**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-K**





ANNUAL
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      fiscal year ended **July
      29, 2006**      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
                LLC




Securities
      registered pursuant to Section 12(g) of the Act: None





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes
x     
      No o





Indicate
      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
x.





Indicate
      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
o.





Indicate
      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 incorporated by reference in Part III of
      this
      Form 10-K or any amendment to this Form 10-K. x.





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
      accelerated filer x  Accelerated
      filer o  Non-accelerated
      filer o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o No
x




The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant as of January 28, 2006 was approximately $1 billion, based on the
      last reported sales price on the NASDAQ Global Select Market (formerly the
      NASDAQ National Market) on that date. As of October 10, 2006, 61,782,888 shares
      of voting common shares were outstanding. The registrant does not have any
      authorized or 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 November 29, 2006 are incorporated into Parts I and III of this Form
      10-K.









**THE
      DRESS BARN, INC.**


**FORM
      10-K**


**FISCAL
      YEAR ENDED JULY 29, 2006**


**TABLE
      OF CONTENTS**


****


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




*This
      Annual Report on Form 10-K* *,
      including the sections 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 or our industry’s results, levels of
      activity, performance or achievements to be materially different from any future
      results, levels 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 filed 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 or otherwise.*





**dressbarn** ®, **dressbarn**  **woman** â , **maurices** â ,
      Studio
      Y â  and
      Industrial Exchange TM are
      our
      trademarks.





**PART
      I**





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





**General**




The
      Dress
      Barn, Inc. and its wholly-owned subsidiaries (the “Company”, “we,” “us,” “our”
or other similar terms) 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** .”
Since
      our retail business began in 1962, we have established and marketed our image
      as
      a source of fashion and value for the working woman. We have built our brand
      image as a core resource for a lifestyle-oriented, stylish, value-priced
      assortment of career and casual fashions tailored to our customers’ needs. As of
      July 29, 2006, we operated  1,339
      stores in 48 states and the District of Columbia, consisting of 575 Combo stores
      (a combination of **dressbarn** and **dressbarn**  **woman** stores),
      173 **dressbarn** stores,
      45 **dressbarn**  **woman** stores
      and  546 **maurices** stores.  We
      maintain an Internet web site at  www.dressbarn.com .
      The
      reference to our Internet web site address in this report does not constitute
      the incorporation by reference of the information contained at this site in
      this
      report. We make available, free of charge through publication on our Internet
      web site, a copy of our Annual Report on Form 10-K and quarterly reports on
      Form
      10-Q and any current reports on Form 8-K or amendments to those reports filed
      or
      furnished to the Securities and Exchange Commission (“SEC”) as soon as
      reasonably practicable after we have filed with or furnished such materials
      to
      the SEC.





**dressbarn
      and dressbarn woman brands**





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 for the working woman at value prices. These brands primarily attract
      female consumers in the mid 30’s to mid 50’s age range.





**maurices
      brand**





The **maurices** stores
      are concentrated in small markets (having populations of approximately 25,000
      to
      100,000) and offer moderately priced, up-to-date fashions designed to appeal
      to
      a younger female consumer than the **dressbarn** and **dressbarn**  **woman** brands. **maurices** product
      offerings are designed to appeal to the apparel and accessory needs of the
      17 to
      34 year-old-woman, as well as the casual apparel needs of the 17 to 34
      year-old-male. Approximately 90% of **maurices** sales
      relate to female-oriented product lines and 10% relate to male-oriented product
      lines.





Since
      the
      date of the acquisition of Maurices Incorporated, we have been implementing
      the
      most effective ways to combine and coordinate our brands so as to optimize
      performance and efficiencies. The integration process with **maurices** has been
      substantially completed. Substantially all of **maurices** ’
      management team prior to the acquisition continues to manage the daily
      operations of **maurices** .





3





**Company
      Strengths and Strategies**





Our **dressbarn** stores
      differentiate themselves from (i) off-price retailers by our carefully edited
      selection of proprietary, in-season, first-quality merchandise, service-oriented
      salespeople and our comfortable shopping environment, (ii) department stores
      by
      our value pricing, customer service and convenient locations and (iii) other
      specialty apparel retailers by our unique, lifestyle-oriented merchandise and
      our continuous focus on connecting with **dressbarn** 's
      target
      customer. As part of this focus, we have successfully developed our own brand,
      which constituted the vast majority of our net sales for the fiscal year ended
      July 29, 2006.





The **dressbarn** brand
      and the **dressbarn
      woman** brand
      strive to be the preferred career and casual women’s specialty store for the
      moderate 30 to 55 year-old-woman, (sizes 4 to 24), providing differentiated,
      current fashion merchandise at value prices in a comfortable, easy-to-shop
      environment. We cater to time-pressured working women who want their shopping
      trips to be efficient by offering one-stop shopping from career to casual
      sportswear, as well as dresses, suits, special occasion clothing, accessories,
      jewelry and shoes. We seek to maintain a distinct fashion point of view, editing
      our assortments frequently in accordance with our targeted customer's taste
      and
      style. Merchandise is arranged conveniently by lifestyle and category. We
      believe our customers have a high degree of confidence that they will quickly
      find the styles that match their preferences and are responding positively
      to
      our updated fashion direction. This, along with attentive service, helps to
      create a loyal, repeat customer. To accommodate this customer, we locate our
      stores primarily in convenient strip centers and operate most of them seven
      days
      and six nights a week.





To
      achieve growth in same store sales, our strategy is to increase customer traffic
      to our store locations by (a) developing and distributing more unique,
      fashion-forward quality merchandise not found at our competitors while
      maintaining value prices, (b) investing in technology and training to enhance
      the customer service levels in our stores and the product knowledge of our
      sales
      associates and (c) spending on marketing, advertising and public relations
      focused on upgrading the image and communicating the personality and voice
      of
      the **dressbarn** brand,
      as well as on special promotions, outreach programs and rewards to current
      and
      potential customers, many of whom are **dressbarn** credit
      card holders. A third-party financial institution administers the **dressbarn** credit
      card with no credit risk to us.





**dressbarn** is one
      of the largest national specialty store chains in its segment offering current
      career and casual fashions at value prices. **dressbarn** attributes its success to its: (i) national brand recognition and loyal customer
      base; (ii) long-standing relationships with vendors and manufacturers of quality
      merchandise, both domestic and overseas; (iii) strong, consistent customer
      focus; (iv) low cost operating structure; and (v) experienced merchandise and
      marketing management team. We have developed
      long-standing relationships with our existing customers, enjoying strong
      customer loyalty.





Over
      the
      past several years, we have gradually repositioned ourselves to appeal to a
      more
      fashion-conscious customer while maintaining our focus on our target customer
      who has also responded positively to our current fashion lifestyle direction.
      This repositioning includes: enhancing the existing **dressbarn** image;
      defining a feminine personality and voice for the brand; building brand
      awareness through various marketing, advertising and public relations campaigns
      and vehicles; adopting a new logo; and developing cause-related programs within
      our communities, all geared towards resonating with existing and potential
      customers and associates. To
      enhance the development of the **dressbarn** brand,
      we changed and updated our in-store graphics, and developed a prototype store
      design. We
      have
      expanded the use of our **dressbarn** label to
      virtually all our merchandise offerings, emphasizing quality, value and fashion.





To
      strengthen our **dressbarn** brand
      image and marketing effectiveness, we have evolved from reliance on weekly
      newspaper advertising to targeted national magazine advertising and expanded
      direct mail. We advertise in approximately 12 national lifestyle magazines
      with
      ads designed to enhance brand awareness and to bring new customers into our
      stores. We also work with a public relations firm to increase editorial coverage
      regarding our fashion and participate in charitable initiatives within our
      communities, particularly with the American Cancer Society, Dress For Success
      and the American Heart Association.





Our
      merchandise offerings reflect a focused and balanced assortment of career and
      casual fashions tailored to our customers’ demands. We believe we offer
      customers unique merchandise that is fashion current, with seasonal updated
      looks and colors arriving daily. The merchandise mix has evolved to a more
      updated contemporary style, shifting in focus from structured, career looks
      to
      softer, more casual outfits and assortments. We have upgraded our fabrications,
      offering value, style and fashion while maintaining quality and price points.
      We
      attempt to offer merchandise with sizes that are true, and have consistent
      fits,
      and that have easy to care for fabrics and quality construction.





Our
      stores continue to reflect newness and fashion, with key items accented by
      six
      floorset changes a year. Stores receive shipments daily for a constant flow
      of
      new looks to keep the assortments fresh and exciting. L ifestyle
      merchandising is key; emphasizing mix and match outfit dressing within strong
      color stories. Our
      prototype store design features an easier to shop layout, warmer colors and
      new
      wood fixtures for enhanced merchandise presentation. During the fifty-two weeks
      ended July 29, 2006 (“Fiscal 2006”), **dressbarn** utilized
      this design in its newly opened stores and updated approximately 55 stores
      to
      this design; **dressbarn** plans to
      update approximately 60 of its store locations during its fiscal year ending
      July 28, 2007 (“Fiscal 2007”). As of July 29, 2006, nearly seventy five percent
      of the **dressbarn** stores
      feature this design.




4




**dressbarn** continues to invest in technology to improve merchandising and sales, reduce
      costs and enhance productivity. We utilize a field information system for all
      our Regional and District Sales Managers via laptop computers, providing sales,
      inventories and other operational data. We upgraded
      our back-office store system software to include such features as inventory
      scanning, quick credit approval for new applications, automated new hire entry
      and store email. We utilize a DVDi Learning Management System (“LMS”), which
      enables sales associates to view training DVDs. These training DVDs assist
      our
      sales associates with the skills they need to properly serve our customers.
      Also
      our POS system has the ability to capture debit card transactions, centralize
      credit authorizations, improve promotion transactions handling, and allow swift
      customer transactions. Our distribution center systems continue to be refined to reduce per-unit
      distribution costs.





All
      aspects of **dressbarn** 's
      stores
      are designed to be responsive to the **dressbarn** customer. In past customer surveys, sales associates were viewed as superior
      to
      our competition and were a competitive advantage. Since 1962, we have been
      consistent in targeting price-conscious and fashion-minded working women. The
      convenient locations of our stores primarily in strip and outlet centers,
      carefully edited coordinated merchandise arranged for ease of shopping,
      comfortable store environment and friendly sales associates embody **dressbarn** 's
      strong
      focus on our customers. **dressbarn** 's
      training program encourages our sales associates to assist customers in a
      low-key and friendly manner. We have various programs to recognize and reward
      our best sales associates. We believe this enhances our customers' shopping
      experience by avoiding aggressive sales tactics that would result from a
      commission-based compensation structure.





In
      January 2003, through a wholly owned subsidiary, we purchased for approximately
      $45.3 million a distribution/office facility and 16 acres of adjacent land
      in
      Suffern, New York (the “Suffern Facility”), of which the major portion is our
      corporate offices and **dressbarn** distribution center. The acquisition of the Suffern Facility provides
      flexibility for future expansion.





Based
      on
      the economic success of our larger size Combo stores, almost all of Fiscal
      2007
      store openings will be Combo stores between 7,000 and 8,000 square feet. Combo
      stores provide us with greater presence in shopping centers, give us more
      leverage in negotiating lease terms, enable us to achieve lower operating cost
      ratios and offer increased flexibility in merchandise presentation. We have
      in
      the past also purchased leased locations from other retailers, some of which
      were too small for a Combo store and were opened as individual locations.
      Of the 39 **dressbarn** stores
      we opened during Fiscal 2006, 35 were Combo store locations and four were
      individual locations. Three stores were converted to Combo stores during Fiscal
      2006. We expect to continue to open stores primarily in strip centers, as well
      as outlet locations. In Fiscal 2007, we plan to open approximately 105 new
      stores, consisting of 65 **maurices** locations and 40 **dressbarn** locations.





In
      conjunction with our strategy of adding mostly Combo stores, we continue to
      close or relocate our underperforming locations and closed 25 locations during
      Fiscal 2006, compared to 36 closed in the fifty-two weeks ended July 30, 2005
      (“Fiscal 2005”). We estimate that we may close approximately 25 more locations
      in Fiscal 2007. We have the option under a substantial number of our store
      leases to terminate the lease at little or no cost if specified sales volumes
      are not achieved, typically only in the first few years of the lease, affording
      us greater flexibility to close certain underperforming stores. Our continued
      opening of new stores, net of store closings, resulted in an aggregate **dressbarn** store
      square footage increase of approximately 1.8% in Fiscal 2006, after a 1.0%
      increase in Fiscal 2005. Net of store closings, we currently plan to increase
      our aggregate **dressbarn** store
      square footage by approximately 1.7% in Fiscal 2007.





Our
      marketing programs focus on developing
      stronger relationships with existing customers, increasing loyalty by making
      them feel better about **dressbarn** .
      Concurrently, the programs try to create awareness among those who are not
      already customers and inspire them to visit our stores and see what **dressbarn** has to
      offer. One major source of marketing information is the **dressbarn** credit
      card. With almost 3 million cardholders, we continue to segment our best
      customers and target them with exclusive offers and recognition. We have created
      a customer database for our c ustomer
      relationship management (“CRM”) system. The CRM database tracks customer
      transactions, with the ability to target customers with specific offers and
      promotions, including coupons, pre-sale announcements, and special events.
      The
      CRM database is used for our direct mail program, providing more productive
      direct mail lists as well as targeting potential customers within each store’s
      trading area and for new stores.





**maurices’** strategy
      is a unique combination of small market expertise, target customer intimacy
      and
      maximization of efficiencies, creating a profitable brand that delivers the
      fashion, value and service needs of the 17 to 34 year-old-female and male
      consumers.





We
      believe that **maurices’** competitive advantage is achieved through its product offering and its
      locations. The wide selection of style, color and current fashion is in stark
      contrast to the large discount and department stores found in small markets.
      These retailers generally offer great depth of fashion basics. **maurices** benefits
      from strategically locating close to these competitors, capitalizing on the
      traffic they generate.




5




A
      further
      differentiator for the **maurices** brand is
      the shopping experience. Integral to this is the relationship our associates
      build with their customers. These relationships build brand awareness as well
      as
      position us as the fashion leader in our communities. In addition, visual
      merchandising simplifies the shopping experience by highlighting outfits,
      utilizing mannequins as silent sales people. We believe these standards tend
      to
      influence the consumers’ shopping behavior. Recent surveys show that a majority
      of the time, our customers’ purchases can be tied to the fashions displayed in
      our stores. The outcome is a visually stimulating environment with a relaxed
      and
      helpful staff.





**maurices** ’
female
      fashion assortment is positioned to appeal to the apparel and accessory needs
      of
      the 17 to 34 year-old-woman. This product offering is specifically tailored
      to
      the fashion needs of those with a 20-something attitude, while appealing to
      the
      broader 17 to 34 year-old-demographic. **maurices** ’
male
      fashion assortment targets the casual needs of the 21 year-old-man while
      appealing to the broader 17 to 34 year-old-male age range. **maurices** has
      targeted a relatively broad age bracket due to the characteristics found within
      the small town retail apparel environment.





To
      provide customers with a variety of styles and colors, **maurices** ’
women’s
      apparel assortment is divided into three lifestyles, casual, career and dressy,
      each with distinct collections. Based on market research, different colors
      are
      developed for each lifestyle for each of the five major seasonal floorsets
      of
      the year. **maurices** focuses
      on five major seasonal floorsets due to the variation in customer demand over
      the course of the year. By adjusting the lifestyle mix, **maurices** is able
      to focus on the target customers’ varying seasonal apparel and accessory
      needs.





**maurices’** merchandise
      is sold under three brand names. **** The
      original **maurices** brand
      encompasses women’s casual clothing, career wear and accessories. *Studio
      Y* represents women’s dressy apparel and is fashionable and trendy with a younger
      target audience. *Industrial
      Exchange* encompasses core, casual and fashion clothing for men. **maurices** ’
brands
      have been developed to tailor its image to specific customer segments and
      groups. Each brand represents a different aspect of **maurices** ’
broad
      product offering. We believe that **maurices** ’
brands
      increase store loyalty by giving the customer another image to connect or
      identify with, and that our brands have a strong following.





**maurices** continues to invest in systems to support merchandising and sales, reduce costs
      and enhance productivity. In 2006, **maurices** implemented “MID”, a new improved merchandise allocation system. We made
      physical and system changes in the distribution center to improve functionality
      and increase the rate of product movement. We implemented changes to accept
      debit cards in our stores. We moved all our customer information to the NSB
      CRM
      system located at **dressbarn** to take
      advantage of their expertise. We gained additional synergies by moving our
      import process to the **dressbarn** system
      as well as taking advantage of leveraging our purchases. In addition, we utilize
      a field information system for all our Regional and District Sales Managers
      via
      laptop computers, providing sales, inventories and other operational data.
      We upgraded
      our store system software to include such features as markdown scanning for
      price changes, quick credit approval for new applications, automated new hire
      entry and store email. The **maurices** point-of-sale (“POS”) system has a real-time intranet network to each store.
      This allows us to add functionality to our POS system and the ability to capture
      debit card transactions, centralize credit authorizations, improve promotion
      transactions handling, and speed up customer transaction time. Our distribution center systems utilize RF technology to run virtually paperless.
      We
      have extensive data warehouses associated with our merchandise, sales and
      financial systems that allow for extensive analytical reporting.





**maurices** will
      continue to capitalize on our recent expansion success, with plans to open
      65
      new stores in Fiscal 2007. The expansion strategy continues to be on the small
      and metro fringe markets. We plan to focus on strip centers and small malls,
      with a continuing test of outlet stores in Fiscal 2007. **maurices** expects
      to close approximately seven locations in Fiscal 2007. The typical **maurices** store is
      between 3,500 and 6,000 square feet. Net of store closings, we currently plan
      to
      increase our **maurices** square
      footage by roughly nine percent in Fiscal 2007, in addition to the nine percent
      gain in 2006. The small town specialty retail store concept is unique in its
      positioning, with the lower occupancy and operating cost structure resulting
      in
      higher levels of profitability.





We
      have
      well-established relationships with our domestic and offshore vendors and
      manufacturers, including our buying agents, often being one of their largest
      accounts. These relationships, together with our buying power and strong credit
      profile, enable us to receive favorable purchasing terms, exclusive merchandise
      and expedited delivery times.





**dressbarn** and **maurices** utilize
      their web sites ( www.dressbarn.com and www.maurices.com ) to
      reinforce store promotions, provide store and product information, help to
      drive
      store traffic and communicate with their retail customers. In addition, we
      sell
      gift cards on our websites.





We
      continually seek to reduce costs in all aspects of our operations and to create
      cost-consciousness at all levels. We believe that our internally generated
      funds
      will provide us with the opportunity to pursue our long-term strategies
      regarding new stores, capital expenditures and marketing and brand development.




6




**Merchandising**





Virtually
      all merchandising decisions affecting our stores are made centrally. Day-to-day **dressbarn** store
      merchandising is under the direction of a Chief Merchandising Officer, and
      five
      additional merchandise managers. We utilize a Visual Merchandising Department
      to
      communicate various floorsets and presentations to the stores. We generally
      have
      six complete floorset changes per year to keep our merchandise presentation
      fresh and exciting. There is a constant flow of new merchandise to the stores
      to
      maintain newness. Store prices and markdowns are determined centrally but may
      be
      adjusted locally in response to competitive situations. Generally, the majority
      of the merchandise sold by us is uniformly carried by all stores, with a
      percentage varied by management according to regional or consumer tastes or
      the
      volume of a particular store. To keep merchandise seasonal and in current
      fashion, inventory is reviewed weekly and markdowns are taken as appropriate
      to
      expedite selling. We offer first-quality, in-season merchandise, with
      approximately 60% of our sales volume derived from sportswear, including
      sweaters, knit and woven tops, pants and skirts. The remainder of our sales
      volume includes dresses, suits, blazers, outerwear and accessories. **dressbarn**  **woman** merchandise features larger sizes of styles similar to **dressbarn** merchandise. Our Petite departments feature merchandise similar to **dressbarn** merchandise in petite sizes. In addition to our broad assortment of career
      and
      casual wear, we offer other items in selected stores including hosiery, handbags
      and shoes. There are separate merchandising teams for **dressbarn** and **dressbarn**  **woman** .





Our
      direct sourcing of merchandise improves our control over the flow of merchandise
      into our stores and enables us to better specify quantities, styles, colors,
      size breaks and delivery dates. In addition, we believe our direct sourcing
      provides us with more flexibility by allowing for higher initial mark-ons.
      We
      believe we have the expertise to execute our brand strategy due to our extensive
      experience sourcing goods, our position as a merchandiser of established
      fashions, and our prior experience with private brands. Nearly all of our sales
      are generated under our **dressbarn** labels.





**dressbarn** continues to expand the number of shoe and petite-size departments within our
      stores. As of July 29, 2006, 391 stores had shoe departments and 248 stores
      featured petite-sized departments.





Merchandising
      for **maurices** is under
      the direction of a Chief Merchandising Officer, and three divisional merchandise
      managers. **maurices** ’
      objective is to be a moderately priced, specialty fashion retailer offering
      value and service to its target customers. For Fiscal 2006, **maurices’** sales
      of
      women’s apparel accounted for approximately 77% of **maurices** ’
net
      sales, while women’s accessories accounted for 15%, men’s apparel accounted for
      7%, and men’s accessories accounted for 1%.  **maurices** offers
      first-quality, in-season merchandise, with a large portion of sales volume
      derived from sportswear, including sweaters, knit and woven tops, denim and
      casual pants.





The **maurices** product
      strategy has been developed to maximize sales and profitability in small
      markets, a market place often requiring unique considerations. This strategy
      emphasizes the importance of product variety. This style selection and variety
      supports the desire of young adults to express their individuality. We believe
      that particularly in small markets the fashion conscious consumer does not
      want
      to wear the same outfits as their peers. This variety is also a key
      differentiator from the big box retailers in the market that offer narrow and
      deep assortments of key items. The wide range in **maurices** product
      offering reduces its dependence on a limited number of products, helping to
      avoid the volatility of a narrow merchandising strategy.





**maurices’** product
      strategy is supported by our pricing philosophy. This approach emphasizes value
      by positioning our fashion assortment at prices lower than large market
      specialty competitors. This combination of fashion and value results in **maurices** generating in excess of 65% of sales volume at regular price, with the remainder
      sold through planned promotions or discounts made in order to maintain inventory
      freshness.





**maurices** utilizes
      micro-merchandising to maximize niche sales opportunities at the store level.
      By
      micro-merchandising **maurices** is able
      to ensure that the store’s product mix accurately represents the local market’s
      preferences. **maurices** augments
      each store’s core assortment by 15% to 20% to successfully address individual
      store demands and customer preferences. Two examples of **maurices** ’
      micro-merchandising strategy are size allocations by store and the timing of
      seasonal clothing deliveries by climate zone. In order to satisfy the size
      needs
      of its markets and the targeted age group, **maurices** micro-merchandises by location demand and offers extended size ranges.
      Additionally, **maurices** allocates product to stores based on local sales patterns. All of these
      micro-merchandising initiatives allow **maurices** to
      maximize its sales relevance within its target markets.





**Buying
      and Distribution**





Buying
      is
      conducted on a departmental basis for **dressbarn** and **dressbarn**  **woman** . **dressbarn** has over
      40 buyers and assistant buyers supervised by the General Merchandising Manager
      and five merchandise managers. We also use independent buying representatives
      in
      New York and overseas. We obtain our merchandise from approximately 200 vendors,
      and no vendor accounted for over 5% of **dressbarn** purchases. In Fiscal 2006, imports accounted for over 50% of merchandise
      purchases and no vendor accounted for over 5% of **dressbarn** import
      purchases. Typical lead times for making purchases from vendors range from
      approximately one month for items purchased domestically to up to six months
      for
      merchandise purchased overseas.




7




All
      merchandise for our **dressbarn** stores
      is received from vendors at our central warehouse and distribution facility
      in
      Suffern, New York, where it is inspected, allocated and shipped to our stores.
      Our distribution operations occupy approximately 410,000 square feet of the
      Suffern facility. We use our strong relationships with vendors to lower
      operating costs by shifting freight and insurance costs to the vendors and
      we
      typically require them to provide ancillary services. For example, nearly 100%
      of our merchandise is pre-ticketed by vendors and approximately 60% of the
      hanging garments purchased by us are delivered on floor-ready hangers. In
      addition, 45% of our merchandise receipts are pre-packaged for distribution
      to
      stores, which allows for efficiencies in our distribution center by using
      cross-docking.





We
      generally do not warehouse store merchandise, but distribute it promptly to
      stores. There are instances where we do hold basic merchandise for future
      distribution. Turnaround time between the receipt of merchandise from the vendor
      and shipment to the stores is usually three days or less, and shipments are
      made
      daily to most stores, maintaining the freshness of merchandise. Because of
      such
      frequent shipments, the stores do not require significant storage space.





**maurices** has
      approximately 60 buyers, assistant buyers, and planning and allocation
      associates supervised by three Divisional Merchandise Managers and four Planning
      and Allocation Managers who report to the Chief Merchandising Officer. **maurices** ’
vendor
      relationship philosophy is to create strategic business partners. **maurices** ’
goal
      has been to have the top five suppliers per apparel segment make up 75% of **maurices** ’
      purchases. Ideally, these top five suppliers should fluctuate minimally. The
      balance between the top five and new suppliers allows for consistency and
      strategic alignment along with exploration and testing of new vendors. However, **maurices** is under
      no ongoing obligation to purchase from any individual supplier, thereby
      permitting **maurices** to make
      supplier decisions based on the quality of product, style selection and price
      competitiveness. In addition, **maurices** ’
direct
      import program accounts for approximately 15% of its total
      purchases. No **maurices** vendor
      accounted for over 5% of total
      company purchases
      in Fiscal 2006 or Fiscal 2005.





We
      supply
      all of the **maurices** stores
      through a modern 360,000-square-foot distribution center in Des Moines, Iowa.
      The productivity of the distribution center is enhanced by working closely
      with **maurices** ’
      merchants and vendors. Approximately 97% of **maurices** ’
      merchandise is pre-ticketed and floor ready while approximately 25%
      of the merchandise is packed in cartons that can flow directly from the
      receiving dock to the shipping dock with no need for repacking.  In
      addition to processing merchandise, the distribution center is the site for
      a
      number of other functions.  All store supplies are warehoused in,
      processed by and shipped from the distribution center, combining store supply
      shipments with merchandise freight to lower overall transportation costs. New **maurices** store
      openings are staged in the distribution center for fixtures, supplies and
      merchandise.





**Store
      Locations and Properties**





As
      of
      July 29, 2006, we operated 1,339 stores in  48
      states
      and the District of Columbia. 758 of the stores were conveniently located in
      strip centers and 229 stores were located in outlet centers. During Fiscal
      2006,
      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
            
            
            113
            
            
            21
            
            
            398
            
            
            226
            
            
            758Outlet
                Malls and Outlet Strip Centers
            
            
            40
            
            
            21
            
            
            153
            
            
            15
            
            
            229Free
                Standing, Downtown and Enclosed Malls
            
            
            20
            
            
            3
            
            
            24
            
            
            305
            
            
            352**Total**
            
            
            **173**
            
            
            **45**
            
            
            **575**
            
            
            **546**
            
            
            **1,339**





As
      of
      July 29, 2006, **dressbarn** had 5.9
      million total square feet in all its stores and **maurices** had 2.7
      million total square feet.




8




The
      table
      below indicates the states in which the stores operating on July 29, 2006 were
      located, and the number of stores in each state:




**Location**
            
            
            **dressbarn**
            
            
            **dressbarn**
              **Woman**
            
            
            **Combo**
              **Stores**
            
            
            **maurices**
              **Stores**
            
            
            **Total**Alabama
            
            
            -
            
            
            -
            
            
            9
            
            
            6
            
            
            15Arizona
            
            
            3
            
            
            -
            
            
            9
            
            
            4
            
            
            16Arkansas
            
            
            -
            
            
            -
            
            
            5
            
            
            12
            
            
            17California
            
            
            15
            
            
            2
            
            
            33
            
            
            -
            
            
            50Colorado
            
            
            3
            
            
            1
            
            
            12
            
            
            14
            
            
            30Connecticut
            
            
            7
            
            
            1
            
            
            16
            
            
            2
            
            
            26District
                of Columbia
            
            
            2
            
            
            1
            
            
            1
            
            
            -
            
            
            4Delaware
            
            
            2
            
            
            1
            
            
            4
            
            
            -
            
            
            7Florida
            
            
            10
            
            
            1
            
            
            17
            
            
            -
            
            
            28Georgia
            
            
            2
            
            
            -
            
            
            19
            
            
            11
            
            
            32Idaho
            
            
            -
            
            
            -
            
            
            3
            
            
            10
            
            
            13Illinois
            
            
            4
            
            
            1
            
            
            30
            
            
            34
            
            
            69Indiana
            
            
            3
            
            
            -
            
            
            14
            
            
            30
            
            
            47Iowa
            
            
            -
            
            
            -
            
            
            7
            
            
            29
            
            
            36Kansas
            
            
            -
            
            
            -
            
            
            6
            
            
            22
            
            
            28Kentucky
            
            
            2
            
            
            -
            
            
            7
            
            
            15
            
            
            24Louisiana
            
            
            -
            
            
            -
            
            
            12
            
            
            -
            
            
            12Maine
            
            
            2
            
            
            1
            
            
            -
            
            
            3
            
            
            6Maryland
            
            
            6
            
            
            3
            
            
            18
            
            
            -
            
            
            27Massachusetts
            
            
            8
            
            
            1
            
            
            23
            
            
            1
            
            
            33Michigan
            
            
            4
            
            
            1
            
            
            23
            
            
            29
            
            
            57Minnesota
            
            
            1
            
            
            -
            
            
            12
            
            
            38
            
            
            51Mississippi
            
            
            -
            
            
            -
            
            
            7
            
            
            1
            
            
            8Missouri
            
            
            6
            
            
            2
            
            
            20
            
            
            30
            
            
            58Montana
            
            
            -
            
            
            -
            
            
            -
            
            
            9
            
            
            9Nebraska
            
            
            -
            
            
            -
            
            
            4
            
            
            10
            
            
            14Nevada
            
            
            -
            
            
            -
            
            
            5
            
            
            2
            
            
            7New
                Hampshire
            
            
            -
            
            
            -
            
            
            6
            
            
            4
            
            
            10New
                Jersey
            
            
            16
            
            
            7
            
            
            25
            
            
            -
            
            
            48New
                Mexico
            
            
            -
            
            
            -
            
            
            1
            
            
            5
            
            
            6New
                York
            
            
            22
            
            
            4
            
            
            40
            
            
            15
            
            
            81North
                Carolina
            
            
            6
            
            
            4
            
            
            17
            
            
            19
            
            
            46North
                Dakota
            
            
            -
            
            
            -
            
            
            1
            
            
            9
            
            
            10Ohio
            
            
            2
            
            
            -
            
            
            17
            
            
            29
            
            
            48Oklahoma
            
            
            1
            
            
            -
            
            
            3
            
            
            15
            
            
            19Oregon
            
            
            2
            
            
            2
            
            
            5
            
            
            17
            
            
            26Pennsylvania
            
            
            18
            
            
            5
            
            
            26
            
            
            13
            
            
            62Rhode
                Island
            
            
            -
            
            
            -
            
            
            4
            
            
            -
            
            
            4South
                Carolina
            
            
            4
            
            
            1
            
            
            9
            
            
            -
            
            
            14South
                Dakota
            
            
            -
            
            
            -
            
            
            -
            
            
            9
            
            
            9Tennessee
            
            
            3
            
            
            2
            
            
            9
            
            
            11
            
            
            25Texas
            
            
            6
            
            
            1
            
            
            42
            
            
            3
            
            
            52Utah
            
            
            -
            
            
            -
            
            
            6
            
            
            12
            
            
            18Vermont
            
            
            -
            
            
            -
            
            
            2
            
            
            5
            
            
            7Virginia
            
            
            8
            
            
            2
            
            
            23
            
            
            8
            
            
            41Washington
            
            
            2
            
            
            1
            
            
            9
            
            
            11
            
            
            23West
                Virginia
            
            
            -
            
            
            -
            
            
            4
            
            
            5
            
            
            9Wisconsin
            
            
            3
            
            
            -
            
            
            10
            
            
            35
            
            
            48Wyoming
            
            
            -
            
            
            -
            
            
            -
            
            
            9
            
            
            9**Total**
            
            
            **173**
            
            
            **45**
            
            
            **575**
            
            
            **546**
            
            
            **1,339**




9




**Operations
      and Management**





In
      considering new store locations, **dressbarn** focuses
      on expanding in existing major trading and high-density markets, adding to
      a
      cluster of suburban or other locations. With respect to suburban and other
      locations, we consider the concentration of our target customer base, the
      average household income in the surrounding area and the location of the
      proposed store relative to competitors and anchor tenants in the shopping
      center. We also seek to expand into new markets. Within the specific strip
      or
      outlet center, we evaluate the proposed co-tenants, local population
      demographics, the traffic count of the existing center and the location of
      the
      store within the center. Our real estate committee, which includes members
      of
      senior management, must approve all new leases. The committee also receives
      input from field management.





**maurices** stores
      are primarily concentrated in small and metro fringe markets in the United
      States. Small markets are defined as areas with populations of 25,000 to 100,000
      people, where **maurices** stores
      are usually located in strip centers or small malls. Metro fringe markets border
      metropolitan areas, where **maurices** stores
      are most often located in strip centers anchored by Target, Kohl’s or similar
      stores.





Our **dressbarn** and **maurices** stores
      are designed to create a comfortable and pleasant shopping environment for
      customers. Merchandise and displays at all stores are set up according to
      uniform guidelines and plans distributed by merchandising management. Our
      merchandise is carefully arranged by lifestyle category (e.g., career, casual
      and weekend wear) for ease of shopping. The stores also have private fitting
      rooms, drive aisles, appealing lighting, carpeting, background music and
      centralized cashier desks. Strategically located throughout the stores are
      "lifestyle" posters showing the customer models wearing outfits coordinated
      from
      among the stores' fashion offerings. Our interior graphics and racktop signs
      are
      designed to provide for a more open and easy to shop environment.





All **dressbarn** and **maurices** stores
      are directly managed and operated by us. The store manager typically staffs
      each
      store with at least one sales associate during non-peak hours, with additional
      sales associates added as needed at peak hours. The sales associates perform
      all
      store operations, from receiving and processing merchandise and arranging it
      for
      display, to assisting customers. Each store manager reports to a District Sales
      Manager who, in turn, reports to a Regional Sales Manager. We employ 10 Regional
      Sales Managers for **dressbarn** and 3
      Regional Sales Managers for **maurices** . **dressbarn** has
      approximately 100 District Sales Managers and **maurices** has
      approximately 30 District Sales Managers. District Sales Managers visit each
      store on a regular basis to review merchandise levels and presentation, staff
      training and personnel performance, expense control, security, cleanliness
      and
      adherence to our operating procedures.





We
      motivate our **dressbarn** sales
      associates through promotion from within, creative incentive programs,
      competitive wages and the opportunity for bonuses. Sales associates compete
      in a
      broad variety of company-wide contests involving sales goals and other measures
      of performance. The contests are designed to boost store profitability, create
      a
      friendly competitive atmosphere among associates and offer opportunities for
      additional compensation. Management believes that our creative incentive
      programs provide an important tool for building cohesive and motivated sales
      teams at each store. We utilize comprehensive training programs at the store
      level in order to ensure that the customer will receive friendly and helpful
      service. They include (i) our DVDi LMS training system, (ii) ongoing DVDi
      training and (iii) one-on-one training of sales associates by store managers
      and
      district sales managers. At **maurices** ,
      the
      training includes (i) management training programs (ii) interactive DVD training
      and (iii) one-on-one training of sales associates by store managers and district
      sales managers.





Almost
      75% of **dressbarn** ’s
      sales
      in Fiscal 2006 and Fiscal 2005 and 70% in Fiscal 2004 were paid for by credit
      card or debit card, with the remainder being paid by cash or check.
      Approximately 68% of **maurices** ’
sales
      in Fiscal 2006 and 64% in Fiscal 2005 were paid for by credit cards, with the
      remainder being paid by cash or check. Consistent with the other credit cards
      it
      accepts, we assume no credit risk with respect to either the **dressbarn** credit
      card or the **maurices** credit
      card, but pay a percentage of sales as a service charge to the third party
      financial institution. As of July 29, 2006, the number of cardholders of the **dressbarn** credit
      card was approximately 3.0 million and the number of cardholders of the **maurices** credit
      card was 1.7 million. The average dollar value per transaction on the **dressbarn** credit
      card and the **maurices** credit
      card during Fiscal 2006 was approximately 75% and 64%, respectively, greater
      than the average dollar value of all other transactions. The **dressbarn** credit
      card and the **maurices** credit
      card represented approximately 23% and 28%, respectively, of each division’s
      sales in Fiscal 2006.





Virtually
      all of our stores are open seven days a week. Stores located in strip, malls
      and
      outlet centers conform to the hours of other stores in the center and are open
      most evenings.




**Advertising
      and Marketing**





As
      the
      lifestyles and behavior of our customers changed, and as the transformation
      of **dressbarn** accelerated,
      our method and style of communication also changed. Abandoning newspaper
      advertising, we determined direct mail was a more targeted and cost effective
      way to communicate our fashion and promotional message. We believe in and
      utilize a customer relationship management (“CRM”) system to track customer
      transactions. This serves as a critical tool directing strategic decisions
      for
      our direct mail initiatives. We focus on targeted marketing through direct
      mail
      that has been our most effective means to reach customers, build relationships
      and drive customers into our stores thereby increasing traffic and
      sales.




10


Our
      national print advertising campaign in lifestyle magazines communicates our
      new
      feminine personality and voice and features our current updated fashions at
      affordable prices, enhancing the perceived value of the brand. These national
      ads are designed to upgrade our image, create awareness of the brand and
      increase brand loyalty, thus increasing share of mind and wallet of our
      customers.





National
      cause related marketing initiatives that resonate with our customers and are
      conducted at the local level are significant contributors to creating brand
      affinity. Our key partners are The American Cancer Society, Dress For Success,
      American Heart Association and World Vision. Through these programs, **dressbarn** reinforces
      that it is an important and integral member of our communities.





**maurices** focuses
      its marketing initiatives on communicating the fashion and lifestyle attitudes
      of its target customers through compelling window and in-store collateral;
      strong, dimensional visual merchandising execution; and the use of branded
      promotional direct mail vehicles. Supported by its partnership with a public
      relations firm, **maurices** has been
      able to garner editorial exposure highlighting both its fashion, offering high
      perceived value, and its cause related efforts.





Critical
      to the brand's strategy to building customer affinity is the focus on its two
      loyalty programs, Take Ten and Get Connected, as well as incentives specifically
      designed to attract the **maurices** credit
      card customers. Additionally, both national cause-related marketing initiatives,
      such as Relay For Life and Hometown Pride programs, are conducted at the local
      level, reinforcing **maurices** as an
      integral member of its communities.




**Management
      Information Systems**





We
      are
      implementing the Oracle Retail Merchandising System for the **dressbarn** segment. **maurices** currently utilizes the Oracle Retail Merchandising System. Implementation of
      the
      system is expected to be completed by July 2007. We have engaged several
      third-party consulting firms to assist with the implementation. We have also
      dedicated several internal personnel on a part-time and a full-time basis to
      work on the implementation. As part of the implementation, we are also
      reengineering certain business processes and/or merchandise reports to minimize
      the number of modifications to the system necessary to customize the standard
      functionality of the Oracle Retail Merchandising system and to conform it to
      the
      current state of our existing legacy merchandise system. Several manual
      processes will be automated with the implementation. The system will expand
      the
      capability of **dressbarn** to
      identify and analyze sales trends and consumer data, and achieve planning and
      inventory management improvements.





**dressbarn** has a
      management information system which integrates all major aspects of our
      business, including sales, distribution, purchasing, inventory control,
      merchandise planning and replenishment, and financial systems. All **dressbarn** stores
      utilize a POS system with price look-up capabilities for both inventory and
      sales transactions. In addition, the rollout of a new POS system with many
      enhanced features to all our stores was completed in the first quarter of Fiscal
      2005. We installed a new wide area network in Fiscal 2004. This system allows
      us
      to add functionality to our POS system with the ability to capture debit card
      transactions, centralize credit authorizations, improve promotion transactions
      handling, and speed up customer transaction time. In addition, we began to
      sell
      gift cards and use merchandise credit cards in the first quarter of Fiscal
      2005.





Our
      current merchandising system tracks merchandise from the inception of the
      purchase order, through receipt at the distribution center, through the
      distribution planning process, and ultimately to the point of sale. To monitor
      the performance of various styles, management reviews sales and inventory
      levels, organized by department, class, vendor, style, color and store. The
      current system enables us to identify slow-moving merchandise to mark down
      or
      efficiently transfer to stores selling such items more rapidly. We analyze
      historic projected sales trends to efficiently schedule store personnel,
      minimizing labor costs while allowing for a high level of sales. We believe
      that
      investments in technology enhance operating efficiencies and position **dressbarn** for
      future growth. We utilize a DVDi Learning Management System (LMS), where sales
      associates are able to take tests for consistency across all of our stores.
      The
      LMS system is part of the back-office store system which also includes automated
      time and attendance, quicker processing of credit card applications and
      integrated email and messaging.





Each **maurices** store is
      connected with the corporate office through its point of sale terminal. The
      store’s point of sale terminal utilizes CRS software that provides bar-coded
      ticket scanning, automatic price look-up on both regular and promotional prices,
      electronic check and credit authorization, and automatic nightly data
      transmission between the store and **maurices** ’
      corporate offices. In addition, the CRS software supports a company Intranet
      used to communicate between the corporate office and all store locations. Data
      from each store is processed nightly through the loss prevention and sales
      audit
      systems at the corporate office. These systems are capable of monitoring trends
      at the individual store level to detect signs of inadequate training or fraud.
      We believe that **maurices** ’
      infrastructure, including its headquarters, distribution center, warehousing
      and
      information technology systems, is capable of supporting substantial growth
      with
      limited incremental investment.





11





**Trademarks**





We
      have
      previously been issued U.S. Certificates of Registration of Trademark or have
      trademark applications pending for the operating names of our stores and our
      major private label merchandise ( **dressbarn** , **maurices** ,
      Studio
      Y and
      Industrial Exchange ,
      among
      others) . We believe
      our **dressbarn** , **dressbarn**  **woman** , **maurices** and
      Studio Y trademarks are materially important to our business. We also believe that our
      rights to these properties are adequately protected.





**Employees**





As
      of
      July 29, 2006, we had approximately 12,800 employees of whom approximately
      7,800
      worked part-time. A number of temporary employees are usually added during
      the
      peak selling periods. None of our employees are covered by any collective
      bargaining agreement. We consider our employee relations to be
      good.




**Seasonality**





Our
      sales
      are evenly split between our Fall (August to January) and Spring (February
      to
      July) seasons. Though we do not consider our business seasonal, we have
      historically experienced substantially lower earnings in our second fiscal
      quarter ending in January than during our other three fiscal quarters,
      reflecting the intense promotional atmosphere that has characterized the holiday
      shopping season in recent years. **maurices** has
      historically experienced losses and lower revenues in January, reflecting the
      decrease in demand following the holiday shopping season. In addition, our
      quarterly results of operations may fluctuate materially depending on, among
      other things, increases or decreases in comparable store sales, 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 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
      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. Some of our in-market competitors include JCPenney,
      Kohl’s and Sears. Our business is vulnerable to demand and pricing shifts and to
      less than optimal selection as a result of these factors. If we fail to compete
      successfully, we could face lower net sales and may decide 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 customer, the fashion-minded working woman,
      and that we are competitive with respect to our national brand recognition
      and
      loyal customer base.





**maurices** ’
stores
      are typically located in the retail hub of a market, anchored by a large
      retailer or discounter such as JCPenney or Wal-Mart. We believe that **maurices** differentiates itself from its competitors based on having a wider variety
      of
      lifestyle fashions catering to a younger demographic group and by offering
      superior customer service. Based on customer surveys, **maurices** believes
      that its customers consider JCPenney as a choice when shopping for basics or
      career needs and Wal-Mart for their essentials. Based on customer surveys, **maurices** believes
      its customers do not consider Cato or Fashion Bug for their fashion needs as
      their products cater to customers of a different size and with different fashion
      preferences and economic situation. **maurices** ’
primary
      out-of-market competitors include American Eagle, Aeropostale, Old Navy, Target
      and Kohl’s. **maurices** differentiates itself from these competitors on the basis of one or more of
      the
      following factors, lower prices, having a more varied selection in small markets
      and by offering superior service.




12




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




***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 and close underperforming locations. In addition, on a routine basis,
      we
      close underperforming stores, which may result in write-offs. The success of
      our
      growth strategy will depend 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. There can be no assurance that we
      will be able to successfully implement our growth strategy of continuing to
      open
      stores or maintain our current growth levels. In addition, there can be no
      assurance that the opening of new stores in existing markets will not have
      an
      adverse effect on sales at existing stores in these markets.




***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 will depend 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.




***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.




13




***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 and competition for
      suitable store locations is intense. We cannot assure you that desirable store
      locations will continue to be available.




***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, merchandising 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 are implementing the Oracle Retail Merchandising
      System for the **dressbarn** segment.
      A version of this merchandising system is already utilized by our **maurices** segment.
      We expect to complete the implementation of the system by July 2007. We have
      engaged several third-party consulting firms to assist with the implementation.
      We have also dedicated several internal personnel on a part-time and a full-time
      basis to work on the implementation. 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. Any delays or difficulties in implementing the Oracle Retail
      Merchandising System or integrating it 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 manufacture these goods. The
      inability of a manufacturer to ship orders in a timely manner or to meet our
      standards could cause us to miss sales of seasonal items, which could have
      a
      material adverse effect on our sales, gross margins, financial condition and
      results of operations.




***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 either 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.




***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.




14




***Our
      operating results fluctuate from season to season.***




We
      have
      historically experienced substantially lower earnings in our second fiscal
      quarter ending in January than during our other three fiscal quarters,
      reflecting the intense promotional atmosphere that characterizes the holiday
      shopping season. **maurices** has
      historically experienced losses or lower revenues in January, reflecting the
      decrease in demand following the holiday shopping season. In addition, our
      quarterly results of operations may fluctuate materially depending on, among
      other things, the number and timing of new store openings and store closings,
      net sales contributed by new stores, increases or decreases in comparable store
      sales, adverse weather conditions, shifts in timing of certain holidays and
      changes in our merchandise mix.




***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. In addition, because **maurices** competes
      in small markets, its operations may be adversely affected if a larger
      competitor were to open stores in a significant number of small markets where **maurices** has
      stores.




***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 depend 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 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.




***A
      decline in general economic conditions may lead to reduced 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, 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 by us. A prolonged economic downturn could have a material adverse
      effect on our business, financial condition, and results of operations.




***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
      have
      remediated the reported material weakness in our internal controls over
      financial reporting as of July 29, 2006. We had previously concluded that a
      material weakness existed in our internal controls over financial reporting
      as
      of July 30, 2005. In order to meet the requirements of the Sarbanes-Oxley Act
      of
      2002 in future periods, we must continuously document, test, monitor and enhance
      our internal controls over financial reporting. We cannot assure you that our
      disclosure controls, procedures and 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 of 2002 could have a material adverse impact on our business,
      our financial condition and the price of our common stock.




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




None.




15




**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 locations leased by us on July 29, 2006, 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**2007
            
            
            326
            
            
            141
            
            
            1852008
            
            
            231
            
            
            153
            
            
            782009-2011
            
            
            573
            
            
            416
            
            
            1572012
                and thereafter
            
            
            213
            
            
            153
            
            
            60**Total**
            
            
            1,343
            
            
            863
            
            
            480





New
      store
      leases generally provide for a base rent of between $7 and $24 per square foot
      per annum. Most 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 29, 2006
      and
      excluding locations acquired after July 29, 2006, for Fiscal 2007, are
      approximately $124.3 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 the 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. Our stores are
      typically profitable within the first 12 months of operation.





We
      own a
      510,000 square foot office and distribution center in Suffern, New York. The
      Suffern facility consists of approximately 65 acres of land, with a current
      total of approximately 900,000 square feet of rentable distribution and office
      space, the majority of which is occupied by us. 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
      adjacent office buildings totaling 150,564 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.


16


**EXECUTIVE
      OFFICERS OF THE REGISTRANT**




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





**Name**
              
              
              **Age**
              
              
              **Positions**Elliot
                  S. Jaffe
              
              
              80
              
              
              Chairman
                  of the Board, Co-Founder
                  and DirectorDavid
                  R. Jaffe
              
              
              47
              
              
              President,
                  Chief
                  Executive Officer and DirectorVivian
                  Behrens
              
              
              53
              
              
              Senior
                  Vice President and Chief Marketing
                  OfficerArmand
                  Correia
              
              
              60
              
              
              Senior
                  Vice President and Chief Financial
                  OfficerGene
                  Wexler
              
              
              51
              
              
              Senior
                  Vice President, General
                  Counsel, and Assistant SecretaryReid
                  Hackney
              
              
              48
              
              
              Vice
                  President - Finance and Corporate Controller


*Mr.
      Elliot S. Jaffe* was
      Chief Executive Officer of the Company from 1966 until February 2002.





*Mr.
      David R. Jaffe* became
      President and Chief Executive Officer in February 2002. Previously he had been
      Vice Chairman, Chief Operating Officer and a member of the Board of Directors
      since September 2001. He had been Vice Chairman since February 2001. He joined
      the Company 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, Secretary, Treasurer and Director of
      the
      Company.





*Ms.
      Vivian Behrens* has been
      employed by the Company since September 2002 as Senior Vice President,
      Marketing. Previously, Ms. Behrens was President of Vivian B Consulting, a
      marketing consultant to several retail and consumer product companies. She
      was
      Chief Executive Officer of Posh & Sticks, Ltd., a consumer products
      multi-channel retailer, from 1999 to 2000. From 1998 to 1999 she was Senior
      Vice
      President-Marketing of the Foot Locker Division of Venator, Inc. From 1994
      to
      1997 she was Vice President-Marketing of Charming Shoppes, Inc. Previously
      she
      held senior marketing positions at Limited Inc. and Avon Products, Inc. and
      was
      a member of the Company’s Board of Directors from 2001 to 2002.





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




*Mr.
      Gene Wexler* has
      been Senior
      Vice President and General Counsel since August 2005. He has been an Assistant
      Secretary of the Company since September 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 January 2005. Prior to
      that
      date he was Vice President - Finance and Controller. He has been employed at
      the
      Company since 1983.




The
      Company’s officers are elected by the Board of Directors for one-year terms and
      serve at the discretion of the Board of Directors.




17




**PART
      II**





**ITEM
      5.** **MARKET
      FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERS 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 (formerly the NASDAQ National Market) under the symbol DBRN. The
      information below has been adjusted for a 2-for-1 stock split that was effective
      as of April 3, 2006.





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




**Fiscal
                2006**
            
            
            **Fiscal
                2005****Fiscal
                Period**
            
            
            **High**
            
            
            **Low**
            
            
            **High**
            
            
            **Low**First
                Quarter
            
            $
            13.39
            
            $
            10.75
            
            $
            9.73
            
            $
            7.71Second
                Quarter
            
            $
            22.50
            
            $
            12.44
            
            $
            9.75
            
            $
            7.60Third
                Quarter
            
            $
            26.79
            
            $
            23.26
            
            $
            10.38
            
            $
            8.26Fourth
                Quarter
            
            $
            28.09
            
            $
            20.28
            
            $
            12.47
            
            $
            8.37





**Number
      of Holders of Record**





As
      of
      October 10, 2006, we had approximately 271 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.





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





The
      following table summarizes our equity compensation plans as of July 29,
      2006.




**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
            
            
            6,255,862
            
            $
            8.81
            
            
            6,961,868Equity
                compensation plans not approved by security holders
            
            
            -
            
            
            -
            
            
            -**Total**
            
            
            6,255,862
            
            $
            8.81
            
            
            6,961,868





18




**Issuer
      Purchases of Equity Securities** **(1)**


**Quarter
      Ending July 29, 2006**




**Period**
            
            **Total
                Number of**
              **Shares
                Purchased**
            
            **Average
                Price**
              **Paid
                per Share**
            
            **Total
                Number**
              **of
                Shares Purchased**
              **as
                Part of Publicly**
              **Announced
                Plans**
              **or
                Programs**
            
            **Maximum
                Number**
              **of
                Shares that**
              **May
                Yet Be Purchased**
              **Under
                the Plans**
              **or
                Programs****(2)**April
                30, 2006 through
              May
                27, 2006
            -
            
            N/A
            
            -
            
            2,300,711May
                28, 2006 through
              July
                1, 2006
            -
            
            N/A
            
            -
            
            2,300,711July
                2, 2006 through
              July
                29, 2006
            -
            
            N/A
            
            -
            
            2,300,711





(1) We
      have a
      $75 million Stock Buyback Program (the “Program”) which was originally announced
      on April 5, 2001. Under the Program, we may repurchase our shares from time
      to
      time, either in the open market or through private transactions, whenever it
      appears prudent to do so. The remaining authorized amount for stock repurchases
      under the Program was
      $48
      million. The Program has no expiration date.




(2)
      Based
      on the closing price of $20.98 at July 28, 2006.




19




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




*In
      thousands, except earnings per share and store operating data* **




**Fiscal
                Year Ended****July
                29,**
              **2006**
            
            
            **July
                30,**
              **2005**
            
            
            **July
                31,**
              **2004**
            
            
            **July
                26,**
              **2003**
            
            
            **July
                27,**
              **2002**(2)Net
                sales
            
            $
            1,300,277
            
            $
            1,000,264
            
            $
            754,903
            
            $
            707,121
            
            $
            717,136Cost
                of sales, includingoccupancy
                and buying costs
            
            
            773,631
            
            
            621,656
            
            
            472,198
            
            
            451,579
            
            
            452,216Gross
                profit
            
            
            526,646
            
            
            378,608
            
            
            282,705
            
            
            255,542
            
            
            264,920Selling,
                general andadministrative
                expenses
            
            
            353,031
            
            
            286,751
            
            
            212,477
            
            
            194,005
            
            
            188,056Depreciation
                and amortization
            
            
            41,679
            
            
            34,457
            
            
            23,197
            
            
            22,262
            
            
            24,631Litigation
                (3)
            
            
            -
            
            
            (35,329
            )
            
            3,329
            
            
            32,000
            
            
            -Operating
                income
            
            
            131,936
            
            
            92,729
            
            
            43,702
            
            
            7,275
            
            
            52,233Interest
                income
            
            
            2,656
            
            
            1,735
            
            
            2,204
            
            
            3,332
            
            
            5,458Interest
                expense
            
            
            (5,364
            )
            
            (10,230
            )
            
            (1,959
            )
            
            (164
            )
            
            -Other
                income
            
            
            1,526
            
            
            1,526
            
            
            1,526
            
            
            779
            
            
            -Earnings
                before income taxes
            
            
            130,754
            
            
            85,760
            
            
            45,473
            
            
            11,222
            
            
            57,691Income
                taxes
            
            
            51,800
            
            
            33,200
            
            
            14,541
            
            
            4,039
            
            
            20,769**Net
                earnings**
            
            **$**
            **78,954**
            
            **$**
            **52,560**
            
            **$**
            **30,932**
            
            **$**
            **7,183**
            
            **$**
            **36,922****Earnings
                per share - basic (1)**
            
            **$**
            **1.29**
            
            **$**
            **0.88**
            
            **$**
            **0.53**
            
            **$**
            **0.12**
            
            **$**
            **0.51****Earnings
                per share - diluted (1)**
            
            **$**
            **1.15**
            
            **$**
            **0.86**
            
            **$**
            **0.51**
            
            **$**
            **0.11**
            
            **$**
            **0.49****Balance
                sheet data:**Working
                capital
            
            $
            121,830
            
            $
            27,395
            
            $
            153,106
            
            $
            126,138
            
            $
            234,576Total
                assets
            
            $
            846,860
            
            $
            716,245
            
            $
            489,316
            
            $
            449,787
            
            $
            487,838Long-term
                debt
            
            $
            144,751
            
            $
            155,900
            
            $
            31,988
            
            $
            33,021
            
            $
            -Shareholders'
                equity
            
            $
            409,147
            
            $
            313,128
            
            $
            252,958
            
            $
            217,421
            
            $
            325,642**Percent
                of net sales:**Cost
                of sales, includingoccupancy
                and buying costs
            
            
            59.5
            %
            
            62.1
            %
            
            62.6
            %
            
            63.9
            %
            
            63.1
            %Gross
                profit
            
            
            40.5
            %
            
            37.9
            %
            
            37.4
            %
            
            36.1
            %
            
            36.9
            %Selling,
                general andadministrative
                expenses
            
            
            27.2
            %
            
            28.7
            %
            
            28.1
            %
            
            27.4
            %
            
            26.2
            %Litigation
            
            
            0.0
            %
            
            (3.5
            %)
            
            0.4
            %
            
            4.5
            %
            
            0.0
            %Operating
                income
            
            
            10.1
            %
            
            9.3
            %
            
            5.8
            %
            
            1.0
            %
            
            7.3
            %Net
                earnings
            
            
            6.1
            %
            
            5.3
            %
            
            4.1
            %
            
            1.0
            %
            
            5.1
            %




(1)
                All earnings per share amounts reported above reflect the 2-for-1
                stock
                split, effective April 3, 2006.(2)
                Includes the impact of the acquisition of Maurices Incorporated.
                See Note
                3 to the consolidated financial statements.(3)
                See Note 4 to the consolidated financial
                statements.





20


**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 2006 refers to the 52-week period ended July 29, 2006, Fiscal
      2005 refers to the 52-week period ended July 30, 2005, and Fiscal 2004 refers
      to
      the 53-week period ended July 31, 2004. Fiscal 2007 refers to our 52-week period
      that will end on July 28, 2007.





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




As
      more
      fully discussed below in Note 1 and Note 11 to the consolidated financial
      statements, we adopted Statement of Financial Accounting Standards ("SFAS")
      No.
      123R, Share-Based Payment (“SFAS No. 123R”), effective July 31, 2005.  We
      adopted the modified prospective transition method provided under SFAS No.
      123R
      and consequently have not retroactively adjusted results for prior
      periods.





**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 necessarily 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 primarily 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 to the working woman 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 and the casual apparel needs of the 17 to 34 year-old male.




The
      retail environment remains very competitive. With the acquisition of
**maurices**, we have diversified our core business and believe it
      will improve our future growth potential. 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
      under-performing 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 2007, 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, store supplies and rent. Positive comparable
      store sales contribute to greater leveraging of costs. Comparable store sales
      also have a direct impact on our total net sales, cash 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. **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.




21




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
                29,**
              **2006**
            
            
            
            **July
                30,**
              **2005**
            
            
            
            **July
                31,**
              **2004**Net
                sales growth
            
            
            30.0
            %(1)
            
            
            32.5
            %
                (1)
            
            
            6.8
            %**dressbarn**comparable store sales
            
            
            9.9
            %
            
            
            5.0
            %
            
            
            1.9
            %**maurices**comparable store sales
            
            
            5.0
            %
            
            
            N/A
            
            
            
            N/ATotal
                comparable store sales growth
            
            
            8.2
            %
            
            
            5.0
            %
            
            
            1.9
            %Merchandise
                margins
            
            
            55.3
            %
            
            
            54.4
            %
            
            
            55.1
            %Square
                footage growth
            
            
            19.1
            %
            
            
            25.6
            %
                (1)
            
            
            2.9
            %Total
                store count
            
            
            1,339
            
            
            
            1,272
            (1)
            
            
            776Diluted
                earnings per share(2)
            
            $
            1.15
            
            
            $
            0.86
            
            
            $
            0.51SG&A
                as a percentage of sales
            
            
            27.2
            %
            
            
            28.7
            %
            
            
            28.1
            %Capital
                expenditures (in millions)
            
            $
            48.3
            
            
            $
            31.4
            
            
            $
            33.9(1)Increase
                mainly due to the acquisition of Maurices Incorporated in January
                2005
              
              (2)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
      and gross profit may not be comparable to those of other entities, since some
      entities include all costs related to their distribution network 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.





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, a s
      appropriate.




**Results
      of Operations**





The
      table
      below sets forth certain financial data expressed as a percentage of our net
      sales for the periods indicated:




**Fiscal
                Year Ended****July
                29,**
              **2006**
            
            
            **July
                30,**
              **2005**
            
            
            **July
                31,**
              **2004**Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales, includingoccupancy
                and buying costs
            
            
            59.5
            %
            
            62.1
            %
            
            62.6
            %Selling,
                general andadministrative
                expenses
            
            
            27.2
            %
            
            28.7
            %
            
            28.1
            %Depreciation
                and amortization
            
            
            3.2
            %
            
            3.4
            %
            
            3.1
            %Litigation
            
            
            0.0
            %
            
            (3.5
            %)
            
            0.4
            %Interest
                income
            
            
            0.2
            %
            
            0.2
            %
            
            0.3
            %Interest
                expense
            
            
            (0.4
            %)
            
            (1.0
            %)
            
            (0.3
            %)Earnings
                before income taxes
            
            
            10.1
            %
            
            8.6
            %
            
            6.0
            %Net
                earnings
            
            
            6.1
            %
            
            5.3
            %
            
            4.1
            %





22




**Fiscal
      2006 Compared to Fiscal 2005**





**Net
      Sales**




Net
        sales
        for the fifty-two weeks ended July 29, 2006 increased 30.0% to $1,300.3 million
        from $1,000.3 million in the prior year. This increase was mainly driven
        by the
        acquisition of **maurices** as well
        as by the **dressbarn** same
        store sales increase of 9.9%. 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. The
        fifty-two weeks ended July 30, 2005 only include 30 weeks of **maurices** sales
        results. The acquisition was completed as of January 1, 2005. Details by
        brand
        are as follows:




**Fifty-Two
                Weeks Ended**(Amounts
                in millions, except for % Change amounts)
            
            
            **July
                29, 2006**
            
            
            **July
                30, 2005**
            
            
            **%
                Change**Net
                sales**dressbarn**and**dressbarn woman**brands
            
            $
            876.2
            
            $
            788.2
            
            
            11.2
            %**maurices**brand
            
            
            424.1
            
            
            212.1
            
            
            100.0
            %Consolidated
                net sales
            
            $
            1,300.3
            
            $
            1,000.3
            
            
            30.0
            %





During
      the fifty-two week period, the **dressbarn** brand
      had a solid sales performance showing sales strength across all regions of
      the
      country, delivering the tenth consecutive quarter of positive comparable store
      sales. On a divisional basis, comparable store sales for the fifty-two week
      period increased 7.2% for **dressbarn** and
      15.0% for **dressbarn
      woman** . All
      regions posted increased comparable store sales for the fifty-two week period.
      The best performing departments were Blouses, Knits and Outerwear. The weakest
      departmental performers were Suits, Coordinates and Sweaters.





For
      the **maurices** brand,
      the Southwest (45 stores) and the Northwest (52 stores) led regional
      performance. Strong sales trends were noted for Studio Y, Knit Tops and Jewelry.





**Gross
      Profit**




Gross
      profit, net of buying and occupancy costs, increased 260 basis points from
      37.9%
      of net sales in the prior year period. For the **dressbarn** brand,
      gross profit was 40.3% of net sales, an increase of 250 basis points as compared
      with the same period last year. Merchandise margins increased to 56.2% from
      55.0% last year mainly due to lower markdowns. The leveraging of store occupancy
      costs was achieved due to the comparable store sales performance of 9.9%. For
      the **maurices** brand,
      gross profit for Fiscal 2006 was $173.6 million or 40.9% of net sales as
      compared to $81.2 million or 38.3% of net sales in Fiscal 2005, which only
      included 30 weeks of **maurices** results.
      The increase in gross margin was the result of increased markon and lower
      markdowns as well as leveraging occupancy, buying and distribution center
      costs.





**SG&A**




As
      a
      percentage of sales, selling, general and administrative expenses (“SG&A”)
      decreased 150 basis points to 27.2% of net sales versus 28.7% last year. On
      a
      divisional basis, **dressbarn** SG&A
      decreased 120 basis points to 28.1% of net sales versus 29.3% last year. The
      decrease was due primarily to leveraging of payroll related expenses (40 basis
      points) as a result of our 9.9% comparable store sales performance, coupled
      with
      total dollar decreases in advertising expense (20 basis points), supplies
      expense (10 basis points), telephone expenses (10 basis points), credit card
      and
      bank charges (10 basis points) and other category costs (40 basis points) for
      the 52 week period. **maurices** SG&A
      was $106.9 million or 25.2% of net sales for the Fiscal 2006 as compared to
      $56.1 million or 26.4% in Fiscal 2005, which only includes 30 weeks of **maurices** results.
      The decrease was due to the strong store selling productivity, coupled with
      reduced credit card processing rates, and other leveraged overheads. These
      savings were partially offset by higher Sarbanes-Oxley compliance costs. Our
      adoption of SFAS No. 123R resulted in the recording of compensation expense
      of
      $4.4 million for share-based payments (stock options and restricted stock)
      in
      Fiscal 2006, partially offsetting the decrease in SG&A. We continue to focus
      on controlling our costs and enhancing productivity, which we believe will
      improve SG&A expense as a percentage of sales in the future.





**Depreciation
      and Amortization**




Depreciation
      expense for the fifty-two week period was $41.7 million, an increase of $7.2
      million from last year. This increase resulted primarily from the addition
      of **maurices** . **maurices’** depreciation expense was $15.8 million for Fiscal 2006 (52 weeks) as compared
      to
      $9.4 million in Fiscal 2005 (30 weeks).





**Interest
      Income**




Interest
      income for the fifty-two week period was $2.7 million as compared to interest
      income of $1.7 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 2005.




23




**Interest
      Expense**




Interest
      expense for the fiscal year decreased to $5.4 million from $10.2 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**




Other
      income for the fiscal year was $1.5 million. This amount represents rental
      income from the two tenants currently occupying space in our Corporate
      Headquarters property in Suffern, New York.





**Income
      Taxes**




The
      effective tax rate for Fiscal 2006 increased to 39.6%, as compared to 38.7%
      in
      Fiscal 2005. The effective rate increased primarily as a result of the recording
      permanent differences for compensation expense related to incentive stock
      options as a result of the adoption of SFAS 123R, reserves for various tax
      related exposures, and more nondeductible expense in Fiscal 2006 for such items
      as officers life insurance premiums and travel and entertainment expenditures.
      Refer to Note 9 to the consolidated financial statements for additional details
      of our income tax amounts.




**Fiscal
      2005 Compared to Fiscal 2004**





**Net
      Sales**




Our
      results for Fiscal 2005 were favorably impacted by the acquisition of
**maurices** in January 2005. Net sales increased by 32.5% to $1
      billion in Fiscal 2005, from $755 million in Fiscal 2004. The following table
      details the net sales by brand:




(Amounts
                in millions, except comparable store
              sales
                % increases)
            
            
            **Fiscal
                2005**
            
            
            **Fiscal
                2004****Net
                Sales**
            
            
            **Comparable
                store**
              **sales
                % increase**
            
            
            **Net
                Sales**
            
            
            **Comparable
                store**
              **sales
                % increase****dressbarn**and**dressbarn woman**brands
            
            $
            788.2
            
            
            5
            %
            $
            754.9
            
            
            2
            %**maurices**brand
            
            
            212.1
            
            
            -
            
            
            -
            
            
            -Total
                Company
            
            $
            1,000.3
            
            
            5
            %
            $
            754.9
            
            
            2
            %





The
      net
      sales increase from fiscal 2004 was mainly due to the accretive impact of the
      acquisition of **maurices**coupled with a 5.0% increase in total
      company same store sales. Same store sales are the primary means most retailers
      use to evaluate their sales performance. 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 intensified marketing and
      store presentation efforts. Among the categories that helped increase net sales
      were jewelry, knitwear, blouses and woven tops.




**Gross
      Profit**




Gross
      profit (net sales less cost of goods sold, including occupancy and buying
      costs), increased 33.9% to $378.6 million, or 37.9% of net sales, in Fiscal
      2005
      from $282.7 million, or 37.4% of net sales in Fiscal 2004. The increase in
      gross
      profit as a percentage of net sales is due to increased sales in higher margin
      categories such as jewelry, the leverage on buying costs gained from the
      acquisition of **maurices**and increased same store sales.
      Excluding the fifty-third week from Fiscal 2004, gross profit would have been
      $276.9 million, or 37.3% of net sales.





**SG&A**




SG&A
      expenses increased to $286.8 million, or 28.7% of net sales in Fiscal 2005
      from
      $212.5 million or 28.1% of net sales in Fiscal 2004. The increase of 60 basis
      points was primarily driven by an increase in management incentive compensation
      and increased costs associated with Sarbanes-Oxley compliance. Excluding the
      fifty-third week from Fiscal 2004, SG&A would have been $209.2 million, or
      28.1% of net sales





**Depreciation
      and Amortization**




Depreciation
      expense increased to $34.5 million in Fiscal 2005, versus $23.2 million in
      Fiscal 2004. The increase was largely the result of the acquisition of
**maurices** in January 2005. Depreciation expense for **maurices** was $9.4
      million in Fiscal 2005.




24




**Litigation**




As
      a
      result of the
      Supreme Court of Connecticut's decision to reverse an approximately $32 million
      jury verdict, we reversed the litigation charge incurred when the judgment
      was
      entered in Fiscal 2003. The judgment was subject to post-judgment interest
      at
      the rate of 10% per annum, which we accrued. Following the reversal of the
      judgment the escrow account established in connection with the appeal, which
      included the post-judgment interest, was released, resulting in $35.3 million
      of
      income to us in Fiscal 2005, which included the interest paid into the escrow
      fund. Refer to Note 4 of the consolidated financial statements for further
      details of this litigation.





**Interest
      Income**




Interest
      income decreased to $1.7 million for Fiscal 2005 from $2.2 million for Fiscal
      2004. The decrease was due to the reduction of interest earned from investments
      in marketable securities, which were liquidated during Fiscal 2005. The proceeds
      from the sales of marketable securities were used in the acquisition of
**maurices**.





**Interest
      Expense**




Interest
      expense for Fiscal 2005 was $10.2 million as compared to $1.9 million in Fiscal
      2004. The increase is primarily due to the issuance of $115 million of 2.50%
      Convertible Senior Notes in December 2004 and borrowings under a Senior Secured
      Credit Facility. Refer to Note 5 to the consolidated financial statements.
      The
      remaining interest expense represents the mortgage interest from the financing
      of our Suffern facility in July 2003 (a 5.3% fixed rate over a 20 year term).





**Other
      Income**




Other
      income for Fiscal 2005 remained at $1.5 million, which is the same as Fiscal
      2004. Other income represents income from unaffiliated tenants of our distribution/office
      facility in Suffern, New York.





**Income
      Taxes**




The
      effective tax rate for Fiscal 2005 was 38.7% versus 32.0% in Fiscal 2004. The
      increase in effective tax rate is mainly due to prior year favorable resolution
      of certain tax audits, which reduced the effective tax rate in Fiscal 2004.
      We
      also had less tax-free interest in Fiscal 2005 because of the sales of municipal
      bond investments, the proceeds of which were used in the acquisition of
**maurices**. Our effective tax rate was also influenced by the
      reversal of the litigation charge in Fiscal 2005. Refer to Note 9 to the
      consolidated financial statements for additional details of our income tax
      amounts.




**Liquidity
      and Capital Resources**





We
      invested $328 million in connection with our acquisition of **maurices**in Fiscal 2005. The funds for this investment were raised
      by issuance
      of $115 million of convertible senior notes, $100 million borrowed under the
      Senior Credit Facility, as described in Note 5 to Consolidated Financial
      Statements and below, and the proceeds from the sale of marketable securities.
      In Fiscal 2006, we repaid $100 million of the Senior Credit Facility.





At
      July
      29, 2006, the Company had cash, cash equivalents, restricted cash and marketable
      securities of $153 million as compared to $43 million as of July 30, 2005.
      The
      increase in cash, cash equivalents, restricted cash and marketable securities
      was primarily driven by generation of operating cash flows.





Net
      cash
      provided by operations was $164 million for the fifty-two
      weeks ended July 29, 2006 compared
      with $106 million during last year’s comparable period. The
      increase in cash flow from operations is primarily due to the accretive effect
      of the acquisition of Maurices Incorporated and the improved cash flows
      generated from **dressbarn** . Cash
      flows from operating activities for the period were primarily generated by
      income from operations, adjusted for depreciation and amortization, and a tax
      benefit related to share-based compensation and changes in working capital
      account balances, specifically the increase in trade accounts payable, income
      taxes payable, accrued salaries and wages and customer credits, offset by the
      increase in merchandise inventories and prepaid expenses.




Net
      cash
      used in investing activities was $170 million for the fifty-two weeks ended
      July
      29, 2006. We made net
      investments of $119 million in marketable securities and investments as of
      July
      29, 2006. We also purchased $48 million of property and equipment mainly for
      new
      store openings during Fiscal 2006. Net cash used in financing activities was
      $3
      million for the fifty-two weeks ended July 29, 2006. We made $11 million of
      principal payments owed under long-term debt agreements. $10 million of these
      payments represented the final repayment of principal of the term loan that
      was
      outstanding at July 30, 2005 that was utilized in our acquisition of **maurices** .
      We also
      received approximately $6 million from the proceeds of stock options exercises.




25




As
      of
      July 29, 2006, $37 million was available under a revolving credit facility
      that
      was part of a credit agreement executed in December 2005 for future borrowings,
      which we believe gives us ample capacity to fund any short-term working capital
      needs that may arise in the operation of our business. The $37 million available
      under the credit agreement represents the $100 million from our revolving credit
      facility less $63 million of outstanding letters of credit at July 29, 2006.
      We
      also have an option to increase the revolving credit facility by $50 million.





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 29, 2006. 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.





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.





In
      January 2003, Dunnigan Realty, LLC, a wholly-owned consolidated subsidiary
      of
      the Company, 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.





In
      Fiscal
      2007, we plan to open approximately 105 additional stores and continue our
      store
      remodeling program. Total Fiscal 2007 capital expenditures, which are primarily
      attributable to our store opening, renovation and refurbishment programs, and
      implementation of the Oracle Retail Merchandising System for the **dressbarn** segment,
      are expected to be approximately $60 million. We intend to focus on both
      expanding in existing major trading markets and developing and expanding into
      new markets.




We
        have a
        $75 million stock repurchase program that was announced in 2001. As of the
        date
        of this filing, the Company had repurchased 4,885,400 shares at an aggregate
        purchase price of approximately $26.7 million. At July 29, 2006, we had $48.3
        million of repurchase availability remaining. Purchases of shares of the
        Company’s common stock will 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.




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 the next 12
      fiscal months.




**Contractual
      Obligations and Commercial Commitments**





The
      estimated significant contractual cash obligations and other commercial
      commitments at July 29, 2006 are summarized in the following table:





**Payments
                Due by Period****(Amounts
                in thousands)****Contractual
                Obligations**
            
            
            **Totals**
            
            
            **Fiscal**
              **2007**
            
            
            **Fiscal
                2008-**
              **2009**
            
            
            **Fiscal
                2010-**
              **2011**
            
            
            **Fiscal
                2012**
              **And
                Beyond**Operating
                lease obligations
            
            $
            1,038,365
            
            $
            124,296
            
            $
            235,441
            
            $
            217,777
            
            $
            460,851Mortgage
                principal
            
            
            30,899
            
            
            1,148
            
            
            2,488
            
            
            2,768
            
            
            24,495Mortgage
                interest
            
            
            16,148
            
            
            1,619
            
            
            3,047
            
            
            2,767
            
            
            8,715Convertible
                Senior Notes
            
            
            115,000
            
            
            -
            
            
            -
            
            
            -
            
            
            115,000Convertible
                Senior Notes interest
            
            
            53,188
            
            
            2,875
            
            
            5,750
            
            
            5,750
            
            
            38,813**Total**
            
            $
            1,253,600
            
            $
            129,938
            
            $
            246,726
            
            $
            229,062
            
            $
            647,874





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 Company transactions. As of July 31,
      2006 and continuing through October 27, 2006, 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 twenty trading days within the
      thirty-trading-day period ending on July 28, 2006. 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.




26




The
      operating lease obligations represent future minimum lease payments under
      non-cancelable operating leases as of July 29, 2006. 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
      2005 were $32.2 million. Total CAM charges and real estate taxes for the Fiscal
      2006 were $36.5 million.




**Amount
                of Commitment Expiration Period****(Amounts
                in thousands)****Other
                Commercial Commitments**
            
            
            **Totals**
            
            
            **Fiscal**
              **2007**
            
            
            **Fiscal
                2008-**
              **2009**
            
            
            **Fiscal
                2010-**
              **2011**
            
            
            **Fiscal
                2012**
              **And
                Beyond**Trade
                letters of credit
            
            $
            56,790
            
            $
            56,790
            
            $
            -
            
            $
            -
            
            $
            -Standby
                letters of credit
            
            
            6,447
            
            
            6,447
            
            
            -
            
            
            -
            
            
            -Firm
                purchase orders
            
            
            1,282
            
            
            1,282
            
            
            -
            
            
            -
            
            
            -**Total**
            
            $
            64,519
            
            $
            64,519
            
            $
            -
            
            $
            -
            
            $
            -





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.





**Seasonality**





The **dressbarn** and **maurices** brands
      have historically experienced substantially lower earnings in our second fiscal
      quarter ending in January than during our other three fiscal quarters,
      reflecting the intense promotional atmosphere that has characterized the holiday
      shopping season in recent years. We expect this trend to continue for Fiscal
      2007. In addition, our quarterly results of operations may fluctuate materially
      depending on, among other things, increases or decreases in same store sales,
      adverse weather conditions, shifts in timing of certain holidays, the timing
      of
      new store openings, 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, long-lived assets, insurance reserves, income taxes, stock-based
      employee compensation, claims and contingencies and litigation. 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.





*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. Sales from purchases made
      with
      gift certificates and layaway sales are also recorded when the customer takes
      possession of the merchandise. Gift certificates and merchandise credits do
      not
      have expiration dates and our policy is not to reduce the liability for
      unredeemed gift certificates or merchandise credits that will eventually be
      remitted to the states under their escheat laws until such time as amounts
      are
      remitted to a state. We have reserved for estimated product returns when sales
      are recorded based on historical return trends and adjusted for known events,
      as
      applicable.




27




*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 fourth
      quarter to calculate actual shrinkage and inventory on hand. Estimates are
      used
      to charge inventory shrinkage for the first, second, and third fiscal quarters
      of the fiscal year. We continuously review our inventory levels to identify
      slow-moving merchandise and broken assortments, using markdowns to clear
      merchandise. A provision is recorded to reduce 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.





*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. As we assess the ongoing expected cash flows and carrying
      amounts of our long-lived assets, these factors could cause us to realize
      material impairment charges. In
      addition, we regularly evaluate our computer-related and other assets and may
      accelerate depreciation over the revised 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 29, 2006 and July 30, 2005, these reserves were $7.8 million
        and $8.3 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.


28




*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 Assets* ,
      (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
      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. 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 .
      In
      addition, while we have concluded that the fair value of goodwill and other
      intangible assets with indefinite lives exceeds the carrying value as of July
      29, 2006, changes in **maurices** estimated future cash flows could require us to record impairment charges on
      these assets.





*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 and rent holidays, we record a deferred rent liability
      in “Other accrued expenses” and “Deferred rent” 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.




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 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 the 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.





*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 accrue for estimates of probable
      settlements of Federal and State tax audits when they are more likely than
      not
      to be settled. At any one time, many tax years are subject to audit by various
      taxing jurisdictions. The results of these audits and negotiations with taxing
      authorities may affect the ultimate settlement of these issues. 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.




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





Our
      portfolio of investments consisting of cash, cash equivalents and marketable
      securities can be affected by changes in market interest rates. Financial
      instruments, which potentially subject us to concentrations of credit risk,
      are
      principally bank deposits and short-term money market 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. 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.




29




Currently,
      we maintain the vast majority of our cash and investments in financial
      instruments with original maturity dates of three months or less. We do not
      believe that an adverse change in interest rates would have a material affect
      on
      our financial condition.





Our
      outstanding long-term liabilities as of July 29, 2006 consisted of $29.8 million
      of our 5.3% 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
      28, 2006, the market value of the Convertible Senior Notes was $242.1 million
      as
      valued on PORTAL (Private Offering Resale and Trading through Automated
      Linkage).





We
      also
      entered into a $100 million Credit Agreement with a group of banks on December
      21, 2005. Under that Credit Agreement, we have available a revolving credit
      facility with borrowings of up to $100 million at a variable rate. At July
      29,
      2006, we had no outstanding borrowings under the revolving credit facility.
      As
      of July 29, 2006, $37 million was available under the revolving credit facility.
      The $37 million available under the revolving credit facility represents the
      $100 million less $63 million of outstanding letters of credit at July 29,
      2006.





We
      hold
      no material options or other derivative instruments at July 29, 2006.





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.




**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−5(e) and 15d−5(e) under the
        Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) as of
        July 29, 2006 . There
        are inherent limitations to the effectiveness of any system of disclosure controls and
        procedures ,
        including the possibility of human error and the circumvention or overriding
        of
        the controls and procedures. Accordingly,
        even effective disclosure controls and
        procedures can only
        provide reasonable assurance of achieving their control objectives .
        Based
        on such evaluation, the Chief
        Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of
        the
        end of the period covered by this report in alerting them on a timely basis
        to
        material information relating to us (including our consolidated subsidiaries)
        required to be included in our reports filed or submitted under the Exchange
        Act.
  **(b)
        Management’s Report of Internal Control** **over Financial Reporting**
 
 Management
        is responsible for establishing and maintaining adequate internal control
        over financial reporting as defined in Rules 13a−5(f) and 15d−5(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 29, 2006. 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) .
        Based
        on the assessment and those criteria, management believes that we maintained
        effective internal control over financial reporting as of July 29, 2006. Our
        independent registered public accounting firm has issued an attestation report
        on management’s assessment of our internal control over
        financial reporting. T hat report
        appears herein below.




30




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




During
        the fourth quarter of Fiscal 2006, we completed the remediation of a material
        weakness identified as of July 30, 2005 in our internal control over financial
        reporting that related to the design and operation of certain of our controls
        with respect to the preparation and review of financial statements. The
        deficiencies identified resulted from inadequate resources in the financial
        reporting and income tax departments and lack of appropriate technical training
        of such resources in matters relating to the preparation of the financial
        statements and footnotes and the accounting for income taxes.  The
        steps we took in connection with the remediation included hiring additional
        personnel, engaging third-party tax, financial and financial systems
        consultants, improving quality control standards, and providing additional
        training and education to our financial reporting and accounting personnel.
  As
        a
        result of the steps we have taken as of July 29, 2006, we have made changes
        to
        controls with respect to the process of preparing and reviewing our financial
        statements.
  **(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 Stockholders of


The
      Dress
      Barn, Inc.


Suffern,
      New York





We
      have
      audited management's assessment, included in the accompanying Management’s
      Report of Internal Control Over Financial Reporting, which is included in Item
      9A(b), that The Dress Barn, Inc. and subsidiaries (the “Company”) maintained
      effective internal control over financial reporting as of July 29, 2006 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. Our responsibility is to express an opinion
      on
      management's assessment and an opinion on the effectiveness of the Company's
      internal control over financial reporting based on our audit.





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





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.





In
      our
      opinion, management's assessment that the Company maintained effective internal
      control over financial reporting as of July 29, 2006, is fairly stated, in
      all
      material respects, based on the criteria established in Internal
      Control—Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission. Also in our opinion, the Company maintained, in
      all
      material respects, effective internal control over financial reporting as of
      July 29, 2006, 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 of
        the
        Company as of and for the fiscal year
        ended July 29, 2006, and our report dated October 11, 2006 expressed an
        unqualified opinion on those consolidated financial
        statements and included an explanatory paragraph relating to the Company’s adoption
        of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment,"
        as of July 31, 2005.




/S/
              Deloitte & Touche LLPNew York, New York
              October 11, 2006




31




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





None.





32





**PART
      III**




**ITEM
      10.**  **DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT**




Information
      with respect to this item is incorporated by reference from our definitive
      Proxy
      Statement to be filed with the SEC not later than 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 (under the
      "Governance" caption). 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.




**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 not later than 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 not later than 120 days after the end of
      our
      fiscal year.





**ITEM
      13.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS**




Information
      with respect to this item is incorporated by reference from our definitive
      Proxy
      Statement to be filed with the SEC not later than 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 not later than 120 days
      after the end of our fiscal year.




33




**PART
      IV**





**ITEM
      15.** **EXHIBITS
      and 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-3Consolidated
                  Statements of Shareholders' Equity and Comprehensive
                  Income
              
              
              F-4Consolidated
                  Statements of Cash Flows
              
              
              F-5Notes
                  to Consolidated Financial Statements
              
              
              F-7





**ITEM
      15. (a) (2) FINANCIAL STATEMENT SCHEDULE**





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 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 October 12, 2000)
              
              
              (4
              )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 to 30
                  Dunnigan Drive, Suffern, NY
              
              
              (5
              )10.2
              
              
              $34,000,000mortgage
                    loan from John Hancock Life InsuranceCompany
                    to Dunnigan Realty,
                  secured
                    by mortgage on 30 Dunnigan
                    Drive, Suffern, NY
              
              
              (6
              )10.3
              
              
              Leases
                  of Company premises of which the lessor is Elliot S. Jaffe or members
                  of
                  his family or related trusts:10.6.1Danbury,
                  CT store
              
              
              (1
              )10.6.2Norwalk,
                  CT**dressbarn**/**dressbarn**Woman store
              
              
              (7
              )
  34
  10.4
              
              
              Amended
                  and Restated Lease between Dunnigan Realty, LLC, as landlord, and
                  The
                  Dress Barn, Inc.,
                as
                  tenant, dated June 24, 2003 for office and
                  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
              
              
              (12
              )
                  *May
                  2, 2002 with Elliot S. Jaffe10.10
              
              
              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
              
              
              Stock
                  Purchase Agreement dated November 16, 2004 Among
                  The Dress Barn, Inc.,
                Maurices
                  Incorporated and American
                  Retail Group, Inc.
              
              
              (19
              )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




35




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 the Securities Act
                  of
                  1933 (Registration No. 333-136061).(4)
              
              
              The
                  Company’s Annual Report on Form 10-K for the fiscal year ended July 29,
                  2000.(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 the Securities
                  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 the Securities
                  Act
                  of
                  1933 (Registration No. 333-124512) filed on May 02, 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 17, 2004.*
              
              Each
                  of these exhibits constitute a management
                  contract, compensatory plan or arrangement required to be filed
                  as an
                  exhibit pursuant to Item 15 (b) of this report.





**ITEM
      15. (c) EXHIBITS**




All
      exhibits are incorporated by reference as shown in Item 15(b), except Exhibits
      21, 23, 31.1, 31.2, 32.1 and 32.2, which are filed as part of this
      Report.





36




**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.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. JAFFE
            
            
            
            10/12/06Elliot S. Jaffe
            
            Chairman of the Board/s/ ROSLYN S. JAFFE
            
            
            
            10/12/06Roslyn S. Jaffe
            
            Director and Secretary and
              Treasurer/s/ DAVID R. JAFFE
            
            
            
            10/12/06David R. Jaffe
            
            Director, President and Chief Executive
                Officer(Principal Executive Officer)/s/ BURT STEINBERG
            
            
            
            10/12/06Burt Steinberg
            
            Director and Executive Director/s/ KLAUS EPPLER
            
            
            
            10/12/06Klaus Eppler
            
            Director/s/ RANDY L. PEARCE
            
            
            
            10/12/06Randy L. Pearce
            
            Director/s/ JOHN USDAN
            
            
            
            10/12/06John Usdan
            
            Director/s/ KATE BUGGELN
            
            
            
            10/12/06Kate Buggeln
            
            Director/s/ MARC LASRY
            
            
            
            10/12/06Marc Lasry
            
            Director/s/ ARMAND CORREIA
            
            
            
            10/12/06Armand Correia
            
            Chief Financial Officer (Principal Financial
              and Accounting Officer)





37





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





**To
      the Board of Directors and Stockholders 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 29, 2006 and July 30, 2005, and the
      related consolidated statements of earnings, shareholders’ equity and
      comprehensive income, and cash flows for each of the three fiscal years in
      the period ended July 29, 2006. 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
        29,
        2006 and July 30, 2005, and the results of their operations and their cash
        flows
        for each of the three fiscal years in the period ended
        July 29, 2006, 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 Statement of Financial Accounting Standards No. 123(R), “Share-Based
        Payment,” as of July 31, 2005.




We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of the Company’s internal
      control over financial reporting as of July 29, 2006, 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 October 11, 2006 expressed an unqualified opinion on management’s
      assessment of the effectiveness of the Company’s internal control over financial
      reporting and an unqualified opinion on the effectiveness of the Company’s
      internal control over financial reporting.




/S/
              Deloitte & Touche LLPNew York, New York
              October 11, 2006




F
          - 1


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


**July
                29, 2006**
            
            **July
                30, 2005****ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            **$**
            **34,168**
            
            $
            42,434Restricted
                cash (see Note 1)
            
            
            **100**
            
            
            100Marketable
                securities and investments (see Note 2)
            
            
            **118,745**
            
            
            85Merchandise
                inventories
            
            
            **170,487**
            
            
            167,643Deferred
                income tax asset (see Note 9)
            
            
            **6,459**
            
            
            -Prepaid
                expenses and other
            
            
            **19,404**
            
            
            12,923**Total
                Current Assets**
            
            
            **349,363**
            
            
            223,185**Property
                and Equipment:**Land
                and buildings
            
            
            **58,730**
            
            
            58,461Leasehold
                improvements
            
            
            **143,240**
            
            
            126,351Fixtures
                and equipment
            
            
            **211,083**
            
            
            202,500Computer
                software
            
            
            **39,763**
            
            
            36,415**452,816**
            
            
            423,727Less
                accumulated depreciation and amortization
            
            
            **214,751**
            
            
            191,029Property
                and equipment, net
            
            
            **238,065**
            
            
            232,698**Other
                Intangible Assets, net (see Note 3)**
            
            
            **110,199**
            
            
            111,243**Goodwill
                (see Note 3)**
            
            
            **132,566**
            
            
            132,566**Other
                Assets**
            
            
            **16,667**
            
            
            16,553**TOTAL
                ASSETS**
            
            **$**
            **846,860**
            
            $
            716,245




**LIABILITIES
                AND SHAREHOLDERS' EQUITY****Current
                Liabilities:**Accounts
                payable
            
            **$**
            **121,198**
            
            $
            107,702Accrued
                salaries, wages and related expenses
            
            
            **38,917**
            
            
            35,209Other
                accrued expenses
            
            
            **38,557**
            
            
            35,237Customer
                credits
            
            
            **16,260**
            
            
            12,849Income
                taxes payable
            
            
            **11,453**
            
            
            92Deferred
                tax liability (see Note 9)
            
            
            **-**
            
            
            3,612Current
                portion of long-term debt (see Note 5)
            
            
            **1,148**
            
            
            1,089**Total
                Current Liabilities**
            
            
            **227,533**
            
            
            195,790Long-term
                debt (see Note 5)
            
            
            **144,751**
            
            
            155,900Deferred
                rent and other
            
            
            **55,352**
            
            
            44,194Deferred
                tax liability (see Note 9)
            
            
            **10,077**
            
            
            7,233**Total
                Liabilities**
            
            
            **437,713**
            
            
            403,117**Commitments
                and Contingencies (see Note 10)****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
                and Outstanding 61,715,588 and 60,410,682 shares, respectively
            
            
            **3,086**
            
            
            3,021Additional
                paid-in capital
            
            
            **87,673**
            
            
            71,682Retained
                earnings
            
            
            **318,380**
            
            
            239,426Accumulated
                other comprehensive income
            
            
            **8**
            
            
            -Deferred
                compensation
            
            
            **-**
            
            
            (1,001
            )**Total
                Shareholders’ Equity**
            
            
            **409,147**
            
            
            313,128**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY**
            
            **$**
            **846,860**
            
            $
            716,245See
                notes to consolidated financial statements




F
          - 2




The
        Dress
        Barn, Inc. and Subsidiaries
 **Consolidated
        Statements of Earnings**
 Amounts
        in thousands, except share data
  **Fiscal
                  Year Ended****July
                  29,**
              
              
              **July
                  30,**
              
              
              **July
                  31,****2006**
              
              
              **2005**
              
              
              **2004**Net
                  sales
              
              **$**
              **1,300,277**
              
              $
              1,000,264
              
              $
              754,903Cost
                  of sales, includingoccupancy
                  and buying costs
              
              
              **773,631**
              
              
              621,656
              
              
              472,198Gross
                  profit
              
              
              **526,646**
              
              
              378,608
              
              
              282,705Selling,
                  general andadministrative
                  expenses
              
              
              **353,031**
              
              
              286,751
              
              
              212,477Depreciation
                  and amortization
              
              
              **41,679**
              
              
              34,457
              
              
              23,197Litigation
                  (see Note 4)
              
              
              **-**
              
              
              (35,329
              )
              
              3,329Operating
                  income
              
              
              **131,936**
              
              
              92,729
              
              
              43,702Interest
                  income
              
              
              **2,656**
              
              
              1,735
              
              
              2,204Interest
                  expense
              
              
              **(5,364**
              **)**
              
              (10,230
              )
              
              (1,959
              )Other
                  income
              
              
              **1,526**
              
              
              1,526
              
              
              1,526Earnings
                  before provision forincome
                  taxes
              
              
              **130,754**
              
              
              85,760
              
              
              45,473Provision
                  for income taxes
              
              
              **51,800**
              
              
              33,200
              
              
              14,541**Net
                  earnings**
              
              **$**
              **78,954**
              
              $
              52,560
              
              $
              30,932Earnings
                  per share:Basic
              
              **$**
              **1.29**
              
              $
              0.88
              
              $
              0.53Diluted
              
              **$**
              **1.15**
              
              $
              0.86
              
              $
              0.51Weighted
                  average shares outstanding:Basic
              
              
              **61,216**
              
              
              59,570
              
              
              58,826Diluted
              
              
              **68,728**
              
              
              61,158
              
              
              60,240See
                  notes to consolidated financial statements




F
          - 3


The
        Dress
        Barn, Inc. and Subsidiaries
 **Consolidated
        Statements of Shareholders’ Equity and Comprehensive Income** (Amounts
          and shares in thousands)


**Common
                  Stock**
              
              
              
              
              
              
              
              
              
              
              
              **Accumulated****Additional**
              
              
              
              
              
              
              
              
              **Other**
              
              
              
              
              
              **Total****Paid-In**
              
              
              **Retained**
              
              
              **Treasury**
              
              
              **Comprehensive**
              
              
              **Deferred**
              
              
              **Shareholders’****Shares**
              
              
              **Amount**
              
              
              **Capital**
              
              
              **Earnings**
              
              
              **Stock**
              
              
              **Income
                  (Loss)**
              
              
              **Compensation**
              
              
              **Equity****Balance,
                  July 26, 2003**
              
              
              58,340
              
              $
              2,916
              
              $
              56,742
              
              $
              157,825
              
              $
              -
              
              $
              (62
              )
              $
              -
              
              $
              217,421Comprehensive
                  income:Net
                  earnings
              
              
              
              
              
              
              
              
              
              
              
              30,932
              
              
              
              
              
              
              
              
              
              
              
              30,932Unrealized
                  holding loss on marketable securities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (460
              )
              
              
              
              
              (460
              )Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              30,472Issuance
                  of restricted stock
              -
              
              
              -
              
              
              67
              
              
              
              
              
              
              
              
              
              
              
              (67
              )
              
              -Amortization
                  of deferred compensation expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              67
              
              
              67Tax
                  benefit from exercise of stock options
              
              
              
              
              
              
              1,460
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,460Employee
                  Stock Purchase Plan activity
              10
              
              
              -
              
              
              83
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              83Shares
                  issued pursuant to exercise of stock options
              928
              
              
              48
              
              
              3,720
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,768Purchase
                  of treasury stock
              
              
              (40
              )
              
              
              
              
              
              
              
              
              
              
              (313
              )
              
              
              
              
              
              
              
              (313
              )**Balance,
                  July 31, 2004**
              
              
              59,238
              
              
              2,964
              
              
              62,072
              
              
              188,757
              
              
              (313
              )
              
              (522
              )
              
              -
              
              
              252,958Net
                  earnings
              
              
              
              
              
              
              
              
              
              
              
              52,560
              
              
              
              
              
              
              
              
              
              
              
              52,560Unrealized
                  gain/(loss) on marketable
                securities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              
              
              
              -Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              52,560Reversal
                  of unrealized loss on marketable
                securities
              
              
              
              
              
              
              
              
              
              
              
              
              522
              
              
              
              
              
              522Issuance
                  of restricted stock
              
              
              154
              
              
              8
              
              
              1,391
              
              
              
              
              
              
              
              
              
              
              
              (1,399
              )
              
              -Amortization
                  of deferred compensation expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              398
              
              
              398Tax
                  benefit from exercise of stock options
              -
              
              
              -
              
              
              2,258
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,258Employee
                  Stock Purchase Plan activity
              12
              
              
              -
              
              
              136
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              136Shares
                  issued pursuant to exercise of stock options
              1,207
              
              
              61
              
              
              5,819
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,880Purchase
                  of treasury stock
              
              
              (200
              )
              
              
              
              
              
              
              
              
              
              
              (1,584
              )
              
              
              
              
              
              
              
              (1,584
              )Retirement
                  of treasury stock
              
              
              
              
              
              (12
              )
              
              6
              
              
              (1,891
              )
              
              1,897
              
              
              
              
              
              
              
              
              -**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 deferred compensation upon adoption
                of
                  SFAS No. 123R - *Share Based Payment*
              
              
              
              
              
              
              
              
              (1,001
              )
              
              
              
              
              
              
              
              
              
              
              1,001**Balance,
                  July 29, 2006**
              
              
              61,716
              
              $
              3,086
              
              $
              87,673
              
              $
              318,380
              
              $
              -
              
              $
              8
              
              $
              -
              
              $
              409,147


See
        notes to consolidated financial statements




F
          - 4


The
        Dress
        Barn, Inc. and Subsidiaries


**Consolidated
        Statements of Cash Flows**
 Amounts
        in thousands
  **Fiscal
                  Year Ended****July
                  29,**
              
              **July
                  30,**
              
              **July
                  31,****2006**
              
              **2005**
              
              **2004****Operating
                  Activities:**Net
                  earnings
              
              **$**
              **78,954**
              
              $
              52,560
              
              $
              30,932Adjustments
                  to reconcile net earnings to net cashprovided
                  by operating activities:Depreciation
                  and amortization
              
              
              **41,679**
              
              
              34,457
              
              
              23,197Provision
                  for impairments and asset disposals
              
              
              **3,794**
              
              
              6,136
              
              
              4,906Deferred
                  taxes
              
              
              **(7,227**
              **)**
              
              25,690
              
              
              2,491Deferred
                  rent expense
              
              
              **5,092**
              
              
              1,268
              
              
              1,351Share
                  based compensation
              
              
              **4,449**
              
              
              -
              
              
              -Tax
                  benefit on exercise of unqualified stock options
              
              
              **5,526**
              
              
              2,258
              
              
              1,460Excess
                  tax benefit on exercise of unqualified stock options
              
              
              **(1,882**
              **)**
              
              -
              
              
              -Amortization
                  of debt issuance cost
              
              
              **808**
              
              
              3,920
              
              
              152Amortization
                  of bond premium cost
              
              
              **59**
              
              
              -
              
              
              -Increase
                  in cash surrender value of life insurance
              
              
              **(818**
              **)**
              
              (522
              )
              
              (600
              )Deferred
                  compensation - restricted stock
              
              
              **641**
              
              
              398
              
              
              67Realized
                  loss / (gain) on sales of securities
              
              
              **3**
              
              
              579
              
              
              (15
              )Changes
                  in assets and liabilities, net of acquisition:(Increase)
                  in merchandise inventories
              
              
              **(2,844**
              **)**
              
              (17,256
              )
              
              (6,564
              )(Increase)
                  / decrease in prepaid expenses and other
              
              
              **(6,469**
              **)**
              
              3,780
              
              
              (1,515
              )Decrease
                  / (increase) in other assets
              
              
              **2,479**
              
              
              (650
              )
              
              208Increase
                  in accounts payable
              
              
              **13,496**
              
              
              22,874
              
              
              1,686Increase
                  in accrued salaries and wages
              
              
              **3,708**
              
              
              7,578
              
              
              2,467(Decrease)
                  / increase in litigation accrual
              
              
              **-**
              
              
              (36,128
              )
              
              536Increase
                  / (decrease) in accrued expenses
              
              
              **1,800**
              
              
              2,428
              
              
              (3,108
              )Increase
                  / (decrease) in customer credits
              
              
              **3,411**
              
              
              (938
              )
              
              1,686Increase
                  / (decrease) in income taxes payable
              
              
              **11,361**
              
              
              (5,456
              )
              
              (1,540
              )Increase
                  in other long-term liabilities
              
              
              **6,066**
              
              
              2,607
              
              
              -Total
                  adjustments
              
              
              **85,132**
              
              
              53,023
              
              
              26,865Net
                  cash provided by operating activities
              
              
              **164,086**
              
              
              105,583
              
              
              57,797




F
          - 5


The
        Dress
        Barn, Inc. and Subsidiaries


**Fiscal
                Year Ended****July
                29,**
            
            **July
                30,**
            
            **July
                31,****2006**
            
            **2005**
            
            **2004****Investing
                Activities:**Acquisition
                of Maurices Incorporated, net of $982 cash acquired
            
            **$**
            **-**
            
            $
            (328,305
            )
            $
            -Return
                of investment / (investment in) restricted cash
            
            
            **-**
            
            
            38,561
            
            
            (38,661
            )Purchases
                of property and equipment
            
            
            **(48,276**
            **)**
            
            (31,381
            )
            
            (33,867
            )Sales
                and maturities of marketable securities and investments
            
            
            **460,250**
            
            
            652,629
            
            
            266,198Purchases
                of marketable securities and investments
            
            
            **(579,026**
            **)**
            
            (530,071
            )
            
            (275,446
            )Investment
                in life insurance policies
            
            
            **(2,200**
            **)**
            
            -
            
            
            -Purchases
                of long-term investments
            
            
            **(343**
            **)**
            
            -
            
            
            (900
            )Net
                cash used in investing activities
            
            
            **(169,595**
            **)**
            
            (198,567
            )
            
            (82,676
            )**Financing
                Activities:**Proceeds
                from issuance of long-term debt
            
            
            **-**
            
            
            215,000
            
            
            -Payment
                of long-term debt
            
            
            **(11,090**
            **)**
            
            (91,033
            )
            
            (979
            )Refund
                of / (payment) for debt issuance cost
            
            
            **10**
            
            
            (8,122
            )
            
            (90
            )Purchase
                of treasury stock
            
            
            **-**
            
            
            (1,584
            )
            
            (313
            )Proceeds
                from Employee Stock Purchase Plan
            
            
            **256**
            
            
            136
            
            
            83Excess
                tax benefits from stock-based compensation
            
            
            **1,882**
            
            
            -
            
            
            -Proceeds
                from stock options exercised
            
            
            **6,185**
            
            
            5,880
            
            
            3,768Net
                cash (used in) provided by financing activities
            
            
            **(2,757**
            **)**
            
            120,277
            
            
            2,469Net
                (decrease) increase in cash and cash equivalents
            
            
            **(8,266**
            **)**
            
            27,293
            
            
            (22,410
            )Cash
                and cash equivalents- beginning of year
            
            
            **42,434**
            
            
            15,141
            
            
            37,551Cash
                and cash equivalents- end of year
            
            **$**
            **34,168**
            
            $
            42,434
            
            $
            15,141Supplemental
                Disclosure of Cash Flow Information:Cash
                paid for income taxes
            
            **$**
            **42,660**
            
            $
            12,083
            
            $
            12,130Cash
                paid for interest
            
            **$**
            **4,892**
            
            $
            5,700
            
            $
            1,789Capital
                expenditures incurred but not yet paid
            
            **$**
            **1,520**
            
            $
            2,702
            
            $
            1,893See
                notes to consolidated financial statements




F
          - 6


**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** .”
The
      Company’s **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 as well as the causal apparel needs
      of
      the 17 to 34 year-old male. During
      the fourth quarter of Fiscal 2005, we concluded that we should disclose
      reportable segments to reflect the impact of our acquisition of Maurices
      Incorporated.





*Basis
      of financial statement presentation*


The
        accounting and reporting policies of the Company conform to the generally
        accepted accounting principles in the United States of America (US GAAP). All
        prior
        period common stock and share and per share amounts have been adjusted to
        reflect a two-for-one split of the Company’s common stock effective April 3,
        2006. Certain
        reclassifications have been made to the prior years’ consolidated financial
        statements to conform to the Company’s Fiscal 2006 presentation. The Company
        revised the financial statements for 2005 and 2004 for amounts that were
        previously reported as a component of inflows and outflows of sales and
        purchases of marketable securities and investments that should not have been
        reported in the statements of cash flows. The Company's cash flow statements
        for
        fiscal years ended July 30, 2005 and July 31, 2004 have been revised to reflect
        a decrease in sales and purchases of marketable securities and investments
        of
        $41.7 million and $7.5 million, respectively. These revisions had no effect
        on
        net income, net cash flows used in investing activities or the amount of
        cash
        and cash equivalents reported.


*Principles
      of consolidation*


The
        consolidated financial statements include the accounts of the Company and
        its
        subsidiaries. All intercompany balances and transactions are eliminated in
        consolidation. The Company reports on a 52-53 week fiscal year ending on
        the
        last Saturday in July. Fiscal years 2006 and 2005 consisted of 52 weeks.
        Fiscal
        year ended July 31, 2004 consisted of 53 weeks.


Dunnigan
      Realty, LLC, a wholly-owned subsidiary of the Company, 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 the Company’s corporate
      offices and **dressbarn** distribution center. Dunnigan Realty, LLC receives rental income and
      reimbursement for taxes and common area maintenance charges from the Company
      and
      two additional tenants that occupy the Suffern facility that are not affiliated
      with the Company. The rental income from the unaffiliated tenants is shown
      as
“other income” on the Company’s Consolidated Statements of Earnings.
      Intercompany rentals between the Company and Dunnigan Realty, LLC are eliminated
      in consolidation.





*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. Sales from purchases made with gift certificates and layaway sales
        are
        also recorded when the customer takes possession of the merchandise. The
        Company’s gift certificates and merchandise credits do not have expiration
        dates, and the Company’s current policy is that it does not reduce its liability
        for unredeemed gift certificates or merchandise credits that will eventually
        be
        remitted to the states under their escheat laws until such time amounts are
        remitted to the state. The **maurices** segment
        of the Company 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. The Company records a reserve for estimated product
        returns when
        sales are recorded based
        on
        historical return trends and
        adjusted for known events, as applicable .
        The
        changes in the sales return reserve are summarized below:




F
          - 7




(amounts
                in thousands)
            
            Fiscal
                Year EndedJuly
                29, 2006
            
            July
                30, 2005
            
            July
                31, 2004Balance
                at beginning of period
            
            $
            1,351
            
            $
            743
            
            $
            -Additions
                - charge to income
            
            
            6,687
            
            
            7,842
            
            
            11,190Adjustments
                and/or deductions
            
            
            6,488
            
            
            7,234
            
            
            10,447Balance
                at end of period
            
            $
            1,550
            
            $
            1,351
            
            $
            743





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


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 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.




*Selling,
      General and Administrative Expenses*





Selling,
      general and administrative expenses consist of compensation and employee benefit
      expenses, other than for our design, sourcing and importing teams, our buyers
      and our distribution centers personnel. Such compensation and employee benefit
      expenses include salaries, incentives 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.





*Cash
      and cash equivalents*


The Company
        considers its 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. The Company also considers receivables related
        to
        credit card purchases to be equivalent to cash. The majority of the Company’s
        money market funds at July 29, 2006 were maintained with one financial
        institution. The
        Company maintains its cash deposits and cash equivalents with well-known
        and
        stable financial institutions. However, it has 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 Company
        has
        not experienced any losses on its deposits of cash and cash equivalents to
        date.




*Restricted
      cash*





At
      July
      29, 2006, restricted cash consisted of $100 thousand held in escrow as required
      as part of a pending lawsuit.





*Marketable
      securities and investments*





The
      Company has categorized its 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 for amortization of premiums and discounts to
      maturity, with the net amortization included in interest income.





*Merchandise
      inventories*





The
      Company values its merchandise inventories at the lower of cost, on a First
      In
      First Out (FIFO) basis, or market, as determined by the retail inventory method.
      The Company includes in cost of sales, including occupancy and buying costs,
      all
      costs of merchandise (net of purchase discounts and vendor allowances), all
      costs associated with its buying and distribution functions, freight on inbound,
      outbound and internally transferred merchandise, merchandise acquisition costs,
      commissions and import fees, and all occupancy costs excluding
      depreciation.





*Property
      and equipment*





Property
      and equipment are carried at cost less accumulated depreciation. Depreciation
      of
      fixtures and equipment, and software is provided on the straight-line method
      over the estimated useful lives, generally ranging from 5 to 10 years and 25
      years for the building. 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 the Company’s option, the Company generally
      uses 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 the Company, 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.




F
          - 8





*Impairment
      of long-lived assets*


The
        Company primarily invests 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, the Company recognizes 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 the Company related to the expected
        useful lives of long-lived assets and the ability of the Company 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, the Company regularly evaluates its computer-related and other
        assets
        and may accelerate depreciation over the revised useful life if the asset
        has
        limited future value. Based
        on
        the review of certain under performing stores, the Company recorded impairment
        charges and store closings that are included in selling, general, and
        administrative expenses of $3.8 million in Fiscal 2006
        ( **dressbarn** $2.7
        million, **maurices** $1.1
        million ), $6.1
        million in
        Fiscal 2005 ( **dressbarn** $5.3
        million, **maurices** $0.8
        million )
        and
        $4.9 million in
        Fiscal 2004. These
        impairment losses reflect the amount of book value over fair market value
        of
        store related assets in certain locations where market conditions limit the
        Company’s ability to recover its investments.





*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 a useful life of five years, beginning when the
      software is ready for its intended use.





*Insurance
      reserves*




The
        Company uses 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 the Company 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 29, 2006 and
        July
        30, 2005 these
        reserves were $7.8 million and $8.3
        million, respectively.





*Income
      taxes*





The
      Company accounts for income taxes in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 109, *Accounting for Income Taxes*.
      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 presently enacted tax rates. The Company establishes valuation
      allowances against deferred tax assets when it is more likely than not that
      the
      realization of those deferred tax assets will not occur.





*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* , the
        Company does not amortize goodwill or other intangible assets with indefinite
        lives but, rather, it is required to 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 30th, the Company
        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.


F
          - 9





*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 $17.3 million for Fiscal 2006, $15.5
      million for Fiscal 2005, and $12.3 million for Fiscal 2004.





*Operating
      leases*





The
      Company leases 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, the Company uses the date of initial possession to
      begin amortization, which is generally when the Company enters the space and
      begins to make improvements in preparation of intended use.





For
      construction allowances, the Company records a deferred rent liability in “Other
      accrued expenses” and “Deferred rent and other” on the consolidated balance
      sheets and amortizes 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, the Company
      records minimum rental expenses on a straight-line basis over the terms of
      the
      leases 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. The Company records a contingent
      rent
      liability in “Other accrued expenses” on the 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.





*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, 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 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.





F
          - 10




*Share-based
      compensation*


Effective
        July 31, 2005, the Company 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 29, 2006, the Company recognized approximately
        $4.4 million in share-based compensation expense related
        to stock options and approximately $0.6 million in share-based compensation
        expense related to restricted stock .
        No
        compensation cost was recognized prior to July 31, 2005, other than amortization
        of restricted stock grants. Had compensation cost for our share-based
        compensation plans been determined consistent with SFAS No. 123, *Accounting
        for Stock-Based Compensation* , the
        Company’s net income and earnings per share would have been reduced to the
        following pro forma amounts:


**Fiscal
                  Year Ended****July
                  30,**
              
              
              **July
                  31,**(Amounts
                  in thousands, except per share data)
              
              
              **2005**
              
              
              **2004**Net
                  earnings as reported
              
              $
              52,560
              
              $
              30,932Add:
                  share-based employee compensation expense included in reported
                  net income,
                  net of taxes
              
              
              244
              
              
              46Deduct:
                  Total stock-based employeecompensation
                  expense determinedunder
                  fair value based methodfor
                  all awards net of related tax effects
              
              
              (1,681
              )
              
              (2,060
              )**Pro
                  forma net earnings**
              
              $
              51,123
              
              $
              28,918Earnings
                  per shareBasic
                  - as reported
              
              $
              0.88
              
              $
              0.53Basic
                  - pro forma
              
              $
              0.86
              
              $
              0.49Diluted
                  - as reported
              
              $
              0.86
              
              $
              0.51Diluted
                  - pro forma
              
              $
              0.84
              
              $
              0.48





The
      fair
      values of the options granted under the Company’s 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
                  29,**
              
              
              **July
                  30,**
              
              
              **July
                  31,****2006**
              
              
              **2005**
              
              
              **2004**Weighted
                  average risk-free interest rate
              
              
              4.2
              %
              
              3.6
              %
              
              3.3
              %Weighted
                  average expected life (years)
              
              
              4.9
              
              
              5.0
              
              
              5.0Expected
                  volatility of the market price of the Company’s common
                  stock
              
              
              42.2
              %
              
              45.1
              %
              
              39.1
              %Expected
                  dividend yield
              
              
              0
              %
              
              0
              %
              
              0
              %





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. The
      Company 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.
      The
      expected term for the Store Managers group was computed per the guidance in
      SAB
      107 (“simplified method”) due to a lack of historical data. Thus, the Company
      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 the Company’s
      stock over a term equal to the expected term of the option granted. All option
      valuation models require input of highly subjective assumptions. Because the
      Company's 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.




F
          - 11





*Financial
      instruments*





Concentration
      of Credit Risk - Financial instruments, which potentially subject the Company
      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.




Fair
        Value of Financial Instruments – At
        July
        29, 2006 and July 30, 2005, the Company believes that 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.


*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.





*Recent
      accounting pronouncements*





In
      March
      2005, the FASB issued FASB Interpretation No. 47 (“FIN 47”), “Accounting for
      Conditional Asset Retirement Obligations, an interpretation of FASB Statement
      No. 143.” FIN 47 clarifies the scope and timing of liability recognition for
      conditional asset retirement obligations under SFAS No. 143 and was effective
      as
      of our 2006 fiscal year end. The adoption of FIN 47 did not have a material
      impact on our consolidated financial position, results of operations or cash
      flows.


In
        May
        2005, the Financial
        Accounting Standards Board (“ FASB”) issued
        SFAS No. 154, *Accounting
        Changes and Error Corrections—a replacement of APB Opinion* *No.
        20 and FASB Statement No. 3* . SFAS No.
        154 provides guidance on the accounting for and reporting of accounting changes
        and error corrections. It establishes retrospective application as the required
        method for reporting a change in accounting principle. SFAS No.
        154
        provides guidance for determining whether retrospective application of a
        change
        in accounting principle is impracticable and for reporting a change when
        retrospective application is impracticable. SFAS No. 154 also addresses the
        reporting of a correction of an error by restating previously issued financial
        statements. SFAS No. 154 is effective for accounting changes and error
        corrections made in fiscal years beginning after December 15, 2005. The Company
        does not believe that the adoption of SFAS No. 154 will have a material impact
        on our
        consolidated financial position , results
        of operations or cash
        flows .


In
        June
        2005, the Emerging Issues Task Force (“EITF”) of
        the
        FASB reached a consensus on Issue No. 05-6, *Determining
        the Amortization Period for Leasehold Improvements* (“EITF
        05-6”). The guidance requires that leasehold improvements acquired in a business
        combination or purchased subsequent to the inception of a lease be amortized
        over the lesser of the useful life of the assets or a term that includes
        renewals that are reasonably assured at the date of the business combination
        or
        purchase. The guidance was effective for periods beginning after June 29,
        2005.
        The adoption of EITF 05-6 did not have a material effect on the Company’s
        consolidated financial position, results of operations or cash
        flows.
 
 In
        October 2005, the FASB issued
        FASB Staff Position (FSP) No. FAS 13-1, *Accounting
        for Rental Costs Incurred during a Construction Period* ,
        which
        mandates that rental costs associated with ground or building operating leases
        incurred during construction shall be recognized as rental expense. The guidance
        is effective as of the first reporting period beginning after December 15,
        2005.
        The adoption of FSP No. FAS 13-1 did not have a material effect on the Company’s
        consolidated financial position, results of operations or cash
        flows.
 
 In
        February 2006, the FASB issued SFAS No. 155, *Accounting
        for Certain Hybrid Instruments, an amendment of FASB Statements No. 133 and
        140* ("SFAS
        155"). SFAS 155 allows financial instruments that have embedded derivatives
        to
        be accounted for as a whole (eliminating the need to separate the derivative
        from its host) if the holder elects to account for the whole instrument on
        a
        fair value basis. It also clarifies which interest only strips and principal
        only strips are not subject to the requirements of Statement 133; establishes
        a
        requirement to evaluate interest in securitized financial assets to identify
        interests that are freestanding derivatives or that are hybrid financial
        instruments that contain an embedded derivative requiring separation; clarifies
        that concentrations of credit risk in the form of subordination are not embedded
        derivatives; and amends Statement 140 to eliminate the prohibition on a
        qualifying special purpose entity from holding a derivative financial instrument
        that pertains to a beneficial interest other than another derivative financial
        instrument. SFAS 155 is effective for all financial instruments acquired
        or
        issued after the beginning of an entity's first fiscal year that begins after
        September 15, 2006. The adoption of SFAS 155 is not expected to have a
        material impact on our consolidated financial position, results of operations
        or
        cash flows or any
        impact on the Company's results of operations or financial
        condition.


F
          - 12




In
      June
      2006, the FASB issued FINNo. 48,*Accounting
      for Uncertainty in Income Taxes — an interpretation of FASB Statement
      No.**109*,which
      clarifies the accounting for uncertainty in income taxes recognized in financial
      statements in accordance with FASB Statement No. 109,*Accounting
      for Income Taxes*.
      FIN 48
      provides guidance on the financial statement recognition and measurement of
      a
      tax position taken or expected to be taken in a tax return. FIN 48 requires
      that
      companies recognize in their consolidated financial statements the impact of
      a
      tax position that is more likely than not to be sustained upon examination
      based
      on the technical merits of the position. The first step is to evaluate the
      tax
      position for recognition by determining if the weight of available evidence
      indicates it is more likely than not that the position will be sustained on
      audit, including resolution of related appeals or litigation processes, if
      any.
      The second step is to measure the tax benefit as the largest amount that is
      more
      than 50% likely of being realized upon ultimate settlement. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosures, and transition. FIN 48 is effective for fiscal
      years beginning after December 15, 2006 (our Fiscal 2008). We have not completed
      our evaluation of the impact that this standard will have on our consolidated
      financial statements.





**2.
      Marketable Securities and Investments**


The
        Company purchases short-term 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* .
        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 income (loss ).”
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 29, 2006 and July 30, 2005, are shown below.




July
                  29, 2006
              
              
              July
                  30, 2005(Amounts
                  in thousands)
              
              
              Estimated
              
              
              Amortized
              
              
              Estimated
              
              
              AmortizedFair
                  Value
              
              
              Cost
              
              
              Fair
                  Value
              
              
              CostMoney
                  market funds
              
              $
              -
              
              $
              -
              
              $
              85
              
              $
              85Municipal
                  bonds
              
              
              29,465
              
              
              29,457
              
              
              -
              
              
              -Tax-exempt
                  auction rate securities
              
              
              89,280
              
              
              89,280
              
              
              -
              
              
              -Total
              
              $
              118,745
              
              $
              118,737
              
              $
              85
              
              $
              85





*Auction
      Rate Securities*





Auction
      rate securities have been classified as short-term marketable securities.
      Auction rate securities are variable rate bonds tied to short-term interest
      rates with maturities on the face of the securities in excess of 90 days.
      Auction rate securities have interest rate resets through a modified Dutch
      auction, at predetermined short-term intervals, usually every 7, 28 or 35 days.
      They trade at par and are callable at par on any interest payment date at the
      option of the issuer. Interest paid during a given period is based upon the
      interest rate determined during the prior auction. Although these securities
      are
      issued and rated as long-term bonds, they are priced and traded as short-term
      instruments because of the liquidity provided through the interest rate reset.
      All of our auction rate securities holdings are tax-exempt.





The
      cost
      and estimated fair value of our available-for-sale marketable securities and
      investments by stated maturities at July 29, 2006 is as follows:


(Amounts
                  in thousands)
              
              
              EstimatedDue
                  In
              
              
              Fair
                  Value
              
              
              CostOne
                  year or less
              
              $
              29,465
              
              $
              29,457One
                  year through five years
              
              
              -
              
              
              -Over
                  five years
              
              
              89,280
              
              
              89,280Total
              
              $
              118,745
              
              $
              118,737





The
      Company periodically reviews its investment portfolio to determine if there
      is
      an impairment that is other than temporary, and to date has not experienced
      any
      impairment in its investments that were other than temporary. In evaluating
      whether the individual investments in the investment portfolio are not other
      than temporarily impaired, the Company 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.




F
          - 13




Proceeds
        from the sale of the above investment were $1.9 million, $114.6 million and
        $62.9 million in Fiscal 2006, Fiscal 2005 and Fiscal 2004, respectively.
        Gross
        realized losses from the sale of the above investments were $3,000 and $579,000
        in Fiscal 2006 and Fiscal 2005, respectively. In Fiscal 2004, gross realized
        gains from the sale of the above investments were $15,000. For the purposes
        of determining gross realized gains and losses, the cost of securities is
        based
        upon specific identification. The realized losses and gains from the sale
        of
        marketable securities are reflected in interest income on our consolidated
        statements of earnings.




**3** **.
      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). The Company’s consolidated financial statements include **maurices** ’
results
      of operations from January 2, 2005. The Company 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
      accordance with SFAS No. 142, Goodwill and Other Intangible Assets, amortization
      of goodwill and indefinite life intangible assets is replaced with annual
      impairment tests. The Company performs 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 the Company’s 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
      the Company's 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 as of July 29,
        2006:


(Amounts
                  in thousands)**Gross****Carrying**
              
              
              **Accumulated****Amount**
              
              
              **Amortization**
              
              
              **Net
                  Amount**
              
              
              **Expected
                  Life**Customer
                  Relationship
              
              $
              2,200
              
              $
              497
              
              $
              1,703
              
              
              7
                  yearsProprietary
                  Technology
              
              
              3,653
              
              
              1,157
              
              
              2,496
              
              
              5
                  yearsTrade
                  Name
              
              
              106,000
              
              
              -
              
              
              106,000
              
              
              Indefinite**Total
                  intangible assets**
              
              $
              111,853
              
              $
              1,654
              
              $
              110,199





The
      estimated annual amortization expense over the next five years is $1 million
      per
      fiscal year. The weighted average expected life of the other intangible
      assets subject to amortization is 6 years.





The
      following unaudited pro forma information assumes the Maurices Incorporated
      acquisition had occurred on July 27, 2003. The pro forma information, as
      presented below, is not indicative of the results that would have been obtained
      had the transaction occurred on July 27, 2003, nor is it indicative of the
      Company’s future results.





(Amounts
                in millions except per share data)
            
            **Fiscal
                Year Ended****July
                30,**
              **2005**
            
            **July
                31, 2004**Pro
                forma net sales
            
            $
            1,167.4
            
            $
            1,117.2Pro
                forma net income
            
            
            45.1
            
            
            33.9Pro
                forma earnings per share:Basic
            
            $
            0.76
            
            $
            0.58Diluted
            
            $
            0.74
            
            $
            0.57




F
          - 14




**4.
      Litigation**





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 the
      Company.  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, the Company 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 the Company 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 the Company's appeal were
      released.





We
      are
      subject to ordinary routine litigation incidental to the 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.




**5.
      Long Term Debt**





On
      December 15, 2004, the Company issued 2.50% Convertible Senior Notes due 2024
      (“Convertible Senior Notes”). The Convertible Senior Notes have an aggregate
      principal amount of $115 million and interest is payable on June 15 and December
      15 of each year, beginning on June 15, 2005, except that from March 15, 2005
      to
      May 2, 2005, the notes bore interest at the rate of 2.75% per year. Beginning
      with the period commencing on December 22, 2011 and ending June 14, 2012, and
      for each of the six-month periods thereafter commencing on June 15, 2012, the
      Company is required to pay contingent interest during the applicable interest
      period if the average trading price of the notes on the five trading days ending
      on the third day immediately preceding the first day of the applicable interest
      period equals or exceeds 120% of the principal amount of the notes. The
      contingent interest payable per note within any applicable interest period
      will
      equal an annual rate of 0.25% of the average trading price of a note during
      the
      measuring period. The Company 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 the Company’s 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, if the price of the Company’s
      common stock reaches, or the trading price of the convertible notes falls below,
      specified thresholds, or upon the event of certain Company transactions. As
      of
      July 31, 2006 and continuing through October 27, 2006, the holders of the
      Convertible Senior Notes may convert their notes as described above because
      the
      Company’s stock price closed at or above $12.61 per share for twenty trading
      days within the thirty trading day period ending on July 29, 2006. Upon
      conversion, the Company would deliver cash for the aggregate principal amount
      of
      Convertible Senior Notes to be converted. The excess, if any, of the price
      of
      the Company’s common stock above $10.51 per share would be payable in common
      shares. Upon certain corporate transactions, the Company may issue additional
      shares based on the date the corporate transaction becomes effective and the
      price of the Company’s common stock. If the market price of the common stock
      exceeds the conversion price, the Company is 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. On July 29, 2006, the market value of the
      Convertible Senior Notes was $242.1 million as valued on PORTAL (Private
      Offering Resale and Trading through Automated Linkage).





On
      December 21, 2005, we entered into a credit agreement with several lenders
      (the
“Credit Agreement”) to replace an existing Senior Credit Facility Agreement and
      related Guarantee and Collateral Agreement that were both dated January 3,
      2005.
      The Credit Agreement provides us with a senior secured revolving credit facility
      that provides for borrowings and issuance of letters of credit for up to $100
      million. We may also request the senior revolving credit facility be increased
      up to an additional $50 million. Amounts under the revolving credit facility
      may
      be borrowed, repaid and reborrowed by the Company from time to time until
      termination. 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 interest rate
      varies from 100 basis points to 150 basis points above LIBOR for Eurocurrency
      loans and 0 basis points to 50 basis points above the prime rate or Federal
      Funds Effective Rate plus 0.50% for base rate loans. The interest rate varies
      from 20 basis points to 150 basis points above the prime rate for letters of
      credit or Federal Funds Effective Rate plus 0.50%. During the term of the Credit
      Agreement, we will pay the lenders a fee, which varies, based upon our adjusted
      leverage ratio from 0.20% to 0.25%, and is equal to the product of such
      percentage per annum and the available portion of the revolving credit
      facility.





The
      Credit Agreement contains affirmative, negative and financial covenants
      customary for facilities of this type, including, among other things, limits
      on
      the incurrence of debt or liens, a limit on the making of dividends or
      distributions, a limit on the ratio of debt to earnings before interest, income
      taxes, depreciation, and amortization, a limit on the ratio of earnings before
      interest, income taxes, depreciation, and amortization to fixed charges, a
      minimum net worth requirement and a limit on capital expenditures. The Credit
      Agreement contains events of default customary for facilities of this type
      (with
      customary grace periods, as applicable) and provides that, upon the occurrence
      of an event of default, the interest rate on all outstanding obligations will
      be
      increased and payment of all outstanding loans may be accelerated and/or the
      lenders’ commitments may be terminated. In addition, upon the occurrence of
      certain insolvency or bankruptcy-related events of default, all amounts payable
      under the Credit Agreement shall automatically become immediately due and
      payable, and the lenders' commitments will automatically terminate. Pursuant
      to
      a related Collateral Agreement, we pledged certain of our securities to the
      collateral agent as security for the full payment and performance of our
      obligations under the Credit Agreement and granted the collateral agent a
      security interest in substantially all of the Company’s property as security for
      the full payment and performance of our obligations under the Credit Agreement.
      None of our subsidiaries has guaranteed the Credit Agreement. As of July 29,
      2006, $37 million was available under the Credit Agreement, which represents
      the
      $100 million from our senior secured revolving credit facility less $63 million
      of outstanding letters of credit at July 29, 2006.




F
          - 15




On
      December 14, 2004, the Company entered into a senior credit facility with a
      number of banks (“Senior Credit Facility”). The Senior Credit Facility
      terminated on December 21, 2005 when we entered into the Credit Agreement
      discussed above. The Senior Credit Facility had consisted of a $150 million
      revolving credit facility and a $100 million term loan. As of the date of the
      termination, the Company had repaid the term loan and had not borrowed any
      funds
      under the $150 million revolving credit facility.


In
        connection with the issuance of the Convertible Senior Notes and the Senior
        Credit Facility, the Company 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 29, 2006, there were
        $3.7
        millionof 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 the
      Company’s 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, the Company paid
      approximately $1.7 million in debt issuance costs. These costs were deferred
      and
      included in “Other assets” on the Consolidated Balance Sheets and are being
      amortized to interest expense over the life of the Mortgage.





Long-term
      debt consists of the following:




(Amounts
                in thousands)
            
            July
                29, 2006
            
            July
                30, 2005Dunnigan
                Mortgage
            
            $
            30,899
            
            $
            31,989Convertible
                Senior Notes
            
            
            115,000
            
            
            115,000Credit
                Agreement
            
            
            -
            
            
            -Senior
                Credit Facility
            
            
            -
            
            
            10,000145,899
            
            
            156,989Less:
                current portion
            
            
            (1,148
            )
            
            (1,089
            )Total
            
            $
            144,751
            
            $
            155,900





Scheduled
      principal payments of the above debt for each of the next five fiscal years
      and
      beyond is as follows: $1.1 million, $1.2 million, $1.3 million, $1.4 million,
      $1.4 million and $139.5 million, respectively.





Interest
      expense relating to the above debt was approximately $4.6 million for the fiscal
      year ended July 29, 2006, $6.3 million for the fiscal year ended July 30, 2005
      and $2.0 million for the fiscal year ended July 31, 2004. Fees related to the
      Credit Agreement and the Senior Credit Facility totaled $0.4 million for the
      fiscal year ended July 29, 2006 and $0.5 million for the fiscal year ended
      July
      30, 2005.




**6.
      Stock Repurchase Program**





The
      Board
      of Directors authorized a $75 million stock repurchase program that was
      announced on April 5, 2001. As of the date of this filing, the Company had
      repurchased 4,885,400 shares at an aggregate purchase price of approximately
      $26.7 million. At July 29, 2006, we had $48.3 million of repurchase availability
      remaining. During Fiscal 2005, 200,000 shares were repurchased under this stock
      repurchase program. Purchases of shares of the Company’s common stock will be
      made at the Company’s discretion from time to time, subject to market conditions
      and at prevailing market prices, through open market purchases or in privately
      negotiated transactions. Treasury (reacquired) shares are retired and treated
      as
      authorized but unissued shares.




F
          - 16




**7.
      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 the Company’s common stock effective
      April 3, 2006.





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




(Amounts
                in thousands)
            
            **July
                29,**
            
            **July
                30,**
            
            **July
                31,****2006**
            
            **2005**
            
            **2004**Weighted
                average number of common shares outstanding - basic
            
            
            61,216
            
            
            59,570
            
            
            58,826Net
                effect of dilutive common stock equivalents that include stock options
              and
                convertible securities based on the treasurystock
                method using the average market price
            
            
            7,512
            
            
            1,588
            
            
            1,414Weighted
                average number of common shares outstanding - diluted
            
            
            68,728
            
            
            61,158
            
            
            60,240




The
        Convertible Senior Notes were dilutive at July 29, 2006 as the average price
        of
        the Company’s stock was more than the conversion price of the Convertible Senior
        Notes, 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 4,946,000 shares for Fiscal 2006. The Convertible
        Senior Notes did not have a dilutive effect on earnings per share for Fiscal 2005.


There
      were no common stock equivalents that were anti-dilutive for Fiscal 2006. Common
      stock equivalents of 52,200 and 4,000 for the fiscal years ended July 30, 2005
      and July 31, 2004, respectively, were excluded because such common stock
      equivalents were anti-dilutive.




**8.
      Employee Benefit Plans**





The
      Company sponsors a defined contribution retirement savings plan (401(k))
      covering all eligible employees. The Company also sponsors 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
      2006, 2005 and 2004 the Company incurred expenses of $2,828,000, $2,171,000,
      and
      $1,815,000, 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. The Company also sponsors an Employee Stock Purchase Plan,
      which allows employees to purchase shares of Company stock during each quarterly
      offering period at a 10% discount through weekly payroll deductions. The Company
      does not provide any additional postretirement benefits.





F
          - 17





**9.
      Income Taxes**





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




**Fiscal
                Year Ended**(Amounts
                in thousands)
            
            
            **July
                29,**
            
            
            **July
                30,**
            
            
            **July
                31,****2006**
            
            
            **2005**
            
            
            **2004**Federal:Current
            
            $
            46,453
            
            $
            4,901
            
            $
            10,268Deferred
            
            
            (4,480
            )
            
            22,283
            
            
            1,60341,973
            
            
            27,184
            
            
            11,871State:Current
            
            
            11,052
            
            
            1,512
            
            
            1,782Deferred
            
            
            (1,225
            )
            
            4,504
            
            
            8889,827
            
            
            6,016
            
            
            2,670**Provision
                for income taxes**
            
            $
            51,800
            
            $
            33,200
            
            $
            14,541





Significant
      components of the Company's deferred tax assets and liabilities were as
      follows:




(Amounts
                in thousands)
            
            **July
                29,**
            
            **July
                30,****2006**
            
            **2005**Deferred
                tax assets:Inventory
                capitalization and inventory-related items
            
            $
            3,326
            
            $
            1,764Capital
                loss carryover
            
            
            590
            
            
            -Employee
                benefits
            
            
            7,941
            
            
            3,446Share
                based compensation
            
            
            4,360
            
            
            1,255Workers’
                compensation
            
            
            1,753
            
            
            909Straight-line
                rent
            
            
            9,576
            
            
            9,082**Total
                deferred tax assets**
            
            
            27,546
            
            
            16,456Deferred
                tax liabilities:Depreciation
            
            
            14,329
            
            
            20,254Intangibles
            
            
            9,749
            
            
            3,703Interest
                on Convertible Senior Notes
            
            
            4,163
            
            
            1,563Other
                items
            
            
            2,923
            
            
            1,781**Total
                deferred tax liabilities**
            
            
            31,164
            
            
            27,301Valuation
                allowance
            
            
            -
            
            
            -**Net
                deferred tax liabilities**
            
            $
            3,618
            
            $
            10,845





The
      Fiscal 2006 total net deferred tax liability is presented on the balance sheet
      as a current asset of $6.5 million and as a long-term liability of $10.1
      million. The Fiscal 2005 total net deferred tax liability is presented on the
      balance sheet as a current liability of $3.6 million and a long-term liability
      of $7.2 million. The components of deferred tax assets and deferred tax
      liabilities were as follows:





(Amounts
                in thousands)
            
            **July
                29,**
              **2006**
            
            **July
                30,**
              **2005**Total
                current deferred tax assets
            
            $
            8,406
            
            $
            271Total
                non-current deferred tax assets
            
            
            19,140
            
            
            16,185**Total
                deferred tax assets**
            
            $
            27,546
            
            $
            16,456Total
                current deferred tax liabilities
            
            
            1,947
            
            
            3,883Total
                non-current deferred tax liabilities
            
            
            29,217
            
            
            23,418**Total
                deferred tax liabilities**
            
            $
            31,164
            
            $
            27,301




F
          - 18





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
                29,**
            
            
            **July
                30,**
            
            
            **July
                31,****2006**
            
            
            **2005**
            
            
            **2004**Statutory
                tax rate
            
            
            35.0
            %
            
            35.0
            %
            
            35.0
            %State
                taxes - net of federal benefit
            
            
            4.5
            %
            
            4.6
            %
            
            3.8
            %Provision
                adjustment- resolution of tax audits
            
            
            -
            
            
            -
            
            
            (4.5
            %)Other
                - net
            
            
            0.1
            %
            
            (0.9
            %)
            
            (2.3
            %)Effective
                tax rate
            
            
            39.6
            %
            
            38.7
            %
            
            32.0
            %




**10.
      Commitments and Contingencies**





*Lease
      commitments*





The
      Company leases all of its 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.
      The Company receives rental income and reimbursement for taxes and common area
      maintenance charges from two tenants that occupy a portion of the Suffern
      facility that are not affiliated with the Company. The rental income from the
      other tenants is shown as “other income” on the Company’s Consolidated
      Statements of Earnings.





A
      summary
      of occupancy costs follows:




**Fiscal
                Year Ended****July
                29,**
            
            
            **July
                30,**
            
            
            **July
                31,**(Amounts
                in thousands)
            
            
            **2006**
            
            
            **2005**
            
            
            **2004**Base
                rentals
            
            $
            119,298
            
            $
            109,632
            
            $
            91,655Percentage
                rentals
            
            
            3,262
            
            
            2,690
            
            
            2,761Other
                occupancy costs
            
            
            40,298
            
            
            32,547
            
            
            30,056162,858
            
            
            144,869
            
            
            124,472Less:
                Rental income from third parties
            
            
            (1,526
            )
            
            (1,526
            )
            
            (1,526
            )**Total**
            
            $
            161,332
            
            $
            143,343
            
            $
            122,946








The
      following is a schedule of future minimum rentals under noncancellable operating
      leases as of July 29, 2006,


(amounts
      in thousands):





**Fiscal
                Year**
            
            **Total**2007
            
            $
            124,2962008
            
            
            120,0722009
            
            
            115,3692010
            
            
            110,4912011
            
            
            107,286Subsequent
                years
            
            
            460,851**Total
                future minimum rentals**
            
            $
            1,038,365





Although
      the Company has 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*





The
      Company leases two stores from its Chairman or related trusts. Future minimum
      rentals under leases with such related parties which extend beyond July 29,
      2006, included in the above schedule, are approximately $312,000 annually and
      in
      the aggregate $1.4 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 2006, 2005 and 2004 under these leases
      amounted to approximately $364,000, $335,000 and $308,000,
      respectively.




F
          - 19




*Contractual
      obligations and commercial commitments*





The
      estimated significant contractual cash obligations and other commercial
      commitments at July 29, 2006 are summarized in the following table:




**Payments
                Due by Period****(Amounts
                in thousands)****Fiscal**
            
            
            **Fiscal
                2008-**
            
            
            **Fiscal
                2010-**
            
            
            **Fiscal
                2012****Contractual
                Obligations**
            
            
            **Totals**
            
            
            **2007**
            
            
            **2009**
            
            
            **2011**
            
            
            **And
                Beyond**Operating
                lease obligations
            
            $
            1,038,365
            
            $
            124,296
            
            $
            235,441
            
            $
            217,777
            
            $
            460,851Mortgage
                principal
            
            
            30,899
            
            
            1,148
            
            
            2,488
            
            
            2,768
            
            
            24,495Mortgage
                interest
            
            
            16,148
            
            
            1,619
            
            
            3,047
            
            
            2,767
            
            
            8,715Convertible
                Senior Notes
            
            
            115,000
            
            
            -
            
            
            -
            
            
            -
            
            
            115,000Convertible
                Senior Notes interest
            
            
            53,188
            
            
            2,875
            
            
            5,750
            
            
            5,750
            
            
            38,813**Total**
            
            $
            1,253,600
            
            $
            129,938
            
            $
            246,726
            
            $
            229,062
            
            $
            647,874




**Amount
                of Commitment Expiration Period****(Amounts
                in thousands)****Fiscal**
            
            
            **Fiscal
                2008-**
            
            
            **Fiscal
                2010-**
            
            
            **Fiscal
                2012****Other
                Commercial Commitments**
            
            
            **Totals**
            
            
            **2007**
            
            
            **2009**
            
            
            **2011**
            
            
            **And
                Beyond**Trade
                letters of credit
            
            $
            56,790
            
            $
            56,790
            
            $
            -
            
            $
            -
            
            $
            -Standby
                letters of credit
            
            
            6,447
            
            
            6,447
            
            
            -
            
            
            -
            
            
            -Firm
                purchase orders
            
            
            1,282
            
            
            1,282
            
            
            -
            
            
            -
            
            
            -**Total**
            
            $
            64,519
            
            $
            64,519
            
            $
            -
            
            $
            -
            
            $
            -





In
      addition to the commitments represented in the above table, the Company enters
      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. The Company does not maintain any long-term or exclusive
      commitments or arrangements to purchase merchandise from any single supplier.
      Preliminary commitments with the Company's private label merchandise vendors
      typically are made five to seven months in advance of planned receipt date.
      Substantially all of the Company’s merchandise purchase commitments are
      cancelable up to 30 days prior to the vendor’s scheduled shipment
      date.




**11.
      Stock-Based Compensation Plans**




The
      Company's 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 29, 2006, there were approximately 7.0 million shares
      under the 2001 plan available for future grant. All of the Company’s prior stock
      option plans have expired as to the ability to grant new options. The Company
      issues new shares of common stock when stock option awards are exercised. Refer
      to the c onsolidated
      statements of shareholders’ equity and comprehensive income for new shares of
      common stock issued in Fiscal 2006, Fiscal 2005 and Fiscal 2004.





Stock
      option awards outstanding under the Company’s 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 29, 2006, there was $14.0 million of total unrecognized compensation cost
      related to nonvested options, which is expected to be recognized over a
      remaining weighted-average vesting period of 3.6 years. The total intrinsic
      value of options exercised during the fifty-two weeks ended July 29, 2006 was
      approximately $15.6 million. The
      total
      fair value of options that vested during the fifty-two weeks ended July 29,
      2006
      was approximately $3.0 million.




F
          - 20





The
      following table summarizes the activities in all Stock Option Plans and changes
      during each of the fiscal years presented:




July
                29, 2006
            
            
            July
                30, 2005
            
            
            July
                31, 2004Weighted
            
            
            
            
            
            Weighted
            
            
            
            
            
            WeightedAverage
            
            
            
            
            
            Average
            
            
            
            
            
            AverageExercise
            
            
            
            
            
            Exercise
            
            
            
            
            
            ExerciseOptions
            
            
            Price
            
            
            Options
            
            
            Price
            
            
            Options
            
            
            PriceOptions
                outstanding - beginning of year
            
            
            5,170,902
            
            $
            5.99
            
            
            5,347,958
            
            $
            5.23
            
            
            5,900,990
            
            $
            4.90Granted
            
            
            2,620,266
            
            
            12.24
            
            
            1,064,764
            
            
            8.48
            
            
            539,250
            
            
            6.91Cancelled
            
            
            (269,872
            )
            
            6.39
            
            
            (35,800
            )
            
            4.85
            
            
            (163,720
            )
            
            5.46Exercised
            
            
            (1,265,434
            )
            
            4.89
            
            
            (1,206,020
            )
            
            4.71
            
            
            (928,562
            )
            
            4.06Outstanding
                end of year
            
            
            6,255,862
            
            $
            8.81
            
            
            5,170,902
            
            $
            5.99
            
            
            5,347,958
            
            $
            5.23Options
                exercisable
              at
                year-end
            
            
            1,743,646
            
            $
            5.45
            
            
            2,044,158
            
            $
            4.49
            
            
            1,721,294
            
            $
            4.39Weighted-average
                fair
              value
                of options granted
              during
                the year
            
            
            
            
            $
            5.07
            
            
            
            
            $
            3.87
            
            
            
            
            $
            2.75





The
      aggregate intrinsic value of options outstanding at July 29, 2006 was $23.4
      million. The aggregate intrinsic value of options that are exercisable at July
      29, 2006 was $4.2 million.





The
      following table summarizes information about stock options outstanding at July
      29, 2006:





Range
                of
              Exercise
                Prices
            
            Number
                Outstanding
              as
                of July 29, 2006
            
            Weighted
                Average
              Remaining
                Life
            
            Weighted
                Average
              Exercise
                Price
            
            Number
                Exercisable
              as
                of July 29, 2006
            
            Weighted
                Average
              Exercise
                Price$2.17
                - $2.84
            
            
            23,100
            
            
            1.1
                years
            
            $
            2.49
            
            
            23,100
            
            $
            2.493.52
                - 5.19
            
            
            1,030,470
            
            
            3.7
                years
            
            
            4.12
            
            
            853,270
            
            
            3.965.63
                - 8.19
            
            
            2,340,626
            
            
            6.9
                years
            
            
            7.05
            
            
            856,676
            
            
            6.978.91
                - 12.93
            
            
            2,719,400
            
            
            9.2
                years
            
            
            11.60
            
            
            10,600
            
            
            9.7117.09
                - 21.04
            
            
            142,266
            
            
            9.5
                years
            
            
            19.42
            
            
            -
            
            
            -$2.17
                - $21.04
            
            
            6,255,862
            
            
            7.4
                years
            
            $
            8.81
            
            
            1,743,646
            
            $
            5.45





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 canceled for any reason,
      or
      expire or terminate unexpired, 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 29, 2006, there was $1.5
      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 3.2 years. The unrecognized compensation
      cost related to nonvested restricted stock awards was recorded as unearned
      compensation in shareholders’ equity at July 30, 2005. As part of the adoption
      of SFAS No. 123R, the unrecognized compensation cost related to nonvested
      restricted stock awards granted prior to July 31, 2005 was included as a
      component of additional paid-in capital. The total fair value of the restricted
      stock awards recognized as compensation expense during the fifty-two weeks
      ended
      July 29, 2006 was $641,000. Compensation expense recognized for restricted
      stock
      awards during the fifty-two weeks ended July 30, 2005 was $398,000. The
      Company recognized $67,000 of compensation expense in Fiscal 2004 .





F
          - 21




Following
      is a summary of the changes in the shares of restricted stock outstanding during
      the fifty-two weeks ended July 29, 2006:





Number
                of Shares
            
            Weighted
                Average Grant Date Fair Value Per ShareRestricted
                stock awards at July 30, 2005
            
            
            178,400
            
            $
            8.69Granted
            
            
            24,000
            
            
            15.08Vested
            
            
            (46,960
            )
            
            8.87Forfeited
            
            
            -
            
            
            -Restricted
                stock awards at July 29, 2006
            
            
            155,440
            
            $
            9.62




The
      Company’s Employee Stock Purchase Plan allows eligible full-time employees to
      purchase a limited number of shares of the Company’s common stock during each
      quarterly offering period at a 10% discount through weekly payroll deductions.
      During the fifty-two weeks ended July 29, 2006, we sold approximately 15,000
      shares to employees at an average discount of $1.93 per share under the Employee
      Stock Purchase Plan. The compensation expense recognized for the discount given
      under the Employee Stock Purchase Plan was approximately $29,000 for the
      fifty-two weeks ended July 29, 2006.





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 fifty-two weeks ended July 29, 2006, excess tax benefits realized from
      the exercise of stock options was $1.9 million.




F
          - 22




12.
**Segments**




Our
      reportable segments are the **dressbarn** brands,
      which are used in 575
      Combo
      stores (a combination of **dressbarn** and **dressbarn**  **woman** stores),
      173 **dressbarn** stores,
      45 **dressbarn**  **woman** stores in 45
      states as of July 29, 2006 and the **maurices** brand,
      which is used in 546 stores in 40 states as of July 29, 2006. The Company
      completed the acquisition of Maurices Incorporated in January 2005.





The
      Company’s **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 as well as
      the
      causal apparel needs of the 17 to 34 year-old-male .
      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** . **maurices** also
      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.





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





(Amounts
                in millions)
            
            **Fiscal
                2006**
            
            **Fiscal
                2005**
            
            **Fiscal
                2004**Net
                sales**dressbarn
                and dressbarn woman**brands
            
            $
            876.2
            
            $
            788.2
            
            $
            754.9**maurices**brand
            
            
            424.1
            
            
            212.1
            
            
            -Consolidated
                net sales
            
            $
            1,300.3
            
            $
            1,000.3
            
            $
            754.9Operating
                income**dressbarn
                and dressbarn woman**brands
            
            
            81.0
            
            $
            76.9
            
            $
            43.7**maurices**brand
            
            
            50.9
            
            
            15.8
            
            
            -Consolidated
                operating income
            
            
            131.9
            
            
            92.7
            
            
            43.7Interest
                income
            
            
            2.7
            
            
            1.8
            
            
            2.2Interest
                expense
            
            
            (5.3
            )
            
            (10.2
            )
            
            (1.9
            )Other
                income
            
            
            1.5
            
            
            1.5
            
            
            1.5Earnings
                before provision for income taxes
            
            $
            130.8
            
            $
            85.8
            
            $
            45.5Depreciation
                and amortization**dressbarn
                and dressbarn woman**brands
            
            $
            25.9
            
            $
            25.1
            
            $
            23.2**maurices**brand
            
            
            15.8
            
            
            9.4
            
            
            -Consolidated
                depreciation and amortization
            
            $
            41.7
            
            $
            34.5
            
            $
            23.2Capital
                expenditures**dressbarn
                and dressbarn woman**brands
            
            $
            31.7
            
            $
            25.2
            
            $
            33.9**maurices**brand
            
            
            16.6
            
            
            6.2
            
            
            -Consolidated
                capital expenditures
            
            $
            48.3
            
            $
            31.4
            
            $
            33.9





(Amounts
                in millions)
            
            **July
                29, 2006**
            
            **July
                30, 2005**Identifiable
                assets**dressbarn
                and dressbarn woman**brands
            
            $
            707.9
            
            $
            587.4**maurices**brand
            
            
            139.0
            
            
            128.8Total
                identifiable assets
            
            $
            846.9
            
            $
            716.2Merchandise
                inventories**dressbarn
                and dressbarn woman**brands
            
            $
            113.9
            
            $
            117.1**maurices**brand
            
            
            56.6
            
            
            50.5Total
                merchandise inventories
            
            $
            170.5
            
            $
            167.6




F
          - 23




**13.
      Quarterly Results of Operations (UNAUDITED)**





(Amounts
      in thousands, except per share data)


**Fiscal
                Year Ended July 29, 2006**
            
            **Fourth
                Quarter**
            
            **Third
                Quarter**
            
            **Second
                Quarter**
            
            **First
                Quarter**Net
                sales
            
            $
            343,305
            
            $
            327,176
            
            $
            310,907
            
            $
            318,889Gross
                profit,including
                occupancy and buying costs
            
            
            143,396
            
            
            133,412
            
            
            117,723
            
            
            132,115Income
                taxes
            
            
            14,111
            
            
            13,968
            
            
            8,196
            
            
            15,525Net
                earnings
            
            
            24,443
            
            
            20,031
            
            
            14,112
            
            
            20,368Earnings
                per share (1)Basic
            
            $
            0.40
            
            $
            0.33
            
            $
            0.23
            
            $
            0.34Diluted
            
            $
            0.35
            
            $
            0.29
            
            $
            0.21
            
            $
            0.32**Fiscal
                Year Ended July 30, 2005 (2)**
            
            
            **Fourth
                Quarter**
            
            
            **Third
                Quarter**
            
            
            **Second
                Quarter**
            
            
            **First
                Quarter**Net
                sales
            
            $
            307,052
            
            $
            295,958
            
            $
            200,138
            
            $
            197,116Gross
                profit,including
                occupancy and buying costs
            
            
            119,330
            
            
            111,972
            
            
            74,602
            
            
            72,704Income
                taxes
            
            
            21,952
            
            
            6,197
            
            
            942
            
            
            4,109Net
                earnings
            
            
            33,581
            
            
            10,193
            
            
            1,637
            
            
            7,149Earnings
                per share (1)Basic
            
            $
            0.56
            
            $
            0.17
            
            $
            0.03
            
            $
            0.12Diluted
            
            $
            0.54
            
            $
            0.17
            
            $
            0.03
            
            $
            0.12






(1)
            Earnings per share is computed independently
              for each period presented. As a result, the total of the per share
              earnings for the four quarters does not equal the annual earnings per
              share. All earnings per share amounts reported above reflect the effect
              of
              the 2-for-1 stock split, effective April 3, 2006.(2)
            Includes the impact of the acquisition
              of
              Maurices Incorporated that was effective January
              2005.




F
          - 24