According to a nationally recognized firm that specializes in apparel research, retail sales of off-price apparel totaled $16.5 billion in the U.S. in 2004, up more than 15% from 2003. The popularity of this segment continues to grow, with off-price retailers accounting for 9.5% of overall retail apparel sales in the U.S. in 2004, versus 8.6% in 2003 and 8.2% in 2002.

The off-price apparel market is dominated by large format, national apparel companies. These retailers generally target more affluent consumers and seek to achieve high volumes by serving the fashion needs of a broad segment of the population. Mass merchants and general merchandise discount retailers also offer apparel at reduced prices, but generally focus on basic apparel and are less fashion oriented. As a result, it is believed there is significant demand for a value retailer that addresses the market of low to moderate income consumers generally and, particularly, African-American and other minority consumers who seek value-priced, urban fashion apparel and accessories.

Based on U.S. Census Bureau data, approximately 31% of the U.S. population was non-white in 2000 versus approximately 20% in 1980. This percentage is estimated to increase to approximately 35% by 2010. Within this market, African-Americans represented 12.7% of the population as of 2000, which is expected to increase to 13.1% in 2010. According to the U.S. Department of Labor, African-Americans spend 4.7% of their annual income on apparel and related products and services, compared to 3.5% for the U.S. population as a whole. In recent years, a series of nationally recognized urban brands, often associated with hip-hop and rap musicians, has emerged and gained significant popularity. These brands offer distinctive, urban apparel designed to appeal to African-American consumers, as well as to the broader population. Sales from 13 national urban apparel brands tracked by a nationally recognized firm that specializes in apparel research totaled approximately $1.9 billion in 2004, an increase of approximately 46% from 2003.

The Company offers high quality, branded products at attractive prices for the entire value-conscious family. Approximately 30% of the Company’s sales are typically represented by nationally recognized brands. The Company also offers a wide variety of products from less recognized brands that represent approximately 60% of sales. The remaining 10% of sales represent private label products under the Company’s proprietary brands such as Citi Steps, Diva Blue and Urban Sophistication. The Company’s merchandise includes apparel, accessories and home décor. Within apparel, the Company offers men’s, women’s, which includes dresses, sportswear and plus size offerings, and children’s, which includes offerings for infants, toddlers, boys and girls. The Company also offers accessories, which includes intimate apparel, handbags, hats, jewelry, footwear, toys, belts and sleepwear, as well as a limited assortment of home décor, which includes giftware, lamps, pictures, mirrors and figurines.

The Company arranges its stores in a racetrack format with women’s sportswear, the most attractive and fashion current merchandise, in the center of each store, and complementary categories adjacent to those items. Men’s and boy’s apparel is displayed on one side of the store while dresses, footwear and accessories are displayed on the other side. Merchandise for infants, toddlers and girls is displayed along the back of the store. Impulse items, such as jewelry and sunglasses, are featured near the checkout area. Products from nationally recognized brands are prominently displayed on four way racks at the front of each department. The remaining merchandise is displayed on hanging racks and occasionally on table displays. Large hanging signs identify each category location. The unobstructed floor plan allows the customer to see virtually all of the different product areas from the store entrance.

The Company purchases its merchandise at low prices and mark prices up less than department or specialty stores. The Company’s nationally recognized brands are offered at prices 20% to 60% below regular retail prices available in department stores and specialty stores. The Company’s basic pricing strategy is everyday low prices. The Company reviews each department in its stores at least monthly for possible markdowns based on sales rates and fashion seasons to promote faster turnover of inventory and to accelerate the flow of current merchandise.

Gross profit increased $10.4 million, or 25.6%, to $50.8 million for the 39-week period ended October 30, 2004 from $40.5 million for the 39-week period ended November 1, 2003.

Selling, general and administrative expenses increased $10.1 million, or 28.1%, to $46.0 million for the 39-week period ended October 30, 2004 from $35.9 million for the 39-week period ended November 1, 2003.

Interest expense increased approximately $243,000 for the 39-week period ended October 30, 2004 to $558,000 compared to approximately $315,000 for the 39-week period ended November 1, 2003.

Net income was $2.6 million for both the 39-week period ended October 30, 2004 and the 39-week period ended November 1, 2003.