**(**

| 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 13, 2007 |
|---------------------------------------------|--------|----------------------------------------------------------------|
| Common                  stock, $1 par value |   | 36,880,885                                                     |

----

| PART                I - FINANCIAL INFORMATION                                                                                                                                                                 | Page                No. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
|                                                                                                                                                                                                          |                    |
| Item                                                                                                                                                                                                          |                    |
| 1.                 Financial Statements (Unaudited)                                                                                                                                                      | 3-13                    |
|                          Consolidated Statements of Operations                                                                                                   | 3                       |
|                          Consolidated Balance Sheets                                                                                                             | 4                       |
|                          Consolidated Statements of Cash Flows                                                                                                   | 5                       |
|                          Notes to Consolidated Financial Statements                                                                                              | 6-13                    |
|                                                                                                                                                                                                          |                    |
| 2.                    Management’s Discussion and Analysis of Financial Condition and                Results                       of Operations | 14-21                   |
|                          General                                                                                                                                 | 14                      |
|                          Executive Summary                                                                                                                       | 15                      |
|                          Results of Operations                                                                                                                   | 17                      |
|                          Liquidity and Capital Resources                                                                                                              | 19                      |
|                          Recent Accounting Pronouncements                                                                                                        | 20                      |
|                                                                                                                                                                                                          |                    |
| 3.                    Quantitative and Qualitative Disclosures About Market Risk                                                                                                          | 21                      |
|                                                                                                                                                                                                          |                    |
| 4.                    Controls and Procedures                                                                                                                                             | 21                      |
|                                                                                                                                                                                                          |                    |
| PART                II - OTHER INFORMATION                                                                                                                                                                    |                    |
|                                                                                                                                                                                                          |                    |
| 1.                    Legal Proceedings                                                                                                                                                   | 22                      |
|                                                                                                                                                                                                          |                    |
| 1A.                 Risk Factors                                                                                                                                                                         | 22                      |
|                                                                                                                                                                                                          |                    |
| 2.                   Unregistered Sales of Equity Securities and Use of                Proceeds                                                                                                | 23                      |
|                                                                                                                                                                                                          |                    |
| 4.                   Submission of Matters to a Vote of Security Holders                                                                                                                       | 23                      |
|                                                                                                                                                                                                          |                    |
| 5.                   Other Information                                                                                                                                                         | 23                      |
|                                                                                                                                                                                                          |                    |
| 6.                   Exhibits                                                                                                                                                                  | 24                      |
|                                                                                                                                                                                                          |                    |
|                       Signatures                                                                                                                                                | 25                      |

----

*(In      thousands, except per share amounts)*

|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      | Three                Months Ended |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-----------|-----------------------------------|
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      | May                5,             |   | April                29, |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      | 2007                              |   | 2006 |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |   |
| Net                revenue …………………………………………………………………………………… |                                                                                                                                                                                                                                                            | $104,629 |      | $118,664                          |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |   |
| Costs                and expenses:                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                            |     |      |                              |
|                                                                                                                                                                                                                                                             | Cost                of sales, buying and store occupancy costs ………………………………………                                                                                        |     | 87,366    |                              | 94,650 |
|                                                                                                                                                                                                                                                             | Selling,                general and administrative expenses ……………………………………………                                                                             |     | 31,709    |                              | 39,764 |
|                                                                                                                                                                                                                                                             | Operating                loss ………………………………………………………………………………                |     | (14,446)  |                              | (15,750) |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |
| Other                income (expense):                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                            |     |      |                              |
|                                                                                                                                                                                                                                                             | Interest                income………………………………………………………………………………                |     | 18        |                              | 37 |
|                                                                                                                                                                                                                                                             | Interest                expense  ……………………………………………………………………………               |     | (1,092)   |                              | (244) |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |   |
| Loss                before income taxes ……………………………………………………………………                              |                                                                                                                                                                                                                                                            | (15,520) |      | (15,957)                          |
| Benefit                for income taxes………………………………………………………………………                             |                                                                                                                                                                                                                                                            | (75)     |      | (404)                             |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |   |
|                                                                                                                                                                                                                                                             | Net                loss ……………………………………………………………………………………… |     | $(15,445) |                              | $(15,553) |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |   |
| Basic                and diluted loss per share………………………………………………………………                                          |                                                                                                                                                                                                                                                            | ($0.42)  |      | ($0.43)                           |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |   |
| Average                common shares outstanding ………………………………………………………                                                             |                                                                                                                                                                                                                                                            | 36,353   |      | 35,930                            |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |   |
|                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                            |     |      |                              |   |   |
| The                accompanying notes are an integral part of these consolidated financial                statements.                                                                                                                                            |

----

*(In      thousands, except per share amounts)*

|                                                                                                                                                                                                                |   | May                5, |     | February                3, |   | April                29, |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|----------|----------------------------|--------|--------------------------|
|                                                                                                                                                                                                                |   | 2007                  |     | 2007                       |   | 2006                     |
| ASSETS                                                                                                                                                                                                              |   |                  |     |                       |   |                     |
| Current                assets:                                                                                                                                                                                      |   |                  |     |                       |   |                     |
| Cash                and cash equivalents …………………………………………………                                      |   | $                     | 3,816    |                       | $      | 1,406                    |   | $ | 3,303 |
| Inventories……………………………………………………………………                   |   |                  | 141,467  |                       |   | 138,148                  |   |   | 127,862 |
| Other                current assets …………………………………………………………                      |   |                  | 19,873   |                       |   | 22,050                   |   |   | 14,820 |
|  Total                current assets …………………………………………………………                |   |                  | 165,156  |                       |   | 161,604                  |   |   | 145,985 |
|                                                                                                                                                                                                                |   |                  |     |                       |   |                     |   |   |   |
| Property                and equipment, net  …………………………………………………                              |   |                  | 70,026   |                       |   | 71,812                   |   |   | 82,496 |
|                                                                                                                                                                                                                |   |                  |     |                       |   |                     |   |   |   |
| Goodwill,                net …………………………………………………………………… |   |                  | --       |                       |   | --                       |   |   | 423 |
| Other                assets ……………………………………………………………………  |   |                  | 4,223    |                       |   | 4,701                    |   |   | 5,740 |
|  Total                assets…………………………………………………………………    |   | $                     | 239,405  |                       | $      | 238,117                  |   | $ | 234,644 |
|                                                                                                                                                                                                                |   |                  |     |                       |   |                     |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                                                                                                                 |   |                  |     |                       |   |                     |   |   |   |
| Current                liabilities:                                                                                                                                                                                 |   |                  |     |                       |   |                     |   |   |   |
| Borrowings                under credit facility ……………………………………………                                             |   | $                     | 78,559   |                       | $      | 39,265                   |   | $ | 19,137 |
| Accounts                payable and accrued expenses…………………………………                                                                     |   |                  | 20,825   |                       |   | 38,546                   |   |   | 21,931 |
| Gift                certificates redeemable …………………………………………………                              |   |                  | 8,953    |                       |   | 9,077                    |   |   | 8,971 |
| Accrued                payroll and bonuses………………………………………………                                            |   |                  | 3,814    |                       |   | 4,613                    |   |   | 3,970 |
| Accrued                insurance  …………………………………………………………                   |   |                  | 5,019    |                       |   | 5,058                    |   |   | 5,252 |
| Customer                deposits  …………………………………………………………                   |   |                  | 3,700    |                       |   | 5,529                    |   |   | 6,366 |
| Current                portion of accrued rent ……………………………………………                                              |   |                  | 3,659    |                       |   | 4,144                    |   |   | 4,702 |
| Other                current liabilities………………………………………………………                         |   |                  | 4,030    |                       |   | 7,677                    |   |   | 4,714 |
|  Total                current liabilities………………………………………………………                   |   |                  | 128,559  |                       |   | 113,909                  |   |   | 75,043 |
|                                                                                                                                                                                                                |   |                  |     |                       |   |                     |   |   |   |
| Accrued                rent and other long term liabilities …………………………………                                                             |   |                  | 44,848   |                       |   | 40,019                   |   |   | 38,469 |
|                                                                                                                                                                                                                |   |                  |     |                       |   |                     |   |   |   |
| 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   …………………………………………………                         |   |                  | 80,540   |                       |   | 80,391                   |   |   | 79,473 |
| Retained                earnings (deficit) …………………………………………………                                    |   |                  | (48,461) |                       |   | (29,112)                 |   |   | 8,117 |
| Accumulated                other comprehensive income………………………………                                                                           |   |                  | 2,544    |                       |   | 1,634                    |   |   | 2,427 |
| Common                shares in treasury, at cost, 1,694,805                                                                                                                                                        |   |                  |     |                       |   |                     |   |   |   |
|  1,713,151                and 1,716,569 shares, respectively ……………………………                                                                     |   |                  | (6,775)  |                       |   | (6,874)                  |   |   | (7,035) |
|  Total                stockholders' equity…………………………………………………                                |   |                  | 65,998   |                       |   | 84,189                   |   |   | 121,132 |
|                                                                                                                                                                                                                |   |                  |     |                       |   |                     |   |   |   |
| Total                liabilities and stockholders' equity ……………………………………                                                        |   | $                     | 239,405  |                       | $      | 238,117                  |   | $ | 234,644 |

----

*(In      thousands, except per share amounts)*

|                                                                                                                                                                                                                                                                          |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                          |   | Three                Months Ended |
|                                                                                                                                                                                                                                                                          |   | May                5, |   | April                29, |
|                                                                                                                                                                                                                                                                          |   | 2007 |   | 2006 |
|                                                                                                                                                                                                                                                                          |   |   |   |   |
| Cash                flows from operating activities:                                                                                                                                                                                                                          |   |   |   |   |
| Net                loss …………………………………………………………………………………………… |   | $ | (15,445) |   | $ | (15,553) |
| Adjustments                to reconcile net loss to net cash used in operating                activities:                                                                                                                                                                     |   |   |   |   |   |   |
|  Depreciation                and amortization ………………………………………………………………                                                   |   |   | 4,243 |   |   | 4,453 |
|  Stock-based                compensation expense  ………………………………………………………                                                               |   |   | 200 |   |   | 617 |
|  Other……………………………………………………………………………………………              |   |   | (1,195) |   |   | (805) |
| Change                in assets and liabilities:                                                                                                                                                                                                                              |   |   |   |   |   |   |
|  Increase                in other assets ………………………………………………………………………                                   |   |   | 2,530 |   |   | 68 |
|  (Increase)                decrease in inventories   …………………………………………………………                                                |   |   | (2,016) |   |   | 1,212 |
|  Decrease                in current liabilities…………………………………………………………………                                           |   |   | (16,071) |   |   | (8,925) |
|  Increase                (decrease) in noncurrent liabilities…………………………………………………                                                                       |   |   | 251 |   |   | (720) |
| Landlord                construction allowances………………………………………………………………                                                       |   |   | 295 |   |   | 1,014 |
| Net                cash used in operating activities……………………………………………………………                                                    |   |   | (27,208) |   |   | (18,639) |
|                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                                                                                                                                                                                          |   |   |   |   |   |   |
|  Purchases                of property and equipment ………………………………………………………                                                                  |   |   | (1,388) |   |   | (1,775) |
|  Proceeds                from sales of property and equipment……………………………………………                                                                                     |   |   | 13 |   |   | -- |
| Net                cash used in investing activities ……………………………………………………………                                                        |   |   | (1,375) |   |   | (1,775) |
|                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                                                                                                                                                                                          |   |   |   |   |   |   |
|  Borrowings                under credit facility ………………………………………………………………                                                |   |   | 39,294 |   |   | 19,137 |
|  Increase                (decrease) in outstanding checks in excess of cash balances  …………………                                                                                                                             |   |   | (7,782) |   |   | 635 |
|  Sale                of stock to employee benefit plans………………………………………………………                                                               |   |   | 4 |   |   | 4 |
|  Proceeds                from exercise of employee stock options…………………………………………                                                                                         |   |   | -- |   |   | 3 |
| Net                cash provided by financing activities ………………………………………………………                                                                  |   |   | 31,516 |   |   | 19,779 |
|                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |
| Effect                of exchange rate change on cash and cash equivalents …………………………………                                                                                                        |   |   | (523) |   |   | (77) |
|                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents……………………………………………                                                                                    |   |   | 2,410 |   |   | (712) |
| Cash                and cash equivalents at beginning of period  ………………………………………………                                                                          |   |   | 1,406 |   |   | 4,015 |
| Cash                and cash equivalents at end of period ………………………………………………………                                                                 |   | $ | 3,816 |   | $ | 3,303 |
|                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |
| Supplemental                disclosure of cash flow information:                                                                                                                                                                                                              |   |   |   |   |   |   |
| Interest                paid…………………………………………………………………………………………    |   | $ | 1,055 |   | $ | 117 |
| Income                taxes paid  …………………………………………………………………………………              |   |   | 170 |   |   | 28 |
| Non-cash                investing and financing activities:                                                                                                                                                                                                                   |   |   |   |   |   |   |
| Distributions                of restricted stock …………………………………………………………………                                              |   |   | 160 |   |   | 18 |
| Distribution                of director fees………………………………………………………………………                                     |   |   | 14 |   |   | -- |
| Cancellation                of restricted stock  …………………………………………………………………                                         |   |   | 1 |   |   | -- |
|                                                                                                                                                                                                                                                                          |
|  The                accompanying notes are an integral part of these consolidated financial                statements.                                                                                                                                                   |

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| (1)   | Accounting                Policies and Basis of Presentation |
|-----------------|--------------------------------------------------------------|

**General**

**Seasonality**

**Liquidity        and Capital Resources**

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**Loss        per Share**

|                                                                                                                                                                                                                                          |   | Three                Months Ended |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                                                                                                                                          |   | May                5,             |   | April                29, |
|                                                                                                                                                                                                                                          |   | 2007                              |   | 2006 |
| Numerator                                                                                                                                                                                                                                     |   |                              |   |   |
|     Net                loss ……………………………………………………………………… |   | $(15,445)                         |   | $(15,553) |
| Denominator                for basic and diluted loss per share:                                                                                                                                                                              |   |                              |   |   |
|     Average                common shares outstanding ……………………………………                                                                   |   | 36,353                            |   | 35,930 |
|     Basic                and diluted loss per share……………………………………………                                                |   | $(0.42)                           |   | $(0.43) |

|                                                                                                                                                                                                                                                    |   | Three                Months Ended |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                                                                                                                                                    |   | May                5,             |   | April                29, |
|                                                                                                                                                                                                                                                    |   | 2007                              |   | 2006 |
| Stock                options  ………………………………………………………………………                        |   | 2,869                             |   | 4,023 |
| Deferred                director stock units………………………………………………………                                                         |   | 260                               |   | 82 |
|     Total                 ………………………………………………………………………… |   | 3,129                             |   | 4,105 |

| (2)   | Stock-Based                Compensation Plans |
|-----------------|-----------------------------------------------|

*Share-Based        Payment*

----

*Stock        Options*

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

|                                           |   |      |   |     |   | Weighted                    |
|------------------------------------------------|--------|-----------|--------|----------|--------|-----------------------------|
|                                           |   |      |   | Weighted |   | Average                     |
|                                           |   |      |   | Average  |   | Remaining                   |
|                                           |   |      |   | Option   |   | Contractual                 |
| Stock                options                   |   | Shares    |   | Price    |   | Term                (years) |
|                                           |   |      |   |     |   |                        |
| Outstanding                at February 3, 2007 |   | 3,056,725 |   | $3.96    |   |                        |
| Granted                                        |   | ─   |   | ─  |   |                        |
| Exercised                                      |   | ─   |   | ─  |   |                        |
| Forfeited                or expired            |   | (187,456) |   | $5.07    |   |                        |
| Outstanding                at May 5, 2007      |   | 2,869,269 |   | $3.89    |   | 5.5                         |
|                                           |   |      |   |     |   |                        |
| Exercisable                at May 5, 2007      |   | 1,836,492 |   | $4.57    |   | 5.1                         |

----

*Restricted        Stock*

|                                                                                                                                                                                                                                                                            |   |   |     |   | Weighted                  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|---------------------------|
|                                                                                                                                                                                                                                                                            |   |   |     |   | Average                   |
|                                                                                                                                                                                                                                                                            |   |   |     |   | Grant                Date |
| Restricted                Stock                                                                                                                                                                                                                                                 |   |   | Shares   |   | Fair                Value |
|                    Non-vested stock at February 3, 2007 …………………………………………………                                                                    |   |   | 98,001   |   | $4.55                     |
|                    Granted ……………………………………………………………………………………      |   |   | 10,000   |   | $0.88                     |
|                    Vested  …………………………………………………………………………………… |   |   | (27,499) |   | $5.82                     |
|                    Forfeited  …………………………………………………………………………………     |   |   | (1,500)  |   | $1.96                     |
|                    Non-vested at May 5, 2007………………………………………………………………                                             |   |   | 79,002   |   | $3.70                     |

| (3)   | Comprehensive                Loss |
|-----------------|-----------------------------------|

|                                                                                                                                                                                                                                                            |   | Three                Months Ended |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                                                                                                                                                            |   | May                5,             |   | April                29, |
|                                                                                                                                                                                                                                                            |   | 2007                              |   | 2006 |
| Net                loss ……………………………………………………………………………………… |   | $(15,445)                         |   | $(15,553) |
| Foreign                currency translation adjustment …………………………………………………                                                                    |   | 910                               |   | 350 |
|     Comprehensive                loss …………………………………………………………………                       |   | $(14,535)                         |   | $(15,203) |

*Accounting        for Income Taxes*

----

*Accounting        for Uncertainty in Income Taxes - an Interpretation of FASB Statement 109        *

*Accounting        for Uncertainty in Income Taxes - an interpretation of FASB Statement No.        109*

*Fair        Value Measurements*

----

*The        Fair Value Option for Financial Assets and Liabilities *

| ·   | a                requirement that the Company must maintain under its Revolver with                its                Senior Lender, the lesser of i) 10% of the aggregate borrowing base;                or                ii) a) $10 million availability through November 30, 2007 and b)                $15                million availability thereafter, provided that this latter amount                may be                adjusted by the Term B Lender based on its acceptance of the Company’s                business plan for the following fiscal year; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                requirement that the aggregate amount owed to the Term B Lender and                the                Senior Lender, including all letter of credit obligations, not exceed                60%                of the cost of eligible inventory as of December 31,                2007; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | a                requirement that the Company report to the Term B Lender certain                financial                and operational information on a recurring                basis; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | restrictions                regarding the incurrence of debt by the                Company; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | restrictions                regarding the creation of liens on assets of the                Company; |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | restrictions                regarding dissolution, liquidation or merger of the Company; |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | restrictions                regarding the Company making certain investments, advances and loans; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | restrictions                regarding the sale, transfer or other disposition of assets of the                Company; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | restrictions                regarding transactions with affiliates of the                Company. |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | no                default or event of default shall have occurred and be continuing; |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | immediately                after giving effect thereto and for the two fiscal quarters then                ended                immediately prior, availability under the facility is at least equal                to                $25 million; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | certain                other conditions are satisfied. |
|--------------------|--------------------------------------------------------|

| ·   | declaring                all obligations immediately due and                payable; |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | terminating                the Term Loan; or |
|--------------------|----------------------------------------------|

| ·   | liquidating                the collateral for its benefit. |
|--------------------|------------------------------------------------------------|

----

|                                                                                                                                                                                                                                                                    |   | Three                Months Ended |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                                                                                                                                                                    |   |  May                5,2007   |   | April                29, 2006 |
| Net                revenue:                                                                                                                                                                                                                                             |   |                              |   |   |
|                      United States  ………………………………………………………………………         |   | $                                 | 88,032 |   | $ | 101,951 |
|  Canada………………………………………………………………………………                                          |   |                              | 16,597 |   |   | 16,713 |
|     Total………………………………………………………………………………                         |   | $                                 | 104,629 |   | $ | 118,664 |
|                                                                                                                                                                                                                                                                    |   |                              |   |   |   |   |
| Long-lived                assets:                                                                                                                                                                                                                                       |   |                              |   |   |   |   |
|                      United States  ………………………………………………………………………         |   | $                                 | 61,822 |   | $ | 77,662 |
|                      Canada ……………………………………………………………………………… |   |                              | 11,799 |   |   | 10,530 |
|     Total………………………………………………………………………………                         |   | $                                 | 73,621 |   | $ | 88,192 |

----

----

**Phase        I:**

**Phase        II:**

----

**Strengthen        Merchandise Management and Control:**

**Strengthen      Product Assortment, Allocation, and Merchandising Strategy:**

| ·   | Introduction                of a “never out of stock program” focused on key SKUs designed to ensure                that highly productive and profitable SKUs are always available in                the                stores. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                more flexible approach to inventory allocation to better respond                to                differing customer tastes and demands by location. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | An                improved customer value proposition to appeal to the Company’s traditional                customers and to attract customers with high-impact price impression                products. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Integration                of an “item of the week” program throughout the year which allocates floor                space to ongoing “take-with” products that will be offered at sharply                attractive prices, usually under $20, designed to increase the conversion                rate of shoppers to buyers and average transaction value. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                unit buying plan focused on ensuring the necessary level of available                inventory to meet customer demand. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Rationalization                of the core product assortment, decreasing from approximately 2,700                core                SKUs to approximately 2,100, eliminated SKU redundancy that cannibalized                best sellers, and re-focused on key best selling merchandise. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Differentiation                of the merchandising strategy by retail channel to better capitalize                on                the difference between mall, off-mall and outlet locations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Improve      Merchandising Clarity and Drive Inventory Cross-Selling:**

**Improve      Inventory Flow for Improved Gross Margin:**

**Phase      Out BombayKIDS and Convert Space to Core Assortment:**

----

**Rationalize      Store Base:**

**Optimize      Marketing Spend: **

**Phase      III:**

**Results      of Operations**

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|                                                                                                                                                                                                                                                                             | Three                Months Ended |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|
|  Net                revenue (in millions)                                                                                                                                                                                                                                   | May                5, 2007        |   | April                29, 2006 |
| Retail                sales  ………………………………………………………………………………………… | $102.4                            |   | $115.5 |
| Wholesale                sales ……………………………………………………………………………………             | 0.6                               |   | 1.2 |
| Shipping                revenue  …………….……………………………………………………………………                 | 1.6                               |   | 1.8 |
| Other                revenue  ………………..……………………………………………………………………            | 0.0                               |   | 0.2 |
|     Total                revenue ………………………………………………………………………………          | $104.6                            |   | $118.7 |

|                                                                                                                                                                                                             | Three                Months Ended |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|
|  Sales                mix:                                                                                                                                                                                  | May                5, 2007        |   | April                29, 2006 |
| Large                furniture ………………………………………………………………          |  43%                         |   | 42% |
| Occasional                furniture…………………………………………………………                    | 13                                |   | 10 |
| Accessories………………………..…………………………………………                     | 29                                |   | 32 |
| Wall                decor……………………….…………………………………………… | 15                                |   | 16 |
|     Total                revenue…………...……………………………………………       | 100%                              |   | 100% |

----

----

*Accounting        for Uncertainty in Income Taxes - an interpretation of FASB Statement No.        109*

*Fair        Value Measurements*

----

*The        Fair Value Option for Financial Assets and Liabilities *

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**The        Company may not be able to maintain its listing on the New York Stock Exchange.        **

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|        Period         |    (a)Total                numberof                shares (orunits)                purchased (1) |   (b)Averageprice                paidper                share(or                unit) | (c)Total                numberof                shares (orunits)                purchasedas                part ofpublicly                announcedplans                or programs(2) | (d)Maximum                number(or                approximatevalue)                of shares (orunits)                that may yetbe                purchased underthe                plans or programs |
|----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| February                4 - March                3, 2007 |  --                                                                                                        |  --                                                                                        |  --                                                                                                                                                                               |  $                3,366,711                                                                                                                                                                         |
| March                4 -April                7, 2007     |  4,896                                                                                                     |  $                1.30                                                                     |  4,896                                                                                                                                                                            |  $                3,360,346                                                                                                                                                                         |
| April                8 -May                5, 2007       |  5,578                                                                                                     |  $                1.96                                                                     |  5,578                                                                                                                                                                            |  $                3,349,393                                                                                                                                                                         |
|                    Total                  | 10,474                                                                                                          |                                                                                            | 10,474                                                                                                                                                                                 |                                                                                                                                                                                                     |

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| Exhibit                   Number |   |  Description                                                                                                                                                          |
|---------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  |   |                                                                                                                                                                       |
| 10(a)                                 |   | Term                  Loan Agreement (1)                                                                                                                                   |
|                                  |   |                                                                                                                                                                       |
| 10(b)                                 |   | Guaranty                  and Security Agreement (1)                                                                                                                       |
|                                  |   |                                                                                                                                                                       |
| 10(c)                                 |   | Pledge                  Agreement (1)                                                                                                                                      |
|                                  |   |                                                                                                                                                                       |
| 10(d)                                 |   | Promissory                  Note (1)                                                                                                                                       |
|                                  |   |                                                                                                                                                                       |
| 10                  (e)               |   | Second                  Lien Deed of Trust, Security Agreement, Assignment of Leases and                  Rent                  and                  Fixture Filing (1)    |
|                                  |   |                                                                                                                                                                       |
| 10                  (f)               |   | Amended                  and Restated Canadian Security Agreement (1)                                                                                                      |
|                                  |   |                                                                                                                                                                       |
| 10                  (g)               |   | Amendment                  No. 1 to Credit Agreement (1)                                                                                                                   |
|                                  |   |                                                                                                                                                                       |
| 10                  (h)               |   | Amendment                  No. 1 to Guaranty and Security Agreement (1)                                                                                                    |
|                                  |   |                                                                                                                                                                       |
| 10                  (i)               |   | Canadian                  Security Agreement (1)                                                                                                                           |
|                                  |   |                                                                                                                                                                       |
| 10                  (j)               |   | Intellectual                  Property Security Agreement (1)                                                                                                              |
|                                  |   |                                                                                                                                                                       |
| 10                  (k)               |   | Intellectual                  Property Security  Agreement (1)                                                                                                        |
|                                  |   |                                                                                                                                                                       |
| 31(a)                                 |   | Certification                  of the Chief Executive Officer Pursuant to Section                  302 of the Sarbanes-Oxley Act of 2002, as amended                       |
|                                  |   |                                                                                                                                                                       |
| 31(b)                                 |   | Certification                  of the Chief Financial Officer Pursuant to Section                  302 of the Sarbanes-Oxley Act of 2002, as amended                       |
|                                  |   |                                                                                                                                                                       |
| 32                                    |   | Certifications                  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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