UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549




FORM
10-K/A


(Amendment No. 1)




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


SECURITIES
EXCHANGE ACT OF 1934





For
      the fiscal year endedJuly 31, 2010
            Commission
      file number 0-11736





THE
DRESS BARN, INC.


(Exact
name of registrant as specified in its charter)





Connecticut
            06-0812960(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      No.)30
      Dunnigan Drive, Suffern, New York
            10901(Address
      of principal executive offices)
            (Zip
      Code)





(845)
369-4500


(Registrant's
telephone number, including area code)


Securities
registered pursuant to Section 12(b) of the Act:





Title of Each Class
              Name of Each Exchange on Which
      RegisteredCommon
      Stock, $0.05 par value
              The
      NASDAQ Stock Market LLC





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





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





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes  ̈  No x





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.   Yes x  No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§
229.405 of this chapter) during the preceding 12  months (or for such
shorter period that the registrant was required to submit and post such
files).   Yes  ̈  No  ̈





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





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





Large
      accelerated filer x
            Accelerated
      filer  ̈
            Non-accelerated
      filer  ̈
              (Do
      not check if a smaller
              reporting
      company)
            Smaller
      reporting company  ̈





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).Yes o  No x





The
aggregate market value of the voting stock held by non-affiliates of the
registrant as of January 23, 2010 was approximately $1.4 billion, based on the
last reported sales price on the NASDAQ Global Select Market on that
date.  As of September 17, 2010, 78,557,619 shares of voting common
shares were outstanding.  The registrant does not have any authorized,
issued or outstanding non-voting common stock.





DOCUMENTS
INCORPORATED BY REFERENCE





Portions
of the registrant's Proxy Statement for the Annual Meeting of Shareholders to be
held on December 8, 2010 are incorporated into Part III of this Form
10-K.









EXPLANATORY
NOTE
  On
October 22, 2010, we received a comment letter from the Securities and Exchange
Commission relating to our Annual Report on Form 10-K
for the fiscal year ended July 31, 2010 (“Fiscal 2010”), which we filed with the
Securities and Exchange Commission on September 24, 2010 (the
“Original Report”). The purpose of this Amendment No. 1 on Form 10-K/A (the
“Amendment”) is to respond to the comment
letter.
  In
this Amendment we have revised the following:
  °
                  Item
      5. Market for Registrant's Common Equity Related Stockholder Matters and
      Issuer Purchases of Equity Securities.
      We have included additional disclosure regarding restrictions on our
      ability to pay dividends.°
                  Item
      7. Management's Discussion and Analysis of Financial Condition and Results
      of Operations. We have included
      additional disclosure regarding the financial covenants contained in
      our revolving credit agreement, ourcompliance
      with such covenants, and restrictions on our ability to pay
      dividends.°
                  Item 15.(a)(1).
      Financial Statements. We have:1.
                  Amended
      note 2 of our consolidated financial statements to correct immaterial
      errors in the unaudited pro forma financial information presented for
      Fiscal 2010, and2.
                  Included
      additional disclosure in a) note 3 of our consolidated financial
      statements regarding the cumulative effect of the change in accounting
      principle on periods prior to those presented that was not material to our
      consolidated financial statements; and b) note 9 of our consolidated
      financial statements regarding the fair value of the convertible senior
      notes tendered and what the note holders were entitled to receive and
      regarding the financial covenants contained in our revolving credit
      agreement and our compliance with such covenants.°
                  Item 15(b).
      Exhibits. We have refiled Exhibit 10.18 with this Amendment, including all
      exhibits, schedules, annexes
      and appendices
thereto.
  Except as
set forth above, the Original Report has not been amended, updated or otherwise
modified. This Amendment includes information
contained in the Original Report, and we have made no attempt in the Amendment
to modify or update the disclosures presented
in the Original Report, except as identified above. The disclosures in this
Amendment continue to speak as of the date of the Original
Report, and do not reflect events occurring after the filing of the Original
Report. Accordingly, this Amendment should be read in
conjunction with our other filings made with the Securities and Exchange
Commission subsequent to the filing of the Original Report,
including any amendments to those filings. The filing of this Amendment shall
not be deemed to be an admission that the Original
Report, when made, included any untrue statement of a material fact or omitted
to state a material fact necessary to make a statement
not misleading.










THE DRESS BARN, INC.


FORM 10-K/A


FISCAL YEAR ENDED JULY31, 2010


TABLE OF CONTENTS





PAGEPART IItem 1
                                                              
                                                              Business
                                                              
                                                              3Item
      1A
                                                              
                                                              Risk
      Factors
                                                              
                                                              9Item
      1B
                                                              
                                                              Unresolved
      Staff Comments
                                                              
                                                              15Item
      2
                                                              
                                                              Properties
                                                              
                                                              15Item
      3
                                                              
                                                              Legal
      Proceedings
                                                              
                                                              16PART
      IIItem
      5
                                                              
                                                              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases
      of Equity Securities
                                                              
                                                              17Item
      6
                                                              
                                                              Selected
      Financial Data
                                                              
                                                              20Item
      7
                                                              
                                                              Management’s
      Discussion and Analysis of  Financial Condition and Results of
      Operations
                                                              
                                                              21Item
      7A
                                                              
                                                              Quantitative
      and Qualitative Disclosures About Market Risk
                                                              
                                                              39Item
      8
                                                              
                                                              Financial
      Statements and Supplementary Data
                                                              
                                                              39Item
      9
                                                              
                                                              Changes
      in and Disagreements with Accountants on Accounting and Financial Disclosure
                                                              
                                                              39Item
      9A
                                                              
                                                              Controls
      and Procedures
                                                              
                                                              40Item
      9B
                                                              
                                                              Other
      Information
                                                              
                                                              42PART
      IIIItem
      10
                                                              
                                                              Directors,
      Executive Officers and Corporate Governance
                                                              
                                                              42Item
      11
                                                              
                                                              Executive
      Compensation
                                                              
                                                              42Item
      12
                                                              
                                                              Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters
                                                              
                                                              42Item
      13
                                                              
                                                              Certain
      Relationships and Related Transactions, and Director
      Independence
                                                              
                                                              42Item
      14
                                                              
                                                              Principal
      Accountant Fees and Services
                                                              
                                                              42PART
      IVItem
      15
                                                              
                                                              Exhibits,
      Financial Statement Schedules
                                                              
                                                              43


2


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





dressbarn®, mauricesâ, Justice®, YVOSâ and Studio Yâ are our own
trademarks.  In addition, we have a one year renewable license for the
Limited Too® trade name which is considered an intangible defensive
asset.  Statements that are made about our fiscal 2010 refer to the
53-week period ended July 31, 2010, fiscal 2009 refer to the 52-week period
ended July 25, 2009, and fiscal 2008 refer to the 52-week period ended July 26,
2008.  Fiscal 2011 refers to our 52-week period that will end on July
30, 2011.  Our fiscal year always ends on the last Saturday in
July.





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





PART
I


ITEM
1.  BUSINESS





Overview





The Dress Barn, Inc.(the“Company”, or“Dress Barn”) operates women’s and girls’apparel specialty stores,  principally under
the names“dressbarn”, “maurices” and, since our
November 2009 merger with Tween Brands, Inc. (the “JusticeMerger”), “Justice”.  From the
time when our retail business began in 1962, we have established, marketed and
expanded our business as a source of fashion and value.  We offer a
lifestyle-oriented, stylish, value-priced assortment of casual andfashion apparel,andaccessories tailored to our
customers’ needs.  As of July 31, 2010, we have expanded our store
base to 2,477 stores in 48 states, Puerto Rico and the District of Columbia,
including 887 Justice
stores, 757 mauricesstores and 833 dressbarn stores.





Our
Stores





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





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


3


In
November 2009, we consummated the merger with Tween Brands, Inc. which operates
under the store name Justice,the specialty apparel company that targets girls who are ages 7 to 14
(“tweens”).  As provided for in the Merger Agreement, each share of
Tween Brands’ Common Stock was converted into the right to receive 0.47 shares
of our common stock, for a total of 11.7 million shares, plus cash in lieu of
fractional shares and the payout of existing in the money stock
options.  Tween Brands, Inc. stock was listed on the NYSE as
“TWB”.  We will refer to the post-Merger operations of Tween Brands as
“Justice”.  Please
see Note 2 to the Consolidated Financial Statements for further
information.





Justice
Overview





Justice sales come from a
variety of income streams, including retail sales in Justice stores and customer
orders from catazines and its e-commerce website, www.shopjustice.com.
 Such e-commerce revenue is approximately 4% of its annual net
sales.  Justice also earns licensing
revenue from its international franchised stores along with advertising and
other “tween-right” marketing initiatives with partner
companies.  Licensing revenue is less than 1% of its annual net
sales.





The Justice business model is
predicated on anticipating what its customer, “Our Girl”- as Justice refers to her- wants
and delivering the hottest fashion and shopping experience just for her and all
at a great value for mom.





Justice creates, designs and
develops its own exclusive Justice branded merchandise
in-house.  This allows Justice to maintain creative
control and respond as quickly as fashion trends dictate, putting Justice ahead of its
competition when it comes to offering the hottest fashion assortment to its
customers.





The Justice merchandise mix
represents the broad assortment that its girl wants in her store - a mix of
apparel, accessories, footwear, intimates and lifestyle products, such as
bedroom furnishings and electronics, to meet all her needs.  While
apparel represents about 70% of its product mix, significant contributions are
made by lifestyle and accessories categories, all serving to diversify the
offering in Justice
stores.  Justice plans inventories to
include about 20% of core offerings, complemented by approximately 70%
“predictable fashion” and 10% of trendier, “incoming fashion”
pieces.





As of
July 31, 2010, Justice
operated 887 stores.  Justice stores feature
furniture, fixtures, lighting and music to create a shopping experience matching
the energetic lifestyle of “our girl”.  In order to keep the store
atmosphere fresh, Justice reassesses the layouts
of its stores and reinvests in new formats to better highlight its
merchandise.





Justice is located where its
target customer shops.  Justice’s store footprint
includes over 450 mall locations, where the presence of strong anchors and other
specialty retailers enhance the shopping experience for its existing customers,
as well as generate new-to-Justice traffic for its
stores.  Strip centers bring convenient shopping to Justice’s customers and Justice currently has over 200
stores located in these formats.  Justice also has a significant
presence in lifestyle centers and outlet centers.  Justice is currently located
across 46 states and Puerto Rico.  Justice also has 34
international franchise stores located in the following
countries:  Bahrain, Jordan, Kuwait, Qatar, Russia, Saudi Arabia and
the United Arab Emirates.





During
fiscal 2010, Justice
increased its direct sourcing penetration from its previous
levels.  Through Justice’s sourcing offices in
Seoul, South Korea, and Shanghai and Hong Kong in China, Justice continues to develop
and expand relationships with manufacturing partners within sourcing networks,
enabling Justice to
control the quality of goods, while achieving speed to market and
better/favorable pricing.  With Justice’s successful sourcing
operations, Justice is
able to eliminate the middleman, reduce costs and increase initial
markup.  Justice has registered marks
in foreign countries to the degree necessary to protect these marks, although
there may be restrictions on the use of these marks in a limited number of
foreign jurisdictions.





Since the
acquisition of maurices
in 2005 and the Justice
Merger in November 2009, we have sought opportunities to generate synergies
through leveraging certain centralized functions, such as taxes, purchasing,
lease administration, imports and loss prevention.  We believe our
synergies have improved dressbarn’s, maurices’ and Justice’s
performance.


4


Store
Locations





Virtually
all of our stores are open seven days a week and most evenings.  As of
July 31, 2010, we operated 2,477 stores in 48 states, the District of Columbia
and Puerto Rico.  Our dressbarn stores are more
concentrated in the northeast while our mauricesstores are more
concentrated in the midwest.  OurJusticestores are locatedprimarily in shopping malls and off-mall
power centers throughout the United States.





During
fiscal 2010, 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
                  
                  
                  maurices
                    Stores
                  
                  
                  Justice
                    Stores
                  
                  
                  TotalStrip
      Shopping Centers
                  
                  
                  582
                  
                  
                  
                  431
                  
                  
                  
                  230
                  
                  
                  
                  1,243Free
      Standing, Downtown and Enclosed Malls
                  
                  
                  53
                  
                  
                  
                  290
                  
                  
                  
                  474
                  
                  
                  
                  817Outlet
      Malls and Outlet Strip Centers
                  
                  
                  191
                  
                  
                  
                  29
                  
                  
                  
                  71
                  
                  
                  
                  291Lifestyle
      Centers
                  
                  
                  7
                  
                  
                  
                  7
                  
                  
                  
                  112
                  
                  
                  
                  126Total
                  
                  
                  833
                  
                  
                  
                  757
                  
                  
                  
                  887
                  
                  
                  
                  2,477





As of
July 31, 2010, our stores had a total of 13.8 million square feet, consisting of
dressbarn with 6.4
million square feet, maurices with 3.7 million
square feet and Justice
with 3.7 million square feet.  All of our store locations are
leased.  Our leases often contain renewal options and termination
clauses, particularly in the early years of a lease, if specified sales volumes
are not achieved.




Store Count by
Segment


Fiscal
      2010
                
                
                Fiscal
      2009
                
                
                Fiscal
      2008Total
                
                
                dressbarn
                  Stores
                
                
                maurices
                  Stores
                
                
                Justice
                  Stores
                
                
                Total
                
                
                dressbarn
                  Stores
                
                
                maurices
                  Stores
                
                
                Total
                
                
                dressbarn
                  Stores
                
                
                maurices
                  StoresStores
      (Beginning   of Period) (a)
                
                
                2,465
                
                
                
                838
                
                
                
                721
                
                
                
                906
                
                
                
                1,503
                
                
                
                826
                
                
                
                677
                
                
                
                1,426
                
                
                
                819
                
                
                
                607StoresOpened
      (b)
                
                
                64
                
                
                
                14
                
                
                
                39
                
                
                
                11
                
                
                
                80
                
                
                
                31
                
                
                
                49
                
                
                
                107
                
                
                
                35
                
                
                
                72StoresClosed
      (c)
                
                
                (52
                )
                
                
                (19
                )
                
                
                (3
                )
                
                
                (30
                )
                
                
                (24
                )
                
                
                (19
                )
                
                
                (5
                )
                
                
                (30
                )
                
                
                (28
                )
                
                
                (2
                )Stores(End
      of Period)
                
                
                2,477
                
                
                
                833
                
                
                
                757
                
                
                
                887
                
                
                
                1,559
                
                
                
                838
                
                
                
                721
                
                
                
                1,503
                
                
                
                826
                
                
                
                677





(a)
Includes Justice’s store
balance as of the date of the Justice Merger.





(b)
Appropriate locations are identified for store expansion.





(c) We
evaluate store-level performance in order to close or relocate underperforming
stores.





Per our
fiscal 2011 financial plan, we currently plan to increase our aggregate square
footage percentage, net of store closings, in the low-single
digits.  Net of store closings, we currently anticipate dressbarn’s and Justice’s square footage to be
flat, and maurices’square footage to increase by approximately 3%.


5


Office and Distribution
Centers





We own an
approximately 900,000 square foot distribution/office facility and 16 acres of
adjacent land in Suffern, New York, which houses, in approximately 510,000
square feet, our dressbarn corporate offices
and distribution center, with the remainder of the facility leased to two third
parties.  We own maurices’ corporate
headquarters in downtown Duluth, Minnesota, which is composed of three office
buildings totaling approximately 151,000 square feet.  We also own an
approximately 360,000 square-foot distribution center and approximately 9 acres
of adjacent land in Des Moines, Iowa, which houses our maurices warehousing and
distribution operations.  We ownJustice’scorporate office facilities in New
Albany, Ohio totaling approximately 280,000 square foot, along with 44 acres of
adjacent land,and a 470,000 square foot distribution
center in Etna Township, Ohio.  We own office space in Hong
Kong, Chinaand lease office space inShanghai, Chinaand Seoul,South Korea to support our international
sourcing operations.





Ourdistribution centers employ warehouse
management systems and material handling equipment that help to minimize overall
inventory levels and distribution costs.We believe the flexibility afforded by
our warehouse/distribution systemsprovide us with operating efficiencies
and the ability to maintain a superior in-stock inventory position at our
stores.We continuously seek to improve our
supply chain management, optimize our inventory assortment and upgrade our
automated replenishment system to improve inventory
turnover.





We currently anticipate that
ourdistribution center in
Suffern, New York will be consolidated into our distribution center in Etna
Township, Ohio during fiscal 2011.The Etna Township, Ohio facility hasa state of the art
warehouse management system and material handling systems.  Our Ohio
facility has both the capacity and storage capability to handlethedressbarnbrand andJusticebrand volume.





To supportsalesof products sold through our websites,
we have multi-year agreementswith contract logistics
providers, who provide warehousing and
fulfillment services for oure-commerceoperations.





Advertising and
Marketing





We use a variety of broad-based and
targeted marketing and advertising strategies to effectively define, evolve and
promote our brands.  These strategies include customer research,
advertising and promotional events,window and in-store marketing
materials, direct mail marketing,
internet marketing, lifestyle magazines, catazines and other measures to
communicate our fashion and promotional message.We utilize a customer
relationship management system to track customer transactions and determine
strategic decisions for our direct mail initiatives.  We pursue a
public relations strategy to garner editorial exposure.





Community
Service





We are proud to have a long tradition of
supporting numerous charities.We actively support charities such asThe American Cancer Society, Dress for Success, United Way and Toys for
Tots.  These programs reinforce that we are actively involved and are
important members of our communities.





Trademarks





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





Employees





As of
July 31, 2010, we had approximately 30,000 employees, approximately 21,000 of
whom worked part-time.  We typically add temporary employees during
peak selling periods.  None of our employees are covered by any
collective bargaining agreement.  We consider our employee relations
to be good.


6


Seasonality





The
retail apparel market has two principal selling seasons, spring (our third and
fourth fiscal quarters) and fall (our first and second fiscal
quarters).  The dressbarn and maurices brands have
historically experienced substantially lower earnings in our second fiscal
quarter ending in January than during our other three fiscal quarters,
reflecting the intense promotional atmosphere that has characterized the holiday
shopping season in recent years.  Justice sales and operating
profits are significantly higher during the fall season, as this includes both
the back to school and holiday selling periods.  We expect these
trends to continue.  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 timing of new store openings, net sales
contributed by new stores and changes in our merchandise mix.





Competition





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





Merchandise
Vendors





We
purchase our merchandise from many domestic and foreign suppliers.  We
have no long-term purchase commitments or arrangements with any of our
suppliers, and believe that we are not dependent on any one
supplier.  We have good working relationships with our
suppliers.  No third party supplier is more than 10% of our
business.





Available
Information





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


7


EXECUTIVE
OFFICERS OF THE REGISTRANT





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





Name
              
              Age
              
              PositionsElliot
      S. Jaffe
              
              84
              
              Founder
      and Chairman of the BoardDavid
      R. Jaffe
              
              51
              
              President
      and Chief Executive OfficerMichael
      W. Rayden
              
              61
              
              Chief
      Executive Officer,
                Tween
      Brands, Inc.Armand
      Correia
              
              64
              
              Executive
      Vice President
                and
      Chief Financial OfficerGene
      Wexler
              
              55
              
              Senior
      Vice President, General Counsel
                and
      Assistant Secretary





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





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





Mr. Michael W. Raydenis the
Chief Executive Officer of Tween Brands.  Prior to the Justice Merger on November 25,
2009, Mr. Rayden served as Chief Executive Officer of Tween Brands since March
1996 and was elected Chairman of the Board of Tween Brands in August
1999.  Mr. Rayden also served as the President of Tween Brands from
March 1996 until January 2007.  Before joining Tween Brands, he served
as President, Chief Executive Officer and Chairman of the Board of Pacific
Sunwear of California, Inc. from 1990 to 1996; President and Chief Executive
Officer of The Stride Rite Corporation from 1987 to 1989 and President and Chief
Executive Officer of Eddie Bauer Inc. from 1984 to 1987.  Upon
consummation of the Justice Merger, Mr. Rayden was
appointed by the Board to fill the vacancy in the class of directors with a term
expiring in 2010.





Mr. Armand Correiahas been
employed by our company since 1991 and currently holds the position of Executive
Vice President and Chief Financial Officer.





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


8


ITEM
1A.  RISK
FACTORS





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





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





Recent
and future economic conditions, including turmoil in the financial and credit
markets, may adversely affect our business.





Recent
economic conditions may adversely affect our business, including the potential
impact on the apparel industry, our customers and our ability to finance our
business.  In addition, conditions may remain depressed in the future
or may be subject to further deterioration.  Recent or future
developments in the U.S. and global economies may lead to a reduction in
consumer spending overall, which could have an adverse impact on sales of our
products.





Tightening
of the credit markets and recent or future turmoil in the financial markets
could also make it more difficult for us to refinance our existing indebtedness
(if necessary), to enter into agreements for new indebtedness or to obtain
funding through the issuance of our securities.  Worsening economic
conditions could also result in difficulties for financial institutions
(including bank failures) and other parties that we may do business with, which
could potentially impair our ability to access financing under existing
arrangements or to otherwise recover amounts as they become due under our other
contractual arrangements.





As
described in Note 8 to our Consolidated Financial Statements included elsewhere
herein, we have significant goodwill and other intangible assets related to our
acquisition of maurices
in January 2005 and the Justice Merger consummated in
November 2009.  Current and future economic conditions may adversely
impact maurices’ or
Justice’s ability to
attract new customers, retain existing customers, maintain sales volumes and
maintain margins.  These events could materially reduce maurices’ or Justice’s profitability and
cash flow which could, in turn, lead to an impairment of maurices’ or Justice’s goodwill and
intangible assets.  Furthermore, if customer attrition were to
accelerate significantly, the value of maurices’ or Justice’s intangible assets
could be impaired or subject to accelerated amortization.





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





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





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





Risks
associated with the Justice Merger.





The
success of the Justice
Merger will depend on our ability to manage both our operations and Justiceoperations, to realize
opportunities for revenue growth and, to some degree, to eliminate redundant and
excess costs.  Achieving the anticipated benefits of the Justice Merger may present a
number of significant risks and considerations, including, but not limited
to:





·
            demands
      on management related to the increase in our
  size;


·
            the
      diversion of management’s attention from the management of daily
      operations to the integration of
operations;


·
            expected
      cost savings not being achieved in full, or taking longer or requiring
      greater investment to achieve; and


·
            achieving
      transition and new store growth
potential.


9


Our ability to successfully adapt to
ongoing organizational change could impact our business
results.





We have executed a number of significant
business and organizational changes including acquisitions and workforce
optimization projects to support our growth strategies.We expect these types of changes to
continue for the foreseeable future.Successfully managing these changes,
including retention of key employees, is critical to our business success.In addition, our success is dependent on
identifying, developing and retaining key employees to provide uninterrupted
leadership and direction for our business.This includes developing organization
capabilities in key growth markets where the depth of skilled employees is
limited and competition for these resources is intense.Further, business and organizational
changes may result in more reliance on third parties for various services, and
that reliance may increase compliance risks, including anti-corruption.Finally, our financial targets assume a
consistent level of productivity improvement.If we are unable to deliver expected
productivity improvements, while continuing to invest in business growth, our
financial results could be adversely impacted.





The disruption in the Company’s
receiving or distribution process during our planned distribution center
relocation would have a material adverse effect on the Company’s business and
operations.





Our
distribution centers are located in Suffern, New York, Des Moines, Iowa and Etna
Township, Ohio.  Ourcompany depends on the orderly operation
of the receiving and distribution process, which relies on adherence to shipping
schedules and effective management of distribution centers.  During
fiscal 2011, we plan to movethedressbarndistribution center operations fromitsSuffern, New Yorklocationto our Etna Township, Ohio
location.  Althoughwe believe we haveappropriate relocation plans,
unforeseen disruptions in operations due to fire, severe weather conditions, or
other events, labor disagreements or other shipping problems may result in
delays in the delivery of merchandise toourstores during the
transition.In
addition, we rely on third party service providers to fulfill our e-commerce
customer orders.  If these providers would fail to operate it could
have a adverse impact on our business.





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





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





We
utilize the Oracle Retail Merchandising System for our dressbarn segment and our
maurices
segment.  Our Justice segment utilizes an
internally developed merchandising system.  The purpose of our
merchandising systems is to expand our capability to identify and analyze sales
trends and consumer data and achieve planning and inventory management
improvements.


10


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 but not limited to:





·
            political
      instability;


·
            increased
      security requirements applicable to imported
  goods;


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


·
            imposition
      of quotas on imported merchandise;


·
            currency
      and exchange risks;


·
            delays
      in shipping; and


·
            increased
      costs of transportation.





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





We may suffer negative publicity and our
business may be harmed if we need to recall any products we
sell.





Justicehas in the past and may in the future
need to recall products that we determine may present safety
issues.  If products we sell have safety problems of which we are not
aware, or if we or the Consumer Product Safety Commission recall a product sold
in our stores, we may suffer negative publicity and product liability lawsuits,
which could have a material adverse impact on our reputation, financial
condition and results of operations or cash flows.





Our expansion into new services and
technologies subjects us to additional business, legal, financial and
competitive risks.





We may have limited or no experience in
our newer market segments and our customers may not adopt our new service
offerings, which include our new e-commerce service.  This new
offering may present new and difficult technology challenges, and we may be
subject to claims if customers of these offerings experience service disruptions
or failures or other quality issues.  In addition, our gross profits
in our newer activities may be lower than in our older activities and we may not
be successful enough in these newer activities to recoup our investments in
them.  If any of this was to occur, it could damage our reputation,
limit our growth and negatively affect our operating
results.





Government regulation of the Internet
and e-commerce is evolving and unfavorable changes could harm our
business.





We are subject to general business
regulations and laws, as well as regulations and laws specifically governing the
Internet and e-commerce.Existing and future laws and regulations
may impede the growth of our Internet or online services.  These
regulations and laws may cover taxation, privacy, data protection, pricing,
content, copyrights, distribution, mobile communications, electronic contracts
and other communications, consumer protection, the provision of online payment
services, unencumbered Internet access to our services, the design and operation
of websites and the characteristics and quality of products and
services.  It is not clear how existing laws governing issues such as
property ownership, libel and personal privacy apply to the Internet and
e-commerce.  Jurisdictions may regulate consumer-to-consumer online
businesses, including certain aspects of our
programs.Unfavorable regulations and laws could
diminish the demand for our products and services and increase our cost of doing
business.





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





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


11


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





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





Our
business would suffer a material adverse effect if our distribution centers were
to shut down or be disrupted.





Most of
the merchandise we purchase is shipped directly to our distribution centers,
where it is prepared for shipment to the appropriate stores.  If our
distribution centers were to have an unplanned 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 any distribution
center.





Additionally, freight cost is impacted by
changes in fuel prices.Fuel prices affect freight cost both on
inbound freight from vendors to the distribution centers and outbound freight
from the distribution centers toourstores.




Althoughwemaintain business interruption and
property insurance, management cannot be assured thatourinsurance coverage will be sufficient,
or that insurance proceeds will be timely paid tous, if any of the distribution centers are
shut down for anyunplannedreason.





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





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





Our
business could suffer if we need to replace manufacturers.





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





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





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


12


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





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





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





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





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





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





Our
business may be affected by regulatory and litigation developments.





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





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





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





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





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





Health care reform could adversely
affect our business.





In March 2010, the United
Statesgovernmentenacted healthcarereform legislation that will make
significant changes to the health care payment and delivery system.The health reform legislation requires
employers to provide employees with insurance coverage that meets minimum
eligibility and coverage requirements or face penalties.The legislation also includes provisions
that will impact the number of individuals with insurance coverage, the types of
coverage and level of health benefits that will be required and the amount of
payment providers performing health care services will receive.The legislation imposes implementation
effective dates beginning in 2010 and extending through 2020.Many of the changes require additional
guidance fromgovernmentagencies or federal regulations.Therefore, it is difficult to determine
at this time what impact the healthcarereform legislation will have onour financial
results.


13


We are pursuing a strategy of
international expansion.





Justicehas licensed stores in certain Middle
Eastern countries and Russia and currently intends to expand into other
countries in the future.  In addition to the general risks associated
with doing business in foreign markets, as disclosed in our prior filings, we
run the risk of not being able to sustain our growth in these international
markets or to penetrate new international markets in the future.  As
we penetrate these markets, there is increased risk of not fully complying with
existing and future laws, rules and regulations of countries where we conduct
business.  As with any future business strategy, we can provide no
assurance that our current and future international endeavors will be
successful.





We utilize ports to import our products
from Asia.





We currently ship the vast majority of
our products by ocean.  If a disruption occurs in the operation of
ports through which our products are imported, we and our vendors may have to
ship some or all of our products from Asia by air freight or to alternative
shipping destinations in the United States.  Shipping by air is
significantly more expensive than shipping by ocean and our profitability could
be reduced.  Similarly, shipping to alternative destinations in the
United States could lead to increased lead times and costs on our
products.  A disruption at ports through which our products are
imported could have a material adverse effect on our results of operations and
cash flows.





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





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





We may experience fluctuations in our
tax obligations and effective tax rate.





We are subject to income taxes in the
United States and numerous international jurisdictions.We record tax expense based on our
estimates of future tax payments, which include reserves for estimates of
probable settlements of international and domestic 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.As a result, we expect that throughout
the year there could be ongoing variability in our quarterly tax rates as
taxable events occur and exposures are re-evaluated.Further, our effective tax rate in a
given financial statement period may be materially impacted by changes in the
mix and level of earnings by taxing jurisdiction or by changes to existing
accounting rules or regulations.





Our
stock price may be volatile.





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





Changes
to accounting rules and regulations may adversely affect our results of
operations.





Changes
to existing accounting rules or regulations may impact our future results of
operations or cause the perception that we are more highly
leveraged.  Other new accounting rules or regulations and varying
interpretations of existing accounting rules and regulations have occurred and
may occur in the future.  For instance, accounting regulatory
authorities have indicated that they may begin to require lessees to capitalize
operating leases in their financial statements in the next few
years.  If adopted, such a change would require us to record a
significant amount of lease related assets and liabilities on our balance sheet
and make other changes to the recording and classification of lease related
expenses on our statement of operations and cash flows.  This and
other future changes to accounting rules or regulations or the questioning of
current accounting practices may adversely affect our results of operations and
financial position.


14


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





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





ITEM
1B.  UNRESOLVED STAFF
COMMENTS


None.





ITEM
2.  PROPERTIES





We lease
all of our stores.  Store leases generally have an initial term
ranging from 5 to 10 years with one or more options to extend the
lease.  The table below, covering all open store locations leased by
us on July 31, 2010, indicates the number of leases expiring during the period
indicated and the number of expiring leases with and without renewal
options:





Fiscal Year
                          
                          Leases Expiring
                          
                          Number with
                            Renewal Options
                          
                          Number without
                            Renewal Options2011
                          
                          456
                          
                          271
                          
                          1852012
                          
                          377
                          
                          295
                          
                          822013
                          
                          335
                          
                          280
                          
                          552014
                          
                          265
                          
                          220
                          
                          452015
                          
                          235
                          
                          194
                          
                          412016
      and thereafter
                          
                          809
                          
                          464
                          
                          345Total
                          
                          2,477
                          
                          1,724
                          
                          753





New store leases generally
provide for anaverage base rentofapproximately $10 to
$40per square foot per
annum.Certain 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 31, 2010 and excluding
locations acquired after July 31, 2010, for fiscal 2011, are approximately
$235.3 million.  In addition, we are also typically responsible under
our store leases for our pro rata share of maintenance expenses and common
charges in strip and outlet centers.





Many of
the store leases have termination clauses if certain specified sales volumes are
not achieved.  This affords us greater flexibility to close
underperforming stores.  Usually these provisions are operative only
during the first few years of a lease.





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


15


We own an
approximately 900,000 square-foot distribution/office facility and 16 acres of
adjacent land in Suffern, New York, which houses, in approximately 510,000
square feet, our dressbarn corporate offices
and distribution center.  The remainder of the rentable square footage
is 100% leased through 2011.  The purchase of the Suffern facility was
financed with a mortgage that is collateralized by a mortgage lien on the
Suffern facility.  Payments of principal and interest on the mortgage,
which is a 20-year fully amortizing loan with a fixed interest rate of 5.33%,
are due monthly through July 2023.  We receive rental income and
reimbursement for taxes and common area maintenance charges from two tenants
that occupy the Suffern facility that are not affiliated with us.  The
rental income from the other tenants is shown as “Other income” on our
Consolidated Statements of Operations.  We own maurices’ corporate
headquarters in downtown Duluth, Minnesota, which is composed of three office
buildings totaling approximately 151,000 square feet.  We also own a
distribution center, which has 360,000 square feet of space and approximately 9
acres of adjacent land which is located in Des Moines, Iowa, which houses our
maurices warehousing and
distribution operations.We ownJustice’scorporate office facilities in New
Albany, Ohio totaling approximately 280,000 square foot, along with 44 acres of
adjacent land,and a 470,000 square foot distribution
center in Etna Township, Ohio.We own office space in Hong
Kong, Chinaand lease office space inShanghai, China and Seoul,South Korea to support our international
sourcing operations.





We currently anticipate that
our distribution center in
Suffern, New York will be consolidated into our distribution center in Etna
Township, Ohio during fiscal 2011.The Etna Township, Ohio facility hasa state of the art
warehouse management system and material handling systems.  Our Ohio
facility has both the capacity and storage capability to handlethedressbarnbrand andJusticebrand volume.




To support sales of products sold
through our websites, we have multi-year agreements with contract logistics
providers, who provide warehousing and fulfillment services for our e-commerce
operations.




ITEM
3.  LEGAL
PROCEEDINGS





On
January 21, 2010, Tween Brands was sued in the U.S. District Court for the
Eastern District of California.  This purported class action alleges,
among other things, that Tween Brands violated the Fair Labor Standards Act by
not properly paying its employees for overtime and missed rest
breaks.  In
September 2010, the parties agreed to a tentative settlement of this wage and
hour lawsuit.  The settlement is subject to preliminary court approval,
notice to the purported class members, and final court approval.


Between
November 2008 and October 2009, Tween Brands was sued in three purported class
action lawsuits alleging that Tween Brands’ telephone capture practice in
California violated the Song-Beverly Credit Card Act, which protects consumers
from having to provide personal information as a condition to a credit card
transaction.  All three cases were consolidated in California state
court.  The parties settled this lawsuit in the spring of
2010.  The court granted preliminary approval of the settlement on
July 9, 2010.  The final court approval hearing is scheduled for
December 10, 2010.





In
addition to the litigation discussed above, we are, and in the future may be,
involved in various other lawsuits, claims and proceedings incident to the
ordinary course of business.  The results of litigation are inherently
unpredictable.  Any claims against us, whether meritorious or not,
could be time consuming, result in costly litigation, require significant
amounts of management time and result in diversion of significant
resources.  The results of these lawsuits, claims and proceedings
cannot be predicted with certainty.  However, we believe that the
ultimate resolution of these current matters will not have a material adverse
effect on our Consolidated Financial Statements taken as a
whole.


16


PART
II





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





Market Prices of Common
Stock





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





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





Fiscal 2010
                                    
                                    
                                    Fiscal 2009Fiscal
                                    
                                    High
                                    
                                    
                                    Low
                                    
                                    
                                    High
                                    
                                    
                                    LowFirst
    Quarter
                                    
                                    $
                                    20.01
                                    
                                    
                                    $
                                    14.82
                                    
                                    
                                    $
                                    17.93
                                    
                                    
                                    $
                                    7.76Second
    Quarter
                                    
                                    $
                                    25.74
                                    
                                    
                                    $
                                    17.85
                                    
                                    
                                    $
                                    11.40
                                    
                                    
                                    $
                                    6.16Third
    Quarter
                                    
                                    $
                                    30.40
                                    
                                    
                                    $
                                    23.07
                                    
                                    
                                    $
                                    15.61
                                    
                                    
                                    $
                                    8.44Fourth
    Quarter
                                    
                                    $
                                    30.58
                                    
                                    
                                    $
                                    22.71
                                    
                                    
                                    $
                                    16.81
                                    
                                    
                                    $
                                    13.09





Number of Holders of
Record





As of
September 17, 2010, we had approximately 5,261 holders of record of our common
stock.





Dividend
Policy





We
have never declared or paid cash dividends on our common stock.  We
currently intend to retain our future earnings and available cash to fund the
growth of our business and do not expect to pay dividends in the foreseeable
future.  However, payment of dividends is within the discretion of our
Board of Directors.  Payments of dividends are limited by our
revolving credit facility as described in the Liquidity and Capital Resources
section of Item 7. "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."


17


Performance
Graph





The
following graph illustrates, for the period from July 30, 2005 through July 31,
2010, the cumulative total shareholder return of $100 invested (assuming that
all dividends, if any, were reinvested) in (1) our common stock, (2) the S&P
Composite-500 Stock Index and (3) the S&P Specialty Apparel Retailers
Index.





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








18


Securities Authorized for
Issuance Under Equity Compensation Plans





The
following table summarizes our equity compensation plans as of July 31,
2010.





PlanCategory
                
                Numberof
                  securitiestobe
                  issuedupon
                  exerciseof
                  outstanding
                  options
                
                
                Weighted
                  average
                  exerciseprice
                  ofoutstanding
                  options
                
                
                Numberof
                  securities
                  remaining
                  availablefor
                  futureissuance
                  underequity
                  compensation
                  plans(excluding
                  securitiesreflected
                  incolumn(a))(a)
                
                
                (b)
                
                
                (c)Equity compensation plans approved
      by security holders
                
                
                6,720,010
                
                
                $
                14.42
                
                
                
                2,351,261Equity compensation plans not
      approved by security holders
                
                
                -
                
                
                
                -
                
                
                
                -Total
                
                
                6,720,010
                
                
                $
                14.42
                
                
                
                2,351,261





Issuer
Purchases of Equity Securities(1),
(2)


Quarter Ended July 31,
2010





Period
                          
                          Total Number of
                            Shares of
                            Common Stock
                            Purchased
                          
                          
                          Average Price
                            Paid per Share of
                            Common Stock
                          
                          
                          Total Number of
                            Shares of
                            Common Stock
                            Purchased as Part
                            of Publicly
                            Announced Plans
                            or Programs
                          
                          
                          Maximum Number
                            of Shares of
                            Common Stock that
                            May Yet Be
                            Purchased Under
                            the Plans or
                            Programs(2)April
      25, 2010 through
                            May
      22, 2010
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          2,323,831May
      23, 2010 through
                            June
      26, 2010
                          
                          
                          774,708
                          
                          
                          $
                          25.21
                          
                          
                          
                          —
                          
                          
                          
                          2,323,831June
      27, 2010 through
                            July
      31, 2010
                          
                          
                          775,292
                          
                          
                          $
                          23.75
                          
                          
                          
                          —
                          
                          
                          
                          2,323,831





(1)
            We have a $100 million Stock
      Repurchase Program (the “2007 Program”), which was announced on September
      20, 2007.  Under the 2007 Program, we may purchase our
      shares of common stockfrom time to time, either in the
      open market or through private transactions.  The 2007 Program
      has no expiration date.  The Company purchased 1.6 million
      shares at an average price of $24.48 during fiscal 2010.  As of
      July 31, 2010, the remaining authorized amount for stock repurchases under
      the 2007 Program was $57.4
million.





(2)
            Based
      on the closing price of $24.70 on July 30,
2010.


19


ITEM 6.  SELECTED FINANCIAL
DATA


The following selected financial data
is derived from ourconsolidatedfinancialstatements and should be read in
conjunction with theconsolidatedfinancialstatements and related notes, Management’s
Discussion and Analysis,and Quantitative and Qualitative Disclosures About Market Risk included in thisAnnual Report onForm 10-K.Prior year amounts have been revised to
reflect the retrospective application of adopting a new accounting pronouncement
relating to convertible debt and the prospective application of the new
accounting pronouncement relating to non-controlling interest.(Refer toNote 3 to the Consolidated
Financial Statements for more information.)





In thousands,
      except earnings per share
                          
                          Fiscal Year Ended(1)and store
      operating data
                          
                          July
      31,
                            2010
                          
                          
                          July
      25,
                            2009
                          
                          
                          July
      26,
                            2008
                          
                          
                          July
      28,
                            2007
                          
                          
                          July
      29,
                            2006(2)Net
      sales
                          
                          $
                          2,374,571
                          
                          
                          $
                          1,494,236
                          
                          
                          $
                          1,444,165
                          
                          
                          $
                          1,426,607
                          
                          
                          $
                          1,300,277Cost of sales,
      including occupancy andbuying costs
      (excluding depreciation)
                          
                          
                          1,395,267
                          
                          
                          
                          918,350
                          
                          
                          
                          885,927
                          
                          
                          
                          842,192
                          
                          
                          
                          773,631Selling, general
      andadministrative
      expenses
                          
                          
                          690,229
                          
                          
                          
                          422,372
                          
                          
                          
                          397,424
                          
                          
                          
                          383,652
                          
                          
                          
                          353,031Depreciation and
      amortization
                          
                          
                          71,618
                          
                          
                          
                          48,535
                          
                          
                          
                          48,200
                          
                          
                          
                          45,791
                          
                          
                          
                          41,679Operating
      income
                          
                          
                          217,457
                          
                          
                          
                          104,979
                          
                          
                          
                          112,614
                          
                          
                          
                          154,972
                          
                          
                          
                          131,936Loss on debt
      extinguishment(3)
                          
                          
                          (5,792
                          )
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —Interest
      income
                          
                          
                          2,258
                          
                          
                          
                          5,394
                          
                          
                          
                          7,817
                          
                          
                          
                          7,051
                          
                          
                          
                          2,656Interest
      expense
                          
                          
                          (6,624
                          )
                          
                          
                          (9,951
                          )
                          
                          
                          (9,577
                          )
                          
                          
                          (9,261
                          )
                          
                          
                          (9,397
                          )Other
      income
                          
                          
                          2,049
                          
                          
                          
                          1,062
                          
                          
                          
                          512
                          
                          
                          
                          1,382
                          
                          
                          
                          1,526Earnings before
      income taxes
                          
                          
                          209,348
                          
                          
                          
                          101,484
                          
                          
                          
                          111,366
                          
                          
                          
                          154,144
                          
                          
                          
                          126,721Income
      taxes
                          
                          
                          75,970
                          
                          
                          
                          34,912
                          
                          
                          
                          40,151
                          
                          
                          
                          55,609
                          
                          
                          
                          50,205Net
      earnings
                          
                          $
                          133,378
                          
                          
                          $
                          66,572
                          
                          
                          $
                          71,215
                          
                          
                          $
                          98,535
                          
                          
                          $
                          76,516Earnings per
      share – basic
                          
                          $
                          1.85
                          
                          
                          $
                          1.11
                          
                          
                          $
                          1.18
                          
                          
                          $
                          1.59
                          
                          
                          $
                          1.25Earnings per
      share – diluted
                          
                          $
                          1.73
                          
                          
                          $
                          1.06
                          
                          
                          $
                          1.10
                          
                          
                          $
                          1.41
                          
                          
                          $
                          1.11Balance sheet
      data (at end of period):Working
      capital
                          
                          $
                          356,929
                          
                          
                          $
                          214,679
                          
                          
                          $
                          113,800
                          
                          
                          $
                          120,906
                          
                          
                          $
                          5,600Total
      assets
                          
                          $
                          1,654,119
                          
                          
                          $
                          1,129,172
                          
                          
                          $
                          1,022,743
                          
                          
                          $
                          975,556
                          
                          
                          $
                          839,033Total
      debt
                          
                          $
                          26,038
                          
                          
                          $
                          128,763
                          
                          
                          $
                          124,959
                          
                          
                          $
                          121,607
                          
                          
                          $
                          118,536Shareholders'
      equity
                          
                          $
                          1,014,667
                          
                          
                          $
                          632,447
                          
                          
                          $
                          566,277
                          
                          
                          $
                          522,469
                          
                          
                          $
                          424,862Percent of net
      sales:Cost of sales,
      including occupancy andbuying costs,
      excluding depreciation and amortization
                          
                          
                          58.8
                          %
                          
                          
                          61.5
                          %
                          
                          
                          61.3
                          %
                          
                          
                          59.0
                          %
                          
                          
                          59.5
                          %Selling, general
      andadministrative
      expenses
                          
                          
                          29.1
                          %
                          
                          
                          28.3
                          %
                          
                          
                          27.5
                          %
                          
                          
                          26.9
                          %
                          
                          
                          27.2
                          %Operating
      income
                          
                          
                          9.2
                          %
                          
                          
                          7.0
                          %
                          
                          
                          7.8
                          %
                          
                          
                          10.9
                          %
                          
                          
                          10.1
                          %Net
      earnings
                          
                          
                          5.6
                          %
                          
                          
                          4.5
                          %
                          
                          
                          4.9
                          %
                          
                          
                          6.9
                          %
                          
                          
                          5.9
                          %





(1)
            Fiscal 2010 consists of 53
      weeks.  All other fiscal years presented consisted of 52
      weeks.


(2)
            Justice Merger
      consummated in November 2009, refer to Note 2 to the Consolidated
      Financial Statements for more
information.


(3)
            Tender
      Offer for our Convertible Senior Notes, refer to Note 9 to the
      Consolidated Financial Statements for more
  information.


20


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





The
following discussion should be read in conjunction with our consolidated
financial statements and related notes thereto included in this Annual Report on
Form 10-K.  Fiscal 2010 refers to the 53-week period ended July 31,
2010, fiscal 2009 refers to the 52-week period ended July 25, 2009, and fiscal
2008 refers to the 52-week period ended July 26, 2008.  Fiscal 2011
refers to our 52-week period that will end on July 30, 2011.  Our
fiscal year always ends on the last Saturday in July.





*
            Prior year amounts have been
      revised to reflect the retrospective application of adopting a new
      accounting pronouncement relating to convertible debt and the prospective
      application of the new accounting pronouncement relating to
      non-controlling interest.  Refer toNote 3 to the Consolidated
      Financial Statements for more information.





Overview





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





We
operate women’s and girls’ apparel specialty stores, principally under the names
“dressbarn”, “maurices” and, since our
November 2009 Merger with Tween Brands (the “JusticeMerger”), “Justice”.  Our dressbarn stores cater to 35
to 55 year-old woman, size 4 to 24.  These stores offer in-season, moderate
to better quality career and casual fashion at value prices.  Ourmauricesstores 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.  OurJusticestorestarget girls who are ages 7 to 14 and
are located primarily in shopping malls and off-mall power centers throughout
theUnited States.





Fiscal 2010Highlights





Merger with Tween Brands,
Inc.


On
November 25, 2009, we completed the Merger with Tween Brands, Inc., a Delaware
corporation (“Tween Brands”), pursuant to the Agreement and Plan of Merger,
dated June 24, 2009 (the “Merger Agreement”).  Pursuant to the Merger
Agreement, we are the acquirer, with one of our subsidiaries merging with Tween
Brands in a stock-for-stock transaction (the “Merger”).  As a result
of the Merger, Tween Brands became a wholly owned subsidiary of Dress
Barn.  The Merger was approved by the stockholders of Tween Brands at
a special meeting of stockholders held on November 25, 2009.  The
Merger became effective on November 25, 2009.  We consummated the
Merger with Tween Brands for a variety of reasons, including the opportunity to
capitalize on the strength of its brand awareness, to leverage the utilization
of combined infrastructure and personnel and to expand into the girls age 7 to
14, or “tween”, market.





Convertible
Senior Notes Debt Extinguishment


During
the second quarter ended, January 23, 2010, we conducted a tender offer for our
2.5% Convertible Senior Notes due December 2024 (the “Notes”).  All of
the outstanding Notes, with
an aggregate balance of $112.5 million, were validly tendered for exchange and
not withdrawn as of the expiration date of the Offer, January 22,
2010.  Total consideration for the Offer was $273.4 million and was
comprised of: cash of $112.5 million for the face amount of the Notes; cash of
$4.5 million as inducement to exchange ($40 per $1,000 principal amount of Notes
tendered); and the issuance of approximately 6.2 million shares of our common
stock valued at $156.4 million. As
a result of the Offer, we reduced our deferred tax liabilities by $14.6 million
and reduced taxes payable by $0.2 million, with a corresponding increase to
additional paid in capital of $14.8 million.In connection
with the Offer, we recognized a loss of $5.8 million consisting of $4.5 million
related to the inducement amount and $1.3 million, which is equal to the
difference between the net book value and the fair value of the Notes upon
redemption in accordance with ASC 470-20.  Previously in December 2009, in a private transaction,
we accepted for exchange $2.5 million of the Notes for an aggregate cash amount
of approximately $5.4 million.  The loss associated with the December
2009 exchange was de minimus to ourconsolidatedfinancialstatements.  No Notes
remain outstanding.





Stock
Repurchases


During fiscal 2010, we purchased 1.6
million shares at an average price of $24.48 equaling $37.9
million.The total stock purchases that have been made under
the 2007 Program are 2.1 million shares at an aggregate purchase price of
approximately $42.6 million, resulting in a remaining authorized balance of
$57.4 million.  Treasury (reacquired) shares are retired and treated
as authorized but unissued shares.


21


Ongoing and Fiscal 2011 Business
Initiatives





We continue to focus on a number of
ongoing initiatives aimed at increasing our store profitability by reducing
expenses and improving our comparative store sales trends.  These
initiatives include, but are not limited to:





Corporate Reorganization and
Potential Corporate Name Change


We are
currently planning a potential corporate reorganization and name change. In our
planned reorganization, each of our dressbarn, maurices and Justice brands would become
subsidiaries of a new Delaware corporation named Ascena Retail Group, Inc., or
Ascena, and Dress Barn shareholders would become stockholders of this new
Delaware holding company on a one-for-one basis, holding the same number of
shares and same ownership percentage after the reorganization as they held
immediately prior to the reorganization.  The reorganization generally
would be tax-free for Dress Barn shareholders.  Shareholders of record
on October 8, 2010 will be entitled to attend and vote at the annual meeting to
approve the reorganization, which will be more fully described in the proxy
statement/prospectus relating to the meeting. Refer to Note 19 to the
Consolidated Financial Statements for more information.





Recognizing
the numerous potential synergies between our segments


Our distribution center in Suffern, New
York will be consolidated into our distribution center in Etna Township, Ohio
during fiscal 2011.The Etna Township, Ohio
facility hasa state of the
art warehouse management system and material handling systems.  Our
Ohio facility has both the capacity and storage capability to handlethedressbarnbrand andJusticebrand volume.





In
addition to our distribution center, we are currently working to consolidate our
information technology departments.  This project will combine
multiple IT resources, including our data centers, into a scalable
model.  This will enable us to better serve the business needs of each
of our brands, allow the realization of synergies and support any future
acquisitions.





In line
with our corporate reorganization plans, there are additional centralized
functions that provide opportunities to generate synergies among our business
segments.  We believe these synergies will enhance dressbarn’s, maurices’ and Justice’s
performance.





Store
Expansion


We are exploring expansion opportunities
both within our current market areas and in other
regions.  OurJusticesegment iscurrently exploring opportunities for
expansion into Canadain
the near future.





E-Commerce


E-Commerce
revenue is currently generated by both the maurices segment and Justice
segment.  E-commerce
sales of products, ordered through our retail internet site are recognized upon
estimated delivery and receipt of the shipment by the
customers.  E-commerce revenue is also reduced by an estimate of
returns and excludes sales taxes.Total e-commerce net sales
were $36.2 million for the Company (approximately $27.0 million for Justice and $9.2 million for
maurices).  During
fiscal 2011, we are planning to launch our dressbarn segment into our
e-commerce operations.





Trends and Other Factors Affecting Our
Business





As we expect to continue our
strategiesto increase profitability through theopeningofnew storesandclosingofunderperforming locations,store expansion in our major trading
marketsanddeveloping and expanding into new
domestic markets, including
Canada in the near future,there are trends and other factors that we
face as a women’s and girls’ specialty apparel retailer that could have a
material impact on our net sales or net earnings.





General Economic
Conditions


Our performance is also subject to
macroeconomic conditions and their impactonlevels of consumer
spending.  Some of the factors impacting discretionary consumer
spending include general economic conditions, wages and employment, consumer
debt, reductions in net worth based on recent severe market declines,
residential real estate and mortgage markets, taxation, fuel and energy prices,
interest rates,andconsumer
confidence.


22


Competition


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





Customer
tastes and fashion trends


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





Seasonality


The
retail apparel market has two principal selling seasons, spring (our third and
fourth fiscal quarters) and fall (our first and second fiscal
quarters).  The dressbarn and maurices brands have
historically experienced substantially lower earnings in our second fiscal
quarter ending in January than during our other three fiscal quarters,
reflecting the intense promotional atmosphere that has characterized the holiday
shopping season in recent years.  Justice sales and operating
profits are significantly higher during the fall season, as this includes both
the back to school and holiday selling periods.  We expect these
trends to continue.  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 timing of new store openings, net sales
contributed by new stores and changes in our merchandise mix.





Weather Conditions


Weather conditions can affect net sales
because inclement weather may discourage travel or require temporary store
closures, thereby reducing customer traffic.





Key Performance
Measures


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





FiscalYearEndedJuly 31, 2010
                      
                      
                      July25,2009
                      
                      
                      July26,2008Net sales
      growth
                      
                      
                      58.9
                      %
                      
                      
                      3.5
                      %
                      
                      
                      1.2
                      %dressbarn comparable
      store sales
                      
                      
                      6.0
                      %
                      
                      
                      0.1
                      %
                      
                      
                      (6.6
                      )
      %maurices comparable
      store sales
                      
                      
                      6.1
                      %
                      
                      
                      (1.3
                      )
      %
                      
                      
                      4.3
                      %Justice comparable store
      sales
                      
                      
                      17.5
                      %
                      
                      
                      n/a
                      
                      
                      
                      n/aTotal
      comparable store sales growth
                      
                      
                      9.2
                      %
                      
                      
                      (0.4
                      )
      %
                      
                      
                      (2.9
                      )
      %Cost of sales, including occupancy
      and buying costs, excluding depreciation
                      
                      
                      58.8
                      %
                      
                      
                      61.5
                      %
                      
                      
                      61.3
                      %SG&A as a percentage of
      sales
                      
                      
                      29.1
                      %
                      
                      
                      28.3
                      %
                      
                      
                      27.5
                      %Square
      footage growth
                      
                      
                      39.4
                      %
                      
                      
                      3.9
                      %
                      
                      
                      5.2
                      %Total store
      count
                      
                      
                      2,477
                      
                      
                      
                      1,559
                      
                      
                      
                      1,503Diluted earnings per
      share
                      
                      $
                      1.73
                      
                      
                      $
                      1.06
                      
                      
                      $
                      1.10Capital expenditures (in
      millions)
                      
                      $
                      65.2
                      
                      
                      $
                      58.4
                      
                      
                      $
                      66.1


*
            TheJusticeMergerwas consummated on November 25,
      2009 and therefore we do not present data related to our prior reporting
      periods.Justicecomparable store sales were based
      on stores that had sales on the same day both in the current year and the
      previous year which were operated by Tween Brands, Inc.prior to the Merger.


23


We
consider comparable store sales to be one of the most important indicators of
our performance since it impacts the following:





·
            Our
      ability to leverage our costs, including store payroll, store supplies and
      occupancy costs.


·
            Our
      total net sales, cash and working
capital.





We
calculate comparable store sales based on the sales of stores open throughout
the full period and throughout the full prior period (including stores relocated
within the same shopping center and stores with minor square footage
additions).  If a single-format dressbarn store is converted
into a Combo store, the additional sales from the incremental format are not
included in the calculation of same store sales.  The determination of
which stores are included in the comparable store sales calculation only changes
at the beginning of each fiscal year, except for stores that close during the
fiscal year, which are excluded from comparable store sales beginning with the
fiscal month the store actually closes.





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





Various factors affect comparable store
net sales, including the number of stores we open or close, the number of
transactions, the average transaction amount, the general retail sales
environment, current local and global economic conditions, consumer preferences
and buying trends, changes in sales mix among distribution channels, our ability
to efficiently source and distribute products, changes in our merchandise mix,
competition, the timing of the release of new merchandise and our promotional
events, the success of marketing programs and the cannibalization of existing
store net sales by new stores.





Financial Performance
Summary





NOTE:  All
results for Justiceare
from November 25, 2009 (the Merger date) to the end of the fiscal
year.





During
the fifty-three weeks of fiscal 2010 that ended July 31, 2010 (the “current
period”), net sales were $2,374.6 million, an increase from $1,494.2 million for
the fifty-two weeks ended July 25, 2009 (the “prior period”).  Net
sales for Justice were
$711.9 million since the effective date of the Merger on November 25,
2009.  Our comparable store sales increased 9.2% during the current
period (dressbarn
increased 6.0%, maurices
increased 6.1% and Justice increased 17.5%).  We opened 14 dressbarn Combo stores, 39
maurices stores and 11
Justice stores during
the current period.  The Merger added 906 Justice
stores.  There were 19 dressbarn,3 mauricesand 30 Justice store closings during
the current period.  Our total store square footage at the end of the
current period increased approximately 39.4% from the end of the prior period,
primarily due to the Justice Merger.





Net
earnings for the fifty-three weeks of fiscal 2010 increased to $133.4 million
from $66.6 million for the prior period.  Diluted earnings per share
for the current period were $1.73 versus $1.06 per share for the prior
period.





Results of
Operations





Our
segment reporting structure reflects a brand-focused approach, designed to
optimize the operational coordination and resource allocation of our businesses
across multiple functional areas including specialty retail, e-commerce and
licensing.  The three reportable segments described below represent
our brand-based activities for which separate financial information is available
and which is utilized on a regular basis by our executive team to evaluate
performance and allocate resources.  In identifying our reportable
segments, we consider economic characteristics, as well as products, customers,
sales growth potential and long-term profitability.  As such, we
report our operations in three reportable segments as follows:





•       dressbarnsegment– consists of the
specialty retail and outlet operations of ourdressbarnbrand.





•       mauricessegment– consists of the
specialty retail, outlet and e-commerce operations of ourmauricesbrand.





•       Justicesegment– consists of the
specialty retail, outlet, e-commerce and licensing operations of ourJusticebrand.


24


Fiscal
2010 Compared to Fiscal 2009





Net
Sales:


Fiscal Year Ended(Amounts in millions, except for % change amounts)
                        
                        July 31,
                          2010
                        
                        
                        % of Total
                          Net Sales
                        
                        
                        July 25,
                          2009
                        
                        
                        % of Total
                          Net Sales
                        
                        
                        % Changedressbarn
                        
                        $
                        982.0
                        
                        
                        
                        41.3
                        %
                        
                        $
                        906.2
                        
                        
                        
                        60.6
                        %
                        
                        
                        8.4
                        %maurices
                        
                        
                        680.7
                        
                        
                        
                        28.7
                        %
                        
                        
                        588.0
                        
                        
                        
                        39.4
                        %
                        
                        
                        15.8
                        %Justice
                        
                        
                        711.9
                        
                        
                        
                        30.0
                        %
                        
                        
                        n/a
                        
                        
                        
                        n/a
                        
                        
                        
                        n/aConsolidated
      net sales
                        
                        $
                        2,374.6
                        
                        
                        
                        
                        
                        
                        $
                        1,494.2
                        
                        
                        
                        
                        
                        
                        
                        58.9
                        %





Net sales
for the current period increased 58.9% to $2,374.6 million from $1,494.2 million
in the prior period. This increase was primarily attributable to a combination
of the following:





·
            an
      increase in net sales of $711.9 million related to Justice from the merger
      date of November 25, 2009 to the end of the fiscal
  year,


·
            an
      increase of $84.0 million in comparable store sales in our dressbarn and maurices brands for the
      fiscal year,


·
            an
      increase in net sales of $30.4 million for the fifty-third week at our
      dressbarn and
      maurices
      brands,


·
            an
      increase in net sales of $25.9 million due to the 53 new stores opened at
      our dressbarn and
      maurices brands
      during the fiscal year,


·
            an
      increase in net sales of $24.6 million for stores previously opened at our
      dressbarn and
      maurices brands
      that were not included in our comparable store
  sales,


·
            e-commerce
      sales of $9.2 million at our maurices brand,
      partially offset by


·
            a
      decrease of $0.6 million in sales reserves and other sales at our dressbarn and maurices brands
      and


·
            a
      decrease in net sales of $5.0 million from stores closed at our dressbarn and maurices brands since
      the comparable period last year.





We
believe the comparative store sales increase was primarily due to our fashion
and value message which resonated with our customers and our increased marketing
spend which drove additional traffic to our stores.





During
fiscal 2010, the dressbarn brand comparable
sales increased 6.0%.  The best performing departments were Petite
Ready-to-Wear, Leather and Outerwear, Petite Tops and
Accessories.  The weakest departmental performers were Suits and
YVOS.





For the
maurices brand, fiscal
2010 comparable sales increased by 6.1%.  Strong sales trends were
noted in the Core Women’s collections as Casual Tops (Woven’s, Knits and
Sweaters) continue to drive increases with strong sales of Denim jeans
completing the outfit.  Additionally, we have posted increases in
“Wear @ Work” Tops, Dresses, and Accessories.  Disappointments include
declines in Intimate Apparel and Outerwear businesses.  The Plus size
collection continues to perform very well.





For theJusticebrand, net sales for fiscal 2010 were
$711.9 million andcomparable sales increased 17.5% from the merger date of November 25,
2009 to the end of the fiscal year.The top performing
departments contributing to sales growth were Girlcare, Denim, Jewelry and Cut
and Sew, partially offset by the Webkinz, Lifestyles and Outerwear
departments.





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





(Amounts in millions, except for % amounts)
                        
                        July 31,
                          2010
                        
                        
                        July 25,
                          2009
                        
                        
                        $ Change
                        
                        
                        % ChangeFiscal
      year ended
                        
                        $
                        1,395.3
                        
                        
                        $
                        918.4
                        
                        
                        $
                        476.9
                        
                        
                        
                        51.9
                        %As
      a percentage of sales
                        
                        
                        58.8
                        %
                        
                        
                        61.5
                        %





Cost of
sales decreased by 270 basis points to 58.8% of net sales in the current year
period from 61.5% of net sales in the prior period.  For the dressbarn brand, cost of sales
was $595.8 million or 60.7% of net sales, a decrease of 210 basis points as
compared to $568.7 million or 62.8% from the same period last
year.  This decrease was the result of higher merchandise margins
mainly due to lower markdowns.  maurices cost of sales for
fiscal 2010 was $386.3 million or 56.7% of net sales as compared to $349.7
million or 59.5% of net sales in fiscal 2009.  The decrease in cost of
sales as a percentage of sales was primarily the result of fewer markdowns and
the leveraging of occupancy costs due to the comparable store sales
increase.  Justice cost of sales for
fiscal 2010 was $413.2 million or 58.0% of net sales.


25


SG&A
expenses:


(Amounts in millions, except for % amounts)
                      
                      July 31,
                        2010
                      
                      
                      July 25,
                        2009
                      
                      
                      $ Change
                      
                      
                      % ChangeFiscal
      year ended
                      
                      $
                      690.2
                      
                      
                      $
                      422.4
                      
                      
                      $
                      267.8
                      
                      
                      
                      63.4
                      %As
      a percentage of sales
                      
                      
                      29.1
                      %
                      
                      
                      28.3
                      %





As a
percentage of sales, selling, general and administrative expenses (“SG&A”)
increased 80 basis points to 29.1% of net sales in the current period versus
28.3%  in the prior period.  dressbarn SG&A increased
130 basis points to 30.5% of net sales versus 29.2% prior period primarily due
to merger related and corporate reorganization costs incurred of $6.2 million
and $1.2 million, respectively, as well as increased marketing and incentive
compensation costs related to the better than planned earnings
results.  maurices SG&A was $180.6
million or 26.5% of net sales for fiscal 2010 as compared to $157.5 million or
26.8% of net sales for fiscal 2009.  The decrease was primarily
attributable to leveraging of payroll and benefits due to the comparable sales
increase offset by increased incentive compensation costs related to the better
than planned earnings results, increased professional services related to
e-commerce and additional store impairments.  JusticeSG&A expenses for
fiscal 2010 were $210.3 million or 29.5% of sales.





Depreciation
and amortization:


(Amounts in millions, except for % amounts)
                        
                        July 31,
                          2010
                        
                        
                        July 25,
                          2009
                        
                        
                        $ Change
                        
                        
                        % ChangeFiscal
      year ended
                        
                        $
                        71.6
                        
                        
                        $
                        48.5
                        
                        
                        $
                        23.1
                        
                        
                        
                        47.6
                        %As
      a percentage of sales
                        
                        
                        3.0
                        %
                        
                        
                        3.2
                        %





Depreciation
expense increased 47.6% in fiscal 2010 as compared to prior period primarily due
to $23.7 million from the inclusion of Justice from the November 25,
2009 merger date to the end of the fiscal year, plus the net opening of 12
stores, store remodels and relocations, and investments in
technology.





Operating
income:


(Amounts in millions, except for % amounts)
                        
                        July 31,
                          2010
                        
                        
                        July 25,
                          2009
                        
                        
                        $ Change
                        
                        
                        % ChangeFiscal
      year ended
                        
                        $
                        217.5
                        
                        
                        $
                        105.0
                        
                        
                        $
                        112.5
                        
                        
                        
                        107.1
                        %As
      a percentage of sales
                        
                        
                        9.2
                        %
                        
                        
                        7.0
                        %





As a
result of the above factors, operating income as a percent of net sales was 9.2%
for fiscal 2010 compared to 7.0% for fiscal 2009. For the dressbarn brand, operating
income as a percent of sales increased to 6.1% versus 5.0% fiscal
2009.  For the maurices brand, operating
income as a percent of sales increased to 13.7% versus 10.3% prior
period.  Justicebrand operating income as a percentage of sales was 9.1% for fiscal
2010.





Loss
on debt extinguishment:





On
January 25, 2010, we announced the completion of our Offer for 100% of the
outstanding balance of the Notes, or $112.5 million, effective January 22,
2010.  In conjunction with the Offer, we recognized a loss of $5.8
million comprised of a $4.5 million loss on the inducement and a $1.3 million
loss on the derecognition related to the difference between the net book value
and the fair value of the Notes.  See Note 9 of the Consolidated
Financial Statements.





Interest
income:


(Amounts in millions, except for % amounts)
                            
                            July 31,
                              2010
                            
                            
                            July 25,
                              2009
                            
                            
                            $ Change
                            
                            
                            % ChangeFiscal
      year ended
                            
                            $
                            2.3
                            
                            
                            $
                            5.4
                            
                            
                            $
                            (3.1
                            )
                            
                            
                            (57.4
                            )
      %As
      a percentage of sales
                            
                            
                            0.1
                            %
                            
                            
                            0.4
                            %





Interest
income for fiscal 2010 was $2.3 million as compared to interest income of $5.4
million in fiscal 2009 due to lower interest rate yields in the current
period.  During fiscal 2010 we adopted a more conservative strategy
with investments in higher grade securities with shorter term maturities for
greater capital security and liquidity which results in a lower
return.


26




Interest
expense:


(Amounts in millions, except for % amounts)
                      
                      July 31,
                        2010
                      
                      
                      July 25,
                        2009
                      
                      
                      $ Change
                      
                      
                      % ChangeFiscal
      year ended
                      
                      $
                      (6.6
                      )
                      
                      $
                      (10.0
                      )
                      
                      $
                      3.4
                      
                      
                      
                      (34.0
                      )%As
      a percentage of sales
                      
                      
                      (0.3
                      )%
                      
                      
                      (0.7
                      )%


Interest
expense for the current period was primarily on our mortgage for our Suffern, NY
facilities.  In the prior period, the interest on the Convertible
Senior Notes was included in interest expense.  The Convertible Senior
Notes were tendered for exchange on January 22, 2010. See Notes 3 and 9 of the
Consolidated Financial Statements.





Other
income:


(Amounts in millions, except for % amounts)
                    
                    July 31,
                      2010
                    
                    
                    July 25,
                      2009
                    
                    
                    $ Change
                    
                    
                    % ChangeFiscal
      year ended
                    
                    $
                    2.0
                    
                    
                    $
                    1.1
                    
                    
                    $
                    0.9
                    
                    
                    
                    81.8
                    %As
      a percentage of sales
                    
                    
                    0.1
                    %
                    
                    
                    0.1
                    %





Other
income for the current period was $2.0 million as compared to $1.1 million prior
period.  The majority of this amount represents rental income from the
two tenants currently occupying space in our corporate headquarters property in
Suffern, New York.  Fiscal 2009 rental income was offset by
approximately $0.8 million of cost basis investment impairment and related to
our ARS.





Income
taxes:


(Amounts in millions, except for % amounts)
                    
                    July 31,
                      2010
                    
                    
                    July 25,
                      2009
                    
                    
                    $ Change
                    
                    
                    % ChangeFiscal
      year ended
                    
                    $
                    76.0
                    
                    
                    $
                    34.9
                    
                    
                    $
                    41.1
                    
                    
                    
                    117.8
                    %As
      a percentage of sales
                    
                    
                    3.2
                    %
                    
                    
                    2.3
                    %





The
effective tax rate for fiscal 2010 was 36.3% as compared to 34.4% reported for
fiscal 2009.  In fiscal 2009, the effective tax rate was reduced due
to the reversal of certain liabilities for uncertain tax positions.  The
reversal of such liabilities did not benefit the effective tax rate to the same
extent in fiscal 2010 due to the overall increase in pretax
income.  Refer to Note 14 to the Consolidated Financial Statements for
additional details.





Net
Earnings:


(Amounts in millions, except for % amounts)
                    
                    July 31,
                      2010
                    
                    
                    July 25,
                      2009
                    
                    
                    $ Change
                    
                    
                    % ChangeFiscal
      year ended
                    
                    $
                    133.4
                    
                    
                    $
                    66.6
                    
                    
                    $
                    66.8
                    
                    
                    
                    100.3
                    %As
      a percentage of sales
                    
                    
                    5.6
                    %
                    
                    
                    4.5
                    %





Net
earnings for the current period increased to $1.73 per diluted share, compared
to $1.06 per diluted share in the prior period due to the above factors
including the Justice
results since the merger date of November 25, 2009.


27





Fiscal
2009 Compared to Fiscal 2008





Net
Sales:


Fifty-Two Weeks Ended(Amounts in millions, except for % change amounts)
                        
                        July 25,
                          2009
                        
                        
                        % of Sales
                        
                        
                        July 26,
                          2008
                        
                        
                        % of Sales
                        
                        
                        % Changedressbarn
                        
                        $
                        906.2
                        
                        
                        
                        60.6
                        %
                        
                        $
                        887.6
                        
                        
                        
                        61.5
                        %
                        
                        
                        2.1
                        %maurices
                        
                        
                        588.0
                        
                        
                        
                        39.4
                        %
                        
                        
                        556.6
                        
                        
                        
                        38.5
                        %
                        
                        
                        5.6
                        %Consolidated
      net sales
                        
                        $
                        1,494.2
                        
                        
                        
                        
                        
                        
                        $
                        1,444.2
                        
                        
                        
                        
                        
                        
                        
                        3.5
                        %




Net sales
for the fifty-two weeks ended July 25, 2009 increased 3.5% to $1,494.2 million
from $1,444.2 million in the prior year.   This increase was
mainly driven by a 3.9% square footage increase offset by a comparable store
sales decrease of 0.4%.  The same store sales decrease was the result
of several factors including decreased customer traffic to our stores and fewer
customer transactions.  We believe the decrease in the number of
customer transactions was the result of the continuing economic challenges that
are affecting a significant number of our customers.





During
fiscal 2009, the dressbarn brand continued to
be impacted by the slowdown in consumer spending, however, the dressbarn brand still managed
to have positive comparable sales.  The strongest comparable store
sales for the fifty-two week period were in the midwest, mid-atlantic and
northeast regions.  The regions with the weakest comparable store
sales were the northwest and southeast.  The best performing
departments were Suit Separates, Outerwear, Shoes and
Accessories.  The weakest departmental performers were Coordinates and
Casual Bottoms.





For the
maurices brand, fiscal
2009 comparable sales were down slightly in a very challenging retail
environment.  The two regions with comparable sales increases were the
mid-atlantic and the midwest regions.  The regions with the weakest
comparable store sales were the southeast, northeast and northwest
regions.  Strong sales trends were noted for Casual Tops within the
Core Women’s collections and within the dressier “Wear @ Work” assortment Dressy
Tops performed well.  The weakest results came from the Dressier Club
Assortment, Shoes and a general softening in sales trends of
Bottoms.  For the year, the Plus size collection produced an 18%
comparable sales increase.  The growth in the Plus size collection
represented approximately two percentage points of the comparable store sales
results for fiscal 2009. Knit Tops and Denim continue to be the key drivers
within the Plus collection.





Revenue
also includes income from the non-redemption of a portion of gift cards and gift
certificates sold, and merchandise credits issued (gift card
breakage).  We recognize income on unredeemed gift cards when it can
be determined that the likelihood of the remaining balances being redeemed are
remote and that there are no legal obligations to remit the remaining balances
to relevant jurisdictions.  During fiscal 2009, we recognized $1.8
million of breakage income related to unredeemed gift cards which included $1.3
million for dressbarn
and $0.5 million for maurices.  During
fiscal 2008, we recognized $2.2 million of breakage income related to unredeemed
gift cards which included $1.8 million for dressbarn and $0.4 million for
maurices.


28


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




(Amounts in millions, except for % amounts)
                    
                    July 25,
                      2009
                    
                    
                    July 26,
                      2008
                    
                    
                    $ Change
                    
                    
                    % ChangeFiscal
      year ended
                    
                    $
                    918.4
                    
                    
                    $
                    885.9
                    
                    
                    $
                    32.5
                    
                    
                    
                    3.7
                    %As
      a percentage of sales
                    
                    
                    61.5
                    %
                    
                    
                    61.3
                    %





Cost of
sales increased by 20 basis points to 61.5% of net sales in the current year
period from 61.3% of net sales in the prior year period.  For the
dressbarn brand, cost of
sales was $568.7 million or 62.7% of net sales, a decrease of 70 basis points as
compared to $562.3 million or 63.4% from the same period last
year.  This decrease was the result of higher merchandise margins from
last year mainly due to lower markdowns.  maurices cost of sales for
fiscal 2009 was $349.7 million or 59.5% of net sales as compared to $323.6
million or 58.1% of net sales in fiscal 2008.  The increase in cost of
sales as a percentage of sales was primarily the result of higher markdowns and
the deleveraging of occupancy costs due to the comparable store sales
decline.





SG&A
expenses:


(Amounts in millions, except for % amounts)
                    
                    July 25,
                      2009
                    
                    
                    July 26,
                      2008
                    
                    
                    $ Change
                    
                    
                    % ChangeFiscal
      year ended
                    
                    $
                    422.4
                    
                    
                    $
                    397.4
                    
                    
                    $
                    25.0
                    
                    
                    
                    6.3
                    %As
      a percentage of sales
                    
                    
                    28.3
                    %
                    
                    
                    27.5
                    %





As a
percentage of sales, selling, general and administrative expenses (“SG&A”)
increased 80 basis points to 28.3% of net sales versus 27.5% last
year.  dressbarn SG&A increased
50 basis points to 29.2% of net sales versus 28.7% last year due to increased
professional fees relating to the pending Tween Brands, Inc. Merger and store
impairment charges.  maurices SG&A was $157.5
million or 26.8% of net sales for fiscal 2009 as compared to $142.7 million or
25.6% of net sales for fiscal 2008.  The increase was primarily
attributable to a de-leveraging of payroll and benefits due to the comparable
sales decrease coupled with a trade name impairment (described in Note 8 to the
Consolidated Financial Statements).





Depreciation
and amortization:


(Amounts in millions, except for % amounts)
                    
                    July 25,
                      2009
                    
                    
                    July 26,
                      2008
                    
                    
                    $ Change
                    
                    
                    % ChangeFiscal
      year ended
                    
                    $
                    48.5
                    
                    
                    $
                    48.2
                    
                    
                    $
                    0.3
                    
                    
                    
                    0.6
                    %As
      a percentage of sales
                    
                    
                    3.2
                    %
                    
                    
                    3.3
                    %





Depreciation
expense increased 0.6% in fiscal 2009 as compared to last year primarily from
the net opening of 56 stores, store remodels and relocations, and investment in
technology.





Operating
income:


(Amounts in millions, except for % amounts)
                          
                          July 25,
                            2009
                          
                          
                          July 26,
                            2008
                          
                          
                          $ Change
                          
                          
                          % ChangeFiscal
      year ended
                          
                          $
                          105.0
                          
                          
                          $
                          112.6
                          
                          
                          $
                          (7.6
                          )
                          
                          
                          (6.7
                          )
      %As
      a percentage of sales
                          
                          
                          7.0
                          %
                          
                          
                          7.8
                          %





As a
result of the above factors, operating income as a percent of net sales was 7.0%
for fiscal 2009 compared to 7.8% for fiscal 2008. For the dressbarn brand, operating
income as a percent of sales increased to 5.0% versus 4.8% fiscal
2008.  For the maurices brand, operating
income as a percent of sales decreased to 10.3% versus 12.6% last fiscal
year.


29





Interest
income:


(Amounts in millions, except for % amounts)
                      
                      July 25,
                        2009
                      
                      
                      July 26,
                        2008
                      
                      
                      $ Change
                      
                      
                      % ChangeFiscal
      year ended
                      
                      $
                      5.4
                      
                      
                      $
                      7.8
                      
                      
                      $
                      (2.4
                      )
                      
                      
                      (30.8
                      )
      %As
      a percentage of sales
                      
                      
                      0.4
                      %
                      
                      
                      0.5
                      %





Interest
income for the fifty-two week period was $5.4 million as compared to interest
income of $7.8 million in fiscal 2008 due to lower interest rate yields in the
current year.  During fiscal 2009 we adopted a more conservative
strategy with investments in higher grade securities with shorter term
maturities for greater security and liquidity.





Interest
expense:


(Amounts in millions, except for % amounts)
                    
                    July 25,
                      2009
                    
                    
                    July 26,
                      2008
                    
                    
                    $ Change
                    
                    
                    % ChangeFiscal
      year ended
                    
                    $
                    (10.0
                    )
                    
                    $
                    (9.6
                    )
                    
                    $
                    (0.4
                    )
                    
                    
                    4.2
                    %As
      a percentage of sales
                    
                    
                    (0.7
                    )
      %
                    
                    
                    (0.7
                    )
      %





Interest
expense for the fiscal year, primarily on our Convertible Senior Notes and the
mortgage on our Suffern, NY facilities, remained consistent with the prior
fiscal year.





Other
income:


(Amounts in millions, except for % amounts)
                    
                    July 25,
                      2009
                    
                    
                    July 26,
                      2008
                    
                    
                    $ Change
                    
                    
                    % ChangeFiscal
      year ended
                    
                    $
                    1.1
                    
                    
                    $
                    0.5
                    
                    
                    $
                    0.6
                    
                    
                    
                    120.0
                    %As
      a percentage of sales
                    
                    
                    0.1
                    %
                    
                    
                    0.0
                    %





Other
income for the fiscal year was $1.1 million as compared to $0.5 million last
year.  The majority of this amount represents rental income from the
two tenants currently occupying space in our corporate headquarters property in
Suffern, New York.  Fiscal 2008 included approximately $1.1 million of
cost basis investment impairment.





Income
taxes:


(Amounts in millions, except for % amounts)
                          
                          July 25,
                            2009
                          
                          
                          July 26,
                            2008
                          
                          
                          $ Change
                          
                          
                          % ChangeFiscal
      year ended
                          
                          $
                          34.9
                          
                          
                          $
                          40.2
                          
                          
                          $
                          (5.3
                          )
                          
                          
                          (13.2
                          )
      %As
      a percentage of sales
                          
                          
                          2.3
                          %
                          
                          
                          2.8
                          %





The
effective tax rate for fiscal 2009 was 34.4% as compared to 36.1% reported for
fiscal 2008.  Refer to Note 14 to the Consolidated Financial
Statements for additional details.





Net
Earnings:


(Amounts in millions, except for % amounts)
                      
                      July 25,
                        2009
                      
                      
                      July 26,
                        2008
                      
                      
                      $ Change
                      
                      
                      % ChangeFiscal
      year ended
                      
                      $
                      66.6
                      
                      
                      $
                      71.2
                      
                      
                      $
                      (4.6
                      )
                      
                      
                      (6.5
                      )
      %As
      a percentage of sales
                      
                      
                      4.5
                      %
                      
                      
                      4.9
                      %





Net
earnings for the fifty-two weeks ended July 25, 2009 increased to $1.06 per
diluted share, compared to $1.10 per diluted share in the prior year
twelve-month period.


30





Liquidity and Capital
Resources





On
November 25, 2009, we completed a merger with Tween Brands.  As a
result of the Merger, Tween Brands became a wholly owned subsidiary of Dress
Barn.  Under the terms of the Merger Agreement, total consideration
was $415.1 million which included $251.2 million of equity value and the
repayment of Tween Brands outstanding bank debt of $162.9
million.  See Note 2 of the Consolidated Financial
Statements.





Cash
Flows





Cash
generated from operating activities provides the primary resources to support
current operations, growth initiatives, seasonal funding requirements and
capital expenditures.  Our uses of cash are generally for working
capital, the construction of new stores and remodeling of existing stores,
information technology upgrades and the purchase of short-term
investments.  We use lines of credit on our $200 million revolving
credit facility to facilitate imports of our products.  Our line of
credit borrowings may fluctuate materially depending among other things, our
seasonal requirements, increases or decreases in comparable 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.





In
summary, our cash flows were as follows (amounts in thousands):


Fiscal Year EndedJuly 31, 2010
                                  
                                  
                                  July 25, 2009
                                  
                                  
                                  July 26, 2008Net
      cash provided by operating activities
                                  
                                  $
                                  231,437
                                  
                                  
                                  $
                                  172,691
                                  
                                  
                                  $
                                  145,455Net
      cash provided by / (used in) investing activities
                                  
                                  
                                  76,387
                                  
                                  
                                  
                                  (56,957
                                  )
                                  
                                  
                                  (46,247
                                  )Net
      cash used in financing activities
                                  
                                  
                                  (307,946
                                  )
                                  
                                  
                                  (2,197
                                  )
                                  
                                  
                                  (39,115
                                  )





Operating
activities


Net cash
provided by operations was $231.4 million for the fifty-three weeks ended July
31, 2010 compared with $172.7 million during the fifty-two week period ended
July 25, 2009.  The increase of $58.7 million was primarily driven by
the higher level of accounts payable and accrued salaries, wages and related
expenses offset by an increase of merchandise inventories due to higher
inventory requirements at the Justice brand for the fall
back-to-school season. Net cash provided by operations was $172.7 million for
the fifty-two weeks ended July 25, 2009 compared with $145.5 million during last
year’s comparable period.  The increase of $27.2 million was primarily
driven by the higher level of accounts payable and income taxes payable offset
by an increase of merchandise inventories due to earlier shipments of fall
merchandise compared to the prior year decrease of inventories due to improved
inventory management and aggressive promotions.





Merchandise
inventories were $320.3 million at July 31, 2010 compared to $194.0 million at
July 25, 2009.  The increase of $126.3 million is a result of the
Justice Merger along
with the opening of new stores in fiscal 2010 and the increased inventory
requirements in the Justice brand due to the
back-to-school season.  We believe current inventory levels are
appropriate, based on sales trends and the industry environment.





Investing
activities


Net cash
provided by investing activities for the current period was $76.4 million
consisting primarily of redemption of investment securities of $140.3 million,
cash acquired in the Justice Merger of $83.7 million partially offset by $65.2
million of property and equipment mainly for new store openings, store remodels
and renovations and costs associated with information system implementations and
upgrades during fiscal 2010.  Net cash used in investing activities
for the fifty-two weeks ended July 25, 2009 was $57.0 million consisting
primarily of $58.4 million of property and equipment mainly for new store
openings, store remodels and renovations and costs associated with information
system implementations and upgrades during fiscal 2009 and the purchase of
investment securities of $95.4 million offset by $96.3 million for the
redemption of investment securities.  Net cash used in investing
activities for the fifty-two weeks ended July 26, 2008 was $46.2 million
consisting primarily of $66.1 million of property and equipment mainly for new
store openings, store remodels and renovations and costs associated with
information system implementations and upgrades during fiscal 2008 and the
purchase of investment securities of $307.9 million offset by $285.4 million for
the redemption of investment securities.


31





Financing
activities


Net cash
used by financing activities was $308.0 million during fiscal 2010 while net
cash used by financing activities was $2.2 million during fiscal
2009.  Our use of cash in fiscal 2010 was primarily related to the
Justice Merger debt paid
of $162.9 million, the Convertible Senior Notes exchange offer of $122.4 million
and the purchase of treasury stock for $37.9 million. Our use of cash in fiscal
2009 was primarily related the purchase of treasury stock for $4.7 million
partially offset by $2.7 million of proceeds from stock options
exercised.  Our use of cash in fiscal 2008 was primarily related the
purchase of treasury stock for $40.2 million partially offset by $1.6 million of
proceeds from stock options exercised.  See Notes 3 and 9 to our
Consolidated Financial Statements for further details.





Investments


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





As of
July 31, 2010, we had approximately $15.8 million of long-term marketable
security investments which consisted of $20.5 million of ARS at cost, less a
valuation allowance of $4.7 million, to reflect our estimate of fair value given
the current lack of liquidity of these investments, while taking into account
the current credit quality of the underlying securities.  If market
conditions deteriorate further, or a recovery in market values does not occur,
we may be required to record additional unrealized or realized losses in future
quarters.  On occasion an ARS is called by its issuer as was the case
during fiscal 2010, when we had $17.0 million of ARS
redemptions.  Subsequent to the fiscal 2010 year end we redeemed $6.9
million of ARS.





In
November 2008, we accepted a settlement offer whereby UBS would purchase
eligible ARS it sold to us prior to February 13, 2008 (“Settlement
Agreement”).  Under the terms of the Settlement Agreement, at our
option, UBS will purchase eligible ARS from us at par value during the period
June 30, 2010 through July 2, 2012.  UBS has offered to also provide
us with access to “no net cost” loans up to 75% of the par value of eligible ARS
until June 30, 2010.  We held approximately $7.2 million, at par
value, of eligible ARS with UBS as of November 2008.  By entering into
the Settlement Agreement, we (1) received the right (“Put Option”) to sell
these auction rate securities back to the investment firm at par, at our sole
discretion, anytime during the period from June 30, 2010 through
July 2, 2012, and (2) gave the investment firm the right to purchase
these auction rate securities or sell them on our behalf at par anytime after
the execution of the Settlement Agreement through July 2,
2012.  We elected to measure the Put Option under the fair value
option of ASC No. 825-10, and therefore, recorded interest income and recorded a
corresponding other asset.  Simultaneously, we transferred these
long-term auction rate securities from available-for-sale to trading investment
securities at market value on our consolidated balance sheets.  During
the second half of our fiscal 2010, all the eligible UBS ARS sold at par through
Dutch auctions.





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





Debt


On
November 25, 2009, we entered into a $200 million revolving credit agreement
(the “Credit Agreement”) with the lenders thereunder.  The Credit
Agreement replaced the Company’s prior $100 million five-year credit facility
entered into on December 21, 2005.  The prior facility was scheduled
to expire on December 21, 2010, but was terminated concurrently with the Credit
Agreement becoming effective on November 25, 2009.  We did not incur
any early termination penalties in connection with the termination of the prior
facility.  As of July 31, 2010, we had $37.8 million of outstanding
letters of credit, of which $12.0 million was issued by one of our banks and
$25.8 million are private label letters of credit secured by the Company’s
assets; the outstanding balance is primarily relating to insurance policies, and
$32.8 million of trade letters of credit relating to the importation of
merchandise.  We believe this revolving credit facility gives us ample
capacity to fund any short-term working capital needs that may arise in the
operation of our business.  At July 31, 2010 we had $188.0 million
available under this revolving credit agreement.


32





Our
Credit Agreement has financial covenants with respect to, among other things, a
fixed charge coverage ratio, as well as customary representations,
warranties and affirmative covenants. We are required to maintain the fixed
charge coverage ratio for any period of four
fiscal quarters ending during a Covenant Period as defined in the Credit
Agreement of at least 1.10 to 1.00. As of July 31, 2010, the
actual fixed charge coverage ratio was 1.61 to 1.00. The Credit Agreement also
contains customary negative covenants, subject to negotiated
exceptions, including, among others, on liens, investments, indebtedness,
significant corporate changes including mergers and
acquisitions, dispositions and restricted payments. The Credit Agreement also
contains customary events of default, such as payment
defaults, cross-defaults to other material indebtedness, bankruptcy and
insolvency, the occurrence of a defined change in control
or the failure to observe the negative covenants and other covenants related to
the operation of our business. We were in compliance
with all financial covenants contained in the Credit Agreement as of July 31,
2010.





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




Payment
of Dividends
 Our
Credit Agreement does not permit cash dividends but allows us to pay stock
dividends, provided that at the time of and immediately
after giving effect to the stock dividend, (a) there is no default or event of
default, (b) the fixed charge coverage ratio (as defined
in the Credit Agreement) is not less than 1.25 to 1.00, and (c) borrowings under
the Credit Agreement do not exceed 75% of the total
available borrowings (such
that availability (as defined in the Credit Agreement) is not less than 25% of
the aggregate revolving commitments (as defined in the Credit
Agreement)).




Stock
Buyback Program


In
September 2007, our Board of Directors authorized a $100 million stock buyback
program.  Purchases of shares of our common stock will be made at our
discretion from time to time, subject to market conditions and prevailing market
prices.  During fiscal 2010, we purchased 1.6 million shares at an
average price of $24.48 amounting to $37.9 million.  As of July 31,
2010, the remaining authorized amount for stock repurchases under the 2007
Program was $57.4 million.





Capital
Expenditures


We
anticipate that total capital expenditures for fiscal 2011 will be approximately
$80 million.  Of this amount, approximately $60 million is for new
store openings, renovations and remodels, and information system
upgrades.  We plan to open approximately 70 stores and close 45 stores
in the upcoming fiscal year.





Off
Balance Sheet Arrangements


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 31, 2010.  We do not have any off-balance sheet
arrangements or transactions with unconsolidated, limited purpose
entities.  In the normal course of business, we enter into operating
leases for our store locations and utilize letters of credit principally for the
importation of merchandise.





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





Contractual Obligations and
Commercial Commitments





The
estimated significant contractual cash obligations and other commercial
commitments at July 31, 2010 are summarized in the following table:





Payments Due by Period (Amounts in thousands)Contractual Obligations(a)
                  
                  Totals
                  
                  
                  Fiscal
                    2011
                  
                  
                  Fiscal
                    2012-
                    2013
                  
                  
                  Fiscal
                    2014-
                    2015
                  
                  
                  Fiscal 2016
                    And
                    BeyondOperating
      lease obligations (b)
                  
                  $
                  1,125,861
                  
                  
                  $
                  235,297
                  
                  
                  $
                  379,848
                  
                  
                  $
                  261,494
                  
                  
                  $
                  249,222Mortgage
      principal
                  
                  
                  25,916
                  
                  
                  
                  1,421
                  
                  
                  
                  3,078
                  
                  
                  
                  3,424
                  
                  
                  
                  17,993Mortgage
      interest
                  
                  
                  10,062
                  
                  
                  
                  1,347
                  
                  
                  
                  2,457
                  
                  
                  
                  2,111
                  
                  
                  
                  4,147Tax
      payments
                  
                  
                  331
                  
                  
                  
                  331
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Other
                  
                  
                  1,661
                  
                  
                  
                  977
                  
                  
                  
                  655
                  
                  
                  
                  29
                  
                  
                  
                  —Total
                  
                  $
                  1,163,831
                  
                  
                  $
                  239,373
                  
                  
                  $
                  386,038
                  
                  
                  $
                  267,058
                  
                  
                  $
                  271,362


33





(a)
            At July 31, 2010, the ultimate amount and timing of
      further cash settlements relating to $23.6 million of gross tax
      liabilities for uncertain tax positions cannot be predicted with
      reasonable certainty; those liabilities for uncertain tax positions are
      excluded from the contractual obligation table.  See Note 14 to
      our Consolidated Financial Statements for further
  details.




At July
31, 2010, we determined that approximately $0.6 million of our Executive
Retirement Plan (“ERP Plan”) liability will be paid in the next 12 months, and
for that reason is classified in the current liability section in the
Consolidated Balance Sheets.  The timing of payments for the remaining
ERP Plan liability of $31.3 million is dependent upon employee retirements and
other factors; and therefore, is not reflected in this table.  See
Note 13 to our Consolidated Financial Statements for further
details.





(b)
            The
      operating lease obligations represent future minimum lease payments under
      non-cancelable operating leases as of July 31, 2010.  The
      minimum lease payments do not include common area maintenance (“CAM”)
      charges or real estate taxes, which are also required contractual
      obligations under our operating leases.  In the majority of our
      operating leases, CAM charges are not fixed and can fluctuate from year to
      year.  Total CAM charges and real estate taxes for fiscal 2010,
      2009 and fiscal 2008 were $59.8 million, $44.7 million and $41.8 million,
      respectively.




Amount of Commitment Expiration Period (Amounts in
      thousands)Other Commercial
Commitments
                    
                    Totals
                    
                    
                    Fiscal
                      2011
                    
                    
                    Fiscal 2012-
                      2013
                    
                    
                    Fiscal 2014-
                      2015
                    
                    
                    Fiscal 2016
                      And BeyondTrade
      letters of credit
                    
                    $
                    32,761
                    
                    
                    $
                    32,761
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —Standby
      letters of credit
                    
                    
                    5,031
                    
                    
                    
                    5,031
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Firm
      purchase orders (1)
                    
                    
                    14,307
                    
                    
                    
                    14,307
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Total
                    
                    $
                    52,099
                    
                    
                    $
                    52,099
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —





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





Recent Accounting
Pronouncements


(Recently
Adopted)





The
Financial Accounting Standards Board (“FASB”) has codified a single source of
U.S. Generally Accepted Accounting Principles, theAccounting Standards
Codification (“Codification”).  The Codification became
effective for financial statements issued for interim and annual periods ending
after September 15, 2009, including our first quarter of fiscal
2010.  The Codification is for disclosure purposes only and did not
impact our financial position, results of operations or cash
flows.  Unless needed to clarify a point to readers, we will refrain
from citing specific section references when discussing application of
accounting principles or addressing new or pending accounting rule
changes.





In
December 2007, the FASB issued new accounting guidance on business
combinations.  The guidance establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired.  The accounting
guidance also establishes disclosure requirements that will enable users to
evaluate the nature and financial effects of the business
combination.  This guidance is effective as of the beginning of an
entity’s fiscal year that begins after December 15, 2008 (our fiscal
2010).  We applied this guidance to the Justice Merger, which was
completed on November 25, 2009.





In
February 2008, the FASB issued new accounting guidance on fair value measurement
for non-financial assets and liabilities, except for items that are recognized
or disclosed at fair value in the financial statements on a recurring basis (at
least annually).  This guidance became effective beginning with our
fiscal year 2010.  The adoption of the new guidance did not have a
material impact on our consolidated financial position, results of operations or
cash flows.


34





In April
2008, the FASB issued new accounting guidance on intangible
assets.  This guidance amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset.  The objective of this guidance is to
improve the consistency between the useful life of a recognized intangible asset
and to improve the period of expected cash flows used to measure the fair
value.  The guidance applies to all intangible assets, whether
acquired in a business combination or otherwise, and shall be effective for
financial statements issued for fiscal years beginning after December 15, 2008
(our fiscal 2010), and interim periods within those fiscal years and should be
applied prospectively to intangible assets acquired after the effective
date.  Early adoption is prohibited.  The adoption of this
new guidance did not have a material impact on our consolidated financial
position, results of operations or cash flows.





In
August 2009, the FASB issued authoritative guidance for measuring
liabilities at fair value that reaffirms the previously existing definition of
fair value and reintroduces the concept of entry value into the determination of
fair value of liabilities.  This guidance became effective for the
first reporting period, including interim periods, beginning after issuance (our
second quarter of fiscal 2010).  The guidance provides clarification
that in circumstances in which a quoted market price in an active market for an
identical liability is not available, an entity is required to measure fair
value using a valuation technique that uses the quoted price of an identical
liability when traded as an asset or, if unavailable, quoted prices for similar
liabilities or similar assets when traded as assets.  If none of this
information is available, an entity should use a valuation technique in
accordance with existing fair valuation principles.  The adoption of
this new guidance did not have a material impact on our consolidated financial
position, results of operations or cash flows.





In
January 2010, the FASB issued updated authoritative guidance for fair value
measurements.  The guidance requires new disclosures for significant
transfers in and out of Level 1 and 2 of the fair value hierarchy and the
activity within Level 3 of the fair value hierarchy.  The updated
guidance also clarifies existing disclosures regarding the level of
disaggregation of assets or liabilities and the valuation techniques and inputs
used to measure fair value.  The updated guidance is effective for
interim and annual reporting periods beginning after December 15, 2009,
with the exception of the new Level 3 activity disclosures, which are effective
for interim and annual reporting periods beginning after December 15,
2010.  We adopted the applicable disclosure requirements beginning in
the third quarter of our fiscal 2010.  The adoption of this new
guidance did not have a material impact on our consolidated financial position,
results of operations or cash flows.





In
February 2010, the FASB amended its guidance on subsequent events.  The
amendment states that entities that are required to file or furnish their
financial statements with the SEC are no longer required to disclose the date
through which the entity has evaluated subsequent events.The
updated guidance was effective upon issuance.  We adopted this
guidance during the second quarter of fiscal 2010.  The adoption of this
new guidance did not have a material impact on our consolidated financial
position, results of operations or cash flows.





Recently
Issued





In April
2010, the FASB amended accounting guidance on share-based payment awards
denominated in certain currencies.  The amendment clarifies that an
employee share-based payment award with an exercise price denominated in the
currency of a market in which a substantial portion of the entity’s equity
securities trade should not be considered to contain a condition that is not a
market, performance or service condition, and, therefore, would not require
classification as a liability if the award otherwise qualifies as
equity.  This amendment is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2010
(our fiscal 2011).  Early adoption is permitted.  We do not expect the
implementation to have a material impact on our financial position, results of
operations or cash flows.





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
GAAP.  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 revenue recognition, merchandise
inventories, long-lived assets, insurance reserves, goodwill and intangible
assets, operating leases, share-based employee compensation and income
taxes.  We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources.  Actual results may differ from these estimates under
different assumptions or conditions.  Management believes the
following accounting principles are the most critical because they involve the
most significant judgments, assumptions and estimates used in preparation of our
financial statements.


35





Revenue
Recognition





While our
recognition of revenue does not involve significant judgment, revenue
recognition represents an important accounting policy of ours.  As
discussed in Note 1 to the Consolidated Financial Statements, we recognize sales
at the point of purchase when the customer takes possession of the merchandise
and pays for the purchase, generally with cash or credit card.  We
have reserved for estimated product returns when sales are recorded based on
historical return trends and adjusted for known events, as
applicable.  Sales from purchases made with gift cards and gift
certificates or by layaway sales are recorded when the customer takes possession
of the merchandise.  Gift cards, gift certificates and merchandise
credits (collectively “gift cards”) do not have expiration dates.  We
recognize income on unredeemed gift cards (“gift card breakage”) when it can be
determined that the likelihood of the remaining balances being redeemed are
remote and that there are no legal obligations to remit the remaining balances
to relevant jurisdictions.  Prior to fiscal 2007, we were unable to
reliably estimate such gift card breakage and therefore recorded no such income
in prior years.  During the fourth quarter of fiscal 2007, we
accumulated a sufficient level of historical data to determine an estimate of
gift card breakage for the first time.  Gift card breakage is included
in net sales in the Consolidated Statement of Operations.





Merchandise
Inventories





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





Goodwill
and Other Intangible Assets





In
accordance with FASB accounting guidance on goodwill and other intangible
assets, we do not amortize goodwill or intangible assets with indefinite lives
but, rather, we are required to evaluate goodwill and intangible assets with
indefinite lives annually or whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.  The
conditions that could trigger an impairment of goodwill or intangible assets
with indefinite lives include a significant, sustained negative trend in maurices’ or Justice’s operating results or
cash flows, a decrease in demand for maurices’ or Justice’s 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 the accounting
guidance.  Our annual assessment date is on or about June 30th.  As
of the latest assessment date the fair value of goodwill at both maurices and Justice substantially exceeded
its carrying value.  We have performed a sensitivity analysis at maurices on our significant
assumptions and determined that a negative change in our assumptions, as
follows, would not have resulted in a change in conclusion in 2010: 1% increase
in the discount rate, 10% decrease in the market approach multiple, 10% decrease
in forecasted net income.





Goodwill
represents the excess of the purchase price over the fair values of net
identifiable assets acquired.  On November 25, 2009, we completed our
Merger with Tween Brands, Inc.  We accounted for the acquisition as a
purchase and, accordingly, the excess purchase price over the fair market value
of the underlying net assets acquired, or $99.0 million, was allocated to
goodwill.  Goodwill amortization for this transaction is not
deductible for tax purposes.  In conjunction with the Merger, we
acquired “Justice” brand
trademarks and service marks, including the mark “Justice”, which is used to
identify merchandise and services.  Certain of these marks are
registered with the U.S. Patent and Trademark Office and certain foreign
jurisdictions in which we conduct business.  These marks are important
to us, and we intend to, directly or indirectly, maintain and protect these
marks and their registrations.


36





Other
identifiable intangible assets consist of customer relationships and proprietary
technology.  Trade names and franchise rights were determined to have
an indefinite life and therefore are not amortized.  Customer
relationships, proprietary technology and defensive assets constitute our
identifiable intangible assets subject to amortization, which are amortized over
their useful lives on a straight line basis.  A fair value was not
assigned to the customer relationships from the Justice Merger because under
the valuation analysis income approach the value of the customer loyalty and the
resulting relationship was offset by the costs associated with the asset and the
relatively short life of the customer relationship.





We also
acquired favorable leases of $7.0 million classified in the long-term section
under “Other Assets” in our Consolidated Balance Sheets.  Favorable
lease rights are amortized over the favorable lease term and assessed for
impairment in accordance with ASC 350-35.  Refer to Note 8 to the
Consolidated Financial Statements for additional information.





Impairment
of Long-Lived Assets





Long-lived
tangible assets are accounted for under ASC 360-10, Property, Plant and
Equipment.  We primarily invest in property and equipment in
connection with the opening and remodeling of stores.  When facts and
circumstances indicate that the carrying values of such long-lived assets may be
impaired, an evaluation of recoverability is performed by comparing the carrying
values of the assets to undiscounted projected future cash flows, in addition to
other quantitative and qualitative analyses.  Upon indication that the
carrying values of such assets may not be recoverable, we recognize an
impairment loss to write down the cost of the asset group to its fair value
against current operations.  Property and equipment assets are grouped
at the lowest level for which there is identifiable cash flows when assessing
impairment, which is the individual store level.  Judgments made by us
related to the expected useful lives of long-lived assets and our ability to
realize undiscounted cash flows in excess of the carrying amounts of such assets
are affected by factors such as the ongoing maintenance and improvements of the
assets, changes in economic conditions and changes in operating
performance.  In addition, we regularly evaluate our computer-related
and other assets for recoverability.  Based on the review of certain
underperforming stores, we recorded impairment charges and store closing
expenses of $8.7 million, $6.3 million and $4.1 million for fiscal 2010, 2009
and 2008, respectively, that are included in selling, general and administrative
expenses.  These impairment losses reflect the amount of book value
over estimated fair market value of store related assets.  Refer to
Note 5 and Note 7 for additional information.





Insurance
Reserves





We use a
combination of insurance and self-insurance mechanisms to provide for the
potential liabilities for workers’ compensation and employee healthcare
benefits.  Liabilities associated with the risks that are retained by
us are estimated, in part, by considering historical claims experience,
demographic factors, severity factors and other actuarial
assumptions.  Such liabilities are capped through the use of stop loss
contracts with insurance companies.  The estimated accruals for these
liabilities could be significantly affected if future occurrences and claims
differ from these assumptions and historical trends.  As of July 31,
2010 and July 25, 2009, these reserves were $14.6 million and $10.4
million, respectively.  We are subject to various claims and
contingencies related to insurance and other matters arising out of the normal
course of business.  We are self-insured for expenses related to our
employee medical and dental plans, and our workers’ compensation plan, up to
certain thresholds.  Claims filed, as well as claims incurred but not
reported, are accrued based on management’s estimates, using information
received from plan administrators, historical analysis and other relevant
data.  We have stop-loss insurance coverage for individual claims in
excess of $250,000 at dressbarn and maurices and $200,000 at Justice.  We believe
our accruals for claims and contingencies are adequate based on information
currently available.  However, it is possible that actual results
could significantly differ from the recorded accruals for claims and
contingencies.





Operating
Leases





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





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





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





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


37





Share-Based
Compensation





The
Company accounts for share-based awards in accordance with ASC 718-10, Compensation-Stock
Compensation.  ASC-718-10 requires the Company to calculate the
grant-date fair value and recognize that calculated value as compensation
expense over the vesting period, adjusted for estimated
forfeitures.  Our calculation of share-based compensation expense
requires the input of highly subjective assumptions, including the expected term
of the share-based awards, stock price volatility, and pre-vesting forfeitures.
We estimate the expected life of shares granted in connection with share-based
awards based on historical exercise patterns, which we believe are
representative of future behavior.  We estimate the volatility of our
common stock at the date of grant based on an average of our historical
volatility and the implied volatility of publicly traded options on our common
stock.  The assumptions used in calculating the fair value of
share-based awards represent our best estimates, but these estimates involve
inherent uncertainties and the application of management judgment.  As
a result, if factors change and we were to use different assumptions, our
share-based compensation expense could be materially different in the
future.  In addition, we are required to estimate the expected
forfeiture rate and only recognize expense for those shares expected to
vest.  We estimate the forfeiture rate based on historical experience
of share-based awards granted, exercised and cancelled, as well as considering
future expected behavior.  If the actual forfeiture rate is materially
different from our estimate, share-based compensation expense could be different
from what we have recorded in the current period.  See Note 16 to our
Consolidated Financial Statements for additional information.





Income
Taxes





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





We
adopted Accounting Standards Codification (“ASC”) 740-10, Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109, on July 29, 2007,
the first day of fiscal 2008.  ASC 740-10 seeks to reduce the
diversity in practice associated with certain aspects of measurement and
recognition in accounting for income taxes.  ASC 740-10 prescribes a
recognition threshold and measurement requirement for the financial statement
recognition of a tax position that has been taken or is expected to be taken on
a tax return and also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.  Under ASC 740-10 we may only recognize tax positions that
meet a “more likely than not” threshold.





We
recorded the cumulative effect of applying ASC 740-10 of $4.9 million as an
adjustment to the opening balance of retained earnings on July 29, 2007, the
first day of our fiscal 2008.  See Note 14 to our Consolidated
Financial Statements for additional information.


38





ITEM
7A.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





The
market risk inherent in our financial instruments and in our financial position
represents the potential loss arising from adverse changes in interest rates and
disruptions caused by financial market conditions.  Cash and cash
equivalents are deposited with high credit quality financial
institutions.  However, we have significant amounts of cash and cash
equivalents at these financial institutions that are in excess of federally
insured limits.  This represents a concentration of credit
risk.  The carrying amounts of cash, cash equivalents and accounts
payable approximate fair value because of the short-term nature and maturity of
such instruments.  Our results of operations could be negatively
impacted by decreases in interest rates on our investments, including our
investments in ARS.  Please see Note 4 to the Consolidated Financial
Statements for further information regarding the Company’s investments in
ARS.





Our
outstanding long-term liabilities as of July 31, 2010 included $24.6 million of
our 5.33% mortgage loan due July 1, 2023.  As the mortgage loan bears
interest at a fixed rate, our results of operations would not be affected by
interest rate changes.





On
November 25, 2009, we entered into a $200 million revolving credit agreement
(the “Credit Agreement”) with the lenders thereunder.





The
Credit Agreement provides for an asset based senior secured revolving credit
facility up to $200 million based on certain asset values and matures in four
years.  The credit facility may be used for the issuance of letters of
credit, to finance the acquisition of working capital assets in the ordinary
course of business, for capital expenditures and for general corporate
purposes.  The Credit Agreement includes a $150 million letter of
credit sublimit, of which $25 million can be used for standby letters of credit,
and a $20 million swing loan sublimit.  The interest rates, pricing
and fees under the Credit Agreement fluctuate based on excess availability as
defined in the Credit Agreement with a base rate of LIBOR plus 375
bps.  There are currently no borrowings outstanding under the Credit
Agreement.





As of
July 31, 2010, $188.0 million of the $200.0 million revolving credit facility
was available, with the availability reduced by $12.0 million of letters of
credit, primarily relating to the importation of merchandise.  We
believe this revolving credit facility gives us ample capacity to fund any
short-term working capital needs that may arise in the operation of our
business.





As of
July 31, 2010, we had $37.8 million of outstanding letters of credit, of which
$12.0 million was issued by one of our banks under our new credit agreement and
$25.8 million are private label letters of credit secured by the Company’s
assets.





We held
no material options or other derivative instruments at July 31,
2010.





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








ITEM
8.  FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA





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





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


None.


39





ITEM
9A.CONTROLS
AND PROCEDURES





(a) Evaluation of Disclosure
Controls and Procedures





We
conducted an evaluation, under the supervision and with the participation of
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as such term is defined in Rules 13a−15(e) and 15d−15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of July 31,
2010.  There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures, including the possibility of human
error and the circumvention or overriding of the controls and
procedures.  Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control
objectives.  Our disclosure controls and procedures are designed to
provide reasonable assurance of achieving their control
objectives.  Based on such evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
were effective at the reasonable assurance level as of the end of the period
covered and in ensuring that informationrequired to
be disclosed in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Commission’s rules and forms and is accumulated and communicated to our
management, including the Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.





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





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a−15(f) and 15d−15(f) under the
Exchange Act.  Our internal control system over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.  Because of
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





Management
has assessed the effectiveness of our internal control over financial reporting
as of July 31, 2010.  In making this assessment, management used the
criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).  Based on the assessment and those criteria, management
believes that we maintained effective internal control over financial reporting
as of July 31, 2010.  Our independent registered public accounting
firm has issued an attestation report on our internal control over financial
reporting. The report appears herein below.





(c) Changes in Internal
Control Over Financial Reporting





In
connection with the evaluation of disclosure controls and procedures described
above, there was no change identified in the Company’s internal control over
financial reporting that occurred during the Company’s fourth fiscal quarter
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.





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


40





REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Shareholders of


The Dress
Barn, Inc.


Suffern,
New York





We have
audited the internal control over financial reporting of Dress Barn, Inc. and
subsidiaries (the "Company") as of July 31, 2010, based on criteria established
in Internal Control —
Integrated Frameworkissued by the Committee of Sponsoring Organizations
of the Treadway Commission.  The Company's management is responsible
for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Assessment of Internal Control Over
Financial Reporting.  Our responsibility is to express an opinion on the
Company's internal control over financial reporting based on our
audit.





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





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





Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis.  Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.





In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of July 31, 2010, based on the criteria
established in Internal
Control — Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission.





We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended July 31, 2010 of the Company and our
report dated September 24, 2010 (November 10, 2010 as to the effects of the
restatement discussed in Note 1) expressed an unqualified opinion on those
financial statements.





/s/
DELOITTE & TOUCHE LLP





New York,
New York






41




ITEM
9B.   OTHER
INFORMATION





None.





PART
III





ITEM
      10.
            DIRECTORS, EXECUTIVE
      OFFICERS AND CORPORATE
GOVERNANCE





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





ITEM
      11.
            EXECUTIVE
      COMPENSATION





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





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





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





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





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





ITEM 14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES


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


42





PART
IV





ITEM
15.  EXHIBITS, FINANCIAL
STATEMENT SCHEDULES





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





ITEM 15. (a) (2) FINANCIAL
STATEMENT SCHEDULES





All
schedules are omitted because they are not applicable, or not required because
the required information is included in the consolidated financial statements or
notes thereto.





ITEM
15.  (b)  LIST OF EXHIBITS





The
following exhibits are filed as part of this Report and except Exhibits
10.18 , 21, 23, 31.1, 31.2, 32.1 and 32.2 are all incorporated by
reference from the sources shown.





Exhibit
                    Number
                  
                  Description
                  
                  IncorporatedBy
                    ReferenceFrom2.1
                  
                  Agreement
      and Plan of Merger, dated as of June 24, 2009, among The Dress Barn, Inc.,
      Thailand Acquisition Corp. and Tween Brands, Inc.
                  
                  (1)3.1
                  
                  Amended
      and Restated Certificate of Incorporation, as approved by shareholders at
      December 10, 2008 Annual Meeting of Shareholders
                  
                  (2)3.2
                  
                  Amended
      and Restated By-Laws (as amended through September 18,
    2008)
                  
                  (3)4
                  
                  Specimen
      Common Stock Certificate
                  
                  (4)10.1
                  
                  Purchase
      and Sale Agreement, dated January 28, 2003,Between
      Rockland Warehouse Center Corporation, as seller,and
      Dunnigan Realty, LLC, as buyer with respect to30
      Dunnigan Drive, Suffern, NY
                  
                  (5)10.2
                  
                  $34,000,000
      mortgage loan from John Hancock Life Insurance Companyto
      Dunnigan Realty, secured by mortgage on 30 Dunnigan Drive, Suffern,
      NY
                  
                  (6)




43





10.3
                    
                    Leases
      of Company premises of which the lessor is Elliot S. Jaffeor
      members of his family or related trusts:10.6.1   Danbury,
      CT store
                    
                    (4)10.6.2   Norwalk,
      CT dressbarn
      store
                    
                    (7)10.4
                    
                    Amended
      and Restated Lease between Dunnigan Realty, LLC, as landlord,and
      The Dress Barn, Inc., as tenant, dated June 24, 2003 for
      officeand
      distribution space in Suffern, New York
                    
                    (6)10.5
                    
                    The
      Dress Barn, Inc. 1993 Incentive Stock Option Plan
                    
                    (8)
      *10.6
                    
                    The
      Dress Barn, Inc. 1995 Stock Option Plan
                    
                    (9)
      *10.7
                    
                    The
      Dress Barn, Inc. 2001 Stock Incentive Plan (amended and restated effective
      September 29, 2005)
                    
                    (10)
      *10.8
                    
                    The
      Dress Barn, Inc. 162(m) Executive Bonus Plan
                    
                    (10)*10.9
                    
                    Amendment
      Number One to 162(m) Executive Bonus Plan
                    
                    (11)10.10
                    
                    Employment
      Agreement with Elliot S. Jaffe dated May 2, 2002
                    
                    (12)
      *10.11
                    
                    Amendment
      dated July 10, 2006 to Employment Agreementdated
      May 2, 2002 with Elliot S. Jaffe
                    
                    (13)
      *10.12
                    
                    Employment
      Agreement dated May 2, 2002 with David R. Jaffe
                    
                    (12)
      *10.13
                    
                    Employment
      Agreement dated April 23, 2010 with   Michael W.
      Rayden
                    
                    (14)
      *10.14
                    
                    Employment
      Agreement dated July 26, 2005 with Gene Wexler
                    
                    (15)
      *10.15
                    
                    Supplemental
      Retirement Benefit Agreement with Mrs. Roslyn Jaffe dated August 29,
      2006
                    
                    (16)
      *10.16
                    
                    Consulting
      Agreement dated July 18, 2006 with Burt Steinberg Retail Consulting
      Ltd.
                    
                    (17)
      *10.17
                    
                    Executive
      Severance Plan dated as of March 3, 2010
                    
                    (18)10.18
                    
                    Credit
      Agreement dated as of November 25, 2009, filed
    herewith14
                    
                    Code
      of Ethics for the Chief Executive Officer and Senior Financial
      Officers
                    
                    (6)21
                    
                    Subsidiaries
      of the Registrant, filed herewith23
                    
                    Consent
      of Independent Registered Public Accounting Firm, filed
      herewith31.1
                    
                    Section
      302 Certification of President and Chief Executive Officer, filed
      herewith31.2
                    
                    Section
      302 Certification of Chief Financial Officer, filed
    herewith32.1
                    
                    Section
      906 Certification of President and Chief Executive Officer, filed
      herewith32.2
                    
                    Section
      906 Certification of Chief Financial Officer, filed
    herewith


44





References
as follows:





(1)
              The
      Company’s Report on Form 8-K filed June 25, 2009. Excludes schedules,
      exhibits and certain annexes, which the Company agrees to furnish
      supplementally to the Securities and Exchange Commission upon
      request.(2)
              Annex
      A to the Company’s Proxy Statement, filed November 5,
  2008.(3)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 26,
      2008 (Exhibit 3.4).(4)
              The
      Company's Registration Statement on Form S-1 under the Securities Act of
      1933 (Registration No. 2-82916) declared effective May 4, 1983 (Exhibits 4
      and 10(l)).(5)
              The
      Company’s Quarterly Report on Form 10-Q for the quarter ended January 25,
      2003.(6)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 26,
      2003 (Exhibits 10(xx), 10(mm) and 14).(7)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 25,
      1992 (Exhibit 10(h)(h)).(8)
              The
      Company's Registration Statement on Form S-8 under the
                Securities
      Act of 1933 (Registration No. 33-60196) filed on March 25, 1993 (Exhibit
      28).(9)
              The
      Company's Annual Report on Form 10-K for the fiscal year ended July 27,
      1996 (Exhibit 10(nn)).(10)
              The
      Company's Proxy Statement, filed October 31, 2005 (Annex A and Annex
      B).(11)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 25,
      2009 (Exhibit 10.9).(12)
              The
      Company's Annual Report on Form 10-K for the fiscal year ended July 27,
      2002 (Exhibits 10(t)(t) and 10(u)(u)).(13)
              The
      Company’s Report on Form 8-K filed July 13, 2006 (Exhibit
      99.1).(14)
              The
      Company's Quarterly Report on Form 8-K filed April 29, 2010 (Exhibit
      10.1).(15)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 30,
      2005 (Exhibit 10.25).(16)
              The
      Company’s Report on Form 8-K filed August 30, 2006 (Exhibit
      99.1).(17)
              The
      Company’s Report on Form 8-K filed July 19, 2006 (Exhibit
      99.1).(18)
              The
      Company's Report on Form 8-K filed April 22, 2010 (Exhibit
      10.1).





*Each of
these exhibits constitute a management contract, compensatory plan or
arrangement required to be filed as an
exhibit pursuant to Item 15 (b) of this report.





ITEM
15.  (c)  FINANCIAL STATEMENT SCHEDULES





None


45





SIGNATURES





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





The
      Dress Barn, Inc.Date:   November
      10, 2010
                        by
                        /s/ DAVID R. JAFFEDavid
      R. JaffePresident
      and Chief Executive
Officer





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





Signature
              
              Title
              
              Date/s/ ELLIOT S. JAFFEElliot
      S. Jaffe
              
              Chairman
      of the Board and Founder
              
              November
      10, 2010/s/ DAVID R. JAFFEDavid
      R. Jaffe
              
              Director,
      President and
              
              November
      10, 2010Chief
      Executive Officer(Principal
      Executive Officer)/s/ MICHAEL W.
RAYDENMichael
      W. Rayden
              
              Chief
      Executive Officer,
                Tween
      Brands, Inc.
              
              November
      10, 2010/s/ KATE BUGGELNKate
      Buggeln
              
              Director
              
              November
      10, 2010/s/ KLAUS EPPLERKlaus
      Eppler
              
              Director
              
              November
      10, 2010/s/ RANDY L. PEARCERandy
      L. Pearce
              
              Director
              
              November
      10, 2010/s/ JOHN USDANJohn
      Usdan
              
              Director
              
              November
      10, 2010/s/ ARMAND CORREIAArmand
      Correia
              
              Executive
      Vice President and
                Chief
      Financial Officer
                (Principal
      Financial Officer and
                Principal
      Accounting Officer)
              
              November
      10, 2010


46





REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Shareholders of


The Dress
Barn, Inc.


Suffern,
New York





We have
audited the accompanying consolidated balance sheets of The Dress Barn, Inc. and
subsidiaries (the "Company") as of July 31, 2010 and July 25, 2009, and the
related consolidated statements of operations, shareholders' equity and
comprehensive income, and cash flows for each of the three fiscal years in the
period ended July 31, 2010.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on the financial statements based on our audits.





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





In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of July 31, 2010 and July 25,
2009, and the results of their operations and their cash flows for each of the
three fiscal years in the period ended July 31, 2010, in conformity with
accounting principles generally accepted in the United States of
America.





As
discussed in Note 3 to the consolidated financial statements, the Company
adopted Accounting Standards Codification (“ASC”) 470-20, “Debt with Conversion
and Other Options” and ASC 810-10, “Consolidation – Overall” effective July 26,
2009.   As discussed in Note 14 to the consolidated financial
statements, the Company adopted ASC 740-10, “Accounting for Uncertainty in
Income Taxes – An Interpretation of FASB Statement No. 109”, effective July 29,
2007.




We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Company's internal control over
financial reporting as of July 31, 2010, based on the criteria established in
Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated September 24, 2010 expressed an
unqualified opinion on the Company's internal control over financial
reporting.





/s/
DELOITTE & TOUCHE LLP





New York,
New York


September
24, 2010 (November 10, 2010 as to the effects of the restatement discussed in
Note 1 )




F-1





The Dress
Barn, Inc. and Subsidiaries


Consolidated
Balance Sheets


Amounts
      in thousands, except share and per share data
                      
                      July 31, 2010
                      
                      
                      July 25, 2009ASSETSCurrent
      Assets:Cash
      and cash equivalents
                      
                      $
                      240,641
                      
                      
                      $
                      240,763Restricted
      cash
                      
                      
                      1,355
                      
                      
                      
                      —Investment
      securities (see Note 4)
                      
                      
                      85,088
                      
                      
                      
                      112,998Merchandise
      inventories
                      
                      
                      320,345
                      
                      
                      
                      193,979Deferred
      income taxes
                      
                      
                      21,400
                      
                      
                      
                      —Prepaid
      expenses and other current assets
                      
                      
                      47,254
                      
                      
                      
                      19,041Total
      Current Assets
                      
                      
                      716,083
                      
                      
                      
                      566,781Property
      and Equipment, net (see Note 7)
                      
                      
                      478,086
                      
                      
                      
                      277,913Other
      Intangible Assets, net (see Note 8)
                      
                      
                      185,628
                      
                      
                      
                      104,932Goodwill
      (see Note 8)
                      
                      
                      229,661
                      
                      
                      
                      130,656Investment
      Securities (see Note 4)
                      
                      
                      15,833
                      
                      
                      
                      30,813Deferred
      Income Taxes
                      
                      
                      —
                      
                      
                      
                      3,091Other
      Assets
                      
                      
                      28,828
                      
                      
                      
                      14,986TOTAL
      ASSETS
                      
                      $
                      1,654,119
                      
                      
                      $
                      1,129,172





See notes
to Consolidated Financial Statements





(continued)


F-2





The Dress
Barn, Inc. and Subsidiaries


Consolidated
Balance Sheets


Amounts
      in thousands, except share and per share data
                        
                        July 31, 2010
                        
                        
                        July 25, 2009LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                        
                        $
                        178,722
                        
                        
                        $
                        138,940Accrued
      salaries, wages and related expenses
                        
                        
                        59,692
                        
                        
                        
                        32,116Other
      accrued expenses
                        
                        
                        89,094
                        
                        
                        
                        49,450Customer
      liabilities
                        
                        
                        27,455
                        
                        
                        
                        13,999Income
      taxes payable
                        
                        
                        2,770
                        
                        
                        
                        7,491Deferred
      income taxes (see Note 14)
                        
                        
                        —
                        
                        
                        
                        7,405Current
      portion of long-term debt (see Note 9)
                        
                        
                        1,421
                        
                        
                        
                        1,347Convertible
      Senior Notes (see Note 9)
                        
                        
                        —
                        
                        
                        
                        101,354Total
      Current Liabilities
                        
                        
                        359,154
                        
                        
                        
                        352,102Long-term
      debt (see Note 9)
                        
                        
                        24,617
                        
                        
                        
                        26,062Lease
      related liabilities
                        
                        
                        178,706
                        
                        
                        
                        67,772Deferred
      compensation and other long-term liabilities
                        
                        
                        56,681
                        
                        
                        
                        50,789Deferred
      income taxes (see Note 14)
                        
                        
                        20,294
                        
                        
                        
                        —Total
      Liabilities
                        
                        
                        639,452
                        
                        
                        
                        496,725Commitments
      and Contingencies (see Note 15)Shareholders'
      Equity:Preferred
      stock, par value $0.05 per share:Authorized-
      100,000 shares, Issued and Outstanding- none
                        
                        
                        —
                        
                        
                        
                        —Common
      stock, par value $0.05 per share: Authorized- 165,000,000 shares Issued-
      78,538,562 and 60,237,797 shares, respectively Outstanding- 78,538,562 and
      60,237,797 shares, respectively
                        
                        
                        3,927
                        
                        
                        
                        3,012Additional
      paid-in capital
                        
                        
                        427,227
                        
                        
                        
                        145,277Retained
      earnings
                        
                        
                        589,278
                        
                        
                        
                        493,767Accumulated
      other comprehensive (loss)
                        
                        
                        (4,324
                        )
                        
                        
                        (8,407
                        )Total
      The Dress Barn, Inc. Shareholders’ Equity
                        
                        
                        1,016,108
                        
                        
                        
                        633,649Noncontrolling
      Interest
                        
                        
                        (1,441
                        )
                        
                        
                        (1,202
                        )Total
      Shareholders’ Equity
                        
                        
                        1,014,667
                        
                        
                        
                        632,447TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
                        $
                        1,654,119
                        
                        
                        $
                        1,129,172


See notes
to Consolidated Financial Statements


F-3





The Dress
Barn, Inc. and Subsidiaries


Consolidated
Statements of Operations


Amounts
in thousands, except per share data


Fiscal Year EndedJuly 31,
                        2010
                      
                      
                      July 25,
                        2009
                      
                      
                      July 26,
                        2008Net
      sales
                      
                      $
                      2,374,571
                      
                      
                      $
                      1,494,236
                      
                      
                      $
                      1,444,165Cost
      of sales, including occupancy and buying costs(excluding
      depreciation which is shown separately below)
                      
                      
                      1,395,267
                      
                      
                      
                      918,350
                      
                      
                      
                      885,927Selling,
      general and administrative expenses
                      
                      
                      690,229
                      
                      
                      
                      422,372
                      
                      
                      
                      397,424Depreciation
      and amortization
                      
                      
                      71,618
                      
                      
                      
                      48,535
                      
                      
                      
                      48,200Operating
      income
                      
                      
                      217,457
                      
                      
                      
                      104,979
                      
                      
                      
                      112,614Loss
      on debt extinguishment (see Note 9)
                      
                      
                      (5,792
                      )
                      
                      
                      —
                      
                      
                      
                      —Interest
      income
                      
                      
                      2,258
                      
                      
                      
                      5,394
                      
                      
                      
                      7,817Interest
      expense
                      
                      
                      (6,624
                      )
                      
                      
                      (9,951
                      )
                      
                      
                      (9,577
                      )Other
      income
                      
                      
                      2,049
                      
                      
                      
                      1,062
                      
                      
                      
                      512Earnings
      before provision for income taxes
                      
                      
                      209,348
                      
                      
                      
                      101,484
                      
                      
                      
                      111,366Provision
      for income taxes
                      
                      
                      75,970
                      
                      
                      
                      34,912
                      
                      
                      
                      40,151Net
      earnings
                      
                      $
                      133,378
                      
                      
                      $
                      66,572
                      
                      
                      $
                      71,215Earnings
      per share:Basic
                      
                      $
                      1.85
                      
                      
                      $
                      1.11
                      
                      
                      $
                      1.18Diluted
                      
                      $
                      1.73
                      
                      
                      $
                      1.06
                      
                      
                      $
                      1.10Weighted
      average shares outstanding:Basic
                      
                      
                      72,194
                      
                      
                      
                      60,044
                      
                      
                      
                      60,102Diluted
                      
                      
                      76,997
                      
                      
                      
                      62,990
                      
                      
                      
                      64,467





See notes
to Consolidated Financial Statements


F-4


The
      Dress Barn, Inc. and SubsidiariesCONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE
  INCOME





(Amounts and shares in thousands)
                                                  
                                                  Shares
                                                    Common
                                                    Stock
                                                  
                                                  
                                                  Common
                                                    Stock
                                                  
                                                  
                                                  Additional
                                                    Paid-In
                                                    Capital
                                                  
                                                  
                                                  Retained
                                                    Earnings
                                                  
                                                  
                                                  Treasury
                                                    Stock
                                                  
                                                  
                                                  Accumulated
                                                    Other
                                                    Comprehensive
                                                    (Loss) Income
                                                  
                                                  
                                                  Non-
                                                    controlling
                                                    Interest
                                                  
                                                  
                                                  Total
                                                    Shareholders’
                                                    EquityBalance,
      July 28, 2007
                                                  
                                                  
                                                  61,694
                                                  
                                                  
                                                  $
                                                  3,115
                                                  
                                                  
                                                  $
                                                  126,091
                                                  
                                                  
                                                  $
                                                  405,073
                                                  
                                                  
                                                  $
                                                  (11,849
                                                  )
                                                  
                                                  $
                                                  39
                                                  
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  522,469Net
      earnings
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  71,215
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  71,215Unrealized
      (loss) on investment securities
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (3,078
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (3,078
                                                  )Total
      comprehensive income
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  68,137Adoption
      of ASC 740-10 (FIN 48)
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (4,886
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (4,886
                                                  )Issuance/retirement
      of shares, net
                                                  
                                                  
                                                  54
                                                  
                                                  
                                                  
                                                  3
                                                  
                                                  
                                                  
                                                  (3
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  —Share-based
      compensation expense
                                                  
                                                  
                                                  (2
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  6,581
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  6,581Tax
      benefit from exercise of stock options
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  383
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  383Employee
      Stock Purchase Plan activity
                                                  
                                                  
                                                  23
                                                  
                                                  
                                                  
                                                  1
                                                  
                                                  
                                                  
                                                  307
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  308Shares
      issued pursuant to exercise of stock options
                                                  
                                                  
                                                  225
                                                  
                                                  
                                                  
                                                  11
                                                  
                                                  
                                                  
                                                  1,604
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  1,615Purchase
      of treasury stock
                                                  
                                                  
                                                  (1,634
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (28,330
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (28,330
                                                  )Retirement
      of treasury stock
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (112
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (40,067
                                                  )
                                                  
                                                  
                                                  40,179
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  —Balance,
      July 26, 2008
                                                  
                                                  
                                                  60,360
                                                  
                                                  
                                                  
                                                  3,018
                                                  
                                                  
                                                  
                                                  134,963
                                                  
                                                  
                                                  
                                                  431,335
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  (3,039
                                                  )
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  566,277Net
      earnings
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  66,572
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  66,572Unrealized
      (loss) on investment securities
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (5,368
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (5,368
                                                  )Total
      comprehensive income
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  61,204Implementation
      of ASC 810-10 Noncontrolling  Interest
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  490
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (1,202
                                                  )
                                                  
                                                  
                                                  (712
                                                  )Issuance/retirement
      of shares, net
                                                  
                                                  
                                                  26
                                                  
                                                  
                                                  
                                                  1
                                                  
                                                  
                                                  
                                                  (1
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  —Share-based
      compensation expense
                                                  
                                                  
                                                  (3
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  6,577
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  6,577Tax
      benefit from exercise of stock options
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  863
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  863Employee
      Stock Purchase Plan activity
                                                  
                                                  
                                                  21
                                                  
                                                  
                                                  
                                                  1
                                                  
                                                  
                                                  
                                                  237
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  238Shares
      issued pursuant to exercise of stock options
                                                  
                                                  
                                                  380
                                                  
                                                  
                                                  
                                                  19
                                                  
                                                  
                                                  
                                                  2,638
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  2,657Purchase
      of treasury stock
                                                  
                                                  
                                                  (546
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (4,657
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (4,657
                                                  )Retirement
      of treasury stock
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (27
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (4,630
                                                  )
                                                  
                                                  
                                                  4,657
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  —Balance,
      July 25, 2009
                                                  
                                                  
                                                  60,238
                                                  
                                                  
                                                  
                                                  3,012
                                                  
                                                  
                                                  
                                                  145,277
                                                  
                                                  
                                                  
                                                  493,767
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  (8,407
                                                  )
                                                  
                                                  
                                                  (1,202
                                                  )
                                                  
                                                  
                                                  632,447Net
      earnings
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  133,378
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  133,378Unrealized
      gain on investment  securities
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  4,083
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  4,083Total
      comprehensive income
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  137,461Change
      in noncontrolling interest
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (239
                                                  )
                                                  
                                                  
                                                  (239
                                                  )Issuance/retirement
      of shares, net
                                                  
                                                  
                                                  187
                                                  
                                                  
                                                  
                                                  8
                                                  
                                                  
                                                  
                                                  (8
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  —Share-based
      compensation expense
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  9,966
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  9,966Tax
      benefit from exercise of stock options
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  5,819
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  5,819Employee
      Stock Purchase Plan activity
                                                  
                                                  
                                                  12
                                                  
                                                  
                                                  
                                                  1
                                                  
                                                  
                                                  
                                                  231
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  232Shares
      issued pursuant to exercise of stock options
                                                  
                                                  
                                                  1,638
                                                  
                                                  
                                                  
                                                  82
                                                  
                                                  
                                                  
                                                  14,914
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  14,996Purchase
      of treasury stock
                                                  
                                                  
                                                  (1,550
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (37,944
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (37,944
                                                  )Retirement
      of treasury stock
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (77
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (37,867
                                                  )
                                                  
                                                  
                                                  37,944
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  —Tween
      Merger restricted stock issuance
                                                  
                                                  
                                                  90
                                                  
                                                  
                                                  
                                                  5
                                                  
                                                  
                                                  
                                                  (5
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  —Tween
      Brands, Inc. Merger
                                                  
                                                  
                                                  11,699
                                                  
                                                  
                                                  
                                                  585
                                                  
                                                  
                                                  
                                                  250,598
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  251,1832.5%
      Convertible Senior Notes tender offer (see Note 9)
                                                  
                                                  
                                                  6,225
                                                  
                                                  
                                                  
                                                  311
                                                  
                                                  
                                                  
                                                  (14,338
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (14,027
                                                  )Tax
      benefit from the Convertible Senior Note tender offer
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  14,773
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  14,773Balance,
      July 31, 2010
                                                  
                                                  
                                                  78,539
                                                  
                                                  
                                                  $
                                                  3,927
                                                  
                                                  
                                                  $
                                                  427,227
                                                  
                                                  
                                                  $
                                                  589,278
                                                  
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  (4,324
                                                  )
                                                  
                                                  $
                                                  (1,441
                                                  )
                                                  
                                                  $
                                                  1,014,667See
      notes to Consolidated Financial Statements


F-5


The Dress Barn, Inc. and SubsidiariesConsolidated Statements of Cash FlowsAmounts in thousands
                  
                  Fiscal Year EndedJuly 31,
                    2010
                  
                  
                  July 25,
                    2009
                  
                  
                  July 26,
                    2008Operating
      Activities:Net
      earnings
                  
                  $
                  133,378
                  
                  
                  $
                  66,572
                  
                  
                  $
                  71,215Adjustments
      to reconcile net earnings to net cashprovided
      by operating activities:Depreciation
      and amortization
                  
                  
                  71,618
                  
                  
                  
                  48,535
                  
                  
                  
                  48,200Asset
      impairments and disposals
                  
                  
                  10,720
                  
                  
                  
                  8,291
                  
                  
                  
                  4,110Deferred
      taxes
                  
                  
                  14,722
                  
                  
                  
                  941
                  
                  
                  
                  8,120Deferred
      rent and other occupancy costs
                  
                  
                  (18,135
                  )
                  
                  
                  (4,120
                  )
                  
                  
                  (4,606
                  )Share-based
      compensation
                  
                  
                  9,966
                  
                  
                  
                  6,577
                  
                  
                  
                  6,612Loss
      on debt extinguishment (see Note 9)
                  
                  
                  5,792
                  
                  
                  
                  —
                  
                  
                  
                  —Excess
      tax benefits from share-based compensation
                  
                  
                  (5,819
                  )
                  
                  
                  (863
                  )
                  
                  
                  (383
                  )Amortization
      of debt issuance cost
                  
                  
                  1,071
                  
                  
                  
                  574
                  
                  
                  
                  555Amortization
      of convertible senior notes discount
                  
                  
                  2,604
                  
                  
                  
                  4,935
                  
                  
                  
                  4,563Amortization
      of bond premium cost
                  
                  
                  405
                  
                  
                  
                  624
                  
                  
                  
                  415Cash
      surrender value of life insurance
                  
                  
                  (558
                  )
                  
                  
                  907
                  
                  
                  
                  732Net
      realized (gain) loss on sales of securities
                  
                  
                  (158
                  )
                  
                  
                  153
                  
                  
                  
                  304Gift
      card breakage
                  
                  
                  (2,772
                  )
                  
                  
                  (1,788
                  )
                  
                  
                  (2,184
                  )Investment
      impairment
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,069Other
                  
                  
                  (310
                  )
                  
                  
                  18
                  
                  
                  
                  238Changes
      in assets and liabilities:Merchandise
      inventories
                  
                  
                  (10,156
                  )
                  
                  
                  (6,574
                  )
                  
                  
                  10,160Prepaid
      expenses and other current assets
                  
                  
                  828
                  
                  
                  
                  (1,629
                  )
                  
                  
                  (11,953
                  )Other
      assets
                  
                  
                  1,825
                  
                  
                  
                  3,098
                  
                  
                  
                  5,247Accounts
      payable
                  
                  
                  10,260
                  
                  
                  
                  17,856
                  
                  
                  
                  (12,718
                  )Accrued
      salaries, wages and related expenses
                  
                  
                  9,227
                  
                  
                  
                  4,182
                  
                  
                  
                  (2,128
                  )Other
      accrued expenses
                  
                  
                  (7,569
                  )
                  
                  
                  227
                  
                  
                  
                  (96
                  )Customer
      liabilities
                  
                  
                  4,684
                  
                  
                  
                  965
                  
                  
                  
                  1,865Income
      taxes payable
                  
                  
                  (4,721
                  )
                  
                  
                  13,785
                  
                  
                  
                  1,642Lease
      related liabilities
                  
                  
                  7,698
                  
                  
                  
                  9,901
                  
                  
                  
                  13,157Deferred
      compensation and other long-term liabilities
                  
                  
                  (3,163
                  )
                  
                  
                  (476
                  )
                  
                  
                  1,319Total
      adjustments
                  
                  
                  98,059
                  
                  
                  
                  106,119
                  
                  
                  
                  74,240Net
      cash provided by operating activities
                  
                  
                  231,437
                  
                  
                  
                  172,691
                  
                  
                  
                  145,455





See notes
to Consolidated Financial Statements





(continued)





F-6


The Dress
Barn, Inc. and Subsidiaries


Consolidated
Statements of Cash Flows


Amounts
in thousands





Fiscal Year EndedJuly 31,
                      2010
                    
                    
                    July 25,
                      2009
                    
                    
                    July 26,
                      2008Investing
      Activities:Merger
      with Tween Brands, net of cash $83,730 (see Note 2)
                    
                    
                    82,754
                    
                    
                    
                    —
                    
                    
                    
                    —Cash
      paid for property and equipment
                    
                    
                    (65,179
                    )
                    
                    
                    (58,428
                    )
                    
                    
                    (66,097
                    )Change
      in restricted cash
                    
                    
                    160
                    
                    
                    
                    —
                    
                    
                    
                    —Redemption
      of available-for-sale investment securities
                    
                    
                    133,153
                    
                    
                    
                    96,342
                    
                    
                    
                    307,902Purchases
      of available-for-sale investment securities
                    
                    
                    (78,330
                    )
                    
                    
                    (95,427
                    )
                    
                    
                    (285,354
                    )Sale
      of trading investment securities
                    
                    
                    7,150
                    
                    
                    
                    —
                    
                    
                    
                    —Investment
      in life insurance policies
                    
                    
                    (3,321
                    )
                    
                    
                    (177
                    )
                    
                    
                    (2,108
                    )Purchases
      of long-term investments
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (590
                    )Proceeds
      from an insurance settlement
                    
                    
                    —
                    
                    
                    
                    733
                    
                    
                    
                    —Net
      cash provided by (used in) investing activities
                    
                    
                    76,387
                    
                    
                    
                    (56,957
                    )
                    
                    
                    (46,247
                    )Financing
      Activities:Repayments
      of Tween Brands long-term debt in connection with the Merger (see Note
      2)
                    
                    
                    (162,915
                    )
                    
                    
                    —
                    
                    
                    
                    —Repayments
      of long-term debt
                    
                    
                    (1,371
                    )
                    
                    
                    (1,298
                    )
                    
                    
                    (1,211
                    )Purchase
      of treasury stock
                    
                    
                    (37,944
                    )
                    
                    
                    (4,657
                    )
                    
                    
                    (40,179
                    )Convertible
      Senior Notes tender offer (see Note 9)
                    
                    
                    (122,406
                    )
                    
                    
                    —
                    
                    
                    
                    —Payment
      of deferred financing costs
                    
                    
                    (4,357
                    )
                    
                    
                    —
                    
                    
                    
                    —Proceeds
      from employee stock purchase plan purchases
                    
                    
                    232
                    
                    
                    
                    238
                    
                    
                    
                    277Excess
      tax benefits from share-based compensation
                    
                    
                    5,819
                    
                    
                    
                    863
                    
                    
                    
                    383Proceeds
      from stock options exercised
                    
                    
                    14,996
                    
                    
                    
                    2,657
                    
                    
                    
                    1,615Net
      cash used in financing activities
                    
                    
                    (307,946
                    )
                    
                    
                    (2,197
                    )
                    
                    
                    (39,115
                    )Net
      increase (decrease) in cash and cash equivalents
                    
                    
                    (122
                    )
                    
                    
                    113,537
                    
                    
                    
                    60,093Cash
      and cash equivalents- beginning of year
                    
                    
                    240,763
                    
                    
                    
                    127,226
                    
                    
                    
                    67,133Cash
      and cash equivalents- end of year
                    
                    $
                    240,641
                    
                    
                    $
                    240,763
                    
                    
                    $
                    127,226Supplemental
      Disclosure of Cash Flow Information:Cash
      paid for income taxes
                    
                    $
                    72,869
                    
                    
                    $
                    20,016
                    
                    
                    $
                    37,506Cash
      paid for interest
                    
                    $
                    2,858
                    
                    
                    $
                    4,365
                    
                    
                    $
                    4,431Accrual
      for capital expenditures
                    
                    $
                    6,470
                    
                    
                    $
                    5,718
                    
                    
                    $
                    7,781Issuance
      of common stock for Tween Brands Merger
                    
                    $
                    251,183
                    
                    
                    $
                    —
                    
                    
                    $
                    —Issuance
      of common stock for convertible senior note tender offer
                    
                    $
                    156,400
                    
                    
                    $
                    —
                    
                    
                    $
                    —





See notes
to Consolidated Financial Statements





F-7


The
Dress Barn, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements





1. Summary of Significant Accounting
Policies





Business





The Dress
Barn, Inc. and its wholly-owned subsidiaries (the “Company,” “we,” “our,” or
similar terms) operate a chain of women's apparel and tween girls’ specialty
stores.  The stores operate principally under the names "dressbarn",  “maurices” and since our
November 2009 Merger with Tween Brands, Inc. (“Justice Merger”), “Justice”.  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.  Our Justice stores feature
furniture, fixtures, lighting and music to create a shopping experience matching
the energetic lifestyle of “our girl”.  Justice targets girls who are
ages 7 to 14.





Fiscal
Year





Statements
that are about our fiscal 2010 refer to the 53-week period ended July 31, 2010,
fiscal 2009 refer to the 52-week period ended July 25, 2009, and fiscal 2008
refer to the 52-week period ended July 26, 2008.  Fiscal 2011 refers
to our 52-week period that will end on July 30, 2011.  Our fiscal year
always ends on the last Saturday in July.




Restatement
      of Footnote InformationSubsequent to the
      issuance of our Fiscal 2010 consolidated financial statements, we
      determined that we needed to correct our footnotes as
    follows:1.
                  Amended
      note 2 of our consolidated financial statements to correct immaterial
      errors in the unaudited pro forma financial information presented for
      Fiscal 2010, and2.
                  Included
      additional disclosure in a) note 3 of our consolidated financial
      statements regarding the cumulative effect of the change in accounting
      principle on periods prior to those presented that was not material to our
      consolidated financial statements; and b) note 9 of our consolidated
      financial statements regarding the fair value of the convertible senior
      notes tendered and what the note holders were entitled to receive and
      regarding the financial covenants contained in our revolving credit
      agreement and our compliance with such
  covenants.
  Ongoing and Fiscal 2011 Business
Initiatives





We
continue to focus on a number of ongoing initiatives that impact our corporate
structure and which include, but are not limited to:





Corporate Reorganization and
Potential Corporate Name Change


We are
currently planning a potential corporate reorganization and name change. In our
planned reorganization, each of our dressbarn, maurices and Justice brands would become
subsidiaries of a new Delaware corporation named Ascena Retail Group, Inc., or
Ascena, and Dress Barn shareholders would become stockholders of this new
Delaware holding company on a one-for-one basis, holding the same number of
shares and same ownership percentage after the reorganization as they held
immediately prior to the reorganization.  The reorganization generally
would be tax-free for Dress Barn shareholders.  Shareholders of record
on October 8, 2010 will be entitled to attend and vote at the annual meeting to
approve the reorganization, which will be more fully described in the proxy
statement/prospectus relating to the meeting. Refer to Note 19 for more
information.





Recognizing the numerous
potential synergies between our segments


Our
distribution center in Suffern, New York will be consolidated into our
distribution center in Etna Township, Ohio during fiscal 2011.





In
addition to our distribution center, we are currently working to consolidate our
information technology departments.  This project will combine
multiple IT resources, including our data centers.  We expect this
will enable us to better serve the business needs of each of our
brands.





E-Commerce


E-Commerce
revenue is currently generated by both the maurices segment and Justice
segment.  E-commerce sales of products, ordered through our retail
internet site are recognized upon estimated delivery and receipt of the shipment
by the customers.  E-commerce revenue is also reduced by an estimate
of returns and excludes sales taxes. Total E-commerce net sales were $36.2
million for the Company (approximately $27.0 million for Justice and $9.2 million for
maurices).  During
the first quarter of fiscal 2011, we launched our dressbarn segment e-commerce
operations.


F-8




Basis
of Financial Statement Presentation





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





Principles
of Consolidation





The
consolidated financial statements include the accounts of the Company and our
subsidiaries.  All intercompany balances and transactions are
eliminated in consolidation.





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





Use
of Estimates





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





Revenue
Recognition





Revenues
from retail sales, net of estimated returns, are recognized at the point of sale
upon delivery of the merchandise to the customer and exclude sales
taxes.  The maurices segment charges its
customers a small fee to offset shipping costs to move product from store to
store for special order transactions.  Amounts related to shipping and
handling, billed to customers as part of a sales transaction, are classified as
revenue.  With the Justice segment, direct sales,
through our catazine and website, are recorded upon customer
receipt.  Amounts relating to shipping and handling billed to
customers in a sale transaction are classified as revenue.  Related
shipping and handling costs are reflected in cost of goods sold, buying and
occupancy costs.  We record a reserve for estimated product returns
when sales are recorded based on historical return trends and are adjusted for
known events, as applicable.  The changes in the sales return reserve
are summarized below:





(amounts in thousands)
                  
                  Fiscal Year EndedJuly 31, 2010
                  
                  
                  July 25, 2009
                  
                  
                  July 26, 2008Balance
      at beginning of period
                  
                  $
                  1,856
                  
                  
                  $
                  1,714
                  
                  
                  $
                  1,571Justice balance at
      merger
                  
                  
                  8,958
                  
                  
                  
                  —
                  
                  
                  
                  —Additions
      – charge to income
                  
                  
                  11,248
                  
                  
                  
                  7,762
                  
                  
                  
                  7,694Adjustments
      and/or deductions
                  
                  
                  (17,278
                  )
                  
                  
                  (7,620
                  )
                  
                  
                  (7,551
                  )Balance
      at end of period
                  
                  $
                  4,784
                  
                  
                  $
                  1,856
                  
                  
                  $
                  1,714





TheJustice segment earns
licensing revenue from its international franchised stores and partner revenue
from advertising and other “tween-right” marketing initiatives with partner
companies.  International franchise revenue is primarily comprised of
the merchandise sales to our international franchise, payment for marketing
materials produced in-house and the royalty payments received in relation to the
use of the Justice trade
name.  Justice
recognizes the revenue when the merchandise has shipped to the international
franchises.  A cost of sales is recorded related to the
merchandise.  Partner revenue is related to marketing deals with our
“tween-right” partners.  We will recognize revenue when earned
according to the contract terms.  Licensing revenue was approximately
$7.0 million (international revenue $5.2 million and partner revenue $1.8
million) and was less than 1% of fiscal 2010 net sales.





Justice recognizes revenue for
merchandise sold to discount third parties.  Justice will blackline
marked-out-of-stock items in order to sell the merchandise.  Justice will also use its
sourcing office to create items for sale directly to the discount
vendors.  The revenue is recognized upon shipment to the third
party.  Total sell-off revenue was approximately $3.5
million.


F-9





Gift
Card Breakage





Sales
from purchases made with gift cards and gift certificates or by layaways are
recorded when the customer takes possession of the merchandise.  Gift
cards, gift certificates and merchandise credits (collectively “gift cards”) do
not have expiration dates.  We recognize income on unredeemed gift
cards (“gift card breakage”) when it can be determined that the likelihood of
the remaining balances being redeemed are remote and that there are no legal
obligations to remit the remaining balances to relevant
jurisdictions.  Prior to fiscal 2007, we were unable to reliably
estimate such gift card breakage and therefore recorded no such income in fiscal
2006, or prior years.  During the fourth quarter of fiscal 2007, we
accumulated a sufficient level of historical data to determine an estimate of
gift card breakage for the first time.  Gift card breakage is included
in net sales in the Consolidated Statements of Operations.  During
fiscal 2010, we recognized $2.7 million of breakage income related to unredeemed
gift cards which included $1.1 million for dressbarn, $0.4 million for
mauricesand $1.2
million for Justice.  During
fiscal 2009, we recognized $1.8 million of breakage income related to unredeemed
gift cards which included $1.3 million for dressbarn and $0.5 million for
maurices.





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





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





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses (“SG&A”) consist of compensation and
employee benefit expenses, other than for our design and sourcing teams, our
buyers and our distribution centers personnel.  Such compensation and
employee benefit expenses include salaries, incentives, share-based compensation
and related benefits associated with our stores and corporate headquarters,
except as previously noted.  Selling, general and administrative
expenses also include advertising costs, supplies for our stores and home
office, communication costs, travel and entertainment, leasing costs and
services purchased.  See Note 17 for additional
information.





Segments





Our
reportable segments are the dressbarn brands, maurices brands and Justice brands.  Our
dressbarn brand is used
in 833 stores in 47 states as of July 31, 2010.  Our  maurices brand, is used in 757
stores in 44 states as of July 31, 2010 and our Justicebrand is used in887 stores and 46 states
as of July 31, 2010.  Justice also has 34
international franchise stores located in the following
countries:  Bahrain, Jordan, Kuwait, Qatar, Russia, Saudi Arabia and
the United Arab Emirates.  See Note 17 for additional
information.





Cash
and Cash Equivalents





We
consider highly liquid investments with maturities of three months or less when
purchased to be cash equivalents.  These amounts are stated at cost,
which approximates market value.  We also consider receivables related
to credit card purchases to be equivalent to cash.  The majority of
our money market funds at July 31, 2010 were maintained with one financial
institution.  We maintain our cash deposits and cash equivalents with
well-known and stable financial institutions.  However, we have
significant amounts of cash and cash equivalents at these financial institutions
that are in excess of federally insured limits.  This represents a
concentration of credit risk.  With the current financial environment
and the instability of financial institutions we cannot be assured that we will
not experience losses on our deposits, however, we have not experienced any
losses on our deposits of cash and cash equivalents to date.




F-10





Investment
securities





We have
categorized our auction rate securities as available for sale and trading
securities, stated at market value.  The unrealized holding gains and
losses on available for sale securities are included in other comprehensive
income, a component of shareholders’ equity, until realized.  The
amortized cost is adjusted by the amortization of premiums and discounts to
maturity, with the net amortization included in interest
income.  During third quarter of fiscal 2008, we classified a portion
of our auction rate securities (“ARS”) as long-term.  We believe this
classification is still appropriate for our fiscal 2009 and fiscal 2010
Consolidated Balance Sheets based on our belief that the market for these
instruments may take in excess of 12 months to fully recover due to the current
disruptions in the credit markets.  We currently believe that this
temporary decline in fair value is due entirely to liquidity issues, because the
underlying assets for the vast majority of ARS are backed by the U.S.
government.  We make periodic assessments of investment impairment to
assess whether the impairment are other than temporary.  Management
believes that our available working capital, excluding the funds held in ARS,
will be sufficient to meet our cash requirements for at least the next 12
months.  See Note 4 for additional information.





Merchandise
Inventories





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





Property
and Equipment





Property
and equipment that is purchased is carried at cost less accumulated
depreciation.  Property and equipment acquired are carried at fair
value less accumulated depreciation.  Depreciation is calculated using
the straight-line method over the estimated useful lives:





Buildings
                
                25-
      40 yearsBuilding
      equipment and heavy machinery
                
                20
      yearsLeasehold
      improvements
                
                10
      years or term of lease, if shorterFurniture,
      fixtures, and equipment
                
                7- 10
      yearsInformational
      technology
                
                3-
      7 years




For
leases with renewal periods at our option, we generally use the original lease
term, excluding renewal option periods to determine estimated useful lives; if
failure to exercise a renewal option imposes an economic penalty to us,
management determines at the inception of the lease that renewal is reasonably
assured and includes the renewal option period in the determination of
appropriate estimated useful lives.  The costs of repairs and
maintenance are expensed when incurred, while expenditures for refurbishments
and improvements that significantly add to the productive capacity or extend the
useful life of an asset are capitalized.  See Note 7 for additional
information.





When
assets are sold or retired, the related cost and accumulated depreciation are
removed from their respective accounts and any resulting gain or loss is
recorded to selling, general and administrative expenses.




F-11




Impairment
of Long-Lived Assets





Long-lived
tangible assets are accounted for under ASC 360-10, Property, Plant and
Equipment.  We primarily invest in property and equipment in
connection with the opening and remodeling of stores.  When facts and
circumstances indicate that the carrying values of such long-lived assets may be
impaired, an evaluation of recoverability is performed by comparing the carrying
values of the assets to undiscounted projected future cash flows, in addition to
other quantitative and qualitative analyses.  Upon indication that the
carrying values of such assets may not be recoverable, we recognize an
impairment loss to write down the cost of the asset group to its fair value
against current operations.  Property and equipment assets are grouped
at the lowest level for which there is identifiable cash flows when assessing
impairment, which is the individual store level.  Judgments made by us
related to the expected useful lives of long-lived assets and our ability to
realize undiscounted cash flows in excess of the carrying amounts of such assets
are affected by factors such as the ongoing maintenance and improvements of the
assets, changes in economic conditions and changes in operating
performance.  In addition, we regularly evaluate our computer-related
and other assets for recoverability.  Based on the review of certain
underperforming stores, we recorded impairment charges and store closing
expenses of $8.7 million, $6.3 million and $4.1 for fiscal 2010, 2009 and 2008,
respectively, that are included in selling, general and administrative
expenses.  These impairment losses reflect the amount of book value
over estimated fair market value of store related assets.  Refer to
Note 5 and Note 7 for additional information.





Costs
of Computer Software





We
capitalize certain costs associated with computer software developed or obtained
for internal use in accordance the FASB accounting guidance of Accounting
Standards Codification No. 350-40, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use.  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 ASC 350-40 are
met.  We expense those costs that are associated with preliminary
stage activities, training, maintenance and all other post-implementation stage
activities as they are incurred.  We amortize all costs capitalized in
connection with internal use computer software projects on a straight-line basis
over the useful life of the asset, usually 3 to 7 years, beginning when the
software is ready for its intended use.





Insurance
Reserves





We use a
combination of insurance and self-insurance mechanisms to provide for the
potential liabilities for workers’ compensation and employee healthcare
benefits.  Liabilities associated with the risks that are retained by
us are estimated, in part, by considering historical claims experience,
demographic factors, severity factors and other actuarial
assumptions.  Such liabilities are capped through the use of stop loss
contracts with insurance companies.  The estimated accruals for these
liabilities could be significantly affected if future occurrences and claims
differ from these assumptions and historical trends.  As of July 31,
2010 and July 25, 2009, these reserves were $14.6 million and $10.4
million, respectively.  We are subject to various claims and
contingencies related to insurance and other matters arising out of the normal
course of business.  We are self-insured for expenses related to our
employee medical and dental plans, and our workers’ compensation plan, up to
certain thresholds.  Claims filed, as well as claims incurred but not
reported, are accrued based on management’s estimates, using information
received from plan administrators, historical analysis and other relevant
data.  We have stop-loss insurance coverage for individual claims in
excess of $250,000 at dressbarn and maurices and $200,000 at Justice.  We believe
our accruals for claims and contingencies are adequate based on information
currently available.  However, it is possible that actual results
could significantly differ from the recorded accruals for claims and
contingencies.





Income
Taxes





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





We
adopted Accounting Standards Codification (“ASC”) 740-10, Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109, on July 29, 2007,
the first day of fiscal 2008. We recorded the cumulative effect of applying
ASC 740-10 of $4.9 million as an adjustment to the opening balance of retained
earnings on July 29, 2007, the first day of our fiscal 2008.  See Note
14 for additional information.




F-12





Goodwill
and Other Intangible Assets





On
November 25, 2009, we completed our Merger with Tween Brands, Inc.  We
accounted for the acquisition as a purchase and, accordingly, the excess
purchase price over the fair market value of the underlying net assets acquired,
or $99.0 million, was allocated to goodwill.  Goodwill amortization
for this transaction is not deductible for tax purposes.  In
conjunction with the Merger, we acquired “Justice” brand trademarks and
service marks, including the mark “Justice”, which is used to
identify merchandise and services.  Certain of these marks are
registered with the U.S. Patent and Trademark Office and certain foreign
jurisdictions in which we conduct business.  These marks are important
to us, and we intend to, directly or indirectly, maintain and protect these
marks and their registrations.





Other
identifiable intangible assets consist of customer relationships and proprietary
technology.  Trade names and franchise rights were determined to have
an indefinite life and therefore are not amortized.  Customer
relationships, proprietary technology and defensive assets constitute our
identifiable intangible assets subject to amortization, which are amortized over
their useful lives on a straight line basis.  A fair value was not
assigned to the customer relationships from the Justice Merger because under
the valuation analysis income approach the value of the customer loyalty and the
resulting relationship was offset by the costs associated with the
asset.





We also
acquired favorable leases of $7.0 million classified in the long-term section
under “Other Assets” in our balance sheet.  Favorable lease rights are
amortized over the favorable lease term and assessed for impairment in
accordance with ASC 350-35.





In
accordance with the FASB accounting guidance on goodwill and intangible assets,
the amortization of goodwill and indefinite-life intangible assets is replaced
with annual impairment tests.  We perform an impairment test at least
annually in our fiscal month of June or whenever we identify certain triggering
events that may indicate impairment.  We assess the fair value of our
indefinite-lived intangible assets, such as trade names, using a discounted cash
flow model based on royalties estimated to be derived in the future use of the
asset if we were to license the use of the assets.  An impairment
charge for indefinite-lived intangible assets is recorded if the carrying amount
of an indefinite-lived intangible asset exceeds the estimated fair value on the
measurement date.  During the first quarter of fiscal 2010, we
performed an interim impairment analysis and concluded that the book value of
the Studio Y trade name exceeded the fair value.  As a result, we
recorded a non-cash impairment charge in the amount of $2.0 million in selling,
general and administrative expenses in the first quarter of fiscal
2010.  For testing purposes, the fair value was estimated based on
projections of future years’ operating results and associated cash
flows.  Should the improved operating results reflected in these
projections not materialize, future impairment charges may be
required.





The
goodwill impairment test is a two-step impairment test.  In the first
step, we determine the fair value of our reporting units using a combination of
a discounted cash flow approach and a market value approach.  The
discounted cash flow approach uses projections of estimated operating results
and cash flows and applies a weighted-average cost of capital that reflects
current market conditions.  A key assumption in our fair value
estimate is the weighted average cost of capital used for discounting our cash
flow projections.  We believe the rate we used is consistent with the
risks inherent in our business and with the retail industry.  The
market value approach estimates fair value by applying cash flow multiples to
the operating performance.  The multiples are derived from comparable
publicly traded companies with similar operating characteristics.  If
the fair value exceeds the carrying value of the net assets, goodwill is not
impaired and we are not required to perform further testing.  If the
carrying value of the net assets exceeds the fair value, we must perform the
second step in order to determine the implied fair value of the goodwill and
compare it to the carrying value of the goodwill.  The activities in
the second step include valuing the tangible and intangible assets and
liabilities based on their fair value and determining the fair value of the
impaired goodwill based upon the residual of the summed identified tangible and
intangible assets and liabilities.  The evaluation of goodwill
requires us to use significant judgments and estimates, including but not
limited to market multiples, projected future revenues and expenses, changes in
gross margins, cash flows, and estimates of future capital
expenditures.  Our estimates may differ from actual results due to,
among other things, economic conditions, changes to our business model, or
changes in operating performance.  Significant differences between
these estimates and actual results could result in future impairment charges and
could materially affect our future financial results.  There were no
cumulative goodwill impairment losses to date.  See Note 8 for
additional information.





Trademarks
that have been determined to have indefinite lives are also not subject to
amortization and are reviewed at least annually for potential impairment, as
mentioned above.  The fair value of our trademarks are estimated and
compared to their carrying value.  We estimate the fair value of these
intangible assets based on an income approach using the relief-from-royalty
method.  This methodology assumes that, in lieu of ownership, a third
party would be willing to pay a royalty in order to exploit the related benefits
of these types of assets.  This approach is dependent on a number of
factors, including estimates of future sales, royalty rates in the category of
intellectual property, discount rates, and other variables. Significant
differences between these estimates and actual results could materially affect
our future financial results.  See Note 8 for additional
information.


F-13





As the
retail industry continues to be materially impacted by the deterioration of the
U.S. economic environment, we may be required to perform interim tests of
impairment on our goodwill and intangible assets which may result in significant
charges.





Store
Preopening Costs





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





Marketing
and Advertising Costs





Marketing
and advertising costs are included in selling, general and administrative
expenses and are expensed the first time the advertising campaign takes
place.  Marketing and advertising expenses were $50.3 million for
fiscal 2010, $24.5 million for fiscal 2009, and $25.1 million for fiscal
2008.  The increase in marketing expenses for fiscal 2010 was
primarily due to the inclusion of Justice from the merger date
of November 25, 2009 to the end of the fiscal year.





Operating
Leases





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





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





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





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





Unfavorable
lease liabilities





As part
of the Justice Merger we
recorded a liability for unfavorable leases of $120.7 million that are being
amortized over their respective lease terms.  See Note 2 to the
Consolidated Financial Statements.





Comprehensive
Income





Accumulated
Other Comprehensive (loss) income (“AOCI”) is calculated in accordance with FASB
accounting guidance.  Cumulative unrealized gains and losses on
available-for-sale investment securities are reflected as AOCI in Shareholders’
Equity.  See Note 10 for additional information.





Share-Based
Compensation





The
Company accounts for share-based awards in accordance with ASC 718-10, Compensation-Stock
Compensation.  ASC-718-10 requires the Company to calculate the
grant-date fair value and recognize that calculated value as compensation
expense over the vesting period, adjusted for estimated
forfeitures.  Our calculation of share-based compensation expense
requires the input of highly subjective assumptions, including the expected term
of the share-based awards, stock price volatility, and pre-vesting
forfeitures.  We estimate the expected life of shares granted in
connection with share-based awards based on historical exercise patterns, which
we believe are representative of future behavior.  We estimate the
volatility of our common stock at the date of grant based on an average of our
historical volatility and the implied volatility of publicly traded options on
our common stock.  The assumptions used in calculating the fair value
of share-based awards represent our best estimates, but these estimates involve
inherent uncertainties and the application of management judgment.  As
a result, if factors change and we were to use different assumptions, our
share-based compensation expense could be materially different in the
future.  In addition, we are required to estimate the expected
forfeiture rate and only recognize expense for those shares expected to
vest.  We estimate the forfeiture rate based on historical experience
of share-based awards granted, exercised and cancelled, as well as considering
future expected behavior.  If the actual forfeiture rate is materially
different from our estimate, share-based compensation expense could be different
from what we have recorded in the current period.  See Note 16 for
additional information.


F-14





Fair
Value of Financial Instruments





ASC
825-10,Financial
Instruments, requires management to disclose the estimated fair value of
certain assets and liabilities defined by ASC 825-10 as financial instruments.
 At July 31, 2010 and July 25, 2009, management believes that the
carrying value of cash and cash equivalents, receivables and payables
approximates fair value, due to the short maturity of these financial
instruments.  See Note 5 and Note 6 for additional
information.





Fair
value of non-financial instruments





On
July 26, 2009, we adopted the provisions of the fair value measurement
accounting and disclosure guidance related to non-financial assets and
liabilities recognized or disclosed at fair value on a nonrecurring
basis.  Assets and liabilities subject to this new guidance primarily
include goodwill and indefinite-lived intangible assets measured at fair value
for impairment assessments, long-lived assets measured at fair value for
impairment assessments and non-financial assets and liabilities measured at fair
value in business combinations.  The adoption of this new guidance did
not have a material impact on our financial position, results of operations or
cash flows for the periods presented.  Refer to Note 5 and Note 6 for
additional information.





Treasury
(Reacquired) Shares





Shares
repurchased are retired and treated as authorized but unissued shares, with the
cost of the reacquired shares recorded in retained earnings and the par value
recorded in common stock.  See Note 11 to the Consolidated Financial
Statements.





Recent
Accounting Pronouncements


Recently
Adopted





In
December 2007, the Financial Accounting Standards Board
(“FASB”)  issued new accounting guidance on business
combinations.  The guidance establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired.  The accounting
guidance also establishes disclosure requirements that will enable users to
evaluate the nature and financial effects of the business
combination.  This guidance is effective as of the beginning of an
entity’s fiscal year that begins after December 15, 2008 (our fiscal
2010).  We applied this guidance to the Justice Merger, which was
completed on November 25, 2009.





In
February 2008, the FASB issued new accounting guidance on fair value measurement
for nonfinancial assets and liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually).  This guidance became effective beginning with our
fiscal year 2010.  The adoption of the new guidance did not have a
material impact on our consolidated financial position, results of operations or
cash flows.





In April
2008, the FASB issued new accounting guidance on intangible
assets.  This guidance amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset.  The objective of this guidance is to
improve the consistency between the useful life of a recognized intangible asset
and to improve the period of expected cash flows used to measure the fair
value.  The guidance applies to all intangible assets, whether
acquired in a business combination or otherwise, and shall be effective for
financial statements issued for fiscal years beginning after December 15, 2008
(our fiscal 2010), and interim periods within those fiscal years and should be
applied prospectively to intangible assets acquired after the effective
date.  Early adoption is prohibited.  The adoption of this
new guidance did not have a material impact on our consolidated financial
position, results of operations or cash flows.





In
August 2009, the FASB issued authoritative guidance for measuring
liabilities at fair value that reaffirms the previously existing definition of
fair value and reintroduces the concept of entry value into the determination of
fair value of liabilities.  This guidance became effective for the
first reporting period, including interim periods, beginning after issuance (our
second quarter of fiscal 2010).  The guidance provides clarification
that in circumstances in which a quoted market price in an active market for an
identical liability is not available, an entity is required to measure fair
value using a valuation technique that uses the quoted price of an identical
liability when traded as an asset or, if unavailable, quoted prices for similar
liabilities or similar assets when traded as assets.  If none of this
information is available, an entity should use a valuation technique in
accordance with existing fair valuation principles.  The adoption of
this new guidance did not have a material impact on our consolidated financial
position, results of operations or cash flows.





In
January 2010, the FASB issued updated authoritative guidance for fair value
measurements.  The guidance requires new disclosures for significant
transfers in and out of Level 1 and 2 of the fair value hierarchy and the
activity within Level 3 of the fair value hierarchy.  The updated
guidance also clarifies existing disclosures regarding the level of
disaggregation of assets or liabilities and the valuation techniques and inputs
used to measure fair value.  The updated guidance is effective for
interim and annual reporting periods beginning after December 15, 2009,
with the exception of the new Level 3 activity disclosures, which are effective
for interim and annual reporting periods beginning after December 15,
2010.  We adopted the applicable disclosure requirements beginning in
the third quarter of our fiscal 2010.  The adoption of this new
guidance did not have a material impact on our consolidated financial position,
results of operations or cash flows.





F-15


In
February 2010, the FASB amended its guidance on subsequent events.  The
amendment states that entities that are required to file or furnish their
financial statements with the SEC are no longer required to disclose the date
through which the entity has evaluated subsequent events.  The updated
guidance was effective upon issuance.  We adopted this guidance during
the second quarter of fiscal 2010.  The adoption of this new guidance did
not have a material impact on our consolidated financial position, results of
operations or cash flows.




Recently
Issued




In April
2010, the FASB amended accounting guidance on share-based payment awards
denominated in certain currencies.  The amendment clarifies that an
employee share-based payment award with an exercise price denominated in the
currency of a market in which a substantial portion of the entity’s equity
securities trade should not be considered to contain a condition that is not a
market, performance or service condition, and, therefore, would not require
classification as a liability if the award otherwise qualifies as
equity.  This amendment is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2010
(our fiscal 2011).  Early adoption is permitted.  We do not expect the
implementation to have a material impact on our financial position, results of
operations or cash flows.





2.  Merger
with Tween Brands, Inc.





On
November 25, 2009, we completed the Merger with Tween Brands, Inc., a Delaware
corporation (“Tween Brands”), pursuant to the Agreement and Plan of Merger,
dated June 24, 2009 (the “Merger Agreement”).  Pursuant to the Merger
Agreement, we are the acquirer, with one of our subsidiaries merging with Tween
Brands, Inc. in a stock-for-stock transaction (the “Merger”).  As a
result of the Merger, Tween Brands became a wholly owned subsidiary of Dress
Barn.  The Merger was approved by the stockholders of Tween Brands at
a special meeting of stockholders held on November 25, 2009.  The
Merger became effective on November 25, 2009.  We consummated the
Merger with Tween Brands for a variety of reasons, including the opportunity to
capitalize on the strength of its brand awareness, to leverage the utilization
of combined infrastructure and personnel and to expand into the girls age 7 to
14, or “tween”, market.





As
provided in the Merger Agreement, each share of Tween Brands’ common stock, par
value $.01 per share (“Tween Brands Common Stock”), issued and outstanding
immediately prior to the effective time of the Merger, was converted into the
right to receive 0.47 shares of our common stock, par value $.05 per share, for
a total of 11.7 million shares of our common stock issued, plus cash in lieu of
fractional shares of our common stock in the amount of $0.2
million.  In addition, as provided in the Merger Agreement, all
options to purchase Tween Brands Common Stock that were outstanding and
unexercised at the effective time of the Merger were cancelled and automatically
converted into the right to receive a lump sum cash payment (without interest),
equal to (i) the amount, if any, by which the measurement value, as defined in
the Merger Agreement, exceeded the per share exercise price of the stock option,
multiplied by (ii) the number of shares of Tween Brands Common Stock issuable
upon exercise of the stock option (whether such option was vested or
unvested).  Any Tween Brands stock option with an exercise price equal
to or greater than the measurement value was cancelled without
consideration.  We paid an aggregate of $0.8 million in cash with
respect to all such options.





In
addition, at the effective time of the Merger, the vesting of each share of
Tween Brands restricted stock was accelerated, and each such share was converted
into the right to receive 0.47 shares of our common stock.  These
shares were treated as a pre-Merger expense by Tween Brands.  In
addition, we repaid bank debt and accrued interest of $162.9
million.





Tween
Brands operates Justice,
apparel specialty stores targeting girls who are ages 7 to 14.  We
refer to the post-Merger operations of Tween Brands as “Justice”.


F-16




The
Company’s consolidated financial statements include Justice’s results of
operations from November 25, 2009, the effective date of the
Merger.  The following are Justice’s results included in
our Consolidated Statements of Operations:




(Amounts in thousands)
                    
                    Fiscal Year Ended
                      July 31, 2010Net
      sales
                    
                    $
                    711,927Less:Cost
      of sales, including occupancy and buying costs
                    
                    
                    413,258Selling,
      general and administrative expenses
                    
                    
                    210,336Depreciation
      and amortization
                    
                    
                    23,677Operating
      income
                    
                    $
                    64,656




The
Company accounted for the merger as a purchase using the accounting standards
established by the FASB guidance on business combinations, and, accordingly, the
excess purchase price over the fair market value of the underlying net assets
acquired, which equaled $99.0 million, was allocated to goodwill (see Note
8).  The Company recognized a total of $5.8 million of Merger-related
costs in the fifty-three weeks ended July 31, 2010.





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 merger date,
November 25, 2009, in accordance with the FASB guidance on business
combinations.  In accordance with FASB guidance, all of Tween Brands
assets acquired and liabilities assumed in the transaction were recorded at
their merger date fair values while transaction costs associated with the
transaction are expensed as incurred.  The Company’s allocation was
based on an evaluation of the appropriate fair values and represented
management’s best estimate based on the available data.  In addition,
the Company utilized specialists to assist in the valuation
process.


F-17




The
estimated fair values of assets acquired and liabilities assumed, as of the
close of business on November 24, 2009 are as follows:





(Amounts
      in thousands)Shares
      of Dress Barn common stock issued in the Merger
                          
                          
                          11,699Per
      share price of our common stock
                          
                          $
                          21.47Fair
      value Dress Barn common stock issued *
                          
                          $
                          251,183Repayment
      of Tween Brands bank debtand
      accrued interest
                          
                          
                          162,915Payment
      for stock options and fractional shares
                          
                          
                          976Total
      Purchase Price
                          
                          $
                          415,074Current
      assets
                          
                          $
                          127,928Inventory
                          
                          
                          116,210Current
      deferred tax assets
                          
                          
                          13,153Property
      and equipment, net
                          
                          
                          213,719Intangibles
                          
                          
                          83,900Other
      non-current assets
                          
                          
                          7,600Total
      assets acquired
                          
                          
                          562,510Accounts
      payable and accrued expenses
                          
                          
                          (109,118
                          )Lease
      related liabilities
                          
                          
                          (120,693
                          )Deferred
      compensation & other long-term liabilities
                          
                          
                          (7,450
                          )Long-term
      deferred tax liabilities
                          
                          
                          (9,180
                          )Total
      liabilities assumed
                          
                          
                          (246,441
                          )Net
      assets acquired, net of cash and cash equivalents acquired of
      $83,730
                          
                          
                          316,069Goodwill
                          
                          $
                          99,005





*
            Amounts
      do not add multiply due to
rounding.





The
following unaudited pro forma information assumes the Justice merger had occurred on
July 29, 2007.  The pro forma information, as presented below, is not
indicative of the results that would have been obtained had the transaction
actually occurred on July 29, 2007, nor is it indicative of the Company’s future
results.




The pro
forma net income and earnings per share information for fiscal year ended July
31, 2010 presented in the table below has been restated
to correct immaterial errors in such information resulting from errors in
the underlying pro forma adjustments. As a result, pro forma net income
was adjusted by $4.1 million to $143.1 million; pro forma basic earnings
per share was adjusted by $0.06 to $1.88; and pro forma diluted
earnings per share was adjusted by $0.05 to $1.77. The amounts reported for
Fiscal years ended July 25, 2009 and July 26, 2008 were
unaffected by these changes.
  F-18





(Amounts
in thousands, except per share data)


(Unaudited)Fiscal Year EndedJuly 31,
                      
                      
                      July 25,
                      
                      
                      July 26,2010
                      
                      
                      2009
                      
                      
                      2008(as
      restated)Pro
      forma net sales
                      
                      $
                      2,697,132
                      
                      
                      $
                      2,424,808
                      
                      
                      $
                      2,496,045Pro
      forma net income
                      
                      $
                      143,102
                      
                      
                      $
                      66,003
                      
                      
                      $
                      116,867Pro
      forma earnings per share:Basic
                      
                      $
                      1.88
                      
                      
                      $
                      0.92
                      
                      
                      $
                      1.63Diluted
                      
                      $
                      1.77
                      
                      
                      $
                      0.88
                      
                      
                      $
                      1.53




3.  Changes
in Accounting Principles





Change
in method of accounting for noncontrolling interest





Effective
July 26, 2009, we adopted the FASB Accounting Standards Codification (ASC)
authoritative guidance ASC 810-10, Consolidation – Overall (formerly known asSFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements – an amendment of Accounting
Research Bulletin No. 51).  This guidance establishes
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary.  It
clarifies that a noncontrolling interest in a subsidiary, which is
sometimes referred to as minority interest, is an ownership interest in the
consolidated entity that should be reported as equity.  This guidance
became effective beginning with our first quarter in fiscal 2010.  The
guidance requires prospective application, except for the presentation and
disclosure requirements, which must be applied retrospectively to all periods
presented.  Noncontrolling interest of $0.7 million, previously
recorded as goodwill, was reclassified to our shareholders’ equity section
resulting in the noncontrolling interest balance of $1.2 million at July 25,
2009 in our Consolidated Balance Sheets.  The adoption of this
guidance did not have a material impact on our Consolidated Financial Statements
and it did not affect our cash flows.  Seetablesbelow for further
information related to our adoption of this guidance.





Noncontrolling
interest income (loss) amounts for the fiscal years ended July 31, 2010 were
($0.2) million and July 25, 2009 were ($0.5) million,
respectively.  We did not have any noncontrolling interest for fiscal
year ended July 26, 2008.  Noncontrolling interest income amounts are
not presented separately in the Consolidated Statements of Operations due to
immateriality, but are reflected within the “Other income” line
item.





Change
in method of accounting for convertible senior notes





In May
2008, the FASB issued ASC 470-20 Debt - Debt with Conversion and Other Options,
new accounting guidance ondebtwith conversion and
other options (formerly known
as FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion).  This guidance
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that reflects the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods.  The guidance requires retrospective application
of its provisions and it does not affect our cash flows.





Since
our 2.5% Convertible Senior Notes due December 2024 (the “Notes”) were within
the scope of this guidance, we adopted this guidance on July 26, 2009, and,
accordingly, we adjusted the accompanying Consolidated Balance Sheets and the
Consolidated Statement of Operations for the fiscal years 2009, 2008, 2007, and
2006, on a retrospective basis.  Upon adoption, we estimated the fair
value, as of the date of issuance, of the Notes, assuming an 8.0%
non-convertible borrowing rate, to be $81.6 million.  The difference
between the fair value and the principal amount of the notes was $33.4
million.  This amount was retrospectively recorded as a debt discount
and as an increase to additional paid-in capital as of the issuance
date.  The discount was being accreted to interest expense over the
seven-year period to the first put date of the Notes in 2011, resulting in an
increase in non-cash interest expense in prior periods.  The
cumulative effect of the change in accounting principle on periods prior to
those presented and recognized as of thebeginning
of the first period presented was $6.4 million as of July 28, 2007 and was not
material to our consolidated financial statements.The
retrospective application to our Consolidated Statements of Operations resulted
in an additional pre-tax non-cash interest expense of approximately $5.2
million, $4.8 million, $4.4 million, and $4.0 million for the fiscal years 2009,
2008, 2007, and 2006, respectively.  The impact on our financial
statements resulted in a pre-tax non-cash interest expense was $4.2 million for
fiscal 2010.  There is no further impact of this standard since the
tender offer extinguished the Notes.  See Note 9 regarding the tender
offer for the Notes.





F-19


The
following tables set forth the effect of the retrospective application on
certain previously reported items in accordance with the new accounting guidance
on debt with conversions and other options, and the new accounting guidance on
noncontrolling interest in consolidated financial statements.





The
Dress Barn, Inc. and Subsidiaries


Consolidated
Balance Sheets


(Amounts
in thousands)




Previously
                  Reported
                
                
                Convertible
                
                
                Non-
                  controllingConsolidated
                
                
                Senior Note
                
                
                Interest
                
                
                ConsolidatedJuly 25, 2009
                
                
                Impact
                
                
                Impact
                
                
                July 25, 2009ASSETSCurrent
      Assets:Cash
      and cash equivalents
                
                $
                240,763
                
                
                $
                —
                
                
                $
                —
                
                
                $
                240,763Investment
      securities
                
                
                112,998
                
                
                
                
                
                
                
                
                
                
                
                112,998Merchandise
      inventories
                
                
                193,979
                
                
                
                
                
                
                
                
                
                
                
                193,979Prepaid
      expenses and other current assets
                
                
                17,874
                
                
                
                1,167
                
                
                
                
                
                
                
                19,041Total
      Current Assets
                
                
                565,614
                
                
                
                1,167
                
                
                
                —
                
                
                
                566,781Property
      and Equipment, net
                
                
                277,913
                
                
                
                
                
                
                
                
                
                
                
                277,913Other
      Intangible Assets, net
                
                
                104,932
                
                
                
                
                
                
                
                
                
                
                
                104,932Goodwill
                
                
                131,368
                
                
                
                
                
                
                
                (712
                )
                
                
                130,656Investment
      Securities
                
                
                30,813
                
                
                
                
                
                
                
                
                
                
                
                30,813Deferred
      Income Taxes
                
                
                3,091
                
                
                
                
                
                
                
                
                
                
                
                3,091Other
      Assets
                
                
                18,090
                
                
                
                (3,104
                )
                
                
                
                
                
                
                14,986TOTAL
      ASSETS
                
                $
                1,131,821
                
                
                $
                (1,937
                )
                
                $
                (712
                )
                
                $
                1,129,172





(continued)





F-20


The
Dress Barn, Inc. and Subsidiaries


Consolidated
Balance Sheets


(Amounts
in thousands)




Previously
                            Reported
                          
                          
                          Convertible
                          
                          
                          Non-
                            controllingConsolidated
                          
                          
                          Senior Note
                          
                          
                          Interest
                          
                          
                          ConsolidatedJuly 25, 2009
                          
                          
                          Impact
                          
                          
                          Impact
                          
                          
                          July 25, 2009LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                          
                          $
                          138,940
                          
                          
                          $
                          —
                          
                          
                          $
                          —
                          
                          
                          $
                          138,940Accrued
      salaries, wages and related expenses
                          
                          
                          32,116
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          32,116Other
      accrued expenses
                          
                          
                          49,450
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          49,450Customer
      liabilities
                          
                          
                          13,999
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          13,999Income
      taxes payable
                          
                          
                          7,491
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          7,491Deferred
      income taxes
                          
                          
                          2,775
                          
                          
                          
                          4,630
                          
                          
                          
                          
                          
                          
                          
                          7,405Current
      portion of long-term debt
                          
                          
                          1,347
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1,347Convertible
      Senior Notes
                          
                          
                          115,000
                          
                          
                          
                          (13,646
                          )
                          
                          
                          
                          
                          
                          
                          101,354Total
      Current Liabilities
                          
                          
                          361,118
                          
                          
                          
                          (9,016
                          )
                          
                          
                          —
                          
                          
                          
                          352,102Long-term
      debt
                          
                          
                          26,062
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          26,062Lease
      related liabilities
                          
                          
                          67,772
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          67,772Deferred
      compensation and other long-termliabilities
                          
                          
                          50,789
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          50,789Total
      Liabilities
                          
                          
                          505,741
                          
                          
                          
                          (9,016
                          )
                          
                          
                          —
                          
                          
                          
                          496,725Commitments
      and ContingenciesShareholders'
      Equity:Preferred
      stock
                          
                          
                          —
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          —Common
      stock
                          
                          
                          3,012
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          3,012Additional
      paid-in capital
                          
                          
                          125,790
                          
                          
                          
                          19,487
                          
                          
                          
                          
                          
                          
                          
                          145,277Retained
      earnings
                          
                          
                          505,685
                          
                          
                          
                          (12,408
                          )
                          
                          
                          490
                          
                          
                          
                          493,767Accumulated
      other comprehensive (loss)
                          
                          
                          (8,407
                          )
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (8,407
                          )Total
      The Dress Barn, Inc.Shareholders’
      Equity
                          
                          
                          626,080
                          
                          
                          
                          7,079
                          
                          
                          
                          490
                          
                          
                          
                          633,649Noncontrolling
      Interest
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          (1,202
                          )
                          
                          
                          (1,202
                          )Total
      Shareholders’ Equity
                          
                          
                          626,080
                          
                          
                          
                          7,079
                          
                          
                          
                          (712
                          )
                          
                          
                          632,447TOTAL
      LIABILITIES ANDSHAREHOLDERS’
      EQUITY
                          
                          $
                          1,131,821
                          
                          
                          $
                          (1,937
                          )
                          
                          $
                          (712
                          )
                          
                          $
                          1,129,172






F-21




The
Dress Barn, Inc. and Subsidiaries


Consolidated
Statements of Operations


(Amounts
in thousands, except per share data)




Fiscal Year Ended July 25, 2009Previously
                              
                              
                              ConvertibleReported
                              
                              
                              Senior NoteConsolidated
                              
                              
                              Impact
                              
                              
                              ConsolidatedNet
      sales
                              
                              $
                              1,494,236
                              
                              
                              $
                              —
                              
                              
                              $
                              1,494,236Cost
      of sales, including occupancy andbuying
      costs (excluding depreciation which is shown separate
      below)
                              
                              
                              918,350
                              
                              
                              
                              
                              
                              
                              
                              918,350Selling,
      general and administrative expenses
                              
                              
                              422,372
                              
                              
                              
                              
                              
                              
                              
                              422,372Depreciation
      and amortization
                              
                              
                              48,535
                              
                              
                              
                              
                              
                              
                              
                              48,535Operating
      income
                              
                              
                              104,979
                              
                              
                              
                              —
                              
                              
                              
                              104,979Interest
      income
                              
                              
                              5,394
                              
                              
                              
                              
                              
                              
                              
                              5,394Interest
      expense
                              
                              
                              (4,795
                              )
                              
                              
                              (5,156
                              )
                              
                              
                              (9,951
                              )Other
      income
                              
                              
                              1,062
                              
                              
                              
                              
                              
                              
                              
                              1,062Earnings
      (loss) before provision for income taxes
                              
                              
                              106,640
                              
                              
                              
                              (5,156
                              )
                              
                              
                              101,484Provision
      for income taxes (benefit)
                              
                              
                              36,952
                              
                              
                              
                              (2,040
                              )
                              
                              
                              34,912Net
      earnings (loss)
                              
                              $
                              69,688
                              
                              
                              $
                              (3,116
                              )
                              
                              $
                              66,572Earnings
      (loss) per share:Basic
                              
                              $
                              1.16
                              
                              
                              $
                              (0.05
                              )
                              
                              $
                              1.11Diluted
                              
                              $
                              1.11
                              
                              
                              $
                              (0.05
                              )
                              
                              $
                              1.06Weighted
      average shares outstanding:Basic
                              
                              
                              60,044
                              
                              
                              
                              60,044
                              
                              
                              
                              60,044Diluted
                              
                              
                              62,990
                              
                              
                              
                              62,990
                              
                              
                              
                              62,990




F-22





The
Dress Barn, Inc. and Subsidiaries


Consolidated
Statements of Operations


(Amounts
in thousands, except per share data)




Fiscal Year Ended July 26, 2008Previously
                                      
                                      
                                      ConvertibleReported
                                      
                                      
                                      Senior NoteConsolidated
                                      
                                      
                                      Impact
                                      
                                      
                                      ConsolidatedNet
      sales
                                      
                                      $
                                      1,444,165
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      1,444,165Cost
      of sales, including occupancy andbuying
      costs (excluding depreciation which isshown
      separate below)
                                      
                                      
                                      885,927
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      885,927Selling,
      general and administrative expenses
                                      
                                      
                                      397,424
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      397,424Depreciation
      and amortization
                                      
                                      
                                      48,200
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      48,200Operating
      income
                                      
                                      
                                      112,614
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      112,614Interest
      income
                                      
                                      
                                      7,817
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      7,817Interest
      expense
                                      
                                      
                                      (4,825
                                      )
                                      
                                      
                                      (4,752
                                      )
                                      
                                      
                                      (9,577
                                      )Other
      income
                                      
                                      
                                      512
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      512Earnings
      (loss) before provision for income taxes
                                      
                                      
                                      116,118
                                      
                                      
                                      
                                      (4,752
                                      )
                                      
                                      
                                      111,366Provision
      for income taxes (benefit)
                                      
                                      
                                      42,030
                                      
                                      
                                      
                                      (1,879
                                      )
                                      
                                      
                                      40,151Net
      earnings (loss)
                                      
                                      $
                                      74,088
                                      
                                      
                                      $
                                      (2,873
                                      )
                                      
                                      $
                                      71,215Earnings
      (loss) per share:Basic
                                      
                                      $
                                      1.23
                                      
                                      
                                      $
                                      (0.05
                                      )
                                      
                                      $
                                      1.18Diluted
      *
                                      
                                      $
                                      1.15
                                      
                                      
                                      $
                                      (0.04
                                      )
                                      
                                      $
                                      1.10Weighted
      average shares outstanding:Basic
                                      
                                      
                                      60,102
                                      
                                      
                                      
                                      60,102
                                      
                                      
                                      
                                      60,102Diluted
                                      
                                      
                                      64,467
                                      
                                      
                                      
                                      64,467
                                      
                                      
                                      
                                      64,467


*
            Amounts
      do not add across due to rounding.




F-23




4.
            Investment
      Securities





The
following is a summary of our investment securities as of July 31, 2010 and July
25, 2009:


(Amounts in thousands)
                
                July 31, 2010
                
                
                July 25, 2009Estimated
                  Fair Value
                
                
                Amortized
                  Cost
                
                
                Estimated
                  Fair Value
                
                
                Amortized
                  CostAvailable-for-sale
      securities short-term:Municipal
      bonds
                
                $
                78,188
                
                
                $
                77,845
                
                
                $
                101,655
                
                
                $
                100,975Auction
      rate securities
                
                
                6,900
                
                
                
                6,900
                
                
                
                4,545
                
                
                
                4,545Trading
      securities:Auction
      rate securities
                
                
                —
                
                
                
                —
                
                
                
                6,798
                
                
                
                6,798Total
      short-term Investment Securities
                
                
                85,088
                
                
                
                84,745
                
                
                
                112,998
                
                
                
                112,318Available-for-sale
      securities long-term:Auction
      rate securities
                
                
                15,833
                
                
                
                20,500
                
                
                
                30,813
                
                
                
                39,900Total
      long-term Investment Securities
                
                
                15,833
                
                
                
                20,500
                
                
                
                30,813
                
                
                
                39,900Total Investment
      Securities
                
                $
                100,921
                
                
                $
                105,245
                
                
                $
                143,811
                
                
                $
                152,218




Our
investment securities have been designated as either “available-for-sale” or
“trading” as required by the FASB accounting guidance on investment
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 (loss) income”. Trading
securities are measured at fair market value each period.  The gains
or losses due to changes in fair market value during the period are reported as
realized gains or losses and are included in our net earnings.  The
cost of securities sold is based on the specific identification
method.





As of
July 31, 2010 and July 25, 2009, our available-for-sale investment securities
are comprised of municipal bonds and auction rate securities
(“ARS”).  The primary objective of our short-term investment
securities is to preserve our capital for the purpose of funding
operations.  We do not enter into short-term investments for trading
or speculative purposes.  The fair value for the municipal bonds is
based on unadjusted quoted market prices for the municipal bonds in active
markets with sufficient volume and frequency.





ARS are
variable-rate debt securities.  ARS have a long-term maturity with the
interest rate being reset through Dutch auctions that are typically held every
7, 28 or 35 days.  Interest is paid at the end of each auction
period.  The vast majority of our ARS are AAA/Aaa rated with the
majority collateralized by student loans guaranteed by the U.S. government under
the Federal Family Education Loan Program and the remaining securities backed by
monoline insurance companies.  Our net $15.8 million investments in
available-for-sale ARS are classified as long-term assets on our Consolidated
Balance Sheets because of our inability to determine when our investments in ARS
could be sold.  While failures in the auction process have affected
our ability to access these funds in the near term, we do not believe that the
underlying securities or collateral have been permanently
affected.  On occasion an ARS is called by its issuer as was the case
during fiscal 2010, when we had $17.0 million of ARS redemptions; additionally,
during our first quarter of fiscal 2011, we have had $6.9 million of ARS
redemptions.  We determined that the ($4.7) million ARS valuation
adjustment for the fifty-three weeks ended July 31, 2010 was not
other-than-temporary, and therefore was recorded within the accumulated other
comprehensive (loss) income component of shareholders’ equity and did not affect
our earnings.  Management believes that our working capital available,
excluding the funds held in ARS, will be sufficient to meet our cash
requirements for at least the next 12 months.





F-24


In
November 2008, we accepted a settlement offer whereby UBS would purchase
eligible ARS it sold to us prior to February 13, 2008 (“Settlement
Agreement”).  Under the terms of a Settlement Agreement, at our
option, UBS will purchase eligible ARS from us at par value during the period
June 30, 2010 through July 2, 2012.  UBS has offered to also provide
us with access to “no net cost” loans up to 75% of the par value of eligible ARS
until June 30, 2010.  We hold approximately $6.9 million, at par
value, of eligible ARS with UBS.  By entering into the Settlement
Agreement, we (1) received the right (“Put Option”) to sell these ARS back
to UBS at par, at our sole discretion, anytime during the period from
June 30, 2010 through July 2, 2012, and (2) gave UBS the right to
purchase these ARS or sell them on our behalf at par anytime after the execution
of the Settlement Agreement through July 2, 2012.  We elected to
measure the Put Option under the fair value method in accordance with accounting
guidance on financial instruments and transferred these long-term ARS from
available-for-sale to trading investment securities at market value on our
Consolidated Balance Sheets.  During the second half of our fiscal
2010, all the eligible UBS ARS were sold at par through Dutch
auctions.




We review
our potential impairments in accordance with FASB accounting guidance on
investments in debt and equity securities to determine if the classification of
the impairment is other-than-temporary.  To determine the fair value
of the ARS, we used the discounted cash flow model, and considered factors such
as the fact that historically, these securities had identical par and fair
value, and the fact that rating agencies assessed a majority of these as
AAA/Aaa.  If the cost of an investment exceeds its fair value, in
making the judgment of whether there has been an other-than-temporary
impairment, we consider available quantitative and qualitative evidence,
including, among other factors, our intent and ability to hold the investment to
maturity, the duration and extent to which the fair value is less than cost,
specific adverse conditions related to the financial health of and business
outlook for the investee and rating agency actions.





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





The
estimated fair value and amortized cost of our available-for-sale investment
securities and investments on the basis of each investment’s contractual
maturities at July 31, 2010 is as follows:





(Amounts
in thousands)


Due In
                    
                    Estimated
                      Fair Value
                    
                    
                    Amortized
                      CostOne
      year or less
                    
                    $
                    45,418
                    
                    
                    $
                    45,785One
      year through five years
                    
                    
                    33,780
                    
                    
                    
                    33,096Over
      five years through ten years
                    
                    
                    1,596
                    
                    
                    
                    1,579Over
      ten years
                    
                    
                    20,127
                    
                    
                    
                    24,785Total
                    
                    $
                    100,921
                    
                    
                    $
                    105,245





5.  Measurement
of Fair Value





Fair
Value Measurements of Financial Instruments





The FASB
accounting guidance on fair value measurement requires certain financial assets
and liabilities be carried at fair value.  Fair value is the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (exit
price).  In determining fair value in accordance with this guidance,
we utilize market data or assumptions that we believe market participants would
use in pricing the asset or liability that maximize the use of observable inputs
and minimize the use of unobservable inputs to the extent possible, including
assumptions about risk and the risks inherent in the inputs to the valuation
technique.  Classification of the financial asset or liability within
the hierarchy is determined based on the lowest level input that is significant
to the fair value measurement.





Accounting
guidance on fair value measurement for certain financial assets and liabilities
requires that assets and liabilities carried at fair value be classified and
disclosed in three hierarchies that prioritize the inputs used to measure fair
value.  The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1
measurement) and the lowest priority to unobservable inputs (Level 3
measurement).  The three levels of the fair value hierarchy are as
follows:





Level 1
            Quoted
      prices are available in active markets for identical assets or liabilities
      as of the reporting date.  Active markets are those in which
      transactions for the asset or liability occur in sufficient frequency and
      volume to provide pricing information on an ongoing
      basis.




Level 2
            Financial
      instruments lacking unadjusted, quoted prices from active market
      exchanges, including over-the-counter traded financial
      instruments.  The prices for the financial instruments are
      determined using prices for recently traded financial instruments with
      similar underlying terms as well as directly or indirectly observable
      inputs, such as interest rates and yield curves that are observable at
      commonly quoted intervals.




Level 3
            Financial
      instruments that are not actively traded on a market
      exchange.  This category includes situations where there is
      little, if any, market activity for the financial
      instrument.  The prices are determined using significant
      unobservable inputs or valuation
techniques.




F-25




The table
below provides our disclosure of all financial assets as of July 31, 2010 that
are measured at fair value on a recurring basis (at least annually) into the
most appropriate level within the fair value hierarchy based on the inputs used
to determine the fair value at the measurement date.  These financial
assets are carried at fair value in accordance with the FASB accounting guidance
on fair value measurement for certain financial assets.





(Amounts in thousands)
                            
                            Fair Value Measurements for financial assets as of July 31, 2010Description
                            
                            Level 1
                            
                            
                            Level 2
                            
                            
                            Level 3
                            
                            
                            Assets at Fair
                              Market ValueAvailable-for-sale
      securities:Municipal
      bonds
                            
                            $
                            78,188
                            
                            
                            $
                            —
                            
                            
                            $
                            —
                            
                            
                            $
                            78,188Auction
      rate securities
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            22,733
                            
                            
                            
                            22,733Subtotal
      investment securities
                            
                            
                            78,188
                            
                            
                            
                            —
                            
                            
                            
                            22,733
                            
                            
                            
                            100,921Total
                            
                            $
                            78,188
                            
                            
                            $
                            —
                            
                            
                            $
                            22,733
                            
                            
                            $
                            100,921




(Amounts in thousands)
                  
                  Fair Value Measurements for financial assets as of July 25, 2009Description
                  
                  Level 1
                  
                  
                  Level 2
                  
                  
                  Level 3
                  
                  
                  Assets at Fair
                    Market ValueAvailable-for-sale
      securities:Municipal
      bonds
                  
                  $
                  101,655
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  101,655Auction
      rate securities
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  35,358
                  
                  
                  
                  35,358Trading
      securities
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  6,798
                  
                  
                  
                  6,798Subtotal
      investment securities
                  
                  
                  101,655
                  
                  
                  
                  —
                  
                  
                  
                  42,156
                  
                  
                  
                  143,811Put
      Option
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  230
                  
                  
                  
                  230Total
                  
                  $
                  101,655
                  
                  
                  $
                  —
                  
                  
                  $
                  42,386
                  
                  
                  $
                  144,041





As of
July 31, 2010, our financial assets utilizing Level 1 are our short-term
investment securities in municipal bonds.  The fair value is based on
unadjusted quoted market prices for the municipal bonds in active markets with
sufficient volume and frequency.





Financial
assets utilizing Level 3 inputs include ARS and the related Put Option (see Note
4 for further detail).  The fair value measurements for items in Level
3 have been estimated using an income-approach model.  The model
considers factors that reflect assumptions market participants would use in
pricing, including, among others: the collateralization underlying the
investments; the creditworthiness of the counterparty; expected future cash
flows, including the next time the security is expected to have a successful
auction; and risks associated with the uncertainties in the current
market.


F-26




The
following table provides a reconciliation of the beginning and ending balances
of the investment securities measured at fair value using significant
unobservable inputs (Level 3):





Level 3 (Unobservable inputs)
                    (Amounts in thousands)
                  
                  Fiscal Year
                    Ended
                    July 31, 2010
                  
                  
                  Fiscal Year
                    Ended
                    July 25, 2009Balance
      at beginning of period
                  
                  $
                  42,386
                  
                  
                  $
                  58,459Realized/Unrealized
      gain included in earnings *
                  
                  
                  122
                  
                  
                  
                  (352
                  )Change
      in temporary valuation adjustment included in other comprehensive income
      (loss)
                  
                  
                  4,420
                  
                  
                  
                  (5,771
                  )Sale
      of trading securities
                  
                  
                  (6,798
                  )
                  
                  
                  —(Derecognition)
      / Recognition of Put Option
                  
                  
                  (352
                  )
                  
                  
                  230Redemptions
      at par
                  
                  
                  (17,045
                  )
                  
                  
                  (10,180
                  )Balance
      at end of period
                  
                  $
                  22,733
                  
                  
                  $
                  42,386





*    Settlement
Agreement- See Note 4 for further detail.  Represents the amount of
total gains for the period included in
earnings relating to assets still held on the fiscal years ended 2010 and
2009.





Fair
Value Measurements of Non-Financial Instruments





On
July 26, 2009, we adopted the provisions of the fair value measurement
accounting and disclosure guidance related to non-financial assets and
liabilities recognized or disclosed at fair value on a nonrecurring
basis.  Assets and liabilities subject to this new guidance primarily
include goodwill and indefinite-lived intangible assets measured at fair value
for impairment assessments, long-lived assets measured at fair value for
impairment assessments and non-financial assets and liabilities measured at fair
value in business combinations.  The adoption of this new guidance did
not have a material impact on our financial position, results of operations or
cash flows for the periods presented.





The table
below segregates non-financial assets and liabilities as of July 31, 2010 that
are measured at fair value on a nonrecurring basis in periods subsequent to
initial recognition into the most appropriate level within the fair value
hierarchy based on the inputs used to determine the fair value at the
measurement date:





Fair
Value Measurements for non-financial assets and liabilities as of July 31, 2010
are as follows:





(Amounts
      in thousands)
                      
                      Description
                    
                    Total
                    
                    
                    Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3
                    
                    
                    Fiscal 2010
                      Realized
                      Lossmaurices Studio Y trade
      name (a)
                    
                    $
                    13,000
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    13,000
                    
                    
                    $
                    2,000Long-lived
      assets held and used (b)
                    
                    
                    150,857
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    150,857
                    
                    
                    
                    8,720Total
                    
                    $
                    163,857
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    163,857
                    
                    
                    $
                    10,720





(a)
            During
      the first quarter of fiscal 2010, based on the performance of the Studio Y
      brand, we performed an interim impairment analysis and concluded that the
      estimated book value of the Studio Y trade name exceeded the fair value on
      October 24, 2009.  The impairment analysis with respect to the Studio
      Y trade name used in the Company’s operations required the Company to
      estimate the fair value of the tradename as of the assessment date. 
      Such determination was made using "relief from royalty" valuation
      method.  Inputs to the valuation model
  included:





·
            Future
      revenue and profitability projections associated with the
      tradename;


·
            Estimated
      market royalty rates that could be derived from the licensing of the
      tradename to third parties in order to establish the cash flows accruing
      to the benefit of the Company as a result of its ownership of the
      tradename; and


·
            A
      rate used to discount the estimated royalty cash flow projections to their
      present value (or estimated fair value) based on the risk and nature of
      the cash flows.




F-27




As a
result of the impairment analysis, we recorded a non-cash impairment charge in
the amount of $2.0 million in selling, general and administrative expenses (see
Note 8 for further detail).





(b)
            The
      impairment charges are primarily triggered by a decline in revenues and
      profitability of the respective stores.  The impairment analysis
      related to store-level assets requires judgments and estimates of future
      revenues, gross margin rates and store expenses.  We base these
      estimates upon the store’s past performance and expected future
      performance based on economic and market conditions.  We believe
      our estimates are appropriate in light of current market
      conditions.  However, future impairment charges could be
      required if we do not achieve our current revenue or cash flow
      projections.





6.  Fair
Value of Financial Instruments





The
carrying amounts and estimated fair value of our financial instruments are as
follows:





(Amounts in thousands)
                    
                    July 31, 2010
                    
                    
                    July 25, 2009Fair
                      Value
                    
                    
                    Carrying
                      Amount
                    
                    
                    Fair
                      Value
                    
                    
                    Carrying
                      AmountAssets:Cash
      and cash equivalents (a)
                    
                    $
                    240,641
                    
                    
                    $
                    240,641
                    
                    
                    $
                    240,763
                    
                    
                    $
                    240,763Restricted
      Cash (a)
                    
                    
                    1,355
                    
                    
                    
                    1,355
                    
                    
                    
                    —
                    
                    
                    
                    —Short-Term
      Investment Securities (b)
                    
                    
                    85,088
                    
                    
                    
                    85,088
                    
                    
                    
                    112,998
                    
                    
                    
                    112,998Long-Term
      Investment Securities  (b)
                    
                    
                    15,833
                    
                    
                    
                    15,833
                    
                    
                    
                    30,813
                    
                    
                    
                    30,813Put
      Option (b)
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    230
                    
                    
                    
                    230Liabilities:2.5%
      Convertible Senior Notes  (c)
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    176,094
                    
                    
                    
                    101,3545.33%
      mortgage note, due July 2023 (d)
                    
                    
                    23,282
                    
                    
                    
                    25,916
                    
                    
                    
                    22,061
                    
                    
                    
                    27,263Other
      long-term debt (e)
                    
                    
                    122
                    
                    
                    
                    122
                    
                    
                    
                    146
                    
                    
                    
                    146





(a)
            The
      fair value of cash and cash equivalents approximates their carrying amount
      because of the short maturities of such
  instruments.


(b)
            For
      more information on our investment securities and Put Option, refer to
      Note 4 and Note 5.


(c)
            Effective
      on January 22, 2010, we completed a tender offer for all of the
      outstanding Notes.  Fair value as of July 25, 2009 is based on
      PORTAL (Private Offering Resale and Trading through Automated
      Linkage).  Refer to Note 3 and Note 9 for further
      detail.


(d)
            The
      fair value of the mortgage note is based on the net present value of cash
      flows at estimated current interest rates that we could obtain for a
      similar borrowing.


(e)
            The
      carrying amount of the other long-term debt approximates fair
      value.




F-28




7.  Property
and Equipment





Property
and equipment consisted of the following:





(Amounts in thousands)
                    
                    
                    July 31,
                      2010
                    
                    
                    
                    July 25,
                      2009Property
      and Equipment:Land
                    
                    $
                    15,631
                    
                    
                    $
                    6,131Buildings
                    
                    
                    74,415
                    
                    
                    
                    53,625Leasehold
      Improvements
                    
                    
                    278,864
                    
                    
                    
                    174,772Furniture,
      Fixtures and Equipment
                    
                    
                    268,933
                    
                    
                    
                    215,350Information
      Technology
                    
                    
                    144,752
                    
                    
                    
                    88,222Construction
      in Progress
                    
                    
                    24,547
                    
                    
                    
                    17,985807,142
                    
                    
                    
                    556,085Less
      accumulated depreciation and amortization
                    
                    
                    (329,056
                    )
                    
                    
                    (278,172
                    )Property
      and equipment, net
                    
                    $
                    478,086
                    
                    
                    $
                    277,913





The
increase in property and equipment is primarily due to the Justice Merger which was
consummated on November 25, 2009.  See Note 2 for further
detail.





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 undiscounted projected future
cash flows, in addition to other quantitative and qualitative
analyses.  Upon indication that the carrying values of such assets may
not be recoverable, we recognize an impairment loss to write down the cost of
the asset group to its fair value.  As a result of this evaluation and
the closing of certain stores, we recorded an asset impairment and disposal
charge of $10.7 million (of which $8.7 million relates to fixed assets and $2.0
million relates to intangible assets) during the fiscal year July 31, 2010, $8.3
million (of which $6.3 million relates to fixed assets and $2.0 million relates
to intangible assets) during the fiscal year ended July 25, 2009 and $4.1
million (relates to fixed assets) during the fiscal year ended July 26, 2008 in
our Consolidated Statements of Operations (see Note 8 for further
detail).




F-29


8.
Goodwill and Other Intangible Assets





On
November 25, 2009, we completed our Merger with Tween Brands, Inc.  We
accounted for the merger in accordance with FASB accounting guidance and,
accordingly, the excess purchase price over the fair market value of the
underlying net assets acquired, or $99.0 million, was allocated to
goodwill.  Goodwill amortization for this transaction is not
deductible for tax purposes.  In conjunction with the Merger, we
acquired “Justice” brand
trademarks and service marks, including the mark “Justice”, which is used to
identify merchandise and services.  Certain of these marks are
registered with the U.S. Patent and Trademark Office and certain foreign
jurisdictions in which we conduct business.  These marks are important
to us, and we intend to, directly or indirectly, maintain and protect these
marks and their registrations.





In
January 2005, we acquired the outstanding stock of Maurices
Incorporated.  We accounted for the acquisition as a purchase and,
accordingly, the excess purchase price over the fair market value of the
underlying net assets acquired, or $130.7 million, was allocated to
goodwill.  Goodwill
amortization for this transaction is deductible for tax purposes.  In
conjunction with this transaction, we acquired the “maurices” and “Studio Y”
brands and trademarks.





We became
a majority owner of an equity investment in the first quarter of fiscal
2009.  We began consolidating the subsidiary’s financial results with
our financials in the first quarter of fiscal 2009, which was reflected in
goodwill in the amount of $0.7 million.  Pursuant to the transition
provisions, we adopted thenew
FASB accounting guidance on consolidation, related to the accounting for
noncontrolling interests inourconsolidated financial
statements.  We have retroactively adjusted our fiscal 2009
presentation to reflect the noncontrolling interest portion of our equity
investment.  Accordingly, we reclassed our prior equity investment
adjustment of $0.7 million from goodwill to noncontrolling interest within the
equity section.  See Note 3 for further detail.





The
following analysis details the changes in goodwill for each reportable segment
during the fiscal year ended July 31, 2010:





(Amounts
      in thousands)
                    
                    maurices
                    
                    
                    Justice
                    
                    
                    TotalBalance
      at July 25, 2009
                    
                    $
                    130,656
                    
                    
                    $
                    —
                    
                    
                    $
                    130,656Justice
      Merger
                    
                    
                    —
                    
                    
                    
                    99,005
                    
                    
                    
                    99,005Balance
      at July 31, 2010
                    
                    $
                    130,656
                    
                    
                    $
                    99,005
                    
                    
                    $
                    229,661





In
accordance with the FASB accounting guidance on goodwill and intangible assets,
the amortization of goodwill and indefinite-life intangible assets is replaced
with annual impairment tests.  We perform an impairment test at least
annually in our fiscal month of June or whenever we identify certain triggering
events that may indicate impairment.  We assess the fair value of our
indefinite-lived intangible assets, such as trade names and franchise rights,
using a discounted cash flow model based on royalties estimated to be derived in
the future use of the asset if we were to license the use of the
assets.  An impairment charge for indefinite-lived
intangible assets is recorded if the carrying amount of an indefinite-lived
intangible asset exceeds the estimated fair value on the measurement
date.  We considered whether specific impairment indicators were
present, such as plans to abandon (for which there were no such
plans).  There were no cumulative goodwill losses to
date.





Other
identifiable intangible assets consist of customer relationships and proprietary
software technology and defensive intangible assets related to a certain
trademark.  Owned trade names and franchise rights were determined to
have an indefinite life and therefore are not amortized.  Customer
relationships, proprietary technology and defensive assets constitute our
identifiable intangible assets subject to amortization, which are amortized over
their useful lives on a straight line basis.  A fair value was not
assigned to the customer relationships from the Justice Merger because under
the valuation analysis income approach the value of the customer loyalty and the
resulting relationship was offset by the costs associated with the
asset.





We also
acquired favorable leases of $7.0 million classified in the long-term section
under “Other Assets” in our balance sheet.  Favorable lease rights are
amortized over the favorable lease term and assessed for impairment in
accordance with ASC 350-35.





During
fiscal 2010, we performed an
interim impairment analysis andconcluded that the book value of the
maurices’ Studio Y trade
name exceeded the fair value.  As a result, we recorded a non-cash
impairment charge in the amount of $2.0 million in selling, general and
administrative expenses in the first quarter of fiscal 2010.  For testing purposes, the fair value wasestimated based on
projections of future years’operating results and associated cash
flows.


F-30





Other intangible assets were
      comprised of the following as of July 31, 2010:(Amounts
      in thousands)Description
                          
                          ExpectedLife
                          
                          Average
                            Remaining
                            Life
                          
                          
                          Gross
                            Intangible
                            Assets
                          
                          
                          Accumulated
                            Amortization
                          
                          
                          Net
                            Intangible
                            AssetsIndefinite
      lived intangible assets:maurices Trade
      Names
                          
                          Indefinite
                          
                          
                          —
                          
                          
                          $
                          89,000
                          
                          
                          $
                          —
                          
                          
                          $
                          89,000maurices Studio YTrade
      Name
                          
                          Indefinite
                          
                          
                          —
                          
                          
                          
                          13,000
                          
                          
                          
                          —
                          
                          
                          
                          13,000Justice Trade Name (a)
                          
                          Indefinite
                          
                          
                          —
                          
                          
                          
                          66,600
                          
                          
                          
                          —
                          
                          
                          
                          66,600JusticeFranchise Rights
      (b)
                          
                          Indefinite
                          
                          
                          —
                          
                          
                          
                          10,900
                          
                          
                          
                          —
                          
                          
                          
                          10,900Finite
      lived intangible assets:maurices Customer
      Relationship
                          
                          7
      years
                          
                          1
      year
                          
                          
                          
                          2,200
                          
                          
                          
                          (1,755
                          )
                          
                          
                          445mauricesProprietary
      Technology
                          
                          5
      years
                          
                          
                          —
                          
                          
                          
                          3,165
                          
                          
                          
                          (3,165
                          )
                          
                          
                          —JusticeLimited TooTrade Name (c)
                          
                          7
      years
                          
                          6
      years
                          
                          
                          
                          1,600
                          
                          
                          
                          (152
                          )
                          
                          
                          1,448Justice Proprietary
      Software Technology (d)
                          
                          6
      years
                          
                          5
      years
                          
                          
                          
                          4,800
                          
                          
                          
                          (565
                          )
                          
                          
                          4,235Total
                          
                          
                          
                          
                          
                          
                          
                          $
                          191,265
                          
                          
                          $
                          (5,637
                          )
                          
                          $
                          185,628





(a)
            Fair
      value was determined using a discounted cash flow model that incorporates
      the relief from royalty (RFR) method.  Significant assumptions
      included, among other things, estimates of future cash flows, royalty
      rates and discount rates.  This asset was assigned an indefinite
      useful life because it is expected to contribute to cash flows
      indefinitely.


(b)
            Fair
      value of these international franchise rights was determined using a
      discounted cash flow model that incorporates the RFR
      method.  This asset was assigned an indefinite useful life
      because it is expected to contribute to cash flows
      indefinitely.


(c)
            Fair
      value was determined using the RFR method.  This meets the
      definition of a defensive asset under ASC 350-30-25-5, and was assigned a
      remaining life of seven years, which represents the lifecycle of the
      average Justice
      customer.


(d)
            Fair
      value was determined using the cost approach, as it consists of internally
      developed software that does not have an identifiable revenue
      stream.  The remaining life is the estimated obsolescence rate
      determined for each identified
asset.





Other intangible assets were
      comprised of the following as of July 25, 2009:(Amounts
      in thousands)Description
                      
                      Expected
      Life
                      
                      Gross
                        Intangible
                        Assets
                      
                      
                      Accumulated
                        Amortization
                      
                      
                      Net
      Intangible
                        Assetsmaurices:Customer
      Relationship
                      
                      7
      years
                      
                      $
                      2,200
                      
                      
                      $
                      (1,440
                      )
                      
                      $
                      760Proprietary
      Technology
                      
                      5
      years
                      
                      
                      3,298
                      
                      
                      
                      (3,126
                      )
                      
                      
                      172Studio
      Y Trade Name
                      
                      Indefinite
                      
                      
                      15,000
                      
                      
                      
                      —
                      
                      
                      
                      15,000Trade
      Names
                      
                      Indefinite
                      
                      
                      89,000
                      
                      
                      
                      —
                      
                      
                      
                      89,000Total
                      
                      
                      
                      $
                      109,498
                      
                      
                      $
                      (4,566
                      )
                      
                      $
                      104,932





Based on
our customer relationship, proprietary technology and Limited Too Trade Name
balances as of July 31, 2010, we expect the related amortization expense for the
remainder fiscal 2011 to be approximately $1.4 million, $1.2 million in fiscal
2012, $1.1 million in fiscal 2013, $1.1 million in fiscal 2014, $1.1 million in
fiscal 2015 and $0.3 million in fiscal 2016.


F-31





9.
Debt





Debt
      consists of the following:July 31,
                      
                      
                      July 25,(Amounts
      in thousands)
                      
                      2010
                      
                      
                      20095.33% mortgage note, due July
      2023
                      
                      $
                      25,916
                      
                      
                      $
                      27,2632.5% Convertible Senior
      Notes
                      
                      
                      —
                      
                      
                      
                      101,354Other
                      
                      
                      122
                      
                      
                      
                      146$
                      26,038
                      
                      
                      $
                      128,763Less: current
      portion
                      
                      
                      (1,421
                      )
                      
                      
                      (102,701
                      )Total long-term
      debt
                      
                      $
                      24,617
                      
                      
                      $
                      26,062





Mortgage
Note





In
connection with the purchase of our Suffern facility, Dunnigan Realty, LLC, in
July 2003, we borrowed $34.0 million under a 5.33% rate mortgage
loan.  This mortgage loan (the “Mortgage”) is collateralized by a
mortgage lien on our Suffern facility, of which the major portion is our dressbarn’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, we paid approximately $1.7
million in debt issuance costs.  These costs were deferred and
included in “Other Assets” on our Consolidated Balance Sheets and are being
amortized to interest expense over the life of the Mortgage.  Our
monthly mortgage payment amount is $0.2 million.





Convertible Senior Notes Debt
Extinguishment




During
the second quarter ended January 23, 2010, we conducted a tender offer for our
Convertible Senior Notes (the “Offer”).  All of the outstanding Notes, with
an aggregate balance of $112.5 million, were validly tendered for exchange and
not withdrawn as of January 23, 2010, the expiration date of the
Offer.  Total consideration for the Offer was $273.4 million and was
comprised of:  cash of $112.5 million for the face amount of the
Notes; cash of $4.5 million as inducement to exchange ($40 per $1,000 principal
amount of the Notes); and the issuance of approximately 6.2 million shares of
our common stock valued at $156.4 million.  The fair value of the Notes
tendered equaled $101.9 million as of January 23, 2010. Each $1,000 Note holder
was entitled to receive the following: 1) the $1,000 principal amount of the
Note, 2) a $40 inducement for conversion of the Notes, 3) accrued and unpaid
interest in the amount of $2.92 and 4) 55.3341 shares of our common stock with a
value of $1,389.99 per Note, which based upon the closing price of our common
stock on the expiration date of the Offer equated to an aggregate fair value of
$2,432.91 per Note. As a result of the Offer, the Company reduced deferred tax
liabilities by $14.6 million and reduced taxes payable by $0.2 million, with a
corresponding increase to additional paid-in capital of $14.8
million.  In connection with the Offer, we recognized a loss of $5.8
million consisting of $4.5 million related to the inducement amount and $1.3
million which is equal to the difference between the net book value and the fair
value of the Notes upon redemption in accordance with ASC
470-20.  Previously in December 2009, in a private transaction, we
accepted for exchange $2.5 million of the Notes for an aggregate cash amount of
approximately $5.4 million.  The loss associated with the December
2009 exchange was de minimus to our consolidated financial
statements.  No Notes remain outstanding.





Revolving
Credit Agreement





On
November 25, 2009, we entered into a $200 million revolving credit agreement
(the “Credit Agreement”) with the lenders thereunder.  The Credit
Agreement replaced the Company’s prior $100 million five-year credit facility
entered into on December 21, 2005.  The prior facility was scheduled
to expire on December 21, 2010, but was terminated concurrently with the CreditAgreement becoming effective on
November 25, 2009.  We did not incur any early termination penalties
in connection with the termination of theprior facility.


F-32





The
Credit Agreement provides for an asset based senior secured revolving credit
facility up to $200 million based on certain asset values and matures on
November 25, 2013.  The credit facility may be used for the issuance
of letters of credit, to finance the acquisition of working capital assets in
the ordinary course of business, for capital expenditures and for general
corporate purposes.  The CreditAgreement includes a $150 million letter of credit sublimit, of
which $25 million can be used for standby letters of credit, and a $20 million
swing loan sublimit.  The interest rates, pricing and fees under theCreditAgreement fluctuate based
on excess availability as defined in the Credit Agreement.  There are
currently no borrowings outstanding under the Credit
Agreement.  Letters of credit totaling $36.7 million that were
outstanding under the prior facility at November 25, 2009 were treated as
letters of credit under the Credit Agreement for the same
amount.




The
Credit Agreement has financial covenants with respect to a fixed charge coverage
ratio, among others, as well as customaryrepresentations,
warranties and affirmative covenants. We are required to maintain the fixed
charge coverage ratio for any period of fourfiscal
quarters ending during a Covenant Period as defined in the Credit Agreement of
at least 1.10 to 1.00. As of July 31, 2010, the actualfixed
charge coverage ratio was 1.61 to 1.00. The Credit Agreement also contains
customary negative covenants, subject to negotiatedexceptions,
including, among others, on liens, investments, indebtedness, significant
corporate changes including mergers and acquisitions,dispositions
and restricted payments. The Credit Agreement also contains customary events of
default, such as payment defaults, cross-defaultsto other
material indebtedness, bankruptcy and insolvency, the occurrence of a defined
change in control or the failure to observethe
negative covenants and other covenants related to the operation of our business.
We were in compliance with all financial covenants as of July31,
2010.





Our
obligations under the Credit Agreement are guaranteed by certain of our domestic
subsidiaries (the “Subsidiary Guarantors”).  As collateral security
under the Credit Agreement and the guarantees thereof, the Company and our
Subsidiary Guarantors have granted to the administrative agent for the benefit
of the lenders, a first priority lien on substantially all of their tangible and
intangible assets, including, without limitation, certain domestic inventory,
but excluding real estate.  The 2009 Credit Agreement costs were $4.4
million and the related amortization of the deferred issuance costs were for
$0.7 million for fiscal 2010.





As of
July 31, 2010, we had $37.8 million of outstanding letters of credit, of which
$12.0 million was issued by one of our banks and $25.8 million are private label
letters of credit secured by the Company’s assets.  The bank letter of
credit fees were $1.0 million for the fiscal year ended July 31, 2010, $0.2
million for the fiscal year ended July 25, 2009, and $0.3 million for the fiscal
year ended July 26, 2008.





Scheduled
principal payments of the above debt for each of the next five fiscal years and
beyond, is as follows: $1.4 million, $1.5 million, $1.6 million, $1.7 million,
$1.8 million and $18.0 million, respectively.





Interest
charges relating to the above debt were approximately $2.9 million for the
fiscal year ended July 31, 2010, $4.4 million for the fiscal year ended July 25,
2009, and $4.4 million for the fiscal year ended July 26, 2008.  The
decrease in interest charges in the current year was related to the Tender Offer
for all the Convertible Senior Notes completed on January 27, 2010.





10.  Accumulated Other Comprehensive
(loss) income





Accumulated
Other Comprehensive (loss) income (“AOCI”) is calculated in accordance with FASB
accounting guidance.  Cumulative unrealized gains and losses on
available-for-sale investment securities are reflected as AOCI in shareholders’
equity.  See Note 4 for additional information.




Accumulated other comprehensive (loss)
income, net of tax, is reflected in the Consolidated Balance Sheets, as
follows:




Fiscal Year
      Ended(Amounts
      in thousands)
                  
                  July
      31, 2010
                  
                  
                  July 25,
    2009Unrealized
      gain / (loss) on short-term investments securities, net of
      taxes
                  
                  $
                  343
                  
                  
                  $
                  680Unrealized
      gain / (loss) on auction rate securities, net of taxes
                  
                  
                  (4,667
                  )
                  
                  
                  (9,087
                  )Accumulated other comprehensive
      (loss) income
                  
                  $
                  (4,324
                  )
                  
                  $
                  (8,407
                  )


F-33





11.
Share Repurchase Program





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





During fiscal 2010, we purchased 1.6
million shares at an average price of $24.48 equaling $37.9
million.The total stock purchases that have been made under
the 2007 Program are 2.1 million shares at an aggregate purchase price of
approximately $42.6 million, resulting in a remaining authorized balance of
$57.4 million.  Treasury (reacquired) shares are retired and treated
as authorized but unissued shares.




On
September 23, 2010, our Board of Directors authorized a $100 million share
repurchase program (the “2010 Program”).  Under the 2010 Program,
purchases of shares of our common stock may be made at our discretion from time
to time, subject to market conditions and at prevailing market prices, through
open market purchases or in privately negotiated transactions and will be
subject to applicable SEC rules. The 2010 Program replaces the 2007 Program
which had a remaining authorization of $57.4 million.


12. Earnings Per
Share





Basic and diluted earnings per share are
calculated by dividing net earnings by the weighted-average number of common
shares outstanding during each period.  Diluted earnings per share
reflects the potential dilution using the treasury stock method that could occur
if outstanding stock options, or other equity awards from our share-based
compensation plans, were exercised and converted into common stock that would
then participate in net earnings.  Also included in diluted earnings
per share is the conversion obligation of theNotes to the extent
dilutive.See Note 9
for additional information.  Components of basic and diluted earnings
per share were as follows:




Fiscal Year
      Ended(Amounts
      in thousands, except
                      earnings
      per share)
                    
                    July
      31,
                    
                    
                    July
      25,
                    
                    
                    July
      26,2010
                    
                    
                    2009
                    
                    
                    2008Net
earnings
                    
                    $
                    133,378
                    
                    
                    $
                    66,572
                    
                    
                    $
                    71,215Weighted-average shares
      outstanding during period on which basic earnings per share is
      calculated
                    
                    
                    72,194
                    
                    
                    
                    60,044
                    
                    
                    
                    60,102Net effect of dilutive stock
      options, other equity awards, and convertible securities based on the
      treasury stock method using the average market
price
                    
                    
                    4,803
                    
                    
                    
                    2,946
                    
                    
                    
                    4,365Weighted-average shares
      outstanding during period on which diluted earnings per share is
      calculated
                    
                    
                    76,997
                    
                    
                    
                    62,990
                    
                    
                    
                    64,467Earnings per
      share:Basic
                    
                    $
                    1.85
                    
                    
                    $
                    1.11
                    
                    
                    $
                    1.18Diluted
                    
                    $
                    1.73
                    
                    
                    $
                    1.06
                    
                    
                    $
                    1.10





During
the second quarter ended January 23, 2010, we sold all of our convertible senior
notes through a tender offer.  The Convertible Senior Notes were
dilutive to earnings per share for the fiscal years ended July 25, 2009 and July
26, 2008, as a result of our average stock price being greater than the
conversion price of the Notes.  In accordance with FASB accounting
guidance, the number of additional shares related to the dilutive effect of the
Convertible Senior Notes was approximately 1,660,000 shares for fiscal 2009 and
approximately 2,866,000 shares for fiscal 2008.  The dilutive effect
of the Convertible Senior Notes in fiscal 2009 was lower since it is directly
related to the lower average market price of fiscal 2009.





The Notes
were fully redeemed as of January 27, 2010, the effective date of the Offer and,
therefore, the 6.2 million shares issued upon the debt extinguishment are now
included in the outstanding shares from that date.  See Notes 3 and 9
for further details.


F-34





The
following shares attributable to outstanding stock options were excluded from
the calculation of diluted earnings per share because their inclusion would have
been anti-dilutive:





Fiscal Year
      Ended(Amounts
      in thousands)
                  
                  July
      31,
                  
                  
                  July
      25,
                  
                  
                  July 26,2010
                  
                  
                  2009
                  
                  
                  2008Shares
      excluded from calculation of diluted earnings per share
                  
                  
                  1,723
                  
                  
                  
                  3,088
                  
                  
                  
                  1,761





13.
Employee Benefit Plans





We
sponsor a defined contribution retirement savings plan (401(k)) covering all
eligible employees.  We also sponsor an Executive Retirement Plan
(“ERP 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 2010, 2009 and 2008, we incurred expenses of approximately $5.3 million,
$2.2 million and $2.9 million, respectively, relating to the contributions to
and administration of the above plans.  These expenses are allocated
to cost of sales and selling, general and administrative expenses in accordance
with our accounting policies described in Note 1.





The ERP
Plan is a non-qualified deferred compensation plan.  The purpose of the ERP
Plan is to attract and retain a select group of management or highly compensated
employees and to provide them an opportunity to defer compensation on a pre-tax
basis above IRS limitations.  ERP Plan balances cannot be rolled over to
another qualified plan or IRA upon distribution.  Unlike a qualified plan,
Dress Barn, Inc. is not required to fund the benefits payable under the
Plan.





ERP Plan
participants can contribute up to 95% of base salary and bonus, before federal
and state taxes are calculated.  Dress Barn, Inc. may make a matching
contribution to the ERP Plan in the amount of 80% to 100% matching contributions
on the first 5% of base salary and bonus deferrals.  Such amounts were
$1.0 million in fiscal 2010, $0.6 million in fiscal 2009 and $0.7 million in
fiscal 2008.  There are 27 reference investment fund elections
currently offered in the ERP Plan.  As of July 31, 2010 and July 25,
2009our ERP liabilitywas $31.9 million and $25.8
million, respectively.As a result of stock market
appreciation and depreciation related to the reference investments of the
participant, we record charges (benefits) in our Consolidated Statement of
Operations related to this plan.  The nature of such a plan has the
potential to create volatility in our Consolidated Statement of
Operations.





We also
sponsor an Employee Stock Purchase Plan, which allows employees to purchase
shares of our stock during each quarterly offering period at a 10% discount
through weekly payroll deductions.  We do not provide any additional
postretirement benefits.





14.
Income Taxes





As a result of the Merger with Tween
Brands discussedin Note
2,we recorded a $13.2
million current deferred tax asset and $9.2 million non-current deferred tax
liability in purchase accounting.  In addition, as a result of the
extinguishment of the Notes discussed inNote 9, we reduced our current deferred tax
liabilities by $14.6 million, reduced our current taxes payable by $0.2 million
and correspondingly increased our additional paid in capital by $14.8
million.





Effective
with the completion of the Merger with Tween Brands on November 25, 2009, the
Tween Brands federal consolidated group ceased to exist and the companies
acquired as a result of the Merger joined Dress Barn’s federal consolidated
group.  Due to the Merger, we now have foreign operations and will now
provide taxes for certain foreign jurisdictions.





We file income tax returns in the U.S.
federal jurisdiction, various state jurisdictions and certain foreign
jurisdictions.  Federal periods that remain subject to examination
include the tax period ended July 29, 2006 through the tax period ended July 25,
2009 for the Dress Barn consolidated group and the tax period ended February 3,
2007 through January 31, 2009 for the Tween Brands consolidated
group.  Tax periods for state jurisdictions that remain subject to
examination include the tax period ended July 30, 2005 through the tax period
ended July 25, 2009, with few exceptions for the Dress Barn consolidated group
and for the Tween Brands consolidated group periods ended January 28, 2006
through January 31, 2009.  The audit by the Internal Revenue Service
of The Dress Barn federal tax return for the fiscal period ended July 29, 2006
was concluded in the 4thquarter, with the exception oftwo issues which the Companyplans to appeal.The Company believes that adequate
reserves have been provided for the resolution of thesematters.Earlier years
related to certain foreign jurisdictions remain subject to
examination.


F-35


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





Fiscal Year
      Ended(Amounts in
      thousands)
                          
                          July
      31,
                          
                          
                          July
      25,
                          
                          
                          July
      26,2010
                          
                          
                          2009
                          
                          
                          2008Federal:Current
                          
                          $
                          55,825
                          
                          
                          $
                          28,166
                          
                          
                          $
                          26,407Deferred
                          
                          
                          5,440
                          
                          
                          
                          (35
                          )
                          
                          
                          10,53661,265
                          
                          
                          
                          28,131
                          
                          
                          
                          36,943State:Current
                          
                          
                          9,933
                          
                          
                          
                          5,807
                          
                          
                          
                          5,625Deferred
                          
                          
                          1,523
                          
                          
                          
                          974
                          
                          
                          
                          (2,417
                          )11,456
                          
                          
                          
                          6,781
                          
                          
                          
                          3,208Foreign:Current
                          
                          
                          3,320
                          
                          
                          
                          —
                          
                          
                          
                          —Deferred
                          
                          
                          (71
                          )
                          
                          
                          —
                          
                          
                          
                          —3,249
                          
                          
                          
                          —
                          
                          
                          
                          —Provision for income
      taxes
                          
                          $
                          75,970
                          
                          
                          $
                          34,912
                          
                          
                          $
                          40,151





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





(Amounts in
      thousands)
                  
                  July
      31,
                  
                  
                  July
      25,2010
                  
                  
                  2009Deferred
      tax assets:Inventory
      capitalization and inventory-related items
                  
                  $
                  9,266
                  
                  
                  $
                  5,558Capital
      loss carryover and unrealized losses
                  
                  
                  2,997
                  
                  
                  
                  4,680Accrued
      payroll & benefits
                  
                  
                  23,990
                  
                  
                  
                  17,159Share-based
      compensation
                  
                  
                  8,213
                  
                  
                  
                  6,873Straight-line
      rent
                  
                  
                  49,094
                  
                  
                  
                  10,706Federal benefit of uncertain tax
      positions
                  
                  
                  12,312
                  
                  
                  
                  9,818Other items
                  
                  
                  8,269
                  
                  
                  
                  6,231Total deferred tax
      assets
                  
                  
                  114,141
                  
                  
                  
                  61,025Deferred
      tax liabilities:Depreciation
                  
                  
                  39,411
                  
                  
                  
                  10,798Intangibles
                  
                  
                  61,628
                  
                  
                  
                  26,788Interest
                  
                  
                  —
                  
                  
                  
                  16,200Other
      items
                  
                  
                  7,818
                  
                  
                  
                  6,089Total deferred tax
      liabilities
                  
                  
                  108,857
                  
                  
                  
                  59,875Valuation
      allowance
                  
                  
                  (4,178
                  )
                  
                  
                  (5,464
                  )Net deferred tax assets
      (liabilities)
                  
                  $
                  1,106
                  
                  
                  $
                  (4,314
                  )





The
fiscal 2010 total net deferred tax asset is presented on our Consolidated
Balance Sheet as a current asset of $21.4 million and as a long-term liability
of $20.3 million.  The fiscal 2009 total net deferred tax liability is
presented on our Consolidated Balance Sheet as a long-term asset of $3.1 million
and as a current liability of $7.4 million.





The
Company has provided the additional U.S. taxes required to permit the future
repatriation of its undistributed foreign earnings without any additional tax
cost.  Future changes to the Company’s international business
operations might cause Management to change its assertion in regard to some
portion of these foreign earnings resulting in a reversal of the federal
deferred tax liability previously established.





In prior
years, the Company assessed its ability to utilize its capital loss carryovers,
as well as its ability to realize the benefit of unrealized losses sustained in
the current period, and concluded that a valuation allowance is required against
the related deferred tax assets.  During the current year, the Company
recorded a decrease in the valuation allowance of $1.3 million, primarily due to
a decrease in the deferred tax asset for unrealized losses on
investments.  The valuation allowance had a balance of $4.2 million at
July 31, 2010 and $5.5 million at July 25, 2009.


F-36





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





(Amounts in
      thousands)
                    
                    July 31,
                      2010
                    
                    
                    July 25,
                      2009Total
      current deferred tax assets
                    
                    $
                    28,146
                    
                    
                    $
                    14,884Total
      non-current deferred tax assets
                    
                    
                    39,827
                    
                    
                    
                    40,677Total deferred tax
      assets
                    
                    $
                    67,973
                    
                    
                    $
                    55,561Total
      current deferred tax liabilities
                    
                    $
                    6,746
                    
                    
                    $
                    22,289Total
      non-current deferred tax liabilities
                    
                    
                    60,121
                    
                    
                    
                    37,586Total deferred tax
      liabilities
                    
                    $
                    66,867
                    
                    
                    $
                    59,875





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 EndedJuly 31, 2010
                    
                    
                    July 25, 2009
                    
                    
                    July 26, 2008Statutory
      tax rate
                    
                    
                    35.0
                    %
                    
                    
                    35.0
                    %
                    
                    
                    35.0
                    %State
      taxes – net of federal benefit
                    
                    
                    3.6
                    %
                    
                    
                    4.1
                    %
                    
                    
                    4.2
                    %Tax-exempt
      interest
                    
                    
                    (0.3
                    )%
                    
                    
                    (1.2
                    )%
                    
                    
                    (2.0
                    )%Net
      change in the ASC 740-10
      (FIN 48) Reserve
                    
                    
                    (2.1
                    )%
                    
                    
                    (4.8
                    )%
                    
                    
                    (4.2
                    )%Valuation
      allowance – capital losses
                    
                    
                    0.1
                    %
                    
                    
                    0.7
                    %
                    
                    
                    0.9
                    %Non-deductible
      acquisition costs
                    
                    
                    0.3
                    %
                    
                    
                    0.4
                    %
                    
                    
                    —Charity
      excess deduction for tax
                    
                    
                    (0.4
                    )%
                    
                    
                    —
                    
                    
                    
                    —Other
      – net
                    
                    
                    0.1
                    %
                    
                    
                    0.2
                    %
                    
                    
                    2.2
                    %Effective
      tax rate
                    
                    
                    36.3
                    %
                    
                    
                    34.4
                    %
                    
                    
                    36.1
                    %





We adopted Accounting Standards
Codification (“ASC”) 740-10,Accounting for
Uncertainty in Income Taxes– An Interpretation of FASB Statement No. 109,on July 29, 2007 and as of
the adoption date, we had recorded unrecognized tax benefits of $27.2 million,
of which $19.4 million, if recognized, would affect the effective tax
rate.





We recognized
interest and penalties related to unrecognized tax benefitsas a
component of income tax expense.





As of July 31, 2010, our gross
unrecognized tax benefits were $23.9 million, including accrued interest and
penalties of $4.6 million.  As a result of the Merger with Tween
Brands, $9.2 million of gross unrecognized tax benefits were recorded in
purchase accounting, including $1.6 million attributable to interest and
penalties.  If recognized, the portion of the liabilities for gross
unrecognized tax benefits that would affect our effective tax rate, includinginterest and penalties, is
$12.1million.The liability
as of July 31, 2010 of $23.9 million includes accrued interest of $3.5 million
and penalties of $1.1 million.Excluding the amounts recorded in
purchase accounting, discussed above,we recognized
a tax benefit of $1.5 million attributable to interest and tax benefit of
$0.6 million
attributable to penalties for a total benefit of $2.1 million during the year
ended July 31, 2010.





The
change in the Company’s unrecognized tax liability during the fiscal year ended
July 31, 2010, excluding interest and penalties, was affected by three
significant events; a reduction of $2.7 million from a change in the method of
accounting for recognition of certain revenues for tax purposes from an
unacceptable method to an acceptable method, a reduction in the liability of
$4.8 million because of the resolution of certain other tax positions and an
increase of $7.6 million in the liability from uncertain tax positions assumed
in the merger with Justice.





A
reconciliation of the beginning and ending balances of the total amounts of
gross unrecognized tax liability excluding interest and penalties is as
follows:





July 31, 2010
                  
                  
                  July 25, 2009
                  
                  
                  July 26, 2008Gross
      liability for unrecognized tax benefit
                  
                  $
                  18.1
                  
                  
                  $
                  14.0
                  
                  
                  $
                  20.2Increase
      related to acquisition
                  
                  
                  7.6
                  
                  
                  
                  —
                  
                  
                  
                  —Increases
      related to tax positions in prior years
                  
                  
                  1.1
                  
                  
                  
                  11.9
                  
                  
                  
                  1.0Decreases
      related to tax positions in prior years
                  
                  
                  (8.0
                  )
                  
                  
                  (6.9
                  )
                  
                  
                  (5.2
                  )Decreases
      related to settlements
                  
                  
                  (3.6
                  )
                  
                  
                  (0.2
                  )
                  
                  
                  (0.9
                  )Decreases
      related to lapse in statute of limitations
                  
                  
                  (0.5
                  )
                  
                  
                  (2.2
                  )
                  
                  
                  (1.9
                  )Increases
      related to current year tax positions
                  
                  
                  4.6
                  
                  
                  
                  1.5
                  
                  
                  
                  0.8Gross
      liability for unrecognized tax benefit
                  
                  $
                  19.3
                  
                  
                  $
                  18.1
                  
                  
                  $
                  14.0


F-37





We believe it is reasonably possible
that there will be a $4.9 million decrease in the gross tax liability for
uncertain tax positions within the next 12 months based upon potential
settlements and the expiration of statutes of limitation in various tax
jurisdictions.





15.
Commitments and Contingencies





Lease
commitments





We lease
all of our stores.  Certain leases provide for additional rents based
on percentages of net sales, charges for real estate taxes, insurance and other
occupancy costs.  Store leases generally have an initial term of
approximately 10 years with one or more 5-year options to extend the
lease.  Some of these leases have provisions for rent escalations
during the initial term.  We receive rental income and reimbursement
for taxes and common area maintenance charges primarily from two tenants that
occupy a portion of the Suffern facility that are not affiliated with
us.  The rental income from the other tenants is shown as “Other
income” on our Consolidated Statements of Operations.  In addition,
the operating leases have been reduced by our sublease revenue annually by $1.8
million through fiscal 2012.





The
operating lease obligations represent future minimum lease payments under
non-cancelable operating leases as of July 31, 2010.  The minimum
lease payments do not include common area maintenance (“CAM”) charges or real
estate taxes, which are also required contractual obligations under our
operating leases.  In the majority of our operating leases, CAM
charges are not fixed and can fluctuate from year to year.  Total CAM
charges and real estate taxes for fiscal 2010, 2009 and fiscal 2008 were $59.8
million, $44.7 million and $41.8 million, respectively.





A summary
of occupancy costs follows:





Fiscal Year
      Ended(Amounts in
      thousands)
                    
                    July 31,
                      2010
                    
                    
                    July 25,
                      2009
                    
                    
                    July 26,
                      2008Base
rentals
                    
                    $
                    212,139
                    
                    
                    $
                    143,697
                    
                    
                    $
                    137,398Percentage
      rentals
                    
                    
                    9,415
                    
                    
                    
                    3,465
                    
                    
                    
                    3,260Other occupancy
      costs
                    
                    
                    69,842
                    
                    
                    
                    49,131
                    
                    
                    
                    46,174291,396
                    
                    
                    
                    196,293
                    
                    
                    
                    186,832Less: Rental income from third
      parties
                    
                    
                    (1,811
                    )
                    
                    
                    (1,813
                    )
                    
                    
                    (1,821
                    )Total
                    
                    $
                    289,585
                    
                    
                    $
                    194,480
                    
                    
                    $
                    185,011





The
following is a schedule of future minimum rentals under noncancelable operating
leases as of July 31, 2010,


(amounts
in thousands):





Fiscal Year
                  
                  Total2011
                  
                  $
                  235,2972012
                  
                  
                  206,4942013
                  
                  
                  173,3552014
                  
                  
                  144,0612015
                  
                  
                  117,433Subsequent
      years
                  
                  
                  249,221Total
      future minimum rentals
                  
                  $
                  1,125,861





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





Leases
with related parties





We lease
two stores from our Chairman or related trusts.  Future minimum
rentals under leases with such related parties which extend beyond July 31,
2010, included in the above schedule, are approximately $337,000 annually and in
the aggregate $1.1 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 2010, 2009 and 2008 under
these leases amounted to approximately $386,000, $337,000 and $332,000,
respectively.


F-38





Contractual
obligations and commercial commitments





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.





Legal
Matters





On
January 21, 2010, Tween Brands was sued in the U.S. District Court for the
Eastern District of California.  This purported class action alleges,
among other things, that Tween Brands violated the Fair Labor Standards Act by
not properly paying its employees for overtime and missed rest
breaks.  In September 2010, the parties agreed to a tentative
settlement of this wage and hour lawsuit.  The settlement is subject to
preliminary court approval, notice to the purported class members, and final
court approval.




Between
November 2008 and October 2009, Tween Brands was sued in three purported class
action lawsuits alleging that Tween Brands’ telephone capture practice in
California violated the Song-Beverly Credit Card Act, which protects consumers
from having to provide personal information as a condition to a credit card
transaction.  All three cases were consolidated in California state
court.  The parties settled this lawsuit in the spring of
2010.  The court granted preliminary approval of the settlement on
July 9, 2010.  The final court approval hearing is scheduled for
December 10, 2010.





In
addition to the litigation discussed above, we are, and in the future may be,
involved in various other lawsuits, claims and proceedings incident to the
ordinary course of business.  The results of litigation are inherently
unpredictable.  Any claims against us, whether meritorious or not,
could be time consuming, result in costly litigation, require significant
amounts of management time and result in diversion of significant
resources.  The results of these lawsuits, claims and proceedings
cannot be predicted with certainty.  However, we believe that the
ultimate resolution of these current matters will not have a material adverse
effect on our consolidated financial statements taken as a whole.





16.
Share-Based Compensation Plans





Our 2001
Stock Incentive Plan (the “2001 Plan”) provides for the granting of either
Incentive Stock Options or non-qualified options to purchase shares of common
stock, as well as the award of shares of restricted stock.  At the
November 30, 2005 Annual Shareholders Meeting, shareholders approved a total of
six million shares to be available for issuance (for a total of 12 million,
after giving effect to a 2-for-1 stock split payable March 31, 2006) under the
2001 Plan.  As of July 31, 2010, there were approximately 2.4 million
shares under the 2001 Plan available for future grant.  All of our
prior stock option plans have expired as to the ability to grant new
options.  We issue new shares of common stock when stock option awards
are exercised.  Refer to the ConsolidatedStatements of Shareholders’ Equity and
Comprehensive Income for new shares of common stock issued in fiscal 2010,
fiscal 2009 and fiscal 2008.





Stock
option awards outstanding under our current plans have primarily been granted at
exercise prices that are equal to the market value of our stock on the date of
grant, generally vest over four or five years and expire no later than ten years
after the grant date.  We recognize compensation expense ratably over
the vesting period, net of estimated forfeitures.  During thefiscal year
ended July 31, 2010,
July 25, 2009 and July 26,2008, we recognized approximately $7.9
million, $6.3 million and $5.3 million, respectively, in share-based
compensation expense related to stock options.  As of July 31, 2010,
there was $18.1 million of total unrecognized compensation cost related to
nonvested options, which is expected to be recognized over a remaining
weighted-average vesting period of 2.9 years.  The total
intrinsic value of options exercised during fiscal 2010 was approximately $20.3
million, fiscal 2009 were approximately $3.2 million, and during fiscal 2008 was
approximately $1.6 million.  The total fair value of options that
vested during fiscal 2010, fiscal 2009 and fiscal 2008, was approximately $6.4
million, $5.0 million, and $5.4 million, respectively.


F-39


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





Fiscal Year EndedJuly 31, 2010
                  
                  
                  July 25, 2009
                  
                  
                  July 26, 2008Options
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Options
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Options
                  
                  
                  Weighted
                    Average
                    Exercise
                    PriceOptions
      outstanding – beginning of year
                  
                  
                  7,192,103
                  
                  
                  $
                  12.20
                  
                  
                  
                  5,850,968
                  
                  
                  $
                  11.05
                  
                  
                  
                  5,677,329
                  
                  
                  $
                  10.35Granted
                  
                  
                  1,393,013
                  
                  
                  
                  20.14
                  
                  
                  
                  1,807,505
                  
                  
                  
                  14.98
                  
                  
                  
                  663,800
                  
                  
                  
                  16.73Cancelled
                  
                  
                  (226,755
                  )
                  
                  
                  17.21
                  
                  
                  
                  (85,950
                  )
                  
                  
                  15.73
                  
                  
                  
                  (265,450
                  )
                  
                  
                  13.42Exercised
                  
                  
                  (1,638,351
                  )
                  
                  
                  9.15
                  
                  
                  
                  (380,420
                  )
                  
                  
                  6.98
                  
                  
                  
                  (224,711
                  )
                  
                  
                  7.19Outstanding
      end of year
                  
                  
                  6,720,010
                  
                  
                  $
                  14.42
                  
                  
                  
                  7,192,103
                  
                  
                  $
                  12.20
                  
                  
                  
                  5,850,968
                  
                  
                  $
                  11.05Options
      exercisable at year-end
                  
                  
                  3,145,045
                  
                  
                  $
                  11.39
                  
                  
                  
                  3,647,636
                  
                  
                  $
                  9.68
                  
                  
                  
                  3,108,018
                  
                  
                  $
                  8.45Weighted-average
      fair value of options granted during the year
                  
                  
                  
                  
                  
                  $
                  8.14
                  
                  
                  
                  
                  
                  
                  $
                  5.73
                  
                  
                  
                  
                  
                  
                  $
                  6.63





At July
31, 2010, we had 6,473,605 options vested and expected to vest with an aggregate
intrinsic value of $68.1 million and a weighted-average remaining contractual
term of 6.3 years.  At July 25, 2009, we had 6,867,663 options vested
and expected to vest with an aggregate intrinsic value of $28.0 million and a
weighted-average remaining contractual term of 6.1 years.  At July 26,
2008, we had 5,609,267 options vested and expected to vest with an aggregate
intrinsic value of $28.2 million and a weighted-average remaining contractual
term of 6.1 years.





The
options exercisable at July 31, 2010 have an aggregate intrinsic value of $41.8
million and a weighted average contractual term of 4.5 years.





The 2001
Plan also allows for the issuance of shares of restricted stock.  Any
shares of restricted stock are counted against the shares available for future
grant limit as three shares for every one restricted share
granted.  In general, if options are cancelled for any reason or
expire, the shares covered by such options again become available for
grant.  If a share of restricted stock is forfeited for any reason,
three shares become available for grant.





The fair value of restricted stock
awards is estimated on the date of grant based on the market price of our common
stock and is amortized to compensation expense on a graded basis over the
related vesting periods, which are generally two to five years.  As of July 31,
2010, there was $2.1 million of
total unrecognized compensation cost related to non-vested restricted stock
awards, which is expected to be recognized over a remaining weighted-average
vesting period of 2.5 years.  Compensation expense recognized
forrestricted stock awardsduring the fiscal years
ended July 31, 2010, July 25,2009 and July 26, 2008was $2.4 million, $0.3 million and $1.3 million,
respectively.





Following is a summary of the changes in
the shares of restricted stock outstanding during fiscal 2010, 2009 and 2008:





Fiscal Year EndedFiscal 2010
                  
                  
                  Fiscal 2009
                  
                  
                  Fiscal 2008Number
                    of Shares
                  
                  
                  Weighted
                    Average
                    Grant Date
                    Fair Value
                    Per Share
                  
                  
                  Number
                    of Shares
                  
                  
                  WeightedAverageGrant DateFair
      ValuePer Share
                  
                  
                  Number
                    of Shares
                  
                  
                  Weighted
                    Average
                    Grant Date
                    Fair Value
                    Per ShareRestricted
      stock awards, beginning of year
                  
                  
                  111,581
                  
                  
                  $
                  16.53
                  
                  
                  
                  140,524
                  
                  
                  $
                  16.12
                  
                  
                  
                  137,167
                  
                  
                  $
                  13.59Granted
                  
                  
                  191,704
                  
                  
                  
                  20.36
                  
                  
                  
                  26,000
                  
                  
                  
                  14.12
                  
                  
                  
                  54,573
                  
                  
                  
                  19.56Vested
                  
                  
                  (107,369
                  )
                  
                  
                  17.64
                  
                  
                  
                  (51,943
                  )
                  
                  
                  14.34
                  
                  
                  
                  (48,816
                  )
                  
                  
                  12.59Forfeited
                  
                  
                  (5,179
                  )
                  
                  
                  21.63
                  
                  
                  
                  (3,000
                  )
                  
                  
                  14.39
                  
                  
                  
                  (2,400
                  )
                  
                  
                  22.12Restricted
      stock awards, end of year
                  
                  
                  190,737
                  
                  
                  $
                  19.62
                  
                  
                  
                  111,581
                  
                  
                  $
                  16.53
                  
                  
                  
                  140,524
                  
                  
                  $
                  16.12


F-40





During fiscal 2007, we established a
Long-Term Incentive Plan (the “LTIP”) that authorizes the grant of
performance-based restricted stock to senior executives based on the achievement
of certain performance metrics versus planned amounts over specified valuation
periods.  As of
July 31, 2010, all
compensationcost for the
restricted shares issued for the fiscal 2007 valuation periodhad been recognized.  During the fiscal years
ended July 31, 2010, July 25, 2009 and July 26,
2008, we recognized ($0.3)
million, ($0.1) million and $0.9 million of compensation expense relating to
certain existing LTIP valuation periods.





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





Fiscal
      Year EndedJuly
      31,
                    2010
                  
                  
                  July
      25,
                    2009
                  
                  
                  July
      26,
                    2008Weighted
      average risk-free interest rate
                  
                  
                  2.2
                  %
                  
                  
                  2.6
                  %
                  
                  
                  4.1
                  %Weighted
      average expected life (years)
                  
                  
                  3.9
                  
                  
                  
                  4.9
                  
                  
                  
                  4.8Expected
      volatility of the market price of our common stock
                  
                  
                  47.6
                  %
                  
                  
                  40.5
                  %
                  
                  
                  39.5
                  %Expected
      dividend yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %
                  
                  
                  0
                  %





The
Black-Scholes option pricing model was developed for use in estimating the fair
value of traded options, which have no vesting restrictions and are fully
transferable.  The expected life of options represents the period of
time the options are expected to be outstanding and is based on historical
trends.  The risk-free rate is based on the yield of a U.S. Treasury
strip rate with a maturity date corresponding to the expected term of the option
granted.  The expected volatility assumption is based on the
historical volatility of our stock over a term equal to the expected term of the
option granted.  Option valuation models require input of highly
subjective assumptions including the expected stock price
volatility.  Because our employee stock options have characteristics
significantly different from those of traded options, and because changes in
subjective input assumptions can materially affect the fair value estimate, the
actual value realized at the time the options are exercised may differ from the
estimated values computed above.





Cash
flows resulting from tax deductions in excess of the cumulative compensation
cost recognized for options exercised (excess tax benefits) are classified as
financing cash flows.  For the fiscal years ended July 31, 2010, July
25, 2009 and July 26, 2008 excess tax benefits realized from the exercise of
stock options was $5.8 million, $0.9 million and $0.4 million,
respectively.





17.
Segments





Our
segment reporting structure reflects a brand-focused approach, designed to
optimize the operational coordination and resource allocation of our businesses
across multiple functional areas including specialty retail, e-commerce and
licensing.  The three reportable segments described below represent
our brand-based activities for which separate financial information is available
and which is utilized on a regular basis by our executive team to evaluate
performance and allocate resources.  In identifying our reportable
segments, we consider economic characteristics, as well as products, customers,
sales growth potential and long-term profitability.  As such, we
report our operations in three reportable segments as follows:





•
            dressbarnsegment– consists of
      the specialty retail and outlet operations of ourdressbarnbrand.





•
            mauricessegment– consists of
      the specialty retail, outlet and e-commerce operations of ourmauricesbrand.





•
            Justicesegment– consists of
      the specialty retail, outlet, e-commerce and licensing operations of ourJusticebrand.





Our Justice brand revenue from
E-commerce is approximately 4.0% of our annual net sales and revenue from
licensing revenue is less than 1.0% of our annual net sales.


F-41





Selected financial information by
reportable segment and a reconciliation of the information by segment to the
consolidated totals is as follows:





Consolidated Statements of Operations
and Cash Flow Data:





(Amounts
      in millions)
                  
                  Fiscal 2010
                  
                  
                  Fiscal 2009
                  
                  
                  Fiscal 2008Net
      salesdressbarn
                  
                  $
                  982.0
                  
                  
                  $
                  906.2
                  
                  
                  $
                  887.6maurices
                  
                  
                  680.7
                  
                  
                  
                  588.0
                  
                  
                  
                  556.6Justice
      *
                  
                  
                  711.9
                  
                  
                  
                  —
                  
                  
                  
                  —Consolidated
      net sales
                  
                  $
                  2,374.6
                  
                  
                  $
                  1,494.2
                  
                  
                  $
                  1,444.2Operating
      incomedressbarn
                  
                  $
                  59.8
                  
                  
                  $
                  44.9
                  
                  
                  $
                  42.8maurices
                  
                  
                  93.0
                  
                  
                  
                  60.1
                  
                  
                  
                  69.8Justice
      *
                  
                  
                  64.7
                  
                  
                  
                  —
                  
                  
                  
                  —Consolidated
      operating income
                  
                  
                  217.5
                  
                  
                  
                  105.0
                  
                  
                  
                  112.6Loss
      on debt extinguishment
                  
                  
                  (5.8
                  )
                  
                  
                  —
                  
                  
                  
                  —Interest
      income
                  
                  
                  2.3
                  
                  
                  
                  5.4
                  
                  
                  
                  7.8Interest
      expense
                  
                  
                  (6.6
                  )
                  
                  
                  (10.0
                  )
                  
                  
                  (9.5
                  )Other
      income
                  
                  
                  2.0
                  
                  
                  
                  1.1
                  
                  
                  
                  0.5Earnings
      before provision for income taxes
                  
                  $
                  209.4
                  
                  
                  $
                  101.5
                  
                  
                  $
                  111.4Depreciation
      and amortizationdressbarn
                  
                  $
                  27.1
                  
                  
                  $
                  28.0
                  
                  
                  $
                  27.8maurices
                  
                  
                  20.8
                  
                  
                  
                  20.5
                  
                  
                  
                  20.4Justice
      *
                  
                  
                  23.7
                  
                  
                  
                  —
                  
                  
                  
                  —Consolidated
      depreciation and amortization
                  
                  $
                  71.6
                  
                  
                  $
                  48.5
                  
                  
                  $
                  48.2Capital
      expendituresdressbarn
                  
                  $
                  24.7
                  
                  
                  $
                  27.3
                  
                  
                  $
                  34.4maurices
                  
                  
                  28.0
                  
                  
                  
                  31.1
                  
                  
                  
                  31.7Justice
      *
                  
                  
                  12.5
                  
                  
                  
                  —
                  
                  
                  
                  —Consolidated
      capital expenditures
                  
                  $
                  65.2
                  
                  
                  $
                  58.4
                  
                  
                  $
                  66.1





*
            TheJusticeMergerwas consummated on November 25,
      2009 and therefore data related to our prior reporting period is not
      presented.





The
information regarding total assets by segment as of July 25, 2009 has been
restated to correct an error in classification of certain assets, primarily
maurices goodwill and
intangible assets.  Such assets were previously included in the dressbarn segment assets and
should have been classified as part of the maurices segment assets. 
As a result, maurices
assets increased by $220.8
million from amounts originally reported and dressbarn assets decreased by
a corresponding amount as of July 25, 2009.  Consolidated assets were
unaffected by this reclassification.  The amounts reported in Note 8
related to goodwill and intangible assets of maurices were also unaffected
by this reclassification of segment assets.





(continued)


F-42





Consolidated Balance
Sheets Data:





(Amounts
      in millions)
                  
                  July 31, 2010
                  
                  
                  July 25, 2009Total
      assetsdressbarn
                  
                  $
                  604.5
                  
                  
                  $
                  725.7maurices
                  
                  
                  447.3
                  
                  
                  
                  403.5Justice
      *
                  
                  
                  602.3
                  
                  
                  
                  —Consolidated
      assets
                  
                  $
                  1,654.1
                  
                  
                  $
                  1,129.2Merchandise
      inventoriesdressbarn
                  
                  $
                  129.6
                  
                  
                  $
                  126.1maurices
                  
                  
                  75.6
                  
                  
                  
                  67.9Justice
      *
                  
                  
                  115.1
                  
                  
                  
                  —Consolidated
      merchandise inventories
                  
                  $
                  320.3
                  
                  
                  $
                  194.0





*
            TheJusticeMergerwas consummated on November 25,
      2009 and therefore
      data related to theprior reporting period is not
presented.





18.
Quarterly Results of Operations (UNAUDITED)





(Amounts
in thousands, except per share data)


Fiscal Year Ended July 31,
      2010(1)
                                                  
                                                  
                                                  FourthQuarter
                                                  
                                                  
                                                  ThirdQuarter
                                                  
                                                  
                                                  SecondQuarter
                                                  
                                                  
                                                  First
                                                    Quarter(2),
      (4)
                                                  
                                                  
                                                  (2),
      (4)
                                                  
                                                  
                                                  (2),
      (4)Net sales
                                                  
                                                  
                                                  $
                                                  710,865
                                                  
                                                  
                                                  $
                                                  665,497
                                                  
                                                  
                                                  $
                                                  594,120
                                                  
                                                  
                                                  $
                                                  404,089Cost of sales, including occupancy
      and buying costs(excluding
      depreciation)
                                                  
                                                  
                                                  
                                                  419,484
                                                  
                                                  
                                                  
                                                  373,874
                                                  
                                                  
                                                  
                                                  361,617
                                                  
                                                  
                                                  
                                                  240,292Income tax
      expense
                                                  
                                                  
                                                  (3)
                                                  18,136
                                                  
                                                  
                                                  
                                                  29,060
                                                  
                                                  
                                                  
                                                  13,929
                                                  
                                                  
                                                  
                                                  14,845Net
earnings
                                                  
                                                  
                                                  
                                                  42,011
                                                  
                                                  
                                                  
                                                  48,007
                                                  
                                                  
                                                  
                                                  21,688
                                                  
                                                  
                                                  
                                                  21,672Earnings per
      shareBasic
                                                  
                                                  
                                                  $
                                                  0.53
                                                  
                                                  
                                                  $
                                                  0.60
                                                  
                                                  
                                                  $
                                                  0.32
                                                  
                                                  
                                                  $
                                                  0.36Diluted
                                                  
                                                  
                                                  $
                                                  0.52
                                                  
                                                  
                                                  $
                                                  0.59
                                                  
                                                  
                                                  $
                                                  0.28
                                                  
                                                  
                                                  $
                                                  0.33Fiscal Year Ended July 25,
      2009(1),
      (5)
                                                  
                                                  
                                                  FourthQuarter
                                                  
                                                  
                                                  ThirdQuarter
                                                  
                                                  
                                                  SecondQuarter
                                                  
                                                  
                                                  First
                                                    QuarterNet sales
                                                  
                                                  
                                                  $
                                                  398,928
                                                  
                                                  
                                                  $
                                                  375,709
                                                  
                                                  
                                                  $
                                                  343,201
                                                  
                                                  
                                                  $
                                                  376,398Cost of sales, including occupancy
      and buying costs(excluding
      depreciation)
                                                  
                                                  
                                                  
                                                  237,994
                                                  
                                                  
                                                  
                                                  220,642
                                                  
                                                  
                                                  
                                                  230,516
                                                  
                                                  
                                                  
                                                  229,198Income tax expense/
      (benefit)
                                                  
                                                  
                                                  
                                                  8,046
                                                  
                                                  
                                                  
                                                  15,469
                                                  
                                                  
                                                  
                                                  (1,160
                                                  )
                                                  
                                                  
                                                  12,557Net earnings/
      (loss)
                                                  
                                                  
                                                  
                                                  25,621
                                                  
                                                  
                                                  
                                                  23,061
                                                  
                                                  
                                                  
                                                  (1,836
                                                  )
                                                  
                                                  
                                                  19,726Earnings/(loss)per shareBasic
                                                  
                                                  
                                                  $
                                                  0.43
                                                  
                                                  
                                                  $
                                                  0.38
                                                  
                                                  
                                                  $
                                                  (0.03
                                                  )
                                                  
                                                  $
                                                  0.33Diluted
                                                  
                                                  
                                                  $
                                                  0.40
                                                  
                                                  
                                                  $
                                                  0.37
                                                  
                                                  
                                                  $
                                                  (0.03
                                                  )
                                                  
                                                  $
                                                  0.30





(1)Fiscal 2010 consists of 53
weeks.  All other fiscal years presented consisted of52 weeks.


(2)  Merger
with Justice in November
2009, refer to Note 2.


(3)  The
income tax provision for fiscal 2010 was favorably impacted by the reversal of
approximately $4.8 million of uncertain tax positions, refer to Note
14.


(4)  Tender
Offer of Convertible Senior Notes, refer to Note 9


(5)  Prior
year amounts have been revised to reflect the retrospective application of
adopting a new accounting pronouncement relating to convertible debt and the
prospective application of the new accounting pronouncement relating to
non-controlling interest, refer to Note 3.


F-43





19.
Subsequent Events





Corporate Reorganization and
Potential Corporate Name Change





We are
currently planning a potential corporate reorganization and name change. In our
planned reorganization, each of our dressbarn, maurices and Justice brands would become
subsidiaries of a new Delaware corporation named Ascena Retail Group, Inc., or
Ascena, and Dress Barn shareholders would become stockholders of this new
Delaware holding company on a one-for-one basis, holding the same number of
shares and same ownership percentage after the reorganization as they held
immediately prior to the reorganization.  The reorganization generally
would be tax-free for Dress Barn shareholders.  Shareholders of record
on October 8, 2010 will be entitled to attend and vote at the annual meeting to
approve the reorganization, which will be more fully described in the proxy
statement/prospectus relating to the meeting.





Upon
completion of the reorganization, Ascena would, in effect, replace the present
company as the publicly held corporation.  Ascena through its
subsidiaries would continue to conduct all of the operations currently conducted
by Dress Barn and its subsidiaries, and the directors and executive officers of
Dress Barn prior to the reorganization would be the same as the directors and
executive officers of Ascena following the reorganization.  The shares
of Ascena common stock are expected to trade on the NASDAQ Global Select Market
under the ticker symbol “ASNA”.





The Board
of Directors and management of Dress Barn, Inc. believe that implementing the
holding company structure will provide the company with strategic, operational
and financing flexibility, and incorporating the new holding company in Delaware
will allow the company to take advantage of the flexibility, predictability and
responsiveness that Delaware corporate law provides.




F-44





EXHIBIT
INDEX





Exhibit
                Number
              
              Description
              
              Incorporated
      By
                Reference From2.1
              
              Agreement
      and Plan of Merger, dated as of June 24, 2009, among The Dress Barn, Inc.,
      Thailand Acquisition Corp. and Tween Brands, Inc.
              
              (1)3.1
              
              Amended
      and Restated Certificate of Incorporation, as approved by shareholders at
      December 10, 2008 Annual Meeting of Shareholders
              
              (2)3.2
              
              Amended
      and Restated By-Laws (as amended through September 18,
    2008)
              
              (3)4
              
              Specimen
      Common Stock Certificate
              
              (4)10.1
              
              Purchase
      and Sale Agreement, dated January 28, 2003,
                Between
      Rockland Warehouse Center Corporation, as seller,
                and
      Dunnigan Realty, LLC, as buyer with respect to
                30
      Dunnigan Drive, Suffern, NY
              
              (5)10.2
              
              $34,000,000
      mortgage loan from John Hancock Life Insurance Company
                to
      Dunnigan Realty, secured by mortgage on 30 Dunnigan Drive, Suffern,
      NY
              
              (6)10.3
              
              Leases
      of Company premises of which the lessor is Elliot S. Jaffe
                or
      members of his family or related trusts:10.6.1   Danbury,
      CT store
              
              (4)10.6.2   Norwalk,
      CT dressbarn/dressbarn Woman
      store
              
              (7)10.4
              
              Amended
      and Restated Lease between Dunnigan Realty, LLC, as landlord,
                and
      The Dress Barn, Inc., as tenant, dated June 24, 2003 for
      office
                and
      distribution space in Suffern, New York
              
              (6)10.5
              
              The
      Dress Barn, Inc. 1993 Incentive Stock Option Plan
              
              (8)10.6
              
              The
      Dress Barn, Inc. 1995 Stock Option Plan
              
              (9)10.7
              
              The
      Dress Barn, Inc. 2001 Stock Incentive Plan (amended and restated effective
      September 29, 2005)
              
              (10)10.8
              
              The
      Dress Barn, Inc. 162(m) Executive Bonus Plan
              
              (10)10.9
              
              Amendment
      Number One to 162(m) Executive Bonus Plan
              
              (11)10.10
              
              Employment
      Agreement with Elliot S. Jaffe dated May 2, 2002
              
              (12)10.11
              
              Amendment
      dated July 10, 2006 to Employment Agreement
                dated
      May 2, 2002 with Elliot S. Jaffe
              
              (13)10.12
              
              Employment
      Agreement dated May 2, 2002 with David R. Jaffe
              
              (12)10.13
              
              Employment
      Agreement dated April 23, 2010 with   Michael W.
      Rayden
              
              (14)10.14
              
              Employment
      Agreement dated July 26, 2005 with Gene Wexler
              
              (15)10.15
              
              Supplemental
      Retirement Benefit Agreement with Mrs. Roslyn Jaffe dated August 29,
      2006
              
              (16)10.16
              
              Consulting
      Agreement dated July 18, 2006 with Burt Steinberg Retail Consulting
      Ltd.
              
              (17)10.17
              
              Executive
      Severance Plan dated as of March 3, 2010
              
              (18)10.18
              
              Credit
      Agreement dated as of November 25, 2009, filed
    herewith








14
              
              Code
      of Ethics for the Chief Executive Officer and Senior Financial
      Officers
              
              (6)21
              
              Subsidiaries
      of the Registrant, filed herewith23
              
              Consent
      of Independent Registered Public Accounting Firm, filed
      herewith31.1
              
              Section
      302 Certification of President and Chief Executive Officer, filed
      herewith31.2
              
              Section
      302 Certification of Chief Financial Officer, filed
    herewith32.1
              
              Section
      906 Certification of President and Chief Executive Officer, filed
      herewith32.2
              
              Section
      906 Certification of Chief Financial Officer, filed
    herewith





References
      as follows:(1)
              The
      Company’s Report on Form 8-K filed June 25, 2009. Excludes schedules,
      exhibits and certain annexes, which the Company agrees to furnish
      supplementally to the Securities and Exchange Commission upon
      request.(2)
              Annex
      A to the Company’s Proxy Statement, filed November 5,
  2008.(3)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 26,
      2008 (Exhibit 3.4).(4)
              The
      Company's Registration Statement on Form S-1 under the Securities Act of
      1933 (Registration No. 2-82916) declared effective May 4, 1983 (Exhibits 4
      and 10(l)).(5)
              The
      Company’s Quarterly Report on Form 10-Q for the quarter ended January 25,
      2003.(6)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 26,
      2003 (Exhibits 10(xx), 10(mm) and 14).(7)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 25,
      1992 (Exhibit 10(h)(h)).(8)
              The
      Company's Registration Statement on Form S-8 under the
                Securities
      Act of 1933 (Registration No. 33-60196) filed on March 25, 1993 (Exhibit
      28).(9)
              The
      Company's Annual Report on Form 10-K for the fiscal year ended July 27,
      1996 (Exhibit 10(nn)).(10)
              The
      Company's Proxy Statement, filed October 31, 2005 (Annex A and Annex
      B).(11)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 25,
      2009 (Exhibit 10.9).(12)
              The
      Company's Annual Report on Form 10-K for the fiscal year ended July 27,
      2002 (Exhibits 10(t)(t) and 10(u)(u)).(13)
              The
      Company’s Report on Form 8-K filed July 13, 2006 (Exhibit
      99.1).(14)
              The
      Company's Quarterly Report on Form 8-K filed April 29, 2010 (Exhibit
      10.1).(15)
              The
      Company’s Annual Report on Form 10-K for the fiscal year ended July 30,
      2005 (Exhibit 10.25).(16)
              The
      Company’s Report on Form 8-K filed August 30, 2006 (Exhibit
      99.1).(17)
              The
      Company’s Report on Form 8-K filed July 19, 2006 (Exhibit
      99.1).(18)
              The
      Company's Report on Form 8-K filed April 22, 2010 (Exhibit
      10.1).