**(**

| Delaware                                                                                    |   | 75-1475223                                                        |
|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
| (State                or other jurisdiction ofincorporation                or organization) |   | (I.R.S.                EmployerIdentification                No.) |
|                                                                                        |   |                                                              |
| 550                Bailey Avenue, Fort Worth, Texas                                         |   | 76107                                                             |
| (Address                of principal executive offices)                                     |   | (Zip                Code)                                         |

| (817)                347-8200                                                      |
|------------------------------------------------------------------------------------|
| (Registrant's                telephone number, including area                code) |

|   |
|--------|

| Class                                     |   | Number                of shares outstanding at June 8, 2006 |
|-------------------------------------------|--------|------------------------------------------------------------------|
| Common                stock, $1 par value |   | 36,346,230                                                       |

----

| PART                I - FINANCIAL INFORMATION                                                                                                                 | Page                No. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
|                                                                                                                                                          |                    |
| Item                                                                                                                                                          |                    |
| 1.                Financial Statements (Unaudited)                                                                                                            | 3-12                    |
| Consolidated                Statements of Operations                                                                                                          | 3                       |
| Consolidated                Balance Sheets                                                                                                                    | 4                       |
| Consolidated                Statements of Cash Flows                                                                                                          | 5                       |
| Notes                to Consolidated Financial Statements                                                                                                     | 6-12                    |
|                                                                                                                                                          |                    |
| 2.                Management’s Discussion and Analysis of Financial Condition and                Results                   of Operations | 13-19                   |
| General                                                                                                                                                       | 13-14                   |
| Executive                Summary                                                                                                                              | 14-16                   |
| Results                of Operations                                                                                                                          | 16-18                   |
| Liquidity                and Capital Resources                                                                                                                | 18                      |
| Recent                Accounting Pronouncements                                                                                                               | 19                      |
|                                                                                                                                                          |                    |
| 3.                Quantitative and Qualitative Disclosures About Market Risk                                                                                  | 20                      |
|                                                                                                                                                          |                    |
| 4.                Controls and Procedures                                                                                                                     | 20                      |
|                                                                                                                                                          |                    |
| PART                II - OTHER INFORMATION                                                                                                                    |                    |
|                                                                                                                                                          |                    |
| 1.                Legal Proceedings                                                                                                                           | 21                      |
|                                                                                                                                                          |                    |
| 1A.                Risk Factors                                                                                                                               | 21                      |
|                                                                                                                                                          |                    |
| 6.                Exhibits                                                                                                                                    | 22                      |
|                                                                                                                                                          |                    |
| 7.                Signatures                                                                                                                                  | 23                      |

----

*(In      thousands, except per share amounts)*

|                                                                                                                            |   | Three                Months Ended |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                            |   | April                29,          |   | April                30, |
|                                                                                                                            |   | 2006                              |   | 2005 |
|                                                                                                                            |   |                              |   | (as                adjusted) |
|                                                                                                                            |   |                              |   |   |
| Net                revenue ........................................................................................        |   | $                                 | 118,664 |   | $ | 122,111 |
|                                                                                                                            |   |                              |   |   |   |   |
| Costs                and expenses:                                                                                              |   |                              |   |   |   |   |
| Cost                of sales, buying and store occupancy costs                ....................                              |   |                              | 94,650 |   |   | 95,200 |
| Selling,                general and administrative expenses                .............................                        |   |                              | 39,764 |   |   | 40,059 |
| Operating                loss                .................................................................................  |   |                              | (15,750) |   |   | (13,148) |
|                                                                                                                            |   |                              |   |   |   |   |
| Other                income (expense):                                                                                          |   |                              |   |   |   |   |
| Interest                income                ...............................................................................   |   |                              | 37 |   |   | 8 |
| Interest                expense                .............................................................................    |   |                              | (244) |   |   | (320) |
|                                                                                                                            |   |                              |   |   |   |   |
| Loss                before income taxes                 ...............................................................    |   |                              | (15,957) |   |   | (13,460) |
| Benefit                for income taxes                ..................................................................       |   |                              | (404) |   |   | (5,491) |
|                                                                                                                            |   |                              |   |   |   |   |
| Net                loss                ........................................................................................ |   |                              | ($15,553) |   |   | ($7,969) |
|                                                                                                                            |   |                              |   |   |   |   |
| Basic                and diluted loss per share                .................................................                |   |                              | ($0.43) |   |   | ($0.22) |
|                                                                                                                            |   |                              |   |   |   |   |
| Average                common shares outstanding                ......................................                          |   |                              | 35,930 |   |   | 35,939 |
|                                                                                                                            |   |                              |   |   |   |   |
|                                                                                                                            |   |                              |   |   |   |   |
| The                accompanying notes are an integral part of these consolidated financial                statements.           |

----

*(In      thousands, except per share amounts)*

|                                                                                                                              |   | April                29, |    | January                28, |   | April                30,     |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|----------------------------|--------|------------------------------|
|                                                                                                                              |   | 2006                     |    | 2006                       |   | 2005                         |
| ASSETS                                                                                                                            |   |                     |    |                       |   | (as                adjusted) |
| Current                assets:                                                                                                    |   |                     |    |                       |   |                         |
| Cash                and cash equivalents                ..........................................................                |   | $                        | 3,303   |                       | $      | 4,015                        |   | $ | 10,386 |
| Inventories......................................................................................                                 |   |                     | 127,862 |                       |   | 128,719                      |   |   | 151,549 |
| Other                current assets                .....................................................................          |   |                     | 14,820  |                       |   | 14,846                       |   |   | 32,783 |
|  Total                current assets                ....................................................................     |   |                     | 145,985 |                       |   | 147,580                      |   |   | 194,718 |
|                                                                                                                              |   |                     |    |                       |   |                         |   |   |   |
| Property                and equipment, net                ..........................................................              |   |                     | 82,496  |                       |   | 84,651                       |   |   | 87,538 |
|                                                                                                                              |   |                     |    |                       |   |                         |   |   |   |
| Deferred                taxes                ...................................................................................  |   |                     | 467     |                       |   | 456                          |   |   | 6,959 |
| Goodwill,                net                ....................................................................................  |   |                     | 423     |                       |   | 423                          |   |   | 423 |
| Other                assets                .....................................................................................  |   |                     | 5,273   |                       |   | 5,631                        |   |   | 5,395 |
|  Total                assets                ................................................................................ |   | $                        | 234,644 |                       | $      | 238,741                      |   | $ | 295,033 |
|                                                                                                                              |   |                     |    |                       |   |                         |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                               |   |                     |    |                       |   |                         |   |   |   |
| Current                liabilities:                                                                                               |   |                     |    |                       |   |                         |   |   |   |
| Bank                borrowings                .........................................................................           |   | $                        | 19,137  |                       | $      | --                           |   | $ | 28,361 |
| Accounts                payable and accrued expenses                ..............................                                |   |                     | 21,931  |                       |   | 29,176                       |   |   | 33,493 |
| Gift                certificates redeemable                .......................................................                |   |                     | 8,971   |                       |   | 9,224                        |   |   | 7,558 |
| Accrued                payroll and bonuses                .................................................                       |   |                     | 3,970   |                       |   | 6,219                        |   |   | 4,202 |
| Accrued                insurance                ....................................................................              |   |                     | 5,252   |                       |   | 5,178                        |   |   | 4,029 |
| Customer                deposits                ....................................................................              |   |                     | 6,366   |                       |   | 4,526                        |   |   | 3,903 |
| Current                portion of accrued rent                ..............................................                      |   |                     | 4,702   |                       |   | 3,871                        |   |   | 3,047 |
| Other                current liabilities                ............................................................              |   |                     | 4,714   |                       |   | 5,834                        |   |   | 4,423 |
|  Total                current liabilities                ...........................................................         |   |                     | 75,043  |                       |   | 64,028                       |   |   | 89,016 |
|                                                                                                                              |   |                     |    |                       |   |                         |   |   |   |
| Accrued                rent and other long term liabilities                .............................                          |   |                     | 38,469  |                       |   | 38,976                       |   |   | 34,895 |
|                                                                                                                              |   |                     |    |                       |   |                         |   |   |   |
| Stockholders'                equity:                                                                                              |   |                     |    |                       |   |                         |   |   |   |
| Preferred                stock, $1 par value,                                                                                     |   |                     |    |                       |   |                         |   |   |   |
|  1,000,000                shares authorized                ...................................................               |   |                     | --      |                       |   | --                           |   |   | -- |
| Common                stock, $1 par value, 50,000,000                ...............................                              |   |                     |    |                       |   |                         |   |   |   |
|  shares                authorized, 38,149,646 shares issued                .......................                           |   |                     | 38,150  |                       |   | 38,150                       |   |   | 38,150 |
| Additional                paid-in capital                ........................................................                 |   |                     | 79,473  |                       |   | 79,817                       |   |   | 79,743 |
| Retained                earnings                ....................................................................              |   |                     | 8,117   |                       |   | 23,669                       |   |   | 62,431 |
| Accumulated                other comprehensive income .........................                                                   |   |                     | 2,427   |                       |   | 2,077                        |   |   | 801 |
| Common                shares in treasury, at cost, 1,716,569;                                                                     |   |                     |    |                       |   |                         |   |   |   |
|  1,715,066                and 2,084,410 shares, respectively .......................                                         |   |                     | (7,035) |                       |   | (7,038)                      |   |   | (8,554) |
| Deferred                compensation                ............................................................                  |   |                     | --      |                       |   | (938)                        |   |   | (1,449) |
|  Total                stockholders' equity                .....................................................              |   |                     | 121,132 |                       |   | 135,737                      |   |   | 171,122 |
|                                                                                                                              |   |                     |    |                       |   |                         |   |   |   |
| Total                liabilities and stockholders' equity                ..................................                       |   | $                        | 234,644 |                       | $      | 238,741                      |   | $ | 295,033 |
|                                                                                                                              |   |                     |    |                       |   |                         |   |   |   |

----

*(In        thousands, except per share amounts)*

|                                                                                                                                                         |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                         |   | Three                Months Ended |
|                                                                                                                                                         |   | April                29, |   | April                30, |
|                                                                                                                                                         |   | 2006 |   | 2005 |
|                                                                                                                                                         |   |   |   | (as                adjusted) |
| Cash                flows from operating activities:                                                                                                         |   |   |   |   |
| Net                loss                ..................................................................................................................... |   |   | ($15,553) |   |   | ($7,969) |
| Adjustments                to reconcile net loss to net cash used in operating                activities:                                                    |   |   |   |   |   |   |
|  Depreciation                and amortization                .........................................................................                  |   |   | 4,453 |   |   | 4,371 |
|  Stock-based                compensation expense                ..............................................................                          |   |   | 617 |   |   | 255 |
|  Deferred                taxes and other                .................................................................................               |   |   | (805) |   |   | 683 |
| Change                in assets and liabilities:                                                                                                             |   |   |   |   |   |   |
|  (Increase)                decrease in other assets                ...............................................................                      |   |   | 68 |   |   | (6,824) |
|  (Increase)                decrease in inventories                ................................................................                      |   |   | 1,212 |   |   | (7,062) |
|  Decrease                in current liabilities                .........................................................................                |   |   | (8,925) |   |   | (9,581) |
|  Increase                (decrease) in noncurrent liabilities                ................................................                           |   |   | (720) |   |   | 475 |
| Landlord                construction allowances                ....................................................................                          |   |   | 1,014 |   |   | 3,149 |
| Net                cash used in operating activities                ...............................................................                          |   |   | (18,639) |   |   | (22,503) |
|                                                                                                                                                         |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                                                                         |   |   |   |   |   |   |
|  Purchases                of property and equipment                ..........................................................                           |   |   | (1,775) |   |   | (5,011) |
| Net                cash used in investing activities                ..................................................................                       |   |   | (1,775) |   |   | (5,011) |
|                                                                                                                                                         |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                                                                         |   |   |   |   |   |   |
|  Net                bank borrowings                ..........................................................................................           |   |   | 19,137 |   |   | 28,361 |
|  Increase                in outstanding checks in excess of cash balances                .......................                                        |   |   | 635 |   |   | -- |
|  Sale                of stock to employee benefit plans                ........................................................                         |   |   | 4 |   |   | 6 |
|  Proceeds                from the exercise of employee stock options                ...............................                                     |   |   | 3 |   |   | 317 |
| Net                cash provided by financing activities                .........................................................                            |   |   | 19,779 |   |   | 28,684 |
|                                                                                                                                                         |   |   |   |   |   |   |
| Effect                of exchange rate change on cash and cash equivalents                ...........................                                        |   |   | (77) |   |   | 48 |
|                                                                                                                                                         |   |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents                ..........................................                                |   |   | (712) |   |   | 1,218 |
| Cash                and cash equivalents at beginning of period                ...............................................                               |   |   | 4,015 |   |   | 9,168 |
| Cash                and cash equivalents at end of period                ..........................................................                          |   | $ | 3,303 |   | $ | 10,386 |
|                                                                                                                                                         |   |   |   |   |   |   |
| Supplemental                disclosure of cash flow information:                                                                                             |   |   |   |   |   |   |
| Interest                paid                .............................................................................................................    |   | $ | 117 |   | $ | 274 |
| Income                taxes paid                ....................................................................................................         |   |   | 28 |   |   | 241 |
| Non-cash                investing and financing activities:                                                                                                  |   |   |   |   |   |   |
| Distributions                of restricted stock                .............................................................................                |   |   | 18 |   |   | 372 |
| Distribution                of director fees                ....................................................................................             |   |   | -- |   |   | 52 |
|                                                                                                                                                         |
| The                accompanying notes are an integral part of these consolidated financial                statements.                                        |

----

| (1)   | Basis                of Presentation |
|-----------------|--------------------------------------|

**General**

**Seasonality**

**Capital      Resources and Liquidity**

**Loss      per Share**

|                                                                                                                                |   | Three                Months Ended |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                                |   | April                29,2006      |   | April                30,2005 |
|                                                                                                                                |   |                              |   | (as                adjusted) |
| Numerator:                                                                                                                          |   |                              |   |   |
| Net                loss                ............................................................................................ |   |                              | ($15,553) |   |   | ($7,969) |
| Denominator                for basic and diluted loss per share:                                                                    |   |                              |   |   |   |   |
| Average                common shares outstanding                ........................................                            |   |                              | 35,930 |   |   | 35,939 |
| Basic                and diluted loss per share                ...........................................................          |   |                              | ($0.43) |   |   | ($0.22) |
|                                                                                                                                |   |                              |   |   |   |   |

----

|                                                                                                                           |   | Three                Months Ended |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                           |   | April                29,2006      |   | April                30,2005 |
| Stock                options............................................................................................       |   |                              | 4,023 |   |   | 3,295 |
| Deferred                director stock units                .................................................................. |   |                              | 82 |   |   | 356 |
| Total                ...................................................................................................       |   |                              | 4,105 |   |   | 3,651 |
|                                                                                                                           |   |                              |   |   |   |   |

| (2)   | Adjustment                to Previously Issued Financial                Statements |
|-----------------|------------------------------------------------------------------------------------|

*Accounting      for Rental Costs Incurred During a Construction Period*

|                                                                                                                             |   | As                Reported |     | Impact                of Adjustment |    | As                Adjusted |
|----------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|-------------------------------------|---------|----------------------------|
| **Consolidated                Balance Sheet**                                                                                    |   |                       |     |                                |    |                       |
| Property                and equipment, net……………                                                    |   | $                          | 92,746   |                                | $       | (5,208)                    |   | $ | 87,538 |
| Deferred                taxes………………………….                             |   |                       | 5,050    |                                |    | 1,909                      |   |   | 6,959 |
| Other                assets ……………………………                        |   |                       | 5,395    |                                |    | --                         |   |   | 5,395 |
| Total                assets…………………………….                        |   |                       | 298,332  |                                |    | (3,299)                    |   |   | 295,033 |
| Retained                earnings………………………                                  |   |                       | 65,737   |                                |    | (3,306)                    |   |   | 62,431 |
| Total                stockholders’ equity……………..                                             |   |                       | 174,421  |                                |    | (3,299)                    |   |   | 171,122 |
| Total                liabilities and stockholders’                equity…………………. |   |                       | 298,332  |                                |    | (3,299)                    |   |   | 295,033 |
|                                                                                                                             |   |                       |     |                                |    |                       |   |   |   |
| **Consolidated                Statement of Operations**                                                                          |   |                       |     |                                |    |                       |   |   |   |
| Cost                of sales, buying and store                occupancy costs ..........                                         |   | $                          | 95,253   |                                | $       | (53)                       |   | $ | 95,200 |
| Loss                before income taxes………………                                                |   |                       | (13,513) |                                |    | 53                         |   |   | (13,460) |
| Benefit                for income taxes……………….                                               |   |                       | (5,513)  |                                |    | 22                         |   |   | (5,491) |
| Net                loss…………………………………               |   |                       | (8,000)  |                                |    | 31                         |   |   | (7,969) |
| Basic                loss per share…………………….                                     |   | $                          | (0.22)   |                                |  $ | 0.00                       |   | $ | (0.22) |
| Diluted                loss per share…………………..                                         |   | $                          | (0.22)   |                                |  $ | 0.00                       |   | $ | (0.22) |

----

| (3)   | Stock-Based                Compensation Plans |
|-----------------|-----------------------------------------------|

*Share-Based      Payment*
*Accounting      for Stock-Based Compensation*
*Accounting      for Stock Issued to Employees*

|  (In                thousands, except per share data)                                                                                                                                                               |   | Three                Months Ended April 30, 2005 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|
|                                                                                                                                                                                                                     |   | (as                adjusted)                     |
| Net                loss as reported                ..................................................................................................................                                                    |   | $                                                | (7,969) |
| Stock-based                employee compensation expense included inreported                net income, net of related tax effects                ...................................................................... |   |                                             | 151 |
| Fair                value based compensation expense, net of tax                ............................................................                                                                             |   |                                             | (490) |
| Net                loss, pro forma                ..................................................................................................................                                                     |   | $                                                | (8,308) |
|                                                                                                                                                                                                                     |   |                                             |   |
| Basic                loss per share, as reported                ..........................................................................................                                                               |   | $                                                | (0.22) |
| Pro                forma under SFAS 123                .............................................................................................                                                                     |   | $                                                | (0.23) |

----

*Stock      Options*

|                                                                                                                                  |   | Three                Months Ended |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                                  |   | April                29, 2006     |   | April                30, 2005 |
| Risk-free                interest rate                ............................................................................... |   |                              | 4.7% |   |   | 4.5% |
| Expected                term (in years)                ..........................................................................     |   |                              |                                    6.0 |   |   |                                   6.0 |
| Expected                volatility                ..................................................................................  |   |                              | 63.0% |   |   | 64.1% |
| Expected                dividend yield                ........................................................................        |   |                              |                                      ─ |   |   |                                    ─ |
| Weighted                average fair value of options granted                ..............................                           |   | $                                 |                                 2.04 |   | $ |                                2.76 |

|                                           |   |                          |   |     |   | Weighted                    |   |                          |
|------------------------------------------------|--------|-------------------------------|--------|----------|--------|-----------------------------|--------|-------------------------------|
|                                           |   |                          |   | Weighted |   | Average                     |   |                          |
|                                           |   |                          |   | Average  |   | Remaining                   |   | Aggregate                     |
|                                           |   |                          |   | Exercise |   | Contractual                 |   | Intrinsic                     |
| Stock                options                   |   | Shares                        |   | Price    |   | Term                (years) |   | Value                         |
|                                           |   | (In                thousands) |   |     |   |                        |   | (In                thousands) |
| Outstanding                at January 28, 2006 |   |                          | 3,168  |     | $      | 5.52                        |   |                          |   |   |   |   |
| Granted                                        |   |                          | 911    |     | $      | 3.28                        |   |                          |   |   |   |   |
| Exercised                                      |   |                          | 1      |     | $      | 3.21                        |   |                          |   |   | $ | 3 |
| Forfeited                or expired            |   |                          | 56     |     | $      | 4.79                        |   |                          |   |   |   |   |
| Outstanding                at April 29, 2006   |   |                          | 4,022  |     | $      | 5.02                        |   |                          | 6.7 |   | $ | 20,205 |
|                                           |   |                          |   |     |   |                        |   |                          |   |   |   |   |
| Exercisable                at April 29, 2006   |   |                          | 3,038  |     | $      | 5.58                        |   |                          | 6.6 |   | $ | 16,951 |

----

*Restricted      Stock*

|   Restricted                Stock                                                           |   |  Shares |    | Weighted                AverageGrant                Date Fair                Value |
|-------------------------------------------------------------------------------------------------------|--------|--------------|---------|------------------------------------------------------------------------------------|
| Nonvested                at January 28, 2006                .......................................   |   |         | 514,274 |                                                                               | $ | 6.25 |
| Granted                .............................................................................. |   |         | 5,000   |                                                                               | $ | 3.15 |
| Vested                ............................................................................... |   |         | 36,123  |                                                                               | $ | 5.71 |
| Forfeited                ...........................................................................  |   |         | ─ |                                                                               |   | ─ |
| Nonvested                at April 29, 2006                .........................................   |   |         | 483,151 |                                                                               | $ | 6.26 |
|                                                                                                  |   |         |    |                                                                               |   |   |

| (4)   | Comprehensive                Loss |
|-----------------|-----------------------------------|

|                                                                                                                              |   | Three                Months Ended |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                              |   | April                29,2006      |   | April                30,2005 |
|                                                                                                                              |   |                              |   | (as                adjusted) |
| Net                loss                .......................................................................................... |   |                              | ($15,553) |   |   | ($7,969) |
| Foreign                currency translation adjustments                ...............................                            |   |                              | 350 |   |   | (150) |
| Comprehensive                loss                ...........................................................                      |   |                              | ($15,203) |   |   | ($8,119) |
|                                                                                                                              |   |                              |   |   |   |   |

| (5)   | Income                Taxes |
|-----------------|-----------------------------|

*Accounting      for Income Taxes*

----

*Share-Based      Payment*

*Inventory      Costs*

|                                                                                |   | Three                Months Ended   |
|-------------------------------------------------------------------------------------|--------|-------------------------------------|
|                                                                                |   |  April                29, 2006 |   |  April                30, 2005 |
|                                                                                |   |                                |   | (as                adjusted) |
| Net                revenue:                                                         |   |                                |   |   |
| United                States .................................................      |   | $                                   | 101,951 |   | $ | 107,182 |
| Canada                ...........................................................   |   |                                | 16,713 |   |   | 14,929 |
| Total                .............................................................. |   | $                                   | 118,664 |   | $ | 122,111 |
|                                                                                |   |                                |   |   |   |   |
| Long-lived                assets:                                                   |   |                                |   |   |   |   |
| United                States .............................................          |   | $                                   | 77,662 |   | $ | 85,763 |
| Canada                ........................................................      |   |                                | 10,530 |   |   | 7,593 |
| Total                ............................................................   |   | $                                   | 88,192 |   | $ | 93,356 |
|                                                                                |   |                                |   |   |   |   |

----

----

*Accounting      for Rental Costs Incurred During a Construction Period*

----

| ·   | Migrating                from mall to off-mall - During the 1980s and 1990s, the focus was                on                opening stores in “A” malls throughout North America. As shopping habits                have evolved, with alternative venues such as lifestyle centers and                big                box strip centers gaining popularity, we began to migrate our stores                to                off-mall locations. Management continues to be encouraged by the                results                of its store migration. In addition to being more convenient for                customers                and suitable for the sale of large items, such locations typically                have                lower cost structures, both from a fixed rent perspective and for                other                common area expenses billed by landlords. On an annual basis, off-mall                stores in the aggregate have consistently delivered four-wall profits                that                are 350 to 450 basis points higher than the mall-based stores while                maintaining or growing the average sales volumes of the mall stores                that                they replaced. The Company expects to continue to execute its strategy                of                migrating to off-mall locations as leases expire, if economically                viable                relocation sites can be identified. We expect to relocate 20 to 25                such                stores during Fiscal 2006. The Company has a total of 221 mall stores,                216                off-mall stores and 45 outlets as of the end of the first quarter                of                Fiscal 2006. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                       |   | April                29, 2006 |   | January                28, 2006 |   | April                30, 2005                                                                                           |
|--------------------------------------------|--------|-------------------------------|--------|---------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|
|                                       |   |  Units                   |   | %                of total       |   |  Units                                                                                                             |   | %                of total |   |  Units |   | %                of total |
| Mall……….…......    |   |                          | 221    |                            |   | 46%                                                                                                                     |   |   | 235 |   |   | 47% |   |   | 298 |   |   | 60% |
| Off-mall………….      |   |                          | 216    |                            |   |                                45            |   |   | 215 |   |   |                                 43 |   |   | 150 |   |   |                                30 |
| Outlet……………. |   |                          | 45     |                            |   |                                  9 |   |   | 48 |   |   |                                 10 |   |   | 47 |   |   |                 10 |
| Total…………….. |   |                          | 482    |                            |   |                                 100%    |   |   | 498 |   |   |                                 100% |   |   | 495 |   |   |                  100% |
|                                       |   |                          |   |                            |   |                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |

| ·   | Although                we ended the quarter with a total of 482 stores compared to 495 stores                at                the end of the first quarter of Fiscal 2005, total square footage                declined                a modest 0.5% due to the difference in sizes of the stores as we                have                migrated to larger off-mall locations over the past twelve                months. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rationalizing                the real estate portfolio - During Fiscal 2005, we conducted a                comprehensive review of our stores and identified a total of approximately                25 unprofitable stores targeted for closure in Fiscal 2006. During                the                first quarter of Fiscal 2006 we closed a total of 20 stores, the                majority                of which were mall based stores whose leases were expiring. During                the                remainder of the year, we expect to see an increase in the number                of                stores closed that were in the underperforming category. We will                continue                to assess closing opportunities and presently expect to close 10                to 14                stores during the second quarter. We expect to end the year with                approximately 460 to 465 stores of which approximately 43% will be                in mall                locations, 49% will be in off-mall locations and 8% will be                outlets. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Upgrading                the assortment - We have focused on upgrading our assortment - increasing                quality and price points to further differentiate our offering from                that                of the mass merchants and other specialty retailers. As a result                of these                efforts, in Fiscal 2006, our average transaction size increased by                15%                over the first quarter of 2005. We also believe that we have made                strides                in improving the quality of our merchandise and have been able to                offer a                more fashion-right assortment to our customers. We will continue                to make                this a priority during the remainder of Fiscal 2006 as longer-term,                we                seek to attract a customer less motivated by price and promotion                and more                likely to make a purchase based upon the value we offer, which considers                fashion, quality and price. |
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| ·   | Remerchandising                stores - During Fiscal 2006, we plan to test variations of the merchandise                offered within our stores with the goal of increasing the overall                sales                per square foot and resulting profits. To date, we have commenced                tests                resulting in: |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | introducing                a bath assortment into 74 stores; |
|--------------------|--------------------------------------------------------------|

| ·   | featuring                a limited selection of the top selling BombayKIDS product in a few                larger                core stores; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | reallocating                a portion of BombayKIDS square footage in two stores and replacing                it with                other Bombay merchandise that we believe would generate higher sales                per                square foot. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Reducing                promotional activity - Our goal has been to reduce our reliance on                promotional activity; however, we have found ourselves in an increasingly                promotional environment. We intend to selectively reduce the level                of                promotional activity as we continue to offer an upgraded assortment                and                improve quality. Although product margins decreased somewhat in the                first                quarter compared to last year, we believe that progress toward higher                product margins should be seen as we go through the fiscal year with                the                greatest opportunity existing in the second quarter as we anniversary                last                year’s aggressive clearance activity. |
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| ·   | Controlling                costs - During the early phases of the turnaround, we have made                investments in infrastructure to help support the growing base of                stores                and increasing complexities of being a multi-channel retailer. We                completed the roll out of the new point of sale system to our stores                and                improved our store telecommunication environment. We relaunched our                Internet site on a more stable, reliable platform. We have made                improvements in our planning and allocations system and expect to                continue                to invest in this area in order to improve our ability to forecast                and                assort our stores. While we believe that these investments are critical                to                our future success, we also need to ensure that our expenses are                in line                with our revenue base. As a result, we have taken steps in other                areas to                right size the organization and will continue to focus on cost control                in                order to ensure that infrastructure costs are in line with the planned                reduction in the store count during Fiscal                2006. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Growing                customer base - As we upgrade our assortment and migrate our stores                to new                off-mall locations, connecting with the right customer is critical                to our                future success. As part of our efforts to grow our customer base,                we need                to not only attract more customers but we need to attract the right                customer who can grow with Bombay as we reposition the brand. During                the                first quarter, much of our investment was for increased Internet                marketing                to support both retail and Internet sales. A key focus will be gathering                additional customer names and email addresses with a goal of doubling                the                current number of customers in our databases. During the second quarter,                we are testing national cable television and increasing the focus                on                gathering customer information at the point of sale. Recent investments                in                technology are expected to help us more effectively manage our customer                databases and increase the effectiveness of direct marketing efforts                across all channels. |
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| ·   | Improving                the supply chain - Over the past three years, we have made investments                in                the supply chain focusing in large part on improving the domestic                distribution network - opening or relocating distribution centers                in the                Midwest, Northeast and Canada. During the Fiscal 2006, we expect                to see                the benefit of technology investments that will improve visibility                to                orders within the global supply chain. We also appointed a logistics                services provider to assist in managing the flow of product in an                efficient, cost-effective manner worldwide. These actions are expected                to                improve our ability to manage inventory flow and reduce overall supply                chain costs. |
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|                                                                             |   | Three                Months Ended |
|----------------------------------------------------------------------------------|--------|-----------------------------------|
|  Net                revenue (in millions)                                   |   | April                29, 2006     |   | April                30, 2005 |
| Retail                sales .................................................... |   | $                                 | 115.5 |   | $ | 117.1 |
| Wholesale                sales ..........................................        |   |                              | 1.2 |   |   | 3.5 |
| Shipping                revenue .......................................          |   |                              | 1.8 |   |   | 1.4 |
| Other                revenue .............................................       |   |                              | 0.2 |   |   | 0.1 |
| Total                revenue .............................................       |   | $                                 | 118.7 |   | $ | 122.1 |
|                                                                             |   |                              |   |   |   |   |

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|                                                                                                |   | Three                Months Ended |
|-----------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|  Sales                mix:                                                                     |   | April                29, 2006     |   | April                30, 2005 |
| Large                furniture ...............................................                      |   |                              | 37% |   |   | 32% |
| Occasional                furniture .....................................                           |   |                              |                                16 |   |   |                                               20 |
| Wall                décor                ..................................................... |   |                              |                                16 |   |   |                                               16 |
| Accessories                ..................................................                       |   |                              |                                31 |   |   |                                               32 |
| Total                revenue ...............................................                        |   |                              |                                 100% |   |   |                                                100% |
|                                                                                                |   |                              |   |   |   |   |

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*Share-Based      Payment*

*Inventory      Costs*

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**We      may not have sufficient liquidity to execute our turnaround strategy. **

**Our      competition is both intense and varied, and our failure to effectively compete      could adversely affect our prospects. **

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