UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~April 2928, ~~2011~~2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File No. 000-07258

CHARMING SHOPPES, INC.

(Exact name of registrant as specified in its charter)



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



3750 STATE ROAD, BENSALEM, PA 19020	(215) 245-9100
(Address of principal executive offices) (Zip Code)	(Registrant’s telephone number, including Area Code)

NOT APPLICABLE

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act):

Large Accelerated Filer x¨ Accelerated Filer ¨x Non-accelerated Filer ¨ Smaller Reporting Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ¨ No x

The number of shares outstanding of the issuer’s Common Stock (par value $.10 per share) as of ~~November 25~~May 18, ~~2011~~2012 was 116,~~533~~879,~~167~~051 shares.

Table of Contents

CHARMING SHOPPES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets
	October 29, 2011 (Unaudited) and January 29, 2011	2
	April 28, 2012 (Unaudited) and January 28, 2012	2
	Condensed Consolidated Statements of Operations (Unaudited)
	Thirteen weeks ended October 29, 2011 and October 30, 2010	3
	Thirteen weeks ended April 28, 2012 and April 30, 2011	3
	Thirty-nine weeks ended October 29, 2011 and October 30, 2010	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)
	Thirty-nine weeks ended October 29, 2011 and October 30, 2010	5
	Thirteen weeks ended April 28, 2012 and April 30, 2011	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	65
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1916
	Forward-looking Statements	1916
	Critical Accounting Policies	2017
	Recent Developments	2118
	Overview	2118
	Results of Operations	2420
	Liquidity and Capital Resources	3728
	Financing	3929
	Market Risk	4030
	Impact of Recent Accounting Pronouncements	4030
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4030
Item 4.	Controls and Procedures	4030
PART II.	OTHER INFORMATION	4231
Item 1.	Legal Proceedings	4231
Item 1A.	Risk Factors	4234
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4235
Item 6.	Exhibits	4235
	SIGNATURES	4537
	Exhibit Index	4638

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)	~~October~~April 2928, ~~2011~~2012			January 2928, ~~2011~~2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	~~157~~214,~~754~~086		$	~~117~~168,~~482~~607
Accounts receivable, net of allowances of $2,045 and $5,667	6,630			36,568
Accounts receivable, net of allowances of $6,413 and $5,688	11,576			39,379
Merchandise inventories	~~355~~278,~~614~~070			~~282~~257,~~248~~180
Deferred taxes	3,~~153~~570			3,~~153~~570
Prepayments and other	~~106~~87,~~390~~033			9890,~~458~~583
Total current assets	~~629~~594,~~541~~335			~~537~~559,~~909~~319
Property, equipment, and leasehold improvements – at cost	1,~~008~~003,~~898~~682			1,~~028~~020,~~843~~334
Less accumulated depreciation and amortization	~~777~~776,~~895~~566			~~772~~790,~~895~~969
Net property, equipment, and leasehold improvements	~~231~~227,~~003~~116			~~255~~229,~~948~~365
Trademarks, tradenames, and internet domain names	187,132			187,132
Goodwill	23,436			23,436
Other assets	1718,~~720~~846			18,~~233~~674
Total assets	$	1,~~088~~050,~~832~~865		$	1,~~022~~017,~~658~~926
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	~~168~~134,~~335~~817		$	~~107~~111,~~882~~630
Accrued expenses	~~144~~134,~~870~~467			~~142~~145,~~002~~667
Current portion – long-term debt	104,~~453~~050			114,~~449~~682
Total current liabilities	~~323~~273,~~658~~334			261,~~333~~979
Deferred taxes	5456,~~122~~339			5155,~~466~~526
Other non-current liabilities	~~149~~150,~~773~~647			~~167~~149,~~089~~836
Long-term debt, net of debt discount of $19,484 and $24,679	132,631			128,350
Long-term debt, net of debt discount of $15,863 and $17,690	134,709			133,639
Stockholders’ equity
Common Stock $.10 par value:
Authorized – 300,000,000 shares
Issued – 155,148,754 shares and 154,185,373 shares	15,515			15,419
Issued – 155,442,947 shares and 155,211,278 shares	15,544			15,521
Additional paid-in capital	~~511~~514,~~659~~200			~~508~~513,~~664~~105
Treasury stock at cost – 38,617,180 shares	(348,400		)	(348,400		)
Retained earnings	~~249~~254,~~874~~492			~~238~~236,~~737~~720
Total stockholders’ equity	~~428~~435,~~648~~836			~~414~~416,~~420~~946
Total liabilities and stockholders’ equity	$	1,~~088~~050,~~832~~865		$	1,~~022~~017,~~658~~926

See Notes to Condensed Consolidated Financial Statements

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Thirteen Weeks Ended
(In thousands, except per share amounts)	~~October~~April 2928, ~~2011~~2012			~~October~~April 30, ~~2010~~2011
Net sales	$	~~429~~481,~~711~~263		$	~~463~~504,~~619~~353
Cost of goods sold	~~196~~219,~~897~~529			~~221~~219,~~918~~032
Gross profit	~~232~~261,~~814~~734			~~241~~285,~~701~~321
Occupancy and buying expenses	8481,~~128~~344			9289,~~687~~411
Selling, general, and administrative expenses	~~140~~137,~~691~~779			~~145~~154,~~016~~587
Depreciation and amortization	1314,~~564~~208			1614,~~367~~408
Restructuring and other charges	3,450			3,234
Gain from sale of office premises	—			(5,185		)
Total operating expenses	241,833			257,304
Restructuring and other charges	1,027			47
Loss from operations	(9,019		)	(15,603		)
Total operating expenses	234,358			253,268
Other income	75			442
Income from operations	27,376			32,053
Interest expense	(3,232		)	(3,790		)
Other income	348			141
Loss before income taxes	(12,176		)	(18,951		)
Interest expense	(3,140		)	(3,776		)
Income tax provision/(benefit)	814			(141		)
Income before income taxes	24,584			28,418
Net loss	$	(12,990	)	$	(18,810	)
Income tax provision	6,812			2,380
Basic net loss per share	$	(0.11	)	$	(0.16	)
Net income	$	17,772		$	26,038
Diluted net loss per share	$	(0.11	)	$	(0.16	)
Basic net income per share	$	0.15		$	0.22
Diluted net income per share	$	0.15		$	0.22

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~CASH FLOWS

(Unaudited)

	Thirty-nine Weeks Ended
	Thirteen Weeks Ended
(In thousands, except per share amounts)	October 29, 2011			October 30, 2010
(In thousands)	April 28, 2012			April 30, 2011
Net sales	$	1,433,266		$	1,485,988
Operating activities
Cost of goods sold	669,225			718,575
Net income	$	17,772		$	26,038
Gross profit	764,041			767,413
Adjustments to reconcile net income to net cash provided by operating activities
Occupancy and buying expenses	260,140			276,791
Depreciation and amortization	14,447			15,099
Selling, general, and administrative expenses	435,212			451,168
Stock-based compensation	1,351			1,031
Depreciation and amortization	42,454			50,115
Accretion of discount on 1.125% Senior Convertible Notes	1,827			1,700
Gain from sale of office premises	(5,185		)	—
Deferred income taxes	813			886
Restructuring and other charges	4,884			4,742
Write-down of capital assets due to restructuring	—			558
Total operating expenses	737,505			782,816
Net loss/(gain) from disposition of capital assets	69			(5,157		)
Income/(loss) from operations	26,536			(15,403		)
Changes in operating assets and liabilities
Other income	312			976
Accounts receivable, net	27,803			26,390
Gain on repurchases of 1.125% Senior Convertible Notes	—			1,907
Merchandise inventories	(20,890		)	(22,467		)
Interest expense	(10,906		)	(12,360		)
Accounts payable	23,187			29,901
Income/(loss) before income taxes	15,942			(24,880		)
Prepayments and other	3,550			(4,280		)
Income tax provision/(benefit)	4,805			(1,323		)
Accrued expenses and other	(9,676		)	(2,355		)
Net income/(loss)	$	11,137		$	(23,557	)
Net cash provided by operating activities	60,253			67,344
Basic net income/(loss) per share	$	0.10		$	(0.20	)
Investing activities
Diluted net income/(loss) per share	$	0.09		$	(0.20	)
Investment in capital assets	(13,128		)	(8,888		)
Proceeds from sales of capital assets	—			7,521
Increase in other assets	(24		)	(594		)
Net cash used by investing activities	(13,152		)	(1,961		)
Financing activities
Repayments of long-term borrowings	(1,389		)	(1,611		)
Issuance of common stock under employee stock plans, net of amounts withheld for payroll taxes	(233		)	(851		)
Net cash used by financing activities	(1,622		)	(2,462		)
Increase in cash and cash equivalents	45,479			62,921
Cash and cash equivalents, beginning of period	168,607			117,482
Cash and cash equivalents, end of period	$	214,086		$	180,403

See Notes to Condensed Consolidated Financial Statements

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Thirty-nine Weeks Ended
(In thousands)	October 29, 2011			October 30, 2010
Operating activities
Net income/(loss)	$	11,137		$	(23,557	)
Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities
Depreciation and amortization	43,854			51,593
Stock-based compensation	3,796			3,666
Accretion of discount on 1.125% Senior Convertible Notes	5,195			5,615
Deferred income taxes	2,656			(321		)
Gain on repurchases of 1.125% Senior Convertible Notes	—			(1,907		)
Write-down of capital assets due to restructuring	950			—
Impairment of store assets	654			—
Net (gain)/loss from disposition of capital assets	(4,841		)	723
Changes in operating assets and liabilities
Accounts receivable, net	29,938			28,206
Merchandise inventories	(73,366		)	(126,983		)
Accounts payable	60,453			50,055
Prepayments and other	(7,932		)	20,064
Accrued expenses and other	(9,526		)	(21,071		)
Net cash provided/(used) by operating activities	62,968			(13,917		)
Investing activities
Investment in capital assets	(22,749		)	(29,217		)
Proceeds from sales of capital assets	7,537			318
Proceeds from sales of securities	—			200
(Increase)/decrease in other assets	(101		)	2,900
Net cash used by investing activities	(15,313		)	(25,799		)
Financing activities
Repayments of long-term borrowings	(4,793		)	(4,674		)
Repurchases of 1.125% Senior Convertible Notes	—			(38,260		)
Payment of deferred financing costs	(1,885		)	—
Issuance of common stock under employee stock plans, net of amounts withheld for payroll taxes	(705		)	227
Net cash used by financing activities	(7,383		)	(42,707		)
Increase/(decrease) in cash and cash equivalents	40,272			(82,423		)
Cash and cash equivalents, beginning of period	117,482			186,580
Cash and cash equivalents, end of period	$	157,754		$	104,157
Non-cash financing and investing activities
Assets acquired through capital leases	$	2,883		$	—

See Notes to Condensed Consolidated Financial Statements

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Note~~NOTE 1. ~~Condensed~~CONDENSED ~~Consolidated~~CONSOLIDATED ~~Financial~~FINANCIAL ~~Statements~~STATEMENTS

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In our opinion, we have made all adjustments (which, except as otherwise disclosed in these notes, include only normal recurring adjustments) necessary to present fairly our financial position, results of operations, and cash flows. We have condensed or omitted certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles. These financial statements and related notes should be read in conjunction with our financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012. The results of operations for the thirteen weeks ~~and thirty-nine weeks~~ ended ~~October~~April 2928, ~~2011~~2012 and ~~October~~April 30, ~~2010~~2011 are not necessarily indicative of operating results for the full fiscal year. As used in these notes, the terms “the Company,” “we,” “us,” and “our” refer to Charming Shoppes, Inc. and, where applicable, our consolidated subsidiaries.

~~Note~~NOTE 2. ~~Accounts~~ACCOUNTS ~~Receivable~~RECEIVABLE

Accounts receivable consist of trade receivables from sales through our FIGI’S^® catalog and website. Details of our accounts receivable are as follows:

(In thousands)	~~October~~April 2928, ~~2011~~2012			January 2928, ~~2011~~2012
Due from customers	$	817,~~675~~989		$	4245,~~235~~067
Allowance for doubtful accounts	(26,~~045~~413		)	(5,~~667~~688		)
Net accounts receivable	$	611,~~630~~576		$	3639,~~568~~379

~~Note~~NOTE 3. ~~Long~~LONG-~~term~~TERM ~~Debt~~DEBT

(In thousands)	~~October~~April 2928, ~~2011~~2012			January 2928, ~~2011~~2012
1.125% Senior Convertible Notes, due May 1, 2014	$	140,451		$	140,451
6.07% mortgage note, due October 11, 2014	8,~~449~~042			98,~~035~~248
6.53% mortgage note, due November 1, 2012	~~1,400~~700			21,~~450~~050
7.77% mortgage note, due December 1, 2011	5,187			5,793
Capital lease obligations	5,429			6,262
Capital lease obligations	7,081			6,749
Total long-term debt principal	154,622			156,011
Total long-term debt principal	162,568			164,478
Less unamortized discount on 1.125% Senior Convertible Notes	(15,863		)	(17,690		)
Less unamortized discount on 1.125% Senior Convertible Notes	(19,484		)	(24,679		)
Long-term debt – carrying value	138,759			138,321
Long-term debt – carrying value	143,084			139,799
Current portion	(4,050		)	(4,682		)
Current portion	(10,453		)	(11,449		)
Net long-term debt	$	134,709		$	133,639
Net long-term debt	$	132,631		$	128,350

Table of Contents

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

OnWe ~~July 14,~~have ~~2011~~a ~~we entered into an amended and restated~~ loan and security agreement (the “~~Amended~~ Agreement”) for a $200,000,000 senior secured revolving credit facility (the “~~Amended~~ Facility”)~~. The~~ ~~Amended~~that ~~Facility replaces our $225,000,000 senior secured revolving credit facility and~~ provides for committed revolving credit availability through July 14, 2016. The amount of credit available from time to time under the ~~Amended~~ Facility is determined as a percentage of the value of eligible inventory, accounts receivable, and cash, as reduced by certain reserves (the “Borrowing Base.”). In addition, the ~~Amended~~ Agreement includes an option allowing us to increase our credit facility to an amount not in excess of $300,000,000, based on certain terms and conditions. The ~~Amended~~ Facility may be used for working capital and other general corporate purposes, and provides that up to $100,000,000 of the $200,000,000 may be used for letters of credit.

The ~~Amended~~ Agreement provides for borrowings under ~~either~~ “Base Rate” loans or “Eurodollar Rate” loans. Borrowings under Base Rate loans are variable and ~~will~~ generally accrue interest at a margin ranging from 1.0% to 1.5% over the Base Rate (as defined in the Agreement). Eurodollar Rate loans ~~will~~ generally accrue interest at a margin ranging from 2.0% to 2.5% over the London Interbank Offered Rate (“LIBOR”) as adjusted for reserves. The applicable margin ~~will~~is be adjusted each fiscal month based on our Monthly Average Liquidity (as defined in the ~~Amended~~ Agreement) for the preceding month. We are also required to pay a monthly unused line fee ranging from 0.375% to 0.5% of the amount by which the maximum credit available under the ~~Amended~~ Facility exceeds the average daily principal balance of any outstanding revolving loans and letters of credit. As of ~~October~~April 2928, ~~2011~~2012 the applicable rates under the ~~facility~~Facility were 4.525% (Base Rate plus 1~~.25~~%) for Base Rate Loans and 2.5024% (LIBOR plus 2~~.25~~%) for Eurodollar Rate Loans.

The ~~Amended~~ Agreement provides for customary representations and warranties and affirmative covenants. The ~~Amended~~ Agreement also contains customary negative covenants providing limitations, subject to negotiated exceptions, for sales of assets; encumbrances; indebtedness; loans, advances and investments; acquisitions; guarantees; new subsidiaries; dividends and redemptions; transactions with affiliates; changes in business; certain actions affecting subsidiaries; credit card agreements; private-label credit cards; and changes in control of certain of our subsidiaries. At all times we are required to maintain Excess Availability (as defined in the ~~Amended~~ Agreement) of at least the greater of 10% of the Borrowing Base or $15,000,000. The ~~Amended~~ Agreement also provides for certain rights and remedies if there is an occurrence of one or more events of default under the terms of the ~~Amended~~ Agreement. Under certain conditions the maximum amount available under the ~~Amended~~ Agreement may be reduced or terminated by the lenders and the obligation to repay amounts outstanding under the ~~Amended~~ Agreement may be accelerated.

In connection with the ~~Amended~~ Agreement we executed ana ~~Amended~~guarantee ~~and Restated Guarantee~~ (the “~~Amended~~ Guarantee”)~~. Pursuant~~ pursuant to ~~the~~which ~~Amended Guarantee,~~ we and most of our subsidiaries jointly and severally ~~guaranteed~~guarantee the borrowings and obligations under the ~~Amended~~ Agreement, subject to standard insolvency limitations. In accordance with the ~~Amended~~ Guarantee, collateral for the borrowings under the ~~Amended~~ Agreement consists of pledges by us and certain of our subsidiaries of the capital stock of each such entity’s subsidiaries. The ~~Amended~~ Agreement also provides for a security interest in substantially all of our assets excluding, among other things, equipment, real property, and stock or other equity and assets of excluded subsidiaries. Excluded subsidiaries are not Guarantors under the ~~Amended~~ Agreement and ~~the Amended~~ Guarantee.

As of ~~October~~April 2928, ~~2011~~2012 we had an aggregate total of $43,~~129~~702,000 of unamortized deferred debt acquisition costs related to the ~~facility~~Facility that will be amortized on a straight-line basis over the life of the ~~Amended~~ Facility as interest expense. There were no borrowings outstanding under the ~~facility~~Facility as of ~~October~~April 2928, ~~2011~~2012.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~Note~~NOTE 4. ~~Stockholders~~STOCKHOLDERS’ ~~Equity~~EQUITY

The following table summarizes changes in total stockholders’ equity for the period indicated:

	Thirty-nine Weeks Ended
	Thirteen Weeks Ended
(Dollars in thousands)	~~October~~April 2928, ~~2011~~2012
Total stockholders’ equity, beginning of period	$	~~414~~416,~~420~~946
Net income	1117,~~137~~772
Issuance of common stock under employee stock plans (963,381 shares), net of amounts withheld for payroll taxes	(705		)
Issuance of common stock under employee stock plans (231,669 shares), net of amounts withheld for payroll taxes	(233		)
Stock-based compensation	31,~~796~~351
Total stockholders’ equity, end of period	$	~~428~~435,~~648~~836

~~Note~~NOTE 5. ~~Stock~~STOCK-~~based~~BASED ~~Compensation~~COMPENSATION ~~Plans~~PLANS

We have various stock-based compensation plans under which we have granted or are currently granting awards, which are more fully described in “Item 8. Financial Statements and Supplementary Data; ~~Note~~NOTE 97. ~~Stock~~STOCK-~~Based~~BASED ~~Compensation~~COMPENSATION ~~Plans~~PLANS” of our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012. Current grants of stock-based compensation consist primarily of stock appreciation rights (“SARs”) and restricted stock units (“RSUs”) under our 2010 Stock Award and Incentive Plan.

SARS and stock option activity under our various stock-based compensation plans for the ~~thirty-nine~~thirteen weeks ended ~~October~~April 2928, ~~2011~~2012 was as follows:

	Option/SARsShares		WeightedAverageExercisePrice		Range of ExercisePrices per Share					AggregateIntrinsicValue(1)(000’s)
Outstanding at January 29, 2011(2)	6,098,153		$	3.10	$	1.00	—	$	13.84	$	—
Outstanding at January 28, 2012(2)	6,091,314		$	3.55	$	1.00	—	$	11.28	$	8,531
Granted – exercise price equal to market price	2985,~~492,133~~924		36.9703		25.7190		—	46.3704
Canceled/forfeited	(~~827~~203,~~041~~991	)	53.0279		1.00		—	135.8431
Exercised(3)	(1,622,562	)	1.80		1.00		—	2.93		2,184		(4)
Exercised	(68,300	)	2.75		1.00		—	5.18		196		(3)
Outstanding at October 29, 2011(5)	6,140,683		$	3.53	$	1.00	—	$	11.28	156
Outstanding at April 28, 2012(4)	6,804,947		$	3.91	$	1.00	—	$	11.28	15,106
Exercisable at October 29, 2011(5)	1,469,717		$	3.26	$	1.00	—	$	11.28	447
Exercisable at April 28, 2012(4)	2,649,098		$	3.31	$	1.00	—	$	11.28	7,481

____________________


(1)	Aggregate market value less aggregate exercise price.

(2) Includes 1591,~~416,~~496 shares related to “inducement grants” of SARs in accordance with Nasdaq Marketplace Rule 5635(c)(4), of which 207,164 shares were exercisable.

(3) ~~Includes~~As ~~825,000~~of ~~shares~~date ~~exercised~~of ~~related to “inducement grants” (see note (2) above)~~exercise.

(4) AsIncludes of591,496 ~~date~~shares outstanding related to “inducement grants” (see note (2) above), of ~~exercise~~which 252,164 shares were exercisable.

~~(5) Includes 591,496 shares outstanding related to “inducement grants” (see note (2) above), of which 207,164 shares were exercisable.~~7

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of October 29, 2011 the following shares were available for future grants under our stock-based compensation plans:



	Thirteen Weeks Ended
(In thousands)	April 28, 2012		April 30, 2011
Total stock-based compensation expense	$	1,351	$	1,031

	SharesAvailable
2010 Stock Award and Incentive Plan	5,078,476
1994 Employee Stock Purchase Plan	301,699

As of April 28, 2012 the following shares were available for future grants under our stock-based compensation plans:

Total stock-based compensation expense was as follows:



	Shares Available
2010 Stock Award and Incentive Plan	3,009,872
1994 Employee Stock Purchase Plan	230,823

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(In thousands)	October 29, 2011		October 30, 2010		October 29, 2011		October 30, 2010
Stock-based compensation expense, excluding cash-settled RSUs	$	1,409	$	1,656	$	3,796	$	3,666
Stock-based compensation expense, cash-settled RSUs(1)	—		—		—		4
Total stock-based compensation expense	$	1,409	$	1,656	$	3,796	$	3,670

We use the Black-Scholes valuation model to estimate the fair value of SARs. We amortize stock-based compensation on a straight-line basis over the requisite service period of an award except for awards that include a market condition, which are amortized on a graded vesting basis over their derived service period. Estimates and assumptions we use under the Black-Scholes model are more fully described in “Item 8. Financial Statements and Supplementary Data; NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES; Stock-based Compensation” and “NOTE 7. STOCK-BASED COMPENSATION PLANS” of our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

~~____________________~~Total stock-based compensation expense not yet recognized related to the non-vested portion of SARs and awards outstanding as of April 28, 2012 was $22,004,000.

~~(1)~~NOTE ~~During the Fiscal 2009 Second Quarter we granted cash-settled RSUs under our 2003 Non-Employee Directors Compensation Plan~~6. WeCUSTOMER ~~accounted~~LOYALTY ~~for~~CARD these cash-settled RSUs as liabilities and recognized compensation expense over the vesting period of one year from the date of grant. Total compensation expense for these cash-settled RSUs was fully recognized as of the Fiscal 2010 Second Quarter.PROGRAMS

We ~~use~~offer ~~the~~our ~~Black-Scholes~~customers ~~valuation~~various ~~model~~loyalty card programs. Customers that join these programs are entitled to ~~estimate~~various benefits, including discounts on purchases, during the ~~fair~~membership ~~value~~period. Customers join some of ~~SARs~~these programs by paying an annual membership fee. WeFor ~~amortize~~these ~~stock-based~~programs ~~compensation~~we onrecognize revenue as a ~~straight-line~~component ~~basis~~of net sales over the ~~requisite~~life ~~service~~of the membership period ofbased anon ~~award~~when the customer earns the benefits and when the fee is no longer refundable. ~~Estimates~~We ~~and~~recognize ~~assumptions~~costs we ~~use~~incur ~~under~~in ~~the~~connection ~~Black-Scholes~~with ~~model~~administering these programs as selling, general, and administrative expenses when incurred. Our loyalty card programs are more fully described in “Item 8. Financial Statements and Supplementary Data; ~~Note~~NOTE 18. ~~Summary~~CUSTOMER ofLOYALTY ~~Significant~~CARD ~~Accounting Policies; Stock-based Compensation~~PROGRAMS” ~~and “Note 9. Stock-Based Compensation Plans”~~ of our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012.

Total stock-based compensation expense not yet recognized, related to the non-vested portion of SARs and awards outstanding, was $11,988,000 as of October 29, 2011. The weighted-average period over which we expect to recognize this compensation expense is approximately 3 years.

Note 6. Customer Loyalty Card Programs

We offer our customers various loyalty card programs. Customers that join these programs are entitled to various benefits, including discounts on purchases, during the membership period. Customers join some of these programs by paying an annual membership fee. For these programs, we recognize revenue as a component of net sales over the life of the membership period based on when the customer earns the benefits and when the fee is no longer refundable. We recognize costs we incur in connection with administering these programs as selling, general, and administrative expenses when incurred. Our loyalty card programs are more fully described in “Item 8. Financial Statements and Supplementary Data; Note 10. Customer Loyalty Card Programs” of our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Additional information with respect to our various loyalty card programs is as follows:

Thirteen Weeks Ended

~~Thirty-nine Weeks Ended~~

(In thousands)

~~October~~April 2928, ~~2011~~2012

~~October~~April 30, ~~2010~~2011

~~October 29, 2011~~

~~October 30, 2010~~

Loyalty card revenues recognized

4,~~474~~455

4,~~644~~575

~~13,641~~

~~13,860~~

	Accrued as of
(In thousands)	~~October~~April 2928, ~~2011~~2012		January 2928, ~~2011~~2012
Discounts earned but not yet issued and discounts issued but not yet redeemed	$	2,~~203~~769	$	2,~~277~~618

~~Note 7. Net Income/(Loss) per Share~~8

	Thirteen Weeks Ended								Thirty-nine Weeks Ended
(In thousands, except per share amounts)	October 29, 2011				October 30, 2010				October 29, 2011		October 30, 2010
Basic weighted average common shares outstanding	116,890				115,794				116,603		115,832
Dilutive effect of SARs, stock options, and awards	—			(1)	—			(1)	1,167		—			(1)
Diluted weighted average common shares and equivalents outstanding	116,890				115,794				117,770		115,832
Net income/(loss) used to determine basic and diluted net income/(loss) per share	$	(12,990	)		$	(18,810	)		$	11,137	$	(23,557	)
SARs and stock options with weighted average exercise price greater than market price, excluded from computation of diluted net income per share:
Number of shares	—			(1)	—			(1)	3,667		—			(1)
Weighted average exercise price per share									$	4.62

____________________

(1) SARs, Stock options, and awards are excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive.

Our 1.125% Notes will not impact our diluted net income per share until the price of our common stock exceeds the conversion price of $15.379 per share because we expect to settle the principal amount of the 1.125% Notes in cash upon conversion. Our call options are not included in the diluted net income per share calculation as their effect would be anti-dilutive. Should the price of our common stock exceed $21.607 per share we would also include the dilutive effect of the additional potential shares that may be issued related to the warrants, using the treasury stock method. See “Item 8. Financial Statements and Supplementary Data; Note 7. Long-term Debt” of our Annual Report on Form 10-K for the fiscal year ended January 29, 2011 for further information regarding our 1.125% Notes, call options, and warrants.

Table of Contents

~~CHARMING~~NOTE ~~SHOPPES, INC~~7. ~~AND~~NET ~~SUBSIDIARIES~~INCOME PER SHARE

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



	Thirteen Weeks Ended
(In thousands, except per share amounts)	April 28, 2012		April 30, 2011
Basic weighted average common shares outstanding	117,080		116,176
Dilutive effect of SARs, stock options, and awards	1,616		1,556
Diluted weighted average common shares and equivalents outstanding	118,696		117,732
Net income used to determine basic and diluted net income per share	$	17,772	$	26,038
SARs and stock options with weighted average exercise price greater than market price, excluded from computation of diluted net income per share:
Number of shares	801		2,803
Weighted average exercise price per share	$	6.27	$	4.93

~~(Unaudited)~~Our 1.125% Notes will not impact our diluted net income per share until the price of our common stock exceeds the conversion price of $15.379 per share because we expect to settle the principal amount of the 1.125% Notes in cash upon conversion. Our call options are not included in the diluted net income per share calculation as their effect would be anti-dilutive. Should the price of our common stock exceed $21.607 per share we would also include the dilutive effect of the additional potential shares that may be issued related to the warrants, using the treasury stock method. See “Item 8. Financial Statements and Supplementary Data; NOTE 5. LONG-TERM DEBT” of our Annual Report on Form 10-K for the fiscal year ended January 28, 2012 for further information regarding our 1.125% Notes, call options, and warrants.

~~Note~~NOTE 8. ~~Income~~INCOME ~~Taxes~~TAXES

Due to the variability that we have experienced in our pretax earnings and the existence of a full valuation allowance on our net deferred tax assets, we have concluded that computing our actual year-to-date effective tax rate (as opposed to estimating our annual effective tax rate) provides an appropriate basis for recording income taxes in our interim periods. Additionally, we record an income tax expense or benefit that does not relate to ordinary income/(loss) in the current fiscal year discretely in the interim period in which it occurs. We also recognize the effects of changes in enacted tax laws or rates in the interim periods in which the changes occur.

In computing ~~the~~our income tax provision~~/(benefit)~~ we make certain estimates and management judgments, such as estimated annual taxable income or loss, the nature and timing of permanent and temporary differences between taxable income for financial reporting and tax reporting, and the recoverability of deferred tax assets. Our estimates and assumptions may change as new events occur, additional information is obtained, or as the tax environment changes.

We recognize deferred tax assets for temporary differences that will result in deductible amounts in future years and for net operating loss (“NOL”) and credit carryforwards. We recognize a valuation allowance to reduce deferred tax assets if, based on existing facts and circumstances, it is more-likely-than-not that some portion or all of our deferred tax assets will not be realized. ~~During~~We ~~Fiscal~~continue 2008 we evaluated our assumptions regarding the recoverability of our deferred tax assets. Based on all available evidence we determined that the recoverability of our deferred tax assets is more-likely-than-not limited to ~~our~~have ~~available tax loss carrybacks. Accordingly, we established~~ a valuation allowance established against our net deferred tax assets. During Fiscal 2009 we increased the valuation allowance and recognized an additional non-cash provision, net of a tax benefit resulting from the carryback of remaining Fiscal 2008 NOLs pursuant to H.R. 3548, the “Worker, Homeownership, and Business Assistance Act of 2009,” which was signed into law on November 6, 2009. During Fiscal 2010 we further increased our valuation allowance and recognized an additional non-cash provision. In future periods we will continue to recognize a valuation allowance until such time as the certainty of future tax benefits can be reasonably assured. When our results ~~of operations~~ demonstrate a pattern of future profitability the valuation allowance may be adjusted, which would result in the reinstatement of all or a part of the net deferred tax assets.

Income taxes receivable, net, which primarily include amended return receivables as of October 29, 2011, and amended return receivables and the NOL carryback for Fiscal 2009 as of January 29, 2011, are included in “Prepayments and other” on our condensed consolidated balance sheets, and were as follows:9

(In thousands)	October 29, 2011				January 29, 2011
Income taxes receivable, net	$	9,281			$	10,733

The reduction in income taxes receivable during the thirty-nine weeks ended October 29, 2011 was principally a result of the receipt of $1,620,000 of net Federal tax refunds that related primarily to our NOL carryback for Fiscal 2009.

As of October 29, 2011 our gross unrecognized tax benefits associated with uncertain tax positions were $28,383,000. If recognized, the portion of the liabilities for gross unrecognized tax benefits that would decrease our provision for income taxes and increase our net income was $18,590,000. The accrued interest and penalties as of October 29, 2011 were $14,738,000.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~During~~Income ~~the~~taxes ~~thirty-nine weeks ended October 29~~(payable)/receivable, ~~2011 the gross unrecognized tax benefits decreased by $410~~net,~~000~~ ~~and~~which ~~the~~primarily ~~portion~~included ofan ~~the~~amended ~~liabilities~~return ~~for~~receivable ~~gross~~as ~~unrecognized tax benefits that~~of January 28, ~~if recognized~~2012, ~~would~~are ~~decrease~~included ~~our~~in ~~provision~~"Accrued ~~for~~expenses" ~~income~~as ~~taxes~~of ~~and increase our net income decreased by $465~~April 28,~~000. Accrued~~ ~~interest~~2012 and ~~penalties~~in ~~decreased~~“Prepayments byand ~~$16,000~~other” ~~during~~as ~~the~~of ~~thirty-nine weeks ended October~~January 2928, ~~2011. These~~2012 ~~decreases~~on ~~are~~our ~~primarily~~condensed ~~the~~consolidated ~~result~~balance ~~of payments relating to audits of state tax positions~~sheets, ~~partially~~and ~~offset~~were byas ~~additional accruals for uncertain tax positions.~~follows:

As of October 29, 2011 it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next twelve months by as much as $10,273,000 as a result of resolutions of audits related to U.S. Federal and state tax positions.



(In thousands)	April 28, 2012			January 28, 2012
Income taxes (payable)/receivable, net	$	(1,227	)	$	10,048

~~Our~~The ~~U.S.~~reduction ~~Federal~~in income ~~tax~~taxes ~~returns~~receivable ~~for~~during ~~Fiscal 2004 and beyond remain subject to examination by~~ the ~~U.S.~~thirteen ~~Internal~~weeks ~~Revenue~~ended ~~Service~~April 28, ~~(“IRS”)~~2012 ~~due~~was toprincipally ~~statute~~a result of ~~limitations and~~ the ~~filing~~receipt of ~~amended returns and NOL carryback claims. We file returns in numerous state jurisdictions~~$10,743,000 ~~with varying statutes~~ of ~~limitations. Our~~net ~~state~~Federal tax ~~returns~~refunds ~~for~~that ~~Fiscal~~related ~~2006~~primarily ~~and subsequent years, depending upon the jurisdiction, generally remain subject~~ to ~~examination. The~~an ~~statute~~amended ~~of limitations on a limited number of returns for years prior to Fiscal 2006 has been extended by agreement between us and the particular state jurisdiction~~return. ~~The earliest year still subject to examination by state tax authorities is Fiscal 2003.~~

~~Note~~As 9of April 28, 2012 our gross unrecognized tax benefits associated with uncertain tax positions were $33,797,000. If ~~Segment~~recognized, ~~Reporting~~the portion of the liabilities for gross unrecognized tax benefits that would decrease our provision for income taxes and increase our net income was $22,101,000. The accrued interest and penalties as of April 28, 2012 were $16,968,000.

WeDuring ~~determine our operating segments based on~~ the ~~way~~thirteen ~~our~~weeks ~~chief~~ended ~~operating~~April 28, ~~decision-makers~~2012 ~~review~~ our ~~results~~gross ofunrecognized ~~operations. We~~tax ~~consider~~benefits ~~our~~increased ~~retail~~by ~~stores~~$4,473,000 and ~~store-related~~the ~~e-commerce~~portion asof ~~operating~~the ~~segments~~liabilities ~~that~~for ~~are~~gross ~~similar~~unrecognized intax ~~terms~~benefits ~~of economic characteristics~~that, ~~production~~if ~~processes~~recognized, ~~and~~would ~~operations. Accordingly,~~decrease weour ~~have~~provision ~~aggregated~~for ~~our~~income ~~retail~~taxes ~~stores~~ and ~~store-related~~increase ~~e-commerce~~our ~~into~~net ~~the~~income ~~“Retail~~increased ~~Stores”~~by ~~segment~~$2,921,000. ~~Our~~ Accrued ~~catalog~~interest and ~~catalog-related~~penalties ~~e-commerce~~increased ~~operations~~by ~~are~~$928,000 ~~separately~~during ~~reported under~~ the ~~Direct-to-Consumer~~thirteen ~~segment. Further~~weeks ~~information~~ended ~~regarding~~April 28, ~~our operating segments is included in “Item 8~~2012. These ~~Financial~~changes ~~Statements~~are ~~and~~primarily ~~Supplementary~~the ~~Data;~~result ~~Note~~of ~~18.~~the ~~Segment~~identification ~~Reporting”~~ of ~~our~~a ~~Annual~~new ~~Report~~uncertain ontax ~~Form~~position ~~10-K~~that ~~for~~required ~~the~~an ~~fiscal~~accrual ~~year~~for ~~ended~~multiple ~~January 29, 2011~~years.

12As of April 28, 2012 it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next twelve months by as much as $10,616,000 as a result of resolutions of audits related to U.S. Federal and state tax positions and/or the expiration of applicable statutes of limitations.

Our U.S. Federal income tax returns for Fiscal 2004 and beyond remain subject to examination by the U.S. Internal Revenue Service (“IRS”) due to statute of limitations and the filing of amended returns and NOL carryback claims. We file returns in numerous state jurisdictions, with varying statutes of limitations. Our state tax returns for Fiscal 2007 and subsequent years, depending upon the jurisdiction, generally remain subject to examination. The statute of limitations on a limited number of returns for years prior to Fiscal 2007 has been extended by agreement between us and the particular state jurisdiction. The earliest year still subject to examination by state tax authorities is Fiscal 2003.

NOTE 9. SEGMENT REPORTING

We operate and report in two segments: Retail Stores and Direct-to-Consumer. We determine our operating segments based on the way our chief operating decision-makers review our results of operations. We consider our retail stores and store-related e-commerce as operating segments that are similar in terms of economic characteristics, production processes, and operations. Accordingly, we have aggregated our retail stores and store-related e-commerce into a single reporting segment (the “Retail Stores” segment). Our catalog and catalog-related e-commerce operations are separately reported under the Direct-to-Consumer segment. Further information regarding our operating segments is included in “Item 8. Financial Statements and Supplementary Data; NOTE 16. SEGMENT REPORTING” of our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Selected financial information for our operations by reportable segment and a reconciliation of the information by segment to our consolidated totals is included in the following ~~tables~~table:

(In thousands)	RetailStores		Direct-to-Consumer			Corporateand Other				Consolidated
Thirteen Weeks Ended October 29, 2011
Thirteen Weeks Ended April 28, 2012
Net sales	$	~~417~~465,~~721~~971	$	1115,~~990~~292		$	—			$	~~429~~481,~~711~~263
Depreciation and amortization	10,~~334~~846		~~265~~333			23,~~965~~029				1314,~~564~~208
Loss from operations	20,254		(3,317		)	(25,956		)	(1)	(9,019		)
Income from operations	54,461		(2,263		)	(24,822		)	(1)	27,376
Net interest expense and other income						(32,~~157~~792		)		(32,~~157~~792		)
Income tax provision						~~814~~6,812				~~814~~6,812
Net loss	20,254		(3,317		)	(29,927		)		(12,990		)
Net income	54,461		(2,263		)	(34,426		)		17,772
Capital expenditures	37,~~583~~412		~~384~~31			45,~~187~~685				813,~~154~~128
Thirteen Weeks Ended October 30, 2010
Thirteen Weeks Ended April 30, 2011
Net sales	$	~~453~~490,~~901~~581	$	913,~~718~~772		$	—			$	~~463~~504,~~619~~353
Depreciation and amortization	1311,~~214~~027		~~216~~254			23,~~937~~127				1614,~~367~~408
Loss from operations	15,214		(2,944		)	(27,873		)	(2)	(15,603		)
Income from operations	55,648		(1,976		)	(21,619		)	(2)	32,053
Net interest expense and other income						(3,~~348~~635		)		(3,~~348~~635		)
Income tax benefit						(141		)		(141		)
Income tax provision						2,380				2,380
Net loss	15,214		(2,944		)	(31,080		)		(18,810		)
Net income	55,648		(1,976		)	(27,634		)		26,038
Capital expenditures	73,~~434~~359		~~274~~745			4,~~925~~784				128,~~633~~888

____________________

(1) Includes $31,~~450~~027 of restructuring and other charges (see “~~Note~~NOTE 10. ~~Restructuring~~RESTRUCTURING ~~and~~AND ~~Other~~OTHER ~~Charges~~CHARGES” below).

(2) Includes $~~3,234~~47 of restructuring and other charges (see “~~Note~~NOTE 10. ~~Restructuring~~RESTRUCTURING ~~and~~AND ~~Other~~OTHER ~~Charges~~CHARGES” below) and a $5,185 gain from the sale of office premises.

1311

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(In thousands)	RetailStores		Direct-to-Consumer			Corporateand Other				Consolidated
Thirty-nine Weeks Ended October 29, 2011
Net sales	$	1,401,080	$	32,186		$	—			$	1,433,266
Depreciation and amortization	32,418		781			9,255				42,454
Income from operations	109,170		(9,101		)	(73,533		)	(1)	26,536
Net interest expense and other income						(10,594		)		(10,594		)
Income tax provision						4,805				4,805
Net income	109,170		(9,101		)	(88,932		)		11,137
Capital expenditures	9,072		1,574			12,103				22,749
Thirty-nine Weeks Ended October 30, 2010
Net sales	$	1,458,194	$	27,794		$	—			$	1,485,988
Depreciation and amortization	39,970		811			9,334				50,115
Loss from operations	57,282		(7,853		)	(64,832		)	(2)	(15,403		)
Gain on repurchases of 1.125% Senior Convertible Notes						1,907				1,907
Net interest expense and other income						(11,384		)		(11,384		)
Income tax benefit						(1,323		)		(1,323		)
Net loss	57,282		(7,853		)	(72,986		)		(23,557		)
Capital expenditures	15,591		354			13,272				29,217

NOTE 10. RESTRUCTURING AND OTHER CHARGES

____________________

(1) Includes $4,884 of restructuring and other charges (see “Note 10. Restructuring and Other Charges” below) and a $5,185 gain from the sale of office premises.

(2) Includes $4,742 of restructuring and other charges (see “Note 10. Restructuring and Other Charges” below).

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 10. Restructuring and Other Charges

The following table summarizes our restructuring and other charges:

	CostsIncurredas of		Costs Incurredfor ~~Thirty-nine~~Thirteen Weeks Ended			EstimatedRemainingCosts			TotalEstimated/ActualCosts as of
(In thousands)	January 2928, ~~2011~~2012		~~October~~April 2928, ~~2011~~2012			To beIncurred			~~October~~April 2928, ~~2011~~2012
Fiscal 2011 Announcements
Transformational initiatives	$	—6,194	$	31,~~576~~741		$	~~815~~2,072	(1)	$	410,~~391~~007
Store impairment charges	—654		~~654~~—			—			654
Store lease termination charges	—2,254		~~484~~(87		)	~~2,000~~—			2,~~484~~167
Fiscal 2010 Announcements
Closing of under-performing stores:
Non-cash impairment charge for CATHERINES® stores in outlet locations	3,210		—			—			3,210
Store lease termination and other charges	—208		(~~873~~297		)	64,~~000~~200			54,~~127~~111
Severance for departure of former CEO	2,898		—(20		)	—			2,~~898~~878
Fiscal 2009 Announcements
Closing of PETITE SOPHISTICATE OUTLET® stores:
Non-cash accelerated depreciation	612		—			—			612
Store lease termination charges	1,070		—			—			1,070
Other non-cash costs	195		—			—			195
Closing of under-performing stores:
Store lease termination charges	24,~~691~~623		~~1,116~~(380		)	~~3,000~~300			64,~~807~~543
Fiscal 2007 and Fiscal 2008 Announcements
Lease termination and accretion charges	11,~~575~~557		~~(87~~70		)	1,~~715~~485		(2)	13,~~203~~112
Severance, retention, and other costs	5,~~123~~137		14—			—			5,137
Closing of under-performing stores:
Store lease termination charges	8,305		—			—			8,305
Total	$	3546,~~679~~917	$	41,~~884~~027		$	138,~~530~~057		$	5456,~~093~~001

____________________

(1) We cannot estimate all remaining costs related to our ~~plans to divest FASHION BUG and to undertake a~~ comprehensive strategic review ~~(see "Note 14. Subsequent Event" below)~~ at this time ~~as we cannot assure the implementation of the divestiture or any additional courses of action that may result from the review~~.


(2)	Accretion charges related to lease termination liability for assets retained from the sale of our Crosstown Traders apparel catalogs.

1512

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table summarizes our accrued restructuring and other charges:

Accrued

~~Thirty-nine~~Thirteen Weeks Ended

Accrued

as of

~~October~~April 2928, ~~2011~~2012

as of

(In thousands)

January 2928,~~2011~~2012(1)

CostsIncurred

Payments/Settlements

~~October~~April 2928,~~2011~~2012(1)

Fiscal 2011 Announcements

Transformational initiatives

—$

2,214

~~3,576~~$

1,741

~~(2,612~~$

(2,914

)

~~964~~$

1,041

Store lease termination charges

—1,343

~~575~~—

(~~575~~743

)

—600

Fiscal 2010 Announcements

Severance for departure of former CEO

~~1,910~~788

—(20

)

(~~828~~252

)

~~1,082~~516

Closing of under-performing stores:

Store lease termination charges

~~619~~661

~~413~~—

(~~311~~426

)

~~721~~235

Fiscal 2009 Announcements

Closing of PETITE SOPHISTICATE OUTLET stores:

Store lease termination charges

~~599~~163

—

(~~292~~44

)

~~307~~119

Closing of under-performing stores:

Store lease termination charges

~~485~~1,751

~~1,433~~—

(~~1,187~~323

)

~~731~~1,428

Fiscal 2007 and Fiscal 2008 Announcements

Non-core misses apparel assets:

Lease termination charges

74,~~074~~156

~~(87~~70

)

(~~2,183~~652

)

43,~~804~~574

Other costs

153

—

153

Transformational initiatives:

Severance and retention costs

~~117~~—

14—

~~(131~~—

)

—

Closing of under-performing stores:

Store lease termination charges

~~798~~465

—

(~~258~~62

)

~~540~~403

Total

11,~~755~~694

51,~~924~~791

(85,~~377~~416

)

98,~~302~~069

____________________


(1)	Included in “Accrued expenses” in the accompanying condensed consolidated balance sheets.

Restructuring and other charges for the ~~thirty-nine~~thirteen weeks ended ~~October~~April 2928, ~~2011~~2012 consisted primarily of professional fees and retention costs related to our previously announced plans to divest our FASHION BUG® business and to undertake a comprehensive strategic review ~~(see "Note 14. Subsequent Event" below), non-cash store impairment charges,~~ and lease termination costs net of store-related deferred allowances in connection with our under-performing store closing programs.

WeRestructuring ~~performed~~and another ~~impairment~~charges ~~review~~for ofthe ~~long-lived~~thirteen ~~assets~~weeks ~~for~~ended ~~FASHION~~April 30, ~~BUG~~2011 ~~and~~consisted ~~identified~~primarily 18of ~~stores~~lease ~~with~~termination ~~asset~~costs, ~~carrying~~non-cash ~~values~~accelerated indepreciation, ~~excess~~and ofcash ~~such~~severance ~~stores'~~and ~~respective~~retention ~~forecasted~~costs ~~undiscounted~~related ~~cash~~to ~~flows. Accordingly,~~under-performing ~~during~~stores ~~the~~identified ~~thirty-nine~~for ~~weeks~~closure ~~ended~~during ~~October 29,~~the ~~2011~~Fiscal we2010 ~~recognized~~Fourth ~~non-cash~~Quarter, ~~impairment~~partially ~~charges~~offset ofby ~~$654,000~~adjustments to ~~write~~store-related ~~down~~deferred ~~the~~allowances ~~long-lived~~as ~~assets~~a ~~(primarily~~result ~~leasehold~~of ~~improvements)~~the atclosure ~~these~~of under-performing stores toidentified ~~their~~for ~~respective~~closure ~~fair~~during ~~values. Due to~~ the ~~nature~~Fiscal of2010 ~~the~~Fourth ~~assets~~Quarter ~~being~~and ~~written~~the ~~down~~settlement ~~and~~of ~~our~~a ~~past~~minor ~~history~~lease ofobligation ~~abandoning~~for ~~such~~facilities ~~assets,~~retained wein ~~have~~connection ~~determined~~with the ~~fair~~sale ~~value~~ of ~~the~~our ~~assets~~Crosstown toTraders beapparel ~~minimal~~catalogs.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~During~~See ~~the~~“Item ~~Fiscal~~8. ~~2011~~Financial ~~Third~~Statements ~~Quarter~~and weSupplementary ~~approved~~Data; ~~the~~NOTE ~~planned~~11. ~~closing~~RESTRUCTURING ofAND 18OTHER ~~additional~~CHARGES” ~~under-performing~~of ~~FASHION~~our ~~BUG~~Annual ~~stores. We~~Report ~~expect~~on toForm ~~close all of these under~~10-~~performing~~K ~~stores~~for inthe ~~Fiscal~~fiscal ~~2011~~year ~~and~~ended weJanuary 28, ~~expect~~2012 tofor ~~incur~~further ~~approximately~~information ~~$2,500,000~~regarding ofour ~~lease~~restructuring ~~termination~~ and other ~~costs to close these stores~~charges.

~~Restructuring~~NOTE ~~and~~11. ~~other~~FAIR ~~charges~~VALUE ~~for~~OF ~~the~~FINANCIAL thirty-nine weeks ended October 30, 2010 consisted primarily of cash severance and non-cash equity compensation costs in connection with the resignation of our former CEO and lease termination costs related to our store closing program and accretion charges on lease termination costs for our store closing program announced March 30, 2010. INSTRUMENTS

See “Item 8. Financial Statements and Supplementary Data; Note 13. Restructuring and Other Charges” of our Annual Report on Form 10-K for the fiscal year ended January 29, 2011 for further information regarding our restructuring and other charges.

Note 11. Fair Value of Financial Instruments

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

October 29, 2011

January 29, 2011

April 28, 2012

January 28, 2012

(In thousands)

CarryingAmount

FairValue

CarryingAmount

FairValue

Assets:

Cash and cash equivalents

~~157~~214,~~754~~086

~~117~~168,~~482~~607

Liabilities:

1.125% Senior Convertible Notes, due May 1, 2014

~~120~~124,~~967~~588

(1)

~~120~~132,~~788~~024

~~115~~122,~~772~~761

(1)

~~118~~127,~~681~~810

6.07% mortgage note, due October 11, 2014

8,~~449~~042

87,~~316~~920

98,~~035~~248

8,~~887~~119

6.53% mortgage note, due November 1, 2012

~~1,400~~700

21,~~450~~050

21,~~451~~050

7.77% mortgage note, due December 1, 2011

5,187

5,267

5,793

5,921

____________________

(1) Net of unamortized discount of $1915,~~484~~863 at ~~October~~April 2928, ~~2011~~2012 and $2417,~~679~~690 at January 2928, ~~2011~~2012 (see “~~Note~~NOTE 3. ~~Long~~LONG-~~term~~TERM ~~Debt~~DEBT” above).

The fair value of cash and cash equivalents approximates their carrying amount because of the short maturities of such instruments (level one measurement). The fair value of the 1.125% Senior Convertible Notes is based on quoted market prices for the securities (level one measurement). The fair values of the mortgage notes and other long-term debt are based on estimated current interest rates that we could obtain on similar borrowings (level three measurement).

~~Note~~NOTE 12. ~~Gain~~GAIN ~~from~~FROM ~~Sale~~SALE ofOF ~~Office~~OFFICE ~~Premises~~PREMISES

During the Fiscal 2011 First Quarter we sold office premises in Hong Kong, which served as the home office for our international sourcing operations, for gross proceeds of $7,512,000 and recognized a gain on the sale of $5,185,000. Our international sourcing operations now utilize leased space in Hong Kong.

17NOTE 13. SUBSEQUENT EVENT

On May 1, 2012 the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ascena Retail Group, Inc. (“Ascena”) and Colombia Acquisition Corp. ("Colombia"), a wholly owned subsidiary of Ascena. Our Board of Directors and the Boards of Directors of each of Ascena and Colombia unanimously approved the Merger Agreement and the transactions contemplated under it.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~Note~~Pursuant 13to the terms and subject to the conditions of the Merger Agreement, on May 15, 2012 Colombia commenced a cash tender offer (the "Offer") to purchase all of the outstanding shares of our common stock at a price of $7.35, ~~Impact~~net per share in cash, without interest and subject to any required withholding taxes (the "Offer Price"). The transaction will be valued at approximately $890,000,000. Following the consummation of ~~Recent~~the ~~Accounting~~Offer, ~~Pronouncements~~subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Colombia will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Ascena. At the effective time of the Merger, any share of our common stock not purchased in the Offer or held by any shareholder who dissents from the Merger and seeks appraisal of his shares will be converted into the right to receive an amount equal to the Offer Price. If, after the purchase of shares of our common stock pursuant to the Offer and the exercise of the Top-Up Option pursuant to the terms of (and as defined in) the Merger Agreement, if applicable, Colombia owns at least 80% of the outstanding shares of our common stock, then once the other conditions to completion of the Merger are satisfied or waived, Colombia will merge with and into the Company pursuant to a “short-form” merger in accordance with the applicable provisions of Pennsylvania law, which would not require a vote of our shareholders.

InAll ~~September~~unexercised ~~2011~~options ~~the~~and ~~Financial~~stock ~~Accounting~~appreciation ~~Standards~~rights ~~Board~~ ("~~FASB~~SARs") ~~issued~~outstanding ~~Accounting~~under ~~Standards~~our ~~Update ("ASU") 2011~~stock-~~08,~~based ~~"Intangibles~~compensation –plans ~~Goodwill~~as ~~and~~of ~~Other~~the ~~(Topic~~effective ~~350):~~time ~~Testing~~of ~~Goodwill~~the ~~for~~Merger ~~Impairment." Topic~~will ~~350~~automatically ~~currently~~be ~~requires~~canceled ~~entities~~and toconverted ~~test~~into ~~goodwill on an annual basis by comparing~~ the ~~fair~~right ~~value of a reporting unit~~ to ~~its~~receive ~~carrying~~an ~~value~~amount ~~including~~in ~~goodwill~~cash ~~(step~~equal ~~one). Step~~to ~~two of~~ the ~~test~~excess, ~~must~~if beany, ~~performed~~of ~~to measure~~ the ~~amount~~Offer ofPrice ~~impairment. Under~~over ~~ASU 2011-08 entities are not required to calculate~~ the ~~fair~~exercise ~~value~~price of aeach ~~reporting~~option ~~unit~~or ~~unless~~SAR, ~~they~~less ~~conclude~~any ~~that~~taxes itrequired isto ~~more~~be ~~likely than not (i~~withheld.e. In ~~there~~addition, isall arestricted ~~greater~~stock ~~than~~units ~~50% likelihood~~("RSUs") ~~that~~and ~~the~~restricted ~~unit's~~stock ~~carrying~~awards ~~value~~("RSAs") isoutstanding ~~greater~~as ~~than~~of ~~its~~the ~~fair~~effective ~~value~~date ~~based on an assessment~~ of ~~events~~the ~~and~~Merger ~~circumstances. ASU~~(excluding ~~2011-08~~any ~~includes~~performance ~~examples~~share ofawards ~~events and circumstances~~ that ~~entities~~are ~~should~~forfeited ~~consider~~at tothe ~~determine~~time ~~whether they have to perform step one~~ of the ~~goodwill~~Merger ~~impairment~~in ~~test. ASU~~accordance ~~2011-08~~with istheir ~~effective~~terms) ~~for~~will ~~our~~automatically ~~fiscal~~be ~~year~~canceled ~~which~~and ~~begins~~converted oninto ~~January~~the ~~29,~~right ~~2012. Early~~to ~~adoption~~receive isan ~~permitted~~amount ~~for~~in ~~interim~~cash orequal ~~annual~~to ~~reports~~the ~~that~~Offer ~~have~~Price ~~not~~less ~~been~~any ~~issued. We~~taxes dorequired ~~not~~to ~~expect~~be ~~that~~withheld, ~~adoption~~and ofsubject, ~~ASU~~with ~~2011-08~~respect ~~will~~to ~~have~~holders aof ~~material~~RSAs, ~~impact~~to ontheir ~~our~~right ~~financial~~to ~~position~~exercise orstatutory ~~results~~appraisal ~~of operations~~rights.

~~Note~~Upon 14consummation of the Merger, a "Fundamental Change" as defined in the Indenture for our 1.125% ~~Subsequent~~Senior ~~Event~~Convertible Notes due May 1, 2014 (the "1.125% Notes") would occur. As a result, each "Holder" (as defined in the 1.125% Notes) would have the right, at the Holder's option, to require us to repurchase for cash that Holder's 1.125% Notes for 100% of the principal amount of the notes plus accrued and unpaid interest.

~~Subsequent~~Completion ~~to the end~~ of the ~~Fiscal~~Offer ~~2011~~is ~~Third~~subject ~~Quarter~~to wevarious ~~announced~~conditions, including that weat ~~are~~least ~~undertaking~~ a ~~comprehensive~~majority ~~strategic~~of ~~review~~the shares of our ~~operations~~common tostock ~~determine~~then ~~how~~outstanding ~~best~~on toa ~~enhance~~fully ~~shareholder~~diluted ~~value~~basis are tendered in the Offer. AsThe ~~part~~Offer ofwill ~~these~~expire ~~efforts~~at midnight, weNew ~~announced~~York ~~plans~~City totime, ~~divest~~on ~~our~~June 12, ~~FASHION~~2012 ~~BUG~~(the ~~business~~end ~~and~~of ~~focus~~the day on ~~the~~June ~~growth~~12, of2012), ~~our~~unless ~~LANE~~otherwise ~~BRYANT®~~extended ~~brand. This~~in ~~review~~accordance iswith ~~expected~~the toterms ~~focus~~of onthe ~~optimizing~~Merger ~~the~~Agreement. The ~~use~~consummation of ~~our~~the ~~cash~~Offer ~~position~~is subject to ~~drive~~certain other customary conditions, including the ~~potential~~absence of ~~the~~any ~~LANE~~Company ~~BRYANT~~Material ~~brand,~~Adverse Effect (as ~~well~~defined asin ~~evaluating~~the ~~other~~Merger ~~alternatives~~Agreement) towith ~~further~~respect ~~enhance~~to ~~shareholder~~our ~~value~~business. AThe ~~time~~Offer ~~frame~~is ~~for~~not ~~the~~subject ~~divestiture~~to ofa ~~FASHION~~financing ~~BUG~~condition orand the ~~completion~~Merger ofAgreement ~~the~~provides ~~strategic~~that ~~review~~it ~~has~~may ~~not~~be ~~yet~~specifically ~~been determined~~enforced. The ~~results~~closing of ~~operations~~the Merger is subject to various additional conditions, including, if required under Pennsylvania law, approval of ~~our~~the ~~FASHION~~Merger ~~BUG~~Agreement ~~business~~by ~~are~~our ~~not~~shareholders. On ~~reported~~May as22, ~~discontinued~~2012 ~~operations~~the asAntitrust Division and the ~~requirements~~Federal ~~for~~Trade ~~treating~~Commission granted early termination of the ~~business~~waiting asperiod ~~held~~under the Hart-~~for~~Scott-~~sale~~Rodino ~~were~~Act ~~not~~in ~~met~~connection aswith ofthe ~~October~~proposed 29acquisition. Accordingly, ~~2011~~the condition relating to the expiration or termination of the Hart-Scott-Rodino Act waiting period has been satisfied.

18The Merger Agreement includes customary representations, warranties, and covenants. We have agreed, among other things, to operate our business in the ordinary course until the Merger is consummated or, if earlier, the date that Ascena has exercised its right to designate a majority of our Board of Directors. Under the Merger Agreement, we have agreed not to solicit or initiate discussions with third parties regarding other proposals to acquire us and have agreed to certain restrictions on our ability to respond to such proposals, subject to the fulfillment of the fiduciary duties of our Board of Directors.

The Merger Agreement contains certain termination rights for both us and Ascena, and further provides that, upon termination of the Merger Agreement under specified circumstances, we may be required to pay Ascena a termination fee of $30,000,000.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes included in Item 1 of this report. It should also be read in conjunction with the management’s discussion and analysis of financial condition and results of operations, financial statements, and accompanying notes appearing in our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012. As used in this management’s discussion and analysis, the terms “Charming Shoppes,” “the Company,” “we,” “us,” and “our” refer to Charming Shoppes, Inc. and its consolidated subsidiaries except where the context otherwise requires or as otherwise indicated.

FORWARD-LOOKING STATEMENTS

With the exception of historical information, the matters contained in the following analysis and elsewhere in this report, including information incorporated herein by reference, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, projections of revenues, income or loss, cost reductions, capital expenditures, liquidity, divestitures, financing needs or plans, store closings and openings, merchandise strategy, and plans for future operations, as well as assumptions relating to the foregoing. The words “expect,” “could,” “should,” “would,” “may,” “project,” “estimate,” “predict,” “anticipate,” “plan,” “intend,” “believes,” “is likely to,” “is expected to” and similar expressions are also intended to identify forward-looking statements.

We operate in a rapidly changing and competitive environment. New risk factors emerge from time to time and it is not possible for us to predict all risk factors that may affect us. Forward-looking statements are inherently subject to risks and uncertainties, some of which we cannot predict or quantify. Future events and actual results, performance, and achievements could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements, which speak only as of the date on which they were made. Given those risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We assume no obligation to update or revise any forward-looking statement to reflect actual results or changes in, or additions to, the factors affecting such forward-looking statements.

Factors that could cause our actual results of operations or financial condition to differ from those described in this report include, but are not necessarily limited to, the following, and the other factors discussed in more detail in “PART I; Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012 and in our other filings with the Securities and Exchange Commission:

•

uncertainties related to the acquisition of the Company by Ascena Retail Group, Inc. (see “RECENT DEVELOPMENTS” below), including the timing of completion of the tender offer and merger, how many of our shareholders will tender their stock in the offer, the possibility that competing offers will be made, the possibility that various closing conditions for the tender offer or merger may not be satisfied or waived, litigation related to the tender offer and merger, and the impact on the tender offer and merger of general economic and business conditions;


•	ongoing economic conditions, including unemployment levels;


•	our ability to accurately predict rapidly changing fashion trends, customer preferences, and other fashion-related factors and our ability to effectively manage our inventory levels;


•	competitive conditions in the women’s specialty retail apparel and direct-to-consumer markets;


•	the continuation of growth in the plus-size women’s apparel market;

•our ability to attract, hire, and retain qualified officers and management;


•	our ability to successfully execute and realize the benefits of our business plans;


•	our ability to successfully manage labor costs, occupancy costs, transportation costs, and other operating costs, particularly in the face of inflationary pressures;

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•	the availability and price volatility of key raw materials in our products, such as cotton, wool, and synthetic fabrics;


•	our continued access to sufficient financing at an affordable cost;


•	recent significant changes in our private-label credit card programs and the impact of Federal and state laws on the availability and cost of providing credit to our cardholders;


•	seasonal fluctuations in net sales and extreme or unseasonable weather conditions;


•	our reliance on technology outsourced to third parties and such third parties’ failure to observe proper internal control practices and procedures;


•	our ability to maintain efficient and uninterrupted customer service and fulfillment operations through our distribution and fulfillment centers and our third-party freight consolidators and service providers;


•	natural disasters, acts of terrorism or other armed conflict, or the threat of any such event;


•	our ability to successfully operate our e-commerce websites and our catalog business and the failure to manage and remedy disruptions in technology, including security breaches;


•	our dependence on foreign sources of production;


•	litigation and regulatory actions relating to our business;


•	our ability to develop and profitably operate new retail stores, and to maintain good relationships with all of our landlords;


•	our ability to effectively implement our plan for closing under-performing stores;

• the failure to successfully implement, or to manage the risks associated with, our plans to divest our FASHION BUG business and focus on the growth of our LANE BRYANT business, or additional courses of action, if any, that may result from our planned comprehensive strategic review;


•	the failure to maintain effective internal control over financial reporting; and


•	changes to existing accounting rules or the adoption of new rules.

The statements contained herein are not an offer to buy or the solicitation of an offer to sell securities. The Offer is being made pursuant to a tender offer statement on Schedule TO filed by Ascena and Colombia with the Securities and Exchange Commission ("SEC") on May 15, 2012, as amended and supplemented through the date hereof. We filed a solicitation/recommendation statement on Schedule 14d-9 with respect to the Offer with the SEC on May 15, 2012, as amended and supplemented through the date hereof. The tender offer statement (including an offer to purchase, a related letter of transmittal, and other tender offer documents) and the solicitation/recommendation statement, as amended and supplemented through the date hereof, contain important information that should be read carefully before making any decision to tender securities in the tender offer. Those materials will be made available to our shareholders at no expense to them. In addition, all of those materials (and all other tender offer documents filed with the SEC) are available at no charge on the SEC's website: www.sec.gov. In addition, the Schedule TO and related exhibits, including the offer to purchase, letter of transmittal, and other related documents may be obtained for free by contacting Ascena at 30 Dunnigan Drive, Suffern, NY 10901, and the Schedule 14d-9 may be obtained for free by contacting us at 3750 State Road, Bensalem, PA 19020.

CRITICAL ACCOUNTING POLICIES

We have prepared the financial statements and accompanying notes included in “Item 1. Financial Statements” of this report in conformity with United States generally accepted accounting principles. This requires us to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. These estimates and assumptions are based on historical experience, analysis of current trends, and various other factors that we believe to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions.

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We periodically reevaluate our accounting policies, assumptions, and estimates and make adjustments when facts and circumstances warrant. Our significant accounting policies are described in “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; ~~Note~~NOTE 1. ~~Summary~~SUMMARY ofOF ~~Significant~~SIGNIFICANT ~~Accounting~~ACCOUNTING ~~Policies~~POLICIES” of our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012. The accounting policies and related assumptions that we consider to be more critical to the preparation of our financial statements and accompanying notes and involve the most significant management judgments and estimates are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; ~~Critical~~CRITICAL ~~Accounting~~ACCOUNTING ~~Policies~~POLICIES” of our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012. There were no material changes in, or additions to, our critical accounting policies or in the assumptions or estimates we used to prepare the financial information appearing in this report.

RECENT DEVELOPMENTS

~~Subsequent~~As toa ~~the~~result ~~end~~ of ~~the~~our ~~Fiscal~~previously ~~2011~~announced ~~Third~~strategic ~~Quarter~~review, on May 2, 2012 we jointly announced with Ascena Retail Group, Inc. ("Ascena") that we ~~are~~had ~~undertaking~~entered into a ~~comprehensive~~definitive ~~strategic~~agreement ~~and~~(the ~~financial~~"Merger ~~review~~Agreement") ofunder ~~our~~which ~~operations~~Ascena will, pursuant to ~~determine~~the ~~how~~terms ~~best~~and subject to ~~enhance~~the ~~shareholder~~conditions ~~value~~of the Merger Agreement, acquire Charming Shoppes, Inc. (the "Company") in a cash transaction valued at approximately $890 million. AsColombia ~~part~~Acquisition Corp. (“Colombia”), a wholly-owned subsidiary of ~~these~~Ascena, ~~efforts~~has commenced a cash tender offer (the "Offer") for all outstanding shares of our common stock at a price of $7.35, wenet ~~announced~~per ~~plans~~share in cash, without interest and subject to ~~divest~~any ~~our~~required ~~FASHION~~withholding ~~BUG~~taxes. The ~~business~~Offer commenced on May 15, 2012 and ~~focus~~will expire at midnight, New York City time, on June 12, 2012 (the ~~growth~~end of ~~our~~the ~~LANE~~day ~~BRYANT~~on ~~brand~~June 12, 2012) unless otherwise extended under the terms of the Merger Agreement. ~~This~~Following ~~review~~the isconsummation ~~expected~~of tothe ~~focus~~Offer, onsubject ~~optimizing~~to the ~~use~~satisfaction ofor ~~our~~waiver ~~strong~~of ~~cash~~certain ~~position~~conditions toset ~~drive~~forth in the ~~potential~~Merger ofAgreement, Colombia will be merged with and into the ~~LANE~~Company ~~BRYANT~~(the ~~brand~~“Merger”), aswith ~~well~~the Company surviving the Merger as ~~evaluating~~a ~~other~~wholly ~~alternatives~~owned subsidiary of Ascena. Subject to ~~further~~customary ~~enhance~~conditions ~~shareholder~~and ~~value~~approvals, the transaction is expected to close during the second calendar quarter of 2012. ~~The~~Following ~~results~~consummation of ~~operations~~the ofMerger, ~~our~~we ~~FASHION~~will ~~BUG~~operate ~~business~~as ~~are~~a ~~not~~separate ~~reported~~subsidiary asof ~~discontinued~~Ascena. Additional ~~operations~~information aswith respect to the ~~requirements~~Offer ~~for~~and ~~treating~~Merger ~~the~~Agreement ~~business~~is asincluded ~~held-for-sale~~in ~~were~~"PART ~~not~~I. Item ~~met~~1. Financial asStatements; ofNotes ~~October~~to ~~29,~~Condensed ~~2011~~Consolidated Financial Statements; NOTE 13. SUBSEQUENT EVENT" above.

Our Board of Directors and management will explore a full range of strategic alternatives for the Company, and have engaged Barclays Capital as a financial advisor to assist in the process. We cannot assure that this process will result in any specific course of action beyond the planned divestiture of FASHION BUG. A time frame for the divestiture of FASHION BUG or the completion of the strategic review has not yet been determined. Additional discussion of our management initiatives is included in "OVERVIEW; Management Initiatives" below.

OVERVIEW

This overview of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) presents a high-level summary of more detailed information contained elsewhere in this Report on Form 10-Q. The intent of this overview is to put this detailed information into perspective and to introduce the discussion and analysis contained in this MD&A. Accordingly, this overview should be read in conjunction with the remainder of this MD&A and with the financial statements and other detailed information included in this Report on Form 10-Q and should not be separately relied upon.

Results of Operations

Our Fiscal ~~2011~~2012 ~~Third~~First Quarter ~~operating~~ results ~~reflect~~were ~~our~~driven ~~continuing~~principally ~~progress~~by onreductions ~~our~~in ~~initiatives~~operating toexpenses ~~increase~~at ~~inventory~~each ~~productivity~~of ~~and~~our ~~to improve overall profitability~~brands. ~~Consolidated~~ We ~~Adjusted~~continued ~~EBITDA~~to ~~for~~experience ~~the~~difficult ~~Fiscal~~traffic ~~2011~~trends ~~Third~~and ~~Quarter~~in ~~increased~~response byoffered ~~$4.0~~deeper-than-planned ~~million~~discounts to ~~$8.0~~ensure ~~million~~seasonal asunit ~~compared to the prior~~sell-~~year period (see “RESULTS OF OPERATIONS; EBITDA and Adjusted EBITDA” below)~~throughs. ~~This~~ However, ~~increase~~we ~~was~~were ~~driven~~able byto ~~decreases~~offset inthe ~~operating~~impact ~~expenses as a result~~ of the ~~closing~~resulting ofpressure ~~under-performing~~on ~~stores~~our ~~and increased~~ gross ~~margins~~margin ~~across~~through ~~all~~reductions ofin ~~our~~operating ~~brands~~expenses. asAt aeach ~~result~~ of our ~~disciplined~~brands, ~~inventory~~we ~~management. Our~~produced ~~disciplined~~improved ~~inventory~~conversion ~~management~~rates ~~resulted~~and inhigher anaverage 8%unit ~~decrease~~retails, indespite ~~inventory at cost on~~ a ~~comparable~~modest ~~store~~increase ~~basis~~in atproduct ~~the end of the quarter as compared to the end of the prior-year period~~costs.

21Consolidated Adjusted EBITDA for the Fiscal 2012 First Quarter increased by $1.3 million to $42.6 million as compared to the prior-year period (see “RESULTS OF OPERATIONS; EBITDA and Adjusted EBITDA” below). This increase was driven primarily by decreases in operating expenses as a result of the closing of under-performing stores during the preceding 12-month period. Our disciplined inventory management resulted in an 7% decrease in inventory at cost on a comparable store basis at the end of the quarter as compared to the end of the prior-year period.

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Consolidated net sales for the Fiscal ~~2011~~2012 ~~Third~~First Quarter reflected the impact of ~~168~~157 net store closings during the preceding 12-month period in connection with our store closing programs ~~and a decrease of 4% in consolidated comparable store sales~~, partially offset by ~~sales~~an ~~from new stores and a 10~~18% increase in store-related e-commerce net sales ~~as compared to the Fiscal 2010 Third Quarter~~. Our ~~Fall~~ seasonal fashion inventory assortments ~~were~~continue to be well received by our customers, resulting in improved average unit retails and average dollar sales during the Fiscal ~~2011~~2012 ~~Third~~First Quarter as compared to the prior-year period. However, Fiscal ~~2011~~2012 ~~Third~~First Quarter sales ~~were negatively impacted by planned reductions in levels of clearance inventory as compared to the prior-year period as we~~ continued to ~~execute~~be ~~against~~negatively ~~our~~impacted ~~plan~~by ~~for~~reduced ~~tightly~~traffic ~~controlled inventories to drive higher gross margins~~levels.

~~Although~~Consolidated ~~the planned reductions in clearance inventory negatively impacted net sales, they contributed to an increase in~~ gross margin decreased for the Fiscal ~~2011~~2012 ~~Third~~First Quarter as compared to the Fiscal ~~2010~~2011 ~~Third~~First Quarter~~. This~~ ~~increase~~as ~~was~~a ~~driven~~result byof ~~improvements~~promotional activity across all of our brands, ~~and benefited from improved seasonal assortments and disciplined inventory management, which resulted~~ in ~~fewer~~an ~~markdowns~~effort ~~as compared~~ to ~~the~~increase ~~prior-year~~store ~~period~~traffic levels and ~~faster~~to sell~~-throughs~~ ofthrough seasonal ~~merchandise~~inventories. We continue to seek the proper balance of full-price, promotional, and clearance inventories in order to improve traffic levels and maximize gross profit dollars. The decline in gross profit dollars was primarily driven by the net closure of ~~168~~157 stores over the preceding 12 months in connection with our store closing program.

Our operating expenses (excluding restructuring and other charges of $31.0 million in the Fiscal 2012 First Quarter and a gain from the sale of office premises of $5.2 million in the Fiscal 2011 First Quarter) decreased by $1525.71 million , driven primarily by the impact of ~~168~~157 net store closures and expense reductions across all of our brands. Our occupancy and buying expenses decreased both in dollar amount and as a percentage of net sales for the Fiscal ~~2011~~2012 ~~Third~~First Quarter as compared to the prior-year period, primarily related to lower rent expense as a result of the operation of fewer stores ~~and the negotiation of store lease terms~~. Selling, general, and administrative expenses also decreased both in dollar amount and as a percentage of net sales for the Fiscal ~~2011~~2012 ~~Third~~First Quarter as compared to the prior-year period, primarily as a result of a combination of lower store payroll and store-related expenses attributable to operating fewer stores and lower advertising expenses~~, but increased as a percentage of net sales, primarily as a result of negative leverage from the decrease in comparable store sales at our FASHION BUG brand~~.

~~Depreciation~~We ~~and~~continue ~~amortization~~to ~~expenses~~make ~~decreased~~progress byon ~~$2.8~~our ~~million~~initiatives ~~for~~to ~~the~~drive ~~Fiscal~~sustainable ~~2011~~productivity ~~Third~~and ~~Quarter~~profitability. Although aswe ~~compared~~are topleased ~~the~~with ~~prior-year~~our ~~period~~progress, ~~primarily~~we ascontinue ato ~~result~~be ofdisappointed by the ~~operation~~reduced oftraffic ~~fewer~~levels at our retail stores. However, ~~and~~we ~~the~~are ~~write~~continuing to achieve better results through core fundamentals, including more fashionable, trend-~~down~~right ofassortments ~~store~~coupled ~~assets~~with ~~during~~disciplined ~~the~~inventory ~~Fiscal~~management ~~2010~~and ~~Fourth~~decreases ~~Quarter~~in operating expenses.

Restructuring and other charges for the Fiscal 2011 Third Quarter were primarily for professional fees and retention costs related to our announced plans to divest our FASHION BUG business and to undertake a comprehensive strategic and financial review (see "RECENT DEVELOPMENTS" above), non-cash store impairment charges, and lease termination costs net of store-related deferred allowances in connection with our under-performing store closing programs. Fiscal 2010 Third Quarter charges were primarily for cash severance and non-cash equity compensation costs in connection with the resignation of our former Chief Executive Officer.

As discussed in prior quarters of Fiscal 2011, our product pricing was affected by inflation in cotton costs that mostly impacted our Fall season. Our Fiscal 2011 Third Quarter average unit retail increased approximately 12%, which did not completely cover the increased product cost. However, our improved assortments and tighter inventory management resulted in a gross margin rate increase of 210 basis points. A decrease in the number of units sold indicated that many of the price increases were not sustainable in the current consumer spending environment. Looking ahead to the December Holiday and Spring seasons, we expect year-over-year price increases to subside into the mid to high single digits.

We continue to make progress on our initiatives to drive sustainable productivity and profitability. Although we are pleased with our progress, our results remain below our expectations. However, we are continuing to achieve better results through core fundamentals, including more fashionable, trend-right assortments coupled with disciplined inventory management, gross margin expansion, and decreases in operating expenses.

Table of Contents

Financial Position and Liquidity

We ended the Fiscal ~~2011~~2012 ~~Third~~First Quarter with $~~158~~214.1 million of cash as compared to $~~117~~168.6 million as of the end of Fiscal ~~2010~~2011. The ~~and~~increase ~~ended~~in ~~the~~our ~~quarter with a net~~ cash position asduring ~~compared to a net debt position as of~~ the ~~end of~~ Fiscal ~~2010. Our~~2012 ~~cash~~First ~~position~~Quarter ~~increased~~was driven primarily asby ~~a result of~~ improved operating results ~~during the first three quarters of Fiscal 2011~~, disciplined inventory management, ~~improved sell-through of our seasonal merchandise at each of our brands,~~ collections of accounts receivable generated from December ~~2010~~2011 holiday season sales by our Direct-to-Consumer segment, and ~~proceeds of~~ $710.57 million ~~from~~of tax refunds. We ended the ~~sale~~quarter with no borrowings against our revolving credit facility and had a total liquidity position of ~~office~~$364.0 ~~premises~~million.

As we continue to rationalize our store base, we expect to close approximately ~~230~~90-~~240~~105 unprofitable stores in ~~2011~~2012. The majority of these stores have natural lease expirations in ~~2011~~2012. ~~Lease termination costs for Fiscal 2011 are projected to be approximately $4 million.~~ During the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2011~~2012, we have closed ~~144~~33 stores, including 8019 FASHION BUG stores~~, and the majority of the remaining store closings will occur near the end of the fourth quarter~~.

OnAs ~~July 14, 2011~~ we ~~entered~~look ~~into~~forward anto ~~amended~~the ~~and~~completion ~~restated~~of ~~loan~~our ~~and~~merger ~~security~~with ~~agreement~~Ascena ~~for~~Retail aGroup, ~~$200~~Inc. ~~million~~(see ~~senior~~"RECENT ~~secured~~DEVELOPMENTS" ~~revolving credit facility~~above), ~~which~~we ~~replaced~~will ~~our~~continue ~~$225~~to ~~million~~focus ~~senior~~on ~~secured~~further ~~revolving~~developing ~~credit~~the ~~facility~~LANE ~~and~~BRYANT ~~provides~~brand, ~~for~~using ~~committed~~its ~~revolving~~strong ~~credit~~consumer ~~availability~~franchise ~~through~~and ~~July 14,~~leading ~~2016. See~~market ~~“FINANCING;~~position ~~Revolving~~to ~~Credit~~drive ~~Facility”~~our ~~below~~sales ~~for~~and ~~further discussion of the amended agreement~~profits. We ~~ended~~currently ~~the~~expect ~~quarter~~that ~~with~~we nowill ~~borrowings~~continue ~~against~~to ~~the~~pursue ~~revolving credit facility and~~ a ~~total~~number ~~liquidity~~of ~~position~~previously ofannounced ~~$305~~initiatives, ~~million.~~including:

Management Initiatives

We are currently engaged in a number of initiatives that we believe will further improve our business and enhance shareholder value (see "RECENT DEVELOPMENTS" above). The first substantive step is the divestiture of our FASHION BUG business. Although we have made progress in improving FASHION BUG's profitability, we believe that it does not fit within our future strategic plan. Concurrent with this process, we are assessing the appropriate expense structure for the Company that incorporates the planned divestiture of FASHION BUG.

We believe that our financial and operational resources are better spent on focusing on our more profitable LANE BRYANT brand. We expect to invest in and focus on that business, using its strong consumer franchise and leading market position to drive our sales and profits. We expect to achieve our vision for the LANE BRYANT brand as the premier brand for women's fashion plus apparel through a number of initiatives, including:


•	offering fashionable, on-trend, lifestyle merchandise collections;


•	enhanced CACIQUE intimate apparel brand awareness and merchandise offerings;

• expansion toof ~~approximately~~our ~~900 stores over several years, resulting in approximately 750~~ full-line LANE BRYANT ~~stores~~ and ~~150~~ LANE BRYANT OUTLET® ~~locations~~stores; ~~and~~

• innovative digital sales initiatives like our recently launched "Fashion Genius"™ online outfitting technology.;

~~Our~~• ~~plans~~increased ~~for~~penetration ~~the next few years include approximately 125 new locations and 125 relocations from malls~~ into power-strip and lifestyle centers with stronger operating metrics, ~~while~~that closing approximately 50 stores through natural lease expirations. Our current mix of LANE BRYANT stores in strip centers to malls is 55% to 45%, and we plan to improve this mix to 80% to 20% over the next few years. The operating metrics for LANE BRYANT stores in power-strip and lifestyle centers support increased profitability, with projected increases in sales and decreases in occupancy expenses as compared to malls,; ~~resulting in a projected improvement in sales productivity~~ and ~~Adjusted EBITDA.~~

2319

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~~Additionally,~~• wecontinued ~~are~~development ~~currently~~of ~~developing~~ a new store design for the LANE BRYANT brand, ~~reflective~~which ~~of our vision for LANE BRYANT as the premier brand for women's fashion plus apparel. The new store design~~ will include visual packages that promote lifestyle storytelling experiences, and will be simplified for easy navigation to enhance our customers' shopping experience. We expect to launch our first new store under this design in Fall 2012. Following the execution of our broader plans for new and relocated stores, nearly one-third of our LANE BRYANT stores will be repositioned and represented by our fresh new store design.

Our CACIQUE intimate apparel brand, which offers key intimates categories and complementary products, has grown to approximately one-third of sales at our full-line LANE BRYANT chain. We are seeking to further grow CACIQUE revenue through enhanced product assortments. Further into the future we expect to explore additional sales distribution channels, such as potential mall-based stand-alone stores, sister brands, and international growth.

As a leading retailer in the women's plus-size apparel market in the United States, we are making the distinction that we are not a plus-size retailer selling fashion, but rather a fashion retailer serving the plus-size apparel market. We must continue our progress in identifying and relating to our target customers, creating fashion-right assortment offerings, and focusing on our LANE BRYANT brand.

We are poised for growth and improved profitability. Our performance will be driven principally by revenue enhancements at LANE BRYANT, through improved merchandise assortments and by transitioning real estate to higher-performing strip-center locations. We believe that our initiatives will create shareholder value.

RESULTS OF OPERATIONS

EBITDA and Adjusted EBITDA

We ~~believe~~define ~~that Adjusted~~ EBITDA, ~~along~~as ~~with~~net ~~other~~income ~~measures,~~before ~~provides~~(i) aincome ~~useful~~taxes; ~~pretax~~(ii) ~~measure~~net ofinterest ~~our~~expense/other ~~ongoing~~income; ~~operating~~and ~~performance~~(iii) depreciation and ~~our~~amortization, ~~ability~~except tofor ~~meet~~amortization ~~debt~~of ~~service~~stock-based ~~and~~compensation, ~~capital~~which ~~requirements~~is on a ~~comparable~~component ~~basis excluding the impact~~ of ~~certain~~selling, ~~items~~general, and ~~capital-related~~administrative ~~non-cash charges~~expenses. We ~~use~~define Adjusted EBITDA toas ~~monitor~~EBITDA ~~and~~before ~~evaluate~~certain ~~the~~items, ~~performance~~such ofas ~~our~~(i) ~~business~~restructuring ~~operations~~ and weother ~~believe~~charges; ~~that~~and it(ii) ~~enhances~~gain ~~our~~from ~~investors’~~sale ~~ability~~of tooffice ~~analyze~~premises. EBITDA ~~trends~~and inAdjusted ~~our~~EBITDA ~~business,~~are ~~compare~~not ~~our~~defined ~~performance~~under toGenerally ~~other~~Accepted ~~companies~~Accounting inPrinciples ~~our~~(“GAAP”) ~~industry,~~ and ~~evaluate~~ our ~~ability~~computation tomay ~~service~~not ~~our~~be ~~debt~~comparable ~~and~~to ~~capital~~similar ~~needs. In~~measures ~~addition,~~reported weby ~~use~~other ~~Adjusted EBITDA as a performance metric in our compensation programs~~companies.

~~Although~~We believe that Adjusted EBITDA, along with other measures, provides a useful ~~information~~pretax onmeasure anof our ongoing operating ~~cash~~performance ~~flow~~and ~~basis,~~our itability isto ameet ~~limited~~debt ~~measure~~service inand ~~that~~capital itrequirements ~~excludes~~on a comparable basis excluding the impact of ~~cash~~certain ~~requirements~~items ~~for~~and ~~interest~~capital-related ~~expense,~~non-cash ~~income~~charges. We ~~taxes,~~use ~~capital~~Adjusted ~~expenditures,~~EBITDA ~~and~~to ~~certain~~monitor ~~other~~and ~~items~~evaluate ~~requiring~~the ~~cash~~performance ~~outlays~~of orour ~~generating~~business ~~cash~~operations ~~receipts. Therefore,~~and ~~Adjusted~~we ~~EBITDA~~believe ~~should~~that beit ~~used~~enhances asour ainvestors’ ~~supplement~~ability to ~~results~~analyze oftrends ~~operations~~in ~~and~~our ~~cash~~business, ~~flows~~compare asour ~~reported~~performance ~~under~~to ~~Generally~~other ~~Accepted~~companies ~~Accounting~~in ~~Principles~~our ~~(“GAAP”)~~industry, and ~~should~~evaluate ~~not~~our beability ~~used~~to asservice aour ~~singular~~debt ~~measure~~and ofcapital ~~operating~~needs. In ~~performance~~addition, orwe use Adjusted EBITDA as a ~~substitute~~component ~~for~~of ~~GAAP~~our ~~results~~compensation programs.

~~Further~~Although ~~information~~Adjusted ~~regarding~~EBITDA ~~our~~provides ~~definition~~useful ofinformation ~~EBITDA~~on ~~and~~an ~~Adjusted~~operating ~~EBITDA~~cash flow basis, it is ~~included~~a limited measure in ~~“Part~~that IIit excludes the impact of cash requirements for interest expense, ~~Item~~income 7.taxes, ~~Management’s~~capital ~~Discussion~~expenditures, and ~~Analysis~~certain ofother ~~Financial~~items ~~Condition~~requiring ~~and~~cash ~~Results~~outlays. Therefore, ofAdjusted ~~Operations;~~EBITDA ~~Results~~should be used as a supplement to results of ~~Operations;~~operations ~~EBITDA~~and cash flows as reported under GAAP and ~~Adjusted~~should ~~EBITDA”~~not ofbe ~~our~~used ~~Annual~~as ~~Report~~a onsingular ~~Form~~measure ~~10-K~~of ~~for~~operating ~~the~~performance ~~fiscal~~or ~~year~~as ~~ended~~a ~~January 29,~~substitute ~~2011~~for GAAP results.

24Further information regarding our definition of EBITDA and Adjusted EBITDA is included in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; RESULTS OF OPERATIONS; EBITDA and Adjusted EBITDA” of our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

The tables on the following two pages show details of our consolidated net sales and a reconciliation of our income from continuing operations to EBITDA and Adjusted EBITDA for the periods indicated.

Table of Contents

~~The~~Net ~~following~~Sales ~~tables show details of our consolidated net sales~~ and aReconciliation ~~reconciliation~~ of ~~our~~Net ~~income/(loss)~~Income ~~from continuing operations~~ to EBITDA and Adjusted EBITDA ~~for the periods indicated.~~

Net Sales and Reconciliation of Net Income/(Loss) to EBITDA and Adjusted EBITDA



(In millions)	LANE BRYANT⁽¹⁾			FASHION BUG			CATHERINES			Total Retail Stores
Thirteen Weeks Ended April 28, 2012
Net sales	$	261.1		$	127.0		$	77.9		$	466.0

Net income	41.7			5.2			7.6			54.5
Income tax provision	—			—			—			—
Net interest expense and other income	—			—			—			—
Depreciation and amortization	7.7			1.9			1.3			10.9
EBITDA	49.4			7.1			8.9			65.4
Restructuring and other charges	—			—			—			—
Adjusted EBITDA	$	49.4		$	7.1		$	8.9		$	65.4
Adjusted EBITDA as a % of net sales	18.9		%	5.6		%	11.4		%	14.0		%

(In millions)	LANEBRYANT(1)			FASHIONBUG			CATHERINES			Total RetailStores
Thirteen Weeks Ended October 29, 2011
Net sales	$	221.3		$	126.8		$	69.6		$	417.7
Net loss	21.7			(3.4		)	1.9			20.2
Income tax provision	—			—			—			—
Net interest expense and other income	—			—			—			—
Depreciation and amortization	7.3			1.7			1.3			10.3
EBITDA	29.0			(1.7		)	3.2			30.5
Restructuring and other charges	—			—			—			—
Adjusted EBITDA	$	29.0		$	(1.7	)	$	3.2		$	30.5
Adjusted EBITDA as a % of net sales	13.1		%	(1.3		)%	4.6		%	7.3		%

____________________

(1) Includes LANE BRYANT OUTLET stores, with net sales of $3031.05 and Adjusted EBITDA of $5.3.8.

(In millions)	Direct-to-Consumer(2)			CorporateAnd Other				Consolidated(4)
Thirteen Weeks Ended October 29, 2011
Thirteen Weeks Ended April 28, 2012
Net sales	$	1215.03		$	—			$	~~429~~481.73
Net loss	(3.3		)	(29.9		)		(13.0		)
Net income	(2.3		)	(34.4		)		17.8
Income tax provision	—			06.8				06.8
Net interest expense and other income	—			3.2.8				3.2.8
Depreciation and amortization	0.3			3.0				1314.62
EBITDA	(32.0		)	(2221.98		)		441.6
Restructuring and other charges	—			31.50				31.50
Adjusted EBITDA	$	(32.0	)	$	(1920.48	)		$	842.06
Adjusted EBITDA as a % of net sales	(2513.01		)%	—			(3)	18.9		%

____________________


(2)	Primarily FIGI’S catalog business. A substantial portion of FIGI’s sales occur during the December holiday season.


(3)	Not meaningful.

(4) Results may not add due to rounding.

2521

Table of Contents

(In millions)	LANEBRYANT(1)			FASHIONBUG			CATHERINES			Total RetailStores
Thirteen Weeks Ended October 30, 2010
Net sales	$	227.5		$	156.4		$	70.0		$	453.9
Net loss	19.9			(1.8		)	(2.9		)	15.2
Income tax benefit	—			—			—			—
Net interest expense and other income	—			—			—			—
Depreciation and amortization	8.4			2.9			1.9			13.2
EBITDA	28.3			1.1			(1.0		)	28.4
Gain on repurchases of 1.125% Senior Convertible Notes	—			—			—			—
Restructuring and other charges	—			—			—			—
Adjusted EBITDA	$	28.3		$	1.1		$	(1.0	)	$	28.4
Adjusted EBITDA as a % of net sales	12.4		%	0.7		%	(1.4		)%	6.3		%

Net Sales and Reconciliation of Net Income to EBITDA and Adjusted EBITDA

(Continued)



(In millions)	LANE BRYANT⁽¹⁾			FASHION BUG			CATHERINES			Total Retail Stores
Thirteen Weeks Ended April 30, 2011
Net sales	$	262.8		$	150.0		$	77.8		$	490.6

Net income	41.6			8.6			5.5			55.7
Income tax provision	—			—			—			—
Net interest expense and other income	—			—			—			—
Depreciation and amortization	7.4			2.0			1.6			11.0
EBITDA	49.0			10.6			7.1			66.7
Gain from sale of office premises	—			—			—			—
Restructuring and other charges	—			—			—			—
Adjusted EBITDA	$	49.0		$	10.6		$	7.1		$	66.7
Adjusted EBITDA as a % of net sales	18.6		%	7.1		%	9.1		%	13.6		%

____________________

(1) Includes LANE BRYANT OUTLET stores, with net sales of $2829.32 and Adjusted EBITDA of $34.74.

(In millions)	Direct-to-Consumer(2)			CorporateAnd Other				Consolidated
Thirteen Weeks Ended October 30, 2010
Thirteen Weeks Ended April 30, 2011
Net sales	$	913.78		$	—			$	~~463~~504.64
Net loss	(2.9		)	(31.1		)		(18.8		)
Net income	(2.0		)	(27.7		)		26.0
Income tax benefit	—			(0.1		)		(0.1		)
Income tax provision	—			2.4				2.4
Net interest expense and other income	—			3.37				3.37
Depreciation and amortization	0.23			3.01				1614.4
EBITDA	(21.7		)	(2418.95		)		046.85
Gain on repurchases of 1.125% Senior Convertible Notes	—			—				—
Gain from sale of office premises	—			(5.2		)		(5.2		)
Restructuring and other charges	—			~~3.2~~—				~~3.2~~—
Adjusted EBITDA	$	(21.7	)	$	(2123.7	)		$	441.03
Adjusted EBITDA as a % of net sales	(2712.83		)%	—			(3)	08.92		%

____________________


(2)	Primarily FIGI’S catalog business. A substantial portion of FIGI’s sales occur during the December holiday season.


(3)	Not meaningful.

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Table of Contents

(In millions)	LANEBRYANT(1)			FASHIONBUG			CATHERINES			Total RetailStores(2)
Thirty-nine Weeks Ended October 29, 2011
Net sales	$	735.6		$	438.2		$	227.3		$	1,401.1
Net income	78.0			17.6			13.5			109.2
Income tax provision	—			—			—			—
Net interest expense and other income	—			—			—			—
Depreciation and amortization	22.4			5.6			4.4			32.4
EBITDA	100.4			23.2			17.9			141.6
Gain from sale of office premises	—			—			—			—
Restructuring and other credits	—			—			—			—
Adjusted EBITDA	$	100.4		$	23.2		$	17.9		$	141.6
Adjusted EBITDA as a % of net sales	13.6		%	5.3		%	7.9		%	10.1		%

____________________

(1) Includes LANE BRYANT OUTLET® stores, with net sales of $93.9 and Adjusted EBITDA of $15.3.

(2) Results may not add due to rounding

(In millions)	Direct-to-Consumer(3)			CorporateAnd Other				Consolidated(2)
Thirty-nine Weeks Ended October 29, 2011
Net sales	$	32.2		$	—			$	1,433.3
Net income	(9.1		)	(88.9		)		11.1
Income tax provision	—			4.8				4.8
Net interest expense and other income	—			10.6				10.6
Depreciation and amortization	0.8			9.3				42.5
EBITDA	(8.3		)	(64.2		)		69.0
Gain from sale of office premises	—			(5.2		)		(5.2		)
Restructuring and other credits	—			4.9				4.9
Adjusted EBITDA	$	(8.3	)	$	(64.5	)		$	68.7
Adjusted EBITDA as a % of net sales	(25.8		)%	—			(4)	4.8		%

____________________

(3) Primarily FIGI’S catalog business. A substantial portion of FIGI’s sales occur during the December holiday season.

(4) Not meaningful.

Table of Contents

(In millions)	LANEBRYANT(1)			FASHIONBUG			CATHERINES			Total RetailStores
Thirty-nine Weeks Ended October 30, 2010
Net sales	$	722.8		$	505.1		$	230.3		$	1,458.2
Net loss	49.3			3.7			4.3			57.3
Income tax benefit	—			—			—			—
Net interest expense and other income	—			—			—			—
Depreciation and amortization	25.8			8.3			5.9			40.0
EBITDA	75.1			12.0			10.2			97.3
Gain on repurchases of 1.125% Senior Convertible Notes	—			—			—			—
Restructuring and other charges	—			—			—			—
Adjusted EBITDA	$	75.1		$	12.0		$	10.2		$	97.3
Adjusted EBITDA as a % of net sales	10.4		%	2.4		%	4.4		%	6.7		%

____________________

(1) Includes LANE BRYANT OUTLET stores, with net sales of $87.0 and Adjusted EBITDA of $13.4.

(In millions)	Direct-to-Consumer(2)			CorporateAnd Other				Consolidated
Thirty-nine Weeks Ended October 30, 2010
Net sales	$	27.8		$	—			$	1,486.0
Net loss	(7.8		)	(73.0		)		(23.5		)
Income tax benefit	—			(1.3		)		(1.3		)
Net interest expense and other income	—			11.4				11.4
Depreciation and amortization	0.8			9.3				50.1
EBITDA	(7.0		)	(53.6		)		36.7
Gain on repurchases of 1.125% Senior Convertible Notes	—			(1.9		)		(1.9		)
Restructuring and other charges	—			4.7				4.7
Adjusted EBITDA	$	(7.0	)	$	(50.8	)		$	39.5
Adjusted EBITDA as a % of net sales	(25.2		)%	—			(3)	2.7		%

____________________

(2) Primarily FIGI’S catalog business. A substantial portion of FIGI’s sales occur during the December holiday season.

(3) Not meaningful.

Table of Contents

The following table shows information related to the change in our Retail Stores segment net sales:

	Thirteen Weeks Ended				~~Thirty-nine Weeks Ended~~
	October 29, 2011		October 30, 2010		October 29, 2011		October 30, 2010
	April 28, 2012		April 30, 2011
Increase/(decrease) in comparable store sales(1) :
Increase/(decrease) in comparable store sales(1) and store-related e-commerce sales:
Consolidated retail stores	(4	)%	3	%	—	%	1	%
Consolidated Retail Stores:
LANE BRYANT(2)	—		4		3		—
Consolidated Retail Stores comparable store sales	—	%	2	%
FASHION BUG	(11	)	7		(5	)	2
Consolidated Retail Stores e-commerce	18		17
CATHERINES	3		(6	)	—		(3	)
Total Consolidated Retail Stores, including e-commerce	2		3
Sales from new stores as a percentage of prior-period consolidated net sales(3):
LANE BRYANT(2)
LANE BRYANT(2)	1		2		1		2
Retail Stores comparable store sales	1		7
FASHION BUG	—		—		—		—
Retail Stores e-commerce	21		17
CATHERINES(4)	—		1		—		1
Total LANE BRYANT, including e-commerce	3		8
Prior-period sales from closed stores as a percentage of prior-period consolidated net sales:
FASHION BUG
LANE BRYANT(2)	(2	)	(1	)	(2	)	(1	)
Retail Stores comparable store sales	(3	)	(3	)
FASHION BUG	(3	)	(2	)	(3	)	(3	)
Retail Stores e-commerce	3		12
CATHERINES	(1	)	—		(1	)	—
Total FASHION BUG, including e-commerce	(3	)	(3	)
Other retail stores(5)	—		(1	)	—		(1	)
CATHERINES
Increase/(decrease) in Retail Stores segment net sales	(8	)	1		(4	)	(2	)
Retail Stores comparable store sales	5		(2	)
Retail Stores e-commerce	23		26
Total CATHERINES, including e-commerce	6		(1	)
Sales from new stores as a percentage of prior-period consolidated net sales:
LANE BRYANT(2)	1		1
FASHION BUG	—		—
CATHERINES	—		—
Prior-period sales from closed stores as a percentage of prior-period consolidated net sales:
LANE BRYANT(2)	(2	)	(1	)
FASHION BUG	(4	)	(2	)
CATHERINES	(1	)	—
Increase/(decrease) in Retail Stores segment net sales	(5	)	—

____________________

(1) “Comparable store sales” is not a measure that has been defined under ~~generally accepted accounting principles~~GAAP. The method of calculating comparable store sales varies across the retail industry and, therefore, our calculation of comparable store sales is not necessarily comparable to similarly-titled measures reported by other companies. We define comparable store sales as sales from stores operating in both the current and prior-year periods. Sales from new stores are added to the comparable store sales base 13 months after their open date. Sales from stores that are relocated within the same mall or strip-center, remodeled, or have a square footage change of less than 20% are included in the calculation of comparable store sales. Sales from stores that are relocated outside the existing mall or strip-center, or have a square footage change of 20% or more, are excluded from the calculation of comparable store sales until 13 months after the relocated store is opened. Stores that are temporarily closed for a period of 4 weeks or more are excluded from the calculation of comparable store sales for the applicable periods in the year of closure and the subsequent year. ~~Non-store sales, such as catalog and internet sales, are excluded from the calculation of comparable store sales.~~


(2)	Includes LANE BRYANT OUTLET stores.

~~(3) Includes incremental Retail Stores segment e-commerce sales.~~23

(4) Includes CATHERINES stores in outlet locations, which were converted from PETITE SOPHISTICATE OUTLET stores during the Fiscal 2009 Fourth Quarter and Fiscal 2010 First Quarter.

(5) Includes PETITE SOPHISTICATE OUTLET stores, which were closed or converted to CATHERINES stores in outlet locations during the Fiscal 2009 Fourth Quarter and Fiscal 2010 First Quarter.

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Retail Store Activity for Fiscal ~~2011~~2012

	LANEBRYANT(1)		FASHIONBUG		CATHERINES		Total
Fiscal 2011 Year-to-Date:
Fiscal 2012 Year-to-Date:
Stores at January 29, 2011	846		743		475		2,064
Stores at January 28, 2012	802		620		435		1,857
Stores opened	8		1—		—		98
Stores closed(2)	(339	)	(8019	)	(315	)	(~~144~~33	)
Net change in stores	(251	)	(7919	)	(315	)	(~~135~~25	)
Stores at October 29, 2011	821		664		444		1,929
Stores at April 28, 2012	801		601		430		1,832
Stores relocated during period	65		—		—		65
Fiscal 2011 Plan:
Fiscal 2012 Plan:
Store openings	820		1—		—		920
Store closings(3)	5520-5725		~~135~~35-~~138~~40		4035-4540		~~230~~90-~~240~~105
Store relocations	620-25		—		—		620-25

____________________


(1)	Includes LANE BRYANT OUTLET stores.


(2)	Primarily includes stores closed as part of our previously announced store closing initiatives.

(3) Includes approximately ~~210~~15 under-performing ~~stores and 15~~ CATHERINES stores in outlet locations to be closed as part of our previously announced store closing initiatives (see “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 1311. RESTRUCTURING AND OTHER CHARGES” of our annual report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012).

Comparison of Thirteen Weeks Ended ~~October~~April 2928, ~~2011~~2012 and ~~October~~April 30, ~~2010~~2011

Net Sales

	ThirteenWeeks Ended				ThirteenWeeks Ended				Change FromPrior Period
(Dollars in millions)	~~October~~April 2928, ~~2011~~2012		% of NetSales		~~October~~April 30, ~~2010~~2011		% of NetSales(1)		Dollars			Percent
LANE BRYANT(1)	$	221.3	51.5	%	$	227.5	49.1	%	$	(6.2	)	(2.7	)%
LANE BRYANT(2)	$	261.1	54.2	%	$	262.8	52.1	%	$	(1.7	)	(0.6	)%
FASHION BUG	~~126~~127.80		2926.54		~~156~~150.40		3329.78		(2923.60		)	(1815.93	)
CATHERINES	6977.69		16.2		7077.08		15.14		(0.41		)	(0.61	)
Total Retail Stores	~~417~~466.70		9796.28		~~453~~490.96		97.93		(3624.26		)	(85.0	)
Direct-to-Consumer	1215.03		23.82		913.78		2.17		21.35			2310.79
Consolidated net sales	$	~~429~~481.73	100.0	%	$	~~463~~504.64	100.0	%	$	(3323.91	)	(74.36	)%

____________________

(1) ~~Includes~~Results ~~LANE~~do ~~BRYANT~~not ~~OUTLET~~add ~~stores~~due to rounding.

30(2) Includes LANE BRYANT OUTLET stores.

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~~The~~Total ~~decrease in~~ Retail Stores segment consolidated net sales decreased for the Fiscal ~~2011~~2012 ~~Third~~First Quarter as compared to the Fiscal ~~2010~~2011 ~~Third~~First Quarter ~~reflects~~primarily as a result of the impact of ~~168~~157 net store closings during the preceding 12-month period and aflat 4%consolidated ~~decrease in~~ comparable store sales, which were partially offset by ~~sales~~an ~~from new stores and a 10~~18% increase in store-related e-commerce net sales. ~~Although~~The ~~our~~inclusion ~~seasonal~~of ~~assortments were well~~e-~~received~~commerce bysales ~~our~~with ~~customers,~~the ~~resulting~~bricks inand ~~higher~~mortar ~~conversion~~comparable ~~rates,~~store sales ~~were~~would ~~negatively~~have ~~impacted~~resulted ~~by planned reductions~~ in ~~levels~~a ofconsolidated ~~clearance~~comparable ~~inventory~~sales asincrease ~~compared~~of to2% ~~the prior-year period as we continued to execute against our plan~~ for ~~tightly~~the ~~controlled~~Fiscal ~~inventories~~2012 toFirst ~~drive higher gross margins~~Quarter.

LANE BRYANT sales decreased as compared to the prior-year period primarily as a result of 37the impact of 26 net store closings during the preceding 12-month period, partially offset by ~~sales from new stores and~~ a 1021% increase in store-related e-commerce net sales. ~~Comparable~~The ~~store~~inclusion ~~sales~~of ~~were~~LANE ~~flat~~BRYANT ase-commerce ~~compared~~sales towith the ~~prior-year~~LANE ~~period~~BRYANT ~~primarily~~bricks asand mortar comparable store sales would have resulted in a ~~result~~comparable sales increase of a3% ~~planned~~for ~~reduction~~the inFiscal ~~clearance~~2012 ~~inventories~~First Quarter. AnImprovements ~~improvement~~ in average dollar sale, ~~was~~units per transaction, and conversion rate were partially offset by a decrease in traffic levels as compared to the prior-year period.

~~FASHION~~CATHERINES ~~BUG~~ sales ~~decreased~~were ~~primarily~~comparable to the prior-year period as athe ~~result~~impact of 9634 net store closings during the preceding 12-month period ~~primarily~~was ~~related~~offset toby ~~our~~a ~~under-performing~~5% ~~store~~increase ~~closing~~in ~~programs~~comparable store sales and ana 1123% ~~decrease~~increase in ~~comparable~~ store-related e-commerce net sales. The ~~decrease~~inclusion inof ~~comparable~~CATHERINES ~~store~~e-commerce sales ~~primarily~~with ~~reflects~~ the ~~impact~~CATHERINES ofbricks ~~increased~~and ~~levels~~mortar ofcomparable ~~clearance~~store sales inwould ~~the~~have ~~prior-year~~resulted ~~period~~in as a ~~result~~comparable ofsales ~~our~~increase ~~efforts~~of to6%. Improvements ~~liquidate~~in ~~slow-moving~~average ~~seasonal~~dollar ~~merchandise~~sale and ~~the~~units ~~impact~~per oftransaction ~~higher~~were ~~initial~~partially ~~ticket~~offset ~~prices~~by ina ~~the~~decrease ~~current-year period. Decreases~~ in traffic levels ~~and units per transaction~~ as compared to the prior-year period ~~were partially offset by an improvement in average dollar sale~~.

~~CATHERINES~~FASHION BUG sales decreased ~~slightly~~primarily as ~~compared~~a toresult of the ~~prior~~impact of 97 net store closings during the preceding 12-~~year~~month period asand a 3% ~~increase~~decrease in comparable store sales, ~~and~~partially offset by a 253% increase in store-related e-commerce net sales ~~were offset by the impact of 35 net store closings during the preceding 12-month period~~. An Decreases ~~improvement~~ in ~~average dollar sale was offset by decreases in~~ traffic levels and units per transaction as compared to the prior-year period were partially offset by an improvement in average dollar sale.

Retail Stores segment e-commerce net sales for the Fiscal ~~2011~~2012 ~~Third~~First Quarter represented 89% of Retail Stores segment net sales for the current-year period as compared to 78% of Retail Stores segment net sales for the prior-year period. The improvement in e-commerce net sales was driven primarily by our LANE BRYANT and CATHERINES brands and reflects our continuing efforts to enhance our customers’ on-line shopping experience,. These ~~which~~efforts include an expanding selection of new brands through our SONSI® website and the September 2011 launch of new online outfitting technology that makes personalized style and fit recommendations. Customers can use these recommendations within the outfitting tool to facilitate viewing and buying of complete outfits. During October 2011 we also announced the launch of an international shipping program that enables customers in over 80100 countries and territories worldwide to shop our brands online.

During the Fiscal ~~2011~~2012 ~~Third~~First Quarter we recognized revenues of $4.5 million in connection with our loyalty card programs as compared to revenues of $4.6 million during the Fiscal ~~2010~~2011 ~~Third~~First Quarter.

For our Direct-to-Consumer segment, the increase in net sales was attributable to a planned increase in the circulation of our FIGI's and Gallery catalogs. The Direct-to-Consumer segment generates a substantial portion of its sales during the December holiday season.

Gross Profit

	ThirteenWeeks Ended				ThirteenWeeks Ended				Change as a
(Dollars in millions)	~~October~~April 2928, ~~2011~~2012		% of NetSales		~~October~~April 30, ~~2010~~2011		% of NetSales		Percentage ofNet Sales
Consolidated gross profit	$	~~232~~261.87	54.24	%	$	~~241~~285.73	5256.16	%	(2.12	)%

3125

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~~Although~~The ~~planned~~decrease ~~reductions~~ in ~~clearance inventory negatively impacted sales, they contributed to an increase in~~ gross ~~margin~~profit ~~for the Fiscal 2011 Third Quarter~~ as ~~compared~~a topercentage ~~the~~of ~~Fiscal~~net ~~2010~~sales ~~Third Quarter. The increase in~~ ("gross margin") was driven by ~~improvements~~increased promotional activity across all of our brands, ~~and benefited from improved seasonal assortments and disciplined inventory management, which resulted~~ in ~~fewer~~an ~~markdowns~~effort ~~as compared~~ to ~~the~~increase ~~prior-year~~store ~~period~~traffic levels and ~~faster sell-throughs of seasonal merchandise. We were more promotional in the Fiscal 2010 Third Quarter~~ to sell through ~~slow-moving~~ seasonal ~~inventory, which negatively impacted gross margins in the prior-year period~~inventories. The decline in gross profit dollars was primarily driven by the net closure of ~~168~~157 stores over the preceding 12 months in connection with our store closing program ~~and negative comparable store sales~~. ~~The Fiscal 2011 Third Quarter gross margin was moderately affected by cost increases associated with cotton, wool, and synthetic fabrics, as discussed in the overview above.~~

For our Retail Stores segment, gross ~~profit~~margin asdecreased a150 ~~percentage of Retail Stores net sales increased 210~~ basis points as compared to the prior-year period. Gross ~~profit~~margin asdecreased a170 ~~percentage of net sales increased 360~~ basis points for ~~FASHION~~LANE ~~BUG~~BRYANT, ~~150~~220 basis points for ~~CATHERINES~~FASHION BUG, and 60140 basis points for ~~LANE~~CATHERINES ~~BRYANT~~ as compared to the prior-year period. ~~The~~These ~~increase~~decreases in ~~Retail Stores segment~~ gross margin ~~was~~were primarily the result of ~~improved~~increased ~~assortments~~promotional ~~and~~activity ~~disciplined inventory management, which resulted~~ in ~~faster~~an ~~inventory~~effort ~~turnover~~to ofincrease ~~seasonal~~store ~~merchandise~~traffic levels and ~~fewer markdowns during the current-year period. Additionally, all of our brands were less promotional in the current-year period as compared~~ to ~~the prior-year period as a result of improved~~ sell- through ~~of our~~ seasonal ~~inventory~~inventories.

Gross profit for the Direct-to-Consumer segment increased slightly as a result of the increase in catalog circulation but decreased ~~slightly~~230 basis points as a percentage of net sales primarily due to the mix of food and non-food catalog sales for ~~Fiscal~~the ~~2011~~current-year period as compared to the prior-year period.

Occupancy and Buying

	ThirteenWeeks Ended				ThirteenWeeks Ended				Change as a
(Dollars in millions)	~~October~~April 2928, ~~2011~~2012		% of NetSales		~~October~~April 30, ~~2010~~2011		% of NetSales		Percentage ofNet Sales
Consolidated occupancy and buying	$	8481.13	1916.69	%	$	9289.74	2017.07	%	(0.48	)%

Consolidated occupancy and buying expenses decreased both in dollar amount and as a percentage of net sales primarily as a result of ~~168~~157 net store closings during the preceding twelve-month period as part of our initiative to close under-performing stores~~, as well as from rent reductions secured from landlords as a result of lease negotiations~~.

Occupancy and buying expenses for our Retail Stores segment as a percentage of Retail Stores net sales decreased 3050 basis points. Occupancy and buying expenses as a percentage of net sales decreased ~~120~~80 basis points for LANE BRYANT, ~~and~~10 ~~decreased 110~~ basis points ~~for CATHERINES. For~~ FASHION BUG, ~~buying~~ and ~~occupancy~~50 ~~expenses decreased in dollar amount but increased 120~~ basis points asfor ~~a percentage of net sales as a result of negative leverage from the decrease in comparable store sales~~CATHERINES.

Occupancy and buying expenses for our Direct-to-Consumer segment increased slightly in dollar amount ~~but~~and ~~decreased~~increased 70200 basis points as compared to the prior-year period ~~as a result of the increase in net sales~~.

Selling, General, and Administrative

	ThirteenWeeks Ended				ThirteenWeeks Ended				Change as a
(Dollars in millions)	~~October~~April 2928, ~~2011~~2012		% of NetSales		~~October~~April 30, ~~2010~~2011		% of NetSales		Percentage ofNet Sales
Consolidated selling, general, and administrative	$	~~140~~137.78	3228.76	%	$	~~145~~154.06	3130.37	%	1(2.41	)%

32Consolidated selling, general, and administrative expenses decreased in dollar amount primarily as a result of a combination of lower store payroll and store-related expenses as a result of operating fewer stores and lower advertising expenses.

Retail Stores segment selling, general, and administrative expenses as a percentage of Retail Stores net sales decreased 140 basis points as compared to the prior-year period. Selling, general, and administrative expenses as a percentage of net sales decreased 110 basis points for LANE BRYANT, 50 basis points for FASHION BUG, and 310 basis points for CATHERINES.

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~~Consolidated selling~~Selling, general, and administrative expenses ~~decreased~~for inour ~~dollar~~Direct-to-Consumer ~~amount~~segment ~~primarily~~decreased as420 abasis ~~result~~points ~~of a combination of lower store payroll and related expenses~~ as acompared ~~result~~to ofthe ~~operating~~prior-year ~~fewer~~period ~~stores~~primarily ~~and lower advertising expenses, but increased~~ as a ~~percentage of net sales as a~~ result of ~~negative~~ leverage ~~primarily~~ from the ~~decrease~~increase in ~~comparable~~Direct-to-Consumer ~~store~~segment net sales.

Retail Stores segment selling, general, and administrative expenses increased 140 basis points as a percentage of Retail Stores net sales as compared to the prior-year period. Selling, general, and administrative expenses as a percentage of net sales increased 130 basis points for LANE BRYANT, primarily as a result of the lack of leverage from flat comparative store sales, and increased 430 basis points for FASHION BUG, primarily as a result of negative leverage from the decrease in comparable store sales sales, but decreased 340 basis points for CATHERINES, primarily as a result of positive leverage from the increase in comparable store sales.

Selling, general, and administrative expenses for our Direct-to-Consumer segment decreased 190 basis points as compared to the prior-year period primarily as a result of leverage from the increase in Direct-to-Consumer segment net sales.

Depreciation and Amortization

	ThirteenWeeks Ended				ThirteenWeeks Ended				Change as a
(Dollars in millions)	~~October~~April 2928, ~~2011~~2012		% of NetSales		~~October~~April 30, ~~2010~~2011		% of NetSales		Percentage ofNet Sales
Depreciation and amortization	$	1314.62	3.20	%	$	1614.4	32.59	%	(0.31	)%

Depreciation and amortization expense decreased slightly in dollar amount primarily as a result of our operation of fewer stores in the current-year period as compared to the prior-year period ~~and~~but ~~the~~increased ~~write-down~~slightly as a percentage of ~~store~~net ~~assets~~sales ~~during~~as a result of the ~~Fiscal~~lack ~~2010~~of ~~Fourth~~leverage ~~Quarter~~from flat comparable store sales.

Restructuring and Other Charges

Restructuring and other charges for the Fiscal 2010 Third Quarter consisted primarily of cash severance and non-cash equity compensation costs in connection with the resignation of our former CEO, as well as lease termination costs for the closing of under-performing stores.

Income Tax Provision/(Benefit)

The income tax provision/(benefit) continues to reflect the impact of a valuation allowance recorded against our net deferred tax assets. Accordingly, the income tax provision for the Fiscal 2011 Third Quarter resulted primarily from (1) certain state and foreign income taxes payable as well as required deferred taxes; and (2) an increase in our liability for unrecognized tax benefits, interest, and penalties associated with uncertain tax positions. These items were partially offset by a reduction in our valuation allowance as a result of our ability to use additional income tax credits in the tax years that are currently under examination.

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The income tax benefit for the Fiscal 2010 Third Quarter was primarily a result of (1) a reduction in our valuation allowance due to our ability to carry back certain income tax credits in connection with our Fiscal 2009 net operating loss carryback and utilization of income tax credits in an amended income tax return; and (2) a net decrease in our liability for unrecognized tax benefits, interest, and penalties associated with uncertain tax positions. These items were offset by certain state and foreign income taxes payable as well as required deferred taxes.

Comparison of Thirty-nine Weeks Ended October 29, 2011 and October 30, 2010

Net Sales

	Thirty-nine Weeks Ended				Thirty-nine Weeks Ended				Change FromPrior Period
(Dollars in millions)	October 29, 2011		% of NetSales		October 30, 2010		% of NetSales		Dollars			Percent
LANE BRYANT(1)	$	735.6	51.3	%	$	722.8	48.6	%	$	12.8		1.8	%
FASHION BUG	438.2		30.6		505.1		34.0		(66.9		)	(13.2	)
CATHERINES	227.3		15.9		230.3		15.5		(3.0		)	(1.3	)
Total Retail Stores	1,401.1		97.8		1,458.2		98.1		(57.1		)	(3.9	)
Direct-to-Consumer	32.2		2.2		27.8		1.9		4.4			15.8
Consolidated net sales	$	1,433.3	100.0	%	$	1,486.0	100.0	%	$	(52.7	)	(3.5	)%

____________________

(1) Includes LANE BRYANT OUTLET stores.

Total Retail Stores segment consolidated net sales decreased primarily as a result of the impact of 168 net store closings during the preceding 12-month period, which was partially offset by a 15% increase in store-related e-commerce net sales for the first three quarters of Fiscal 2011 as compared to the first three quarters of Fiscal 2010. Comparable store sales were flat for the first three quarters of Fiscal 2011.

LANE BRYANT sales increased as compared to the prior-year period primarily as a result of a 3% increase in comparable store sales and a 15% increase in store-related e-commerce net sales, partially offset by 37 net store closings during the preceding 12-month period. Improvements in average dollar sale, units per transaction, and conversion rate were partially offset by declines in traffic levels as compared to the prior-year period.

FASHION BUG sales decreased primarily as a result of 96 net store closings during the preceding 12-month period and a 5% decrease in comparable store sales, partially offset by a 6% increase in store-related e-commerce net sales. A decrease in traffic levels as compared to the prior-year period was partially offset by improvements in average dollar sale and conversion rate.

CATHERINES sales decreased as compared to the prior-year period as a 24% increase in store-related e-commerce net sales was more than offset by the impact of 35 net store closings during the preceding 12-month period. Improvements in average dollar sale and units per transaction were more than offset by a decrease in traffic levels as compared to the prior-year period.

Retail Stores segment e-commerce net sales for the first three quarters of Fiscal 2011 represented 8% of Retail Stores segment net sales for the current-year period as compared to 6% of Retail Stores segment net sales for the prior-year period. The improvement in e-commerce net sales reflects our continuing efforts to enhance our customers’ on-line shopping experience, which include an expanding selection of new brands through our SONSI website and the September 2011 launch of new online outfitting technology that makes personalized style and fit recommendations. Customers can use these recommendations within the outfitting tool to facilitate viewing and buying of complete outfits. During October 2011 we also announced the launch of an international shipping program that enables customers in over 80 countries and territories worldwide to shop our brands online.

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During the first three quarters of Fiscal 2011 we recognized revenues of $13.6 million in connection with our loyalty card programs as compared to revenues of $13.9 million during the first three quarters of Fiscal 2010.

For our Direct-to-Consumer segment, the increase in net sales was attributable to a planned increase in the circulation of our FIGI’S Spring season and Gallery catalogs. The Direct-to-Consumer segment generates a substantial portion of its sales during the December holiday season.

Gross Profit

	Thirty-nine Weeks Ended				Thirty-nine Weeks Ended				Change as a
(Dollars in millions)	October 29, 2011		% of NetSales		October 30, 2010		% of NetSales		Percentage ofNet Sales
Consolidated gross profit	$	764.0	53.3	%	$	767.4	51.6	%	1.7	%

Consolidated gross profit as a percentage of net sales increased primarily as a result of improvements in gross margins from improved assortments and disciplined inventory management. We were more promotional in the first three quarters of Fiscal 2010 to sell through slow-moving seasonal inventory, which negatively impacted gross margins in the prior-year period. Gross margin for the first three quarters of Fiscal 2011 was moderately affected by cost increases associated with cotton, wool, and synthetic fabrics, as discussed in the overview above.

For our Retail Stores segment, gross profit as a percentage of Retail Stores net sales increased 230 basis points as compared to the prior-year period. Gross profit as a percentage of net sales increased 450 basis points for FASHION BUG, 180 basis points for CATHERINES, and 40 basis points for LANE BRYANT as compared to the prior-year period. As noted in the overview above, the increase in Retail Stores segment gross margin was primarily the result of improved assortments and disciplined inventory management, which resulted in faster inventory turnover of seasonal merchandise and fewer markdowns during the current-year period. Additionally, FASHION BUG and CATHERINES were less promotional in the current-year period as compared to the prior-year period as a result of improved sell-through of our seasonal inventory.

Gross profit for the Direct-to-Consumer segment increased as a result of the increase in catalog circulation but decreased slightly as a percentage of net sales primarily due to the mix of food and non-food catalog sales for Fiscal 2011.

Occupancy and Buying

	Thirty-nine Weeks Ended				Thirty-nine Weeks Ended				Change as a
(Dollars in millions)	October 29, 2011		% of NetSales		October 30, 2010		% of NetSales		Percentage ofNet Sales
Consolidated occupancy and buying	$	260.1	18.2	%	$	276.8	18.6	%	(0.4	)%

Consolidated occupancy and buying expenses decreased both in dollar amount and as a percentage of net sales primarily as a result of 168 net store closings during the preceding twelve-month period as part of our initiative to close under-performing stores, as well as from rent reductions secured from landlords as a result of lease negotiations.

Occupancy and buying expenses for our Retail Stores segment as a percentage of Retail Stores net sales decreased 70 basis points. Occupancy and buying expenses as a percentage of net sales decreased 160 basis points for LANE BRYANT, primarily as a result of leverage from the increase in comparable store sales, and 80 basis points for CATHERINES. For FASHION BUG, buying and occupancy expenses decreased in dollar amount but increased 50 basis points as a percentage of net sales as a result of negative leverage from the decrease in comparable store sales.

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Occupancy and buying expenses for our Direct-to-Consumer segment were comparable to the prior-year period.

Selling, General, and Administrative

	Thirty-nine Weeks Ended				Thirty-nine Weeks Ended				Change as a
(Dollars in millions)	October 29, 2011		% of NetSales		October 30, 2010		% of NetSales		Percentage ofNet Sales
Consolidated selling, general, and administrative	$	435.2	30.4	%	$	451.2	30.4	%	—	%

Consolidated selling, general, and administrative expenses were flat as a percentage of net sales but decreased in dollar amount primarily as a result of a combination of lower payroll as a result of operating fewer stores, higher credit income as a result of increased penetration in the usage of our private-label credit cards, and lower advertising expenses primarily due to the non-recurrence of our national television campaign that occurred in the prior-year period.

Retail Stores segment selling, general, and administrative expenses decreased 50 basis points as a percentage of Retail Stores net sales as compared to the prior-year period. Selling, general, and administrative expenses as a percentage of net sales decreased 130 basis points for LANE BRYANT, primarily as a result of leverage from the increase in comparable store sales, and decreased 90 basis points for CATHERINES, primarily as a result of the increase in store-related e-commerce net sales. Selling, general, and administrative expenses as a percentage of net sales increased 110 basis points for FASHION BUG, primarily as a result of store closings and negative leverage from the decrease in comparable store sales.

Selling, general, and administrative expenses for our Direct-to-Consumer segment increased as compared to the prior-year period primarily as a result of selling expenses related to our SONSI social media website, which was launched in the latter part of Fiscal 2010.

Depreciation and Amortization

	Thirty-nine Weeks Ended				Thirty-nine Weeks Ended				Change as a
(Dollars in millions)	October 29, 2011		% of NetSales		October 30, 2010		% of NetSales		Percentage ofNet Sales
Depreciation and amortization	$	42.5	3.0	%	$	50.1	3.4	%	(0.4	)%

Depreciation and amortization expense decreased primarily as a result of our operation of fewer stores in the current-year period as compared to the prior-year period and the write-down of store assets during the Fiscal 2010 Fourth Quarter.

Gain from Sale of Office Premises

During the Fiscal 2011 First Quarter we sold office premises in Hong Kong, which served as the home office for our international sourcing operations, for gross proceeds of $7.5 million and recognized a gain on the sale of $5.2 million. Our international sourcing operations now utilize leased space in Hong Kong.

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Restructuring and Other Charges

Restructuring and other charges for the ~~first~~Fiscal ~~three~~2012 ~~quarters~~First ofQuarter ~~Fiscal 2011~~ were primarily for professional fees and retention costs related to our previously announced plans to divest our FASHION BUG business and to undertake a comprehensive strategic review (see "RECENT DEVELOPMENTS" above), ~~non-cash store impairment charges,~~ and lease termination costs net of store-related deferred allowances in connection with our under-performing store closing programs.

Restructuring and other charges for the ~~first~~Fiscal ~~three~~2011 ~~quarters~~First ofQuarter ~~Fiscal 2010~~ consisted primarily of cash severance and non-cash equity compensation costs in connection with the resignation of our former CEO, ~~and~~as ~~lease~~well ~~termination~~as ~~costs related to our store closing program and accretion charges on~~ lease termination costs for ~~our~~the ~~store~~ closing ~~program~~of ~~announced~~under-performing ~~March 30, 2010~~stores.

~~Gain~~Income onTax ~~Repurchases of 1.125% Senior Convertible Notes~~Provision

~~During~~The income tax provision continues to reflect the ~~first~~impact ~~three~~of ~~quarters~~a valuation allowance recorded against our net deferred tax assets, as well as the availability of net operating loss carryforwards. Accordingly, the income tax provision for the Fiscal ~~2010~~2012 weFirst ~~repurchased~~Quarter ~~1.125%~~resulted ~~Notes~~primarily ~~with~~from (1) an ~~aggregate~~increase ~~principal~~in ~~amount~~our ofliability ~~$49.2~~for ~~million~~unrecognized tax benefits, interest, and ~~recognized~~penalties aprimarily ~~gain~~associated onwith the ~~repurchases~~identification of ~~$1.9~~a ~~million~~new uncertain tax position that required an accrual for multiple years, ~~net~~and of(2) ~~unamortized~~certain ~~issue~~state ~~costs~~and foreign income taxes payable as well as required deferred taxes.

~~Income~~The ~~Tax~~income ~~Provision/(Benefit)~~tax provision for the Fiscal 2011 First Quarter resulted primarily from certain state and foreign income taxes payable as well as required deferred taxes and an increase in our liability for unrecognized tax benefits, interest, and penalties associated with uncertain tax positions.

The income tax provision/(benefit) continues to reflect the impact of a valuation allowance recorded against our net deferred tax assets, as well as the availability of net operating loss carryforwards. Accordingly, the income tax provision for the first three quarters of Fiscal 2011 resulted primarily from (1) certain state and foreign income taxes payable as well as required deferred taxes; and (2) an increase in our liability for unrecognized tax benefits, interest, and penalties associated with uncertain tax positions. These items were partially offset by a reduction in our valuation allowance as a result of our ability to use additional income tax credits in the tax years that are currently under examination. 27

~~The~~Table ~~income tax benefit for the first three quarters~~ of Fiscal 2010 resulted primarily from (1) a reduction in our valuation allowance associated with our net operating loss carrybacks and the utilization of income tax credits in an amended income tax return; and (2) a net decrease in our liability for unrecognized tax benefits, interest, and penalties associated with uncertain tax positions. These items were partially offset by certain state and foreign income taxes payable as well as required deferred taxes.Contents

LIQUIDITY AND CAPITAL RESOURCES

The primary sources of funding for our working capital requirements are our available cash balances, cash flow from operations (including our private-label credit card programs), and our revolving credit facility. The following table highlights certain information related to our liquidity and capital resources:

(Dollars in millions)	~~October~~April 2928, ~~2011~~2012			January 2928,~~2011~~ 2012
Cash and cash equivalents	$	~~157~~214.81		$	~~117~~168.56
Available borrowing capacity under revolving credit facility	$	~~147~~150.40		$	~~153~~136.87
Working capital	$	~~305~~321.90		$	~~276~~297.63
Current ratio	12.92			2.1
Long-term debt to equity ratio	3735.95		%	3937.74		%

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Cash Provided by Operating Activities

~~Our~~Net ~~net~~ cash provided by operating activities was $6360.03 million for the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2011~~2012 as compared to net cash ~~used~~provided by operating activities of $1367.93 million for the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2010~~2011. The ~~increase~~decrease in cash provided by operating activities as compared to the prior-year period was primarily the result of ~~improved~~an ~~operating~~increase ~~results and a reduction~~ in our investment in inventories net of accounts payable inand ~~the current-year period, partially offset by the impact of the timing of~~ payments of ~~prepaid and~~ accrued expenses~~. Cash provided by operating activities for the first three quarters of Fiscal 2011 included $1.6 million of Federal income tax refunds~~, ~~while~~partially ~~cash~~offset ~~used~~ by ~~operations for the first three quarters of Fiscal 2010 included~~ $4510.07 million of ~~Federal income~~ tax refunds ~~related~~received in tothe acurrent-year ~~NOL carryback for Fiscal 2008 and an amended return~~period. Overall, inventories decreased 87% on a comparable store cost basis.

Cash Used by Investing Activities

Gross capital expenditures, excluding construction allowances received from landlords, were $2213.71 million for the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2011~~2012 as compared to $298.29 million for the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2010~~2011. Capital expenditures net of construction allowances received from landlords were $2112.57 million for the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2011~~2012 as compared to $268.58 million for the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2010. During the Fiscal~~ 2011 ~~Second Quarter we also acquired $2~~.~~9 million of equipment through a capital lease.~~ During the Fiscal 2011 First Quarter we received proceeds of $7.5 million from the sale of office premises in Hong Kong.

We anticipate that our projected gross capital expenditures for Fiscal 2011 will be approximately $38-$40 million before construction allowances received from landlords as compared to gross capital expenditures of $35.8 million for Fiscal 2010. We anticipate that our Fiscal 2011 capital expenditures, net of construction allowances received from landlords, will be approximately $36-$38 million as compared to net capital expenditures of $32.8 million for Fiscal 2010. We expect to make these expenditures according to disciplined return on investment criteria for 9 new store openings, store remodels, and store refurbishments; for fixturing for new merchandise assortments; to test brand combinations and conversions; and for the implementation of information technology tools to assist in improving our business results. We expect to finance these capital expenditures primarily through internally-generated funds.

Cash Used by Financing Activities

During the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2011~~2012 we used $41.84 million of cash and during the first ~~three~~quarter ~~quarters~~ of Fiscal ~~2010~~2011 we used $41.76 million of cash for scheduled repayments of long-term borrowings. In addition, during the first three quarters of Fiscal 2011 we used $1.9 million of cash for payments of deferred financing fees related to our amended revolving credit facility (see “FINANCING; Revolving Credit Facility” below). During the Fiscal 2010 Second Quarter we repurchased $49.2 million aggregate principal amount of 1.125% Senior Convertible Notes due May 1, 2014 for an aggregate purchase price of $38.3 million.

Repurchases of Common Stock

In November 2007 our Board of Directors (the "Board") authorized a $200 million share repurchase program to make share repurchases from time to time in the open market or through privately-negotiated transactions. ~~The timing of such repurchases and the number of shares repurchased will depend on market conditions.~~ We ~~intend to hold shares repurchased as treasury shares. We~~ have not repurchased any shares of common stock subsequent to the Fiscal 2008 First Quarter. Shares repurchased under this program have been held as treasury shares.

38Our revolving credit facility (see "FINANCING; Revolving Credit Facility" below) allows the repurchase of our common stock subject to maintaining a minimum level of “Excess Availability” (as defined in the Agreement) for the six months preceding the date of such repurchase, as of the date of such repurchase, and on a projected pro forma basis for the 12 consecutive fiscal months thereafter. The Agreement allows common stock repurchases at lower levels of “Excess Availability” subject to maintaining a minimum “Fixed Charge Coverage Ratio” (as defined in the Agreement) on a pro forma basis for the 12 months immediately preceding such repurchase.

As a result of the planned acquisition of the Company by Ascena (see "RECENT DEVELOPMENTS" above), we do not expect to repurchase any further treasury shares and we expect the $200 million share repurchase program to expire in connection with consummation of the Merger.

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Our amended 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) for the six months preceding the date of such repurchase, as of the date of such repurchase, and on a projected pro forma basis for the 12 consecutive fiscal months thereafter. The agreement allows common stock repurchases at lower levels of “Excess Availability” subject to maintaining a minimum “Fixed Charge Coverage Ratio” (as defined in the facility agreement) on a pro forma basis for the 12 months immediately preceding such repurchase. See “PART II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” below for additional information regarding the share-repurchase program announced in November 2007.

Dividends

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 foreseeable future~~. ~~The~~ As ~~payment~~a result of ~~future dividends is within~~ the ~~discretion~~planned ofacquisition ~~our Board~~ of ~~Directors and will depend upon our future earnings, if any; our capital requirements; our financial condition; and other relevant factors. Our amended revolving credit facility allows~~ the ~~payment~~Company ofby ~~dividends~~Ascena ~~on our common stock subject to maintaining a minimum level of “Excess Availability”~~ (assee ~~defined~~"RECENT inDEVELOPMENTS" ~~the facility agreement~~above) ~~for the six months preceding the payment of such dividends~~, aswe ofdo ~~the~~not ~~date~~expect ofto ~~payment~~pay ofany ~~such~~future dividends, ~~and on a projected pro forma basis for the 12 consecutive fiscal months thereafter. The agreement allows the payment of dividends at lower levels of “Excess Availability” subject~~ to ~~maintaining~~our apublic ~~minimum “Fixed Charge Coverage Ratio” (as defined in the facility agreement) on a pro forma basis for the 12 months immediately preceding such payment~~shareholders.

FINANCING

Operating Leases

We lease substantially all of our operating stores and certain administrative facilities under non-cancelable operating lease agreements. Additional details on these leases, including minimum lease commitments, are included in “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; ~~Note~~NOTE 1715. ~~Leases~~LEASES” of our Annual Report on Form 10-K for the fiscal year ended January 29 28, ~~2011~~2012.

Revolving Credit Facility

OnWe ~~July 14,~~have ~~2011~~a ~~we entered into an amended and restated~~ loan and security agreement (the ~~“Amended~~ "Agreement”") for a $200 million senior secured revolving credit facility (the ~~“Amended~~ "Facility”"). The ~~Amended~~ Facility ~~replaces our $225 million senior secured revolving credit facility and~~ provides for committed revolving credit availability through July 14, 2016. In addition, the ~~Amended~~ Agreement includes an option allowing us to increase our credit facility to an amount not in excess of $300 million, based on certain terms and conditions. The ~~Amended~~ Facility may be used for working capital and other general corporate purposes, and provides that up to $100 million of the $200 million may be used for letters of credit. See “Item 1. Notes to Condensed Consolidated Financial Statements (Unaudited); ~~Note~~NOTE 3. ~~Long~~LONG-~~term~~TERM ~~Debt~~DEBT” above for further details regarding the ~~amended credit facility~~Facility. There were no borrowings outstanding under the ~~credit~~Facility ~~facility~~ as of ~~October~~April 2928, ~~2011~~2012.

The ~~Amended~~ Agreement provides for customary representations and warranties and affirmative covenants, and contains customary negative covenants. The ~~Amended~~ Agreement also provides for certain rights and remedies if there is an occurrence of one or more events of default under the terms of the ~~agreement~~Agreement. Under certain conditions the maximum amount available under the ~~agreement~~Agreement may be reduced or terminated by the lenders and the obligation to repay amounts outstanding under the ~~agreement~~Agreement may be accelerated. At all times we are required to maintain Excess Availability (as defined in the ~~Amended~~ Agreement) of at least the greater of 10% of the Borrowing Base (as defined in the ~~Amended~~ Agreement) or $15~~,000,000~~ million. As of ~~October~~April 2928, ~~2011~~2012, the Excess Availability under the credit facility was $~~171~~169.5 million and we were in compliance with all of the covenants included in the facility.

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Long-term Debt

~~See~~Upon consummation of the Merger (see "RECENT DEVELOPMENTS" above), a "Fundamental Change" as defined in the Indenture for the 1.125% Senior Convertible Notes due May 1, 2014 (the "1.125% Notes") would occur (see “~~PART~~Item I8. Financial Statements and Supplementary Data; ~~Item~~NOTE 1A5. ~~Risk~~LONG-TERM ~~Factors~~DEBT” of our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012). As ~~for~~ a ~~discussion~~result, ofeach ~~the~~"Holder" ~~potential~~(as ~~impact~~defined toin ~~our~~the ~~liquidity~~1.125% asNotes) awould ~~result~~have of the ~~occurrence~~right, ofat athe ~~“fundamental~~Holder's ~~change”~~option, asto ~~defined~~require inus ~~the~~to ~~prospectus~~repurchase ~~filed~~for incash ~~connection~~that ~~with~~Holder's ~~our~~ 1.125% ~~Senior~~Notes ~~Convertible~~for ~~Notes~~100% ~~due~~of ~~May~~the 1,principal ~~2014~~amount of the notes plus accrued and unpaid interest.

Additional information regarding our long-term borrowings is included in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; ~~Financing~~FINANCING; Long-term Debt” and “Part II, Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; ~~Note~~NOTE 75. ~~Long~~LONG-~~term~~TERM ~~Debt~~DEBT” of our Annual Report on Form 10-K for the fiscal year ended January 2928, ~~2011~~2012.

In Fiscal 2011 we plan to continue to utilize our combined financial resources to fund our inventory and inventory-related purchases, advertising and marketing initiatives, and our store development and infrastructure strategies. We believe our cash and cash equivalents, our operating agreements with Alliance Data related to our private-label credit cards, and our revolving credit facility will provide adequate liquidity for our business operations and growth opportunities during Fiscal 2011. However, our liquidity is affected by many factors, including some that are based on normal operations and some that are related to our industry and the economy.29

WeTable may seek, as we believe appropriate, additional debt or equity financing to provide capital for corporate purposes or to fund strategic business opportunities. We may also elect to redeem debt financing prior to maturity or to purchase additional 1.125% Senior Convertible Notes under circumstances that we believe to be favorable to us. At this time we cannot determine the timing or amount of such potential capital requirements, which will depend on a number of factors, including demand for our merchandise, industry conditions, competitive factors, the market value of our outstanding debt, the condition of financial markets, and the nature and size of strategic business opportunities that we may elect to pursue.Contents

We plan to continue to utilize our combined financial resources to fund our inventory and inventory-related purchases, advertising and marketing initiatives, and our store development and infrastructure strategies. We believe our cash and cash equivalents, our operating agreements with Alliance Data related to our private-label credit cards, and our revolving credit facility will continue to provide adequate liquidity for our business operations and growth opportunities during Fiscal 2012. However, our liquidity could be affected by many factors, including consummation of the planned acquisition of the Company by Ascena, as well as factors that are based on normal operations or related to our industry and the economy.

MARKET RISK

As of ~~October~~April 2928, ~~2011~~2012 there were no borrowings outstanding under our revolving credit facility. Future borrowings made under the facility, if any, could be exposed to variable interest rates.

We are not subject to material foreign exchange risk, as our foreign transactions are primarily U.S. Dollar-denominated and our foreign operations do not constitute a material part of our business.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

~~See~~Not ~~“Item 1~~applicable. ~~Financial Statements; Notes to Condensed Consolidated Financial Statements; Note 13. Impact of Recent Accounting Pronouncements” above.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations; MARKET RISK,” above.

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Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate and in such a manner as to allow timely decisions regarding required disclosure. Our Disclosure Committee, which is made up of several key management employees and reports directly to the CEO and CFO, assists our management, including our CEO and CFO, in fulfilling their responsibilities for establishing and maintaining such controls and procedures and providing accurate, timely, and complete disclosure.

As of the end of the period covered by this report on Form 10-Q (the “Evaluation Date”), our Disclosure Committee, under the supervision and with the participation of management, including our CEO and CFO, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our management, including our CEO and CFO, has concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective. Furthermore, there has been no change in our internal control over financial reporting that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

InOn ~~August~~May ~~2009~~4, ~~Sharon~~2012, ~~Bates~~a Verified Shareholder Derivative and ~~Tamara~~Class ~~Baggett~~Action Complaint captioned Pamela Kraus v. Charming Shoppes, ~~former~~Inc., ~~Store~~et ~~Sales~~al., ~~Managers~~No. 2012-04154, was filed in the Court of Common Pleas of Bucks County, Pennsylvania (the “~~SSMs~~Kraus Complaint”). The Kraus Complaint purports to assert claims derivatively on behalf of ~~stores~~the ~~under~~Company ~~our~~and ~~trade~~names ~~name~~as ~~“Catherines~~defendants the members of the Board,” ~~filed~~as awell as the Company and Ascena. The Kraus Complaint alleges, among other things, that the Company's directors breached their fiduciary duties to the Company’s shareholders in connection with the ~~United~~Offer ~~States~~and ~~District~~the ~~Court~~Merger, ~~District~~and offurther ~~Connecticut,~~claims ~~against~~that ~~Catherines,~~Ascena ~~Inc.~~aided ~~(“Catherines”)~~and abetted those alleged breaches of fiduciary duty. The ~~complaint,~~Kraus asComplaint ~~amended,~~further alleges that the ~~plaintiffs~~Company’s ~~were~~directors ~~unlawfully~~engaged ~~denied~~in ~~overtime~~abuse ~~compensation. See~~of ~~“Item~~control 3and gross mismanagement by entering into the Merger Agreement. ~~Legal~~The ~~Proceedings”~~Kraus ofComplaint ~~our~~also ~~Annual~~alleges ~~Report~~that onthe ~~Form~~Offer 10and Merger involve an unfair and self-Kserving ~~for~~sales ~~the~~process ~~fiscal~~with ~~year~~preclusive ~~ended~~deal ~~January~~protection 29devices, ~~2011~~and ~~for~~that ~~further~~the ~~discussion~~Company’s directors agreed to the transactions to benefit themselves personally. The Kraus Complaint seeks rescission of the ~~complaint~~Merger Agreement and injunctive relief, including an order prohibiting defendants from consummating the Offer and Merger, and an award of attorneys’ and other fees and costs, in addition to other relief.

On ~~July~~May 154, ~~2011~~2012, the ~~Court~~Company ~~entered~~received ana ~~order~~letter ~~granting~~from ~~preliminary~~counsel ~~approval~~for toMario aLamanna ~~settlement~~(the ~~reached~~“Demand byLetter”) demanding that the ~~parties~~Board ~~and~~commence an action on ~~July~~behalf ~~27,~~of ~~2011~~the Company against the ~~parties~~individual ~~signed~~members aof ~~formal~~the ~~Settlement~~Board ~~Agreement~~for breaches of fiduciary duty arising out of allegedly wrongful conduct in connection with the Offer and ~~Release~~the Merger. ~~The~~ Specifically, ~~Settlement~~the ~~Agreement~~Demand ~~received~~Letter ~~final~~asserts ~~court~~that ~~approval~~the onCompany’s ~~November~~directors 21breached their duties of loyalty, ~~2011~~care, good faith, and/or candor by causing and/or allowing the Company to be acquired by Ascena for inadequate consideration and by failing to adequately shop the Company before the transaction. The ~~terms~~Demand ofLetter also alleges that the ~~settlement~~Company’s ~~will~~directors ~~not~~agreed ~~have~~to athe ~~material~~Offer ~~impact~~to onbenefit ~~our~~themselves ~~financial~~personally, ~~condition~~approved improper deal protection devices, and ignored or ~~results~~failed to protect against conflicts of ~~operations~~interest.

~~Except~~On ~~for~~May ~~ordinary~~7, ~~routine~~2012, ~~litigation~~a ~~incidental~~Verified toShareholder ~~our~~Derivative ~~business~~and Class Action Complaint captioned Philip E. Ricciardi v. Charming Shoppes, ~~there~~Inc., ~~are~~et noal., ~~other~~No. ~~material~~2012-04154, ~~pending~~was ~~legal~~filed ~~proceedings~~in ~~that~~the weCourt orof ~~any~~Common Pleas of ~~our~~Bucks ~~subsidiaries~~County, ~~are~~Pennsylvania a(the ~~party~~“Ricciardi Complaint”). The Ricciardi Complaint purports to, orassert ofboth ~~which~~direct ~~any~~and derivative claims and names as defendants the members of ~~their~~the ~~property~~Board, isas well as the ~~subject~~Company, Ascena, and Colombia. ~~There~~ The ~~are~~Ricciardi noComplaint ~~proceedings~~alleges, among other things, that the Company’s directors breached their fiduciary duties to the Company’s shareholders in connection with the Offer and the Merger, ifand ~~adversely~~further ~~determined~~claims that Ascena and Colombia aided and abetted those alleged breaches of fiduciary duty. The Ricciardi Complaint further alleges that the Company’s directors engaged in self-dealing and corporate waste by entering into the Merger Agreement. The Ricciardi Complaint seeks rescission of the Merger Agreement and injunctive relief, ~~are~~including ~~expected~~an toorder ~~have~~prohibiting adefendants ~~material~~from ~~adverse~~consummating ~~effect~~the onOffer ~~our~~and ~~financial~~Merger, ~~condition~~and oran ~~results~~award of ~~operations~~attorneys’ and other fees and costs, in addition to other relief.

On May 14, 2012, the Company received a letter dated May 8, 2012, from counsel for Phillip E. Ricciardi (the “Ricciardi Demand Letter”) demanding that the Board conduct an investigation and commence an action on behalf of the Company against the individual members of the Board for breaches of fiduciary duty arising out of allegedly wrongful conduct in connection with the Offer and the Merger. The Ricciardi Demand Letter refers to the allegations set forth in the Ricciardi Complaint.

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On May 8, 2012, a Verified Class Action and Shareholder Derivative Complaint captioned Mario Lamanna v. Charming Shoppes, Inc., et al., No. 2012-04275, was filed in the Court of Common Pleas of Bucks County, Pennsylvania (the “Lamanna Complaint”). The Lamanna Complaint purports to assert both direct and derivative claims and names as defendants the members of the Board, the Company, Ascena, and Colombia. The Lamanna Complaint alleges, among other things, that the Company’s directors engaged in waste of corporate assets and breached their fiduciary duties to the Company’s shareholders in connection with the Offer and the Merger, and further claims that Ascena and Colombia aided and abetted those alleged breaches of fiduciary duty. Specifically, the Lamanna Complaint asserts that the Company’s directors wrongfully allowed or caused the Company to be acquired by Ascena for unfair and inadequate consideration. The Lamanna Complaint further alleges that the Company’s directors failed to take steps to maximize the value of the Company to its public shareholders, failed to properly value the Company and its assets and operations, and ignored or failed to protect against conflicts of interest with respect to the Offer and Merger. The Lamanna Complaint also alleges that the Offer and Merger involve unfair and preclusive deal protection devices, and that the Company’s directors agreed to the transactions to benefit themselves personally. As to the Board’s rejection of the Demand Letter, the Lamanna Complaint alleges the Board’s rejection was unreasonable, not in good faith, and not protected by the business judgment rule. The Lamanna Complaint seeks rescission of the Merger Agreement and injunctive relief, including an order that prohibits defendants from consummating the Offer and Merger, and an award of attorneys’ fees and other fees and costs, in addition to other relief.

On May 9, 2012, a Verified Shareholder Derivative and Class Action Complaint captioned Robert Steinfeld v. Charming Shoppes, Inc., et al., No. 2012-04284, was filed in the Court of Common Pleas of Bucks County, Pennsylvania (the “Steinfeld Complaint”). The Steinfeld Complaint purports to assert claims derivatively on behalf of the Company and names as defendants the members of the Board, as well as the Company and Ascena. The Steinfeld Complaint alleges, among other things, that the Company's directors breached their fiduciary duties to the Company's shareholders in connection with the Offer and the Merger, and further claims that Ascena aided and abetted those alleged breaches of fiduciary duty. The Steinfeld Complaint further alleges that the Company's directors engaged in abuse of control and gross mismanagement by entering into the Merger Agreement. The Steinfeld Complaint also alleges that the Offer and Merger involve an unfair and self-serving sales process with preclusive deal protection devices, and that the Company's directors agreed to the transactions to benefit themselves personally. The Steinfeld Complaint seeks rescission of the Merger Agreement and injunctive relief, including an order prohibiting defendants from consummating the Offer and Merger, and an award of attorneys’ and other fees and costs, in addition to other relief.

On May 22, 2012, a Verified Class Action and Shareholder Derivative Complaint captioned John Vineyard v. Charming Shoppes, Inc., et al., No. 2012-04715, was filed in the Court of Common Pleas of Bucks County, Pennsylvania (the “Vineyard Complaint”). The Vineyard Complaint purports to assert both direct and derivative claims and names as defendants the members of the Board, the Company, Ascena, and Colombia. The Vineyard Complaint alleges, among other things, that the Company's directors engaged in waste of corporate assets and breached their fiduciary duties to the Company's shareholders in connection with the Offer and the Merger, and further claims that Ascena and Colombia aided and abetted those alleged breaches of fiduciary duties. Specifically, the Vineyard Complaint asserts that the Company's directors wrongfully allowed or caused the Company to be acquired by Ascena for unfair and inadequate consideration. The Vineyard Complaint further alleges that the Company's directors failed to take steps to maximize the value of the Company to its public shareholders, failed to properly value the Company and its assets and operations, and ignored or failed to protect against conflicts of interest with respect to the Offer and Merger. The Vineyard Complaint also alleges that the Offer and Merger involve unfair and preclusive deal protection devices, and that the Company's directors agreed to the transactions to benefit themselves personally. In addition, the Vineyard complaint alleges that the defendants disseminated a materially false and misleading Schedule 14d-9. The Vineyard Complaint seeks rescission of the Merger Agreement and injunctive relief, including an order that prohibits defendants from consummating the Offer and Merger, and an award of attorneys' fees and other fees and costs, in addition to other relief.

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On May 23, 2012, an Individual and Class Action Complaint captioned Judith Nadler v. Charming Shoppes, Inc., et al., No. 2:12-cv-02838-HB, was filed in the United States District Court for the Eastern District of Pennsylvania (the “Federal Action”). The complaint in the Federal Action names as defendants the Company and the members of the Board. The complaint in the Federal Action alleges, among other things, that defendants disseminated a Schedule 14d-9 in which they made untrue statements of material facts or failed to state all material facts necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading, or engaged in deceptive or manipulative acts or practices. The complaint in the Federal Action also alleges that the Offer and the Merger are on terms that are fundamentally unfair. The Federal Action seeks injunctive relief, including an order that prohibits defendants from consummating the Offer and Merger, and an award of attorneys' fees and other fees and costs, in addition to other relief.

On May 23, 2012, by agreement of the parties, a Stipulation and Order Regarding Consolidation of Related Actions and Appointment of Lead Counsel was filed with the Court of Common Pleas, Bucks County, Pennsylvania with regard to the actions described in the Kraus Complaint, the Ricciardi Complaint, the Lamanna Complaint, the Steinfeld Complaint, and the Vineyard Complaint. The court approved the order on May 24, 2012, which consolidated these proceedings before the Court of Common Pleas, Bucks County, Pennsylvania, into a single case captioned In Re Charming Shoppes, Inc. Derivative and Class Action Litigation, No. 2012-04154 (the “Consolidated Action”). Also on May 24, 2012, the plaintiffs in the Consolidated Action filed a Verified Amended Class Action and Derivative Complaint (the “Amended Complaint”) that purports to assert both direct and derivative claims and names as defendants the members of the Board, the Company, Ascena, and Colombia. The Amended Complaint alleges, among other things, that the Company's directors engaged in waste of corporate assets and breached their fiduciary duties to the Company's shareholders in connection with the Offer and the Merger, and further claims that Ascena and Colombia aided and abetted those alleged breaches of fiduciary duties. Specifically, the Amended Complaint asserts that the Company's directors wrongfully allowed or caused the Company to be acquired by Ascena for unfair and inadequate consideration. The Amended Complaint further alleges that the Company's directors failed to take steps to maximize the value of the Company to its public shareholders, failed to properly value the Company and its assets and operations, and ignored or failed to protect against conflicts of interest with respect to the Offer and Merger. The Amended Complaint also alleges that the Offer and Merger involve unfair and preclusive deal protection devices, and that the Company's directors agreed to the transactions to benefit themselves personally. In addition, the Amended Complaint alleges that the Schedule 14d-9 was materially false and misleading. The Amended Complaint seeks rescission of the Merger Agreement and injunctive relief, including an order that prohibits defendants from consummating the Offer and Merger, and an award of attorneys’ fees and other fees and costs, in addition to other relief.

The defendants named in the Consolidated Action and the Federal Action (collectively, the “Defendants”) believe that the Consolidated Action and the Federal Action are entirely without merit, and that they have valid defenses to all claims raised by Judith Nadler and the plaintiffs named in the Consolidated Action (collectively, the “Plaintiffs”). Nevertheless, and despite their belief that they ultimately would have prevailed in the defense of the Plaintiffs' claims, to avoid the costs, disruption and distraction associated with such litigation, on May 31, 2012, the Defendants entered into a Memorandum of Understanding (“MOU”) with the Plaintiffs. Under the MOU, the Plaintiffs and the purported class of Company shareholders they represent agreed to negotiate and present a final stipulation of settlement to the court presiding over the Consolidated Action which provides for the dismissal with prejudice of the Consolidated Action and the Federal Action and the discharge and release of the Defendants, their agents, advisors, and certain affiliated parties from and against all direct, derivative, legal, or equitable claims, known and unknown, that are based on, arise out of, or relate in any way, directly or indirectly, to the allegations and claims in the Consolidated Action, the Federal Action, the Offer, the Merger, and other transactions contemplated by the Merger Agreement (collectively, the “Contemplated Transactions”), the negotiations and deliberations related to the Merger Agreement, the various public filings relating to the Contemplated Transactions, and certain other potential legal or equitable claims described more fully in the MOU. In exchange for such settlement and release, the parties agreed, after arm's length discussions between and among the Defendants and Plaintiffs, that the Company would include additional supplemental disclosures in the Schedule 14d-9, although the Company and the other Defendants do not make any admission that such additional supplemental disclosures are material as a matter of law or in the context of a shareholder's decision to tender shares of the Company's common stock into and accept the Offer. After reaching agreement on the substantive terms of the MOU, the parties also agreed that they would attempt to reach an agreement as to an amount of attorneys' fees and

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expenses that the Company, or its successor, will pay to Plaintiffs' counsel. If the parties are not able to agree on the amount of fees payable to Plaintiffs' counsel within two weeks of executing the MOU, then Plaintiffs' counsel will seek an award of attorneys' fees and expenses from either the court presiding over the Consolidated Action or the court presiding over the Federal Action, but not both. If agreement is reached on the amount of attorneys' fees and expenses payable to Plaintiffs' counsel, Plaintiffs' counsel will seek an award of attorneys' fees and expenses and the Company, or its successor, will pay an amount decided by the court, not to exceed the agreed upon amount. Defendants reserved their right to contest the amount of fees and expenses sought by Plaintiffs' counsel. The settlement is also contingent upon, among other things, consummation of the Contemplated Transactions and the approval of the Court of Common Pleas, Bucks County, Pennsylvania. The MOU recognizes, among other things, that the parties will cooperate and use their best efforts to execute a Stipulation of Settlement and present the Stipulation of Settlement and such other documentation as may be required by the court within thirty (30) days from the date of the MOU in order to obtain court approval of the settlement.

The MOU provides that the Defendants deny that they committed any violation of law or breach of duty or acted improperly in any way, and they believe that they acted properly at all times and that the Consolidated Action and the Federal Action have no merit, but wish to settle the Consolidated Action and the Federal Action in order to avoid the costs, disruption and distraction of further litigation.

Any settlement will not affect the amount of the Offer Price or the Merger consideration. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the Court of Common Pleas, Bucks County, Pennsylvania will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the MOU may be terminated. In the event that the MOU is not approved and the conditions described above are not satisfied, the Defendants will continue to vigorously defend the Consolidated Action and the Federal Action.

Except for the foregoing and for ordinary routine litigation incidental to our business, there are no other material pending legal proceedings that we or any of our subsidiaries are a party to, or of which any of their property is the subject. There are no other proceedings that, if adversely determined, are expected to have a material adverse effect on our financial condition or results of operations.

Item 1A. Risk Factors

As a result of the ~~information~~Offer and Merger Agreement discussed in "Part I; Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations; RECENT DEVELOPMENTS” above and elsewhere in this report, we have included the following risk factor in “Part I; Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations; FORWARD-LOOKING STATEMENTS” above.

~~The~~Uncertainties ~~failure~~related to ~~successfully~~the ~~implement~~acquisition of the Company by Ascena Retail Group, orInc., toincluding the ~~manage~~timing of completion of the ~~risks~~tender ~~associated~~offer ~~with~~and merger, ~~our~~how ~~plans~~many toof ~~divest~~ our ~~FASHION~~shareholders ~~BUG~~will ~~business~~tender ~~and~~their ~~focus~~stock onin the ~~growth~~offer, ofthe ~~our~~possibility ~~LANE~~that ~~BRYANT~~competing ~~business~~offers will be made, the possibility that various closing conditions for the tender offer or ~~additional~~merger ~~courses~~may ofnot ~~action~~be satisfied or waived, iflitigation ~~any~~related to the tender offer and merger, ~~that~~and ~~may~~the ~~result~~impact ~~from~~on ~~our~~the ~~planned~~tender ~~comprehensive~~offer ~~strategic~~and ~~review~~merger of general economic and business conditions.

With the exception of the above risk factor, we have not become aware of any material changes in the risk factors previously disclosed in “Part I; Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 29 28, ~~2011~~2012.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~34

On November 8, 2007 we publicly announced that our Board of Directors granted authority to repurchase shares of our common stock up to an aggregate value of $200,000,000. Shares may be purchased in the open market or through privately-negotiated transactions, as market conditions allow. During Fiscal 2008 we repurchased a total of 505,406 shares of stock ($5.21 average price paid per share) in the open market under this program. We have not repurchased any shares of our common stock under this program subsequent to Fiscal 2008. As of October 29, 2011, $197,365,000 was available for future repurchases under this program. This repurchase program has no expiration date.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 8, 2007 we publicly announced that the Board granted authority to repurchase shares of our common stock up to an aggregate value of $200,000,000. Shares may be purchased in the open market or through privately-negotiated transactions, as market conditions allow. During Fiscal 2008 we repurchased a total of 505,406 shares of stock ($5.21 average price paid per share) in the open market under this program. We have not repurchased any shares of our common stock under this program subsequent to Fiscal 2008. As of April 28, 2012, $197,365,000 was available for future repurchases under this program. This repurchase program has no expiration date.

As a result of our entering into the Merger Agreement with Ascena and Colombia on May 1, 2012 (see "PART I. Item 2. Management's Discussion and Analysis of Financial Condition and Results of operations; RECENT DEVELOPMENTS" above), we do not expect to repurchase any further shares under this program and we expect this program to expire in connection with consummation of the Merger.

Item 6. Exhibits

The following is a list of Exhibits filed as part of this Quarterly Report on Form 10-Q. Where so indicated, Exhibits that were previously filed are incorporated by reference. For Exhibits incorporated by reference, the location of the Exhibit in the previous filing is indicated in parentheses.

Exhibit No.		Item
2.1		Agreement and Plan of Merger, dated as of May 1, 2012, by and among Charming Shoppes, Inc., Ascena Retail Group, Inc., and Colombia Acquisition Corp., incorporated by reference to Form 8-K of the Registrant dated April 30, 2012, filed on May 3, 2012 (File No. 000-07258, Exhibit 2.1).
3.1		Restated Articles of Incorporation, incorporated by reference to Form 10-Q of the Registrant for the quarter ended August 2, 2008 (File No. 000-07258, Exhibit 3.1).
3.2		Bylaws, as Amended and Restated, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 31, 2009 (File No. 000-07258, Exhibit 3.2).
4.1		Fourth Amended and Restated Loan and Security Agreement, dated July 14, 2011, by and among Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., FB Apparel, Inc., Catherines Stores Corporation, and Lane Bryant, Inc. as borrowers; a syndicate of banks and other financial institutions as lenders, including Wells Fargo Bank, National Association, as agent for the lenders; and certain of the Company’s subsidiaries as guarantors.*
10.1		Stock Appreciation Rights Agreement for grant of 400,000 SARs to Anthony M. Romano dated as of March 29, 2011, incorporated by reference to Form 8-K of the Registrant dated March 23, 2011, filed on March 29, 2011 (File No. 000-07258, Exhibit 10.1).
10.2		Second Amendment to Severance Agreement dated as of March 28, 2011 between Charming Shoppes, Inc. and Anthony M. Romano, incorporated by reference to Form 8-K of the Registrant dated March 23, 2011, filed on March 29, 2011 (File No. 000-07258, Exhibit 10.4).
10.3		Form of Stock Appreciation Rights Agreement for executive officers dated as of March 29, 2011, incorporated by reference to Form 8-K of the Registrant dated March 23, 2011, filed on March 29, 2011 (File No. 000-07258, Exhibit 10.5).
10.4		Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan (A Subplan under the 2010 Stock Award and Incentive Plan), Amended and Restated Effective June 24, 2010, incorporated by reference to Form 10-Q of the Registrant for the quarter ended April 30, 2011 (File No. 000-07258, Exhibit 10.4).
10.5		Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan (A Subplan under the 2010 Stock Award and Incentive Plan) Restricted Share Units Agreement – Share Settled, incorporated by reference to Form 10-Q of the Registrant for the quarter ended April 30, 2011 (File No. 000-07258, Exhibit 10.5).
10.6		Fourth Amended and Restated Guarantee, dated July 14, 2011, by Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., FB Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc., and certain of the Company’s subsidiaries for the benefit of the lenders party to the Fourth Amended and Restated Loan and Security Agreement, dated July 14, 2011, incorporated by reference to Form 8-K of the Registrant dated July 14, 2011, filed on July 19, 2011 (File No. 000-07258, Exhibit 10.1).
31.1		Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.**
101.SCH		XBRL Taxonomy Extension Schema.*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase.*
101.LAB		XBRL Taxonomy Extension Label Linkbase.*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase.*
101.DEF		XBRL Taxonomy Extension Definition Linkbase.*

4335

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101.SCH		XBRL Taxonomy Extension Schema.**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase.**
101.LAB		XBRL Taxonomy Extension Label Linkbase.**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase.**
101.DEF		XBRL Taxonomy Extension Definition Linkbase.**

Pursuant to Rule 406T of Regulation S-T, the XBRL-related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” as a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

* Exhibit 4.1 is filed with this Quarterly Report on Form 10-Q in order to include all exhibits and schedules to such previously filed documents. Confidential treatment has been requested for certain portions of this exhibit.36

** Pursuant to Rule 406T of Regulation S-T, the XBRL-related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” as a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CHARMING SHOPPES, INC.
		(Registrant)
Date:	~~December~~June 1, ~~2011~~2012	/S/ ANTHONY M. ROMANO
		Anthony M. Romano
		President
		Chief Executive Officer
Date:	~~December~~June 1, ~~2011~~2012	/S/ ERIC M. SPECTER
		Eric M. Specter
		Executive Vice President
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.		Item
2.1		Agreement and Plan of Merger, dated as of May 1, 2012, by and among Charming Shoppes, Inc., Ascena Retail Group, Inc., and Colombia Acquisition Corp., incorporated by reference to Form 8-K of the Registrant dated April 30, 2012, filed on May 3, 2012 (File No. 000-07258, Exhibit 2.1).
3.1		Restated Articles of Incorporation, incorporated by reference to Form 10-Q of the Registrant for the quarter ended August 2, 2008 (File No. 000-07258, Exhibit 3.1).
3.2		Bylaws, as Amended and Restated, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 31, 2009 (File No. 000-07258, Exhibit 3.2).
4.1		Fourth Amended and Restated Loan and Security Agreement, dated July 14, 2011, by and among Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., FB Apparel, Inc., Catherines Stores Corporation, and Lane Bryant, Inc. as borrowers; a syndicate of banks and other financial institutions as lenders, including Wells Fargo Bank, National Association, as agent for the lenders; and certain of the Company’s subsidiaries as guarantors.*
10.1		Stock Appreciation Rights Agreement for grant of 400,000 SARs to Anthony M. Romano dated as of March 29, 2011, incorporated by reference to Form 8-K of the Registrant dated March 23, 2011, filed on March 29, 2011 (File No. 000-07258, Exhibit 10.1).
10.2		Second Amendment to Severance Agreement dated as of March 28, 2011 between Charming Shoppes, Inc. and Anthony M. Romano, incorporated by reference to Form 8-K of the Registrant dated March 23, 2011, filed on March 29, 2011 (File No. 000-07258, Exhibit 10.4).
10.3		Form of Stock Appreciation Rights Agreement for executive officers dated as of March 29, 2011, incorporated by reference to Form 8-K of the Registrant dated March 23, 2011, filed on March 29, 2011 (File No. 000-07258, Exhibit 10.5).
10.4		Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan (A Subplan under the 2010 Stock Award and Incentive Plan), Amended and Restated Effective June 24, 2010, incorporated by reference to Form 10-Q of the Registrant for the quarter ended April 30, 2011 (File No. 000-07258, Exhibit 10.4).
10.5		Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan (A Subplan under the 2010 Stock Award and Incentive Plan) Restricted Share Units Agreement – Share Settled, incorporated by reference to Form 10-Q of the Registrant for the quarter ended April 30, 2011 (File No. 000-07258, Exhibit 10.5).
10.6		Fourth Amended and Restated Guarantee, dated July 14, 2011, by Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., FB Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc., and certain of the Company’s subsidiaries for the benefit of the lenders party to the Fourth Amended and Restated Loan and Security Agreement, dated July 14, 2011, incorporated by reference to Form 8-K of the Registrant dated July 14, 2011, filed on July 19, 2011 (File No. 000-07258, Exhibit 10.1).
31.1		Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.**
101.SCH		XBRL Taxonomy Extension Schema.**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase.*
101.LAB		XBRL Taxonomy Extension Label Linkbase.*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase.*
101.DEF		XBRL Taxonomy Extension Definition Linkbase.*

46* Pursuant to Rule 406T of Regulation S-T, the XBRL-related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” as a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

~~Table of Contents~~38

101.CAL		XBRL Taxonomy Extension Calculation Linkbase.**
101.LAB		XBRL Taxonomy Extension Label Linkbase.**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase.**
101.DEF		XBRL Taxonomy Extension Definition Linkbase.**

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