**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
              30, 2005**
            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 incorporation
                or organization)
            (I.R.S.
                Employer 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(g) of the Act:




Title
      of each class


Common
      Stock $.05 par value




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 an accelerated filer. Yes x 
      No o.





The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant as of January 29, 2005 was approximately $410 million (based on
      the
      last reported sales price on the NASDAQ National Market on that date). For
      the
      purposes of such calculation, all outstanding shares of Common Stock have been
      considered held by non-affiliates, other than the 7,805,406 shares beneficially
      owned by Directors and Executive Officers of the registrant. As of September
      27,
      2005, 30,280,116 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 30, 2005 are incorporated into Parts I and III of this Form
      10-K.





Table
          of Contents




**THE
      DRESS BARN, INC.**


**FORM
      10-K**


**FISCAL
      YEAR ENDED JULY 30, 2005**


**TABLE
      OF CONTENTS**


**PART
                I**
            
            **PAGE****Item
                1**
            **Business**General
            **3**Company
                Strengths and
                Strategies
            **4**Merchandising
            **7**Buying
                and Distribution
            **8**Store
                Locations and Properties
            **9**Operations
                and
                Management
            **11**Advertising
                and
                Marketing
            **12**Management
                Information
                Systems
            **12**Trademarks
            **13**Employees
            **13**Seasonality
            **13**Competition
            **13**Risk
                Factors Related to our
                Business
            **14****Item
                2**
            **Properties**
            **17****Item
                3**
            **Legal
                Proceedings**
            **18****Item
                4**
            **Submission
                of Matters to a Vote of Security
                Holders**
            **18****Executive
                Officers of the
                Registrant**
            **18****PART
                II****Item
                5**
            **Market
                for Registrant’s Common Equity and Related
                Stockholder Matters**
            **19****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**
            **31****Item
                8**
            **Financial
                Statements and Supplementary
                Data**
            **31****Item
                9**
            **Changes
                in and Disagreements with Accountants on Accounting
                and Financial Disclosure**
            **31****Item
                9A**
            **Controls
                and Procedures**
            **32****Item
                9B**
            **Other
                Information**
            **33**


**PART
                III****Item
                10**
            **Directors
                and Executive Officers of the
                Registrant**
            **34****Item
                10 A**
            **Code
                of Business Conduct and
                Ethics**
            **34****Item
                11**
            **Executive
                Compensation**
            **34****Item
                12**
            **Security
                Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters**
            **34****Item
                13**
            **Certain
                Relationships and Related
                Transactions**
            **34****Item
                14**
            **Principal
                Accountant Fees and
                Services**
            **34****PART
                IV****Item
                15**
            **Exhibits
                and Financial Statement
                Schedules**
            **35**






-2-
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          of Contents





*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 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
      the heading “Business -Risk Factors Related to our Business,” 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.*





**PART
      I**





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





**General**




The
      Dress
      Barn, Inc. and its wholly-owned subsidiaries (the “Company”, “we,” 
“us,”  “our,” or other similar terms) operates 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 30, 2005, the Company operated 1,272 stores in 48 states and the District
      of Columbia, consisting of 552 Combo stores (a combination of **dressbarn** and **dressbarn**  **woman** stores),
      182 **dressbarn** stores,
      45 **dressbarn**  **woman** stores
      and 493 **maurices** stores.
      The Company maintains 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 to 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 analyzing the
      most effective ways to combine and coordinate our brands so as to optimize
      performance and efficiencies. The integration process with **maurices** has been
      completed in many areas and remains ongoing in others. Substantially all of **maurices** ’
      management team prior to the acquisition continues to manage the daily
      operations of **maurices** .




-3-
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          of Contents




While
      we
      are reporting two segments ,
      there
      are a number of similarities between our **dressbarn** and **maurices** operations. **dressbarn** and **maurices** have
      similar economic characteristics and similar operating, financial and
      competitive risks. **dressbarn** and **maurices** are
      similar in nature of product, as they offer apparel and clothing accessories.
      The merchandise inventory for **dressbarn** and **maurices** is
      sourced from many of the same countries and some of the same vendors, using
      similar production processes. Neither **dressbarn** nor **maurices** performs
      its own manufacturing, but buys all its merchandise from third parties. **dressbarn** and **maurices** clients
      have similar characteristics; retail clothing customers, primarily women looking
      for apparel that reflects style and fashion made of good quality offered at
      competitive prices. In addition, **dressbarn** and **maurices** merchandise is distributed to stores in a similar manner and sold to customers
      through the Company’s retail stores located primarily in strip shopping
      centers.





**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 majority of our net sales for the fiscal year ended July
      30, 2005.





The **dressbarn** brands
      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, the Company
      locates its stores primarily in nearby strip centers and operates 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; the **dressbarn** credit
      card is administered by a third party financial institution with no credit
      risk
      to us.




**dressbarn** is one
      of the largest national specialty store chains in its segment offering current
      women’s 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.





Our
      established relationships with our domestic and offshore vendors and
      manufacturers, including our buying agents, often being one of their largest
      accounts, along with the Company’s buying power and strong credit profile,
      enable us to receive favorable purchasing terms, exclusive merchandise and
      expedited delivery times.




-4-
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          of Contents





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, too, has 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. During
      this period, we have expanded the use of our **dressbarn** â label to
      virtually all our merchandise offerings, emphasizing quality, value and fashion.





To
      strengthen our **dressbarn** brand
      image and marketing effectiveness, the Company has evolved from reliance on
      weekly newspaper advertising in favor of targeted national magazine advertising
      and expanded direct mail. We advertise in approximately 10 national lifestyle
      magazines with ads designed to enhance brand awareness and to bring new
      customers into our stores and work with a public relations firm to increase
      editorial coverage regarding our fashion as well as 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 causal outfits and assortments. We have upgraded our fabrications,
      offering value, style and fashion while maintaining quality and price points.
      We
      attempt to ensure our merchandise sizes are true, with consistent fits, easy
      to
      care for and of 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 Fiscal 2005, the
      Company utilized this design in its newly opened stores and updated
      approximately 15 stores to this design; the Company plans to update or
      completely remodel approximately 12 of its store locations during its fiscal
      year ending July 29, 2006. As of July 30, 2005, almost half of the Company’s
      stores feature this design.





**dressbarn** continues to invest in technology to improve merchandising and sales, reduce
      costs and enhance productivity. The Company utilizes a field information system
      for all its 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
      enable sales associates to view training DVDs. These training DVDs assist our
      sales associates with the skills they need to properly serve our customers.
      In
      addition, we began a rollout of a new point-of-sale (“POS”) system with many
      enhanced features to all our stores, which was completed in the first quarter
      of
      Fiscal 2005. This rollout included the installation of a wide area network.
      This
      new 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.
      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, the Company, through a wholly owned subsidiary, 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 the Company’s corporate offices and **dressbarn**distribution center. The acquisition of the Suffern Facility
      provides
      flexibility for future expansion and has resulted in significant savings in
      corporate office and dressbarn distribution center occupancy costs.




-5-
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          of Contents





Based
      on
      the economic success of our larger size Combo stores, most Fiscal 2006 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 the Company 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 bankrupt retailers, some of which
      were too small for a Combo store and were opened as freestanding locations.
      Of
      the 41 **dressbarn** stores
      we opened during Fiscal 2005, 34 were Combo store locations and 7 were
      freestanding locations. We have an ongoing program of converting our older
      freestanding stores to Combo stores. Two stores were converted to Combo stores
      during Fiscal 2005. We expect to continue to open stores primarily in strip
      centers, as well as in downtown and outlet locations. In Fiscal 2006, we plan
      to
      open approximately 100 new stores, consisting of 60 **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 36 such locations
      during Fiscal 2005, compared to 47 closed in Fiscal 2004. We also plan to close
      approximately 35 more such locations in Fiscal 2006. The Company has the option
      under a substantial number of its store leases to terminate the lease at little
      or no cost if specified sales volumes are not achieved, 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 1.0% in Fiscal 2005, after a 1.2%
      increase in Fiscal 2004. Net of store closings, we currently plan to increase
      our aggregate **dressbarn** store
      square footage in the low single-digits in Fiscal 2006.





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 and deliver
      fashion in a less timely manner. **maurices** does
      benefit from strategically locating close to these competitors, capitalizing
      on
      the traffic they generate.





A
      further
      differentiator to 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 , customer
      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.




-6-
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          of Contents





To
      provide customers with a variety of styles and colors, **maurices** ’
      women’s
      apparel assortment is divided into two lifestyles, casual 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. **mauriuces** ’
      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** has
      invested in a suite of systems to support merchandising and sales, reduce costs
      and enhance productivity. The Company utilizes a field information system for
      all its 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. In addition, we recently rolled out a new point-of-sale
      (“POS”) system with many enhanced features to all our stores. This rollout
      included the installation of a real-time intranet network to each store. This
      new 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.
      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 allows for extensive analytical reporting.





**maurices** will
      continue to capitalize on our recent expansion successes, with plans to open
      60
      new stores in Fiscal 2006. The expansion strategy continues to be on the small
      and metro fringe markets. The focus will remain on strip centers and small
      malls, with a test of outlet stores in Fiscal 2006. **maurices** expects
      to close approximately 10 locations in Fiscal 2006. The typical **maurices** store is
      between 3,500 to 6,000 square feet. Net of store closings, we currently plan
      to
      increase our **maurices** square
      footage by roughly seven percent in Fiscal 2006, in addition to the six percent
      gain in 2005. 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.





**dressbarn** and **maurices** utilizes
      their web sites ( www.dressbarn.com and www.maurices.com ) for
      reinforcing store promotions and providing store and product information,
      helping 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.





**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** .




-7-
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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. The vast majority of
      our
      sales are generated from our **dressbarn** labels.





We
      continue to expand the number of our stores with shoe and petite-size
      departments. As of July 30, 2005, 373 stores had shoe departments and 242 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 the portion of Fiscal 2005 that **maurices’** results
      were consolidated in our financial statements, sales of women’s apparel
      accounted for approximately 75% of **maurices** ’
      net
      sales, while women’s accessories accounted for 17%, 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 their sales volume
      derived from sportswear, including sweaters, knit and woven tops, denim and
      causal 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 our 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 2005, 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 versus up to six months
      for merchandise purchased overseas.





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, over 90%
      of
      our merchandise is pre-ticketed by vendors and over half 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.




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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 50 buyers, assistant buyers, and planning & allocation
      associates supervised by three Divisional Merchandise Managers and three
      Planning & 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 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 90% of **maurices** ’
      merchandise is pre-ticketed and floor ready while over 20% 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 30, 2005, the Company operated 1,272 stores in 48 states and the District
      of Columbia. 701 of the stores were conveniently located in strip centers and
      223 stores were located in outlet centers. During Fiscal 2005, 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
            
            
            118
            
            
            22
            
            
            372
            
            
            189
            
            
            701Outlet
                Malls and Outlet Strip Centers
            
            
            41
            
            
            20
            
            
            156
            
            
            6
            
            
            223Free
                Standing, Downtown and Enclosed Malls
            
            
            23
            
            
            3
            
            
            24
            
            
            298
            
            
            348**Total**
            
            
            **182**
            
            
            **45**
            
            
            **552**
            
            
            **493**
            
            
            **1,272**





As
      of
      July 30, 2005, **dressbarn** had 5.8
      million total square feet in all its stores and **maurices** had 2.5
      million total square feet.




-9-
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          of Contents





The
      table
      below indicates the states in which the stores operating on July 30, 2005 were
      located, and the number of stores in each state:


**dressbarn**
              
              **Combo**
              
              **maurices****Location**
              
              **dressbarn**
              
              **Woman**
              
              **Stores**
              
              **Stores**
              
              **Total**Alabama
              
              
              –
              
              
              –
              
              
              8
              
              
              1
              
              
              9Arizona
              
              
              3
              
              
              –
              
              
              9
              
              
              4
              
              
              16Arkansas
              
              
              –
              
              
              –
              
              
              4
              
              
              12
              
              
              16California
              
              
              15
              
              
              2
              
              
              33
              
              
              –
              
              
              50Colorado
              
              
              3
              
              
              1
              
              
              10
              
              
              14
              
              
              28Connecticut
              
              
              9
              
              
              1
              
              
              15
              
              
              1
              
              
              26District
                  of Columbia
              
              
              2
              
              
              1
              
              
              1
              
              
              –
              
              
              4Delaware
              
              
              2
              
              
              1
              
              
              3
              
              
              –
              
              
              6Florida
              
              
              10
              
              
              1
              
              
              16
              
              
              –
              
              
              27Georgia
              
              
              2
              
              
              –
              
              
              18
              
              
              8
              
              
              28Idaho
              
              
              –
              
              
              -
              
              
              3
              
              
              10
              
              
              13Illinois
              
              
              4
              
              
              1
              
              
              29
              
              
              34
              
              
              68Indiana
              
              
              4
              
              
              –
              
              
              12
              
              
              28
              
              
              44Iowa
              
              
              –
              
              
              –
              
              
              6
              
              
              28
              
              
              34Kansas
              
              
              –
              
              
              –
              
              
              5
              
              
              20
              
              
              25Kentucky
              
              
              1
              
              
              –
              
              
              7
              
              
              14
              
              
              22Louisiana
              
              
              –
              
              
              –
              
              
              12
              
              
              –
              
              
              12Maine
              
              
              2
              
              
              1
              
              
              –
              
              
              2
              
              
              5Maryland
              
              
              6
              
              
              3
              
              
              19
              
              
              –
              
              
              28Massachusetts
              
              
              8
              
              
              1
              
              
              23
              
              
              –
              
              
              32Michigan
              
              
              6
              
              
              1
              
              
              23
              
              
              29
              
              
              59Minnesota
              
              
              1
              
              
              –
              
              
              11
              
              
              36
              
              
              48Mississippi
              
              
              –
              
              
              –
              
              
              7
              
              
              1
              
              
              8Missouri
              
              
              5
              
              
              2
              
              
              20
              
              
              28
              
              
              55Montana
              
              
              –
              
              
              –
              
              
              –
              
              
              9
              
              
              9Nebraska
              
              
              –
              
              
              –
              
              
              4
              
              
              10
              
              
              14Nevada
              
              
              –
              
              
              –
              
              
              5
              
              
              2
              
              
              7New
                  Hampshire
              
              
              –
              
              
              –
              
              
              6
              
              
              3
              
              
              9New
                  Jersey
              
              
              16
              
              
              7
              
              
              25
              
              
              –
              
              
              48New
                  Mexico
              
              
              –
              
              
              –
              
              
              1
              
              
              6
              
              
              7New
                  York
              
              
              24
              
              
              4
              
              
              38
              
              
              13
              
              
              79North
                  Carolina
              
              
              9
              
              
              4
              
              
              15
              
              
              16
              
              
              44North
                  Dakota
              
              
              –
              
              
              –
              
              
              1
              
              
              9
              
              
              10Ohio
              
              
              2
              
              
              –
              
              
              18
              
              
              22
              
              
              42Oklahoma
              
              
              1
              
              
              –
              
              
              2
              
              
              13
              
              
              16Oregon
              
              
              2
              
              
              2
              
              
              4
              
              
              15
              
              
              23Pennsylvania
              
              
              19
              
              
              5
              
              
              25
              
              
              9
              
              
              58Rhode
                  Island
              
              
              1
              
              
              –
              
              
              3
              
              
              –
              
              
              4South
                  Carolina
              
              
              4
              
              
              1
              
              
              10
              
              
              –
              
              
              15South
                  Dakota
              
              
              –
              
              
              –
              
              
              –
              
              
              9
              
              
              9Tennessee
              
              
              3
              
              
              2
              
              
              10
              
              
              10
              
              
              25Texas
              
              
              5
              
              
              1
              
              
              41
              
              
              2
              
              
              49Utah
              
              
              –
              
              
              –
              
              
              5
              
              
              10
              
              
              15Vermont
              
              
              –
              
              
              -
              
              
              2
              
              
              3
              
              
              5Virginia
              
              
              8
              
              
              2
              
              
              22
              
              
              6
              
              
              38Washington
              
              
              2
              
              
              1
              
              
              8
              
              
              11
              
              
              22West
                  Virginia
              
              
              –
              
              
              –
              
              
              3
              
              
              4
              
              
              7Wisconsin
              
              
              3
              
              
              –
              
              
              10
              
              
              32
              
              
              45Wyoming
              
              
              –
              
              
              –
              
              
              –
              
              
              9
              
              
              9**Total**
              
              
              **182**
              
              
              **45**
              
              
              **552**
              
              
              **493**
              
              
              **1,272**








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**Operations
      and
      Management**





In
      considering new store locations, **dressbarn** focuses
      on expanding in existing major trading and high-density markets, in certain
      cases seeking downtown or urban locations and/or adding to a cluster of suburban
      or other locations. Downtown and urban locations are considered based on
      pedestrian traffic and daytime population, proximity to major corporate centers
      and occupancy costs at the location, which are substantially higher than in
      suburban 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, 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 easier 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 13 Regional
      Sales Managers and approximately 125 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.





Almost
      75% of **dressbarn** ’s
      sales
      in Fiscal 2005 and 70% of sales in Fiscal 2004 and Fiscal 2003 were paid for
      by
      credit card or debit card, with the remainder being paid by cash or check.
      Approximately 64% of **maurices** ’
      sales
      in Fiscal 2005 were paid for by credit cards, with the remainder being paid
      by
      cash and checks. 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 30, 2005, 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 1.8 million. The average dollar value per transaction on both the **dressbarn** credit
      card and the **maurices** credit
      card during Fiscal 2005 was approximately 50% greater than the average dollar
      value of all other transactions. The **dressbarn** credit
      card and the **maurices** credit
      card represented approximately 21% and 27% of our sales in Fiscal 2005,
      respectively.





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




-11-
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          of Contents





**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 more targeted and cost effective
      to
      communicate our fashion and promotional message. In the last two years,
      distribution of direct mail has more than doubled. 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.





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 as well as 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 1.8 million **maurices** credit
      card customers. Additionally, both national cause-related marketing initiatives,
      such as Relay For Life conducted at the local level along with grassroots
      Hometown Pride programs, reinforce **maurices** as
      integral members of its communities.





**Management
      Information
      Systems**





**dressbarn** has made
      a significant investment in technology to improve sales, gain efficiencies
      and
      reduce operating costs. **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 point-of-sale (“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 new
      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
      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 system
      enables us to identify slow-moving merchandise to mark down or efficiently
      transfer to stores selling such items more rapidly. We analyze historical hourly
      and 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 was part of the new back-office store system which also included
      automated time and attendance, quicker processing of credit card applications
      and integrated email and messaging.




-12-
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Each **maurices** store is
      connected with the corporate office through its point of sale terminal. The
      store’s point of sale terminal utilizes POS 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 POS 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.





**Trademarks**





We
      have
      previously been issued U.S. Certificates of Registration of Trademark for the
      operating names of our stores and our major private label merchandise
      ( **dressbarn** â , **maurices** â ,
      Studio
      Y â  and
      Westport Ltd. â ,
      among
      others) .
      We
      filed applications to register a number of additional trademarks, the most
      significant being **dressbarn** â and our
      new logo. In Fiscal 2004, the **dressbarn** â trademark registration was completed. We believe
      our **dressbarn** ®, **dressbarn**  **woman** â , **maurices** â and
      Studio Y â trademarks are materially important to our business.





**Employees**





As
      of
      July 30, 2005, we had approximately 12,000 employees of whom approximately
      7,000
      worked part time. As of July 31, 2004, we had approximately 8,500 employees
      of
      whom approximately 5,000 worked part time. The increase in employees from Fiscal
      2004 was the result of the acquisition of M aurices
      Incorporated in January 2005. 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 Christmas 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, fashion-minded
      working women, and that we are competitive with respect to our national brand
      recognition and loyal customer base.




-13-
 Table
          of Contents





**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 lower prices,
      having a more varied selection in small markets and by offering superior
      service.





**Risk
      Factors********Related
      to our Business**




***Our
      business is dependent upon it being able 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.




***Our
      failure to manage and coordinate maurices’ operations successfully and realize
      the anticipated benefits of the acquisition would harm our
      business.***




We
      consummated the acquisition of Maurices Incorporated on January 3, 2005, as
      of
      the close of business on January 1, 2005. Managing **maurices** and
      coordinating **maurices** ’
      operations with ours will represent a number of challenges, including the
      management of businesses with different approaches to management, sales and
      service, and may involve the integration of a number of geographically separated
      facilities. This may distract management from day-to-day business. As a result,
      we may not be able to operate these businesses efficiently and effectively,
      which may negatively impact our sales and gross margins. We have not previously
      made any material acquisitions.




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




In
      addition to managing the acquisition of **maurices** and the
      coordination of **maurices** ’
      operations with ours, 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 it currently has 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.




-14-
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          of Contents




***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:




1.
            political
                instability;




2.
            increased
                security requirements applicable to imported
                goods;




3.
            imposition
                or increases of duties, taxes and other charges on
                imports;




4.
            imposition
                of quotas on imported merchandise;




5.
            currency
                and exchange risks;




6.
            delays
                in shipping; and




7.
            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.




***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.




***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.




-15-
 Table
          of Contents




***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 therefore adversely affect our
      sales and net earnings.




***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 Christmas
      shopping season. **maurices** has
      historically experienced losses or lower revenues in January, reflecting the
      decrease in demand following the Christmas 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.




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




**dressbarn** earnings
      and **maurices** ’
      earnings have fluctuated from year to year. In addition, **dressbarn** and **maurices** ’
      results
      of operations may fluctuate materially from year to year depending on, among
      other things, net sales contributed by new stores, number and timing of new
      store openings and closings, write-offs, increases or decreases in comparable
      store sales, adverse weather conditions 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.




-16-
 Table
          of Contents




***We
      depend on key personnel 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.




***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 mall 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.




***We
      reported a material weakness in our internal controls over financial reporting
      in Fiscal 2005. Failure to remediate the material weakness could negatively
      impact our business and the price of our common stock.***


We
        concluded that a material weakness existed in our internal control over
        financial reporting as of July 30, 2005. We are in the process of remediating
        our deficiencies in internal control over financial reporting by hiring a
        new
        Director of Financial Reporting and we plan to hire additional accounting
        and
        tax personnel in addition to engaging third party tax and financial consultants
        to ensure that adequate resources exist to implement policies and procedures
        needed to remediate the deficiencies in internal control over financial
        reporting that existed at July 30, 2005. The Company intends to provide ongoing
        training to enhance the abilities of internal financial personnel. The Company
        is also instituting quality control standards, improving the quality of its
        accounting staff through training and education and insuring that all accounting
        personnel understand the accounting regulations and standards to address
        the
        identified deficiencies that exist in its internal control 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. Our failure to remediate the material
        weakness could negatively impact our business and the price of our common
        stock.


**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 stores operated by us on July 30, 2005, indicates the number of leases
      expiring during the period indicated and the number of expiring leases with
      and
      without renewal options:





**Leases**
            
            **Number
                with**
            
            **Number
                Without****Fiscal
                Years**
            
            **Expiring**
            
            **Renewal
                Options**
            
            **Renewal
                Options**2006
            
            
            270
            
            
            109
            
            
            1612007
            
            
            275
            
            
            183
            
            
            922008-2010
            
            
            523
            
            
            380
            
            
            1432011
                and thereafter
            
            
            204
            
            
            140
            
            
            64**Total**
            
            
            1,272
            
            
            812
            
            
            460





New
      store
      leases generally provide for a base rent of between $11 and $30 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 30, 2005,
      and
      excluding locations acquired after July 30, 2005, for Fiscal 2006 are
      approximately $118.9 million. In addition, we are also 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 the Company. 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. The Company 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. 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.




-17-
 Table
          of Contents





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





There
      are
      no material pending legal proceedings. We are subject to ordinary routine
      litigation incidental to the business, to which the Company or any of its
      subsidiaries is a party or of which any of their property is the subject.





**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.





**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
            
            79
            
            Chairman
                of the Board, Co-Founder
                and DirectorDavid
                R. Jaffe
            
            46
            
            President,
                Chief
                Executive Officer and DirectorVivian
                Behrens
            
            52
            
            Senior
                Vice President and Chief Marketing
                OfficerArmand
                Correia
            
            59
            
            Senior
                Vice President and Chief Financial
                OfficerGene
                Wexler
            
            50
            
            Senior
                Vice President, General
                Counsel, and Assistant
                Secretary





*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* started
      with the Company in 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 29, 2005. He has been
        an
        Assistant Secretary of the Company since September 29, 2005. He previously
        served as Vice President, General Counsel and Secretary for Del Laboratories from
        September 1999 until April 2005.




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.




-18-
 Table
          of Contents





**PART
      II**





**ITEM
              5.**
            **MARKET
                FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
                MATTERS**








**Market
      Prices of Common Stock**





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





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


**Fiscal
                  2005**
              
              **Fiscal
                  2004****Fiscal
                  Period**
              
              **High**
              
              **Low**
              
              **High**
              
              **Low**First
                  Quarter
              
              $
              19.45
              
              $
              15.41
              
              $
              14.53
              
              $
              12.30Second
                  Quarter
              
              $
              19.49
              
              $
              15.19
              
              $
              15.86
              
              $
              13.90Third
                  Quarter
              
              $
              20.75
              
              $
              16.51
              
              $
              18.72
              
              $
              14.74Fourth
                  Quarter
              
              $
              24.93
              
              $
              16.73
              
              $
              18.10
              
              $
              15.56





**Number
      of Holders of Record**





As
      of
      September 27, 2005, we had approximately 270 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 30,
      2005.




**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
              
              
              2,585,451
              
              $
              11.97
              
              
              1,711,117Equity
                  compensation plans not approved by security holders
              
              
              –
              
              
              –
              
              
              –**Total**
              
              
              2,585,451
              
              $
              11.97
              
              
              1,711,117


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


**Quarter
        Ending July 30, 2005**
  **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)**May
                  1, 2005 through May 28, 2005
              
              
              –
              
              
              N/A
              
              
              –
              
              
              1,979,857May
                  29, 2005 through July 2, 2005
              
              
              –
              
              
              N/A
              
              
              –
              
              
              1,979,857July
                  3, 2005 through July 30, 2005
              
              
              –
              
              
              N/A
              
              
              –
              
              
              1,979,857
 
 (1)
              The
                  Company has a $75 million Stock Buyback Program (the “Program”) which was
                  originally announced on April 5, 2001. Under the Program, the Company
                  may
                  repurchase its 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 $24.38 at July 29,
                  2005.






-19-
 Table
          of Contents





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




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


**Fiscal
                    Year Ended****July
                    30,**
                  **2005**
                
                **July
                    31,**
                  **2004**
                  **(as
                    restated)**
                
                **July
                    26,**
                  **2003**
                
                **July
                    27,**
                  **2002**
                
                **July
                    28,**
                  **2001**(3)
                
                (4)Net
                    sales
                
                $
                1,000,264
                
                $
                754,903
                
                $
                707,121
                
                $
                717,136
                
                $
                695,008Cost
                      of sales, including occupancy and buying costs
                
                
                621,656
                
                
                472,198
                
                
                451,579
                
                
                452,216
                
                
                440,817Gross
                    profit
                
                
                378,608
                
                
                282,705
                
                
                255,542
                
                
                264,920
                
                
                254,191Selling,
                      general and administrative expenses
                
                
                286,751
                
                
                212,477
                
                
                194,005
                
                
                188,056
                
                
                182,598Depreciation
                    and amortization
                
                
                34,457
                
                
                23,197
                
                
                22,262
                
                
                24,631
                
                
                25,146Litigation
                    (2)
                
                
                (35,329
                )
                
                3,329
                
                
                32,000
                
                
                **–**
                
                
                **–**Operating
                    income
                
                
                92,729
                
                
                43,702
                
                
                7,275
                
                
                52,233
                
                
                46,447Interest
                    income
                
                
                1,735
                
                
                2,204
                
                
                3,332
                
                
                5,458
                
                
                8,949Interest
                    expense
                
                
                (10,230
                )
                
                (1,959
                )
                
                (164
                )
                
                –
                
                
                –Other
                    income
                
                
                1,526
                
                
                1,526
                
                
                779
                
                
                –
                
                
                –Earnings
                    before income taxes
                
                
                85,760
                
                
                45,473
                
                
                11,222
                
                
                57,691
                
                
                55,396Income
                    taxes
                
                
                33,200
                
                
                14,541
                
                
                4,039
                
                
                20,769
                
                
                20,219**Net
                    earnings**
                
                **$**
                **52,560**
                
                **$**
                **30,932**
                
                **$**
                **7,183**
                
                **$**
                **36,922**
                
                **$**
                **35,177****Earnings
                    per share –
                    basic
                    (1)**
                
                **$**
                **1.76**
                
                **$**
                **1.05**
                
                **$**
                **0.23**
                
                **$**
                **1.01**
                
                **$**
                **0.96****Earnings
                    per share – diluted (1)**
                
                **$**
                **1.72**
                
                **$**
                **1.03**
                
                **$**
                **0.22**
                
                **$**
                **0.98**
                
                **$**
                **0.94****Balance
                    sheet data:**Working
                    capital
                
                $
                27,395
                
                $
                153,106
                
                $
                126,138
                
                $
                234,576
                
                $
                201,241Total
                    assets
                
                $
                716,245
                
                $
                489,316
                
                $
                449,787
                
                $
                487,838
                
                $
                434,082Long-term
                    debt
                
                $
                155,900
                
                $
                31,988
                
                $
                33,021
                
                $
                –
                
                $
                –Shareholders'
                    equity
                
                $
                313,128
                
                $
                252,958
                
                $
                217,421
                
                $
                325,642
                
                $
                289,005**Percent
                    of net sales:**Cost
                      of sales, includingoccupancy
                      and buying costs
                
                
                62.1
                %
                
                62.6
                %
                
                63.9
                %
                
                63.1
                %
                
                63.4
                %Gross
                    profit
                
                
                37.9
                %
                
                37.4
                %
                
                36.1
                %
                
                36.9
                %
                
                36.6
                %Selling,
                      general and administrative expenses
                
                
                28.7
                %
                
                28.1
                %
                
                27.4
                %
                
                26.2
                %
                
                26.3
                %Litigation
                
                
                (3.5
                %)
                
                0.4
                %
                
                4.5
                %
                
                –
                
                
                –Operating
                    income
                
                
                9.3
                %
                
                5.8
                %
                
                1.0
                %
                
                7.3
                %
                
                6.7
                %Net
                    earnings
                
                
                5.3
                %
                
                4.1
                %
                
                1.0
                %
                
                5.1
                %
                
                5.1
                %
 
 (1)
                    All earnings per share amounts reported above reflect the effect
                    of the
                    2-for-1 stock split, distributed May 31, 2002.(2)
                    See Note 7 to the consolidated financial statements.(3)
                    Includes the impact of the acquisition of Maurices Incorporated.
                    See Note
                    2 to the consolidated financial statements.(4)
                    See Note 3 to the consolidated financial
                    statements.








-20-
 Table
          of Contents




**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 2005 refers to
      our
      fiscal year ended July 30, 2005, Fiscal 2004 refers to our fiscal year ended
      July 31, 2004, and Fiscal 2003 refers to our fiscal year ended July 26, 2003.
      Fiscal 2005 and Fiscal 2003 were 52-week periods. Fiscal 2004 was a 53-week
      period. Fiscal 2006 refers to our fiscal year that will end on July 29, 2006.
      For certain comparisons, we compare Fiscal 2005 results to the 52-week period
      ended July 24, 2004 (Fiscal 2004 less the 53rd week).




**Restatement
      of Financial Statements**




We
        concluded that our Consolidated Financial Statements should be restated.
        These
        corrections did not affect the net increase
        or decrease in cash
        and cash equivalents and had no impact on the Company’s consolidated balance
        sheets, net earnings, consolidated statement of shareholders’ equity
        and comprehensive income, and earnings per share. See Note 3 to the consolidated
        financial statements of this Annual Report on Form 10-K for details of the
        restatements. The following Management’s Discussion and Analysis gives effect to
        the restatement.





**Overview**





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, to a lesser extent, the casual apparel needs of the
      17 to
      34 year-old-male.




The
      retail environment remains very competitive. With the acquisition of Maurices
      Incorporated, we have diversified our core business and believe it will improve
      our future growth potential. The addition of **maurices** will
      allow 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. Store expansion will focus on both expanding in
      the
      Company's major trading markets and developing and expanding into new domestic
      markets. For
      Fiscal 2006 we are currently projecting net square footage growth in the mid
      single-digit percentage range. H urricane
      Katrina caused extensive damage to portions of the southeast United States,
      including areas where certain of the Company’s retail stores are located. The
      Company carries property and casualty insurance with deductibles on its retail
      store locations, and is currently assessing the impact of the hurricane on
      its
      stores located within the affected areas as well as actions it may take with
      respect to its affected associates, its business, and other consequences of
      the
      hurricane. We do not believe that the related costs will have a material
      impact on the Company’s consolidated
      financial position, results of operations or cash flows .





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
                    30,**
                  **2005**
                
                
                
                
                **July
                    31,**
                  **2004**
                
                
                **July
                    26,**
                  **2003**Net
                    sales growth
                
                
                32.5
                %
                (1
                )
                
                6.8
                %
                
                (1.4
                %)Comparable
                    store sales growth
                
                
                5.0
                %
                
                
                
                1.9
                %
                
                (4.6
                %)Merchandise
                    margins
                
                
                54.4
                %
                
                
                
                55.1
                %
                
                54.7
                %Square
                    footage growth
                
                
                25.6
                %
                (1
                )
                
                2.9
                %
                
                4
                %Total
                    store count
                
                
                1,272
                
                (1
                )
                
                776
                
                
                772Diluted
                    earnings per share
                
                $
                1.72
                
                
                
                $
                1.03
                
                $
                0.22S,G
                    &A as a percentage of sales
                
                
                28.7
                %
                
                
                
                28.1
                %
                
                27.4
                %Capital
                    expenditures (in millions)
                
                $
                31.4
                
                
                
                $
                33.9
                
                $
                67.1
 
 (1)
                    Increase mainly due to the acquisition of Maurices Incorporated
                    in January
                    2005







-21-
 Table
          of Contents




Our
      methodology for determining same store sales is calculated 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 changes). If a single-format store is converted into a
      Combo store, the additional sales are not included in the calculation of same
      store sales. The determination of which stores are included in the same 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 same store
      sales beginning with the fiscal month the store actually closes. **maurices** same
      store sales were calculated in the same manner as **dressbarn** using
      historical pre-acquisition data as comparison.





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), all occupancy costs excluding depreciation and all costs
      associated with our 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 like us exclude
      a portion of these expenses from cost of sales and include them in selling,
      general and administrative expenses or depreciation.





During
      the fourth quarter, we concluded that we should disclose reportable segments
      to
      reflect the impact of our acquisition of Maurices Incorporated. We believe
      that **maurices** is a
      reportable segment due management’s review of **maurices’** separately available operating results and other financial information 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 of the Company expressed as a percentage
      of net sales for the periods indicated:





**Fiscal
                Year Ended****July
                30,**
              **2005**
            
            **July
                31,**
              **2004**
            
            **July
                26,**
              **2003**Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                  of sales, including occupancy
                  and buying costs
            
            
            62.1
            %
            
            62.6
            %
            
            63.9
            %Selling,
                  general and administrative expenses
            
            
            28.7
            %
            
            28.1
            %
            
            27.4
            %Depreciation
                and amortization
            
            
            3.4
            %
            
            3.1
            %
            
            3.1
            %Litigation
            
            
            (3.5
            %)
            
            0.4
            %
            
            4.5
            %Interest
                income
            
            
            0.2
            %
            
            0.3
            %
            
            0.5
            %Interest
                expense
            
            
            (1.0
            %)
            
            (0.3
            %)
            
            –Earnings
                before income taxes
            
            
            8.6
            %
            
            6.0
            %
            
            1.6
            %Net
                earnings
            
            
            5.3
            %
            
            4.1
            %
            
            1.0
            %




-22-
 Table
          of Contents





**Fiscal
      2005 Compared to Fiscal 2004**





**Net
      Sales**




Our
      results for Fiscal 2005 were favorably impacted by the acquisition of Maurices
      Incorporated 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
            
            
            4%
            
            
            –
            
            
            –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 Incorporated 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 margins
      categories such as jewelry, the leverage on buying costs gained from the
      acquisition of Maurices Incorporated 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**




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





**Litigation**





As
      a
      result of the
      Supreme Court of Connecticut's decision to reverse an approximately $32 million
      jury verdict, the Company 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 the Company accrued. Following
      the
      reversal of the judgment the escrow account established in connection the
      appeal, which included the post-judgment interest, was released, resulting
      in
      $35.3 of income to the Company, which included the interest paid into the escrow
      fund. Refer to Note 7 of the consolidated financial statements for further
      details of this litigation.




-23-
 Table
          of Contents





**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
      Incorporated.





**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.





**Provision
      for 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
      Incorporated. 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.





**Fiscal
      2004 Compared to Fiscal 2003**





**Net
      Sales**





Our
      results for Fiscal 2004 were favorably impacted by an extra reporting week.
      Net
      sales increased by 6.8% to $754.9 million for Fiscal 2004, from $707.1 million
      in Fiscal 2003. Net sales for the fifty-two week period ended July 24, 2004,
      were $743.2 million, an increase of $36.1 million or 5.1% from the prior year.
      The increase from Fiscal 2003 was due to a 1.9% increase in same store sales,
      as
      well as a 2.9% increase in average store square footage. Same store sales are
      the primary means most retailers use to evaluate their sales performance. Same
      store sales represented approximately 86% of total sales for fiscal 2004. The
      increase in store square footage was due to the opening of 53 new stores,
      primarily combination **dressbarn** / **dressbarn**  **woman** stores,
      which carry both **dressbarn** and **dressbarn**  **woman** merchandise, offset in part by the square footage reduction from the closings
      of
      47 underperforming stores. The Company had 776 stores in operation at July
      31,
      2004 compared to 772 stores in operation as of July 26, 2003.





The
      sales
      increase was the result of several factors. More customer traffic to its stores
      resulted in more customer transactions and higher sales associate productivity
      and increased jewelry sales resulted in increased units sold per transaction.
      These factors were partially offset by a slight decrease in the average price
      per transaction due primarily to an increase in jewelry sales. The Company
      believes the increase in the number of customer transactions was the result
      of
      greater customer acceptance of the Company’s more updated and fashionable
      merchandise assortment and intensified marketing and store presentation
      efforts.





**Gross
      Profit**





Gross
      profit (net sales less cost of goods sold, including occupancy and buying
      costs), increased 10.6% to $282.7 million, or 37.4% of net sales, in fiscal
      2004
      from $255.5 million, or 36.1% of net sales in fiscal 2003. The increase in
      gross
      profit as a percentage of net sales, is due to higher maintained margins, the
      leverage on buying costs gained from increased same store sales, and the
      leverage from the extra fifty-third week of net sales on fixed occupancy costs.
      For the fifty-two weeks, gross profit was 37.3% of net sales.




-24-
 Table
          of Contents





**SG&A**





Selling,
      general and administrative (SG&A) expenses increased by 9.5% to $212.5
      million, or 28.1% of net sales, in Fiscal 2004 from $194 million or 27.4% of
      net
      sales, in Fiscal 2003. For the fifty-two weeks, SG&A increased by 8% to
      $209.6 million, or 27.8% of net sales from $194 million, or 27.4% of net sales
      last fiscal year. The increase of 40 basis points reflects lack of sales
      leverage, increased marketing expense, a higher number of closed stores (47
      stores closed in Fiscal 2004 versus 28 stores closed in Fiscal 2003) and related
      write-offs ($4.9 million in Fiscal 2004 versus $1.5 million in Fiscal 2003),
      as
      well as increased costs associated with impending Sarbanes-Oxley compliance
      and
      training costs for the Company’s new POS system. The Company continues to focus
      on controlling its costs and enhancing productivity.





**Other
      Income**





Other
      income for Fiscal 2004 increased 95.9% to $1.5 million from $0.8 million in
      Fiscal 2003. The Company received a full year’s rent versus a partial year in
      Fiscal 2003 by Dunnigan Realty, LLC from the unaffiliated tenants of the Suffern
      facility. In January 2003 Dunnigan
      Realty, LLC, a wholly-owned subsidiary of the Company, acquired a
      distribution/office facility in Suffern, New York (the “Suffern facility”), of
      which the major portion is the Company’s corporate offices and distribution
      center.





**Depreciation
      and Amortization**





Depreciation
      expense increased by 4.2% to $23.2 million in Fiscal 2004, versus $22.3 million
      in Fiscal 2003. The increase resulted from the first year depreciation of the
      new Point of Sale (POS) system, and the first full year of depreciation of
      the
      Company headquarters.





**Litigation**





The
      current year litigation amount of $3.3 million related to the accrual of
      interest under an escrow account established in connection with the appeal
      of a
      $32 million jury verdict against the Company. The judgment was subject to
      post-judgment interest at the rate of 10% per annum, which the Company accrued.





**Interest
      Income**





Interest
      income decreased by 33.9% to $2.2 million for Fiscal 2004 from $3.3 million
      for
      Fiscal 2003. The decrease was due primarily to a reduction in funds available
      for investment for most of the fiscal year after the purchase of the Company
      headquarters for $45.4 million in the fourth quarter of 2003, partially offset
      by an increase in interest rates.





**Interest
      Expense**





Interest
      expense for the fiscal year was $2.0 million. The interest expense mainly
      represents the mortgage interest from the financing of the Suffern facility
      in
      July 2003 (a 5.3% fixed rate over a 20 year term).





**Provision
      for Income Taxes**





The
      effective tax rate for Fiscal 2004 was 32.0% versus 36.0% in Fiscal 2003. The
      decrease resulted from the reversal of certain income tax reserves of
      approximately $2.0 million. Such reversal resulted from the Company finalizing
      certain pending tax audits.




**Net
      Earnings**




Net
      earnings for Fiscal 2004 increased to $30.9 million from $7.2 million in Fiscal
      2003. Net earnings were favorably impacted by approximately $1.6 million or
      $0.05 per share by the extra reporting week in Fiscal 2004. Diluted earnings
      per
      share also increased to $1.03 per share versus $0.22 per share in Fiscal 2003.
      Diluted earnings in Fiscal 2003 were negatively impacted by a $32.0 million
      litigation charge (or $20.3 million or $0.64 per diluted share after tax).
      Operating income for Fiscal 2004 increased to $43.7 million from $7.3 million
      in
      Fiscal 2003. The change in operating income was primarily due to the $32.0
      million litigation charge recorded in Fiscal 2003.




-25-
 Table
          of Contents





**Liquidity
      and Capital Resources**





We
      invested $328 million in connection with our acquisition on Maurices
      Incorporated 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. As of July 30, 2005, we had repaid $90 million under the Senior
      Credit Facility. The outstanding balance of $10 million was repaid subsequent
      to
      July 30, 2005.





At
      July
      30, 2005, the Company had cash, cash equivalents, restricted cash and marketable
      securities of $43 million as compared to $177 million as of July 31, 2004.
      The
      decrease in cash, cash equivalents, restricted cash and marketable securities
      was primarily driven by our investment in Maurices Incorporated.





Our
      cash,
      cash equivalents, and marketable securities are highly liquid investments and
      consist of term deposits and investments in money market funds with commercial
      banks and financial institutions, and municipal bonds that can readily be
      converted to cash. Working capital was $27 million at July 30, 2005. We also
      had
      $240 million available borrowing capacity at July 30, 2005 under the Senior
      Credit Facility.




Net
      cash
      provided by operations was $106 million for Fiscal 2005 compared with $58
      million for Fiscal 2004. Cash flows from operating activities for the period
      were primarily generated by net earnings of $53 million, plus non-cash charges
      for depreciation and amortization $34 million, plus a non-cash charge for
      deferred income tax expense of $26 million, plus non-cash charges for provision
      for impairments and asset disposals of $6 million, plus other non-cash charges
      totaling $10 million, and less $23 million due to changes in working capital
      account balances. Such working capital changes are detailed on the Consolidated
      Statements of Cash Flows, include a $17 million use of cash related to increase
      in inventories mainly due to the Maurices Incorporated acquisition, a $36
      million reduction in accrued expenses related the litigation settlement, $6
      million from the decrease in the income taxes payable balance, offset by $23
      million in a larger trade payable balance.





During
      Fiscal 2005, we invested approximately $328 million in Maurices Incorporated.
      This investment was funded from the issuance of $115 million of 2.5% Convertible
      Senior Notes, a $100 million term loan in connection with our $250 million
      Senior Credit Facility, and from the net sale of marketable securities of $122
      million. Subsequent to the acquisition of Maurices Incorporated we repaid
      approximately $90 million of borrowings under the Senior Secured Credit
      Facility. We also purchased $31 million of property and equipment mainly due
      to
      expenditures for new stores. We plan to invest approximately $46 million in
      capital expenditures during Fiscal 2006. We also paid approximately $8 million
      in fees related to the 2.5% Convertible Senior Notes and Senior Credit Facility.
      We also received approximately $6 million from the proceeds of stock options
      exercises.





The
      Senior Credit Facility provides a $150 million revolving line of credit that
      gives us ample capacity to fund any short-term working capital needs that may
      arise in the operation of our expanded business. We believe that our cash and
      cash equivalents, together with cash flow from operations, along with the Senior
      Credit Facility will be adequate to fund our planned capital expenditures and
      all other operating requirements and other proposed or contemplated expenditures
      in Fiscal 2006 and beyond. As of the date of this filing, we had not utilized
      the revolving credit facility.




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 30, 2005. 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.





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. 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.




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In
      Fiscal
      2006, we plan to open approximately 100 additional stores and continue our
      store
      remodeling program. Total Fiscal 2006 capital expenditures, which are primarily
      attributable to the Company's store opening, renovation and refurbishment
      programs, are expected to be approximately $46 million. The Company intends
      to
      focus on both expanding in existing major trading markets and developing and
      expanding into new markets. We believe that cash and cash equivalents, together
      with cash flow from operations, will be adequate to fund our proposed capital
      expenditures and other anticipated obligations.





**Contractual
      Obligations and Commercial Commitments**





The
      estimated significant contractual cash obligations and other commercial
      commitments at July 30, 2005 are summarized in the following table:





**Payments
                Due by Period (****Amounts
                in thousands****)****Contractual
                Obligations**
            
            **Totals**
            
            **Fiscal**
              **2006**
            
            **Fiscal
                2007-**
              **2008**
            
            **Fiscal
                2009-**
              **2010**
            
            **Fiscal
                2011**
              **And
                Beyond**Operating
                lease obligations
            
            $
            1,237,642
            
            $
            118,944
            
            $
            248,221
            
            $
            247,878
            
            $
            622,599Mortgage
                principal and interest
            
            
            49,816
            
            
            2,768
            
            
            5,535
            
            
            5,535
            
            
            35,978Convertible
                Senior Notes and interest
            
            
            169,625
            
            
            2,875
            
            
            5,750
            
            
            5,750
            
            
            155,250Term
                loan and interest
            
            
            12,563
            
            
            513
            
            
            1,025
            
            
            11,025
            
            
            –$
            1,469,646
            
            $
            125,100
            
            $
            260,531
            
            $
            270,188
            
            $
            813,827





**Amount
                of Commitment Expiration Period (****Amounts
                in thousands****)****Other
                Commercial Commitments**
            
            **Totals**
            
            **Fiscal**
              **2006**
            
            **Fiscal
                2007-**
              **2008**
            
            **Fiscal
                2009-**
              **2010**
            
            **Fiscal
                2011**
              **And
                Beyond**Trade
                letters of credit
            
            $
            51,504
            
            $
            51,504
            
            $
            –
            
            $
            –
            
            $
            –Standby
                letters of credit
            
            
            5,247
            
            
            5,247
            
            
            –
            
            
            –
            
            
            –Firm
                purchase orders
            
            
            294
            
            
            294
            
            
            –
            
            
            –
            
            
            –$
            57,045
            
            $
            57,045
            
            $
            –
            
            $
            –
            
            $
            –





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
      Christmas shopping season in recent years. We expect this trend to continue
      for
      Fiscal 2006. 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.




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**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
      the Company’s financial statements.





*Revenue
      Recognition*





While
      the
      Company’s recognition of revenue does not involve significant judgment, revenue
      recognition represents an important accounting policy of the Company. As
      discussed in Note 1 to the Consolidated Financial Statements, the Company
      recognizes 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 the
      Company’s 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. The
      Company has reserved for estimated product returns based on historical return
      trends.





*Merchandise
      Inventories*





The
      Company’s 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. The Company includes 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 January and July to calculate actual shrinkage and inventory
      on
      hand. Estimates are used to charge inventory shrinkage for the first and third
      fiscal quarters of the fiscal year. The Company continuously reviews its
      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, the Company’s gross margins could increase or decrease and,
      accordingly, affect its financial position and results of operations. A
      significant variation between the estimated provision and actual results could
      have a substantial impact on the Company’s results of operations.




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          of Contents





*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.
      Cash
      flows are identified at 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. As the Company assesses the ongoing expected
      cash flows and carrying amounts of its long-lived assets, these factors could
      cause the Company to realize material impairment charges. In
      addition, the Company regularly evaluates its 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. When assets are retired or otherwise
      disposed of, the cost and related accumulated depreciation or amortization
      are
      removed from the accounts, and any resulting gain or loss is reflected in income
      for that period.





*Insurance
      Reserves*





The
      Company uses 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 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 30, 2005 and July 31, 2004, these reserves were
      $8.3 million and $5.6 million, respectively, and were included
      in
“Other accrued expenses” on the consolidated balance sheets.





*Claims
      and Contingencies*




The
      Company is subject to various claims and contingencies related to insurance,
      taxes and other matters arising out of the normal course of business. The
      Company is self-insured for expenses related to its employee medical and dental
      plans, and its worker’s 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. The Company has stop-loss
      insurance coverage for individual claims in excess of $250,000. The Company
      accrues its estimate of probable settlements of Federal and State tax audits.
      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. The Company
      believes its 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.





*Litigation*




The
      Company is subject to various claims and contingencies relating to litigation
      arising out of the normal course of business. If the Company believes the
      likelihood of an adverse legal outcome is probable and the amount is estimable
      it accrues a liability in accordance with FASB Statement No. 5, “Accounting for
      Contingencies”. The Company consults with legal counsel on matters related to
      litigation and seeks input from other experts both within and outside the
      Company with respect to matters in the ordinary course of business. There
      are
      no material pending legal proceedings. We are subject to ordinary routine
      litigation incidental to the business, to which the Company or any of its
      subsidiaries is a party or of which any of their property is the
      subject.




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*Goodwill*





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) the Company does not amortize
      goodwill or intangible assets with indefinite lives but, rather, the Company
      is
      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 142. The Company’s annual
      assessment date is on or about June 30th. 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 30, 2005, changes in
      **maurices** estimated future cash flows could require us to record
      impairment charges on these assets.




*Operating
      Leases*





The
      Company leases 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, 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 and rent holidays, the Company records a deferred rent
      liability in “Other accrued expenses” and “Deferred rent” on the consolidated
      balance sheets and amortizes 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
      premiums paid upfront to enter a lease agreement, the Company records a deferred
      rent asset in “Other assets” on the consolidated balance sheets and then
      amortizes the deferred rent over the terms of the leases as additional rent
      expense 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.





*Income
      Taxes*





The
      Company does 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. 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.




*Stock-based
      Compensation*





We
      have
      elected to follow Accounting Principles Board (APB) Opinion No. 25, *Accounting
      for Stock Issued to Employees,* and
      related interpretations, in accounting for our stock-based employee compensation
      plans, rather than the alternative fair value accounting method provided for
      under SFAS No. 123, *Accounting
      for Stock-based Compensation* .
      In the
      notes to our financial statements, we provide pro forma disclosures in
      accordance with SFAS No. 123, as amended by SFAS No. 148, *Accounting
      for Stock-based Compensation, Transition and Disclosure* ,
      and
      related pronouncements.





We
      account for stock options and warrants granted to non-employees based on the
      fair value of the stock option or warrant using the Black-Scholes option-pricing
      model based on assumptions for expected stock price volatility, expected term
      of
      the option, risk-free interest rate and expected dividend yield at the grant
      date.





In
      December 2004, the Financial Accounting Standards (FASB) issued SFAS 123
      (revised 2004) statement, *Share-Based
      Payment* ,
      (SFAS
      123R), which addresses the accounting for share-based awards to employees,
      including those made under employee stock purchase plans. SFAS 123R requires
      companies to recognize fair value of stock options and other stock-based
      compensation to employees in their statements of operations. The effective
      date
      of SFAS 123R for us is July 31, 2005. Because we currently account for our
      stock-based compensation plans in accordance with APB Opinion No. 25, we expect
      the adoption of SFAS 123R will have a material effect on our financial
      statements beginning in the first quarter of Fiscal 2006. Although we cannot
      precisely estimate the future impact of adopting SFAS 123R because it will
      depend on several factors including future stock price volatility and the levels
      of share-based awards granted in the future.





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





The
      Company’s 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 the Company 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.





Currently,
      we maintain approximately 100% of our cash and investments in financial
      instruments with original maturity dates of three months or less. The Company
      does not believe that an adverse change in interest rates would have a material
      affect on the Company’s financial condition.





Our
      outstanding long-term liabilities as of July 30, 2005 consisted of $32.0 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, the Company issued $115 million of convertible senior notes.
      As the convertible senior notes bear interest at a fixed rate, the Company’s
      results of operations would not be affected by interest rate changes. On July
      29, 2005 the market value of the convertible senior notes was over the $1,000
      par value selling at $1,329.92 trading on the PORTAL (Private Offering Resale
      and Trading through Automated Linkage).





The
      Company also entered into a $250 million senior credit facility with a group
      of
      banks on December 14, 2004. Under that senior credit facility, the Company
      borrowed $100 million under a variable rate term loan and has available a
      revolving credit facility with borrowings of up to $150 million at a variable
      rate. At July 30, 2005, the Company had $10 million outstanding under the term
      loan and had no borrowings under the revolving credit facility. The term loan
      was paid in full with a voluntary payment of $10 million in September
      2005.





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.





The
      Company holds no material options or other derivative instruments at July 30,
      2005.




**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.








-31-
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**ITEM
              9A.**
            **CONTROLS
                AND PROCEDURES**




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




The
        Company’s management, with the participation of the Company’s Chief
        Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as
        defined
        in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
        as
        amended, as of
        July 30, 2005. Based upon such evaluation ,
        the
        Chief Executive Officer and Chief Financial Officer have concluded
        that the Company’s disclosure controls and procedures were not effective
        as of July 30, 2005
        for
        the reasons discussed below related to a material weakness in the Company’s
        internal control over financial reporting.




**(b)
      Management’s Report on Internal Control over Financial
      Reporting**





Management
        is responsible for establishing and maintaining adequate internal control
        over
        financial reporting, as such term is defined in Rule 13a-15(f) of the Securities
        Exchange Act of 1934. Under the supervision and with the participation of
        the
        Company’s management, including its principal executive officer and principal financial officer, the Company conducted
        an
        evaluation of the effectiveness of the Company’s internal control over financial
        reporting as of July 30, 2005 as required by the Securities and Exchange
        Act of
        1934 Rule 13a-15(c). There
        are
        inherent limitations to the effectiveness of any system of internal control
        over
        financial reporting, including the possibility of human error and the
        circumvention or overriding of the controls and procedures. Accordingly,
        even
        effective internal control over financial reporting controls can only provide
        reasonable assurance of achieving their control objectives. In making its
        assessment of the effectiveness of its internal control over financial
        reporting ,
        the
        Company used the criteria set forth by the Committee of Sponsoring Organizations
        of the Treadway Commission (COSO) in *Internal
        Control-Integrated Framework* .
        We
        excluded from our assessment the internal control over financial reporting
        at
        Maurices Incorporated, which was acquired effective as of January 2, 2005,
        and
        whose financial statements reflect total assets and net sales constituting 10 %
        and
        21%, respectively, of the related consolidated financial statement amounts
        as of
        and for the fiscal year ended July 30, 2005.
 
 A
        material weakness (within the meaning of the Auditing
        Standard No. 2, *An
        Audit of Internal Control Over Financial Reporting Performed in Conjunction
        With
        an Audit of Financial Statements* , of the
        Public Company Accounting Oversight Board (United
        States)) is a significant deficiency, or combination of significant
        deficiencies, that results in there being more than a remote likelihood that
        a
        material misstatement of the annual or interim financial statements will
        not be
        prevented or detected. Based
        on
        the definition of “material weakness” ,
        the
        deficiencies described below indicate the
        existence of a “material weakness” in the Company’s design
        or
        operation of internal control over financial reporting .
        Based
        on that, management concluded that a material weakness existed in the Company’s
        internal control over financial reporting ,
        and
        disclosed this to the Audit Committee and to the independent registered public
        accountants.
  Certain
          deficiencies were identified in the design and operation of the Company’s
          controls with respect to the process of preparing and reviewing the annual
          and
          interim 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 deficiencies include the lack of an appropriate review
          of the
          financial statements and footnote disclosures, lack of documentation to
          support
          the financial statements and footnotes, and ineffective controls to determine
          and monitor compliance with generally accepted accounting principles. As
          a
          result of these deficiencies, significant modifications to the financial
          statements and disclosures were necessary to present the annual financial
          statements for the year ended July 30, 2005 in accordance with generally
          accepted accounting principles. Such modifications affected income taxes
          and
          various footnote and financial statement disclosures. In
          addition, these deficiencies resulted in errors and the restatement of
          the
          Company’s previously issued 2004, 2003, and 2002 annual financial statements and
          the quarterly financial statements for the 2005 first and second fiscal
          quarters. These restatements have been previously disclosed in the
          Company’s consolidated financial statements, which were filed on Form 10-K/A and
          Forms 10-Q/A. Due to the significance of the 2005 adjustments, the previous
          restatements, the potential pervasive effect of the identified deficiencies
          on
          the financial statement account balances and disclosures and the importance
          of
          the annual and interim financial closing and reporting process in the aggregate,
          there is more than a remote likelihood that a material misstatement in
          future
          annual or interim financial statements could occur that would not be prevented
          or detected in the absence of improvements in the Company’s internal controls
          over financial reporting.
  Based
            on
            its evaluation, management concluded that its internal control over financial
            reporting was not effective
            as of July 30, 2005.


The
      Company’s independent registered public accounting firm has issued an
      attestation report on management’s assessment of the Company’s internal control
      over financial reporting. The report appears herein below.





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





There were no
        changes in the Company’s internal control over financial reporting during the
        fourth quarter of Fiscal 2005 that materially affected or are reasonably
        likely
        to materially affect internal control over financial reporting. Subsequent
        to July 30, 2005, the Company hired a new Director of Financial Reporting
        and
        plans on hiring additional accounting and tax personnel and engaging third
        party
        tax and financial consultants to ensure that adequate resources exist to
        implement the additional policies and procedures needed to remediate the
        deficiencies in internal control over financial reporting. The Company intends
        to provide ongoing training to enhance the abilities of internal financial
        personnel. The Company is instituting quality control standards, improving
        the
        quality of its accounting staff through training and education to assist
        all
        accounting personnel in understanding the accounting regulations and standards
        to address the identified deficiencies that exist in its internal control
        over
        financial reporting.




-32-
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**(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 ”)
        did
        not maintain effective internal control over financial reporting as of July 30, 2005, because
        of the effect of the material weakness identified in management’s assessment based
        on criteria
        established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations
        of the
        Treadway Commission. As described in Management's Report
        on Internal Control Over Financial Reporting, management excluded from their
        assessment the internal control over financial reporting at Maurices
        Incorporated ("Maurices"), which was acquired on January 3, 2005,
        and whose financial statements reflect total assets and sales constituting
        10 % and
        21 % ,
        respectively, of the related consolidated financial statement amounts as
        of and
        for the year ended July 30, 2005. Accordingly,
        our audit did not include the internal control over financial reporting at
        Maurices. 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.




A
      material weakness is a significant deficiency, or combination of significant
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected. The following material
      weakness has been identified
      and included in management’s assessment: Certain deficiencies were identified in
      the design and operation of the Company’s controls with respect to the process
      of preparing and reviewing the annual and interim 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 deficiencies
      include the lack of an appropriate review of the financial statements and
      footnote disclosures, lack of documentation to support the financial statements
      and footnotes, and ineffective controls to determine and monitor compliance
      with
      generally accepted accounting principles. As a result of these deficiencies,
      significant modifications to the financial statements and disclosures were
      necessary to present the annual financial statements for the year ended July
      30,
      2005 in accordance with generally accepted accounting principles. Such
      modifications affected income taxes and various footnote and financial statement
      disclosures.  In
      addition, these deficiencies resulted in errors and the restatement of the
      Company’s previously issued 2004, 2003, and 2002 annual financial statements and
      the quarterly financial statements for the 2005 first and second fiscal
      quarters. Due
      to
      the significance of the adjustments, the previous restatements, the potential
      pervasive effect of the identified deficiencies on the financial statement
      account balances and disclosures and the importance of the annual and interim
      financial closing and reporting process in the aggregate, there is more than
      a
      remote likelihood that a material misstatement in future annual or interim
      financial statements could occur that would not be prevented or detected. This
      material weakness was considered in determining the nature, timing, and extent
      of audit tests applied in our audit of the consolidated financial statements
      and
      the related financial statement schedule as of and for the year ended July
      30,
      2005, of the Company and this report does not affect our report on such
      consolidated financial statements and financial statement schedule.




In
      our
      opinion, management ’ s
      assessment that the Company did
      not
      maintain effective internal control over financial reporting as of July 30, 2005, 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,  because
      of the effect of the material weakness described above on the achievement of
      the
      objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of July 30, 2005, 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 statementsof
      the
      Companyas
      of and
      for the year endedJuly
      30,
      2005, and the relatedfinancial statement scheduleincluded
      in the index at Item 15a.2,and our
      report dated October 12, 2005 expressed an unqualified opinion on those
      financial statements andthe
      relatedfinancial
      statement schedule.







/S/
      DELOITTE & TOUCHE LLP


Deloitte
      & Touche LLP


New
      York,
      New York


October
      12, 2005





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





None.





-33-
 Table
          of Contents





**PART
      III**





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




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




**ITEM
              10A.**
            **CODE
                OF BUSINESS CONDUCT AND ETHICS**




The
      Company has 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 the Company's website, www.dressbarn.com
      (under the "Governance" caption). The Company intends 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 its website. The Company undertakes
      to
      provide to any person a copy of this Code of Ethics upon request to the
      Secretary of the Company at the Company's principal executive
      offices.




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




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




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




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




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




The
      information with respect to this item is incorporated by reference from the
      Registrant’s definitive Proxy Statement to be filed with the Commission not
      later than 120 days after the end of the Registrant’s fiscal year.




-34-
 Table
          of Contents





**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-4Consolidated
                Statements of Shareholders' Equity and
                Comprehensive Income
            
            F-5Consolidated
                Statements of Cash Flows
            
            F-6Notes
                to Consolidated Financial
                Statements
            
            F-8





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





Schedule
      II-Valuation and Qualifying Accounts for the years ended July 30, 2005, July
      31,
      2004 and July 26, 2003





All
      other
      schedules are omitted because they are not applicable, or not required, or
      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
            
            
            
            Incorporated
                ByNumber
            
            Description
            
            Reference
                From3.1
            
            Amended
                and Restated Certificate of Incorporation
            
            (1)3.2
            
            Amended
                and Restated By-Laws
            
            (13)3.3
            
            Amendments
                to Amended and Restated Certificate of Incorporation
            
            (5)4.
            
            Specimen
                Common Stock Certificate
            
            (1)10.1
            
            Purchase
                and Sale Agreement - 30 Dunnigan Drive, Suffern NY
            
            (17)10.2*
            
            1993
                Incentive Stock Option Plan
            
            (10)10.3*
            
            Employment
                Agreement With Burt Steinberg
            
            (14)10.4*
            
            Agreement
                Terminating Agreement for Purchase of Certain Stock from Elliot S.
                Jaffe
                upon death
            
            (6)10.5*
            
            Agreement
                Terminating Agreement for Purchase of Certain Stock from Roslyn S.
                Jaffe
                upon death
            
            (6)





-35-
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Exhibit
            
            
            
            Incorporated
                ByNumber
            
            Description
            
            Reference
                From10.6
            
            Leases
                of Company premises of which the lessor is Elliot S. Jaffe or members
                of
                his family or related trusts:10.6.1
                Danbury, CT store
            
            (1)10.6.2
                Norwalk, CT**dressbarn**/**dressbarn**Woman store
            
            (8)10.7*
            
            The
                Dress Barn, Inc. 1987 Non-Qualified Stock Option Plan
            
            (5)10.8*
            
            Nonqualified
                Stock Option Agreement with Armand Correia
            
            (7)10.9*
            
            Nonqualified
                Stock Option Agreement with Elliot Jaffe
            
            (7)10.10*
            
            Nonqualified
                Stock Option Agreement with Burt Steinberg
            
            (7)10.11
            
            Lease
                between Dress Barn, Inc. and Dunnigan Realty, LLC for Office and
                Distribution Space in Suffern, New York
            
            (18)10.12*
            
            The
                Dress Barn, Inc. 1995 Stock Option Plan
            
            (11)10.13
            
            Split
                Dollar Agreement between Dress Barn, Inc. and Steinberg Family Trust
                f/b/o
                Michael Steinberg
            
            (12)10.14
            
            Split
                Dollar Agreement between Dress Barn, Inc and Steinberg Family Trust
                f/b/o
                Jessica Steinberg
            
            (12)10.15*
            
            Split
                Dollar Agreement between Dress Barn, Inc. and Jaffe 1996 Insurance
                Trust
            
            (12)10.16*
            
            The
                Dress Barn, Inc. 2001 Stock Option Plan
            
            (14)10.17*
            
            Employment
                Agreement with Elliot S. Jaffe
            
            (15)10.18*
            
            Employment
                Agreement with David R. Jaffe
            
            (15)10.19*
            
            Employment
                Agreement with Vivian Behrens
            
            (16)10.20
            
            Mortgage
                Agreement- Dunnigan Realty, LLC
            
            (18)10.21*
            
            2001
                Stock Incentive Plan
            
            (19)10.22
            
            The
                Dress Barn Inc. 2.5% Convertible Senior Notes due 2024
            
            (20)10.23
            
            The
                Dress Barn Inc. Senior Credit Facility
            
            (21)10.24
            
            Acquisition
                of Maurices Incorporated
            
            (21)10.25*
            
            Employment
                Agreement with Gene Wexler14.
            
            Code
                of Ethics for the Chief Executive Officer and Senior Financial
                Officers
            
            (18)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





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)
            [Omitted](3)
            [Omitted](4)
            [Omitted](5)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                30,
                1988.(6)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                28,
                1990.(7)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                27,
                1991.(8)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                25,
                1992.(9)
            [Omitted](10)
            The
                Company's Registration Statement on Form S-8 under the Securities
                Act of
                1933 (Registration No. 33-60196) filed on March 29,
                1993.(11)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                27,
                1996.(12)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                25,
                1998.(13)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                29,
                2000.(14)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                28,
                2001.(15)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                27,
                2002.(16)
            The
                Company's Quarterly Report on Form 10-Q for the quarter ended October
                26,
                2002.(17)
            The
                Company's Quarterly Report on Form 10-Q for the quarter ended January
                26,
                2003.(18)
            The
                Company's Annual Report on Form 10-K for the fiscal year ended July
                26,
                2003.(19)
            The
                Company's Quarterly Report on Form 10-Q for the quarter ended January
                29,
                2005.(20)
            The
                Company's Registration Statement on Form S-1 under the Securities
                Act of
                1933 (Registration No. 333-124512) filed on May 02, 2005.(21)
            The
                Company’s Report on Form 8-K filed January 06, 2005.*
            Indicates
                management contract or compensatory plan or
                arrangement.




**ITEM
              15.**
            **(c)
                EXHIBITS**




All
      exhibits are incorporated by reference as shown in Item 15(b), except Exhibits
      10.25, 21, 23, 31.1, 31.2, 32.1 and 32.2, which are filed as part of this
      Report.





-36-
 Table
          of Contents





**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
            
            Chairman
                of the Board
            
            10/12/05Elliot
                S. Jaffe/s/
                ROSLYN S. JAFFE
            
            Director
                and Secretary and Treasurer
            
            10/12/05Roslyn
                S. Jaffe/s/
                DAVID R. JAFFE
            
            Director,
                President and
                Chief Executive Officer
            
            10/12/05David
                R. Jaffe
            
            (Principal
                  Executive Officer)/s/
                BURT STEINBERG
            
            Director
                and Executive Director
            
            10/12/05Burt
                Steinberg/s/
                KLAUS EPPLER
            
            Director
            
            10/12/05Klaus
                Eppler/s/
                EDWARD D. SOLOMON
            
            Director
            
            10/12/05Edward
                D. Solomon/s/
                JOHN USDAN
            
            Director
            
            10/12/05John
                Usdan/s/
                KATE BUGGELN
            
            Director
            
            10/12/05Kate
                Buggeln/s/
                MARC LASRY
            
            Director
            
            10/12/05Marc
                Lasry/s/
                ARMAND CORREIA
            
            Chief
                Financial Officer
            
            10/12/05Armand
                Correia
            
            (Principal
Financial
                and Accounting Officer)




-37-
 Table
          of Contents




**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 30, 2005 and July 31, 2004, and the related consolidated statements
        of earnings, shareholders’
        equity and comprehensive income, and
        cash
        flows for each of the three fiscal  periods ended
        July 30, 2005 . Our
        audits also included the financial statement schedule listed
        in
        the Index at Item 15a . 2. These financial
        statements and financial statement schedule are the responsibility of the
        Company’s management. Our
        responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those
        standards require that we plan and perform the audit to obtain reasonable
        assurance about whether the financial statements are free of material
        misstatement. An
        audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements. An
        audit
        also includes assessing the accounting principles used and significant estimates
        made by management, as well as evaluating the overall financial statement
        presentation. We
        believe that our audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, such consolidated financial statements present fairly, in all material
        respects, the financial position of the
        Company and subsidiaries as of
        July 30, 2005 and July 31, 2004, and the results of their operations and
        their
        cash flows for each of the three fiscal periods
        in the year ended
        July 30, 2005, in conformity with accounting principles generally accepted
        in
        the United States of America. Also , in our
        opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken
        as a
        whole, presents fairly , in all
        material respects , the
        information set forth therein.
 
 As
        discussed in Note 3, the accompanying Fiscal
        2004 and 2003 consolidated
        financial statements have been restated.
  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 30, 2005, 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 12, 2005 expressed an unqualified opinion on
        management’s
        assessment of the effectiveness of the Company’s
        internal control over financial reporting and anadverseopinion
        on the effectiveness of the Company’s
        internal control over financial reporting because of a material weakness.




/S/
      DELOITTE & TOUCHE LLP


Deloitte
      & Touche LLP


New
      York, New York




October
      12, 2005





F-1
 Table
          of Contents




The
                  Dress Barn, Inc. and Subsidiaries**Consolidated
                  Balance
                  Sheets**
                  Amounts
                    in thousands, except share data**July
                  30,**
                **2005**
              
              
              **July
                  31,**
                **2004**
  **ASSETS****Current
                    Assets:**Cash
                    and cash equivalents
                
                $
                42,434
                
                $
                15,141Restricted
                    cash (see Note 1)
                
                
                100
                
                
                38,661Marketable
                    securities and investments (see Note 4)
                
                
                85
                
                
                122,700Merchandise
                    inventories
                
                
                167,643
                
                
                116,912Deferred
                    income tax asset (see Note 9)
                
                
                –
                
                
                14,845Prepaid
                    expenses and other
                
                
                12,923
                
                
                8,898**Total
                    Current Assets**
                
                
                223,185
                
                
                317,157**Property
                    and Equipment:**Land
                    and buildings
                
                
                58,461
                
                
                45,391Leasehold
                    improvements
                
                
                126,351
                
                
                93,289Fixtures
                    and equipment
                
                
                202,500
                
                
                173,466Computer
                    software
                
                
                36,415
                
                
                23,302423,727
                
                
                335,448Less
                    accumulated depreciation and amortization
                
                
                191,029
                
                
                172,244Property
                    and equipment, net
                
                
                232,698
                
                
                163,204**Other
                    Intangible Assets, net (see Note 2)**
                
                
                111,243
                
                
                –**Goodwill
                    (see Note 2)**
                
                
                132,566
                
                
                –**Other
                    Assets**
                
                
                16,553
                
                
                8,955**TOTAL
                    ASSETS**
                
                $
                716,245
                
                $
                489,316




F-2
 Table
          of Contents




The
                  Dress Barn, Inc. and Subsidiaries**Consolidated
                  Balance Sheets**
                  Amounts
                    in thousands, except share data**July
                  30,**
                **2005**
              
              
              **July
                  31,**
                **2004**
 **LIABILITIES
                    AND SHAREHOLDERS' EQUITY****Current
                    Liabilities:**Accounts
                    payable- trade
                
                $
                107,702
                
                $
                66,776Accrued
                    salaries, wages and related expenses
                
                
                35,209
                
                
                21,349Litigation
                    accrual (see Note 7)
                
                
                –
                
                
                36,128Other
                    accrued expenses
                
                
                35,237
                
                
                24,247Customer
                    credits
                
                
                12,849
                
                
                8,970Income
                    taxes payable
                
                
                92
                
                
                5,548Deferred
                    tax liability
                
                
                3,612
                
                
                –Current
                    portion of long-term debt(see
                    Note 5)
                
                
                1,089
                
                
                1,033**Total
                    Current Liabilities**
                
                
                195,790
                
                
                164,051Long-term
                    debt (see Note 5)
                
                
                155,900
                
                
                31,988Deferred
                    rent and other
                
                
                44,194
                
                
                40,319Deferred
                    tax liability
                
                
                7,233
                
                
                –**Total
                    Liabilities**
                
                
                403,117
                
                
                236,358**Commitments
                    and Contingencies (see Note 10)****Shareholders'
                    Equity:**Preferred
                    stock, par value $.05 per share:Authorized-
                    100,000 sharesIssued
                    and outstanding- none
                
                
                –
                
                
                –Common
                    stock, par value $.05 per share:Authorized-
                    50,000,000 sharesIssued-
                    30,205,341 and 29,638,360 shares, respectivelyOutstanding-
                    30,205,341 and 29,618,660 shares, respectively
                
                
                1,510
                
                
                1,482Additional
                    paid-in capital
                
                
                73,193
                
                
                63,554Retained
                    earnings
                
                
                239,426
                
                
                188,757Treasury
                    stock, to be retired
                
                
                –
                
                
                (313
                )Accumulated
                    other comprehensive loss
                
                
                –
                
                
                (522
                )Deferred
                    compensation
                
                
                (1,001
                )
                
                –**Total
                    Shareholders’ Equity**
                
                
                313,128
                
                
                252,958**TOTAL
                    LIABILITIES AND SHAREHOLDERS’ EQUITY**
                
                $
                716,245
                
                $
                489,316See
                    notes to consolidated financial statements








F-3
 Table
          of Contents




The
                  Dress Barn, Inc. and Subsidiaries**Consolidated
                  Statements of
                  Earnings**Amounts
                  in thousands, except share data
  **Fiscal
                  Year Ended****July
                  30,**
                **2005**
              
              **July
                  31,**
                **2004**
                **(as
                  restated,**
                **see
                  Note 3)**
              
              **July
                  26,**
                **2003**Net
                  sales
              
              $
              1,000,264
              
              $
              754,903
              
              $
              707,121Cost
                    of sales, including occupancy and buying costs
              
              
              621,656
              
              
              472,198
              
              
              451,579Gross
                  profit
              
              
              378,608
              
              
              282,705
              
              
              255,542Selling,
                    general andadministrative
                    expenses
              
              
              286,751
              
              
              212,477
              
              
              194,005Depreciation
                  and amortization
              
              
              34,457
              
              
              23,197
              
              
              22,262Litigation
                  (see Note 7)
              
              
              (35,329
              )
              
              3,329
              
              
              32,000Operating
                  income
              
              
              92,729
              
              
              43,702
              
              
              7,275Interest
                  income
              
              
              1,735
              
              
              2,204
              
              
              3,332Interest
                  expense
              
              
              (10,230
              )
              
              (1,959
              )
              
              (164
              )Other
                  income
              
              
              1,526
              
              
              1,526
              
              
              779Earnings
                    before provision for income taxes
              
              
              85,760
              
              
              45,473
              
              
              11,222Provision
                  for income taxes
              
              
              33,200
              
              
              14,541
              
              
              4,039**Net
                  earnings**
              
              **$**
              **52,560**
              
              **$**
              **30,932**
              
              **$**
              **7,183**Earnings
                  per share:Basic
              
              **$**
              **1.76**
              
              **$**
              **1.05**
              
              **$**
              **0.23**Diluted
              
              **$**
              **1.72**
              
              **$**
              **1.03**
              
              **$**
              **0.22**Weighted
                  average shares outstanding:Basic
              
              
              29,785
              
              
              29,413
              
              
              31,219Diluted
              
              
              30,579
              
              
              30,120
              
              
              31,942See
                  notes to consolidated financial statements




F-4
 Table
          of Contents




The
                  Dress Barn, Inc. and Subsidiaries**Consolidated
                  Statements of Shareholders’ Equity and
                  Comprehensive Income**(Amounts
                  and shares in thousands)
  **Accumulated****Other****Additional**
              
              
              
              
              
              
              
              
              **Comprehensive**
              
              
              
              
              
              **Total****Common
                  Stock**
              
              
              **Paid-In**
              
              
              **Retained**
              
              
              **Treasury**
              
              
              **Income**
              
              
              **Deferred**
              
              
              **Shareholders’****Shares**
              
              
              **Amount**
              
              
              **Capital**
              
              
              **Earnings**
              
              
              **Stock**
              
              
              **(Loss)**
              
              
              **Compensation**
              
              
              **Equity****Balance,
                  July 27, 2002**
              
              
              36,508
              
              $
              1,825
              
              $
              52,209
              
              $
              271,061
              
              $
              –
              
              $
              547
              
              $
              –
              
              $
              325,642Comprehensive
                  income:Net
                  earnings
              
              
              
              
              
              
              
              
              
              
              
              7,183
              
              
              
              
              
              
              
              
              
              
              
              7,183Unrealized
                  holding loss on marketable securities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (609
              )
              
              
              
              
              (609
              )Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,574Issuance
                  of restricted stock
              
              
              20
              
              
              1
              
              
              264
              
              
              
              
              
              
              
              
              
              
              
              (265
              )
              
              –Amortization
                  of deferred compensation expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              265
              
              
              265Tax
                  benefit from exercise of stock options
              
              
              
              
              
              
              
              
              1,381
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,381Employee
                  Stock Purchase Plan activity
              
              
              7
              
              
              
              
              
              87
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              87Shares
                  issued pursuant to exercise of stock options
              
              
              635
              
              
              32
              
              
              4,259
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              4,291Purchase
                  of treasury stock
              
              
              (8,000
              )
              
              
              
              
              
              
              
              
              
              
              (120,819
              )
              
              
              
              
              
              
              
              (120,819
              )Retirement
                  of treasury stock – Tender Offer
              
              
              
              
              
              (400
              )
              
              
              
              
              (120,419
              )
              
              120,819
              
              
              
              
              
              
              
              
              –**Balance,
                  July 26, 2003**
              
              
              29,170
              
              
              1,458
              
              
              58,200
              
              
              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
              
              
              5
              
              
              
              
              
              83
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              83Shares
                  issued pursuant to exercise of stock options
              
              
              464
              
              
              24
              
              
              3,744
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,768Purchase
                  of treasury stock
              
              
              (20
              )
              
              
              
              
              
              
              
              
              
              
              (313
              )
              
              
              
              
              
              
              
              (313
              )**Balance,
                  July 31, 2004**
              
              
              29,619
              
              
              1,482
              
              
              63,554
              
              
              188,757
              
              
              (313
              )
              
              (522
              )
              
              –
              
              
              252,958Comprehensive
                  income:Net
                  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
              
              
              77
              
              
              4
              
              
              1,395
              
              
              
              
              
              
              
              
              
              
              
              (1,399
              )
              
              –Amortization
                  of deferred compensation expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              398
              
              
              398Tax
                  benefit from exercise of stock options
              
              
              
              
              
              
              
              
              2,258
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,258Employee
                  Stock Purchase Plan activity
              
              
              6
              
              
              
              
              
              136
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              136Shares
                  issued pursuant to exercise of stock options
              
              
              603
              
              
              30
              
              
              5,850
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,880Purchase
                  of treasury stock
              
              
              (100
              )
              
              
              
              
              
              
              
              
              
              
              (1,584
              )
              
              
              
              
              
              
              
              (1,584
              )Retirement
                  of treasury stock
              
              
              
              
              
              (6
              )
              
              
              
              
              (1,891
              )
              
              1,897
              
              
              
              
              
              
              
              
              –**Balance,
                  July 30, 2005**
              
              
              30,205
              
              $
              1,510
              
              $
              73,193
              
              $
              239,426
              
              $
              –
              
              $
              –
              
              $
              (1,001
              )
              $
              313,128


See
      notes
      to consolidated financial statements





F-5
 Table
          of Contents




The
                  Dress Barn, Inc. and Subsidiaries**Consolidated
                  Statements of Cash
                  Flows**Amounts
                  in thousands
  **Fiscal
                  Year Ended****July
                  30,**
                **2005**
              
              **July
                  31,**
                **2004**
                **(as
                  restated,**
                **see
                  Note 3)**
              
              **July
                  26,**
                **2003**
                **(as
                  restated,**
                **see
                  Note 3)****Operating
                  Activities:**Net
                  earnings
              
              $
              52,560
              
              $
              30,932
              
              $
              7,183Adjustments
                    to reconcile net earnings to net cash provided by operating
                    activities:Depreciation
                  and amortization
              
              
              34,457
              
              
              23,197
              
              
              22,262Provision
                  for impairments and asset disposals
              
              
              6,136
              
              
              4,906
              
              
              1,539Deferred
                  income tax expense (benefit)
              
              
              25,690
              
              
              2,491
              
              
              (5,871
              )Deferred
                  rent expense and other
              
              
              3,875
              
              
              1,351
              
              
              1,899Tax
                  benefit on exercise of unqualified stock options
              
              
              2,258
              
              
              1,460
              
              
              1,381Amortization
                  of debt issuance cost
              
              
              3,920
              
              
              152
              
              
              –Increase
                  in cash surrender value of life insurance
              
              
              (522
              )
              
              (600
              )
              
              (1,060
              )Deferred
                  compensation
              
              
              398
              
              
              67
              
              
              265Realized
                  loss / (gain) on sales of securities
              
              
              579
              
              
              (15
              )
              
              (608
              )Changes
                  in assets and liabilities, net of acquisition:(Increase)
                  decrease in merchandise inventories
              
              
              (17,256
              )
              
              (6,564
              )
              
              3,023Decrease
                  (increase) in prepaid expenses and other
              
              
              3,780
              
              
              (1,515
              )
              
              (3,790
              )(Increase)
                  decrease in other assets
              
              
              (650
              )
              
              208
              
              
              456Increase
                  in accounts payable- trade
              
              
              22,874
              
              
              1,686
              
              
              1,056Increase
                  in accrued salaries and wages
              
              
              7,578
              
              
              2,467
              
              
              793(Decrease)
                  increase in litigation accrual
              
              
              (36,128
              )
              
              536
              
              
              31,544Increase
                  (decrease) in accrued expenses
              
              
              2,428
              
              
              (3,108
              )
              
              813(Decrease)
                  increase in customer credits
              
              
              (938
              )
              
              1,686
              
              
              634Decrease
                  in income taxes payable
              
              
              (5,456
              )
              
              (1,540
              )
              
              (1,568
              )Total
                  adjustments
              
              
              53,023
              
              
              26,865
              
              
              52,768Net
                  cash provided by operating activities
              
              
              105,583
              
              
              57,797
              
              
              59,951






F-6
 Table
          of Contents




**Fiscal
                Year Ended**The
                Dress Barn, Inc. and Subsidiaries
            
            
            **July
                30,**
              **2005**
            
            
            **July
                31,**
              **2004**
              **(as
                restated,**
              **see
                Note 3)**
            
            
            **July
                26,**
              **2003**
              **(as
                restated,**
              **see
                Note 3**





**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
            
            
            (31,381
            )
            
            (33,867
            )
            
            (67,071
            )Sales
                and maturities of marketable securities and investments
            
            
            694,346
            
            
            258,713
            
            
            404,430Purchases
                of marketable securities and investments
            
            
            (571,788
            )
            
            (267,961
            )
            
            (359,279
            )Purchases
                of long-term investments
            
            
            –
            
            
            (900
            )
            
            –Net
                cash used in investing activities
            
            
            (198,567
            )
            
            (82,676
            )
            
            (21,920
            )**Financing
                Activities:**Proceeds
                from issuance of long-term debt
            
            
            215,000
            
            
            –
            
            
            34,000Payment
                of long-term debt
            
            
            (91,033
            )
            
            (979
            )
            
            –Payment
                for debt issuance cost
            
            
            (8,122
            )
            
            (90
            )
            
            (1,730
            )Purchase
                of treasury stock
            
            
            (1,584
            )
            
            (313
            )
            
            (120,819
            )Proceeds
                from Employee Stock Purchase Plan
            
            
            136
            
            
            83
            
            
            88Proceeds
                from stock options exercised
            
            
            5,880
            
            
            3,768
            
            
            4,291Net
                cash provided by (used in) financing activities
            
            
            120,277
            
            
            2,469
            
            
            (84,170
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            27,293
            
            
            (22,410
            )
            
            (46,139
            )Cash
                and cash equivalents- beginning of year
            
            
            15,141
            
            
            37,551
            
            
            83,690Cash
                and cash equivalents- end of year
            
            $
            42,434
            
            $
            15,141
            
            $
            37,551Supplemental
                Disclosure of Cash Flow Information:Cash
                paid for income taxes
            
            $
            12,083
            
            $
            12,130
            
            $
            10,206Cash
                paid for interest
            
            $
            5,700
            
            $
            1,789
            
            $
            35Capital
                expenditures incurred but not yet paid
            
            $
            2,702
            
            $
            1,893
            
            $
            998See
                notes to consolidated financial statements








F-7
 Table
          of Contents


**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,
      operating 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, we concluded that we should disclose reportable segments to
      reflect the impact of our acquisition of Maurices
      Incorporated.




*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 2005 and 2003 consisted of 52 weeks. Fiscal
      year ended July 31, 2004 consisted of 53 weeks. Certain reclassifications have
      been made to the prior years’ consolidated financial statements to conform to
      Fiscal 2005’s presentation.





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
      Company records a reserve for estimated product returns based on historical
      return trends.





*Cash
      and cash equivalents*





For
      purposes of the statement of cash flows, 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 majority of the Company’s money market funds at July 30, 2005 were
      maintained with one financial institution. The
      Company’s cash management process provides for the daily funding of checks as
      they are presented to the bank.




*Restricted
      cash and cash equivalents*





At
      July
      31, 2004, restricted cash consisted of $38.7 million held in escrow as required
      as part of an appeal of a legal judgment which was reversed in Fiscal 2005.
      Refer to Note 7 to the Consolidated Financial Statements for further details.








F-8
 Table
          of Contents





*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. When assets
      are
      retired or sold, the asset cost and related accumulated depreciation are
      eliminated with any remaining gain or loss reflected in net earnings.





*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.
      Cash
      flows are identified at 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. As the Company assesses the ongoing expected
      cash flows and carrying amounts of its long-lived assets, these factors could
      cause the Company to realize material impairment charges. 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. When assets are impaired, the cost and related accumulated
      depreciation or amortization are removed from the accounts, and any resulting
      loss is reflected in income for that period. 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 $6.1 million in Fiscal 2005, $4.9 million in Fiscal
      2004 and $1.5 million in Fiscal 2003. 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.




F-9
 Table
          of Contents





*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 30, 2005 these reserves were
      $8.3 million and as of July 31, 2004 these reserves were
      $5.6 million, and were included in “Other accrued expenses” on the
      consolidated balance sheets.





*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
      impairment*





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,” 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. 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 undiscounted cash flows, comparable transactions, and comparable public
      companies) of the goodwill and our intangible assets with indefinite lives,
      we
      determined that no impairment exists. The Company performs an annual assessment
      of our goodwill and other intangible assets with indefinite lives on or about
      June 30th or as impairment conditions arise.





*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.





*Earnings
      per share (EPS)*





The
      Company calculates EPS in accordance with the provisions of SFAS No. 128,
“Earnings per Share”. Basic EPS is computed as net income divided by the
      weighted average number of common shares outstanding for the period. Diluted
      EPS
      reflects the potential dilution that could occur from common shares issuable
      through stock options, warrants and other convertible securities.




F-10
 Table
          of Contents





*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 $15.5 million for Fiscal 2005, $12.3
      million for Fiscal 2004, and $10.1 million for Fiscal 2003.





*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” 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
      premiums paid upfront to enter a lease agreement, the Company records a deferred
      rent asset in “Other assets” on the consolidated balance sheets and then
      amortizes the deferred rent over the term of the respective lease as additional
      rent expense 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 accounting principles
      generally accepted in the United States 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, 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 consists of net earnings and unrealized holding gains and losses on
      marketable securities, net of tax.





*Stock-based
      compensation*





The
      Company uses the intrinsic value method to account for stock-based compensation
      in accordance with Accounting Principles Board Opinion No. 25, “Accounting for
      Stock Issued to Employees”, where compensation expense, if any, is measured as
      the excess of the market price of the stock over the exercise price on the
      measurement date. No compensation expense is recognized for the Company's option
      grants that have an exercise price equal to the market price on the date of
      grant or for the Company's Employee Stock Purchase Plan. In accordance with
      SFAS
      No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-An
      Amendment of SFAS No. 123" (“SFAS 148”), the Company discloses the pro forma
      effects of recording stock-based employee compensation plans at fair value
      on
      net earnings and net earnings per common share—basic and diluted as if the
      compensation expense was recorded in the financial statements.




F-11
 Table
          of Contents





Had
      compensation cost for the Company’s stock option plans been determined based on
      the fair value at the option grant dates for awards in accordance with the
      accounting provisions of SFAS No. 148 (which does not apply to awards prior
      to
      fiscal 1996), the Company’s net earnings and earnings per share for fiscal 2005,
      fiscal 2004 and fiscal 2003 would have been reduced to the pro forma amounts
      indicated below:




**Fiscal
                  Year Ended**(Amounts
                  in thousands, except per share data)
              
              
              **July
                  30,**
                **2005**
              
              
              **July
                  31,**
                **2004**
              
              
              **July
                  26,**
                **2003**Net
                  earnings as reported
              
              $
              52,560
              
              $
              30,932
              
              $
              7,183Deduct:
                  Total stock-based employeecompensation
                  expense determinedunder
                  fair value based methodfor
                  all awards net of related tax effects
              
              
              (1,681
              )
              
              (2,060
              )
              
              (1,939
              )**Pro
                  forma net earnings**
              
              $
              50,879
              
              $
              28,872
              
              $
              5,244Earnings
                  per shareBasic
                  - as reported
              
              $
              1.76
              
              $
              1.05
              
              $
              0.23Basic
                  - pro forma
              
              $
              1.71
              
              $
              0.98
              
              $
              0.17Diluted
                  - as reported
              
              $
              1.72
              
              $
              1.03
              
              $
              0.22Diluted
                  - pro forma
              
              $
              1.66
              
              $
              0.96
              
              $
              0.16





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
                  30,**
                **2005**
              
              **July
                  31,**
                **2004**
              
              **July
                  26,**
                **2003**Weighted
                  average risk-free interest rate
              
              
              3.6
              %
              
              3.3
              %
              
              3.1
              %Weighted
                  average expected life (years)
              
              
              5.0
              
              
              5.0
              
              
              5.0Expected
                  volatility of the market price of the Company’s common
                  stock
              
              
              45.1
              %
              
              39.1
              %
              
              43.9
              %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. In addition, option valuation models require input of highly
      subjective assumptions including the expected stock price volatility. 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.





*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 - 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.




F-12
 Table
          of Contents





*Recent
      accounting pronouncements*





In
      December 2004, the FASB issued Statement No. 123R (revised 2004), “Share-Based
      Payment” (“SFAS No. 123R”), which is a revision of SFAS No. 123. SFAS No. 123R
      supersedes APB No. 25 and amends Statement No. 95, “Statement of Cash Flows.”
      Under SFAS No. 123R, companies must calculate and record in the income
      statement, not in pro forma disclosures, the cost of equity instruments, such
      as
      stock options, awarded to employees for services received. The cost of the
      equity instruments will be measured based on fair value of the instruments
      on
      the date they are granted (with certain exceptions) and will be required to
      be
      recognized over the period during which the employees are required to provide
      services in exchange for the equity instruments. The statement is effective
      in
      the first fiscal year beginning after June 15, 2005, therefore, the Company
      is
      required to adopt SFAS No. 123R effective the beginning of its fiscal year
      ending in July 2006.





The
      Company is evaluating the requirements of SFAS No. 123R and expects that the
      adoption of SFAS No. 123R will have a material effect on its results of
      operations and earnings per share. The Company must determine the appropriate
      fair value method to be used for valuing share-based payments, the amortization
      method of compensation cost and the transition method to be used at the date
      of
      adoption. W e
      cannot
      precisely estimate the future impact of adopting SFAS No. 123R because it will
      depend on several factors including future stock price volatility and the levels
      of share-based awards granted in the future .
      However, had we adopted SFAS No. 123R in prior periods, the impact of that
      standard would have approximated the impact of SFAS No. 123 as described in
      the
      disclosure of pro forma net income and earnings per share in this Note above
      to
      our consolidated financial statements. SFAS No. 123R also requires the benefits
      of tax deductions in excess of recognized compensation cost to be reported
      as a
      financing cash flow. This change will reduce net operating cash flows and
      increase net financing cash flows in periods after adoption. The amount of
      this
      change cannot be estimated at this time.





In
      September 2004, the Emerging Issues Task Force reached a final consensus on
      EITF
      Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings
      Per Share” (“EITF 04-8”), to change the existing accounting for convertible debt
      within the dilutive earnings per share calculation. The EITF concluded the
      common stock underlying contingent convertible debt instruments should be
      included in diluted net income per share computations using the if-converted
      method regardless of whether the market price trigger or other contingent
      feature has been met. The EITF concluded that this new treatment should be
      applied retroactively, with the result that issuers of securities would be
      required to restate previously issued diluted earning per share. In October
      2004, The FASB approved EITF 04-8 and established an implementation date of
      December 15, 2004. The Company has included the shares of common stock that
      may
      be issued to settle its contingently convertible securities in the calculation
      of its diluted earnings per share. The impact of the adoption of this EITF
      consensus was not significant to the Company’s overall results of operations or
      financial position.





In
      November 2004, the FASB issued SFAS No. 151 (“SFAS No. 151”), “Inventory Costs,”
      which amends Accounting Research Bulletin No. 43 to clarify the accounting
      for
      abnormal amounts of idle facility expense, freight, handling costs and spoilage.
      SFAS No. 151 also requires the allocation of fixed production overheads to
      inventory be based on normal production capacity. SFAS No. 151 is effective
      for
      inventory costs incurred during fiscal years beginning after June 15, 2005,
      and,
      accordingly, the Company will adopt the standard in the first quarter of fiscal
      2006. Adoption of SFAS No. 151 is not expected to have a material impact on
      the
      Company’s consolidated
      financial position, results of operations or cash flows .





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 is effective
      no
      later than the end of our 2005 fiscal year. The Company does not expect FIN
      47
      to have a material impact on our consolidated financial position, results of
      operations or cash flows.





In
      June 2005, the Emerging Issues Task Force of the Financial Accounting
      Standards Board (“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 is effective for periods beginning after June 29,
      2005. The adoption of EITF 05-6 is not expected to have a material effect on
      the
      Company’s consolidated
      financial position, results of operations or cash flows.




F-13
 Table
          of Contents





**2.**
            **ACQUISITION
                OF MAURICES INCORPORATED**





On
      January 3, 2005, as of the close of business on January 1, 2005, the Company
      acquired 100% of the outstanding stock of Maurices Incorporated, a specialty
      apparel retailer, for a total purchase price of $328.3 million, net of cash
      acquired, which included $4.4 million of transaction fees. The transaction
      was
      financed by $114.3 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 condensed 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 Statement of Financial
      Accounting Standards (“SFAS”) No. 141, Business Combinations, and, accordingly,
      the excess purchase price over the fair market value of the underlying net
      assets acquired, of $132.6 million, was allocated to goodwill after considering
      the post-closing adjustments described below.





The
      following table summarizes the allocation of the purchase price to the estimated
      fair value of the assets acquired and liabilities assumed as of the acquisition
      date, January 1, 2005, in accordance with SFAS No. 141. The allocation of the
      purchase price to the estimated fair value of the assets acquired and
      liabilities assumed as of the acquisition date was performed in accordance
      with
      SFAS No. 141. The Company’s allocation was based on an evaluation of the
      appropriate fair values and represented management’s best estimate based on the
      data.





The
      estimated fair values of assets acquired and liabilities assumed, as of the
      close of business on January 1, 2005 are as follows:


(Amounts
                in thousands)Purchase
                Price
            
            $
            328,305Current
                assets
            
            
            7,788Inventory
            
            
            33,475Property,
                plant, and equipment, net
            
            
            75,394Intangibles
            
            
            111,853Other
                non-current assets
            
            
            2,241Total
                assets acquired
            
            
            230,751Total
                liabilities assumed
            
            
            (35,012
            )Net
                assets acquired, net of cash
            
            
            195,739**Goodwill**
            
            $
            132,566





In
      accordance with Statement of Financial Accounting Standards (“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 annual impairment tests on or about June 30 th to
      determine whether an impairment charge related to the carrying value of the
      Company’s recorded goodwill is necessary.





Other
      identifiable intangible assets consist of trade names, customer relationship
      and
      proprietary technology. Trade names have an indefinite life and therefore are
      not amortized. Customer relationship 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.




F-14
 Table
          of Contents




(Amounts
                in thousands)Other
                intangible assets were comprised of the following as of July 30,
                2005:**Gross
                Carrying Amount**
            
            **Accumulated
                Amortization**
            
            **Net
                Amount**
            
            **Expected
                Life**Customer
                Relationship
            
            $
            2,200
            
            $
            183
            
            $
            2,017
            
            
            7
                yearsProprietary
                Technology
            
            
            3,653
            
            
            427
            
            
            3,226
            
            
            5
                yearsTrade
                Name
            
            
            106,000
            
            
            –
            
            
            106,000
            
            
            Indefinite**Total
                intangible assets**
            
            $
            111,853
            
            $
            610
            
            $
            111,243





The
      estimated annual amortization expense over the next five 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
            
            $
            1.51
            
            $
            1.15Diluted
            
            $
            1.47
            
            $
            1.13




**3.**
            **RESTATEMENTS
                OF FINANCIAL STATEMENTS**




The
        Company concluded that its Consolidated Statements of Cash Flow presentation
        for
        fiscal periods ending July 31, 2004 and July 26, 2003 should be restated
        to
        properly record the presentation of purchases and sales of marketable securities
        and investments on a gross basis, which had historically been recorded on
        a net
        basis and to
        correct both the amounts and the presentation of gain\(loss) on sale of
        marketable securities from investing activities to operating
        activities .





In
      addition, the Company corrected the classification of the change in restricted
      cash in the consolidated statements of cash flows from an operating activity
      to
      an investing activity in accordance with FASB Statement No. 95, “Statement of
      Cash Flows.”





The
      Company also determined that certain liabilities associated with the acquisition
      of property and equipment, were incorrectly reflected as a component of changes
      in operating liabilities and purchases of property and equipment in the
      statements of cash flows. Purchases of property and equipment accrued at each
      balance sheet date have been presented as supplemental disclosure of non-cash
      items.





These
      corrections did not affect the total net change in cash and cash equivalents
      and
      had no impact on the Company’s consolidated balance sheets, consolidated
      statements of earnings, consolidated statement of shareholders’ equity and
      comprehensive income, and earnings per share.




F-15
 Table
          of Contents





Following
      is a summary of the significant effects of these restatements on the Company’s
      consolidated statements of cash flows for Fiscal years 2004 and
      2003:


(Amounts
                  in thousands)
              
              **Consolidated
                  Statement of Cash Flows****Fiscal
                  year ended July 31, 2004**
              
              **As
                  previously**
                **reported**
              
              **Adjustments**
              
              **As
                  restated****Operating
                  activities:**Restricted
                  cash
              
              $
              (38,661
              )
              $
              38,661
              
              $
              –Realized
                  loss / (gain) on sales of securities
              
              
              –
              
              
              (15
              )
              
              (15
              )Increase
                  (decrease) in accrued expenses
              
              
              (1,215
              )
              
              (1,893
              )
              
              (3,108
              )**Net
                  cash provided by operating activities**
              
              **$**
              **21,044**
              
              **$**
              **36,753**
              
              **$**
              **57,797****Investing
                  Activities:**Restricted
                  cash
              
              $
              –
              
              $
              (38,661
              )
              $
              (38,661
              )Purchases
                  of property and equipment
              
              
              (35,760
              )
              
              1,893
              
              
              (33,867
              )Sales
                  and maturities of marketable securities and investments
              
              
              62,741
              
              
              195,972
              
              
              258,713Purchases
                  of marketable securities and investments
              
              
              (72,004
              )
              
              (195,957
              )
              
              (267,961
              )**Net
                  cash used in investing activities**
              
              **$**
              **(45,923**
              **)**
              **$**
              **(36,753**
              **)**
              **$**
              **(82,676**
              **)**
  **Fiscal
                    year ended July 26, 2003**
                
                **As
                    previously**
                  **reported**
                
                **Adjustments**
                
                **As
                    restated****Operating
                    activities:**Realized
                    loss / (gain) on sales of securities
                
                $
                –
                
                $
                (608
                )
                $
                (608
                )Increase
                    (decrease) in accrued expenses
                
                
                1,811
                
                
                (998
                )
                
                813**Net
                    cash provided by operating activities**
                
                **$**
                **61,557**
                
                **$**
                **(1,606**
                **)**
                **$**
                **59,951****Investing
                    Activities:**Purchases
                    of property and equipment
                
                $
                (68,069
                )
                $
                998
                
                $
                (67,071
                )Sales
                    and maturities of marketable securities and investments
                
                
                138,346
                
                
                266,084
                
                
                404,430Purchases
                    of marketable securities and investments
                
                
                (93,803
                )
                
                (265,476
                )
                
                (359,279
                )**Net
                    cash used in investing activities**
                
                **$**
                **(23,526**
                **)**
                **$**
                **1,606**
                
                **$**
                **(21,920**
                **)**




The
        Company also determined
        that interest expense
        related to an escrow account established with litigation
        discussed in Note 7, which was previously reported as a component of interest
        expense, and thus not included as part of operating income, should be
        reclassified to be recorded as litigation expense. The Company’s financial
        statements for the year ended July 31, 2004 have been corrected to reflect
        an
        increase in litigation with a corresponding decrease in interest expense
        and
        operating income of $3.3 million. This revision had no effect on net income.





In
      addition, the Company restated diluted earnings per share in the fourth quarter
      of Fiscal 2004, to correct an error. The restated amount of $0.45 was previously
      reported as $0.46.




F-16
 Table
          of Contents





**4.**
            **MARKETABLE
                SECURITIES AND INVESTMENTS**





The
      Company purchases short-term investments and marketable securities which have
      been designated as “available-for-sale” as required by Statement of Financial
      Accounting Standards 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, gross unrealized gains and losses and estimated fair value
      based
      on published closing prices of securities at July 30, 2005 and July 31, 2004,
      by
      contractual maturity, are shown below.


**July
                  30, 2005**
              
              **July
                  31, 2004**(Amounts
                  in thousands)
              
              **Estimated**
                **Fair
                  Value**
              
              **Cost**
              
              **Estimated**
                **Fair
                  Value**
              
              **Cost**Money
                  Market Funds
              
              $
              85
              
              $
              85
              
              $
              4,676
              
              $
              4,676Short-Term
                  Investments
              
              
              –
              
              
              –
              
              
              35,545
              
              
              35,545Tax
                  Free Municipal Bonds
              
              
              –
              
              
              –
              
              
              80,746
              
              
              81,176US
                  Govt. Securities Fund
              
              
              –
              
              
              –
              
              
              1,733
              
              
              1,878**Total**
              
              $
              85
              
              $
              85
              
              $
              122,700
              
              $
              123,275


The
      scheduled maturities of marketable securities and investments at July 30, 2005
      are:


**Due
                    In**(Amounts
                    in thousands)
                
                **Estimated**
                  **Fair
                    Value**
                
                **Cost**One
                    year or less
                
                $
                85
                
                $
                85One
                    year through five years
                
                
                –
                
                
                –Six
                    years through ten years
                
                
                –
                
                
                –Over
                    ten years
                
                
                –
                
                
                –**Total**
                
                $
                85
                
                $
                85




Proceeds
        and gross realized (losses) gains from the sale of the above investments
        in
        Fiscal 2005, 2004 and 2003 were $114.6 million and $( 0.6 )
        million, $62.9 million and $ 15
        thousand ,
        $138.3
        million and $ 0.6 million,
        respectively. 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.





Gross
      unrealized losses and fair values of the Company’s investments in the US
      Government Securities Fund have been in a continuous unrealized loss position
      deemed to be temporary for more than 12 months. The gross unrealized losses
      were
      $145 thousand and fair value of these securities were $1.7 million as of July
      31, 2004.





The
      Company did not have any other investments in individual securities that were
      in
      a continuous unrealized loss position deemed to be temporary for more than
      12
      months at July 30, 2005 or July 31, 2004.





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
      impairments 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 which are primarily related to interest rate increases and the
      severity of the impairment of the individual securities which are all less
      than
      5% of the book value of the security.




F-17
 Table
          of Contents




**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 47.5715 shares per $1,000 principal
        amount of Convertible Senior Notes (equal to a conversion price of approximately
        $21.02 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. Upon
        conversion, the Company would deliver cash to the lesser of the aggregate
        principal amount of Convertible Senior Notes to be converted and our conversion
        obligation, 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 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
        30,
        2005 the market value of the convertible senior notes was over the $1,000
        par
        value selling at $1,329.92 trading on the PORTAL (Private Offering Resale
        and
        Trading through Automated Linkage).





On
      December 14, 2004, the Company entered into a senior credit facility with a
      number of banks. The $250 million Senior Credit Facility consists of a $150
      million revolving credit facility and a $100 million term loan. The Senior
      Credit Facility will mature five years after it is entered into, subject to
      customary rollover and exchange provisions, which may extend the maturity of
      the
      loans under the Senior Credit Facility and the senior exchange note into which
      they are converted to up to seven years. In addition to customary financial
      and
      non-financial covenants, the Senior Credit Facility will limit the Company’s
      ability to use borrowings under that facility to pay any cash payable on a
      conversion of the notes and will prohibit the Company from making any cash
      payments on the conversion of the notes if a default or event of default has
      occurred under that facility without the consent of the lenders under the senior
      credit facility. As
      of
      July 30, 2005 the Company has repaid $90 million of the term loan, which
      included a voluntary principal prepayment of $85 million, leaving a balance
      of
      $10 million (the term loan was paid off in full with a voluntary payment of
      $10
      million made in September 2005). As
      of the
      date of this filing, the Company has 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 condensed consolidated balance
      sheets at July 30, 2005 and are being amortized to interest expense over the
      life of the Notes and the Senior Credit facility, respectively.





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 Realty, LLC 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 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 condensed consolidated balance sheets and are
      being amortized to interest expense over the life of the mortgage.




F-18
 Table
          of Contents





Long-term
      debt consists of the following:




(Amounts
                  in thousands)
              
              **July
                  30,**
                **2005**
              
              **July
                  31,**
                **2004**Dunnigan
                  Realty, LLC mortgage loan
              
              $
              31,989
              
              $
              33,021Convertible
                  Senior Notes
              
              $
              115,000
              
              
              –Senior
                  Secured Credit Facility
              
              $
              10,000
              
              
              –156,989
              
              
              33,021Less:
                  current portion
              
              
              (1,089
              )
              
              (1,033
              )**Total**
              
              $
              155,900
              
              $
              31,988





Scheduled
      principal payments of the above debt for each of the next five fiscal years
      and
      beyond is as follows: $1.1 million, $1.1 million, $1.2 million, $1.3 million,
      $1.3 million, and $150.9 million, respectively.





Interest
      expense relating to the above debt was approximately $6.3 million and $1.8
      million for the fiscal year ended July 30, 2005 and July 31, 2004,
      respectively .




**6.**
            **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 foregoing and exercise
        of
        all stock options (see Note 11) using the treasury stock method on conversion
        of
        the Senior Convertible Notes, 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
        (see
        Note 5), to the extent dilutive.


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




(Amounts
                in thousands)**July
                  30,**
                **2005**
              
              **July
                  31,**
                **2004**
              
              **July
                  26,**
                **2003**Weighted
                  average number of common shares outstanding - basic
              
              
              29,785
              
              
              29,413
              
              
              31,219Net
                    effect of dilutive common stock equivalents that include stock
                    options and
                    convertible securities based on the treasury stock method using
                    the
                    average market price
              
              
              794
              
              
              707
              
              
              723Weighted
                  average number of common shares outstanding - diluted
              
              
              30,579
              
              
              30,120
              
              
              31,942




The
        Senior Convertible Notes were not dilutive at July 30, 2005 as the average
        price
        of the Company’s stock was less than the conversion price of the Senior
        Convertible Notes (see Note 5), in accordance with EITF 04-8.
  Common
        stock equivalents of 26,100, 2,000 and 170,000 for the fiscal years ended
        July
        30, 2005, July 31, 2004 and July 26, 2003, respectively, were excluded because
        such common stock equivalents were anti-dilutive




**7.**
            **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 had become final. Upon the Supreme Court
        of
        Connecticut's decision reversing the judgment described above, approximately
        $35.3 million of previously recognized litigation charge **s** 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.


F-19
 Table
          of Contents





The
      Company is involved in various routine legal proceedings incident to the
      ordinary course of business. There are no material pending legal proceedings,
      other than ordinary routine litigation incidental to the business, to which
      the
      Company or any of its subsidiaries is a party or of which any of their property
      is the subject.





**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
      2005, 2004 and 2003 the Company incurred expenses of $1,811,000, $1,815,000,
      and
      $1,363,000, respectively, relating to the contributions to and administration
      of
      the above plans. 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.





**9.**
            **INCOME
                TAXES**





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


(Amounts
                  in thousands)
                
                **Fiscal
                    Year Ended****July
                    30,**
                  **2005**
                
                **July
                    31,**
                  **2004**
                
                **July
                    26,**
                  **2003**Federal:Current
                
                $
                4,901
                
                $
                10,268
                
                $
                7,772Deferred
                
                
                22,283
                
                
                1,603
                
                
                (4,778
                )27,184
                
                
                11,871
                
                
                2,994State:Current
                
                
                1,512
                
                
                1,782
                
                
                2,138Deferred
                
                
                4,504
                
                
                888
                
                
                (1,093
                )6,016
                
                
                2,670
                
                
                1,045**Provision
                    for income taxes**
                
                $
                33,200
                
                $
                14,541
                
                $
                4,039


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




(Amounts
                in thousands)**July
                  30,**
                **2005**
              
              **July
                  31,**
                **2004**Deferred
                  tax assets:Inventory
                  capitalization and inventory-related items
              
              $
              1,764
              
              $
              4,121Capital
                  loss carryover
              
              
              –
              
              
              85Employee
                  benefits
              
              
              4,624
              
              
              3,050Litigation
                  accrual
              
              
              –
              
              
              14,248Other
                  items
              
              
              9,991
              
              
              15,605**Total
                  deferred tax assets**
              
              
              16,380
              
              
              37,109Deferred
                  tax liabilities:Depreciation
              
              
              20,254
              
              
              20,489Intangibles
              
              
              3,703
              
              
              –Other
                  items
              
              
              3,267
              
              
              1,690**Total
                  deferred tax liabilities**
              
              
              27,224
              
              
              22,179Valuation
                  allowance
              
              
              –
              
              
              (85
              )**Net
                  deferred tax (liabilities) / assets**
              
              
              ($10,845
              )
              $
              14,845





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. For Fiscal 2004, the net deferred tax asset is presented on the balance
      sheet as a current asset of $14.8 million. The Company successfully resolved
      several State and Federal audits during Fiscal 2004 and Fiscal 2003, resulting
      in benefits to its tax provision for approximately $2.0 million for Fiscal
      2004
      and $2.7 million for Fiscal 2003.




F-20
 Table
          of Contents





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
                  30,**
                **2005**
              
              **July
                  31,**
                **2004**
              
              **July
                  26,**
                **2003**Statutory
                  tax rate
              
              
              35.0
              %
              
              35.0
              %
              
              35.0
              %State
                  taxes - net of federal benefit
              
              
              4.6
              %
              
              3.8
              %
              
              6.1
              %Valuation
                  allowance –
                  loss carryforward
              
              
              –
              
              
              –
              
              
              25.7
              %Provision
                  adjustment – resolution of tax audits
              
              
              –
              
              
              (4.5
              %)
              
              (25.7
              %)Other –
                  net, primarily tax-free interest
              
              
              (0.9
              %)
              
              (2.3
              %)
              
              (5.1
              %)**Effective
                  tax rate**
              
              
              38.7
              %
              
              32.0
              %
              
              36.0
              %





**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 ranging
      from
      5 to 15 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:




(Amounts
                  in thousands)
              
              **Fiscal
                  Year Ended****July
                  30,**
                **2005**
              
              **July
                  31,**
                **2004**
              
              **July
                  26,**
                **2003**Base
                  rentals
              
              $
              109,632
              
              $
              91,655
              
              $
              88,807Percentage
                  rentals
              
              
              2,690
              
              
              2,761
              
              
              3,898Other
                  occupancy costs
              
              
              32,547
              
              
              30,056
              
              
              29,069144,869
              
              
              124,472
              
              
              121,774Less:
                  Rental income from third parties
              
              
              (1,526
              )
              
              (1,526
              )
              
              (779
              )**Total**
              
              $
              143,343
              
              $
              122,946
              
              $
              120,995





The
      following is a schedule of future minimum rentals under noncancellable operating
      leases as of July 30, 2005, (amounts
      in thousands):





**Fiscal
                Year**
            
            **Total**2006
            
            $
            118,9442007
            
            
            121,0592008
            
            
            127,1622009
            
            
            125,0792010
            
            
            122,799Subsequent
                years
            
            
            622,599**Total
                future minimum rentals**
            
            $
            1,237,642





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.




F-21
 Table
          of Contents





*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 30,
      2005, included in the above schedule, are approximately $312,000 annually and
      in
      the aggregate $1.7 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 2005, 2004 and 2003 under these leases
      amounted to approximately $335,000, $308,000 and $309,000,
      respectively.





*Contractual
      obligations and commercial commitments*





The
      estimated significant contractual cash obligations and other commercial
      commitments at July 30, 2005 are summarized in the following table:


**Payments
                  Due by Period****(Amounts
                  in thousands)****Contractual
                Obligations**
              
              **Totals**
              
              **Fiscal**
                **2006**
              
              **Fiscal
                  2007-**
                **2008**
              
              **Fiscal
                  2009-**
                **2010**
              
              **Fiscal
                  2011**
                **And
                  Beyond**Operating
                  lease obligations
              
              $
              1,237,642
              
              $
              118,944
              
              $
              248,221
              
              $
              247,878
              
              $
              622,599Mortgage
                  principal and interest
              
              
              49,816
              
              
              2,768
              
              
              5,535
              
              
              5,535
              
              
              35,978Convertible
                  Senior Notes and interest
              
              
              169,625
              
              
              2,875
              
              
              5,750
              
              
              5,750
              
              
              155,250Term
                  loan and interest
              
              
              12,563
              
              
              513
              
              
              1,025
              
              
              11,025
              
              
              –**Total**
              
              $
              1,469,646
              
              $
              125,100
              
              $
              260,531
              
              $
              270,188
              
              $
              813,827




**Amount
                  of Commitment Expiration Period****(Amounts
                  in thousands)****Other
                Commercial Commitments**
              
              **Totals**
              
              **Fiscal**
                **2006**
              
              **Fiscal
                  2007-**
                **2008**
              
              **Fiscal
                2009-**
                **2010**
              
              **Fiscal
                  2011**
                **And
                  Beyond**Trade
                  letters of credit
              
              $
              51,504
              
              $
              51,504
              
              $
              –
              
              $
              –
              
              $
              –Standby
                  letters of credit
              
              
              5,247
              
              
              5,247
              
              
              –
              
              
              –
              
              
              –Firm
                  purchase orders
              
              
              294
              
              
              294
              
              
              –
              
              
              –
              
              
              –**Total**
              
              $
              57,045
              
              $
              57,045
              
              $
              –
              
              $
              –
              
              $
              –





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 Option Plan provides for the granting of either ISO’s or
      non-qualified options to purchase up to 3,000,000 shares of common stock. As
      of
      July 30, 2005, there were 1,711,117 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
      exercise price of ISO’s granted under any of the option plans may not be less
      than the market price of the common stock at the date of grant. Generally,
      all
      options granted by the Company vest over a five-year period and expire after
      ten
      years from the date of grant.




F-22
 Table
          of Contents





From
      January 2005 to July 30, 2005, the Company issued 70,500 shares of restricted
      stock under the 2001 Stock Option Plan. Prior to January 2005, restricted shares
      did not count against the 2001 Stock Option Plan. Any shares of restricted
      stock
      are counted against the shares available for future grant limit as
      three shares for every 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. The
      restricted shares generally vest over five years. The Company recognized
      $398,000 of compensation expense in Fiscal 2005, $67,000 of compensation expense
      in Fiscal 2004, and $265,000 of compensation expense in Fiscal 2003 related
      to
      the issuance of restricted stock.





The
      Company’s Employee Stock Purchase Plan allows employees to purchase shares of
      the Company’s common stock during each quarterly offering period at a 10%
      discount through weekly payroll deductions.





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


**July
                    30, 2005**
                
                **July
                    31, 2004**
                
                **July
                    26, 2003****Options**
                
                **Weighted**
                  **Average**
                  **Exercise**
                  **Price**
                
                **Options**
                
                **Weighted**
                  **Average**
                  **Exercise**
                  **Price**
                
                **Options**
                
                **Weighted**
                  **Average**
                  **Exercise**
                  **Price**Options
                    outstanding - beginning of year
                
                
                2,673,979
                
                $
                10.46
                
                
                2,950,495
                
                $
                9.80
                
                
                2,734,352
                
                $
                8.14Granted
                
                
                532,382
                
                
                16.95
                
                
                269,625
                
                
                13.82
                
                
                909,883
                
                
                12.54Cancelled
                
                
                (17,900
                )
                
                9.70
                
                
                (81,860
                )
                
                10.92
                
                
                (59,200
                )
                
                8.27Exercised
                
                
                (603,010
                )
                
                9.41
                
                
                (464,281
                )
                
                8.11
                
                
                (634,540
                )
                
                6.76Outstanding
                    end of year
                
                
                2,585,451
                
                $
                11.97
                
                
                2,673,979
                
                $
                10.46
                
                
                2,950,495
                
                $
                9.80Options
                    exercisableat
                    year-end
                
                
                1,022,079
                
                $
                8.97
                
                
                860,647
                
                $
                8.77
                
                
                528,208
                
                $
                7.56Weighted-average
                    fairvalue
                    of options grantedduring
                    the year
                
                
                
                
                $
                7.74
                
                
                
                
                $
                5.50
                
                
                
                
                $
                5.34
 The
          following table summarizes information about stock options outstanding
          at July
          30, 2005:





**Range
                of Exercise Prices**
            
            **Number
                Outstanding as of July 30, 2005**
            
            **Weighted
                Average Remaining Life**
            
            **Weighted
                Average Exercise Price**
            
            **Number
                Exercisable as of July 30, 2005**
            
            **Weighted
                Average Exercise Price**$2.50
            
            
            94,800
            
            
            1.0
                years
            
            $
            2.50
            
            
            94,800
            
            $
            2.504.27
                - 5.69
            
            
            33,436
            
            
            2.5
                years
            
            
            5.03
            
            
            33,436
            
            
            5.037.03
                - 10.38
            
            
            817,875
            
            
            4.9
                years
            
            
            8.52
            
            
            573,155
            
            
            7.9010.84
                - 15.90
            
            
            1,110,658
            
            
            7.3
                years
            
            
            13.14
            
            
            320,688
            
            
            13.2316.37
                - 23.37
            
            
            528,682
            
            
            9.4
                years
            
            
            16.98
            
            
            –
            
            
            –$2.50
                - $23.37
            
            
            2,585,451
            
            
            6.7
                years
            
            $
            11.97
            
            
            1,022,079
            
            $
            8.97







F-23
 Table
          of Contents





**12.**
            **SEGMENTS**




Our
      reportable segments are the **dressbarn** brands,
      which are used in 552
      Combo
      stores (a combination of **dressbarn** and **dressbarn**  **woman** stores),
      182 **dressbarn** stores,
      45 **dressbarn**  **woman** stores in 42
      states as of July 30, 2005 and the **maurices** brand,
      which is used in 493 stores in 39 states as of July 30, 2005. 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 . 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** .





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





(Amounts
                in millions)
            
            **Fiscal
                2005**
            
            **Fiscal
                2004**
            
            **Fiscal
                2003**Net
                sales**dressbarn
                and dressbarn woman**brands
            
            $
            788.2
            
            $
            754.9
            
            $
            707.1**maurices**brand
            
            
            212.1
            
            
            –
            
            
            –Consolidated
                net sales
            
            $
            1,000.3
            
            $
            754.9
            
            $
            707.1Operating
                income**dressbarn
                and dressbarn woman**brands
            
            $
            76.9
            
            $
            43.7
            
            $
            7.3**maurices**brand
            
            
            15.8
            
            
            –
            
            
            –Consolidated
                operating income
            
            
            92.7
            
            
            43.7
            
            
            7.3Interest
                income
            
            
            1.8
            
            
            2.2
            
            
            3.3Interest
                expense
            
            
            (10.2
            )
            
            (1.9
            )
            
            (0.2
            )Other
                income
            
            
            1.5
            
            
            1.5
            
            
            0.8Earnings
                before provision for income taxes
            
            $
            85.8
            
            $
            45.5
            
            $
            11.2Identifiable
                assets**dressbarn
                and dressbarn woman**brands
            
            $
            644.0
            
            $
            489.3
            
            $
            449.8**maurices**brand
            
            
            72.2
            
            
            –
            
            
            –Total
            
            $
            716.2
            
            $
            489.3
            
            $
            449.8Depreciation
                and amortization**dressbarn
                and dressbarn woman**brands
            
            $
            25.1
            
            $
            23.2
            
            $
            22.3**maurices**brand
            
            
            9.4
            
            
            –
            
            
            –Consolidated
                depreciation and amortization
            
            $
            34.5
            
            $
            23.2
            
            $
            22.3




F-24
 Table
          of Contents




**13.**
            **SUBSIDIARY
                GUARANTORS**





The
      Dress
      Barn, Inc.’s (as used in this Note, the “Parent Company”) $250 million Senior
      Credit Facility, which consists of a $100 million term loan and a $150 million
      revolving credit facility, and its Convertible Senior Notes contain provisions
      that all obligations under the Senior Credit Facility are unconditionally
      guaranteed by each existing and subsequently acquired or organized subsidiary
      of
      the Parent Company, except for Dunnigan Realty LLC .





Presented
      below are the condensed consolidating balance sheets, statements of earnings
      and
      statements of cash flows for the Parent Company, for the Parent Company’s
      guarantor subsidiaries and for the Parent Company’s non-guarantor subsidiary for
      the periods presented herein as required by Rule 3-10 under Regulation S-X.




CONDENSED
      CONSOLIDATING BALANCE SHEET


as
      of
      July 30, 2005


(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated****ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            34,041
            
            $
            5,700
            
            $
            2,693
            
            $
            –
            
            $
            42,434Restricted
                cash
            
            
            100
            
            
            –
            
            
            –
            
            
            –
            
            
            100Marketable
                securities and investments
            
            
            59
            
            
            24
            
            
            2
            
            
            –
            
            
            85Merchandise
                inventories
            
            
            117,077
            
            
            50,566
            
            
            –
            
            
            –
            
            
            167,643Prepaid
                expenses and other
            
            
            9,363
            
            
            3,000
            
            
            560
            
            
            –
            
            
            12,923**Total
                Current Assets**
            
            
            160,640
            
            
            59,290
            
            
            3,255
            
            
            –
            
            
            223,185Property
                and equipment, net
            
            
            116,573
            
            
            75,020
            
            
            41,105
            
            
            –
            
            
            232,698Intangible
                assets, net
            
            
            –
            
            
            111,243
            
            
            –
            
            
            –
            
            
            111,243Goodwill
            
            
            –
            
            
            132,566
            
            
            –
            
            
            –
            
            
            132,566Other
                assets
            
            
            11,680
            
            
            3,214
            
            
            1,659
            
            
            –
            
            
            16,553Investment
                in subsidiaries
            
            
            576,234
            
            
            –
            
            
            –
            
            
            (576,234
            )
            
            –Due
                from affiliate
            
            
            –
            
            
            312,468
            
            
            –
            
            
            (312,468
            )
            
            –**Total
                Assets**
            
            $
            865,127
            
            $
            693,801
            
            $
            46,019
            
            $
            (888,702
            )
            $
            716,245











F-25
 Table
          of Contents





CONDENSED
      CONSOLIDATING BALANCE SHEET


as
      of
      July 30, 2005


(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated****LIABILITIES
                AND SHAREHOLDERS' EQUITY****Current
                Liabilities:**Accounts
                payable - trade
            
            $
            73,675
            
            $
            34,027
            
            $
            –
            
            $
            –
            
            $
            107,702Accrued
                salaries, wages and related expenses
            
            
            26,806
            
            
            8,403
            
            
            –
            
            
            –
            
            
            35,209Other
                accrued expenses
            
            
            20,028
            
            
            13,500
            
            
            1,709
            
            
            –
            
            
            35,237Customer
                credits
            
            
            1,425
            
            
            11,424
            
            
            –
            
            
            –
            
            
            12,849Income
                taxes payable
            
            
            92
            
            
            –
            
            
            –
            
            
            –
            
            
            92Deferred
                tax liability
            
            
            3,612
            
            
            –
            
            
            –
            
            
            –
            
            
            3,612Current
                portion of long-term debt
            
            
            –
            
            
            –
            
            
            1,089
            
            
            –
            
            
            1,089**Total
                Current Liabilities**
            
            
            125,638
            
            
            67,354
            
            
            2,798
            
            
            –
            
            
            195,790Long-term
                debt
            
            
            125,001
            
            
            –
            
            
            30,899
            
            
            –
            
            
            155,900Deferred
                rent and other
            
            
            41,783
            
            
            2,411
            
            
            –
            
            
            –
            
            
            44,194Long-term
                deferred tax liability
            
            
            7,233
            
            
            –
            
            
            –
            
            
            –
            
            
            7,233Due
                to affiliate
            
            
            252,344
            
            
            60,007
            
            
            117
            
            
            (312,468
            )
            
            –**Total
                Liabilities**
            
            
            551,999
            
            
            129,772
            
            
            33,814
            
            
            (312,468
            )
            
            403,117Commitments
                and contingencies
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –Shareholders'
                equity
            
            
            313,128
            
            
            564,029
            
            
            12,205
            
            
            (576,234
            )
            
            313,128**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY**
            
            $
            865,127
            
            $
            693,801
            
            $
            46,019
            
            $
            (888,702
            )
            $
            716,245






F-26
 Table
          of Contents





CONDENSED
      CONSOLIDATING STATEMENT OF EARNINGS


(for
      the
      Fiscal Year Ended July 30, 2005)


(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated**Net
                sales
            
            $
            788,226
            
            $
            212,038
            
            $
            6,791
            
            $
            (6,791
            )
            $
            1,000,264Cost
                of sales, including:Occupancy
                and buying costs
            
            
            483,315
            
            
            141,997
            
            
            1,609
            
            
            (5,265
            )
            
            621,656Gross
                profit
            
            
            304,911
            
            
            70,041
            
            
            5,182
            
            
            (1,526
            )
            
            378,608Selling,
                  general and administrative expenses
            
            
            246,010
            
            
            63,489
            
            
            906
            
            
            (23,654
            )
            
            286,751Depreciation
                and amortization
            
            
            23,128
            
            
            9,613
            
            
            1,716
            
            
            –
            
            
            34,457Litigation
            
            
            (35,329
            )
            
            –
            
            
            –
            
            
            –
            
            
            (35,329
            )Operating
                income (loss)
            
            
            71,102
            
            
            (3,061
            )
            
            2,560
            
            
            22,128
            
            
            92,729Interest
                income
            
            
            1,506
            
            
            209
            
            
            20
            
            
            –
            
            
            1,735Interest
                expense
            
            
            (8,357
            )
            
            –
            
            
            (1,873
            )
            
            –
            
            
            (10,230
            )Other
                income
            
            
            –
            
            
            23,654
            
            
            –
            
            
            (22,128
            )
            
            1,526Equity
                  in earnings of subsidiaries
            
            
            13,186
            
            
            –
            
            
            –
            
            
            (13,186
            )
            
            –Earnings
                before provision for income taxes
            
            
            77,437
            
            
            20,802
            
            
            707
            
            
            (13,186
            )
            
            85,760Provision
                for income taxes
            
            
            24,877
            
            
            8,049
            
            
            274
            
            
            –
            
            
            33,200**Net
                earnings**
            
            **$**
            **52,560**
            
            **$**
            **12,753**
            
            **$**
            **433**
            
            **$**
            **(13,186**
            **)**
            **$**
            **52,560**








F-27
 Table
          of Contents





CONDENSED
      CONSOLIDATING STATEMENT OF CASH FLOWS


for
      the
      Fiscal Year Ended July 30, 2005


(Amounts
                in thousands)**Parent**
              **Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated****Operating
                Activities:**Net
                earnings
            
            $
            52,560
            
            $
            12,753
            
            $
            433
            
            $
            (13,186
            )
            $
            52,560Adjustments
                to reconcile net earnings to net cash provided by / (used in) operating
                activities:Equity
                in earnings of subsidiaries
            
            
            (13,186
            )
            
            –
            
            
            –
            
            
            13,186
            
            
            –Depreciation
                and amortization of property and equipment
            
            
            23,128
            
            
            9,613
            
            
            1,716
            
            
            –
            
            
            34,457Provision
                for impairment and asset disposals
            
            
            5,345
            
            
            791
            
            
            –
            
            
            –
            
            
            6,136Deferred
                income tax expense
            
            
            25,690
            
            
            –
            
            
            –
            
            
            –
            
            
            25,690Deferred
                rent expense and other
            
            
            1,464
            
            
            2,411
            
            
            –
            
            
            –
            
            
            3,875Tax
                benefit on exercise of unqualified stock options
            
            
            2,258
            
            
            –
            
            
            –
            
            
            –
            
            
            2,258Amortization
                of debt issuance costs
            
            
            3,920
            
            
            –
            
            
            –
            
            
            –
            
            
            3,920Increase
                in cash surrender of life insurance
            
            
            (522
            )
            
            –
            
            
            –
            
            
            –
            
            
            (522
            )Deferred
                compensation
            
            
            398
            
            
            –
            
            
            –
            
            
            –
            
            
            398Realized
                (gain)/loss on sales of securities
            
            
            579
            
            
            –
            
            
            –
            
            
            –
            
            
            579Other
            
            
            (27
            )
            
            –
            
            
            27
            
            
            –
            
            
            –Changes
                in assets and liabilities, net of acquisition:Increase
                in merchandise inventories
            
            
            (165
            )
            
            (17,091
            )
            
            –
            
            
            –
            
            
            (17,256
            )(Increase)
                decrease in prepaid expenses and other
            
            
            (901
            )
            
            4,798
            
            
            (117
            )
            
            –
            
            
            3,780(Increase)
                decrease in other assets
            
            
            (786
            )
            
            11
            
            
            125
            
            
            –
            
            
            (650
            )(Decrease)
                increase in due from affiliate
            
            
            -
            
            
            (128,485
            )
            
            -
            
            
            128,485
            
            
            –Increase
                (decrease) in due to affiliate
            
            
            117,615
            
            
            11,320
            
            
            (450
            )
            
            (128,485
            )
            
            –Increase
                in accounts payable- trade
            
            
            6,899
            
            
            15,975
            
            
            –
            
            
            –
            
            
            22,874Increase
                in accrued salaries, wages and related expenses
            
            
            5,457
            
            
            2,121
            
            
            –
            
            
            –
            
            
            7,578Decrease
                in litigation accrual
            
            
            (36,128
            )
            
            –
            
            
            –
            
            
            –
            
            
            (36,128
            )(Decrease)
                increase in other accrued expenses
            
            
            (1,286
            )
            
            2,750
            
            
            964
            
            
            –
            
            
            2,428(Decrease)
                in customer credits
            
            
            (718
            )
            
            (220
            )
            
            –
            
            
            –
            
            
            (938
            )(Decrease)
                in income taxes payable
            
            
            (5,456
            )
            
            –
            
            
            –
            
            
            –
            
            
            (5,456
            )Total
                adjustments
            
            
            133,578
            
            
            (96,006
            )
            
            2,265
            
            
            13,186
            
            
            53,023**Net
                cash provided by (used in) operating activities**
            
            $
            186,138
            
            $
            (83,253
            )
            $
            2,698
            
            $
            –
            
            $
            105,583








F-28
 Table
          of Contents




CONDENSED
      CONSOLIDATING STATEMENT OF CASH FLOWS


for
      the
      Fiscal Year Ended July 30, 2005


(Amounts
                in thousands)**Parent
                  Company**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-guarantor
                  Subsidiary**
              
              **Eliminations**
              
              **Consolidated****Investing
                  Activities:**Acquisition
                  of Maurices Incorporated, net of $982 cash acquired
              
              $
              (328,305
              )
              $
              –
              
              $
              –
              
              $
              –
              
              $
              (328,305
              )Restricted
                  cash
              
              
              38,561
              
              
              –
              
              
              –
              
              
              –
              
              
              38,561Purchases
                  of property and equipment
              
              
              (25,066
              )
              
              (6,313
              )
              
              (2
              )
              
              –
              
              
              (31,381
              )Sales
                  and maturities of marketable securities and investments
              
              
              584,086
              
              
              110,260
              
              
              –
              
              
              –
              
              
              694,346Purchases
                  of marketable securities and investments
              
              
              (556,138
              )
              
              (15,648
              )
              
              (2
              )
              
              –
              
              
              (571,788
              )Net
                  cash (used in) provided by investing activities
              
              
              (286,862
              )
              
              88,299
              
              
              (4
              )
              
              –
              
              
              (198,567
              )**Financing
                  Activities:**Proceeds
                  from long-term debt
              
              
              215,000
              
              
              –
              
              
              –
              
              
              –
              
              
              215,000Repayment
                  of long-term debt
              
              
              (90,000
              )
              
              –
              
              
              (1,033
              )
              
              –
              
              
              (91,033
              )Payment
                  of debt financing costs
              
              
              (8,122
              )
              
              –
              
              
              –
              
              
              –
              
              
              (8,122
              )Purchase
                  of treasury stock
              
              
              (1,584
              )
              
              –
              
              
              –
              
              
              –
              
              
              (1,584
              )Proceeds
                  from Employee Stock Purchase Plan
              
              
              136
              
              
              –
              
              
              –
              
              
              –
              
              
              136Proceeds
                  from stock options exercised
              
              
              5,880
              
              
              –
              
              
              –
              
              
              –
              
              
              5,880Net
                  cash provided by (used in) financing activities
              
              
              121,310
              
              
              –
              
              
              (1,033
              )
              
              –
              
              
              120,277Net
                  increase in cash and cash equivalents
              
              
              20,586
              
              
              5,046
              
              
              1,661
              
              
              –
              
              
              27,293Cash
                  and cash equivalents- beginning of period
              
              
              13,455
              
              
              654
              
              
              1,032
              
              
              –
              
              
              15,141Cash
                  and cash equivalents- end of period
              
              $
              34,041
              
              $
              5,700
              
              $
              2,693
              
              $
              –
              
              $
              42,434








F-29
 Table
          of Contents





CONDENSED
      CONSOLIDATING BALANCE SHEET


as
      of
      July 31, 2004


(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated****ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            13,455
            
            $
            654
            
            $
            1,032
            
            $
            –
            
            $
            15,141Restricted
                cash
            
            
            38,661
            
            
            –
            
            
            –
            
            
            –
            
            
            38,661Marketable
                securities and investments
            
            
            28,639
            
            
            94,061
            
            
            –
            
            
            –
            
            
            122,700Merchandise
                inventories
            
            
            116,912
            
            
            –
            
            
            –
            
            
            –
            
            
            116,912Deferred
                tax asset
            
            
            14,845
            
            
            –
            
            
            –
            
            
            –
            
            
            14,845Prepaid
                expenses and other
            
            
            8,445
            
            
            10
            
            
            443
            
            
            –
            
            
            8,898Total
                Current Assets
            
            
            220,957
            
            
            94,725
            
            
            1,475
            
            
            –
            
            
            317,157Property
                and equipment, net
            
            
            117,278
            
            
            3,107
            
            
            42,819
            
            
            –
            
            
            163,204Intangible
                assets, net
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –Goodwill
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –Other
                assets
            
            
            7,169
            
            
            2
            
            
            1,784
            
            
            -
            
            
            8,955Investment
                in subsidiaries
            
            
            233,159
            
            
            –
            
            
            –
            
            
            (233,159
            )
            
            –Due
                from affiliate
            
            
            –
            
            
            183,983
            
            
            –
            
            
            (183,983
            )
            
            –**TOTAL
                ASSETS**
            
            $
            578,563
            
            $
            281,817
            
            $
            46,078
            
            
            ($417,142
            )
            $
            489,316











F-30
 Table
          of Contents





CONDENSED
      CONSOLIDATING BALANCE SHEET


as
      of
      July 31, 2004


(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated****LIABILITIES
                AND SHAREHOLDERS' EQUITY****Current
                Liabilities:**Accounts
                payable –
                trade
            
            $
            66,776
            
            $
            –
            
            $
            –
            
            $
            –
            
            $
            66,776Accrued
                salaries, wages and related expenses
            
            
            21,349
            
            
            –
            
            
            –
            
            
            –
            
            
            21,349Litigation
                accrual
            
            
            36,128
            
            
            –
            
            
            –
            
            
            –
            
            
            36,128Other
                accrued expenses
            
            
            18,613
            
            
            4,889
            
            
            745
            
            
            –
            
            
            24,247Customer
                credits
            
            
            2,143
            
            
            6,827
            
            
            –
            
            
            –
            
            
            8,970Income
                taxes payable
            
            
            5,548
            
            
            –
            
            
            –
            
            
            –
            
            
            5,548Current
                portion of long-term debt
            
            
            –
            
            
            –
            
            
            1,033
            
            
            –
            
            
            1,033Total
                Current Liabilities
            
            
            150,557
            
            
            11,716
            
            
            1,778
            
            
            –
            
            
            164,051Long-Term
                Debt
            
            
            –
            
            
            –
            
            
            31,988
            
            
            –
            
            
            31,988Deferred
                Rent
            
            
            40,319
            
            
            –
            
            
            –
            
            
            –
            
            
            40,319Long-Term
                Deferred Tax Liability
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –Due
                to Affiliate
            
            
            134,729
            
            
            48,687
            
            
            567
            
            
            (183,983
            )
            
            –Total
                Liabilities
            
            
            325,605
            
            
            60,403
            
            
            34,333
            
            
            (183,983
            )
            
            236,358Commitments
                and Contingencies
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –**Shareholders'
                Equity**
            
            
            252,958
            
            
            221,414
            
            
            11,745
            
            
            (233,159
            )
            
            252,958**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY**
            
            $
            578,563
            
            $
            281,817
            
            $
            46,078
            
            $
            (417,142
            )
            $
            489,316






F-31
 Table
          of Contents





CONDENSED
      CONSOLIDATING STATEMENT OF EARNINGS


(for
      the
      Fiscal Year Ended July 31, 2004)


(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated**Net
                sales
            
            $
            754,903
            
            $
            –
            
            $
            6,468
            
            $
            (6,468
            )
            $
            754,903Cost
                  of sales, including occupancy and buying costs
            
            
            463,629
            
            
            12,137
            
            
            1,374
            
            
            (4,942
            )
            
            472,198Gross
                profit
            
            
            291,274
            
            
            (12,137
            )
            
            5,094
            
            
            (1,526
            )
            
            282,705Selling,
                  general and administrative expenses
            
            
            226,575
            
            
            7,752
            
            
            797
            
            
            (22,647
            )
            
            212,477Depreciation
                and amortization
            
            
            21,255
            
            
            226
            
            
            1,716
            
            
            –
            
            
            23,197Litigation
            
            
            3,329
            
            
            –
            
            
            –
            
            
            –
            
            
            3,329Operating
                income (loss)
            
            
            40,115
            
            
            (20,115
            )
            
            2,581
            
            
            21,121
            
            
            43,702Interest
                income
            
            
            761
            
            
            1,442
            
            
            1
            
            
            –
            
            
            2,204Interest
                expense
            
            
            (1
            )
            
            –
            
            
            (1,958
            )
            
            –
            
            
            (1,959
            )Other
                income
            
            
            –
            
            
            22,647
            
            
            –
            
            
            (21,121
            )
            
            1,526Equity
                in earnings of subsidiaries
            
            
            2,919
            
            
            –
            
            
            –
            
            
            (2,919
            )
            
            –Earnings
                  before provision for income taxes
            
            
            43,794
            
            
            3,974
            
            
            624
            
            
            (2,919
            )
            
            45,473Provision
                for income taxes
            
            
            12,862
            
            
            1,451
            
            
            228
            
            
            –
            
            
            14,541**Net
                earnings**
            
            **$**
            **30,932**
            
            **$**
            **2,523**
            
            **$**
            **396**
            
            **$**
            **(2,919**
            **)**
            **$**
            **30,932**











F-32
 Table
          of Contents





CONDENSED
      CONSOLIDATING STATEMENT OF CASH FLOWS


for
      the
      Fiscal Year Ended July 31, 2004


(as
      restated, see Note 3)


(Amounts
                in thousands)**Parent**
              **Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated****Operating
                Activities:**Net
                earnings
            
            $
            30,932
            
            $
            2,523
            
            $
            396
            
            $
            (2,919
            )
            $
            30,932Adjustments
                to reconcile net earnings to net cash provided by operating
                activities:Equity
                in earnings of subsidiaries
            
            
            (2,919
            )
            
            –
            
            
            –
            
            
            2,919
            
            
            –Depreciation
                and amortization of property and equipment
            
            
            21,255
            
            
            226
            
            
            1,716
            
            
            –
            
            
            23,197Provision
                for impairment and asset disposals
            
            
            4,906
            
            
            –
            
            
            –
            
            
            –
            
            
            4,906Deferred
                income tax expense
            
            
            2,491
            
            
            –
            
            
            –
            
            
            –
            
            
            2,491Deferred
                rent expense
            
            
            1,351
            
            
            –
            
            
            –
            
            
            –
            
            
            1,351Tax
                benefit on exercise of unqualified stock options
            
            
            1,460
            
            
            –
            
            
            –
            
            
            –
            
            
            1,460Amortization
                of debt issuance costs
            
            
            152
            
            
            –
            
            
            –
            
            
            –
            
            
            152Increase
                in cash surrender of life insurance
            
            
            (600
            )
            
            –
            
            
            –
            
            
            –
            
            
            (600
            )Deferred
                compensation
            
            
            –
            
            
            67
            
            
            –
            
            
            –
            
            
            67Realized
                loss / (gain) on sales of securities
            
            
            (15
            )
            
            –
            
            
            –
            
            
            –
            
            
            (15
            )Changes
                in assets and liabilities:Increase
                in merchandise inventories
            
            
            (6,564
            )
            
            –
            
            
            –
            
            
            –
            
            
            (6,564
            )(Increase)
                decrease in prepaid expenses and other
            
            
            (2,831
            )
            
            (10
            )
            
            1,326
            
            
            –
            
            
            (1,515
            )(Increase)
                decrease in other assets
            
            
            1,899
            
            
            –
            
            
            (1,691
            )
            
            –
            
            
            208Increase
                in due from affiliate
            
            
            –
            
            
            (13,755
            )
            
            –
            
            
            13,755
            
            
            –Increase
                (decrease) in due to affiliate
            
            
            2,774
            
            
            11,753
            
            
            (772
            )
            
            (13,755
            )
            
            –Increase
                in accounts payable- trade
            
            
            1,686
            
            
            –
            
            
            –
            
            
            –
            
            
            1,686Increase
                in accrued salaries, wages and related expenses
            
            
            2,467
            
            
            –
            
            
            –
            
            
            –
            
            
            2,467Increase
                in litigation accrual
            
            
            536
            
            
            –
            
            
            –
            
            
            –
            
            
            536(Decrease)
                increase in other accrued expenses
            
            
            (4,443
            )
            
            1,115
            
            
            220
            
            
            –
            
            
            (3,108
            )(Decrease)
                increase in customer credits
            
            
            (5,141
            )
            
            6,827
            
            
            –
            
            
            –
            
            
            1,686Decrease
                in income taxes payable
            
            
            (1,540
            )
            
            –
            
            
            –
            
            
            –
            
            
            (1,540
            )Total
                adjustments
            
            
            16,924
            
            
            6,223
            
            
            799
            
            
            2,919
            
            
            26,865**Net
                cash provided by operating activities**
            
            $
            47,856
            
            $
            8,746
            
            $
            1,195
            
            $
            –
            
            $
            57,797











F-33
 Table
          of Contents





CONDENSED
      CONSOLIDATING STATEMENT OF CASH FLOWS


for
      the
      Fiscal Year Ended July 31, 2004


(as
      restated, see Note 3)


(Amounts
                  in thousands)**Parent
                  Company**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-guarantor
                  Subsidiary**
              
              **Eliminations**
              
              **Consolidated****Investing
                  Activities:**
  Restricted
                  cash
              
              $
              (38,661
              )
              $
              –
              
              $
              –
              
              $
              –
              
              $
              (38,661
              )Purchases
                  of property and equipment
              
              
              (33,702
              )
              
              (164
              )
              
              (1
              )
              
              –
              
              
              (33,867
              )Sales
                  and maturities of marketable securities and investments
              
              
              219,051
              
              
              39,662
              
              
              –
              
              
              –
              
              
              258,713Purchases
                  of marketable securities and investments
              
              
              (220,072
              )
              
              (47,889
              )
              
              –
              
              
              –
              
              
              (267,961
              )Purchases
                  of long term investments
              
              
              (900
              )
              
              –
              
              
              –
              
              
              –
              
              
              (900
              )Net
                  cash (used in) provided by investing activities
              
              
              (74,284
              )
              
              (8,391
              )
              
              (1
              )
              
              –
              
              
              (82,676
              )**Financing
                  Activities:**Repayment
                  of long-term debt
              
              
              –
              
              
              –
              
              
              (979
              )
              
              –
              
              
              (979
              )Payment
                  (to) from affiliate
              
              
              1,246
              
              
              –
              
              
              (1,246
              )
              
              –
              
              
              –Payment
                  of debt financing costs
              
              
              (90
              )
              
              –
              
              
              –
              
              
              –
              
              
              (90
              )Purchase
                  of treasury stock
              
              
              (313
              )
              
              –
              
              
              –
              
              
              –
              
              
              (313
              )Proceeds
                  from Employee Stock Purchase Plan
              
              
              84
              
              
              (1
              )
              
              –
              
              
              –
              
              
              83Proceeds
                  from stock options exercised
              
              
              3,768
              
              
              –
              
              
              –
              
              
              –
              
              
              3,768Net
                  cash provided by (used in) financing activities
              
              
              4,695
              
              
              (1
              )
              
              (2,225
              )
              
              –
              
              
              2,469Net
                  increase (decrease) in cash and cash equivalents
              
              
              (21,733
              )
              
              354
              
              
              (1,031
              )
              
              –
              
              
              (22,410
              )Cash
                  and cash equivalents- beginning of period
              
              
              35,188
              
              
              300
              
              
              2,063
              
              
              –
              
              
              37,551Cash
                  and cash equivalents- end of period
              
              $
              13,455
              
              $
              654
              
              $
              1,032
              
              $
              –
              
              $
              15,141








F-34
 Table
          of Contents





CONDENSED
      CONSOLIDATING STATEMENT OF EARNINGS


for
      the
      Fiscal Year Ended July 26, 2003


(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated**Net
                sales
            
            $
            707,121
            
            $
            –
            
            $
            3,274
            
            $
            (3,274
            )
            $
            707,121Cost
                  of sales, including occupancy and buying costs
            
            
            443,544
            
            
            9,630
            
            
            900
            
            
            (2,495
            )
            
            451,579Gross
                profit
            
            
            263,577
            
            
            (9,630
            )
            
            2,374
            
            
            (779
            )
            
            255,542Selling,
                  general andadministrative
                  expenses
            
            
            207,557
            
            
            7,250
            
            
            411
            
            
            (21,213
            )
            
            194,005Depreciation
                and amortization
            
            
            21,148
            
            
            256
            
            
            858
            
            
            –
            
            
            22,262Litigation
                charge
            
            
            32,000
            
            
            –
            
            
            –
            
            
            –
            
            
            32,000Operating
                income (loss)
            
            
            2,872
            
            
            (17,136
            )
            
            1,105
            
            
            20,434
            
            
            7,275Interest
                income
            
            
            1,181
            
            
            2,151
            
            
            –
            
            
            –
            
            
            3,332Interest
                expense
            
            
            –
            
            
            –
            
            
            (164
            )
            
            –
            
            
            (164
            )Other
                income
            
            
            –
            
            
            21,213
            
            
            –
            
            
            (20,434
            )
            
            779Equity
                  in earnings of subsidiaries
            
            
            4,577
            
            
            –
            
            
            –
            
            
            (4,577
            )
            
            –Earnings
                  before provision for income taxes
            
            
            8,630
            
            
            6,228
            
            
            941
            
            
            (4,577
            )
            
            11,222Provision
                for income taxes
            
            
            1,447
            
            
            2,253
            
            
            339
            
            
            –
            
            
            4,039**Net
                earnings**
            
            **$**
            **7,183**
            
            **$**
            **3,975**
            
            **$**
            **602**
            
            **$**
            **(4,577**
            **)**
            **$**
            **7,183**











F-35
 Table
          of Contents





CONDENSED
      CONSOLIDATING STATEMENT OF CASH FLOWS


for
      the
      Fiscal Year Ended July 26, 2003


(as
      restated, see Note 3)


(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated****Operating
                Activities:**Net
                earnings
            
            $
            7,183
            
            $
            3,975
            
            $
            602
            
            $
            (4,577
            )
            $
            7,183Adjustments
                to reconcile net earnings to net cash provided by / (used in) operating
                activities:Equity
                in earnings of subsidiaries
            
            
            (4,577
            )
            
            –
            
            
            –
            
            
            4,577
            
            
            –Depreciation
                and amortization of property and equipment
            
            
            21,148
            
            
            256
            
            
            858
            
            
            –
            
            
            22,262Provision
                for impairment and asset disposals
            
            
            1,539
            
            
            –
            
            
            –
            
            
            –
            
            
            1,539Deferred
                income tax expense
            
            
            (5,871
            )
            
            –
            
            
            –
            
            
            –
            
            
            (5,871
            )Deferred
                rent expense
            
            
            1,899
            
            
            –
            
            
            –
            
            
            –
            
            
            1,899Tax
                benefit on exercise of unqualified stock options
            
            
            1,381
            
            
            –
            
            
            –
            
            
            –
            
            
            1,381Amortization
                of debt issuance costs
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –Increase
                in cash surrender of life insurance
            
            
            (1,060
            )
            
            –
            
            
            –
            
            
            –
            
            
            (1,060
            )Deferred
                compensation
            
            
            265
            
            
            –
            
            
            –
            
            
            –
            
            
            265Realized
                loss / (gain) on sales of securities
            
            
            (608
            )
            
            –
            
            
            –
            
            
            –
            
            
            (608
            )Changes
                in assets and liabilities:Decrease
                in merchandise inventories
            
            
            3,023
            
            
            –
            
            
            –
            
            
            –
            
            
            3,023Increase
                in prepaid expenses and other
            
            
            (2,021
            )
            
            –
            
            
            (1,769
            )
            
            –
            
            
            (3,790
            )(Increase)
                decrease in other assets
            
            
            549
            
            
            –
            
            
            (93
            )
            
            –
            
            
            456Increase
                in due from affiliate
            
            
            –
            
            
            (43,617
            )
            
            –
            
            
            43,617
            
            
            –Increase
                in due to affiliate
            
            
            32,244
            
            
            10,034
            
            
            1,339
            
            
            (43,617
            )
            
            –Increase
                in accounts payable- trade
            
            
            1,056
            
            
            –
            
            
            –
            
            
            –
            
            
            1,056Increase
                in accrued salaries, wages and related expenses
            
            
            793
            
            
            –
            
            
            –
            
            
            –
            
            
            793Increase
                in litigation accrual
            
            
            31,544
            
            
            –
            
            
            –
            
            
            –
            
            
            31,544Increase
                in other accrued expenses
            
            
            140
            
            
            148
            
            
            525
            
            
            –
            
            
            813Increase
                in customer credits
            
            
            634
            
            
            –
            
            
            –
            
            
            –
            
            
            634Decrease
                in income taxes payable
            
            
            (1,568
            )
            
            –
            
            
            –
            
            
            –
            
            
            (1,568
            )Total
                adjustments
            
            
            80,510
            
            
            (33,179
            )
            
            860
            
            
            4,577
            
            
            52,768**Net
                cash provided by / (used in) operating activities**
            
            **$**
            **87,693**
            
            **$**
            **(29,204**
            **)**
            **$**
            **1,462**
            
            **$**
            –
            
            **$**
            **59,951**










F-36
 Table
          of Contents





CONDENSED
      CONSOLIDATING STATEMENT OF CASH FLOWS


for
      the
      Fiscal Year Ended July 26, 2003


(as
      restated, see Note 3)








(Amounts
                in thousands)**Parent
                Company**
            
            **Guarantor
                Subsidiaries**
            
            **Non-guarantor
                Subsidiary**
            
            **Eliminations**
            
            **Consolidated****Investing
                Activities:**Purchases
                of property and equipment
            
            $
            (67,053
            )
            $
            (18
            )
            $
            –
            
            $
            –
            
            $
            (67,071
            )Sales
                and maturities of marketable securities and investments
            
            
            222,229
            
            
            182,201
            
            
            –
            
            
            –
            
            
            404,430Purchases
                of marketable securities and investments
            
            
            (206,201
            )
            
            (153,078
            )
            
            –
            
            
            –
            
            
            (359,279
            )Net
                cash (used in) provided by investing activities
            
            
            (51,025
            )
            
            29,105
            
            
            –
            
            
            –
            
            
            (21,920
            )**Financing
                Activities:**
            
            
            
            
            
            
            
            
            
            
            
            –Proceeds
                from long-term debt
            
            
            –
            
            
            –
            
            
            34,000
            
            
            –
            
            
            34,000Repayment
                of long-term debt
            
            
            (1,730
            )
            
            –
            
            
            –
            
            
            –
            
            
            (1,730
            )Payment
                (to) from affiliate
            
            
            33,399
            
            
            –
            
            
            (33,399
            )
            
            –
            
            
            –Purchase
                of treasury stock
            
            
            (120,819
            )
            
            –
            
            
            –
            
            
            –
            
            
            (120,819
            )Proceeds
                from Employee Stock Purchase Plan
            
            
            88
            
            
            –
            
            
            –
            
            
            –
            
            
            88Proceeds
                from stock options exercised
            
            
            4,291
            
            
            –
            
            
            –
            
            
            –
            
            
            4,291Net
                cash provided by (used in) financing activities
            
            
            (84,771
            )
            
            –
            
            
            601
            
            
            –
            
            
            (84,170
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            (48,103
            )
            
            (99
            )
            
            2,063
            
            
            –
            
            
            (46,139
            )Cash
                and cash equivalents- beginning of period
            
            
            83,291
            
            
            399
            
            
            –
            
            
            –
            
            
            83,690Cash
                and cash equivalents- end of period
            
            $
            35,188
            
            $
            300
            
            $
            2,063
            
            $
            –
            
            $
            37,551





**14.**
            **SUBSEQUENT
                EVENT**




On
        August
        29-30, 2005, Hurricane Katrina caused extensive damage to portions of the
        southeast United States, including areas where certain of the Company’s retail
        stores are located. The Company carries property and casualty insurance with
        deductibles on its retail store locations, and is currently assessing the
        impact
        of the hurricane on its stores located within the affected areas as well
        as
        actions it may take with respect to its affected associates, its business,
        and
        other consequences of the hurricane. We
        believe the effect of the hurricane on September 2005 sales was approximately
        $1
        million or less than 1% on overall comparable store sales for that month.
        We
        currently have six stores closed, including two with significant damage.
        We had
        approximately 20 other store closings for a period of time ranging from two
        days
        to two weeks. The
        Company does not believe that the related costs will have a significant impact
        on the Company's financial position or results of operations.




F-37
 Table
          of Contents




**15.**
            **QUARTERLY
                RESULTS OF OPERATIONS****(UNAUDITED)**





(Amounts
      in thousands, except per share data)


**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
            
            
            72,704Provision
                for income taxes
            
            
            21,952
            
            
            6,197
            
            
            942
            
            
            4,109Net
                earnings
            
            
            33,581
            
            
            10,193
            
            
            1,637
            
            
            7,149Earnings
                per share (1)Basic
            
            $
            1.12
            
            $
            0.34
            
            $
            0.06
            
            $
            0.24Diluted
            
            $
            1.08
            
            $
            0.33
            
            $
            0.05
            
            $
            0.24**Fiscal
                Year Ended July 31, 2004**
            
            
            **Fourth**
              **Quarter**
            
            
            **Third**
              **Quarter**
            
            
            **Second**
              **Quarter**
            
            
            **First**
              **Quarter**Net
                sales
            
            $
            207,975
            
            $
            183,331
            
            $
            171,053
            
            $
            192,544Gross
                  profit, including occupancy and buying costs
            
            
            82,794
            
            
            65,194
            
            
            64,932
            
            
            69,785Provision
                for income taxes
            
            
            4,783
            
            
            3,169
            
            
            2,769
            
            
            3,820Net
                earnings
            
            
            13,806
            
            
            5,514
            
            
            4,820
            
            
            6,792Earnings
                per share (1)Basic
            
            $
            0.47
            
            $
            0.19
            
            $
            0.16
            
            $
            0.23Diluted,
                previously reported
            
            $
            0.46
            
            $
            0.19
            
            $
            0.16
            
            $
            0.23Diluted,
                as restated (see Note 3)
            
            $
            0.45
            
            $
            0.19
            
            $
            0.16
            
            $
            0.23





(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.


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






F-38