Table of Contents

** **

 

** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x**** ****QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**Forthe quarterly period ended March 28, 2009**

 

**OR**

 

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

 

**Forthe transition periodfrom                   to                   **

 

**Commission File Number: 0-10345**

 

**CACHE, INC.**

(Exactname of registrant as specified in its Charter)

 

| **Florida**                              | ** ** | **59-1588181**                    |
|------------------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of          |       | (IRS Employer Identification No.) |
| incorporation or organization)           |       |                              |
|                                     |       |                              |
| **1440 Broadway, New York, New York**    | ** ** | **10018**                         |
| (Address of principal executive offices) |       | (zip code)                        |

 

**212-575-3200**

(Registrant’stelephone number, including area code)

 

 

(Formername, address and former fiscal year, if changed since last report)

 

**Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to filing requirements for thepast 90 days.  Yes  **x   No  o

** **

**Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 of RegulationS-T during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post suchfiles).  Yes  **o    No  o

** **

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, ora smaller reporting company. See definitions of “large accelerated filer,” “acceleratedfiler,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.(Check one):

 
| Large accelerated filer o                     |   | Accelerated filer x         |
|-----------------------------------------------|--------|----------------------------------|
|                                          |   |                             |
| Non-accelerated filer o                       |   | Smaller reporting company o |
| (Do not check if a smaller reporting company) |   |                             |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the ExchangeAct).  Yes  o   No x

 

As of April 30 2009,12,927,837 common shares were outstanding.

 

 

 

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CACHE, INC. AND SUBSIDIARIES

 

INDEX

** **
| PART I. FINANCIAL INFORMATION | 3                                                                                                                                 |
|-----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|
|                                    |                                                                                                                              |   |
| Item 1.                            | Condensed  Consolidated Financial Statements  (unaudited)                                                                         | 3 |
|                                    | Condensed Consolidated Balance Sheets  as of March 28, 2009, December 27, 2008 and March 29, 2008                  | 3 |
|                                    | Condensed Consolidated Statements of  Operations for the thirteen week periods ended March 28, 2009 and  March 29, 2008 | 4 |
|                                    | Condensed Consolidated Statements of Cash  Flows for the thirteen week  periods ended March 28, 2009 and March 29, 2008 | 5 |
|                                    | Notes to the Condensed Consolidated  Financial Statements                                                                         | 6 |
| Item 2.                            | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                       | 11 |
| Item 3.                            | Quantitative and Qualitative Disclosures  About Market Risk                                                                       | 17 |
| Item 4.                            | Controls and Procedures                                                                                                           | 18 |
|                                    |                                                                                                                              |   |
| PART II. OTHER INFORMATION    | 18                                                                                                                                |
|                                    |                                                                                                                              |
| Item 1A.                                | Risk Factors                                                                                                                      | 18 |
| Item 6.                            | Exhibits                                                                                                                          | 18 |
|                                    |                                                                                                                              |   |
| SIGNATURES                              | 19                                                                                                                                |

 

2

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**PART I - FINANCIAL INFORMATION**

 

**ITEM 1.FINANCIAL STATEMENTS (UNAUDITED)**

 

**CACHE, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                     | ** ** | **March 28,********2009** | ** **      | **December 27,********2008** | ** ** | **March 29,********2008** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|--------------------------------|-----------------|-----------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                     | ** ** | **(Unaudited)**                | ** **      | **(Audited)**                     | ** ** | **(Unaudited)**                | ** ** |
| **ASSETS**                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Current assets:**                                                                                            | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Cash and equivalents**                                                                                       | ** ** | **$**                          | **1,146,000**   | ** **                        | **$**      | **4,835,000**                  | ** ** | **$** | **3,250,000** | ** ** |
| **Marketable securities**                                                                                      | ** ** | **29,379,000**                 | ** **      | **25,153,000**                    | ** ** | **27,414,000**                 | ** ** |
| **Receivables, net**                                                                                           | ** ** | **3,784,000**                  | ** **      | **3,898,000**                     | ** ** | **6,204,000**                  | ** ** |
| **Income tax receivables**                                                                                     | ** ** | **3,709,000**                  | ** **      | **5,883,000**                     | ** ** | **—**                     | ** ** |
| **Inventories, net**                                                                                           | ** ** | **26,036,000**                 | ** **      | **22,321,000**                    | ** ** | **32,524,000**                 | ** ** |
| **Prepaid expenses and other current assets**                                                                  | ** ** | **3,116,000**                  | ** **      | **1,795,000**                     | ** ** | **4,924,000**                  | ** ** |
| **Total current assets**                                                                                       | ** ** | **67,170,000**                 | ** **      | **63,885,000**                    | ** ** | **74,316,000**                 | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Equipment and leasehold improvements, net**                                                                  | ** ** | **41,180,000**                 | ** **      | **43,320,000**                    | ** ** | **46,561,000**                 | ** ** |
| **Goodwill**                                                                                                   | ** ** | **9,092,000**                  | ** **      | **9,092,000**                     | ** ** | **10,089,000**                 | ** ** |
| **Intangible assets, net**                                                                                     | ** ** | **1,275,000**                  | ** **      | **1,304,000**                     | ** ** | **1,393,000**                  | ** ** |
| **Other assets**                                                                                               | ** ** | **2,113,000**                  | ** **      | **1,924,000**                     | ** ** | **383,000**                    | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Total assets**                                                                                               | ** ** | **$**                          | **120,830,000** | ** **                        | **$**      | **119,525,000**                | ** ** | **$** | **132,742,000** | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                  | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Current liabilities:**                                                                                       | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Accounts payable**                                                                                           | ** ** | **$**                          | **10,659,000**  | ** **                        | **$**      | **6,375,000**                  | ** ** | **$** | **11,751,000** | ** ** |
| **Note payable**                                                                                               | ** ** | **1,271,000**                  | ** **      | **1,259,000**                     | ** ** | **1,474,000**                  | ** ** |
| **Accrued compensation**                                                                                       | ** ** | **2,330,000**                  | ** **      | **1,713,000**                     | ** ** | **2,926,000**                  | ** ** |
| **Accrued liabilities**                                                                                        | ** ** | **9,897,000**                  | ** **      | **11,077,000**                    | ** ** | **10,875,000**                 | ** ** |
| **Total current liabilities**                                                                                  | ** ** | **24,157,000**                 | ** **      | **20,424,000**                    | ** ** | **27,026,000**                 | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Note payable**                                                                                               | ** ** | **2,832,000**                  | ** **      | **3,143,000**                     | ** ** | **4,052,000**                  | ** ** |
| **Other liabilities**                                                                                          | ** ** | **16,801,000**                 | ** **      | **16,795,000**                    | ** ** | **15,491,000**                 | ** ** |
| **Deferred income taxes, net**                                                                                 | ** ** | **—**                     | ** **      | **—**                        | ** ** | **50,000**                     | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Commitments and contingencies**                                                                              | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **STOCKHOLDERS’ EQUITY**                                                                                  | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Common stock, par value $.01; authorized,  20,000,000 shares; issued 16,410,036, 16,410,036 and 16,386,608** | ** ** | **164,000**                    | ** **      | **164,000**                       | ** ** | **164,000**                    | ** ** |
| **Additional paid-in capital**                                                                                 | ** ** | **47,213,000**                 | ** **      | **47,155,000**                    | ** ** | **46,678,000**                 | ** ** |
| **Retained earnings**                                                                                          | ** ** | **69,458,000**                 | ** **      | **71,053,000**                    | ** ** | **76,122,000**                 | ** ** |
| **Treasury stock, 3,682,199, 3,372,000 and 3,000,000 shares, at cost**                                         | ** ** | **(39,795,000**                | **)**           | **(39,209,000**                   | **)**      | **(36,841,000**                | **)**      |
| **Total stockholders’ equity**                                                                            | ** ** | **77,040,000**                 | ** **      | **79,163,000**                    | ** ** | **86,123,000**                 | ** ** |
| ** **                                                                                                     | ** ** | ** **                     | ** **      | ** **                        | ** ** | ** **                     | ** ** |
| **Total liabilities and stockholders’ equity**                                                            | ** ** | **$**                          | **120,830,000** | ** **                        | **$**      | **119,525,000**                | ** ** | **$** | **132,742,000** | ** ** |

 

**The accompanying Notes to Condensed Consolidated Financial Statementsare an integral part of these statements.**

 

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**CACHE,INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THETHIRTEEN WEEKS ENDED**

**(Unaudited)**

 
| ** **                                         | ** ** | **March 28,  2009** | ** **     | **March 29,  2008** | ** ** |
|----------------------------------------------------|------------|--------------------------|----------------|--------------------------|------------|
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Net sales**                                      | ** ** | **$**                    | **53,006,000** | ** **               | **$**      | **67,708,000** | ** ** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Cost of sales, including buying and  occupancy** | ** ** | **31,211,000**           | ** **     | **39,293,000**           | ** ** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Gross profit**                                   | ** ** | **21,795,000**           | ** **     | **28,415,000**           | ** ** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Expenses**                                       | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Store operating expenses**                       | ** ** | **19,588,000**           | ** **     | **23,918,000**           | ** ** |
| **General and administrative expenses**            | ** ** | **4,736,000**            | ** **     | **5,669,000**            | ** ** |
| **Store exit costs**                               | ** ** | **—**               | ** **     | **2,308,000**            | ** ** |
| **Total expenses**                                 | ** ** | **24,324,000**           | ** **     | **31,895,000**           | ** ** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Operating loss**                                 | ** ** | **(2,529,000**           | **)**          | **(3,480,000**           | **)**      |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Other income (expense):**                        | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Interest expense**                               | ** ** | **(51,000**              | **)**          | **(68,000**              | **)**      |
| **Interest income**                                | ** ** | **67,000**               | ** **     | **290,000**              | ** ** |
| **Total other income, net**                        | ** ** | **16,000**               | ** **     | **222,000**              | ** ** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Loss before income taxes**                       | ** ** | **(2,513,000**           | **)**          | **(3,258,000**           | **)**      |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Income tax benefit**                             | ** ** | **(918,000**             | **)**          | **(1,205,000**           | **)**      |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Net loss**                                       | ** ** | **$**                    | **(1,595,000** | **)**                    | **$**      | **(2,053,000** | **)** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Basic loss per share**                           | ** ** | **$**                    | **(0.12**      | **)**                    | **$**      | **(0.15** | **)** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Diluted loss per share**                         | ** ** | **$**                    | **(0.12**      | **)**                    | **$**      | **(0.15** | **)** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Basic weighted average shares outstanding**      | ** ** | **12,954,000**           | ** **     | **13,566,000**           | ** ** |
| ** **                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Diluted weighted average shares outstanding**    | ** ** | **12,954,000**           | ** **     | **13,566,000**           | ** ** |

 

**The accompanying Notes to Condensed Consolidated Financial Statementsare an integral part of these statements.**

 

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**CACHE,INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THETHIRTEEN WEEKS ENDED**

**(Unaudited)**

** **
| ** **                                                                                         | ** ** | **March 28,  2009** | ** **     | **March 29,  2008** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------|----------------|--------------------------|------------|
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                          | ** ** | ** **               | ** **     | ** **               | ** ** |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Net loss**                                                                                       | ** ** | **$**                    | **(1,595,000** | **)**                    | **$**      | **(2,053,000** | **)** |
| **Adjustments to reconcile net loss to net  cash****provided by (used in) operating  activities:** | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Depreciation and amortization**                                                                  | ** ** | **2,743,000**            | ** **     | **3,191,000**            | ** ** |
| **Write down of equipment and leasehold  improvements, net of deferred rent**                      | ** ** | **—**               | ** **     | **1,445,000**            | ** ** |
| **Provision for sales allowance and doubtful  accounts, net**                                      | ** ** | **73,000**               | ** **     | **515,000**              | ** ** |
| **Stock-based compensation**                                                                       | ** ** | **58,000**               | ** **     | **74,000**               | ** ** |
| **Non-cash interest expense on note payable**                                                      | ** ** | **51,000**               | ** **     | **68,000**               | ** ** |
| **Deferred income taxes**                                                                          | ** ** | **(918,000**             | **)**          | **(33,000**              | **)**      |
| **Gift card breakage**                                                                             | ** ** | **(63,000**              | **)**          | **(81,000**              | **)**      |
| **Amortization of deferred income for  co-branded credit card**                                    | ** ** | **(90,000**              | **)**          | **—**               | ** ** |
| **Amortization of deferred rent**                                                                  | ** ** | **(512,000**             | **)**          | **(625,000**             | **)**      |
| **Excess tax benefit from stock-based  compensation**                                              | ** ** | **—**               | ** **     | **(155,000**             | **)**      |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Change in assets and liabilities:**                                                              | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Decrease (increase) in receivables and  income tax receivables**                                 | ** ** | **2,215,000**            | ** **     | **(1,931,000**           | **)**      |
| **Increase in inventories**                                                                        | ** ** | **(3,715,000**           | **)**          | **(1,977,000**           | **)**      |
| **Increase in prepaid expenses and other  current assets**                                         | ** ** | **(592,000**             | **)**          | **(2,302,000**           | **)**      |
| **Increase in accounts payable**                                                                   | ** ** | **4,284,000**            | ** **     | **1,241,000**            | ** ** |
| **Increase (decrease) in accrued liabilities,  accrued compensation and other liabilities**        | ** ** | **217,000**              | ** **     | **(1,488,000**           | **)**      |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Net cash provided by (used in) operating  activities**                                           | ** ** | **2,156,000**            | ** **     | **(4,111,000**           | **)**      |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                                          | ** ** | ** **               | ** **     | ** **               | ** ** |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Purchase of marketable securities**                                                              | ** ** | **(12,030,000**          | **)**          | **(13,455,000**          | **)**      |
| **Maturities of marketable securities**                                                            | ** ** | **7,804,000**            | ** **     | **28,927,000**           | ** ** |
| **Purchase of equipment and leasehold  improvements**                                              | ** ** | **(683,000**             | **)**          | **(2,717,000**           | **)**      |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Net cash provided by (used in) investing  activities**                                           | ** ** | **(4,909,000**           | **)**          | **12,755,000**           | ** ** |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                          | ** ** | ** **               | ** **     | ** **               | ** ** |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Proceeds from the issuance of common stock**                                                     | ** ** | **—**               | ** **     | **314,000**              | ** ** |
| **Excess tax benefit from stock-based  compensation**                                              | ** ** | **—**               | ** **     | **155,000**              | ** ** |
| **Repayment of note payable**                                                                      | ** ** | **(350,000**             | **)**          | **(475,000**             | **)**      |
| **Repurchase of common stock**                                                                     | ** ** | **(586,000**             | **)**          | **(12,631,000**          | **)**      |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Net cash used in financing activities**                                                          | ** ** | **(936,000**             | **)**          | **(12,637,000**          | **)**      |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Net decrease in cash and equivalents**                                                           | ** ** | **(3,689,000**           | **)**          | **(3,993,000**           | **)**      |
| **Cash and equivalents, at beginning of  period**                                                  | ** ** | **4,835,000**            | ** **     | **7,243,000**            | ** ** |
| **Cash and equivalents, at end of period**                                                         | ** ** | **$**                    | **1,146,000**  | ** **               | **$**      | **3,250,000** | ** ** |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Supplemental disclosure of cash flow  information:**                                             | ** ** | ** **               | ** **     | ** **               | ** ** |
| ** **                                                                                         | ** ** | ** **               | ** **     | ** **               | ** ** |
| **Interest paid**                                                                                  | ** ** | **$**                    | **54,000**     | ** **               | **$**      | **73,000** | ** ** |
| **Income taxes paid**                                                                              | ** ** | **$**                    | **35,000**     | ** **               | **$**      | **507,000** | ** ** |
| **Accrued equipment and leasehold  improvements**                                                  | ** ** | **$**                    | **107,000**    | ** **               | **$**      | **530,000** | ** ** |

 

**The accompanying Notes to Condensed Consolidated Financial Statementsare an integral part of these statements.**

 

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**CACHE,INC.**

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.****             ****BASIS OF PRESENTATION**

 

Referencesto the “Company,” “we,” “us,” or “our” means Cache, Inc., together withits wholly-owned subsidiaries, except as expressly indicated or unless thecontext otherwise requires. We currently operate two chains of women’s apparelspecialty stores, of which 288 stores are operated under the trade name “Cache”and six stores are operated under the trade name “Cache Luxe”.

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with Rule 10-01 of Regulation S-X and do notinclude all of the information and footnotes required by accounting principlesgenerally accepted in the United States. However, in the opinion of ourmanagement, all known adjustments necessary for a fair presentation of theresults of the interim periods have been made. These adjustments consistprimarily of normal recurring accruals and estimates that impact the carryingvalue of assets and liabilities. Actual results may materially differ fromthese estimates.

 

Thesecondensed consolidated financial statements should be read in conjunction withthe Company’s audited consolidated financial statements for the year ended December 27,2008, which are included in the Company’s Annual Report on Form 10-K withrespect to such period filed with the Securities and Exchange Commission. Allsignificant intercompany accounts and transactions have been eliminated. The December 27,2008 condensed consolidated balance sheet amounts are derived from the Company’saudited consolidated financial statements.

 

TheCompany’s fiscal year (“fiscal year” or “fiscal”) refers to the applicable52 or 53 week period. The year ended December 27, 2008 (“fiscal2008”) was a 52-week year and the year ending January 2, 2010 (“fiscal2009”) is a 53-week year.

 

**2.     STOCK BASED COMPENSATION**

 

TheCompany records compensation expense associated with stock options inaccordance with Statement of Financial Accounting Standards (“SFAS”) No. 123R, “*Share-BasedPayment*”, as interpreted by SEC Staff Accounting Bulletin No. 107.During the 13-week periods ended March 28, 2009 and March 29, 2008,the Company recognized approximately $58,000 and $74,000, respectively, instock-based compensation expense. The grant date fair value is calculated usingthe Black-Scholes option valuation model. The Company did not grant any optionsduring the 13-week period ended March 28, 2009 and no excess tax benefitswere recognized from the exercise of stock options during the same period. Duringthe 13-week period ended March 29, 2008, the Company granted 15,000options and recognized $155,000 in excess tax benefits from the exercise ofstock options.

 

Theweighted-average fair value of options granted during the 13-week period ended March 29,2008 was $3.14. The grant date fair value is calculated using the Black-Scholesoption valuation model. The following assumptions were used during fiscal 2008:

 
| Expected dividend rate  |   | $     | 0.00   |   |
|-------------------------|--------|-------|--------|--------|
| Expected volatility     |   | 36.06 | %      |
| Risk free interest rate |   | 2.64  | %      |
| Expected lives (years)  |   | 4.00  |   |

 

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**3.     BASIC AND DILUTED EARNINGSPER SHARE**

 

In accordance with SFAS No. 128, “*Earnings PerShare*”, basic earnings per share has been computed based upon theweighted average of common shares outstanding. Diluted earnings per share giveseffect to outstanding stock options. Earningsper common share has been computed as follows:

 
| ** **                                             | ** ** | **13-Weeks Ended**  | ** ** |
|--------------------------------------------------------|------------|--------------------------|------------|
| ** **                                             | ** ** | **March 28,  2009** | ** ** | **March 29,  2008** | ** ** |
| Net loss                                               |       | $                        | (1,595,000 | ) | $ | (2,053,000 | ) |
| Basic weighted average number of shares  outstanding   |       | 12,954,000               |       | 13,566,000 |   |
| Diluted weighted average number of shares  outstanding |       | 12,954,000               |       | 13,566,000 |   |
|                                                   |       |                     |       |   |   |
| Net loss per share - Basic                             |       | $                        | (0.12      | ) | $ | (0.15 | ) |
| - Diluted                                              |       | $                        | (0.12      | ) | $ | (0.15 | ) |

 

Optionsto purchase 732,675 and 761,503 common shares were excluded from thecomputation of diluted earnings per share for the 13-week periods ended March 28,2009 and March 29, 2008, respectively, due to the net loss incurred by theCompany.

 

**4.     RECENTACCOUNTING PRONOUNCEMENTS**

 

In February 2008, theFASB issued FASB Staff Position 157-2, Effective Date of FAS 157 (“FSP FAS175-2”). FSP FAS 157-2 deferred the effective date of FAS 157 for non-financialassets and liabilities that are not on a recurring basis recognized ordisclosed at fair value in the financial statements, to fiscal years andinterim periods beginning after November 15, 2008. The Company has adoptedFAS 157 for non-financial assets and liabilities measured at fair value on anon-recurring basis at December 28, 2008 and will continue to apply itsprovisions prospectively. The application of FAS 157 for non-financial assetsand liabilities did not have a significant impact on the consolidated financialstatements in the first quarter of 2009.

 

In April 2009, the FASBissued Staff Position No. FAS 157-4, “*DeterminingFair Value When the Volume and Level of Activity for the Asset or LiabilityHave Significantly Decreased and Identifying Transactions That Are Not Orderly*”(“FSP 157-4”). FSP 157-4 amends FASB Statement No.157, Fair ValueMeasurements to provide additional guidance on estimating fair value when thevolume and level of activity for an asset or liability significantly decreasedin relation to market activity for the asset or liability. The FSP alsoprovides additional guidance on circumstances that may indicate that atransaction is not orderly. SFAS No. 157-4 becomes effective for interimand annual periods ending after June 15, 2009 with early applicationpermitted for period ending after March 15, 2009. The Company does notexpect to have a material impact on its consolidated financial statements uponadoption.

 

In April 2009, the FASBissued Staff Position No. FAS 107-1, “*InterimDisclosures About Fair Value of Financial Instruments*” (“FSP 107-1”).FSP 107-1 amends FASB Statement No.107, Disclosures about Fair Value ofFinancial Instruments, to require disclosures about fair value of financial instrumentsfor interim periods of publicly traded companies as well as in annual financialstatements. This FSP also amends APB Opinion No. 28, Interim FinancialReporting, to require those disclosures in summarized financials information atinterim reporting periods. SFAS No. 107-1 becomes effective for interimand annual periods ending after June 15, 2009 with early applicationpermitted for period ending after March 15, 2009. The Company does notexpect to have a material impact on its consolidated financial statements uponadoption.

 

In April 2009, the FASBissued Staff Position No. FAS 115-2, “*Recognitionand Presentation of Other-Than-Temporary Impairments*” (“FSP 115-2”).FSP 115-2 provides new guidance on the recognition of anOther-Than-Temporary-Impairments (OTTI) and provides some new disclosurerequirements. SFAS No. 115-2 becomes effective for interim and annualperiods ending after June 15, 2009 with early application permitted forperiod ending after March 15, 2009. The Company does not expect to have amaterial impact on its consolidated financial statements upon adoption.

 

During December 2007,the FASB issued SFAS No. 160, *“Noncontrolling interestsin Consolidated Financial Statements—an amendment of ARB No. 51”*(“SFAS No. 160”). SFAS No. 160 requires expanded disclosures in theconsolidated financial statements that clearly identify and distinguish betweenthe interests of the parent’s owners and the interests of noncontrolling ownersof a subsidiary. SFAS No. 160 is effective for fiscal years beginning onor after December 15, 2008. Effective December 28, 2008, the Companyadopted SFAS No. 160, which did not have an impact on its consolidatedfinancial statements.

 

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DuringDecember 2007, the FASB issued SFAS No. 141R, *“BusinessCombinations”* (“SFAS No. 141R”). Under Statement 141R, anacquiring entity will be required to recognize all the assets acquired andliabilities assumed in a transaction at the acquisition-date fair value withlimited exceptions. In addition, acquisition costs will generally be expensedas incurred. The revised statement also includes a substantial number of newdisclosure requirements. SFAS 141R is effective prospectively to businesscombinations for which the acquisition date is on or after the beginning of thefirst annual reporting period beginning on or after December 15, 2008.

 

InMarch 2008, the FASB issued SFAS No. 161, “*Disclosuresabout Derivative Instruments and Hedging Activities — an amendment of FASBStatement No. 133*” (“SFAS No. 161”). SFAS No. 161requires enhanced disclosures about how and why an entity uses derivativeinstruments, how derivative instruments and related hedged items are accountedfor, and how they affect an entity’s financial position, financial performance,and cash flows. The Statement is effective for financial statements issued forfiscal years and interim periods beginning after November 15, 2008, withearly application encouraged. Effective December 28, 2008, the Companyadopted SFAS No. 161, which did not have an impact on its consolidatedfinancial statements.

 

InMay 2008, the FASB issued SFAS No. 163, *“Accountingfor Financial Guarantee Insurance Contracts—an interpretation of FASB StatementNo. 60”* (“SFAS No. 163”). SFAS 163 requires recognition ofan insurance claim liability prior to an event of default when there isevidence that credit deterioration has occurred in an insured financial obligation.SFAS No. 163 is effective for financial statements issued for fiscal yearsbeginning after December 15, 2008, and all interim periods within thosefiscal years. Early application is not permitted. Effective December 28,2008, the Company adopted SFAS No. 163, which did not have an impact on itsconsolidated financial statements.

 

**5.     FAIRVALUE MEASUREMENT**

 

Effective December 30,2007, the Company adopted SFAS 157, which defines fair value as the price thatwould be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date (exitprice). SFAS 157 establishes a fair value hierarchy, which prioritizes theinputs used in measuring fair value into three broad levels as follows:

 

·                  Level1 – Unadjusted quoted market prices in active markets for identical assets orliabilities that the Company has the ability to access at the measurement date.

 

·                  Level2 – Quoted prices for similar assets or liabilities in active markets, quotedprices for identical or similar assets or liabilities in markets that are notactive, inputs other than quoted prices that are observable for the asset orliability (i.e., interest rates, yield curves, etc.) and inputs that arederived principally from or corroborated by observable market data bycorrelation or other means.

 

·                  Level3 – Unobservable inputs that reflect assumptions about what market participantswould use in pricing assets or liabilities based on the best informationavailable.

 

As of March 28,2009, the Company’s marketable securities primarily consist of short-termUnited States Treasury bills. The Company classifies its short-term investmentsas held-to-maturity. Held-to-maturity securities are those securities in whichthe Company has the ability and intent to hold the securities until maturity.Because the Company’s held-to-maturity securities mature within one year of thepurchase date, the securities are classified as short-term marketablesecurities. Held-to-maturity debt securities are recorded at amortized cost,adjusted for the amortization or accretion of premiums or discounts and suchcarrying values approximate fair value. A decline in the market value of anyheld-to-maturity security below cost that is deemed to be other than temporaryresults in a reduction in carrying amount to fair value. The impairment ischarged to earnings and a new cost basis for the security is established.

 

Effective December 30,2007, the Company adopted SFAS 159, which provides entities the option tomeasure many financial instruments and certain other items at fair value.Entities that choose the fair value option will recognize unrealized gains andlosses on items for which the fair value option was elected in earnings at eachsubsequent reporting date. The Company has currently chosen not to elect thefair value option for any items that are not already required to be measured atfair value in accordance with accounting principles generally accepted in theUnited States of America.

 

The fair valueof our marketable securities, which was determined based upon Level 1 inputs,totaled $29.4 million, $25.2 million and $27.5 million as of March 28,2009, December 27, 2008 and March 29, 2008, respectively. For thefiscal periods ended March 28, 2009, December 27, 2008 and March 29,2008, the aggregate amount of marketable securities (maturing greater than 90days and less than one year) totaled approximately $29.4 million, $25.2 millionand $27.4 million, respectively. The Company noted small variances between thebook value and fair value due to the remaining unamortized

 

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premiums. As a result, no impairment hasoccurred for the fiscal periods presented herein. Premiums and discounts areamortized or accreted over the life of the related held-to-maturityinvestments. Interest income is recognized when earned.

 

**6.     RECEIVABLES**

 
| ** **               | ** ** | **March 28,** | ** ** | **December 27,** | ** ** | **March 29,** | ** ** |
|--------------------------|------------|--------------------|------------|-----------------------|------------|--------------------|------------|
| ** **               | ** ** | **2009**           | ** ** | **2008**              | ** ** | **2008**           | ** ** |
| Construction allowances  |       | $                  | 505,000    |                  | $          | 536,000            |       | $ | 826,000 |   |
| Third party credit card  |       | 2,109,000          |       | 2,382,000             |       | 3,207,000          |       |
| Accounts receivable, net |       | 341,000            |       | 184,000               |       | 1,327,000          |       |
| Other                    |       | 829,000            |       | 796,000               |       | 844,000            |       |
|                     |       | $                  | 3,784,000  |                  | $          | 3,898,000          |       | $ | 6,204,000 |   |

 

Accounts receivable, net includes sales from our wholesale division -Mary L., which are recorded net of any returns, chargebacks, discounts andallowances. The Company recorded approximately $306,000 and utilized $233,000of provisions for sales allowances and doubtful accounts during the 13-weekperiod ended March 28, 2009, which resulted in an aggregate reserve amountof $184,000, as of March 28, 2009.

 

At March 28, 2009, theincome tax receivables were $3.7 million, which represents the federal andstate income tax refunds the Company expects to receive from its fiscal 2008tax returns. During the 13-week period ended March 28, 2009, the Companyreceived payments of $2.2 million against the $5.9 million receivable, whichwas recorded for fiscal 2008. During fiscal 2008, the Company recorded incometax receivables of $5.9 million, which resulted from estimated taxpayments of $2.5 million made during fiscal 2008 and 2007 combined with arefund of $3.4 million, generated as a result of the carry back on the netloss incurred for fiscal 2008.

 

**7.     INVENTORIES**

 
| ** **      | ** ** | **March 28,** | ** ** | **December 27,** | ** ** | **March 29,** | ** ** |
|-----------------|------------|--------------------|------------|-----------------------|------------|--------------------|------------|
| ** **      | ** ** | **2009**           | ** ** | **2008**              | ** ** | **2008**           | ** ** |
| Raw materials   |       | $                  | 1,526,000  |                  | $          | 2,136,000          |       | $ | 4,023,000 |   |
| Work in process |       | 1,498,000          |       | 1,614,000             |       | 207,000            |       |
| Finished goods  |       | 23,012,000         |       | 18,571,000            |       | 28,294,000         |       |
|            |       | $                  | 26,036,000 |                  | $          | 22,321,000         |       | $ | 32,524,000 |   |

 

**8.     EQUIPMENT AND LEASEHOLDIMPROVEMENTS**

 
| ** **                                       | ** ** | **March 28,** | ** ** | **December 27,** | ** ** | **March 29,** | ** ** |
|--------------------------------------------------|------------|--------------------|------------|-----------------------|------------|--------------------|------------|
| ** **                                       | ** ** | **2009**           | ** ** | **2008**              | ** ** | **2008**           | ** ** |
|                                             |       |               |       |                  |       |               |       |
| Leasehold improvements                           |       | $                  | 53,817,000 |                  | $          | 53,480,000         |       | $ | 52,592,000 |   |
| Furniture, fixtures and equipment                |       | 52,022,000         |       | 51,789,000            |       | 49,191,000         |       |
|                                             |       | 105,839,000        |       | 105,269,000           |       | 101,783,000        |       |
| Less: accumulated depreciation and  amortization |       | (64,659,000        | )          | (61,949,000           | )          | (55,222,000        | )          |
|                                             |       | $                  | 41,180,000 |                  | $          | 43,320,000         |       | $ | 46,561,000 |   |

 

**9.     GOODWILL****AND INTANGIBLE ASSETS**

 

In accordance with Statement ofFinancial Accounting Standards (“SFAS”) No. 142, “*Goodwill andOther Intangible Assets”*, the Company’s goodwill and itsindefinite-lived intangible assets are reviewed annually for impairment or morefrequently, if impairment indicators arise. The annual valuation process is performedduring the fourth quarter of each year. The carrying values of goodwill as of March 28,2009, December 27, 2008 and March 29, 2008 were $9.1 million, $9.1million and $10.1 million, respectively. 

 

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The Company recorded a goodwill impairmentcharge of $997,000 during the fourth quarter of fiscal 2008. The carryingamounts of intangible assets as of March 28, 2009, December 27, 2008and March 29, 2008 are as follows:

 
| ** **                          | ** ** | **March 28,** | ** ** | **December 27,** | ** ** | **March 29,** | ** ** |
|-------------------------------------|------------|--------------------|------------|-----------------------|------------|--------------------|------------|
| ** **                          | ** ** | **2009**           | ** ** | **2008**              | ** ** | **2008**           | ** ** |
| Indefinite-lived intangible assets: |       |               |       |                  |       |               |       |
| Trademarks-Cache                    |       | $                  | 102,000    |                  | $          | 102,000            |       | $ | 102,000 |   |
| Trademarks-Mary L                   |       | 620,000            |       | 620,000               |       | 620,000            |       |
|                                |       | 722,000            |       | 722,000               |       | 722,000            |       |
|                                |       |               |       |                  |       |               |       |
| Definite-lived intangible assets:   |       |               |       |                  |       |               |       |
| Customer relationships              |       | 300,000            |       | 300,000               |       | 300,000            |       |
| Non-compete agreements              |       | 300,000            |       | 300,000               |       | 300,000            |       |
| Favorable market lease              |       | 160,000            |       | 160,000               |       | 160,000            |       |
|                                |       | 760,000            |       | 760,000               |       | 760,000            |       |
| Less: accumulated amortization      |       | (207,000           | )          | (178,000              | )          | (89,000            | )          |
|                                |       | 553,000            |       | 582,000               |       | 671,000            |       |
|                                |       |               |       |                  |       |               |       |
| Total intangible assets, net        |       | $                  | 1,275,000  |                  | $          | 1,304,000          |       | $ | 1,393,000 |   |

 

**10.  ACCRUEDLIABILITIES**

 
| ** **                                                                    | ** ** | **March 28,** | ** ** | **December 27,** | ** ** | **March 29,** | ** ** |
|-------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|--------------------|------------|
| ** **                                                                    | ** ** | **2009**           | ** ** | **2008**              | ** ** | **2008**           | ** ** |
| Operating expenses                                                            |       | $                  | 2,088,000  |                  | $          | 2,469,000          |       | $ | 2,669,000 |   |
| Taxes, including income taxes                                                 |       | 2,232,000          |       | 2,593,000             |       | 2,027,000          |       |
| Group insurance                                                               |       | 655,000            |       | 656,000               |       | 552,000            |       |
| Sales return reserve                                                          |       | 735,000            |       | 550,000               |       | 950,000            |       |
| Leasehold additions                                                           |       | 107,000            |       | 216,000               |       | 530,000            |       |
| Gift cards, merchandise credit cards and  other customer deposits and credits |       | 3,365,000          |       | 3,644,000             |       | 3,347,000          |       |
| Store exit costs (Note 12)                                                    |       | 337,000            |       | 616,000               |       | 665,000            |       |
| Deferred income                                                               |       | 378,000            |       | 333,000               |       | 135,000            |       |
|                                                                          |       | $                  | 9,897,000  |                  | $          | 11,077,000         |       | $ | 10,875,000 |   |

 

Leaseholdadditions generally represent a liability to general contractors for a final10% payable on construction contracts for store construction or renovations.

 

**11.  BANK DEBT**

 

The Company’s credit line with Bank of America, N.A., as extended,expired on March 2, 2009.  Atexpiration, the credit line was $10.0 million. After consideration, given theCompany’s current strong liquidity position and expected liquidity needs,coupled with the onerous terms currently being offered by banks on creditfacilities due to the ongoing credit crisis, the Company decided not to enterinto a new credit facility at the present time. There were no outstanding loans due to Bank of America, N.A. as of theexpiration date of the credit line.

 

**12.  STOREEXIT COSTS**

 

Duringfiscal 2008, the Company recorded a pre-tax charge of $2.8 million, net ofdeferred rent, for asset write down and store closing costs for 16 underperformingstores, of which $2.3 million was recorded for 14 stores during the firstquarter of fiscal 2008. As of December 27, 2008, there was a totalliability of $695,000 remaining for lease termination and severance costs. Thefollowing table identifies the payments made against this liability during thefirst quarter of fiscal 2009.

 
| ** **              | ** ** | **Liability  Balance  Beginning of Year** | ** ** | **Cash Payments** | ** ** | **Liability  Balance  End of Period** | ** ** |
|-------------------------|------------|-----------------------------------------------------|------------|------------------------|------------|-------------------------------------------------|------------|
| Severance               |       | $                                                   | 79,000     |                   | $          | 6,000                                           |       | $ | 73,000 |   |
| Lease termination costs |       | 616,000                                             |       | 279,000                |       | 337,000                                         |       |
|                    |       | $                                                   | 695,000    |                   | $          | 285,000                                         |       | $ | 410,000 |   |
|                         |            |                                                     |            |                        |            |                                                 |            |  |  |  |  |  |  |

 

The Company does not expect to incursignificant additional exit costs upon the closing of these stores.  The Company has closed 10 underperformingstores as of March 28, 2009 and expects to close the remaining stores overthe balance of fiscal 2009.

 

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**13.  COMMITMENTSAND CONTINGENCIES**

 

The cash and marketable securities at March 28,2009 included certificates of deposit that have been placed by the Company ascollateral against a standby letter of credit in the amount of $550,000.

 

The Company is exposed to anumber of asserted and unasserted potential claims.  Management does not believe that theresolution of any of these matters will result in a material loss.  The Company had no guarantees, subleases orassigned lease obligations as of March 28, 2009, December 27, 2008 orMarch 29, 2008.

 

**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

 

Except for the historicalinformation contained in this Form 10-Q, the matters addressed herein areforward-looking statements within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended. Forward-looking statements represent the Company’s expectation or beliefconcerning future events.  Withoutlimiting the foregoing, the words “believes,” “thinks,” “anticipates,” “estimates,”“plans,” “expects” and similar expressions are intended to identifyforward-looking statements.  The Companycautions that forward-looking statements are subject to risks, uncertainties,assumptions and other important factors that could cause actual results todiffer materially, or otherwise, from those expressed or implied in theforward-looking statements, including, without limitation, macroeconomicfactors that have affected the retail sector, including changes in national,regional and local economic conditions, employment levels and consumer spendingpatterns, and the other risks detailed from time to time in the Company’s mostrecent Form 10-K, Forms 10-Q and other reports filed with the Securitiesand Exchange Commission. Continued weakness in or a further worsening of theeconomy generally or in a number of our markets could adversely affect ourfinancial position and results of operations, cause us to reduce the number andfrequency of new store openings, slow our re-modeling of existing locations orcause us to increase store closings. Other unknown or unpredictable factorsalso could harm the Company’s business, financial condition and results.  Consequently, there can be no assurance thatactual results or developments anticipated by the Company will be realized or,even if substantially realized, that they will have the expected consequencesto, or effects on, the Company.  TheCompany undertakes no obligation to update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise,except to the extent required by applicable securities laws.

 

**RESULTS OF OPERATIONS**

 

The following table sets forth our results ofoperations for the 13-week periods ended March 28, 2009 and March 29,2008, respectively, expressed as a percentage of net sales.

 
| ** **                          | ** ** | **13-Weeks Ended**  | ** ** |
|-------------------------------------|------------|--------------------------|------------|
| ** **                          | ** ** | **March 28,  2009** | ** ** | **March 29,  2008** | ** ** |
| Sales                               |       | 100.0                    | %          | 100.0 | % |
| Cost of sales                       |       | 58.9                     |       | 58.0 |   |
| Gross profit                        |       | 41.1                     |       | 42.0 |   |
| Store operating expenses            |       | 37.0                     |       | 35.3 |   |
| General and administrative expenses |       | 8.8                      |       | 8.4 |   |
| Store exit costs                    |       | 0.0                      |       | 3.4 |   |
| Operating loss                      |       | (4.7                     | )          | (5.1 | ) |
| Interest expense                    |       | (0.1                     | )          | (0.1 | ) |
| Interest income                     |       | 0.1                      |       | 0.4 |   |
| Loss before income taxes            |       | (4.7                     | )          | (4.8 | ) |
| Income tax benefit                  |       | (1.7                     | )          | (1.8 | ) |
| Net loss                            |       | (3.0                     | )%         | (3.0 | )% |

 

Weuse a number of key indicators of financial condition and operating performanceto evaluate the performance of our business, some of which are set forth in thefollowing table:

 
| ** **                                             | ** ** | **13-Weeks Ended**  | ** ** |
|--------------------------------------------------------|------------|--------------------------|------------|
| ** **                                             | ** ** | **March 28,  2009** | ** ** | **March 29,  2008** | ** ** |
| Total store count, at end of period                    |       | 294                      |       | 294 |   |
| Net sales increase (decrease)                          |       | (21.7                    | )%         | 5.2 | % |
| Comparable store sales increase (decrease)             |       | (20.7                    | )%         | 3.3 | % |
| Average sales per transaction decrease                 |       | (13.7                    | )%         | (3.3 | )% |
| Average number of transactions increase  (decrease)    |       | (8.1                     | )%         | 6.8 | % |
| Net sales per average square foot                      |       | $                        | 86         |   | $ | 106 |   |
| Total square footage, at end of period (in  thousands) |       | 596                      |       | 595 |   |
|                                                        |            |                          |            |  |  |  |  |

 

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Net sales

 

During the 13-week period ended March 28,2009, net sales decreased to $53.0 million from $67.7 million, a decrease of$14.7 million, or 21.7%, as compared to the same 13-week period last year.  This reflects $13.2 million of reduced netsales, as a result of a 20.7% decrease in comparable store sales, a decrease of$1.5 million of net sales from our Mary L. division, and a decrease of $134,000from our non-comparable store sales, which was offset by a small increase inincome recognized from our co-branded credit card. The decrease in net sales isdue primarily to the ongoing economic crisis, which resulted in a dramaticreduction in mall traffic where Cache stores are located. The decrease in netsales in fiscal 2009 at Cache stores reflected a 8.1% decrease in salestransactions and a 13.7% decrease in average dollars per transactions.

 

Gross profit

 

During the 13-week period ended March 28,2009, gross profit decreased to $21.8 million from $28.4 million, a decrease of$6.6 million, or 23.3%, as compared to the same 13-week period last year.  This decrease was primarily due to lower netsales, as described above. As a percentage of net sales, gross profit decreasedto 41.1% from 42.0% for the fiscal 2009 13-week period as compared to the prioryear period. This decrease as a percentage of net sales was driven by reducedleverage of store occupancy costs resulting from lower sales.  The decrease in net sales was partiallyoffset by a decrease in production costs, lower markdowns and higher initialmark ups, primarily due to improved sourcing, as compared to the prior year.

 

Store operating expenses

 

During the 13-week period ended March 28,2009, store operating expenses decreased to $19.6 million from $23.9 million, adecrease of $4.3 million, or 18.1%, as compared to the same 13-week period lastyear. Store operating expenses decreased due to Company’s initiatives to reducecosts and to preserve cash. Due to these initiatives, the Company achievedreductions primarily in payroll expenses ($2.0 million), advertising expense($897,000) and depreciation expense ($610,000). Payroll expenses were lowerprimarily due to reduction in store hours allotted to employees. Decline inadvertising expense was due to reduction in spending for postcards, direct mailand photography. Depreciation expense decreased as a result of certain assetsbeing fully depreciated as of fiscal 2008, the closure of 16 underperformingstores, as indicated below, under “Store exit costs” and due to the Company’s decisionto reduce capital expenditures on new stores, store renovations and newequipment.  As a percentage of net sales,store operating expenses increased to 37.0% from 35.3% for the fiscal 200913-week period as compared to the prior year period.

 

General and administrative expenses

 

During the 13-week period ended March 28,2009, general and administrative expenses decreased to $4.7 million from $5.7million, a decrease of $933,000, or 16.5%, as compared to the same 13-weekperiod last year. The decrease in general and administrative expenses wasprimarily due to the departure of the Company’s previous Chairman and CEOcombined with the Company’s initiatives to reduce costs and to preserve cash.In total, payroll expenses decreased by $756,000, primarily due to the one timecharges associated with the departure of the Company’s former Chairman and CEOincurred during the first quarter of fiscal 2008 in the amount of $616,000,combined with a reduction of base salaries paid to several of the Company’s officers.In addition, travel expense decreased by $253,000 due to a reduction in travelby corporate and regional management. As a percentage of net sales, general andadministrative expenses increased to 8.9% from 8.4%, due to lower sales volumein fiscal 2009.

 

Store exit costs

 

There were no exit costs incurred during the first quarter of fiscal2009. During the 13-week period ended March 29, 2008, the Company recordeda pre-tax charge of $2.3 million ($1.5 million after tax or $0.11 per dilutedshare) for 14 underperforming stores, of which we closed six stores duringfiscal 2008 and an additional four stores during the 13-week period ended March 28,2009. The remaining stores will close over the balance of fiscal 2009. Includedin the exit costs is a write down of equipment and leasehold improvements andfurniture and fixtures in the amount of $2.1 million, severance accrual of$198,000 and lease termination costs for $665,000. These costs were offset bythe reversal of $626,000 of deferred rent accruals.

 

Other income/expense

 

During the 13-week period ended March 28,2009, other income (expense) decreased to $16,000 from $222,000, a decrease of$206,000 or 92.8%, as compared to the same 13-week period last year. Thisdecrease was due to a reduction in interest 

 

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income of $223,000, caused by lower interestrates and lower average cash and marketable securities balances. The reductionin average cash balances was primarily due to the repurchase of the Company’scommon stock.

 

Income taxes

 

During the 13-week period ended March 28,2009, an income tax benefit of $918,000 was recorded as compared to an incometax benefit of $1.2 million recorded in the same 13-week period last year.  The estimated effective tax rate for fiscal2009 is projected to be 36.5%, as compared to the fiscal 2008 estimate of37.0%.

 

Net loss

 

As a result of the factors discussed above,net loss of $1.6 million was recorded during the 13-week period ended March 28,2009, as compared to the net loss of $2.1 million for the prior year 13-weekperiod.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The Company’s cash requirements are primarily for working capital,inventory for new stores, construction of new stores, remodeling of existingstores and to improve and enhance our information technology systems. We havehistorically satisfied our cash requirements principally through cash flow fromoperations. During the 13-week period ended March 28, 2009, we generated$2.2 million of cash flow from operations, as compared to $4.1 million used forthe same period in fiscal 2008. We expect to continue to meet our operatingcash requirements primarily through cash flows from operating activities,existing cash and equivalents, and short-term investments. At March 28,2009, we had working capital of $43.0 million, cash and marketable securitiesof $30.5 million and $4.1 million in third party debt outstanding related to thepurchase of AVD. The cash and marketable securities at March 28, 2009included certificates of deposit that have been placed by the Company ascollateral against a standby letter of credit in the amount of $550,000.

 

The following table sets forth our cash flows for the periodsindicated:

 
| ** **                                           | ** ** | **13-Weeks Ended**        | ** ** |
|------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                           | ** ** | **March 28,********2009** | ** ** | **March 29,********2008** | ** ** |
| Net cash provided by (used in) operating  activities |       | $                              | 2,156,000  |   | $ | (4,111,000 | ) |
| Net cash provided by (used in) investing  activities |       | (4,909,000                     | )          | 12,755,000 |   |
| Net cash used in financing activities                |       | (936,000                       | )          | (12,637,000 | ) |
| Net decrease in cash and equivalents                 |       | $                              | (3,689,000 | ) | $ | (3,993,000 | ) |

 

Duringthe 13-week period ended March 28, 2009, cash and equivalents decreased by$3.7 million, primarily due to net purchases of marketable securities ($4.2million), a seasonal increase in inventories ($3.7 million) and the net lossincurred during the current 13-week period. In addition, this decrease wascaused by purchases of equipment and leasehold improvements ($683,000) for ournew and remodeled stores, amortization of deferred rent ($512,000), repurchaseof common stock ($586,000), repayment of a note payable ($350,000) inconnection with the acquisition of AVD and a net loss of $1.6 million.  This decrease was partially offset by,depreciation and amortization expense ($2.7 million), the decrease inreceivables ($2.2 million) primarily due to the collection of an income taxreceivable recorded during fiscal 2008 and a seasonal increase in accountspayable ($4.3 million).

 

The Company opened two new stores during the13-week period ended March 28, 2009. No additional new stores are scheduled to open for the remainder offiscal 2009.  We spent approximately$683,000 through March 28, 2009, and expect to spend an additional $1.5million to $2.0 million during the balance of fiscal 2009, for existingremodelings. We announced the closure of 16 underperforming stores throughoutfiscal 2008, of which we have closed ten stores as of March 28, 2009 andexpect to close the remaining stores over the balance of fiscal 2009. TheCompany accrued for the cost of closing these stores during fiscal 2008, asnoted under note 12 of our condensed consolidated financial statements includedherein. We have closed one additional store in the normal course of businessduring the 13-week period ended March 28, 2009.

 

During the first quarter of fiscal 2009, theCompany has repurchased in the open market a total of 310,199 shares at a costof $586,000, or an average of $1.89 per share. This brings the totalrepurchase, since inception of the buyback program in 2007, to 3,682,000shares, at a cost of $39.8 million or an average of $10.81 per share.

 

The Company had outstanding letters of creditof $643,000, $585,000 and $783,000 at March 28, 2009, December 27,2008 and March 29, 2008, respectively.

 

The Company has no bank debt. TheCompany’s credit line with Bank of America, N.A., as extended, expired on March 2,2009.  At expiration, the credit line was$10.0 million. After consideration, given the Company’s current strong 

 

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liquidity position and expected liquidity needs, coupled with theonerous terms currently being offered by banks on credit facilities due to theongoing credit crisis, the Company decided not to enter in to a new creditfacility at the present time.  There wereno outstanding loans due to Bank of America, N.A. as of the expiration date ofthe credit line.

 

#### **Inflation / Recession**

#### ** **

The Company does not believe that its sales revenue or operatingresults have been materially impacted by inflation during the past two fiscalyears. There can be no assurance, however, that our sales revenue or operatingresults will not be impacted by inflation in the future.

 

Recent economic events have affected, and continued economic weaknessin the United States is likely to continue to affect, the sales volume andprofitability levels of our company. Furthermore, a further reduction in the availability of consumer credit,especially of credit cards, is likely to adversely affect customer demand forour products, which could result in a decrease in our net sales, which couldadversely effect our business, financial condition and results of operations.

 

Many of our suppliers rely on working capital financing to fund theiroperations.  As a result of currenteconomic conditions, lenders have over the last several months generallytightened credit standards and terms.  Tothe extent that any of our suppliers are unable to obtain adequate credit ortheir borrowing costs increase, we may experience delays in obtaining products,the suppliers may increase their wholesale prices to us or they may modifypayment terms in a manner that is unfavorable to us.  Any of the foregoing could adversely effectour net sales or gross margins, which could adversely effect our business,financial condition and results of operations.

 

#### **Off-Balance Sheet Arrangements**

#### ** **

On July 3, 2007, the Company acquired certain assets of AdrienneVictoria Designs, Inc. (“AVD”), our largest vendor. Under the terms of theagreement, the Company is obligated to make contingent payments, not to exceed$5.5 million, based upon an earn-out to be paid over 5 years, if certainconditions are met. During the first quarters of fiscal 2009 and 2008 and forfiscal 2008, the earn-out threshold was not achieved; therefore, the Companywas not obligated to make any cash payments. Other than operating lease commitmentsand potential payment obligations pursuant to the AVD earn-out, we are not a party to any material off-balance sheetfinancing arrangements.

 

# **Critical Accounting Policies and Estimates**

# ** **

The Company’s accounting policies are morefully described in Note 1 of Notes to Consolidated Financial Statements in ourfiscal 2008 Form 10-K.  As disclosedin Note 1 of Notes to Consolidated Financial Statements, the preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America (“GAAP”) requires management to makeestimates and assumptions about future events that affect the amounts reportedin the consolidated financial statements and accompanying notes. Since futureevents and their effects cannot be determined with absolute certainty, actualresults will differ from those estimates. We evaluate our estimates and judgments on an ongoing basis and predicatethose estimates and judgments on historical experience and on various otherfactors that are believed to be reasonable under the circumstances.  Actual results will differ from theseunder different assumptions or conditions.

 

The Company’s management believes thefollowing critical accounting policies, among others, affect its moresignificant judgments and estimates used in preparation of the ConsolidatedFinancial Statements.

 

***Allowance fordoubtful accounts***. The allowance fordoubtful accounts, which is regularly reviewed, is an estimate of probablecredit losses in the existing accounts receivable. The allowance is determinedbased on historical write-off experience and the current retailer environment.Balances over 90 days past due and over a specified amount are reviewedindividually for collectability; other balances are considered on an aggregatebasis considering the aging of balances. Account balances are written off against the allowance when it isprobable the receivable will not be recovered. There is no off-balance sheetcredit exposure related to our customers. Management believes that the riskassociated with trade accounts receivable is adequately provided for in theallowance for doubtful accounts.  Duringthe 13-week period ended March 28, 2009, we recorded a reserve ofapproximately $306,000 and utilized $233,000, resulting in an aggregate reserveamount of $184,000 as of March 28, 2009. As of December 27, 2008, thecompany reported a reserve balance of $111,000.

** **

*Inventories**.* The Company’s finished goods inventories atour retail stores are valued at the lower of cost or market using the retailinventory method. Under the retail inventory method (“RIM”), the valuation ofinventories at cost and the resulting gross margins are calculated by applyinga calculated cost to retail ratio to the retail value of inventories. RIM is anaveraging 

 

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method that is widely used in the retail industry due to itspracticality. Additionally, it is recognized that the use of RIM will result invaluing inventories at the lower of cost or market if markdowns are currentlytaken as a reduction of the retail value of inventories. Inherent in the RIMcalculation are certain significant management judgments including, amongothers, merchandise markon, markups, and markdowns, which significantly impactthe ending inventory valuation at cost as well as the resulting gross margins.We take markdowns due to changes in fashion and style, based on the followingfactors: (i) supply on hand, (ii) historical experience and (iii) ourexpectations as to future sales. We do not anticipate any significant change inour markdown strategy that would cause a significant change in our earnings. Webelieve that our RIM provides an inventory valuation that results in a carryingvalue at the lower of cost or market. For our AVD division, which makes upapproximately 12% of total inventory as of March 28, 2009, the rawmaterials, work in process and finished goods inventories are valued at thelower of cost or market value, using the first-in-first-out valuation method.The Company ensures that the raw materials, work in process and finished goodsare properly valued by taking into account any obsolescence and recording areserve in accordance with our established policy.

 

***Finite-long lived assets.***  The Company’s judgment regarding the existence of impairmentindicators is based on market and operational performance. We assess theimpairment of long-lived assets, primarily fixed assets, whenever events orchanges in circumstances indicate that the carrying value may not berecoverable and exceeds the fair market value. Factors we consider importantwhich could trigger an impairment review include the following:

** **

**·**       significant changes inthe manner of our use of assets or the strategy for our overall business;

** **

**·**       significant negativeindustry or economic trends;

** **

**·**       storeclosings; or

** **

**·**       underperformingbusiness trends.

** **

The Company evaluates finite-lived assets in accordance with SFASNo.144, “*Accounting for the Impairment or Disposal ofLong-lived Assets*” (“SFAS No. 144”). Finite-lived assets areevaluated for recoverability in accordance with SFAS No. 144 wheneverevents or changes in circumstances indicate that an asset may have beenimpaired. In evaluating an asset for recoverability, the Company estimates thefuture cash flows expected to result from the use and eventual disposition ofthe asset. If the sum of the expected future cash flows (undiscounted andwithout interest charges) is less than the carrying amount of the asset, animpairment loss, equal to the excess of the carrying amount over the fairmarket value of the asset is recognized. Various factors including future salesgrowth and profit margins are included in this analysis. To the extent thesefuture projections or strategies change, the conclusion regarding impairmentmay differ from the current estimates. No impairment charges were recordedduring the 13-week period ended March 28, 2009 and March 29, 2008.Cache recorded an impairment charge of $1.1 million for 12 stores for fiscal2008.

 

*Goodwilland Intangible Assets*. The Company adopted SFAS No. 142, “*Goodwill and Other Intangible Assets*” (“SFAS No. 142”)on December 30, 2001. SFAS No. 142 requires that ratable amortizationof goodwill be replaced with periodic tests of the goodwill’s impairment.During fiscal 2007, in connection with the acquisition of AVD, the Company recordedgoodwill and other intangible assets. The Company performs impairment testingof its subsidiary—AVD, which considers the Company’s fair value to determinewhether an impairment charge related to the carrying value of the Company’srecorded goodwill and other intangible assets is necessary. This is reevaluatedannually during the fourth quarter, or more frequently if necessary. TheCompany considers many factors in evaluating whether the carrying value of therecorded goodwill will be recoverable. Factors used to determine this primarilyinclude declines in stock price and the market capitalization in relation tothe book value of the Company, discounted projected cash flows of the reportingunit and valuation of companies comparable to the reporting unit. No impairmentcharges were recorded during the 13-week period ended March 28, 2009 and March 29,2008. The Company recorded an impairment charge of approximately $1.0 millionagainst the carrying value of AVD’s goodwill for fiscal 2008.

 

*Self Insurance.* The Company is self-insured for losses andliabilities related primarily to employee health and welfare claims up tocertain thresholds. Losses are accrued based upon our estimates of theaggregate liability for claims incurred using certain actuarial assumptionsfollowed in the insurance industry and based on Company experience. Adjustmentsto earnings resulting from changes in historical loss trends have beeninsignificant for fiscal 2009 and 2008. Further, we do not anticipate anysignificant change in loss trends, settlements or other costs that would causea significant change in our earnings. We maintain stop-loss insurance coverage,which covers us for benefits paid in excess of limits as defined in the plan.

 

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*Gift Cards, Gift Certificates and Credits**.***The Company sells gift cards and giftcertificates (“Gift Cards”) and issues credits to its customers whenmerchandise is returned (“Merchandise Credit”), which do not expire. TheCompany recognizes sales from Gift Cards when they are redeemed by the customerand income when the likelihood of the Gift Card and Merchandise Credit beingredeemed by the customer is remote (“Gift Card breakage”), since the Companyhas determined that it does not have a legal obligation to remit the unredeemedvalue to the relevant jurisdiction as abandoned property. The Companydetermines Gift Card breakage income based upon historical redemption patternsand the remaining unredeemed percentage at the end of our historical data of 3.5years. Historical redemptions of Gift Cards ranged from 64% in the firstquarter to 0.03% in the fourteenth quarter subsequent to the issue date,resulting in an average of approximately 95% redeemed or 5% unredeemed GiftCards over the historical data of 3.5 years. We have determined that redemptionwould be remote based on the fact that, by the fourteenth quarter since issuedate, the redemption rate approximated 0%, indicating that the probability ofsuch cards being redeemed is remote. As such, we have recorded breakage incomebased upon this 5%, which is reviewed on a quarterly basis for propriety.Breakage income represents the balance of Gift Cards and Merchandise Credit,for which the Company believes the likelihood of redemption by the customer is remote.At that time, the Company will recognize breakage income for those Gift Cardsand Merchandise Credit. The Company recorded $63,000 and $81,000 of breakageincome during the 13-week periods ended March 28, 2009 and March 29,2008, respectively.

 

*Revenue Recognition.*  Salesare recognized at the “point of sale,” which occurs when merchandise is sold inan “over-the-counter” transaction or upon receipt by a customer. Sales ofmerchandise via our website are recognized at the expected time of delivery tothe customer. Our customers have the right to return merchandise. Sales arereported net of actual and estimated returns. We maintain a reserve forpotential product returns and record, as a reduction to sales, a provision forestimated product returns, which is determined based on historical experience.Charges/(credits) to earnings resulting from revisions to estimates on oursales return provision were approximately $185,000 and $198,000 for the 13-weekperiod ended March 28, 2009 and March 29, 2008, respectively. Amountsbilled to customers for shipping and handling fees are included in net sales atthe time of shipment. Costs incurred at our stores for shipping and handling isincluded in cost of sales. The Company records revenues net of applicable salestax.

 

In connection with the acquisition of AVD,the Company also acquired the rights to the “Mary L.” trademark. Mary L.products are sold in upper tier department stores and, as a result, Mary L.sales are included under net sales when the merchandise is shipped to thedepartment stores. Mary L. sales are recorded net of any returns, chargebacks,discounts and allowances. We also maintain a reserve as a reduction to salesfor potential returns, chargebacks, discounts and allowances. During the 13-weekperiod ended March 28, 2009, we recorded a reserve of approximately $306,000and utilized $233,000, resulting in an aggregate reserve amount of $184,000 asof March 28, 2009.

 

Under Cache’s co-branded visa card program,the Company receives from the issuing bank a non-refundable credit cardactivation fee for each new account that is opened and activated. These feesare initially deferred and recognized in consolidated net sales as revenue overthe life of the contract.  During the13-week periods ended March 28, 2009 and March 29, 2008, the Companyreceived approximately $240,000 and $289,000 respectively, in connection withactivated cards. The amount of fee income recorded in connection with activatedcredit cards was $90,000 for the 13-week period ended March 28, 2009 andinsignificant for the same period last year.

 

The Company also receives from the issuingbank and Visa U.S.A Inc. a sales royalty, which is based on a percentage of netpurchases made by cardholders at Cache or other businesses. Cache hasdetermined that since it has not incurred any significant or recurring costs inrelation to the co-branded credit card program the sales royalties earned inconnection to the agreement will be recorded under net sales. The fees that areincurred by the Company are cardholder incentives, which are funded from thefees paid by the issuing bank and Visa U.S.A Inc. The amount of sales royaltyincome recorded has been insignificant for the 13-week periods ended March 28,2009 and March 29, 2008.

 

The Company also offers its card holders aprogram whereby points can be earned on net purchases made with the co-brandedcredit card. Five reward points are awarded for each dollar spent at Cache andone reward point is awarded for each dollar spent at non-Cache businesses.  A cardholder whose credit card account is notdelinquent, in default or closed will be automatically eligible to receive a$25 Cache gift card upon accrual of 2,500 reward points. The issuing bank bearsthe cost of the reward program and is responsible for the administration andmanagement of the program.

 

*Income Taxes.*****The Company accounts for income taxes in accordance with SFAS No. 109,“*Accounting for Income Taxes*.”This statement requires the Company to recognize deferred tax liabilities and assetsfor the expected future tax consequences of events that have been recognized inthe Company’s financial statements or tax returns. Under this method, deferredtax liabilities and assets are determined based on the difference between thefinancial statement carrying amounts and tax bases of assets and liabilities,using applicable tax rates for the years in which the differences are expectedto reverse. When tax contingencies become probable, a liability for thecontingent amount is estimated based upon the Company’s best estimation of thepotential exposures associated with the timing and amount of deductions, aswell as various tax filing positions. As of

 

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March 28, 2009, the Company has recorded a $331,000 reserve, netof federal benefit for potential tax contingencies. No such reserves wererecorded as of March 29, 2008.

 

Effective December 31, 2006, the Company adopted the provisions ofFinancial Accounting Standards Board (“FASB”) Interpretation No. 48, “*Accounting for Uncertainty in Income Taxes*”(“FIN 48”). FIN 48 prescribes a comprehensive model of how a company shouldrecognize, measure, present and disclose in its financial statements uncertaintax positions that the company has taken or expects to take on a tax return.FIN 48 states that a tax benefit from an uncertain tax position may be recognizedif it is “more likely than not” that the position is sustainable, based uponits technical merits. The tax benefit of a qualifying position is the largestamount of tax benefit that has greater than a 50% likelihood of being realizedupon the ultimate settlement with a taxing authority having full knowledge ofall relevant information.

 

*Seasonality.* The Company experiences seasonal and quarterly fluctuations in netsales and operating income. Quarterly results of operations may fluctuatesignificantly as a result of a variety of factors, including the timing of newstore openings, fashion trends, shifts in timing of certain holidays, economicconditions and competition.  Our businessis subject to seasonal influences, characterized by highest sales during thefourth quarter (October, November and December) and lowest sales duringthe third quarter (July, August and September). We believe that historicalquarterly trends were disrupted in fiscal 2008 by macroeconomic conditionsduring the second half of the fiscal year. These macroeconomic conditions maycontinue to disrupt historical trends in fiscal 2009.

 

**ITEM 3. QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Our market risk relates primarily to changes in interest rates. Theinterest rate risk involves the short-term investment of excess cash inshort-term, investment-grade interest-bearing securities. These investments areincluded in cash and equivalents as well as marketable securities on ourbalance sheet. If there are changes in interest rates, those changes wouldaffect the investment income we earn on these investments and, therefore,impact our cash flows and results of operations.

 

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**ITEM 4. CONTROLS AND PROCEDURES**

 

The Company is committed to maintainingdisclosure controls and procedures designed to ensure that information requiredto be disclosed in our periodic reports filed under the Securities Exchange Actof 1934, as amended (the “Exchange Act”), is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules andforms, and that such information is accumulated and communicated to ourmanagement, including our chief executive officer and chief financial officer,as appropriate, to allow for timely decisions regarding required disclosure.

 

Under the supervision and with theparticipation of our management, including our principal executive officer andprincipal financial officer, we conducted an evaluation of our disclosurecontrols and procedures, as such term is defined under Rules 13a-15(e) and15d-15(e) under the Exchange Act, as of the end of the period covered bythis Report.  There are inherentlimitations to the effectiveness of any system of disclosure controls andprocedures, including the possibility of human error and the circumvention oroverriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can onlyprovide reasonable assurance of achieving their control objectives.  Based on this evaluation, our principalexecutive officer and our principal financial officer concluded that ourdisclosure controls and procedures were effective as of the end of the periodcovered by this Report.

 

There has been no change in our internalcontrol over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) of the Exchange Act) during the 13-weeks ended March 28,2009 that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**PART II - OTHERINFORMATION**

 

**ITEM 1A.  RISK FACTORS**

 

***The Further Spread of H1N1Influenza May Adversely Affect Our Business***

 

During April 2009, the World HealthOrganization issued a warning for the H1N1 virus. The further spread of H1N1influenza, which is more commonly known as “swine flu,” may adversely affectour business.  We could be adverselyaffected if one or more jurisdictions in which we have stores impose mandatorystore closures or seek voluntary closures. Furthermore, shoppers may seek to avoid crowded or enclosed locationssuch as malls, where substantially all of our stores are located.  H1N1 influenza also could adversely affectour ability to adequately staff our stores, receive merchandise deliveries on atimely basis and/or perform functions at the corporate level.  Even if H1N1 influenza does not spreadsignificantly or does not result in a significant number of additionalfatalities, the perceived risk of infection or significant health risk mayadversely affect our business.

 

**ITEM 6.  EXHIBITS**

** **
|   | 31.1* | Certification Pursuant to Section 302  of the Sarbanes-Oxley Act of 2002. |
|--------|-------|--------------------------------------------------------------------------------|
|   | 31.2* | Certification Pursuant to Section 302  of the Sarbanes-Oxley Act of 2002. |
|   | 32.1* | Certification Pursuant to Section 906  of the Sarbanes-Oxley Act of 2002. |

 

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* Filed herewith

 

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**Signatures**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 
|   | Dated: May 7, 2009 |
|--------|-------------------------|
|   | CACHE, INC.             |
|   |                    |
|   |                    |
|   | BY:                     | /s/ Thomas E. Reinckens |
|   |                    | Thomas E. Reinckens |
|   |                    | Chairman and Chief Executive Officer |
|   |                    | (Principal Executive Officer) |
|   |                    |   |
|   |                    |
|   | BY:                     | /s/ Margaret Feeney |
|   |                    | Margaret Feeney |
|   |                    | Executive Vice President and Chief  Financial Officer |
|   |                    | (Principal Financial and Accounting  Officer) |

 

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