As filed with the Securities and Exchange Commission on December 19, 2003

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K



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|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
|- | ---------------------------------------------

| | OF THE SECURITIES EXCHANGE ACT OF 1934
| | --------------------------------------



FOR THE FISCAL YEAR ENDED SEPTEMBER 27, 2003



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
|- | -------------------------------------------------

| | OF THE SECURITIES EXCHANGE ACT OF 1934
| | --------------------------------------



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COMMISSION FILE NUMBER 0-27677



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CHARLOTTE RUSSE HOLDING, INC.

(Exact Name of Registrant as Specified in Its
Charter)



|DELAWARE                                       |  | 33-0724325                          
|---------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation) |  | (I.R.S. Employer Identification No.)



4645 MORENA
BOULEVARD

SAN DIEGO, CA 92117

(Address, including Zip Code, of Registrants Principal Executive Offices)



(858) 587-1500

(Registrants Telephone Number, Including Area Code)



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SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE

SECURITIES
REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:

COMMON STOCK, PAR VALUE $0.01 PER SHARE

(Title of Each Class)



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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 if the
Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act):    Yes  x    No ̈



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



The aggregate market value of voting stock held by
non-affiliates of the registrant was approximately $165,834,000 as of December 15, 2003 based upon the closing sale price per share of the registrants common stock of $13.34 as reported on the Nasdaq National Market ® on such date. Shares of common stock held by each
executive officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive for
other purposes.



Number of shares of common stock outstanding
as of December 15, 2003 was 21,496,882.

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DOCUMENTS INCORPORATED BY REFERENCE



Part III incorporates information by reference from the definitive Proxy Statement for the 2004 Annual Meeting of
Shareholders, to be filed with the Commission within 120 days after the end of the registrants fiscal year covered by this Annual Report on Form 10-K.



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The stylized and
non-stylized Charlotte Russe and

LOGO trademarks
referred to in this Annual Report on Form 10-K are federally registered in the United States. These trademarks are the property of Charlotte Russe Holding, Inc. or its subsidiaries. The Rampage® trademark referred to in this Annual Report on Form 10-K is federally registered in the
United States and is used by Charlotte Russe under a license agreement with Rampage Licensing, LLC. The use of the Rampage trademark by other parties, including other apparel manufacturers and retailers, should not be attributed to our business. All
other trademarks or trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.



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PART I



ITEM 1. BUSINESS



General



Charlotte
Russe Holdings, Inc. (we, our, and us) is a rapidly growing, mall-based specialty retailer of fashionable, value-priced apparel and accessories targeting young women between the ages of 15 and 35. We have two
distinct, established store concepts: Charlotte Russe and Rampage. As of September 27, 2003, we operated a total of 311 stores throughout 38 states and Puerto Rico. Through our fashion content, merchandise mix, exciting store
layout and design, and striking merchandise presentation, we project fashion attitudes that appeal to customers across age and socioeconomic boundaries. Our Charlotte Russe stores offer fashionable, affordable apparel and accessories that have been
tested and accepted by the marketplace, thus appealing to women who prefer established fashion trends. Our Rampage stores feature emerging fashion trends and thus appeal to women who have a flair for making fashion statements and who want to create
a cutting-edge look.



Our Charlotte Russe and Rampage stores
are located predominantly in high-visibility, center court mall locations in spaces that average approximately 7,100 square feet. In our estimation, these stores are generally twice as large as those of most of our direct mall-based competitors and
are designed to create an environment that is exciting to shop and accentuates the fashion, breadth and value of our merchandise selection.



Our broad assortment of merchandise is centered on styles that are affordable, feminine and reflect the latest fashion trends. Our breadth of merchandise
enables our customers to assemble coordinated and complete outfits that satisfy many of their lifestyle needs. Both our Charlotte Russe and Rampage store concepts offer merchandise at value-oriented prices, generally below most of our direct
mall-based competitors. Over 80% of our Charlotte Russe merchandise is sold under the Charlotte Russe labels and over 80% of our Rampage merchandise is sold under our proprietary

LOGO label. The remainder of our merchandise at these stores consists of nationally-recognized brands popular with our customers.



We are becoming a leading national specialty retailer.



Since our acquisition in September 1996, we have conducted an accelerated store opening program. As of September 27, 2003, we operated 311 stores
throughout 38 states and Puerto Rico. Based on our successful track record, favorable demographic trends and a solid infrastructure, we believe we are positioned for continued growth over the next several years. We plan to continue to open new
Charlotte Russe and Rampage stores at a rapid rate, with 50 new Charlotte Russe and Rampage stores planned for fiscal year 2004. We have already completed our site selection and evaluation process for 43 of these stores. We expect to open these new
stores in existing markets as well as in markets in which we currently do not have a presence.



We rely on exciting in-store graphics and window displays to convey our fashion-forward orientation in both our Charlotte Russe and Rampage stores. We have also leveraged these successful marketing efforts to promote
awareness of our Charlotte Russe brands on a national level through a national print marketing campaign. Through both our store expansion and marketing strategies, we are becoming a leading national specialty retailer of affordable fashion-forward
apparel and accessories for youthful-minded women.



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Our business strategy differentiates us from our competitors.



The elements of our business strategy combine to create a merchandise
assortment that appeals to consumers from a broad range of socioeconomic, demographic and cultural profiles and that differentiates us from our competitors. We believe this broad consumer appeal, coupled with our superior new store cash returns on
investment, creates a highly portable store concept and a significant opportunity for growth. The principal elements of our business strategy include the following:



Offer Consistent Value Pricing.We offer a broad assortment of fashionable, quality merchandise at prices generally
below most of our direct mall-based competitors. We employ this value-pricing strategy across both of our established store concepts, with an average sales price for apparel items at our Charlotte Russe and Rampage stores of approximately $16.00 and
$26.00, respectively. Because our prices are affordable and our merchandise quality is comparable to higher priced specialty retailers and department stores, we create a strong perception of value that has enabled us to build a broad and loyal base
of customers.



Maintain Distinct Brand Images.We have
created focused and differentiated brand images based on fashion attitude, value pricing and quality. These images are consistently communicated through all aspects of our business, including merchandise assortments, in-store visual merchandising
and marketing materials. We also enhance brand recognition by offering approximately 80% of our Charlotte Russe merchandise under the Charlotte Russe labels and approximately 80% of our Rampage merchandise under our proprietary

LOGO label. We believe that both of our established brands provide opportunities for expansion of our current merchandise categories and entry into new product categories.



Target a Highly Desirable Market.Our Charlotte Russe and Rampage
stores target women between the ages of 15 and 35, a broad and large demographic that is expected to grow over the next ten years. While our target customer base is expected to grow, a core group of our target market, the teenage and early twenties
population, is expected to grow at a rate faster than that of the overall United States population according to the United States Census Bureau.



Offer Broad, Exciting Merchandise Assortment.Our merchandising strategy is founded on offering a broad assortment of apparel and accessories that
conveys a consistent fashion attitude. Our merchandise includes ready-to-wear apparel such as knit and woven tops, dresses, shorts, pants and skirts, as well as accessories such as shoes, handbags and jewelry that enable our customers to create
distinct ensembles complemented by color coordinated and fashion-forward items. Our merchandise assortment is voguish enough to attract teenage customers and yet stylish enough to retain those women as they mature into young adults. We maintain a
fresh and exciting shopping environment by frequently introducing new merchandise into our stores and by regularly updating our merchandise displays. In addition, our stores provide a comfortable and spacious environment that accentuates the breadth
of our merchandise offerings.



Capitalize on Strong Store
Economics.Based on our experience with store openings for our two established concepts, we estimate that the average net investment to open these new stores is approximately $400,000, which includes capital expenditures, net of landlord
contributions, and initial inventory, net of payables. All new stores opened since our acquisition in fiscal 1996 that have operated for more than a year generated average net sales of approximately $1.8 million and store-level operating cash flow
in excess of $375,000, or approximately 21.0% of net sales. Accordingly, these stores generated an average cash return on investment of over 90% in their first year of operation. In light of recent economic conditions, we are targeting future store
openings that will generate, on average, cash returns on investment in excess of 80% for the first year of operation.



Leverage Highly Experienced Management Team. We believe our management is positioned to capitalize on the strong economics of the Charlotte Russe
and Rampage concepts and to successfully execute our national expansion program. Our four executive officers and our active Chairman of the Board have an average of more than 25 years of retailing experience, including experience with national
retailers such as Contempo Casuals,



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Guess?, Pacific Sunwear, Claires Stores, Suzy Shier and Price Club. In addition, our 13 Vice Presidents average over 18 years of retailing experience,
and our total of 17 executives have been with us for an average of 8 years.



Actively Manage Inventory.A key aspect of our merchandising strategy is our test-and-reorder philosophy. This strategy allows us to minimize our inventory risk by ordering small quantities of fashion
merchandise to test customer acceptance before placing larger purchase commitments. Our test-and-reorder strategy is successful in large part because we deal primarily with domestic vendors, which in our experience has generally resulted in short
lead times of three to six weeks. These short lead times, together with our ability to monitor store sales on a daily basis, permit us to quickly react to sell-through trends and fashion preferences. We have one of the higher inventory turn rates in
the industry, and we believe that our approach to managing our merchandise mix has contributed to strong merchandise gross margins.



Our target customers are young, fashion-conscious women.



We target young, fashion-conscious women. Our Charlotte Russe customer is a woman who desires understandable trends at substantial value. She is a hip
teenager seeking the current fashion trends, as well as the fashionable working woman looking for career dressing. Regardless of her age, the Charlotte Russe customer is feminine and body conscious. Our Rampage stores cater to women with definitive
fashion sense who set rather than follow trends. Our Rampage customer is hip, eclectic, body conscious and tapped into pop culture. She wants her look to be cutting-edge, while recognizing the value of competitive pricing.



We offer established fashion and cutting-edge merchandise.



Charlotte Russe.Our Charlotte Russe stores provide an exciting,
fashionable assortment of merchandise that complements virtually every facet of our customers lifestyle. Our merchandise reflects established fashion trends and includes a broad offering of ready-to-wear apparel, including knit and woven tops,
dresses, shorts, pants and skirts, as well as seasonal items such as prom dresses and outerwear. This product assortment allows us to be fashionable enough to attract teenage customers and yet stylish enough to retain customers as they become young
working women. We believe Charlotte Russe stores offer a higher percentage of dresses as compared to other specialty retailers to better meet our customers broad lifestyle needs for casual, social and special occasion wear. Our typical dresses
range in price from $19.99 to $60.00. By offering a product mix that reflects a more mature stage of the fashion cycle, our Charlotte Russe stores are able to learn from the experience of our Rampage stores with emerging trends in order to more
quickly identify fashion that has a broad market appeal. Charlotte Russe stores also offer a broad assortment of accessories, such as lingerie, shoes, jewelry, handbags and cosmetics. Our expansive accessories category enables us to offer the
convenience of one-stop shopping to our customers, enabling them to complement their ready-to-wear clothing with color coordinated items and fashion-forward accessories. Over 80% of the merchandise sold in these stores carries the Charlotte Russe
labels. Our average sales price for apparel items is $16.00, and the average sales price for all of our merchandise, including accessories, is $12.00.



Rampage.Our Rampage stores offer essentially the same breadth of ready-to-wear apparel as our Charlotte Russe stores, but the merchandise reflects
emerging trends and therefore a more cutting-edge look. The retail prices for our typical dresses range from $39.00 to $59.00. There is also less emphasis on the career customer in our Rampage stores. Over 80% of the Rampage merchandise is offered
under our proprietary

LOGO label. We work with our vendors to design a majority of the merchandise that is carried in our Rampage stores. We also have established a standard fit for all of our apparel to ensure consistent sizing among our
merchandise. Our Rampage stores also offer specialty accessories that complement our higher-end merchandise. By offering the latest in emerging fashions, our Rampage stores are able to command price points that are higher than those of Charlotte
Russe, but still below those of its competitors. The average sales price for apparel items in our Rampage stores is $26.00, and the average sales price for all of our merchandise, including accessories, is $21.00.



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Our visual merchandising strengthens our brand name and creates an exciting shopping environment.



Our merchandising presentation for our retail apparel concepts communicates
a clear fashion point-of-view to our customers and encourages the purchase of coordinated outfits. Our visual merchandising team for the Charlotte Russe and Rampage stores also makes use of body forms in store windows as well as on the selling floor
to enhance our merchandise presentation.



Within our Charlotte
Russe stores, we seek to create an inviting environment for our broad product offerings. We generally group our apparel merchandise by fashion casual, wear-to-work and going-out lifestyles. Our offerings are complemented with lingerie, shoes and
other accessories. We believe that presenting apparel merchandise by lifestyles, when accompanied with boutiques of various accessories, creates an attractive atmosphere for our customers and that the breadth and depth of our product offerings makes
us a destination location for their shopping needs.



At our
Rampage stores, we employ an equally effective visual merchandising strategy in order to capture the interest of our customers. Our Rampage merchandise is generally grouped by lifestyles with some emphasis on color and fashion trend to keep the
stores vibrant, hip and visually stimulating. Our stores are larger than most of our competitors, and we take advantage of our store size by providing an expansive and diverse offering of merchandise. Our store window displays and in-store graphics
accentuate the fashion, quality and cutting-edge style of our merchandise.



We order primarily from domestic sources and utilize a test-and-reorder strategy.



We purchase all of our inventory from third party vendors. A key aspect of our merchandising strategy is our test-and-reorder philosophy. Our experienced
buying staff uses sophisticated information systems to track the weekly sell-through of each merchandise item by classification, style, color and size, and then places appropriate reorders for popular merchandise. Accordingly, our test-and-reorder
strategy enables us to quickly react to sell-through trends and fashion preferences.



Our test-and-reorder strategy is successful in large part because we deal with domestic vendors, which has generally resulted in short lead times of three to six weeks. Accordingly, we have established relationships
with over 700 vendors to meet our ongoing fashion and inventory needs. We believe that we generally are able to obtain attractive pricing and other terms from vendors because of their desire to be associated with the Charlotte Russe and Rampage
images and the rapid consumer feedback provided by our test-and-reorder philosophy. We maintain a buying office in the CaliforniaMart in Los Angeles, the primary apparel center in southern California, to facilitate constant dialogue and feedback
between our buying staff and our vendors. During the fiscal year ended September 27, 2003, our top five vendors accounted for approximately 11.8% of our total purchases and no single vendor accounted for more than 2.5% of our total purchases.



We manage our inventory through merchandise planning and allocation.



Our merchandise planning and allocation team works
closely with our merchants and store personnel to meet the requirements of individual stores for appropriate merchandise in sufficient quantities. This team is also responsible for managing inventory levels, allocating merchandise to stores and
replenishing inventory based upon information generated by our management information systems. Our planning department allocates merchandise for new store openings based on estimated units per square foot, and all new stores are fully stocked prior
to opening. Our inventory control systems monitor current inventory levels at each store and for our operations as a whole. If necessary, we shift slow moving inventory to other stores for sell-through prior to instituting corporate-wide markdowns.
We also monitor recent selling history within each store by merchandise classification, style, color and size.



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We distribute merchandise through our modern facilities.



Our merchandise is distributed through two modern distribution facilities:
our 265,000 square foot distribution facility in Ontario, California, which we opened in April 2002, and our 125,000 square foot distribution facility (which includes our corporate offices) in San Diego, California, which we opened in April 1998.
Both of these facilities use automated systems for sorting apparel by store and facilitating packaging for display in our stores. In addition, our Ontario facility also uses an automated system for sorting accessories by store. Our Ontario facility
services the Charlotte Russe stores, and our San Diego facility (which until April 2002 served all our stores) services Rampage stores. We estimate that we have the distribution capacity to service at least 700 stores.



We estimate that over 90% of our apparel merchandise is currently
pre-ticketed by our vendors. This pre-ticketing by vendors allows us to ship merchandise more quickly, reduces labor costs and enhances inventory management. Our merchandise is generally shipped to stores within 24 hours of receipt at the
distribution center for delivery on common carrier within one to five business days. Our merchandise is available for sale in our stores the same day it is received and, accordingly, the time period from receipt of goods at our distribution center
to display in our stores is typically less than seven days. Each store generally receives three to five merchandise shipments per week. We believe our current distribution operations are sufficient to accommodate our expected store growth and
expanded product offerings through the next several years.



We have stores
throughout the United States.



As of September 27, 2003,
we operated 256 Charlotte Russe stores and 55 Rampage stores throughout 38 states and Puerto Rico. The number of our stores located in each state is shown in the following map:



LOGO



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The following table highlights the number of stores, by geographic region, opened in each of the last
five fiscal years:



|                                     |  | California |   |  | Northeast |   |  | Southwest |   |  | Southeast |   |  | Midwest& Other |  | Total |  
|------------------------------------ |  | ---------- | - |  | --------- | - |  | --------- | - |  | --------- | - |  | -------------- |  | ----- | -
|Store count at September 26, 1998    |  | 39         |   |  | 4         |   |  | 16        |   |  | 14        |   |  | 1              |  | 74    |  
|Fiscal 1999                          |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|Stores opened                        |  | 1          |   |  | 5         |   |  | 3         |   |  | 9         |   |  | 4              |  | 22    |  
|                                     |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|                                     |  | 40         |   |  | 9         |   |  | 19        |   |  | 23        |   |  | 5              |  | 96    |  
|Fiscal 2000                          |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|Stores opened                        |  | 4          |   |  | 14        |   |  | 9         |   |  | 6         |   |  | 7              |  | 40    |  
|                                     |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|                                     |  | 44         |   |  | 23        |   |  | 28        |   |  | 29        |   |  | 12             |  | 136   |  
|Fiscal 2001                          |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|Stores opened                        |  | 7          |   |  | 13        |   |  | 8         |   |  | 8         |   |  | 18             |  | 54    |  
|Stores closed                        |  | (1         | ) |  |          |   |  |          |   |  | (1        | ) |  |               |  | (2    | )
|                                     |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|                                     |  | 50         |   |  | 36        |   |  | 36        |   |  | 36        |   |  | 30             |  | 188   |  
|Fiscal 2002                          |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|Stores opened                        |  | 2          |   |  | 16        |   |  | 14        |   |  | 11        |   |  | 20             |  | 63    |  
|                                     |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|                                     |  | 52         |   |  | 52        |   |  | 50        |   |  | 47        |   |  | 50             |  | 251   |  
|Fiscal 2003                          |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|Stores opened                        |  | 4          |   |  | 19        |   |  | 10        |   |  | 10        |   |  | 27             |  | 70    |  
|Stores closed (Charlottes Room)     |  | (4         | ) |  | (1        | ) |  | (4        | ) |  | (1        | ) |  |               |  | (10   | )
|                                     |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  
|Store count as of September 27, 2003 |  | 52         |   |  | 70        |   |  | 56        |   |  | 56        |   |  | 77             |  | 311   |  
|                                     |  |            |   |  |           |   |  |           |   |  |           |   |  |                |  |       |  



We seek to locate our stores in
large, commanding spaces in high traffic areas of strong regional malls.



Our stores provide a comfortable and spacious shopping environment that accentuates the breadth of our merchandise offering. To distinguish our stores, we also seek prominent center court locations with distinctive
architectural features, such as high angled ceilings, which our store designers and visual merchandisers can use to create striking displays, facades and entrances. We believe that specialized store design features, including finished ceilings,
classic lighting and detailed features, help create a differentiated store environment unique to young women apparel retailers in the mall. We have historically been able to locate and profitably operate our stores in a variety of malls catering to
different socioeconomic, demographic and cultural profiles. Our Charlotte Russe and Rampage stores, which average approximately 7,100 square feet, are generally twice the size of those of most of our mall-based competitors.



We seek to identify favorable store locations in existing or new markets with
criteria that include:



| |  | a careful assessment of mall traffic;
| | - | -------------------------------------



| |  | the performance of other retailers within the mall and in particular those serving our target customers;
| | - | --------------------------------------------------------------------------------------------------------



| |  | the proposed location within the mall;
| | - | --------------------------------------



| |  | population and demographic characteristics of the area; and
| | - | -----------------------------------------------------------



| |  | projected profitability and cash return on investment.
| | - | ------------------------------------------------------



Immediately after site approval, we simultaneously negotiate lease terms and begin planning the store layout and design. We typically open a new store within three months
after lease execution and delivery of space. We also continually evaluate our stores to assess the need for remodeling or possible closure based on economic factors.



Although we currently engage an independent real estate consultant to assist us in site selection and lease negotiations, we
expect to develop the capabilities to perform these functions internally.



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Store Operations



Our store operations are currently organized into four regions: a Western/Northwestern region with 8 districts; an Eastern region with 9 districts; a
Southeastern region with 9 districts; and a Western/Southwestern region with 9 districts. Each region is managed by a regional manager and each district is managed by a district manager. Each district manager is responsible for approximately 10
stores in their district. Individual store personnel generally consist of a store manager, one or two assistant managers and seven to ten sales associates, the number of which generally increases during our peak selling seasons. Our store managers
are responsible primarily for customer service training and hiring store level staff. Merchandise selections, inventory management and visual merchandising strategies for each store are determined at the corporate level. Our regional, district, and
store managers receive a base compensation plus incentive compensation based on sales goals.



Our commitment to customer satisfaction and service is an integral part of building customer loyalty. We strive to hire enthusiastic sales personnel and provide them with extensive training to create a sales staff
with a strong fashion sense, a focus on customer service and a willingness to assist customers with assembling, accessorizing and coordinating outfits.



Our standard training program for store managers includes an initial three week session at a store managed by one of our training managers, as well as
frequent regional and district meetings. In addition, our training manual provides practical information and skill development for all store level positions. We develop new store managers by promoting from within and selectively hiring from other
retail organizations. In anticipation of our continued store expansion, we will continue to increase the number of people in our store manager training program as appropriate to support our proposed expansion strategy.



We continually invest in and upgrade our information technology systems.



We are committed to investing in and continually upgrading our
information technology systems, as we believe those systems are critical to implementing our expansion strategy in an efficient manner and to maintaining a competitive industry position. Our information technology systems address an array of
operations information, including among others things, our stock keeping unit and classification inventory tracking, purchase order management, merchandise distribution, automated ticket making, general ledger, sales audit, accounts payable, fixed
asset management, payroll, integrated financials and point-of-sale information. Through automated nightly two-way electronic communication with each store, we upload sales information, payroll hours, carton receipts and messages to our host system
and download new merchandise pricing, price changes for existing merchandise, and system maintenance tasks to the point-of-sale devices. Our planning department evaluates information obtained through daily polling and, accordingly, implements
merchandising decisions regarding inventory levels, reorders, price changes and allocation of merchandise to stores.



We compete with other retailers primarily on the basis of timeliness of fashions, breadth of merchandise, brand recognition, pricing and quality.



We currently compete against a diverse group of retailers, including
national and local specialty retail stores, regional retail chains, traditional retail department stores and, to a lesser extent, mass merchandisers. The primary competitors of Charlotte Russe are Express, Wet Seal and Forever 21. The primary
competitors of Rampage are bebe and Arden B. Our competitors sell a broad assortment of apparel and accessories that are similar and often identical to those we sell. Furthermore, our competitors may at times sell their merchandise at prices lower
than what we charge for comparable merchandise. We believe that the principal bases upon which we compete in our industry are timeliness of fashions, breadth of merchandise, brand recognition, pricing and quality. We believe that we have a
significant competitive advantage over our competitors because of our exciting shopping environment. Our stores are generally twice as large as most of our mall-based competitors and provide a feminine look that is exciting to shop and accentuates
the value and breadth of our merchandise



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selection. We also believe that we have a competitive advantage because of high consumer recognition and acceptance of our brands, our strong presence in
major shopping malls throughout the United States, our relationship with our vendors and the experience of our management. The retail and apparel industries, however, are highly competitive and characterized by relatively low barriers to entry.



Our intellectual property is important to our success.



We believe that our trademarks are important to our success. Our Charlotte
Russe and

LOGO trademarks are registered with the United States Patent and Trademark Office.



In connection with the acquisition of our Rampage stores in September 1997, we acquired the exclusive right within the United States to use the Rampage
trademark on exterior and interior signage identifying our Rampage stores, as well as the non-exclusive right within the United States to use the Rampage trademark for promotional and advertising materials. The right to market merchandise under the
Rampage trademark was retained by Rampage Clothing Company and subsequently transferred to an affiliate, Rampage Licensing, LLC (Rampage Clothing Company and Rampage Licensing, LLC are collectively referred to herein as Rampage Clothing Company);
and, accordingly, we do not have the right to use the Rampage trademark on our merchandise. Further, nothing in our license agreement prohibits the sale of merchandise bearing the Rampage trademark by other parties or the licensing of the Rampage
trademark to other parties, and Rampage Clothing Company has licensed the trademark to other parties. If the product quality or activities of the Rampage Clothing Company or these other parties substantially negatively impact our business
reputation, we have the right to terminate the license agreement, subject to certain contractual notice obligations. We pay a royalty under the license agreement equal to the greater of a stated dollar amount or a percentage of net sales during the
calendar year at stores operating under the Rampage name. The license agreement has an initial term that expires in 2012 and may be extended for six additional five-year periods provided that net sales under the license exceeds an annual goal for
the year ending immediately prior to the beginning of such extension period. In the event we decide to terminate the license agreement prior to the end of the term, we may be required to pay a termination fee as specified in the licensing agreement.



We consider the relationship with our employees to be good.



As of September 27, 2003, we employed 1,680 full-time and 4,225 part-time
employees. Of our full-time employees, 187 were employed at our corporate offices, 130 were employed at our distribution centers and 1,363 were employed at our store locations. The number of part-time employees fluctuates depending on our seasonal
needs. None of our employees are represented by a labor union, and we consider the relationship with our employees to be good.



Available Information



We are subject to the information requirements of the Securities Exchange Act of 1934 (the Exchange Act). Therefore, we file periodic reports,
proxy statements, and other information with the Securities and Exchange Commission (the SEC). Such reports, proxy statements, and other information may be obtained by visiting the Public Reference Room of the SEC at 450 Fifth Street,
NW, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file
electronically.



Our Internet address is
http://www.charlotte-russe.com. We make available through our Internet website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act, as amended, as soon as reasonably practicable after such reports and amendments are electronically filed with or furnished to the SEC.



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We have adopted a code of ethics for our principal executive officer, principal financial officer and
other individuals performing similar accounting and finance functions for us. This code of ethics is available via the Internet on our website. In the future, should amendments to the code of ethics be required, any such amendments will also be
posted on our website.



ITEM 2. PROPERTIES



We operated 311 stores throughout 38 states and Puerto Rico as of September
27, 2003. We currently lease all of our store locations. Most leases have an initial term of at least ten years and do not contain options to extend the lease. Our leases, however, often allow for termination by us after three years if sales at that
site do not exceed specified levels, although in many instances we are required to pay back a portion of any landlord allowances received. We lease space containing approximately 125,000 square feet for our executive offices and distribution center
in San Diego, California. This lease is for a term of twelve years and is scheduled to expire on August 31, 2009. We have entered into a ten and a half year lease, scheduled to expire on July 17, 2012, for space containing approximately 265,000
square feet for our Ontario, California distribution center. We believe our distribution capacity at the San Diego facility and the Ontario, California facility should be sufficient to accommodate our expected store growth through the next several
years. We also lease approximately 16,200 square feet, which includes an allocation of adjoining common area space, at the CaliforniaMart in Los Angeles. This lease expires April 30, 2010.



The following table highlights the number of stores, by concept, in each
state:



|                                  |  | Charlotte |  |         |  |      
|--------------------------------- |  | --------- |  | ------- |  | -----
|                                  |  | Russe     |  | Rampage |  | Total
|Arizona                           |  | 11        |  | 3       |  | 14   
|California                        |  | 40        |  | 12      |  | 52   
|Colorado                          |  | 4         |  | 1       |  | 5    
|Connecticut                       |  | 3         |  | 1       |  | 4    
|Delaware                          |  | 1         |  |        |  | 1    
|Florida                           |  | 32        |  | 8       |  | 40   
|Georgia                           |  | 8         |  | 1       |  | 9    
|Hawaii                            |  | 1         |  |        |  | 1    
|Iowa                              |  | 1         |  |        |  | 1    
|Illinois                          |  | 15        |  | 4       |  | 19   
|Indiana                           |  | 4         |  |        |  | 4    
|Kansas                            |  | 1         |  |        |  | 1    
|Kentucky                          |  | 2         |  |        |  | 2    
|Louisiana                         |  | 2         |  |        |  | 2    
|Maryland                          |  | 3         |  | 2       |  | 5    
|Massachusetts                     |  | 4         |  | 2       |  | 6    
|Michigan                          |  | 11        |  |        |  | 11   
|Minnesota                         |  | 5         |  | 1       |  | 6    
|Missouri                          |  | 4         |  | 1       |  | 5    
|Nebraska                          |  | 1         |  |        |  | 1    
|Nevada                            |  | 4         |  | 2       |  | 6    
|New Hampshire                     |  | 3         |  |        |  | 3    
|New Jersey                        |  | 8         |  | 4       |  | 12   
|New Mexico                        |  | 1         |  |        |  | 1    
|New York                          |  | 14        |  | 5       |  | 19   
|North Carolina                    |  | 3         |  |        |  | 3    
|Ohio                              |  | 9         |  | 1       |  | 10   
|Oklahoma                          |  | 5         |  |        |  | 5    
|Oregon                            |  | 2         |  |        |  | 2    
|Pennsylvania                      |  | 10        |  | 2       |  | 12   
|Puerto Rico                       |  | 4         |  | 1       |  | 5    
|Rhode Island                      |  | 1         |  |        |  | 1    
|South Carolina                    |  | 2         |  |        |  | 2    
|Tennessee                         |  | 3         |  |        |  | 3    
|Texas                             |  | 22        |  | 3       |  | 25   
|Utah                              |  | 2         |  |        |  | 2    
|Vermont                           |  | 1         |  |        |  | 1    
|Virginia                          |  | 5         |  |        |  | 5    
|Wisconsin                         |  | 4         |  | 1       |  | 5    
|                                  |  |           |  |         |  |      
|Store count at September 27, 2003 |  | 256       |  | 55      |  | 311  
|                                  |  |           |  |         |  |      



9



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ITEM 3. LEGAL PROCEEDINGS



From time to time, we may be involved in litigation relating to claims arising out of our operations. As of the date of this
filing, we are not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or results of operations.



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



Not applicable.



10



---

PART II



ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER

MATTERS



Market Information and
Holders



Our common stock began trading on the Nasdaq
National Market under the symbol CHIC on October 20, 1999, following our initial public offering. The following table sets forth the range of high and low closing sales prices of the common stock as reported by the Nasdaq National
Market:



|                                     |  | High |       | Low
|------------------------------------ |  | ---- | ----- | ---
|Fiscal Year Ended September 27, 2003 |  |      |       |    
|First Quarter                        |  | $    | 14.48 |    
|Second Quarter                       |  | $    | 12.80 |    
|Third Quarter                        |  | $    | 11.28 |    
|Fourth Quarter                       |  | $    | 12.85 |    
|Fiscal Year Ended September 28, 2002 |  |      |       |    
|First Quarter                        |  | $    | 19.75 |    
|Second Quarter                       |  | $    | 27.75 |    
|Third Quarter                        |  | $    | 28.65 |    
|Fourth Quarter                       |  | $    | 16.51 |    



As of December 15,
2003, the number of holders of record of our common stock was approximately 20 and the number of beneficial holders of our common stock was estimated to be in excess of 1,500. On December 15, 2003, the closing price of our common stock as reported
by the Nasdaq National Market was $13.34 per share.



Dividends



We have never declared nor paid dividends on our common
stock and we do not intend to pay any dividends on our common stock in the foreseeable future. We currently intend to retain earnings to finance future operations; and, under the terms of our revolving credit facility, we are prohibited from making
any dividends, distributions or capital stock redemptions.



Securities
Authorized for Issuance Under Equity Compensation Plans



The shares disclosed in column (c) in the schedule below include 254,328 shares of common stock issuable under the 1999 Employee Stock Purchase Plan.



|                                                           |  | Equity Compensation Plan Information                                                       
|---------------------------------------------------------- |  | -------------------------------------------------------------------------------------------
|Plan category                                              |  | Number of securities tobe issued upon exerciseof outstanding optionswarrants and
rights (a)
|Equity compensation plans approved by security holders     |  | 4,271,010                                                                                  
|Equity compensation plans not approved by security holders |  |                                                                                           
|                                                           |  |                                                                                            
|Total                                                      |  | 4,271,010                                                                                  
|                                                           |  |                                                                                            



Please see Note 8 in
the notes to the consolidated financial statements for more information regarding our equity compensation plans.



11



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ITEM 6. SELECTED FINANCIAL DATA



The selected consolidated financial data set forth on the next page is qualified in its entirety by, and should be read in
conjunction with, Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.



|                                              |  | Fiscal Year Ended (1)                                            |  
|--------------------------------------------- |  | ---------------------------------------------------------------- | -
|                                              |  | Sept. 25,1999                                                    |  
|                                              |  | (amounts in thousands, except per share and sales per foot data) |  
|Statement of Income Data:                     |  |                                                                  |  
|Net sales                                     |  | $177,459                                                         |  
|Cost of goods sold                            |  | 119,141                                                          |  
|                                              |  |                                                                  |  
|Gross profit                                  |  | 58,318                                                           |  
|Selling, general and administrative expenses  |  | 34,129                                                           |  
|Store closing costs                           |  |                                                                 |  
|Amortization of goodwill                      |  | 828                                                              |  
|                                              |  |                                                                  |  
|Operating income                              |  | 23,361                                                           |  
|Interest income (expense), net                |  | (3,271                                                           | )
|Other charges, net                            |  | (270                                                             | )
|                                              |  |                                                                  |  
|Income before income taxes                    |  | 19,820                                                           |  
|Provision for income taxes                    |  | 8,325                                                            |  
|                                              |  |                                                                  |  
|Net income                                    |  | $11,495                                                          |  
|                                              |  |                                                                  |  
|Earnings per share (2):                       |  |                                                                  |  
|Basic                                         |  | $0.63                                                            |  
|                                              |  |                                                                  |  
|Diluted                                       |  | $0.54                                                            |  
|                                              |  |                                                                  |  
|Weighted average shares outstanding (2):      |  |                                                                  |  
|Basic (000s)                                 |  | 18,304                                                           |  
|Diluted (000s)                               |  | 21,234                                                           |  
|Selected Operating Data:                      |  |                                                                  |  
|Number of stores open at end of period        |  | 96                                                               |  
|Average square footage per store (3)          |  | 7,541                                                            |  
|Sales per square foot (4)                     |  | $282                                                             |  
|Comparable store salesincrease (decrease) (5) |  | 6.70                                                             | %
|Average store sales (6)                       |  | $2,138                                                           |  
|Balance Sheet Data:                           |  |                                                                  |  
|Cash and cash equivalents                     |  | $2,982                                                           |  
|Working capital (deficiency).                 |  | (7,218                                                           | )
|Total assets                                  |  | 88,569                                                           |  
|Total long-term debt                          |  | 18,000                                                           |  
|Total stockholders equity                    |  | 40,037                                                           |  



12



---

---

|(1) | Our results of operations for fiscal 2000 included 53 weeks. All other periods presented included 52 weeks.
|--- | -----------------------------------------------------------------------------------------------------------

|(2) | See Notes 1 and 12 of the notes to the consolidated financial statements for the method used to calculate the earnings per share and weighted average shares outstanding.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Our average square footage per store is based on all open stores at the end of the period.
|--- | ------------------------------------------------------------------------------------------

|(4) | Our sales per square foot consist of net sales divided by the time weighted average of gross square footage of all open stores.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(5) | Our comparable store percentages are based on net sales, and stores are considered comparable beginning on the first day of the month following the fourteenth full month of sales.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Our average store sales are based on the time weighted average of all open stores in the period.
|--- | ------------------------------------------------------------------------------------------------



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS



The following Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Financial
Statements and Notes thereto of the company included elsewhere in this Annual Report on Form 10-K. The following Managements Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Risks Relating to Our Business in this
section.



OVERVIEW



We were founded in 1975 and opened our first store in Carlsbad, California.
By September 1996, we had developed into a regional retailer with 35 stores in three states. On September 26, 1996, two funds managed by Saunders Karp & Megrue Partners, LLC, a private equity investment firm, acquired the business from its
founders with the intention of pursuing an accelerated national new store expansion program. Bernard Zeichner, who had joined us as President in May 1996, shared the belief that a significant opportunity existed to leverage the strength of our new
store economics by further penetrating existing markets and expanding the chain into other regions of the country. We subsequently implemented a series of strategic initiatives to position us to support an accelerated store rollout. We hired a
number of senior executives with national retail experience to complement our existing senior management team and significantly upgraded our management information systems, distribution systems and facilities. In September 1997, we launched our
second distinct retail concept by acquiring 16 stores in five states from Rampage Retailing, Inc.



Since our initial public offering in October 1999, we have continued to open new stores for our Charlotte Russe and Rampage concepts on an accelerated
basis. Since the beginning of fiscal 2000, we added 215 new Charlotte Russe and Rampage stores. As of September 27, 2003, we operated 311 stores throughout 38 states and Puerto Rico. Our net sales increased to $456.6 million in fiscal 2003 from
$70.7 million in fiscal 1996, representing a compound annual growth rate of approximately 30.5%.



13



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RESULTS OF OPERATIONS



The following table sets forth our operating results, expressed as a percentage of sales, and store information for the
periods indicated.



|                                             |  | Fiscal Year |  
|-------------------------------------------- |  | ----------- | -
|                                             |  | 2001        |  
|Net sales                                    |  | 100.0       | %
|Cost of goods sold                           |  | 69.6        |  
|                                             |  |             |  
|Gross profit                                 |  | 30.4        |  
|                                             |  |             |  
|Selling, general and administrative expenses |  | 19.4        |  
|Store closing costs                          |  | 0.0         |  
|Amortization of goodwill                     |  | 0.3         |  
|                                             |  |             |  
|Operating income                             |  | 10.7        |  
|                                             |  |             |  
|Interest income, net                         |  | 0.1         |  
|Other charges, net                           |  | (0.1        | )
|                                             |  |             |  
|Income before income taxes                   |  | 10.7        |  
|                                             |  |             |  
|Income taxes                                 |  | 4.1         |  
|                                             |  |             |  
|Net income                                   |  | 6.6         | %
|                                             |  |             |  
|Number of stores open at end of period       |  | 188         |  
|                                             |  |             |  



Fiscal Year Ended September 27,
2003 Compared to Fiscal Year Ended September 28, 2002



Net Sales. Our net sales increased to $456.6 million from $409.4 million, an increase of $47.2 million or 11.5%, over the prior fiscal year. This increase reflects $115.8 million of additional net sales from 70 new stores opened
during fiscal 2003 as well as other stores opened in prior fiscal years that did not qualify as comparable stores. This increase was partially offset by a 10.1% decline in comparable store sales, which resulted in decreased sales of $47.2 million
compared to the prior fiscal year.



Gross Profit. Gross
profit represents net sales less cost of goods sold, which includes buying, distribution and occupancy costs. Our gross profit increased to $114.0 million from $113.4 million, an increase of $0.6 million, or 0.6%, over the prior fiscal year. This
increase was the result of higher net sales, offset in part by decreased gross profit margins. As a percentage of net sales, gross profit decreased to 25.0% from 27.7%. The decrease in gross profit as a percentage of net sales was principally due to
higher occupancy expenses as these relatively fixed charges were spread over a smaller average store sales base.



Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased to $90.9 million from $76.5 million, an
increase of $14.4 million, or 18.8%, over the prior fiscal year. This increase was attributable to new store expansion and increased corporate expenses. As a percentage of net sales, selling, general and administrative expenses increased to 19.9%
from 18.7% primarily due to higher store operating expenses as these charges were spread over a smaller average store sales base.



Store Closing Costs. Fiscal 2003 includes a $4.9 million pre-tax charge associated with the closure of 10 Charlottes Room stores. No such
charges were incurred in the prior fiscal year.



14



---

Income Taxes. Our effective tax rate of 39.0% approximates our statutory income tax rates.



Net Income. Our net income decreased to $11.0 million
from $22.4 million, a decrease of $11.4 million, or 50.9%, over the prior fiscal year. The decrease was primarily due to a decrease in gross profit as a percentage of sales, an increase in selling, general and administrative expenses, store closing
costs and offset by a decrease in income taxes.



Fiscal Year Ended September
28, 2002 Compared to Fiscal Year Ended September 29, 2001



Net Sales. Our net sales increased to $409.4 million from $324.8 million, an increase of $84.6, or 26.0%, over the prior fiscal year. This increase reflects $100.7 million of additional net sales from the 63 new stores opened during
fiscal 2002 as well as other stores opened in prior fiscal years that did not qualify as comparable stores. This increase was partially offset by a 5.4% decrease in comparable store sales, which resulted in decreased sales of $16.1 million compared
to the prior fiscal year.



Gross Profit. Gross profit
represents net sales less cost of goods sold, which includes buying, distribution and occupancy costs. Our gross profit increased to $113.4 million from $98.8 million, an increase of $14.6 million, or 14.8%, over the prior fiscal year. This increase
was the result of higher net sales, offset in part by decreased gross profit margins. As a percentage of net sales, gross profit decreased to 27.7% from 30.4%. The decrease as a percentage of net sales was principally due to higher occupancy
expenses and incremental fixed expense associated with operations of the Ontario, California distribution center that opened during fiscal 2002.



Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased to $76.5 million from $63.1 million, an
increase of $13.4 million, or 21.2%, over the prior fiscal year. This increase was attributable to new store expansion and increased corporate expenses. As a percentage of net sales, selling, general and administrative expenses decreased to 18.7%
from 19.4% primarily due to the impact of leveraging corporate expenses over a higher sales base.



Amortization of Goodwill. Our amortization of goodwill was discontinued as of the first quarter of fiscal 2002 in accordance with Statement of
Financial Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets; therefore, this expense decreased $0.8 million compared to the prior fiscal year.



Income Taxes. Our effective tax rate of 39.0% approximates our
statutory income tax rates.



Net Income. Our net income
increased to $22.4 million from $21.5 million, an increase of $0.9 million, or 4.3%, over the prior fiscal year. The increase was primarily due to an increase in gross profit and the elimination of goodwill amortization and was partially offset by
an increase in selling, general and administrative expenses, and an increase in income taxes.



15



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QUARTERLY RESULTS AND SEASONALITY



We have historically experienced and expect to continue to experience seasonal and quarterly fluctuations in our net sales
and operating income. As is the case with many retailers of apparel and related merchandise, our business is subject to seasonal influences, characterized by strong sales during the back-to-school, Easter and winter holiday seasons. The strength of
each of these three seasons generally provides relatively balanced sales during our first, third and fourth fiscal quarters. We typically experience lower net sales and net income during the second quarter of each fiscal year. Our quarterly results
of operations may fluctuate significantly as a result of a variety of factors, including the timing of new store openings, fashion trends and shifts in timing of certain holidays, as well as other factors discussed in the section entitled
Risks Relating to Our Business.



The following
table includes our unaudited quarterly results of operations data for each of the eight quarters during the two-year period ended September 27, 2003. This data has been derived from our unaudited consolidated financial statements. We believe that
this information has been prepared on the same basis as our audited consolidated financial statements and that all necessary adjustments, consisting only of normal recurring adjustments, have been included to present fairly the selected quarterly
information when read in conjunction with our audited consolidated financial statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K.



|                                  |  | Fiscal Year 2002                              |    |  | Fiscal Year 2003   |   
|--------------------------------- |  | --------------------------------------------- | -- |  | ------------------ | --
|                                  |  | Three Months Ended                            |    |  | Three Months Ended |   
|                                  |  | Dec. 29,2001                                  |    |  | Mar. 30,2002       |   
|                                  |  | (dollars in thousands, except per share data) |   
|Statement of Operations Data:     |  |                                               |    |  |                    |   
|Net sales                         |  | $111,938                                      |    |  | $86,070            |   
|Gross profit                      |  | 32,293                                        |    |  | 22,829             |   
|Operating income (loss)           |  | 12,275                                        |    |  | 5,630              |   
|Net income (loss)                 |  | 7,380                                         |    |  | 3,503              |   
|Earnings Per Share:               |  |                                               |    |  |                    |   
|Basic earnings (loss) per share   |  | $0.35                                         |    |  | $0.16              |   
|Diluted earnings (loss) per share |  | $0.31                                         |    |  | $0.15              |   
|As a Percentage of Net Sales:     |  |                                               |    |  |                    |   
|Net sales                         |  | 100.0                                         | %  |  | 100.0              | % 
|Gross profit                      |  | 28.9                                          |    |  | 26.5               |   
|Operating income (loss)           |  | 11.0                                          |    |  | 6.6                |   
|Net income (loss)                 |  | 6.6                                           |    |  | 4.1                |   
|Operating Data:                   |  |                                               |    |  |                    |   
|Comparable store sales (decrease) |  | (12.1                                         | )% |  | (2.8               | )%
|Stores open at end of period      |  | 212                                           |    |  | 224                |   



16



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LIQUIDITY AND CAPITAL RESOURCES



Our working capital requirements vary consistent with the seasonality of our business. Our capital requirements result
primarily from capital expenditures related to new store openings. We have historically satisfied our cash requirements principally through cash flow from operations, although we have also used borrowings under prior credit facilities in the past
for acquisitions, including our acquisition and the acquisition of the Rampage stores. Due to the rapid turnover of our inventory, we generate trade payables and other accrued liabilities sufficient to offset most, if not all, of our working capital
requirements, and this allows us to generally operate with limited working capital. As of September 27, 2003, we had working capital of approximately $26.1 million which included cash and cash equivalents of $23.0 million.



During fiscal years 2001, 2002 and 2003, our net cash provided by operations
amounted to approximately $36.4 million, $34.7 million and $32.8 million, respectively. In fiscal year 2003, our net cash provided by operations decreased as a result of lower net income than in the prior fiscal year and changes in working capital
accounts. Our net cash used in investing activities amounted to approximately $33.2 million, $31.8 million and $24.0 million in fiscal years 2001, 2002 and 2003, respectively. The primary component related to purchases of fixed assets, which
consists of new store openings, the upgrade of our information systems and other corporate expenditures. We opened a total of 54, 63 and 70 new stores during the fiscal years 2001, 2002 and 2003, respectively. The decrease in capital expenditures in
fiscal year 2003 as compared to fiscal 2002 primarily relates to the $9.9 million expenditure in fiscal 2002 for the Ontario distribution center. We expect to continue to invest in capital to support our growth.



Based on our experience with store openings for our two concepts, we estimate
that the average net investment to open these new stores is approximately $400,000, which includes capital expenditures, net of landlord contributions, and initial inventory, net of payables. All new stores opened since our acquisition that have
operated for more than one year generated average net sales of approximately $1.8 million and store-level operating cash flow in excess of $375,000, or approximately 21.0% of net sales. Accordingly, these stores generated an average cash return on
investment of approximately 90% in their first year of operation. In light of recent economic conditions, we are targeting future store openings that will generate, on average, cash returns on investment in excess of 80% for the first year of
operation. After taking into account new store construction, existing store remodeling, distribution center expenditures, and other corporate capital projects, total capital expenditures for fiscal year 2004 are projected to be approximately $25
million.



Net cash provided by financing activities amounted to
approximately $2.9 million, $0.6 million and $0.6 million for fiscal years 2001, 2002 and 2003, respectively. Financing activities primarily consist of the proceeds of stock option exercises.



Effective February 28, 2003, we obtained a $25.0 million unsecured revolving
credit facility with Bank of America, N.A. to replace a previous $15.0 million unsecured revolving credit facility with another lender. The new facility, as amended on July 9, 2003, is subject to certain restrictions and covenants and expires on
March 1, 2006. Interest on the revolving credit facility is payable quarterly, at the Companys option, at either (i) the Banks Base Rate, as defined, or (ii) the Banks Eurodollar Rate plus 1.00%, subject to certain adjustments. At
September 27, 2003, there was no outstanding debt under the revolving credit facility. The agreement requires that the Company maintain certain financial ratios on a quarterly basis, sets limits on stock repurchases and capital spending and
restricts future liens and indebtedness, sales of assets and dividend payments. As of September 27, 2003, we were in compliance with the terms of the bank credit agreement.



We believe that cash flows from operations, our current cash balance and funds available under our revolving credit facility
will be sufficient to meet our working capital needs and contemplated capital expenditure requirements for fiscal 2004. If our cash flow from operations should decline significantly, it may be necessary for us to seek additional sources of capital.



17



---

LETTERS OF CREDIT



Pursuant to the terms of the unsecured revolving credit facility, the Company can issue up to $15.0 million of documentary
or standby letters of credit. The outstanding commitments under this agreement at September 27, 2003 totaled approximately $8.3 million, including $1.7 million in standby letters of credit.



CONTRACTUAL OBLIGATIONS



The Companys commitment to make future payments under long-term
contractual obligations was as follows, as of September 27, 2003 (000s):



|Contractual Obligations     |  | Total |         | Less Than 1 Year |   | 1-3 Years |  | 3-5 Years |         | After 5 Years
|--------------------------- |  | ----- | ------- | ---------------- | - | --------- |  | --------- | ------- | -------------
|Operating leases            |  | $     | 441,653 |                  | $ | 56,997    |  | $         | 110,799 |              
|Other long-term obligations |  |       | 6,904   |                  |   | 716       |  |           | 1,500   |              
|                            |  |       |         |                  |   |           |  |           |         |              
|                            |  | $     | 448,557 |                  | $ | 57,713    |  | $         | 112,299 |              
|                            |  |       |         |                  |   |           |  |           |         |              



18



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CRITICAL ACCOUNTING POLICIES AND ESTIMATES



Managements Discussion and Analysis of Financial Condition and
Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as revenues and expenses during the reported periods.



On an on-going basis, management evaluates its estimates and judgments
regarding inventories, receivables, fixed assets, intangible assets, accrued liabilities, income taxes and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances. The results from this evaluation form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Under different assumptions
or conditions, alternative estimates and judgments could be derived which would differ from the estimates being used by management. Actual results could differ from any or all of these estimates.



As a retailer of womens apparel and accessories, our financial
statements are affected by several critical accounting policies, many of which affect managements use of estimates and judgments, as described in the Notes to the Consolidated Financial Statements. We sell merchandise directly to retail
customers and recognize revenue at the point of sale. Customers have the right to return merchandise to us, and we maintain a reserve for the financial impact of returns which occur subsequent to the current reporting period.



Our merchandise is initially offered for sale at a regular price, but is
often marked down prior to the ultimate sale of all such units. We utilize the retail method of accounting for our inventory valuation that inherently reduces the inventories carrying value as markdowns are initiated. In addition, we maintain
a reserve for the financial impact of markdowns that we believe are likely to be encountered in the future. If actual demand or market conditions are more or less favorable than those projected by management, the level of the reserve for future
markdowns would be subject to change in subsequent reporting periods.



We also provide for estimated inventory losses for damaged, lost or stolen inventory for the period from the last physical inventory to the financial statement date. These estimates are based on historical experience and other factors.



We have recorded a goodwill asset that arose from the
acquisition of our business in September 1996. This asset is tested for possible impairment on at least an annual basis in accordance with SFAS No. 142, Goodwill and Other Intangibles. The carrying value of investments in our
stores, principally leasehold improvements and equipment, and other operations is reviewed for impairment on at least an annual basis in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
In prior years, we established reserves for stores which have been closed, and no other stores are contemplated for closure at this time.



During fiscal 2003, we decided to exit the Charlottes Room concept and closed 10 Charlottes Room stores. In accordance with SFAS No. 146, the
Company recorded a liability of $2.6 million and recognized an impairment charge of $2.9 million for total store closing costs of $5.5 million, before the effect of income taxes. The final settlement of charges is currently estimated to be $4.9
million; therefore, $600,000 was reversed into income during the fourth quarter of fiscal 2003. The $2.9 million impairment charge reflected the difference between the carrying value and fair value of Charlottes Room assets. Fair value was
based on estimated market valuations for those assets since their carrying value was not anticipated to be recoverable through future cash flows. These assets were disposed of during the third quarter at approximately the estimated fair value. The
asset impairment charge of $2.9 million is included in the $4.9 million shown in the store closing costs line item on the accompanying statement of income for the fiscal year ended September 27, 2003.



19



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RECENT ACCOUNTING PRONOUNCEMENTS



In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or
fair value less costs to sell. SFAS 144 retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale.
SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the
Results of Operations  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in
that opinion). We adopted SFAS No. 144 on September 29, 2002, the beginning of fiscal 2003. The adoption of SFAS No. 144 did not have a significant impact on our consolidated financial position or results of operations.



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes EITF No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a cost associated with an exit of disposal activity be recognized when the liability
is incurred. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. We applied the provisions of SFAS No. 146 for exit or disposal activities that initiated after December 31, 2002. The adoption of
SFAS No. 146 results in recognizing the cost of future restructuring activities over a period of time rather than in one reporting period. The adoption of SFAS No. 146 did not have a significant impact on our consolidated financial position or
results of operations.



In November 2002, the FASB issued FASB
Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also states that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. FIN No. 45 is an interpretation of FASB Statements Nos. 5, 57 and 107 and a rescission of FIN No. 34. The disclosure requirements in FIN No. 45 are effective for financial statements of interim or
annual periods ending after December 15, 2002. The adoption of FIN No. 45 did not have an impact on our consolidated financial position or results of operations.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based CompensationTransition and
Disclosure, an Amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported results. In accordance with the provisions of SFAS No. 148, we have continued using APB No. 25 to account for stock-based employee compensation, and we have provided the
required disclosures.



In January 2003, the EITF finalized a
consensus on Issue No. 02-16,Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor. The Task Force concluded that cash consideration in excess of specific identifiable costs,
including sales incentives, allowances, discounts, coupons, rebates and price reductions, when meeting certain criteria, constitute a reduction in vendor price, and should therefore be reflected as a reduction in cost of sales when the related
merchandise is sold. The EITF concluded that this



20



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literature should be applied to new arrangements, including modifications of existing arrangements, entered into after December 31, 2002. Our accounting
methodology has been consistent with the provisions of EITF 02-16; therefore, there was no change required in our consolidated financial position and results of operations as a result of the issuance of this statement.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for the first interim period beginning after June 15, 2003, with certain exceptions. We adopted SFAS No. 150 in the fourth
quarter of fiscal 2003. The adoption of SFAS No. 150 did not have an impact on our consolidated financial position or results of operations.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Our market risks relate primarily to changes in interest rates. We bear this risk in two specific ways. First, our revolving credit facility carries a
variable interest rate that is tied to market indices and, therefore, our statement of income and our cash flows will be exposed to changes in interest rates. As of September 27, 2003, we had no borrowings against our credit facility. However, we
may borrow additional funds under our revolving credit facility as needed.



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



We believe market risk exposure is immaterial.



21



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FORWARD-LOOKING STATEMENTS



We have made statements under the captions, Business, Managements Discussion and Analysis of
Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures About Market Risk and Risks Relating to Our Business, as well as in other sections of this Annual Report on Form 10-K, that are
forward-looking statements. You can identify these statements by forward-looking words such as may, will, expect, intend, anticipate, believe, estimate and
continue or similar words. These forward-looking statements may also use different phrases. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements,
which are subject to risks, uncertainties, and assumptions about us, may include, among other things, projections of our future results of operations or of our financial condition, our anticipated growth strategies, and general and regional economic
conditions, industry trends, consumer demands and preferences, competition from other retailers and uncertainties generally associated with womens apparel and accessory retailing.



There may be events in the future that we are not able to accurately predict or which we do not fully control that could
cause actual results to differ materially from those expressed or implied in our forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by these forward-looking statements, including shopping mall traffic and shopping patterns, timing of openings for new shopping malls or our stores, fashion trends, national or regional economic
influences, and weather.



We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Annual Report on Form
10-K might not occur.



22



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RISKS RELATING TO OUR BUSINESS



We intend to continue to open new stores at a rapid rate, which could strain our resources and cause us to operate our business less
effectively.



Our growth will largely depend on
successfully opening and operating new stores. During fiscal 2003, we opened 70 new stores representing a 28% increase from the number of stores open at the end of fiscal 2002 for these chains, excluding Charlottes Room stores. We plan to open
at least 50 new Charlotte Russe and Rampage stores during fiscal 2004, an increase of 16% from total stores opened as of September 27, 2003. We intend to continue to increase our number of Charlotte Russe and Rampage stores by approximately 15-25%
per year for at least the next few years.



In order to support
our planned expansion we will need to continually monitor and upgrade our management information and other systems. This rapid expansion also will place increased demand on our managerial, operational, and administrative resources. These increased
demands and operating complexities could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of our individual stores and slow our new store growth.



Our planned expansion involves a number of risks that could prevent or delay the
successful opening of new stores as well as impact the performance of our existing stores.



Our ability to open and operate new stores successfully depends on many factors, including, among others, our ability to:



| |  | identify suitable store locations, the availability of which is outside of our control;
| | - | ---------------------------------------------------------------------------------------



| |  | negotiate acceptable lease terms, including desired tenant improvement allowances;
| | - | ----------------------------------------------------------------------------------



| |  | source sufficient levels of inventory to meet the needs of new stores;
| | - | ----------------------------------------------------------------------



| |  | hire, train and retain store personnel;
| | - | ---------------------------------------



| |  | successfully integrate new stores into our existing operations; and
| | - | -------------------------------------------------------------------



| |  | identify and satisfy the fashion preferences of new geographic areas.
| | - | ---------------------------------------------------------------------



In addition, many of our new stores will be opened in regions of the United States in which we currently have few or no stores. The expansion into new
markets may present competitive, merchandising and distribution challenges that are different from those currently encountered in our existing markets. Any of these challenges could adversely affect our business and results of operations. In
addition, to the extent our new store openings are in existing markets, we may experience reduced net sales volumes in existing stores in those markets.



The decline in general economic conditions has led to reduced consumer demand for our apparel and accessories.



Consumer spending habits, including spending for the fashionable apparel and
related accessories that we sell, are affected by, among other things, prevailing economic conditions, levels of employment, salaries and wage rates, consumer confidence and consumer perception of economic conditions. The general slowdown in the
United States economy and the uncertain economic outlook has adversely affected consumer spending habits and mall traffic, which has resulted in, and may continue to result in, lower net sales than expected and has caused us to somewhat slow our
expansion plans. We are unlikely to return to our historical expansion rate until we achieve improved sales trends, and further erosion of sales trends could cause us to further delay or slow our expansion plans.



Our stores are heavily dependent on the customer traffic generated by shopping malls.



Most of our store locations are not sufficiently
concentrated to make significant marketing expenditures cost effective. As a result, we depend heavily on locating our stores in prominent locations within successful shopping malls in order to generate customer traffic. We cannot control the
development of new shopping malls, the availability or cost of appropriate locations within existing or new shopping malls or the success of individual shopping malls.



23



---

If at any time our comparable store sales and quarterly results of operations decline or do not meet the
expectations of research analysts, the price of our common stock could decline substantially.



Our quarterly results of operations for our individual stores have fluctuated in the past and can be expected to continue to fluctuate in the future. For
instance, our quarterly comparable store sales percentages have ranged as high as negative 0.3% and as low as negative 16.1% over the past two years. Our net sales and operating results are typically lower in the second quarter of our fiscal year
due to the traditional retail slowdown immediately following the winter holiday season. Our comparable store sales and quarterly results of operations are affected by a variety of factors, including:



| |  | the timing of new store openings and the relative proportion of new stores to mature stores;
| | - | --------------------------------------------------------------------------------------------



| |  | fashion trends;
| | - | ---------------



| |  | calendar shifts of holiday or seasonal periods;
| | - | -----------------------------------------------



| |  | the effectiveness of our test-and-reorder strategy in maintaining appropriate inventory levels;
| | - | -----------------------------------------------------------------------------------------------



| |  | changes in our merchandise mix;
| | - | -------------------------------



| |  | timing of promotional events;
| | - | -----------------------------



| |  | general economic conditions and, in particular, the retail sales environment;
| | - | -----------------------------------------------------------------------------



| |  | actions by competitors or mall anchor tenants;
| | - | ----------------------------------------------



| |  | weather conditions; and
| | - | -----------------------



| |  | the level of pre-opening expenses associated with new stores.
| | - | -------------------------------------------------------------



Our success depends on our ability to identify and rapidly respond to consumer fashion tastes.



The apparel industry is subject to rapidly evolving fashion trends and
shifting consumer demands. Accordingly, our success is heavily dependent both on the priority our target customers place on fashion and on our ability to anticipate, identify and capitalize upon emerging fashion trends in a timely manner. Current
fashion tastes place significant emphasis on a fashionable look. In the past this emphasis has increased and decreased through fashion cycles and decreased emphasis has adversely affected our results. If we do not anticipate, identify or react
appropriately and timely to changes in styles, trends, desired images or brand preferences, it may lead to, among other things, excess inventories and higher markdowns, as well as decreased appeal of our brands.



Our business and reputation may be adversely affected if our Rampage stores are
associated with negative publicity related to the use of the Rampage trademark by other parties.



In connection with the acquisition of our Rampage stores, we acquired the exclusive right within the United States to use the Rampage trademark on
exterior and interior signage identifying our Rampage stores, as well as the non-exclusive right within the United States to use the Rampage trademark for promotional and advertising materials. We do not, however, have the right to use the Rampage
trademark on our merchandise. The right to market merchandise under the Rampage trademark was retained by Rampage Clothing Company. Further, nothing in our license agreement with Rampage Clothing Company prohibits the sale of merchandise bearing the
Rampage trademark by other parties or the licensing of the Rampage trademark to other parties. In fact, Rampage Clothing Company has licensed the trademark to other parties. We believe a positive Rampage brand image is important to our success.
Accordingly, if the merchandise sold by the Rampage Clothing Company or other parties under the Rampage trademark is of low quality or if the Rampage Clothing Company or these parties otherwise engage in activities that negatively affect the Rampage
trademark or are otherwise inconsistent with our Rampage store concept, consumers could lose confidence in our merchandise and our reputation and business could be materially adversely affected.



24



---

Our market share may be adversely impacted at any time by a significant number of competitors.



We operate in a highly competitive environment characterized by low
barriers to entry. We compete against a diverse group of retailers, including national and local specialty retail stores, regional retail chains, traditional department stores and, to a lesser extent, mass merchandisers. Our market share and results
of operations may be adversely impacted by this significant number of competitors. Many of our competitors also are larger and have substantially greater resources than we do.



We rely on our good relationships with vendors to implement our business strategy successfully.



Our business is dependent on continued good relations with our vendors. In
particular, we believe that we generally are able to obtain attractive pricing and other terms from vendors because we are perceived as a desirable customer. Our test-and-reorder merchandise strategy also relies in large part on our ability to
obtain much of our merchandise from our vendors within three to six weeks from the date of order. Our failure to maintain good relations with our vendors could increase our exposure to changing fashion cycles, which may in turn lead to increased
inventory markdown rates.



Our operations, as well as a substantial
number of our stores, are concentrated in the Southwest, which makes us susceptible to adverse conditions in this region.



Our headquarters and distribution centers are located in California, and a substantial number of our stores are located in California and the Southwest.
As a result, our business may be more susceptible to regional factors than the operations of more geographically diversified competitors. These factors include, among others, economic and weather conditions, demographic and population changes and
fashion tastes. Further, a natural disaster or other catastrophic event, such as an earthquake affecting southern California, could significantly disrupt our operations.



Our failure to retain our existing senior management team could adversely affect our business.



Our business requires disciplined execution at all levels of our
organization in order to timely deliver and display fashionable merchandise in appropriate quantities in our stores. This execution requires experienced and talented management. If we fail to attract, motivate and retain qualified and talented key
personnel, it may adversely affect our business and inhibit our plans for future growth.



Our Chief Executive Officer recently assumed that role after approximately two years of service as our Chief Operations Officer. In addition, we recently hired new General Merchandise Managers for our Charlotte Russe
and Rampage chains and a Vice President of Information Technology. Each of these individuals has significant experience in these and similar roles with other apparel retailers, although each has limited tenure in their current positions with us.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



Information with respect to this Item is indexed on page F-1 of this Report
and is contained on pages F-3 through F-21.



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

FINANCIAL DISCLOSURE



Not applicable.



25



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ITEM 9A. CONTROLS AND PROCEDURES



Within the 90 days prior to the date of filing this Annual Report on Form 10-K, the Company carried out an evaluation, under
the supervision and with the participation of the Companys Disclosure Committee and the Companys management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to the Securities and Exchange Act of 1934 Rules 13a-14 and 15d-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys periodic SEC filings.



Subsequent to the date of that evaluation, there have been no significant
changes in the Companys internal controls or in other factors that could significantly affect internal controls, or were there any corrective actions required with regard to significant deficiencies and material weaknesses.



26



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PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



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



ITEM 11. EXECUTIVE COMPENSATION



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



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



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



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



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



ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



|(a) |  | 1.      The financial statements listed in the Index to
Financial Statements at page F-1 are filed as part of this report.  2.      The exhibits are listed in the Exhibit Index, which is incorporated herein by
reference.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 
|(b) |  | Reportson Form 8-K  None.                                                                                                                                                                                                     





27



---

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California, on the     th day of December, 2003.



CHARLOTTE RUSSE HOLDING, INC.By:

/s/    DANIEL T. CARTERDaniel T. Carter Executive Vice
President and Chief Financial Officer




POWER OF
ATTORNEY



KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below hereby constitutes and appoints Mark A. Hoffman and Daniel T. Carter, and each of them acting individually, as his true and lawful attorneys-in-fact and agents, each with full power of substitution, for him in
any and all capabilities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities
Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated:



|Signature                                 |  | Title                                                                                                |  | Date             
|----------------------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | -----------------
|                                          |  |                                                                                                     
|/s/    MARK A. HOFFMANMark A. Hoffman     |  | Chief Executive Officer and Director (Principal Executive Officer)                                   |  | December 19, 2003
|                                          |  |                                                                                                     
|/s/     DANIEL T. CARTERDaniel T. Carter  |  | Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |  | December 19, 2003
|                                          |  |                                                                                                     
|/s/    BERNARD ZEICHNERBernard Zeichner   |  | Chairman of the Board                                                                                |  | December 19, 2003
|                                          |  |                                                                                                     
|/s/    PAUL R. DEL ROSSIPaul R. Del Rossi |  | Director                                                                                             |  | December 19, 2003
|                                          |  |                                                                                                     
|/s/    W. THOMAS GOULDW. Thomas Gould     |  | Director                                                                                             |  | December 19, 2003
|                                          |  |                                                                                                     
|/s/    ALLAN W. KARPAllan W. Karp         |  | Director                                                                                             |  | December 19, 2003
|                                          |  |                                                                                                     
|/s/    LEONARD H. MOGILLeonard H. Mogil   |  | Director                                                                                             |  | December 19, 2003
|                                          |  |                                                                                                     
|/s/     DAVID J. ODDIDavid J. Oddi        |  | Director                                                                                             |  | December 19, 2003



28



---

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|Charlotte Russe Holding, Inc.                                                                                                            |  | Page
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Ernst & Young LLP, Independent Auditors                                                                                        |  | F-3 
|Consolidated Balance Sheets as of September 27, 2003 and September 28, 2002                                                              |  | F-4 
|Consolidated Statements of Income for the fiscal years ended September 27, 2003, September 28, 2002 and September 29, 2001               |  | F-5 
|Consolidated Statements of Stockholders Equity for the fiscal years ended September 27, 2003, September 28, 2002 and September 29, 2001 |  | F-6 
|Consolidated Statements of Cash Flows for the fiscal years ended September 27, 2003, September 28, 2002 and September 29, 2001           |  | F-7 
|Notes to Consolidated Financial Statements                                                                                               |  | F-8 



F-1



---



This Page Intentionally Left
Blank



---

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



The Board of Directors

Charlotte Russe Holding, Inc.



We have audited the accompanying consolidated balance sheets of Charlotte Russe Holding, Inc. as of September 27, 2003 and September 28, 2002, and the
related consolidated statements of income, stockholders equity, and cash flows for each of the three years in the period ended September 27, 2003. These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Charlotte Russe Holding, Inc. at September 27, 2003 and September 28, 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 27, 2003, in conformity
with accounting principles generally accepted in the United States.



As discussed in Notes 1 and 3 to the consolidated financial statements, effective October 1, 2001, the Company adopted Financial Accounting Standards Board No. 142, Goodwill and Other Intangible Assets.



/s/ ERNST & YOUNG LLP



San Diego, California

October 21, 2003



F-3



---

CHARLOTTE RUSSE HOLDING, INC.



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                 |  | September 27,2003 |             |   | September 28,2002 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- | -
|ASSETS                                                                                                                                                                          
|Current assets:                                                                                                                                                                  |  |                   |             |   |                   |  
|Cash and cash equivalents                                                                                                                                                        |  | $                 | 22,967,317  |   |                   | $
|Inventories                                                                                                                                                                      |  |                   | 34,506,912  |   |                   |  
|Other current assets                                                                                                                                                             |  |                   | 5,410,123   |   |                   |  
|Deferred tax assets                                                                                                                                                              |  |                   | 5,300,000   |   |                   |  
|                                                                                                                                                                                 |  |                   |             |   |                   |  
|Total current assets                                                                                                                                                             |  |                   | 68,184,352  |   |                   |  
|                                                                                                                                                                                 |  |                  
|Fixed assets, net                                                                                                                                                                |  |                   | 100,018,536 |   |                   |  
|Goodwill                                                                                                                                                                         |  |                   | 28,790,000  |   |                   |  
|Other assets                                                                                                                                                                     |  |                   | 1,371,894   |   |                   |  
|                                                                                                                                                                                 |  |                   |             |   |                   |  
|Total assets                                                                                                                                                                     |  | $                 | 198,364,782 |   |                   | $
|                                                                                                                                                                                 |  |                   |             |   |                   |  
|                                                                                                                                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                            
|Current liabilities:                                                                                                                                                             |  |                   |             |   |                   |  
|Accounts payable, trade                                                                                                                                                          |  | $                 | 20,928,264  |   |                   | $
|Accounts payable, other                                                                                                                                                          |  |                   | 6,457,132   |   |                   |  
|Accrued payroll and related expense                                                                                                                                              |  |                   | 2,526,756   |   |                   |  
|Income and sales taxes payable                                                                                                                                                   |  |                   | 2,320,337   |   |                   |  
|Other current liabilities                                                                                                                                                        |  |                   | 9,886,267   |   |                   |  
|                                                                                                                                                                                 |  |                   |             |   |                   |  
|Total current liabilities                                                                                                                                                        |  |                   | 42,118,756  |   |                   |  
|                                                                                                                                                                                 |  |                  
|Deferred rent                                                                                                                                                                    |  |                   | 9,946,860   |   |                   |  
|Other liabilities                                                                                                                                                                |  |                   | 312,777     |   |                   |  
|Deferred tax liabilities                                                                                                                                                         |  |                   | 5,600,000   |   |                   |  
|                                                                                                                                                                                 |  |                   |             |   |                   |  
|Total liabilities                                                                                                                                                                |  |                   | 57,978,393  |   |                   |  
|                                                                                                                                                                                 |  |                  
|Commitments and contingencies                                                                                                                                                    |  |                   |             |   |                   |  
|                                                                                                                                                                                 |  |                  
|Stockholders equity:                                                                                                                                                            |  |                   |             |   |                   |  
|Preferred stock, $0.01 par value, 3,000,000 shares authorized, none issued and outstanding                                                                                       |  |                   |            |   |                   |  
|Common stock, $0.01 par value, 100,000,000 shares authorized; issued and outstanding shares 21,290,182 and 21,210,707 at September
27, 2003 and September 28, 2002, respectively |  |                   | 212,902     |   |                   |  
|Additional paid-in capital                                                                                                                                                       |  |                   | 44,498,540  |   |                   |  
|Deferred compensation                                                                                                                                                            |  |                   | (63,000     | ) |                   |  
|Retained earnings                                                                                                                                                                |  |                   | 95,737,947  |   |                   |  
|                                                                                                                                                                                 |  |                   |             |   |                   |  
|Total stockholders equity                                                                                                                                                       |  |                   | 140,386,389 |   |                   |  
|                                                                                                                                                                                 |  |                   |             |   |                   |  
|Total liabilities and stockholders equity                                                                                                                                       |  | $                 | 198,364,782 |   |                   | $
|                                                                                                                                                                                 |  |                   |             |   |                   |  



See accompanying notes.



F-4



---

CHARLOTTE RUSSE HOLDING, INC.



CONSOLIDATED STATEMENTS OF INCOME



|                                                                       |  | Years Ended       |            
|---------------------------------------------------------------------- |  | ----------------- | -----------
|                                                                       |  | September 27,2003 |            
|Net sales                                                              |  | $                 | 456,622,115
|Cost of goods sold, including buying, distribution and occupancy costs |  |                   | 342,621,003
|                                                                       |  |                   |            
|Gross profit                                                           |  |                   | 114,001,112
|Selling, general and administrative expenses                           |  |                   | 90,896,124 
|Store closing costs                                                    |  |                   | 4,900,000  
|Amortization of goodwill                                               |  |                   |           
|                                                                       |  |                   |            
|Operating income                                                       |  |                   | 18,204,988 
|Other income (expense):                                                |  |                   |            
|Interest income, net                                                   |  |                   | 118,718    
|Other charges, net                                                     |  |                   | (269,933   
|                                                                       |  |                   |            
|Total other income (expense)                                           |  |                   | (151,215   
|                                                                       |  |                   |            
|Income before income taxes                                             |  |                   | 18,053,773 
|Income taxes                                                           |  |                   | 7,040,971  
|                                                                       |  |                   |            
|Net income                                                             |  | $                 | 11,012,802 
|                                                                       |  |                   |            
|Earnings per share:                                                    |  |                   |            
|Basic                                                                  |  |                   | $0.52      
|                                                                       |  |                   |            
|Diluted                                                                |  |                   | $0.47      
|                                                                       |  |                   |            
|Weighted average shares outstanding:                                   |  |                   |            
|Basic                                                                  |  |                   | 21,239,569 
|Diluted                                                                |  |                   | 23,507,028 



See accompanying notes.



F-5



---

CHARLOTTE RUSSE HOLDING, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                                     |  | Common Stock |  | AdditionalPaid-in Capital |         |  | DeferredCompensation |            |   | RetainedEarnings |   | TotalStockholdersEquity |  
|---------------------------------------------------- |  | ------------ |  | ------------------------- | ------- |  | -------------------- | ---------- | - | ---------------- | - | ------------------------ | -
|                                                     |  | Shares       |  | Amount                    |         |  |                      |           
|Balance at October 1, 2000                           |  | 20,319,412   |  | $                         | 203,194 |  | $                    | 33,980,470 |   |                  | $ | (516,000                 | )
|Public offering of stock                             |  | 100,000      |  |                           | 1,000   |  |                      | 1,785,000  |   |                  |   |                         |  
|Stock option transactions, including tax benefits    |  | 359,800      |  |                           | 3,599   |  |                      | 4,019,237  |   |                  |   |                         |  
|Amortization of deferred compensation                |  |             |  |                           |        |  |                      |           |   |                  |   | 144,000                  |  
|Issuance of stock under employee stock purchase plan |  | 23,535       |  |                           | 235     |  |                      | 253,757    |   |                  |   |                         |  
|Net income and comprehensive income                  |  |             |  |                           |        |  |                      |           |   |                  |   |                         |  
|                                                     |  |              |  |                           |         |  |                      |            |   |                  |   |                          |  
|Balance atSeptember 29, 2001                         |  | 20,802,747   |  | $                         | 208,028 |  | $                    | 40,038,464 |   |                  | $ | (372,000                 | )
|Stock option transactions, including tax benefits    |  | 388,230      |  |                           | 3,882   |  |                      | 3,985,370  |   |                  |   |                         |  
|Amortization and adjustment of deferred compensation |  |             |  |                           |        |  |                      | (93,000    | ) |                  |   | 201,000                  |  
|Issuance of stock under employee stock purchase plan |  | 19,730       |  |                           | 197     |  |                      | 312,663    |   |                  |   |                         |  
|Stock offering costs                                 |  |             |  |                           |        |  |                      | (450,000   | ) |                  |   |                         |  
|Net income and comprehensive income                  |  |             |  |                           |        |  |                      |           |   |                  |   |                         |  
|                                                     |  |              |  |                           |         |  |                      |            |   |                  |   |                          |  
|Balance atSeptember 28, 2002                         |  | 21,210,707   |  | $                         | 212,107 |  | $                    | 43,793,497 |   |                  | $ | (171,000                 | )
|Stock option transactions, including tax benefits    |  | 53,000       |  |                           | 530     |  |                      | 467,646    |   |                  |   |                         |  
|Amortization of deferred compensation                |  |             |  |                           |        |  |                      |           |   |                  |   | 108,000                  |  
|Issuance of stock under employee stock purchase plan |  | 26,475       |  |                           | 265     |  |                      | 237,397    |   |                  |   |                          |  
|Net income and comprehensive income                  |  |             |  |                           |        |  |                      |           |   |                  |   |                         |  
|                                                     |  |              |  |                           |         |  |                      |            |   |                  |   |                          |  
|Balance atSeptember 27, 2003                         |  | 21,290,182   |  | $                         | 212,902 |  | $                    | 44,498,540 |   |                  | $ | (63,000                  | )
|                                                     |  |              |  |                           |         |  |                      |            |   |                  |   |                          |  



See accompanying notes.



F-6



---

CHARLOTTE RUSSE HOLDING, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  | Years Ended       |            
|--------------------------------------------------------------------------------- |  | ----------------- | -----------
|                                                                                  |  | September 27,2003 |            
|Operating Activities                                                              |  |                   |            
|Net income                                                                        |  | $                 | 11,012,802 
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                   |            
|Depreciation and amortization                                                     |  |                   | 16,343,654 
|Deferred rent                                                                     |  |                   | 1,569,866  
|Amortization of deferred compensation                                             |  |                   | 108,000    
|Loss on disposal of assets                                                        |  |                   | 3,264,869  
|Deferred income taxes                                                             |  |                   | 3,000,000  
|Changes in operating assets and liabilities:                                      |  |                   |            
|Inventories                                                                       |  |                   | (1,187,898 
|Other current assets                                                              |  |                   | (2,907,922 
|Accounts payable, trade                                                           |  |                   | (4,000,479 
|Accounts payable, other                                                           |  |                   | 1,012,326  
|Accrued payroll and related expense                                               |  |                   | 154,622    
|Income and sales taxes payable                                                    |  |                   | 1,191,340  
|Other current liabilities                                                         |  |                   | 3,134,132  
|Other liabilities                                                                 |  |                   | 103,894    
|                                                                                  |  |                   |            
|Net cash provided by operating activities                                         |  |                   | 32,799,206 
|                                                                                  |  |                   |            
|Investing Activities                                                              |  |                   |            
|Purchases of fixed assets                                                         |  |                   | (23,867,852
|Other assets                                                                      |  |                   | (92,827    
|                                                                                  |  |                   |            
|Net cash used in investing activities                                             |  |                   | (23,960,679
|                                                                                  |  |                   |            
|Financing Activities                                                              |  |                   |            
|Payments on capital leases                                                        |  |                   |           
|Payments on notes payable to bank and revolving credit facility                   |  |                   |           
|Proceeds from notes payable to bank and revolving credit facility                 |  |                   |           
|Proceeds from issuance of common stock                                            |  |                   | 575,310    
|Stock offering costs                                                              |  |                   |           
|                                                                                  |  |                   |            
|Net cash provided by financing activities                                         |  |                   | 575,310    
|                                                                                  |  |                   |            
|Net increase in cash and cash equivalents                                         |  |                   | 9,413,837  
|Cash and cash equivalents at beginning of the year                                |  |                   | 13,553,480 
|                                                                                  |  |                   |            
|Cash and cash equivalents at end of the year                                      |  | $                 | 22,967,317 
|                                                                                  |  |                   |            



See accompanying notes.



F-7



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements



1.
Organization and Summary of Significant Accounting Policies



Organization



Charlotte Russe Holding, Inc.
(the Company) was incorporated in Delaware in July 1996. On September 27, 1996, the Company was capitalized through the issuance of Common Stock and long-term debt. Effective September 27, 1996, the Company acquired all of the stock of
Lawrence Merchandising Corporation, a California corporation, and its affiliates, Lawrence Merchandising Corporation of Nevada and Lawrence Merchandising Corporation of Nevada II, both Nevada corporations, (collectively, the Predecessor
companies) for approximately $35.0 million in cash. In addition, the Company repaid $5.0 million of the Predecessors short-term borrowings concurrent with the consummation of the purchase transaction. The acquisition was accounted for using
the purchase method of accounting. The excess of the aggregate purchase price over the fair value of net assets acquired of approximately $32.9 million was recognized as goodwill.



Description of Business



The Company operates in a single segment, selling clothing and accessories for women through its mall-based retail stores that operate under the names
Charlotte Russe and Rampage. As of September 27, 2003, the Company operated 311 retail stores in 38 states and Puerto Rico.



Principles of Consolidation



The accompanying consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America,
include the assets, liabilities, revenues and expenses of all wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.



Fiscal Year



The Companys fiscal year is the 52/53 week period ending on the last Saturday in September. All years presented contained 52 weeks.



Use of Estimates



The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosed in the accompanying notes. Actual results could differ from these estimates.



Cash Equivalents



The Company considers all liquid investments with maturities of three months
or less when purchased to be cash equivalents.



Inventories



Inventories consist primarily of apparel and accessories purchased for
resale. Inventories are accounted for by the retail inventory method. The cost of inventory is determined at the lower of the first-in, first-out (FIFO) method or market.



F-8



---

CHARLOTTE RUSSE HOLDINGS, INC.



Notes to Consolidated Financial Statements(Continued)



1. Organization and Summary of Significant Accounting Policies (Continued)



Fixed Assets



Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of
the assets, generally five to seven years. Leasehold improvements are amortized on a straight-line basis over the estimated useful lives of the respective assets or the term of the lease, whichever is shorter. Maintenance, repairs and minor renewals
are charged to expense when incurred. Upon disposition of an asset, its accumulated depreciation is deducted from the original cost, and any gain or loss is reflected in current operations. Depreciation expense for the fiscal years ended September
27, 2003, September 28, 2002 and September 29, 2001 amounted to $16,216,793, $13,423,724, and $9,744,418, respectively.



Goodwill



Goodwill represents the excess of the cost over the fair value of net assets acquired. The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible Assets,, at the beginning of fiscal 2002, which supercedes Accounting Principles Board Opinion (APB) No. 17, Intangible Assets, and
eliminated the requirement to amortize goodwill and indefinite-lived intangible assets. SFAS No. 142 requires that goodwill be tested annually for impairment or more frequently if events and circumstances warrant, utilizing a test that begins with
an estimate of the fair value of the reporting unit or intangible asset. The Company tests goodwill annually and whenever events or circumstances occur indicating that goodwill might be impaired.



Prior to fiscal year 2002, when goodwill amortization was ceased under SFAS
No. 142, goodwill was amortized on a straight-line basis over a 40-year period. The amortization period was determined based upon the following factors, among others: operating history, brand name recognition, merchandising strategy, vendor network,
proven portability to new markets and demographics of the junior womens market.



Other Assets



Other assets include intangibles
that resulted from the Companys acquisition of assets from Rampage Retailing Inc. including a license to utilize the Rampage name and other intangibles. This intangible asset is stated at cost and is amortized using the straight-line method
over the estimated useful life of 20 years. The amortization period was primarily determined based on the expectation that the Rampage license renewal options would be exercised (see Note 6). Accumulated amortization at September 27, 2003 and
September 28, 2002 amounted to $401,896 and $334,912, respectively. Straight-line amortization on the intangible asset amounts to $66,984 each year.



Impairment of Long-lived Assets



In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, whenever events or changes in
circumstances indicate that the carrying amount of its assets might not be recoverable, the Company, using its best estimates based upon reasonable and supportable assumptions and projections, reviews the carrying value of long-lived assets for
impairment.



Impairment for long-lived assets to be held is
measured by comparing the carrying amount of the asset to its fair value. Impairment is reviewed at the lowest levels for which there are identifiable cash flows that are independent of the cash flows of other groups of assets. The Company performs
such analysis on an individual store basis and estimates fair values based on sales prices for comparable assets. The Company measures impairment for long-lived assets to be disposed of at the lower of the carrying amount or net realizable value
(fair market value less cost to dispose).



F-9



---

CHARLOTTE RUSSE HOLDINGS, INC.



Notes to Consolidated Financial Statements(Continued)



1. Organization and Summary of Significant Accounting Policies (Continued)



Deferred Rent



Rent expense on noncancellable leases containing known future scheduled rent increases are recorded on a straight-line basis
over the term of the respective leases. The difference between rent expense and rent paid is accounted for as deferred rent.



Income Taxes



The Company accounts for income taxes under SFAS No. 109, Accounting for Income Taxes, which requires the use of the asset and
liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded to reflect the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases.



Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.



Revenue Recognition



Retail merchandise sales are recognized at the point of sale. A reserve is provided for the impact of anticipated returns based on historical experience.



Advertising Costs



Advertising costs are expensed as incurred and amounted to $863,330,
$680,441, and $1,410,816 for the fiscal years ended September 27, 2003, September 28, 2002, and September 29, 2001, respectively.



Store Pre-opening Costs



Costs incurred in connection with the opening of a new store are expensed as incurred.



Earnings Per Share



Basic earnings per share is calculated based on the weighted average outstanding common shares. Diluted earnings per share is calculated based on the
weighted average outstanding shares and potentially dilutive stock options and warrants.



F-10



---

CHARLOTTE RUSSE HOLDINGS, INC.



Notes to Consolidated Financial Statements(Continued)



1. Organization and Summary of Significant Accounting Policies (Continued)



Stock-Based Compensation



The Company has stock-based compensation plans, which are described more
fully in Note 8. SFAS No. 123, Accounting for Stock-Based Compensation, encourages, but does not require the Company to record compensation cost for stock-based employee compensation plans at fair value. The Company has adopted
the disclosure-only provision of SFAS No. 123. Accordingly, compensation expense has only been recognized for stock options granted to employees when the exercise price was below fair market value on the date of grant. Had compensation expense been
recorded for options granted in fiscal 2003, 2002 and 2001 using the fair value method under SFAS No. 123, the Companys net income and basic and diluted earnings per share would have been decreased to the following proforma amounts:



|                           |  | Years Ended      
|-------------------------- |  | -----------------
|                           |  | September 27,2003
|Net income                 |  | $                
|Pro forma net income       |  | $                
|                           |  |                  
|Basic earnings per share   |  |                  
|Pro forma                  |  |                  
|Diluted earnings per share |  |                  
|Pro forma                  |  |                  



Pro forma information
regarding net income is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. For options granted through October 18, 1999, the fair value of
options granted were estimated at the date of grant using the minimum value option pricing model. Following the Companys initial public offering, the fair value of the options granted was estimated at the date of grant using the Black-Scholes
option-pricing model. The following weighted average assumptions were used for those periods:



|                               |  | Years Ended       |  
|------------------------------ |  | ----------------- | -
|                               |  | September 27,2003 |  
|Risk free interest rate        |  | 3                 | %
|Dividend yield                 |  | 0                 | %
|Expected volatility            |  | 65                | %
|Weighted average expected life |  | 4 years           |  



The minimum value
option-pricing model is similar to the Black-Scholes option-pricing model except that it excludes the factor of volatility. In addition, option valuation models require the input of highly subjective assumptions. Because the Companys employee
stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee stock options.



Fair Value of Financial Instruments



Financial instruments, including cash equivalents, accounts payable, accrued expenses and income tax payable are carried at cost, which management believes approximates fair value because of the short-term maturity of
these instruments. There was no long-term debt at September 27, 2003 or September 28, 2002.



F-11



---

CHARLOTTE RUSSE HOLDINGS, INC.



Notes to Consolidated Financial Statements(Continued)



1. Organization and Summary of Significant Accounting Policies (Continued)



Recent Accounting Pronouncements



In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less costs to sell. SFAS 144 retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions of APB
Opinion No. 30, Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment
of a business (as previously defined in that opinion). We adopted SFAS No. 144 on September 29, 2002, the beginning of fiscal 2003. The adoption of SFAS No. 144 did not have a significant impact on the Companys consolidated financial position
or results of operations.



In June 2002, the FASB issued SFAS
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes EITF No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a cost associated with an exit
of disposal activity be recognized when the liability is incurred. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. We applied the provisions of SFAS No. 146 for exit or disposal activities
that initiated after December 31, 2002. The adoption of SFAS No. 146 results in recognizing the cost of future restructuring activities over a period of time rather than in one reporting period. The adoption of SFAS No. 146 did not have a
significant impact on the Companys consolidated financial position or results of operations.



In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it
has issued. It also states that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. FIN No. 45 is an interpretation of FASB Statements Nos. 5,
57 and 107 and a rescission of FIN No. 34. The disclosure requirements in FIN No. 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN No. 45 did not have an impact on the
Companys consolidated financial position or results of operations.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure, an Amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. In
accordance with the provisions of SFAS No. 148, the Company has continued using APB No. 25 to account for stock-based employee compensation and provided the required disclosures.



F-12



---

CHARLOTTE RUSSE HOLDINGS, INC.



Notes to Consolidated Financial Statements(Continued)



1. Organization and Summary of Significant Accounting Policies (Continued)



In January 2003, the EITF finalized a consensus on Issue No. 02-16,Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor. The Task Force concluded that cash consideration in excess of specific identifiable costs, including sales incentives, allowances,
discounts, coupons, rebates and price reductions, when meeting certain criteria, constitute a reduction in vendor price, and should therefore be reflected as a reduction in cost of sales when the related merchandise is sold. The EITF concluded that
this literature should be applied to new arrangements, including modifications of existing arrangements, entered into after December 31, 2002. The Companys accounting methodology has been consistent with the provisions of EITF 02-16;
therefore, there was no change required as a result of the issuance of this statement.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This statement establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for the first
interim period beginning after June 15, 2003, with certain exceptions. The Company adopted SFAS No. 150 in the fourth quarter of fiscal 2003. The adoption of SFAS No. 150 did not have an impact on the Companys consolidated financial position
or results of operations.



2. Fixed Assets



A summary of fixed assets is as follows:



|                                                |  | September 27,2003 |             |   | September 28,2002 |  
|----------------------------------------------- |  | ----------------- | ----------- | - | ----------------- | -
|Leasehold improvements                          |  | $                 | 103,936,579 |   |                   | $
|Furniture and fixtures                          |  |                   | 24,381,457  |   |                   |  
|Equipment and other                             |  |                   | 27,291,164  |   |                   |  
|                                                |  |                   |             |   |                   |  
|                                                |  |                   | 155,609,200 |   |                   |  
|Less: Accumulated depreciation and amortization |  |                   | (55,590,664 | ) |                   |  
|                                                |  |                   |             |   |                   |  
|                                                |  | $                 | 100,018,536 |   |                   | $
|                                                |  |                   |             |   |                   |  



F-13



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements(Continued)



3. Goodwill



The following table reconciles the Companys reported net income and net income per share to amounts that would have been reported had the
non-amortization provisions of SFAS No. 142 been adopted for all periods presented after taking into account the related tax impact on the portion of expense that is tax deductible:



|                                                          |  | Years Ended       |           
|--------------------------------------------------------- |  | ----------------- | ----------
|                                                          |  | September 27,2003 |           
|Net income                                                |  | $                 | 11,012,802
|Add back: goodwill amortization                           |  |                   |          
|Related income tax impact                                 |  |                   |          
|                                                          |  |                   |           
|Adjusted net income                                       |  | $                 | 11,012,802
|                                                          |  |                   |           
|Basic earnings per share:                                 |  |                   |           
|Net income per share                                      |  |                   | $0.52     
|Add back: goodwill amortization, net of income tax impact |  |                   |          
|                                                          |  |                   |           
|Adjusted net income per share                             |  |                   | $0.52     
|                                                          |  |                   |           
|Diluted earnings per share:                               |  |                   |           
|Net income per share                                      |  |                   | $0.47     
|Add back: goodwill amortization, net of income tax impact |  |                   |          
|                                                          |  |                   |           
|Adjusted net income per share                             |  |                   | $0.47     
|                                                          |  |                   |           



F-14



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements(Continued)



4. Credit Arrangements



Effective February 28, 2003, the Company obtained a $25.0 million unsecured revolving credit facility (the new credit
facility) to replace the previous $15.0 million unsecured revolving credit agreement with another lender. The new credit facility, as amended on July 9, 2003, is subject to certain restrictions and covenants and matures on March 1, 2006.
Interest on the new credit facility is payable quarterly, at the Companys option, at either (i) the Banks Base Rate, as defined, or (ii) the Banks Eurodollar Rate plus 1.00%, subject to certain adjustments. At September 27, 2003,
there was no outstanding debt under the new credit facility. The new credit facility requires that the Company maintain certain financial ratios on a quarterly basis and restricts future liens and indebtedness, sales of assets and prohibits dividend
payments. As of September 27, 2003, the Company is in compliance with the terms of the credit facility.



Pursuant to the terms of the new credit facility, the Company can issue up to $15.0 million of documentary or standby letters of credit. The Company is
charged a fee equal to the Banks Eurodollar Rate for the average daily face amount of outstanding letters of credit and customary issuance and amendment charges. Fees are paid quarterly in arrears and charges are paid as incurred. At September
27, 2003, there were outstanding letters of credit in the amount of $6.7 million.



5. Store Closing Costs



During fiscal 2003,
the Company decided to exit the Charlottes Room concept and closed all 10 Charlottes Room stores. In accordance with SFAS No. 146, the Company recorded a liability of $2.6 million and recognized an impairment charge of $2.9 million for
total store closing costs of $5.5 million, before the effect of income taxes. The final settlement of charges is currently estimated to be $4.9 million; and therefore, $600,000 was reversed into income during the fourth quarter of fiscal 2003. The
$4.9 million in closing costs is included in the accompanying consolidated statements of income.



The $2.9 million impairment charge reflected the difference between the carrying value and fair value of Charlottes Room assets. Fair value was
based on estimated market valuations for those assets since their carrying value was not anticipated to be recoverable through future cash flows. The majority of these assets were disposed of during the third quarter at approximately the estimated
fair value. The asset impairment charge of $2.9 million is included in the $4.9 million shown in the store closing costs line item on the accompanying statement of income for the fiscal year ended September 27, 2003.



A reconciliation of the initial reserve to the ending liability included in
the accompanying consolidated balance sheets at September 27, 2003 is as follows:



|Description                |  | InitialReserveEstimate |           | Revision toEstimateBasedUpon FinalCosts |   |          | Costs Paid orSettled |  |   | OtherAdjustments |   |  | EndingReserve
|-------------------------- |  | ---------------------- | --------- | --------------------------------------- | - | -------- | -------------------- |  | - | ---------------- | - |  | -------------
|Contract termination costs |  | $                      | 1,787,100 |                                         | $ | (432,223 | )                    |  | $ | (835,459         | ) |  | $            
|Employee termination       |  |                        | 100,000   |                                         |   |         |                      |  |   | (18,055          | ) |  |              
|Other associated costs     |  |                        | 712,900   |                                         |   | (167,777 | )                    |  |   | (422,690         | ) |  |              
|                           |  |                        |           |                                         |   |          |                      |  |   |                  |   |  |              
|Store closing costs        |  | $                      | 2,600,000 |                                         | $ | (600,000 | )                    |  | $ | (1,276,204       | ) |  | $            
|                           |  |                        |           |                                         |   |          |                      |  |   |                  |   |  |              



The remaining balance
of the reserve is expected to be paid or settled during fiscal 2004.



F-15



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements(Continued)



6. Commitments and Contingencies



Leases



The Company leases its retail stores, distribution centers, and office facilities under various non-cancelable operating leases that expire between 2004
and 2015. Under certain retail store leases, the Company is required to pay the greater of a minimum lease payment or 5% to 11% of annual sales volume. Rent expense, including reimbursement of the Companys proportional share of common area
maintenance expenses, for the years ended September 27, 2003, September 28, 2002 and September 29, 2001 amounted to $80,031,516, $62,035,066 and $44,378,390, respectively, including $3,834,060, $1,617,494 and $1,708,916, respectively, of contingent
rentals.



As of September 27, 2003, aggregate future minimum
rentals are as follows:



|                                    |  | Operating Leases
|----------------------------------- |  | ----------------
|Fiscal Year Ending September        |  |                 
|2004                                |  | $               
|2005                                |  |                 
|2006                                |  |                 
|2007                                |  |                 
|2008                                |  |                 
|Thereafter                          |  |                 
|                                    |  |                 
|Total future minimum lease payments |  | $               
|                                    |  |                 



License agreement



In conjunction with the acquisition of Rampage assets on September 30,
1997, the Company entered into a license agreement enabling the Company to operate stores under the Rampage name. As amended in fiscal 2002, the license fee is calculated as the greater of an annual fee (ranging between $600,000 to $750,000) or a
percent of sales at stores operating under the Rampage name (ranging between 0.5% and 1.0%).



The license agreement has an initial term that expires in 2012 and may be extended for six additional five-year periods provided that net sales under the license exceeds an annual goal for the year ending immediately
prior to the beginning of such extension period. In the event the Company decides to terminate the license agreement prior to the end of the term, the Company may be required to pay a termination fee as specified in the licensing agreement. License
fees incurred during the fiscal years ended September 27, 2003, September 28, 2002, and September 29, 2001 were $849,405, $926,492, and $690,587, respectively, and are included in selling, general and administrative expenses in the accompanying
consolidated statements of income.



The Company is involved
from time to time in various claims and lawsuits incidental to the business. Management believes that the outcome of these matters individually and in the aggregate will not have a material adverse effect on the Companys consolidated financial
position or results of operations.



F-16



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements(Continued)



7. Income Taxes



Income taxes consist of the following:



|          |  | Years Ended       |          
|--------- |  | ----------------- | ---------
|          |  | September 27,2003 |          
|Current:  |  |                   |          
|Federal   |  | $                 | 3,077,971
|State     |  |                   | 963,000  
|          |  |                   |          
|          |  |                   | 4,040,971
|Deferred: |  |                   |          
|Federal   |  |                   | 2,923,000
|State     |  |                   | 77,000   
|          |  |                   |          
|          |  |                   | 3,000,000
|          |  |                   |          
|          |  | $                 | 7,040,971
|          |  |                   |          



A reconciliation of
the calculated income tax provision based on statutory tax rates in effect and the effective tax rate follows:



|                                               |  | Years Ended       |          
|---------------------------------------------- |  | ----------------- | ---------
|                                               |  | September 27,2003 |          
|Tax at U.S. statutory rates                    |  | $                 | 6,318,821
|State income taxes, net of federal tax benefit |  |                   | 668,892  
|Non-deductible expenses                        |  |                   | 70,608   
|Other, net                                     |  |                   | (17,350  
|                                               |  |                   |          
|                                               |  | $                 | 7,040,971
|                                               |  |                   |          



Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Companys deferred tax
liabilities and assets are as follows:



|                                      |  | September 27,2003 |            |   | September 28,2002 |  
|------------------------------------- |  | ----------------- | ---------- | - | ----------------- | -
|Deferred tax assets:                  |  |                   |            |   |                   |  
|Inventory                             |  | $                 | 2,390,955  |   |                   | $
|Deferred rent                         |  |                   | 3,803,144  |   |                   |  
|Employee benefit programs             |  |                   | 476,357    |   |                   |  
|State income taxes                    |  |                   | 121,344    |   |                   |  
|Other accrued expenses                |  |                   | 2,311,344  |   |                   |  
|                                      |  |                   |            |   |                   |  
|                                      |  |                   | 9,103,144  |   |                   |  
|Deferred tax liabilities:             |  |                   |            |   |                   |  
|Tax over book depreciation            |  |                   | (7,989,238 | ) |                   |  
|Intangibles                           |  |                   | (1,413,906 | ) |                   |  
|                                      |  |                   |            |   |                   |  
|                                      |  |                   | (9,403,144 | ) |                   |  
|                                      |  |                   |            |   |                   |  
|Net deferred tax assets (liabilities) |  |                   | $(300,000  | ) |                   | $
|                                      |  |                   |            |   |                   |  



F-17



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements(Continued)



8. Equity



Stock Options



In 1996, the Company established a Long-Term Incentive Plan (the 1996 Plan). The 1996 Plan provides for the issuance of shares of Common Stock
under incentive stock options and non-qualified stock options. Options vest ratably at 20% per year over five years from the date of the grant, subject to certain acceleration provisions and are exercisable for a period of up to ten years from the
date of grant. Incentive stock options are granted at prices that approximate the fair value of the common shares at the date of grant as determined by the Board of Directors.



In May 1999, the Company established a 1999 Long-Term Incentive Plan (the 1999 Plan). The 1999 Plan provides for
the issuance of shares of Common Stock under non-qualified stock options and stock appreciation rights. The exercise price of options shall not be less than 85% of the fair market value at the date of grant, or 110% in the case of any person
possessing 10% combined voting power of all classes of stock of the Company. The Companys Board of Directors determines the vesting and other provisions of option and stock appreciation rights granted under the 1999 Plan. In July 1999, the
Companys Board of Directors resolved that no further stock option grants will be made from the 1996 Plan or the 1999 Plan.



The Companys Board of Directors and stockholders adopted the 1999 Equity Incentive Plan, effective as of the completion of its initial public
offering. The 1999 Equity Incentive Plan permits the grant of options that qualify as incentive stock options and non-qualified options. The option exercise price of each option shall be determined by the compensation committee of the Board of
Directors. In the case of incentive stock options, however, the exercise price shall not be less than 100% of the fair market value of the shares on the date of grant, or 110% in the case of incentive stock options granted to an individual with
ownership in excess of certain limits. Subject to adjustment for stock splits and similar events, the total number of shares of Common Stock that can be issued under the 1999 Equity Incentive Plan is 2,250,000 shares. The terms of these options are
substantially the same as other options previously issued.



A
summary of the Companys stock option activity and related information for the plans is as follows:



|                                  |  | Options   |   |  | WeightedAverageExercisePrice
|--------------------------------- |  | --------- | - |  | ----------------------------
|Outstanding at September 30, 2000 |  | 1,927,600 |   |  | $                           
|Granted                           |  | 443,000   |   |  |                             
|Cancelled                         |  | (24,600   | ) |  |                             
|Exercised                         |  | (359,800  | ) |  |                             
|                                  |  |           |   |  |                             
|Outstanding at September 29, 2001 |  | 1,986,200 |   |  |                             
|Granted                           |  | 586,500   |   |  |                             
|Cancelled                         |  | (66,600   | ) |  |                             
|Exercised                         |  | (388,230  | ) |  |                             
|                                  |  |           |   |  |                             
|Outstanding at September 28, 2002 |  | 2,117,870 |   |  |                             
|Granted                           |  | 438,000   |   |  |                             
|Cancelled                         |  | (197,300  | ) |  |                             
|Exercised                         |  | (53,000   | ) |  |                             
|                                  |  |           |   |  |                             
|Outstanding at September 27, 2003 |  | 2,305,570 |   |  | $                           
|                                  |  |           |   |  |                             



F-18



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements(Continued)



8. Equity (continued)



The following table summarizes information about stock options outstanding as of September 27, 2003:



|                |  | Options Outstanding |  | Options Exercisable         
|--------------- |  | ------------------- |  | ----------------------------
|Exercise Prices |  | Outstanding         |  | WeightedAverageRemainingLife
|$1.00 - $4.00   |  | 860,170             |  | 3.11                        
|$7.00 - $13.50  |  | 1,238,400           |  | 8.35                        
|$18.90 - $27.00 |  | 207,000             |  | 7.90                        
|                |  |                     |  |                             
|Total           |  | 2,305,570           |  | 6.36                        
|                |  |                     |  |                             



The weighted average
fair value of options granted was $5.41, $5.58, and $9.35 for the fiscal years ended September 27, 2003, September 28, 2002 and September 29, 2001, respectively.



Deferred compensation relating to options granted prior to the Companys initial public offering is being amortized
ratably over the vesting period of the respective options subject to adjustment for cancellations.



Stock Purchase Plan



On
September 27, 1999, the Company approved the adoption of the 1999 Employee Stock Purchase Plan (the Plan), which authorized up to 350,000 shares of Common Stock available for employee purchase through payroll deductions at 85% of fair
market value. All eligible employees of the Company may participate. Eligibility is defined as those employees who have completed at least six months of employment and work at least 20 hours per week, except for employees who own Common Stock or
options on such Common Stock that represents 5% or more of the Company total equity ownership. There were 26,475, 19,730 and 23,535 shares issued under the Plan during the fiscal years ended September 27, 2003, September 28, 2002 and September 29,
2001, respectively.



Warrants



In conjunction with the issuance of two senior subordinated note agreements
with affiliated investors that were paid off in June 1999, the Company issued warrants to purchase 1,964,410 shares of Common Stock at $1.00 per share. The number of shares of Common Stock issuable under these warrants was increased by an aggregate
of 1,030 shares pursuant to certain anti-dilution provisions. The warrants are fully exercisable and expire on September 27, 2006.



Shares Reserved for Future Issuance



|                                                                  |  | September 27,2003 |  | September 28,2002
|----------------------------------------------------------------- |  | ----------------- |  | -----------------
|Warrants issued and outstanding                                   |  | 1,965,440         |  | 1,965,440        
|Stock options issued and outstanding                              |  | 2,305,570         |  | 2,117,870        
|Common shares authorized for future stock option grants           |  | 779,500           |  | 26,200           
|Shares authorized for issuance under Employee Stock Purchase Plan |  | 254,328           |  | 280,803          
|                                                                  |  |                   |  |                  
|Shares reserved for future issuance                               |  | 5,304,838         |  | 4,390,313        
|                                                                  |  |                   |  |                  

|
|



|
|



F-19



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements(Continued)



9. Supplemental Cash Flows Disclosures



|                                                |  | Years Ended      
|----------------------------------------------- |  | -----------------
|                                                |  | September 27,2003
|Income tax benefit of stock option transactions |  | $130,528         
|Cash paid during the year for:                  |  |                  
|Interest                                        |  | $39,231          
|Income taxes                                    |  | $7,081,428       



10. Related Party Transactions



The Company, its Chairman of the Board and two funds
managed by Saunders, Karp & Megrue Partners, LLC (SKM), entered into a stockholders agreement in 1996. This agreement provides that: (1) as long as SKM owns more than 25% but less than 50% of the Companys outstanding
shares, they will have the right to nominate three directors, and (2) as long as SKM owns at least 1,820,735 shares of Common Stock, including shares of Common Stock issuable upon exercise of outstanding warrants, it will have the right to nominate
two directors.



The stockholders agreement grants the
Companys Chairman of the Board certain tag along rights in the event of a private sale by SKM of their shares of Common Stock. The stockholders agreement also grants, subject to limitations and exceptions, demand and piggyback registration
rights to SKM and piggyback registration rights to the Chairman of the Board. The Company is responsible for certain costs of registered offerings in which shares are sold by SKM and the Chairman of the Board. Costs attributable to shares sold by
SKM and the Chairman of the Board were $450,000 and $462,000 for the fiscal years ended September 28, 2002, September 29, 2001, respectively. There were no such costs during the year ended September 27, 2003. Given the historical nature of this
obligation, these costs are treated as reductions to stockholders equity as an offset to proceeds received from shares sold by the Company, if any.



The Company expensed a management fee of $250,000 to SKM during each of the three years presented. This fee terminates when SKM owns less than 1,820,735
shares of Common Stock, including shares of Common Stock issuable upon exercise of outstanding warrants.



For the fiscal years ended September 27, 2003, September 28, 2002 and September 29, 2001, the Company purchased approximately $821,000, $664,000 and
$681,000, respectively, of merchandise from a company primarily owned by family members of the Companys Chairman of the Board. Related accounts payable balances at September 27, 2003 and September 28, 2002 amounted to $14,786 and $900,
respectively. These balances are included with Accounts payable, trade in the accompanying consolidated balance sheets.



11. Employee Savings Plan



The Company has an Internal Revenue Code Section 401(k) profit-sharing plan (the Plan) for eligible employees. The Plan is funded by employee
contributions and provides for the Company to make discretionary contributions. The Company matches 25% of participants contributions up to 4% of eligible compensation. Amounts contributed and expensed under this plan were approximately
$108,500, $89,500 and $80,000 for the fiscal years ended September 27, 2003, September 28, 2002 and September 29, 2001, respectively.



F-20



---

CHARLOTTE RUSSE HOLDING, INC.



Notes to Consolidated Financial Statements(Continued)



12. Earnings Per Share



|                                   |  | Years Ended       |  
|---------------------------------- |  | ----------------- | -
|                                   |  | September 27,2003 |  
|Net income                         |  | $11,012,802       |  
|Earnings per share:                |  |                   |  
|Basic                              |  | $0.52             |  
|Effect of dilutive stock options   |  | (0.01             | )
|Effect of dilutive warrants        |  | (0.04             | )
|                                   |  |                   |  
|Diluted                            |  | $0.47             |  
|                                   |  |                   |  
|Weighted average number of shares: |  |                   |  
|Basic                              |  | 21,239,569        |  
|Effect of dilutive stock options   |  | 485,798           |  
|Effect of dilutive warrants        |  | 1,781,661         |  
|                                   |  |                   |  
|Diluted                            |  | 23,507,028        |  
|                                   |  |                   |  



F-21



---

EXHIBIT INDEX



|(a)     |  | Exhibits marked with an asterisk are filed herewith. The remainder of the exhibits have heretofore been filed with the Commission and are incorporated herein by
reference.                                                                                                                                                        
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                        
|2.1     |  | Stock Purchase Agreement dated as of August 26, 1996 by and among Charlotte Russe Holding, Inc., Daniel Lawrence, Frank Lawrence and Larry Lawrence (Exhibit 2.1 to Registration
Statement 333-84297 filed October 19, 1999)                                                                                                       
|        | 
|3.1     |  | Certificate of Incorporation of Charlotte Russe Holding, Inc., as amended (Exhibit 3.1 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                 
|        | 
|3.2     |  | Certificate of Amendment to the Certificate of Incorporation of Charlotte Russe Holding, Inc. (Exhibit 3.2 to Registration Statement 333-84297 filed October 19,
1999)                                                                                                                                                             
|        | 
|3.3     |  | Amended and Restated By-laws of Charlotte Russe Holding, Inc. (Exhibit 3.3 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                             
|        | 
|4.1     |  | Form of Common Stock Certificate (Exhibit 4.1 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                                                          
|        | 
|10.1    |  | Revolving Credit Agreement, dated as of December 23, 1999, by and among Charlotte Russe, Inc., as Borrower, Charlotte Russe Holding, Inc., as Guarantor, and BankBoston, N.A., as
Agent (Exhibit 10.1 to Form 10-Q filed on February 8, 2000)                                                                                      
|        | 
|10.2    |  | Guaranty, dated as of December 23, 1999, by Charlotte Russe Holding, Inc., Charlotte Russe Merchandising, Inc. and certain other Subsidiaries of the Borrower (as therein defined)
which may become parties thereto, each as Guarantor, in favor of BankBoston, N.A. as Agent (Exhibit 10.2 to Form 10-Q filed on February 8, 2000)
|        | 
|10.3    |  | Stockholders Agreement by and among Charlotte Russe Holding, Inc., The SK Equity Fund, L.P., SK Investment Fund, L.P. and Bernard Zeichner (Exhibit 10.7 to Registration
Statement 333-84297 filed October 19, 1999)                                                                                                               
|        | 
|10.4    |  | Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner dated October 1, 1996 (Exhibit 10.9 to Registration Statement 333-84297 filed October 19,
1999)                                                                                                                                                     
|        | 
|10.5    |  | Amendment No. 1 to Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner (Exhibit 10.10 to Registration Statement 333-84297 filed October 19,
1999)                                                                                                                                                       
|        | 
|10.6    |  | Trade Secret and Confidentiality Agreement dated as of October 1, 1996 by and between Charlotte Russe Holding, Inc. and Bernard Zeichner (Exhibit 10.11 to Registration Statement
333-84297 filed October 19, 1999)                                                                                                                
|        | 
|10.7    |  | Charlotte Russe Holding, Inc. 1999 Long-Term Incentive Plan (Exhibit 10.12 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                             
|        | 
|10.8    |  | Charlotte Russe Holding, Inc. 1996 Long-Term Incentive Plan (Exhibit 10.13 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                             
|        | 
|10.9    |  | Lease Agreement for San Diego Distribution Center dated July 24, 1997 by and between Price Enterprises, Inc. and Charlotte Russe, Inc. (Exhibit 10.14 to Registration Statement
333-84297 filed October 19, 1999)                                                                                                                  
|        | 
|10.10   |  | Charlotte Russe Holding, Inc. 1999 Equity Incentive Plan (Exhibit 10.15 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                                
|        | 
|10.11   |  | License Agreement dated September 30, 1997 by and between Rampage Clothing Company and Charlotte Russe, Inc. (Exhibit 10.16 to Registration Statement 333-84297 filed October 19,
1999)                                                                                                                                            
|        | 
|10.12   |  | Charlotte Russe Holding, Inc. 1999 Employee Stock Purchase Plan (Exhibit 10.17 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                         



---

|Exhibit |  | Description                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13   |  | Common Stock Purchase Warrant No. 2 by and between Charlotte Russe Holding, Inc. and The SK Equity Fund, L.P., dated as of September 27, 1996 (Exhibit 10.19 to Registration
Statement 333-84297 filed October 19, 1999)                                       
|        | 
|10.14   |  | Common Stock Purchase Warrant No. 3 by and between Charlotte Russe Holding, Inc. and SK Investment Fund, L.P., dated as of September 27, 1996 (Exhibit 10.20 to Registration
Statement 333-84297 filed October 19, 1999)                                       
|        | 
|10.15   |  | First Amendment dated October 1, 1999 to the Common Stock Purchase Warrant by and between Charlotte Russe Holding, Inc. and The SK Equity Fund, L.P., dated as of September 27,
1996 (Exhibit 10.22 to Registration Statement 333-84297 filed October 19, 1999)
|        | 
|10.16   |  | First Amendment dated October 1, 1999 to the Common Stock Purchase Warrant by and between Charlotte Russe Holding, Inc. and SK Investment Fund, L.P., dated as of September 27,
1996 (Exhibit 10.23 to Registration Statement 333-84297 filed October 19, 1999)
|        | 
|10.17   |  | Form of Indemnification Agreement for Directors and Officers of Charlotte Russe Holding, Inc. (Exhibit 10.24 to Registration Statement 333-84297 filed October 19,
1999)                                                                                       
|        | 
|10.18   |  | Stockholders Agreement dated as of October 1, 1999 by and among Charlotte Russe Holdings, Inc., The SK Equity Fund, L.P. and SK Investment Fund, L.P. (Exhibit 10.25 to
Registration Statement 333-84297 filed October 19, 1999)                               
|        | 
|10.19   |  | Amendment No. 2 to Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner (Exhibit 10.19 to Form 10-K filed on December 12, 2001)                                                                                                      
|        | 
|10.20   |  | Employment Agreement by and between Charlotte Russe Holding, Inc. and Harriet A. Bailiss-Sustarsic dated October 16, 2001(Exhibit 10.20 to Form 10-K filed on December 12,
2001)                                                                               
|        | 
|10.21   |  | Employment Agreement by and between Charlotte Russe Holding, Inc. and Mark A. Hoffman dated August 20, 2001(Exhibit 10.21 to Form 10-K filed on December 12, 2001)                                                                                             
|        | 
|10.22   |  | Employment Agreement by and between Charlotte Russe Holding, Inc. and Daniel T. Carter dated October 11, 2001(Exhibit 10.22 to Form 10-K filed on December 12,
2001)                                                                                           
|        | 
|10.23   |  | Employment Agreement by and between Charlotte Russe Holding, Inc. and R. Tina Kernohan dated August 29, 2001(Exhibit 10.23 to Form 10-K filed on December 12,
2001)                                                                                            
|        | 
|10.24   |  | Amendment #1 to Revolving Credit Agreement, dated as of December 23, 1999, by and among Charlotte Russe, Inc., as Borrower, Charlotte Russe Holding, Inc., as Guarantor, and
BankBoston, N.A., as Agent (Exhibit 10.24 to Form 10-K filed on December 13, 2001)
|        | 
|10.25   |  | Amendment #2 to Revolving Credit Agreement, dated as of December 31, 1999, by and among Charlotte Russe, Inc., as Borrower, Charlotte Russe Holding, Inc., as Guarantor, and
BankBoston, N.A. as Agent (Exhibit 10.25 to Form 10-Q filed on April 19, 2002)    
|        | 
|10.26   |  | Amendment #3 to Revolving Credit Agreement, dated as of December 31, 1999, by and among Charlotte Russe, Inc., as Borrower, Charlotte Russe Holding, Inc., as Guarantor, and
BankBoston, N.A., as Agent (Exhibit 10.26 to Form 10-K filed on December 13, 2002)
|        | 
|10.27   |  | Amendment #1 to License Agreement, dated September 30, 1997, by and between Rampage Clothing Company and Charlotte Russe, Inc. (Exhibit 10.27 to Form 10-K filed on December 13,
2002)                                                                         
|        | 
|10.28   |  | Business Loan Agreement, dated as of February 28, 2003, between Bank of America, N.A and Charlotte Russe, Inc. (Exhibit 10.28 to Form 10-Q filed on April 21,
2003)                                                                                            
|        | 
|10.29   |  | First Amendment dated as of July 9, 2003, between Bank of America, N.A and Charlotte Russe, Inc. amending the Business Loan Agreement dated as of February 28, 2003. (Exhibit 10.29
to Form 10-Q filed on July 17, 2003)                                       
|        | 
|10.30   |  | Employment Agreement by and between Charlotte Russe Holding, Inc. and Mark A. Hoffman dated July 9, 2003. * (Exhibit 10.30 to Form 10-K filed on December 19,
2003)                                                                                            



---

|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.31   |  | Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner dated August 31, 2003. * (Exhibit 10.31 to Form 10-K filed on December 19,
2003)                                                                                                                                                                                            
|        | 
|10.32   |  | Employment Agreement by and between Charlotte Russe, Inc. and Donna Desrosiers dated October 13, 2003.* (Exhibit 10.32 to Form 10-K filed on December 19, 2003)                                                                                                                                                                                            
|        | 
|21      |  | Subsidiaries (Exhibit 21 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                                                                                                       
|        | 
|23.1    |  | Consent of Ernst & Young LLP*                                                                                                                                                                                                                                                                                                                              
|        | 
|24      |  | Power of Attorney (See Signature Page)                                                                                                                                                                                                                                                                                                                     
|        | 
|31.1    |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                   
|        | 
|31.2    |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                   
|        | 
|32.1    |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                   
|        | 
|32.2    |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                   
|        | 
|(b)     |  | Financial Statement Schedules                                                                                                                                                                                                                                                                                                                              
|        | 
|        |  | All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are
not required under the related instructions or are inapplicable as the information has been provided in the consolidated financial statements or related notes thereto.