First Quarter Operating Results

Gross profit for the first quarter of fiscal 2011 was $21.9 million, or 42.1% of net sales, compared to $16.7 million, or 34.4% of net sales, in the first quarter of fiscal 2010. The 770 basis point improvement in gross profit margin was primarily driven by lower markdowns, as well as the leverage impact from higher sales as it relates to operational costs in our design, production and sourcing departments, as compared to the prior year.

In total, operating expenses were $23.2 million, or 44.5% of net sales, as compared to $23.3 million, or 48.1% of net sales, in the first quarter of fiscal 2010. The slight decrease in operating expenses was primarily due to reductions in advertising, depreciation and other store operating expenses, partially offset by an increase in corporate payroll expenses and professional/legal fees.

At April 2, 2011, cash and marketable securities totaled $21.2 million, as compared to $27.6 million in cash and marketable securities at April 3, 2010. Total inventory at cost increased 18.9% and compares to a decline of 25.8% at the end of the first quarter of fiscal 2010. The Company noted it is comfortable with the content and level of inventory at quarter end, with growth supporting its improved design and production calendar.

A table summarizing financial results follows:

Thirteen Weeks Ended
April 2, April 3,




($ thousands, except for per share data)
Net sales $ 52,099 $ 48,550
Operating loss $ (1,260 ) $ (6,618 )
Net loss $ (772 ) $ (4,081 )
Diluted loss per share $ (0.06 ) $ (0.32 )
Basic and diluted weighted average 12,817,000 12,771,000
shares outstanding
Number of stores open at end of period 280 285

Store Opening Plans

During the first quarter, the Company opened no new stores and closed two locations, ending the quarter with 280 stores in operation. For fiscal 2011, the Company expects to open no new additional stores and close approximately two additional existing locations, ending the year with approximately 278 locations and approximately 565,000 square feet in operation.

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