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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
 For The Fiscal Year Ended February 3, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 1-10767
 RETAIL VENTURES, INC.
  Ohio
    
    20-0090238(State or other jurisdiction of incorporation or 
organization)
    
    (I.R.S. Employer Identification No.)3241 Westerville Road, Columbus, Ohio
    
    43224(Address of principal executive offices)
    
    (Zip Code)
   Title of each class:
    
    Name of each exchange on which registered:Common Shares, without par value
    
    New York Stock Exchange
  o þ
 o þ
 þ o
 þ
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 Item No.
    
    
    
    PagePART I1.
    
    Business
    
    
    41.A
    
    Risk Factors
    
    
    161.B
    
    Unresolved Staff Comments
    
    
    282.
    
    Properties
    
    
    293.
    
    Legal Proceedings
    
    
    304.
    
    Submission of Matters to a Vote of Security Holders
    
    
    31PART II5.
    
    Market for the Registrants Common Equity, Related Shareholder Matters and
Issuer Purchases of Equity Securities
    
    
    326.
    
    Selected Financial Data
    
    
    347.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    347A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    498.
    
    Financial Statements and Supplementary Data
    
    
    509.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    509A.
    
    Controls and Procedures
    
    
    509B.
    
    Other Information
    
    
    51PART III10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    5211.
    
    Executive Compensation
    
    
    5312.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Shareholders Matters
    
    
    5313.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    5314.
    
    Principal Accountant Fees and Services
    
    
    53PART IV15.
    
    Exhibits, Financial Statement Schedules
    
    
    54SIGNATURES
    
    
    
    
    55
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TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULES
 Report of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheets
    
    F-2Consolidated Statements of Operations
    
    F-4Consolidated Statements of Shareholders Equity
    
    F-5Consolidated Statements of Cash Flows
    
    F-7Notes to Consolidated Financial Statements
    
    F-8SCHEDULESI- Condensed Financial Information of Registrant
    
    S-1II-Valuation and Qualifying Accounts
    
    S-2Index to Exhibits
    
    E-1EX-10.84EX-10.85EX-10.86EX-12EX-21EX-23EX-24EX-31.1EX-31.2EX-32.1EX-32.2
  3




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PART I
   Cautionary Statement Regarding Forward-Looking Information for Purposes of the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995
  
    
    our success in opening new stores and operating stores on a timely and profitable
basis;
    
    maintaining good relationships with our vendors;
    
    our ability to anticipate and respond to fashion trends;
    
    fluctuation of our comparable store sales and quarterly financial performance;
    
    disruption of our distribution operations;
    
    our dependence on DSW Inc. for key services;
    
    failure to retain our key executives or attract qualified new personnel;
    
    our competitiveness with respect to style, price, brand availability and customer
service;
    
    declining general economic conditions;
    
    risks inherent to international trade with countries that are major manufacturers
of apparel and footwear; and
    
    security risks related to the electronic processing and transmission of
confidential customer information.
  
 ITEM 1. BUSINESS.
 History of Our Business
    4




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SM
 General
  Value City.
 DSW.
 Filenes Basement.
 5




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Corporate.
  VALUE CITY
    Merchandising
   Supplier Relationships and Purchasing
   6




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Advertising and Promotion
     Stores
 Store Location, Design and Operations.
    7




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Expansion.
 Distribution
    License Agreements
   Segment Seasonality
  Service Marks, Trademarks and Tradenames
  8




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DSW
   Merchandising
 Selection.
  Value.
  Convenience.
 9




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Supplier Relationships and Purchasing
  Advertising and Promotion
   Stores
 Store Location, Design and Operations.
   10




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Expansion.
   Distribution
  Leased Departments and Supply Agreements
    Segment Seasonality
  11




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Service Marks, Trademarks and Tradenames
 ® ®
  FILENES BASEMENT
  Merchandising
 Designer and Famous Brand Merchandise.
 Value Pricing.
  Supplier Relationships and Purchasing
  Advertising and Promotion
  12




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Stores
 Store Location, Design and Operations.
      13




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Expansion.
  Distribution
    License Agreements and Leased Departments
    Segment Seasonality
  Service Marks, Trademarks and Tradenames
 ,
 14




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RVI Management Information and Control Systems
  Value City.
  DSW.
   Filenes Basement.
 Associates
   15




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Competition
       Available Information
  
 ITEM 1A. RISK FACTORS.
 Safe Harbor Under the Private Securities Litigation Reform Act of 1995
  16




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We are exploring strategic alternatives for our Value City operations, including the possible sale
of the division, which sale could disrupt our business and may unfavorably impact our future
financial performance.
   If we are unable to retain current and attract new customers to our Value City business segment,
our results of operations, cash flow, financial condition and business could be materially
adversely affected.
  We may be unable to open all the DSW and Filenes Basement stores contemplated by our growth
strategy on a timely basis, and new stores we open may not be profitable or may have an adverse
impact on the profitability of existing stores, either of which could have a material adverse effect
on our business, financial condition, cash flow and results of operations.
  
    
    identify suitable markets and sites for new store locations;
    
    negotiate favorable lease terms;
    
    build-out or refurbish sites on a timely and effective basis;
    
    obtain sufficient levels of inventory to meet the needs of new stores;
    
    obtain sufficient financing and capital resources or generate sufficient cash flows from operations to fund growth;
    
    successfully open new DSW and Filenes Basement stores in regions of the United States in
which we currently have few or no stores;
    
    open new stores at costs not significantly greater than those anticipated;
    
    control the costs of other capital investments associated with store openings, including,
for example, those related to the expansion of distribution facilities;
    
    hire, train and retain qualified managers and store personnel; and
    
    successfully integrate new stores into our existing infrastructure, operations and
management and distribution systems or adapt such infrastructure, operations and systems to
accommodate our growth.
  17




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We intend to open new DSW and Filenes Basement stores at an increased rate compared to historical
years, which could strain our resources and have a material adverse effect on our business and
financial performance.
  The temporary cessation of operations at the Downtown Crossing Boston Filenes Basement store could
lead to reduced sales when that location resumes operations.
  DSW
plans to invest in the development of an e-commerce business which
may not be successful or could distract management from its core
business.
  We rely on our good relationships with vendors and their factors which provide vendor financing to
purchase brand name and designer merchandise at favorable prices. If these relationships were to
be impaired, we may not be able to obtain a sufficient selection of merchandise at attractive
prices, and we may not be able to respond promptly to changing fashion trends, either of which
could have a material adverse effect on our competitive position, our business and financial
performance.
  18




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We may be unable to anticipate and respond to fashion trends and consumer preferences in the
markets in which we operate, which could materially adversely affect our business, financial
condition, cash flow and results of operations.
  
    
    variations in local economic conditions, which could affect our customers discretionary spending;
    
    unanticipated fashion trends;
    
    our success in developing and maintaining vendor relationships that provide us access to
in-season merchandise at attractive prices;
    
    our success in distributing merchandise to our stores in an efficient manner; and
    
    changes in weather patterns, which in turn affect consumer preferences.
  Our operations are affected by seasonal variability.
  Our comparable store sales and quarterly financial performance may fluctuate for a variety of
reasons in addition to seasonal factors, which could result in a decline in the price of our common
shares.
  
    
    changes in our merchandising strategy;
    
    timing and concentration of new store openings and related pre-opening and other start-up costs;
    
    levels of pre-opening expenses associated with new stores;
    
    changes in our merchandise mix;
    
    changes in and regional variations in demographic and population characteristics;
    
    timing of promotional events;
    
    actions by our competitors; and
    
    general United States economic conditions and, in particular, the retail sales environment.
 19




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Retail Ventures is a holding company and relies on its subsidiaries to make payments on its
indebtedness and meet its obligations.
  We have debt which could have consequences if we were unable to repay the balances or interest due.
  
    
    limit our flexibility in planning for, or reacting to, changes in our industry in which we operate;
    
    place us at a competitive disadvantage compared to our competitors that have less debt;
    
    limit our ability to seek and borrow additional funds; and
    
    expose us to risks inherent in interest rate fluctuations because some of our
borrowings are at variable rates of interest, which could result in higher interest
expense in the event of increases in interest rates.
    VCDSs and DSWs secured revolving credit facilities could limit operational flexibility.
 $275 Million Secured Revolving Credit Facility  The VCDS Revolving Loan
  20




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$150 Million Secured Revolving Credit Facility  The DSW Revolving Loan
  Our stock price may fluctuate significantly, which could negatively affect the trading of our
common shares.
  
    
    developments related to DSW and fluctuations in the market price of DSW shares;
    
    quarterly variations in actual or anticipated operating results;
    
    changes by securities analysts in estimates regarding Retail Ventures;
    
    conditions in the retail industry;
    
    the condition of the stock market; and
    
    general economic conditions.
 Our failure to retain our existing senior management team and to continue to attract qualified new
personnel could materially adversely affect our business.
  We may be unable to compete favorably in our highly competitive markets.
  SSC and/or its affiliates may compete directly against us.
  21




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A decline in general economic conditions, or the outbreak or escalation of war or terrorist acts,
could lead to reduced consumer demand for our merchandise.
   We rely on foreign sources for our merchandise, and our business is therefore subject to risks
associated with international trade.
  
    
    economic and political instability in countries where these suppliers are located;
    
    international hostilities or acts of war or terrorism affecting the United States or
foreign countries from which our merchandise is sourced;
    
    increases in shipping costs;
    
    transportation delays and interruptions, including as a result of increased inspections
of import shipments by domestic authorities;
    
    work stoppages;
    
    adverse fluctuations in currency exchange rates;
    
    laws of the United States affecting the importation of goods, including duties, tariffs
and quotas and other non-tariff barriers;
    
    expropriation or nationalization;
    
    changes in local government administration and governmental policies;
    
    changes in import duties or quotas;
    
    compliance with trade and foreign tax laws; and
    
    local business practices, including compliance with local laws and with domestic and international labor standards.
  22




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DSW and Filenes Basement each rely on a primary distribution center. The loss or disruption of
either of these centralized distribution centers could have a material adverse effect on our
business and operations.
     We will require strong cash flows from our operations to support capital expansion, operations and
debt repayment.
  If we fail to execute our opportunistic buying and inventory management well, our business could be
materially adversely affected.
  If we do not attract and retain quality sales, distribution center and other associates in
sufficient numbers as well as experienced buying and management personnel, our performance could be
materially adversely affected.
  23




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If our
information systems do not operate and our new technologies are not
implemented effectively, our
business could be materially disrupted or our sales or profitability could be reduced.
  We are reliant on our information systems and the loss or disruption of services could affect our
ability to implement our growth strategy and have a material adverse effect on our business.
    We face security risks related to our electronic processing and transmission of confidential
customer information. On March 8, 2005, we announced the theft of credit card and other purchase
information related to DSW customers. This security breach could materially adversely affect our
reputation and business and subject us to liability.
    http://www.ftc.gov
  Accounting for Contingencies
 24




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We continue to be dependent on DSW to provide us with key services for our business.
   We are controlled indirectly by Schottenstein Stores Corporation, whose interests may differ from
our other shareholders.
  Some of our directors and officers also serve as directors or officers of DSW, and may have
conflicts of interest because they may own DSW Common Shares or options to purchase DSW Common
Shares, or they may receive cash-based or equity-based awards based on the performance of DSW.
  Risk Factors Relating to Our PIES
 PIES holders will bear the full risk of a decline in the market price of the DSW Class A Common
Shares between the pricing date for the PIES and the exchange date.
  25




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The opportunity for equity appreciation provided by an investment in the PIES is less than that
provided by a direct investment in DSW Class A Common Shares.
  The market price of the DSW Class A Common Shares, which may fluctuate significantly, may adversely
affect the market price of the PIES.
  
    
    developments related to DSW;
    
    quarterly variations in DSWs actual or anticipated operating results;
    
    changes by securities analysts in estimates regarding DSW;
    
    conditions in the retail industry;
    
    the condition of the stock market;
    
    general economic conditions; and
    
    sales of DSWs Common Shares by its existing shareholders, including Retail Ventures,
or holders of rights to purchase DSW Common Shares.
  The PIES may adversely affect the market price for DSW Class A Common Shares.
  26




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The adjustments to the exchange ratio do not cover all the events that could adversely affect the
market price of the DSW Class A Common Shares.
  PIES holders will have no rights with respect to DSW Class A Common Shares, but may be negatively
affected by some changes made with respect to DSW Class A Common Shares.
  Our obligations under the PIES will be effectively junior to our other existing and future secured
debt to the extent of the value of the assets securing that debt and effectively subordinate to the
debt and other liabilities of our subsidiaries.
   27




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The tax consequences of an investment in the PIES are uncertain.
   In the event of our bankruptcy, the principal amount of the PIES would not represent a debt claim
against us.
  The secondary market for the PIES, if any, may be illiquid.
  DSW has no obligations with respect to the PIES and does not have to consider PIES holders
interests for any reason.
  PIES holders should carefully consider the risk factors relating to DSW.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS.
 28




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ITEM 2. PROPERTIES.
  Value
    
    
    
    
    
    FilenesCity
    
    DSW
    
    Basement
    
    TotalAlabama
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Arizona
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5California
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21Colorado
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Connecticut
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Delaware
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    4Florida
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Georgia
    
    
    4
    
    
    
    8
    
    
    
    1
    
    
    
    13Illinois
    
    
    16
    
    
    
    10
    
    
    
    3
    
    
    
    29Indiana
    
    
    7
    
    
    
    6
    
    
    
    
    
    
    
    13Iowa
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Kansas
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Kentucky
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Maine
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Maryland
    
    
    8
    
    
    
    7
    
    
    
    3
    
    
    
    18Massachusetts
    
    
    
    
    
    
    9
    
    
    
    9
    
    
    
    18Michigan
    
    
    9
    
    
    
    12
    
    
    
    
    
    
    
    21Minnesota
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Missouri
    
    
    6
    
    
    
    4
    
    
    
    
    
    
    
    10Nebraska
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Nevada
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3New Hampshire
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1New Jersey
    
    
    6
    
    
    
    8
    
    
    
    1
    
    
    
    15New York
    
    
    
    
    
    
    18
    
    
    
    7
    
    
    
    25North Carolina
    
    
    1
    
    
    
    4
    
    
    
    
    
    
    
    5Ohio
    
    
    22
    
    
    
    12
    
    
    
    2
    
    
    
    36Oklahoma
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Oregon
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Pennsylvania
    
    
    18
    
    
    
    11
    
    
    
    2
    
    
    
    31Rhode Island
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Tennessee
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    4Texas
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    23Utah
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Virginia
    
    
    4
    
    
    
    10
    
    
    
    
    
    
    
    14Washington
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Washington D.C.
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3West Virginia
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Wisconsin
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4113
    
    
    
    223
    
    
    
    31
    
    
    
    367
   29




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ITEM 3. LEGAL PROCEEDINGS.
   http://www.ftc.gov
   Accounting for Contingencies
  30




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 31




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PART II
 
 ITEM 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
  High
    
    LowFiscal 2005:First Quarter
    
    $
    10.25
    
    
    $
    6.60Second Quarter
    
    
    14.34
    
    
    
    9.80Third Quarter
    
    
    14.12
    
    
    
    8.95Fourth Quarter
    
    
    14.03
    
    
    
    10.02Fiscal 2006:First Quarter
    
    $
    16.60
    
    
    $
    12.35Second Quarter
    
    
    18.00
    
    
    
    14.31Third Quarter
    
    
    17.50
    
    
    
    13.61Fourth Quarter
    
    
    20.47
    
    
    
    15.29Fiscal 2007:First Quarter
    
    $
    21.69
    
    
    $
    19.12(through March 31, 2007)
   PERFORMANCE GRAPH
   32




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Company / Index
    
    02-Feb-02
    
    01-Feb-03
    
    31-Jan-04
    
    29-Jan-05
    
    28-Jan-06
    
    03-Feb-07RETAIL VENTURES, INC.
    
    $
    100.00
    
    
    $
    45.03
    
    
    $
    138.34
    
    
    $
    152.66
    
    
    $
    294.00
    
    
    $
    466.28RUSSELL 2000
    
    $
    100.00
    
    
    $
    78.62
    
    
    $
    124.25
    
    
    $
    132.64
    
    
    $
    160.30
    
    
    $
    179.31S&P GENERAL MERCHANDISE STORES
    
    $
    100.00
    
    
    $
    78.29
    
    
    $
    108.17
    
    
    $
    128.95
    
    
    $
    134.59
    
    
    $
    158.32
 33




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ITEM 6. SELECTED FINANCIAL DATA.
  For the Fiscal Year Ended(1)February 3,
    
    January 28,
    
    January 29,
    
    January 31,
    
    February 1,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars in thousands, except per share amounts and net sales per selling square foot)Net sales
    
    $
    3,067,658
    
    
    $
    2,913,371
    
    
    $
    2,739,631
    
    
    $
    2,594,206
    
    
    $
    2,450,719Operating profit before change in fair
value of derivative instruments
(2)
    
    $
    81,513
    
    
    $
    7,218
    
    
    $
    6,685
    
    
    $
    31,658
    
    
    $
    36,706Change in fair value of derivative
instruments
    
    $
    (175,955
    )
    
    $
    (144,209
    )Operating (loss) profit
    
    $
    (94,442
    )
    
    $
    (136,991
    )
    
    $
    6,685
    
    
    $
    31,658
    
    
    $
    36,706Loss before cumulative effect of accounting
change
    
    $
    (150,913
    )
    
    $
    (183,418
    )
    
    $
    (19,448
    )
    
    $
    (5,219
    )
    
    $
    (2,357
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,080
    )Net loss
    
    $
    (150,913
    )
    
    $
    (183,418
    )
    
    $
    (19,448
    )
    
    $
    (5,219
    )
    
    $
    (4,437
    )Basic loss per share before cumulative
effect of accounting change
    
    $
    (3.35
    )
    
    $
    (4.75
    )
    
    $
    (0.57
    )
    
    $
    (0.15
    )
    
    $
    (0.07
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (0.06
    )Basic and diluted loss per share
    
    $
    (3.35
    )
    
    $
    (4.75
    )
    
    $
    (0.57
    )
    
    $
    (0.15
    )
    
    $
    (0.13
    )Total assets
    
    $
    1,267,217
    
    
    $
    1,086,574
    
    
    $
    976,426
    
    
    $
    860,592
    
    
    $
    828,126Working capital
    
    $
    274,439
    
    
    $
    184,961
    
    
    $
    233,568
    
    
    $
    227,665
    
    
    $
    174,971Current ratio
    
    
    1.45
    
    
    
    1.33
    
    
    
    1.65
    
    
    
    1.84
    
    
    
    1.57Long-term obligations
    
    $
    265,783
    
    
    $
    165,995
    
    
    $
    343,375
    
    
    $
    326,940
    
    
    $
    264,664Number of:(3)Value City Stores
    
    
    113
    
    
    
    113
    
    
    
    116
    
    
    
    116
    
    
    
    116DSW Stores
    
    
    223
    
    
    
    199
    
    
    
    172
    
    
    
    142
    
    
    
    126Filenes Basement Stores
    
    
    31
    
    
    
    27
    
    
    
    26
    
    
    
    21
    
    
    
    20Net sales per selling sq. ft. (4)
    
    $
    232.38
    
    
    $
    219.08
    
    
    $
    221.00
    
    
    $
    225.00
    
    
    $
    224.00Comparable store sales change (5)
    
    
    0.8
    %
    
    
    0.5
    %
    
    
    -1.0
    %
    
    
    1.2
    %
    
    
    -3.5
    %
 
 (1)
    
    Fiscal 2006 consists of 53 weeks. All other years reported consist of 52 weeks.(2)
    
    The Company believes that the non-cash accounting charge associated with the change in fair value of derivative
instruments is not directly related to its retail operations and is therefore providing supplemental adjusted results that exclude this
item. This financial measure should facilitate analysis by investors and others who follow the Companys financial performance.(3)
    
    Includes all stores operating at the end of the fiscal year.(4)
    
    Presented in whole dollars and excludes leased departments and stores not operated during the entire fiscal period.(5)
    
    A store or leased department is considered to be comparable if it has been opened 14
months at the beginning of the fiscal year. 
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
  34




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##### Table of Contents



OVERVIEW
      Key Financial Measures
   35




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
    
    
    Revenue recognition. Revenues from merchandise sales are recognized at the point of sale,
net of returns and exclude sales tax. Layaway sales are recognized when the merchandise has
been paid for in full. Layaway was discontinued at the end of fiscal 2004.
  
    
    Cost of sales and merchandise inventories. We use the retail method of accounting for
substantially all of our merchandise inventories. Merchandise inventories are stated at the
lower of cost, determined using the first-in, first-out basis, or market, using the retail
inventory method. The retail inventory method is widely used in the retail industry due to
its practicality. Under the retail inventory method, the valuation of inventories at cost
and the resulting gross margins are calculated by applying a calculated cost to retail ratio
to the retail value of inventories. The cost of the inventory reflected on our consolidated
balance sheet is decreased by charges to cost of sales at the time the retail value of the
inventory is lowered through the use of markdowns. Accordingly, earnings are negatively
impacted as merchandise is marked down prior to sale. Reserves to value inventory at the
lower of cost or market were $44.4 million and $43.1 million at the end of fiscal 2006 and
2005, respectively.
  
    
    Short-term investments. Short-term investments include investment grade variable-rate
debt obligations and auction rate securities and are classified as available-for-sale
securities. These securities are recorded at cost, which approximates fair value due to
their variable interest rates, which reset every 33 to 182 days, and despite the long-term
nature of their stated contractual maturities, the Company has the intent and ability to
quickly liquidate these securities. As a result of the resetting variable rates, there are
no cumulative gross unrealized or realized holding gains or losses from these investments.
All income generated
 36




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##### Table of Contents



from these investments is recorded as interest income. As of February 3, 2007, the Company
held $98.7 million in short-term investments, and at January 28, 2006, the Company had no
short-term investments.
 
    
    Asset impairment and long-lived assets. We must periodically evaluate the carrying amount
of our long-lived assets, primarily property and equipment, and finite life intangible
assets when events and circumstances warrant such a review to ascertain if any assets have
been impaired. The carrying amount of a long-lived asset is considered impaired when the
carrying amount of the asset exceeds the expected future cash flows from the asset. Our
reviews are conducted at the lowest identifiable level which includes a store. The
impairment loss recognized is the excess of the carrying value of the asset over its fair
value, based on discounted future cash flows. Should an impairment loss be realized, it will
be included in operating expenses. Assets acquired for stores that have been previously
impaired are not capitalized when acquired if the stores expected future cash flow remains
negative. During fiscal 2006, fiscal 2005 and fiscal 2004, we recorded $0.8 million, $0.5
million, and $2.9 million (including the impairment of a capital lease of $1.2 million
related to a store closing) in charges, respectively, related to long-lived assets at store
operating units.
   
    
    Store Closing Reserve. During the 2006 fiscal year, the Company recorded charges
associated with the closing of five DSW stores. The operating lease at one of the five
stores was terminated through the exercise of a lease kick-out option. During the first
quarter of 2006, the Company closed one Filenes Basement store for which closing costs were
accrued during the fourth quarter of fiscal 2005. These reserves are monitored on at least
a quarterly basis for changes in circumstances. The store closing reserves were $1.9 million
and $2.4 million at the end of fiscal 2006 and 2005, respectively.
    
    Self-insurance reserves. We record estimates for certain health and welfare, workers
compensation and casualty insurance costs that are self-insured programs. Self insurance
reserves include actuarial estimates of both claims filed, carried at their expected
ultimate settlement value, and claims incurred but not yet reported. Our liability
represents an estimate of the ultimate cost of claims incurred as of the balance sheet date.
Health and welfare estimates are calculated monthly, based on a historical analysis for the
average of the previous two months claims cost and the number of associates employed.
Workers compensation and general liability estimates are calculated semi-annually, with
the assistance of an actuary, utilizing claims development estimates based on historical
experience and other factors. We have purchased stop loss insurance to limit our exposure to
any significant exposure on a per person basis for health and welfare and on a per claim
basis for workers compensation and general liability. Although we do not anticipate the
amounts ultimately paid will differ significantly from our estimates, self-insurance
reserves could be affected if future claims experience differs significantly from the
historical trends and the actuarial assumptions. For example, for workers compensation and
liability claims estimates, a 1% increase or decrease to the assumptions for claims costs
and loss development factors would increase or decrease our self-insurance accrual by $0.4
million and $0.1 million, respectively. The self-insurance reserves were $17.5 million and
$17.6 million at the end of fiscal 2006 and 2005, respectively. The decrease in
self-insurance reserves was principally associated with the decrease in general liability.
    
    Pension. The obligations and related assets of defined benefit retirement plans are
presented in Note 7 of the Notes to Consolidated Financial Statements in this Annual Report.
Plan assets, which consist primarily of marketable equity and debt instruments, are valued
using market quotations. Plan obligations and the annual pension expense are determined by
independent actuaries and through the use of a number of assumptions. Key assumptions in
measuring the plan obligations include the discount rate, the rate of salary increases and
the estimated future return on plan assets. In determining the discount rate, we utilize the
yield on fixed-income investments currently available with maturities corresponding to the
anticipated timing of the benefit payments. Salary increase assumptions are based upon
historical experience and anticipated future management actions. Asset returns are based
upon the anticipated average rate of earnings expected on the invested funds of the plans.
At January 28, 2006, the weighted-average actuarial assumptions applied to our plans were a
discount rate of 5.75%, assumed salary increases of 3.5% and long-term rate of return on
plan assets of 8.0%. At February 3, 2007, the weighted-average actuarial assumptions applied
to our plans were a discount rate of 6.0%, assumed salary increases of 3.0% and long-term
rate of return on plan assets of 8.0%. To the extent actual results vary from assumptions,
earnings would be impacted.
    
    Customer loyalty program. DSW maintains a customer loyalty program for the DSW stores in
which program members receive a discount on future purchases. Upon reaching the
target-earned threshold, members receive certificates for these
 37




---



##### Table of Contents



discounts which must be redeemed within six months. During the third quarter of fiscal 2006
DSW re-launched its loyalty program, which included changing the name from Reward Your Style
to DSW Rewards, the points threshold to receive a certificate and the certificate amounts.
The changes were designed to improve customer awareness, customer loyalty and their ability to
communicate with their customers. DSW accrues the anticipated redemptions of the discount earned
at the time of the initial purchase. To estimate these costs, DSW is required to make
assumptions related to customer purchase levels and redemption rates based on historical
experience. The accrued
liability as of February 3, 2007 and January 28, 2006 was $5.0 million and $8.3 million,
respectively. Substantially all certificates under the Reward Your Style program expired on
or before January 31, 2007.
 
    
    Change in fair value of derivative instruments. In accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended, the Company
recognizes all derivatives on the balance sheet at fair value. For derivatives that are
not designated as hedges under SFAS No. 133, changes in the fair values are recognized
in earnings in the period of change. The Company uses the Black-Sholes Pricing Model to
calculate the fair value of derivative instruments.
   
    
    Income taxes. We are required to determine the aggregate amount of income tax expense to
accrue and the amount which will be currently payable based upon tax statutes of each
jurisdiction in which we do business. In making these estimates, we adjust income based on a
determination of generally accepted accounting principles for items that are treated
differently by the applicable taxing authorities. Deferred tax assets and liabilities, as a
result of these differences, are reflected on our balance sheet for temporary differences
that will reverse in subsequent years. A valuation allowance is established against deferred
tax assets when it is more likely than not that some or all of the deferred tax assets will
not be realized. If our management had made these determinations on a different basis, our
tax expense, assets and liabilities could be different. During fiscal 2006, we established
an additional valuation reserve of $2.2 million for deferred tax assets. During fiscal
2005, we established an additional valuation reserve of $14.4 million for state net
operating loss carry forwards and wrote off $4.0 million of deferred tax assets no longer
deductible as a result of changes in state income tax laws in Ohio. During fiscal 2004, we
established an additional valuation reserve for deferred income tax assets of $3.2 million
for carry forwards related to state net operating losses.
  RESULTS OF OPERATIONS
  Seasonality
  Fiscal Year
  38




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##### Table of Contents



Fifty-three
    
    Fifty-twoweeks
    
    weeksended
    
    endedFebruary 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    (60.4
    )
    
    
    (61.9
    )
    
    
    (60.7
    )Gross profit
    
    
    39.6
    
    
    
    38.1
    
    
    
    39.3Selling, general and administrative expenses
    
    
    (37.3
    )
    
    
    (38.1
    )
    
    
    (39.3
    )Change in fair value of derivative instruments
    
    
    (5.7
    )
    
    
    (5.0
    )
    
    
    0.0License fees and other income
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.2Operating (loss) profit
    
    
    (3.1
    )
    
    
    (4.7
    )
    
    
    0.2Non-related interest expense
    
    
    (0.7
    )
    
    
    (0.5
    )
    
    
    (0.5
    )Related party interest expense
    
    
    (0.2
    )
    
    
    (0.5
    )
    
    
    (0.9
    )Total interest expense
    
    
    (0.9
    )
    
    
    (1.0
    )
    
    
    (1.4
    )Interest income
    
    
    0.3
    
    
    
    0.1
    
    
    
    0.0Interest expense, net
    
    
    (0.6
    )
    
    
    (0.9
    )
    
    
    (1.4
    )Loss before income taxes and minority interest
    
    
    (3.7
    )
    
    
    (5.6
    )
    
    
    (1.2
    )Income taxes (expense) benefit
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    0.5Loss before minority interest
    
    
    (4.1
    )
    
    
    (6.1
    )
    
    
    (0.7
    )Minority interest
    
    
    (0.8
    )
    
    
    (0.2
    )
    
    
    0.0Net loss
    
    
    (4.9
    )%
    
    
    (6.3
    )%
    
    
    (0.7
    )%
 Fiscal Year Ended February 3, 2007 (fiscal 2006) Compared To Fiscal Year Ended January 28, 2006 (fiscal 2005)
 Sales.
 2006
    
    2005Value City
    
    
    (1.3
    )%
    
    
    (3.2
    )%DSW
    
    
    2.5
    %
    
    
    5.4
    %Filenes Basement
    
    
    3.1
    %
    
    
    3.5
    %Total
    
    
    0.8
    %
    
    
    0.5
    %
    39




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##### Table of Contents



Gross Profit.
  2006
    
    2005Value City
    
    
    37.2
    %
    
    
    35.6
    %DSW
    
    
    43.1
    %
    
    
    42.4
    %Filenes Basement
    
    
    37.0
    %
    
    
    34.3
    %Total
    
    
    39.6
    %
    
    
    38.1
    %
  rd
 rd
 Selling, General and Administrative Expenses.
  2006
    
    2005Value City
    
    
    38.9
    %
    
    
    39.8
    %DSW
    
    
    35.4
    %
    
    
    36.3
    %
 40




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##### Table of Contents



2006
    
    2005Filenes Basement
    
    
    39.5
    %
    
    
    39.5
    %Total
    
    
    37.3
    %
    
    
    38.1
    %
    Change in Fair Value of Derivatives.
 License fees and other income.
 Operating (Loss) Profit.
  2006
    
    2005Value City
    
    
    (1.3
    )%
    
    
    (14.2
    )%DSW
    
    
    7.9
    %
    
    
    6.1
    %Filenes Basement
    
    
    (0.3
    )%
    
    
    (2.8
    )%Total
    
    
    (3.1
    )%
    
    
    (4.7
    )%
  Interest
Expense.
 41




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##### Table of Contents



Interest
Income.
 Income
Taxes.
 Minority Interest.
 Net Loss.
 Fiscal Year Ended January 28, 2006 (fiscal 2005) Compared To Fiscal Year Ended January 29, 2005
(fiscal 2004)
 Sales.
 2005
    
    2004Value City
    
    
    (3.2
    )%
    
    
    (4.9
    )%DSW
    
    
    5.4
    %
    
    
    5.0
    %Filenes Basement
    
    
    3.5
    %
    
    
    4.7
    %Total
    
    
    0.5
    %
    
    
    (1.0
    )%
     42




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##### Table of Contents



Gross Profit.
  2005
    
    2004Value City
    
    
    35.6
    %
    
    
    38.0
    %DSW
    
    
    42.4
    %
    
    
    43.2
    %Filenes Basement
    
    
    34.3
    %
    
    
    33.7
    %Total
    
    
    38.1
    %
    
    
    39.3
    %
    Selling, General and Administrative Expenses.
 2005
    
    2004Value City
    
    
    39.8
    %
    
    
    40.0
    %DSW
    
    
    36.3
    %
    
    
    37.2
    %Filenes Basement
    
    
    39.5
    %
    
    
    43.1
    %Total
    
    
    38.1
    %
    
    
    39.3
    %
    Change in Fair Value of Warrants.
 43




---



##### Table of Contents



License fees and other income.
 Operating (Loss) Profit.
  2005
    
    2004Value City
    
    
    (14.2
    )%
    
    
    (1.7
    )%DSW
    
    
    6.1
    %
    
    
    6.1
    %Filenes Basement
    
    
    (2.8
    )%
    
    
    (7.8
    )%Total
    
    
    (4.7
    )%
    
    
    0.2
    %
 Interest Expense.
 Interest Income.
 Income Taxes.
 Minority Interest.
 Net Loss.
 44




---



##### Table of Contents



Inflation
  Liquidity and Capital Resources
         45




---



##### Table of Contents



SM
   Revolving Credit Facilities
 $275 Million Secured Revolving Credit Facility  The VCDS Revolving Loan
  $150 Million Secured Revolving Credit Facility  The DSW Revolving Loan
  Term Loans  Related Parties
   46




---



##### Table of Contents



Amendment to Term Loans
  Senior Subordinated Convertible Loan  Related Parties
 $75 Million Senior Subordinated Convertible Loan
  $50 Million Second Amended and Restated Senior Loan Agreement  The Non-Convertible Loan
   $143,750,000 Premium Income Exchangeable Securities SM (PIES)
 SM
 47




---



##### Table of Contents



Contractual Obligations
   Payments due by PeriodNoLess Than
    
    
    1 - 3
    
    
    3 - 5
    
    
    More Than
    
    
    ExpirationContractual Obligations(5)
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years
    
    
    DateLongterm debt
    
    $
    249,250
    
    
    
    
    
    
    $
    105,500
    
    
    $
    143,750
    
    
    
    
    
    
    $Interest payments on longterm debt (1)
    
    
    47,678
    
    
    $
    11,896
    
    
    
    19,116
    
    
    
    16,666Capital lease obligations(2)
    
    
    54,669
    
    
    
    3,448
    
    
    
    7,022
    
    
    
    7,289
    
    
    $
    36,910Operating lease obligations (2)
    
    
    1,535,456
    
    
    
    189,496
    
    
    
    361,240
    
    
    
    310,198
    
    
    
    674,522Construction commitments(3)
    
    
    10,026
    
    
    
    10,026Purchase obligations(4)
    
    
    25,087
    
    
    
    13,288
    
    
    
    11,394
    
    
    
    405Total
    
    $
    1,922,166
    
    
    $
    228,154
    
    
    $
    504,272
    
    
    $
    478,308
    
    
    $
    711,432
    
    
    $
    `
 
 (1)
    
    Projected interest payments are for the Non-Convertible Loan and the VCDS Revolving
Loan and are based on the outstanding principal amount at February 3, 2007 and interest rate
per the agreement. 48




---



##### Table of Contents



(2)
    
    Many capital and operating leases require us, as part of the lease, to pay for
common area maintenance, real estate taxes and contingent rents. In fiscal 2006, the common
area maintenance and real estate taxes represented approximately 36.7% of the rent expense.
These costs vary year by year and are based almost entirely on actual costs incurred by the
landlord and as such are not included in the lease obligations presented above.(3)
    
    Construction commitments include capital items to be purchased for projects that
were under construction, or for which a lease had been signed, as of February 3, 2007.(4)
    
    Many of our purchase commitments are cancelable by us without payment or penalty,
and we have excluded such commitments, along with all associate employment and intercompany
commitments.(5)
    
    Deferred taxes, minority interest and payments related to pension plans are not
included in this table.       Recent Accounting Pronouncements
  Off-Balance Sheet Arrangements
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  49




---



##### Table of Contents



Secured Revolving Credit Facilities
  Warrants
   Conversion Feature of PIES
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 
 ITEM 9A. CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures
  50




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting
    Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION.
 51




---



##### Table of Contents



PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
 Executive Officers
  Heywood Wilansky
 James A. McGrady
 Julia A. Davis
 Jed L. Norden
 Steven E. Miller
 Audit Committee
  Code of Ethics and Corporate Governance Information
  52




---



##### Table of Contents



Other
 ELECTION
OF DIRECTORS, OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE
INFORMATION
    
 Item 11.
    
    EXECUTIVE COMPENSATION.
 COMPENSATION OF MANAGEMENT OTHER DIRECTOR INFORMATION COMMITTEES OF DIRECTORS AND CORPORATE
GOVERNANCE INFORMATION  GENERAL
 
 Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS.
 SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS and
PROPOSAL NO. 2, APPROVAL OF RETAIL VENTURES, INC. 2007 CASH INCENTIVE COMPENSATION PLAN  EQUITY
COMPENSATION PLAN INFORMATION
 
 Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS and OTHER
DIRECTOR INFORMATION, COMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE
INFORMATION  CORPORATE GOVERNANCE PRINCIPLES
 
 Item 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES.
 AUDIT AND
OTHER SERVICE FEES
 53




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
 15(a)(1) Financial Statements
  Page inForm 10-KReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets at February 3, 2007 and January 28, 2006
    
    
    F-2Consolidated Statements of Operations for the years ended February 3, 2007, January 28, 2006
and January 29, 2005
    
    
    F-4Consolidated Statements of Shareholders Equity for the years ended February 3, 2007, January 28, 2006
and January 29, 2005
    
    
    F-5Consolidated Statements of Cash Flows for the years ended February 3, 2007, January 28, 2006
and January29, 2005
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-815(a)(2) Consolidated Financial Statement Schedules:The schedule listed below is filed as part of this Form 10-K:Schedule I. Condensed Financial Information of Registrant
    
    
    S-1Schedule II. Valuation and Qualifying Accounts
    
    
    S-2
  15(a)(3) and (b) Exhibits:
  15(c) Additional Financial Statement Schedules:
  54




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##### Table of Contents



SIGNATURES
  RETAIL VENTURES, INC.April 5, 2007
    By:
    /s/ James A. McGradyJames A. McGrady, Executive Vice President, Chief Financial Officer, Treasurer and Secretary  Signature
    
    Title
    
    Date*

Jay L. Schottenstein
    
    Chairman of the Board of Directors
    
    April 5, 2007/s/ Heywood Wilansky

Heywood Wilansky
    
    President, Chief Executive Officer and
Director (Principal Executive Officer)
    
    April 5, 2007/s/ James A. McGrady

James A. McGrady
    
    Executive Vice President, Chief Financial Officer, Treasurer
and Secretary (Principal Financial and
Accounting Officer)
    
    April 5, 2007*

Henry L. Aaron
    
    Director
    
    April 5, 2007*


Ari Deshe
    
    Director
    
    April 5, 2007*


Jon P. Diamond
    
    Director
    
    April 5, 2007*


Elizabeth M. Eveillard
    
    Director
    
    April 5, 2007*


Lawrence J. Ring
    
    Director
    
    April 5, 2007*


Harvey L. Sonnenberg
    
    Director
    
    April 5, 2007*


James L. Weisman
    
    Director
    
    April 5, 2007
 
 *By:
    /s/ James A. McGradyJames A. McGrady (Attorney-in-fact) 55




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##### Table of Contents



Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal ControlIntegrated Framework
 
 F-1




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##### Table of Contents



RETAIL VENTURES, INC.  CONSOLIDATED BALANCE SHEETS  February 3, 2007 and January 28, 2006  (in thousands, except share amounts)
 February 3,
    
    
    January 28,2007
    
    
    2006ASSETSCash and equivalents
    
    $
    160,221
    
    
    $
    138,731Restricted cash
    
    
    511Short-term investments
    
    
    98,650Accounts receivable, net
    
    
    16,781
    
    
    
    19,259Accounts receivables from related parties
    
    
    3,777
    
    
    
    437Inventories
    
    
    545,584
    
    
    
    491,867Prepaid expenses and other assets
    
    
    36,686
    
    
    
    26,814Deferred income taxes
    
    
    25,737
    
    
    
    66,581Total current assets
    
    
    887,947
    
    
    
    743,689Property and equipment, at cost:Furniture, fixtures and equipment
    
    
    367,823
    
    
    
    348,296Leasehold improvements
    
    
    299,743
    
    
    
    272,835Land and building
    
    
    789
    
    
    
    789Capital leases
    
    
    32,300
    
    
    
    32,300700,655
    
    
    
    654,220Accumulated depreciation and amortization
    
    
    (420,746
    )
    
    
    (385,094
    )Property and equipment, net
    
    
    279,909
    
    
    
    269,126Goodwill
    
    
    25,899
    
    
    
    25,899Tradenames and other intangibles, net
    
    
    34,976
    
    
    
    39,217Deferred income taxes
    
    
    26,114Other assets
    
    
    12,372
    
    
    
    8,643Total assets
    
    $
    1,267,217
    
    
    $
    1,086,574
  F-2




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##### Table of Contents



RETAIL VENTURES, INC.  CONSOLIDATED BALANCE SHEETS (Continued)  February 3, 2007 and January 28, 2006  (in thousands, except share amounts)
 February 3,
    
    
    January 28,2007
    
    
    2006LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    212,434
    
    
    $
    221,444Accounts payable to related parties
    
    
    4,902
    
    
    
    4,901Accrued expenses:Compensation
    
    
    40,886
    
    
    
    35,085Taxes
    
    
    45,227
    
    
    
    37,869Other
    
    
    92,894
    
    
    
    88,403Warrant liability
    
    
    3,594
    
    
    
    1,723Warrant liability-related parties
    
    
    212,806
    
    
    
    168,680Current maturities of long-term obligations
    
    
    765
    
    
    
    623Total current liabilities
    
    
    613,508
    
    
    
    558,728Long-term obligations, net of current maturities:Non-related parties
    
    
    265,283
    
    
    
    115,995Related parties
    
    
    500
    
    
    
    50,000Conversion feature of long-term debt
    
    
    62,770Other noncurrent liabilities
    
    
    95,108
    
    
    
    87,080Deferred income taxes
    
    
    
    
    
    
    45,829Minority interest
    
    
    138,428
    
    
    
    112,396Commitments and contingenciesShareholders equity:Common shares, without par value; 160,000,000
authorized; issued, including 7,551 treasury
shares, 47,270,777 and 39,864,577 outstanding,
respectively
    
    
    276,690
    
    
    
    159,617Accumulated deficit
    
    
    (184,461
    )
    
    
    (36,082
    )Deferred compensation expense, net
    
    
    
    
    
    
    (1
    )Treasury shares, at cost, 7,551 shares
    
    
    (59
    )
    
    
    (59
    )Accumulated other comprehensive loss
    
    
    (550
    )
    
    
    (6,929
    )Total shareholders equity
    
    
    91,620
    
    
    
    116,546Total liabilities and shareholders equity
    
    $
    1,267,217
    
    
    $
    1,086,574
  F-3




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##### Table of Contents



RETAIL VENTURES, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS  Years Ended February 3, 2007, January 28, 2006 and January 29, 2005  (in thousands, except per share amounts)
 February 3,
    
    
    January 28,
    
    
    January 29,2007
    
    
    2006
    
    
    2005Net sales
    
    $
    3,067,658
    
    
    $
    2,913,371
    
    
    $
    2,739,631Cost of sales
    
    
    (1,852,242
    )
    
    
    (1,804,139
    )
    
    
    (1,663,215
    )Gross profit
    
    
    1,215,416
    
    
    
    1,109,232
    
    
    
    1,076,416Selling, general and administrative expenses
    
    
    (1,143,468
    )
    
    
    (1,110,950
    )
    
    
    (1,076,445
    )Change in fair value of derivative instruments
    
    
    (53,012
    )
    
    
    (151
    )Change in fair value of derivative instruments- related parties
    
    
    (122,943
    )
    
    
    (144,058
    )License fees and other income
    
    
    9,565
    
    
    
    8,936
    
    
    
    6,714Operating (loss) profit
    
    
    (94,442
    )
    
    
    (136,991
    )
    
    
    6,685Non-related parties interest expense
    
    
    (20,499
    )
    
    
    (13,526
    )
    
    
    (13,465
    )Related parties interest expense
    
    
    (6,718
    )
    
    
    (14,335
    )
    
    
    (25,741
    )Total interest expense
    
    
    (27,217
    )
    
    
    (27,861
    )
    
    
    (39,206
    )Interest income
    
    
    9,542
    
    
    
    1,660
    
    
    
    645Interest expense, net
    
    
    (17,675
    )
    
    
    (26,201
    )
    
    
    (38,561
    )Loss before income taxes and minority interest
    
    
    (112,117
    )
    
    
    (163,192
    )
    
    
    (31,876
    )Income taxes (expense) benefit
    
    
    (14,630
    )
    
    
    (13,224
    )
    
    
    12,428Loss before minority interest
    
    
    (126,747
    )
    
    
    (176,416
    )
    
    
    (19,448
    )Minority interest
    
    
    (24,166
    )
    
    
    (7,002
    )Net loss
    
    $
    (150,913
    )
    
    $
    (183,418
    )
    
    $
    (19,448
    )Basic and diluted loss per share
    
    $
    (3.35
    )
    
    $
    (4.75
    )
    
    $
    (0.57
    )Shares used in basic and diluted per share calculations
    
    
    45,088
    
    
    
    38,586
    
    
    
    33,956
  F-4




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##### Table of Contents



RETAIL VENTURES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Years Ended February 3, 2007, January 28, 2006 and January 29, 2005
(in thousands)
 Number of Shares
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon
    
    
    
    
    
    
    
    
    
    
    Earnings
    
    
    Deferred
    
    
    
    
    
    
    OtherCommon
    
    
    Shares in
    
    
    Common
    
    
    
    
    
    
    (Accumulated
    
    
    Compensation
    
    
    Treasury
    
    
    Comprehen-Shares
    
    
    Treasury
    
    
    Shares
    
    
    Warrants
    
    
    Deficit)
    
    
    Expense
    
    
    Shares
    
    
    sive Loss
    
    
    TotalBalance, January
31, 2004
    
    
    33,991
    
    
    
    8
    
    
    $
    143,077
    
    
    $
    6,074
    
    
    $
    62,204
    
    
    $
    (635
    )
    
    $
    (59
    )
    
    $
    (6,011
    )
    
    $
    204,650Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,448
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,448
    )Change in minimum
pension liability,
net of income tax
benefit of $753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,057
    )
    
    
    (1,057
    )Total
comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,505
    )Exercise of stock
options
    
    
    136
    
    
    
    
    
    
    
    504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    504Net
issuance/forfeitures
of restricted
shares
    
    
    (16
    )
    
    
    
    
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    104Amortization of
deferred
compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    528
    
    
    
    
    
    
    
    
    
    
    
    528Balance, January
29, 2005
    
    
    34,111
    
    
    
    8
    
    
    $
    143,477
    
    
    $
    6,074
    
    
    $
    42,756
    
    
    $
    (3
    )
    
    $
    (59
    )
    
    $
    (7,068
    )
    
    $
    185,177Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183,418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183,418
    )Change in minimum
pension liability,
net of income tax
benefit of $924
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    139Total
comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183,279
    )Initial public
offering of
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,187
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,187Capital
transactions of
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    393
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    393Exercise of stock
options
    
    
    5,754
    
    
    
    
    
    
    
    26,286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,286Excess tax benefit
related to
stock option
exercises
    
    
    
    
    
    
    
    
    
    
    9,974
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,974Amortization of
deferred
compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Warrant
reclassification to
liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,074
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,074
    )Warrant adjustment
to fair value
    
    
    
    
    
    
    
    
    
    
    (20,120
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,120
    )Balance, January
28, 2006
    
    
    39,865
    
    
    
    8
    
    
    $
    159,617
    
    
    $
    
    
    
    $
    (36,082
    )
    
    $
    (1
    )
    
    $
    (59
    )
    
    $
    (6,929
    )
    
    $
    116,546
 F-5




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##### Table of Contents



RETAIL VENTURES, INC.  CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (Continued)  Years Ended February 3, 2007, January 28, 2006 and January 29, 2005  (in thousands)
 Number of Shares
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon
    
    
    
    
    
    
    
    
    
    
    Earnings
    
    
    Deferred
    
    
    
    
    
    
    OtherCommon
    
    
    Shares in
    
    
    Common
    
    
    
    
    
    
    (Accumulated
    
    
    Compensation
    
    
    Treasury
    
    
    Comprehen-Shares
    
    
    Treasury
    
    
    Shares
    
    
    Warrants
    
    
    Deficit)
    
    
    Expense
    
    
    Shares
    
    
    sive Loss
    
    
    TotalBalance, January
28, 2006
    
    
    39,865
    
    
    
    8
    
    
    $
    159,617
    
    
    $
    
    
    
    $
    (36,082
    )
    
    $
    (1
    )
    
    $
    (59
    )
    
    $
    (6,929
    )
    
    $
    116,546Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150,913
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150,913
    )Change in minimum
pension liability,
net of income tax
expense of $153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,192
    
    
    
    1,192Total
comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149,721
    )Capital
transactions of
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,534
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,534Stock based
compensation
expense, before
related tax effects
    
    
    
    
    
    
    
    
    
    
    634
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    634Exercise of stock
options
    
    
    406
    
    
    
    
    
    
    
    2,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,934Exercise of warrants
    
    
    7,000
    
    
    
    
    
    
    
    110,317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,317Deferred income tax
adjustment
    
    
    
    
    
    
    
    
    
    
    3,189
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,189Reclassification of
unamortized
deferred
compensation
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    1Adjustment to
initially apply
FASB Statement No.
158, net of income
tax expense of $3,330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,187
    
    
    
    5,187Balance, February
3, 2007
    
    
    47,271
    
    
    
    8
    
    
    $
    276,690
    
    
    $
    
    
    
    $
    (184,461
    )
    
    $
    
    
    
    $
    (59
    )
    
    $
    (550
    )
    
    $
    91,620
  F-6




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##### Table of Contents



RETAIL VENTURES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended February 3, 2007, January 28, 2006 and January 29, 2005
(in thousands)
 February 3,
    
    
    January 28,
    
    
    January 29,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (150,913
    )
    
    $
    (183,418
    )
    
    $
    (19,448
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Amortization of debt issuance costs and discount on debt
    
    
    4,567
    
    
    
    4,422
    
    
    
    5,380Amortization of deferred compensation
    
    
    
    
    
    
    2
    
    
    
    528Stock based compensation expense
    
    
    634Stock based compensation expense of subsidiary
    
    
    2,534Depreciation and amortization
    
    
    58,329
    
    
    
    58,889
    
    
    
    56,111Change in fair value of derivative instruments ($122,943, $144,058 and $0  related
party)
    
    
    175,955
    
    
    
    144,209Deferred income taxes and other noncurrent liabilities
    
    
    (23,671
    )
    
    
    2,872
    
    
    
    (8,264
    )Excess tax benefit related to stock option exercises
    
    
    
    
    
    
    9,974Loss on disposal of assets
    
    
    1,469
    
    
    
    1,735
    
    
    
    120Gain on lease termination
    
    
    
    
    
    
    (9,536
    )Minority interest in consolidated subsidiary
    
    
    24,166
    
    
    
    7,353Impairment charges
    
    
    832
    
    
    
    507
    
    
    
    14,596Other
    
    
    1,866
    
    
    
    393Change in working capital, assets and liabilities:Accounts receivable
    
    
    (862
    )
    
    
    (11,740
    )
    
    
    1,150Inventories
    
    
    (53,717
    )
    
    
    (18,816
    )
    
    
    (52,713
    )Prepaid expenses and other assets
    
    
    (11,079
    )
    
    
    (10,825
    )
    
    
    (12,013
    )Accounts payable
    
    
    (10,595
    )
    
    
    16,419
    
    
    
    58,488Proceeds from lease incentives
    
    
    10,168
    
    
    
    10,781
    
    
    
    13,099Accrued expenses
    
    
    17,618
    
    
    
    9,524
    
    
    
    33,042Net cash provided by operating activities
    
    
    47,301
    
    
    
    32,745
    
    
    
    90,076Cash flows from investing activities:Restricted cash
    
    
    (511
    )Cash paid for property and equipment
    
    
    (65,584
    )
    
    
    (46,499
    )
    
    
    (85,443
    )Proceeds from sale of assets
    
    
    30
    
    
    
    165
    
    
    
    119Purchases of available-for-sale investments
    
    
    (188,250
    )Maturities and sales from available-for-sale investments
    
    
    89,600Tradename acquisitions
    
    
    
    
    
    
    
    
    
    
    (4,066
    )Net cash used in investing activities
    
    
    (164,715
    )
    
    
    (46,334
    )
    
    
    (89,390
    )Cash flows from financing activities:Payment on Senior Loan Agreement Non Convertible Loan
    
    
    (49,500
    )Payments on convertible loan
    
    
    
    
    
    
    (25,000
    )Payments on term loan
    
    
    
    
    
    
    (100,000
    )Payments of capital lease obligations
    
    
    (624
    )
    
    
    (611
    )
    
    
    (720
    )Net increase (decrease) in revolving credit facility
    
    
    17,000
    
    
    
    (52,000
    )
    
    
    15,000Proceeds from issuance of PIES
    
    
    143,750Proceeds from the exercise of warrants
    
    
    31,500Proceeds from exercise of stock options
    
    
    2,934
    
    
    
    26,286
    
    
    
    504Debt issuance costs
    
    
    (6,156
    )
    
    
    (3,576
    )
    
    
    (438
    )Proceeds from sale of stock of subsidiary
    
    
    
    
    
    
    277,963Net cash provided by financing activities
    
    
    138,904
    
    
    
    123,062
    
    
    
    14,346Net increase in cash and equivalents
    
    
    21,490
    
    
    
    109,473
    
    
    
    15,032Cash and equivalents, beginning of year
    
    
    138,731
    
    
    
    29,258
    
    
    
    14,226Cash and equivalents, end of year
    
    $
    160,221
    
    
    $
    138,731
    
    
    $
    29,258
  F-7




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business Operations
       Principles of Consolidation
  Fiscal Year
  Use of Estimates
  F-8




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Cash and Equivalents
  Short-term investments
  Accounts Receivable, Net
  Inventories
   Pre-Opening Expenses
  Property and Equipment
  Buildings
    
    31 yearsFurniture, fixtures and equipment
    
    
    3 to 10 years
 F-9




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Asset Impairment and Long-Lived Assets
   Fiscal Year2006
    
    2005
    
    2004Value City
    
    
    
    
    
    
    
    
    
    $
    2,043DSW
    
    $
    832
    
    
    $
    234
    
    
    
    833Filenes Basement
    
    
    
    
    
    
    273$
    832
    
    
    $
    507
    
    
    $
    2,876
 Store Closings
   Balance at1/28/06
    
    
    Related Charges
    
    
    Payments
    
    
    Adjustments
    
    
    Balance at 2/3/07Employee severance and termination benefits
    
    $
    277
    
    
    $
    56
    
    
    $
    (333
    )
    
    
    
    
    
    $Lease Costs
    
    
    2,130
    
    
    
    1,104
    
    
    
    (1,601
    )
    
    $
    233
    
    
    
    1,866Other
    
    
    
    
    
    
    64
    
    
    
    (64
    )Total
    
    $
    2,407
    
    
    $
    1,224
    
    
    $
    (1,998
    )
    
    $
    233
    
    
    $
    1,866
 Balance at1/29/05
    
    
    Related Charges
    
    
    Payments
    
    
    Adjustments
    
    
    Balance at 1/28/06Employee severance and termination benefits
    
    $
    599
    
    
    $
    277
    
    
    $
    (599
    )
    
    $
    
    
    
    $
    277Lease Costs
    
    
    674
    
    
    
    4,892
    
    
    
    (3,436
    )
    
    
    
    
    
    
    2,130Other
    
    
    39
    
    
    
    307
    
    
    
    (346
    )
    
    
    
    
    
    
    Total
    
    $
    1,312
    
    
    $
    5,476
    
    
    $
    (4,381
    )
    
    $
    
    
    
    $
    2,407
 Goodwill
   F-10




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Tradenames and Other Intangible Assets
  FilenesValue City
    
    DSW
    
    Basement
    
    TotalAs of February 3, 2007Tradenames:Gross amount
    
    $
    5,211
    
    
    $
    12,750
    
    
    $
    9,900
    
    
    $
    27,861Accumulated amortization
    
    
    (1,484
    )
    
    
    (7,438
    )
    
    
    (4,565
    )
    
    
    (13,487
    )Useful life (in years)
    
    
    15
    
    
    
    15
    
    
    
    15Favorable lease values:Gross amount
    
    $
    14,417
    
    
    $
    140
    
    
    $
    23,057
    
    
    $
    37,614Accumulated amortization
    
    
    (6,316
    )
    
    
    (98
    )
    
    
    (10,598
    )
    
    
    (17,012
    )Useful life (in years)
    
    
    25
    
    
    
    14
    
    
    
    21As of January 28, 2006Tradenames:Gross amount
    
    $
    5,211
    
    
    $
    12,750
    
    
    $
    9,900
    
    
    $
    27,861Accumulated amortization
    
    
    (1,134
    )
    
    
    (6,587
    )
    
    
    (3,905
    )
    
    
    (11,626
    )Useful life (in years)
    
    
    15
    
    
    
    15
    
    
    
    15Favorable lease values:Gross amount
    
    $
    14,417
    
    
    $
    140
    
    
    $
    23,057
    
    
    $
    37,614Accumulated amortization
    
    
    (5,715
    )
    
    
    (87
    )
    
    
    (8,830
    )
    
    
    (14,632
    )Useful life (in years)
    
    
    25
    
    
    
    14
    
    
    
    21
  FilenesFiscal Year
    
    Value City
    
    DSW
    
    Basement
    
    Total2006
    
    $
    952
    
    
    $
    861
    
    
    $
    2,428
    
    
    $
    4,2412007
    
    
    952
    
    
    
    854
    
    
    
    2,428
    
    
    
    4,2342008
    
    
    948
    
    
    
    854
    
    
    
    2,428
    
    
    
    4,2302009
    
    
    938
    
    
    
    854
    
    
    
    1,624
    
    
    
    3,4162010
    
    
    930
    
    
    
    854
    
    
    
    1,624
    
    
    
    3,4082011
    
    
    915
    
    
    
    854
    
    
    
    1,625
    
    
    
    3,394
 Self-insurance Reserves
  F-11




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Revenue Recognition
   Customer Loyalty Program
  Advertising Expense
  Derivative Financial Instruments
 Accounting for Derivative Instruments and Hedging Activities
     Minority Interest
  F-12




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Earnings Per Share
   February 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005Stock Options
    
    
    1,335
    
    
    
    1,782
    
    
    
    7,714SARS
    
    
    978
    
    
    
    1,308
    
    
    
    1,998Term loan warrants
    
    
    4,413
    
    
    
    4,413
    
    
    
    2,955Conversion warrants
    
    
    9,667
    
    
    
    16,667Convertible debt
    
    
    
    
    
    
    
    
    
    
    16,667Total of all potentially dilutive instruments
    
    
    16,393
    
    
    
    24,170
    
    
    
    29,334
 Stock-Based Compensation
  Comprehensive Loss
  Recent Accounting Pronouncements
 Share-Based Payment Accounting for
Stock-Based Compensation
 Accounting Changes and Error Corrections  a replacement of APB Opinion
No. 20 and FASB Statement No. 3
 Accounting for Uncertainty in Income
Taxes, Accounting for Income
Taxes
 F-13




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fair Value Measurements
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans- an amendment of FASB Statements No. 87, 88, 106,
and 132(R),
 Considering the Effects of
Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements
 How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should
Be Presented in the Income Statement (That Is, Gross Versus Net Presentation)
 The Fair Value Option for Financial Assets and
Financial Liabilities
 2. RELATED PARTY TRANSACTIONS
    F-14




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    3. STOCK BASED COMPENSATION
 Accounting for Stock Issued to Employees
    Retail Ventures Stock Compensation Plans
     F-15




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Share-based(in thousands, except per share amounts)
    
    compensation expenseLoss before income taxes and minority interest
    
    $
    (4,050
    )Minority interest
    
    
    (768
    )Net loss
    
    $
    (1,557
    )Loss per shareBasic
    
    $
    (0.03
    )Diluted
    
    $
    (0.03
    )
  January 28,
    
    January 29,2006
    
    2005Net loss, as reported
    
    $
    (183,418
    )
    
    $
    (19,448
    )Add: Stock-based employee compensation
expense included in reported net loss,
net of tax
    
    
    4,698
    
    
    
    391Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards
    
    
    (5,748
    )
    
    
    (2,773
    )Pro forma net loss
    
    $
    (184,468
    )
    
    $
    (21,830
    )Loss per share:Basic and diluted as reported
    
    $
    (4.75
    )
    
    $
    (0.57
    )Basic and diluted pro forma
    
    $
    (4.78
    )
    
    $
    (0.64
    )
 Stock Options
   Fiscal year endedFebruary 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005AssumptionsRisk-free interest rate
    
    
    4.6
    %
    
    
    4.3
    %
    
    
    4.1
    %Expected volatility of Retail
Ventures Common Shares
    
    
    62.5
    %
    
    
    71.8
    %
    
    
    72.5
    %Expected option term
    
    4.8
    years
    
    4.5
    years
    
    5.4
    yearsExpected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
  F-16




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  February 3, 2007Shares
    
    WAEPOutstanding beginning of year
    
    
    1,782
    
    
    $
    5.81Granted
    
    
    50
    
    
    
    15.78Exercised
    
    
    (406
    )
    
    
    7.22Canceled
    
    
    (91
    )
    
    
    8.23Outstanding end of year
    
    
    1,335
    
    
    $
    5.59Options exercisable end of year
    
    
    1,089
    
    
    $
    5.76Shares available for additional grants
    
    
    5,626
 As of February 3, 2007AggregateIntrinsicShares
    
    WAEP
    
    WARCL
    
    ValueOptions outstanding
    
    
    1,335
    
    
    $
    5.59
    
    
    5 years
    
    $
    19,495Options vested or expected to vest
    
    
    1,316
    
    
    $
    5.60
    
    
    5 years
    
    $
    19,216Options exercisable
    
    
    1,089
    
    
    $
    5.76
    
    
    5 years
    
    $
    15,729Shares available for additional grants
    
    
    5,626
   Fiscal year ended February 3, 2007Weighted-AverageGrant Date FairShares
    
    ValueNonvested beginning of period
    
    
    934
    
    
    $
    2.47Granted
    
    
    50
    
    
    $
    9.18Vested
    
    
    (697
    )
    
    $
    2.78Forfeited/Cancelled
    
    
    (41
    )
    
    $
    3.10Nonvested end of period
    
    
    246
    
    
    $
    2.87
   Options Outstanding
    
    Options ExercisableRange of Exercise Prices
    
    Shares
    
    WARCL
    
    WAEP
    
    Shares
    
    WAEP$1.63  $4.49
    
    
    391
    
    
    6 years
    
    $
    2.14
    
    
    
    229
    
    
    $
    2.16$4.50  $10.00
    
    
    771
    
    
    5 years
    
    $
    5.44
    
    
    
    725
    
    
    $
    5.48$10.01  $22.00
    
    
    173
    
    
    6 years
    
    $
    14.07
    
    
    
    135
    
    
    $
    13.31
 F-17




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock Appreciation Rights
    Fiscal year ended February 3, 2007Shares
    
    WAEPOutstanding beginning of period
    
    
    1,318
    
    
    $
    6.61Granted
    
    
    345
    
    
    $
    14.78Exercised
    
    
    (644
    )
    
    $
    6.15Forfeited
    
    
    (41
    )
    
    $
    13.88Outstanding end of period
    
    
    978
    
    
    $
    9.49Exercisable end of period
    
    
    135
    
    
    $
    7.53
 Fiscal year ended February 3, 2007SharesNonvested beginning of period
    
    
    1,286Granted
    
    
    345Vested
    
    
    (747
    )Forfeited/Cancelled
    
    
    (41
    )Nonvested end of period
    
    
    843
 Restricted Stock Units
   F-18




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal year endedFebruary 3, 2007UnitsOutstanding beginning of period
    
    
    300Granted
    
    
    35Vested
    
    
    (160
    )Forfeited
    
    
    (5
    )Outstanding end of period
    
    
    170
 DSW Stock Compensation Plan
  Stock Options
   Fiscal year endedFebruary 3,
    
    
    January 28,2007
    
    
    2006Assumptions
Risk-free interest rate
    
    
    4.6
    %
    
    
    4.1
    %Expected volatility of DSW common stock
    
    
    39.9
    %
    
    
    42.3
    %Expected option term
    
    4.8 years
    
    5.0 yearsExpected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
   February 3, 2007Shares
    
    WAEPOutstanding beginning of year
    
    
    914
    
    
    $
    19.54Granted
    
    
    270
    
    
    $
    30.05Exercised
    
    
    (31
    )
    
    $
    19.12Canceled
    
    
    (69
    )
    
    $
    20.07Outstanding end of year
    
    
    1,084
    
    
    $
    22.14Options exercisable end of year
    
    
    186
    
    
    $
    19.51Shares available for additional grants
    
    
    3,314
 F-19




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 As of February 3, 2007AggregateIntrinsicShares
    
    WAEP
    
    WARCL
    
    ValueOptions outstanding
    
    
    1,084
    
    
    $
    22.14
    
    
    9 years
    
    $
    20,466Options vested or expected to vest
    
    
    1,017
    
    
    $
    22.10
    
    
    9 years
    
    $
    19,245Options exercisable
    
    
    186
    
    
    $
    19.51
    
    
    8 years
    
    $
    3,998Shares available for additional grants
    
    
    3,314
   Fiscal year ended February 3, 2007Weighted-AverageGrant Date FairShares
    
    ValueNonvested beginning of period
    
    
    884
    
    
    $
    8.41Granted
    
    
    270
    
    
    $
    13.01Vested
    
    
    (187
    )
    
    $
    8.40Forfeited/Cancelled
    
    
    (69
    )
    
    $
    8.64Nonvested end of period
    
    
    898
    
    
    $
    9.78
   Options Outstanding
    
    Options ExercisableRange of Exercise Prices
    
    Shares
    
    WARCL
    
    WAEP
    
    Shares
    
    WAEP$19.00  $20.00
    
    
    738
    
    
    8 years
    
    $
    19.00
    
    
    
    170
    
    
    $
    19.00$20.01  $25.00
    
    
    70
    
    
    9 years
    
    
    24.54
    
    
    
    14
    
    
    $
    24.55$25.01  $30.00
    
    
    167
    
    
    9 years
    
    
    27.93
    
    
    
    2
    
    
    $
    26.84$30.01  $35.00
    
    
    79
    
    
    9 years
    
    
    31.84$35.01  $36.00
    
    
    30
    
    
    9 years
    
    
    35.79
 Restricted Stock Units
   F-20




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal Year ended February 3, 2007Weighted-AverageGrant Date FairUnits
    
    ValueOutstanding beginning of period
    
    
    131
    
    
    $
    20.46Granted
    
    
    23
    
    
    $
    30.91Vested
    
    
    (10
    )
    
    $
    24.85Forfeited
    
    
    (9
    )
    
    $
    19.00Outstanding end of period
    
    
    135
    
    
    $
    22.03
 Director Stock Units
  4. INVESTMENTS
  5. LEASES
    F-21




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  February 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005Minimum rentals
    
    $
    694
    
    
    $
    694
    
    
    $
    694Contingent rentals
    
    
    420
    
    
    
    473
    
    
    
    641Total
    
    $
    1,114
    
    
    $
    1,167
    
    
    $
    1,335
   Operating LeasesUnrelated
    
    
    Related
    
    
    CapitalFiscal Year
    
    Total
    
    
    Party
    
    
    Party
    
    
    Leases2007
    
    $
    189,496
    
    
    $
    164,013
    
    
    $
    25,483
    
    
    $
    3,4482008
    
    
    185,735
    
    
    
    161,297
    
    
    
    24,438
    
    
    
    3,5042009
    
    
    175,505
    
    
    
    151,795
    
    
    
    23,710
    
    
    
    3,5182010
    
    
    162,853
    
    
    
    140,452
    
    
    
    22,401
    
    
    
    3,6572011
    
    
    147,345
    
    
    
    125,944
    
    
    
    21,401
    
    
    
    3,632Future Years
    
    
    674,522
    
    
    
    536,027
    
    
    
    138,495
    
    
    
    36,910Total minimum lease payments
    
    $
    1,535,456
    
    
    $
    1,279,528
    
    
    $
    255,928
    
    
    
    54,669Less amount representing interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,674
    )Present value of minimum lease payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,995Less current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (765
    )Total long-term portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    27,230
  February 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005Minimum rentals:Unrelated parties
    
    $
    140,015
    
    
    $
    132,692
    
    
    $
    117,770Related parties
    
    
    20,809
    
    
    
    21,156
    
    
    
    24,549Contingent rentals:Unrelated parties
    
    
    20,289
    
    
    
    20,776
    
    
    
    17,746Related parties
    
    
    10
    
    
    
    69
    
    
    
    111Total
    
    $
    181,123
    
    
    $
    174,693
    
    
    $
    160,176
  F-22




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6. LONG TERM OBLIGATIONS
  February 3,
    
    January 28,2007
    
    2006Credit facilities:Revolving credit facilities
    
    $
    105,000
    
    
    $
    88,000Senior Loan Agreement  related parties
    
    
    500
    
    
    
    50,000PIES
    
    
    143,750Discount on PIES
    
    
    (10,697
    )238,553
    
    
    
    138,000Capital lease obligations
    
    
    27,995
    
    
    
    28,618266,548
    
    
    
    166,618Less current maturities
    
    
    (765
    )
    
    
    (623
    )$
    265,783
    
    
    $
    165,995Letters of credit outstanding:RVI revolving credit facilities
    
    $
    19,355
    
    
    $
    19,019DSW revolving credit facilities
    
    $
    13,448
    
    
    $
    13,577Availability under revolving credit facilities:RVI revolving credit facilities
    
    $
    66,838
    
    
    $
    63,521DSW revolving credit facilities
    
    $
    136,552
    
    
    $
    136,423Accrued interest to related parties
    
    
    
    
    
    $
    1,236
   SM
  F-23




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Revolving Credit Facilities
 $275 Million Secured Revolving Credit Facility  The VCDS Revolving Loan
  $150 Million Secured Revolving Credit Facility  The DSW Revolving Loan
  Term Loans  Related Parties
   Amendment to Term Loans
  F-24




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Senior Subordinated Covertible Loan  Related Parties
 $75 Million Senior Subordinated Convertible Loan
  $50 Million Second Amended and Restated Senior Loan Agreement  The Non-Convertible Loan
   $143,750,000 Premium Income Exchangeable Securities SM (PIES)
 SM
  F-25




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Other Debt Items
    Fiscal Year
    
    Amount200720082009
    
    $
    105,50020102011
    
    
    143,750Future YearsTotal
    
    $
    249,250
 7. PENSION BENEFIT PLANS
  F-26




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  February 3,
    
    January 28,2007
    
    2006Change in projected benefit obligation:Projected benefit obligation at beginning of year
    
    $
    26,316
    
    
    $
    26,588Service cost
    
    
    42
    
    
    
    45Interest cost
    
    
    1,449
    
    
    
    1,464Settlement (gain) or loss
    
    
    62Benefits paid
    
    
    (1,260
    )
    
    
    (1,581
    )Settlement payments
    
    
    (296
    )Actuarial loss
    
    
    (396
    )
    
    
    (200
    )Projected benefit obligation at end of year
    
    $
    25,917
    
    
    $
    26,316
 February 3,
    
    January 28,2007
    
    2006Change in plan assets:Fair market value at beginning of year
    
    $
    22,680
    
    
    $
    19,902Actual return on plan assets
    
    
    2,094
    
    
    
    2,036Employer contributions
    
    
    2,000
    
    
    
    2,500Benefits paid
    
    
    (1,260
    )
    
    
    (1,581
    )Settlement payments
    
    
    (296
    )Other
    
    
    (205
    )
    
    
    (177
    )Fair market value at end of year
    
    $
    25,013
    
    
    $
    22,680
  February 3,
    
    January 28,2007
    
    2006Accrued benefit cost
    
    $
    (904
    )
    
    $
    (3,527
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    10,630Net amount recognized
    
    $
    (904
    )
    
    $
    7,103
  February 3,
    
    January 28,2007
    
    2006Projected benefit obligation
    
    $
    25,917
    
    
    $
    26,316Accumulated benefit obligation
    
    
    25,854
    
    
    
    26,208Fair value of plan assets
    
    
    25,014
    
    
    
    22,681
  February 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005Service cost
    
    $
    42
    
    
    $
    45
    
    
    $
    43Interest cost
    
    
    1,449
    
    
    
    1,464
    
    
    
    1,401Expected return on plan assets
    
    
    (1,772
    )
    
    
    (1,571
    )
    
    
    (1,436
    )Amortization of transition (asset) obligation
    
    
    (38
    )
    
    
    (38
    )
    
    
    (37
    )Amortization of net loss
    
    
    585
    
    
    
    700
    
    
    
    580Net periodic benefit cost
    
    $
    266
    
    
    $
    600
    
    
    $
    551
 F-27




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Remaining unrecognized benefit obligation existing at transition
    
    $
    (38
    )Unrecognized net loss
    
    
    523Total
    
    $
    485
  February 3,
    
    January 28,2007
    
    2006Discount rate
    
    
    6.00
    %
    
    
    5.75
    %Rate of increase in compensation levels
    
    
    3.0
    %
    
    
    3.5
    %Expected long-term rate of return
    
    
    8.0
    %
    
    
    8.0
    %
   February 3,
    
    January 28,2007
    
    2006Equity securities
    
    
    50.4
    %
    
    
    50.7
    %Fixed securities
    
    
    31.3
    %
    
    
    44.9
    %Government securities
    
    
    17.9
    %Commercial mortgage
    
    
    
    
    
    
    3.3
    %Other
    
    
    0.4
    %
    
    
    1.1
    %100.0
    %
    
    
    100.0
    %
    Fiscal Year
    
    Amount2007
    
    $
    1,1162008
    
    
    1,1162009
    
    
    1,1252010
    
    
    1,1192011
    
    
    1,1622012  2017
    
    
    7,450
 Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans an amendment of FASB Statements No. 87, 88,
106, and 132(R),
 F-28




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Before
    
    
    
    
    
    AfterApplication of
    
    
    
    
    
    Application ofStatement 158
    
    Adjustments
    
    Statement 158Pension assets
    
    
    
    
    
    $
    118
    
    
    $
    118Deferred income taxes
    
    $
    29,444
    
    
    
    (3,330
    )
    
    
    26,114Total assets
    
    
    1,270,429
    
    
    
    (3,212
    )
    
    
    1,267,217Liability for pension
benefits
    
    
    (9,420
    )
    
    
    8,398
    
    
    
    (1,022
    )Total liabilities
    
    
    (1,183,995
    )
    
    
    8,398
    
    
    
    (1,175,597
    )Accumulated other
comprehensive loss
    
    
    5,737
    
    
    
    (5,187
    )
    
    
    550Total stockholders equity
    
    $
    (86,433
    )
    
    $
    (5,187
    )
    
    $
    (91,620
    )
 8. OTHER BENEFIT PLANS
       F-29




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   9. SHAREHOLDERS EQUITY AND WARRANT LIABILITY
  Warrants
 Accounting for Derivative
Instruments and Hedging Activities
     F-30




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. COMMITMENTS AND CONTINGENCIES
   http://www.ftc.gov
   Accounting for Contingencies
  F-31




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. INCOME TAXES
  February 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005Current:Federal
    
    $
    31,988
    
    
    $
    1,644
    
    
    $
    9,967State and local
    
    
    8,028
    
    
    
    4,451
    
    
    
    3,923Total current tax expense
    
    
    40,016
    
    
    
    6,095
    
    
    
    13,890Deferred:Federal
    
    
    (24,598
    )
    
    
    (10,071
    )
    
    
    (29,245
    )State and local
    
    
    (788
    )
    
    
    17,200
    
    
    
    2,927Total deferred tax (benefit) expense
    
    
    (25,386
    )
    
    
    7,129
    
    
    
    (26,318
    )Income tax expense (benefit)
    
    $
    14,630
    
    
    $
    13,224
    
    
    $
    (12,428
    )
  February 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005Income tax (benefit) expense at federal statutory rate of 35%
    
    $
    (39,241
    )
    
    $
    (57,117
    )
    
    $
    (12,760
    )Warrant liability marked to market
    
    
    43,685
    
    
    
    50,473Jobs credit
    
    
    (751
    )
    
    
    (949
    )
    
    
    (800
    )State and local taxes, net
    
    
    1,148
    
    
    
    (1,713
    )
    
    
    (1,251
    )Tax exempt interest
    
    
    (498
    )Non-deductible interest
    
    
    
    
    
    
    222
    
    
    
    592Valuation allowance
    
    
    2,241
    
    
    
    14,367
    
    
    
    3,214Write off of net operating loss
    
    
    
    
    
    
    4,018
    
    
    
    3,072Provision to return adjustments
    
    
    177
    
    
    
    1,979Change in subsidiary basis
    
    
    6,025
    
    
    
    910Other
    
    
    1,844
    
    
    
    1,034
    
    
    
    (4,495
    )Income tax expense (benefit)
    
    $
    14,630
    
    
    $
    13,224
    
    
    $
    (12,428
    )
 F-32




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  February 3,
    
    January 28,2007
    
    2006Deferred tax assets:Basis differences in inventory
    
    $
    10,587
    
    
    $
    9,537Basis differences in property and equipment
    
    
    12,311
    
    
    
    10,316Deferred compensation
    
    
    5,667
    
    
    
    1,473Intangible assets
    
    
    2,441
    
    
    
    6,196Store closing reserve
    
    
    
    
    
    
    913State net operating loss & credits
    
    
    15,263
    
    
    
    14,631Federal net operating loss
    
    
    22,496
    
    
    
    22,526Federal tax credit
    
    
    13,621
    
    
    
    4,583Contribution carry forward
    
    
    
    
    
    
    391Tenant allowance
    
    
    1,415
    
    
    
    173Capital leases
    
    
    3,462
    
    
    
    3,387Other comprehensive loss
    
    
    
    
    
    
    3,837Workers compensation
    
    
    7,160
    
    
    
    7,278Deferred revenue
    
    
    4,663Accrued expenses
    
    
    5,294
    
    
    
    10,791Accrued rent
    
    
    14,788
    
    
    
    12,059PIES
    
    
    24,354Other
    
    
    4,365
    
    
    
    1,896Total deferred tax assets
    
    
    147,887
    
    
    
    109,987Less: Valuation allowance
    
    
    (15,648
    )
    
    
    (13,406
    )132,239
    
    
    
    96,581Deferred tax liabilities:Basis in subsidiary
    
    
    (72,480
    )
    
    
    (69,644
    )Prepaid expenses
    
    
    (6,816
    )
    
    
    (5,367
    )Deferred Revenue  CAT Credit
    
    
    (1,092
    )
    
    
    (818
    )Total deferred tax liabilities
    
    
    (80,388
    )
    
    
    (75,829
    )Total net
    
    $
    51,851
    
    
    $
    20,752
  February 3,
    
    January 28,2007
    
    2006Current deferred tax asset
    
    $
    25,737
    
    
    $
    66,581Non current deferred tax (liability) asset
    
    
    26,114
    
    
    
    (45,829
    )Net deferred tax asset
    
    $
    51,851
    
    
    $
    20,752
   F-33




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12. SEGMENT REPORTING
    IntersegmentValue City
    
    DSW
    
    Filenes Basement
    
    Corporate
    
    Eliminations
    
    TotalAs of and for the year ended
February 3, 2007Net sales
    
    $
    1,361,125
    
    
    $
    1,279,060
    
    
    $
    427,473
    
    
    
    
    
    
    
    
    
    
    $
    3,067,658Operating (loss) profit
    
    
    (17,975
    )
    
    
    100,714
    
    
    
    (1,226
    )
    
    $
    (175,955
    )
    
    
    
    
    
    
    (94,442
    )Depreciation and amortization
    
    
    25,508
    
    
    
    20,686
    
    
    
    9,282
    
    
    
    2,853
    
    
    
    
    
    
    
    58,329Interest expense
    
    
    17,774
    
    
    
    614
    
    
    
    6,791
    
    
    
    7,873
    
    
    $
    (5,835
    )
    
    
    27,217Interest income
    
    
    2,235
    
    
    
    7,527
    
    
    
    40
    
    
    
    5,575
    
    
    
    (5,835
    )
    
    
    9,542Benefit (expense) for income
taxes
    
    
    10,560
    
    
    
    (42,164
    )
    
    
    2,215
    
    
    
    14,759
    
    
    
    
    
    
    
    (14,630
    )Capital expenditures
    
    
    8,962
    
    
    
    42,407
    
    
    
    16,118
    
    
    
    (317
    )
    
    
    
    
    
    
    67,170Total assets
    
    
    438,899
    
    
    
    603,785
    
    
    
    175,287
    
    
    
    328,208
    
    
    
    (278,962
    )
    
    
    1,267,217
 IntersegmentValue City
    
    DSW
    
    Filenes Basement
    
    Corporate
    
    Eliminations
    
    TotalAs of and for the year ended
January 28, 2006Net sales
    
    $
    1,379,975
    
    
    $
    1,144,061
    
    
    $
    389,335
    
    
    
    
    
    
    
    
    
    
    $
    2,913,371Operating (loss) profit
    
    
    (52,167
    )
    
    
    70,112
    
    
    
    (10,727
    )
    
    $
    (144,209
    )
    
    
    
    
    
    
    (136,991
    )Depreciation and amortization
    
    
    28,141
    
    
    
    19,443
    
    
    
    8,662
    
    
    
    2,643
    
    
    
    
    
    
    
    58,889Interest expense
    
    
    21,812
    
    
    
    8,892
    
    
    
    3,743
    
    
    
    6,928
    
    
    $
    (13,514
    )
    
    
    27,861Interest income
    
    
    7,143
    
    
    
    1,388
    
    
    
    57
    
    
    
    6,586
    
    
    
    (13,514
    )
    
    
    1,660Benefit (expense) for income
taxes
    
    
    8,953
    
    
    
    (25,426
    )
    
    
    3,526
    
    
    
    (277
    )
    
    
    
    
    
    
    (13,224
    )Capital expenditures
    
    
    17,336
    
    
    
    25,537
    
    
    
    4,112
    
    
    
    1,434
    
    
    
    
    
    
    
    48,419Total assets
    
    
    466,642
    
    
    
    501,459
    
    
    
    119,932
    
    
    
    265,103
    
    
    
    (266,562
    )
    
    
    1,086,574
 IntersegmentValue City
    
    DSW
    
    Filenes Basement
    
    Corporate
    
    Eliminations
    
    TotalFor the year ended January 29,
2005Net sales
    
    $
    1,434,618
    
    
    $
    961,089
    
    
    $
    343,924
    
    
    
    
    
    
    
    
    
    
    $
    2,739,631Operating (loss) profit
    
    
    (25,883
    )
    
    
    58,275
    
    
    
    (26,731
    )
    
    $
    1,024
    
    
    
    
    
    
    
    6,685Depreciation and amortization
    
    
    27,276
    
    
    
    18,515
    
    
    
    7,094
    
    
    
    3,226
    
    
    
    
    
    
    
    56,111Interest expense
    
    
    32,553
    
    
    
    2,734
    
    
    
    3,919
    
    
    
    1,024
    
    
    $
    (1,024
    )
    
    
    39,206Interest income
    
    
    1,614
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    (1,024
    )
    
    
    645Benefit (expense) for income
taxes
    
    
    18,008
    
    
    
    (18,420
    )
    
    
    12,840
    
    
    
    
    
    
    
    
    
    
    
    12,428Capital expenditures
    
    
    19,420
    
    
    
    33,975
    
    
    
    26,528
    
    
    
    3,932
    
    
    
    
    
    
    
    83,855
 F-34




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  February 3,
    
    January 28,
    
    January 29,2007
    
    2006
    
    2005Apparel and ready to wear
    
    $
    1,309,218
    
    
    $
    1,077,088
    
    
    $
    1,083,195Hard goods and home furnishings
    
    
    303,027
    
    
    
    509,592
    
    
    
    512,169Shoes and other footwear
    
    
    1,455,413
    
    
    
    1,326,691
    
    
    
    1,144,267Total
    
    $
    3,067,658
    
    
    $
    2,913,371
    
    
    $
    2,739,631
 13. QUARTERLY FINANCIAL DATA (UNAUDITED):
 Year Ended February 3, 2007
 Thirteen weeks Ended
    
    Fourteen weeks ended(in thousands except per share data)
    
    April 29, 2006
    
    July 29, 2006
    
    October 28, 2006
    
    February 3, 2007Net sales
    
    $
    721,513
    
    
    $
    684,508
    
    
    $
    787,619
    
    
    $
    874,018Cost of sales
    
    
    (430,888
    )
    
    
    (409,557
    )
    
    
    (472,090
    )
    
    
    (539,707
    )Gross profit
    
    
    290,625
    
    
    
    274,951
    
    
    
    315,529
    
    
    
    334,311Selling, general and administrative expenses
    
    
    (277,524
    )
    
    
    (264,793
    )
    
    
    (301,939
    )
    
    
    (299,212
    )Change in fair value of derivative instruments
    
    
    (926
    )
    
    
    (311
    )
    
    
    (28,009
    )
    
    
    (23,766
    )Change in fair value of derivative instruments  related party
    
    
    (63,883
    )
    
    
    (15,032
    )
    
    
    (2,565
    )
    
    
    (41,463
    )License fees and other income
    
    
    1,562
    
    
    
    1,660
    
    
    
    2,192
    
    
    
    4,151Operating loss
    
    
    (50,146
    )
    
    
    (3,525
    )
    
    
    (14,792
    )
    
    
    (25,979
    )Non-related parties interest expense
    
    
    (2,866
    )
    
    
    (3,418
    )
    
    
    (7,980
    )
    
    
    (6,235
    )Related parties interest expense
    
    
    (1,264
    )
    
    
    (1,264
    )
    
    
    (4,176
    )
    
    
    (14
    )Total interest expense
    
    
    (4,130
    )
    
    
    (4,682
    )
    
    
    (12,156
    )
    
    
    (6,249
    )Interest income
    
    
    1,638
    
    
    
    2,339
    
    
    
    2,194
    
    
    
    3,371Interest expense, net
    
    
    (2,492
    )
    
    
    (2,343
    )
    
    
    (9,962
    )
    
    
    (2,878
    )Loss before income taxes and minority interest
    
    
    (52,638
    )
    
    
    (5,868
    )
    
    
    (24,754
    )
    
    
    (28,857
    )Expense for income taxes
    
    
    (5,846
    )
    
    
    (4,473
    )
    
    
    (3,411
    )
    
    
    (900
    )Loss before minority interest
    
    
    (58,484
    )
    
    
    (10,341
    )
    
    
    (28,165
    )
    
    
    (29,757
    )Minority interest
    
    
    (6,464
    )
    
    
    (5,660
    )
    
    
    (5,909
    )
    
    
    (6,133
    )Net Loss
    
    $
    (64,948
    )
    
    $
    (16,001
    )
    
    $
    (34,074
    )
    
    $
    (35,890
    )Loss per share(1):Basic
    
    $
    (1.58
    )
    
    $
    (0.36
    )
    
    $
    (0.72
    )
    
    $
    (0.76
    )Diluted
    
    $
    (1.58
    )
    
    $
    (0.36
    )
    
    $
    (0.72
    )
    
    $
    (0.76
    )
 F-35




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##### Table of Contents



RETAIL VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Year Ended January 28, 2006
 Thirteen weeks endedApril 30,
    
    July 30,
    
    October 30,
    
    January 28,(in thousands except per share data)
    
    2005
    
    2005
    
    2005
    
    2006Net sales
    
    $
    680,045
    
    
    $
    666,734
    
    
    $
    746,101
    
    
    $
    820,491Cost of sales
    
    
    (411,653
    )
    
    
    (407,362
    )
    
    
    (462,397
    )
    
    
    (522,727
    )Gross profit
    
    
    268,392
    
    
    
    259,372
    
    
    
    283,704
    
    
    
    297,764Selling, general and administrative expenses
    
    
    (279,342
    )
    
    
    (265,547
    )
    
    
    (290,439
    )
    
    
    (275,622
    )Change in fair value of derivative instruments
    
    
    
    
    
    
    (28
    )
    
    
    590
    
    
    
    (713
    )Change in fair value of derivative instruments  related party
    
    
    
    
    
    
    (137,555
    )
    
    
    66,407
    
    
    
    (72,910
    )License fees and other income
    
    
    1,518
    
    
    
    3,993
    
    
    
    1,593
    
    
    
    1,832Operating (loss) profit
    
    
    (9,432
    )
    
    
    (139,765
    )
    
    
    61,855
    
    
    
    (49,649
    )Non-related parties interest expense
    
    
    (3,124
    )
    
    
    (5,516
    )
    
    
    (2,307
    )
    
    
    (2,579
    )Related parties interest expense
    
    
    (6,558
    )
    
    
    (5,062
    )
    
    
    (1,264
    )
    
    
    (1,451
    )Total interest expense
    
    
    (9,682
    )
    
    
    (10,578
    )
    
    
    (3,571
    )
    
    
    (4,030
    )Interest income
    
    
    47
    
    
    
    144
    
    
    
    326
    
    
    
    1,143Interest expense, net
    
    
    (9,635
    )
    
    
    (10,434
    )
    
    
    (3,245
    )
    
    
    (2,887
    )(Loss) income before income taxes and minority interest
    
    
    (19,067
    )
    
    
    (150,199
    )
    
    
    58,610
    
    
    
    (52,536
    )Benefit (expense) for income taxes
    
    
    7,608
    
    
    
    (7,775
    )
    
    
    1,812
    
    
    
    (14,869
    )(Loss) income before minority interest
    
    
    (11,459
    )
    
    
    (157,974
    )
    
    
    60,422
    
    
    
    (67,405
    )Minority Interest
    
    
    
    
    
    
    723
    
    
    
    (4,022
    )
    
    
    (3,703
    )Net (loss) income
    
    $
    (11,459
    )
    
    $
    (157,251
    )
    
    $
    56,400
    
    
    $
    (71,108
    )(Loss) earnings per share(1):Basic
    
    $
    (0.32
    )
    
    $
    (4.03
    )
    
    $
    1.43
    
    
    $
    (1.79
    )Diluted
    
    $
    (0.32
    )
    
    $
    (4.03
    )
    
    $
    0.92
    
    
    $
    (1.79
    )
 (1)
    
    (Loss) earnings per share calculations for each quarter are based on the
applicable weighted average shares outstanding for each period and may not necessarily
be equal to the full year per share amount.
 14. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 February 3,
    
    January 28,
    
    January 29,(in thousands)
    
    2007
    
    2006
    
    2005Cash paid during the period for:Interest:Non-related parties
    
    $
    14,712
    
    
    $
    9,041
    
    
    $
    8,647Related parties
    
    
    7,954
    
    
    
    16,382
    
    
    
    20,217Income taxes
    
    
    41,841
    
    
    
    16,278
    
    
    
    12,540Noncash investing and operating activities:Changes in accounts payable due to asset purchases
    
    
    (1,586
    )
    
    
    1,920
    
    
    
    (1,588
    )Additional paid in capital transferred from
warrant liability for warrant exercises
    
    
    78,817
 F-36




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##### Table of Contents



RETAIL VENTURES, INC.
SCHEDULE I  Condensed Financial Information of Registrant
(dollars in thousands)
 Description
    
    AmountDividend paid to registrant from DSW Inc.:January 29, 2005
    
    NoneJanuary 28, 2006
    
    $
    190,000February 3, 2007
    
    None
 S-1




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##### Table of Contents



RETAIL VENTURES, INC.
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
 Balance at
    
    Charges to
    
    Charges to
    
    
    
    
    
    Balance atBeginning of
    
    Costs and
    
    Other
    
    
    
    
    
    End ofDescription
    
    Period
    
    Expenses
    
    Accounts
    
    Deductions(1)
    
    PeriodAllowance deducted from asset to which it applies:Allowance for doubtful accountsJanuary 29, 2005
    
    $
    826
    
    
    
    
    
    
    $
    
    
    
    $
    60
    
    
    $
    766January 28, 2006
    
    
    766
    
    
    $
    99
    
    
    
    
    
    
    
    419
    
    
    
    446February 3, 2007
    
    
    446
    
    
    
    364
    
    
    
    
    
    
    
    80
    
    
    
    730Inventory ReserveJanuary 29, 2005
    
    
    34,185
    
    
    
    14,142
    
    
    
    
    
    
    
    5,545
    
    
    
    42,782January 28, 2006
    
    
    42,782
    
    
    
    7,820
    
    
    
    
    
    
    
    7,542
    
    
    
    43,060February 3, 2007
    
    
    43,060
    
    
    
    4,927
    
    
    
    
    
    
    
    3,554
    
    
    
    44,433Allowance for Sales ReturnsJanuary 29, 2005
    
    
    3,210
    
    
    
    1,861
    
    
    
    
    
    
    
    1,495
    
    
    
    3,576January 28, 2006
    
    
    3,576
    
    
    
    2,868
    
    
    
    
    
    
    
    2,436
    
    
    
    4,008February 3, 2007
    
    
    4,008
    
    
    
    2,157
    
    
    
    
    
    
    
    2,648
    
    
    
    3,517Store Closing ReserveJanuary 29, 2005
    
    
    1,122
    
    
    
    1,926
    
    
    
    
    
    
    
    1,736
    
    
    
    1,312January 28, 2006
    
    
    1,312
    
    
    
    5,476
    
    
    
    
    
    
    
    4,381
    
    
    
    2,407February 3, 2007
    
    
    2,407
    
    
    
    1,224
    
    
    
    
    
    
    
    1,765
    
    
    
    1,866
 
 (1)
    
    The deductions are amounts written off against the reserve.
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##### Table of Contents



INDEX TO EXHIBITS
Exhibits marked with an asterisk (*) are filed herewith.
 ExhibitNo.
    
    Description2.1
    
    Agreement and Plan of Merger among Value City Department Stores,
Inc., Retail Ventures, Inc. (the Company) and Value City Merger
Sub, Inc., effective as of October 8, 2003. Incorporated by
reference to Exhibit 2 to Form 8-K (file no. 1-10767) filed on
October 8, 2003.3.1
    
    Amended Articles of Incorporation of the Company. Incorporated by
reference to Exhibit 3(a) to Form 8-K (file No. 1-10767) filed on
October 8, 2003.3.2
    
    Amended Code of Regulations of the Company. Incorporated by
reference to Exhibit 3(b) to Form 8-K (file No. 1-10767) filed on
October 8, 2003.4.1
    
    Amended Common Stock Purchase Warrant issued by Retail Ventures,
Inc. to Cerberus Partners, L.P. Incorporated by reference to
Exhibit 4.1 to Form 8-K (file no. 1-10767) filed October 19, 2005.4.2
    
    Amended Common Stock Purchase Warrant issued by Retail Ventures,
Inc. to Schottenstein Stores Corporation. Incorporated by
reference to Exhibit 4.2 to Form 8-K (file no. 1-10767) filed
October 19, 2005.4.3
    
    Form of Term Loan Warrant issued by Retail Ventures, Inc. to
Millennium Partners, L.P. Incorporated by reference to Exhibit 4.1
to Form 10-Q (file no. 1-10767) filed December 8, 2005.4.4
    
    Form of Conversion Warrant issued by Retail Ventures, Inc. issued
to Cerberus Partners, L.P. and Schottenstein Stores Corporation.
Incorporated by reference to Exhibit 4.1 to Form 8-K (file no.
1-10767) filed July 11, 2005.4.5
    
    Exchange Agreement, dated July 5, 2005, between Retail Ventures,
Inc. and DSW Inc. Incorporated by reference to Exhibit 10.4 to
Form 8-K (file no. 1-10767) filed July 11, 2005.4.6
    
    Second Amended and Restated Registration Rights Agreement, dated
July 5, 2005, among Retail Ventures, Inc., Cerberus Partners,
L.P., Schottenstein Stores Corporation and Back Bay Capital
Funding LLC. Incorporated by reference to Exhibit 4.2 to Form 8-K
(file no. 1-10767) filed July 11, 2005.4.7
    
    Specimen of Common Share Certificate. Incorporated by reference to
Exhibit 4.7 to Form 10-K (file no. 1-10767) filed April 13, 2006.4.8
    
    Indenture, dated as of August 16, 2006, by and between Retail
Ventures, Inc. and HSBC Bank USA, National Association, as
indenture trustee (Form of 6.625% Mandatorily Exchangeable Notes
Due September 15, 2011 filed as Exhibit A thereto). Incorporated
by reference to Exhibit 4.1 to Form 8-K (file no. 001-10767) filed
on August 22, 2006.4.9
    
    Collateral Agreement, dated as of August 16, 2006, by and between
Retail Ventures, Inc., as pledgor, and HSBC Bank USA, National
Association, as collateral agent, indenture trustee and securities
intermediary. Incorporated by reference to Exhibit 4.2 to Form
8-K (file no. 001-10767) filed on August 22, 2006.4.10
    
    Form of Exchange Request by Retail Ventures, Inc. to DSW Inc.
Incorporated by reference to Exhibit 4.5 to Registration
Statement on Form S-3/A (file no. 333-134225) filed on July 17,
2006.4.11
    
    Pledge Agreement, dated as of August 16, 2006, made by Retail
Ventures, Inc. with and in favor of Cerberus Partners, L.P.
Incorporated by reference to Exhibit 10.4 to Form 8-K (file no.
001-10767) filed on August 22, 2006.4.12
    
    Pledge Agreement, dated as of August 16, 2006, made by Retail
Ventures, Inc. with and in favor of Schottenstein Stores
Corporation. Incorporated by reference to Exhibit 10.5 to Form
8-K (file no. 001-10767) filed on August 22, 2006.10.1
    
    Corporate Services Agreement, dated June 12, 2002, between the
Company and SSC. Incorporated by reference to Exhibit 10.6 to Form
10-Q (file no. 1-10767) filed June 18, 2002.10.1.1
    
    Amendment to Corporate Services Agreement, dated July 5, 2005,
among Schottenstein Stores Corporation, Retail Ventures, Inc. and
Schottenstein Management Company, together with Side Letter
Agreement, dated July 5, 2005, among DSW Inc., Schottenstein
Stores Corporation, Retail Ventures, Inc. and Schottenstein
Management Company. Incorporated by reference to Exhibit 10.5 to
Form 8-K (file no. 1-10767) filed July 11, 2005.10.2
    
    License Agreement, dated June 5, 1991, between the Company and SSC
re: Service Marks. Incorporated by reference to Exhibit 10.2 to
Amendment No. 1 to Form S-1 Registration Statement (file no.
33-40214) filed June 6, 1991.10.3
    
    Master Separation Agreement, dated July 5, 2005, between Retail
Ventures, Inc. and DSW Inc. Incorporated by reference
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##### Table of Contents



ExhibitNo.
    
    Descriptionto Exhibit 10.1 to Form 8-K (file no. 1-10767) filed July 11, 2005.10.4
    
    Amended and Restated Shared Services Agreement, dated as of
October 29, 2006, between Retail Ventures, Inc. and DSW Inc.
Incorporated by reference to Exhibit 10.8 to form 10-Q (file no.
1-10767) filed December 6. 2006.10.5
    
    Tax Separation Agreement, dated July 5, 2005, among Retail
Ventures, Inc. and its affiliates and DSW Inc. and its affiliates.
Incorporated by reference to Exhibit 10.3 to Form 8-K (file no.
1-10767) filed July 11, 2005.10.6
    
    Supply Agreement, effective as of January 30, 2005, between DSW
Inc. and Filenes Basement, Inc. Incorporated by reference to
Exhibit 10.6 to Form 8-K (file no. 1-10767) filed July 11, 2005.10.7#
    
    Form of Indemnification Agreement entered into on December 22,
2005 between Retail Ventures, Inc. and each of its directors and
executive officers. Incorporated by reference to Exhibit 10.1 to
Form 8-K (file no. 1-10767) filed December 23, 200510.8#
    
    Amended and Restated Retail Ventures, Inc. 1991 Stock Option Plan.
Incorporated by reference to Exhibit 4(a) to Amendment No. 1 to
Form S-8 Registration Statement (file no. 333-45852) filed October
16, 2003.10.9#
    
    Retail Ventures, Inc. Employee Stock Purchase Plan. Incorporated
by reference to Exhibit 4(a) to Amendment No. 1 to Form S-8
Registration Statement (file no. 33-46221) filed October 16, 2003.10.10#
    
    Retail Ventures, Inc. Amended and Restated 2000 Stock Incentive
Plan (the 2000 Stock Incentive Plan). Incorporated by reference
to Exhibit 4(a) to Amendment No. 1 to Form S-8 Registration
Statement (file no. 333-100398) filed on October 16, 2003.10.11#
    
    Amended and Restated Retail Ventures, Inc. Non-Employee Director
Stock Option Plan. Incorporated by reference to Exhibit 4(a) to
Form S-8 Registration Statement (file no. 333-45856) filed October
16, 2003.10.12
    
    Sublease, dated April 25, 1991, between the Company, as sublessor,
and SSC, as sublessee, re: Baltimore, MD (Eastpoint) furniture
store location. Incorporated by reference to Exhibit 10.15.1 to
Registration Statement on Form S-1 (file no. 33-40214) filed April
29, 1991.10.13
    
    Sublease, dated April 25, 1991, between the Company, as sublessor,
and SSC, as sublessee, re: Baltimore, MD (Westview) furniture
store location. Incorporated by reference to Exhibit 10.15.2 to
Registration Statement on Form S-1 (file no. 33-40214) filed April
29, 1991.10.14
    
    Sublease, dated April 25, 1991, between the Company, as sublessor,
and SSC, as sublessee, re: Lansing, MI furniture store location.
Incorporated by reference to Exhibit 10.15.3 to Registration
Statement on Form S-1 (file no. 33-40214) filed April 29, 1991.10.15
    
    Sublease, dated April 25, 1991, between the Company, as sublessor,
and SSC, as sublessee, re: Louisville, KY (Preston Highway)
furniture store location. Incorporated by reference to Exhibit
10.15.4 to Registration Statement on Form S-1 (file no. 33-40214)
filed April 29, 1991.10.16
    
    Form of Assignment and Assumption Agreement between the Company,
as assignee, and SSC, as assignor, re: separate assignments of
leases for 31 stores. Incorporated by reference to Exhibit 10.16
to Registration Statement on Form S-1 (file no. 33-40214) filed
April 29, 1991.10.17
    
    Lease Agreement, dated July 1, 1988, between the Company, by
assignment from SSC, dated April 25, 1991, as sublessee, and SSC,
as sublessor, re: Benwood, WV store location. Incorporated by
reference to Exhibit 10.19 to Form 10-K (file no.1-10767) filed
October 24, 1991.10.18#
    
    Form of Restricted Stock Agreement between the Company and certain
employees. Incorporated by reference to Exhibit 10.27 to Amendment
No. 1 to Form S-1 Registration Statement (file no. 33-47252) filed
April 27, 1992.10.19
    
    Lease, dated September 1, 1992, between the Company, as lessee,
and SSC, as lessor, re: South Bend/Mishawaka, IN store.
Incorporated by reference to Exhibit 10.29 to Form 10-K (file
no.1-10767) filed October 22, 1992.10.20
    
    Lease, dated January 27, 1992, between the Company, as lessee, and
J.A.L. Realty Company, an affiliate of SSC, as lessor, re: 3080
Alum Creek Drive, Columbus, OH warehouse. Incorporated by
reference to Exhibit 10.30 to Form 10-K (file no.1-10767) filed
October 22, 1992.10.20.1
    
    Exercise of the first five-year renewal option commencing February
1, 1997 under lease, dated January 27, 1992, as amended, between
the Company, as lessee, and J.A.L. Realty Company, an affiliate of
SSC, as lessor, re: 3080 Alum Creek Drive, Columbus, OH warehouse.
Incorporated by reference to Exhibit 10.30.1 to Form 10-Q (file
no. 1-10767) filed March 19, 1996.
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##### Table of Contents



ExhibitNo.
    
    Description10.21
    
    Lease, dated July 29, 1992, between the Company, as lessee, and
J.A.L. Realty Company, an affiliate of SSC, as lessor, re: 3232
Alum Creek Drive, Columbus, OH warehouse. Incorporated by
reference to Exhibit 10.31 to Form 10-K (file no.1-10767) filed
October 22, 1992.10.22
    
    Ground lease, dated April 15, 1994, between the Company, as
lessee, and J.A.L. Realty Company, an affiliate of SSC, as lessor,
re: 19 acres (Westerville Rd., Columbus, OH). Incorporated by
reference to Exhibit 10.35 to Form 10-K (file no. 1-10767) filed
October 26, 1994.10.23
    
    Agreement of Lease, dated March 1, 1994, between the Company, as
tenant, and Jubilee Limited Partnership, an affiliate of SSC, as
landlord, re: Hobart, IN store. Incorporated by reference to
Exhibit 10.37 to Form 10-Q (file no. 1-10767) filed December 12,
1994.10.24
    
    Agreement of Lease, dated January 13, 1995, between the Company,
as tenant, and Westland Partners, an affiliate of SSC, as
landlord, re: Westland, MI store. Incorporated by reference to
Exhibit 10.39 to Form 10-Q, (file no. 1-10767) filed March 14,
1995.10.25
    
    Agreement of Lease, dated January 13, 1995, between the Company,
as tenant, and Taylor Partners, an affiliate of SSC, as landlord,
re: Taylor, MI store. Incorporated by reference to Exhibit 10.40
to Form 10-Q, (file no. 1-10767) filed March 14, 1995.10.26
    
    Lease, dated September 2, 1997, between the Company, as lessee,
and SSC-Fort Wayne L.L.C., an affiliate of SSC, as lessor.
Incorporated by reference to Exhibit 10.33.1 to Form 10-K (file
no. 1-10767) filed April 29, 2002.10.27
    
    Agreement of Lease, dated April 10, 1995, between the Company, as
tenant, and Independence Limited Liability Company, an affiliate
of SSC, as landlord, re: Charlotte, NC store. Incorporated by
reference to Exhibit 10.45 to Form 10-Q (file no. 1-10767) filed
December 12, 1995.10.28
    
    Sublease and Occupancy Agreement, dated December 15, 1995, between
the Company, SSC and SSC, dba Value City Furniture, re: Louisville, KY (Preston Highway) store. Incorporated by reference
to Exhibit 10.46 to Form 10-Q (file no. 1-10767) filed March 19,
1996.10.29
    
    Agreement of Lease, dated October 4, 1996, between the Company, as
tenant, and Hickory Ridge Pavilion, Ltd., an affiliate of SSC, as
landlord, re: Memphis, TN store. Incorporated by reference to
Exhibit 10.50 to Form 10-K (file no. 1-10767) filed November 1,
1996.10.30
    
    Agreement of Lease, dated October 30, 1998, between the Company,
as lessee, and Jubilee Limited Partnership, an affiliate of SSC,
as lessor, re: Calumet City, IL store. Incorporated by reference
to Exhibit 10.56 to Form 10-K (file no. 1-10767) filed April 30,
1999.10.31
    
    Agreement of Lease, dated September 29, 1998, between the Company,
as tenant, and Valley Fair Irvington, LLC, an affiliate of SSC, as
landlord, re: Irvington, NJ. Incorporated by reference to Exhibit
10.57 to Form 10-K (file no. 1-10767) filed April 30, 1999.10.32
    
    Industrial Space Lease-Net, dated March 22, 2000, between 4300
East Fifth Avenue, LLC, an affiliate of SSC, as landlord, and
Shonac Corporation, as tenant, re: Building 6, Columbus
International Aircenter, Columbus, OH. Incorporated by reference
to Exhibit 10.60 to Form 10-K (file no. 1-10767) filed April 28,
2000.10.33
    
    Lease, dated August 30, 2002, by and between Jubilee Limited
Partnership, an affiliate of SSC, and Shonac Corporation, re:Troy, MI DSW store. Incorporated by reference to Exhibit 10.44 to
Form 10-K (file no. 1-10767) filed April 29, 2004.10.33.1
    
    Assignment and Assumption Agreement, dated October 23, 2002,
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee, re: Troy, MI DSW store. Incorporated by
reference to Exhibit 10.29.1 to Form 10-K/A Amendment No. 2 (file
no. 1-10767) filed May 12, 2005.10.34
    
    Lease, dated October 8, 2003, by and between Jubilee Limited
Partnership, an affiliate of SSC, and Shonac Corporation, re:Denton, TX DSW store. Incorporated by reference to Exhibit 10.46
to Form 10-K (file no. 1-10767) filed April 29, 2004.10.34.1
    
    Assignment and Assumption Agreement, dated December 18, 2003
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee, re: Denton, TX DSW store. Incorporated by
reference to Exhibit 10.30.1 to Form 10-K/A Amendment No. 2 (file
no. 1-10767) filed May 12, 2005.10.35
    
    Lease, dated October 28, 2003, by and between JLP-RICHMOND LLC, an
affiliate of SSC, and Shonac Corporation, re: Richmond, VA DSW
store. Incorporated by reference to Exhibit 10.47 to Form 10-K
(file no. 1-10767) filed April 29, 2004.
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##### Table of Contents



ExhibitNo.
    
    Description10.35.1
    
    Assignment and Assumption Agreement, dated December 18, 2003,
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee, re: Richmond, VA DSW store. Incorporated by
reference to Exhibit 10.31.1 to Form 10-K/A Amendment No. 2 (file
no. 1-10767) filed May 12, 2005.10.36#
    
    Employment Agreement, dated June 21, 2000, between James A.
McGrady and the Company. Incorporated by reference to Exhibit
10.46 (also listed as Exhibit 10.61) to Form 10-K (file no.
1-10767) filed May 4, 2001.10.37#
    
    Employment Agreement, dated as of April 29, 2004, between Julia A.
Davis and the Company. Incorporated by reference to Exhibit 10.51
to Form 10-K (file no. 1-10767) filed April 29, 2004.10.38
    
    Amended and Restated Loan and Security Agreement, dated July 5,
2005, by and among National City Business Credit, Inc., as
Administrative Agent for the ratable benefit of the Revolving
Credit Lenders, National City Business Credit, Inc., as Collateral
Agents for the ratable benefit of the Revolving Credit Lenders,
the Revolving Credit Lenders and Value City Department Stores LLC
(in such capacity, the Lead Borrower), as agent for the Borrower
and collectively the Borrowers. Incorporated by reference to
Exhibit 10.7 to Form 8-K (file no. 1-10767) filed July 11, 2005.10.38.1
    
    First Amendment to Amended and Restated Loan and Security
Agreement, dated as of August 16, 2006, by and among Value City
Department Stores LLC, as lead borrower, the other borrowers named
therein, the revolving credit lenders party thereto and National
City Business Credit, Inc., as administrative agent and collateral
agent. Incorporated by reference to Exhibit 10.6 to Form 8-K
(file no. 001-10767) filed on August 22, 2006.10.39
    
    Third Amended and Restated Senior Loan Agreement, dated as of
August 16, 2006, among Value City Department Stores LLC, as
borrower, and Cerberus Partners, L.P., as lender. Incorporated by
reference to Exhibit 10.1 to Form 8-K (file no. 001-10767) filed
on August 22, 2006.10.40
    
    Third Amended and Restated Senior Loan Agreement, dated as of
August 16, 2006, among Value City Department Stores LLC, as
borrower, and Schottenstein Stores Corporation, as lender.
Incorporated by reference to Exhibit 10.2 to Form 8-K (file no.
001-10767) filed on August 22, 2006.10.41#
    
    Value City Department Stores, Inc. 2003 Incentive Compensation
Plan. Incorporated by reference to Exhibit 10.41 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.42#
    
    Employment Agreement, effective November 1, 2004, between Retail
Ventures, Inc. and Heywood Wilansky. Incorporated by reference to
Exhibit 10.1 to Form 8-K/A (file no. 1-10767) filed November 24,
2004.10.43#
    
    Employment Agreement, effective October 10, 2003, between Value
City Department Stores, Inc. and Steven E. Miller. Incorporated by
reference to Exhibit 10.43 to Form 10-K (file no. 1-10767) filed
April 14, 2005.10.44
    
    Agreement of Lease, dated March 1, 1994, between Jubilee Limited
Partnership, an affiliate of SSC, and Value City Department
Stores, Inc., as modified by First Lease Modification, dated
November 1, 1994, re: Merrilville, IN Value City store.
Incorporated by reference to Exhibit 10.44 to Form 10-K (file no.
1-10767) filed April 14, 2005.10.45
    
    Lease Agreement, dated July 7, 1987, by and between Schottenstein
Trustees, an affiliate of SSC, and Schottenstein Stores Corp. dba
Schottensteins Department Store, as modified by Lease Extension
and Modification Agreement, dated March 12, 1998, by and between
Schottenstein Trustees and Value City Department Stores, Inc. dba
Schottensteins East Department Store, re: 6055 E. Main Street,
Columbus, OH Value City store. Incorporated by reference to
Exhibit 10.45 to Form 10-K (file no. 1-10767) filed April 14,
2005.10.46
    
    Industrial Space Lease  Net, dated May 18, 2000, by and between
4300 East Fifth Avenue LLC, an affiliate of SSC, and Value City
Department Stores, Inc., re: 4320-30 East Fifth Avenue, Columbus,
OH warehouse. Incorporated by reference to Exhibit 10.47 to Form
10-K (file no. 1-10767) filed April 14, 2005.10.47
    
    Sublease, dated May 2000, by and between SSC, as sublessor, and
Shonac Corporation dba DSW Shoe Warehouse, as sublessee, re: Pittsburgh, PA DSW store. Incorporated by reference to Exhibit
10.48 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.47.1
    
    Assignment and Assumption Agreement, dated January 8, 2001,
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee, re: 451 Clariton Boulevard, Pittsburgh, PA DSW
store. Incorporated by reference to Exhibit 10.48.1 to Form 10-K/A
Amendment No. 2 (file no. 1-10767) filed May 12, 2005.10.48
    
    Lease, dated May 2000, by and between Jubilee-Richmond LLC, an
affiliate of SSC, and DSW Shoe Warehouse, Inc. (as assignee of
Shonac Corporation), re: Glen Allen, VA DSW store. Incorporated by
reference to Exhibit 10.49 to Form 10-K (file no. 1-10767) filed
April 14, 2005.
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##### Table of Contents



ExhibitNo.
    
    Description10.49
    
    Lease, dated February 28, 2001, by and between Jubilee-Springdale,
LLC, an affiliate of SSC, and Shonac Corporation dba DSW Shoe
Warehouse, re: Springdale, OH DSW store. Incorporated by reference
to Exhibit 10.50 to Form 10-K (file no. 1-10767) filed April 14,
2005.10.49.1
    
    Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Springdale, OH DSW store. Incorporated by reference
to Exhibit 10.50.1 to Form 10-K/A Amendment No. 2 (file no.
1-10767) filed May 12, 2005.10.50
    
    Agreement of Lease, dated 1997, between Shoppes of Beavercreek
Ltd., an affiliate of SSC, and Shonac Corporation (assignee of SSC
d/b/a Value City Furniture through Assignment of Tenanyt
Leasehold Interst and Amendment No. 1 to Agreement of Lease, dated
February 28, 2001), re: Beavercreek, OH DSW store. Incorporated by
reference to Exhibit 10.51 to Form 10-K (file no. 1-10767) filed
April 14, 2005.10.50.1
    
    Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Beavercreek, OH DSW store. Incorporated by reference
to Exhibit 10.51.1 to Form 10-K/A Amendment No. 2 (file no.
1-10767) filed May 12, 2005.10.51
    
    Lease, dated February 28, 2001, by and between JLP-Chesapeake,
LLC, an affiliate of SSC, and Shonac Corporation, re: Chesapeake,
VA DSW store. Incorporated by reference to Exhibit 10.52 to Form
10-K (file no. 1-10767) filed April 14, 2005.10.51.1
    
    Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Chesapeake, VA DSW store. Incorporated by reference
to Exhibit 10.52.1 to Form 10-K/A Amendment No. 2 (file no.
1-10767) filed May 12, 2005.10.52
    
    Ground Lease Agreement, dated April 30, 2002, by and between
Polaris Mall, LLC, a Delaware limited liability company, and
SSC-Polaris LLC, an affiliate of SSC, as modified by Sublease
agreement, dated April 30, 2002, by and between SSC-Polaris LLC,
as sublessor, and DSW Shoe Warehouse, Inc. as sublease (assignee
of Shonac Corporation), re: Columbus, OH (Polaris) DSW store.
Incorporated by reference to Exhibit 10.53 to Form 10-K (file no.
1-10767) filed April 14, 2005.10.52.1
    
    Assignment and Assumption Agreement, dated August 6, 2002, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Columbus, OH (Polaris) DSW store. Incorporated by
reference to Exhibit 10.53.1 to Form 10-K/A Amendment No. 2 (file
no. 1-10767) filed May 12, 2005.10.53
    
    Lease, dated August 30, 2002, by and between JLP-Cary LLC, an
affiliate of SSC, and Shonac Corporation, re: Cary, NC DSW store.
Incorporated by reference to Exhibit 10.54 to Form 10-K (file no.
1-10767) filed April 14, 2005.10.53.1
    
    Assignment and Assumption Agreement, dated October 23, 2002,
between Shonac Corporation, as assignor and DSW Shoe Warehouse,
Inc., as assignee, re: Cary, NC DSW store. Incorporated by
reference to Exhibit 10.54.1 to Form 10-K/A Amendment No. 2 (file
no. 1-10767) filed May 12, 2005.10.54
    
    Lease, dated August 30, 2002, by and between JLP-Madison LLC, an
affiliate of SSC, and Shonac Corporation, re: Madison, TN DSW
store. Incorporated by reference to Exhibit 10.55 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.54.1
    
    Assignment and Assumption Agreement, dated October 23, 2002,
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee, re: Madison, TN DSW store. Incorporated by
reference to Exhibit 10.55.1 to Form 10-K/A Amendment No. 2 (file
no. 1-10767) filed May 12, 2005.10.55
    
    Lease, dated July 19, 2000, by and between Jubilee Limited
Partnership, an affiliate of SSC, and Value City Department
Stores, Inc., as modified by Lease Modification Agreement, dated
November 2, 2000, re: 3704 W. Dublin-Granville Rd., Columbus, OH
DSW/Filenes combo store. Incorporated by reference to Exhibit
10.56 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.56
    
    Master Store Lease, dated April 25, 1991, by and between SSC and
Value City Department Stores, Inc., as modified by First Amendment
to Master Store Lease, dated February 3, 1992, and Second
Amendment to Master Store Lease, dated March 18, 2005, by and
between SSC and Value City Department Stores LLC and Value City of
Michigan, Inc., re: 4 store locations (Clarksville, IN,
Springdale, OH, Louisville, KY (Dixie Highway), and Beckley, WV).
Incorporated by reference to Exhibit 10.57 to Form 10-K (file no.
1-10767) filed April 14, 2005.10.57
    
    Lease, dated September 24, 2004, by and between K&S Maple Hill
Mall, L.P., an affiliate of SSC, and Shonac Corporation, re:Kalamazoo, MI DSW store. Incorporated by reference to Exhibit
10.58 to Form 10-K (file no. 1-10767) filed April 14, 2005.
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##### Table of Contents



ExhibitNo.
    
    Description10.57.1
    
    Assignment and Assumption Agreement, dated February 28, 2005, between Shonac Corporation,
as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: Kalamazoo, MI DSW store.
Incorporated by reference to Exhibit 10.58.1 to Form 10-K/A Amendment No. 2 (file no.
1-10767) filed May 12, 2005.10.58
    
    Lease, dated November 2004, by and between KSK Scottsdale Mall, L.P., an affiliate of SSC,
and Shonac Corporation, re: South Bend, IN DSW store. Incorporated by reference to Exhibit
10.59 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.58.1
    
    Assignment and Assumption Agreement, dated March 18, 2005, between Shonac Corporation, as
assignor, and DSW Shoe Warehouse, Inc., as assignee, re: South Bend, IN DSW store.
Incorporated by reference to Exhibit 10.59.1 to Form 10-K/A Amendment No. 2 (file no.
1-10767) filed May 12, 2005.10.59
    
    Lease Agreement, dated March 18, 2005, by and between SSC and Value City of Michigan,
Inc., re: Flint, MI DSW store. Incorporated by reference to Exhibit 10.60 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.60
    
    Lease Agreement, dated September 2, 1997, by and between SSC-Barboursville, L.L.C., an
affiliate of SSC, and Value City Department Stores, Inc. Incorporated by reference to
Exhibit 10.61 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.61#
    
    Sample Nonqualified Stock Option Award Agreement issued by the Company pursuant to the
2000 Stock Incentive Plan. Incorporated by reference to Exhibit 10.62 to Form 10-K (file
no. 1-10767) filed April 14, 2005.10.62#
    
    Sample Price Protected Stock Option Award Agreement issued by the Company pursuant to the
2000 Stock Incentive Plan. Incorporated by reference to Exhibit 10.63 to Form 10-K (file
no. 1-10767) filed April 14, 2005.10.63#
    
    Sample Equity Compensation Approval Notice and Agreement issued by the Company to certain
employees. Incorporated by reference to Exhibit 10.64 to Form 10-K (file no. 1-10767)
filed April 14, 2005.10.64
    
    Master Sublease, dated April 25, 1991, between the Company, as sublessee, and SSC, as
sublessor, re: two stores (Covington, KY and Greenwood, IN). Incorporated by reference to
Exhibit 10.11 to Registration Statement on Form S-1 (file no. 33-402144) filed April 29,
1991.10.65#
    
    Form of Indemnification Agreement between the Company and its directors and officers.
Incorporated by reference to Exhibit 10(b) to Registration Statement on Form S-8 (file no.
333-117341) filed July 13, 2004.10.66
    
    Lease Agreement, dated November 5, 1992, by and between Value City Department Stores, Inc.
(successor to SSC d/b/a Elyria Value City Shopping Center), as sublessor, and SSC d/b/a
Value City Furniture #17, as sublessee, as modified by Sublease Extension and Modification
Agreement, dated October 11, 2001, re: Elyria, OH store. Incorporated by reference to
Exhibit 10.67.1 to Form 10-K/A Amendment No. 2 (file no. 1-10767) filed May 12, 2005.10.67
    
    Agreement of Lease, dated March 6, 1996, between Value City of Michigan, Inc. (assignee of
MRSLV Saginaw, L.L.C.), as sublessor, and SSC d/b/a Value City Furniture, as sublessee,
re: Saginaw Michigan store. Incorporated by reference to Exhibit 10.68.1 to Form 10-K/A
Amendment No. 2 (file no. 1-10767) filed May 12, 2005.10.68
    
    Agreement of Sublease, dated June 12, 2000, between Jubilee Limited Partnership, an
affiliate of SSC, and DSW Shoe Warehouse, Inc. (assignee of DSW Inc.), re: Baileys
Crossroads, VA DSW Store. Incorporated by reference to Exhibit 10.1 to Form 10-Q (file no.
1-10767) filed June 9, 2005.10.70
    
    License Agreement, dated August 30, 2002, by and between Value City Department Stores,
Inc. and Shonac Corporation, re: Merrillville, IN DSW store. Incorporated by reference to
Exhibit 10.1 to Form 10-Q (file no. 1-10767) filed September 13, 2005.10.71#
    
    Employment Agreement, effective as of January 29, 2006, by and between Jed L. Norden and
the Company. Incorporated by reference to Exhibit 10.1 to Form 8-K (file no. 1-10767)
filed February 2, 2006.10.72
    
    Agreement of Lease, dated April 7, 2006, by and between JLP  Harvard Park, LLC, an
affiliate of SSC, as landlord, and DSW Inc., as tenant, re: Chagrin Highlands,
Warrensville, Ohio DSW store. Incorporated by reference to Exhibit 10.72 to Form 10-K
(file no. 1-10767) filed April 13, 2006.10.74#
    
    Summary of Director Compensation. Incorporated by reference to Exhibit 10.74 to Form 10-K
(file no. 1-10767) filed April 13, 2006.10.75
    
    Loan and Security Agreement, between DSW Inc. and DSW Shoe Warehouse, Inc., as the
Borrowers, and National City Business Credit, Inc., as Administrative Agent and Collateral
Agent for the Revolving Credit Lenders. Incorporated by reference to Exhibit 10.11 to DSW
Inc.s Form 10-K (file no. 001-32545) filed on April 13, 2006.
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##### Table of Contents



ExhibitNo.
    
    Description10.76
    
    Agreement of Lease, dated April 13, 2006, between JLP  Harvard Park, LLC, an affiliate
of SSC, as landlord, and Filenes Basement, Inc. as tenant, re: Chagrin, OH Filenes
Basement store. Incorporated by reference to Exhibit 10.1 to Form 10-Q (file no. 1-10767)
filed June 8, 2006.10.77
    
    Agreement of Lease, dated June 30, 2006, between JLPK  Levittown NY LLC, an affiliate of
Schottenstein Stores Corporation and DSW Inc., re: Levittown, NY DSW store. Incorporated
by reference to Exhibit 10.1 to Form 10-Q (file no. 1-10767) filed December 6, 2006.10.78
    
    Agreement of Lease, dated November 27, 2006, between JLP  Lynnhaven VA LLC, an affiliate
of Schottenstein Stores Corporation and DSW Inc., re: Lynnhaven, Virginia DSW store.
Incorporated by reference to Exhibit 10.2 to Form 10-Q (file no. 1-10767) filed December
6, 2006.10.79
    
    Agreement of Lease, dated November 30, 2006, between 4300 Venture 34910 LLC, an affiliate
of Schottenstein Stores Corporation, and DSW Inc., re: Home office. Incorporated by
reference to Exhibit 10.3 to Form 10-Q (file no. 1-10767) filed December 6, 2006.10.80
    
    Agreement of Lease, dated November 30, 2006, between 4300 East Fifth Avenue LLC, an
affiliate of Schottenstein Stores Corporation, and DSW Inc., re: Trailer Parking spaces
for home office. Incorporated by reference to Exhibit 10.4 to Form 10-Q (file no. 1-10767)
filed December 6, 2006.10.81
    
    Lease Amendment, dated November 30, 2006 between 4300 Venture 6729 LLC, an affiliate of
Schottenstein Stores Corporation, and DSW Inc., re: warehouse and corporate headquarters.
Incorporated by reference to Exhibit 10.5 to Form 10-Q (file no. 1-10767) filed December
6, 2006.10.82
    
    Agreement of Lease, dated June 30, 2006, between JLPK  Levittown NY LLC, an affiliate of
Schottenstein Stores Corporation and Filenes Basement, re: Levittown, NY Filenes
Basement store. Incorporated by reference to Exhibit 10.6 to Form 10-Q (file no. 1-10767)
filed December 6, 2006.10.83
    
    IT Transfer and Assignment Agreement dated October 29, 2006. Incorporated by reference to
Exhibit 10.7 to Form 10-Q (file no. 1-10767) filed December 6, 2006.10.84*
    
    Agreement of Lease, dated December 15, 2006, between American Signature, Inc., an
affiliate of SSC, and DSW Shoe Warehouse, Inc., re: Langhorne, Pennsylvania DSW store.10.85*
    
    Sample Restricted Stock Unit Award Agreement issued by the Company to certain employees.10.86*
    
    Sample Stock Appreciation Right Award Agreement issued by the Company to certain employees.12*
    
    Ratio of Earnings to Fixed Charges21*
    
    List of Subsidiaries.23*
    
    Consent of Independent Registered Public Accounting Firm.24*
    
    Power of Attorney.31.1*
    
    Rule 13a-14(a)/15d-14(a) Certification  Principal Executive Officer.31.2*
    
    Rule 13a-14(a)/15d-14(a) Certification  Principal Financial Officer.32.1*
    
    Section 1350 Certification  Principal Executive Officer.32.2*
    
    Section 1350 Certification  Principal Financial Officer.
 
 *
    
    Filed herewith.#
    
    Management contract or compensatory plan or arrangement. E-7