Form 10-K Year Ended January 28, 2006

We are a leading multi-channel, multi-brand specialty apparel retailer primarily focused on plus-size women’s apparel. Our Retail Stores segment operates retail stores and related E-commerce websites through our three distinct brands: LANE BRYANT^(R), FASHION BUG^(R), and CATHERINES PLUS SIZES^(R). Our Direct-to-Consumer segment operates numerous apparel, accessories, footwear, and gift catalogs and related E-commerce websites through our Crosstown Traders business, which we acquired in June 2005. During the year ended January 28, 2006 (“Fiscal 2006”), the sale of plus-size apparel represented approximately 72% of our total net sales. Through our multiple channels, fashion content, and broad merchandise assortments, we seek to appeal to customers from a broad range of socioeconomic, demographic, and cultural groups. As of January 28, 2006, we operated 2,236 stores in 48 states.

LANE BRYANT is a widely recognized name in plus-size fashion. Through private labels, such as VENEZIA^(R), CACIQUE^(R), and LANE BRYANT^(R), we offer fashionable and sophisticated apparel in plus-sizes 14 - 28, including intimate apparel, wear-to-work, and casual sportswear, as well as accessories. LANE BRYANT has a loyal customer base, generally ranging in age from 25 to 45 years old, who shops for fashionable merchandise in the moderate price range. Primarily a mall-based destination store for the plus-size woman, LANE BRYANT operates 748 stores in 46 states that average approximately 5,800 square feet. In March 2003, we began E-commerce operations on our lanebryant.com website. During Fiscal 2006, our LANE BRYANT website has averaged more than 1.8 million unique visitors per month and has an established on-line community.

FASHION BUG stores specialize in selling a wide variety of plus-size, misses and junior apparel, accessories, intimate apparel, and footwear. FASHION BUG customers generally range in age from 20 to 49 years old and shop in the low-to-moderate price range. Our 1,025 FASHION BUG stores are located in 45 states, primarily in strip shopping centers, and average approximately 8,800 square feet. In July 2004, we began E-commerce operations on our fashionbug.com website. During Fiscal 2006, our FASHION BUG website has averaged more than 800,000 unique visitors per month.

CATHERINES PLUS SIZES is particularly known for extended sizes (over size 28) and petite plus-sizes. CATHERINES offers classic apparel and accessories for wear-to-work and casual lifestyles. CATHERINES customers generally range in age from 40 to 65 years old, shop in the moderate price range, and are concerned with fit and value when purchasing clothes. Our 463 CATHERINES stores are located in 44 states, primarily in strip shopping centers in the Southeast, Mid-Atlantic, and Eastern Central regions of the United States, and average approximately 4,200 square feet. In March 2002, we began E-commerce operations on our catherines.com website. During Fiscal 2006, our CATHERINES website has averaged more than 400,000 unique visitors per month.

CROSSTOWN TRADERS is a direct marketer of women’s apparel, footwear, and specialty gifts. Crosstown Traders markets women’s apparel through its OLD PUEBLO TRADERS^(R), BEDFORD FAIR LIFESTYLES^TM, BEDFORD FAIR SHOESTYLES^TM, WILLOW RIDGE^TM, LEW MAGRAM^(R), BROWNSTONE STUDIO^(R), REGALIA^(R), INTIMATE APPEAL^(R), MONTEREY BAY CLOTHING COMPANY^(R), HOME ETC.^TM, COWARD^(R) SHOE, and other catalog titles and related E-commerce sites, and markets food and specialty gift products through its FIGI’S^(R) catalog and related E-commerce site. During the eight months since our acquisition of Crosstown Traders, their websites have collectively averaged more than 400,000 unique visitors per month. Crosstown Traders also operates three outlet stores.

During Fiscal 2006, we signed an agreement to assume the leases on approximately 75-80 outlet store locations. These leases represent the majority of the outlet locations previously operated by Retail Brand Alliance, which ceased its outlet operations early in 2006. The agreement was effective on April 1, 2006, and provides an entry into many of the country’s leading outlet centers for our LANE BRYANT brand. The outlet stores will be operated under the LANE BRYANT OUTLET nameplate. The majority of the stores are expected to open during July and August of 2006, and these outlet locations will average 7,800 square feet.

Our 2,236 retail stores (as of January 28, 2006) are primarily located in suburban areas and small towns. Approximately 70% of these stores are located in strip shopping centers, with the remainder located in community and regional malls. The majority of our FASHION BUG and CATHERINES stores are strip-center based. Most of our LANE BRYANT stores are in malls. Over the past few years, LANE BRYANT has expanded into strip and lifestyle centers, and has demonstrated success in such locations. Approximately 31% of our LANE BRYANT stores are currently located in strip and lifestyle shopping centers.

We believe that our customers visit strip shopping centers frequently as a result of the tenant mix and convenience of strip shopping centers. Our long-term retail store growth plans are to expand both LANE BRYANT and CATHERINES into additional strip and lifestyle center locations. Availability of strip and lifestyle center retail space significantly outpaces mall expansion. In addition, we benefit in strip and lifestyle centers from substantially lower occupancy costs as compared to occupancy costs in malls.

Our retail store merchandise displays enable our customers to assemble coordinated and complete outfits that satisfy many of their lifestyle needs. We relocate or remodel our stores as appropriate to convey a fresh and contemporary shopping environment. We frequently test and implement new store designs and fixture packages that are aimed at providing an effective merchandise presentation. We emphasize customer service, including the presence of helpful salespeople in the stores, layaway plans, and acceptance of merchandise returns for cash or credit within a reasonable time period. Typically, our stores are open seven days per week, eleven hours per day Monday through Saturday, and seven hours on Sunday.

During Fiscal 2006, LANE BRYANT introduced and tested a new store concept, the side-by-side CACIQUE store. The new design pairs LANE BRYANT’s casual and wear-to-work sportswear assortments with an expanded line of CACIQUE intimates, presented in a double store-front using the nameplates CACIQUE and LANE BRYANT. As a result of a successful testing period, the majority of LANE BRYANT retail store openings and relocations for Fiscal 2007 are expected to be in the CACIQUE side-by-side format. This larger footprint of approximately 7,000 square feet per combined store compares with the standard strip and lifestyle center store footprint of approximately 5,800 square feet.

	Year Ended
	Jan. 28,			Jan. 29,			Jan. 31,			Feb. 1,			Feb. 2,
	2006⁽¹⁾			2005			2004			2003			2002
Store Activity:
Number of stores open at beginning of period		2,221			2,227			2,248			2,446			1,755
Opened during period		70			51			50			57			125
Acquired during period		0			0			0			0			651
Closed during period		(55	)		(57	)		(71	)		(255	)⁽²⁾		(85	)
Number of stores open at end of period		2,236			2,221			2,227			2,248			2,446

Number of Stores by Brand:
FASHION BUG		1,025			1,028			1,051			1,083			1,252
LANE BRYANT		748			722			710			689			647
CATHERINES		463			471			466			467			461
Discontinued brands ⁽³⁾		0			0			0			9			86
Number of stores open at end of period		2,236			2,221			2,227			2,248			2,446
____________________
(1) Does not include 3 outlet stores operated by Crosstown Traders, Inc.
(2) Includes 124 FASHION BUG stores and 68 ADDED DIMENSIONS^(R) stores that were closed in connection with a restructuring plan announced on January 28, 2002.
(3) Includes THE ANSWER^(R) and ADDED DIMENSIONS stores closed during Fiscal 2003, and MONSOON^(R) and ACCESSORIZE^(R) stores closed during Fiscal 2004.

We continue to seek additional locations that meet our financial and operational objectives. We plan to open approximately 155-160 stores and close approximately 50 stores during Fiscal 2007. Planned store openings by brand are approximately 60 LANE BRYANT stores, 75-80 LANE BRYANT OUTLET stores, 15 FASHION BUG stores, and 8 CATHERINES stores. Planned store closings by brand are approximately 15 LANE BRYANT stores, 20 FASHION BUG stores, and 8 CATHERINES stores. Additionally, we currently plan to relocate approximately 35 LANE BRYANT stores, 35 FASHION BUG stores, and 15 CATHERINES stores during Fiscal 2007.

All retail stores are operated under our direct management. Each store has a manager and an assistant manager or supervisor who is in daily operational control of the location. We also employ district managers, who travel to all stores in their district on a frequent basis, to supervise store operations. Each district manager has responsibility for an average of 12 stores. Regional managers, who report to a Vice President of Stores, supervise the district managers. Generally, we appoint store managers from the group of assistant managers and district managers from the group of store managers. We seek to motivate our store personnel through internal advancement and promotion, competitive wages, and various incentive, medical, and retirement plans. We centrally develop store operations, merchandising, and buying policies, and assign to individual store management the principal duties of display, selling, and reporting through point-of-sale terminals.

We employ a merchandising and buying strategy that is focused on providing an attractive selection of apparel and accessories that reflect the fashion preferences of the target customer for each of our Retail Store brands. Separate merchandise groups for each of our brands conduct merchandise purchasing using buyers supervised by one or more merchandise managers. We believe that specialization of buyers within our brands enhances the distinctiveness of our brands and their offerings. In addition, we use domestic and international fashion market guidance, fashion advisory services, proprietary design, and in-store testing to determine the optimal product assortments for each of our brands. We believe that this approach results in greater success in predicting customer preferences while reducing our inventory investment and risk. We also seek to maintain high quality standards with respect to merchandise fabrication, construction, and fit. Our merchandising and buying philosophy, coupled with enhancements in inventory management, helps facilitate the timely and orderly purchase and flow of merchandise. This enables our stores to offer fresh product assortments on a regular basis.

We continually refine our merchandise assortments to reflect the needs and demands of our diverse customer groups and the demographics of each store location. At LANE BRYANT, we offer a combination of fashion basics, seasonal fashions, and high fashion in casual and wear-to-work merchandise, intimate apparel, and accessories. We strive to translate current trends into plus-sizes and to be first to market with our styles. At FASHION BUG, we offer a broad assortment of both casual and wear-to-work apparel, in plus, misses, and junior sizes as well as girls, at low-to-moderate prices. FASHION BUG’s plus- and misses-size merchandise typically reflects established fashion trends and includes a broad offering of ready-to-wear apparel as well as footwear, accessories, intimate apparel, and seasonal items, such as outerwear. FASHION BUG’s junior merchandise reflects the latest fashion trends and includes a significant amount of well-recognized third-party national brands. At CATHERINES, we offer a broad assortment of plus-size merchandise in classic styles designed to provide “head-to-toe” dressing for our customers. CATHERINES features casual and career sportswear, dresses, intimate apparel, suits, and accessories in a variety of plus-sizes, including petites and extended sizes. CATHERINES has developed a unique expertise in the fit, design, and manufacturing of extended sizes, making it one of the few retailers to emphasize these sizes.

For stores that are identified as having certain attributes, we use our distribution capabilities to stock the stores with products specifically targeted to such attributes. Our merchandising staffs obtain store- and brand-wide inventory information generated by merchandise information systems that use point-of-sale terminals. Merchandise can be followed from the placement of our initial order for the merchandise to the actual sale to our customer. Based upon this data, our merchandise managers compare budgeted-to-actual sales and make merchandising decisions as needed, including re-order, markdowns, and changes in the buying plans for upcoming seasons. In addition, we continue to work to improve inventory turnover by better managing the flow of seasonal merchandise to our stores across all geographic regions.

We employ a realistic pricing strategy for our stores that is aimed at setting the initial price markup of fashion merchandise in order to increase the percentage of sales at the original ticketed price. We believe this strategy has resulted in a greater degree of credibility with the customer. However, our pricing strategy typically does allow sufficient margin to permit merchandise discounts in order to stimulate customer purchases when necessary.

Our stores experience a normal seasonal sales pattern for the retail apparel industry, with peak sales occurring during the spring and Christmas seasons. We generally build inventory levels before these peak sales periods. To maintain current and fashionable inventory, we reduce the price of slow-moving merchandise throughout the year. Much of our merchandise is developed for one or more of our six seasons: spring, summer, summer-fall transitional, fall, holiday, and holiday-spring transitional. End-of-season sales are conducted with the objective of carrying a minimal amount of seasonal merchandise over from one season to another. Retail Stores segment sales for the four quarters of Fiscal 2006, as a percent of annual Retail Stores segment sales, were 24.6%, 26.0%, 23.1%, and 26.3%, respectively.

We use several types of advertising to stimulate retail store customer traffic. We use targeted direct-mail advertising to preferred customers selected from a database of approximately 27.8 million proprietary credit card, third-party credit card, and cash customers that have purchased merchandise from us within the past three years. We may also use radio, television, and newspaper advertising and fashion shows to stimulate traffic at certain strategic times of the year. We also use pricing policies, displays, store promotions, and convenient store hours to attract customers. We maintain websites for our LANE BRYANT, FASHION BUG, and CATHERINES brands that provide information regarding current fashions and promotions. We believe that, with the planning and guidance of our specialized home-office personnel, each brand provides such displays and advertising as may be necessary to feature certain merchandise or certain promotional selling prices from time to time.

We offer our Retail Store customers various loyalty card programs. Customers who join these programs are entitled to various benefits, including discounts and rebates on purchases during the membership period. Customers generally join these programs by paying an annual membership fee. Additional information on our loyalty card programs is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; CRITICAL ACCOUNTING POLICIES; Revenue Recognition” below.

In August 2003, we launched FIGURE^(R) magazine, a periodic fashion and lifestyle magazine for women. The magazine features clothing and fashions from our LANE BRYANT, FASHION BUG, and CATHERINES brands, and also covers topics such as: beauty; health and fitness; home, food, and entertaining; relationships; and social and community issues. FIGURE magazine is available by subscription, and is also sold in all of our stores and at selected newsstands and supermarkets, including certain national booksellers. Since its inception, the magazine has grown to a per-issue circulation of more than 400,000 copies.

To meet the demands of our customers, we access both the domestic wholesale and overseas markets for our Retail Store merchandise purchases. This allows us to maintain flexible lead times, respond quickly to current fashion trends, and quickly replenish merchandise inventory as necessary. During Fiscal 2006, we purchased merchandise from approximately 1,000 suppliers and factories located throughout the world. We use our overseas sourcing operations, which generally require longer lead times, primarily to purchase fashion-basic merchandise for our stores. In Fiscal 2006, our overseas sourcing operations accounted for approximately 27% of Retail Store merchandise purchases. Overseas sourcing by brand, as a percent of merchandise purchases, was approximately 29% for FASHION BUG, 27% for LANE BRYANT, and 20% for CATHERINES. In addition, during Fiscal 2006, we purchased a portion of LANE BRYANT merchandise from Mast Industries, Inc. (“Mast”). Mast, a contract manufacturer and apparel importer, is a wholly-owned subsidiary of Limited Brands, Inc. (“Limited Brands”). These purchases from Mast accounted for approximately 12% of our total Retail Store merchandise purchases and approximately 32% of merchandise purchases for LANE BRYANT during Fiscal 2006. No other vendor accounted for more than 4% of total Retail Store merchandise purchases during Fiscal 2006.

We pay for a majority of our merchandise purchases outside the United States using letters of credit with third-party vendors where we are the importer of record. To date, we have not experienced difficulties in purchasing merchandise overseas or importing such merchandise into the United States. Should events such as political instability or a natural disaster result in a disruption of normal activities in any single country with which we do business, we believe that we would have adequate alternative sources of supply.

We currently operate two distribution centers for our Retail Stores segment. For our FASHION BUG stores, we operate a distribution center in Greencastle, Indiana. Located on a 150-acre tract of land, this facility contains a building of approximately 1,000,000 square feet. We estimate that this facility has the capacity to service up to approximately 1,800 stores. For our LANE BRYANT stores and CATHERINES stores, we operate a distribution center in White Marsh, Maryland. Located on 29 acres of land, the White Marsh facility contains a building of approximately 393,000 square feet, which is currently designed to service up to approximately 1,600 stores. Beginning in Fiscal 2007, we also expect to use the Greencastle facility to service our LANE BRYANT OUTLET stores. Our distribution and logistics operations provide adequate current capacity, and we are currently evaluating our overall long-term distribution and logistics requirements for both our Retail Stores and our Direct-to-Consumer segments.

Substantially all of our merchandise purchases are received at these distribution facilities, where they are prepared for distribution to our stores. Automated sorting systems in the distribution centers enhance the flow of merchandise from receipt to quality control inspection, receiving, ticketing, packing, and final shipment. Merchandise is shipped to each store principally by common carriers. We use computerized automated distribution attributes to combine shipments when possible and improve the efficiency of the distribution operations.

Inventory and fulfillment activities for our Retail Stores segment E-commerce operations are handled by a third-party warehouse facility in Indianapolis, Indiana. We have 150,000 square feet of space which is used for merchandise receipt, storage, picking, packing, shipping, and returns processing. A majority of the merchandise is received from our Greencastle and White Marsh distribution centers. This facility, which shipped approximately 2,900,000 units in Fiscal 2006, has a current capacity of approximately 7,500,000 units per year.

We established our Direct-to-Consumer segment in June 2005 with the acquisition of Crosstown Traders, Inc. Crosstown Traders operates multiple catalog titles and related websites, with the majority of revenues derived from the catalog sales of women's apparel, footwear, and accessories, of which plus-sizes are an important component. Crosstown Traders also derives revenues from the catalog sales of food and gifts, a substantial majority of which occur during the Christmas holiday season. In addition to catalog and catalog-related E-commerce operations, Crosstown Traders operates three catalog outlet stores.

The acquisition of Crosstown Traders provides us with an infrastructure for the development and expansion of our Direct-to-Consumer segment, which includes our catalog and catalog-related E-commerce sales distribution channels. We will continue to build infrastructure to prepare for the launch of new catalog offerings, including the launch of the LANE BRYANT catalog in 2007. The LANE BRYANT catalog trademark, which is currently licensed by a third party, will revert to us in late Fiscal 2008. We also plan to launch additional catalog titles in the future, including apparel, home, and footwear titles under the FASHION BUG and CATHERINES brands, and plan to develop cross-channel selling tools with our Retail Stores segment.

The Direct-to-Customer segment complements the Retail Stores segment by providing a different channel to serve our customers’ lifestyle needs with targeted merchandise offerings and marketing media. This channel allows us to offer to our customers targeted merchandise assortments in wide color and size selections not generally available in our retail stores. In addition, we believe that the mail order catalogs and catalog-related E-commerce serve as a cost efficient means of building brand awareness as well as testing market acceptance of new products and new brands.

Generally, the initial sourcing of new merchandise for a catalog begins six to nine months before the catalog is mailed. We target each of our catalogs to its particular market by offering a focused assortment of merchandise designed to meet the needs and preferences of each catalog’s customers. Through market research and ongoing testing of new products and concepts, we develop a separate merchandise strategy for each catalog, including appropriate merchandise assortments, price points, mailing plans, and product presentation. We seek to develop exclusive or private label products for a number of our catalogs on an ongoing basis to further differentiate each catalog’s identity.

Our catalogs range in size from approximately 32 - 132 pages, with 4 - 12 editions per year depending on the seasonality and fashion content of the products offered. We may mail each edition several times each season with slight variations in format and content. We have mailed approximately 145 million catalogs since our acquisition of Crosstown Traders on June 2, 2005, which was in line with our catalog circulation plans. Our circulation strategy was focused on mailing to customers who had already purchased from us and acquiring new customers through targeted prospecting.

We use outside creative agencies or our own creative staff to develop the designs, layout, copy, feel, and theme of our catalogs. We have created E-commerce-enabled websites for each of our catalogs, which offer all of a particular catalog’s merchandise and more extensive offerings than any single issue of a print catalog. Customers can request catalogs and place orders for not only website merchandise, but also for merchandise from any current print catalog already mailed. The website for each catalog is prominently promoted within each catalog.

We maintain all of our catalog, internet, retail customer, and transaction data in multi-channel customer databases. This cross-channel customer database contains detailed purchasing information and certain demographic information about our customers, E-mail addresses, and the names and addresses of individuals who have requested catalogs from us. This database enables us to see how our customers use our various channels to shop.

We continuously analyze our customers’ responses to our catalog mailings and E-commerce promotions in order to understand our customers’ profit contribution. We have developed our own customer selection criteria to segment our customer list according to many variables, allowing our marketing department to analyze each segment's buying patterns. We review the results of each of our catalog mailings. The results are used to further refine the frequency and selectivity of our catalog mailings in an effort to maximize response rates and profitability. We also analyze historical purchasing patterns of existing customers, including recency, frequency, and monetary activity, to assist in merchandising and customer targeting and to increase sales to existing customers.

We acquire lists of prospective customers by renting or exchanging lists with database cooperatives and other sources, including direct competitors. Our most productive prospects tend to come from customer lists of other women's apparel catalogs. We also rent our customer list to others, including direct competitors. In order to determine which prospective customers will receive a particular catalog mailing, we analyze available information concerning such prospects, including historical profit contribution for comparable customer segments and, to the extent possible, use the same type of statistical modeling techniques used to target mailings to our own customers.

We strive to develop promotional formats that will stimulate customer purchases from our catalogs and websites. Successful promotional formats include different catalog wraps, multiple-unit purchase discounts, free shipping, and promotional tag lines such as “last chance” offers. We also market our E-commerce websites in our catalogs. This marketing channel has been the principal marketing mechanism to reach our E-commerce target audience.

Leveraging its experience in handling direct-to-consumer transactions, Crosstown Traders continues to refine its technology infrastructure and customer service processes to make catalog shopping as convenient as possible. We maintain toll free numbers, accessible 24 hours a day, seven days a week (except for major holidays) to accept orders and catalog requests, and to answer order and credit-account-related questions. We utilize an 850-seat call center network in multiple locations supported by integrated system platforms designed to provide uninterrupted services to our customers. Telephone calls are answered by knowledgeable call-center associates, who process customer orders and answer questions on merchandise and its availability. These customer service associates also assist customers in the selection of merchandise and can provide detailed information regarding size, color, fit, and other merchandise features. Many order taking, order status, and other service inquiry functions can also be conducted on Crosstown’s E-commerce sites, allowing customers to browse and shop at their own pace.

Our sales associates enter order data into an online computerized system, which systematically updates its customer database and permits us to measure customer responses to our individual merchandise and catalog mailings. Much of the sales and inventory information is available to our buying staff on a real-time basis throughout the business day. We have achieved efficiencies in order processing and fulfillment, which permit the shipment of most orders the following business day.

We use primarily the domestic wholesale markets for our Direct-to-Consumer merchandise purchases. During Fiscal 2006, we purchased merchandise from approximately 900 suppliers and factories located throughout the United States. No single vendor accounted for more than 3% of total Direct-to-Consumer merchandise purchases during Fiscal 2006. We are beginning to shift a portion of the sourcing for our Direct-to-Consumer segment from domestic markets to our international sourcing network, using third-party suppliers.

We operate several distribution centers and an 850-seat call center network supported by integrated systems platforms for our Direct-to-Consumer segment, which handle receiving, quality control inspection, and distribution directly to our Direct-to-Consumer catalog and catalog-related E-commerce customers. A 240,000 square foot leased facility in Tucson, Arizona ships approximately 3,500,000 packages per year to customers of our OLD PUEBLO TRADERS, MONTEREY BAY CLOTHING COMPANY, INTIMATE APPEAL, and REGALIA catalogs. A separate 100,000 square foot leased facility in Tucson, which became fully operational in the first quarter of Fiscal 2007, will service footwear for all catalogs and E-commerce sites (including Retail Store E-commerce sites commencing in Fiscal 2007). A 240,000 square foot leased facility in Wilmington, North Carolina ships approximately 2,900,000 packages per year to customers of our BEDFORD FAIR, WILLOW RIDGE, BROWNSTONE STUDIO, and LEW MAGRAM catalogs. We own a 130,000 square-foot automated distribution center in Marshfield, Wisconsin which serves as the main distribution center for our FIGI’S catalog and ships approximately 2,000,000 packages per year. Two additional warehouses (a 122,000 square-foot leased facility in Stevens Point, Wisconsin, which services our HOME ETC. catalog, and a 46,000 square-foot owned facility in Neillsville, Wisconsin) also service FIGI’S. Our distribution and logistics operations provide adequate current capacity, and we are currently evaluating our overall long-term distribution and logistics requirements for both our Retail Stores and our Direct-to-Consumer segments.

We seek to encourage sales through the promotion of our proprietary credit cards. We believe that our credit cards act as promotional vehicles by engendering customer loyalty, creating a substantial base for targeted direct-mail promotion, and encouraging incremental sales. Our FASHION BUG, LANE BRYANT, CATHERINES, and Crosstown Traders brands each offer our customers the convenience of proprietary credit card programs.

The LANE BRYANT credit card program accounted for approximately 30% of LANE BRYANT retail sales in Fiscal 2006, and has approximately 1.2 million active accounts. During Fiscal 2006, we used a third-party bank to finance and service the LANE BRYANT credit card program. This third-party bank provides new account approval, credit authorization, billing, and account collection services. Under a non-recourse agreement with the third-party bank, we are reimbursed with respect to sales generated by the credit cards. Our agreement with the third-party bank expires in October 2007. Upon termination of the agreement, we have the right to purchase the receivables allocated to the Lane Bryant retail stores under the agreement at book value from the third party.

Our CATHERINES credit card program accounted for approximately 32% of CATHERINES retail sales in Fiscal 2006, and has approximately 0.7 million active accounts. Prior to March 2005, we had a non-recourse agreement with a third-party bank for our CATHERINES brand that was similar to the LANE BRYANT program. In March 2005, we purchased the CATHERINES credit card portfolio for approximately $54.6 million. Subsequent to this acquisition, we control credit policies and service the CATHERINES proprietary credit card file, and, through various agreements, we securitize and sell the credit card receivables generated by this program.

The credit card receivables from the Crosstown Traders apparel program, which we securitized subsequent to our acquisition of Crosstown Traders, are originated in a non-bank program by Crosstown Traders. Our Crosstown Traders credit card program accounted for approximately 36% of Crosstown Traders apparel retail sales in Fiscal 2006, and has approximately 0.9 million active accounts. We control credit policies and service the Crosstown Traders proprietary credit card file. In addition to this program, FIGI’S, one of Crosstown Traders’ non-apparel catalog brands, offers interest-free, three-payment credit terms over three months to its customers, with the first payment due on a defined date 30 to 60 days after a stated holiday.

A more comprehensive description of our asset securitization process and our commitments under the third-party bank agreements is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; FINANCIAL CONDITION; Off-Balance-Sheet Arrangements” and “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements; NOTE 17. ASSET SECURITIZATION” below.

The women's specialty retail apparel and direct-to-consumer businesses are highly competitive, with numerous competitors, including department stores, specialty apparel stores, discount stores, and mail-order and E-commerce companies. We cannot reasonably estimate the number of our competitors due to the large number of women’s apparel and direct-to-consumer retailers. The primary elements of competition common to both our Retail Stores segment and our Direct-to-Consumer segment are merchandise style, size, selection, fit, quality, display, price, attractive website/catalog layout, efficient fulfillment of website and catalog mail orders, and personalized service to the customer. For our Retail Stores segment, store location, design, advertising, and promotion are also significant elements of competition.

As of the end of Fiscal 2006, we employed approximately 28,000 associates, which included approximately 17,500 part-time employees. In addition, we hire a number of temporary employees during the Christmas season. Approximately 100 of our employees are represented by unions whose contracts are currently due to expire in August 2006. We expect to negotiate new agreements with these unions by the end of August 2006. We believe that overall our relationship with these unions, and our employees in general, is satisfactory.

We own, or are in the process of obtaining, all rights to the trademarks and trade names we believe are necessary to conduct our business as presently operated. “FASHION BUG^(R)”, “FASHION BUG PLUS^(R)”, “BUNDLE OF JOY^(R)”, “FIGURE^(R)”, “L.A. BLUES^(R)”, “CATHERINES^(R)”, “CATHERINES PLUS SIZES^(R)”, “C.S.T. STUDIO^(R)”, “C.S.T. SPORT^(R)”, “MAGGIE BARNES^(R)”, “ANNA MAXWELL^(R)”, “LIZ & ME^(R)”, “SERENADA^(R)”, “LANE BRYANT^(R)”, “LANE BRYANT OUTLET^TM” “VENEZIA^(R)”, “CACIQUE^(R)”, “PETITE SOPHISTICATE^(R)”, “OLD PUEBLO TRADERS^(R)”, “BEDFORD FAIR LIFESTYLES^TM”, “BEDFORD FAIR SHOESTYLES^TM”, “WILLOW RIDGE^TM”, “LEW MAGRAM^(R)”, “BROWNSTONE STUDIO^(R)”, “REGALIA^(R)”, “INTIMATE APPEAL^(R)”, “MONTEREY BAY CLOTHING COMPANY^(R)”, “HOME ETC.^TM”, “COWARD^(R) SHOE”, “FIGI’S^(R)”, and several other trademarks and servicemarks of lesser importance to us have been registered or are in the process of being registered with the United States Patent and Trademark Office and in other countries.

We also own the following Internet domain name registrations: catherines.com, charming.com, charmingshoppes.com, fashionbug.com, fashionbugcard.com, fashionbugplus.com, figuremag.com, lanebryant.com, figis.com, bedfordfair.com, brownstonestudio.com, cowardshoe.com, intimateappeal.com, lewmagram.com, willowridgecatalog,com, oldpueblotraders.com, regaliaonline.com, shoetrader.com, shopthebay.us, and others of lesser importance.

Copies of our annual reports 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 Securities Exchange Act of 1934, as amended, are available free of charge on or through our website at www.charmingshoppes.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). Our historical filings can also be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549 or can be accessed directly from the SEC’s website at www.sec.gov. Information on the operation of the Public Reference Room can be obtained by calling the SEC at (800) 732-0330. See “PART III; Item 10. Directors and Executive Officers of the Registrant” below for additional information that is available on our Internet website.

You should carefully consider and evaluate all of the information in this annual report on Form 10-K and the documents incorporated by reference into this report, including the risk factors listed below. Any of these risks could materially and adversely affect our business, financial condition and operating results, and could cause our actual results to differ materially from our plans, projections, or other forward-looking statements included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” below and elsewhere in this Report on Form 10-K and in our other public filings. The occurrence of one or more of these risks could also materially and adversely affect the price of our common stock.

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

The women's specialty retail apparel and direct-to-consumer markets are highly competitive. Our competitors include individual and chain fashion specialty stores, department stores, discount stores, catalog retailers, and Internet-based retailers. As a result of this competition, we are required to effectively market and competitively price our products to consumers in diverse markets, and we may experience pricing pressures, increased marketing expenditures, and loss of market share, which could have a material adverse effect on our business, financial condition, and results of operations. We believe that the principal bases upon which we compete are merchandise style, size, selection, quality, and price, as well as store location, design, advertising, promotion, and personalized service to our customers. Other women's apparel and direct-to-consumer companies with greater financial resources, marketing capabilities, or brand recognition may enter the plus-size business. We cannot give assurance that we will be able to compete successfully against existing or future competitors.

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

In order to maintain or improve our operating margins, we need to successfully manage our operating costs. Our inability to successfully manage labor costs, increases in costs such as postage and paper, occupancy costs, or other operating costs, or our inability to take advantage of opportunities to reduce operating costs, would adversely affect our operating margins and our results of operations. In addition, we may be unable to obtain adequate insurance coverage for our operations at a reasonable cost.

Our retail store and direct-to-consumer operations experience seasonal fluctuations in net sales and consequently in operating income, with peak sales occurring during the Easter, Labor Day, and Christmas seasons. In addition, extreme or unseasonable weather can affect our sales. Any decrease in net sales or margins during our peak selling periods, or in the availability of working capital needed in the months before these periods, could have a material adverse effect on our business, financial condition, and results of operations. We usually order merchandise in advance of peak selling periods and sometimes before new fashion trends are confirmed by customer purchases. We must carry a significant amount of inventory, including perishable products in certain of our direct-to-consumer businesses, before the peak selling periods. If we are not successful in selling our inventory, especially during our peak selling periods, we may be forced to rely on markdowns or promotional sales to dispose of the inventory or we may not be able to sell the inventory at all, which could have a material adverse effect on our business, financial condition, and results of operations.

Our business requires substantial investment in our inventory for a long period before sales occur. Consequently, we require significant amounts of working capital financing. We depend on the availability of credit to fund our working capital, including credit we receive from our suppliers and their agents, on our credit card securitization program, and on our revolving credit facility. If we are unable to obtain sufficient financing at an affordable cost, we might be unable to adequately merchandise our stores, E-commerce, or catalog businesses, which could have a material adverse effect on our business, financial condition, and results of operations.

Our operating challenges and management responsibilities are increasing as we continue to grow and expand into additional distribution channels. Successful growth will require that we continue to expand and improve our internal systems and our operations, including our distribution infrastructure. Our business plan depends on our ability to open and operate new retail stores and to convert, where applicable, the formats of existing stores on a profitable basis. In addition, we will need to identify, hire and retain a sufficient number of qualified personnel to work in our stores. We are also seeking to complete the integration of Crosstown Traders and our Direct-to-Consumer channel into our current operating structure. Growth in our Direct-to-Consumer channel is dependent on sufficient response rates to our catalogs and Internet websites and access to new customers, which may not occur. In addition, we plan to continue to build infrastructure in our Direct to Consumer channel to prepare for the launch of new catalogs, including the launch of the LANE BRYANT catalog in calendar 2007 when the LANE BRYANT catalog trademark, currently licensed by a third party, reverts to us. These objectives have created, and may continue to create, additional pressure on our staff and on our operating systems. We cannot assure the successful implementation of our business plan for our Retail Store and Direct-to-Consumer segments, or that we will achieve our objectives as quickly or as effectively as we hope.

Our success and our ability to execute our business strategy depend largely on the efforts and abilities of our Chief Executive Officer, Dorrit J. Bern, and her management team. The loss of services of one or more of our key personnel could have a material adverse effect on our business, as we may not be able to find suitable management personnel to replace departing executives on a timely basis. We do not maintain key-person life insurance policies with respect to any of our employees.

We operate distribution facilities in Greencastle, Indiana, and Baltimore County, Maryland, and we operate catalog fulfillment centers in Tucson, Arizona, Marshfield, Wisconsin, Stevens Point, Wisconsin, and Wilmington, North Carolina. Most of the merchandise we purchase is shipped directly to our distribution and fulfillment centers, where it is prepared for shipment to the appropriate stores or to the customer. If any of our distribution or fulfillment centers were to shut down or lose significant capacity for any reason, the other distribution or fulfillment centers may not be able to adequately support the resulting additional distribution demands, in part because of capacity constraints and in part because each distribution or fulfillment center services a particular brand or brands. As a result, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores or customers during the time it takes for us to reopen or replace the affected distribution or fulfillment center.

In the event of a natural disaster, war, or acts of terrorism, or if either are threatened, our ability to obtain merchandise for sale in our stores or through our direct-to-consumer business may be negatively impacted. A significant portion of our merchandise is imported from other countries. If imported goods become difficult or impossible to bring into the United States, and if we cannot obtain such merchandise from other sources at similar costs, our net sales and profit margins may be adversely affected. If commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution centers, fulfillment centers, stores, or our direct-to-consumer customers. In the event of a natural disaster or acts of terrorism in the United States, or the threat of either, we may be required to suspend operations in some or all of our stores, which could have a material adverse impact on our business, financial condition, and results of operations.

Successful management of our E-commerce and catalog operations is dependent on our ability to maintain efficient and uninterrupted customer service and order fulfillment. Inadequate systems capacity, a disruption or slowdown in telecommunications services, changes in technology, changes in government regulations, systems issues, security breaches, a failure to integrate order management systems, or customer privacy issues could result in reduced sales or increases in operating expenses as a result of our efforts or our inability to remedy such issues. In addition, we may not be able to hire sufficient qualified associates to support our E-commerce or catalog operations during peak periods, especially during the Christmas holiday season. The occurrence of one or more of these events could adversely affect our E-commerce or catalog businesses.

●	political instability;
●	increased security requirements applicable to imported goods;
●	trade restrictions;
●	imposition of, or changes in, duties, quotas, taxes, and other charges on imports;
●	currency and exchange risks;
●	issues relating to compliance with domestic or international labor standards;
●	concerns over anti-dumping,
●	delays in shipping; or
●	increased costs of transportation.

New initiatives could be proposed that would have an impact on the trading status of certain countries, and could include retaliatory duties or other trade sanctions that, if enacted, could increase the cost of products purchased from suppliers in such countries or restrict the importation of products from such countries. The future performance of our business will depend on our foreign suppliers and may be adversely affected by the factors listed above, all of which are beyond our control.

If any one of our manufacturers or vendors fails to operate in compliance with applicable laws and regulations, is perceived by the public as failing to meet certain labor standards in the United States, or employs unfair labor practices, our business could be adversely affected. Current global workplace concerns of the public include perceived low wages, poor working conditions, age of employees, and various other employment standards. These globalization issues may affect the available supply of certain manufacturers' products, which may result in increased costs to us. Furthermore, a negative customer perception of any of our key vendors or their products may result in a lower customer demand for our apparel.

Our sales are dependent in part on a high volume of strip shopping center and mall traffic. Strip shopping center and mall traffic may be adversely affected by, among other things, economic downturns, the closing of anchor stores or changes in customer shopping preferences. A decline in the popularity of strip shopping center or mall shopping among our target customers could have a material adverse effect on our business. To take advantage of customer traffic and the shopping preferences of our customers, we need to maintain or acquire stores in desirable locations. We cannot assure you that desirable store locations will continue to be available. Acquisition of additional store locations is also dependent on our ability to successfully negotiate lease terms for such locations. In addition, the timely opening of new store locations could be adversely affected by delays in obtaining necessary permits and approvals, lack of availability of construction materials and labor, or work stoppages.

We believe that our trademarks and servicemarks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks and servicemarks on a worldwide basis. We are not aware of any claims of infringement or challenges to our right to use any of our trademarks and servicemarks in the United States. Nevertheless, there can be no assurance that the actions we have taken to establish and protect our trademarks and servicemarks will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as a violation of the trademarks, servicemarks and proprietary rights of others. Also, others may assert rights in, or ownership of, our trademarks and other proprietary rights, and we may not be able to successfully resolve these types of conflicts to our satisfaction. In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States.

●	classify our board into three classes, with one class being elected each year;
●	do not permit cumulative voting;
●	permit our board to issue "blank check" preferred stock without shareholder approval;
●	require certain advance notice procedures with regard to the nomination of candidates for election as directors, other than nominations by or at the direction of our board;
●	prohibit us from engaging in some types of business combinations with a holder of 10% or more of our voting securities without super-majority shareholder or board approval;
●	prevent our directors from being removed without cause except upon super-majority shareholder approval; and
●	prevent a holder of 20% or more of our common stock from taking certain actions without certain approvals.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to perform periodic assessments of the effectiveness of our internal control over financial reporting, and to report on the results of our assessments in our quarterly and annual reports to the Securities and Exchange Commission. Our independent registered public accounting firm is required on an annual basis to attest to whether or not our assessment is fairly stated in all material respects and to separately report on whether or not they believe that we maintained, in all material respects, effective internal control over financial reporting. If we are unable to maintain effective internal control over financial reporting, or if our independent registered public accounting firm is unable to timely attest to our assessment, we could be subject to regulatory sanctions and a possible loss of public confidence in the reliability of our financial reporting. Such a failure could result in our inability to provide timely and/or reliable financial information and could adversely affect our business.

We make certain significant assumptions, estimates, and projections related to the useful lives of our property, plant, and equipment and the valuation of intangible assets related to acquisitions. The carrying amount and/or useful life of these assets are subject to periodic valuation tests for impairment. Impairment results when the carrying value of an asset exceeds the undiscounted (or for goodwill and indefinite-lived intangible assets the discounted) future cash flows associated with the asset. If actual experience were to differ materially from the assumptions, estimates, and projections used to determine useful lives or the valuation of property, plant, equipment or intangible assets, a write-down for impairment of the carrying value of the assets, or acceleration of depreciation or amortization of the assets, could result. Such a write-down or acceleration of depreciation or amortization could have an adverse impact on our reported results of operations.

Size in		Leased/
Sq. Feet	Location	Owned	Description

1,000,000	Greencastle, IN	Owned	FASHION BUG distribution center
393,000	White Marsh, MD	Owned	LANE BRYANT and CATHERINES distribution center
240,000	Tucson, AZ	Leased	Crosstown Traders distribution center
240,000	Wilmington, NC	Leased	Crosstown Traders distribution center
213,000	Memphis, TN	Owned	Warehouse facility (currently leased to a third party)
145,000	Bensalem, PA	Owned	Corporate technology center, LANE BRYANT OUTLET operations, and corporate administrative offices
142,000	Bensalem, PA	Leased	Corporate headquarters/FASHION BUG operations
135,000	Columbus, OH	Leased	LANE BRYANT home office⁽¹⁾
130,000	Marshfield, WI	Owned	Crosstown Traders distribution center
129,000	Stevens Point, WI	Leased	Crosstown Traders distribution and call centers
100,000	Tucson, AZ	Leased	Crosstown Traders distribution center
63,000	Memphis, TN	Owned	CATHERINES home office
63,000	Marshfield, WI	Owned	Crosstown Traders administrative offices and call center
60,000	Phoenix, AZ	Leased	Crosstown Traders manufacturing facility
46,000	Neillsville, WI	Owned	Crosstown Traders distribution center
45,000	Tucson, AZ	Leased	Crosstown Traders offices
40,000	Greenwich, CT	Leased	Crosstown Traders offices
23,000	Hong Kong, PRC	Owned	International sourcing offices
13,000	Hong Kong, PRC	Leased	International sourcing warehouse and offices
30,000	Miami Township, OH	Leased	Spirit of America National Bank (our wholly-owned credit card bank subsidiary) and credit operations
22,000	Carlsbad, CA	Leased	Crosstown Traders offices
17,000	New York, NY	Leased	E-commerce operations
____________________
(1) During Fiscal 2006, we relocated our LANE BRYANT home office from a 130,000 square-foot leased facility in Reynoldsburg, Ohio to the facility in Columbus, Ohio.

James G. Bloise, 62, has served as Executive Vice President - Supply Chain Management, Information Technology, and Shared Business Services since December 2005 and as Senior Vice President - Supply Chain Management from March 2002 to December 2005. Before that, he served as an executive management consultant. From May 1996 to July 1999, Mr. Bloise served as Chief Operating Officer for the Calvin Klein Jeanswear Division of Warnaco, Inc. (formerly Design Holdings, Ltd., a NYSE-listed company).

Our common stock is traded on the over-the-counter market and quoted on the NASDAQ National Market (“NASDAQ”) under the symbol “CHRS,” and is listed and traded on the Chicago Board Options Exchange (“CBOE”) and Pacific Stock Exchange (“PCX”) under the symbol “QSR.” The following table sets forth the high and low sale prices for our common stock during the indicated periods, as reported by NASDAQ.

We have not paid any dividends since 1995, and we do not expect to declare or pay any dividends on our common stock in the near future. The payment of future dividends is within the discretion of our Board of Directors and will depend upon our future earnings, if any, our capital requirements, our financial condition, and other relevant factors. Our existing revolving credit facility allows the payment of dividends on our common stock subject to maintaining a minimum level of Excess Availability (as defined in the facility agreement) for 30 days before and immediately after the payment of such dividends. (See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; FINANCIAL CONDITION; Financing; Long-term Debt and Equity Financing” and “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT” below).

Total

Maximum

Number

Number of

of Shares

Shares that

Total

Purchased as

May Yet be

Number

Average

Part of Publicly

Purchased

of Shares

Price Paid

Announced Plans

Under the Plans

Period

Purchased

per Share

or Programs⁽²⁾

October 30, 2005 through November 26, 2005

550⁽¹⁾

11.20⁽¹⁾

November 27, 2005 through December 31, 2005

January 1, 2006 through January 28, 2006

696⁽¹⁾

12.65⁽¹⁾

Total

1,246

12.01

____________________

(1) Shares withheld for the payment of payroll taxes on employee stock awards that vested during the period.

(2) In Fiscal 1998, we publicly announced that our Board of Directors granted authority to repurchase up to 10,000,000 shares of our common stock. In Fiscal 2000, we publicly announced that our Board of Directors granted authority to repurchase up to an additional 10,000,000 shares of our common stock. In Fiscal 2003, the Board of Directors granted an additional authorization to repurchase 6,350,662 shares of common stock issued to Limited Brands in connection with our acquisition of LANE BRYANT. From Fiscal 1998 through Fiscal 2003, we repurchased a total of 21,370,993 shares of common stock, which included shares purchased on the open market as well as shares repurchased from Limited Brands. As of January 28 2006 4,979,669 shares of our common stock remain available for repurchase under these programs. Our revolving credit facility allows the repurchase of our common stock subject to maintaining a minimum level of Excess Availability (as defined in the facility agreement) immediately before and after such repurchase. As conditions may allow, we may from time to time acquire additional shares of our common stock under these programs. Such shares, if purchased, would be held as treasury shares. No shares were acquired under these programs during the thirteen weeks ended January 28, 2006. The repurchase programs have no expiration date.

The following table presents selected financial data for each of our five fiscal years ended as of February 2, 2002 through January 28, 2006. The selected financial data is taken from our audited financial statements and should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes included under “Item 8. Financial Statements and Supplementary Data.”

	Year Ended
	Jan. 28,			Jan. 29,			Jan. 31,			Feb. 1,			Feb. 2,
(Dollars in thousands, except per share amounts)	2006⁽¹⁾			2005⁽²⁾			2004⁽²⁾			2003⁽²⁾			2002^{(2) (3)}

Operating Statement Data:
Net sales	$	2,755,725		$	2,334,736		$	2,288,363		$	2,413,356		$	1,995,785

Cost of goods sold, buying, catalog, and
occupancy expenses		1,911,275			1,642,650			1,645,499			1,727,253			1,462,198
Selling, general, and administrative expenses		683,231			577,301			558,248			603,502			486,204
Amortization of goodwill		0			0			0			0			4,885
Expenses related to cost reduction plan		0			605	⁽⁴⁾		11,534	⁽⁴⁾		0			0
Restructuring charge (credit)		0			0			0			(4,813	)⁽⁵⁾		37,708	⁽⁵⁾
Total operating expenses		2,594,506			2,220,556			2,215,281			2,325,942			1,990,995
Income from operations		161,219			114,180			73,082			87,414			4,790
Other income		9,093			3,098			2,050			2,328			4,730
Interest expense		(17,911	)		(15,610	)		(15,609	)		(20,292	)		(18,701	)
Income (loss) before income taxes, minority interest,
and cumulative effect of accounting changes		152,401			101,668			59,523			69,450			(9,181	)
Income tax provision (benefit)		53,010			37,142			21,623			27,117			(1,838	)
Income (loss) before minority interest and cumulative
effect of accounting changes		99,391			64,526			37,900			42,333			(7,343	)
Minority interest in net loss of consolidated subsidiary		0			0			142			679			0
Cumulative effect of accounting changes, net of tax		0			0			0			(49,098	)⁽⁶⁾		0
Net income (loss)	$	99,391		$	64,526		$	38,042		$	(6,086	)	$	(7,343	)

Basic net income (loss) per share:

	PENNSYLVANIA		23-1721355
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	450 WINKS LANE, BENSALEM, PA 19020		(215) 245-9100
	(Address of principal executive offices) (Zip Code)		(Registrant’s telephone number, including Area Code)

		Page
	PART I

Item 1	Business	1
	General	1
	Retail Stores Segment	2
	Direct-to-Consumer Segment	6
	Proprietary Credit Programs	9
	Competition	10
	Employees	10
	Trademarks and Servicemarks	10
	Executive Offices	11
	Available Information	11
Item 1A	Risk Factors	11
	Risks Related to Our Business and Industry	11
	Other Risks	16
Item 1B	Unresolved Staff Comments	17
Item 2	Properties	17
Item 3	Legal Proceedings	19
Item 4	Submission of Matters to a Vote of Security Holders	19
	Additional Part I Information - Our Executive Officers	19

	PART II

Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	21
Item 6	Selected Financial Data	23
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Forward-Looking Statements	25
	Overview	27
	Critical Accounting Policies	29
	Recent Developments	35
	Results of Operations	36
	Financial Condition	45
	Market Risk	53
	Impact of Recent Accounting Pronouncements	53
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	53
Item 8	Financial Statements and Supplementary Data	54
	Management’s Report on Internal Control Over Financial Reporting	54
	Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	55
	Report of Independent Registered Public Accounting Firm	57
	Consolidated Balance Sheets	58
	Consolidated Statements of Operations and Comprehensive Income	59

		Page

	Consolidated Statements of Stockholders’ Equity	60
	Consolidated Statements of Cash Flows	61
	Notes to Consolidated Financial Statements	62
Item 9	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	102
Item 9A	Controls and Procedures	102
Item 9B	Other Information	103

	PART III

Item 10	Directors and Executive Officers of the Registrant	104
Item 11	Executive Compensation	104
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	104
Item 13	Certain Relationships and Related Transactions	105
Item 14	Principal Accountant Fees and Services	105

	PART IV

Item 15	Exhibits and Financial Statement Schedules	106

	Signatures	116

	Exhibit Index	117

Period	Number of Leases Expiring⁽¹⁾

2006	205⁽²⁾
2007 - 2011	652
2012 - 2016	439
2017 - 2021	445
2022 - 2026	422
2027 - 2031	56
Thereafter	17
____________________
(1) Excludes 3 Crosstown Traders outlet stores
(2) Includes 142 stores on month-to-month leases

	Fiscal 2006				Fiscal 2005
	High		Low		High		Low

1^st Quarter	$	9.03	$	7.04	$	8.22	$	5.70
2^nd Quarter		12.25		7.00		9.19		6.48
3^rd Quarter		12.34		9.69		7.73		6.23
4^th Quarter		14.07		10.86		9.64		7.55