UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

    FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)
[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
        EXHCANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 1, 2005
                                   OR
[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                         COMMISSION FILE NUMBER 0-10345

                                   CACHE, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            FLORIDA                                     59-1588181
--------------------------------            ---------------------------------
(State or other jurisdiction of             (IRS Employer Identification No.)
 incorporation or organization)

    1440 BROADWAY, NEW YORK, NEW YORK                         10018
----------------------------------------                    ----------
(Address of principal executive offices)                    (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 575-3200
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                           COMMON STOCK $.01 PAR VALUE
                                (Title of Class)

     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 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
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes [X] No [ ]

     As of June 26, 2004, the aggregate market value of the voting stock held by
non-affiliates of the registrant (based on the closing price of $14.53 in the
NASDAQ National Market) was approximately $184 million.

     As of February 28, 2005, 15,684,000 common shares were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain information included in the Registrant's Proxy Statement to be
filed in connection with its 2005 Annual Meeting of Stockholders has been
incorporated by reference into Part III (Items 10, 11, 12, 13, 14 and 15) of
this report on Form 10-K.


<PAGE>


                                   CACHE, INC.
                             FORM 10-K ANNUAL REPORT
                                 JANUARY 1, 2005
                                TABLE OF CONTENTS


                                                                            PAGE

PART I

Item 1.      Business                                                          1
Item 2.      Properties                                                       12
Item 3.      Legal Proceedings                                                12
Item 4.      Submission of Matters to a Vote of Security Holders              13

PART II

Item 5.      Market for the Registrant's Common Stock and Related
               Stockholder Matters                                            14
Item 6.      Selected Financial Data                                          15
Item 7.      Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                      17
Item 7A      Quantitative and Qualitative Disclosures About Market Risk       24
Item 8.      Financial Statements and Supplementary Data                      25
Item 9.      Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure                                       25
Item 9A      Controls and Procedures                                          26
Item 9B      Other Information                                                29

PART III

Item 10.     Directors and Executive Officers of the Registrant               29
Item 11.     Executive Compensation                                           29
Item 12.     Security Ownership of Certain Beneficial Owners and
               Management                                                     29
Item 13.     Certain Relationships and Related Transactions                   29
Item 14      Principal Accountant Fees and Services                           29
Item 15.     Exhibits, Financial Statement Schedules and Reports on
               Form 8-K                                                       30


<PAGE>


                                     PART I

ITEM 1.  BUSINESS

STATEMENT REGARDING FORWARD LOOKING STATEMENTS

     Except for the historical  information and current statements  contained in
this  Annual  Report,  certain  matters  discussed  herein,  including,  without
limitation,  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations"  are  forward-looking  statements  that involve risks and
uncertainties.  Actual  results  and  timing  of  certain  events  could  differ
materially from those projected in or contemplated by forward-looking statements
due to a number of  factors  including,  without  limitation,  industry  trends,
merchandise  and  fashion  trends,  competition,  changes  in  general  economic
conditions and consumer spending  patterns,  vendor  procurement  issues and the
ability to obtain  financing,  any of which could cause actual results to differ
materially.

GENERAL

     We are a  specialty  retailer  of social  occasion  sportswear  and dresses
targeting style-conscious women. We own and operate two separate store concepts,
Cache and  Lillie  Rubin,  each of which  carries  its own  distinctive  branded
merchandise.  Cache  targets  women  between the ages of 25 and 45 while  Lillie
Rubin  stores  offer  a more  sophisticated  line  of  social  occasion  apparel
targeting women between the ages of 35 and 55.

     Both  store  concepts  focus  on  social  occasion  dressing  designed  for
contemporary  women.  Our Cache and  Lillie  Rubin  lines  extend  from  elegant
eveningwear to our distinctive  day-into-evening sportswear, which encompasses a
variety of tops,  bottoms and dresses versatile enough to be worn during the day
or evening.  We operate 254 Cache and 37 Lillie  Rubin  stores (as of January 1,
2005)  primarily  situated in central  locations in high traffic,  upscale malls
throughout the United States.

MERCHANDISING

     Our  merchandising  focuses on  providing a  selection  of  sportswear  and
dresses extending from elegant eveningwear to day-into-evening  sportswear. As a
result of our short lead time of four weeks to 12 weeks, we are able to employ a
constant  process of  test-and-ordering  that allows us to restock popular items
during the same season.  We also maintain a key item  strategy,  providing  some
popular and core items for longer periods to meet ongoing customer  demand.  New
merchandise  typically  arrives on a weekly basis at each of our stores,  giving
our  customers a reason to visit our stores  frequently.  We introduce new floor
sets into each of our stores approximately every six weeks. These new floor sets
allow exciting  changes in visual  merchandising  within both our stores and our
window presentations.

                                       1


<PAGE>


MERCHANDISE

     We design and market three general categories of merchandise:

          SPORTSWEAR. Sportswear consists of related tops and bottoms, versatile
          enough to be worn during the day or out for evening affairs.

          DRESSES.  Dresses range from special  occasion long dresses to shorter
          lengths for cocktail and day-into-evening wear.

          ACCESSORIES.  Accessories  consist  primarily  of  jewelry,  belts and
          handbags intended to complement our sportswear and dress selections.

          These  categories of merchandise  differ in style depending on whether
          they are offered in our Cache or Lillie Rubin stores.

     CACHE.  Cache's average price points for sportswear range from $60 to $300,
dresses  range from $125 to $450 and  accessories  range  from $30 to $150.  The
following  table  indicates the  percentage of Cache's net sales by  merchandise
category for each of the last three fiscal years:

                               52 WEEKS ENDED               53 WEEKS ENDED
                         -----------------------------      --------------
                         DECEMBER 28,     DECEMBER 27,         JANUARY 1,
                             2002             2003                2005
                         ------------     ------------         ----------
      Sportswear             64.3%            67.3%               69.1%
      Dresses                27.5%            24.3%               22.3%
      Accessories             8.2%             8.4%                8.6%
                         ------------     ------------         ----------
      Total                 100.0%           100.0%              100.0%
                         ============     ============         ==========

     LILLIE  RUBIN.  Price points at Lillie Rubin are  approximately  25% to 30%
higher than at Cache.  The following  table  indicates the  percentage of Lillie
Rubin's  net sales by  merchandise  category  for each of the last three  fiscal
years:

                               52 WEEKS ENDED               53 WEEKS ENDED
                         -----------------------------      --------------
                         DECEMBER 28,     DECEMBER 27,         JANUARY 1,
                             2002             2003              2005
                         ------------     ------------         ----------
      Sportswear             44.9%            49.7%             58.1%
      Dresses                47.1%            44.9%             36.6%
      Accessories             8.0%             5.4%              5.3%
                         ------------     ------------         ----------
      Total                 100.0%           100.0%            100.0%
                         ============     ============         ==========


                                       2

<PAGE>



     The percentage of sales  represented by dresses is typically  higher in the
first  half of the year for both  Cache and  Lillie  Rubin due to buying for the
Easter,  wedding  and  prom  seasons.  The  percentage  of  Lillie  Rubin  sales
represented  by  sportswear  is expected  to increase  again in fiscal 2005 as a
result  of  the  introduction  in  fall  2003  of  an  updated  day-into-evening
sportswear collection in all of our Lillie Rubin stores.

DESIGN

     Our apparel design and  merchandising  are organized  around the spring and
fall  seasons.  Our  internal  design and  merchandising  team is comprised of a
designer,  buyers who  specialize  in  particular  fashion  classifications  and
executive management  personnel.  Following the end of a season, our design team
reviews  data from that  season's  results  as well as market  research,  retail
trends,  trade shows and other resources.  Based on this  information,  our team
develops  seasonal  themes,  which will influence our exclusive  designs for the
following year.

     Approximately  nine to 12 weeks prior to a season,  we begin to  coordinate
with external  designers at our vendors to select  specific  styles that reflect
our themes for the upcoming season. We have established close relationships with
many of our vendors,  enabling us to frequently  create and test new merchandise
in our stores prior to the upcoming season and stay abreast of changing  fashion
trends and market  demands.  On an ongoing basis, we revise our styles or buying
levels accordingly.

     We believe that our ability to offer an attractive  but  comfortable  missy
fit is crucial for our customers.  Once we have identified  specific designs and
materials,  our technical  department  works closely with our in-house fit model
and our  manufacturers  through a  collaborative  process  that  tests  specific
measurements to ensure that the merchandise meets our high standards for fit and
comfort.

     Our  accessories  are  designed  and  manufactured  for  us by  third-party
vendors.

     In addition,  in January 2004, we hired a new designer for the Lillie Rubin
brand. This new resource,  we believe, has enhanced the Lillie Rubin merchandise
assortment and complements the Cache designer already in place.


PLANNING

     We conduct our planning process based on our historical point-of-sale data,
economic  trends,  seasonality and anticipated  demand based on market tests. We
determine at a corporate  level the total number of stock  keeping units and the
composition by product,  print, color, style and size. Our vendors are then able
to negotiate  bulk  material  purchase  with their  suppliers,  which we believe
enables us to obtain better pricing.

     Our  merchandising  and planning teams determine the appropriate  level and
type of merchandise  per store and communicate  that  information to our vendors
who drop ship the merchandise to each store. Following receipt at our stores the
merchandising  staff obtains daily sales  information and store-level  inventory
generated by our point-of-sale  computer system. Based upon this data management
teams make decisions with respect to re-orders, store transfers and markdowns.

     In addition to introducing new  merchandise,  we employ a key item strategy
whereby we maintain an  inventory of core items in every  store.  This  provides
customers  with a level of certainty that these items

                                       3

<PAGE>


will be in stock when they  visit,  rather than  rotating  out of the store with
merchandise  changes.  In  certain  situations,  a store  that  is  experiencing
particularly strong  sell-throughs relays the information to our management team
and buyers,  who in turn may add or adjust new  merchandise  in response to this
feedback.

SOURCING AND DISTRIBUTION

     We employ a sourcing and  distribution  strategy that enhances our speed to
market,  allows us to respond  quickly to fashion  preferences  and demand,  and
reduces  inventory risk. We purchase the vast majority of our  merchandise  from
domestic  vendors.  Sourcing from domestic  vendors  provides us with short lead
times  ranging  from four to 12 weeks  from  order to  shipment,  compared  with
typically  much longer  periods for  sourcing  from  foreign  vendors.  Our five
largest vendors accounted for approximately 38% of our purchases in fiscal 2004,
and our largest vendor accounted for 19% of our purchases during this period.

     Nearly all of our  merchandise  is drop shipped  directly by our vendors to
our individual  stores rather than sent to a warehouse or  distribution  center.
Drop shipping significantly  decreases our distribution expenses and reduces the
time required to deliver  merchandise to our stores.  If a customer  requests an
item out of stock at a specific store, we can ship the merchandise  from another
store  to the  customer  by  overnight  or  common  carrier,  the  cost of which
typically is borne by the customer.

STORE OPERATIONS

STORE DESIGN AND ENVIRONMENT

     Most of our stores range in size from  approximately  1,500 to 2,500 square
feet,  with our typical  store  averaging  approximately  2,000 square feet.  We
believe  that  our  relatively  smaller  store  size  enables  us  to  create  a
boutique-like atmosphere by providing a more intimate shopping environment and a
higher level of customer service than department stores.  Most of our stores are
open  during the same hours as the malls in which  they are  located,  typically
seven days and six nights a week.

     We have  recently  adopted new store designs and layouts for both our Cache
and Lillie Rubin stores to enhance their appeal to the customer, increase access
to  merchandise,  facilitate  movement  throughout  the  store and  improve  our
displays.  Our new store design emphasizes a modern,  sophisticated and well-lit
atmosphere with streamlined exteriors and sleek interiors. In addition, at Cache
we have moved the dressing  rooms from the middle of the store to the rear,  and
check-out  locations  from the front of the store to the side.  This  eliminates
barriers to movement  throughout  the store and permits  greater  flexibility in
merchandise displays, allowing us to more effectively market our clothing.

     We began to remodel  existing  stores  using this new  design  during  late
fiscal  2001.  We  remodeled 19 Cache and two Lillie Rubin stores in fiscal 2004
and expect to remodel  approximately  30 stores in fiscal  2005 and 30 stores in
fiscal 2006, as leases come up for renewal.  Most store  remodels take from four
to six weeks.  During this period, we typically  utilize temporary  locations in
the mall near the existing  location so that  customers can continue to shop for
our merchandise.

                                       4

<PAGE>


STORE MANAGEMENT AND TRAINING

     We organize  our stores into regions and  districts,  which are overseen by
four  regional  vice  presidents  and 32  district  managers,  with  each of our
district  managers  typically  responsible for eight to 12 stores.  We typically
staff our stores with two opening  employees,  three  mid-day  employees and two
closing employees.

     We seek to provide our customers with superior customer service. To promote
this part of our strategy,  store managers and co-managers receive both salaries
and performance-based bonuses. We pay sales associates and assistant managers on
an hourly basis as well as performance  incentives.  From time to time, we offer
additional  incentives,  such as sales  contests,  to both  management and sales
associates.  Additionally,  we place  special  emphasis  on the  recruitment  of
fashion-conscious and career-oriented  sales personnel.  We train most new store
managers  in  designated  training  stores and train most other new store  sales
personnel on the job.

EXISTING STORE LOCATIONS

     As of  January  1, 2005 we  operated  291  stores  located in 43 states and
Puerto Rico. Of these 254 were Cache stores and 37 were Lillie Rubin stores. The
following tables indicate our stores by location:

CACHE STORES:
    Alabama         5        Louisiana             5     Ohio                9
    Arizona         4        Maryland              6     Oklahoma            2
    Arkansas        1        Massachusetts         8     Oregon              2
    California      27       Michigan              6     Pennsylvania        7
    Colorado        3        Minnesota             2     Rhode Island        2
    Connecticut     4        Mississippi           1     South Carolina      5
    Delaware        1        Missouri              3     Tennessee           5
    Florida         33       Nebraska              1     Texas               19
    Georgia         9        Nevada                6     Utah                1
    Hawaii          2        New Hampshire         3     Vermont             1
    Illinois        8        New Jersey            13    Virginia            8
    Indiana         2        New Mexico            2     Washington          5
    Iowa            2        New York              14    West Virginia       1
    Kansas          2        North Carolina        7     Wisconsin           3
    Kentucky        3                                    Puerto Rico         1

LILLIE RUBIN STORES:
    Alabama         1        Louisiana             1     North Carolina      1
    Arizona         1        Maryland              1     Ohio                1
    Colorado        1        Michigan              2     Pennsylvania        2
    Florida         10       Minnesota             1     Tennessee           1
    Georgia         2        Nevada                1     Texas               4
    Illinois        1        New Jersey            1     Virginia            2
    Indiana         1        New York              1     Washington          1

                                       5

<PAGE>


The  following  table  indicates the number of stores opened and closed over the
past five fiscal years:

<TABLE>
<CAPTION>

           STORES OPEN    STORES OPENED DURING      STORES CLOSED      STORES OPEN AT END
            BEGINNING          FISCAL YEAR        DURING FISCAL YEAR     OF FISCAL YEAR                  TOTAL
 FISCAL        OF         --------------------    ------------------   ------------------                SQUARE
  YEAR     FISCAL YEAR      CACHE       L.R.       CACHE      L.R.      CACHE      L.R.      TOTALS     FOOTAGE
 ------    -----------    --------    --------    -------    -------    ------    -------    ------    ---------
<S>            <C>           <C>        <C>         <C>       <C>       <C>        <C>       <C>        <C>
  2000         201            8          8           1          1        190        25         215      448,000
  2001         215            9          1           2          1        197        25         222      460,000
  2002         222           10          3           0          1        207        27         234      478,000
  2003         234           22          2           2          1        227        28         255      514,000
  2004         255           31          9           4          0        254        37         291      596,000

</TABLE>

NEW STORE DEVELOPMENT

     We  continually  review  potential new locations for Cache and Lillie Rubin
stores.  We locate our new stores  primarily  in upscale  shopping  malls.  When
selecting  a  new  site,  we  target  high  traffic   locations   with  suitable
demographics and favorable lease economics.  When evaluating a new site, we also
look at the  principal  and  anchor  stores in the mall,  location  of our store
within the mall and other specialty stores located in the mall.

     During fiscal 2004, we opened 31 Cache stores and 9 Lillie Rubin stores and
closed 4 Cache stores. In fiscal 2005, we intend to open approximately 40 stores
consisting of 30 Cache and 10 Lillie Rubin stores.  In fiscal 2006, we intend to
open approximately 50 stores, consisting of 30 Cache and 20 Lillie Rubin stores.
Currently  34 of our Lillie  Rubin stores are located in malls that also contain
Cache stores, and we intend to locate the substantial majority of our new Lillie
Rubin stores in malls containing Cache stores.

MARKETING AND PROMOTION

     Historically,  we conducted limited  marketing and advertising,  relying on
our  individual  store  displays,  mall locations and  word-of-mouth  to attract
customers.  In early fiscal 2002 and all during  fiscal 2003 and 2004, we used a
variety of media to  promote  our Cache  brand and  increase  sales,  consisting
primarily of advertisements in magazines such as Harper's Bazaar, Latina, Lucky,
People and Vogue. We also introduced outdoor  advertising in selected markets on
billboards and buses, including a large campaign in Grand Central Station in New
York.  We expect to continue to increase  our Cache  advertising  and  marketing
expenditures. In fiscal 2003, we launched a first-time advertising and marketing
campaign for the Lillie Rubin brand. These increased  marketing efforts for both
Cache and Lillie Rubin  continued in fiscal 2004 and are intended to attract new
customers and increase sales to existing customers.

     We  use  direct  mail  campaigns  to  both  potential  and  existing  Cache
customers.  Over the past  several  years,  we have built a database of over 2.8
million preferred Cache customers from our point-of-sale  information system and
mail 10 to 12  promotions  per year to our targeted  customers.  We have already
rapidly  expanded the Lillie Rubin  Preferred  Customer  database  over the past
year. Our preferred  customer  tracking system enables us to identify and target
specific merchandise  promotions targeted at individual customers.  We also send
e-mail notices to customers and intend to increase our use of e-mail  promotions
in the future.

                                       6

<PAGE>


     Our Cache and Lillie  Rubin brands are  supported by visual  merchandising,
which consists of window displays,  front table layouts and various  promotions.
This type of marketing is an important  component of our marketing and promotion
strategies since our mall locations  provide  significant foot traffic.  We make
decisions  regarding  store  displays and  advertising  at the corporate  level,
ensuring a  consistent  appearance  and message  throughout  all our stores.  In
addition, we encourage store management to become involved in community affairs,
such  as  participating  in  local  charity  fashion  shows,  to  enhance  brand
recognition and meet potential  customers.  Some stores host trunk shows several
times each year to present selected merchandise to customers.

     We have  operated a Cache  website,  www.cache.com,  since August 1999.  We
continue to enhance features on this website, which allows customers to purchase
merchandise  online,  view  currently  available  styles  and  schedule  private
fittings of  merchandise at any Cache store.  We have seen a strong  increase in
sales at the website over the past two years,  as website  sales have  increased
from  $537,000 in fiscal 2002 to $1.3 million in fiscal 2003 and $1.9 million in
fiscal 2004.

COMPETITION

     The market for women's social occasion sportswear,  dresses and accessories
is highly competitive.  We compete primarily with specialty retailers of women's
apparel and department  stores. Our stores typically compete directly with other
women's apparel stores located in the same mall or a nearby location. We believe
our target customers choose to purchase apparel based on the following factors:

     o    Style and fashion,
     o    Fit and comfort,
     o    Customer service,
     o    Shopping convenience and environment and
     o    Value.

     We believe  that our Cache and Lillie  Rubin  stores and  merchandise  have
advantages over our competitors in meeting these needs.

INFORMATION SYSTEMS

     We utilize a combination of off-the-shelf and custom software  applications
in our point-of-sale  computer system to track our sales and inventory levels on
a daily basis. Each store  communicates this data directly to the host system at
our  corporate  headquarters  in New York.  Our  systems  enable  us to  quickly
identify  issues and make decisions such as redirecting  merchandise  shipments,
adjusting prices,  re-ordering based on results of test marketing and monitoring
the success of  promotional  campaigns.  In  addition,  our  systems  facilitate
various administrative functions such as payroll, inventory control, merchandise
transfers, special orders and price checking.

TRADEMARKS AND SERVICE MARKS

     We are the  owner in the  United  States  of the  Cache  and  Lillie  Rubin
trademarks and service marks.  These marks are registered with the United States
Patent and Trademark Office. Each federal registration is renewable indefinitely
if the mark is still in use at the time of  renewal.  Our rights to the  "Cache"
mark  and  "Lillie  Rubin"  mark  are  a  significant   part  of  our  business.
Accordingly, we intend to maintain these marks and the related registrations. We
are unaware of any material claims of  infringement  or other

                                       7


<PAGE>


challenges to our right to use our marks in the United States,  although we have
successfully brought infringement claims against third parties in the past.

EMPLOYEES

     As of  January 1,  2005,  we had  approximately  2,500  employees,  of whom
approximately 1,200 were full-time employees and 1,300 were part time employees.
None of these  employees  is  represented  by a labor  union.  We  consider  our
employee relations to be satisfactory.

AVAILABLE INFORMATION

     We  make  available  on  our  website,   www.cache.com,   under   "Investor
Relations," free of charge,  our annual reports on Form 10-K,  quarterly reports
on Form 10-Q,  currents  reports on Form 8-K and  amendments to those reports as
soon as  reasonably  practicable  after we  electronically  file or furnish such
materials to the U.S. Securities and Exchange Commission ("SEC").

     Our Code of Business Conduct and Ethics, and Board of Directors'  Committee
Charters are also available on our website, under "Corporate Governance".


                                       8



<PAGE>


EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

     The  following  table  sets  forth  information  concerning  our  executive
officers, directors and key employees:

<TABLE>
<CAPTION>

NAME                                          AGE      POSITION
---------------------------------             ---      -----------------------------------------------------------------------
<S>                                           <C>       <C>

EXECUTIVE OFFICERS AND DIRECTORS
Brian Woolf                                   56       Chief Executive Officer and Chairman of the Board
Thomas E. Reinckens                           51       President, Chief Operating Officer
Arthur S. Mintz                               59       Director
Andrew M. Saul                                58       Director
Morton J. Schrader                            73       Director
Gene G. Gage                                  57       Director
Catherine McNeal                              45       Executive Vice President, General Merchandise Manager, Cache
Maria Comfort                                 48       Executive Vice President, General Merchandise Manager, Lillie Rubin

</TABLE>


<TABLE>
<CAPTION>

OTHER KEY EMPLOYEES
<S>                                           <C>      <C>

Victor Coster                                 47       Treasurer and Secretary
Lisa Decker                                   43       Vice President, Marketing
Margaret Feeney                               47       Vice President, Finance
Clifford Gray                                 49       Vice President, Construction
Joanne Marselle                               44       Vice President, Planning and Distribution
Caryl Paez                                    44       Director, Information Technologies


</TABLE>

EXECUTIVE OFFICERS AND DIRECTORS

     BRIAN WOOLF has served as Chief Executive Officer and Chairman of the Board
since  October 2000.  From March 1999 to October 2000,  Mr. Woolf served as Vice
President and General  Merchandise  Manager for The Limited.  From 1995 to March
1999, Mr. Woolf served as Senior Vice President and General  Merchandise Manager
for Caldor.  Mr. Woolf has held various  management  positions within the retail
industry over the last 30 years.

     THOMAS E.  REINCKENS  has served as President and Chief  Operating  Officer
since October 2000. Mr.  Reinckens also is our current  principal  financial and
accounting  officer.  Mr.  Reinckens joined our company in February 1987 and has
held various  positions  throughout his tenure,  most recently  serving as Chief
Financial  Officer  from  November  1989 to  October  2000  and  Executive  Vice
President from  September 1995 to October 2000. Mr.  Reinckens has over 20 years
of retail experience.

     ARTHUR S. MINTZ has served as one of our directors  since  September  2002.
Mr.  Mintz  has  served  as  the  President  of  Bees & Jam,  Inc.,  an  apparel
manufacturer, since 1971.

     ANDREW M. SAUL has served as one of our directors since 1986. Mr. Saul also
served as our Chairman of the Board from February 1993 to October 2000. Mr. Saul
is a partner in Saul Partners, an investment partnership, a position he has held
since 1986.

                                       9

<PAGE>

     MORTON J.  SCHRADER  has served as one of our  directors  since  1989.  Mr.
Schrader was the  President of Abe Schrader  Corp.,  a  manufacturer  of women's
apparel,  from 1968 through March 1989. Since 1989, he has been active as a real
estate broker.

     GENE G. GAGE has served as one of our directors  since  September 2004. Mr.
Gage is  currently  a  Financial  Advisor  for New  England  Financial.  He is a
certified public accountant,  as well as a certified  financial planner.  He has
over 30 years of financial experience.

     CATHERINE  MCNEAL  has  served as  Executive  Vice  President,  Merchandise
Manager for our Cache stores since June 2003. From 1997 until joining Cache, Ms.
McNeal served in various managerial capacities for the Limited, most recently as
Vice President, Merchandising Manager for Limited stores. Ms. McNeal has over 20
years of retail experience.

     MARIA COMFORT has served as Executive  Vice President of Lillie Rubin since
April 2004.  Ms.  Comfort has served as Vice  President and General  Merchandise
Manager for our Lillie Rubin  stores since May 2002.  From 1999 until she joined
us, Ms. Comfort served as Executive Vice President for Giorgio Armani. From June
1997 to 1999,  Ms.  Comfort  served as  President of 9 & Co., a division of Nine
West  Group,  Inc.,  a  women's  apparel  company.   Ms.  Comfort's   background
encompasses   a  variety   of   merchandising   functions,   including   design,
manufacturing and buying. Ms. Comfort has over 25 years of retail experience.


                                       10

<PAGE>



OTHER KEY EMPLOYEES

     VICTOR COSTER has served as Secretary  since July 1991 and as our Treasurer
since July 2001. Mr. Coster is responsible for all treasury and tax matters. Mr.
Coster joined us in February 1991, and has held various positions, most recently
as Controller  from February 1997 to July 2001.  Mr. Coster has over 25 years of
experience in finance and accounting and has been a Certified Public  Accountant
since 1981.

     LISA DECKER has served as Vice President of Marketing and Advertising since
1998 and was our  Director of  Marketing  from 1991 until 1998.  She has over 20
years of  experience  in  marketing,  advertising,  sales  promotion  and visual
merchandising within the retail industry.

     MARGARET  FEENEY has served as Vice  President of Finance  since 2001.  Ms.
Feeney has served in a variety of financial and  operational  capacities with us
since  1992.  Prior to joining  us, Ms.  Feeney  served as Manager of  Financial
Analysis and  Budgeting  for Toys "R" Us and in various  financial  positions at
Brooks Fashion  Stores,  a junior  specialty  chain.  Ms. Feeney has 20 years of
retail experience.

     CLIFFORD GRAY has served as Vice President of  Construction  since 1999 and
was our  Operations  Manager  from 1991 to 1999.  Prior to joining  us, Mr. Gray
served as Operations Manager with Kids "R" Us.

     JOANNE  MARSELLE has served as Vice President of Planning and  Distribution
since 2000 and was our Director of Planning from 1990 to 2000.  Prior to joining
us, Ms. Marselle served at various times as a Planning and Distribution  Analyst
and a Merchandise  Coordinator  for both Country Road  Australia and Ann Taylor.
Ms.  Marselle  has  over 20  years  experience  in the  areas  of  planning  and
distribution.

     CARYL PAEZ has served as  Director  of  Information  Technologies  since he
rejoined our company in 1999.  From 1996 to 1999, he was Director of Information
Technologies  for Louis  Vuitton  Americas.  From 1992 to 1996, he served as our
Director of Management Systems and from 1989 to 1992, as our Manager of Point of
Sales Systems.


                                       11


<PAGE>



ITEM 2.   PROPERTIES

     All  but a few of our  291  stores  are  located  in  shopping  malls.  The
substantial  majority of our stores contain  between 1,500 and 2,500 square feet
of space,  with the typical store averaging 2,000 square feet. All of our stores
are in leased facilities, and we typically negotiate our rental agreements based
on our portfolio of store locations with a particular landlord rather than on an
individual  basis.  Rental  terms  usually  include a fixed  minimum rent plus a
percentage rent based on sales in excess of a specified amount. In addition,  we
generally  are  required  to pay a charge for common area  maintenance,  utility
consumption,  promotional  activities  and/or  advertising,  insurance  and real
estate taxes. Many leases contain fixed escalation clauses.  Most leases contain
leasehold  improvement  reimbursements  from landlords and/or rent holidays.  In
recognizing landlord incentives and minimum rent expenses, the Company amortizes
the charges on a straight line basis over the lease term.

     Our leases  expire at various  dates  through  2019.  The  following  table
indicates the periods during which our leases expire.

         FISCAL YEARS          CACHE          LILLIE RUBIN          TOTALS
         ------------         -------         ------------          ------
         Present-2007           76                  5                 81
         2008-2010              40                  6                 46
         2011-2013              59                 15                 74
         2014-2016              77                 10                 87
         2017-2019               2                  1                  3
                              -------            ------             ------
         Totals                254                 37                291

     Our  corporate  office is a 20,000  square  foot  facility  located at 1440
Broadway  in New York City.  We lease this space under a 10-year  lease  through
2013 at a rate of approximately $543,000 per year.

     We contract for space in a warehouse  in New York on an as-needed  basis to
serve as a staging area for new store inventories and fixtures.


ITEM 3.    LEGAL PROCEEDINGS

     We are party to  various  lawsuits  arising in the  ordinary  course of our
business.  Management does not believe it is reasonably possible that resolution
of these matters will result in a material loss.


                                       12

<PAGE>



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

     Cache,  Inc. held its annual meeting of shareholders at its headquarters in
New York, New York on October 14, 2004. Of the 15,634,000 shares  outstanding as
of the record date,  14,360,822 shares were represented by proxy at the meeting.
Proxies were  solicited by Cache pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended. At the meeting,  Cache's shareholders voted on
the following matters:

     (1)  Proposal to elect five  directors  to hold office for a one-year  term
          and until their successors are elected and qualified.

                                              FOR               WITHHELD
                                         --------------       ------------
          Andrew M. Saul                   14,054,948            305,874
          Brian Woolf                      14,191,272            169,550
          Gene G. Gage                     14,289,949             70,873
          Arthur S. Mintz                  14,135,084            225,738
          Morton J. Schrader               14,034,998            325,824



     (2)  Proposal  to ratify  the  appointment  of KPMG LLP as our  independent
          auditors for the fiscal year ending January 1, 2005.

               FOR                  AGAINST            ABSTAIN
          --------------          -----------         ----------
            14,258,097              97,541              5,184


                                       13

<PAGE>


                                     PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
           MATTERS

a.   The principal market in which the Company's Common Stock is being traded is
     the NASDAQ  National  Market  System.  The stock symbol is CACH.  The price
     range of the high and low bid information  (restated for the June 18, 2004,
     3 for 2 stock split) for the  Company's  Common Stock during 2003 and 2004,
     by fiscal quarters, are as follows:

           FISCAL PERIOD                FISCAL 2003            FISCAL 2004
           -------------           --------------------    --------------------
                                     HIGH        LOW         HIGH         LOW
                                   --------    --------    --------    --------
        First Fiscal Quarter         $9.71       $6.70      $21.59      $12.50
        Second Fiscal Quarter       $10.21       $5.08      $23.63      $13.39
        Third Fiscal Quarter        $14.93       $9.81      $15.85      $11.31
        Fourth Fiscal Quarter       $18.22      $12.74      $18.53      $13.69

     Such  over-the-counter   market  quotations  reflect  inter-dealer  prices,
without retail mark-up, markdown or commission and may not necessarily represent
actual transactions.

b.   As of February 28, 2005, there were  approximately 325 holders of record of
     the Company's Common Stock.

c.   The Company has never paid cash  dividends on its common stock.  Payment of
     dividends is within the discretion of the Company's Board of Directors.  On
     June 18,  2004,  the  company  paid a 3 for 2 stock  dividend to holders of
     record.

d.   The following table summarizes our equity  compensation plans as of January
     1, 2005:

<TABLE>
<CAPTION>

                                                                                                                    NUMBER OF
                                                                                                         SECURITIES REMAINING
                                                                                                                AVAILABLE FOR
                                                                             WEIGHTED AVERAGE       THE FUTURE ISSUANCE UNDER
                                                                                     EXERCISE       EQUITY COMPENSATION PLANS
                                                  NUMBER OF SECURITIES TO            PRICE OF           (EXCLUDING SECURITIES
                                                  BE ISSUED UPON EXERCISE         OUTSTANDING                    REFLECTED IN
  PLAN CATEGORY                                    OF OUTSTANDING OPTIONS             OPTIONS                     COLUMN (a))
                                                                      (a)                 (b)                             (c)
  -------------                                    ----------------------             -------                     -----------
<S>                                                <C>                       <C>                    <C>

  Equity compensation plans approved by
       security holders                                         1,651,750              $10.43                         145,782
  Equity compensation plans not approved by
       security holders                                                 0                   0                               0
                                                               -----------           --------                        --------
  Total                                                         1,651,750              $10.43                         145,782
                                                               ==========            ========                        ========

</TABLE>

                                                                    14


<PAGE>



ITEM 6.    SELECTED FINANCIAL DATA

The following Selected Consolidated Financial Data should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto.

CACHE, INC. AND SUBSIDIARIES
STORE DATA AND OPERATING RESULTS

<TABLE>
<CAPTION>
                                                                                                                 53 WEEKS
                                                                      52 WEEKS ENDED (1)                           ENDED
                                           -----------------------------------------------------------------     ---------
                                              DEC. 30,          DEC. 29,        DEC. 28,          DEC. 27,        JAN. 1,
                                                2000              2001            2002              2003            2005
                                           -------------      -----------     -----------       -----------      -----------
                                                             (in thousands, except per share and operating data)
<S>                                          <C>               <C>               <C>               <C>          <C>

OPERATING RESULTS:

   NET SALES                                 $177,313          $180,750         $200,315          $216,256        $247,300
   COST OF SALES                              119,091           117,201          116,490           120,731         135,745
                                           -------------      -----------     -----------       -----------      -----------
   GROSS PROFIT                                58,222            63,549           83,825            95,525         111,555
   STORE OPERATING EXPENSES                    47,028            51,285           57,322            63,546          76,466
   GENERAL AND
      ADMINISTRATIVE EXPENSES                   9,481             8,929           12,190            14,074          14,221
                                           -------------      -----------     -----------       -----------      -----------
    OPERATING INCOME                            1,713             3,335           14,313            17,905          20,868

   OTHER INCOME, (net) (2)                         24             1,858              260               273             459
                                           -------------      -----------     -----------       -----------      -----------
    INCOME BEFORE INCOME
      TAXES                                     1,737             5,193           14,573            18,178          21,327
    INCOME TAX PROVISION                          634             1,895            5,632             7,089           8,030
                                           -------------      -----------     -----------       -----------      -----------
    NET INCOME                                 $1,103            $3,298           $8,941           $11,089          13,297
                                           =============      ===========     ===========       ===========      ===========
EARNINGS PER SHARE:
    BASIC EARNINGS PER SHARE                    $0.08             $0.24            $0.66             $0.78           $0.85
    DILUTED EARNINGS
      PER SHARE                                 $0.08             $0.24            $0.62             $0.75           $0.83

WEIGHTED AVERAGE
SHARES OUTSTANDING:
    BASIC                                      13,637            13,637           13,650            14,256          15,589
    DILUTED  (3)                               13,836            13,844           14,448            14,721          16,004

STORE DATA:
     NUMBER OF STORES OPEN
     AT END OF PERIOD                             215               222              234               255             291

     AVERAGE SALES PER
     SQUARE FOOT (4)                             $409              $408             $438              $450            $461

     COMPARABLE STORE
     SALES INCREASE (5)                            3%                0%               7%               3%               5%


</TABLE>

                                                                      15

<PAGE>



CACHE, INC. AND SUBSIDIARIES
BALANCE SHEET DATA

<TABLE>
<CAPTION>

                                           ---------------------------------------------------------------------------------
                                              DEC. 30,          DEC. 29,        DEC. 28,          DEC. 27,        JAN. 1,
                                                2000              2001            2002              2003            2005
                                           -------------      -----------     -----------       -----------      -----------
                                                            (in thousands, except ratios and per share data)
<S>                                         <C>                 <C>             <C>               <C>              <C>

WORKING CAPITAL                               $16,165           $20,197          $26,654           $41,034         $53,469

TOTAL ASSETS (6)                              $57,585           $61,182          $76,480          $104,067        $132,028

TOTAL LONG-TERM
DEBT                                              ---               ---              ---               ---             ---

STOCKHOLDERS' EQUITY                          $33,008           $36,306          $45,292           $65,142         $84,840

RATIO OF CURRENT ASSETS
TO CURRENT LIABILITIES                       1.78 : 1          2.03 : 1         2.07 : 1          2.41 : 1        2.75 : 1

INVENTORY TURNOVER
RATIO                                        4.84 : 1          5.07 : 1         5.28 : 1          4.94 : 1        4.60 : 1

CAPITAL EXPENDITURES (6)                       $6,196            $6,220           $9,033           $15,628         $21,753

DEPRECIATION AND
AMORTIZATION                                   $5,106            $5,247           $5,519            $6,395          $8,232

BOOK VALUE PER SHARE                            $2.42             $2.66            $3.32             $4.35           $5.42


</TABLE>

FOOTNOTES

(1)  Results for all periods presented include 52 weeks,  except for fiscal 2004
     which includes 53 weeks.
(2)  Other income in fiscal 2001 included  $1,518,000  from the  settlement of a
     trademark  litigation  claim  undertaken  against  a  third  party,  net of
     professional fees related to the lawsuit.  Other income generally  consists
     of interest income.
(3)  Diluted  weighted  average shares for the fiscal years ended,  December 30,
     2000,  December 29, 2001,  December 28, 2002, December 27, 2003 and January
     1, 2005 include  200,000,  207,000,  798,000,  465,000 and 415,000,  shares
     respectively,  due to the  potential  exercise of stock  options  that were
     outstanding and exercisable during those years.
(4)  Average  sales per square foot are  calculated by dividing net sales by the
     weighted average store square footage available.
(5)  Comparable  store sales data is calculated based on the net sales of stores
     open at least 12 full months at the  beginning  of the period for which the
     data are presented.
(6)  Restated.  See Item 7,  Management's  Discussion  and Analysis of Financial
     Condition and Results of Operations.


                                       16

<PAGE>



ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

GENERAL

     NET  SALES.  Net  sales  consist  of  sales  from  comparable   stores  and
non-comparable  stores.  A store is not included in comparable store sales until
the first day of the fiscal  month  following  the twelfth  full month of sales.
Non-comparable  store sales include  sales  generated at new stores prior to the
period  when they are  considered  comparable  stores and sales  generated  from
stores that we have since closed.

     SHIPPING  AND  HANDLING.  Amounts  billed to  customers  for  shipping  and
handling fees are included in net sales at the time of shipment.  Costs incurred
for shipping and handling are included in cost of sales.

     COST OF SALES.  Cost of sales  includes  the cost of  merchandise,  cost of
freight from vendors, costs incurred for shipping and handling,  payroll for our
design,  buying and  merchandising  personnel and store occupancy  costs.  Store
occupancy costs include rent, contingent rents, common area maintenance and real
estate taxes.

     STORE OPERATING EXPENSES. Store operating expenses include payroll, payroll
taxes, health benefits,  insurance,  credit card processing fees,  depreciation,
licenses and taxes as well as marketing and advertising expenses.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
include district and regional manager payroll, other corporate personnel payroll
and employee benefits, employment taxes, insurance, legal and other professional
fees and other corporate level expenses.  Corporate level expenses are primarily
attributable to our corporate headquarters in New York.

RESTATEMENT OF FINANCIAL STATEMENTS

     On February 7, 2005, the Office of the Chief Accountant of the SEC issued a
letter to the American Institute of Certified Public Accountants  expressing its
views regarding  certain operating lease accounting issues and their application
under generally accepted accounting  principles ("GAAP") in the United States of
America.  After reviewing this letter,  Cache's management began a review of its
lease related accounting policies and determined that its then-current method of
accounting  for  leasehold  improvements  reimbursed  by landlord  incentives or
allowances under operating leases (landlord construction  allowances) was not in
accordance with GAAP.

     The Company had historically  accounted for landlord construction allowance
reimbursements  as  reductions  to leasehold  improvements  on the  consolidated
balance  sheets  and  capital   expenditures  in  investing  activities  on  the
consolidated  statements of cash flows.  Cache's  management has determined that
the  appropriate  interpretation  of FASB Technical  Bulletin No. 88-1,  "Issues
Relating to Accounting for Leases,"  requires these allowances to be recorded as
deferred rent liabilities on the consolidated  balance sheets and as a component
of operating activities on the consolidated statements of cash flows.

     As of January 1,  2005,  the  Company  reclassified  landlord  construction
allowance  reimbursements  from net leasehold  improvements  to deferred rent to
conform with the requirements of SFAS No. 13, "Accounting for Leases". There was
no effect on the Company's income statements.  Leasehold

                                       17


<PAGE>


improvements  and total assets  increased for each year presented as a result of
the  reclassification  and was offset by an increase in deferred  rent and total
liabilities.

     As a result of the above, the Company has restated its consolidated balance
sheet as of December 27, 2003 and its consolidated  statements of cash flows for
each of the 52 week periods ended December 28, 2002 and December 27, 2003.

     See Note 1 to the  consolidated  financial  statements  of the Report for a
summary of the effects of these  changes on the Company's  consolidated  balance
sheet  as of  December  27,  2003,  as  well  as on the  Company's  consolidated
statements  of cash flows for the 52 week  periods  ended  December 28, 2002 and
December  27,  2003.  The  accompanying  Management's  Discussion  and  Analysis
describes these corrections.

ACCOUNTING POLICIES AND ESTIMATES

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally  accepted  in the United  States of America  requires  the
appropriate  application of certain accounting policies,  many of which requires
us to make  estimates  and  assumptions  about future events and their impact on
amounts  reported in our financial  statements and related  notes.  Since future
events and their impact cannot be determined with certainty,  the actual results
will inevitably differ from our estimates. Such differences could be material to
the financial statements.

     Our accounting policies are more fully described in Note 1 to the financial
statements,  located  elsewhere in this  document.  We have  identified  certain
critical accounting policies which are described below.

     INVENTORIES.  Merchandise  inventory  is  carried  at the  lower of cost or
market using the retail method of accounting.  We make assumptions to adjust the
value of inventory based on historical experience and current information.  This
procedure  inherently  reduces the carrying  value of  inventories  as permanent
markdowns are  initiated.  These  assumptions  can have a significant  impact on
current and future operating results and financial position.

     SELF INSURANCE.  We are  self-insured  for losses and  liabilities  related
primarily to employee health and welfare  claims.  Losses are accrued based upon
our  estimates of the  aggregate  liability  for claims  incurred  using certain
actuarial  assumptions  followed in the insurance  industry and based on Company
experience.

     REVENUE  RECOGNITION.  Sales are  recognized  at the "point of sale," which
occurs when  merchandise  is sold in an  "over-the-counter"  transaction or upon
receipt by a customer.  Sales of  merchandise  via our website are recognized at
the time of shipment to the  customer.  Our  customers  have the right to return
merchandise. Sales are reported net of actual and estimated returns. We maintain
a reserve for potential  product returns and record,  as a reduction to sales, a
provision for estimated product returns, which is determined based on historical
experience.


                                       18

<PAGE>



     OPERATING  LEASES.  The Company leases retail stores and office space under
operating leases.  Most leases contain  construction allowance reimbursements by
landlords,  rent  holidays,  rent  escalation  clauses  and/or  contingent  rent
provisions. The Company recognizes the related rental expense on a straight-line
basis over the lease term and records the difference between the amounts charged
to expense and the rent paid as a deferred rent liability.

     To account for  construction  allowance  reimbursements  from landlords and
rent holidays, the Company records a deferred rent liability included in accrued
liabilities and other long-term  liabilities on the consolidated  balance sheets
and  amortizes  the  deferred  rent over the lease term,  as a reduction to rent
expense  on the  consolidated  income  statements.  For leases  containing  rent
escalation clauses, the Company records minimum rent expense on a straight- line
basis over the lease term on the consolidated  income statement.  The lease term
used for lease evaluation includes option periods only in instances in which the
exercise of the option period can be reasonably  assured and failure to exercise
such options would result in an economic penalty.


RESULTS OF OPERATIONS

     The  following  table  sets forth our  operating  results,  expressed  as a
percentage of net sales.

<TABLE>
<CAPTION>

                                                 52 WEEKS ENDED           53 WEEKS ENDED
                                          ----------------------------    --------------
                                          DECEMBER 28,    DECEMBER 27,      JANUARY 1,
                                              2002            2003             2005
                                          ------------    ------------    --------------
<S>                                       <C>               <C>            <C>
OPERATING RESULTS
Net sales                                    100.0%          100.0%            100.0%
Cost of sales                                 58.2            55.8              54.9
                                          ------------    ------------    --------------
Gross profit                                  41.8            44.2              45.1
Store operating expenses                      28.6            29.4              30.9
General and administrative expenses            6.1             6.5               5.8
                                          ------------    ------------    --------------
Operating income                               7.1             8.3               8.4
Other income (net)                             0.1             0.1               0.2
Income before income taxes                     7.3             8.4               8.6
Income taxes                                   2.8             3.3               3.2
                                          ------------    ------------    --------------
Net income                                     4.5%            5.1%              5.4%
                                          ============    ============    ==============

</TABLE>

                                                  19


<PAGE>



53 WEEKS ENDED JANUARY 1, 2005 (FISCAL 2004) COMPARED TO 52 WEEKS ENDED DECEMBER
27, 2003 (FISCAL 2003)

     NET SALES.  The  results of the  Company  for  fiscal  2004 were  favorably
impacted by the extra reporting week. Net sales increased to $247.3 million from
$216.3 million,  an increase of $31.0 million,  or 14.3%,  over the prior fiscal
year,  for the 53 week period  ended  January 1, 2005 as compared to the 52 week
period in  Fiscal  2003.  The one week of  additional  sales in Fiscal  2004 was
approximately  2.7% of the total sales  increase.  The sales  increase  reflects
$10.1 million of additional net sales as a result of a 5% increase in comparable
store sales.  The  remainder of the  increase was the result of  additional  net
sales from non-comparable stores.

     GROSS PROFIT.  Gross profit increased to $111.6 million from $95.5 million,
an  increase  of $16.1  million,  or 16.9%,  over the prior  fiscal  year.  This
increase  was the  combined  result of higher  net sales,  partially  due to the
additional  one week of sales in the  Fiscal  2004  period and  increased  gross
profit margins.  As a percentage of net sales,  gross profit  increased to 45.1%
from 44.2%.  This  increase as a percentage  of net sales was  primarily  due to
higher initial margins resulting from sourcing improvements.

     STORE  OPERATING  EXPENSES.  Store  operating  expenses  increased to $76.5
million from $63.5  million,  an increase of $13.0 million,  or 20.5%,  over the
prior  fiscal year.  As a  percentage  of net sales,  store  operating  expenses
increased to 30.9% from 29.4%,  primarily  due to the increase in stores  opened
over the past two years and an increase in marketing and advertising expenses of
$1.8  million.  Store  operating  expenses  in Fiscal 2004 were also higher than
Fiscal  2003,  due to the  additional  one week  period  included in Fiscal 2004
results.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
increased to $14.2 million from $14.1 million,  an increase of $147,000 or 1.0%,
above  the  prior  fiscal  year.  As a  percentage  of net  sales,  general  and
administrative  expenses  decreased  to 5.8% from 6.5%,  primarily  due to lower
incentive  compensation expense in Fiscal 2004 costs. General and administrative
expenses in Fiscal 2004 were also  slightly  higher  than Fiscal  2003,  due the
additional one week period included in Fiscal 2004 results.

     OTHER  INCOME.  Other income  increased to $459,000 from  $273,000,  in the
prior fiscal year,  primarily  attributable  to higher average cash balances and
higher  interest  rates during  fiscal 2004,  as compared to fiscal 2003.  Other
income generally  consists of interest income. We expect interest income to grow
in the future as cash flow from  operations is greater than  expenditures on new
stores and remodeling.

     INCOME TAXES.  Income taxes increased to $8.0 million from $7.1 million, an
increase of $941,000, over the prior fiscal year. This increase was attributable
to  higher  taxable  income,  and was  partially  offset  by a  decrease  in the
effective  tax rate from  39.0% in  fiscal  2003 to 37.7% in  fiscal  2004.  The
decrease in the overall effective income tax rate is primarily attributable to a
reversal of state income tax over accrued in prior fiscal years.

     NET INCOME.  As a result of the  foregoing,  net income  increased to $13.3
million from $11.1 million,  an increase of $2.2 million or 19.8%, over the same
period last year.

                                       20


<PAGE>



52 WEEKS ENDED DECEMBER 27, 2003 (FISCAL 2003) COMPARED TO 52 WEEKS ENDED
DECEMBER 28, 2002 (FISCAL 2002)

     NET SALES.  Net sales increased to $216.3 million from $200.3  million,  an
increase of $15.9 million,  or 8.0%,  over the prior fiscal year.  This increase
reflects  $6.2 million of  additional  net sales as a result of a 3% increase in
comparable  store  sales.  The  remainder  of the  increase  was the  result  of
additional  net sales  from  non-comparable  stores.  We  believe  our new store
expansion and remodeling  program will help to materially  increase sales during
the next few years.

     GROSS PROFIT.  Gross profit  increased to $95.5 million from $83.8 million,
an  increase  of $11.7  million,  or 14.0%,  over the prior  fiscal  year.  As a
percentage  of net sales,  gross  profit  increased  to 44.2% from  41.8%.  This
increase  in gross  profit  was the  combined  result of higher net sales and an
increase in gross profit  margins,  due to a more focused  approach to inventory
management.  We plan to increase  inventory  turns in future years, as we reduce
dress inventory levels,  turns of which are historically  slower than sportswear
inventory turns.

     STORE  OPERATING  EXPENSES.  Store  operating  expenses  increased to $63.5
million from $57.3  million,  an increase of $6.2  million,  or 10.9%,  over the
prior fiscal year.  This was due primarily to an increase in the total number of
new  stores  open.  As a  percentage  of net  sales,  store  operating  expenses
increased to 29.4% from 28.6%,  primarily due to an increase in payroll  expense
of $3.0  million and an  increase in  advertising  expense of $1.2  million.  We
anticipate  store  operating  expenses will run slightly  higher than historical
levels,  as a percent of sales in the short  term,  as we  increase  our rate of
store expansion.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
increased to $14.1  million from $12.2  million,  an increase of $1.9 million or
15.5% from the prior fiscal  year.  As a  percentage  of net sales,  general and
administrative expenses increased to 6.5% from 6.1%. This increase was primarily
attributable  to  increase  in  corporate  level  payroll  of $1.4  million  and
professional fees of $289,000. We anticipate general and administrative expenses
will  return  to lower  historical  levels  in the next  few  years,  as we have
completed most of the headquarters  staffing necessary to fuel the current store
expansion.

     OTHER INCOME.  Other income increased to $273,000 from $260,000,  primarily
attributable  to higher  average cash  balances  during  fiscal 2003,  partially
offset by lower interest rates in fiscal 2003. We expect interest income to grow
in the future due to stronger  cash flows from  operations  and higher  interest
rates, as the U.S. economy recovers.

     INCOME TAXES.  Income taxes increased to $7.1 million from $5.6 million, an
increase of $1.5  million,  over the same period last year.  This  increase  was
attributable to higher taxable  income,  as well as an increase in the effective
tax rate from 38.6% in fiscal 2002 to 39.0% in fiscal 2003.  The increase in the
overall effective income tax rate is attributable to increased levels of federal
taxable  income  subject to tax in a higher tax bracket,  as well as a change in
the mix of income  subject  to tax in the  various  states  in which we  conduct
business.

     NET INCOME.  As a result of the  foregoing,  net income  increased to $11.1
million from $8.9  million,  an increase of $2.2  million,  over the same period
last year.

                                       21


<PAGE>


QUARTERLY RESULTS AND SEASONALITY

     We  experience  seasonal and  quarterly  fluctuations  in our net sales and
operating   income.   Our  quarterly   results  of   operations   may  fluctuate
significantly  as a result of a variety of factors,  including the timing of new
store  openings,  fashion trends and shifts in timing of certain  holidays.  Our
business  is subject to  seasonal  influences,  characterized  by highest  sales
during our fourth  fiscal  quarter  (October,  November and December) and lowest
sales during our third fiscal quarter (July, August and September).

     The following table includes our unaudited  quarterly results of operations
data for each of the eight quarters  during the two-year period ended January 1,
2005. We derived this data from our unaudited quarterly  consolidated  financial
statements.  We believe that we have prepared this information on the same basis
as our audited  consolidated  financial statements and that we have included all
necessary  adjustments,  consisting  only of normal  recurring  adjustments,  to
present fairly the selected quarterly  information when read in conjunction with
our audited  annual  consolidated  financial  statements  and the notes to those
statements  included  elsewhere in this document.  The operating results for any
particular  quarter are not necessarily  indicative of the operating results for
any future period.

<TABLE>
<CAPTION>

                                                                13 WEEKS ENDED                                     14 WEEKS ENDED
                                ----------------------------------------------------------------------------------   -----------
                                  MAR. 29,    JUNE 28,   SEPT. 27,   DEC. 27,     MAR. 27,    JUNE 26,    SEPT. 25,    JAN. 1,
                                    2003        2003        2003       2003        2004        2004         2004         2005
                                ----------   ---------   ---------   ---------   ---------   ---------   ---------   ----------
<S>                               <C>          <C>        <C>        <C>         <C>          <C>         <C>         <C>
(Unaudited)
(Dollars in thousands)

OPERATING RESULTS
Net sales                          $48,098     $56,193     $47,343     $64,622     $57,194     $62,087     $49,430       $78,589
Gross profit                        20,037      24,913      20,223      30,352      25,688      29,149      19,596        37,122
Operating income (loss)              2,583       5,665         936       8,721       5,151       7,102       (961)         9,576
Net income (loss)                   $1,641      $3,541        $614      $5,293      $3,249      $4,361      ($521)        $6,208

AS A PERCENTAGE OF NET SALES
Net sales                           100.0%      100.0%      100.0%      100.0%      100.0%      100.0%      100.0%        100.0%
Gross profit                         41.7%       44.3%       42.7%       47.0%       44.9%       46.9%       39.6%         47.2%
Operating income                      5.4%       10.1%        2.0%       13.5%        9.0%       11.4%      (1.9%)         12.2%
Net income                            3.4%        6.3%        1.3%        8.2%        5.7%        7.0%      (1.1%)          7.9%

SELECTED OPERATING DATA

Number of stores open at end of
   period                              237         240         244         255         258         269         276           291
Comparable store sales increase       (3%)          4%          3%          4%         13%          3%        (1%)            4%

</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     Our cash  requirements are primarily for the construction of new stores and
inventory for new stores as well as the remodeling of existing  stores.  We have
historically satisfied our cash requirements  principally through cash flow from
operations. Cash flows have increased significantly in fiscal 2003 and 2004, due
to the dramatic increase in gross margin  contribution.  We expect this trend to
continue  over the next several  years.  As a result of the  restatement  of our
financial  statements to reflect the  reclassification of landlord  construction
allowance  reimbursements from net leasehold improvements to deferred rent, cash
flow  from  operations  increased  in  fiscal  2002  and 2003  from the  amounts
previously reported.  Cash used in investing activities also increased in fiscal
2002 and 2003 reflecting the offsetting increase in leasehold  improvements.  As
of January 1, 2005, we had working capital of $53.5 million, which included cash
and marketable securities of $42.7 million.

                                       22

<PAGE>


     During  fiscal 2004,  we  generated  $23.0  million in cash from  operating
activities  due  primarily  to net  income,  depreciation  of $8.2  million,  an
increase in deferred taxes of $2.7 million,  an increase in accounts  payable of
$2.7  million,  an increase  in accrued  liabilities  of $3.9  million and a tax
benefit of $1.6 million from stock option exercises, which were partially offset
by an increase in inventories of $5.6 million (primarily due to the net increase
of 36 stores),  reversal of deferred  rent of $1.2  million,  and an increase in
receivables of $1.9 million.

     During  fiscal 2003,  we  generated  $21.8  million in cash from  operating
activities  due  primarily  to net  income,  depreciation  of $6.4  million,  an
increase in accrued liabilities and compensation of $5.4 million, an increase in
accounts  payable of $2.4  million,  tax benefit from stock option  exercises of
$2.9  million,  partially  offset by an increase in accounts  receivable of $1.9
million,  and an increase in inventories  of $4.7 million,  primarily due to the
net increase of 21 stores.  During  fiscal 2002,  we generated  $21.6 million in
cash from operating activities due primarily to net income, depreciation of $5.5
million,  a decrease in  receivables  of $1.6  million,  an increase in accounts
payable of $899,000 and an increase in accrued  liabilities and  compensation of
$5.8 million.

     Cash used in investing activities was approximately $27.9 million in fiscal
2004,  $21.0  million in fiscal 2003,  and $23.4  million in fiscal 2002.  These
amounts  were used for the  purchase  of  marketable  securities  as well as the
payment for equipment and leasehold  improvements  in new and remodeled  stores.
Our capital  requirements  depend primarily on the number of new stores we open,
the number of existing  stores we remodel and the timing of these  expenditures.
Projected  capital  expenditures  for fiscal 2005 to fund new store openings and
remodelings are approximately $18.0 to $20.0 million.

     Based on our  experience  with new store  openings,  we  estimate  that the
average net investment to open new stores is approximately $225,000 to $375,000,
which includes new store opening expenses and initial inventory, net of landlord
contributions.  We  estimate  that the  average  net  investment  to  remodel an
existing  store  is  approximately   $200,000  to  $300,000,   net  of  landlord
contributions.

     Cash provided by financing  activities  was  approximately  $4.9 million in
fiscal 2004, primarily due to stock option exercises and stock issuances. During
fiscal 2003,  we received net proceeds of $5.8 million from stock  issuances and
stock option exercises.  Cash provided by financing activities was negligible in
fiscal 2002.

     We have a line of credit with Fleet Bank, N.A.,  permitting us to borrow up
to $17.5  million  on a  revolving  basis.  At  January  1,  2005,  there was no
outstanding  balance under this credit facility.  Amounts  outstanding under the
credit facility bear interest at a maximum annual rate equal to the bank's prime
rate, currently 5.50%. The agreement relating to this facility contains selected
financial  and other  covenants.  In  addition,  the  credit  facility  contains
restrictions on our ability to make capital expenditures,  incur indebtedness or
create or incur liens on our assets.  While this  facility  is  unsecured,  if a
default  occurs  under the  facility,  we are  required  to grant  the  lender a
security interest in our inventory and accounts receivable. We have at all times
been in compliance with all loan covenants.  This facility  currently expires in
November 2005.

     We believe that cash flow from operations,  our current  available cash and
funds available  under our revolving  credit facility will be sufficient to meet
our working  capital needs and  contemplated  new store opening  expenses for at
least  the next 12  months.  If our cash  flow from  operations  should  decline
significantly  or if we should  accelerate  our store  expansion  or  remodeling
program, it may be necessary for us to seek additional sources of capital.

                                       23

<PAGE>

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

     The following  tables  summarize our minimum  contractual  obligations  and
commercial commitments as of January 1, 2005:


<TABLE>
<CAPTION>

                                               PAYMENTS DUE IN PERIOD
                           -----------------------------------------------------------------
                                         WITHIN                                     AFTER
                            TOTAL        1 YEAR        2-3 YEARS     4-5 YEARS      5 YEARS
                           -------       --------      ---------     ---------      --------
<S>                         <C>           <C>            <C>           <C>          <C>

(In thousands)
Contractual Obligations
  Employment contracts   $   1,042       $    500      $    542      $      -       $      -
  Purchase Obligations      31,662         31,662             -             -              -
  Operating leases         166,578         23,745        41,794        37,745         63,294
                         ---------       --------      ---------     ---------      --------
Total                    $ 199,282       $ 55,907      $ 42,336      $ 37,745       $ 63,294
                         ---------       --------      ---------     ---------      --------


                                               PAYMENTS DUE IN PERIOD
                           -----------------------------------------------------------------
                                         WITHIN                                     AFTER
                            TOTAL        1 YEAR        2-3 YEARS     4-5 YEARS      5 YEARS
                           -------       --------      ---------     ---------      --------
(In thousands)
Commercial Commitments
   Credit facility         $      -       $     -      $       -      $     -      $       -
   Standby Letters of
     credit                   3,054         3,054              -            -              -
                           --------      --------      ---------     ---------     ---------
Total                      $  3,054       $ 3,054      $       -      $     -      $       -
                           ========      ========      =========     =========     =========

</TABLE>

     We issue  standby  letters  of  credit  primarily  for the  importation  of
merchandise  inventories.  The  Company  does  not have  any off  balance  sheet
financing arrangements.


ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
             MARKET RISK

     Our market risk relates primarily to changes in interest rates. We bear the
risk in two specific  ways.  First,  the  revolving  credit  facility  carries a
variable  interest  rate  that is tied to market  indices  and,  therefore,  the
statement of income and cash flows will be exposed to changes in interest rates.
As of January 1, 2005, we had no borrowing under our credit  facility.  However,
we may borrow funds under the revolving credit facility, as needed.

     The  second  component  of  interest  rate  risk  involves  the  short-term
investment  of  excess  cash in  short-term,  investment-grade  interest-bearing
securities.  These  investments  are included in cash and equivalents as well as
marketable  securities  on our balance  sheet,  If there are changes in interest
rates,  those  changes  would  affect  the  investment  income  we earn on these
investments  and,  therefore,  impact our cash flows and results of  operations.


                                       24

<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

     In December  2004,  the FASB issued SFAS No. 123R,  "SHARE-BASED  PAYMENT,"
which  revises SFAS No. 123,  "ACCOUNTING  FOR  STOCK-BASED  COMPENSATION,"  and
supersedes APB Opinion No. 25,  "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES." This
Statement  focuses  primarily on accounting for  transactions in which an entity
obtains employee services in share-based  payment  transactions.  This Statement
requires  an entity to  recognize  the cost of  employee  services  received  in
share-based payment transactions and measure the cost on a grant-date fair value
of the  award.  That cost will be  recognized  over the period  during  which an
employee  is  required  to  provide  service  in  exchange  for the  award.  The
provisions  of SFAS No.  123R  will be  effective  for the  Company's  financial
statements issued for periods beginning after June 15, 2005.

     In  December   2003,   the  FASB  issued  FASB   Interpretation   No.  46R,
"CONSOLIDATION OF VARIABLE INTEREST ENTITIES" ("FIN 46R"), which addresses how a
business  enterprise  should  evaluate  whether it has a  controlling  financial
interest in an entity  through  means other than voting  rights and  accordingly
should consolidate the entity. The adoption of FIN46R did not have any impact on
our financial position and results of operations.

     In March 2004, the Emerging Issues Task Force ("EITF")  reached a consensus
on Issue No. 03-1,  "THE  MEANING OF  OTHER-THAN-TEMPORARY  IMPAIRMENTS  AND ITS
APPLICATION  TO  CERTAIN  INVESTMENTS"  ("EITF  03-1").  EITF  03-1  provides  a
three-step   impairment   model  for   determining   whether  an  investment  is
other-than-temporarily  impaired  and  requires  the Company to  recognize  such
impairments  as  an  impairment  loss  equal  to  the  difference   between  the
investment's  cost and  fair  value  at the  reporting  date.  The  guidance  is
effective for the Company  during the first quarter of fiscal 2005.  The Company
does not believe that the adoption of EITF 03-1 will have a  significant  effect
on its financial statements.


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's  unaudited selected quarterly  financial data is incorporated
herein  by  reference  to  Note  11  to  the  Company's  consolidated  financial
statements on page F-20. The Company's consolidated financial statements and the
report of independent  public  accountants  are listed at Item 16 of this Report
and are included in this Form 10-K on pages F-1 through F-22.


ITEM 9.     CHANGES IN AND/OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

     During the two most recent fiscal years and the interim  period through the
date of this disclosure,  (i) there have been no disagreements  with KPMG on any
matter of accounting principles or practices,  financial statement disclosure or
auditing  scope  or  procedure,  which  disagreements,  if not  resolved  to the
satisfaction  of KPMG,  would have  caused it to make  reference  to the subject
matter of the  disagreements in connection with its report,  and (ii) there were
no  "reportable  events" (as defined in Item  304(a)(1)(v)  of Regulation  S-K).
Please see our Current Report on Form 8-K filed February 15, 2005 for additional
disclosure regarding our change in accountants.


                                       25

<PAGE>


ITEM 9A.    CONTROLS AND PROCEDURES

     (1)  DISCLOSURE CONTROLS AND PROCEDURES--The  Company maintains a system of
disclosure  controls and procedures that are designed to ensure that information
required to be disclosed in the Company's reports under the Securities  Exchange
Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and  communicated to management,  including
the Company's  Chief Executive  Officer ("CEO") and the Principal  Financial and
Accounting Officer ("PFAC"), as appropriate, to allow timely decisions regarding
required  disclosure.  In designing and evaluating  the disclosure  controls and
procedures,  management  recognized that any controls and procedures,  no matter
how well  designed  and  operated,  can provide  only  reasonable  assurance  of
achieving the desired control  objectives,  as the Company's are designed to do,
and management  necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.

     In connection  with the  preparation of this Annual Report on Form 10-K, as
of January 1, 2005, an evaluation was performed  under the  supervision and with
the  participation of the Company's  management,  including the CEO and PFAC, of
the  effectiveness  of the  design and  operation  of the  Company's  disclosure
controls and procedures  (as defined in Rule 13a-15(e)  under the Exchange Act).
In  performing  this  evaluation,   management   reviewed  the  Company's  lease
accounting and leasehold depreciation practices in light of the February 7, 2005
letter  issued by the Office of the Chief  Accountant of the SEC to the American
Institute  of Certified  Public  Accountants.  As a result of this  review,  the
Company concluded that its previously established lease accounting and leasehold
improvement  depreciation practices were not appropriate and determined that the
Company's cash flows from operations and cash used in investing  activities over
the last several years had been understated.  There was no impact on net income,
as a result  of the  changes.  Accordingly,  as  described  below,  the  Company
determined to restate certain of its previously  issued financial  statements to
reflect  the  correction  in  the  Company's  lease   accounting  and  leasehold
improvement depreciation practices.  Based on that evaluation, the Company's CEO
and PFAC concluded that the Company's  disclosure  controls and procedures  were
not effective as of January 1, 2005.

     (2)  MANAGEMENT'S   ANNUAL  REPORT  ON  INTERNAL   CONTROL  OVER  FINANCIAL
REPORTING--Management  is responsible for establishing and maintaining  adequate
internal control over financial  reporting,  as such term is defined in Exchange
Act Rules 13a-15(f).  A system of internal control over financial reporting is a
process designed to provide  reasonable  assurance  regarding the reliability of
financial  reporting  and the  preparation  and fair  presentation  of financial
statements  for  external   purposes  in  accordance  with  generally   accepted
accounting  principles.  All  internal  control  systems,  no  matter  how  well
designed, have inherent limitations. Therefore, even those systems determined to
be effective  can provide only  reasonable  assurance  with respect to financial
statement preparation and presentation.

     Management has assessed the effectiveness of the Company's internal control
over  financial  reporting as of January 1, 2005.  In making its  assessment  of
internal  control over  financial  reporting,  management  used the criteria set
forth by the  Committee  of  Sponsoring  Organizations  ("COSO") of the Treadway
Commission in INTERNAL CONTROL--INTEGRATED FRAMEWORK.

     In performing  this  assessment,  management  reviewed the Company's  lease
accounting practices in light of the SEC letter of February 7, 2005. As a result
of this  review,  management  concluded  that the  Company's  controls  over the
selection  and  monitoring of accounting  policies for  construction  allowances
received from  landlords  were  insufficient,  and, as a result,  management has
determined  that the

                                       26

<PAGE>


Company's cash flows from operations and cash used in investing  activities over
the last  several  years  had been  understated.  On March 11,  2005,  the Audit
Committee of the Board of Directors (the "Committee") and management  determined
to restate certain of the Company's  previously  issued financial  statements to
reflect  the  correction  in its  accounting  and  for  construction  allowances
received from landlords.

     Management  evaluated  the  impact  of this  restatement  on the  Company's
assessment of its system of internal  control and has concluded that the control
deficiency that resulted in the incorrect accounting for construction allowances
received from landlords  represented a material  weakness as of January 1, 2005.
As a result of this  material  weakness in the Company's  internal  control over
financial  reporting,  management has concluded that, as of January 1, 2005, the
Company's  internal control over financial  reporting was not effective based on
the  criteria  set  forth by the COSO of the  Treadway  Commission  in  INTERNAL
CONTROL--INTEGRATED  FRAMEWORK.  A material  weakness in internal  control  over
financial  reporting is a control  deficiency  (within the meaning of the Public
Company  Accounting  Oversight  Board's  ("PCAOB")  Auditing Standard No. 2), or
combination  of control  deficiencies,  that  results in there being more than a
remote  likelihood  that a  material  misstatement  of  the  annual  or  interim
financial statements will not be prevented or detected.  PCAOB Auditing Standard
No. 2  identifies  a number  of  circumstances  that,  because  of their  likely
significant negative effect on internal control over financial reporting, are to
be regarded as at least  significant  deficiencies as well as strong  indicators
that a material weakness exists,  including the restatement of previously issued
financial statements to reflect the correction of a misstatement.

     The Company's independent  registered public accounting firm, KPMG LLP, has
issued  an  attestation  report  on  management's  assessment  of the  Company's
internal control over financial reporting. This report appears below.

     (3)  REMEDIATION  STEPS TO  ADDRESS  MATERIAL  WEAKNESS--To  remediate  the
aforementioned   material  weakness  in  the  Company's  internal  control  over
financial reporting, the Company implemented, subsequent to year end, additional
review  procedures over the selection and monitoring of accounting  policies for
construction allowances received from landlords.

     (4)  CHANGE IN INTERNAL  CONTROL OVER FINANCIAL  REPORTING -- No changes in
the Company's internal control over financial  reporting has occurred during the
Company's last fiscal quarter that have materially  affected,  or are reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting.


         /s/ BRIAN WOOLF                                    March 16, 2005
         -------------------------------------
         Brian Woolf
         CHAIRMAN AND CHIEF EXECUTIVE OFFICER


         /s/ THOMAS E. REINCKENS                            March 16, 2005
         -------------------------------------
         Thomas E. Reinckens
         PRESIDENT AND CHIEF OPERATING OFFICER
         (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)


                                       27

<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We have  audited  management's  assessment,  included  in the  accompanying
Management's  Annual Report on Internal  Control over Financial  Reporting (Item
9(A)(2)),  that Cache,  Inc. did not maintain  effective  internal  control over
financial reporting as of January 1, 2005, because of the effect of deficiencies
in  the  Company's   selection  and   monitoring  of  accounting   policies  for
construction  allowances received from landlords,  based on criteria established
in Internal Control--Integrated  Framework issued by the Committee of Sponsoring
Organizations  of the Treadway  Commission  (the COSO criteria).  Cache,  Inc.'s
management  is  responsible  for  maintaining  effective  internal  control over
financial  reporting  and for its  assessment of the  effectiveness  of internal
control over financial reporting. Our responsibility is to express an opinion on
management's  assessment  and an opinion on the  effectiveness  of the Company's
internal control over financial reporting based on our audit.

     We  conducted  our audit in  accordance  with the  standards  of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and  perform  the audit to obtain  reasonable  assurance  about  whether
effective  internal  control over  financial  reporting  was  maintained  in all
material  respects.  Our audit included  obtaining an  understanding of internal
control over financial reporting,  evaluating management's  assessment,  testing
and evaluating the design and operating  effectiveness of internal control,  and
performing   such  other   procedures   as  we   considered   necessary  in  the
circumstances.  We believe that our audit  provides a  reasonable  basis for our
opinion.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

     Because  of its  inherent  limitations,  internal  control  over  financial
reporting  may not prevent or detect  misstatements.  Also,  projections  of any
evaluation  of  effectiveness  to future  periods  are  subject to the risk that
controls may become  inadequate  because of changes in  conditions,  or that the
degree of compliance with the policies or procedures may deteriorate.

     A material  weakness is a control  deficiency,  or  combination  of control
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weakness has been identified and included in
management's  assessment:  In its  assessment as of January 1, 2005,  management
identified as a material weakness the Company's lack of sufficient controls over
the selection and monitoring of accounting policies for construction  allowances
received  from  landlords.  As a result of this  material  weakness  in internal
control,  Cache, Inc. concluded the Company's  previously  reported  annual cash
flows from operations and cash used in investing activities had been understated
and that previously issued financial statements should be restated.


                                       28


<PAGE>



     We also have  audited,  in  accordance  with the  standards  of the  Public
Company  Accounting  Oversight Board (United States),  the consolidated  balance
sheets of Cache,  Inc.  as of January 1, 2005 and  December  27,  2003,  and the
related consolidated  statements of income,  stockholders' equity and cash flows
for each of the years in the  three-year  period  ended  January  1,  2005.  The
aforementioned  material  weakness was  considered  in  determining  the nature,
timing,  and extent of audit tests applied in our audit of the 2004 consolidated
financial statements, and this report does not affect our report dated March 15,
2005,  which expressed an unqualified  opinion on those  consolidated  financial
statements.

     In our opinion, management's  assessment  that Cache, Inc. did not maintain
effective  internal  control over  financial  reporting as of January 1, 2005 is
fairly  stated,  in all  material  respects,  based on criteria  established  in
Internal  Control - Integrated  Framework  issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).  Also, in our opinion,  because
of the effect of the material weakness described above on the achievement of the
objectives  of the control  criteria,  Cache Inc. has not  maintained  effective
internal  control  over  financial  reporting  as of January  1, 2005,  based on
criteria  established in Internal  Control - Integrated  Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).

                                    /s/ KPMG LLP
                                    ----------------------------------------
                                    KPMG LLP

New York, New York
March 15, 2005



ITEM 9B.   OTHER INFORMATION

     None.

                                    PART III

     The information  called for by Items 10, 11, 12, 13, and 14 is incorporated
herein by  reference  from the  definitive  proxy  statement  to be filed by the
Company in connection with its 2005 Annual Meeting of Shareholders.


                                       29

<PAGE>


ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  1.   The  financial  statements  listed in the  "Index To The  Consolidated
          Financial Statements" on page F-2 are filed as a part of this report.

     2.   Financial statement schedules are included on page F-22 or are omitted
          because they are not  applicable or the required  information is shown
          in the financial statements or notes thereto.

3.   Exhibits (9)

              3.1    Articles of Incorporation of the Company and all amendments
                     thereto (2)

              3.2    Bylaws of the Company (1)

              10.1   Lease, dated July 28, 2003, between the Company, as Tenant,
                     and New 1440 Broadway Partners,  LLC, as Landlord,  for the
                     Company's offices at 1440 Broadway, New York, New York (11)

              10.2   1994 Stock Option Plan of the Company (3) (12)

              10.3   Form of Option  Agreement  relating to Options issued under
                     the 1994 Stock Option Plan (4) (12)

              10.4   2000 Stock Option Plan of the Company (7) (12)

              10.5   Form of Option  Agreement  relating to Options issued under
                     the 2000 Stock Option Plan (8) (12)

              10.6   2003 Stock Option Plan of the Company (9) (12)

              10.7   Form of Option  Agreement  relating to Options issued under
                     the 2003 Stock Option Plan (11) (12)

              10.8   Second Amended and Restated Revolving Credit Agreement (the
                     "Credit  Agreement")  dated as of August 26, 1996,  between
                     Fleet  Bank,  N.A.   (Successor  in  interest  to  National
                     Westminster Bank, New Jersey) and the Company (4)

              10.9   Security  Agreement,  dated  as of  August  26,  1996  (the
                     "Security Agreement"),  between the Company and Fleet Bank,
                     N.A. (4)

              10.10  Amended and Restated Asset Purchase  Agreement dated August
                     10,  1998  between  Lillie  Rubin  Fashions,  Inc.  and the
                     Company (5)

                                       30

<PAGE>


              10.11  Master Amendment,  dated July 19, 1999, to Revolving Credit
                     Agreement and Security Agreement (6)

              10.12  Employment Agreement, dated September 30, 2003, between the
                     Company and Brian P. Woolf (10) (12)

              10.13  Second  Master  Amendment,  dated  November  21,  2002,  to
                     Revolving Credit Agreement (11)

              10.14  Third Master  Amendment,  dated May 20, 2004,  to Revolving
                     Credit Agreement (11)

              11.1   Calculation of Basic and Fully Diluted  Earnings per Common
                     Share

              12.1   Statements re: Computation of Ratios

              23.1   Consent of KPMG LLP

              31.1   Certification  of the Chief Executive  Officer  pursuant to
                     Section 302 of the Sarbanes-Oxley Act of 2002.

              31.2   Certification  of the Principal  Financial  and  Accounting
                     Officer pursuant to Section 302 of the  Sarbanes-Oxley  Act
                     of 2002.

              32.1   Certification of the Chief Executive  Officer and Principal
                     Financial and Accounting Officer pursuant to Section 906 of
                     the Sarbanes-Oxley Act of 2002.

(1)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-18, dated December 29, 1980.

(2)  Incorporated  by reference  to the  Company's  Current  Report on Form 8-K,
     dated September 15, 1993.

(3)  Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1994.

(4)  Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the fiscal year ended December 28, 1996.

(5)  Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the fiscal year ended January 2, 1999.

(6)  Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the fiscal year ended January 1, 2000.

(7)  Incorporated by reference to the Company's Definitive Proxy Statement filed
     on September 18, 2001.


                                       31

<PAGE>


(8)  Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the fiscal year ended December 29, 2001.

(9)  Incorporated by reference to the Company's Definitive Proxy Statement filed
     on October 6, 2003.

(10) Incorporated by reference to the Company's  Registration  Statement on Form
     S-3, dated November 17, 2003.

(11) Incorporated by references to the Company's  Annual Report on Form 10-K for
     the fiscal year ended December 27, 2003.

(12) Exhibits  10.2  through  10.7  and  10.12  are   management   contracts  or
     compensatory  plans or  arrangements,  which are required to be filed as an
     exhibit pursuant to Item 16(c) of this Annual Report on Form 10-K.

(13) A  Stockholder  may obtain a copy of any of the  exhibits  included  in the
     Annual  Report on Form 10-K upon  payment of a fee to cover the  reasonable
     expenses of furnishing such exhibits, by written request to CACHE, Inc., at
     1440  Broadway,  5th  Floor,  New York,  New York  10018  Attention:  Chief
     Operating Officer.

(b)  Reports on Form 8-K

          None.

                                       32


<PAGE>



SIGNATURES

     Pursuant  to the  requirement  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.

Date:    March 16, 2005                    CACHE, INC.
                                           (Registrant)

                                     By:   /s/ BRIAN WOOLF
                                           -------------------------------
                                           Brian Woolf
                                           Chairman of the Board
                                           and Chief Executive Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

         SIGNATURE                     TITLE                     DATE
----------------------------    --------------------------    ----------------

/s/ BRIAN WOOLF                 Chairman of the Board         March 16, 2005
----------------------
    BRIAN WOOLF


/s/ THOMAS E. REINCKENS         President                     March 16, 2005
----------------------          (Principal Financial
    THOMAS E. REINCKENS         and Accounting Officer)


/s/ GENE GAGE                   Director                      March 16, 2005
----------------------
    GENE GAGE


/s/ ARTHUR S. MINTZ             Director                      March 16, 2005
----------------------
    ARTHUR S. MINTZ


/s/ ANDREW M. SAUL              Director                      March 16, 2005
----------------------
    ANDREW M. SAUL


/s/ MORTON J. SCHRADER          Director                      March 16, 2005
----------------------
    MORTON J. SCHRADER

                                       33


<PAGE>

EXHIBIT 11.1     CALCULATION OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

<TABLE>
<CAPTION>

<S>                                      <C>                   <C>                <C>

                                                   52 WEEKS ENDED                 53 WEEKS ENDED
                                         ----------------------------------       ---------------
                                         DECEMBER 28,          DECEMBER 27,          JANUARY 1,
EARNINGS PER SHARE                           2002                  2003                 2005
                                         --------------        -------------      ---------------
Net income applicable
     to common stockholders                $8,941,000           $11,089,000          $13,297,000
                                         --------------        -------------      ---------------
BASIC EARNINGS PER SHARE
     Weighted average number of
     common shares outstanding             13,650,000            14,256,000           15,589,000
                                         ==============        =============      ===============
Basic earnings per share                        $0.66                 $0.78                $0.85
                                         ==============        =============      ===============
DILUTED EARNINGS PER SHARE
Weighted average number of
     common shares outstanding             13,650,000            14,256,000           15,589,000

Assuming conversion of
     outstanding stock options              1,710,000             2,015,000            1,651,000

Less: assumed repurchase
     of common stock pursuant
     to the treasury stock method            (912,000)           (1,550,000)          (1,236,000)
                                         --------------        -------------      ---------------
Weighted average number of
     common shares outstanding
     as adjusted                           14,448,000            14,721,000           16,004,000
                                         ==============        =============      ===============
Diluted earnings per share                      $0.62                 $0.75                $0.83
                                         ==============        =============      ===============


</TABLE>


<PAGE>



EXHIBIT 12.1      COMPUTATION OF RATIOS

RATIO OF CURRENT  ASSETS TO CURRENT  LIABILITIES  = current  assets (at  balance
sheet date) divided by current liabilities (at balance sheet date).

INVENTORY  TURNOVER  RATIO = total cost of sales  divided  by average  inventory
(beginning and ending inventory, divided by two, at the balance sheet date).

BOOK VALUE PER SHARE = stockholders' equity divided by common shares outstanding
(at balance sheet date).



<PAGE>



CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors
Cache, Inc.:

We consent to the  incorporation  by  reference in the  registration  statements
(Nos.  333-65113,  333-84848,  333-96717 and  333-110553) on Forms S-8 of Cache,
Inc.  of our reports  dated March 15,  2005,  with  respect to the  consolidated
balance  sheets of Cache,  Inc. as of January 1, 2005 and December 27, 2003, and
the related consolidated  statements of income,  stockholders'  equity, and cash
flows, for each of the years in the three-year period ended January 1, 2005, and
the  related  financial  statement  schedule,  management's  assessment  of  the
effectiveness of internal control over financial reporting as of January 1, 2005
and the effectiveness of internal control over financial reporting as of January
1, 2005,  which reports appear in the January 1, 2005 annual report on Form 10-K
of Cache, Inc.

Our report  dated March 15, 2005 on the  consolidated  balance  sheets of Cache,
Inc. as of January 1, 2005 and December 27, 2003,  and the related  consolidated
statements  of income,  stockholders'  equity,  and cash flows,  for each of the
years in the  three-year  period ended January 1, 2005  contains an  explanatory
paragraph  that states that the  consolidated  balance  sheet as of December 27,
2003 and the related  consolidated  statements of cash flows for the years ended
December 27, 2003 and December 28, 2002, have been restated.

Our report dated March 15, 2005 on management's  assessment of the effectiveness
of internal control over financial  reporting and the  effectiveness of internal
control over  financial  reporting as of January 1, 2005,  expresses our opinion
that Cache,  Inc. did not maintain  effective  internal  control over  financial
reporting as of January 1, 2005 because of the effect of a material  weakness on
the  achievement  of the  objectives  of the control  criteria  and  contains an
explanatory  paragraph that states that as of January 1, 2005,  Cache,  Inc. had
insufficient  controls over the selection and monitoring of accounting  policies
for construction  allowances  received from landlords which could have prevented
the Company from  concluding  that its previously  reported annual and quarterly
cash  flows  from  operating  activities,  cash  used in  investing  activities,
equipment and leasehold improvements and other long term liabilities relating to
construction  allowances  received from landlords had been  understated and that
previously issued financial statements should be restated.

/s/ KPMG LLP


New York, New York
March 16, 2005


<PAGE>


EXHIBIT 31.1      CERTIFICATION

I, Brian Woolf, certify that:

1.   I have reviewed this annual report on Form 10-K of Cache Inc. (Cache);

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements are made,  not misleading  with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     Cache as of, and for, the periods presented in this annual report;

4.   Cache's other certifying officer and I are responsible for establishing and
     maintaining  disclosure controls and procedures (as defined in Exchange Act
     Rules  13a-15(e)  and  15d-15(e))  and  internal   control  over  financial
     reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
     registrant and have:

     a.   designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure that material  information  relating to Cache,
          including its consolidated subsidiaries, is made known to us by others
          within those  entities,  particularly  during the period in which this
          annual report is being prepared;
     b.   designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of  financial  reporting  and  preparation  of  financial
          statements for external purposes in accordance with generally accepted
          accounting principles;
     c.   evaluated  the  effectiveness  of  Cache's  disclosure   controls  and
          procedures and presented in this annual report our  conclusions  about
          the effectiveness of the disclosure  controls and procedures as of the
          end of the  period  covered  by  this  annual  report  based  on  such
          evaluation; and
     d.   disclosed in this report any change in Cache's  internal  control over
          financial  reporting that occurred  during Cache's fourth quarter that
          has materially affected, or is reasonably likely to materially affect,
          the registrant's internal control over financial reporting;

5.   Cache's other  certifying  officer and I have disclosed,  based on our most
     recent evaluation of internal control over financial reporting,  to Cache's
     auditors and the audit committee of Cache's Board of Directors;

     a.   all significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect  Cache's  ability  to record,
          process, summarize and report financial information ; and
     b.   any fraud, whether or not material,  that involves management or other
          employees who have a significant role in Cache's internal control over
          financial reporting.

March 16, 2005                            By: /s/ BRIAN WOOLF
                                              ---------------------------
                                              Brian Woolf
                                              CHAIRMAN AND CHIEF
                                              EXECUTIVE OFFICER


<PAGE>



EXHIBIT 31.2    CERTIFICATION

I, Thomas E. Reinckens, certify that:

1.   I have reviewed this annual report on Form 10-K of Cache Inc. (Cache);

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements are made,  not misleading  with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     Cache as of, and for, the periods presented in this annual report;

4.   Cache's other certifying officer and I are responsible for establishing and
     maintaining  disclosure controls and procedures (as defined in Exchange Act
     Rules  13a-15(e)  and  15d-15(e))  and  internal   control  over  financial
     reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
     registrant and have:

     a.   designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure that material  information  relating to Cache,
          including its consolidated subsidiaries, is made known to us by others
          within those  entities,  particularly  during the period in which this
          annual report is being prepared;
     b.   designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of  financial  reporting  and  preparation  of  financial
          statements for external purposes in accordance with generally accepted
          accounting principles;
     c.   evaluated  the  effectiveness  of  Cache's  disclosure   controls  and
          procedures and presented in this annual report our  conclusions  about
          the effectiveness of the disclosure  controls and procedures as of the
          end of the  period  covered  by  this  annual  report  based  on  such
          evaluation; and
     d.   disclosed in this report any change in Cache's  internal  control over
          financial  reporting that occurred  during Cache's fourth quarter that
          has materially affected, or is reasonably likely to materially affect,
          the registrant's internal control over financial reporting;

5.   Cache's other  certifying  officer and I have disclosed,  based on our most
     recent evaluation of internal control over financial reporting,  to Cache's
     auditors and the audit committee of Cache's Board of Directors;

     a.   all significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect  Cache's  ability  to record,
          process, summarize and report financial information ; and
     b.   any fraud, whether or not material,  that involves management or other
          employees who have a significant role in Cache's internal control over
          financial reporting.

March 16, 2005               By: /s/ THOMAS E. REINCKENS
                                 --------------------------------------------
                                 Thomas E. Reinckens
                                 PRESIDENT AND CHIEF OPERATING OFFICER
                                 (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)


<PAGE>



EXHIBIT 32.1      CERTIFICATION PURSUANT TO SECTION 906 OF THE
                  SARBANES-OXLEY ACT OF 2002

Pursuant to, and solely for purposes of, 18 U.S.C.  Section 1350 (Section 906 of
the Sarbanes-Oxley Act of 2002), each of the undersigned hereby certifies in the
capacity and on the date indicated below that:


1.   The Annual Report of Cache, Inc. on Form 10-K for the period ending January
     1, 2005 as filed with the  Securities  and Exchange  Commission on the date
     hereof (the "Report")  fully complies with the  requirements  of Section 13
     (a) or 15 (d) of the Securities and Exchange Act of 1934; and

2.   The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of Cache, Inc.



         /s/ BRIAN WOOLF                                     March 16, 2005
         -----------------------------------
         Brian Woolf
         CHAIRMAN AND CHIEF EXECUTIVE OFFICER



         /s/ THOMAS E. REINCKENS                             March 16, 2005
         ------------------------------------
         Thomas E. Reinckens
         PRESIDENT AND CHIEF OPERATING OFFICER
         (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)


<PAGE>



                          CACHE, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                       FISCAL YEARS ENDED JANUARY 1, 2005,

                               DECEMBER 27, 2003,

                                       AND

                                DECEMBER 28, 2002









                                      F-1


<PAGE>



                          CACHE, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



INDEX                                                     PAGE

Independent Auditors' Report                               F-3

Consolidated Balance Sheets                                F-4

Consolidated Statements of Income                          F-5

Consolidated Statements of Stockholders' Equity            F-6

Consolidated Statements of Cash Flows                      F-7

Notes to Consolidated Financial Statements                 F-8

Valuation and Qualifying Accounts                         F-22





                                      F-2



<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
Cache, Inc.:

We have audited the accompanying  consolidated balance sheets of Cache, Inc. and
subsidiaries  as of January  1, 2005 and  December  27,  2003,  and the  related
consolidated statements of income,  stockholders' equity and cash flows for each
of the years in the three-year  period ended January 1, 2005. In connection with
our audits of the consolidated  financial  statements,  we also have audited the
financial  statement  schedule.  These  consolidated  financial  statements  and
financial statement schedule are the responsibility of the Company's management.
Our  responsibility  is to express an  opinion on these  consolidated  financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Cache,  Inc. and
subsidiaries  as of January 1, 2005 and December  27,  2003,  and the results of
their  operations  and their cash flows for each of the years in the  three-year
period  ended  January 1,  2005,  in  conformity  with U.S.  generally  accepted
accounting  principles.  Also in our opinion,  the related  financial  statement
schedule,  when  considered  in  relation  to the basic  consolidated  financial
statements taken as a whole,  presents  fairly,  in all material  respects,  the
information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company has
restated  its  consolidated  balance  sheet  as of  December  27,  2003  and its
consolidated  statements of cash flows for the years ended December 27, 2003 and
December 28, 2002.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the effectiveness of Cache, Inc.'s
internal  control  over  financial  reporting  as of January  1, 2005,  based on
criteria  established in Internal  Control--Integrated  Framework  issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated March 15, 2005  expressed an  unqualified  opinion on  management's
assessment of, and an adverse  opinion on the effective  operation of,  internal
control over financial reporting.

/s/ KPMG LLP

New York, New York
March 15, 2005


                                      F-3

<PAGE>

CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

ASSETS

                                                                             DECEMBER 27,               JANUARY 1,
                                                                                2003                       2005
                                                                             (RESTATED -
                                                                               NOTE 1)
                                                                          ------------------        ------------------
<S>                                                                         <C>                        <C>
CURRENT ASSETS
        Cash and equivalents  (Note 1)                                       $16,887,000                $16,848,000
        Marketable securities                                                 19,746,000                 25,874,000
        Receivables, net   (Note 2)                                            4,614,000                  6,545,000
        Inventories                                                           26,724,000                 32,296,000
        Deferred income taxes (Note 9)                                           936,000                    567,000
        Prepaid expenses and other current assets                              1,239,000                  1,948,000
                                                                          --------------             --------------
                    Total Current Assets                                      70,146,000                 84,078,000

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET   (Note 3)                          33,048,000                 47,118,000

OTHER ASSETS                                                                     873,000                    832,000
                                                                          --------------             --------------
       TOTAL ASSETS                                                        $104,067,0000               $132,028,000
                                                                          ==============             ==============
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
      Accounts payable                                                       $14,362,000                $17,055,000
      Accrued compensation                                                     4,675,000                  1,927,000
      Accrued liabilities  (Note 4)                                           10,075,000                 11,627,000
                                                                          --------------             --------------
         Total Current Liabilities                                            29,112,000                 30,609,000

OTHER LIABILITIES   (Note 7)                                                   9,126,000                 13,556,000

DEFERRED INCOME TAXES, NET   (Note 9)                                            687,000                  3,023,000

COMMITMENTS AND CONTINGENCIES   (Note 8)

STOCKHOLDERS' EQUITY
   Common stock, par value $.01; authorized, 20,000,000
      shares; issued and outstanding 15,665,053 shares (Note 10)                 100,000                    157,000
   Additional paid-in capital                                                 28,361,000                 34,705,000
                                                                          --------------             --------------
   Retained earnings                                                          36,681,000                 49,978,000
                                                                          --------------             --------------
         Total Stockholders' Equity                                           65,142,000                 84,840,000
                                                                           -------------             --------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $104,067,000               $132,028,000
                                                                          ==============             ==============

</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

                                                                F-4

<PAGE>


CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                      52 WEEKS ENDED                     53 WEEKS ENDED
                                                        ----------------------------------------       -----------------
                                                           DECEMBER 28,           DECEMBER 27,             JANUARY 1,
                                                               2002                   2003                    2005
                                                        ------------------      ----------------       -----------------
<S>                                                      <C>                       <C>                  <C>

NET SALES                                                 $ 200,315,000          $ 216,256,000          $ 247,300,000

COST OF SALES, INCLUDING BUYING
      AND OCCUPANCY (Note 8)                                116,490,000            120,731,000            135,745,000
                                                          ---------------        --------------          -------------
GROSS PROFIT                                                 83,825,000             95,525,000            111,555,000

EXPENSES
      Store operating expenses                               57,322,000             63,546,000             76,466,000
      General and administrative expenses                    12,190,000             14,074,000             14,221,000
                                                          ---------------        --------------          -------------
           TOTAL EXPENSES                                    69,512,000             77,620,000             90,687,000
                                                          ---------------        --------------          -------------
OPERATING INCOME                                             14,313,000             17,905,000             20,868,000
                                                          ---------------        --------------          -------------
OTHER INCOME (EXPENSE)
      Interest income                                           260,000                259,000                439,000
      Miscellaneous income (net)                                     --                 14,000                 20,000
                                                          ---------------        -------------           ------------
           TOTAL OTHER INCOME                                   260,000                273,000                459,000
                                                          ---------------        --------------          -------------
INCOME BEFORE INCOME TAXES                                   14,573,000             18,178,000             21,327,000

INCOME TAX PROVISION (Note 9)                                 5,632,000              7,089,000              8,030,000
                                                          ---------------        --------------          -------------
NET INCOME                                                $   8,941,000          $  11,089,000           $ 13,297,000
                                                          ===============        ==============          =============
BASIC EARNINGS PER SHARE                                          $0.66                  $0.78                  $0.85
                                                          ===============        ==============          =============
DILUTED EARNINGS PER SHARE                                        $0.62                  $0.75                  $0.83
                                                          ===============        ==============          =============
BASIC WEIGHTED AVERAGE
      SHARES OUTSTANDING                                     13,650,000             14,256,000             15,589,000
                                                          ===============        ==============          =============
DILUTED WEIGHTED AVERAGE
      SHARES OUTSTANDING                                     14,448,000             14,721,000             16,004,000
                                                          ===============        ==============          =============
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.


                                                              F-5



<PAGE>

CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                     ADDITIONAL
                                                       COMMON          PAID-IN         RETAINED
                                                        STOCK          CAPITAL         EARNINGS            TOTAL
                                                    -------------    -----------      -----------       -----------
<S>                                                    <C>            <C>                <C>              <C>
BALANCE DECEMBER 29, 2001                              $91,000       $19,564,000      $16,651,000       $36,306,000
---------------------------------------
Net Income                                              ----            ----            8,941,000         8,941,000
Issuance of common stock                                ----              45,000          ----               45,000
                                                      --------       -----------      -----------       -----------
BALANCE DECEMBER 28, 2002                               91,000        19,609,000       25,592,000        45,292,000
---------------------------------------               --------       -----------      -----------       -----------
Net Income                                              ----            ----           11,089,000        11,089,000
Tax benefit from stock option exercises                 ----           2,933,000         ----             2,933,000
Issuance of common stock                                 9,000         5,819,000         ----             5,828,000
                                                      --------       -----------      -----------       -----------
BALANCE DECEMBER 27, 2003                              100,000        28,361,000       36,681,000        65,142,000
---------------------------------------               --------       -----------      -----------       -----------

Net Income                                              ----            ----           13,297,000        13,297,000
Tax benefit from stock option exercises                 ----           1,583,000         ----             1,583,000
Issuance of common stock                                 5,000         4,813,000         ----             4,818,000
Stock Split                                             52,000           (52,000)        ----               ----
                                                      --------       -----------      -----------       -----------
BALANCE JANUARY 1, 2005                               $157,000       $34,705,000      $49,978,000       $84,840,000
                                                      ========       ===========      ===========       ===========


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

</TABLE>

                                                                   F-6

<PAGE>


CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                            52 WEEKS ENDED                 53 WEEKS ENDED
                                                                ----------------------------------         --------------
                                                                    DECEMBER 28,     DECEMBER 27,             JANUARY 1,
                                                                        2002             2003                    2005
                                                                     (RESTATED -      (RESTATED -
                                                                      NOTE 1)          NOTE 1)
                                                                ----------------    --------------         --------------
<S>                                                                 <C>                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                                           $8,941,000      $11,089,000              $13,297,000
Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
Depreciation and amortization                                         5,519,000        6,395,000                8,232,000
Income tax benefit from stock option exercises                          ----           2,933,000                1,583,000
Decrease (increase) in deferred tax assets                              (24,000)         916,000                2,705,000
Reversal of deferred rent                                              (672,000)        (835,000)              (1,221,000)

Change in assets and liabilities:
Decrease (increase) in receivables                                    1,641,000       (1,937,000)              (1,931,000)
Decrease in notes receivable from related parties                        50,000          321,000                 ----
Increase in inventories                                                (304,000)      (4,659,000)              (5,572,000)
Increase in prepaid expenses                                           (308,000)        (219,000)                (709,000)
Increase in accounts payable                                            899,000        2,374,000                2,693,000
Increase in accrued liabilities
     and accrued compensation                                         5,816,000        5,432,000                3,906,000
                                                                 --------------     -------------        -----------------
Net cash provided by operating activities                            21,558,000       21,810,000               22,983,000
                                                                 --------------     -------------        -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities                                   (21,184,000)     (19,746,000)             (25,874,000)
Maturities of marketable securities                                   6,792,000       14,392,000               19,746,000
Payments for equipment and leasehold improvements                    (9,033,000)     (15,628,000)             (21,753,000)
                                                                 --------------     -------------        -----------------
Net cash used in investing activities                               (23,425,000)     (20,982,000)             (27,881,000)
                                                                 --------------     -------------        -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock                                   45,000        5,828,000                4,818,000
Other, net                                                                8,000          (56,000)                  41,000
                                                                 --------------     -------------        -----------------
Net cash provided by financing activities                                53,000        5,772,000                4,859,000
                                                                 --------------     -------------        -----------------
Net increase (decrease) in cash and equivalents                      (1,814,000)       6,600,000                  (39,000)
Cash and equivalents, at beginning of period                         12,101,000       10,287,000               16,887,000
                                                                 --------------     -------------        -----------------
Cash and equivalents, at end of period                              $10,287,000      $16,887,000              $16,848,000
                                                                 ==============     =============        =================



The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

</TABLE>

                                                                 F-7


<PAGE>



CACHE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

     Cache,  Inc.  (together  with its  subsidiaries,  the  "Company")  owns and
operates two chains of women's apparel specialty stores, of which 254 stores (as
of January 1, 2005) are operated  under the trade name "Cache" and 37 stores are
operated  under the trade name "Lillie  Rubin".  The Company  specializes in the
sale of high fashion  women's apparel and accessories in the better to expensive
price range.

BASIS OF CONSOLIDATION

     The consolidated  financial  statements include the accounts of the Company
and  its   subsidiaries,   all  of  which  are  wholly  owned.  All  significant
intercompany balances and transactions have been eliminated.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally  accepted  in the United  States of America  requires  the
appropriate  application of certain accounting policies,  many of which requires
us to make  estimates  and  assumptions  about future events and their impact on
amounts  reported in our financial  statements and related  notes.  Since future
events and their impact cannot be determined with certainty,  the actual results
will inevitably differ from our estimates. Such differences could be material to
the financial statements.

FISCAL REPORTING PERIOD

     The  Company  reports  its  annual  results of  operations  based on fiscal
periods  comprised  of 52 or 53  weeks,  which is in  accordance  with  industry
practice. Results for fiscal 2004 includes 53 weeks. Results for fiscal 2002 and
2003 include 52 weeks.

RESTATEMENT OF FINANCIAL STATEMENTS

     On February 7, 2005, the Office of the Chief Accountant of the SEC issued a
letter to the American Institute of Certified Public Accountants  expressing its
views regarding  certain operating lease accounting issues and their application
under generally accepted accounting  principles ("GAAP") in the United States of
America.  After reviewing this letter,  Cache's management began a review of its
lease related accounting policies and determined that its then-current method of
accounting  for  leasehold  improvements  reimbursed  by landlord  incentives or
allowances under operating leases (landlord construction  allowances) was not in
accordance with GAAP.

     The Company had historically  accounted for landlord construction allowance
reimbursements  as  reductions  to leasehold  improvements  on the  consolidated
balance  sheets  and  capital   expenditures  in  investing  activities  on  the
consolidated  statements of cash flows.  Cache's  management has determined that
the  appropriate  interpretation  of FASB Technical  Bulletin No. 88-1,  "Issues
Relating to Accounting for Leases,"  requires these allowances to be recorded as
deferred rent liabilities on the consolidated  balance sheets and as a component
of operating activities on the consolidated statements of cash flows.

                                      F-8

<PAGE>


     As a result of the above, the Company has restated its consolidated balance
sheet as of December 27, 2003 and its consolidated  statements of cash flows for
each of the 52 week periods ended December 28, 2002 and December 27, 2003.

     As of January 1,  2005,  the  Company  reclassified  landlord  construction
allowance  reimbursements  from net leasehold  improvements  to deferred rent to
conform with the requirements of SFAS No. 13, "ACCOUNTING FOR LEASES". There was
no effect on the Company's income statements.  Leasehold  improvements and total
assets increased for each year presented as a result of the reclassification and
was offset by an  increase  in deferred  rent and total  liabilities.  The table
presented  below  summarizes  the effect of the  reclassification  for the years
presented;

<TABLE>
<CAPTION>


                                                                AS ORIGINALLY                             AS
                                                                   REPORTED         ADJUSTMENT          RESTATED
                                                                --------------    ---------------   ----------------
<S>                                                              <C>                <C>              <C>
BALANCE SHEET AT DECEMBER 27, 2003
------------------------------------------------------------
Equipment and leasehold improvements, (net)                        $25,010,000        $8,038,000       $33,048,000
Total assets                                                        96,029,000         8,038,000       104,067,000
Other liabilities                                                    1,088,000         8,038,000         9,126,000
Total liabilities and stockholders' equity                         $96,029,000        $8,038,000      $104,067,000
                                                               ===============      ============      ============

STATEMENT OF CASH FLOWS AT DECEMBER 28, 2002
------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Depreciation and amortization                                       $4,963,000          $556,000        $5,519,000
Reversal of deferred rent                                             (116,000)         (556,000)         (672,000)
Increase in accrued liabilities and
    accrued compensation                                             4,125,000         1,691,000         5,816,000

Net cash provided by operating activities                          $19,867,000        $1,691,000       $21,558,000
                                                               ===============     =============      ============

CASH FLOW FROM INVESTING ACTIVITIES:
Payments for equipment and
   leasehold improvements                                          ($7,342,000)      ($1,691,000)      ($9,033,000)

Net cash used in investing activities                             ($21,734,000)      ($1,691,000)     ($23,425,000)
                                                               ===============     =============      ============
STATEMENT OF CASH FLOWS AT DECEMBER 27, 2003
CASH FLOWS FROM OPERATIONS ACTIVITIES:
Depreciation and amortization                                       $5,570,000          $825,000        $6,395,000
Reversal of deferred rent                                              (10,000)         (825,000)         (835,000)
Increase in accrued liabilities and
    accrued compensation                                             1,751,000         3,681,000         5,432,000

Net cash provided by operating activities                          $18,129,000        $3,681,000       $21,810,000
                                                                ==============      ============      ============


CASH FLOW FROM INVESTING ACTIVITIES:
Payments for equipment and
    leasehold improvements                                        ($11,947,000)      ($3,681,000)     ($15,628,000)

Net cash used in investing activities                             ($17,301,000)      ($3,681,000)     ($20,982,000)
                                                                ==============     =============     =============



                                                             F-9

</TABLE>


<PAGE>



FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts of accounts  receivable,  accounts payable and accrued
liabilities approximate fair value due to the short-term nature of such items.

CASH EQUIVALENTS

     The Company  considers  all highly  liquid  investments  that mature within
three months of the date of purchase to be cash equivalents.

MARKETABLE SECURITIES:

     Marketable  securities  at January 1, 2005 and December 27, 2003  primarily
consist of short-term  United States Treasury bills. The Company  classifies its
short-term  investments  as  held-to-maturity.  Held-to-maturity  securities are
those  securities  in which the  Company  has the ability and intent to hold the
securities  until maturity.  Because the Company's  held-to-maturity  securities
mature within one year of the purchase  date,  the  securities are classified as
short-term marketable securities.  Held-to-maturity debt securities are recorded
at amortized  cost,  adjusted for the  amortization  or accretion of premiums or
discounts  and such carrying  values  approximate  fair value.  A decline in the
market value of any  held-to-maturity  security  below cost that is deemed to be
other than  temporary  results in a reduction in carrying  amount to fair value.
The  impairment  is charged to earnings and a new cost basis for the security is
established.  Premiums and  discounts are amortized or accreted over the life of
the related  held-to-maturity  as an  adjustment  to yield  using the  effective
interest method. Interest income is recognized when earned.

INVENTORIES

     Merchandise  inventory  is carried at the lower of cost or market using the
retail  method  of  accounting.  We make  assumptions  to  adjust  the  value of
inventory based on historical experience and current information. This procedure
inherently reduces the carrying value of inventories as permanent  markdowns are
initiated. These assumptions can have a significant impact on current and future
operating results and financial position.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

     Equipment and leasehold  improvements are stated at cost.  Depreciation and
amortization  are computed  using the  straight-line  method over the  estimated
useful lives of the related assets which generally range from three to 10 years.
For income tax  purposes,  accelerated  methods are  generally  used.  Leasehold
improvements are amortized over the shorter of their useful life or lease term.

     The  Company  adopted  SFAS No.  144,  "ACCOUNTING  FOR THE  IMPAIRMENT  OR
DISPOSAL OF LONG-LIVED  ASSETS",  on December 30, 2001. The adoption of SFAS No.
144 did not affect the Company's financial  statements.  In accordance with SFAS
No. 144,  long-lived  assets,  such as property,  and  equipment,  and purchased
intangibles subject to amortization, are reviewed for impairment whenever events
or changes in  circumstances  indicate that the carrying  amount of an asset may
not be  recoverable.  Assets are grouped and  evaluated  at the lowest level for
which there are identifiable cash flows that are largely independent of the cash
flows of other groups of assets. The Company has identified this lowest level to
be principally  individual stores.  Recoverability of assets to be held and used
is measured by a  comparison  of the  carrying  amount of an asset to  estimated
undiscounted  future cash flows  expected to


                                      F-10

<PAGE>


be  generated  by the asset.  If the  carrying  amount of an asset  exceeds  its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of an asset.

     Assets to be disposed of would be separately presented in the balance sheet
and  reported  at the lower of the  carrying  amount or fair value less costs to
sell, and are no longer  depreciated.  The assets and  liabilities of a disposed
group  classified  as  held  for  sale  would  be  presented  separately  in the
appropriate asset and liability sections of the balance sheet.

SELF INSURANCE

     We are  self-insured  for  losses  and  liabilities  related  primarily  to
employee health and welfare claims.  Losses are accrued based upon our estimates
of  the  aggregate   liability  for  claims  incurred  using  certain  actuarial
assumptions followed in the insurance industry and based on Company experience.

GOODWILL

     Goodwill  represents  the  excess  of costs  over  fair  value of assets of
businesses  acquired.  The  Company  adopted  the  provisions  of SFAS No.  142,
"GOODWILL  AND OTHER  INTANGIBLE  ASSETS",  as of January 1, 2002.  Pursuant  to
Statement 142,  goodwill and intangible  assets acquired in a purchase  business
combination and determined to have an indefinite  useful life are not amortized,
but instead are tested for impairment at least  annually in accordance  with the
provisions of Statement 142.  Statement 142 also requires that intangible assets
with estimable useful lives be amortized over their respective  estimated useful
lives to their  estimated  residual  values,  and  reviewed  for  impairment  in
accordance with SFAS No. 144.

     Goodwill is tested  annually for  impairment,  and is tested for impairment
more  frequently  if events and  circumstances  indicate that the asset might be
impaired.  An  impairment  loss is  recognized  to the extent that the  carrying
amount  exceeds  the  asset's  fair  value.  This  determination  is made at the
reporting unit level and consists of two steps.  First,  the Company  determines
the fair value of a  reporting  unit and  compares  it to its  carrying  amount.
Second,  if the carrying  amount of a reporting unit exceeds its fair value,  an
impairment  loss is  recognized  for any  excess of the  carrying  amount of the
reporting  unit's  goodwill  over the implied fair value of that  goodwill.  The
implied fair value of goodwill is determined by allocating the fair value of the
reporting unit in a manner similar to a purchase price allocation, in accordance
with SFAS No. 141, "BUSINESS  COMBINATIONS".  The residual fair value after this
allocation is the implied fair value of the reporting unit goodwill.

REVENUE RECOGNITION

     Sales are recognized at the "point of sale," which occurs when  merchandise
is sold in an  "over-the-counter"  transaction  or upon  receipt by a  customer.
Sales of  merchandise  via our website are recognized at the time of shipment to
the customer.  Our  customers  have the right to return  merchandise.  Sales are
reported  net of actual  and  estimated  returns.  We  maintain  a  reserve  for
potential  product returns and record,  as a reduction to sales, a provision for
estimated product returns, which is determined based on historical experience.

     Amounts  billed to customers for shipping and handling fees are included in
net sales at the time of shipment.  Costs incurred for shipping and handling are
included in cost of sales.


                                      F-11


<PAGE>



OPERATING LEASES

     The Company leases retail stores and office space under  operating  leases.
Most leases contain  construction  allowance  reimbursements by landlords,  rent
holidays, rent escalation clauses and/or contingent rent provisions. The Company
recognizes the related rental  expense on a  straight-line  basis over the lease
term and records the difference  between the amounts  charged to expense and the
rent paid as a deferred rent liability.

     To account for  construction  allowance  reimbursements  from landlords and
rent holidays, the Company records a deferred rent liability included in accrued
liabilities and other long-term  liabilities on the consolidated  balance sheets
and  amortizes  the  deferred  rent over the lease term,  as a reduction to rent
expense  on the  consolidated  income  statements.  For leases  containing  rent
escalation clauses,  the Company records minimum rent expense on a straight-line
basis over the lease term on the consolidated  income statement.  The lease term
used for lease evaluation includes option periods only in instances in which the
exercise of the option period can be reasonably  assured and failure to exercise
such options would result in an economic penalty.

ADVERTISING COSTS

     Costs  associated with  advertising are charged to store operating  expense
when the  advertising  first takes place.  We spent  $4,375,000,  $5,610,000 and
$7,373,000 on advertising in fiscal 2002, 2003 and 2004, respectively.

PRE-OPENING STORE EXPENSES

     Expenses  associated  with  the  opening  of new  stores  are  expensed  as
incurred.

EMPLOYEE BENEFIT PLAN

     Employees are eligible to participate in the Company's  401(k) plan if they
have been employed by the Company for one year, have reached age 21, and work at
least 1,000 hours  annually.  Generally,  employees can defer up to 18% of their
gross wages up to the maximum limit allowable  under the Internal  Revenue Code.
We can make a discretionary  matching  contribution  for the employee.  Employer
contributions  to the plan for fiscal  2002,  fiscal  2003 and fiscal  2004 were
$190,000, $195,000, and $205,000, respectively.

INCOME TAXES

     The Company  accounts  for income  taxes in  accordance  with SFAS No. 109,
"ACCOUNTING FOR INCOME TAXES." This statement  requires the Company to recognize
deferred tax liabilities and assets for the expected future tax  consequences of
events that have been  recognized in the Company's  financial  statements or tax
returns.  Under this method,  deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
bases of assets and  liabilities,  using  applicable  tax rates for the years in
which the differences are expected to reverse.

STOCK OPTION PLANS

     As permitted by SFAS No. 123,  "ACCOUNTING FOR  STOCK-BASED  COMPENSATION",
the Company has elected to continue to apply the intrinsic-value-based method of
accounting  and has adopted the  disclosure  requirements  of Statement  123, as
amended.  Under this  method,  compensation  expense is


                                      F-12

<PAGE>


recorded on the date of grant only if the current market price of the underlying
stock exceeded the exercise price.  SFAS No. 123, and SFAS No. 148,  "ACCOUNTING
FOR STOCK-BASED  COMPENSATION - TRANSITION AND DISCLOSURE,  AN AMENDMENT OF FASB
STATEMENT NO. 123", established  accounting and disclosure  requirements using a
fair-value-based  method of accounting  for  stock-based  employee  compensation
plans.

EARNINGS PER SHARE

     Basic  earnings per share (EPS) is computed as net earnings  divided by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects  the  potential  dilution  that could occur from common  shares  issued
through the exercise of outstanding dilutive stock options.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December  2004,  the FASB issued SFAS No. 123R,  "SHARE-BASED  PAYMENT,"
which  revises SFAS No. 123,  "ACCOUNTING  FOR  STOCK-BASED  COMPENSATION,"  and
supersedes APB Opinion No. 25,  "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES." This
Statement  focuses  primarily on accounting for  transactions in which an entity
obtains employee services in share-based  payment  transactions.  This Statement
requires  an entity to  recognize  the cost of  employee  services  received  in
share-based payment transactions and measure the cost on a grant-date fair value
of the  award.  That cost will be  recognized  over the period  during  which an
employee  is  required  to  provide  service  in  exchange  for the  award.  The
provisions  of SFAS No.  123R  will be  effective  for the  Company's  financial
statements issued for periods beginning after June 15, 2005.

     In  December   2003,   the  FASB  issued  FASB   Interpretation   No.  46R,
"CONSOLIDATION OF VARIABLE INTEREST ENTITIES" ("FIN 46R"), which addresses how a
business  enterprise  should  evaluate  whether it has a  controlling  financial
interest in an entity  through  means other than voting  rights and  accordingly
should consolidate the entity. The adoption of FIN46R did not have any impact on
our financial position and results of operations.

     In March 2004, the Emerging Issues Task Force ("EITF")  reached a consensus
on Issue No. 03-1,  "THE  MEANING OF  OTHER-THAN-TEMPORARY  IMPAIRMENTS  AND ITS
APPLICATION  TO  CERTAIN  INVESTMENTS"  ("EITF  03-1").  EITF  03-1  provides  a
three-step   impairment   model  for   determining   whether  an  investment  is
other-than-temporarily  impaired  and  requires  the Company to  recognize  such
impairments  as  an  impairment  loss  equal  to  the  difference   between  the
investment's  cost and  fair  value  at the  reporting  date.  The  guidance  is
effective for the Company  during the first quarter of fiscal 2005.  The Company
does not believe that the adoption of EITF 03-1 will have a  significant  effect
on its financial statements.

SUPPLEMENTAL STATEMENTS OF CASH FLOW INFORMATION

     The Company paid no interest charges in fiscal 2002, 2003 and 2004.  During
fiscal  2002,  2003  and  2004  the  Company  paid  $5,160,000,  $4,071,000  and
$4,143,000 in income taxes, respectively.  The Company also generated income tax
benefits of $2,933,000 and $1,583,000 from stock option exercises in fiscal 2003
and 2004.

                                      F-13


<PAGE>



NOTE 2.    RECEIVABLES


                              DECEMBER 27,        JANUARY 1,
                                 2003               2005
                             --------------    ----------------
Construction allowances       $ 1,850,000        $ 3,270,000
Third party credit card         2,368,000          2,885,000
Other                             396,000            390,000
                             --------------    ----------------
                              $ 4,614,000        $ 6,545,000
                             ==============    ================


NOTE 3.    EQUIPMENT AND LEASEHOLD IMPROVEMENTS


                                     DECEMBER 27,          JANUARY 1,
                                         2003                 2005
                                   (RESTATED-NOTE 1)
                                   -----------------       ------------
Leasehold improvements                $ 34,105,000         $ 45,349,000
Furniture, fixtures, and equipment      36,644,000           45,049,000
                                     -------------         ------------
                                        70,749,000           90,398,000
Less: accumulated depreciation and
  amortization                         (37,701,000)         (43,280,000)
                                     -------------         ------------
                                      $ 33,048,000         $ 47,118,000
                                     =============         ============


     Store   operating   and  general  and   administrative   expenses   include
depreciation and amortization of $5,519,000, $6,395,000 and $8,232,000 in fiscal
years 2002, 2003 and 2004, respectively.

NOTE 4.    ACCRUED LIABILITIES


                                      DECEMBER 27,          JANUARY 1,
                                         2003                  2005
                                   ----------------        ------------
Operating expenses                     $ 2,631,000        $ 3,315,000
Taxes, including income taxes            2,426,000          2,185,000
Group insurance                            696,000            509,000
Sales return reserve                       812,000            832,000
Leasehold additions                        379,000            928,000
Other customer deposits and credits      3,131,000          3,858,000
                                       -----------        -----------
                                       $10,075,000        $11,627,000
                                       ===========        ===========


     Leasehold  additions generally represent a liability to general contractors
for a final 10% payable on  construction  contracts  for store  construction  or
renovations.


                                      F-14

<PAGE>


NOTE 5.  BANK DEBT

     During May 2004,  the Company  reached an agreement  with its bank to amend
the amount available under the Amended  Revolving  Credit Facility.  Pursuant to
the newly Amended  Revolving  Credit  Facility,  $17,500,000 is available  until
expiration  at November  30,  2005.  The  amounts  outstanding  thereunder  bear
interest  at a maximum  per annum  rate  equal to the  bank's  prime  rate.  The
agreement  contains selected  financial and other covenants.  Effective upon the
occurrence  of an Event of Default  under the  Revolving  Credit  Facility,  the
Company  grants to the bank a security  interest in the Company's  inventory and
certain  receivables.  The Company has at all times been in compliance  with all
loan covenants.

     There have been no borrowings against the line of credit during fiscal 2003
and 2004.  There were  outstanding  letters of credit of $2.1  million  and $3.1
million  pursuant to the  Revolving  Credit  Facility  at December  27, 2003 and
January 1, 2005, respectively.

NOTE 6.  INDEBTEDNESS TO/FROM RELATED PARTIES

     As of December 28, 2002, the Company had notes receivable totaling $321,000
from one  current  executive  officer  and one former  executive  officer of the
Company.  The receivables,  which were due on demand,  were evidenced by secured
promissory  notes,  which bore  interest at rates of 6% and 9% per annum.  These
notes were repaid in July 2003.

NOTE 7.  OTHER LIABILITIES

     Other liabilities  primarily consist of accruals of future rent escalations
and unamortized landlord construction allowances.

NOTE 8.  COMMITMENTS AND CONTINGENCIES

LEASES

     At January 1, 2005, the Company was obligated  under  operating  leases for
various store locations expiring at various times through 2019. The terms of the
leases generally  provide for the payment of minimum annual rentals,  contingent
rentals based on a percentage of sales in excess of a stipulated  amount,  and a
portion of real estate taxes, insurance and common area maintenance. Most leases
contain  leasehold   improvement   reimbursements  from  landlords  and/or  rent
holidays.  In recognizing  landlord  incentives  and minimum rent expenses,  the
Company amortizes the charges on a straight line basis over the lease term.


     Store rental  expense  related to these leases,  included in cost of sales,
consisted of the following:

                                      52 WEEKS ENDED             53 WEEKS ENDED
                              ------------------------------     --------------
                              DECEMBER 28,      DECEMBER 27,        JANUARY 1,
                                  2002              2003              2005
                              ------------      ------------      ------------
     Minimal rentals          $ 17,611,000      $ 19,058,000      $ 21,410,000
     Contingent rentals          7,555,000         8,258,000         9,176,000
                              ------------      ------------      ------------
                              $ 25,166,000      $ 27,316,000      $ 30,586,000
                              ============      ============      ============


                                      F-15

<PAGE>


     Future minimum payments under non-cancelable  operating leases consisted of
the following at January 1, 2005:


         Fiscal Year

         2005                                                 $ 23,745,000
         2006                                                   21,642,000
         2007                                                   20,152,000
         2008                                                   19,145,000
         2009                                                   18,600,000
         Thereafter                                             63,294,000
                                                              ------------
         Total future minimum lease payments                  $166,578,000
                                                              ============


CONTINGENCIES

     The Company is exposed to a number of  asserted  and  unasserted  potential
claims. Management does not believe it is reasonably possible that resolution of
these matters will result in a material loss.

NOTE 9.  INCOME TAXES

             The provision for income taxes includes:

                                          52 WEEKS ENDED        53 WEEKS ENDED
                                 ----------------------------   --------------
                                 DECEMBER 28,    DECEMBER 27,     JANUARY 1,
                                    2002            2003            2005
                                 ------------    ------------   --------------
  Current:
     Federal                     $4,841,000      $5,105,000        $4,628,000
      State                       1,023,000       1,067,000           736,000
                                 ----------      ------------      ----------
                                  5,864,000       6,172,000         5,364,000
                                 ----------      ------------      ----------
  Deferred:
      Federal                      (205,000)      1,110,000         2,189,000
      State                         (27,000)       (193,000)          477,000
                                 ----------      ------------      ----------
                                   (232,000)        917,000         2,666,000
                                 ----------      ------------      ----------
  Provision for income taxes     $5,632,000      $7,089,000        $8,030,000
                                 ==========      ============      ==========


                                      F-16

<PAGE>



     The Company's effective tax rate, as a percent of income before income
taxes differs from the statutory federal tax rates as follows:

<TABLE>
<CAPTION>

                                                       52 WEEKS ENDED                  53 WEEKS ENDED
                                             -----------------------------------       --------------
                                              DECEMBER 28,          DECEMBER 27,          JANUARY 1,
                                                 2002                  2003                 2005
                                             -------------          ------------       --------------
<S>                                             <C>                   <C>               <C>
         Effective federal tax rate              34.3%                 34.5%                34.5%
         State and local income taxes,
         net of federal tax benefit               4.5%                  4.7%                 4.6%
         Reversal of state and local
         income tax overaccural                   ---                   ---                 (1.3%)
         Other net, primarily tax free           (0.2%)                (0.2%)               (0.1%)
                                             --------------         -------------       ---------------
         Provision for income taxes              38.6%                 39.0%                37.7%
                                             ==============         =============       ===============

</TABLE>

     The major components of the Company's net deferred tax assets (liabilities)
at December 27, 2003 and January 1, 2005 are as follows:

                                                  DECEMBER 27,     JANUARY 1,
                                                      2003            2005
                                                ---------------  --------------
State tax net operating loss carryforwards      $   89,000      $     76,000
Deferred rent                                      543,000           590,000
Group insurance                                    275,000           199,000
Sales return reserve                               321,000           325,000
Inventory                                          356,000           407,000
Prepaid expenses                                     ----           (364,000)
Other (principally depreciation expense)        (1,335,000)       (3,690,000)
                                                -----------     -------------
                                                $  249,000      $ (2,457,000)
                                                ===========     =============

NOTE 10.          INCENTIVE STOCK OPTION PLAN

     On July 22, 2003, the Company  adopted the 2003 Stock Option Plan. The plan
is administered by the  Compensation  and Plan  Administration  Committee of the
Company's Board of Directors. Under the option plan the Company reserved 900,000
shares of the Company's authorized common stock for issuance to officers and key
employees of the Company.

     On October 4, 2000,  the Company  adopted the 2000 Stock Option  Plan.  The
plan is administered by the  Compensation and Plan  Administration  Committee of
the  Company's  Board of Directors.  Under the option plan the Company  reserved
550,000 shares of the Company's authorized common stock for issuance to officers
and key employees of the Company.

     On December 16, 1994, the Company adopted the 1994 Stock Option Plan. Under
the option plan the Company reserved 600,000 shares of the Company's  authorized
common stock for issuance to officers and key employees of the Company.

     Options  granted  under the plans  have a  ten-year  term and may be either
incentive stock options or non-qualified stock options.  The options are granted
at an exercise  price  equal to the fair  market  value on the date of grant and
generally vest over a four year period.  The granted  options  generally  become


                                      F-17

<PAGE>


exercisable  at the maximum rate of 25% per annum,  to the extent the  Company's
earning plan, as approved by the Compensation and Plan Administration Committee,
is achieved. The price is payable in cash at the time of the exercise or, at the
discretion of the Administrators, through the delivery of shares of Common Stock
or the Company's withholding of shares otherwise deliverable to the employee, or
a combination thereof.

     The following table summarizes all stock option  transactions for the three
fiscal years ended January 1, 2005:

<TABLE>
<CAPTION>

                                                                               WEIGHTED AVERAGE       EXERCISE
                                                                                    SHARES             PRICES
                                                                               ----------------      ----------
<S>                                                                             <C>                   <C>
         Shares under option as of December 29, 2001                               1,558,641            $1.96
              Options granted in 2002                                                279,000             4.54
              Options exercised in 2002                                              (13,218)            1.73
              Options canceled in 2002                                              (114,048)            1.73
                                                                               ----------------
         Shares under option as of December 28, 2002                               1,710,375             2.40
              Options granted in 2003                                              1,222,500            12.44
              Options exercised in 2003                                             (871,500)            2.09
              Options canceled in 2003                                               (39,375)            3.30
                                                                               ----------------
         Shares under option as of December 27, 2003                               2,022,000             8.46
              Options granted in 2004                                                105,000            15.17
              Options exercised in 2004                                             (392,750)            2.36
              Options canceled in 2004                                               (82,500)            9.67
                                                                               ----------------
         Shares under options as of January 1, 2005                                1,651,750           $10.43
                                                                               ================

</TABLE>


     Significant  option  groups  outstanding  at  January  1, 2005 and  related
weighted average price and life information follows:

<TABLE>
<CAPTION>

                                         OPTIONS               OPTIONS             EXERCISE          REMAINING
         GRANT DATE                    OUTSTANDING           EXERCISABLE             PRICE          LIFE (YEARS)
       -----------------              -------------        --------------        -----------       -------------
<S>                                       <C>                 <C>                  <C>               <C>
         1/22/04                         105,000                26,250              $15.17              9
         7/22/03                       1,127,250               294,750               12.65              8
         5/23/03                          28,125                 9,375                5.83              8
         5/13/02                          18,750                 9,375                7.47              7
         4/16/02                         121,500               121,500                4.69              7
         3/11/02                           8,125                 8,125                3.30              7
         10/2/01                         130,500               130,500                2.13              7
         10/4/00                         112,500               112,500                1.73              6

</TABLE>

                                      F-18


<PAGE>


     The Company  accounts for stock  options in  accordance  with the intrinsic
value method  described in APB Opinion No. 25,  "ACCOUNTING  FOR STOCK ISSUED TO
EMPLOYEES"   and  allowed  by  SFAS  No.  123,   "ACCOUNTING   FOR  STOCK  BASED
COMPENSATION"  under which no  compensation  cost has been  recognized for stock
option  awards  granted at fair market  value.  Had  compensation  expense  been
determined  based on the fair  value at the  grant  dates for  awards  under the
plans,  the Company's  net  earnings,  basic EPS and diluted EPS would have been
reduced to the pro forma amounts listed below:

                             52 WEEKS ENDED                53 WEEKS ENDED
                      ------------------------------      -----------------
                       DECEMBER 28,       DECEMBER 27,       JANUARY 1,
                           2002              2003              2005
                      ------------        -----------      ----------------
    --as reported     $  8,941,000        $11,089,000      $    13,297,000
    --pro-forma       $  7,857,000        $10,377,000      $    12,211,000

    --as reported     $       0.65        $      0.78      $           .85
    --pro-forma       $       0.57        $      0.73      $           .78

    --as reported     $       0.62        $      0.75      $           .83
    --pro-forma       $       0.55        $      0.71      $           .76



     The weighted  average  fair value of options  granted  during  fiscal years
ended  December  28,  2002,  December  27,  2003 and January 1, 2005 were $4.54,
$12.44  and  $15.17,  respectively.  The fair  value of each  option  grant  was
estimated on the date of the grant using the Black-Scholes option pricing method
with the following weighted average assumptions:

                                   2002                2003               2004
                                  GRANTS              GRANTS             GRANTS
                                  ----------------------------------------------
     Expected dividend rate       $ 0.00              $ 0.00             $ 0.00
     Expected volatility            70.3%               98.9%              97.8%
     Risk free interest rate         3.0%                3.0%               3.8%
     Expected lives (years)          5.0                 5.0                5.0


                                      F-19

<PAGE>



NOTE 11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)

<TABLE>
<CAPTION>

                                                        FIRST           SECOND             THIRD          FOURTH
                                                       QUARTER          QUARTER           QUARTER         QUARTER
                                                     -----------      -----------       ----------       -----------
<S>                                                     <C>              <C>               <C>            <C>
52 WEEKS ENDED DECEMBER 27, 2003

Net sales                                              $48,098           $56,193          $47,343           $64,622
Gross profit                                            20,037            24,914           20,222            30,352
Income before income tax provision                       2,657             5,735              998             8,788
Income tax provision                                     1,016             2,194              384             3,495
                                                     ---------         ---------         --------          --------
Net income                                              $1,641            $3,541             $614            $5,293
                                                     =========         =========         ========          ========
Basic and diluted earnings per share:
Basic earnings per share:                                $0.12             $0.26            $0.04             $0.35
                                                     =========         =========         ========          ========
Diluted earnings per share:                              $0.11             $0.25            $0.04             $0.34
                                                     =========         =========         ========          ========

53 WEEKS ENDED JANUARY 1, 2005

Net sales                                              $57,194           $62,087          $49,430           $78,589
Gross profit                                            25,688            29,149           19,596            37,122
Income loss before income tax provision                  5,246             7,229            (854)             9,706
Income tax provision benefit                             1,997             2,868            (333)             3,498
                                                     ---------         ---------         --------          --------
Net income loss                                         $3,249            $4,361           ($521)            $6,208
                                                     =========         =========         ========          ========
Basic and diluted earnings loss per share:
Basic earnings loss per share:                           $0.21             $0.28          ($0.03)             $0.40
                                                     =========         =========         ========          ========
Diluted earnings loss per share:                         $0.20             $0.27          ($0.03)             $0.39
                                                     =========         =========         ========          ========


                                                              F-20

</TABLE>


<PAGE>



The effect of the  restatement  on the first  three  quarters  of the year ended
January 1, 2005 is summarized as follows:

<TABLE>
<CAPTION>

                                                                        First           Second             Third
                                                                       Quarter          Quarter           Quarter
BALANCE SHEET
--------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>              <C>             <C>
Equipment and leasehold improvements, (net) - as reported             $26,984,000     $29,310,000      $32,466,000

Equipment and leasehold improvements, (net) - as restated             $35,307,000     $39,589,000      $43,378,000

Other liabilities - as reported                                        $1,129,000      $1,163,000       $1,230,000

Other liabilities - as restated                                        $9,452,000     $11,442,000      $12,142,000

STATEMENT OF CASH FLOWS
Cash flows from operating activities - as reported                     $2,037,000      $5,876,000       $6,935,000

Cash flows from operating activities - as restated                     $2,578,000      $8,642,000      $10,707,000

Cash provided by (used in) investing activities - as reported          $2,962,000     ($6,087,000)    ($15,692,000)

Cash provided by (used in) investing activities - as restated          $2,421,000     ($8,853,000)    ($19,464,000)


                                                                 F-21

</TABLE>


<PAGE>



CACHE, INC AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                                                   ADDITIONS
                                                        ----------------------------
                                      BALANCE AT        CHARGE TO                                         BALANCE AT
                                        BEG. OF         COSTS AND           OTHER        DEDUCTIONS          END OF
SALES RETURN RESERVE                    PERIOD          EXPENSES          ACCOUNTS            $              PERIOD
--------------------------------      ------------     -----------       -----------    -----------       ------------
<S>                                     <C>                <C>              <C>            <C>             <C>
52 Weeks Ended
    December 28, 2002                  $555,000          $191,000            --               --             $746,000

52 Weeks Ended
    December 27, 2003                  $746,000           $66,000            --               --             $812,000

53 Weeks Ended
    January 1, 2005                    $812,000           $20,000            --               --             $832,000


                                                                  F-22


</TABLE>