**UNITED
                STATES****SECURITIES
                AND EXCHANGE COMMISSION**Washington,
                D.C. 20549**FORM
                10-K**ANNUAL
                REPORT PURSUANT TO SECTION 13 or 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934For
                the fiscal year ended**July 26, 2008**
            Commission
                file number 0-11736**THE
                DRESS BARN, INC****.**(Exact
                name of registrant as specified in its charter)Connecticut
            06-0812960(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)30
                Dunnigan Drive, Suffern, New York
            10901(Address
                of principal executive offices)
            (Zip
                Code)(845)
                369-4500(Registrant's
                telephone number, including area code)Securities
                registered pursuant to Section 12(b) of the
                Act:




Title
                of Each Class
            Name
                of Each Exchange on Which RegisteredCommon
                Stock, $0.05 par value
            The
                NASDAQ Stock Market LLCSecurities
                registered pursuant to Section 12(g) of the Act: NoneIndicate
                by check mark if the registrant is a well-known seasoned issuer,
                as
                defined in Rule 405 of the Securities Act.Yes x No oIndicate
                by check mark if the registrant is not required to file reports pursuant
                to Section 13 or Section 15(d) of the Act. Yes o No xIndicate
                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
                such filing requirements for the past 90 days.Yes
                x No oIndicate
                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 registrant's knowledge, in the definitive proxy or information
                statements incorporated by reference in Part III of this Form 10-K
                or any
                amendment to this Form 10-K. xIndicate
                by check mark whether the registrant is a large accelerated filer,
                an
                accelerated filer, a non-accelerated filer, or a smaller reporting
                company. See definition of “large accelerated filer”, “accelerated filer”
                and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
                one):Large
                accelerated filer x
            Accelerated
                filer o
            Non-accelerated
                filer o
              (Do
                not check if a smaller reporting company)
            Smaller reporting company oIndicate
                by check mark whether the registrant is a shell company (as defined
                in
                Rule 12b-2 of the Exchange Act).Yes o No xThe
                aggregate market value of the voting stock held by non-affiliates
                of the
                registrant as of January 26, 2008 was approximately $510 million,
                based on
                the last reported sales price on the NASDAQ Global Select Market
                on that
                date. As of September 16, 2008, 60,511,317 shares of voting common
                shares
                were outstanding. The registrant does not have any authorized, issued
                or
                outstanding non-voting common stock.**DOCUMENTS
                INCORPORATED BY REFERENCE**Portions
                of the registrant's Proxy Statement for the Annual Meeting of Shareholders
                to be held on December 10, 2008 are incorporated into Part III of
                this
                Form 10-K.









**THE
                DRESS BARN, INC.****FORM
                10-K****FISCAL
                YEAR ENDED JULY 26, 2008****TABLE
                OF CONTENTS**




**PART
                I**
            
            
            
            
            **PAGE****Item
                1**
            
            **Business**
            
            **3**General
            
            **3**Locations
                and Properties
            
            **4**Advertising
                and Marketing
            
            **5**Trademarks
            
            **5**Employees
            
            **5**Seasonality
            
            **5**Competition
            
            **5**Merchandise
                Vendors
            
            **5**Available
                Information
            
            **5****Item
                1A**
            
            **Risk
                Factors**
            
            **6****Item
                1B**
            
            **Unresolved
                Staff Comments**
            
            **10****Item
                2**
            
            **Properties**
            
            **10****Item
                3**
            
            **Legal
                Proceedings**
            
            **10****Item
                4**
            
            **Submission
                of Matters to a Vote of Security Holders**
            
            **10****Executive
                Officers of the Registrant**
            
            **11****PART
                II****Item
                5**
            
            **Market
                for Registrant’s Common Equity, Related Stockholder Matters and****Issuer
                Purchases of Equity Securities**
            
            **12****Item
                6**
            
            **Selected
                Financial Data**
            
            **15****Item
                7**
            
            **Management’s
                Discussion and Analysis of****Financial
                Condition and Results of Operations**
            
            **16****Item
                7A**
            
            **Quantitative
                and Qualitative Disclosures About Market Risk**
            
            **33****Item
                8**
            
            **Financial
                Statements and Supplementary Data**
            
            **33****Item
                9**
            
            **Changes
                in and Disagreements with Accountants****on
                Accounting and Financial Disclosure**
            
            **34****Item
                9A**
            
            **Controls
                and Procedures**
            
            **34****Item
                9B**
            
            **Other
                Information**
            
            **37****PART
                III****Item
                10**
            
            **Directors,
                Executive Officers and Corporate Governance**
            
            **37****Item
                11**
            
            **Executive
                Compensation**
            
            **37****Item
                12**
            
            **Security
                Ownership of Certain Beneficial Owners****and
                Management and Related Stockholder Matters**
            
            **37****Item
                13**
            
            **Certain
                Relationships and Related Transactions, and Director
                Independence**
            
            **37****Item
                14**
            
            **Principal
                Accountant Fees and Services**
            
            **37****PART
                IV****Item
                15**
            
            **Exhibits,
                Financial Statement Schedules**
            
            **38**




2




*This
      Annual Report on Form 10-K* *,
      including the section labeled Management’s Discussion and Analysis of Financial
      Condition and Results of Operations, contains forward-looking statements that
      should be read in conjunction with the consolidated financial statements and
      notes to consolidated financial statements and risk factors that we have
      included elsewhere in this report. These forward-looking statements are based
      on
      our current expectations, assumptions, estimates and projections about our
      business and our industry, and involve known and unknown risks, uncertainties
      and other factors that may cause our results, level of activity, performance
      or
      achievements to be materially different from any future results, level of
      activity, performance or achievements expressed or implied in, or contemplated
      by, the forward-looking statements. We generally identify these statements
      by
      words or phrases such as “believe”, “anticipate”, “expect”, “intend”, “plan”,
“may”, “should”, “estimate”, “predict”, “potential”, “continue” or the negative
      of such terms or other similar expressions. Our actual results may differ
      significantly from the results discussed in the forward-looking statements.
      Factors that might cause such a difference include those discussed below under
      Item 1A. RISK FACTORS, and other factors discussed in this Annual Report on
      Form
      10-K and other reports we file with the Securities and Exchange Commission.
      We
      disclaim any intent or obligation to update or revise any forward-looking
      statements as a result of developments occurring after the period covered by
      this report.*





**dressbarn** ®, **dressbarn**  **woman** â , **maurices** â ,
      Studio
      Y â and
      YVOS â  are
      our
      trademarks. Fiscal
      2008 refers to the 52-week period ended July 26, 2008, fiscal 2007 refers to
      the
      52-week period ended July 28, 2007 and fiscal 2006 refers to the 52-week period
      ended July 29, 2006. Fiscal 2009 refers to our 52-week period that will end
      on
      July 25, 2009. All prior period common stock and share and per share amounts
      have been adjusted to reflect a two-for-one split of our common stock effective
      April 3, 2006.





References
      to “we”, “us”, “our” or “our company” or other similar terms in this report are
      to The Dress Barn, Inc. and its wholly owned subsidiaries.





**PART
      I**


**ITEM
              1.**
            **BUSINESS**





General





We
      operate women’s apparel specialty stores, principally under the names
“ **dressbarn** ”,
      “ **dressbarn
      woman** ”
and
      “ **maurices** ”.
      Since
      our retail business began in 1962, we have established, marketed and expanded
      our brands as a source of fashion and value. We offer a lifestyle-oriented,
      stylish, value-priced assortment of career and casual fashions tailored to
      our
      customers’ needs. As of July 26, 2008, we operated 1,503 stores in 48 states and
      the District of Columbia, including 656 **dressbarn** Combo
      stores (a combination of our **dressbarn** and **dressbarn
      woman** brands),
      677 **maurices** stores,
      134 **dressbarn** stores
      and 36 **dressbarn
      woman** stores.





Our **dressbarn** stores
      are typically operated as Combo stores, offering both **dressbarn** and
      larger-sized **dressbarn
      woman** merchandise. We also operate stand-alone **dressbarn** and **dressbarn
      woman** stores
      in certain markets. Our **dressbarn** brands
      cater to 35- to 55-year-old women, sizes 4 to 24. Our **dressbarn** stores
      offer in-season, moderate to better quality career and casual fashion at value
      prices, and are located primarily in convenient strip shopping centers in major
      trading and high-density markets and surrounding suburban areas. Our centrally
      managed merchandise selection is changed and augmented frequently to keep our
      merchandise presentation fresh and exciting. Carefully edited, coordinated
      merchandise is featured in a comfortable, easy-to-shop environment, staffed
      by
      friendly, service-oriented salespeople.





Our **maurices** stores
      cater to the apparel and accessory needs of 17- to 34-year-old women and are
      typically located in small markets with populations of approximately 25,000
      to
      100,000. Our **maurices** stores
      offer moderately priced, up-to-date fashions, sizes 4 to 24, designed to appeal
      to a younger female customer than our **dressbarn** brands. **maurices** merchandise is primarily sold under two brands, **maurices** and
      Studio Y. The **maurices** brand
      encompasses women’s casual clothing, career wear and accessories. Studio Y
      represents women’s dressy apparel. Our **maurices** stores
      are typically located near large discount and department stores to capitalize
      on
      the traffic those retailers generate. We seek to differentiate **maurices** from
      those retailers by offering a wider selection of style, color and current
      fashion and by the shopping experience we offer, which emphasizes a visually
      stimulating environment with a helpful staff. While our **maurices** stores
      offer a core merchandise assortment, individual **maurices** stores
      vary and augment their merchandise assortment to reflect individual store
      demands and local market preferences.





All
      of
      our stores are directly managed and operated by us. Virtually all of our stores
      are open seven days a week and most evenings. We utilize creative incentive
      programs and comprehensive training programs to ensure that our customers
      receive friendly and helpful service.




3





Since
      the
      acquisition of **maurices** in 2005,
      we have sought appropriate opportunities to generate synergies through
      leveraging certain centralized functions, such as taxes, purchasing, lease
      administration, imports and loss prevention. We believe our synergies have
      improved both **dressbarn’s** and **maurices’** performance.




Locations
      and Properties





As
      of
      July 26, 2008, we operated 1,503 stores in 48 states and the District of
      Columbia, of which, 931 of the stores were located in strip centers and 237
      stores were located in outlet centers. During fiscal 2008, no store accounted
      for as much as 1% of our total sales. The table below indicates the type of
      shopping facility in which the stores were located:





**Type
                of Facility**
            
            **dressbarn**
              **Stores**
            
            **dressbarn**
              **woman**
              **Stores**
            
            **Combo**
              **Stores**
            
            **maurices**
              **Stores**
            
            **Total**Strip
                Shopping Centers
            
            
            86
            
            
            16
            
            
            472
            
            
            357
            
            
            931Outlet
                Malls and Outlet Strip Centers
            
            
            32
            
            
            17
            
            
            157
            
            
            31
            
            
            237Free
                Standing, Downtown and Enclosed Malls
            
            
            16
            
            
            3
            
            
            27
            
            
            289
            
            
            335Total
            
            
            134
            
            
            36
            
            
            656
            
            
            677
            
            
            1,503




As
      of
      July 26, 2008, **dressbarn** had 6.3
      million total square feet in all its stores and **maurices** had 3.3
      million total square feet. All of our store locations are leased. Our leases
      typically contain renewal options and also provide an option to terminate at
      little or no cost, particularly in the early years of a lease, if specified
      sales volumes are not achieved. Our **dressbarn** stores
      are primarily concentrated in the northeast while our **maurices** stores
      are primarily concentrated in the midwest.





During
      fiscal 2008, we opened 35 **dressbarn** Combo
      stores, and converted five existing stores to Combo stores. We opened 72 **maurices** stores
      during fiscal 2008. We evaluate store-level performance and seek to close or
      relocate underperforming stores. During fiscal 2008, we closed 30 locations,
      including 28 **dressbarn** stores
      and 2 **maurices** stores.
      We expect to open approximately 100 new stores in fiscal 2009, comprised of
      approximately 35 **dressbarn** locations (almost all of which will be Combo stores) and approximately 65 **maurices** locations. Net of store closings, we currently plan to increase our aggregate **dressbarn** square
      footage by approximately 2.0%, and aggregate **maurices** square
      footage by approximately 8.6% in fiscal 2009.





We
      own an
      approximately 900,000 square-foot distribution/office facility and 16 acres
      of
      adjacent land in Suffern, New York, which houses, in approximately 510,000
      square feet, our corporate offices and our **dressbarn** distribution center, with the remainder of the facility leased to a third party.
      We own **maurices’** corporate headquarters in downtown Duluth, Minnesota, which is composed of
      three
      office buildings totaling approximately 151,000 square feet. We also own an
      approximately 360,000 square-foot distribution center in Des Moines, Iowa,
      which
      houses our **maurices** warehousing and distribution operations.





4





Advertising
      and Marketing





We
      rely
      on direct mail, national print advertising in lifestyle magazines and compelling
      window and in-store marketing materials to communicate our fashion and
      promotional message. We utilize a customer relationship management system to
      track customer transactions and determine strategic decisions for our direct
      mail initiatives. We pursue a public relations strategy to garner editorial
      exposure.





We
      participate in national cause-related marketing initiatives that resonate with
      our customers, creating brand affinity. Our current key partners in these
      programs include The American Cancer Society, Dress for Success and American
      Heart Association. We believe these programs, which are conducted at the local
      level, reinforce that our stores are important members of their
      communities.





Trademarks





We
      have
      U.S. Certificates of Registration of Trademark and trademark applications
      pending for the operating names of our stores and our major private label
      merchandise brands. We believe
      our **dressbarn** , **dressbarn
      woman** , **maurices** ,
      Studio
      Y and YVOS trademarks are material to the continued success of our business. We also
      believe that our rights to these trademarks are adequately protected.





Employees





As
      of
      July 26, 2008, we had approximately 13,700 employees, approximately 8,000 of
      whom worked part-time. We typically add temporary employees during peak selling
      periods. None of our employees are covered by any collective bargaining
      agreement. We consider our employee relations to be good.





Seasonality





We
      have
      historically experienced substantially lower earnings in our second fiscal
      quarter ending in January, reflecting the intense promotional atmosphere that
      has characterized the holiday shopping season in recent years. In addition,
      our
      quarterly results of operations may fluctuate materially depending on, among
      other things, adverse weather conditions, shifts in timing of certain holidays,
      the number and timing of new store openings and closings, net sales contributed
      by new stores and changes in our merchandise mix.





Competition





The
      retail apparel industry is highly competitive and fragmented, with numerous
      competitors, including department stores, off-price retailers, specialty stores,
      discount stores, mass merchandisers and Internet-based retailers, many of which
      have substantially greater financial, marketing and other resources than us.
      Many of our competitors are able to engage in aggressive promotions, reducing
      their selling prices. Some of our competitors include JCPenney, Kohl’s, Old
      Navy, Target and Sears. Other competitors may move into the markets that we
      serve. Our business is vulnerable to demand and pricing shifts, and to changes
      in customer tastes and preferences. If we fail to compete successfully, we
      could
      face lower net sales and may need to offer greater discounts to our customers,
      which could result in decreased profitability. We believe that we have
      established and reinforced our image as a source of fashion and value by
      focusing on our target customers, and by offering superior customer service.





Merchandise
      Vendors





We
      purchase our merchandise from many domestic and foreign suppliers. We have
      no
      long-term purchase commitment or arrangements with any of our suppliers, and
      believe that we are not dependent on any one supplier. We have good working
      relationships with our suppliers.





Available
      Information





We
      maintain our corporate Internet website at www.dressbarn.com .
      The
      information on our Internet website is not incorporated by reference into this
      report. We make available, free of charge through publication on our Internet
      website, a copy of our Annual Reports on Form 10-K, our quarterly reports on
      Form 10-Q and our current reports on Form 8-K, including any amendments to
      those
      reports, as filed with or furnished to the Securities and Exchange Commission,
      or SEC, as soon as reasonably practicable after they have been so filed or
      furnished.





5




**ITEM
              1A.**
            **RISK
                FACTORS**




***A
      slowdown in the United States economy, an uncertain economic outlook and
      escalating energy costs may continue to affect consumer demand for our apparel
      and accessories.***




Consumer
      spending habits, including spending for our apparel and accessories, are
      affected by, among other things, prevailing economic conditions, levels of
      employment, fuel prices, salaries, wage rates, the availability of consumer
      credit, consumer confidence and consumer perception of economic conditions.
      A
      general slowdown in the United States economy and an uncertain economic outlook
      may adversely affect consumer spending habits and customer traffic, which may
      result in lower net sales. A prolonged economic downturn could have a material
      adverse effect on our business, financial condition, and results of operations.




***Our
      business is dependent upon our ability to predict accurately fashion trends,
      customer preferences and other fashion-related
      factors.***




Customer
      tastes and fashion trends are volatile and tend to change rapidly, particularly
      for women’s apparel. Our success depends in part upon our ability to anticipate
      and respond to changing merchandise trends and consumer preferences in a timely
      manner. Accordingly, any failure by us to anticipate, identify and respond
      to
      changing fashion trends could adversely affect consumer acceptance of the
      merchandise in our stores, which in turn could adversely affect our business
      and
      our image with our customers. If we miscalculate either the market for our
      merchandise or our customers’ tastes or purchasing habits, we may be required to
      sell a significant amount of unsold inventory at below average markups over
      cost, or below cost, which would have an adverse effect on our margins and
      results of operations.




***We
      face challenges to grow our business and to manage our
      growth.***




Our
      growth is dependent, in large part, upon our ability to successfully add new
      stores. In addition, on a routine basis, we close underperforming stores, which
      may result in write-offs. The success of our growth strategy depends upon a
      number of factors, including the identification of suitable markets and sites
      for new stores, negotiation of leases on acceptable terms, construction or
      renovation of sites in a timely manner at acceptable costs and maintenance
      of
      the productivity of our existing store base. We must be able to hire, train
      and
      retain competent managers and personnel and manage the systems and operational
      components of our growth. Our failure to open new stores on a timely basis,
      obtain acceptance in markets in which we currently have limited or no presence,
      attract qualified management and personnel or appropriately adjust operational
      systems and procedures would have an adverse effect on our growth prospects.




***We
      rely on foreign sources of production.***




We
      purchase a significant portion of our apparel directly in foreign markets,
      including Asia, the Middle East and Africa, and indirectly through domestic
      vendors with foreign sources. We face a variety of risks generally associated
      with doing business in foreign markets and importing merchandise from abroad,
      including:




·
            political
                instability;




·
            increased
                security requirements applicable to imported
                goods;




·
            imposition
                or increases of duties, taxes and other charges on
                imports;




·
            imposition
                of quotas on imported merchandise;




·
            currency
                and exchange risks;




·
            delays
                in shipping; and




·
            increased
                costs of transportation.




New
      initiatives may be proposed that may have an impact on the trading status of
      certain countries and may include retaliatory duties or other trade sanctions
      that, if enacted, could increase the cost of products purchased from suppliers
      in such countries or restrict the importation of products from such countries.
      The future performance of our business depends on foreign suppliers and may
      be
      adversely affected by the factors listed above, all of which are beyond our
      control. This may result in our inability to obtain sufficient quantities of
      merchandise or increase our cost, thereby negatively impacting sales, gross
      profit and net earnings.




6




***Our
      business would be severely disrupted if our distribution centers were to shut
      down.***




The
      distribution of our **dressbarn** products
      is centralized in one distribution center in Suffern, New York and the
      distribution of our **maurices** products
      is centralized in one distribution center in Des Moines, Iowa. Most of the
      merchandise we purchase is shipped directly to our distribution centers, where
      it is prepared for shipment to the appropriate stores. If either of these
      distribution centers were to shut down or lose significant capacity for any
      reason, our operations would likely be seriously disrupted. As a result, we
      could incur significantly higher costs and longer lead times associated with
      distributing our products to our stores during the time it takes for us to
      reopen or replace either distribution center.




***We
      depend on strip shopping center and mall traffic and our ability to identify
      suitable store locations.***




Our
      sales
      are dependent in part on a high volume of strip shopping center and mall
      traffic. Strip shopping center and mall traffic may be adversely affected by,
      among other things, economic downturns, the closing of anchor stores or changes
      in customer shopping preferences. A decline in the popularity of strip shopping
      center or mall shopping among our target customers could have a material adverse
      effect on customer traffic and reduce our sales and net earnings.




To
      take
      advantage of customer traffic and the shopping preferences of our customers,
      we
      need to maintain or acquire stores in desirable locations where competition
      for
      suitable store locations is intense.




***Our
      management information systems may fail and cause disruptions in our
      business.***




We
      rely
      on our existing management information systems in operating and monitoring
      all
      major aspects of our business, including sales, warehousing, distribution,
      purchasing, inventory control, merchandise planning and replenishment, as well
      as various financial systems. Any disruption in the operation of our management
      information systems, or our failure to continue to upgrade, integrate or expend
      capital on such systems as our business expands, would have a material adverse
      effect on our business.




We
      began
      utilizing the Oracle Retail Merchandising System for the **dressbarn** segment
      starting in fiscal 2008. A version of this merchandising system is already
      utilized by our **maurices** segment.
      The purpose of the Oracle Retail Merchandising system is to expand our
      capability to identify and analyze sales trends and consumer data, and achieve
      planning and inventory management improvements.




We
      will
      also begin implementation of a new point of sale (“POS”) system during fiscal
      2009, giving our stores greater functionality as well as implement a new upgrade
      to our customer relationship management (“CRM”) system that will improve our
      data analysis of customer relationships.




We
      have
      engaged several third-party consulting firms to assist with these
      implementations. We also dedicated several internal personnel on a part-time
      and
      a full-time basis to work on these implementations. Any delays or difficulties
      in utilizing these systems or integrating them with our other systems or any
      other disruptions affecting any of our information systems could have a material
      adverse impact on our business, financial condition and results of operations.




***Our
      business could suffer as a result of a manufacturer’s inability to produce goods
      for us on time and to our specifications.***




We
      do not
      own or operate any manufacturing facilities and therefore depend upon
      independent third parties for the manufacture of all of the goods that we sell.
      Both domestic and international manufacturers produce these goods. The inability
      of a manufacturer to ship orders in a timely manner or to meet our standards
      could have a material adverse impact on our business.




***Our
      business could suffer if we need to replace
      manufacturers.***




We
      compete with other companies for the production capacity of our manufacturers
      and import quota capacity. Many of our competitors have greater financial and
      other resources than we have and thus may have an advantage in the competition
      for production capacity. If we experience a significant increase in demand,
      or
      if an existing manufacturer of the goods that we sell must be replaced, we
      may
      have to increase purchases from our third-party manufacturers and we cannot
      guarantee we will be able to do so at all or on terms that are acceptable to
      us.
      This may negatively affect our sales and net earnings. We enter into a number
      of
      purchase order commitments each season specifying a time for delivery, method
      of
      payment, design and quality specifications and other standard industry
      provisions, but we do not have long-term contracts with any manufacturer. None
      of the manufacturers we use produces products for us exclusively.




7




***Our
      business could suffer if one of the manufacturers of the goods that we sell
      fails to use acceptable labor practices.***




We
      require manufacturers of the goods that we sell to operate in compliance with
      applicable laws and regulations. While our internal and vendor operating
      guidelines promote ethical business practices and our staff and our agents
      periodically visit and monitor the operations of our independent manufacturers,
      we do not control these manufacturers or their labor practices. The violation
      of
      labor or other laws by an independent manufacturer used by us, or the divergence
      of an independent manufacturer’s labor practices from those generally accepted
      as ethical in the United States, could interrupt, or otherwise disrupt the
      shipment of products to us or damage our reputation, which may result in a
      decrease in customer traffic to our stores and adversely affect our sales and
      net earnings.




***Existing
      and increased competition in the women’s retail apparel industry may reduce our
      net revenues, profits and market share.***




The
      women’s retail apparel industry is highly competitive. We compete primarily with
      department stores, off-price retailers, specialty stores, discount stores,
      mass
      merchandisers and Internet-based retailers, many of which have substantially
      greater financial, marketing and other resources than we have. Many department
      stores offer a broader selection of merchandise than we offer. In addition,
      many
      department stores continue to be promotional and reduce their selling prices,
      and in some cases are expanding into markets in which we have a significant
      market presence. As a result of this competition, including close-out sales
      and
      going-out-of-business sales by other women’s apparel retailers, we may
      experience pricing pressures, increased marketing expenditures and loss of
      market share, which could have a material adverse effect on our business,
      financial condition and results of operations.




***We
      depend on key personnel in order to support our existing business and future
      expansion and may not be able to retain or replace these employees or recruit
      additional qualified personnel.***




Our
      success and our ability to execute our business strategy depends largely on
      the
      efforts of our management. The loss of the services of one or more of our key
      personnel could have a material adverse effect on our business, as we may not
      be
      able to find suitable management personnel to replace departing executives
      on a
      timely basis. We do not have key man life insurance on our key personnel. We
      compete for experienced personnel with companies who have greater financial
      resources than we do. If we fail to attract, motivate and retain qualified
      personnel, it could harm our business and limit our ability to expand.




***Covenants
      in our revolving credit facility agreement may impose operating
      restrictions.***




Our
      revolving credit facility agreement has financial covenants with respect to
      consolidated net worth, as well as other financial ratios. If we fail to meet
      these covenants or obtain appropriate waivers, our lender may terminate the
      revolving credit facility.





***Our
      business may be affected by regulatory and litigation
      developments.***




Various
      aspects of our operations are subject to federal, state or local laws, rules
      and
      regulations, any of which may change from time to time. Additionally, we are
      regularly involved in various litigation matters that arise in the ordinary
      course of our business.




***Natural
      disasters, war and acts of terrorism on the United States or international
      economies may adversely impact our business.***




A
      significant act of terrorism or a natural disaster event in the United States
      or
      elsewhere could have an adverse impact on the delivery of imports or domestic
      products to us, or by disrupting production of our goods or interfering with
      our
      distribution or information systems. Additionally, any of these events could
      result in higher costs of doing business, lower client traffic and reduced
      consumer confidence and spending resulting in a material adverse effect on
      our
      business, financial condition and results of operations.




***The
      recent downturn in the financial markets could have an adverse effect on our
      ability to access our cash and marketable securities.***





We
      have
      significant amounts of cash and cash equivalents at financial institutions
      that
      are in excess of federally insured limits. With the current financial
      environment and the instability of financial institutions we cannot be assured
      that we will not experience losses on our deposits.




8





***Funds
      associated with the auction rate securities held by us that we have
      traditionally held as short-term investments may not be liquid or readily
      available.***





Our
      investment in securities currently consists partially of auction rate securities
      which are not currently liquid or readily available to convert to cash and,
      therefore, we have reclassified as long-term marketable security investments.
      We
      do not believe that the current liquidity issues related to our auction rate
      securities will impact our ability to fund our ongoing business operations.
      However, if the global credit crisis persists or intensifies, it is possible
      that we will be required to further adjust the fair value of our auction rate
      securities. If we determine that the decline in the fair value of our auction
      rate securities is other-than-temporary, it would result in an impairment charge
      being recognized on our consolidated statement of earnings which could be
      material and which could adversely affect our financial results.





***Our
      stock price may be volatile.***





Our
      stock
      price may fluctuate substantially as a result of quarter to quarter variations
      in our actual or anticipated financial results, the results of other companies
      in the retail industry, or the markets we serve. In addition, the stock market
      has experienced price and volume fluctuations that have affected the market
      price of many retail and other stocks and that have often been unrelated or
      disproportionate to the operating performance of these companies.




***We
      could be required to repurchase our 2.5% Senior Convertible Notes due in 2024
      for cash prior to maturity of the notes.***




During
      fiscal 2005, we issued $115.0 million principal amount of 2.5% Senior
      Convertible Notes due in 2024, or Senior Convertible Notes, in a private
      offering for resale to qualified institutional buyers pursuant to Rule 144A
      under the Securities Act of 1933.  The Senior Convertible Notes were
      subsequently registered with the SEC. The holders of the Senior Convertible
      Notes could require us to repurchase the principal amount of the notes for
      cash
      before maturity of the notes under certain circumstances (see “Item 8. Financial
      Statements and Supplementary Data; Notes to Consolidated Financial Statements;
      Note 5. Debt” below).  Such a repurchase would require significant
      amounts of cash and could adversely affect our financial condition.




***New
      accounting rules or regulations or changes in existing rules or regulations
      could adversely impact our reported results of
      operations.***




Changes
      to existing accounting rules or the adoption of new rules could have an adverse
      effect on our reported results of operations.  In May 2008, the
      Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”)
      APB 14-a, Accounting for Convertible Debt Instruments That May Be Settled in
      Cash upon Conversion,which applies to any convertible debt instrument that
      may
      be settled in whole or in part with cash upon conversion, which would include
      our 2.5% Senior Convertible Notes. We are required to adopt the FSP at the
      beginning of our fiscal year 2010, with retroactive application to financial
      statements for periods prior to the date of adoption.




***Failure
      to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively
      impact our business, the price of our common stock and market confidence in
      our
      reported financial information.***




We
      must
      continue to document, test, monitor and enhance our internal controls over
      financial reporting in order to satisfy the requirements of Section 404 of
      the
      Sarbanes-Oxley Act of 2002. We cannot be assured that our disclosure controls
      and procedures and our internal controls over financial reporting required
      under
      Section 404 of the Sarbanes-Oxley Act will prove to be adequate in the future.
      Any failure to maintain the effectiveness of internal controls over financial
      reporting or to comply with the requirements of the Sarbanes-Oxley Act could
      have a material adverse impact on our business, our financial condition and
      the
      price of our common stock.




**We
        have identified a material weakness in our internal control over financial
        reporting that, if not remediated, could affect our ability to prepare timely
        and accurate financial reports, which could cause investors to lose confidence
        in our reported financial information and could have a negative effect on
        the
        trading price of our stock.**
  In
        connection with the preparation of this report, we identified and reported
        a
        material weakness in our internal controls over financial reporting relating
        to
        accounting for income taxes. As a result of this material weakness, we were
        unable to conclude that our internal control over financial reporting 
relating to income taxes was effective as of July 26, 2008.


9




**ITEM
              1B.**
            **UNRESOLVED
                STAFF COMMENTS**




None.




**ITEM
              2.**
            **PROPERTIES**





We
      lease
      all of our stores. Store leases generally have an initial term ranging from
      5 to
      10 years with one or more options to extend the lease. The table below, covering
      all open store locations leased by us on July 26, 2008, indicates the number
      of
      leases expiring during the period indicated and the number of expiring leases
      with and without renewal options:





**Fiscal Years**
            
            **Leases Expiring**
            
            **Number with**
              **Renewal Options**
            
            **Number Without**
              **Renewal Options**2009
            
            
            297
            
            
            133
            
            
            1642010
            
            
            260
            
            
            183
            
            
            772011-2013
            
            
            699
            
            
            550
            
            
            1492014
                and thereafter
            
            
            247
            
            
            160
            
            
            87Total
            
            
            1,503
            
            
            1,026
            
            
            477





New
      store
      leases generally provide for a base rent of between
      $6 and $40 per square
      foot per annum. Certain of our leases have formulas requiring the payment of
      a
      percentage of sales as additional rent, generally when sales reach specified
      levels. Our aggregate minimum rentals under operating leases in effect at July
      26, 2008 and excluding locations acquired after July 26, 2008, for fiscal 2009,
      are approximately $141.3 million. In addition, we are also typically responsible
      under our store leases for our pro rata share of maintenance expenses and common
      charges in strip and outlet centers.





Most
      of
      the store leases give us the right to terminate the lease at little or no cost
      if certain specified sales volumes are not achieved. This affords us greater
      flexibility to close underperforming stores. Usually these provisions are
      operative only during the first few years of a lease.





Our
      investment in new stores consists primarily of inventory, leasehold
      improvements, fixtures and equipment. We often receive tenant improvement
      allowances from landlords to offset these initial investments.





We
      own an
      approximately 900,000 square-foot distribution/office facility and 16 acres
      of
      adjacent land in Suffern, New York, which houses, in approximately 510,000
      square feet, our corporate offices and our **dressbarn** distribution center. The
      remainder of the rentable square footage is 100% leased through 2012. The
      purchase of the Suffern facility was financed with a mortgage that is
      collateralized by a mortgage lien on the Suffern facility. Payments of principal
      and interest on the mortgage, which is a 20-year fully amortizing loan with
      a
      fixed interest rate of 5.33%, are due monthly through July 2023. We receive
      rental income and reimbursement for taxes and common area maintenance charges
      from two tenants that occupy the Suffern facility that are not affiliated with
      us. The rental income from the other tenants is shown as “other income” on our
      Consolidated Statements of Earnings. We own **maurices’** corporate headquarters in downtown Duluth, Minnesota, which is composed of
      three
      office buildings totaling approximately151,000 square feet. We also own **maurices’** distribution center, which has 360,000 square feet of space and is located
      in
      Des Moines, Iowa.





**ITEM
              3.**
            **LEGAL
                PROCEEDINGS**





We
      are
      subject to ordinary routine litigation incidental to our business. Although
      the outcome of such items cannot be determined with certainty, in our opinion,
      dispositions of these matters are not expected to have a material adverse affect
      on our financial position, results of operations or cash flows.




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





No
      matters were submitted to a vote of security holders during the fourth quarter
      of the fiscal year.




10





****  **** **EXECUTIVE
      OFFICERS OF THE REGISTRANT**





The
      following table sets forth the name, age and position with our company of our
      Executive Officers:





**Name**
            
            **Age**
            
            **Positions**Elliot
                S. Jaffe
            
            82
            
            Chairman
                of the Board
              and
                Co-FounderDavid
                R. Jaffe
            
            49
            
            President,
                Chief Executive Officer
              and
                DirectorVivian
                Behrens
            
            55
            
            Senior
                Vice President,
              Chief
                Marketing OfficerArmand
                Correia
            
            62
            
            Senior
                Vice President,
              Chief
                Financial OfficerGene
                Wexler
            
            53
            
            Senior
                Vice President, General Counsel
              and
                Assistant SecretaryReid
                Hackney
            
            50
            
            Vice
                President, Finance
              and
                Corporate Controller




*Mr.
      Elliot S. Jaffe,* our
      co-founder and Chairman of the Board, was Chief Executive Officer of our company
      from 1966 until 2002.





*Mr.
      David R. Jaffe* became
      President and Chief Executive Officer in 2002. Previously he had been Vice
      Chairman, Chief Operating Officer and a member of the Board of Directors since
      2001. He joined us in 1992 as Vice President-Business Development and became
      Senior Vice President in 1995 and Executive Vice President in 1996. Mr. Jaffe
      is
      the son of Elliot S. and Roslyn S. Jaffe. Mrs Jaffe serves as Secretary and
      Treasurer of our company.





*Ms.
      Vivian Behrens* has been
      employed by our company since 2002 as Senior Vice President and Chief Marketing
      Officer. She was a member of our Board of Directors from 2001 to 2002.
      Previously, Ms. Behrens held senior marketing positions at Posh & Sticks,
      Ltd., a consumer products multi-channel retailer, the Foot Locker Division
      of
      Venator, Inc., Charming Shoppes, Inc., Limited Inc. and Avon Products, Inc.





*Mr.
      Armand Correia* has
      been
      Senior Vice President and Chief Financial Officer of our company since
      1991.




*Mr.
      Gene Wexler* has
      been Senior
      Vice President, General Counsel and Assistant Secretary of our company since
      2005. He previously served as Vice President, General Counsel and Secretary
      for
      Del Laboratories from 1999 until 2005.




*Mr.
      Reid Hackney* became
      Vice President - Finance and Corporate Controller in 2005. Prior to that date,
      he was Vice President – Finance and Controller. He has been employed at our
      company since 1983.




11




**PART
      II**





**ITEM
              5.**
            **MARKET
                FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY
                SECURITIES**




**Market
      Prices of Common Stock**





The
      Common Stock of The Dress Barn, Inc. is quoted on the NASDAQ Global Select
      Market under the symbol DBRN.





The
      table
      below sets forth the high and low prices as reported on the NASDAQ Global Select
      Market for the last eight fiscal quarters.





**Fiscal
                2008**
            
            **Fiscal
                2007****Fiscal**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low**First
                Quarter
            
            $
            19.32
            
            $
            15.02
            
            $
            24.25
            
            $
            16.91Second
                Quarter
            
            $
            16.55
            
            $
            9.35
            
            $
            24.93
            
            $
            20.48Third
                Quarter
            
            $
            14.88
            
            $
            11.00
            
            $
            23.56
            
            $
            18.90Fourth
                Quarter
            
            $
            16.28
            
            $
            12.31
            
            $
            23.40
            
            $
            18.36




**Number
      of Holders of Record**





As
      of
      September 16, 2008, we had approximately 245 holders of record of our common
      stock.




**Dividend
      Policy**





We
      have
      never declared or paid cash dividends on our common stock. We currently intend
      to retain our future earnings and available cash to fund the growth of our
      business and do not expect to pay dividends in the foreseeable future. However,
      payment of dividends is within the discretion of our Board of Directors.
      Payments of dividends are limited in any one year by our revolving credit
      facility.





12





**Performance
      Graph**





The
      following graph illustrates, for the period from July 26, 2003 through July
      26,
      2008, the cumulative total shareholder return of $100 invested (assuming that
      all dividends, if any, were reinvested) in (1) our common stock, (2) the S&P
      Composite-500 Stock Index, (3) the S&P Specialty Apparel Retailers Index and
      (4) an index of peer companies selected by us. In
      prior
      years, we used in our performance graph, a peer group
      index (consisting of four companies) that management believed was
      a good reflection of our competitors in the marketplace.  However, during
      fiscal 2008, Deb Shops, Inc. and United Retail Group, Inc. (two of the four
      members of the peer group index) were sold and ceased to be public
      companies.  Therefore, the peer group index shown in our performance graph
      below consists of only the two remaining  companies, The Cato
      Corporation and Charming Shoppes, Inc.  Instead, we are using the S&P
      Specialty Apparel Index as an indicator of our competitors’ share
      performance as the majority of them are included either in this index or the
      S&P 500.




The
      comparisons in this table are required by the rules of the Securities and
      Exchange Commission and, therefore, are not intended to forecast or be
      indicative of possible future performance of our common stock.











13


**Securities
      Authorized for Issuance Under Equity Compensation
      Plans**





The
      following table summarizes our equity compensation plans as of July 26,
      2008.




**Plan
                Category**
            
            **Number of**
              **securities to be**
              **issued upon**
              **exercise of**
              **outstanding**
              **options**
            
            **Weighted**
              **average**
              **exercise price**
              **of outstanding**
              **options**
            
            **Number of**
              **securities**
              **remaining**
              **available for**
              **future issuance**
              **under equity**
              **compensation**
              **plans (excluding**
              **securities reflected**
              **in column (a))**(a)
            
            (b)
            
            (c)Equity
                compensation plans approved by security holders
            
            
            5,850,968
            
            $
            11.05
            
            
            5,884,049Equity
                compensation plans not approved by security holders
            
            
            -
            
            
            -
            
            
            -**Total**
            
            
            5,850,968
            
            $
            11.05
            
            5,884,049





**Issuer
      Purchases of Equity Securities**


**Quarter
      Ending July 26, 2008**





We
      did
      not purchase any securities in the quarter ending July 26, 2008.





In
      September 2007, our Board of Directors authorized an additional $100 million
      stock buyback program (the “Program”). The purchases are authorized to be made
      by us from time to time when market conditions warrant. The Program authorizes
      the purchase of Dress Barn Common Stock through open market purchases and/or
      privately negotiated transactions and will be subject to applicable SEC rules.
      The Program has no expiration date. No purchases have been made under the
      Program.





The
      maximum number of shares that may yet be purchased under the Program, based
      on
      the closing price of $15.01 on July 25, 2008 is 6,662,225.





14





**ITEM
              6.**
            **SELECTED
                FINANCIAL DATA**




The
      following selected financial data is derived from our consolidated
      financial statements and should be read in conjunction with the consolidated
      financial statements and related notes, Management Discussion and Analysis
      and
      Quantitative and Qualitative Disclosures About Market Risk included in this
      Form
      10-K.




**Fiscal
                Year Ended***In
                thousands, except earnings per share*
            
            **July
                26,**
            
            **July
                28,**
            
            **July
                29,**
            
            **July
                30,**
            
            **July
                31,***and
                store operating data*
            
            **2008**
            
            **2007**
            
            **2006**
            
            **2005**
            
            **2004**(2)Net
                sales
            
            $
            1,444,165
            
            $
            1,426,607
            
            $
            1,300,277
            
            $
            1,000,264
            
            $
            754,903Cost
                of sales, including occupancy andbuying
                costs (excluding depreciation)
            
            
            885,927
            
            
            842,192
            
            
            773,631
            
            
            621,656
            
            
            472,198Selling,
                general andadministrative
                expenses
            
            
            397,424
            
            
            383,652
            
            
            353,031
            
            
            286,751
            
            
            212,477Depreciation
                and amortization
            
            
            48,200
            
            
            45,791
            
            
            41,679
            
            
            34,457
            
            
            23,197Litigation
                (3)
            
            
            -
            
            
            -
            
            
            -
            
            
            (35,329
            )
            
            3,329Operating
                income
            
            
            112,614
            
            
            154,972
            
            
            131,936
            
            
            92,729
            
            
            43,702Interest
                income
            
            
            7,817
            
            
            7,051
            
            
            2,656
            
            
            1,735
            
            
            2,204Interest
                expense
            
            
            (4,825
            )
            
            (4,883
            )
            
            (5,364
            )
            
            (10,230
            )
            
            (1,959
            )Other
                income
            
            
            512
            
            
            1,382
            
            
            1,526
            
            
            1,526
            
            
            1,526Earnings
                before income taxes
            
            
            116,118
            
            
            158,522
            
            
            130,754
            
            
            85,760
            
            
            45,473Income
                taxes
            
            
            42,030
            
            
            57,340
            
            
            51,800
            
            
            33,200
            
            
            14,541**Net
                earnings**
            
            **$**
            **74,088**
            
            **$**
            **101,182**
            
            **$**
            **78,954**
            
            **$**
            **52,560**
            
            **$**
            **30,932****Earnings
                per share – basic (1)**
            
            **$**
            **1.23**
            
            **$**
            **1.63**
            
            **$**
            **1.29**
            
            **$**
            **0.88**
            
            **$**
            **0.53****Earnings
                per share – diluted (1)**
            
            **$**
            **1.15**
            
            **$**
            **1.45**
            
            **$**
            **1.15**
            
            **$**
            **0.86**
            
            **$**
            **0.51****Balance
                sheet data (at end of period):**Working
                capital
            
            $
            100,300
            
            $
            104,332
            
            $
            15,880
            
            $
            40,756
            
            $
            164,194Total
                assets
            
            $
            1,024,459
            
            $
            981,325
            
            $
            842,697
            
            $
            716,245
            
            $
            489,316Total
                long-term debt (4)
            
            $
            27,263
            
            $
            28,540
            
            $
            29,751
            
            $
            155,900
            
            $
            31,988Shareholders'
                equity
            
            $
            556,082
            
            $
            509,401
            
            $
            409,147
            
            $
            313,128
            
            $
            252,958**Percent
                of net sales:**Cost
                of sales, including occupancy andbuying
                costs, excluding depreciation and amortization
            
            
            61.3
            %
            
            59.0
            %
            
            59.5
            %
            
            62.1
            %
            
            62.6
            %Selling,
                    general and administrative expenses
            
            
            27.5
            %
            
            26.9
            %
            
            27.2
            %
            
            28.7
            %
            
            28.1
            %Litigation
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %
            
            (3.5
            )%
            
            0.4
            %Operating
                income
            
            
            7.8
            %
            
            10.9
            %
            
            10.1
            %
            
            9.3
            %
            
            5.8
            %Net
                earnings
            
            
            5.1
            %
            
            7.1
            %
            
            6.1
            %
            
            5.3
            %
            
            4.1
            %





(1)
      All
      earnings per share amounts reflect the 2-for-1 stock split, effective April
      3,
      2006.


(2)
      Includes the impact of the acquisition of Maurices Incorporated. See Note 4
      to
      the consolidated financial statements.


(3) In
      2003,
      after a trial in the Superior Court of Connecticut, Waterbury District, a jury
      returned a verdict of $30 million of compensatory damages against us.  The
      court then entered a judgment of approximately $32 million in compensatory
      damages and expenses, which was subject to post-judgment interest.  In
      addition to the original litigation charge of $32 million recorded in fiscal
      2003, we accrued interest and other amounts of approximately $3.3 million in
      the
      consolidated statement of earnings in fiscal 2004.  In July 2005, the
      Supreme Court of Connecticut's decision to reverse the judgment against us
      became final. Upon the Supreme Court of Connecticut's decision reversing the
      judgment described above, approximately $35.3 million of previously recognized
      litigation charges were reversed in the consolidated statement of earnings
      in
      fiscal 2005 and amounts held in the escrow account established in connection
      with our appeal were released.


(4)
      As of
      July 30, 2005, the holders of the Convertible Senior Notes could not convert
      their notes because our stock price closed at or above $12.61 per share for
      20
      trading days within the 30-trading-day period ended on July 29, 2005. Therefore,
      the $115 million of the Convertible Senior Notes were classified as long-term
      debt. See Note 5 to the consolidated financial statements.





15


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





The
      following discussion should be read in conjunction with our consolidated
      financial statements and related notes thereto included in this Annual Report
      on
      Form 10-K. Fiscal 2008 refers to the 52-week period ended July 26, 2008, fiscal
      2007 refers to the 52-week period ended July 28, 2007, and fiscal 2006 refers
      to
      the 52-week period ended July 29, 2006. Fiscal 2009 refers to our 52-week period
      that will end on July 25, 2009.





All
      prior
      period common stock and share and per share amounts have been adjusted to
      reflect a two-for-one split of our common stock effective April 3, 2006.




**Overview**





This
      Management Overview section of Management’s Discussion and Analysis of Financial
      Condition and Results of Operations provides a high-level summary of the more
      detailed information elsewhere in this annual report and an overview to put
      this
      information into context. This section is also an introduction to the discussion
      and analysis that follows. Accordingly, it omits details that appear elsewhere
      in this annual report. It should not be relied upon separately from the balance
      of this annual report.





We
      operate a chain of women’s apparel specialty stores, operating principally under
      the names “ **dressbarn** ”
and
      “ **dressbarn**  **woman** ”
and,
      since our January 2005 acquisition of Maurices Incorporated, “ **maurices** .”
Our **dressbarn** stores
      are operated mostly in a combination of **dressbarn** and **dressbarn**  **woman** stores,
      or Combo stores, which carry **dressbarn** and
      larger-sized **dressbarn**  **woman** merchandise, as well as freestanding **dressbarn** and **dressbarn**  **woman** stores.
      These stores offer in-season, moderate to better quality career and casual
      fashion at value prices. Our **maurices** stores
      are concentrated in small markets in the United States and their product
      offerings are designed to appeal to the apparel and accessory needs of the
      17-
      to 34-year-old woman.





The
      retail environment remains very competitive and is subject to macroeconomic
      conditions. The addition of **maurices** has
      allowed us to broaden our demographic reach and diversify our retail base.
      We
      expect to continue our strategy of opening new stores while closing
      underperforming locations. We expect to continue store expansion focusing on
      both expanding in our major trading markets and developing and expanding into
      new domestic markets. For fiscal 2009, we are currently projecting net square
      footage growth in the mid single-digit percentage range.





Customer
      tastes and fashion trends are volatile and can change rapidly. Our success
      depends in part on our ability to effectively predict and respond to changing
      fashion trends and consumer demands, and to translate market trends into
      appropriate, saleable product offerings. If we are unable to successfully
      predict or respond to changing styles or trends and misjudge the market for
      our
      products or any new product lines, our sales will be lower and we may be faced
      with a substantial amount of unsold inventory. In response, we may be forced
      to
      rely on additional markdowns or promotional sales to dispose of excess or
      slow-moving inventory, which may have a material adverse effect on our financial
      condition or results of operations.





We
      consider comparable store sales to be an important indicator of our current
      performance. Comparable store sales results are important in leveraging our
      costs, including store payroll, rent and other operating costs. Positive
      comparable store sales contribute to greater leveraging of costs. Comparable
      store sales also have a direct impact on our total net sales, operating income
      and working capital.





We
      calculate comparable store sales based on the sales of stores open throughout
      the full period and throughout the full prior period (including stores relocated
      within the same shopping center and stores with minor square footage additions).
      If a single-format store is converted into a Combo store, the additional sales
      from the incremental format are not included in the calculation of same store
      sales. The determination of which stores are included in the comparable store
      sales calculation only changes at the beginning of each fiscal year except
      for
      stores that close during the fiscal year which are excluded from comparable
      store sales beginning with the fiscal month the store actually
      closes. **** It
      should
      be noted that **maurices** comparable
      store sales for fiscal 2006 were calculated in the same manner as **dressbarn** using
      historical pre-acquisition and post-acquisition data for the comparable fiscal
      2005 period.





16





Management
      uses a number of key indicators of financial condition and operating performance
      to evaluate the performance of our business, including the
      following:





**Fiscal
                Year Ended****July
                26,**
            
            **July
                28,**
            
            **July
                29,****2008**
            
            **2007**
            
            **2006**Net
                sales growth
            
            
            1.2
            %
            
            9.7
            %
            
            30.0
            %**dressbarn**comparable store sales
            
            
            (6.6
            )%
            
            3.8
            %
            
            9.9
            %**maurices**comparable store sales
            
            
            4.3
            %
            
            6.9
            %
            
            5.0
            %Total
                comparable store sales growth
            
            
            (2.9
            )%
            
            4.8
            %
            
            8.2
            %Cost
                of sales, including occupancy and buying costs, excluding depreciation
            
            
            61.3
            %
            
            59.0
            %
            
            59.5
            %Square
                footage growth
            
            
            5.2
            %
            
            5.0
            %
            
            19.1
            %Total
                store count
            
            
            1,503
            
            
            1,428
            
            
            1,339Diluted
                earnings per share (1)
            
            $
            1.15
            
            $
            1.45
            
            $
            1.15SG&A
                as a percentage of sales
            
            
            27.5
            %
            
            26.9
            %
            
            27.2
            %Capital
                expenditures (in millions)
            
            $
            66.1
            
            $
            63.0
            
            $
            48.3





(1)
            All
                earnings per share amounts reported above reflect the 2-for-1 stock
                split,
                effective April 3, 2006




We
      include in our cost of sales line item all costs of merchandise (net of purchase
      discounts and vendor allowances), freight on inbound, outbound and internally
      transferred merchandise, merchandise acquisition costs (primarily commissions
      and import fees), occupancy costs excluding utilities and depreciation and
      all
      costs associated with the buying and distribution functions. Our cost of sales
      may not be comparable to those of other entities, since some entities include
      all costs related to their distribution network including depreciation and
      all
      buying and occupancy costs in their cost of sales, while other entities,
      including us, exclude a portion of these expenses from cost of sales and include
      them in selling, general and administrative expenses or depreciation. We include
      depreciation related to the distribution network in depreciation and
      amortization, and utilities and insurance expenses, among other expenses, in
      selling, general and administrative expenses on the consolidated statements
      of
      earnings.





17




**Highlights**





During
      fiscal 2008, we undertook three key strategic initiatives to help improve the **dressbarn** customer
      experience. The first is the Oracle Retail (Retek) merchandising system, which
      we began utilizing during the first quarter of fiscal 2008, for merchandising,
      the retail stock ledger and data warehousing(Phase I). This initiative is
      currently in Phase II, which enhances merchandise financial planning, allocation
      and invoice matching. The second initiative is Global Store, a new POS
      application, giving our stores greater functionality. This will be piloting
      in
      stores in fiscal 2009, with a complete rollout targeted during late fiscal
      2009. The
      third
      initiative will be implementing a new upgrade to our CRM system that will
      improve data analysis and the efficiency of our marketing efforts.





The
      strategic decision for **maurices** to exit
      the men’s product line and replace it with Plus size women’s apparel was
      implemented in the fourth quarter of fiscal 2007.  While we fell short of
      our sales and margin targets during the fall season, both sales and margin
      fell
      in line with expectations as the year progressed.  For the year, the Plus
      size apparel was 23% more productive on a square footage basis than the prior
      men’s concept.  Based on current trends, we are targeting the Plus size
      apparel to represent approximately 10% of **maurices’** volume
      for the 2009 fiscal year.  The Plus size apparel is represented in
      approximately 75% of our current **maurices** store
      locations, and will be placed in most future projects.





In
      fiscal
      2008, we introduced a new line of coordinates called YVOS “Your Very Own Style”
which is currently being piloted in approximately 100 of our **dressbarn** stores.
      Our new brand is designed to be very stylish and fresh and it creates a bold
      fashion statement for work and play at an affordable price. This merchandise
      is
      priced 20% to 25% higher than current **dressbarn** merchandise due to more expensive fabrics, yarns, designs and trims. Our
      competitors offer similar styles that are 35% to 40% higher in price than YVOS.
      We plan to distribute this new brand to more stores during fiscal
      2009.





The **dressbarn** customer
      has been negatively impacted by the slowdown in consumer spending more than
      the
      typically younger **maurices** customer. This has led to increased markdowns for the **dressbarn** brand to
      control inventory levels during fiscal 2008 while the **maurices** brand
      had
      increased markups partially offset by slightly higher markdowns during fiscal
      2008.





During
      the third quarter of fiscal 2008, we classified $61.8 million of our auction
      rate securities (“ARS”) as long-term. We
      have
      classified our investment in ARS to long-term because
      of our inability to determine when our investments in ARS would settle. We
      believe this classification is still appropriate for our fiscal 2008
      Consolidated Balance Sheet based on our belief that the market for these
      instruments may take in excess of 12 months to fully recover due to the current
      disruptions in the credit markets. Additionally, we have recognized a $3.3
      million temporary impairment loss in fair value of our ARS, with an offsetting
      entry to accumulated other comprehensive (loss) income. We currently believe
      that this temporary decline in fair value is due entirely to liquidity issues,
      because the underlying assets for the vast majority of our ARS are backed by
      the
      U.S. government. Management believes that our available working capital,
      excluding the funds held in ARS, will be sufficient to meet our cash
      requirements for at least the next 12 months.





We
      adopted the provisions of FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes”, on July 29, 2007. As a result of adoption, we
      recognized a charge of approximately $4.9 million to the July 29, 2007 retained
      earnings balance. As of the adoption date, we had gross tax affected
      unrecognized tax benefits of $27.2 million of which $19.4 million, if
      recognized, would affect our effective tax rate. Also as of the adoption date,
      we had accrued interest expense related to the unrecognized tax benefits of
      $6.5
      million and accrued penalties of $0.5 million. We recognize interest and
      penalties related to unrecognized tax benefits as a component of income tax
      expense.





18




**Results
      of Operations**





We
      have
      two reportable segments. We believe that **maurices** is a
      reportable segment due to management’s review of **maurices’** separately available operating results and other financial information used
      to
      regularly assess their performance for decision-making purposes. **maurices** is
      discussed separately in the following Management’s Discussion and Analysis, as
      appropriate.





*Fiscal
      2008 Compared to Fiscal 2007*





**Net
      Sales:**


**Fifty-Two
                Weeks Ended**(Amounts
                in millions, except for % change amounts)
            
            **July
                26, 2008**
            
            **%
                of Sales**
            
            **July
                28, 2007**
            
            **%
                of Sales**
            
            **%
                Change****dressbarn**and**dressbarn woman**brands
            
            $
            887.6
            
            
            61.5
            %
            $
            934.8
            
            
            65.5
            %
            
            (5.0
            )%**maurices**brand
            
            
            556.6
            
            
            38.5
            %
            
            491.8
            
            
            34.5
            %
            
            13.2
            %Consolidated
                net sales
            
            $
            1,444.2
            
            
            
            
            $
            1,426.6
            
            
            
            
            
            1.2
            %





Net
      sales
      for the fifty-two weeks ended July 26, 2008 increased 1.2% to $1,444.2 million
      from $1,426.6 million in the prior year. This increase was mainly driven by
      a
      5.2% square footage increase offset by a comparable store sales decrease of
      2.9%. The same store sales decrease was the result of several factors including
      decreased customer traffic to our stores and fewer customer transactions. We
      believe the decrease in the number of customer transactions was the result
      of
      the continuing economic challenges that are affecting a significant number
      of
      our customers.





During
      fiscal 2008, the **dressbarn** brand
      was negatively impacted by the slowdown in consumer spending. All regions posted
      decreased comparable store sales for the fifty-two week period. The best
      performing departments were leather and outerwear, blazers and social occasion
      dresses. The weakest departmental performers were career bottoms and sweaters.





For
      the **maurices** brand,
      fiscal 2008 was a solid year. All six regions had comparable sales increases
      with the Midwest and the Northwest leading regional performance. Strong sales
      trends were noted for the dressier “Wear @ Work” assortment with additionally
      strong results from outerwear, knit tops, denim and lounge apparel. The
      strategic decision to exit the men’s product line and replace it with plus size
      women’s apparel was implemented in the fourth quarter of fiscal 2007. 
While we fell short of our sales and margin targets during the fall season,
      both
      sales and margin fell in line with expectations as the year progressed. 
For the year, the Plus size apparel was 23% more productive on a square footage
      basis than the prior men’s concept.  Based on current trends, we are
      targeting the Plus size apparel to represent 10% of **maurices’** volume
      for the 2009 fiscal year.  The Plus size apparel is represented in
      approximately 75% of our current store locations, and will be placed in most
      future stores.




Revenue
      also includes income from the non-redemption of a portion of gift cards and
      gift
      certificates sold, and merchandise credits issued (gift card breakage). We
      recognize income on unredeemed gift cards when it can be determined that the
      likelihood of the remaining balances being redeemed are remote and that there
      are no legal obligations to remit the remaining balances to relevant
      jurisdictions. Prior
      to
      fiscal 2007, we were unable to reliably estimate such gift card breakage and
      therefore recorded no such income in fiscal 2006, or prior years. During the
      fourth quarter of fiscal 2007, we accumulated a sufficient level of historical
      data to determine an estimate of gift card breakage for the first time. During
      fiscal 2008, we recognized $2.2 million of breakage income related to unredeemed
      gift cards which included $1.8 million for **dressbarn** and $0.4
      million for **maurices** .
      During
      fiscal 2007, we recognized $3.7 million of breakage income related to unredeemed
      gift cards which included $2.6 million for **dressbarn** and
      $1.1million for **maurices** .




19




**Cost
      of sales, including occupancy and buying costs, excluding depreciation:**




(Amounts in millions, except for % amounts)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            885.9
            
            $
            842.2
            
            $
            43.7
            
            
            5.2
            %As
                a percentage of sales
            
            
            61.3
            %
            
            59.0
            %





Cost
      of
      sales increased by 230 basis points to 61.3% of net sales in the current year
      period from 59.0% of net sales in the prior year period. For the **dressbarn** brand,
      cost of sales was $562.3 million or 63.4% of net sales, an increase of 410
      basis
      points as compared to $554.5 million or 59.3% from the same period last year.
      This increase was the result of lower merchandise margins from last year mainly
      due to increased markdowns and the de-leveraging of store occupancy costs. **maurices** cost of
      sales for fiscal 2008 was $323.6 million or 58.1% of net sales as compared
      to
      $287.7 million or 58.5% of net sales in fiscal 2007. The decrease in cost of
      sales as a percentage of sales was primarily the result of higher initial
      markons.





**SG&A
      expenses:**




(Amounts in millions, except for % amounts)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            397.4
            
            $
            383.7
            
            $
            13.7
            
            
            3.6
            %As
                a percentage of sales
            
            
            27.5
            %
            
            26.9
            %





As
      a
      percentage of sales, selling, general and administrative expenses (“SG&A”)
      increased 60 basis points to 27.5% of net sales versus 26.9% last year. **dressbarn** SG&A
      increased 120 basis points to 28.7% of net sales versus 27.5% last year due
      primarily to the de-leveraging of payroll related expenses as a result of our
      comparable store sales decrease and increased marketing, utilities and
      professional fees. **maurices** SG&A
      was $142.7 million or 25.6% of net sales for the fiscal 2008 as compared to
      $126.1 million or 25.6% in fiscal 2007. Increased marketing investments were
      partially offset by lower health insurance and workers compensation claims
      and
      improved leveraging from the increase in comparable store sales.





**Depreciation
      and amortization:**




(Amounts in millions, except for % amounts)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            48.2
            
            $
            45.8
            
            $
            2.4
            
            
            5.2
            %As
                a percentage of sales
            
            
            3.3
            %
            
            3.2
            %





Depreciation
      expense increased 5.2% in fiscal 2008 as compared to last year primarily from
      the
      opening of 107 stores, store remodels and relocations, and investment in
      technology.




**Operating
      income:**




(Amounts in millions, except for % amounts)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            112.6
            
            $
            155.0
            
            $
            (42.4
            )
            
            (27.4
            )%As
                a percentage of sales
            
            
            7.8
            %
            
            10.9
            %





As
      a
      result of the above factors, operating income as a percent of net sales was
      7.8%
      for fiscal 2008 compared to 10.9% for fiscal 2007. For the **dressbarn** brand,
      operating income as a percent of sales decreased to 4.8% versus 10.1% fiscal
      2007. For the **maurices** brand,
      operating income as a percent of sales increased to 12.6% versus 12.3% last
      fiscal year.





**Interest
      income:**




(Amounts in millions, except for % amounts)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            7.8
            
            $
            7.1
            
            $
            0.7
            
            
            9.9
            %As
                a percentage of sales
            
            
            0.5
            %
            
            0.5
            %





Interest
      income for the fifty-two week period was $7.8 million as compared to interest
      income of $7.1 million in fiscal 2007 due to higher investment balances combined
      with investments with higher interest rates.


20





**Interest
      expense:**




(Amounts in millions, except for % amounts)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            (4.8
            )
            $
            (4.9
            )
            $
            0.1
            
            
            (2.0
            )%As
                a percentage of sales
            
            
            (0.3
            )%
            
            (0.3
            )%





Interest
      expense for the fiscal year decreased to $4.8 million from $4.9 million due
      to
      slightly lower average debt levels over the comparable prior year period.





**Other
      income (expense):**




(Amounts in millions, except for % amounts)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            0.5
            
            $
            1.4
            
            $
            (0.9
            )
            
            (64.3
            )%As
                a percentage of sales
            
            
            0.0
            %
            
            0.1
            %





Other
      income (expense) for the fiscal year was $0.5 million as compared to $1.4
      million last year. The majority of this amount represents the recording of
      approximately $1.1 million of a cost basis investment impairment offset by
      rental income from the two tenants currently occupying space in our corporate
      headquarters property in Suffern, New York.





**Income
      taxes:**




(Amounts in millions, except for % amounts)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            42.0
            
            $
            57.3
            
            $
            (15.3
            )
            
            (26.7
            )%As
                a percentage of sales
            
            
            2.9
            %
            
            4.0
            %





The
      effective tax rate for fiscal 2008 did not change from the 36.2% rate reported
      for fiscal 2007. Refer to Note 10 to the consolidated financial statements
      for
      additional details.


21


*Fiscal
      2007 Compared to Fiscal 2006*





**Net
      Sales:**




**Fifty-Two
                Weeks Ended**(Amounts in millions, except for % change amounts)
            
            **July 28,**
              **2007**
            
            **% of Sales**
            
            **July 29,**
              **2006**
            
            **% of Sales**
            
            **% Change****dressbarn**and**dressbarn woman**brands
            
            $
            934.8
            
            
            65.5
            %
            $
            876.2
            
            
            67.4
            %
            
            6.7
            %**maurices**brand
            
            
            491.8
            
            
            34.5
            %
            
            424.1
            
            
            32.6
            %
            
            16.0
            %Consolidated
                net sales
            
            $
            1,426.6
            
            
            
            
            $
            1,300.3
            
            
            
            
            
            9.7
            %





Net
      sales
      for the fifty-two weeks ended July 28, 2007 increased 9.7% to $1,426.6 million
      from $1,300.3 million in the prior year. This increase was mainly driven by
      the
      same store sales increase of 4.8% and a square footage increase of approximately
      5.0%. The same store sales increase was the result of several factors, including
      increased customer traffic to our stores and more customer transactions. We
      believe the increase in the number of customer transactions was the result
      of
      continuing customer acceptance of our more updated and fashionable merchandise
      assortment and targeted marketing and store presentation efforts.





During
      fiscal 2007, the **dressbarn** brand
      showed sales strength across all regions of the country, delivering the
      fourteenth consecutive quarter of positive comparable store sales. All regions
      posted increased comparable store sales for the fifty-two week period. The
      best
      performing departments were leather and outerwear, social and dresses. The
      weakest departmental performers were suits, woven tops and coordinates.





For
      the **maurices** brand,
      the Northeast and the Northwest led regional performance. Strong sales trends
      were noted for knit tops, sweaters and denim bottoms.




Revenue
      also includes income from the non-redemption of a portion of gift cards and
      gift
      certificates sold, and merchandise credits issued (gift card breakage). During
      the fourth quarter of fiscal 2007, we accumulated a sufficient level of
      historical data to determine an estimate of gift card breakage for the first
      time. As a result, in the fourth quarter of fiscal 2007, we recognized $3.7
      million of breakage income related to unredeemed gift cards which included
      $2.6
      million for **dressbarn** and
      $1.1million for **maurices** .





**Cost
      of sales, including occupancy and buying costs, excluding depreciation:**




(Amounts in millions, except for % amounts)
            
            **July 28, 2007**
            
            **July 29, 2006**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            842.2
            
            $
            773.6
            
            $
            68.6
            
            
            8.9
            %As
                a percentage of sales
            
            
            59.0
            %
            
            59.5
            %




Cost
      of
      sales decreased by 50 basis points to 59.0% of net sales in the current year
      period from 59.5% of net sales in the prior year period. For the **dressbarn** brand,
      cost of sales was $554.5 million or 59.3% of net sales, a decrease of 40 basis
      points as compared to $523.1 million or 59.7% from the same period last year.
      This decrease was the result of higher merchandise margins from last year mainly
      due to slightly lower markdowns and the leveraging of store occupancy costs. **maurices** cost of
      sales for fiscal 2007 was $287.7 million or 58.5% of net sales as compared
      to
      $250.5 million or 59.1% of net sales in fiscal 2006. The decrease in cost of
      sales was the result of increased markon and lower markdowns as well as
      leveraging occupancy, buying and distribution center costs due to the comparable
      store sales increase.


22





**SG&A
      expenses:**




(Amounts in millions, except for % amounts)
            
            **July 28, 2007**
            
            **July 29, 2006**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            383.7
            
            $
            353.0
            
            $
            30.7
            
            
            8.7
            %As
                a percentage of sales
            
            
            26.9
            %
            
            27.2
            %





As
      a
      percentage of sales, selling, general and administrative expenses (“SG&A”)
      decreased 30 basis points to 26.9% of net sales versus 27.2% last year. **dressbarn** SG&A
      decreased 60 basis points to 27.5% of net sales versus 28.1% last year due
      primarily to leveraging of payroll related expenses and other fixed costs and
      reductions in professional fees, offset by an increase in utilities. **maurices** SG&A
      was $126.1 million or 25.6% of net sales for the fiscal 2007 as compared to
      $106.9 million or 25.2% in fiscal 2006. The increase is primarily related to
      greater marketing investments and increased health insurance costs.





**Depreciation
      and amortization:**




(Amounts in millions, except for % amounts)
            
            **July 28, 2007**
            
            **July 29, 2006**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            45.8
            
            $
            41.7
            
            $
            4.1
            
            
            9.8
            %As
                a percentage of sales
            
            
            3.2
            %
            
            3.2
            %





Depreciation
      expense for the fifty-two week period was $45.8 million, an increase of $4.1
      million from last year. The increase is primarily due to the new store
      growth.




**Operating
      income:**




(Amounts in millions, except for % amounts)
            
            **July 28, 2007**
            
            **July 29, 2006**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            155.0
            
            $
            131.9
            
            $
            23.1
            
            
            17.5
            %As
                a percentage of sales
            
            
            10.9
            %
            
            10.1
            %





As
      a
      result of the above factors, operating income as a percent of net sales was
      10.9% for fiscal 2007 compared to 10.1% for fiscal 2006. For **dressbarn** ,
      operating income as a percent of sales increased to 10.1% versus 9.3% last
      fiscal year. For the **maurices** brand,
      operating income as a percent of sales increased to 12.3% versus 12.0% last
      fiscal year.





**Interest
      income:**




(Amounts in millions, except for % amounts)
            
            **July 28, 2007**
            
            **July 29, 2006**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            7.1
            
            $
            2.7
            
            $
            4.4
            
            
            163.0
            %As
                a percentage of sales
            
            
            0.5
            %
            
            0.2
            %





Interest
      income for the fifty-two week period was $7.1 million as compared to interest
      income of $2.7 million last year. The increase was due to the increase in funds
      invested in marketable securities and investments over the fiscal year as
      compared to fiscal 2006. The majority of our interest income is derived from
      tax-free municipal bonds and overnight tax-free investment funds.


23





**Interest
      expense:**




(Amounts in millions, except for % amounts)
            
            **July 28, 2007**
            
            **July 29, 2006**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            (4.9
            )
            $
            (5.4
            )
            $
            0.5
            
            
            (9.3
            )%As
                a percentage of sales
            
            
            (0.3
            )%
            
            (0.4
            )%




Interest
      expense for the fiscal year decreased to $4.9 million from $5.4 million due
      to
      lower average debt levels over the comparable prior year period. We acquired **maurices** in
      fiscal 2005. Part of the funds for this investment were raised by issuance
      of
      $115 million of convertible senior notes, and $100 million borrowed under the
      Senior Credit Facility, as described in Note 5 to the consolidated financial
      statements. In fiscal 2006, we repaid the remaining $10 million under the $100
      million Senior Credit Facility.





**Other
      income:**




(Amounts in millions, except for % amounts)
            
            **July 28, 2007**
            
            **July 29, 2006**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            1.4
            
            $
            1.5
            
            $
            (0.1
            )
            
            (6.7
            )%As
                a percentage of sales
            
            
            0.1
            %
            
            0.1
            %




Other
      income for the fiscal year was $1.4 million. The majority of this amount
      represents rental income from the two tenants currently occupying space in
      our
      corporate headquarters property in Suffern, New York.





**Income
      taxes:**




(Amounts in millions, except for % amounts)
            
            **July 28, 2007**
            
            **July 29, 2006**
            
            **$ Change**
            
            **% Change****Fiscal
                year ended**
            
            $
            57.3
            
            $
            51.8
            
            $
            5.5
            
            
            10.6
            %As
                a percentage of sales
            
            
            4.0
            %
            
            4.0
            %




The
      effective tax rate for fiscal 2007 decreased to 36.2%, as compared to 39.6%
      in
      fiscal 2006. The income tax provision for fiscal 2007 was favorably impacted
      by
      $2.3 million, primarily as a result of one-time adjustments to certain deferred
      tax accounts. In addition we benefited from a lower state tax rate and higher
      tax exempt income. Refer to Note 10 to the consolidated financial statements
      for
      additional details of our income tax amounts.


24





**Liquidity
      and Capital Resources**





Cash
      generated from operating activities provides the primary resources to support
      current operations, growth initiatives, seasonal funding requirements and
      capital expenditures. Our uses of cash are generally for working capital, the
      construction of new stores and remodeling of existing stores, information
      technology upgrades and the purchase of short-term investments. We use lines
      of
      credit on our $100 million revolving credit facility to facilitate imports
      of
      our products.





Our
      growth strategy includes expanding existing major trading markets, developing
      and expanding into new markets and the possibility of acquisitions. We
      periodically consider and evaluate potential acquisitions to support future
      growth. In the event we do pursue a potential acquisition, we could require
      additional equity or debt financing. There can be no assurance that we would
      be
      successful in closing any potential transaction, or that any endeavor we
      undertake would increase our profitability.




At
      July
      26, 2008, we had cash, cash equivalents, marketable securities and long-term
      investments of $278.3 million as compared to $244.6 million as of July 28,
      2007.
      The increase in cash, cash equivalents, marketable securities and long-term
      investments was due primarily to the cash generated by operations of $145.5
      million offset by treasury stock purchases of $40.2 million and capital
      expenditures of $66.1 million.





Net
      cash
      provided by operations was $145.5 million for the fifty-two
      weeks ended July 26, 2008 compared
      with $155.2 million during last year’s comparable period.  Cash
      flows from operating activities for the period were primarily generated by
      income from operations, adjusted for non-cash items such as depreciation and
      amortization, gift card breakage, and changes in working capital account
      balances, specifically the trade accounts payable, prepaid expenses and other
      current assets, deferred compensation and other long-term liabilities, accrued
      salaries and wages and income taxes payable, offset by the change in merchandise
      inventories, deferred rent and lease incentives and customer credits.





Merchandise
      inventories were $187.0 million at July 26, 2008 compared to $197.1 million
      at
      July 28, 2007. The decrease is a result of improved inventory management and
      aggressive promotional activities. We believe current inventory levels are
      appropriate, based on sales trends and the industry environment.





As
      of
      July 26, 2008, $54 million was available under a $100 million revolving credit
      facility. The $46 million of our revolving credit facility consists of
      outstanding letters of credit. We believe this revolving credit facility gives
      us ample capacity to fund any short-term working capital needs that may arise
      in
      the operation of our business. We also have an option to increase the revolving
      credit facility by $50 million.





Net
      cash
      used in investing activities for the fifty-two weeks ended July 26, 2008 was
      $46.2 million consisting primarily of $66.1 million of property and equipment
      mainly for new store openings, store remodels and renovations and costs
      associated with information system implementations and upgrades during fiscal
      2008. The impact of these reductions was partially offset by net sales of $22.5
      million in marketable securities and investments during fiscal
      2008.





Our
      investments are comprised of municipal bonds and auction rate securities
      (“ARS”). Our ARS are all AAA/Aaa rated with the vast majority collateralized by
      student loans guaranteed by the U.S. government under the Federal Family
      Education Loan Program with the remaining securities backed by monoline
      insurance companies. Until February 2008, the auction rate securities market
      was
      highly liquid. During the week of February 11, 2008, a substantial number of
      auctions “failed,” meaning that there was not enough demand to sell the entire
      issue at auction. The immediate effect of a failed auction is that holders
      could
      not sell the securities and the interest or dividend rate on the security
      generally resets to a “penalty” rate. In the case of a failed auction, the
      auction rate security is deemed not currently liquid and in the event we need
      to
      access these funds, we may not be able to do so without a potential loss of
      principal, unless a future auction on these investments is successful or they
      are redeemed by the seller. We believe that the current lack of liquidity
      relating to our ARS investments will not have an impact on our ability to fund
      our ongoing operations and growth initiatives; for that reason, we have the
      ability and intent to hold these ARS investments until a recovery of the auction
      process, redemption by the seller or until maturity.





As
      of
      July 26, 2008, we had approximately $58.4 million of long-term marketable
      security investments which consisted of $61.7 million of ARS at cost, less
      a
      valuation allowance of $3.3 million to reflect our estimate of fair value given
      the current lack of liquidity of these investments while taking into account
      the
      current credit quality of the underlying securities. If the current market
      conditions deteriorate further, or a recovery in market values does not occur,
      we may be required to record additional unrealized or realized losses in future
      quarters.


25





We
      have
      no reason to believe that any of the underlying issuers of our ARS are presently
      at risk of default.  Although we continue to receive interest payments on
      these securities in accordance with their stated terms, we expect the interest
      payments to significantly decrease in accordance with the terms of these
      securities.  In addition, we believe that we will not be able to access
      funds if needed from these securities until future auctions for these ARS are
      successful, we sell the securities in a secondary market which is currently
      limited or they are redeemed by the seller.  As a result, we may be unable
      to liquidate our investment in these ARS without incurring significant
      losses.  We may have to hold these securities until final maturity in order
      to redeem them without incurring any losses.  For these reasons, we believe
      the recovery period for these investments is likely to be longer than 12 months.
      Based on our expected operating cash flows and our other sources of cash, we
      do
      not anticipate the lack of liquidity on these investments will affect our
      ability to execute our current business plan.





In
      January 2003, Dunnigan Realty, LLC, our wholly-owned consolidated subsidiary,
      purchased the Suffern facility, of which the major portion is our corporate
      offices and **dressbarn** distribution center, for approximately $45.3 million utilizing internally
      generated funds. In July 2003, Dunnigan Realty, LLC borrowed $34.0 million
      with
      a 5.33% rate mortgage loan. The mortgage has a twenty-year term with annual
      payments of $2.8 million including principal and interest and is secured by
      a
      first mortgage lien on the Suffern facility. Dunnigan Realty, LLC receives
      rental income and reimbursement for taxes and common area maintenance charges
      from two tenants that occupy the Suffern facility that are not affiliated with
      us. These unaffiliated rental payments are used to offset the mortgage payments
      and planned capital and maintenance expenditures for the Suffern facility.





Net
      cash
      used by financing activities was $39.1 million during fiscal 2008 while net
      cash
      provided by financing activities was $3.3 million during fiscal 2007. Our use
      of
      cash was primarily related to the purchases of $40.2 million of treasury stock
      slightly offset by the exercise of stock options and the related excess tax
      benefits.





On
      April
      5, 2001, our Board of Directors approved a stock repurchase program pursuant
      to
      which we were authorized to purchase on the open market or in privately
      negotiated transactions up to $75 million of our common stock. We purchased
      approximately 1,010,000 shares for an aggregate amount of $19.9 million in
      fiscal 2007. As of July 28, 2007, we had purchased 5,895,400 shares under the
      program at an aggregate purchase price of approximately $46.7 million of which
      approximately $11.9 were pending payment and paid in August 2007. At July 28,
      2007, we had $28.3 million of purchase availability remaining, which was used
      in
      August 2007. In September 2007, our Board of Directors authorized an additional
      $100 million stock buyback program. Purchases of shares of our common stock
      will
      be made at our discretion from time to time, subject to market conditions and
      prevailing market prices.





We
      anticipate that total capital expenditures for fiscal 2009 will be approximately
      $70 million. Of this amount, approximately $62 million is for new
      store openings, renovations and remodels, and information system
      upgrades. W e
      plan to
      open approximately 100 additional stores in the upcoming fiscal year.





We
      do not
      have any undisclosed material transactions or commitments involving related
      persons or entities. We held no material options or other derivative instruments
      at July 26, 2008. We do not
      have any off-balance sheet arrangements or transactions with unconsolidated,
      limited purpose entities. In the normal course of business, we enter into
      operating leases for our store locations and utilize letters of credit
      principally for the importation of merchandise.





We
      believe that our cash, cash equivalents, short-term investments and cash flow
      from operations, along with the credit agreement mentioned above, will be
      adequate to fund our planned capital expenditures and all other operating
      requirements and other proposed or contemplated expenditures for at least the
      next 12 months.


26





**Contractual
      Obligations and Commercial Commitments**





The
      estimated significant contractual cash obligations and other commercial
      commitments at July 26, 2008 are summarized in the following table:





**Payments
                Due by Period****(Amounts in
                thousands)****Contractual
                Obligations**
            
            **Totals**
            
            **Fiscal**
              **2009**
            
            **Fiscal 2010-**
              **2011**
            
            **Fiscal 2012-**
              **2013**
            
            **Fiscal 2014**
              **And**
              **Beyond**Operating
                lease obligations
            
            $
            569,569
            
            $
            141,305
            
            $
            215,953
            
            $
            120,327
            
            $
            91,984Mortgage
                principal
            
            
            28,540
            
            
            1,277
            
            
            2,768
            
            
            3,078
            
            
            21,417Mortgage
                interest
            
            
            12,973
            
            
            1,490
            
            
            2,767
            
            
            2,457
            
            
            6,259Convertible
                Senior Notes (1)
            
            
            115,000
            
            
            115,000
            
            
            -
            
            
            -
            
            
            -Convertible
                Senior Notes interest (1)
            
            
            47,438
            
            
            2,875
            
            
            5,750
            
            
            5,750
            
            
            33,063Total
            
            $
            773,520
            
            $
            261,947
            
            $
            227,238
            
            $
            131,612
            
            $
            152,723





(1)
      Holders of the Convertible Senior Notes may convert their notes into cash and
      shares of our common stock at a conversion rate of 95.1430 shares per $1,000
      principal amount of convertible senior notes (equal to a conversion price of
      approximately $10.51 per share), during specified periods, if the price of
      our
      common stock reaches, or the trading price of the convertible notes falls below,
      specified thresholds, or upon the event of certain transactions. As of July
      28,
      2008 and continuing through October 24, 2008, the holders of the convertible
      senior notes may convert their notes as described above because our stock price
      closed at or above $12.61 per share for 20 trading days within the
      30-trading-day period ending on July 25, 2008. Upon conversion, we would deliver
      cash to the extent of the aggregate principal amount of convertible senior
      notes
      to be converted and our conversion obligation. The excess, if any, of the price
      of our common stock above $10.51 per share would be payable in common shares.
      Therefore as holders of the convertible senior notes elect to convert their
      notes, the principal amount of the notes would be currently payable and
      subsequent associated interest payments would be relinquished. The interest
      on
      the Convertible Senior Notes assumes no exercise of the conversion put by the
      holders. Our
      Convertible Senior Notes are due in 2024. We may redeem some or all of the
      Convertible Senior Notes for cash at any time on or after December 22, 2011
      at a
      redemption price equal to 100% of the principal amount of the notes plus accrued
      interest.


27





The
      operating lease obligations represent future minimum lease payments under
      non-cancelable operating leases as of July 26, 2008. The minimum lease payments
      do not include common area maintenance (“CAM”) charges or real estate taxes,
      which are also required contractual obligations under our operating leases.
      In
      the majority of our operating leases, CAM charges are not fixed and can
      fluctuate from year to year. Total CAM charges and real estate taxes for fiscal
      2008, fiscal 2007 and fiscal 2006 were $41.8 million, $38.0 million and $36.5
      million, respectively. In addition, the operating leases have been reduced
      by our sublease revenue annually by $1.7 million through
      fiscal 2012.





**Amount of Commitment Expiration Period****(Amounts in thousands)****Other Commercial Commitments (2)**
            
            **Totals**
            
            **Fiscal**
              **2009**
            
            **Fiscal 2010-**
              **2011**
            
            **Fiscal 2012-**
              **2013**
            
            **Fiscal 2014**
              **And Beyond**Trade
                letters of credit
            
            $
            39,759
            
            $
            39,759
            
            $
            -
            
            $
            -
            
            $
            -Standby
                letters of credit
            
            
            6,447
            
            
            6,447
            
            
            -
            
            
            -
            
            
            -Firm
                purchase orders(1)
            
            
            5,527
            
            
            5,527
            
            
            -
            
            
            -
            
            
            -**Total**
            
            $
            51,733
            
            $
            51,733
            
            $
            -
            
            $
            -
            
            $
            -





1.
            In
                addition to the commitments represented in the above table, we enter
                into
                a number of cancelable and non-cancelable commitments during the
                year.
                Typically, these commitments are for less than a year in duration
                and are
                principally focused on the construction of new retail stores and
                the
                procurement of inventory. We do not maintain any long-term or exclusive
                commitments or arrangements to purchase merchandise from any single
                supplier. Preliminary commitments with our private label merchandise
                vendors typically are made five to seven months in advance of planned
                receipt date. Substantially all of our merchandise purchase commitments
                are cancelable up to 30 days prior to the vendor’s scheduled shipment
                date.





2.
            At
                July 26, 2008, the liability recorded for uncertain tax positions,
                including the associated interest and penalties, was approximately
                $18
                million pursuant to FASB Interpretation No. 48, Accounting for Uncertainty
                in Income Taxes-an Interpretation of Financial Accounting Standards
                Board
                Statement No. 109 (“FIN 48”) . In the 12 months succeeding
                July 26, 2008, audit resolutions could potentially reduce total
                unrecognized tax benefits by up to $3 million. Since the ultimate
                amount
                and timing of further cash settlements cannot be predicted with reasonable
                certainty, liabilities for uncertain tax positions are excluded from
                the
                contractual obligation table (See Note 10 to the consolidated financial
                statements).





**Recent
      Accounting Pronouncements**





In
      September 2006, the FASB issued Statement of Financial Accounting Standard
      (“SFAS”) No. 157, Fair Value Measurements. The standard defines fair value,
      outlines a framework for measuring fair value, and details the required
      disclosures about fair value measurements. The standard was effective for fiscal
      years beginning after November 15, 2007 (our fiscal 2009). In February 2008,
      the
      FASB Staff Position (“FSP”) issued FSP 157-1 and FSP 157-2. FSP 157-1 amends
      SFAS 157 to exclude FASB Statement No. 13, Accounting for Leases and other
      accounting pronouncements that address fair value measurements of leases from
      the provisions of SFAS 157. FSP 157-2 delays the effective date of SFAS 157
      for
      most nonfinancial assets and nonfinancial liabilities to fiscal years beginning
      after November 15, 2008 (our fiscal 2010). We have not completed our evaluation
      of the potential impact, if any, of the adoption of SFAS No. 157 on our
      consolidated financial position, results of operations and cash
      flows.





In
      February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities – Including an Amendment of FASB Statement
      No. 115 (“SFAS 159”), which provides companies with an option to measure at fair
      value, at specified election dates, many financial instruments and certain
      other
      items that are not currently measured at fair value. A company will report
      unrealized gains and losses on items for which the fair value option has been
      elected in earnings at each subsequent reporting date. This Statement also
      establishes presentation and disclosure requirements designed to facilitate
      comparisons between entities that choose different measurement attributes for
      similar types of assets and liabilities. SFAS 159 is effective as of the
      beginning of an entity’s first fiscal year that begins after November 15, 2007
      (our fiscal 2009). We have not completed our evaluation of the potential impact,
      if any, of the adoption of SFAS 159 on our consolidated financial position,
      results of operations and cash flows.


28





In
      December 2007, the FASB issued SFAS No. 141(R) (“SFAS 141 (R)”), Business
      Combinations, which replaces FASB Statement No. 141, Business Combinations.
      SFAS
      No. 141(R) establishes principles and requirements for how an acquirer
      recognizes and measures in its financial statements the identifiable assets
      acquired, the liabilities assumed, any non-controlling interest in the acquiree
      and the goodwill acquired. The Statement also establishes disclosure
      requirements that will enable users to evaluate the nature and financial effects
      of the business combination. SFAS 141(R) is effective as of the beginning of
      an
      entity’s fiscal year that begins after December 15, 2008 (our fiscal 2010) and
      will be applied if we consummate an acquisition.





In
      December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
      Consolidated Financial Statements – an amendment of Accounting Research
      Bulletin No. 51 (“SFAS 160”), which establishes accounting and reporting
      standards for ownership interests in subsidiaries held by parties other than
      the
      parent, the amount of consolidated net income attributable to the parent and
      to
      the noncontrolling interest, changes in a parent’s ownership interest and the
      valuation of retained noncontrolling equity investments when a subsidiary is
      deconsolidated. The Statement also establishes reporting standards that require
      the provision of sufficient disclosures that clearly identify and distinguish
      between the interests of the parent and the interests of the noncontrolling
      owners. SFAS 160 is effective as of the beginning of an entity’s fiscal year
      that begins after December 15, 2008 (our fiscal 2010). We have not completed
      our
      evaluation of the potential impact, if any, of the adoption of SFAS 160 on
      our
      consolidated financial position, results of operations and cash flows.





In
      May
      2008, the FASB issued FSP APB 14-a, Accounting for Convertible Debt Instruments
      That May Be Settled in Cash upon Conversion. This FSP requires entities with
      cash settled convertibles to bifurcate the securities into a debt component
      and
      an equity component and accrete the debt component to par over the expected
      life
      of the convertible. This FSP will be effective for our fiscal year 2010. Early
      adoption will not be permitted, and the FSP must be applied retrospectively
      to
      all instruments. When effective, we believe this FSP will be applicable to
      our
      2.5% Convertible Senior Notes. We have not completed our evaluation of the
      potential impact, if any, of the adoption of FSP APB 14-a on our consolidated
      financial position, results of operations and cash flows.





In
      June
      2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted
      in Share-Based Payment Transactions Are Participating Securities. This FSP
      states that unvested share-based payment awards that contain nonforfeitable
      rights to dividends or dividend equivalents (whether paid or unpaid) are
      participating securities and shall be included in the computation of earnings
      per share pursuant to the two-class method. The FSP is effective for financial
      statements issued for fiscal years beginning after December 15, 2008, and
      interim periods within those years. Upon adoption, a company is required to
      retrospectively adjust its earnings per share data (including any amounts
      related to interim periods, summaries of earnings and selected financial data)
      to conform with the provisions in this FSP. Earlier adoption is prohibited.
      This
      FSP will be effective for our fiscal year 2010, as required. We have not
      completed our evaluation of the potential impact, if any, of the adoption of
      FSP
      EITF 03-6-1 on our consolidated financial position, results of operations and
      cash flows.





**Seasonality**





The **dressbarn** and **maurices** brands
      have historically experienced substantially lower earnings in our second fiscal
      quarter ending in January, reflecting the intense promotional atmosphere that
      has characterized the holiday shopping season in recent years. In addition,
      our
      quarterly results of operations may fluctuate materially depending on, among
      other things, adverse weather conditions, shifts in timing of certain holidays,
      the number and timing of new store openings and closings, net sales contributed
      by new stores and changes in our merchandise mix.





**Critical
      Accounting Policies and Estimates**





Our
      accounting policies are more fully described in Note 1 to the Consolidated
      Financial Statements. Management’s discussion and analysis of our financial
      condition and results of operations are based upon our consolidated financial
      statements, which have been prepared in accordance with accounting principles
      generally accepted in the United States of America. The preparation of these
      financial statements requires us to make estimates and judgments that affect
      the
      reported amounts of assets, liabilities, revenues and expenses, income taxes
      and
      related disclosures of contingent assets and liabilities. On an ongoing basis,
      we evaluate estimates, including those related primarily to merchandise
      inventories, marketable security investments, long-lived assets, goodwill,
      insurance reserves, income taxes and stock-based employee compensation. We
      base
      our estimates on historical experience and on various other assumptions that
      are
      believed to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions. Management believes
      the following accounting principles are the most critical because they involve
      the most significant judgments, assumptions and estimates used in preparation
      of
      our financial statements.


29





*Revenue
      Recognition*





While
      our
      recognition of revenue does not involve significant judgment, revenue
      recognition represents an important accounting policy of ours. As discussed
      in
      Note 1 to the Consolidated Financial Statements, we recognize sales at the
      point
      of purchase when the customer takes possession of the merchandise and pays
      for
      the purchase, generally with cash or credit card. We have reserved for estimated
      product returns when sales are recorded based on historical return trends and
      adjusted for known events, as applicable.




Sales
      from purchases made with gift cards and gift certificates or by layaway sales
      are recorded when the customer takes possession of the merchandise. Gift cards,
      gift certificates and merchandise credits (collectively “gift cards”) do not
      have expiration dates. We recognize income on unredeemed gift cards (“gift card
      breakage”) when it can be determined that the likelihood of the remaining
      balances being redeemed are remote and that there are no legal obligations
      to
      remit the remaining balances to relevant jurisdictions. Prior
      to
      fiscal 2007, we were unable to reliably estimate such gift card breakage and
      therefore recorded no such income in prior years. During the fourth quarter
      of
      fiscal 2007, we accumulated a sufficient level of historical data to determine
      an estimate of gift card breakage for the first time. Gift card breakage is
      included in net sales in the Consolidated Statement of Earnings.





*Cash
      and Cash Equivalents*





We
      consider our highly liquid investments with maturities of three months or less
      when purchased to be cash equivalents. These amounts are stated at cost, which
      approximates market value. We also consider receivables related to credit card
      purchases to be equivalent to cash. The majority of our money market funds
      at
      July 26, 2008 were maintained with one financial institution. We maintain
      cash deposits and cash equivalents with well-known and stable financial
      institutions. However, we have significant amounts of cash and cash equivalents
      at these financial institutions that are in excess of federally insured limits.
      This represents a concentration of credit risk. We have not experienced any
      losses on our deposits of cash and cash equivalents to date.





*Merchandise
      Inventories*





Our
      inventory is valued using the retail method of accounting and is stated at
      the
      lower of cost, on a First In, First Out (“FIFO”) basis, or market. Under the
      retail inventory method, the valuation of inventory at cost and resulting gross
      margin are calculated by applying a calculated cost to retail ratio to the
      retail value of inventory. The retail inventory method is an averaging method
      that has been widely used in the retail industry due to its practicality. We
      include in the cost of sales line item all costs of merchandise (net of purchase
      discounts and vendor allowances), freight on inbound, outbound and internally
      transferred merchandise, merchandise acquisition costs, primarily commissions
      and import fees, all occupancy costs excluding depreciation and all costs
      associated with our buying and distribution functions. Inherent in the retail
      method are certain significant management judgments and estimates including,
      among others, initial merchandise markup, markdowns and shrinkage, which
      significantly impact the ending inventory valuation at cost as well as the
      resulting gross margins. Physical inventories are conducted in the third and
      fourth quarters to calculate actual shrinkage and inventory on hand. Estimates
      are used to charge inventory shrinkage for the remaining quarters of the fiscal
      year. We continuously review our inventory levels to identify slow-moving
      merchandise and broken assortments, using markdowns to clear merchandise, which
      reduces the cost of inventories to its estimated net realizable value.
      Consideration is given to a number of quantitative factors, including
      anticipated subsequent markdowns and aging of inventories. To the extent that
      actual markdowns are higher or lower than estimated, our gross margins could
      increase or decrease and, accordingly, affect our financial position and results
      of operations. A significant variation between the estimated provision and
      actual results could have a substantial impact on our results of operations.





*Marketable
      Securities Investments*





We
      have
      categorized our current and long-term marketable security investments as
      available for sale which are stated at market value. The unrealized holding
      gains and losses are included in other comprehensive income, a component of
      shareholders’ equity, until realized. The amortized cost is adjusted for
      amortization of premiums and discounts to maturity, with the net amortization
      included in interest income. During the third quarter of fiscal 2008, we
      classified our auction rate securities (“ARS”) as long-term. We have classified
      our investment in ARS to long-term because
      of our inability to determine when our investments in ARS would settle. We
      believe this classification is still appropriate for our fiscal 2008
      Consolidated Balance Sheet based on our belief that the market for these
      instruments may take in excess of twelve months to fully recover due to the
      current disruptions in the credit markets. Additionally, we have recognized
      a
      $3.3 million temporary unrealized loss in fair value of our ARS, with an
      offsetting entry to accumulated other comprehensive (loss) income. We currently
      believe that this temporary decline in fair value is due entirely to liquidity
      issues, because the underlying assets for the vast majority of ARS are backed
      by
      the U.S. government. Management believes that our available working capital,
      excluding the funds held in ARS, will be sufficient to meet our cash
      requirements for at least the next 12 months. See Note 2 for further
      detail.


30


*Impairment
      of Long-Lived Assets*




We
      primarily invest in property and equipment in connection with the opening and
      remodeling of stores. When facts and circumstances indicate that the carrying
      values of such long-lived assets may be impaired, an evaluation of
      recoverability is performed by comparing the carrying values of the assets
      to
      projected future cash flows, in addition to other quantitative and qualitative
      analyses. Upon indication that the carrying values of such assets may not be
      recoverable, we recognize an impairment loss as a charge against current
      operations. Property and equipment assets are grouped at the lowest level for
      which there is identifiable cash flows when assessing impairment, which is
      the
      individual store level. Judgments
      made by us related to the expected useful lives of long-lived assets and our
      ability to realize undiscounted cash flows in excess of the carrying amounts
      of
      such assets are affected by factors such as the ongoing maintenance and
      improvements of the assets, changes in economic conditions and changes in
      operating performance. In
      addition, we regularly evaluate our computer-related and other assets for
      impairment and revise the depreciation over the estimated useful life if the
      asset is no longer in use or has limited future value.





*Insurance
      Reserves*





We
      use a
      combination of insurance and self-insurance mechanisms to provide for the
      potential liabilities for workers’ compensation and employee healthcare
      benefits. Liabilities associated with the risks that are retained by us are
      estimated, in part, by considering historical claims experience, demographic
      factors, severity factors and other actuarial assumptions. Such liabilities
      are
      capped through the use of stop loss contracts with insurance companies. The
      estimated accruals for these liabilities could be significantly affected if
      future occurrences and claims differ from these assumptions and historical
      trends. As of July 26, 2008 and July 28, 2007, these reserves were
      $9.3 million and $8.4 million, respectively. We
      are
      subject to various claims and contingencies related to insurance and other
      matters arising out of the normal course of business. We are self-insured for
      expenses related to our employee medical and dental plans, and our workers’
compensation plan, up to certain thresholds. Claims filed, as well as claims
      incurred but not reported, are accrued based on management’s estimates, using
      information received from plan administrators, historical analysis and other
      relevant data. We have stop-loss insurance coverage for individual claims in
      excess of $250,000. We believe our accruals for claims and contingencies are
      adequate based on information currently available. However, it is possible
      that
      actual results could significantly differ from the recorded accruals for claims
      and contingencies.





*Goodwill
      and Other Intangible Assets*





Goodwill
      represents the excess of the purchase price over the fair values of net
      identifiable assets acquired. In accordance with Statement of Financial
      Accounting Standards No. 142, *Goodwill
      and Other Intangible Asset* s
      (“SFAS
      No. 142”), we do not amortize goodwill or intangible assets with indefinite
      lives but, rather, we are required to evaluate goodwill and intangible assets
      with indefinite lives annually or whenever events or changes in circumstances
      indicate that the carrying amount may not be recoverable. The conditions that
      could trigger an impairment of goodwill or intangible assets with indefinite
      lives include a significant, sustained negative trend in **maurices** ’
      operating results or cash flows, a decrease in demand for **maurices** products, a change in the competitive environment or other industry and economic
      factors. Goodwill and intangible assets with indefinite lives are evaluated
      for
      impairment annually under the provisions of SFAS No. 142. Our annual assessment
      date is on or about June 30 th .





*Operating
      Leases*





We
      lease
      retail stores under operating leases. Most lease agreements contain construction allowances, rent holidays, lease premiums, rent escalation clauses
      and/or contingent rent provisions. For purposes of recognizing incentives,
      premiums and minimum rental expenses on a straight-line basis over the terms
      of
      the leases, we use the date of initial possession to begin amortization, which
      is generally when we enter the space and begin to make improvements in
      preparation of intended use.





For
      construction allowances, we record a deferred rent liability in “Other accrued
      expenses” and “Deferred rent and lease incentives” on the Consolidated Balance
      Sheets and amortize the deferred rent over the terms of the leases as reductions
      to “Cost of sales including occupancy and buying costs” on the Consolidated
      Statements of Earnings.





Certain
      leases provide for contingent rents, which are determined as a percentage of
      gross sales in excess of specified levels. We record a contingent rent liability
      in “Other accrued expenses” on our Consolidated Balance Sheets and the
      corresponding rent expense when specified levels have been achieved or when
      management determines that achieving the specified levels during the fiscal
      year
      is probable.


31





*Leases
      with Related Parties*





We
      lease
      two stores from our Chairman or related trusts. Future minimum rentals under
      leases with such related parties which extend beyond July 26, 2008 are
      approximately $312,000 annually and in the aggregate of $0.8 million. The leases
      also contain provisions for cost escalations and additional rent based on net
      sales in excess of stipulated amounts. Rent expense for fiscal years 2008,
      2007
      and 2006 under these leases amounted to approximately $332,000, $389,000 and
      $364,000, respectively.





*Stock
      Based Compensation*





Effective
      July 31, 2005, we adopted SFAS No. 123(R) using the modified prospective method.
      The calculation of stock-based compensation expense requires the input of highly
      subjective assumptions, including the expected term of the stock-based awards,
      stock price volatility, and pre-vesting forfeitures. We estimate the expected
      life of shares granted in connection with stock-based awards based on historical
      exercise patterns, which we believe are representative of future behavior.
      We
      estimate the volatility of our common stock at the date of grant based on an
      average of our historical volatility and the implied volatility of publicly
      traded options on our common stock. The assumptions used in calculating the
      fair
      value of stock-based awards represent our best estimates, but these estimates
      involve inherent uncertainties and the application of management judgment.
      As a
      result, if factors change and we were to use different assumptions, our
      stock-based compensation expense could be materially different in the future.
      In
      addition, we are required to estimate the expected forfeiture rate and only
      recognize expense for those shares expected to vest. We estimate the forfeiture
      rate based on historical experience of stock-based awards granted, exercised
      and
      cancelled, as well as considering future expected behavior. If the actual
      forfeiture rate is materially different from our estimate, stock-based
      compensation expense could be different from what we have recorded in the
      current period. See Note
      12, “Stock- Based Compensation Plans,” for additional information.





*Income
      Taxes*





We
      do
      business in various jurisdictions that impose income taxes. Management
      determines the aggregate amount of income tax expense to accrue and the amount
      currently payable based upon the tax statutes of each jurisdiction. This process
      involves adjusting income determined using generally accepted accounting
      principles for items that are treated differently by the applicable taxing
      authorities. Deferred taxes are provided using the asset and liability method,
      whereby deferred income taxes result from temporary differences between the
      reported amounts in the financial statements and the tax basis of assets and
      liabilities, as measured by current tax rates. We establish valuation allowances
      against deferred tax assets when it is more likely than not that the realization
      of those deferred tax assets will not occur.





We
      adopted Financial Accounting Standards Board, (“FASB”) Interpretation No. 48,
      Accounting for Uncertainty in Income Taxes – An Interpretation of FASB
      Statement No. 109, on July 29, 2007, the first day of fiscal
      2008.  FIN 48 seeks to reduce the diversity in practice associated
      with certain aspects of measurement and recognition in accounting for income
      taxes.  FIN 48 prescribes a recognition threshold and measurement
      requirement for the financial statement recognition of a tax position that
      has
      been taken or is expected to be taken on a tax return and also provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure and transition.  Under FIN 48 we may only
      recognize tax positions that meet a “more likely than not”
threshold.





We
      recorded the cumulative effect of applying FIN 48 of $4.9 million as an
      adjustment to the opening balance of retained earnings on July 29, 2007, the
      first day of our fiscal 2008. See Note 10, “Income Taxes,” for additional
      information.


32





**ITEM
              7A.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**





The
      market risk inherent in our financial instruments and in our financial position
      represents the potential loss arising from adverse changes in interest rates
      and
      disruptions caused by financial market conditions.  Cash and cash
      equivalents are deposited with high credit quality financial institutions.
      However, we have significant amounts of cash and cash equivalents at these
      financial institutions that are in excess of federally insured limits. This
      represents a concentration of credit risk. The carrying amounts of cash, cash
      equivalents, short-term investments and accounts payable approximate fair value
      because of the short-term nature and maturity of such instruments. Our results
      of operations could be negatively impacted by decreases in interest rates on
      our
      investments, including our investments in ARS.  Please see Note 2 to the
      Consolidated Financial Statements for further information regarding the
      Company’s investments in ARS.





Our
      outstanding long-term liabilities as of July 26, 2008 included $27.3 million
      of
      our 5.33% mortgage loan due July 1, 2023. As the mortgage loan bears interest
      at
      a fixed rate, our results of operations would not be affected by interest rate
      changes.





On
      December 15, 2004, we issued $115 million of convertible senior notes. As the
      convertible senior notes bear interest at a fixed rate, our results of
      operations would not be affected by interest rate changes. On
      July
      25, 2008, the market value of the Convertible Senior Notes was $191.5 million
      as
      valued on PORTAL (Private Offering Resale and Trading through Automated
      Linkage).





We
      also
      entered into a $100 million senior credit facility with a group of banks in
      December, 2005. Under that senior credit facility, we have available a revolving
      credit facility with borrowings of up to $100 million at a variable rate. At
      July 26, 2008, we had no outstanding borrowings under the revolving credit
      facility. As of July 26, 2008, we had used $46 million of the $100 million
      revolving credit facility for outstanding letters of credit leaving a net
      available balance of $54 million.





We
      held
      no material options or other derivative instruments at July 26, 2008.





Accordingly,
      we do not believe that there is any material market risk exposure with respect
      to derivative or other financial instruments that would require disclosure
      under
      this item.





**ITEM
              8.**
            **FINANCIAL
                STATEMENTS AND SUPPLEMENTARY
                DATA**





The
      consolidated financial statements of The Dress Barn, Inc. and subsidiaries
      are
      filed together with this report: See Index
      to Financial Statements, Item 15.


33





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




None.




**ITEM
              9A.**
            **CONTROLS
                AND PROCEDURES**




**(a)
      Evaluation of Disclosure Controls and Procedures**





We
      conducted an evaluation, under the supervision and with the participation of
      management, including the Chief Executive Officer and Chief Financial Officer,
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures (as such term is defined in Rules 13a−15(e) and 15d−15(e) under the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of July 26,
      2008. Based
      on
      that evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that, due to material weakness in internal control over financial
      reporting for income taxes described below in Management’s Annual Report on
      Internal Control Over Financial Reporting, the company’s disclosure controls and
      procedures were not effective as of July 26, 2008.





**(b)
      Management’s Assessment of Internal Control over Financial
      Reporting**





Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting as defined in Rules 13a−15(f) and 15d−15(f) under the
      Exchange Act. Our internal control system over financial reporting is 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. Because of 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.





Management
      has assessed the effectiveness of our internal control over financial reporting
      as of July 26, 2008. In making this assessment, management used the criteria
      established in *Internal
      Control – Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      During this evaluation, management identified a material weakness in our
      internal control over financial reporting. A material weakness is a deficiency,
      or a combination of deficiencies, in internal control over financial reporting,
      such that there is a reasonable possibility that a material misstatement of
      the
      Company’s annual or interim financial statements will not be prevented or
      detected on a timely basis. As a result of the following material weakness,
      management has concluded that our internal control over financial reporting
      for
      income taxes was not effective as of July 26, 2008 based upon the criteria
      issued by COSO.


The
        Company’s processes, procedures and controls related to income taxes were not
        effective to ensure that amounts related to current taxes payable, certain
        deferred tax assets and liabilities, the current and deferred income tax
        expense
        and related footnote disclosures were accurate. The Company did not maintain
        effective controls over the review and analysis of supporting working papers
        for
        the tax balances noted above. As a result these balances required
        adjustments to be recorded in accordance with generally accepted accounting
        principles. These control deficiencies were caused by turnover of personnel
        in
        the Company’s tax department that resulted in inadequate internal tax resources,
        lack of oversight of the work performed by outside tax advisors, and lack
        of
        controls and procedures over the tax accounting process which did not provide
        for a complete, comprehensive and timely review of the income tax accounts
        and
        required income tax footnote disclosures.





Our
      independent registered public accounting firm has issued an attestation report
      on our assessment of our internal control over financial reporting. The report
      appears herein below.


34





**(c)
      Changes in Internal Control Over Financial Reporting**





Other
      than the material weakness noted above, there was no change in our internal
      control over financial reporting during the quarterly period covered by this
      report that has materially affected, or is reasonably likely to materially
      affect, our internal control over financial reporting.





**(d)
      Remediation Plan for Material Weakness in Internal Control Over Financial
      Reporting**


The
        Company developed the following plan to remediate the material weakness in
        income taxes identified above:
 
 ·
            In
                April 2008 the Company hired an Assistant Vice President of Tax,
                who has
                experience in accounting for income taxes. Subsequent to year end
                the
                Company filled the remaining open positions in the tax department
                with
                professionals trained and experienced in income taxes. Management
                recognizes that a tax department, staffed with the appropriate tax
                accounting expertise, is important for the Company to maintain effective
                internal controls on an ongoing basis; ·
            Improve
                documentation and institute more formalized review of tax positions
                taken,
                with senior management and external experts, to ensure proper evaluation
                and accounting treatment of complex tax
                issues; ·
            Evaluate
                and, if necessary, supplement the resources provided by our external
                expert; and ·
            Accelerate
                the timing of certain tax review activities during the financial
                statement
                closing 
 We
        anticipate the actions described above and resulting improvements in controls
        will strengthen our internal control over financial reporting relating to
        accounting for income taxes and will, over time, address the related material
        weakness that we identified as of July 26, 2008. However, because the remedial
        actions relate to the training of personnel and many of the controls in our
        system of internal controls rely extensively on manual review and approval,
        the
        successful operations of these controls, for at least several quarters, may
        be
        required prior to management being able to conclude that the material weakness
        has been remediated.


35




**(d)
      Report of Independent Registered Public Accounting Firm on Internal Control
      Over
      Financial Reporting**




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To
        the
        Board of Directors and Shareholders of
 The
        Dress
        Barn, Inc.
 Suffern,
        New York
  We
        have
        audited Dress Barn, Inc. and subsidiaries' (the "Company's") internal control
        over financial reporting as of July 26, 2008, based on criteria established
        in *Internal
        Control — Integrated Framework* issued
        by
        the Committee of Sponsoring Organizations of the Treadway Commission. The
        Company'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, included in the accompanying Management’s
        Assessment of Internal Control Over Financial Reporting.  Our
        responsibility is to express an opinion on 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, assessing the risk that a material
        weakness exists, testing and evaluating the design and operating effectiveness
        of internal control based on that risk, 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
        by, or
        under the supervision of, the company's principal executive and principal
        financial officers, or persons performing similar functions, and effected
        by the
        company's board of directors, management, and other personnel 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 the inherent limitations of internal control over financial reporting,
        including the possibility of collusion or improper management override of
        controls, material misstatements due to error or fraud may not be prevented
        or
        detected on a timely basis.  Also, projections of any evaluation of the
        effectiveness of the internal control over financial reporting to future
        periods
        are subject to the risk that the 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 deficiency, or a combination of deficiencies, in internal
        control over financial reporting, such that there is a reasonable possibility
        that a material misstatement of the company’s annual or interim financial
        statements will not be prevented or detected on a timely basis.  The
        following material weakness has been identified and included in management's
        assessment:
  The
        Company’s processes, procedures and controls related to income taxes were not
        effective to ensure that amounts related to current taxes payable, certain
        deferred tax assets and liabilities, the current and deferred income tax
        expense
        and related footnote disclosures were accurate. The Company did not maintain
        effective controls over the review and analysis of supporting working papers
        for
        the tax balances noted above. As a result the balances required adjustments
        to
        be in accordance with generally accepted accounting principles. These control
        deficiencies were caused by turnover of personnel in the Company’s tax
        department that resulted in inadequate internal tax resources, lack of oversight
        of the work performed by outside tax advisors, and lack of controls and
        procedures over the tax accounting process which did not provide for a complete,
        comprehensive and timely review of the income tax accounts and required income
        tax footnote disclosures.
  This
        material weakness was considered in determining the nature, timing, and extent
        of audit tests applied in our audit of the consolidated financial statements
        as
        of and for the year ended July 26, 2008, of the Company and this report does
        not
        affect our report on such financial statements.
  36
  In
        our
        opinion, because of the effect of the material weakness identified above
        on the
        achievement of the objectives of the control criteria, the Company has not
        maintained effective internal control over financial reporting as of July
        26,
        2008, based on the criteria established in *Internal
        Control — Integrated Framework* issued
        by
        the Committee of Sponsoring Organizations of the Treadway
        Commission.
  We
        have
        also audited, in accordance with the standards of the Public Company Accounting
        Oversight Board (United States), the consolidated financial
        statements as of
        and for the year ended July 26, 2008 of the Company and our report dated
        September 24, 2008 expressed an unqualified opinion on those financial
        statements and included an explanatory paragraph regarding the Company’s
        adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in Income
        Taxes - an Interpretation of SFAS No. 109,” effective July 29,
        2007.
   */s/
        DELOITTE & TOUCHE LLP*
  New
        York,
        New York
 September
        24, 2008
 37





**ITEM
              9B.**
            **OTHER
                INFORMATION**





None.





**PART
      III**





**ITEM
              10.**
            **DIRECTORS,
                EXECUTIVE OFFICERS AND CORPORATE
                GOVERNANCE**





Information
      with respect to this item is incorporated by reference from our definitive
      Proxy
      Statement to be filed with the SEC within 120 days after the end of our fiscal
      year.   We
      have
      adopted a Code of Ethics for the Chief Executive Officer and Senior Financial
      Officers. The Code of Ethics for the Chief Executive Officer and Senior
      Financial Officers is posted on our website, www.dressbarn.com ,
      then
“Investor Relations”, then under the Investors Relations pull-down menu, click
      on “Code of Ethics”. We intend to satisfy the disclosure requirement regarding
      any amendment to, or a waiver of, a provision of the Code of Ethics by posting
      such information on our website. We undertake to provide to any person a copy
      of
      this Code of Ethics upon request to our Secretary at our principal executive
      offices, 30 Dunnigan Drive, Suffern, NY 10901.





**ITEM
              11.**
            **EXECUTIVE
                COMPENSATION**





Information
      with respect to this item is incorporated by reference from our definitive
      Proxy
      Statement to be filed with the SEC within 120 days after the end of our fiscal
      year.





**ITEM
              12.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS**





Information with respect to this item is incorporated by reference from our
      definitive Proxy Statement to be filed with the SEC within 120 days after the
      end of our fiscal year.





**ITEM
              13.**
            **CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE**





Information
      with respect to this item is incorporated by reference from our definitive
      Proxy
      Statement to be filed with the SEC within 120 days after the end of our fiscal
      year.




**ITEM
              14.**
            **PRINCIPAL
                ACCOUNTANT FEES AND SERVICES**




The
      information with respect to this item is incorporated by reference from our
      definitive Proxy Statement to be filed with the SEC within 120 days after the
      end of our fiscal year.


38





**PART
                IV**




**ITEM
                15.****EXHIBITS,
                FINANCIAL STATEMENT SCHEDULES**




**ITEM
                15. (a) (1) FINANCIAL STATEMENTS**
            
            **PAGE
                NUMBER**Report
                of Independent Registered Public Accounting Firm
            
            F-1Consolidated
                Balance Sheets
            
            F-2Consolidated
                Statements of Earnings
            
            F-4Consolidated
                Statements of Shareholders' Equity and Comprehensive
                Income
            
            F-5Consolidated
                Statements of Cash Flows
            
            F-6Notes
                to Consolidated Financial Statements
            
            F-8





**ITEM
                15. (a) (2) FINANCIAL STATEMENT SCHEDULES**All
                schedules are omitted because they are not applicable, or not required
                because the required information is included in the consolidated
                financial
                statements or notes thereto.





**ITEM
                15. (b) LIST OF EXHIBITS**The
                following exhibits are filed as part of this Report and except Exhibits
                3.4, 21, 23, 31.1, 31.2, 32.1 and 32.2 are all incorporated by reference
                (utilizing the same exhibit numbers) from the sources
                shown.Exhibit
              Number
            
            Description
            
            Incorporated
                By
              Reference
                From3.1
            
            1983
                Amended and Restated Certificate of Incorporation
            
            (1)3.2
            
            Amendments
                to Amended and Restated Certificate of Incorporation
            
            (2)3.3
            
            Amendment
                to Certificate of Incorporation, filed with the Connecticut Secretary
                of
                State on December 19, 2005
            
            (3)3.4
            
            Amended
                and Restated By-Laws (as amended through September 18,
                2008)4
            
            Specimen
                Common Stock Certificate
            
            (1)10.1
            
            Purchase
                and Sale Agreement, dated January 28, 2003,Between
                Rockland Warehouse Center Corporation, as seller,and
                Dunnigan Realty, LLC, as buyer with respect to30
                Dunnigan Drive, Suffern, NY
            
            (5)10.2
            
            $34,000,000
                mortgage loan from John Hancock Life Insurance Companyto
                Dunnigan Realty, secured by mortgage on 30 Dunnigan Drive, Suffern,
                NY
            
            (6)


39





10.3
            
            Leases
                of Company premises of which the lessor is Elliot S. Jaffeor
                members of his family or related trusts:10.6.1
                Danbury, CT store
            
            (1)10.6.2
                Norwalk, CT**dressbarn**/**dressbarn**Woman store
            
            (7)10.4
            
            Amended
                and Restated Lease between Dunnigan Realty, LLC, as landlord,and
                The Dress Barn, Inc., as tenant, dated June 24, 2003 for officeand
                distribution space in Suffern, New York
            
            (6)10.5
            
            The
                Dress Barn, Inc. 1993 Incentive Stock Option Plan
            
            (8)
                *10.6
            
            The
                Dress Barn, Inc. 1995 Stock Option Plan
            
            (9)
                *10.7
            
            The
                Dress Barn, Inc. 2001 Stock Incentive Plan (amended and restated
                effective
                September 29, 2005)
            
            (10)
                *10.8
            
            Employment
                Agreement with Elliot S. Jaffe dated May 2, 2002
            
            (11)
                *10.9
            
            Amendment
                dated July 10, 2006 to Employment Agreement
              dated
                May 2, 2002 with Elliot S. Jaffe
            
            (12)
                *10.10
            
            Employment
                Agreement dated May 2, 2002 with David R. Jaffe
            
            (11)
                *10.11
            
            Employment
                Agreement dated August 28, 2002 with Vivian Behrens
            
            (13)
                *10.12
            
            Employment
                Agreement dated July 26, 2005 with Gene Wexler
            
            (14)
                *10.13
            
            Supplemental
                Retirement Benefit Agreement with Mrs. Roslyn Jaffe dated August
                29,
                2006
            
            (15)
                *10.14
            
            Consulting
                Agreement dated July 18, 2006 with Burt Steinberg Retail Consulting
                Ltd.
            
            (16)
                *10.15
            
            The
                Dress Barn Inc. 2.5% Convertible Senior Notes due 2024
            
            (17)10.16
            
            Credit
                Agreement dated as of December 21, 2005
            
            (18)10.17
            
            First
                Amendment to Credit Agreement
            
            (19)10.18
            
            Stock
                Purchase Agreement dated November 16, 2004Among
                The Dress Barn, Inc., Maurices Incorporated andAmerican
                Retail Group, Inc.
            
            (20)14
            
            Code
                of Ethics for the Chief Executive Officer and Senior Financial
                Officers
            
            (6)21
            
            Subsidiaries
                of the Registrant23
            
            Consent
                of Independent Registered Public Accounting Firm31.1
            
            Section
                302 Certification of President and Chief Executive Officer31.2
            
            Section
                302 Certification of Chief Financial Officer32.1
            
            Section
                906 Certification of President and Chief Executive Officer32.2
            
            Section
                906 Certification of Chief Financial Officer


40





References
                as follows:(1)
            The
                Company's Registration Statement on Form S-1 under the Securities
                Act of
                1933
              (Registration
                No. 2-82916) declared effective May 4, 1983.(2)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                30,
                1988.(3)
            The
                Company’s Registration Statement on Form S-8 under theSecurities
                Act of 1933 (Registration No. 333-136061).(4)
            Omitted.(5)
            The
                Company’s Quarterly Report on Form 10-Q for the quarter ended January 25,
                2003.(6)
            The
                Company’s Annual Report on Form 10-K for the fiscal year ended July 26,
                2003.(7)
            The
                Company’s Annual Report on Form 10-K for the fiscal year ended July 25,
                1992.(8)
            The
                Company's Registration Statement on Form S-8 under theSecurities
                Act of 1933 (Registration No. 33-60196) filed on March 29,
                1993.(9)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                27,
                1996.(10)
            The
                Company's Proxy Statement dated October 31, 2005, filed October 31,
                2005.(11)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                27,
                2002.(12)
            The
                Company’s Report on Form 8-K filed July 13, 2006.(13)
            The
                Company's Quarterly Report on Form 10-Q for the quarter ended October
                26,
                2002.(14)
            The
                Company’s Annual Report on Form 10-K for the fiscal year ended July 30,
                2005.(15)
            The
                Company’s Report on Form 8-K filed August 30, 2006.(16)
            The
                Company’s Report on Form 8-K filed July 19, 2006.(17)
            The
                Company's Registration Statement on Form S-1 under theSecurities
                Act of 1933 (Registration No. 333-124512) filed on May 2,
                2005.(18)
            The
                Company’s Report on Form 8-K filed December 23, 2005.(19)
            The
                Company’s Report on Form 8-K filed November 1, 2007.(20)
            The
                Company’s Report on Form 8-K filed November 17, 2004.*Each
                of these exhibits constitute a management contract, compensatory
                plan or
                arrangement required to be filedas
                an exhibit pursuant to Item 15 (b) of this report.**ITEM
                15. (c) FINANCIAL STATEMENT SCHEDULES****None**


41




**SIGNATURES**





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





The
              Dress Barn, Inc.Date:
                September 24, 2008
            
            by
            /s/
                DAVID R. JAFFEDavid
              R. JaffePresident 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/
                ELLIOT S. JAFFEElliot
                S. Jaffe
            
            Chairman
                of the Board
            
            September
                24, 2008/s/
                DAVID R. JAFFEDavid
                R. Jaffe
            
            Director,
                President and
            
            September
                24, 2008Chief
                Executive Officer(Principal
                Executive Officer)/s/
                BURT STEINBERGBurt
                Steinberg
            
            Director
                and Executive Director
            
            September
                24, 2008/s/
                KLAUS EPPLERKlaus
                Eppler
            
            Director
            
            September
                24, 2008/s/
                RANDY L. PEARCERandy
                L. Pearce
            
            Director
            
            September
                24, 2008/s/
                JOHN USDANJohn
                Usdan
            
            Director
            
            September
                24, 2008/s/
                KATE BUGGELNKate
                Buggeln
            
            Director
            
            September
                24, 2008/s/
                ARMAND CORREIAArmand
                Correia
            
            Chief
                Financial Officer
            
            September
                24, 2008(Principal
                Financial and Accounting Officer)


42


**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
  **To
        the Board of Directors and Shareholders of**
 **The
        Dress Barn, Inc.**
 **Suffern,
        New York**
  We
        have
        audited the accompanying consolidated balance sheets of The Dress Barn, Inc.
        and
        subsidiaries (the "Company") as of July 26, 2008 and July 28, 2007 and the
        related consolidated statements of earnings, shareholders' equity and
        comprehensive income, and cash flows for each of the three years in the period
        ended July 26, 2008. These financial statements are the responsibility of
        the
        Company's management.  Our responsibility is to express an opinion on the
        financial statements 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, such consolidated financial statements present fairly, in all material
        respects, the financial position of the Company and subsidiaries as of July
        26,
        2008 and July 28, 2007, and the results of their operations and their cash
        flows
        for each of the three years in the period ended July 26, 2008, in conformity
        with accounting principles generally accepted in the United States of
        America.
  As
        discussed in Note 1 to the consolidated financial statements, the Company
        adopted Financial
        Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes - An Interpretation of FASB Statement No. 109”, effective July 29,
        2007, and Statement
        of Accounting Standards No. 123(R), “Share-Based Payment”, as revised, effective
        July 31, 2005.
  We
        have
        also audited, in accordance with the standards of the Public Company Accounting
        Oversight Board (United States), the Company's internal control over financial
        reporting as of July 26, 2008, based on the criteria established in *Internal
        Control—Integrated Framework* issued
        by the Committee of Sponsoring Organizations of the Treadway Commission and
        our
        report dated September 24, 2008 expressed an
        adverse opinion on the Company's internal control over financial reporting
        because of a material weakness.
   */s/
        DELOITTE & TOUCHE LLP*
  New
        York,
        New York
 September
        24, 2008
 F
              -
              1




The
      Dress
      Barn, Inc. and Subsidiaries


**Consolidated
      Balance Sheets**


Amounts in thousands, except share and per share data




**July
                26, 2008**
            
            **July
                28, 2007****ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            127,226
            
            $
            67,133Marketable
                security investments (see Note 2)
            
            
            92,697
            
            
            177,446Merchandise
                inventories
            
            
            186,983
            
            
            197,143Current
                portion of deferred income tax assets (see Note 10)
            
            
            -
            
            
            4,242Prepaid
                expenses and other current assets
            
            
            24,882
            
            
            17,831**Total
                Current Assets**
            
            
            431,788
            
            
            463,795**Property,
                Plant and Equipment, net (see Note 3)**
            
            
            274,279
            
            
            256,454**Other
                Intangible Assets, net (see Note 4)**
            
            
            107,802
            
            
            108,932**Goodwill
                (see Note 4)**
            
            
            130,656
            
            
            130,656**Marketable
                Security Investments (see Note 2)**
            
            
            58,404
            
            
            -**Other
                Assets**
            
            
            21,530
            
            
            21,488**TOTAL
                ASSETS**
            
            $
            1,024,459
            
            $
            981,325


See
        notes
        to consolidated financial statements




(continued)


F
          -
          2


The
        Dress
        Barn, Inc. and Subsidiaries
 **Consolidated
        Balance Sheets**
 Amounts in thousands, except share and per share data


**July
                26, 2008**
            
            **July
                28, 2007****LIABILITIES
                AND SHAREHOLDERS' EQUITY****Current
                Liabilities:**Accounts
                payable
            
            $
            121,084
            
            $
            133,802Accrued
                salaries, wages and related expenses
            
            
            27,934
            
            
            30,062Other
                accrued expenses
            
            
            50,970
            
            
            60,009Customer
                credits
            
            
            14,822
            
            
            15,141Income
                taxes payable
            
            
            -
            
            
            4,238Current
                portion of deferred income tax liabilities (see Note 10)
            
            
            401
            
            
            -Current
                portion of long-term debt (see Note 5)
            
            
            1,277
            
            
            1,211Convertible
                Senior Notes (see Note 5)
            
            
            115,000
            
            
            115,000**Total
                Current Liabilities**
            
            
            331,488
            
            
            359,463Long-term
                debt (see Note 5)
            
            
            27,263
            
            
            28,540Deferred
                rent and lease incentives
            
            
            62,003
            
            
            53,356Deferred
                compensation and other long-term liabilities
            
            
            44,391
            
            
            25,862Deferred
                income tax liabilities (see Note 10)
            
            
            3,232
            
            
            4,703**Total
                Liabilities**
            
            
            468,377
            
            
            471,924**Commitments
                and Contingencies (see Note 11)****Shareholders'
                Equity:**Preferred
                stock, par value $0.05 per share:Authorized-
                100,000 shares, Issued and Outstanding- none
            
            
            -
            
            
            -Common
                stock, par value $0.05 per share: Authorized- 75,000,000
                sharesIssued-
                60,359,617 and 62,303,794 shares, respectively
              Outstanding-
                60,359,617 and 61,693,794 shares, respectively
            
            
            3,018
            
            
            3,115Additional
                paid-in capital
            
            
            115,476
            
            
            106,604Retained
                earnings
            
            
            440,627
            
            
            411,492Treasury
                stock (common stock at cost, 0 and 610,000 shares,
                respectively)
            
            
            -
            
            
            (11,849
            )Accumulated
                other comprehensive (loss) income
            
            
            (3,039
            )
            
            39**Total
                Shareholders’ Equity**
            
            
            556,082
            
            
            509,401**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY**
            
            $
            1,024,459
            
            $
            981,325


See
        notes
        to consolidated financial statements


F
          -
          3





The
        Dress
        Barn, Inc. and Subsidiaries
 **Consolidated
        Statements of Earnings**
 Amounts in thousands, except per share data
  **Fiscal
                    Year Ended****July
                    26,**
                  **2008**
                
                **July
                    28,**
                  **2007**
                
                **July
                    29,**
                  **2006**Net
                    sales
                
                $
                1,444,165
                
                $
                1,426,607
                
                $
                1,300,277Cost
                    of sales, including occupancy and buying costs(excluding
                    depreciation which is shown separately below)
                
                
                885,927
                
                
                842,192
                
                
                773,631Selling,
                        general and administrative expenses
                
                
                397,424
                
                
                383,652
                
                
                353,031Depreciation
                    and amortization
                
                
                48,200
                
                
                45,791
                
                
                41,679Operating
                    income
                
                
                112,614
                
                
                154,972
                
                
                131,936Interest
                    income
                
                
                7,817
                
                
                7,051
                
                
                2,656Interest
                    expense
                
                
                (4,825
                )
                
                (4,883
                )
                
                (5,364
                )Other
                    income
                
                
                512
                
                
                1,382
                
                
                1,526Earnings
                      before provision for income taxes
                
                
                116,118
                
                
                158,522
                
                
                130,754Provision
                    for income taxes
                
                
                42,030
                
                
                57,340
                
                
                51,800**Net
                    earnings**
                
                $
                74,088
                
                $
                101,182
                
                $
                78,954Earnings
                    per share:Basic
                
                $
                1.23
                
                $
                1.63
                
                $
                1.29Diluted
                
                $
                1.15
                
                $
                1.45
                
                $
                1.15Weighted
                    average shares outstanding:Basic
                
                
                60,102
                
                
                62,020
                
                
                61,216Diluted
                
                
                64,467
                
                
                70,022
                
                
                68,728See
                    notes to consolidated financial statements


F
          -
          4


The
      Dress
      Barn, Inc. and Subsidiaries


**Consolidated
      Statements of Shareholders’ Equity and Comprehensive
      Income**


(Amounts and shares in thousands)




**Common
                  Stock**
              
              **Additional**
                **Paid-In**
              
              **Retained**
              
              **Treasury**
              
              **Accumulated**
                **Other**
                **Comprehensive**
              
              **Deferred**
              
              **Total**
                **Shareholders’****Shares**
              
              **Amount**
              
              **Capital**
              
              **Earnings**
              
              **Stock**
              
              **Income
                  (Loss)**
              
              **Compensation**
              
              **Equity****Balance,
                  July 30, 2005**
              
              
              60,411
              
              $
              3,021
              
              $
              71,682
              
              $
              239,426
              
              $
              -
              
              $
              -
              
              $
              (1,001
              )
              $
              313,128Net
                  earnings
              
              
              
              
              
              
              
              
              
              
              
              78,954
              
              
              
              
              
              
              
              
              
              
              
              78,954Unrealized
                  gain on marketable securities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              8
              
              
              
              
              
              8Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              78,962Issuance
                  of restricted stock
              
              
              24
              
              
              1
              
              
              (1
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Restricted
                  stock compensation expense
              
              
              
              
              
              
              
              
              641
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              641Tax
                  benefit from exercise of stock options
              
              
              
              
              
              
              
              
              5,526
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,526Employee
                  Stock Purchase Plan activity
              
              
              15
              
              
              
              
              
              285
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              285Shares
                  issued pursuant to exercise of stock options
              
              
              1,266
              
              
              64
              
              
              6,121
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,185Share
                  based compensation – stock options
              
              
              
              
              
              
              
              
              4,420
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              4,420Reclass
                  of def comp- adoption of SFAS 123
              
              
              
              
              
              
              
              
              (1,001
              )
              
              
              
              
              
              
              
              
              
              
              1,001
              
              
              -**Balance,
                  July 29, 2006**
              
              
              61,716
              
              
              3,086
              
              
              87,673
              
              
              318,380
              
              
              -
              
              
              8
              
              
              -
              
              
              409,147Net
                  earnings
              
              
              
              
              
              
              
              
              
              
              
              101,182
              
              
              
              
              
              
              
              
              
              
              
              101,182Unrealized
                  gain on marketable securities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              31
              
              
              
              
              
              31Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              101,213Issuance
                  of restricted stock
              
              
              39
              
              
              2
              
              
              (2
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Restricted
                  stock compensation expense
              
              
              (5
              )
              
              
              
              
              1,091
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,091Tax
                  benefit from exercise of stock options
              
              
              
              
              
              
              
              
              5,863
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,863Employee
                  Stock Purchase Plan activity
              
              
              15
              
              
              1
              
              
              298
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              299Shares
                  issued pursuant to exercise of stock options
              
              
              939
              
              
              46
              
              
              6,465
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,511Share
                  based compensation – stock options
              
              
              
              
              
              
              
              
              5,216
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,216Purchase
                  of treasury stock
              
              
              (1,010
              )
              
              
              
              
              
              
              
              
              
              
              (19,939
              )
              
              
              
              
              
              
              
              (19,939
              )Retirement
                  of treasury stock
              
              
              
              
              
              (20
              )
              
              
              
              
              (8,070
              )
              
              8,090
              
              
              
              
              
              
              
              
              -**Balance,
                  July 28, 2007**
              
              
              61,694
              
              
              3,115
              
              
              106,604
              
              
              411,492
              
              
              (11,849
              )
              
              39
              
              
              -
              
              
              509,401Net
                  earnings
              
              
              
              
              
              
              
              
              
              
              
              74,088
              
              
              
              
              
              
              
              
              
              
              
              74,088Unrealized
                  (loss) on marketable securities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,078
              )
              
              
              
              
              (3,078
              )Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              71,010Adoption
                  of FIN 48
              
              
              
              
              
              
              
              
              
              
              
              (4,886
              )
              
              
              
              
              
              
              
              
              
              
              (4,886
              )Issuance
                  of restricted stock
              
              
              54
              
              
              3
              
              
              (3
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Restricted
                  stock compensation expense
              
              
              (2
              )
              
              
              
              
              1,345
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,345Tax
                  benefit from exercise of stock options
              
              
              
              
              
              
              
              
              383
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              383Employee
                  Stock Purchase Plan activity
              
              
              23
              
              
              1
              
              
              307
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              308Shares
                  issued pursuant to exercise of stock options
              
              
              225
              
              
              11
              
              
              1,604
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,615Share
                  based compensation – stock options
              
              
              
              
              
              
              
              
              5,236
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,236Purchase
                  of treasury stock
              
              
              (1,634
              )
              
              
              
              
              
              
              
              
              
              
              (28,330
              )
              
              
              
              
              
              
              
              (28,330
              )Retirement
                  of treasury stock
              
              
              
              
              
              (112
              )
              
              
              
              
              (40,067
              )
              
              40,179
              
              
              
              
              
              
              
              
              -**Balance,
                  July 26, 2008**
              
              
              60,360
              
              $
              3,018
              
              $
              115,476
              
              $
              440,627
              
              $
              -
              
              $
              (3,039
              )
              $
              -
              
              $
              556,082




See
      notes
      to consolidated financial statements




F
          -
          5


The
      Dress
      Barn, Inc. and Subsidiaries


**Consolidated
      Statements of Cash Flows**


Amounts in thousands




**Fiscal
                Year Ended****July
                26,**
              **2008**
            
            **July
                28,**
              **2007**
            
            **July
                29,**
              **2006****Operating
                Activities:**Net
                earnings
            
            $
            74,088
            
            $
            101,182
            
            $
            78,954Adjustments
                to reconcile net earnings to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            
            48,200
            
            
            45,791
            
            
            41,679Impairments
                and asset disposals
            
            
            4,110
            
            
            2,363
            
            
            3,794Deferred
                taxes
            
            
            9,999
            
            
            (1,533
            )
            
            (5,705
            )Deferred
                rent and other occupancy costs
            
            
            (4,606
            )
            
            (4,520
            )
            
            5,092Share
                based compensation
            
            
            6,612
            
            
            6,307
            
            
            5,090Tax
                benefit on exercise of unqualified stock options
            
            
            -
            
            
            5,863
            
            
            5,526Excess
                tax benefits from stock-based compensation
            
            
            (383
            )
            
            (5,721
            )
            
            (1,882
            )Amortization
                of debt issuance cost
            
            
            366
            
            
            372
            
            
            808Amortization
                of bond premium cost
            
            
            415
            
            
            108
            
            
            59Change
                in cash surrender value of life insurance
            
            
            732
            
            
            (441
            )
            
            (818
            )Realized
                loss on sales of securities
            
            
            304
            
            
            215
            
            
            3Gift
                card breakage
            
            
            (2,184
            )
            
            (3,724
            )
            
            -Other
            
            
            1,307
            
            
            (354
            )
            
            -Changes
                in assets and liabilities:Merchandise
                inventories
            
            
            10,160
            
            
            (26,656
            )
            
            (2,844
            )Prepaid
                expenses and other current assets
            
            
            (7,084
            )
            
            2,171
            
            
            (6,469
            )Other
                assets
            
            
            378
            
            
            450
            
            
            2,479Accounts
                payable
            
            
            (12,718
            )
            
            12,604
            
            
            13,496Accrued
                salaries, wages and related expenses
            
            
            (2,128
            )
            
            4,358
            
            
            3,856Other
                accrued expenses
            
            
            (96
            )
            
            7,313
            
            
            1,800Customer
                credits
            
            
            1,865
            
            
            2,605
            
            
            3,411Income
                taxes payable
            
            
            1,642
            
            
            (8,839
            )
            
            9,839Deferred
                rent and lease incentives
            
            
            13,157
            
            
            10,028
            
            
            1,314Deferred
                compensation and other long-term liabilities
            
            
            1,319
            
            
            5,290
            
            
            4,604Total
                adjustments
            
            
            71,367
            
            
            54,050
            
            
            85,132Net
                cash provided by operating activities
            
            
            145,455
            
            
            155,232
            
            
            164,086




See
      notes
      to consolidated financial statements





(continued)


F
          -
          6





The
      Dress
      Barn, Inc. and Subsidiaries


**Consolidated
      Statements of Cash Flows**


Amounts in thousands




**Fiscal Year Ended****July 26,**
              **2008**
            
            **July 28,**
              **2007**
            
            **July 29,**
              **2006****Investing
                Activities:**Purchases
                of property and equipment
            
            $
            (66,097
            )
            $
            (62,986
            )
            $
            (48,276
            )Return
                of restricted cash
            
            
            -
            
            
            100
            
            
            -Sales
                and maturities of marketable securities and investments
            
            
            307,902
            
            
            344,097
            
            
            460,250Purchases
                of marketable securities and investments
            
            
            (285,354
            )
            
            (403,090
            )
            
            (579,026
            )Investment
                in life insurance policies
            
            
            (2,108
            )
            
            (3,279
            )
            
            (2,200
            )Purchases
                of long-term investments
            
            
            (590
            )
            
            (2,312
            )
            
            (343
            )Reimbursement
                related to acquisition of Maurices Incorporated
            
            
            -
            
            
            1,910
            
            
            -Net
                cash used in investing activities
            
            
            (46,247
            )
            
            (125,560
            )
            
            (169,595
            )**Financing
                Activities:**Payment
                of long-term debt
            
            
            (1,211
            )
            
            (1,148
            )
            
            (11,090
            )Refund
                of debt issuance cost
            
            
            -
            
            
            -
            
            
            10Purchase
                of treasury stock
            
            
            (40,179
            )
            
            (8,090
            )
            
            -Proceeds
                from Employee Stock Purchase Plan
            
            
            277
            
            
            299
            
            
            256Excess
                tax benefits from stock-based compensation
            
            
            383
            
            
            5,721
            
            
            1,882Proceeds
                from stock options exercised
            
            
            1,615
            
            
            6,511
            
            
            6,185Net
                cash (used in) provided by financing activities
            
            
            (39,115
            )
            
            3,293
            
            
            (2,757
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            60,093
            
            
            32,965
            
            
            (8,266
            )Cash
                and cash equivalents- beginning of year
            
            
            67,133
            
            
            34,168
            
            
            42,434Cash
                and cash equivalents- end of year
            
            $
            127,226
            
            $
            67,133
            
            $
            34,168Supplemental
                Disclosure of Cash Flow Information:Cash
                paid for income taxes
            
            $
            37,506
            
            $
            61,906
            
            $
            42,660Cash
                paid for interest
            
            $
            4,431
            
            $
            4,494
            
            $
            4,892Capital
                expenditures incurred but not yet paid
            
            $
            7,781
            
            $
            2,290
            
            $
            1,520Treasury
                shares purchased not settled
            
            $
            -
            
            $
            11,849
            
            $
            -





See
      notes
      to consolidated financial statements




F
          -
          7


**The
      Dress Barn, Inc. and Subsidiaries** ****


**Notes
      to Consolidated Financial Statements**




**1.**  **Summary
      of Significant Accounting Policies**





*Business*





The
      Dress
      Barn, Inc. and its wholly-owned subsidiaries (the “Company,” “we,” “our,” or
      similar terms) operate a chain of women's apparel specialty stores. The stores
      operate principally under the names " **dressbarn** "
      and
“ **dressbarn**  **woman** ”
and,
      since our January 2005 acquisition of Maurices Incorporated, “ **maurices** .”
Our **dressbarn** stores
      are operated mostly in a combination of **dressbarn** and **dressbarn**  **woman** stores,
      or Combo stores, which carry **dressbarn** and
      larger-sized **dressbarn**  **woman** merchandise, as well as freestanding **dressbarn** and **dressbarn**  **woman** stores.
      These stores offer in-season, moderate to better quality career and casual
      fashion to the working woman at value prices. The **dressbarn** brands
      primarily attract female consumers in the mid 30’s to mid 50’s age range. The **maurices** stores
      are concentrated in small markets (having populations of approximately 25,000
      to
      100,000) in the United States and offer moderately priced, up-to-date fashions
      designed to appeal to **maurices** ’
target
      customers, the 17 to 34 year-old female. During third quarter of fiscal 2007 **maurices** began
      transitioning out of the men’s product line in order to introduce female
      plus-sizes in the fourth quarter of fiscal 2007.





*Basis
      of Financial Statement Presentation*





Our
      accounting and reporting policies conform to the generally accepted accounting
      principles in the United States of America (US GAAP).




*Principles
      of Consolidation*





The
      consolidated financial statements include the accounts of the Company and our
      subsidiaries. All intercompany balances and transactions are eliminated in
      consolidation. We report on a 52-53 week fiscal year ending on the last Saturday
      in July. Fiscal years 2008, 2007 and 2006 consisted of 52 weeks.





Dunnigan
      Realty, LLC, our wholly-owned subsidiary, was formed in fiscal 2003 to purchase,
      own and operate a distribution/office facility in Suffern, New York (the
“Suffern facility”), of which the major portion is our corporate offices and **dressbarn’s** distribution center. Dunnigan Realty, LLC receives rental income and
      reimbursement for taxes and common area maintenance charges from us and two
      additional tenants that occupy the Suffern facility that are not affiliated
      with
      us. The rental income from the unaffiliated tenants is shown as “other income”
on our Consolidated Statements of Earnings. Intercompany rentals between us
      and
      Dunnigan Realty, LLC are eliminated in consolidation.





*Reclassifications*





Certain
      reclassifications have been made to prior years’ financial statements, notes,
      and analysis to conform to the 2008 presentation. We have reclassified certain
      prior year amounts within property, plant and equipment categories to conform
      to
      the 2008 presentation.





*Revenue
      Recognition*





Revenues
      from retail sales, net of estimated returns, are recognized at the point of
      purchase upon delivery of the merchandise to the customer and exclude sales
      taxes. The **maurices** segment
      charges its customers a small fee to offset shipping costs to move product
      from
      store to store for special order transactions. Amounts related to shipping
      and
      handling, billed to customers as part of a sales transaction, are classified
      as
      revenue. We record a reserve for estimated product returns when sales are
      recorded based on historical return trends and is adjusted for known events,
      as
      applicable. The changes in the sales return reserve are summarized below:





(amounts in thousands)
            
            Fiscal Year EndedJuly 26, 2008
            
            July 28, 2007
            
            July 29, 2006Balance
                at beginning of period
            
            $
            1,571
            
            $
            1,550
            
            $
            1,351Additions –
                charge to income
            
            
            7,694
            
            
            6,760
            
            
            6,687Adjustments
                and/or deductions
            
            
            (7,551
            )
            
            (6,739
            )
            
            (6,488
            )Balance
                at end of period
            
            $
            1,714
            
            $
            1,571
            
            $
            1,550




F
          -
          8




Sales
      from purchases made with gift cards and gift certificates or by layaway are
      recorded when the customer takes possession of the merchandise. Gift cards,
      gift
      certificates and merchandise credits (collectively “gift cards”) do not have
      expiration dates. We recognize income on unredeemed gift cards (“gift card
      breakage”) when it can be determined that the likelihood of the remaining
      balances being redeemed are remote and that there are no legal obligations
      to
      remit the remaining balances to relevant jurisdictions. Prior
      to
      fiscal 2007, we were unable to reliably estimate such gift card breakage and
      therefore recorded no such income in fiscal 2006, or prior years. During the
      fourth quarter of fiscal 2007, we accumulated a sufficient level of historical
      data to determine an estimate of gift card breakage for the first time. Gift
      card breakage is included in net sales in the Consolidated Statements of
      Earnings.




*Cost
      of Sales, Including Certain Buying, Occupancy and Warehousing Expenses,
      excluding depreciation*




Cost
      of
      sales consists of net merchandise costs, including design, sourcing, importing
      and inbound freight costs, as well as markdowns, shrinkage and promotional
      costs. Buying, occupancy and warehousing costs consist of compensation and
      travel expenses for our buyers and certain senior merchandising executives;
      rent
      related to our stores, corporate headquarters, distribution centers and other
      office space; freight from our distribution centers to the stores; and
      compensation and supplies for our distribution centers, including purchasing,
      receiving and inspection costs. Our cost of sales may not be comparable to
      those
      of other entities, since some entities include all costs related to their
      distribution network including depreciation and all buying and occupancy costs
      in their cost of sales, while other entities, including us, exclude a portion
      of
      these expenses from cost of sales and include them in selling, general and
      administrative expenses or depreciation. We include depreciation related to
      the
      distribution network in depreciation and amortization, utilities and insurance
      expenses, among other expenses, in selling, general and administrative expenses
      on the consolidated statements of earnings.





*Selling,
      General and Administrative Expenses*





Selling,
      general and administrative expenses consist of compensation and employee benefit
      expenses, other than for our design and sourcing teams, our buyers and our
      distribution centers personnel. Such compensation and employee benefit expenses
      include salaries, incentives, share based compensation and related benefits
      associated with our stores and corporate headquarters, except as previously
      noted. Selling, general and administrative expenses also include advertising
      costs, supplies for our stores and home office, communication costs, travel
      and
      entertainment, leasing costs and services purchased.





*Segments*





Our
      reportable segments are the **dressbarn** brands,
      which are used in 656 Combo
      stores (a combination of **dressbarn** and **dressbarn**  **woman** stores),
      134 **dressbarn** stores,
      and 36 **dressbarn**  **woman** stores in 46
      states as of July 26, 2008 and the **maurices** brand,
      which is used in 677 stores in 44 states as of July 26, 2008.





Our **dressbarn** stores
      are operated mostly in a combination of **dressbarn** and **dressbarn**  **woman** stores,
      or Combo stores, which carry **dressbarn** and
      larger-sized **dressbarn**  **woman** merchandise, as well as freestanding **dressbarn** and **dressbarn**  **woman** stores.
      The **dressbarn** brands
      primarily attract female consumers in the mid 30’s to mid 50’s age range, while **maurices** ’
      fashions are designed to appeal to the 17 to 34 year-old-female. During the
      third quarter of fiscal 2007 **maurices** began
      transitioning out of the men’s product line in order to introduce female
      plus-sizes in the fourth quarter of fiscal 2007. Our **maurices** stores
      are concentrated in small markets in the United States, while our **dressbarn** and **dressbarn**  **woman** stores
      tend to be in larger population markets. Additionally, **maurices** distributes goods to its stores through a separate distribution center. **maurices** also has
      separate financial reporting systems from **dressbarn** .
      We
      believe that **maurices** is
      currently a reportable segment due to management’s review of **maurices’** separately available operating results and other financial information to
      regularly assess its performance for decision-making purposes.





*Cash
      and Cash Equivalents*





We
      consider highly liquid investments with maturities of three months or less
      when
      purchased to be cash equivalents. These amounts are stated at cost, which
      approximates market value. We also consider receivables related to credit card
      purchases to be equivalent to cash. The majority of our money market funds
      at
      July 26, 2008 were maintained with one financial institution. We
      maintain our cash deposits and cash equivalents with well-known and stable
      financial institutions. However, we have significant amounts of cash and cash
      equivalents at these financial institutions that are in excess of federally
      insured limits. This represents a concentration of credit risk. With the current
      financial environment and the instability of financial institutions we cannot
      be
      assured that we will not experience losses on our deposits, however, we have
      not
      experienced any losses on our deposits of cash and cash equivalents to
      date.




*Restricted
      Cash*





At
      July
      29, 2006, restricted cash consisted of $100,000 held in escrow as required
      as
      part of a pending lawsuit. During the second quarter of fiscal 2007, the pending
      lawsuit was resolved and the cash was released from escrow.




F
          -
          9




*Marketable
      Securities Investments*





We
      have
      categorized our marketable securities as available for sale, stated at market
      value. The unrealized holding gains and losses are included in other
      comprehensive income, a component of shareholders’ equity, until realized. The
      amortized cost is adjusted by the amortization of premiums and discounts to
      maturity, with the net amortization included in interest income. During third
      quarter of fiscal 2008, we classified our auction rate securities (“ARS”) as
      long-term. We believe this classification is still appropriate for our fiscal
      2008 Consolidated Balance Sheet based on our belief that the market for these
      instruments may take in excess of 12 months to fully recover due to the current
      disruptions in the credit markets. Additionally, we have recognized a $3.3
      million temporary unrealized loss in fair value of our ARS, with an offsetting
      entry to accumulated other comprehensive (loss) income. We currently believe
      that this temporary decline in fair value is due entirely to liquidity issues,
      because the underlying assets for the vast majority of ARS are backed by the
      U.S. government. Management believes that our available working capital,
      excluding the funds held in ARS, will be sufficient to meet our cash
      requirements for at least the next 12 months. See Note 2 for further
      detail.





*Merchandise
      Inventories*





We
      value
      our merchandise inventories at the lower of cost, on a First In First Out (FIFO)
      basis, or market, as determined by the retail inventory method. Under the retail
      inventory method, the valuation of inventory at cost and resulting gross margin
      are calculated by applying a calculated cost to retail ratio to the retail
      value
      of inventory. Physical inventories are conducted in the third and fourth
      quarters to calculate actual shrinkage and inventory on hand. Estimates are
      used
      to charge inventory shrinkage for the remaining quarters of the fiscal year.





*Property,
      Plant  and Equipment*





Property,
      plant and equipment are carried at cost less accumulated depreciation.
      Depreciation is calculated using the straight-line method over the estimated
      useful lives. The depreciable lives for buildings is 25 years, furniture and
      fixtures and machinery and equipment is 10 years, data processing equipment
      is 7
      years, automobiles are 5 years and software is approximately 5 years. Leasehold
      improvements are amortized over the shorter of their estimated useful lives
      or
      the related lease life, generally 10 years. For leases with renewal periods
      at our option, we generally use the original lease term, excluding renewal
      option periods to determine estimated useful lives; if failure to exercise
      a
      renewal option imposes an economic penalty to us, management determines at
      the
      inception of the lease that renewal is reasonably assured and includes the
      renewal option period in the determination of appropriate estimated useful
      lives. The costs of repairs and maintenance are expensed when incurred, while
      expenditures for refurbishments and improvements that significantly add to
      the
      productive capacity or extend the useful life of an asset are capitalized.





*Impairment
      of Long-Lived Assets*





We
      primarily invest in property and equipment in connection with the opening and
      remodeling of stores. When facts and circumstances indicate that the carrying
      values of such long-lived assets may be impaired, an evaluation of
      recoverability is performed by comparing the carrying values of the assets
      to
      projected future cash flows, in addition to other quantitative and qualitative
      analyses. Upon indication that the carrying values of such assets may not be
      recoverable, we recognize an impairment loss as a charge against current
      operations. Property and equipment assets are grouped at the lowest level for
      which there is identifiable cash flows when assessing impairment, which is
      the
      individual store level. Judgments
      made by us related to the expected useful lives of long-lived assets and the
      ability to realize undiscounted cash flows in excess of the carrying amounts
      of
      such assets are affected by factors such as the ongoing maintenance and
      improvements of the assets, changes in economic conditions and changes in
      operating performance. In
      addition, we regularly evaluate our computer-related and other assets for
      recoverability. Based
      on
      the review of certain under performing stores, we recorded impairment charges
      and store closings that are included in selling, general and administrative
      expenses of $3.5 million in fiscal 2008, $1.7 million in fiscal 2007, and $3.2
      million in fiscal 2006. These impairment losses reflect the amount of book
      value
      over estimated fair market value of store related assets.





*Costs
      of Computer Software*





We
      capitalize certain costs associated with computer software developed or obtained
      for internal use in accordance with the provisions of Statement of Position
      No.
      98-1, *Accounting
      for the Costs of Computer Software Developed or Obtained for Internal
      Use* (SOP
      98-1), issued by the American Institute of Certified Public Accountants (AICPA).
      We capitalize those costs from the acquisition of external materials and
      services associated with developing or obtaining internal use computer software.
      We capitalize certain payroll costs for employees that are directly associated
      with internal use computer software projects once specific criteria of SOP
      98-1
      are met. We expense those costs that are associated with preliminary stage
      activities, training, maintenance, and all other post-implementation stage
      activities as they are incurred. We amortize all costs capitalized in connection
      with internal use computer software projects on a straight-line basis over
      the
      useful life of the asset, beginning when the software is ready for its intended
      use.


F
          -
          10


*Insurance
      Reserves*





We
      use a
      combination of insurance and self-insurance mechanisms to provide for the
      potential liabilities associated with workers’ compensation and employee
      healthcare benefit claims. Liabilities associated with the risks that are
      retained by us are estimated, in part, by considering historical claims
      experience, demographic factors, severity factors and other actuarial
      assumptions. Such liabilities are capped through the use of stop loss contracts
      with insurance companies. The estimated accruals for these liabilities could
      be
      significantly affected if future occurrences and claims differ from these
      assumptions and historical trends. As of July 26, 2008 and July 28, 2007
      these reserves were $9.3 million and $8.4 million, respectively.





*Income
      Taxes*





We
      account for income taxes in accordance with SFAS No. 109, ** *Accounting
      for Income Taxes*  (SFAS
      No.
      109), which requires the use of the assets and liability method. Deferred tax
      assets and liabilities are recognized based on the differences between the
      financial statement carrying value of existing assets and liabilities and their
      respective tax bases. We
      establish valuation allowances against deferred tax assets when it is more
      likely than not that the realization of those deferred tax assets will not
      occur.




Under
      the
      asset and liability method, deferred tax assets and liabilities are recognized,
      and income or expense is recorded, for the estimated future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax bases. We file a
      consolidated Federal income tax return.




Additionally,
      we adopted Financial Accounting Standards Board, (FASB) Interpretation No.
      48,
      Accounting for Uncertainty in Income Taxes – An Interpretation of FASB
      Statement No. 109, or (FIN 48), on July 29, 2007, the first day of fiscal
      2008.  FIN 48 seeks to reduce the diversity in practice associated
      with certain aspects of measurement and recognition in accounting for income
      taxes.  FIN 48 prescribes a recognition threshold and measurement
      requirement for the financial statement recognition of a tax position that
      has
      been taken or is expected to be taken on a tax return and also provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure and transition.  Under FIN 48 we may only
      recognize tax positions that meet a “more likely than not” threshold. We
      recorded the cumulative effect of applying FIN 48 of $4.9 million as an
      adjustment to the opening balance of retained earnings on July 29, 2007, the
      first day of our fiscal 2008. See Note 10, “Income Taxes,” for additional
      information.





*Goodwill
      and Other Intangible Assets*





Goodwill
      represents the excess of the purchase price over the fair values of net
      identifiable assets acquired. In accordance with SFAS No. 142, *Goodwill
      and Other Intangible Assets* ,
      we do
      not amortize goodwill or other intangible assets with indefinite lives but,
      rather, evaluate goodwill and other intangible assets with indefinite lives
      annually or whenever events or changes in circumstances indicate that the
      carrying amount may not be recoverable. The conditions that would trigger an
      impairment of goodwill or intangible assets with indefinite lives include a
      significant, sustained negative trend in **maurices** ’
      operating results or cash flows, a decrease in demand for **maurices** ’
      products, a change in the competitive environment or other industry and economic
      factors. During the fourth quarter, on or about June 30 th ,
      we did
      perform an assessment for impairment of our goodwill and our intangible assets
      with indefinite lives. Based on the estimated fair market values (calculated
      using discounted cash flows, comparable transactions, and comparable public
      companies) of the goodwill and our intangible assets with indefinite lives,
      we
      determined that no impairment exists.





*Store
      Preopening Costs*





Non-capital
      expenditures, such as advertising and payroll costs incurred prior to the
      opening of a new store are charged to expense in the period they are
      incurred.





*Marketing
      and Advertising Costs*





Marketing
      and advertising costs are included in selling, general and administrative
      expenses and are expensed the
      first
      time the advertising campaign takes place .
      Marketing and advertising expenses were $25.1 million for fiscal 2008, $21.3
      million for fiscal 2007, and $17.3 million for fiscal 2006.





*Operating
      Leases*





We
      lease
      retail stores under operating leases. Most lease agreements contain construction
      allowances, and rent escalations. For purposes of recognizing incentives and
      minimum rental expenses on a straight-line basis over the terms of the leases,
      we use the date of initial possession to begin amortization, which is generally
      when we enter the space and begin to make improvements in preparation of
      intended use.


F
          -
          11


For
      construction allowances, we record a deferred rent liability in “Other accrued
      expenses” and “Deferred rent and lease incentives” on the Consolidated Balance
      Sheets and amortize the deferred rent over the term of the respective lease
      as
      reductions to “Cost of sales including occupancy and buying costs” on the
      Consolidated Statements of Earnings.





For
      scheduled rent escalation clauses during the lease terms or for rental payments
      commencing at a date other than the date of initial occupancy, we record minimum
      rental expenses on a straight-line basis over the terms of the leases.





Certain
      leases provide for contingent rents, which are determined as a percentage of
      gross sales in excess of specified levels. We record a contingent rent liability
      in “Other accrued expenses” on our Consolidated Balance Sheets and the
      corresponding rent expense on the Consolidated Statements of Earnings when
      specified levels have been achieved or when management determines that achieving
      the specified levels during the fiscal year is probable.





*Use
      of Estimates*





The
      preparation of the financial statements in conformity with US GAAP requires
      us
      to make estimates and assumptions that affect the amounts reported in the
      consolidated financial statements and accompanying notes. The more significant
      items subject to such estimates and assumptions include fair value of our equity
      securities, marketable security investments, carrying amount of property and
      equipment, goodwill, other intangible assets, obligations related to employee
      benefits, inventory valuation, insurance reserves, and accounting for income
      taxes. Actual results could differ from those estimates.





*Comprehensive
      Income*





Comprehensive
      income is calculated in accordance with SFAS No. 130, *Reporting
      Comprehensive Income* ,
      and
      includes our net earnings and unrealized gains and losses on both current and
      long-term available-for-sale marketable securities. Cumulative unrealized gains
      and losses on available-for-sale marketable securities are reflected as
      accumulated other comprehensive income (loss) in shareholders’ equity. We have
      recognized a $3.3 million temporary unrealized loss in fair value of our ARS,
      with an offsetting entry to accumulated other comprehensive (loss)
      income.





*Share-Based
      Compensation*





Effective
      July 31, 2005, we began recording compensation expense associated with
      stock options and other forms of equity compensation in accordance with SFAS
      No. 123R, *Share-Based
      Payment* ,
      (“SFAS
      No. 123R”) as interpreted by SEC Staff Accounting Bulletin No. 107, *Valuation
      of share-based payment arrangements for public companies* ,
      (SAB
      107). Prior to July 31, 2005, we had accounted for stock options according
      to the provisions of Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related interpretations, and therefore no related compensation expense was
      recorded for awards granted with no intrinsic value. We adopted the modified
      prospective transition method provided under SFAS No. 123R, and, consequently,
      have not retroactively adjusted results from prior periods. Under this
      transition method, compensation cost associated with stock options recognized
      in
      the fiscal year ended July 29, 2006 (“fiscal 2006”) includes: 1) amortization
      related to the remaining unvested portion of all stock option awards granted
      prior to July 31, 2005, based on the grant date fair value estimated in
      accordance with the original provisions of SFAS No. 123; and 2)
      amortization related to all stock option awards granted subsequent to
      July 31, 2005, based on the grant date fair value estimated in accordance
      with the provisions of SFAS No. 123R.





During
      the fifty-two weeks ended July 26, 2008, July 28, 2007 and July 29, 2006 we
      recognized approximately $5.3 million, $5.2 million and $4.4 million,
      respectively, in share-based compensation expense related to stock options.
      During the fifty-two weeks ended July 26, 2008, July 28, 2007 and July 29,
      2006
      we recognized approximately $1.3 million, $1.1 million and $0.6 million,
      respectively, in share-based compensation expense related to restricted stock.





The
      fair
      values of the options granted under our fixed stock option plans were estimated
      on the date of grant using the Black-Scholes option pricing model with the
      following assumptions:


**Fiscal Year Ended****July 26,**
                **2008**
              
              **July 28,**
                **2007**
              
              **July 29,**
                **2006**Weighted
                  average risk-free interest rate
              
              
              4.1
              %
              
              4.5
              %
              
              4.2
              %Weighted
                  average expected life (years)
              
              
              4.8
              
              
              4.7
              
              
              4.9Expected
                  volatility of the market price of our common stock
              
              
              39.5
              %
              
              39.5
              %
              
              42.2
              %Expected
                  dividend yield
              
              
              0
              %
              
              0
              %
              
              0
              %




F
          -
          12


The
      Black-Scholes option pricing model was developed for use in estimating the
      fair
      value of traded options, which have no vesting restrictions and are fully
      transferable. The expected life of options represents the period of time the
      options are expected to be outstanding and is based on historical trends. We
      compiled historical data on an employee-by-employee basis from the grant date
      through the settlement date. The results showed that there were four distinct
      populations of optionees, the Executives & Officers Group, the Outside
      Directors group, the Store Managers group and the All Others Group. Thus, we
      will use different expected term assumptions for these four groups in estimating
      fair value, as this approach is more precise and yielded a more accurate
      estimate of fair value than using one term assumption for all groups. The
      risk-free rate is based on the yield of a US Treasury strip rate with a maturity
      date corresponding to the expected term of the option granted. The expected
      volatility assumption is based on the historical volatility of our stock over
      a
      term equal to the expected term of the option granted. All option valuation
      models require input of highly subjective assumptions. Because our employee
      stock options have characteristics significantly different from those of traded
      options, and because changes in subjective input assumptions can materially
      affect the fair value estimate, the actual value realized at the time the
      options are exercised may differ from the estimated values computed above.
      SFAS
      No. 123R also requires forfeitures to be estimated at the time of grant and
      revised, if necessary, in subsequent periods if actual forfeitures differ from
      those estimates.





*Fair
      Value of Financial Instruments*





Concentration
      of Credit Risk - Financial instruments, which potentially subject us to
      concentrations of credit risk, are principally bank deposits and short-term
      investments. Cash and cash equivalents are deposited with high credit quality
      financial institutions. Short-term investments principally consist of “triple A”
or “double A” rated instruments.





SFAS
      No. 107, Disclosures about Fair Value of Financial Instruments, requires
      management to disclose the estimated fair value of certain assets and
      liabilities defined by SFAS No. 107 as financial instruments.  At
      July
      26, 2008 and July 28, 2007, our financial instruments consist primarily of
      cash,
      cash equivalents, current marketable security investments, and payables. We
      believe that the carrying value of these assets and liabilities are
      representative of their respective fair values because of the short maturity
      of
      these financial instruments. The Convertible Senior Notes are carried on the
      cost basis ,
      the
      market value on July 25, 2008 was $191.5 million as valued on PORTAL (Private
      Offering Resale and Trading through Automated Linkage).





As
      of
      July 26, 2008, we had approximately $58.4 million of long-term marketable
      security investments which consisted of $61.7 million of ARS at cost, less
      a
      valuation allowance of $3.3 million to reflect our estimate of fair value given
      the current lack of liquidity of these investments while taking into account
      the
      current credit quality of the underlying securities. See
      Note
      2 “Marketable Security Investments” for additional information.





*Treasury
      (Reacquired) Shares*





Shares
      repurchased are retired and treated as authorized but unissued shares, with
      the
      cost of the reacquired shares recorded in retained earnings and the par value
      recorded in common stock. As of July 28, 2007 we had purchased 610,000 shares
      at
      a cost of $11.8 million for which the cash had not yet been expended. This
      amount was included in other accrued expenses as of July 28, 2007. During
      August 2007, the $28 million authorized amount remaining for stock purchases
      was
      used to purchase approximately 1,600,000 shares.





*Recent
      Accounting Pronouncements*





In
      September 2006, the FASB issued Statement of Financial Accounting Standard
      SFAS
      No. 157, Fair Value Measurements. The standard defines fair value, outlines
      a
      framework for measuring fair value, and details the required disclosures about
      fair value measurements. The standard was effective for fiscal years beginning
      after November 15, 2007 (our fiscal 2009). In February 2008, the FASB Staff
      Position (“FSP”) issued FSP 157-1 and FSP 157-2. FSP 157-1 amends SFAS 157 to
      exclude FASB Statement No. 13, Accounting for Leases and other accounting
      pronouncements that address fair value measurements of leases from the
      provisions of SFAS 157. FSP 157-2 delays the effective date of SFAS 157 for
      most
      nonfinancial assets and nonfinancial liabilities to fiscal years beginning
      after
      November 15, 2008 (our fiscal 2010). We have not completed our evaluation of
      the
      potential impact, if any, of the adoption of SFAS No. 157 on our consolidated
      financial position, results of operations and cash flows.


F
          -
          13




In
      February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities – Including an Amendment of FASB Statement
      No. 115 (“SFAS 159”), which provides companies with an option to measure at fair
      value, at specified election dates, many financial instruments and certain
      other
      items that are not currently measured at fair value. A company will report
      unrealized gains and losses on items for which the fair value option has been
      elected in earnings at each subsequent reporting date. This Statement also
      establishes presentation and disclosure requirements designed to facilitate
      comparisons between entities that choose different measurement attributes for
      similar types of assets and liabilities. SFAS 159 is effective as of the
      beginning of an entity’s first fiscal year that begins after November 15, 2007
      (our fiscal 2009). We have not completed our evaluation of the potential impact,
      if any, of the adoption of SFAS 159 on our consolidated financial position,
      results of operations and cash flows.





In
      December 2007, the FASB issued SFAS No. 141(R) (“SFAS 141 (R)”), Business
      Combinations, which replaces FASB Statement No. 141, Business Combinations.
      SFAS
      No. 141(R) establishes principles and requirements for how an acquirer
      recognizes and measures in its financial statements the identifiable assets
      acquired, the liabilities assumed, any non-controlling interest in the acquiree
      and the goodwill acquired. The Statement also establishes disclosure
      requirements that will enable users to evaluate the nature and financial effects
      of the business combination. SFAS 141(R) is effective as of the beginning of
      an
      entity’s fiscal year that begins after December 15, 2008 (our fiscal 2010) and
      will be applied if we consummate an acquisition.





In
      December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
      Consolidated Financial Statements – an amendment of Accounting Research
      Bulletin No. 51 (“SFAS 160”), which establishes accounting and reporting
      standards for ownership interests in subsidiaries held by parties other than
      the
      parent, the amount of consolidated net income attributable to the parent and
      to
      the noncontrolling interest, changes in a parent’s ownership interest and the
      valuation of retained noncontrolling equity investments when a subsidiary is
      deconsolidated. The Statement also establishes reporting standards that require
      the provision of sufficient disclosures that clearly identify and distinguish
      between the interests of the parent and the interests of the noncontrolling
      owners. SFAS 160 is effective as of the beginning of an entity’s fiscal year
      that begins after December 15, 2008 (our fiscal 2010). We have not completed
      our
      evaluation of the potential impact, if any, of the adoption of SFAS 160 on
      our
      consolidated financial position, results of operations and cash flows.





In
      May
      2008, the FASB issued FSP APB 14-a, Accounting for Convertible Debt Instruments
      That May Be Settled in Cash upon Conversion. This FSP requires entities with
      cash settled convertibles to bifurcate the securities into a debt component
      and
      an equity component and accrete the debt component to par over the expected
      life
      of the convertible. This FSP will be effective for our fiscal year 2010. Early
      adoption will not be permitted, and the FSP must be applied retrospectively
      to
      all instruments. When effective, we believe this FSP will be applicable to
      our
      2.5% Convertible Senior Notes. We have not completed our evaluation of the
      potential impact, if any, of the adoption of FSP APB 14-a on our consolidated
      financial position, results of operations and cash flows.





In
      June
      2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted
      in Share-Based Payment Transactions Are Participating Securities. This FSP
      states that unvested share-based payment awards that contain nonforfeitable
      rights to dividends or dividend equivalents (whether paid or unpaid) are
      participating securities and shall be included in the computation of earnings
      per share pursuant to the two-class method. The FSP is effective for financial
      statements issued for fiscal years beginning after December 15, 2008, and
      interim periods within those years. Upon adoption, a company is required to
      retrospectively adjust its earnings per share data (including any amounts
      related to interim periods, summaries of earnings and selected financial data)
      to conform with the provisions in this FSP. Earlier adoption is prohibited.
      This
      FSP will be effective for our fiscal year 2010, as required. We are currently
      evaluating the impact FSP EITF 03-6-1 will have on our consolidated financial
      statements when it becomes effective.


F
          -
          14





**2.**  **Marketable
      Security** **Investments**





We
      purchase investments and marketable securities that have been designated as
      “available-for-sale” as required by SFAS No. 115, Accounting for Certain
      Investments in Debt and Equity Securities, (“SFAS 115”). Available-for-sale
      securities are carried at fair value with the unrealized gains and losses
      reported in shareholders’ equity under the caption “Accumulated Other
      Comprehensive (Loss) Income.” The cost of securities sold is based on the
      specific identification method.





The
      amortized cost and estimated fair value based on published closing prices of
      securities at July 26, 2008 and July 28, 2007, are shown below.





(Amounts in thousands)
            
            **July 26, 2008**
            
            **July 28, 2007****Estimated**
              **Fair Value**
            
            **Amortized**
              **Cost**
            
            **Estimated**
              **Fair Value**
            
            **Amortized**
              **Cost**Marketable Security Investments:Municipal
                bonds
            
            $
            92,642
            
            $
            92,365
            
            $
            69,871
            
            $
            69,832Auction
                rate securities
            
            
            55
            
            
            55
            
            
            107,575
            
            
            107,575Total
                Current
            
            
            92,697
            
            
            92,420
            
            
            177,446
            
            
            177,407Marketable
                Security Investments:Auction
                rate securities – long-term
            
            
            58,404
            
            
            61,720
            
            
            -
            
            
            -**Total
                Marketable Security Investments**
            
            $
            151,101
            
            $
            154,140
            
            $
            177,446
            
            $
            177,407




Our
      investments are comprised of municipal bonds and auction rate securities.
      Auction rate securities (“ARS”) are variable-rate debt securities. ARS have a
      long-term maturity with the interest rate being reset through Dutch auctions
      that are typically held every 7, 28 or 35 days. Interest is paid at the end
      of
      each auction period. Our auction rate securities are all AAA/Aaa rated with
      the
      vast majority collateralized by student loans guaranteed by the U.S. government
      under the Federal Family Education Loan Program and the remaining securities
      backed by monoline insurance companies. Until February 2008, the auction rate
      securities market was highly liquid. Starting the week of February 11, 2008,
      a
      substantial number of auctions “failed,” meaning that there was not enough
      demand to sell the entire issue at auction. The immediate effect of a failed
      auction is that holders could not sell the securities and the interest or
      dividend rate on the security generally resets to a “penalty” rate. In the case
      of a failed auction, the auction rate security is deemed not currently liquid
      and in the event we need to access these funds, we will not be able to do so
      without a loss of principal, unless a future auction on these investments is
      successful. We
      believe that the current lack of liquidity relating to our ARS investments
      will
      not have an impact on our ability to fund our ongoing operations and growth
      initiatives; for that reason, we have the ability and intent to hold these
      ARS
      investments until a recovery of the auction process or until
      maturity. The
      securities for which auctions have failed will continue to accrue interest
      at
      the contractual rate and be auctioned generally every 35 days until the auction
      succeeds, the issuer calls the securities or they mature.




The
      recent and current disruptions in the credit markets have adversely affected
      the
      auction market for ARS, subsequent to July 26, 2008. As of July 26, 2008, we
      had
      approximately $58.4 million of marketable security investments which consisted
      solely of $61.7 million of ARS at cost, less a valuation allowance of $3.3
      million to reflect our estimate of fair value given the current lack of
      liquidity of these investments while taking into account the current credit
      quality of the underlying securities. Therefore, we have classified our net
      $58.4 million investment in ARS to long-term on our fiscal 2008 Consolidated
      Balance Sheet
      because of our inability to determine when our investments in ARS would settle. In
      addition, we determined that the valuation adjustment was deemed not to be
      other-than-temporary, and therefore was recorded within the other comprehensive
      income component of shareholders’ equity and did not affect our earnings. If the
      current market conditions deteriorate further, or a recovery in market values
      does not occur, we may record additional unrealized or realized losses in future
      quarters. Management believes that our available working capital, excluding
      the
      funds held in ARS, will be sufficient to meet our cash requirements for at
      least
      the next 12 months.


F
          -
          15





We
      review
      our impairments in accordance with SFAS No. 115, Accounting for Certain
      Investments in Debt and Equity Securities, and related guidance issued by the
      FASB and the Securities and Exchange Commission (“SEC”) in order to determine if
      the classification of the impairment is “other-than-temporary”. An
      other-than-temporary impairment charge results in a realized loss being recorded
      in the statement of earnings.  Otherwise, the unrealized loss is recorded
      as a component of other comprehensive income in shareholders’ equity. Such an
      unrealized loss does not affect net income for the applicable accounting period.
      To determine the fair value of the ARS, we used the discounted cash flow model,
      and considered factors such as the fact that historically, these securities
      had
      identical par and fair value, and the fact that rating agencies see these as
      AAA/Aaa. If the cost of an investment exceeds its fair value, in making the
      judgment of whether there has been an other-than-temporary impairment, we
      consider available quantitative and qualitative evidence, including, among
      other
      factors, our intent and ability to hold the investment to maturity, the duration
      and extent to which the fair value is less than cost, specific adverse
      conditions related to the financial health of and business outlook for the
      investee and rating agency actions.





The
      cost
      and estimated fair value of our available-for-sale marketable securities and
      investments by contractual maturities at July 26, 2008 is as
      follows:





(Amounts in thousands)
              Due In
            
            Estimated
              Fair Value
            
            Amortized
              CostOne
                year or less
            
            $
            67,416
            
            $
            67,311One
                year through five years
            
            
            15,388
            
            
            15,255Over
                five years through ten years
            
            
            1,723
            
            
            1,715Over
                ten years
            
            
            66,574
            
            
            69,859Total
            
            $
            151,101
            
            $
            154,140





We
      periodically review our investment portfolio to determine if there is an
      impairment that is other than temporary, and to date have not experienced any
      impairment in our investments that were other than temporary. In evaluating
      whether the individual investments in the investment portfolio are not other
      than temporarily impaired, we considered the credit rating of the individual
      securities, the cause of the impairment of the individual securities, and the
      severity of the impairment of the individual securities.





**3.
      Property, Plant and Equipment**





Property,
      plant and equipment consisted of the following:




(Amounts in thousands)
            
            **July 26,**
              **2008**
            
            **July 28,**
              **2007**Property
                and Equipment:Land
            
            $
            6,131
            
            $
            6,131Buildings
            
            
            53,332
            
            
            53,115Leasehold
                Improvements
            
            
            163,216
            
            
            150,770Fixtures
                and Equipment
            
            
            203,782
            
            
            188,981Information
                Technology
            
            
            80,715
            
            
            79,675Construction
                in Progress
            
            
            18,429
            
            
            6,531525,605
            
            
            485,203Less
                accumulated depreciation and amortization
            
            
            (251,326
            )
            
            (228,749
            )Property,
                plant and equipment, net
            
            $
            274,279
            
            $
            256,454




Construction
      in progress primarily represents costs related to new store development and
      investments in new technology.


F
          -
          16




**4** **.
      Goodwill and Other Intangible Assets**





In
      January 2005, we acquired 100% of the outstanding stock of Maurices
      Incorporated. The total purchase price was $328.3 million, net of cash acquired,
      which included $4.4 million of transaction fees. The transaction was financed
      by
      $114.3 million in cash (derived from the sale of investments), the issuance
      of
      $115 million 2.5% convertible senior notes due 2024, and $100 million from
      borrowings under a $250 million senior credit facility (consisting of a $100
      million term loan, and a $150 million revolving credit line under which no
      funds
      were drawn). We accounted for the acquisition as a purchase using the accounting
      standards established in SFAS No. 141, Business Combinations, and, accordingly,
      the excess purchase price over the fair market value of the underlying net
      assets acquired, or $132.6 million, was allocated to goodwill **.** In
      connection with the acquisition, there was an unsettled purchase price
      adjustment that would be ultimately determined upon finalization of the seller’s
      tax returns. This determination of the purchase price was resolved during the
      first quarter of fiscal 2007, which generated a $1.9 million reduction from
      the
      initial goodwill recorded and resulted in a goodwill balance of $130.7 million.
      Goodwill amortization is deductible for tax purposes.





In
      accordance with SFAS No. 142, *Goodwill
      and Other Intangible Assets* ,
      amortization of goodwill and indefinite life intangible assets is replaced
      with
      annual impairment tests. We perform an impairment test at least annually on
      or
      about June 30th or whenever events or changes in business circumstances
      necessitate determining whether an impairment charge related to the carrying
      value of our recorded goodwill or indefinite life intangible assets is needed.





Other
      identifiable intangible assets consist of trade names, customer relationships
      and proprietary technology. Trade names have an indefinite life and therefore
      are not amortized. Customer relationships and proprietary technology constitute
      our identifiable intangible assets subject to amortization, which are amortized
      on a straight-line basis over their useful lives.




Other
      intangible assets were comprised of the following:




(Amounts
      in thousands)


**July 26, 2008**
            
            **July 28, 2007****Description**
            
            **Expected**
              **Life**
            
            **Gross**
              **Carrying**
              **Amount**
            
            **Accumulated**
              **Amortization**
            
            **Net Amount**
            
            **Gross**
              **Carrying**
              **Amount**
            
            **Accumulated**
              **Amortization**
            
            **Net Amount**Customer
                Relationship
            
            7
              years
            
            $
            2,200
            
            $
            1,126
            
            $
            1,074
            
            $
            2,200
            
            $
            812
            
            $
            1,388Proprietary
                Technology
            
            5
              years
            
            
            3,298
            
            
            2,570
            
            
            728
            
            
            3,298
            
            
            1,754
            
            
            1,544Trade
                Names
            
            Indefinite
            
            
            106,000
            
            
            -
            
            
            106,000
            
            
            106,000
            
            
            -
            
            
            106,000**Total
                intangible assets**
            
            
            
            
            $
            111,498
            
            $
            3,696
            
            $
            107,802
            
            $
            111,498
            
            $
            2,566
            
            $
            108,932





The
      amortization for fiscal 2008 was $1.1 million. The estimated annual amortization
      expense for the customer relationship and proprietary technology intangible
      assets for the remaining years of their lives is as follows: $0.9 million,
      $0.5
      million, $0.3 million, and $0.1 million, for fiscal 2009, fiscal 2010, fiscal
      2011 and fiscal 2012, respectively.





**5.
      Debt**




Our
      2.50%
      Convertible Senior Notes (“Convertible Senior Notes”), which have an aggregate
      principal amount of $115 million, are due 2024. We may redeem some or all of
      the
      Convertible Senior Notes for cash at any time on or after December 22, 2011
      at a
      redemption price equal to 100% of the principal amount of the notes plus accrued
      interest. Holders may convert their notes into cash and shares of our common
      stock, if any, at a conversion rate of 95.1430 shares per $1,000 principal
      amount of Convertible Senior Notes (equal to a conversion price of approximately
      $10.51 per share), during specified periods. Upon conversion, we would deliver
      cash for the aggregate principal amount of Convertible Senior Notes to be
      converted. The excess, if any, of the price of our common stock above $10.51
      per
      share would be payable in common shares. If the market price of the common
      stock
      exceeds the conversion price, we are required to use the treasury stock method
      in calculating diluted earnings per share for the number of shares to be issued
      for the excess value. As of July 28, 2008 and continuing through October 24,
      2008, the holders of the Convertible Senior Notes may convert their notes as
      described above because our stock price closed at or above $12.61 per share
      for
      20 trading days within the 30-trading-day period ended on July 25, 2008. As
      a
      result of the conversion criteria being met as of July 25, 2008 and July 28,
      2007 and the ability of the holders, at their option, to convert their notes,
      the Company has classified the Convertible Senior Notes as current liabilities
      in the accompanying Consolidated Balance Sheets. On July 25, 2008, the market
      value of the Convertible Senior Notes was $191.5 million as valued on PORTAL
      (Private Offering Resale and Trading through Automated Linkage).




F
          -
          17





On
      December 21, 2005, we entered into a credit agreement with several lenders
      (the
“Credit Agreement”). Our credit agreement provides a senior secured revolving
      credit facility that provides for borrowings and issuance of letters of credit
      for up to $100 million, which we may request be increased up to $150 million.
      The Credit Agreement will terminate on December 21, 2010 or earlier under
      certain conditions. Borrowings under the Credit Agreement are based on either
      LIBOR or the higher of the prime rate of JPMorgan Chase Bank, N.A. or the
      Federal Funds Effective Rate plus 0.50%. The interest rates under the Credit
      Agreement vary depending upon our adjusted leverage ratio. The Credit Agreement
      contains affirmative, negative and financial covenants, the most restrictive
      of
      which include a fixed charge coverage ratio and a limit on capital expenditures
      in any fiscal year. The Credit Agreement is collateralized by substantially
      all
      of our assets exclusive of the Dunnigan Realty, LLC assets, and Maurices
      Incorporated assets, and none of our subsidiaries have guaranteed the Credit
      Agreement. As of July 26, 2008, $54 million was available under the Credit
      Agreement, which represents the $100 million from our senior secured revolving
      credit facility less $46 million of outstanding letters of credit at July 26,
      2008.





In
      connection with the issuance of the Convertible Senior Notes and the Senior
      Credit Facility, we incurred approximately $4.0 million in underwriting costs
      and $4.1 million in professional fees. Such fees were deferred and included
      in
“Other assets” on the accompanying Consolidated Balance Sheets. Certain of these
      amounts were fully amortized to interest expense with the repayment of the
      $100
      million term loan and the termination of the Senior Credit Facility. At July
      26,
      2008, there were $3.3 million of unamortized costs.





In
      connection with the purchase of the Suffern facility, Dunnigan Realty, LLC
      (“Dunnigan”), in July 2003, borrowed $34 million under a 5.33% rate mortgage
      loan. The Dunnigan mortgage loan (the “Mortgage”) is collateralized by a
      mortgage lien on the Suffern facility, of which the major portion is our
      corporate offices and **dressbarn’s** distribution center. Payments of principal and interest on the mortgage, a
      20-year fully amortizing loan, are due monthly through July 2023. In connection
      with the mortgage, we paid approximately $1.7 million in debt issuance costs.
      These costs were deferred and included in “Other assets” on our Consolidated
      Balance Sheets and are being amortized to interest expense over the life of
      the
      Mortgage.





Debt
      consists of the following:





(Amounts in thousands)
            
            **July 26,**
              **2008**
            
            **July 28,**
              **2007**Dunnigan
                Mortgage
            
            $
            28,540
            
            $
            29,751Convertible
                Senior Notes
            
            
            115,000
            
            
            115,000$
            143,540
            
            $
            144,751Less:
                current portion
            
            
            (116,277
            )
            
            (116,211
            )**Total
                long-term debt**
            
            $
            27,263
            
            $
            28,540




Scheduled
      principal payments of the above debt for each of the next five fiscal years
      and
      beyond, excluding the Convertible Senior Notes which are payable on demand,
      is
      as follows: $1.3 million, $1.3 million, $1.4 million, $1.5 million, $1.6 million
      and $21.4 million, respectively. Currently, the $115.0 million of Convertible
      Senior Notes is not a scheduled payment.





Interest
      expense relating to the above debt was approximately $4.4 million for the fiscal
      year ended July 26, 2008, $4.5 million for the fiscal year ended July 28, 2007,
      and $4.6 million for the fiscal year ended July 29, 2006. Fees related to the
      Credit Agreement and the Senior Credit Facility totaled $0.3 million for the
      fiscal year ended July 26, 2008, $0.3 million for the fiscal year ended July
      28,
      2007, and $0.4 million for the fiscal year ended July 29, 2006.




**6** . **Comprehensive
      Income (Loss)**





Comprehensive
      income is calculated in accordance with SFAS No. 130, Reporting Comprehensive
      Income *,* and
      includes our net earnings and unrealized gains and losses on available-for-sale
      marketable security investments. Cumulative unrealized gains and losses on
      available-for-sale marketable securities are reflected as accumulated other
      comprehensive (loss) income in shareholders’ equity. We have recognized a $3.3
      million temporary unrealized loss in fair value of our ARS, partially offset
      by
      an unrealized gain of $0.3 million from our short term investments which is
      reflected in our accumulated other comprehensive (loss) income. See Note 2
      “Marketable Security Investments” for additional information. C omprehensive
      income for all periods presented is comprised of the following:




F
          -
          18




**Fiscal Year Ended**(Amounts in thousands)
            
            **July 26, 2008**
            
            **July 28, 2007**
            
            **July 29, 2006**Net
                earnings
            
            $
            74,088
            
            $
            101,182
            
            $
            78,954Unrealized
                (loss) gain on marketable security investments, net of taxes
            
            
            (3,078
            )
            
            31
            
            
            8Other
                Comprehensive income
            
            $
            71,010
            
            $
            101,213
            
            $
            78,962




**7.
      Stock Repurchase Program**




On
      September 20, 2007, our Board of Directors authorized a new $100 million share
      repurchase program (the “2007 Program”). Under the 2007 Program purchases of
      shares of our common stock may be made at our discretion from time to time,
      subject to market conditions and at prevailing market prices, through open
      market purchases or in privately negotiated transactions and will be subject
      to
      applicable SEC rules. The 2007 Program has no expiration date. As of the date
      of
      this filing, no shares were purchased under this stock repurchase program.





During
      the first quarter of fiscal 2008, we completed our $75 million share repurchase
      program, which was originally announced on April 5, 2001. The remaining
      authorized amount for this share repurchase program was $28.3 million with
      which
      we purchased 1,634,060 shares at an average price of $17.34 in August 2007.
      During the first quarter of fiscal 2008, 610,000 shares which were reacquired
      but not retired during the fourth quarter of fiscal 2007 were retired for $11.9
      million. Treasury (reacquired) shares are retired and treated as authorized
      but
      unissued shares.





**8.
      Earnings Per Share**





Basic
      earnings per share are computed based upon the weighted average number of common
      shares outstanding. The computation of diluted earnings per share assumes the
      exercise of all stock options using the treasury stock method and the conversion
      of the Senior Convertible Notes (see Note 5), to the extent dilutive. Diluted
      earnings per share are computed based upon the weighted average number of common
      and common equivalent shares outstanding. Common equivalent shares outstanding
      consist of shares covered by stock options and the Convertible Senior Notes,
      to
      the extent dilutive. All prior period common stock share amounts have been
      adjusted to reflect a two-for-one split of our common stock effective April
      3,
      2006.





A
      reconciliation of basic and diluted weighted average number of common shares
      outstanding is presented below:





**Fiscal
                Year Ended**(Amounts
                in thousands)
            
            **July
                26,**
              **2008**
            
            **July
                28,**
              **2007**
            
            **July
                29,**
              **2006**Weighted
                average number of common shares outstanding – basic
            
            
            60,102
            
            
            62,020
            
            
            61,216Net
                    effect of dilutive common stock equivalents that include stock
                    options and
                    convertible securities based on the treasury stock method using
                    the
                    average market price
            
            
            4,365
            
            
            8,002
            
            
            7,512Weighted
                average number of common shares outstanding – diluted
            
            
            64,467
            
            
            70,022
            
            
            68,728Anti-dilutive
                common stock equivalents
            
            
            1,761
            
            
            561
            
            
            -





The
      Convertible Senior Notes were dilutive at July 26, 2008, July 28, 2007 and
      July
      29, 2006 as the average price of our stock was more than the conversion price
      of
      the Convertible Senior Notes for the year, in accordance with EITF Issue No.
      04-8, *The
      Effect of Contingently Convertible Debt on Diluted Earnings Per
      Share* .
      The
      number of additional shares related to the dilutive effect of the Convertible
      Senior Notes was approximately 2,866,000 shares for fiscal 2008, approximately
      5,565,000 shares for fiscal 2007 and approximately 4,946,000 shares for fiscal
      2006. The dilutive effect of the Convertible Senior Notes in fiscal 2008 was
      lower since it is directly related to the lower average market price of fiscal
      2008.





Anti-dilutive
      common stock equivalents were excluded from the shares used in the computation
      of diluted earnings per share for fiscal 2008 and fiscal 2007, as they were
      anti-dilutive. There were no anti-dilutive shares for fiscal
      2006.


F
          -
          19


**9.
      Employee Benefit Plans**





We
      sponsor a defined contribution retirement savings plan (401(k)) covering all
      eligible employees. We also sponsor an Executive Retirement Plan for certain
      officers and key executives. Both plans allow participants to defer a portion
      of
      their annual compensation and receive a matching employer contribution on a
      portion of that deferral. During fiscal 2008, 2007 and 2006 we incurred expenses
      of approximately $2,925,000, $3,794,000 and $2,828,000, respectively, relating
      to the contributions to and administration of the above plans. These expenses
      are allocated to cost of sales and selling, general and administrative expenses
      in accordance with our accounting policies described in Note 1. We also sponsor
      an Employee Stock Purchase Plan, which allows employees to purchase shares
      of
      our stock during each quarterly offering period at a 10% discount through weekly
      payroll deductions. We do not provide any additional postretirement
      benefits.





**10.
      Income Taxes**





The
      components of the provision for income taxes were as follows:





**Fiscal Year Ended**(Amounts in thousands)
            
            **July 26,**
              **2008**
            
            **July 28,**
              **2007**
            
            **July 29,**
              **2006**Federal:Current
            
            $
            26,407
            
            $
            48,513
            
            $
            46,453Deferred
            
            
            12,083
            
            
            (1,366
            )
            
            (4,480
            )38,490
            
            
            47,147
            
            
            41,973State:Current
            
            
            5,625
            
            
            10,360
            
            
            11,052Deferred
            
            
            (2,085
            )
            
            (167
            )
            
            (1,225
            )3,540
            
            
            10,193
            
            
            9,827**Provision
                for income taxes**
            
            $
            42,030
            
            $
            57,340
            
            $
            51,800




Significant
      components of our deferred tax assets and liabilities were as
      follows:





(Amounts
                in thousands)
            
            **July
                26,**
              **2008**
            
            **July
                28,**
              **2007**Deferred
                tax assets:Inventory
                capitalization and inventory-related items
            
            $
            5,022
            
            $
            4,843Capital
                loss carryover
            
            
            998
            
            
            660Accrued
                payroll & benefits
            
            
            14,090
            
            
            12,463Share
                based compensation
            
            
            5,341
            
            
            6,198Straight-line
                rent
            
            
            10,068
            
            
            9,428Federal
                benefit of uncertain tax positions
            
            
            5,580
            
            
            -Other
                items
            
            
            8,083
            
            
            4,401**Total
                deferred tax assets**
            
            
            49,182
            
            
            37,993Deferred
                tax liabilities:Depreciation
            
            
            13,372
            
            
            13,344Intangibles
            
            
            22,348
            
            
            16,056Interest
            
            
            9,056
            
            
            6,557Other
                items
            
            
            5,511
            
            
            2,431**Total
                deferred tax liabilities**
            
            
            50,287
            
            
            38,388Valuation
                allowance
            
            
            2,528
            
            
            66**Net
                deferred tax liabilities**
            
            $
            3,633
            
            $
            461





The
      fiscal 2008 total net deferred tax liability is presented on our Consolidated
      Balance Sheet as a long term liability of $3.2 million and as a current
      liability of $0.4 million. The fiscal 2007 total net deferred tax liability
      is
      presented on our Consolidated Balance Sheet as a current asset of $4.2 million
      and as a long-term liability of $4.7 million.


F
          -
          20


The
        Company assessed the ability to utilize its capital loss carryovers, as well
        as
        ability to realize the benefit of unrealized losses sustained in the current
        period, and concluded that a valuation allowance is required against the
        related
        tax assets. The
        Company established a valuation allowance of approximately $2.5 million during
        the year that relates to capital loss carryovers, and unrealized losses on
        investments. The valuation allowance had a balance of $2.5 million at July
        26,
        2008 and $0.1 at July 28, 2007.





The
      classification of deferred tax assets and deferred tax liabilities were as
      follows:





(Amounts in thousands)
            
            **July 26,**
              **2008**
            
            **July 28,**
              **2007**Total
                current deferred tax assets
            
            $
            13,804
            
            $
            13,230Total
                non-current deferred tax assets
            
            
            32,850
            
            
            24,697**Total
                deferred tax assets**
            
            $
            46,654
            
            $
            37,927Total
                current deferred tax liabilities
            
            $
            14,205
            
            
            8,988Total
                non-current deferred tax liabilities
            
            
            36,082
            
            
            29,400**Total
                deferred tax liabilities**
            
            $
            50,287
            
            $
            38,388




Following
      is a reconciliation of the statutory Federal income tax rate and the effective
      income tax rate applicable to earnings before income taxes:




**Fiscal Year Ended****July 26,**
              **2008**
            
            **July 28,**
              **2007**
            
            **July 29,**
              **2006**Statutory
                tax rate
            
            
            35.0
            %
            
            35.0
            %
            
            35.0
            %State
                taxes – net of federal benefit
            
            
            4.3
            %
            
            4.3
            %
            
            4.5
            %Tax-exempt
                interest
            
            
            (2.0
            )%
            
            (1.5
            )%
            
            (0.7
            )%Net
                change in the Fin 48 Reserve
            
            
            (4.2
            )%
            
            -
            
            
            -Valuation
                allowance – capital losses
            
            
            0.9
            %
            
            -
            
            
            -Other –
                net
            
            
            2.2
            %
            
            (1.6
            )%
            
            0.8
            %Effective
                tax rate
            
            
            36.2
            %
            
            36.2
            %
            
            39.6
            %


We
        adopted FIN 48 on July 29, 2007 and as of the adoption date, we had recorded
        unrecognized tax benefits of $27.2 million, of which $19.4 million, if
        recognized, would affect the effective tax rate. At July 26, 2008, the liability
        for income taxes associated with uncertain tax positions was $18.1 million,
        of
        which $12.5 million, if recognized, would affect the effective tax
        rate.
 
 We
        recognized interest and penalties related to unrecognized tax benefits as
        a
        component of income tax expense. Our gross liability as of July 29, 2007
        of
        $27.2 million includes accrued interest of $6.5 million and penalties of
        $0.5
        million. The liability as of July 26, 2008 of $18.1 million includes accrued
        interest of $3.6 million and penalties of $0.5 million. During the year ended
        July 26, 2008, we recognized a net benefit in tax expense of $2.9 million
        attributable to interest and $0.1 million attributable to penalties for a
        total
        benefit of $3.0 million related to the decrease in its liability for uncertain
        tax positions.
 
 A
        reconciliation of the beginning and ending balances of the total amounts
        of
        gross unrecognized tax liability, excluding interest and penalties is as
        follows:
  TotalGross
                  liability for unrecognized tax benefit at July 29,
                  2007
              
              $
              20.2Increases
                  related to tax positions in prior years
              
              
              1.0Decreases
                  related to tax positions in prior years
              
              
              (5.2
              )Decreases
                  related to settlements
              
              
              (0.9
              )Decreases
                  related to lapse in statute of limitations
              
              
              (1.9
              )Increases
                  related to current year tax positions
              
              
              0.8Gross
                  liability for unrecognized tax benefit at July 26,
                  2008
              
              $
              14.0
  We
        believe it is reasonably possible that there will be a $3.0 million decrease
        in
        the gross tax liability for uncertain tax positions within the next 12 months
        based upon potential settlements and the expiration of statutes of limitations
        in various tax jurisdictions. We file
        income tax returns in the U.S. federal jurisdiction and various tax
        jurisdictions. Federal periods that remain subject to examination include
        fiscal
        2005 to fiscal 2007 and state jurisdictions that remain subject to examination
        range from fiscal 2003 to 2007, with few exceptions.
  F
            -
            21





**11.
      Commitments and Contingencies**





*Lease
      commitments*





We
      lease
      all of our stores. Certain leases provide for additional rents based on
      percentages of net sales, charges for real estate taxes, insurance and other
      occupancy costs. Store leases generally have an initial term of approximately
      10
      years with one or more 5-year options to extend the lease. Some of these leases
      have provisions for rent escalations during the initial term. We receive rental
      income and reimbursement for taxes and common area maintenance charges primarily
      from two tenants that occupy a portion of the Suffern facility that are not
      affiliated with us. The rental income from the other tenants is shown as “other
      income” on our Consolidated Statements of Earnings. In addition, the operating
      leases have been reduced by our sublease revenue annually by $1.7 million
      through fiscal 2012.





A
      summary
      of occupancy costs follows:




**Fiscal Year Ended**(Amounts in thousands)
            
            **July 26,**
              **2008**
            
            **July 28,**
              **2007**
            
            **July 29,**
              **2006**Base
                rentals
            
            $
            137,398
            
            $
            126,275
            
            $
            119,298Percentage
                rentals
            
            
            3,260
            
            
            4,113
            
            
            3,262Other
                occupancy costs
            
            
            46,174
            
            
            41,909
            
            
            40,298186,832
            
            
            172,297
            
            
            162,858Less:
                Rental income from third parties
            
            
            (1,821
            )
            
            (1,659
            )
            
            (1,526
            )**Total**
            
            $
            185,011
            
            $
            170,638
            
            $
            161,332




The
      following is a schedule of future minimum rentals under noncancelable operating
      leases as of July 26, 2008, (amounts
      in thousands):





**Fiscal
                Year**
            
            **Total**2009
            
            $
            141,3052010
            
            
            119,4582011
            
            
            96,4952012
            
            
            72,7252013
            
            
            47,602Subsequent
                years
            
            
            91,984**Total
                future minimum rentals**
            
            $
            569,569




Although
      we have the ability to cancel certain leases if specified sales levels are
      not
      achieved, future minimum rentals under such leases have been included in the
      above table.





*Leases
      with related parties*





We
      lease
      two stores from our Chairman or related trusts. Future minimum rentals under
      leases with such related parties which extend beyond July 26, 2008, included
      in
      the above schedule, are approximately $312,000 annually and in the aggregate
      $0.8 million. The leases also contain provisions for cost escalations and
      additional rent based on net sales in excess of stipulated amounts. Rent expense
      for fiscal years 2008, 2007, and 2006 under these leases amounted to
      approximately $332,000, $389,000, and $364,000, respectively.





*Contractual
      obligations and commercial commitments*





In
      addition to the lease commitments represented in the above table, we enter
      into
      a number of cancelable and non-cancelable commitments during the year.
      Typically, these commitments are for less than a year in duration and are
      principally focused on the construction of new retail stores and the procurement
      of inventory. We do not maintain any long-term or exclusive commitments or
      arrangements to purchase merchandise from any single supplier. Preliminary
      commitments with our private label merchandise vendors typically are made five
      to seven months in advance of planned receipt date. Substantially all of our
      merchandise purchase commitments are cancelable up to 30 days prior to the
      vendor’s scheduled shipment date.


F
          -
          22




**12.
      Stock-Based Compensation Plans**




Our
      2001
      Stock Incentive Plan provides for the granting of either ISO’s or non-qualified
      options to purchase shares of common stock. At the November 30, 2005 Annual
      Shareholders Meeting, shareholders approved an additional 6 million shares
      available for issuance (for a total of 12 million) under the 2001 Stock
      Incentive Plan. As of July 26, 2008, there were approximately 5.9 million shares
      under the 2001 plan available for future grant. All of our prior stock option
      plans have expired as to the ability to grant new options. We issue new shares
      of common stock when stock option awards are exercised. Refer to the
      c onsolidated
      statements of shareholders’ equity and comprehensive (loss) income for new
      shares of common stock issued in fiscal 2008, fiscal 2007 and fiscal
      2006.





Stock
      option awards outstanding under our current plans have generally been granted
      at
      exercise prices which are equal to the market value of our stock on the date
      of
      grant, generally vest over five years and expire no later than ten years after
      the grant date. Effective July 31, 2005, we recognize compensation expense
      ratably over the vesting period, net of estimated forfeitures. As of July 26,
      2008, there was $12.4 million of total unrecognized compensation cost related
      to
      nonvested options, which is expected to be recognized over a remaining
      weighted-average vesting period of 2.9 years. The total intrinsic value of
      options exercised during fiscal 2008 was approximately $1.6 million, during
      fiscal 2007 was approximately $14.8 million, and during fiscal 2006 was
      approximately $15.6 million. The total fair value of options that vested during
      fiscal 2008, fiscal 2007 and fiscal 2006, was approximately $5.4 million, $5.5
      million, and $3.0 million, respectively.




The
      following table summarizes the activities in all Stock Option Plans and changes
      during fiscal 2008:


Options
              
              Weighted
                Average
                Exercise
                PriceOptions
                  outstanding – beginning of year
              
              
              5,677,329
              
              $
              10.35Granted
              
              
              663,800
              
              
              16.73Cancelled
              
              
              (265,450
              )
              
              13.42Exercised
              
              
              (224,711
              )
              
              7.19Outstanding
                  end of year
              
              
              5,850,968
              
              $
              11.05Options
                  exercisable at year-end
              
              
              3,108,018
              
              $
              8.45Weighted-average
                  fair value of options granted during the year
              
              
              
              
              $
              6.63




At
      July
      26, 2008, we had 5,609,267 options vested and expected to vest with an aggregate
      intrinsic value of $28.2 million and a weighted-average remaining contractual
      term of 6.1 years. At July 28, 2007, we had 5,354,865 options vested and
      expected to vest with an aggregate intrinsic value of $46.2 million and a
      weighted-average remaining contractual term of 7.2 years. The weighted-average
      fair value of options granted during fiscal 2006 was
      $5.07.


F
          -
          23




The
      following table summarizes information about stock options outstanding at July
      26, 2008:





Range of Exercise
              Prices
            
            Number
              Outstanding as of
              July 26, 2008
            
            Weighted
              Average
              Remaining Life
            
            Weighted
              Average
              Exercise Price
            
            Number
              Exercisable as of
              July 26, 2008
            
            Weighted
              Average
              Exercise Price$2.84
            
            
            3,100
            
            
            0.2
                years
            
            $
            2.84
            
            
            3,100
            
            $
            2.842.85 –
                5.19
            
            
            648,495
            
            
            1.6
                years
            
            
            3.98
            
            
            648,495
            
            
            3.985.20 –
                8.19
            
            
            1,746,579
            
            
            4.8
                years
            
            
            7.10
            
            
            1,452,179
            
            
            6.958.20 –
                12.93
            
            
            2,218,828
            
            
            7.1
                years
            
            
            11.58
            
            
            802,228
            
            
            11.4812.94 –
                23.30
            
            
            1,233,966
            
            
            8.7
                years
            
            
            19.44
            
            
            202,016
            
            
            21.59$2.84
                - $23.30
            
            
            5,850,968
            
            
            6.2
                years
            
            $
            11.05
            
            
            3,108,018
            
            $
            8.45





The
      options exercisable at July 26, 2008, have an aggregate intrinsic value of
      $21.7
      million and a weighted average contractual term of 4.8 years.





The
      2001
      Stock Incentive Plan also allows for the issuance of restricted shares. Prior
      to
      January 2005, restricted shares did not count against the 2001 Stock Incentive
      Plan. Effective January 2005, any shares of restricted stock are counted against
      the shares available for future grant limit as three shares for every one
      restricted share granted. In general, if options are cancelled for any reason
      or
      expire, the shares covered by such options again become available for grant.
      If
      a share of restricted stock is forfeited for any reason, three shares
      become available for grant.




In
      accordance with SFAS No. 123R, the fair value of restricted stock awards is
      estimated on the date of grant based on the market price of our stock and is
      amortized to compensation expense on a graded basis over the related vesting
      periods, which are generally five years. As of July 26, 2008, there was $0.9
      million of total unrecognized compensation cost related to nonvested restricted
      stock awards, which is expected to be recognized over a remaining
      weighted-average vesting period of 2.9 years. The total fair value of the
      restricted stock awards recognized as compensation expense during the fifty-two
      weeks ended July 26, 2008, July 28, 2007 and July 29, 2006 was $1.3 million,
      $1.1million and $0.6 million, respectively.





Following
      is a summary of the changes in the shares of restricted stock outstanding during
      fiscal 2008:





Number of
              Shares
            
            Weighted Average
              Grant Date Fair
              Value Per ShareRestricted
                stock awards at July 28, 2007
            
            
            137,167
            
            $
            13.59Granted
            
            
            54,573
            
            
            19.56Vested
            
            
            (48,816
            )
            
            12.59Forfeited
            
            
            (2,400
            )
            
            22.12Restricted
                stock awards at July 26, 2008
            
            
            140,524
            
            $
            16.12




Our
      Employee Stock Purchase Plan allows eligible full-time employees to purchase
      a
      limited number of shares of our common stock during each quarterly offering
      period at a 10% discount through weekly payroll deductions. During the fifty-two
      weeks ended July 26, 2008, we sold approximately 23,000 shares to employees
      at
      an average discount of $1.36 per share under the Employee Stock Purchase Plan.
      The compensation expense recognized for the discount given under the Employee
      Stock Purchase Plan was approximately $31,000 for the fifty-two weeks ended
      July
      26, 2008.





Prior
      to
      the adoption of SFAS No. 123R, we presented all tax benefits resulting from
      the exercise of stock options as operating cash flows in the Consolidated
      Statement of Cash Flows. SFAS No. 123R requires that cash flows resulting
      from tax deductions in excess of the cumulative compensation cost recognized
      for
      options exercised (“excess tax benefits”) be classified as financing cash flows.
      For the 52 weeks ended July 26, 2008, excess tax benefits realized from the
      exercise of stock options was $0.4 million.




F
          -
          24


**13.
      Segments**





Our
      reportable segments are the **dressbarn** brands,
      which are used in 656 Combo
      stores (a combination of **dressbarn** and **dressbarn**  **woman** stores),
      134 **dressbarn** stores
      and 36 **dressbarn**  **woman** stores in 46
      states as of July 26, 2008 and the **maurices** brand,
      which is used in 677 stores in 44 states as of July 26, 2008. We completed
      the
      acquisition of Maurices Incorporated in January 2005.





Our **dressbarn** stores
      are operated mostly in a combination of **dressbarn** and **dressbarn**  **woman** stores,
      or Combo stores, which carry **dressbarn** and
      larger-sized **dressbarn**  **woman** merchandise, as well as freestanding **dressbarn** and **dressbarn**  **woman** stores.
      The **dressbarn** brands
      primarily attract female consumers in the mid 30’s to mid 50’s age range, while **maurices** ’
      fashions are designed to appeal to the 17 to 34 year-old-female. During third
      quarter of fiscal 2007 **maurices** began
      transitioning out of the men’s product line in order to introduce female
      Plus-sizes in the fourth quarter of fiscal 2007. Our **maurices** stores
      are concentrated in small markets in the United States, while our **dressbarn** and **dressbarn**  **woman** stores
      tend to be in larger population markets. Substantially
      all of **maurices’** management team prior to the acquisition continues to manage the daily
      operations of **maurices** .
      Additionally, **maurices** distributes goods to its stores through a separate distribution center. **maurices** also has
      separate financial reporting systems from **dressbarn** .
      We
      believe that **maurices** is
      currently a reportable segment due to management’s review of **maurices’** separately available operating results and other financial information to
      regularly assess its performance for decision-making purposes. Income tax
      information by segment has not been included as taxes are calculated at a
      company-wide level and are not allocated to each segment.





Information
      on the **dressbarn** and **maurices** brands
      and the reconciliation to operating earnings, are as follows:





(Amounts in millions)
            
            **Fiscal 2008**
            
            **Fiscal 2007**
            
            **Fiscal 2006**Net
                sales**dressbarn
                and dressbarn woman**brands
            
            $
            887.6
            
            $
            934.8
            
            $
            876.2**maurices**brand
            
            
            556.6
            
            
            491.8
            
            
            424.1Consolidated
                net sales
            
            $
            1,444.2
            
            $
            1,426.6
            
            $
            1,300.3Operating
                income**dressbarn
                and dressbarn woman**brands
            
            $
            42.8
            
            $
            94.9
            
            $
            81.0**maurices**brand
            
            
            69.8
            
            
            60.1
            
            
            50.9Consolidated
                operating income
            
            
            112.6
            
            
            155.0
            
            
            131.9Interest
                income
            
            
            7.8
            
            
            7.0
            
            
            2.7Interest
                expense
            
            
            (4.8
            )
            
            (4.9
            )
            
            (5.3
            )Other
                income
            
            
            0.5
            
            
            1.4
            
            
            1.5Earnings
                before provision for income taxes
            
            $
            116.1
            
            $
            158.5
            
            $
            130.8Depreciation
                and amortization**dressbarn
                and dressbarn woman**brands
            
            $
            27.8
            
            $
            28.1
            
            $
            25.9**maurices**brand
            
            
            20.4
            
            
            17.7
            
            
            15.8Consolidated
                depreciation and amortization
            
            $
            48.2
            
            $
            45.8
            
            $
            41.7Capital
                expenditures**dressbarn
                and dressbarn woman**brands
            
            $
            34.4
            
            $
            37.7
            
            $
            31.7**maurices**brand
            
            
            31.7
            
            
            25.3
            
            
            16.6Consolidated
                capital expenditures
            
            $
            66.1
            
            $
            63.0
            
            $
            48.3




(Amounts in millions)
            
            **July 26, 2008**
            
            **July 28, 2007**Total
                assets**dressbarn
                and dressbarn woman**brands
            
            $
            850.0
            
            $
            822.3**maurices**brand
            
            
            174.5
            
            
            159.0Total
                assets
            
            $
            1,024.5
            
            $
            981.3Merchandise
                inventories**dressbarn
                and dressbarn woman**brands
            
            $
            117.9
            
            $
            130.4**maurices**brand
            
            
            69.1
            
            
            66.7Total
                merchandise inventories
            
            $
            187.0
            
            $
            197.1




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**14.
      Quarterly Results of Operations (UNAUDITED)**





(Amounts
      in thousands, except per share data)


**Fiscal Year Ended July 26, 2008**
            
            **Fourth**
              **Quarter**
            
            **Third**
              **Quarter**
            
            **Second**
              **Quarter**
            
            **First**
              **Quarter**Net
                sales
            
            $
            382,303
            
            $
            352,570
            
            $
            345,568
            
            $
            363,724Cost
                    of sales, including occupancy and buying costs (excluding
                    depreciation)
            
            
            231,309
            
            
            206,571
            
            
            223,832
            
            
            224,215Income
                taxes (1)
            
            
            14,515
            
            
            12,712
            
            
            2,529
            
            
            12,274Net
                earnings
            
            
            22,114
            
            
            24,937
            
            
            7,414
            
            
            19,623Earnings
                per shareBasic
            
            $
            0.37
            
            $
            0.41
            
            $
            0.12
            
            $
            0.33Diluted
            
            $
            0.34
            
            $
            0.39
            
            $
            0.12
            
            $
            0.30




**Fiscal Year Ended July 28, 2007**
            
            
            **Fourth**
              **Quarter**
            
            
            **Third**
              **Quarter**
            
            
            **Second**
              **Quarter**
            
            
            **First**
              **Quarter**Net
                sales
            
            $
            379,902
            
            $
            347,923
            
            $
            340,344
            
            $
            358,438Cost
                    of sales, including occupancy and buying costs (excluding
                    depreciation)
            
            
            216,010
            
            
            205,378
            
            
            211,288
            
            
            209,516Income
                taxes (2)
            
            
            20,054
            
            
            13,216
            
            
            6,610
            
            
            17,460Net
                earnings
            
            
            33,629
            
            
            23,111
            
            
            17,024
            
            
            27,418Earnings
                per shareBasic
            
            $
            0.54
            
            $
            0.37
            
            $
            0.27
            
            $
            0.45Diluted
            
            $
            0.48
            
            $
            0.33
            
            $
            0.24
            
            $
            0.40




(1)
            The
                income tax provision for the second quarter of fiscal 2008 was favorably
                impacted by the reversal of $1.9 million of uncertain tax positions
                following a state administrative ruling that reduced our potential
                exposure for taxes and interest in that state.





(2)
            The
                income tax provision for the second quarter of fiscal 2007 was favorably
                impacted by $2.3 million, primarily as a result of one-time adjustments
                to
                certain deferred tax accounts.




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