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Article by DailyStocks_admin    (01-16-08 05:21 AM)

The Daily Magic Formula Stock for 01/16/2008 is Dress Barn Inc. According to the Magic Formula Investing Web Site, the ebit yield is 22% and the EBIT ROIC is 25-50 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

General

We operate women’s apparel specialty stores, principally under the names “ dressbarn ”, “ dressbarn woman ” and “ maurices ”. Since our retail business began in 1962, we have established, marketed and expanded our brands as a source of fashion and value. We offer a lifestyle-oriented, stylish, value-priced assortment of career and casual fashions tailored to our customers’ needs. As of July 28, 2007, we operated 1,428 stores in 48 states and the District of Columbia, including 617 dressbarn Combo stores (a combination of our dressbarn and dressbarn woman brands), 607 maurices stores, 161 dressbarn stores and 43 dressbarn woman stores. References to “we”, “us”, “our” or “our company” or other similar terms in this report are to The Dress Barn, Inc. and its wholly owned subsidiaries.

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

Our maurices stores cater to the apparel and accessory needs of 17- to 34-year-old women and are typically located in small markets with populations of approximately 25,000 to 100,000. Our maurices stores offer moderately priced, up-to-date fashions designed to appeal to a younger female customer than our dressbarn brands. During the fourth quarter of Fiscal 2007, we made the strategic decision to exit the men’s product line and to expand the current core female assortment of maurices merchandise with styles targeted at the plus-size female customer. maurices merchandise is primarily sold under two brands, maurices and Studio Y. The maurices brand encompasses women’s casual clothing, career wear and accessories. Studio Y represents women’s dressy apparel. Our maurices stores are typically located near large discount and department stores to capitalize on the traffic those retailers generate. We seek to differentiate maurices from those retailers by offering a wider selection of style, color and current fashion and by the shopping experience we offer, which emphasizes a visually stimulating environment with a helpful staff. While our maurices stores offer a core merchandise assortment, individual maurices stores vary and augment their merchandise assortment to reflect individual store demands and local market preferences.

All of our stores are directly managed and operated by us. Virtually all of our stores are open seven days a week and most evenings. We utilize creative incentive programs and comprehensive training programs to ensure that our customers receive friendly and helpful service.

We acquired Maurices Incorporated in January 2005. The acquisition was a good fit for us because we share similar values and business cultures. Since the acquisition, while we have maintained each of our brand’s distinct focus and appeal, keeping many functions separate, we have also sought appropriate opportunities to generate synergies through leveraging certain centralized functions, such as taxes, purchasing, lease administration, imports and loss prevention. We believe our synergies have improved both dressbarn’s and maurices’ performance.

As of July 28, 2007, dressbarn had 6.1 million total square feet in all its stores and maurices had 2.9 million total square feet. All of our store locations are leased. Our leases typically contain renewal options and also provide an option to terminate at little or no cost, particularly in the early years of a lease, if specified sales volumes are not achieved. Our dressbarn stores are primarily concentrated in the north-east while our maurices stores are primarily concentrated in the mid-west.

During Fiscal 2007, we opened 42 dressbarn Combo stores and converted five existing stores to Combo stores. We also opened 64 maurices stores during Fiscal 2007. We evaluate store-level performance and seek to close or relocate underperforming stores. During Fiscal 2007, we closed 17 locations, including 14 dressbarn stores and 3 maurices stores. We expect to open approximately 106 new stores in Fiscal 2008, comprised of approximately 41 dressbarn locations (almost all of which will be Combo stores) and approximately 65 maurices locations. Net of store closings, we currently plan to increase our aggregate dressbarn square footage by approximately 3%, and maurices by approximately 9%, in Fiscal 2008.

We own an approximately 900,000 square-foot distribution/office facility and 16 acres of adjacent land in Suffern, New York, which houses, in approximately 510,000 square feet, our corporate offices and our dressbarn distribution center, with the remainder of the facility leased. We own maurices’ corporate headquarters in downtown Duluth, Minnesota, which is composed of three adjacent office buildings totaling 150,564 square feet. We also own a 360,000 square-foot distribution center in Des Moines, Iowa, which houses our maurices warehousing and distribution operations.

Advertising and Marketing

We rely on direct mail, national print advertising in lifestyle magazines and compelling window and in-store marketing materials to communicate our fashion and promotional message. We utilize a customer relationship management system to track customer transactions and determine strategic decisions for our direct mail initiatives. We pursue a public relations strategy to garner editorial exposure.

We participate in national cause-related marketing initiatives that resonate with our customers, creating brand affinity. Our current key partners in these programs include The American Cancer Society, Dress for Success, American Heart Association, and World Vision. We believe these programs, which are conducted at the local level, reinforce that our stores are important and integral members of their communities.

Trademarks

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

Employees

As of July 28, 2007, we had approximately 13,200 employees, approximately 8,000 of whom worked part-time. We typically add temporary employees during peak selling periods. None of our employees are covered by any collective bargaining agreement. We consider our employee relations to be good.

Seasonality

We have historically experienced substantially lower earnings in our second fiscal quarter ending in January, reflecting the intense promotional atmosphere that has characterized the holiday shopping season in recent years. In addition, our quarterly results of operations may fluctuate materially depending on, among other things, increases or decreases in comparable store sales, adverse weather conditions, shifts in timing of certain holidays, the number and timing of new store openings and closings, net sales contributed by new stores and changes in our merchandise mix.

Competition

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

Merchandise Vendors

We purchase our merchandise from many domestic and foreign suppliers. We have no long-term purchase commitment or arrangements with any of our suppliers, and believe that we are not dependent on any one supplier. We continue to have good working relationships with our suppliers.

Available Information

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


CEO BACKGROUND

ELLIOT S. JAFFE, Chairman of the Board and a Founder of our Company, was Chief Executive Officer from the founding of our Company in 1962 until 2002. Mr. Jaffe is the spouse of Roslyn S. Jaffe, a Founder and Director Emeritus of our Company, and they are the parents of David R. Jaffe, a director and CEO, Elise Jaffe, an officer and a more than 5% shareholder, and Richard Jaffe, a more than 5% shareholder.

BURT STEINBERG, Executive Director since 2001, was Chief Operating Officer of our Company from 1989 until 2001, first as President and then as Vice Chairman. Mr. Steinberg was in charge of our merchandising activities from 1982 until 2001. He is also a Director of Provident New York Bancorp.

DAVID R. JAFFE has been President and Chief Executive Officer (“CEO”) since 2002. Previously he had been Vice Chairman and Chief Operating Officer since 2001. Mr. Jaffe joined our Company in 1992 as Vice President Business Development and became Senior Vice President in 1995, Executive Vice President in 1996 and Vice Chairman in 2001. He is the son of Elliot S. and Roslyn S. Jaffe. Elliot S. Jaffe is Chairman of the Board and an executive officer. Roslyn S. Jaffe is a Founder and Director Emeritus. David R. Jaffe is the brother of Elise Jaffe, an officer and a more than 5% shareholder, and Richard Jaffe, a more than 5% shareholder.

KLAUS EPPLER is a pensioned partner in the law firm of Proskauer Rose LLP. He was an equity partner of Proskauer Rose LLP from 1965 to 2001. Mr. Eppler is also a Director of Bed Bath & Beyond Inc.

KATE BUGGELN is on the Governing Board of the Business Council for Peace. Ms. Buggeln was Senior Vice President, Strategic Planning and Business Development for Coach, Inc. from 2001 to 2004.

JOHN USDAN has, since 1981, been President of Midwood Management Corporation, a company specializing in real estate ownership, development and management.

RANDY L. PEARCE has been the Senior Executive Vice President and Chief Financial and Administrative Officer of Regis Corporation, an owner, operator and franchisor of hair and retail product salons, since 1998, and has held various executive positions at Regis Corporation since 1985.

SHARE OWNERSHIP



(1) Consists of 494,557 shares owned directly by Elliot S. Jaffe, 381,469 shares owned by his wife, Mrs. Roslyn S. Jaffe, and 120,000 shares covered by options exercisable by Elliot S. Jaffe within 60 days of October 19, 2007.


(2) Consists of 4,787,098 shares owned directly by David R. Jaffe, 14,066 restricted shares subject to vesting restrictions and 1,020,000 shares covered by options exercisable within 60 days of October 19, 2007.


(3) Consists of 56,309 shares owned directly by Burt Steinberg and 13,327 shares covered by options exercisable within 60 days of October 19, 2007.


(4) Consists of 18,371 restricted shares subject to vesting restrictions owned by Vivian Behrens and 106,200 shares covered by options exercisable within 60 days of October 19, 2007.


(5) Consists of 2,700 shares owned directly by Armand Correia, 7,450 restricted shares subject to vesting restrictions and 72,000 shares covered by options exercisable within 60 days of October 19, 2007.


(6) Consists of 9,541 restricted shares subject to vesting restrictions owned by Gene Wexler and 16,800 shares covered by options exercisable within 60 days of October 19, 2007.


(7) Consists of 1,482 shares owned directly by Klaus Eppler and 19,993 shares covered by options exercisable within 60 days of October 19, 2007.


(8) Consists of 17,771 shares covered by options exercisable by Kate Buggeln within 60 days of October 19, 2007.


(9) Consists of 2,000 shares owned directly by John Usdan and 10,133 shares covered by options exercisable within 60 days of October 19, 2007.


(10) Consists of 7,775 shares covered by options exercisable Randy Pearce within 60 days of October 19, 2007.


(11) Includes 1,403,999 shares covered by options exercisable by Directors and Executive Officers within 60 days of October 19, 2007


(12) Consists of 4,790,398 shares owned directly by Elise Jaffe, 1,434 restricted shares subject to vesting restrictions and 196,000 shares covered by options exercisable within 60 days of October 19, 2007.


(13) Based solely on information set forth in the latest Schedule 13G filed with the SEC on or about February 14, 2007.


(14) Based on 60,145,721 shares outstanding on October 19, 2007. Shares subject to stock options which are currently exercisable or will become exercisable within 60 days after October 19, 2007, are deemed outstanding for computing the percentage of the person holding such options, but are not deemed outstanding for computing the percentage of any other person or group.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

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

We operate a chain of women’s apparel specialty stores, operating principally under the names “ dressbarn ” and “ dressbarn woman ” and, since our January 2005 acquisition of Maurices Incorporated, “ maurices .” Our dressbarn stores are operated mostly in a combination of dressbarn and dressbarn woman stores, or Combo stores, which carry dressbarn and larger-sized dressbarn woman merchandise, as well as freestanding dressbarn and dressbarn woman stores. These stores offer in-season, moderate to better quality career and casual fashion at value prices. Our maurices stores are concentrated in small markets in the United States and their product offerings are designed to appeal to the apparel and accessory needs of the 17 to 34 year-old woman. maurices introduced female plus-sizes in the fourth quarter of Fiscal 2007.

The retail environment remains very competitive. With the acquisition of maurices , we have diversified our core business and believe it will improve our future growth potential. The addition of maurices has allowed us to broaden our demographic reach and diversify our retail base. We expect to continue our strategy of opening new stores while closing under-performing locations. We expect to continue store expansion focusing on both expanding in our major trading markets and developing and expanding into new domestic markets. For Fiscal 2008, we are currently projecting net square footage growth in the mid single-digit percentage range.

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

We consider comparable store sales to be an important indicator of our current performance. Comparable store sales results are important in leveraging our costs, including store payroll, store supplies and rent. Positive comparable store sales contribute to greater leveraging of costs. Comparable store sales also have a direct impact on our total net sales, cash and working capital.

We calculate comparable store sales based on the sales of stores open throughout the full period and throughout the full prior period (including stores relocated within the same shopping center and stores with minor square footage additions). If a single-format store is converted into a Combo store, the additional sales from the incremental format are not included in the calculation of same store sales. The determination of which stores are included in the comparable store sales calculation only changes at the beginning of each fiscal year except for stores that close during the fiscal year which are excluded from comparable store sales beginning with the fiscal month the store actually closes. It should be noted that maurices comparable store sales for Fiscal 2006 were calculated in the same manner as dressbarn using historical pre-acquisition and post-acquisition data for the comparable Fiscal 2005 period.

(1) All earnings per share amounts reported above reflect the 2-for-1 stock split, effective April 3, 2006

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

We believe that maurices is a reportable segment due to management’s review of maurices’ separately available operating results and other financial information used to regularly assess their performance for decision-making purposes. maurices is discussed separately in the following Management’s Discussion and Analysis, a s appropriate.

Fiscal 2007 Compared to Fiscal 2006

Net Sales

Net sales for the fifty-two weeks ended July 28, 2007 increased 9.7% to $1,426.6 million from $1,300.3 million in the prior year. This increase was mainly driven by the same store sales increase of 4.8% and a square footage increase of approximately 5.0%. The same store sales increase was the result of several factors including increased customer traffic to our stores and more customer transactions. We believe the increase in the number of customer transactions was the result of continuing customer acceptance of our more updated and fashionable merchandise assortment and targeted marketing and store presentation efforts.

During Fiscal 2007, the dressbarn brand showed sales strength across all regions of the country, delivering the fourteenth consecutive quarter of positive comparable store sales. All regions posted increased comparable store sales for the fifty-two week period. The best performing departments were leather and outerwear, social and dresses. The weakest departmental performers were suits, woven tops and coordinates.

For the maurices brand, the Northeast and the Northwest led regional performance. Strong sales trends were noted for knit tops, sweaters and denim bottoms.

Revenue also includes income from the non-redemption of a portion of gift cards and gift certificates sold, and merchandise credits issued (gift card breakage). During the fourth quarter of fiscal 2007, we accumulated a sufficient level of historical data to determine an estimate of gift card breakage for the first time. As a result, in the fourth quarter of fiscal 2007, we recognized $3.7 million of breakage income related to unredeemed gift cards which included $2.6 million for dressbarn and $1.1million for maurices .

Cost of sales, including occupancy and buying costs, excluding depreciation
Cost of sales decreased by 50 basis points to 59.0% of net sales in the current year period from 59.5% of net sales in the prior year period. For the dressbarn brand, cost of sales was $554.4 million or 59.3% of net sales, a decrease of 40 basis points as compared to $523.2 million or 59.7% from the same period last year. This decrease was the result of higher merchandise margins from last year mainly due to slightly lower markdowns and the leveraging of store occupancy costs. maurices cost of sales for Fiscal 2007 was $287.7 million or 58.5% of net sales as compared to $250.5 million or 59.1% of net sales in Fiscal 2006. The decrease in cost of sales was the result of increased markon and lower markdowns as well as leveraging occupancy, buying and distribution center costs due to the comparable store sales increase.

SG&A
As a percentage of sales, selling, general and administrative expenses (“SG&A”) decreased 30 basis points to 26.9% of net sales versus 27.2% last year. On a divisional basis, dressbarn SG&A decreased 60 basis points to 27.5% of net sales versus 28.1% last year due primarily to leveraging of payroll related expenses and other fixed costs and reductions in professional fees, offset by an increase in utilities. maurices SG&A was $126.1 million or 25.6% of net sales for the Fiscal 2007 as compared to $106.9 million or 25.2% in Fiscal 2006. The increase is primarily related to greater marketing investments and increased health insurance costs.

Depreciation and Amortization
Depreciation expense for the fifty-two week period was $45.8 million, an increase of $4.1 million from last year. The increase is primarily due to the new store growth.

Interest Income
Interest income for the fifty-two week period was $7.1 million as compared to interest income of $2.7 million last year. The increase was due to the increase in funds invested in marketable securities and investments over the fiscal year as compared to Fiscal 2006. The majority of our interest income is derived from tax-free municipal bonds and overnight tax-free investment funds.

Interest Expense
Interest expense for the fiscal year decreased to $4.9 million from $5.4 million due to lower average debt levels over the comparable prior year period. We acquired maurices in Fiscal 2005. Part of the funds for this investment were raised by issuance of $115 million of convertible senior notes, and $100 million borrowed under the Senior Credit Facility, as described in Note 5 to the consolidated financial statements. In Fiscal 2006, we repaid the remaining $10 million under the $100 million Senior Credit Facility.

Other Income
Other income for the fiscal year was $1.4 million. The majority of this amount represents rental income from the two tenants currently occupying space in our corporate headquarters property in Suffern, New York.

Income Taxes
The effective tax rate for Fiscal 2007 decreased to 36.2%, as compared to 39.6% in Fiscal 2006. The income tax provision for Fiscal 2007 was favorably impacted by $2.3 million, primarily as a result of one-time adjustments to certain deferred tax accounts. In addition we benefited from a lower state tax rate and higher tax exempt income. Refer to Note 9 to the consolidated financial statements for additional details of our income tax amounts.

Fiscal 2006 Compared to Fiscal 2005

Net Sales
Net sales for the fifty-two weeks ended July 29, 2006 increased 30.0% to $1,300.3 million from $1,000.3 million in the prior year. This increase was mainly driven by the acquisition of maurices as well as by the dressbarn same store sales increase of 9.9%. The same store sales increase was the result of several factors including increased customer traffic to our stores and more customer transactions. We believe the increase in the number of customer transactions was the result of continuing customer acceptance of our more updated and fashionable merchandise assortment and targeted marketing and store presentation efforts. The fifty-two weeks ended July 30, 2005 only include 30 weeks of maurices sales results. The acquisition was completed as of January 1, 2005. Details by brand are as follows:

During the fifty-two week period, the dressbarn brand had a solid sales performance showing sales strength across all regions of the country, delivering the tenth consecutive quarter of positive comparable store sales. On a divisional basis, comparable store sales for the fifty-two week period increased 7.2% for dressbarn and 15.0% for dressbarn woman . All regions posted increased comparable store sales for the fifty-two week period. The best performing departments were blouses, knits and outerwear. The weakest departmental performers were suits, coordinates and sweaters.

For the maurices brand, the Southwest (45 stores) and the Northwest (52 stores) led regional performance. Strong sales trends were noted for Studio Y, knit tops and jewelry.

Cost of sales, including occupancy and buying costs, excluding depreciation
Cost of sales decreased 260 basis points from 62.1% of net sales in the prior year period. For the dressbarn brand, cost of sales was $523.1 million or 59.7% of net sales, a decrease of 250 basis points as compared to $490.9 million or 62.3% of net sales for the same period last year. Merchandise margins increased to 56.2% from 55.0% last year mainly due to lower markdowns. The leveraging of store occupancy costs was achieved due to the comparable store sales performance of 9.9%. For the maurices brand, cost of sales for Fiscal 2006 was $250.5 million or 59.1% of net sales as compared to $130.9 million or 61.7% of net sales in Fiscal 2005, which only included 30 weeks of maurices results. The decrease in cost of sales was the result of increased markon and lower markdowns as well as leveraging occupancy, buying and distribution center costs.

SG&A
As a percentage of sales SG&A decreased 150 basis points to 27.2% of net sales versus 28.7% last year. On a divisional basis, dressbarn SG&A decreased 120 basis points to 28.1% of net sales versus 29.3% last year. The decrease was due primarily to leveraging of payroll related expenses (40 basis points) as a result of our 9.9% comparable store sales performance, coupled with total dollar decreases in advertising expense (20 basis points), supplies expense (10 basis points), telephone expenses (10 basis points), credit card and bank charges (10 basis points) and other category costs (40 basis points) for the 52-week period. maurices SG&A was $106.9 million or 25.2% of net sales for the Fiscal 2006 as compared to $56.1 million or 26.4% in Fiscal 2005, which only includes 30 weeks of maurices results. The decrease was due to the strong store selling productivity, coupled with reduced credit card processing rates, and other leveraged overheads. These savings were partially offset by higher Sarbanes-Oxley compliance costs. Our adoption of SFAS No. 123R resulted in the recording of compensation expense of $4.4 million for share-based payments (stock options and restricted stock) in Fiscal 2006, partially offsetting the decrease in SG&A.

Depreciation and Amortization
Depreciation expense for the fifty-two week period was $41.7 million, an increase of $7.2 million from last year. This increase resulted primarily from the addition of maurices . maurices’ depreciation expense was $15.8 million for Fiscal 2006 (52 weeks) as compared to $9.4 million in Fiscal 2005 (30 weeks).

Interest Income
Interest income for the fifty-two week period was $2.7 million as compared to interest income of $1.7 million last year. The increase was due to the increase in funds invested in marketable securities and investments over the fiscal year as compared to Fiscal 2005.

Interest Expense
Interest expense for the fiscal year decreased to $5.4 million from $10.2 million due to lower average debt levels over the comparable prior year period. We acquired maurices in Fiscal 2005. Part of the funds for this investment were raised by issuance of $115 million of convertible senior notes, and $100 million borrowed under the Senior Credit Facility, as described in Note 5 to the consolidated financial statements. In Fiscal 2006, we repaid the remaining $10 million under the $100 million senior credit facility.

Other Income
Other income for the fiscal year was $1.5 million. This amount represents rental income from the two tenants currently occupying space in our Corporate Headquarters property in Suffern, New York.

Income Taxes
The effective tax rate for Fiscal 2006 increased to 39.6%, as compared to 38.7% in Fiscal 2005. The effective rate increased primarily as a result of the recording permanent differences for compensation expense related to incentive stock options as a result of the adoption of SFAS 123R, reserves for various tax related exposures, and more nondeductible expense in Fiscal 2006 for such items as officers life insurance premiums and travel and entertainment expenditures. Refer to Note 9 to the consolidated financial statements for additional details of our income tax amounts.

Liquidity and Capital Resources

Cash generated from operating activities and available lines of credit under our revolving credit facility provide the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Our uses of cash are generally for working capital, the construction of new stores and remodeling of existing stores, information technology upgrades and the purchase of short-term investments.

Our growth strategy includes expanding existing major trading markets, developing and expanding into new markets and the possibility of acquisitions. We periodically consider and evaluate these options to support future growth. In the event we do pursue such options, we could require additional equity or debt financing. There can be no assurance that we would be successful in closing any potential transaction, or that any endeavor we undertake would increase our profitability.

At July 28, 2007, we had cash, cash equivalents, and marketable securities of $244.6 million as compared to $153.0 million as of July 29, 2006. The increase in cash, cash equivalents, and marketable securities was primarily driven by generation of operating cash flows net of capital expenditures.

Net cash provided by operations was $155.2 million for the fifty-two weeks ended July 28, 2007 compared with $164.1 million during last year’s comparable period. Cash flows from operating activities for the period were primarily generated by income from operations, adjusted for non-cash items such as depreciation and amortization, gift card breakage, and a tax benefit related to share-based compensation and changes in working capital account balances, specifically the other long-term liabilities, trade accounts payable, accrued expenses, accrued salaries and wages and customer credits, offset by the increase in merchandise inventories and income tax payable.

Merchandise inventories were $197.1 million at July 28, 2007 compared to $170.5 million at July 29, 2006. We believe current inventory levels are appropriate, based on sales trends and the industry environment.

As of July 28, 2007, $44 million was available under a revolving credit facility that was part of a credit agreement executed in December 2005 for future borrowings, which we believe gives us ample capacity to fund any short-term working capital needs that may arise in the operation of our business. The $44 million available under the credit agreement represents the $100 million from our revolving credit facility less $56 million of outstanding letters of credit at July 28, 2007. We also have an option to increase the revolving credit facility by $50 million.

Net cash used in investing activities was $125.6 million for the fifty-two weeks ended July 28, 2007. We made net investments of $59.0 million in marketable securities and investments during Fiscal 2007. We also purchased $63.0 million of property and equipment mainly for new store openings, store remodels and renovations and information system implementations during Fiscal 2007.

We invested $328 million in connection with our acquisition of maurices in Fiscal 2005. The funds for this investment were raised by issuance of $115 million of convertible senior notes, $100 million borrowed under the Senior Credit Facility, as described in our footnotes to Consolidated Financial Statements and below, and the proceeds from the sale of marketable securities. In Fiscal 2006, we repaid the remaining balance of the Senior Credit Facility.

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

Net cash provided by financing activities was $3.3 million during Fiscal 2007 while net cash used by financing activities was $2.8 million during Fiscal 2006. Cash was provided primarily from the exercise of stock options and the related excess tax benefits.

On April 5, 2001, our Board of Directors approved a stock repurchase program in which we are authorized to purchase on the open market or in privately negotiated transactions up to $75 million of our common stock. We purchased approximately 1,010,000 shares for an aggregate amount of $19.9 million in Fiscal 2007. As of Fiscal 2007, we had purchased 5,895,400 shares at an aggregate purchase price of approximately $46.7 million. At July 28, 2007, we had $28.3 million of purchase availability remaining which was used in August 2007. In September 2007, our Board of Directors authorized an additional $100 million stock buyback program. Purchases of shares of our common stock will be made at our discretion from time to time, subject to market conditions and prevailing market prices.

We anticipate that total capital expenditures for Fiscal 2008 will be approximately $75 million. Of this amount, approximately $65 million is for new store openings, renovations and remodels, and information system upgrades. W e plan to open approximately 106 additional stores in the upcoming fiscal year.

We do not have any undisclosed material transactions or commitments involving related persons or entities. We held no material options or other derivative instruments at July 28, 2007. We do not have any off-balance sheet arrangements or transactions with unconsolidated, limited purpose entities. In the normal course of business, we enter into operating leases for our store locations and utilize letters of credit principally for the importation of merchandise.

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

Recent accounting pronouncements

In June 2006, the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force reached a consensus on Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (“EITF 06-3”). EITF 06-3 includes sales, use, value-added and some excise taxes that are assessed by a governmental authority on specific revenue-producing transactions between a seller and a customer. EITF 06-3 requires disclosure of the method of accounting for the applicable assessed taxes and the amount of assessed taxes included in revenues if such taxes are accounted for under the gross method. EITF 06-3 is effective for interim and annual periods beginning after December 15, 2006. The adoption of EITF 06-3 did not have a material impact on our consolidated financial position, results of operations or cash flows.

In June 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 , which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that companies recognize in their consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006 (our Fiscal 2008). The adoption of FIN 48 is not expected to have a material effect on our consolidated financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements , which defined fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value measurement. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 (our Fiscal 2009), and for interim periods within those fiscal years. We have not completed our evaluation of the potential impact, if any, of the adoption of SFAS No. 157 on our consolidated financial position, results of operations and cash flows.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements , which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006 (our Fiscal 2007). The cumulative effect, if any, of applying the provisions of SAB No. 108 is reported as an adjustment to beginning-of-year retained earnings. We adopted SAB 108 during fourth quarter of Fiscal 2007. The adoption of SAB 108 did not have an impact on our consolidated financial position, results of operations or cash flows.


In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115 , which provides companies with an option to measure, at specified election dates, many financial instruments and certain other items at fair value that are not currently measured at fair value. A company will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This Statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007 (our Fiscal 2009). We have not completed our evaluation of the potential impact, if any, of the adoption of SFAS No. 159 on our consolidated financial position, results of operations and cash flows.

Seasonality

The dressbarn and maurices brands have historically experienced substantially lower earnings in our second fiscal quarter ending in January than during our other three fiscal quarters, reflecting the intense promotional atmosphere that has characterized the holiday shopping season in recent years. We expect this trend to continue for Fiscal 2008. In addition, our quarterly results of operations may fluctuate materially depending on, among other things, increases or decreases in same store sales, adverse weather conditions, shifts in timing of certain holidays, the timing of new store openings, net sales contributed by new stores, and changes in our merchandise mix.

Critical Accounting Policies and Estimates

Our accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, income taxes and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate estimates, including those related primarily to merchandise inventories, long-lived assets, insurance reserves, income taxes, stock-based employee compensation, claims and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following accounting principles are the most critical because they involve the most significant judgments, assumptions and estimates used in preparation of our financial statements.

Revenue Recognition

While our recognition of revenue does not involve significant judgment, revenue recognition represents an important accounting policy of ours. As discussed in Note 1 to the Consolidated Financial Statements, we recognize sales at the point of purchase when the customer takes possession of the merchandise and pays for the purchase, generally with cash or credit card. We have reserved for estimated product returns when sales are recorded based on historical return trends and adjusted for known events, as applicable.

Sales from purchases made with gift cards, gift certificates, and layaway sales are recorded when the customer takes possession of the merchandise. Gift cards, gift certificates and merchandise credits (collectively “gift cards”) do not have expiration dates. We recognize income on unredeemed gift cards (“gift card breakage”) when it can be determined that the likelihood of the remaining balances being redeemed are remote and that there are no legal obligations to remit the remaining balances to relevant jurisdictions. Prior to Fiscal 2007, we were unable to reliably estimate such gift card breakage and therefore recorded no such income in Fiscal 2006 or Fiscal 2005. During the fourth quarter of Fiscal 2007, we accumulated a sufficient level of historical data to determine an estimate of gift card breakage for the first time. As a result, in the fourth quarter of Fiscal 2007, we recognized $3.7 million of breakage income related to unredeemed gift cards which included $2.6 million for dressbarn and $1.1million for maurices .

Cash and cash equivalents

We consider our highly liquid investments with maturities of three months or less when purchased to be cash equivalents. These amounts are stated at cost, which approximates market value. We also consider receivables related to credit card purchases to be equivalent to cash. The majority of our money market funds at July 28, 2007 were maintained with one financial institution. We maintain cash deposits and cash equivalents with well-known and stable financial institutions. However, we have significant amounts of cash and cash equivalents at these financial institutions that are in excess of federally insured limits. This represents a concentration of credit risk. We have not experienced any losses on our deposits of cash and cash equivalents to date.

Merchandise Inventories

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

Impairment of Long-lived Assets

We primarily invest in property and equipment in connection with the opening and remodeling of stores. When facts and circumstances indicate that the carrying values of such long-lived assets may be impaired, an evaluation of recoverability is performed by comparing the carrying values of the assets to projected future cash flows, in addition to other quantitative and qualitative analyses. Upon indication that the carrying values of such assets may not be recoverable, we recognize an impairment loss as a charge against current operations. Property and equipment assets are grouped at the lowest level for which there is identifiable cash flows when assessing impairment, which is the individual store level. Judgments made by us related to the expected useful lives of long-lived assets and our ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions and changes in operating performance. In addition, we regularly evaluate our computer-related and other assets and revise the depreciation over the estimated useful life if the asset is no longer in use or has limited future value.

Insurance Reserves

We use a combination of insurance and self-insurance mechanisms to provide for the potential liabilities for workers’ compensation and employee healthcare benefits. Liabilities associated with the risks that are retained by us are estimated, in part, by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions. Such liabilities are capped through the use of stop loss contracts with insurance companies. The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends. As of July 28, 2007 and July 29, 2006, these reserves were $8.4 million and $7.8 million, respectively. We are subject to various claims and contingencies related to insurance and other matters arising out of the normal course of business. We are self-insured for expenses related to our employee medical and dental plans, and our workers’ compensation plan, up to certain thresholds. Claims filed, as well as claims incurred but not reported, are accrued based on management’s estimates, using information received from plan administrators, historical analysis and other relevant data. We have stop-loss insurance coverage for individual claims in excess of $250,000. We believe our accruals for claims and contingencies are adequate based on information currently available. However, it is possible that actual results could significantly differ from the recorded accruals for claims and contingencies.

Goodwill and other intangible assets

Goodwill represents the excess of the purchase price over the fair values of net identifiable assets acquired. In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Asset s (“SFAS No. 142”), we do not amortize goodwill or intangible assets with indefinite lives but, rather, we are required to evaluate goodwill and intangible assets with indefinite lives annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The conditions that would trigger an impairment of goodwill or intangible assets with indefinite lives include a significant, sustained negative trend in maurices ’ operating results or cash flows, a decrease in demand for maurices products, a change in the competitive environment or other industry and economic factors. Goodwill and intangible assets with indefinite lives are evaluated for impairment annually under the provisions of SFAS No. 142. Our annual assessment date is on or about June 30 th .

Operating Leases

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

For construction allowances and rent holidays, we record a deferred rent liability in “Other accrued expenses” and “Deferred rent” on the consolidated balance sheets and amortize the deferred rent over the terms of the leases as reductions to “Cost of sales including occupancy and buying costs” on the consolidated statements of earnings.

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

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

Leases with related parties

We lease two stores from its Chairman or related trusts. Future minimum rentals under leases with such related parties which extend beyond July 28, 2007 are approximately $312,000 annually and in the aggregate $1.1 million. The leases also contain provisions for cost escalations and additional rent based on net sales in excess of stipulated amounts. Rent expense for Fiscal years 2007, 2006 and 2005 under these leases amounted to approximately $389,000, $364,000 and $335,000, respectively.

Income Taxes

We do business in various jurisdictions that impose income taxes. Management determines the aggregate amount of income tax expense to accrue and the amount currently payable based upon the tax statutes of each jurisdiction. This process involves adjusting income determined using generally accepted accounting principles for items that are treated differently by the applicable taxing authorities. Deferred taxes are provided using the asset and liability method, whereby deferred income taxes result from temporary differences between the reported amounts in the financial statements and the tax basis of assets and liabilities, as measured by current tax rates. We establish valuation allowances against deferred tax assets when it is more likely than not that the realization of those deferred tax assets will not occur. We accrue for estimates of probable settlements of Federal and State tax audits when they are more likely than not to be settled. At any one time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. We believe our accruals for claims and contingencies are adequate based on information currently available. However, it is possible that actual results could significantly differ from the recorded accruals for claims and contingencies.


MANAGEMENT DISCUSSION FOR LATEST QUARTER

Management Overview

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

The following is a summary of highlights for the first fiscal quarter of Fiscal 2008:

During the first fiscal quarter of Fiscal 2008 which ended October 27, 2007 (the “first quarter”), we opened 17 dressbarn brand Combo stores and 14 maurices stores, and 7 freestanding dressbarn brand stores were converted into Combo stores. There were 3 closings of dressbarn brand locations during the first quarter. The Company’s total store square footage at the end of the first quarter increased approximately 5.6% from the end of the fiscal quarter ended October 28, 2006 (the “prior period”).

Net Sales for the first fiscal quarter of 2008 were $363.7 million, an increase of 1.5% from $358.4 million as compared to prior period. Our comparable same store sales decreased 3% during the same period.

Net earnings for the first fiscal quarter ended October 27, 2007 decreased to $19.6 million from $27.4 million for the prior period. Diluted earnings per share for the first fiscal quarter were $0.30 versus $0.40 per share for the prior period. The decrease was largely due to the comparable sales performance coupled with higher cost of sales, offset by the leveraging of our expense structure and higher net interest income.

The dressbarn brand was negatively impacted by the difficult macro-economic environment which has caused the dressbarn customer to be more cautious with her spending. This coupled with the unseasonable fall weather has led to increased promotional activity to reduce seasonal inventory.

We completed our $75 million stock buyback repurchase program which was originally announced on April 5, 2001. The remaining authorized amount for this stock repurchase program was $28 million with which we purchased 1,634,060 shares at an average price of $17.34 in August 2007. On September 20, 2007, our Board of Directors authorized a new $100 million stock repurchase program (the “2007 Program”). No purchases have been made under the 2007 program.

We consider comparable store sales to be one of the most important indicators of our current performance. Comparable store sales results are important in leveraging our costs, including store payroll, store supplies, and occupancy costs. Positive comparable store sales contribute to greater leveraging of costs. Comparable store sales also have a direct impact on our total net sales, cash and working capital. We calculate comparable store sales based on the sales of stores open throughout the full period and throughout the full prior period (including stores relocated within the same shopping center and stores with minor square footage additions). If a single-format dressbarn store is converted into a Combo store, the additional sales from the incremental format are not included in the calculation of same store sales. The determination of which stores are included in the comparable store sales calculation only changes at the beginning of each fiscal year except for stores that close during the fiscal year which are excluded from comparable store sales beginning with the fiscal month the store actually closes.

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

We expect to continue our strategy of opening new stores while closing underperforming locations. Our store expansion strategy is to focus on both expanding our major trading markets and developing and expanding into new domestic markets. We plan to continue our planned store openings using cash flow from operations. We plan to open approximately 80 additional stores and close approximately 25 stores during the remainder of our fiscal year ending July 26, 2008 (“Fiscal 2008”).

Net sales for the first quarter increased by 1.5% to $363.7 million from $358.4 million from the prior period. The net sales increase for the first quarter was related to the 5.6% increase in store square footage due to new store openings partially offset by our consolidated comparable store sales decrease of 3% ( dressbarn decreased 8.1% and maurices increased 7.5%). The dressbarn brand was impacted by the difficult macro-economic environment which has caused the dressbarn customer to be more cautious with her spending resulting in a 2% reduction of total sales transactions and a 4% decrease in average transaction compared to the prior period. This coupled with the unseasonable fall weather has led to increased promotional activity to reduce seasonal inventory. maurices sales for the first quarter were $135.5 million as compared with $116.3 million in the prior period primarily due to the comparable store sales increase. For the maurices brand, the Northwest led regional performance.

Liquidity and Capital Resources

Cash generated from operating activities and available lines of credit under our revolving credit facility provide the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Our uses of cash are generally for working capital, the construction of new stores and remodeling of existing stores, information technology upgrades and the purchase of short-term investments.

Our growth strategy includes expanding existing major trading markets, developing and expanding into new markets. In addition, we periodically consider and evaluate the possibility of acquisitions. In the event we do pursue an acquisition, we could require additional equity or debt financing. There can be no assurance that we would be successful in closing any potential transaction, or that any endeavor we undertake would increase our profitability.

At October 27, 2007, we had cash, cash equivalents, and marketable securities of $197.6 million as compared to $244.6 million as of July 28, 2007. The decrease in cash, cash equivalents, and marketable securities was primarily driven by treasury stock purchases of $40.2 million combined with capital expenditures of $14 .7 million.

Net cash provided by operations was $7.8 million for the first quarter compared with $37.1 million during the prior period. Our first quarter net income decreased $7.8 million from the prior period and cash flow from operations decreased $29.3 million. This is primarily due to a decrease in inventory resulting from the decline in same store sales coupled with a large decrease of accounts payable trade since a higher percentage of our inventory is purchased overseas, requiring faster payment.

Net cash provided by investing activities was $12.1 million. The majority of this amount is related to the cash proceeds received from the sales of marketable securities in excess of the purchases. Additionally, t his amount was partially offset by the purchases of $14.7 million related to property and equipment mainly for new store openings during the first quarter.

Net cash used by financing activities was $40.0 million during the first quarter, primarily relating to the purchases of treasury stock slightly offset by the exercise of stock options and the related excess tax benefits.

As of October 27, 2007, $55 million was available under a revolving credit facility that was part of a credit agreement executed in December 2005 for future borrowings, which we believe gives ample capacity to fund any short-term working capital needs that may arise in the operation of our business. The $55 million available under the credit agreement represents the $100 million from our revolving credit facility less $45 million of outstanding letters of credit at October 27, 2007. We also have an option to increase the revolving credit facility by $50 million.

On April 5, 2001, our Board of Directors approved a stock repurchase program in which we were authorized to purchase on the open market or in privately negotiated transactions up to $75 million of our common stock. During August 2007, we purchased the remaining authorized amount of $28.3 million of the 2001 stock repurchase program. In September 2007, our Board of Directors authorized a new $100 million stock buyback program. There were no purchases made under the 2007 stock buyback program in the first quarter. Purchases of shares of our common stock may be made at our discretion from time to time, subject to market conditions and prevailing market prices and will be subject to applicable SEC rules.

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

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

Contractual Obligations and Commercial Commitments

There have been no material changes during the period covered by this report, outside of the ordinary course of business, to the contractual obligations specified in the table of contractual obligations included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Fiscal 2007 Annual Report on Form 10-K.

Seasonality

The dressbarn and maurices brands have historically experienced substantially lower earnings in our second fiscal quarter ending in January than during our other three fiscal quarters, reflecting the intense promotional atmosphere that has characterized the holiday shopping season in recent years. We expect this trend to continue. In addition, our quarterly results of operations may fluctuate materially depending on, among other things, increases or decreases in comparable store sales, adverse weather conditions, shifts in timing of certain holidays, the timing of new store openings, net sales contributed by new stores, and changes in our merchandise mix.

Critical Accounting Policies and Estimates

Management has determined that our most critical accounting policies are those related to revenue recognition, merchandise inventories, long-lived assets, insurance reserves, claims and contingencies, litigation, operating leases, income taxes, goodwill impairment, sales returns and share-based compensation. We continue to monitor our accounting policies to ensure proper application. Other than accounting for uncertain tax provisions under FIN 48, which is described in Note 6 in our notes to condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q, we have made no changes to these policies as discussed in our Annual Report on Form 10-K for the fiscal year ended July 28, 2007.

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