Operating loss for the second quarter of fiscal 2012 for the direct segment was $1.3 million as compared to $1.9 million in the prior year period. Included in the second quarter of fiscal 2012 was incremental gift card breakage income of $0.3 million, and the aforementioned costs related to the closing of our customer contact center of $0.3 million.

Balance Sheet Highlights

At the end of the second quarter of fiscal 2012, cash and cash equivalents were $11.7 million compared with $22.2 million at the end of the second quarter of fiscal 2011.

Total net inventories at the end of the second quarter of fiscal 2012 were $38.0 million compared with $39.9 million at the end of the second quarter of fiscal 2011. Inventory per average retail store was down 2.1% compared to the prior year period, and inventory for the direct segment was down 1.1% compared to the prior year.

First Six Month Results

For the six-month period ended July 28, 2012, total revenue increased 7.8% to $100.8 million from $93.5 million for the prior year period. Total gross margin was 33.3% compared to 30.4% for the prior year period. SG&A expenses were $43.1 million, or 42.7% of sales, for the first six months of fiscal 2012, compared to $43.3 million, or 46.3% of sales, for the prior year period.

The operating loss for the first six months of fiscal 2012 decreased to $8.5 million, compared to $14.8 million for the first six months of fiscal 2011.

Net loss for the first six months of fiscal 2012 decreased to $8.9 million, or $0.28 per diluted share, compared to a net loss of $14.1 million, or $0.45 per diluted share, for the first six months of fiscal 2011. Included in the first six months of fiscal 2012 is gift card breakage of $1.0 million, or $0.03 per diluted share, compared to $0.1 million, or $0.00 per diluted share, in first six months of fiscal 2011.

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