificateholders, for up to $60,122,700 Charming Shoppes Master
            Trust Series 2000-VFC, incorporated by reference to Form 10-K of the
            Registrant for the fiscal year ended February 3, 2001. (Exhibit
            10.1.16).

10.1.6      Certificate Purchase Agreement, dated as of November 9, 2000, among
            Charming Shoppes Receivables Corp. as Seller and as the Class B
            Purchaser, Spirit of America, Inc. as Servicer, Monte Rosa Capital
            Corporation as the Conduit Purchaser, and ING Baring (U.S.) Capital
            Markets LLC as Administrator for the Conduit Purchaser, incorporated
            by reference to Form 10-K of the Registrant for the fiscal year
            ended February 3, 2001. (Exhibit 10.1.17).

10.1.7      Merchant Services Agreement, between Hurley State Bank and
            Catherines, Inc., incorporated by reference to Form 10-Q of
            Catherines Stores Corp. for the quarter ended May 1, 1999. (File No.
            000-19372, Item 6. (A)(1)).

10.1.8      Credit Card Processing Agreement, among World Financial Network
            National Bank, Lane Bryant, Inc. and Sierra Nevada Factoring, Inc.,
            dated as of January 31, 1996, incorporated by reference to Form 10-K
            of the Registrant for the fiscal year ended February 2, 2002.
            (Exhibit 10.1.9).

10.1.9      Purchase and Sale Agreement, among Spirit of America National Bank,
            as Seller, and Charming Shoppes Receivables Corp., as Purchaser,
            dated as of November 25, 1997, incorporated by reference to Form
            S-1/A of Charming Shoppes Receivables Corp. (No. 333-71757) (Exhibit
            10.1(a)).

10.1.10     First Amendment to Purchase and Sale Agreement, among Spirit of
            America National Bank, as Seller, and Charming Shoppes Receivables
            Corp., as Purchaser, dated as of July 22, 1999, incorporated by
            reference to Form 8-K of Charming Shoppes Receivables Corp. (No.
            333-71757) (Exhibit 10.1).

10.1.11     Series 2002-1 Supplement, dated as of November 20, 2002, to Second
            Amended and Restated Pooling and Service Agreement, dated as of
            November 25, 1997, as amended on July 22, 1999 and on May 8, 2001,
            among Charming Shoppes Receivables Corp., as Seller, Spirit of
            America, Inc., as Servicer, and Wachovia Bank, National Association,
            as Trustee, for $100,000,000 Charming Shoppes Master Trust
            Asset-Backed Certificates Series 2002-1, incorporated by reference
            to Form 10-Q of the Registrant for the quarter ended November 2,
            2002. (Exhibit 10.1).

10.1.12     Charming Shoppes Master Trust $63,500,000 Fixed Rate Class A Asset
            Backed Certificates, Series 2002-1 and $16,500,000 Fixed Rate Class
            B Asset Backed Certificates, Series 2002-1 Certificate Purchase
            Agreement, dated as of November 22, 2002, incorporated by reference
            to Form 10-Q of the Registrant for the quarter ended November 2,
            2002. (Exhibit 10.2).

10.1.13     Certificate Purchase Agreement, dated as of November 22, 2002, among
            Wachovia Bank, National Association, as Trustee, Charming Shoppes
            Receivables Corp., as Seller, Spirit of America, Inc., as Servicer,
            and The Class C Holders described therein, incorporated by reference
            to Form 10-Q of the Registrant for the quarter ended November 2,
            2002. (Exhibit 10.3).




                                       95
<PAGE>


10.1.14     Certificate Purchase Agreement, dated as of November 22, 2002, among
            Wachovia Bank, National Association, as Trustee, Charming Shoppes
            Receivables Corp., as Seller, Spirit of America, Inc., as Servicer,
            and The Class D Holders described therein, incorporated by reference
            to Form 10-Q of the Registrant for the quarter ended November 2,
            2002. (Exhibit 10.4).

10.1.15     $14,000,000 Promissory Note, dated October 2002, between White Marsh
            Distribution, LLC., as Borrower, and General Electric Capital
            Business Asset Funding Corporation, as Payee and Holder,
            incorporated by reference to Form 10-Q of the Registrant for the
            quarter ended November 2, 2002. (Exhibit 10.5).

10.1.16     Commercial Deed of Trust, Security Agreement, Assignment of Leases
            and Rents, and Fixture Filing, made as of October 2002, among the
            Grantor, White Marsh Distribution, LLC, as Borrower, in favor of
            James M. Smith, as Trustee, for the benefit of the Beneficiary,
            General Electric Capital Business Asset Funding Corporation, as
            Lender, incorporated by reference to Form 10-Q of the Registrant for
            the quarter ended November 2, 2002. (Exhibit 10.6).

10.1.17     Certificate Purchase Agreement, dated as of January 21, 2004, among
            Charming Shoppes Receivables Corp., as Seller and as the Class B
            Purchaser, Spirit of America, Inc., as Servicer, Sheffield
            Receivables Corporation, as the Conduit Purchaser, and Barclay's
            Bank PLC as Administrator for the Conduit Purchaser.

10.1.18     Series 2004-VFC Supplement, dated as of January 21, 2004, to Second
            Amended and Restated Pooling and Service Agreement, dated as of
            November 25, 1997 and amended as of July 22, 1999 and as of May 8,
            2001, among Charming Shoppes Receivables Corp., as Seller, Spirit of
            America, Inc., as Servicer, and Wachovia Bank, National Association,
            as Trustee on behalf of the Series 2004-VFC Certificateholders, for
            up to $132,000,000 Charming Shoppes Master Trust Asset-Backed
            Certificates Series 2004-VFC.

10.2.1      The 1988 Key Employee Stock Option Plan of Charming Shoppes, Inc.,
            as amended, incorporated by reference to Form 10-K of the Registrant
            for the fiscal year ended January 30, 1993. (File No. 000-07258,
            Exhibit 10.2.3).

10.2.2      The 1989 Non-Employee Director Stock Option Plan of Charming
            Shoppes, Inc., as amended, incorporated by reference to Form 10-K of
            the Registrant for the fiscal year ended January 30, 1993. (File No.
            000-07258, Exhibit 10.2.5).

10.2.3      Non-Employee Directors' Restricted Stock Plan of Charming Shoppes,
            Inc., as amended, incorporated by reference to Form 10-K of the
            Registrant for the fiscal year ended January 30, 1993. (File No.
            000-07258, Exhibit 10.2.6).

10.2.4      The Charming Shoppes, Inc. Non-Employee Directors Compensation
            Program, incorporated by reference to Registration Statement on Form
            S-8 of the Registrant, dated February 25, 1997. (Registration No.
            333-22323, Exhibit 4.1).

10.2.5      The Charming Shoppes, Inc. Non-Employee Directors Compensation
            Program, As Amended and Restated, incorporated by reference to Form
            10-Q of the Registrant for the quarter ended July 31, 1999. (Exhibit
            10.1).

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<PAGE>

10.2.6      The Charming Shoppes, Inc. Non-Employee Directors Compensation
            Program, As Amended and Restated at June 27, 2002, incorporated by
            reference to Form 10-K of the Registrant for the fiscal year ended
            February 1, 2003. (Exhibit 10.2.6).

10.2.7      The Charming Shoppes, Inc. Non-Employee Directors Compensation
            Program Stock Option Agreement, incorporated by reference to Form
            10-Q of the Registrant for the quarter ended July 31, 1999. (Exhibit
            10.2).

10.2.8      The Charming Shoppes, Inc. Non-Employee Directors Compensation
            Program Restricted Stock Agreement, incorporated by reference to
            Form 10-Q of the Registrant for the quarter ended July 31, 1999.
            (Exhibit 10.3).

10.2.9      The 1993 Employees' Stock Incentive Plan of Charming Shoppes, Inc.,
            incorporated by reference to Form 10-K of the Registrant for the
            fiscal year ended January 29, 1994. (File No. 000-07258, Exhibit
            10.2.10).

10.2.10     The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan
            Restricted Stock Agreement, dated as of February 11, 2002,
            incorporated by reference to Form 10-K of the Registrant for the
            fiscal year ended February 2, 2002. (Exhibit 10.2.8).

10.2.11     The Charming Shoppes, Inc. Employee Stock Purchase Plan, as amended,
            incorporated by reference to Form 10-K of the Registrant for the
            fiscal year ended February 3, 1996. (File No. 000-07258, Exhibit
            10.2.10).

10.2.12     The Charming Shoppes, Inc. Restricted Stock Award Plan for
            Associates, incorporated by reference to Form 10-K of the Registrant
            for the fiscal year ended February 3, 1996. (File No. 000-07258,
            Exhibit 10.2.11).

10.2.13     The Charming Shoppes, Inc. 1996 Restricted Stock Award Program,
            incorporated by reference to Form 10-K of the Registrant for the
            fiscal year ended February 3, 1996. (File No. 000-07258, Exhibit
            10.2.12).

10.2.14     The Charming Shoppes, Inc. 1996 Restricted Stock Award Program
            Restricted Stock Agreement, incorporated by reference to Form 10-K
            of the Registrant for the fiscal year ended February 3, 1996. (File
            No. 000-07258, Exhibit 10.2.13).

10.2.15     Employment Agreement, dated as of October 12, 1999, by and between
            Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference
            to Form 10-Q of the Registrant for the quarter ended October 30,
            1999. (Exhibit 10.1).

10.2.16     First Amendment, dated as of February 6, 2003, to Employment
            Agreement, dated as of October 12, 1999, by and between Charming
            Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form
            10-K of the Registrant for the fiscal year ended February 1, 2003.
            (Exhibit 10.2.16).

10.2.17     Employment Agreement, dated as of March 12, 2003, by and between
            Charming Shoppes, Inc. and Erna Zint, incorporated by reference to
            Form 10-K of the Registrant for the fiscal year ended February 1,
            2003. (Exhibit 10.2.17).

10.2.18     The Charming Shoppes, Inc. 1998 Restricted Award Program,
            incorporated by reference to Form 10-K of the Registrant for the
            fiscal year ended January 31, 1998. (Exhibit 10.2.22).

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<PAGE>

10.2.19     The Charming Shoppes Inc. 1999 Associates' Stock Incentive Plan,
            incorporated by reference to Form 10-K of the Registrant for the
            fiscal year ended January 30, 1999. (Exhibit 10.2.24).

10.2.20     Charming Shoppes, Inc. 1999 Associates' Stock Incentive Plan Stock
            Option Agreement, incorporated by reference to Form 10-K of the
            Registrant for the fiscal year ended January 30, 1999. (Exhibit
            10.2.25).

10.2.21     The Charming Shoppes, Inc. Amended and Restated 2000 Associates'
            Stock Incentive Plan, incorporated by reference to Form 10-K of the
            Registrant for the fiscal year ended February 3, 2001. (Exhibit
            10.2.29).

10.2.22     The Charming Shoppes, Inc. 2000 Associates' Stock Incentive Plan
            Stock Option Agreement, incorporated by reference to Form 10-K of
            the Registrant for the fiscal year ended January 29, 2000. (Exhibit
            10.2.32).

10.2.23     The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan
            Stock Option Agreement (regular vesting schedule), incorporated by
            reference to Form 10-K of the Registrant for the fiscal year ended
            February 2, 2002. (Exhibit 10.2.20).

10.2.24     The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan
            Stock Option Agreement (accelerated vesting schedule), incorporated
            by reference to Form 10-K of the Registrant for the fiscal year
            ended February 2, 2002. (Exhibit 10.2.21).

10.2.25     The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan
            Performance-Accelerated Stock Option Agreement, incorporated by
            reference to Form 10-K of the Registrant for the fiscal year ended
            February 2, 2002. (Exhibit 10.2.22).

10.2.26     The Charming Shoppes, Inc. Amended and Restated 2000 Associates'
            Stock Incentive Plan Stock Option Agreement (regular vesting
            schedule), incorporated by reference to Form 10-K of the Registrant
            for the fiscal year ended February 2, 2002. (Exhibit 10.2.23).

10.2.27     The Charming Shoppes, Inc. Amended and Restated 2000 Associates'
            Stock Incentive Plan Stock Option Agreement (accelerated vesting
            schedule), incorporated by reference to Form 10-K of the Registrant
            for the fiscal year ended February 2, 2002. (Exhibit 10.2.24).

10.2.28     The Charming Shoppes, Inc. Amended and Restated 2000 Associates'
            Stock Incentive Plan Restricted Stock Agreement, incorporated by
            reference to Form 10-K of the Registrant for the fiscal year ended
            February 2, 2002. (Exhibit 10.2.25).

10.2.29     Forms of Executive Severance Agreements by and between Charming
            Shoppes, Inc., the named executive officers in the company's Proxy
            Statement for the Annual Meeting held on June 15, 2000, and certain
            other executive officers and officers of Charming Shoppes, Inc. and
            its subsidiaries, incorporated by reference to Form 10-K of the
            Registrant for the fiscal year ended January 29, 2000. (Exhibit
            10.2.33).

10.2.30     Forms of First Amendment, dated as of February 6, 2003, to Forms of
            Executive Severance Agreements, dated July 15, 1999, by and between
            Charming Shoppes, Inc., and the executive officers and officers
            named in the Agreements, incorporated by reference to Form 10-K of
            the Registrant for the fiscal year ended February 1, 2003. (Exhibit
            10.2.30).

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10.2.31     Form of Executive Severance Agreement, dated February 6, 2003, by
            and between Charming Shoppes, Inc. and certain executive officers
            and officers of Charming Shoppes, Inc. and its subsidiaries,
            incorporated by reference to Form 10-K of the Registrant for the
            fiscal year ended February 1, 2003. (Exhibit 10.2.31).

10.2.32     Charming Shoppes, Inc. Supplemental Retirement Plan, effective
            February 1, 2003, incorporated by reference to Form 10-Q of the
            Registrant for the quarter ended May 3, 2003. (Exhibit 10.1).

14          Charming Shoppes, Inc. Business Ethics and Standards of Conduct
            Policy

21          Subsidiaries of Registrant

23          Consent of independent auditors

31.1        Certification by Principal Executive Officer Pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.

31.2        Certification by Principal Financial Officer Pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.

32          Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.









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