# FORM 10-Q/AAmendment No. 2

SECURITIES AND EXCHANGE
COMMISSION

Washington, DC 20549

(Mark One)

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

For the quarterly period ended May 1,
2004

OR

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

For the transition period from ___________________ to _____________________

Commission file number  00019774

| | United Retail Group, Inc. (Exact name of registrant as specified in its charter)
| | --------------------------------------------------------------------------------

| |                                                               |                                     
| | ------------------------------------------------------------- | ------------------------------------
| | Delaware                                                      | 51-0303670                          
| | (State or other jurisdictionof incorporation or organization) | (I.R.S. employer identification no.)

365 West Passaic Street, Rochelle Park, New Jersey 07662(Address of principal executive offices) (Zip Code)

(201) 845-0880Registrant's telephone number, including area code

_______________________________________________________________

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

---

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the Exchange Act) during the preceding 12
months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

YES [X]   NO [  ]

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES [  ]   NO [X]

# APPLICABLE ONLY TO
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

Indicate by check mark whether the
registrant has filed all documents and reports required to be filed by Section 12, 13 or
15(d) of the Exchange Act subsequent to the distribution of securities under a plan
confirmed by a court.

YES [  ]   NO [  ]

# APPLICABLE ONLY TO
CORPORATE ISSUERS:

Indicate the number of shares
outstanding of each of the registrants classes of common stock, as of the latest
practicable date.

As of May 1, 2004, 12,937,304 units,
each consisting of one share of the registrants common stock, $.001 par value per
share, and one attached stock purchase right, were outstanding. The units are referred to
herein as shares.

INTRODUCTORY NOTE:

This Amendment No. 2 on Form 10-Q/A
amends the Companys Form 10-Q (i) to restate the Companys balance sheets and
statements of cash flows in Item 1 of Part I, as further discussed in Note 2 to the
condensed consolidated financial statements to (a) reflect a liability for the unamortized
portion of construction allowances and other lease concessions (deferred lease incentives)
rather than as a reduction to property and equipment and (b) present construction
allowances and other lease concessions received within operating activities rather than as
a reduction of capital expenditures, (ii) to make conforming changes and to supply
incremental disclosure in the footnotes to the financial statements in Item 1 of Part I,
and (iii) to make related changes and to supply incremental disclosure in Items 2 and 4 of
Part I and Item 6 of Part II. The restatements are made in order to comply with Statement
of Financial Accounting Standards No. 13 and FASB Technical Bulletin No. 88-1. The other
Items of the Form 10-Q as previously filed are not amended hereby and remain in effect as
of the filing date of the original Form 10-Q or the date of the filing of the first
amendment, as applicable. Except as otherwise expressly stated, the information in this
Amendment is as of June 14, 2004, the date on which the original Form 10-Q was filed and
this Amendment does not purport to provide an update or discussion of any developments
subsequent to the original filing.

---

PART I - FINANCIAL INFORMATION

Item 1 - FINANCIAL STATEMENTS

UNITED RETAIL GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(dollars in thousands)(Unaudited)

|                                                        |                      | May 1,2004 | January 31,2004 | May 3,2003
|------------------------------------------------------- | -------------------- | ---------- | --------------- | ----------
|
|Current Assets:                                         |                      |            |                 |           
|Cash and cash equivalents                               |                      | $14,344    | $14,421         | $12,143   
|Accounts receivable                                     |                      | 1,703      | 1,789           | 1,626     
|Inventory                                               |                      | 60,787     | 49,054          | 67,821    
|Prepaid rents                                           |                      | 4,740      | 4,826           | 4,932     
|Other prepaid expenses                                  |                      | 1,712      | 2,044           | 1,711     
|Total current assets                                    |                      | 83,286     | 72,134          | 88,233    
|                                                        |                      |            |                 |           
|Property and equipment, net                             |                      | 88,048     | 91,703          | 101,202   
|Deferred compensation plan assets                       |                      | 5,114      | 4,893           | 4,144     
|Trademarks, net of accumulated                          |                      |            |                 |           
|amortization of $405, $389 and $341                     |                      | 478        | 493             | 541       
|Other assets                                            |                      | 1,366      | 1,465           | 1,526     
|Total Assets                                            |                      | $178,292   | $170,688        | $195,646  
|                                                        |                      |            |                
|                                                        | LIABILITIES          |            |                 |           
|Current liabilities:                                    |                      |            |                 |           
|Short-term distribution center financing                |                      | $650       | $635            | $998      
|Short-term capital leases                               |                      | 2,062      | 2,086           | 1,998     
|Accounts payable and other                              |                      | 29,902     | 19,795          | 31,152    
|Disbursement accounts                                   |                      | 9,007      | 9,434           | 8,047     
|Accrued expenses                                        |                      | 21,538     | 21,737          | 20,869    
|Total current liabilities                               |                      | 63,159     | 53,687          | 63,064    
|                                                        |                      |            |                 |           
|Long-term distribution center financing                 |                      | 3,158      | 3,326           | 3,807     
|Long-term capital leases                                |                      | 3,148      | 3,646           | 5,241     
|Deferred lease incentives                               |                      | 14,331     | 14,993          | 16,278    
|Deferred compensation plan liabilities                  |                      | 5,114      | 4,893           | 4,144     
|Other long-term liabilities                             |                      | 12,725     | 10,123          | 8,584     
|Total liabilities                                       |                      | 101,635    | 90,668          | 101,118   
|                                                        | STOCKHOLDERS' EQUITY |            |                 |           
|Preferred stock, $.001 par value; authorized            |                      |            |                 |           
|1,000,000 shares; none issued                           |                      |            |                 |           
|Series A junior participating preferred stock           |                      |            |                 |           
|$.001 par value; authorized 150,000 shares; none issued |                      |            |                 |           
|Common stock, $.001 par value; authorized               |                      |            |                
|30,000,000 shares; issued 14,248,200 shares             |                      | 14         | 14              | 14        
|Additional paid-in capital                              |                      | 83,696     | 83,696          | 83,679    
|Retained earnings                                       |                      | 623        | 3,986           | 18,511    
|Treasury stock (1,310,896 shares) at cost               |                      | (7,676)    | (7,676)         | (7,676)   
|Total stockholders' equity                              |                      | 76,657     | 80,020          | 94,528    
|Total liabilities and stockholders' equity              |                      | $178,292   | $170,688        | $195,646  

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

---

UNITED RETAIL GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(dollars in thousands, except per share amounts)(Unaudited)

|                              | Thirteen Weeks Ended |           
|----------------------------- | -------------------- | ----------
|
|Net Sales                     | $97,519              | $101,530  
|                              |                      |           
|Cost of goods sold, including |                      |           
|buying and occupancy costs    | 76,645               | 79,361    
|                              |                      |           
|Gross profit                  | 20,874               | 22,169    
|                              |                      |           
|General, administrative and   |                      |           
|store operating expenses      | 23,972               | 26,380    
|                              |                      |           
|Operating Loss                | (3,098)              | (4,211)   
|                              |                      |           
|Interest expense, net         | 216                  | 252       
|                              |                      |           
|Loss before income taxes      | (3,314)              | (4,463)   
|                              |                      |           
|Provision for income taxes    | 49                   | 82        
|                              |                      |           
|Net loss                      | ($3,363)             | ($4,545)  
|                              |                      |           
|Net loss per share            |                      |           
|Basic                         | ($0.26)              | ($0.35)   
|Diluted                       | ($0.26)              | ($0.35)   
|                              |                      |           
|Weighted average number of    |                      |           
|shares outstanding            |                      |           
|Basic                         | 12,937,304           | 12,937,304
|Common stock equivalents      |                      |           
|(stock options)               | -                    | -         
|Diluted                       | 12,937,304           | 12,937,304

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

---

UNITED RETAIL GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in thousands)(Unaudited)

|                                                        | Thirteen Weeks Ended |         
|------------------------------------------------------- | -------------------- | --------
|
|
|Cash Flows From Operating Activities:                   |                      |         
|Net loss                                                | ($3,363)             | ($4,545)
|Adjustments to reconcile net loss to net cash           |                      |         
|provided by (used in) operating activities:             |                      |         
|Depreciation and amortization of property and equipment | 3,687                | 3,794   
|Amortization of deferred charges and other              |                      |         
|intangible assets                                       | 117                  | 128     
|Loss on disposal of assets                              | 26                   | 301     
|Deferred compensation                                   | -                    | 78      
|Deferred lease assumption revenue amortization          | (2)                  | (16)    
|Changes in operating assets and liabilities:            |                      |         
|Accounts receivable                                     | 86                   | 1,368   
|Income taxes                                            | 34                   | 43      
|Inventory                                               | (11,733)             | (6,252) 
|Accounts payable and accrued expenses                   | 9,886                | 4,898   
|Prepaid expenses                                        | 418                  | 619     
|Deferred lease incentives                               | (662)                | (710)   
|Other assets and liabilities                            | 2,599                | 221     
|Net Cash Provided by (used in) Operating Activities     | 1,093                | (73)    
|                                                        |                      |         
|Investing Activities:                                   |                      |         
|Capital expenditures                                    | (58)                 | (589)   
|Deferred payment for property and equipment             | (10)                 | 4       
|                                                        |                      |         
|Net Cash Used in Investing Activities                   | (68)                 | (585)   
|                                                        |                      |         
|Financing Activities                                    |                      |         
|Repayments of long-term debt                            | (153)                | (376)   
|Payments on capital lease obligations                   | (522)                | (488)   
|Increase (decrease) in disbursement accounts            | (427)                | (3,875) 
|                                                        |                      |         
|Net Cash Used in Financing Activities                   | (1,102)              | (4,739) 
|                                                        |                      |         
|Net decrease in cash and cash equivalents               | (77)                 | (5,397) 
|Cash and cash equivalents, beginning of period          | 14,421               | 17,540  
|Cash and cash equivalents, end of period                | $14,344              | $12,143 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

---

UNITED
RETAIL GROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

# 1. Basis of Presentation

The consolidated financial statements
include the accounts of United Retail Group, Inc. and its subsidiaries (the
Company). All significant intercompany balances and transactions have been
eliminated.

The consolidated financial statements
as of and for the thirteen weeks ended May 1, 2004 and May 3, 2003 are unaudited and are
presented pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, the consolidated financial statements are condensed and do not include all
disclosures required by generally accepted accounting principles for a full set of
financial statements and should be read in conjunction with the financial statement
disclosures contained in the Companys 2003 Annual Report and 2003 Form 10-K. In the
opinion of management, the accompanying consolidated financial statements reflect all
adjustments necessary to present fairly the financial position and results of operations
and cash flows for the interim periods, but are not necessarily indicative of the results
of operations for a full fiscal year.

Certain prior period balances have been
reclassified to conform with the current period presentation.

# 2. Restatement of
Financial Statements

In accordance with Statement of
Financial Accounting Standards No. 13, Accounting for Leases (SFAS
13) and Financial Accounting Standards Board Technical Bulletin No. 88-1,
Issues Relating to Accounting for Leases (FTB 88-1), the Company
accounts for rental expense for step provisions and escalation clauses on a straight-line
basis over the minimum lease term, with such amounts being included along with other
related rent expense as part of buying and occupancy costs. Construction allowances and
other lease concessions are amortized over the minimum lease term on a straight-line basis
as part of buying and occupancy costs. However, in its detailed accounts, the Company had
previously recorded this amortization as a reduction of depreciation expense, rather than
rent expense. Both depreciation and rent expense are reflected within buying and occupancy
costs on the statements of operations.

Also, historically, the
Companys balance sheets have reflected the unamortized portion of construction
allowances and other lease concessions as a reduction of property and equipment, instead
of as a deferred credit (liability). Further, historically, the Companys statements
of cash flows have reflected construction allowances and other lease concessions received
as a reduction of capital expenditures (within investing cash flows), rather
than as an operating lease activity (within operating cash flows).

In order to comply with SFAS 13 and
FTB 88-1, we have determined in December of 2004 that we will restate our consolidated
balance sheets as of May 1, 2004, January 31, 2004 and May 3, 2003 to reflect a liability
for the unamortized portion of construction allowances and other lease concessions
(deferred lease incentives) rather than as a reduction to property and equipment.

The following information shows the
effect of these restatements on our balance sheets as of May 1, 2004, January 31, 2004 and
May 3, 2003:

|                            | As of May 1, 2004(in thousands) |         |         
|--------------------------- | ------------------------------- | ------- | --------
|
|Property and equipment, net | $73,717                         | $14,331 | $88,048 
|Total assets                | $163,961                        | $14,331 | $178,292
|Deferred lease incentives   | $        --                     | $14,331 | $14,331 
|Total liabilities           | $87,304                         | $14,331 | $101,635
|                            |                                 |         |         

|                            | As of January 31, 2004(in thousands) |         |         
|--------------------------- | ------------------------------------ | ------- | --------
|
|Property and equipment, net | $76,710                              | $14,993 | $91,703 
|Total assets                | $155,695                             | $14,993 | $170,688
|Deferred lease incentives   | $        --                          | $14,993 | $14,993 
|Total liabilities           | $75,675                              | $14,993 | $90,668 
|                            |                                      |         |         

|                            | As of May 3, 2003(in thousands) |         |         
|--------------------------- | ------------------------------- | ------- | --------
|
|Property and equipment, net | $84,924                         | $16,278 | $101,202
|Total assets                | $179,368                        | $16,278 | $195,646
|Deferred lease incentives   | $        --                     | $16,278 | $16,278 
|Total liabilities           | $84,840                         | $16,278 | $101,118

Further, we are restating our
consolidated statements of cash flows for the thirteen weeks ended May 1, 2004 and May 3,
2003 to present construction allowances and other lease concessions within operating
activities, rather than as a reduction of capital expenditures.

The following information shows the
effect of this restatement on our statements of cash flows for the thirteen weeks ended
May 1, 2004 and May 3, 2003:

|                                            | For the thirteen weeks ended May 1, 2004(in thousands) |       |       
|------------------------------------------- | ------------------------------------------------------ | ----- | ------
|
|Net cash provided by   operating activities | $1,075                                                 | $18   | $1,093
|                                            |                                                        |       |       
|Net cash used in    investing activities    | ($50)                                                  | ($18) | ($68) 
|                                            |                                                        |       |       

|                                            | For the thirteen weeks ended May 3, 2003(in thousands) |      |       
|------------------------------------------- | ------------------------------------------------------ | ---- | ------
|
|Net cash provided by   operating activities | ($68)                                                  | ($5) | ($73) 
|                                            |                                                        |      |       
|Net cash used in    investing activities    | ($590)                                                 | $5   | ($585)

There is no impact on our statements
of operations related to the above. However, amortization of construction allowances and
other lease concessions is now treated as a reduction of rent expense rather than as a
reduction of depreciation expense.

The accompanying financial statements
and these footnotes have not been updated except as required to reflect the effects of the
restatements discussed above, and certain additions to disclosures. Except as identified
in the prior sentence, no other items included in the previously filed financial
statements and footnotes have been updated. Additionally, these financial statements and
footnotes do not purport to provide an update or discussion of any other developments at
the Company subsequent to the original filing.

# 3. Net Loss Per Share

Basic per share data has been
computed based on the weighted average number of shares of common stock outstanding.
Diluted per share data has been computed on the basic shares because for the thirteen
weeks ended May 1, 2004 and May 3, 2003, the effect of stock options is anti-dilutive.

Options to purchase shares of common
stock which were not included in the computation of diluted per share data were as
follows:

|                                 |                      |                
|-------------------------------- | -------------------- | ---------------
|                                 | Thirteen Weeks Ended |                
|                                 | May 1,2004           | May 3,2003     
|                                 |                      |                
|Options                          | 1,931,812            | 1,841,572      
|Range of option prices per share | $1.80 -  $15.13      | $2.25 -  $15.13

The Company uses the intrinsic value
method to account for stock-based compensation in accordance with Accounting Principles
Board Opinion No. 25, Accounting For Stock Issued To Employees (Opinion No.
25) and has adopted the disclosure provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting For Stock-Based Compensation (SFAS No.
123). Under Opinion No. 25, compensation expense, if any, is measured as the excess of the
market price of the stock over the exercise price on the measurement date. In accordance
with Opinion No. 25, compensation expense is recorded ratably over the five-year vesting
period of the options.

The following table illustrates the
effect on net loss and loss per share if the Company had applied the fair value
recognition provisions under SFAS No. 123, Accounting For Stock-Based
Compensation to stock-based employee compensation:

|                                                                                                                                         |                      |           
|---------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ----------
|                                                                                                                                         | Thirteen Weeks Ended |           
|(dollars in thousands except forper share amounts)                                                                                       | May 1,2004           | May 3,2003
|                                                                                                                                         |                      |           
|Reported net loss                                                                                                                        | ($3,363)             | ($4,545)  
|Add back: Compensation expense                                                                                                           | -                    | 78        
|Deduct: Total stock-based employeecompensation expense determined underfair value based method for all awards,net of related tax effects | (75)                 | (69)      
|                                                                                                                                         |                      |           
|Pro forma net loss                                                                                                                       | ($3,438)             | ($4,536)  
|                                                                                                                                         |                      |           
|Loss per share:                                                                                                                          |                      |           
|Basic - as reported                                                                                                                      | ($0.26)              | ($0.35)   
|Basic - pro forma                                                                                                                        | ($0.27)              | ($0.35)   
|                                                                                                                                         |                      |           
|Diluted - as reported                                                                                                                    | ($0.26)              | ($0.35)   
|Diluted - pro forma                                                                                                                      | ($0.27)              | ($0.35)   

# 4. Financing Arrangements

In 1993, the Company executed a
ten-year $7.0 million note bearing interest at 7.3%. Interest and principal were payable
in equal monthly installments beginning November 1993. Final payment on this note was made
in October 2003.

In 1994, the Company executed a
fifteen-year $8.0 million loan bearing interest at 8.64%. Interest and principal are
payable in equal monthly installments beginning May 1994. The loan is collateralized by a
mortgage on the national distribution center owned by the Company in Troy, Ohio.

The Company and certain of its
subsidiaries, (collectively, the Companies) are parties to a Financing
Agreement, dated August 15, 1997 (the Financing Agreement), with The CIT
Group/Business Credit, Inc.(CIT). The Financing Agreement was extended and
expanded during fiscal 2003. The term was extended three years to August 15, 2008. The
line of credit was increased from $40 million to $50 million for the Companies, subject to
availability of credit according to a borrowing base computation. The line of credit may
be used on a revolving basis by any of the Companies to support trade letters of credit
and standby letters of credit and to finance loans.

The Companies are required to
maintain unused at all times combined asset availability of at least $5 million. Except
for the maintenance of a minimum availability of $5 million and a limit on capital
expenditures, the Financing Agreement does not contain any significant financial
covenants.

The Financing Agreement also includes
certain restrictive covenants that impose limitations (subject to certain exceptions) on
the Companies with respect to, among other things, making certain investments, declaring
or paying dividends, making loans, engaging in certain transactions with affiliates, or
consolidating, merging or making acquisitions outside the ordinary course of business.

In the event a loan is made to one of
the Companies, interest is payable monthly based on a 360-day year at the Chase Manhattan
Bank prime rate plus incremental percentages ranging from 0.00% to 0.75% or the LIBOR rate
plus incremental percentages ranging from 1.75% to 2.50% as determined by the average
excess availability each month per the Financing Agreement on a per annum basis. The
borrower can select either the prime rate or the LIBOR rate as the basis for determining
the interest rate.

The line of credit is collateralized
by a security interest in i) inventory and its proceeds ii) bank credit card receivables
and iii) the balance on deposit from time to time in a bank account that has been pledged
to the lenders.

At May 1, 2004, the borrowing
capacity of the Companies under the Financing Agreement with CIT, after satisfying the $5
million minimum availability requirement, was $22.4 million, trade letters of credit for
the account of the Companies were outstanding in the amount of $22.1 million, standby
letters of credit were outstanding in the amount of $5.5 million and no loan from CIT was
outstanding. The Companys cash and cash equivalents of $14.3 million were
unrestricted.

In January 2002, the Company executed
a five-year $8.2 million sale and lease back agreement for certain fixtures in new and
remodeled stores. The lease bears an interest rate of 7.0% per annum. The Company was
required to pay sales tax as part of the agreement. The agreement provides for equal
monthly rent payments beginning February 2002 and gives the Company the option of buying
back the fixtures at the end of the term for a nominal price.

In January 2002 through January 2003,
the Company executed a series of three-year capital lease agreements for call center
systems at the Companys national distribution center in Troy, Ohio, bearing interest
at rates between 6.09% and 6.64% per annum aggregating approximately $1.4 million. The
Company has the option of buying the systems at the end of the term for a nominal price.

# 5. Income Taxes

Reconciliation of the provision for
income taxes from the U.S. Federal statutory rate to the Companys effective rate is
as follows (dollars in thousands):

|                           | Thirteen Weeks Ended |         |          |        
|-------------------------- | -------------------- | ------- | -------- | -------
|
|                           |                      |         |          |        
|Tax at Federal rate        | ($1,160)             | (35.0%) | ($1,562) | (35.0%)
|State income taxes, net of |                      |         |          |        
|Federal benefit            | (56)                 | (1.7%)  | (13)     | (0.3%) 
|Change in State NOL        | (68)                 | (2.0%)  | (451)    | (10.1%)
|Other                      | 7                    | 0.2%    | 7        | 0.2%   
|Sub-total                  | (1,277)              | (38.5%) | (2,019)  | (45.2%)
|                           |                      |         |          |        
|Change in deferred tax     |                      |         |          |        
|valuation allowance        | 1,326                | 40.0%   | 2,101    | 47.0%  
|                           |                      |         |          |        
|                           | $49                  | 1.5%    | $82      | 1.8%   

In November 2003, the Company agreed
in principle with the Internal Revenue Service (IRS) on a settlement and the
closure of its examination of the Companys tax returns for the years through 1996.

In November 2003, the Company also
agreed in principle with the IRS on the settlement of a matter related to tax refund
claims the Company had filed for research credits and for deductions attributable to
certain bank financing transactions during 1989 to 1992. Although only a preliminary
settlement has been reached with the IRS, in April 2004, the Company received payment from
the IRS in the amount of $2.5 million (which includes $1.2 million representing interest).
The Company has not received final clearance from the IRS. Upon receipt of final
clearance, the Company will recognize the benefit of the refund claims, including the
related interest thereon. It is anticipated that the $1.3 million refund will be recorded
as an increase to stockholders equity as it relates to stock warrant deductions and
the $1.2 million interest amount will be recorded in the Companys results of
operations. An additional payment estimated to be approximately $0.7 million is also
expected in connection with the claim related to research credits and when received, this
item would be recorded in the Companys operating results.

The Company recorded a $7.3 million
non-cash charge to establish a valuation allowance for its net deferred tax assets and net
operating loss carryforwards in the fourth quarter of fiscal 2002. The valuation allowance
was calculated in accordance with the provisions of SFAS No. 109, Accounting for
Income Taxes (SFAS No. 109), which places significant importance on the
Companys cumulative operating results in the most recent three-year period when
assessing the need for a valuation allowance. The Companys cumulative loss in the
three-year period ended February 1, 2003, which included the net loss reported in the
fourth quarter of fiscal 2002, was sufficient to require a full valuation allowance under
the provisions of SFAS No. 109.

The Company recorded additional
valuation allowances of $12.6 million and $1.3 million in the fiscal year ended January
31, 2004 and quarter ended May 1, 2004, respectively. The Company intends to maintain a
valuation allowance for its net deferred tax assets and net operating loss carryforwards
until sufficient positive evidence exists to support its reversal.

# 6. Stock Appreciation
Rights Plan

Commencing in May 2000 and annually
thereafter, each nonmanagement Director received an award under the Companys Stock
Appreciation Rights Plan that provides for a cash payment by the Company when the Director
exercises the stock option granted to him contemporaneously under the Companys Stock
Option Plans. The payment will be an amount equivalent to the after tax equity in the
option that is being exercised, that is, the excess of the then current market price of
the shares issued over the exercise price of the corresponding option plus any personal
income tax withholding on the gain arising from the exercise.

# 7. Supplemental Cash
Flow Information

Net cash flow from operating
activities reflects cash payments for interest and income taxes as follows (dollars in
thousands):

|                          |                      |            
|------------------------- | -------------------- | -----------
|                          | Thirteen Weeks Ended |            
|                          | May 1, 2004          | May 3, 2003
|                          |                      |            
|Net cash interest expense |                      |            
|paid, including interest  |                      |            
|income of $14 and $10     | $193                 | $256       
|                          |                      |            
|Income taxes paid         | $15                  | $39        

There were no non-cash investing
activities for the thirteen weeks ended May 1, 2004 and May 3, 2003.

# 8. Contingencies

The Company is involved in legal actions
and claims arising in the ordinary course of business. Management believes that such
litigation and claims will not have a material adverse effect on the Companys
financial position, annual results of operations or cash flows.

In addition, on May 1, 2003, a suit
in California Superior Court, Los Angeles County, styled Erik Stanford vs. United Retail
Incorporated was served on the Company by a former store manager in California. On March
3, 2004, an amended complaint was served that added another plaintiff. The suit is
purportedly a class action on behalf of certain current and former associates in
California in the previous four years.

The plaintiffs in the Stanford case
assert state wage and hour claims.

The Company intends to oppose class certification
strongly and to defend the Stanford case vigorously on the merits.

The Company has recorded an accrual for its estimated losses in the Stanford case.

Although the ultimate outcome of the
Stanford case cannot be predicted at this time, management does not believe that the
amount related to the outcome of the case, beyond the amount already accrued, will have a
material impact on the Companys financial position. An estimate of the range of
reasonably possible losses cannot be made at this stage of the case. However, given the
uncertainty at this stage, it is possible that if either an adverse judgment for damages
is rendered or a negotiated settlement is agreed upon, the amount payable could be
material to the Companys annual results of operations or cash flows.

---

ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE SUMMARY

Introduction

The Executive Summary section of
Managements Discussion and Analysis of Financial Condition and Results of Operations
provides a high level summary of the more detailed information elsewhere in this Report,
an overview to put this information in context and a plan to return the Company to
long-term profitability. This section is also an introduction to the discussion and
analysis that follows. Accordingly, it necessarily omits details that appear elsewhere in
this Report. It should not be relied upon separately from the balance of this Report.

As discussed in Note 2 to the
condensed consolidated financial statements, the balance sheets and the statements of cash flows
have been restated to reflect a change in accounting for construction allowances received
from landlords. As applicable, this Item 2 has been revised to reflect these changes and
to make other incremental disclosures.

Products and Purchasing

The Company is a leading specialty
retailer of womens fashions featuring its proprietary AVENUE® brand. Its product
line features AVENUE® brand large size womens wearing apparel, AVENUE BODY®
brand large size womens undergarments and lingerie and CLOUDWALKERS® brand
womens footwear, as well as AVENUE® brand accessories and gifts.

Most of the Companys products
are made for the Company by contract manufacturing abroad.

Customer Base

The Company serves the mass market in
the United States and targets fashion conscious women between 25 and 55 years of age who
wear large size apparel. Management believes that the number of women in this age range
who wear large size apparel has increased in recent years.

Merchandising and
Marketing

Design is an important aspect of the
Companys products. Many AVENUE® and AVENUE BODY® products are custom
designed. The Company emphasizes a contemporary brand image and consistency of merchandise
quality and fit.

The Company uses direct mail, credit
card statement inserts, in-store signage and e-mail messages in its marketing activities.

Channel of Distribution

The Companys channel of
distribution is retail stores using its AVENUE® trade name. It leased 533 stores in 37
states, principally in strip shopping centers, at June 14, 2004, the filing date of the
original Form 10-Q. The Company also has operated a website at www.avenue.com that sells a
selection of the merchandise that is also on sale in the stores.

Until March 2003, the Company also
mailed catalogs that featured a merchandise selection that included both items in the
stores and similar products.

Increased Competition

The womens retail apparel and
shoe industries are highly competitive. Operating results of businesses in these
industries, especially businesses that emphasize fashionable merchandise, can vary
materially from year to year. The Companys competition includes other specialty
retailers, mass merchants, department stores, discount stores, mail order companies,
television shopping channels and Internet websites. Management believes that total sales
of large size womens apparel from these sources of supply increased in recent years.
Among specialty retailers for large size women like the Company, the competition includes
large store chains that have announced long-term store growth plans to aggressively expand
into additional strip shopping center locations.

Deflationary Price Trend
in Apparel Industry

The Consumer Price Index published by
the U.S. Dept. of Labor, Bureau of Labor Statistics city average for womens and
girls apparel (the CPI) declined 5.0% in fiscal 2001, 1.9% in fiscal
2002 and 1.8% in fiscal 2003. There is no assurance that this deflationary trend will not
continue.

Company Sales Fluctuations

Sales figures and merchandise margins
are central to the Companys profitability. The Company conducts a weekly
interdisciplinary review of sales and merchandise margins and prepares budgets for two
six-month seasons each year, the Spring season and the Fall season. Management uses
comparable store sales (for stores open at least 12 months at the time) as a management
tool.

Seasonal sales and CPI data follow:

|                                 | 2001   | 2002   | 2003   |        |        |       
|-------------------------------- | ------ | ------ | ------ | ------ | ------ | ------
|
|Total store sales ($ millions)*  | $208.8 | $206.7 | $225.1 | $198.7 | $203.5 | $187.7
|Sales per average store ($000's) | $393   | $373   | $406   | $356   | $371   | $344  
|Average number of stores         | 532    | 554    | 555    | 558    | 548    | 545   
|Comparable store sales**         | -3.4%  | -2.1%  | +3.2%  | -5.3%  | -9.3%  | -4.2% 
|Six-month CPI***                 | -3.4%  | -1.6%  | -1.9%  | 0.0%   | -1.4%  | -0.4% 

______* Excluding sales on the internet
and, until March 2003, through a catalog.**A store that is relocated within
the same shopping center or mall is considered comparable. However, if the store is
relocated elsewhere, it is considered a new store and not comparable. A store that is
expanded or contracted is still comparable, i.e., the sales from the remodeled store are
considered comparable. Stores that are closed are not considered comparable. The
comparable store sales calculation is not adjusted for changes in the store sales return
reserve.**U.S. Dept. of Labor, U.S. City Average, Womens and Girls Apparel

Seasonal Operating Results

The declines in sales per average
store from fiscal 2001 to fiscal 2003 adversely affected operating results.

The Company had net income of $0.4
million in fiscal 2001 and incurred net losses of $23.1 million in fiscal 2002 and $19.1
million in fiscal 2003. The Company had operating income of $0.6 million in fiscal 2001
and incurred operating losses of $22.8 million in fiscal 2002 and $18.8 million in fiscal
2003. (Excluding a one-time goodwill write-off, the operating loss in fiscal 2002 was
$17.2 million.)

Product Repositioning Plan

In the womens retail specialty
apparel industry, sales, especially in businesses that emphasize fashionable merchandise,
can vary significantly over time. Sales are volatile because of shifts in consumer
spending patterns, consumer preferences and overall economic conditions; the impact of
increased competition; variations in weather patterns; fluctuations in consumer acceptance
of products; changes in the ability to develop new merchandise; differences in promotional
strategies; and movements in consumer confidence levels. These variables caused the
Companys sales per average store to fluctuate in the past. Thus, recent sales
performance is not necessarily indicative of future sales performance. As a result,
management believes that long-term sales projections within a defined narrow range are not
reliable.

After fiscal 2001, when net income
declined to $0.4 million, the Company incurred net losses. The Company has sought to
return to long-term profitability through a goal of increased sales per average store with
higher merchandise margins. This unrealized financial goal was translated into an
integrated operational plan early in fiscal 2003 that was designed to reposition the
Companys product offering. This plan has four principal components: (i) to improve
the design of the Companys merchandise and thereby differentiate it from
competitors merchandise, (ii) to market more items together as coordinated outfits
rather than separately as individual garments, (iii) to put more emphasis on fashionable
merchandise and less on basic items, and (iv) to raise the level of merchandise
presentation in the store to make shopping easier and to encourage outfit buying. This
plan relies primarily on the Companys intellectual capital. Only small amounts of
financial capital are required to execute the plan.

This section constitutes
forward-looking information under the Reform Act, which is subject to the variables,
uncertainties and other risk factors referred to under the caption Future
Results.

Fluctuation in Store Count

Store counts averaged 543, 557 and
546, respectively, for fiscal 2001, 2002 and 2003. In 2003, the Company opened five stores
and closed 24 stores. In 2004, the Company is planning to open two stores and close
approximately 15-25 stores as part of its normal lease maintenance program. Thus, the
average number of stores is expected to decline further in fiscal 2004.

The annual capital expenditure
budgets after fiscal 2004 will provide for new store construction and other infrastructure
development priorities. Prioritization will be based, among other things, on overall
profitability and the availability of suitable locations at rents and on terms that fit
the Companys financial model for new store construction.

Liquidity

United Retail Group, Inc. and certain
of its subsidiaries (collectively, the Companies) are parties to a Financing
Agreement, dated August 15, 1997, as amended (the Financing Agreement), with
The CIT Group/Business Credit, Inc. (CIT). The Financing Agreement provides
credit on a revolving basis.

In early fiscal 2003, the Company
adopted an integrated operational plan designed to reposition the Companys product
offering. This plan has four principal components: (i) to improve the design of the
Companys merchandise and thereby differentiate it from competitors
merchandise, (ii) to market more items together as coordinated outfits rather than
separately as individual garments, (iii) to put more emphasis on fashionable merchandise
and less on basic items; and (iv) to raise the level of merchandise presentation in the
store to make shopping easier and to encourage outfit buying.

The Company plans to use the
Financing Agreement for its immediate and future working capital needs. Management
believes that the borrowing capacity under the Financing Agreement, together with cash on
hand and current and anticipated cash flow from operations, will be adequate to meet the
Companys working capital and capital expenditure requirements for at least 12 months
after June 14, 2004, the filing date of the original Form 10-Q.

This section constitutes
forward-looking information under the Reform Act and is subject to the variables,
uncertainties and other risk factors referred to under the caption Future
Results.

---

DISCUSSION AND ANALYSIS

This section provides details about
the material line items in the Companys statement of operations.

First Quarter of Fiscal
2004 Versus First Quarter of Fiscal 2003

Net sales for the first quarter of
fiscal 2004 decreased 4.0% from the first quarter of fiscal 2003, to $97.5 million from
$101.5 million.

The components of this decrease in
net sales are as follows:

| |                |                                        
| | -------------- | ---------------------------------------
| | Amount         | Attributable to                        
| | ($2.1) million | 2.2% decrease in comparable store sales
| | 1.0 million    | new stores                             
| | (2.9) million  | closed stores                          
| | -              | other                                  
| | ($4.0) million | Total                                  

Units sold per average store
decreased 1% and average price per unit sold was flat, in comparison to the first quarter
of fiscal 2003.

There was less customer acceptance of
denim, which reduced sales $2.2 million in comparison to sales of denim in the first
quarter of fiscal 2003.

Average number of stores decreased from 550 to 534.  See, "Stores."

Gross profit decreased to $20.9
million in the first quarter of fiscal 2004 from $22.2 million in the first quarter of
fiscal 2003 decreasing as a percentage of net sales to 21.4% from 21.8%. Gross profit as a
percentage of net sales decreased principally because of lower merchandise margins (100
basis points as a percentage of net sales), partially offset by lower marketing expenses
(30 basis points). Merchandise margins were lower because of weaker customer demand.
Marketing expenses declined as a result of fewer mailings to customers. Gross profit
levels in the future will be subject to the uncertainties and other risk factors referred
to under the caption Future Results.

General, administrative and store
operating expenses decreased to $24.0 million in the first quarter of fiscal 2004 from
$26.4 million in the first quarter of fiscal 2003, decreasing as a percentage of net sales
to 24.6% from 26.0%. The percentage decrease was principally because of lower insurance
expense in the current quarter (100 basis points).

The Company incurred operating losses
of $3.1 million in the first quarter of fiscal 2004 and $4.2 million in the first quarter
of the previous year.

The Companys effective tax rate
was 1.5% for the first quarter of fiscal 2004 and 1.8% for the first quarter of fiscal
2003. The primary factor contributing to this rate in each period was that the Company
provides a valuation allowance for its net deferred tax assets. The tax valuation
allowance was increased by $1.3 million in the first quarter of fiscal 2004 and by $2.1
million in the first quarter of fiscal 2003.

The provision for income taxes was
$49,000 for the first quarter of fiscal 2004 and $82,000 for the first quarter of fiscal
2003.

The Company incurred net losses of
$3.4 million in the first quarter of fiscal 2004 and $4.5 million in the first quarter of fiscal 2003.

See, Critical Accounting
Policies for a discussion of estimates made by management in preparing financial
statements in accordance with generally accepted accounting principles.

May Sales Results

Net sales for May 2004 decreased 2.5%
from May 2003, to $36.0 million from $36.9 million. Comparable store sales for the month
declined 1.2%.

Increased Competition

The womens retail apparel and
shoe industries are highly competitive. Operating results of businesses in these
industries, especially businesses that emphasize fashionable merchandise, can vary
materially from year to year. The Companys competition includes other specialty
retailers, mass merchants, department stores, discount stores, mail order companies,
television shopping channels and Internet websites. Management believes that total sales
of large size womens apparel from these sources of supply increased in recent years.
Among specialty retailers for large size women like the Company, the competition includes
large store chains that have announced long-term store growth plans to aggressively expand
into additional strip shopping center locations.

Product Repositioning Plan

In the womens retail specialty
apparel industry, sales, especially in businesses that emphasize fashionable merchandise,
can vary significantly over time. Sales are volatile because of shifts in consumer
spending patterns, consumer preferences and overall economic conditions; the impact of
increased competition; variations in weather patterns; fluctuations in consumer acceptance
of products; changes in the ability to develop new merchandise; differences in promotional
strategies; and movements in consumer confidence levels. These variables caused the
Companys sales per average store to fluctuate in the past. Thus, recent sales
performance is not necessarily indicative of future sales performance. As a result,
management believes that long-term sales projections that fall within a defined narrow
range are not reliable.

After fiscal 2001, when net income
declined to $0.4 million, the Company incurred net losses. The Company has sought to
return to long-term profitability through a goal of increased sales per average store with
higher merchandise margins. This unrealized financial goal was translated into an
integrated operational plan early in fiscal 2003 that was designed to reposition the
Companys product offering. This plan has four principal components: (i) to improve
the design of the Companys merchandise and thereby differentiate it from
competitors merchandise, (ii) to market more items together as coordinated outfits
rather than separately as individual garments, (iii) to put more emphasis on fashionable
merchandise and less on basic items, and (iv) to raise the level of merchandise
presentation in the store to make shopping easier and encourage outfit buying. This plan
relies primarily on the Companys intellectual capital. Only small amounts of
financial capital are required to execute the plan. There is no assurance, however, that
the Companys product repositioning plan will succeed.

This section constitutes
forward-looking information under the Reform Act, which is subject to the uncertainties
and other risk factors referred to under the caption Future Results.

Liquidity and Capital
Resources

This section provides details about
the Companys sources of liquidity.

Cash Flow

Net cash provided from operating
activities was $1.1 million in the first quarter of fiscal 2004 compared with net cash
used in operating activities of $0.1 million in the first quarter of fiscal 2003. This
improvement resulted principally from (i) a larger increase in accounts payable and
accrued expenses ($9.9 million in the first quarter of fiscal 2004 versus $4.9 million in
the first quarter of fiscal 2003) and (ii) a larger improvement in the balance of other
assets and liabilities ($2.6 million versus $0.2 million), primarily from receipt in the
first quarter of fiscal 2004 of a federal income tax refund and related interest,
partially offset by a larger increase in inventory from year end to quarter end ($11.7
million in the first quarter of fiscal 2004 versus $6.3 million in the first quarter of
fiscal 2003).

Balance Sheet Sources of
Liquidity

The Companys cash and cash
equivalents were $14.3 million at May 1, 2004 compared with $12.1 million at May 3, 2003
and $14.4 million at January 31, 2004.

During the first quarter of fiscal
2004, a planned decrease in inventories was implemented. Inventories were stated at $60.8
million at May 1, 2004 compared with $67.8 million at May 3, 2003, principally as a result
of fewer units, and compared with $49.1 million at January 31, 2004. (See, Critical
Accounting Policies  Inventory for a discussion of estimates made by
management in stating inventories in financial statements prepared in accordance with
generally accepted accounting principles.)

Property and equipment decreased to
$88.0 million at May 1, 2004 from $101.2 million at May 3, 2003, principally from
depreciation, compared with $91.7 million at January 31, 2004.

Other Liquidity Sources

Purchases of merchandise directly
imported by the Company are made in U.S. dollars. Direct imports are generally financed by
trade letters of credit. They constituted approximately 53% of total purchases in fiscal
2003.

The Financing Agreement was extended
and expanded during fiscal 2003. The term was extended three years to August 15, 2008. The
line of credit was increased from $40 million to $50 million for the Companies, subject to
availability of credit as described in the following paragraphs. The line of credit may be
used on a revolving basis by any of the Companies to support trade letters of credit and
standby letters of credit and to finance loans. At May 1, 2004, trade letters of credit
for the account of the Companies and supported by CIT were outstanding in the amount of
$22.1 million and standby letters of credit were outstanding in the amount of $5.5
million. Standby letters of credit were used principally in connection with insurance
policies issued to the Company.

Subject to the following paragraph,
the availability of credit (within the aggregate $50 million line of credit) to any of the
Companies at any time is the excess of its borrowing base over the aggregate outstanding
amount of its letters of credit and its revolving loans, if any. The borrowing base, as to
any of the Companies, is (i) the sum of (x) a percentage of the book value of its eligible
inventory (both on hand and unfilled purchase orders financed with letters of credit),
ranging from 65% to 75% depending on the time of year, (y) the balance from time to time
in an account in its name that has been pledged to the lenders (a Pledged
Account) and (z) 85% of certain receivables from credit card companies less (ii)
reserves for rent for stores located in the states of Pennsylvania, Virginia and
Washington and liens other than permitted liens and, at CITs option, a reserve for
sales taxes collected but not yet paid.

The provisions of the preceding
paragraph to the contrary notwithstanding, the Companies are required to maintain unused
at all times combined availability of at least $5 million. Except for the maintenance of a
minimum availability of $5 million and a limit on capital expenditures, the Financing
Agreement does not contain any financial covenants.

The combined borrowing capacity of
the Companies is cyclical due to the seasonality of the retail industry. At May 1, 2004,
the combined borrowing capacity of the Companies, after satisfying the $5 million minimum
availability requirement, was $22.4 million; the Pledged Account had a zero balance; the
Companies cash on hand was unrestricted; and no loan was outstanding.

The line of credit is collateralized
by a security interest in (i) inventory and its proceeds, (ii) receivables from credit
card companies and (iii) the balance from time to time in the Pledged Account.

The Financing Agreement includes
certain restrictive covenants that impose limitations (subject to certain exceptions) on
the Companies with respect to making certain investments, declaring or paying dividends,
making loans, engaging in certain transactions with affiliates, or consolidating, merging
or making acquisitions outside the ordinary course of business.

The Company has drawn on the
revolving loan facility under the Financing Agreement from time to time to meet its peak
working capital requirements. Interest is payable monthly based on a 360-day year either
at the prime rate plus an incremental percentage up to 0.75% per annum or at the LIBOR
rate plus an incremental percentage ranging from 1.75% to 2.50% per annum. The borrower
can select either the prime rate or the LIBOR rate as the basis for determining the
interest rate. In either case, the incremental percentage is determined by the average
excess availability.

The Companys obligation to pay
customs duties on merchandise imports was collateralized by an unsecured surety bond for
$1.5 million during the first quarter of fiscal 2003. The surety bond has been $2.0
million since May 2004. The tightening market for surety bonds has made it necessary for
the Company to support the surety bond with a standby letter of credit under the Financing
Agreement in the amount of $0.5 million.

Short-term trade credit represents a
significant source of financing for merchandise purchases other than merchandise directly
imported by the Company. Trade credit arises from the willingness of the Companys
vendors of these products to grant extended payment terms for inventory purchases and is
generally financed either by the vendor or a third-party factor. The availability of trade
credit depends on the Companys having other sources of liquidity, as well. In
particular, credit authorizations by trade creditors focus on the amount of the
Companys cash and cash equivalents and its borrowing capacity under the Financing
Agreement.

In November 2003, the Company also
agreed in principle with the IRS on the settlement of a matter related to tax refund
claims the Company had filed for research credits and for deductions attributable to
certain bank financing transactions during 1989 to 1992. Although only a preliminary
settlement has been reached with the IRS, in April 2004, the Company received payment from
the IRS in the amount of $2.5 million (which includes $1.2 million representing interest.)
The Company has not received final clearance from the IRS. Upon receipt of final
clearance, the Company will recognize the benefit of the refund claims, including the
related interest thereon. It is anticipated that the $1.3 million refund will be recorded
as an increase to stockholders equity as it relates to stock warrant deductions and
the $1.2 million interest amount will be recorded in the Companys results of
operations. An additional payment estimated to be approximately $0.7 million is also
expected in connection with the claim related to research credits and, when received, this
item would be recorded in the Companys operating results.

Capital Expenditures

This section and the one that follows
provide details about certain uses of cash by the Company.

Capital expenditures in the first
quarter of fiscal 2004 were $0.1 million compared with $0.6 million in the first quarter
of fiscal 2003.

Capital expenditures are projected to
be approximately $2.5 million for fiscal 2004, including implementation of the
Companys product repositioning plan. This paragraph constitutes forward-looking
information under the Reform Act and is subject to the variables, uncertainties and other
risk factors referred to under the caption Future Results.

Pending Litigation

The Company is involved in legal
actions and claims arising in the ordinary course of business. Management believes that
such litigation and claims, net of reserves, will not have a material adverse effect on
the Companys financial position, annual results of operations or cash flows.

In addition, on May 1, 2003, a suit
in California Superior Court, Los Angeles County, styled Erik Stanford vs. United
Retail Incorporated was served on the Company by a former store manager in California.
On March 3, 2004, an amended complaint was served that added another plaintiff. The suit
is purportedly a class action on behalf of certain current and former associates in
California in the previous four years.

The plaintiffs in the Stanford
case assert state wage and hour claims.

The Company intends to oppose class
certification strongly. To the extent that the plaintiffs successfully obtain class
certification, the Company intends to defend the Stanford case vigorously on the
merits.

The Company has recorded an accrual
for its estimated losses in the Stanfordcase.

Although the ultimate overall outcome
of the Stanfordcase can not be predicted at this time, management does not believe
that the amount related to the outcome of the case, beyond the amount already accrued,
will have a material impact on the Companys financial position. An estimate of the
range of reasonably possible losses can not be made at this stage of the case. Given the
uncertainty at this stage, it is possible that if either an adverse judgment for damages
is rendered or a negotiated settlement is agreed upon, the amount payable could be
material to the Companys cash flows and results of operations for the fiscal year in
which the matter is resolved.

Meeting Cash Requirements

The Companys cash requirements
include (i) anticipated working capital needs, including seasonal inventory financing,
(ii) financing activities, including payments due on its principal contractual obligations
and (iii) investing activities, including costs for building the stores that it plans to
open, renovating certain other stores and replacing fixtures where appropriate. Also, the
Stanfordwage and hour class action lawsuit might be settled with Court approval
(see, Pending Litigation).

During the first quarter of fiscal
2004, the Company funded repayments of long term debt and payments on capital lease
obligations and net cash used in investing activities from net cash provided from
operating activities. The Companys historical sources of liquidity have been the
availability of credit under the Financing Agreement on a revolving basis and short-term
trade credit, as well as its cash on hand and net cash provided by operating activities.

The Company plans to use the
Financing Agreement for its immediate and future working capital needs. Management
believes that the borrowing capacity under the Financing Agreement, together with cash on
hand and current and anticipated cash flow from operations, will be adequate to meet the
Companys working capital and capital expenditure requirements for at least 12 months
after June 14, 2004, the filing date of the original Form 10-Q.

In the womens retail specialty
apparel industry, operating results of businesses, especially businesses that emphasize
fashionable merchandise, can vary significantly over time because of shifts in consumer
spending patterns, consumer preferences and overall economic conditions; the impact of
increased competition and pricing; variations in weather patterns; fluctuations in
consumer acceptance of products; and changes in the ability to develop new merchandise.

This section constitutes
forward-looking information under the Reform Act and is subject to the variables,
uncertainties and other risk factors referred to under the caption Future
Results.

Critical Accounting
Policies

Introduction

This section discusses the
Companys critical accounting policies.

Financial statements prepared by
companies in accordance with generally accepted accounting principles are affected by the
policies followed by management in preparing them. Some accounting policies require
difficult, subjective or complex judgments by corporate management, often as a result of
the need to make estimates about the effect of matters that are inherently uncertain.
Among the most important accounting policies of the Company that involve such management
judgments are (i) the use of the retail method of accounting for inventory, (ii) the use
of estimates of incurred but not reported claims for uninsured damages for personal
injuries and workers compensation benefits and for benefits under the Companys
self-insured medical, dental and prescription plans for its associates, as well as future
development costs of reported claims (collectively, IBNR Claims) and (iii)
determining whether to continue the valuation allowance for the Companys net
deferred tax assets, including NOLs.

Inventory

In accordance with generally accepted
accounting principles, inventories are stated at the lower of cost or market. The Company
utilizes the retail method, under which a cost-to-price relationship is developed on the
basis of original cost as compared to initial retail selling price. The valuation of
inventories at cost and the resulting margins are calculated by applying this
cost-to-price relationship to the retail value of inventories. Consequently, the use of
the retail inventory method results in valuing inventories at lower of cost or market.

Inherent in the retail inventory
method are management estimates on current and future selling value of the inventory.
These estimates, which are described in the following paragraphs, can significantly impact
the ending inventory valuation at cost, as well as resulting margins. In the womens
retail specialty apparel industry, sales, especially in businesses that emphasize
fashionable merchandise, can vary significantly over time. Sales are volatile because of
shifts in consumer spending patterns, consumer preferences and overall economic
conditions; the impact of competition and pricing; variations in weather patterns;
fluctuations in consumer acceptance of the Companys products; changes in the ability
to develop new merchandise; differences in promotional strategies; and movements in
consumer confidence levels. The necessity for management estimates based on these
variables, coupled with the fact that the retail inventory method is an averaging process,
can produce inventory valuations at any point in time that are inexact.

Permanent markdowns, when taken,
reduce both the price and cost components of inventory on hand, which maintains the
established cost-to-price relationship. Deferred markdowns can result in an overstatement
of inventories under the lower of cost or market principle. Accordingly, at the end of
each fiscal year, management conducts a thorough review of inventory on hand. Based on
managements business judgment, the Company may reduce further the carrying value of
inventories by recording a markdown reserve. Markdown reserves are established for
inventory categories with sales performance below expectations and/or unsold quantities in
excess of expectations.

At the end of the first fiscal
quarter of each year, management values prior season merchandise to achieve historical
margin rates. A markdown reserve is established to reduce the carrying value of the prior
season merchandise. Also, a markdown reserve is established by management to reduce the
carrying value of obsolete categories of merchandise to their estimated net realizable
value.

The markdown reserves at the end of
the first quarter of fiscal 2004, fiscal 2003 and fiscal 2002, respectively, ranged from a
high of $1.0 million to a low of $0.2 million. Giving effect to these reserves,
inventories were stated at approximately $60.8 million at May 1, 2004, $67.8 million at
May 3, 2003 and $72.3 million at May 4, 2002.

Markdown reserves are likely to
continue to fluctuate, principally because the market environment is dynamic for the
reasons set forth above.

Recording a reserve reduces the
inventory on the Companys balance sheet and is charged to the Companys cost of
sales. If inventories, net of reserves, were overestimated at the end of a period, assets
and income for that period would be overstated and margins for the beginning of the next
period would be lower. (The opposite would be true if inventories were underestimated.)

Management believes that the
inventories shown on all the balance sheets included in the
financial statements contained in this Report were properly stated in all material
respects. Further, margins in the quarter that followed May 3, 2003 were within the
historical range of margins for the second fiscal quarter, indicating that the inventory
valuation at May 3, 2003 was estimated properly.

Incurred But Not Reported
Claims For Personal Injuries and Medical Benefits

The Company records a liability for
IBNR Claims which is based on (i) the number and size of outstanding claims, (ii) a
comparison between the dates paid claims were incurred and the dates they were paid, (iii)
an analysis of the amounts previously paid, (iv) projections of inflation in medical costs
and (v) advice from time to time from its insurance broker. The Company has insurance
policies with coverage for auto, general liability and workers compensation claims
but it remains liable for a self-insured retention of $0.1 million for each auto claim and
$0.3 million for each general liability and workers compensation claim. The Company
is self-insured for its medical, dental and prescription plans for associates. The Company
currently has stop loss insurance coverage for medical claims over $0.2 million each with
an aggregate limit of $6.9 million.

To estimate its casualty (auto,
general liability and workers compensation) IBNR, the Company uses policy year (July
1) maturation factors based on the Companys history of claim development (currently
eight fully developed years; the high and low year factors are excluded to arrive at an
average). Another possible methodology would be to use industry maturation factors.

The Company estimates its health
claims IBNR by (i) dividing the run-off amounts (claims paid after a policy
expired without being renewed) by claims paid during the last policy year (December 31)
and (ii) applying the resulting percentage to the trailing 12 months of paid claims at the
time of the calculation. An alternative methodology would be to use industry factors.

The Company believes that industry
factors are less reliable because they are broad based.

If the outcome of claims made with respect
to a fiscal period were to exceed the recorded IBNR liability for that period, the
liabilities on the balance sheet would have been understated and income would have been
overstated for the period in question. (The opposite would be true if the subsequent
outcome was less than the recorded IBNR liability.) The estimates underlying the liability
for IBNR Claims are matters of judgment on which insurance experts may differ.

As the use of different estimates
would change the IBNR liability recorded materially, a consistent approach to estimating
liability for IBNR Claims is one of the Companys important accounting objectives.

Management believes that the
liabilities for IBNR Claims reflected in all the balance sheets included in the financial
statements contained in this Report were fairly stated in all material respects, subject
to the uncertainties of litigation and the risk of different than anticipated inflation in
medical costs.

Tax Valuation Allowance

In fiscal 2002, the Company recorded
a $7.3 million charge to establish a valuation allowance for its net deferred tax assets.
The tax valuation allowance was calculated in accordance with the provisions of SFAS No.
109, Accounting for Income Taxes (SFAS No. 109), which places
significant importance on the Companys cumulative operating results in the most
recent three-year period when assessing the need for a tax valuation allowance. The tax
valuation allowance was increased by $12.6 million in fiscal 2003 and by $1.3 million in
the first quarter of fiscal 2004.

The Company intends to maintain a
valuation allowance for its net deferred tax assets until management determines that
sufficient positive evidence regarding operating results exists to support reversal of the
allowance remaining at that time. A reversal of the tax valuation allowance would improve
the Companys net income/loss. Accordingly, whether to continue a tax valuation
allowance is one of the Companys important accounting matters.

Private Label Credit
Cards Issued By The Bank

The Company and World Financial
Network National Bank (the Bank) are parties to a Private Label Credit Card
Program Agreement, dated January 27, 1998 (as amended, the Credit Card Program
Agreement).

Under the Credit Card Program
Agreement, the Bank issues credit cards to eligible Company customers who apply to the
Bank. Net credit sales volume with the Bank increased to $27.5 million in the first
quarter of fiscal 2004 from $25.2 million in the first quarter of fiscal 2003. Customers
must meet standards for creditworthiness set by the Bank with the approval of the Company,
provided, however, that the Bank shall take any actions required to prevent unsafe and
unsound banking practices. The credit cards issued by the Bank are co-branded with both
the Companys AVENUE service mark and the Banks name. The credit cards are used
only for merchandise and services offered by the Company. Credit card holders remit
payments to the Bank, generally by mailing personal checks. The Bank also handles all
statement processing, payment processing, cardholder customer service and collections from
delinquent cardholders.

In accordance with generally accepted
accounting principles, the Company does not include the receivable asset created under the
Credit Card Program Agreement in the Companys accounts receivable on its balance
sheets because the Company has no interest in the customer accounts or receivables. In
this connection, it should be noted that the Credit Card Program Agreement states that (i)
the Bank is the sole and exclusive owner of all customer accounts, (ii) the Company has no
interest in the customer accounts and (iii) the Bank is the creditor in respect of
receivables (defined in the Credit Card Program Agreement as amounts owed with respect to
retail purchases, finance charges, deferred finance charges, other fees and charges for
sales tax). Also, depending on the circumstances, the Company might not purchase the
accounts from the Bank upon the expiration of the contractual term.

The Credit Card Program Agreement is
currently scheduled to expire on February 28, 2007. The Company shall then have the right
to purchase the customer accounts from the Bank for a price equal to the receivables.
Also, the Bank shall then have the right to sell the customer accounts to the Company at
that price if the Company commences a private label credit card program either on its own
or through another issuer of credit cards. When the Credit Card Program Agreement is about
to expire without being renewed, the Company is likely to submit requests for proposals to
other banks that issue private label credit cards to retailers customers and to use
the banks proposals to evaluate a continuation of the private label credit card
program. There is no assurance, however, that other banks would make proposals to continue
the program on terms satisfactory to the Company or that the Company could finance a
program on its own without involving a bank.

Receivables as defined in the Credit
Card Program Agreement at the close of the last billing cycle in the quarter were $70.7
million at May 1, 2004 and $71.5 million at May 3, 2003.

The credit card program premium (or,
potentially, discount) reflected in general, administrative and store operating expenses
is an amount equal to royalties paid to the Company by the Bank minus costs charged by the
Bank. Costs are based on the volume of credit card program processing activities performed
by the Bank.

General, administrative and store
operating expenses were offset in part by premiums received from the Bank of $1.0 million
in the first quarter of fiscal 2004 and $0.7 million in the first quarter of fiscal 2003.
The increase in premiums from the Bank was primarily due to a decrease in bad debt
write-offs by the Bank.

Royalties are based on program
revenues minus receivables written off by the Bank and the cost of funds for the program.
For up to the first $85 million of receivables, cost of funds means the one-year Constant
Maturities Treasury (CMT) rate plus 25 basis points to be reset every three
months (the published CMT rate was 1.55% per annum at May 1, 2004). However, the CMT rate
shall not be more than 6.75% per annum and not be less than 5.00% per annum for the
purpose of this calculation. (The Banks receivables for the program were less than
$85 million at May 1, 2004, but, if they grew larger than that amount, the cost of funds
for the excess would be based primarily on the cost of borrowing of a trust for the
purpose of securitizing receivables.)

Stores

The Companys channel of
distribution is retail stores using its AVENUE® trade name. The Company leased 533
stores at May 1, 2004.

Store counts averaged 543, 557 and
546, respectively, for fiscal 2001, 2002 and 2003. In 2003, the Company opened five stores
and closed 24 stores. In 2004, the Company is planning to open two stores and close
approximately 15-25 stores as part of its normal lease maintenance program. Thus, the
average number of stores is expected to decline further in fiscal 2004. This paragraph
includes forward-looking information under the Reform Act, which is subject to the
variables, uncertainties and other risk factors referred to under the caption Future
Results.

The annual capital expenditure
budgets after fiscal 2004 will provide for new store construction and other infrastructure
development priorities. Prioritization will be based, among other things, on overall
profitability and the availability of suitable locations at rents and on terms that fit
the Companys financial model for new store construction.

Retail selling space was
approximately 2.3 million square feet at May 1, 2004 and 2.4 million square feet at May 3,
2003.

Depreciation and amortization of
property and equipment relate principally to assets in stores and were $3.7 million in the
first quarter of fiscal 2004 and $3.8 million in the first quarter of fiscal 2003.

E-Commerce

The Company has an Internet site
(www.avenue.com) that sells a selection of the merchandise that is also for sale in the
Companys stores. The Company ships its avenue.com orders from its national
distribution center in Troy, Ohio.

Sales on the website have not been
material to the Companys operations.

Suspension of Catalog
Operations

The Company mailed catalogs until
March 2003, when the Company suspended catalog mailings indefinitely.

Stock Repurchases

The Company did not repurchase shares
of its own stock in the first quarter of fiscal 2004. The Company has no plans to
repurchase shares of its own stock at present except with trust funds under the
Companys Supplemental Retirement Savings Plan to satisfy obligations that are
expected to arise under that plan to invest a portion of participants accounts in
Company stock.

Corporate Acquisition
Reviews

As a matter of routine, the Company
from time to time conducts due diligence reviews of businesses that are either
for sale as a going concern or are in liquidation. The Company would consider making a bid
on a suitable corporate acquisition at an opportune price if adequate financing at
acceptable rates were available.

Future Results

The Company cautions that any
forward-looking statements (as such term is defined in the Reform Act) contained in this
Report or otherwise made by management of the Company involve risks and uncertainties and
are subject to change based on various important factors, many of which may be beyond the
Companys control. Accordingly, the Companys future performance and financial
results may differ materially from those expressed or implied in any such forward-looking
statements.

The following factors, among others,
could affect the Companys actual results and could cause actual results to differ
materially from those expressed or implied in any forward-looking statements included in
this Report or otherwise made by management: threats of terrorism; war risk; shifts in
consumer spending patterns, consumer preferences and overall economic conditions; the
impact of competition and pricing; variations in weather patterns; fluctuations in
consumer acceptance of the Companys products; changes in the ability to develop new
merchandise; store lease expirations; risks associated with the financial performance of
the World Financial Network National Bank private label credit card program; increases in
interest rates; the ability to retain, hire and train key personnel; risks associated with
the ability of the Companys manufacturers to deliver products in a timely manner;
political instability and other risks associated with foreign sources of production and
increases in fuel costs. Also, in the fourth quarter of fiscal 2004, the transition from
the international quota system for apparel may disrupt imports into the United States.
Further, the Stanford wage and hour class action lawsuit might be settled or go to
trial (see, Pending Litigation). As a result of these variables, risks and
uncertainties, the projections made in this Report may not be reliable.

The Company assumes no obligation to
update any forward-looking statement.

ITEM 4. CONTROLS AND
PROCEDURES

In December 2004, the Company
re-evaluated the manner in which it accounts for construction allowances and other
concessions from landlords of retail stores leased by the Company (Construction
Allowances) on its balance sheets and statements of cash flows. The Companys
accounting for Construction Allowances on its statements of operations has complied with
Statement of Financial Accounting Standards No. 13 (SFAS 13) and FASB
Technical Bulletin No. 88-1 (FTB 88-1) because Construction Allowances have
been amortized over the minimum lease term on a straight-line basis, as part of buying and
occupancy costs. However, in its detailed accounts, the Company historically followed the
practice of recording this amortization as a reduction of depreciation expense, rather
than rent expense. Additionally, on the Companys balance sheets, the unamortized
portion of Construction Allowances was netted against fixed assets and not presented as a
deferred credit. Further, the Companys statements of cash flows reflected
Construction Allowances received as a reduction of capital expenditures (within
investing cash flows), rather than as an operating lease activity (within
operating cash flows).

The Company, in consultation with and
with the concurrence of the Companys independent registered public accounting firm,
is changing the manner in which it accounts for Construction Allowances to provide for,
pursuant to SFAS 13 and FTB 88-1, the establishment of a deferred credit on the balance
sheets for the unamortized portion of Construction Allowances, rather than netting these
amounts against fixed assets. Further, the Company will present Construction Allowances
received within operating activities on the statements of cash flows. These
changes to the accounting presentation of Construction Allowances are reflected in the
balance sheets and statements of cash flows included in this Amendment.

In addition, this Amendment includes
conforming changes to the financial statement footnotes and Managements Discussion
and Analysis of Financial Condition and Results of Operations.

Based on the definition of the term
material weakness in the Public Company Accounting Oversight Boards
Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting
Performed in Conjunction With an Audit of Financial Statements,theneed to
file amendments to restate financial statements in prior filings with the Securities and
Exchange Commission indicates the existence of a material weakness in the
design or operation of internal control over financial reporting. Management notified the
Audit Committee of the Board of Directors and the Companys independent registered
public accounting firm of this matter.

The Company also performed its
evaluation, in which the Companys Chief Executive Officer and Chief Financial
Officer (the CEO and CFO) participated, of the effectiveness of
its disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e),
Disclosure Controls) with respect to information required to be disclosed by
the Company (Disclosures) in filings with the Commission. Based on the issue
that they identified in the Companys accounting for Construction Allowances and
certain other matters, the CEO and CFO each concluded that the Disclosure Controls were
not effective as of May 1, 2004 in providing reasonable assurance that Disclosures were
(i) recorded, accumulated, processed, summarized and communicated to him on a timely basis
and (ii) reported within the time periods specified in the Commissions rules and
forms. The Company is currently studying ways (i) to strengthen its evaluation and
monitoring of ongoing compliance with leasing matters and other generally accepted
accounting principles and (ii) to ensure that it has appropriate staffing in its financial
reporting function with qualifications for evaluating ongoing compliance with relevant
accounting and financial reporting requirements.

During the first quarter of fiscal
2004, there were no changes in the Companys internal control over financial
reporting that materially affected or are reasonably likely to materially affect internal
control over financial reporting.

---

# PART II  OTHER
INFORMATION

# ITEM 6. EXHIBITS AND REPORTS
ON FORM 8-K

(a)    
          The following exhibit is filed herewith:

|Number | Description                           
|------ | --------------------------------------
|31     | Certifications pursuant to Section 302

Certifications pursuant to Section
906 are furnished as Exhibit 32 hereto

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended May 1, 2004 is
incorporated herein by reference.

|Number in Filing | Description                                                                   
|---------------- | ------------------------------------------------------------------------------
|10*              | Bonus Agreement, dated May 28, 2004, between the Corporation and Joann Fielder

The following exhibits to the
Corporations Annual Report on Form 10-K for the year ended January 31, 2004 are
incorporated herein by reference.

|Number in Filing | Description                                                                                 
|---------------- | --------------------------------------------------------------------------------------------
|3                | Restated By-laws of the Corporation                                                         
|10.1*            | Form of Tandem Bonus Plan Agreement                                                         
|10.2             | Form of Indemnification Agreement between the Corporation and each of its Directors         
|14               | Code of Ethics for Principal Executive and Senior Financial Officers pursuant to Section 406

The following exhibit to the
Corporations Current Report on Form 8-K filed on January 8, 2004 is incorporated
herein by reference:

|Number in Filing | Description                                                                                                                                                                                          
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10               | Amendment, dated December 23, 2003, to Financing Agreement among the Corporation, United
Retail Incorporated, Cloudwalkers, Inc. and The CIT Group/Business Credit, Inc., as Agent and Lender ("CIT")

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended August 2, 2003 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                          
|---------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1*            | Amendment, dated September 2, 2003, to Employment Agreement, dated November 20, 1998, between the Corporation and Raphael Benaroya ("Benaroya Employment Agreement") 
|10.2*            | Amendment, dated September 2, 2003, to Employment Agreement, dated November 20, 1998, between the Corporation and George R. Remeta ("Remeta Employment Agreement")   
|10.3*            | Amendment, dated September 2, 2003, to Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll ("Carroll Employment Agreement")
|21               | Subsidiaries of the Corporation                                                                                                                                      

The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the period ended May 3, 2003 is
   incorporated herein by reference:

|Number in Filing | Description                                                         
|---------------- | --------------------------------------------------------------------
|10*              | Amendments to Restated Supplemental Retirement Savings Plan ("SRSP")

The 2003 Stock Option Plan set forth
as the appendix to the Corporations proxy statement on Schedule 14A for its 2003
annual meeting of stockholders is incorporated herein by reference.*

The following exhibits to the
Corporations Annual Report on Form 10-K, as amended, for the year ended February 1,
2003 are incorporated herein by reference:

|Number in Filing | Description                                                                                                                            
|---------------- | ---------------------------------------------------------------------------------------------------------------------------------------
|10.1             | Amendment, dated January 31, 2003, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT
|10.2*            | Amendment to SRSP                                                                                                                      

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended November 2, 2002 are
incorporated herein by reference:

|Number in Filing | Description                                                        
|---------------- | -------------------------------------------------------------------
|10.1*            | Amendment, dated December 6, 2002, to Benaroya Employment Agreement
|10.2*            | Amendment, dated December 6, 2002, to Remeta Employment Agreement  
|10.3*            | Amendment, dated December 6, 2002, to Carroll Employment Agreement 

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended August 3, 2002 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                          
|---------------- | -------------------------------------------------------------------------------------------------------------------------------------
|10.1             | Amendment, dated August 2, 2002, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT
|10.2*            | Amendment to SRSP                                                                                                                    
|10.3             | Purchase and Sale Agreement, dated as of July 1, 2002, between Raphael Benaroya and the Corporation                                  

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended May 4, 2002 is
incorporated herein by reference:

|Number in Filing | Description                                                    
|---------------- | ---------------------------------------------------------------
|10.1*            | Amendment, dated May 30, 2002, to Benaroya Employment Agreement

The following exhibits to the
Corporations Annual Report on Form 10-K for the year ended February 2, 2002 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                                                                                                          
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1             | Amendment, dated April 5, 2002, to Private Label Credit Card Program Agreement, dated January 27, 1998, between the Corporation, United Retail Incorporated and World Financial
Network National Bank ("Private Label Credit Card Program Agreement")
|10.2             | Amendment, dated December 29, 1999, to Private Label Credit Card Program Agreement                                                                                                                                                                   
|10.3             | Amendment, dated August 19, 1999, to Private Label Credit Card Program Agreement                                                                                                                                                                     
|10.4*            | Letter, dated March 1, 2002, from the Corporation to Raphael Benaroya with respect to the
cost of living adjustment under the Benaroya Employment Agreement                                                                                          

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended November 3, 2001 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                   
|---------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1*            | Amendment, dated November 29, 2001, to Benaroya Employment Agreement                                                                                          
|10.2*            | Amendment, dated November 29, 2001, to Remeta Employment Agreement                                                                                            
|10.3*            | Amendment, dated November 29, 2001, to Carroll Employment Agreement                                                                                           
|10.4*            | Summary Plan Description for United Retail Group, Inc. Incentive Compensation Program for Executives                                                          
|10.5             | Amendment, dated October 1, 2001, to Private Label Credit Card Program Agreement (Confidential portions filed separately with the Secretary of the Commission)
|10.6*            | Promissory note, dated November 30, 2001, from Raphael Benaroya to the Corporation (paid as of July 1, 2002)                                                  

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended August 4, 2001 is
incorporated herein by reference:

|Number in Filing | Description                            
|---------------- | ---------------------------------------
|10.1*            | Restated Stock Appreciation Rights Plan

The 2001 Stock Option Plan set forth
as an appendix to the Corporations proxy statement on Schedule 14A for its 2001
annual meeting of stockholders is incorporated herein by reference.*

The following exhibit to the
Corporations Registration Statement on Form S-8 (Registration No. 333-44868) is
incorporated herein by reference:

|Number in Filing | Description                                                                                                                           
|---------------- | --------------------------------------------------------------------------------------------------------------------------------------
|10               | Amendment, dated August 21, 2000, to Financing Agreement among the Corporation,
United Retail Incorporated, Cloudwalkers, Inc. and CIT

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended October 28, 2000 are
incorporated herein by reference:

|Number in Filing | Description                                                       
|---------------- | ------------------------------------------------------------------
|10.1*            | Amendment, dated August 18, 2000, to Benaroya Employment Agreement
|10.2*            | Amendment, dated August 18, 2000, to Carroll Employment Agreement 

The following exhibits to the
Corporations Annual Report on Form 10-K for the year ended January 29, 2000 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                 
|---------------- | --------------------------------------------------------------------------------------------------------------------------------------------
|10.2             | Amendment, dated December 28, 1999, to Financing Agreement among the Corporation, United Retail Incorporated and CIT ("Financing Agreement")
|10.3             | Amendment, dated January 31, 2000, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT     

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended October 30, 1999 is
incorporated herein by reference:

|Number in Filing | Description                                             
|---------------- | --------------------------------------------------------
|10.1             | Amendment, dated October 6, 1999, to Financing Agreement

The following exhibit to the
Corporations Current Report on Form 8-K, filed September 23, 1999, is incorporated
herein by reference:

|Number in Filing | Description                                                                                        
|---------------- | ---------------------------------------------------------------------------------------------------
|3                | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock

The stockholders rights plan
filed as the exhibit to the Corporations Registration Statement on Form 8-A, dated
September 15, 1999, is incorporated herein by reference.

The following exhibit to the
Corporations Annual Report on Form 10-K for the year ended January 30, 1999 is
incorporated herein by reference:

|Number in Filing | Description                                            
|---------------- | -------------------------------------------------------
|10.1             | Amendment, dated March 29, 1999, to Financing Agreement

The 1999 Stock Option Plan set forth
as the Appendix to the Corporations proxy statement on Schedule 14A for its 1999
annual meeting of stockholders is incorporated herein by reference.*

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended October 31, 1998 are
incorporated herein by reference:

|Number in Filing | Description                  
|---------------- | -----------------------------
|10.1*            | Benaroya Employment Agreement
|10.2*            | Remeta Employment Agreement  
|10.3*            | Carroll Employment Agreement 

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended May 2, 1998 are
incorporated herein by reference:

|Number in Filing | Description                                                                                  
|---------------- | ---------------------------------------------------------------------------------------------
|10.1*            | 1998 Stock Option Agreement, dated May 21, 1998, between the Corporation and Raphael Benaroya
|10.2*            | 1998 Stock Option Agreement, dated May 21, 1998, between the Corporation and George R. Remeta

The following exhibits to the
Corporations Annual Report on Form 10-K for the year ended January 31, 1998 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                                        
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1             | Restated Stockholders' Agreement, dated December 23, 1992, between the Corporation and certain of its
stockholders and Amendment No. 1, Amendment No. 2 and Amendment No. 3 thereto
|10.2             | Private Label Credit Card Program Agreement                                                                                                                                        
|10.4*            | Restated 1990 Stock Option Plan as of March 6, 1998                                                                                                                                
|10.5*            | Restated 1990 Stock Option Plan as of May 28, 1996                                                                                                                                 
|10.6*            | Restated 1996 Stock Option Plan as of March 6, 1998                                                                                                                                

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended November 1, 1997 is
incorporated herein by reference:

|Number in Filing | Description                                                
|---------------- | -----------------------------------------------------------
|10.1             | Amendment, dated September 15, 1997, to Financing Agreement

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended August 2, 1997 are
incorporated herein by reference:

|Number in Filing | Description        
|---------------- | -------------------
|10.1             | Financing Agreement
|10.2*            | Amendment to SRSP  

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended November 2, 1996 is
incorporated herein by reference:

|Number in Filing | Description
|---------------- | -----------
|10.1*            | SRSP       

The following exhibits to the
Corporations Registration Statement on Form S-1 (Registration No. 33-44499), as
amended, are incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                                      
|---------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1              | Amended and Restated Certificate of Incorporation of the Corporation                                                                                                             
|4.1              | Specimen Certificate for Common Stock of the Corporation                                                                                                                         
|10.2.1           | Software License Agreement, dated as of April 30, 1989, between The Limited Stores, Inc.
and Sizes Unlimited, Inc. (now known as United Retail Incorporated) ("Software License")
|10.2.2           | Amendment, dated December 10, 1991, to Software License                                                                                                                          

---

*A compensatory plan for the benefit
of the Corporations management or a management contract.

|(b) | During the first quarter of fiscal 2004, the Company filed a Current Report on
          Form 8-K, dated February 17, 2004, to furnish summary financial information for
          the fourth quarter of fiscal 2003.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

# SIGNATURES

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

(Registrant)    
          UNITED RETAIL GROUP, INC.

|                        |                                                                                                                                                 
|----------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------
|Date: February 16, 2005 | By: /s/GEORGE R. REMETAGeorge R. RemetaVice Chairman of the Board,Chief Administrative Officerand Chief Financial Officer - Authorized Signatory

---

EXHIBIT INDEX

(a)    
          The following exhibit is filed herewith:

|Number | Description                           
|------ | --------------------------------------
|31     | Certifications pursuant to Section 302

Certifications pursuant to Section
906 are furnished as Exhibit 32 hereto

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended May 1, 2004 is
incorporated herein by reference.

|Number in Filing | Description                                                                   
|---------------- | ------------------------------------------------------------------------------
|10*              | Bonus Agreement, dated May 28, 2004, between the Corporation and Joann Fielder

The following exhibits to the
Corporations Annual Report on Form 10-K for the year ended January 31, 2004 are
incorporated herein by reference.

|Number in Filing | Description                                                                                 
|---------------- | --------------------------------------------------------------------------------------------
|3                | Restated By-laws of the Corporation                                                         
|10.1*            | Form of Tandem Bonus Plan Agreement                                                         
|10.2             | Form of Indemnification Agreement between the Corporation and each of its Directors         
|14               | Code of Ethics for Principal Executive and Senior Financial Officers pursuant to Section 406

The following exhibit to the
Corporations Current Report on Form 8-K filed on January 8, 2004 is incorporated
herein by reference:

|Number in Filing | Description                                                                                                                                                                                          
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10               | Amendment, dated December 23, 2003, to Financing Agreement among the Corporation, United
Retail Incorporated, Cloudwalkers, Inc. and The CIT Group/Business Credit, Inc., as Agent and Lender ("CIT")

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended August 2, 2003 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                          
|---------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1*            | Amendment, dated September 2, 2003, to Employment Agreement, dated November 20, 1998, between the Corporation and Raphael Benaroya ("Benaroya Employment Agreement") 
|10.2*            | Amendment, dated September 2, 2003, to Employment Agreement, dated November 20, 1998, between the Corporation and George R. Remeta ("Remeta Employment Agreement")   
|10.3*            | Amendment, dated September 2, 2003, to Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll ("Carroll Employment Agreement")
|21               | Subsidiaries of the Corporation                                                                                                                                      

The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the period ended May 3, 2003 is
   incorporated herein by reference:

|Number in Filing | Description                                                         
|---------------- | --------------------------------------------------------------------
|10*              | Amendments to Restated Supplemental Retirement Savings Plan ("SRSP")

The 2003 Stock Option Plan set forth
as the appendix to the Corporations proxy statement on Schedule 14A for its 2003
annual meeting of stockholders is incorporated herein by reference.*

The following exhibits to the
Corporations Annual Report on Form 10-K, as amended, for the year ended February 1,
2003 are incorporated herein by reference:

|Number in Filing | Description                                                                                                                            
|---------------- | ---------------------------------------------------------------------------------------------------------------------------------------
|10.1             | Amendment, dated January 31, 2003, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT
|10.2*            | Amendment to SRSP                                                                                                                      

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended November 2, 2002 are
incorporated herein by reference:

|Number in Filing | Description                                                        
|---------------- | -------------------------------------------------------------------
|10.1*            | Amendment, dated December 6, 2002, to Benaroya Employment Agreement
|10.2*            | Amendment, dated December 6, 2002, to Remeta Employment Agreement  
|10.3*            | Amendment, dated December 6, 2002, to Carroll Employment Agreement 

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended August 3, 2002 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                          
|---------------- | -------------------------------------------------------------------------------------------------------------------------------------
|10.1             | Amendment, dated August 2, 2002, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT
|10.2*            | Amendment to SRSP                                                                                                                    
|10.3             | Purchase and Sale Agreement, dated as of July 1, 2002, between Raphael Benaroya and the Corporation                                  

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended May 4, 2002 is
incorporated herein by reference:

|Number in Filing | Description                                                    
|---------------- | ---------------------------------------------------------------
|10.1*            | Amendment, dated May 30, 2002, to Benaroya Employment Agreement

The following exhibits to the
Corporations Annual Report on Form 10-K for the year ended February 2, 2002 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                                                                                                          
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1             | Amendment, dated April 5, 2002, to Private Label Credit Card Program Agreement, dated January 27, 1998, between the Corporation, United Retail Incorporated and World Financial
Network National Bank ("Private Label Credit Card Program Agreement")
|10.2             | Amendment, dated December 29, 1999, to Private Label Credit Card Program Agreement                                                                                                                                                                   
|10.3             | Amendment, dated August 19, 1999, to Private Label Credit Card Program Agreement                                                                                                                                                                     
|10.4*            | Letter, dated March 1, 2002, from the Corporation to Raphael Benaroya with respect to the
cost of living adjustment under the Benaroya Employment Agreement                                                                                          

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended November 3, 2001 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                   
|---------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1*            | Amendment, dated November 29, 2001, to Benaroya Employment Agreement                                                                                          
|10.2*            | Amendment, dated November 29, 2001, to Remeta Employment Agreement                                                                                            
|10.3*            | Amendment, dated November 29, 2001, to Carroll Employment Agreement                                                                                           
|10.4*            | Summary Plan Description for United Retail Group, Inc. Incentive Compensation Program for Executives                                                          
|10.5             | Amendment, dated October 1, 2001, to Private Label Credit Card Program Agreement (Confidential portions filed separately with the Secretary of the Commission)
|10.6*            | Promissory note, dated November 30, 2001, from Raphael Benaroya to the Corporation (paid as of July 1, 2002)                                                  

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended August 4, 2001 is
incorporated herein by reference:

|Number in Filing | Description                            
|---------------- | ---------------------------------------
|10.1*            | Restated Stock Appreciation Rights Plan

The 2001 Stock Option Plan set forth
as an appendix to the Corporations proxy statement on Schedule 14A for its 2001
annual meeting of stockholders is incorporated herein by reference.*

The following exhibit to the
Corporations Registration Statement on Form S-8 (Registration No. 333-44868) is
incorporated herein by reference:

|Number in Filing | Description                                                                                                                           
|---------------- | --------------------------------------------------------------------------------------------------------------------------------------
|10               | Amendment, dated August 21, 2000, to Financing Agreement among the Corporation,
United Retail Incorporated, Cloudwalkers, Inc. and CIT

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended October 28, 2000 are
incorporated herein by reference:

|Number in Filing | Description                                                       
|---------------- | ------------------------------------------------------------------
|10.1*            | Amendment, dated August 18, 2000, to Benaroya Employment Agreement
|10.2*            | Amendment, dated August 18, 2000, to Carroll Employment Agreement 

The following exhibits to the
Corporations Annual Report on Form 10-K for the year ended January 29, 2000 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                 
|---------------- | --------------------------------------------------------------------------------------------------------------------------------------------
|10.2             | Amendment, dated December 28, 1999, to Financing Agreement among the Corporation, United Retail Incorporated and CIT ("Financing Agreement")
|10.3             | Amendment, dated January 31, 2000, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT     

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended October 30, 1999 is
incorporated herein by reference:

|Number in Filing | Description                                             
|---------------- | --------------------------------------------------------
|10.1             | Amendment, dated October 6, 1999, to Financing Agreement

The following exhibit to the
Corporations Current Report on Form 8-K, filed September 23, 1999, is incorporated
herein by reference:

|Number in Filing | Description                                                                                        
|---------------- | ---------------------------------------------------------------------------------------------------
|3                | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock

The stockholders rights plan
filed as the exhibit to the Corporations Registration Statement on Form 8-A, dated
September 15, 1999, is incorporated herein by reference.

The following exhibit to the
Corporations Annual Report on Form 10-K for the year ended January 30, 1999 is
incorporated herein by reference:

|Number in Filing | Description                                            
|---------------- | -------------------------------------------------------
|10.1             | Amendment, dated March 29, 1999, to Financing Agreement

The 1999 Stock Option Plan set forth
as the Appendix to the Corporations proxy statement on Schedule 14A for its 1999
annual meeting of stockholders is incorporated herein by reference.*

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended October 31, 1998 are
incorporated herein by reference:

|Number in Filing | Description                  
|---------------- | -----------------------------
|10.1*            | Benaroya Employment Agreement
|10.2*            | Remeta Employment Agreement  
|10.3*            | Carroll Employment Agreement 

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended May 2, 1998 are
incorporated herein by reference:

|Number in Filing | Description                                                                                  
|---------------- | ---------------------------------------------------------------------------------------------
|10.1*            | 1998 Stock Option Agreement, dated May 21, 1998, between the Corporation and Raphael Benaroya
|10.2*            | 1998 Stock Option Agreement, dated May 21, 1998, between the Corporation and George R. Remeta

The following exhibits to the
Corporations Annual Report on Form 10-K for the year ended January 31, 1998 are
incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                                        
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1             | Restated Stockholders' Agreement, dated December 23, 1992, between the Corporation and certain of its
stockholders and Amendment No. 1, Amendment No. 2 and Amendment No. 3 thereto
|10.2             | Private Label Credit Card Program Agreement                                                                                                                                        
|10.4*            | Restated 1990 Stock Option Plan as of March 6, 1998                                                                                                                                
|10.5*            | Restated 1990 Stock Option Plan as of May 28, 1996                                                                                                                                 
|10.6*            | Restated 1996 Stock Option Plan as of March 6, 1998                                                                                                                                

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended November 1, 1997 is
incorporated herein by reference:

|Number in Filing | Description                                                
|---------------- | -----------------------------------------------------------
|10.1             | Amendment, dated September 15, 1997, to Financing Agreement

The following exhibits to the
Corporations Quarterly Report on Form 10-Q for the period ended August 2, 1997 are
incorporated herein by reference:

|Number in Filing | Description        
|---------------- | -------------------
|10.1             | Financing Agreement
|10.2*            | Amendment to SRSP  

The following exhibit to the
Corporations Quarterly Report on Form 10-Q for the period ended November 2, 1996 is
incorporated herein by reference:

|Number in Filing | Description
|---------------- | -----------
|10.1*            | SRSP       

The following exhibits to the
Corporations Registration Statement on Form S-1 (Registration No. 33-44499), as
amended, are incorporated herein by reference:

|Number in Filing | Description                                                                                                                                                                      
|---------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1              | Amended and Restated Certificate of Incorporation of the Corporation                                                                                                             
|4.1              | Specimen Certificate for Common Stock of the Corporation                                                                                                                         
|10.2.1           | Software License Agreement, dated as of April 30, 1989, between The Limited Stores, Inc.
and Sizes Unlimited, Inc. (now known as United Retail Incorporated) ("Software License")
|10.2.2           | Amendment, dated December 10, 1991, to Software License                                                                                                                          

---

*A compensatory plan for the benefit
of the Corporations management or a management contract.