FORWARD LOOKING STATEMENTS

As noted above, this Annual Report on Form 10-K, including, without limitation, this Item 7, contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Actual results or developments could differ materially from those projected in such statements as a result of numerous factors, including, without limitation those risks and uncertainties set forth in Item 1A, Risk Factors which you are encouraged to read. The following discussion and analysis of our financial condition and results of operations should be read in light of those risks and uncertainties and in conjunction with our accompanying Consolidated Financial Statements and Notes thereto.

EXECUTIVE OVERVIEW

2008 Financial Summary

Fiscal 2008 was a challenging year for the retail industry, which has been significantly weakened by the volatile economic environment. We have seen a lack of consumer confidence which has resulted in a decrease in discretionary spending. In addition, like so many public companies, we incurred substantial decreases in our market capitalization during fiscal 2008, largely due to the volatility in the financial markets as a whole, especially during the fourth quarter of fiscal 2008. These economic conditions began to impact our business as early as the second half of 2007 when our sales slowed from a 5.0% comparative sales growth to a decline of 0.6%. During the first half of 2008, sales trends continued as they were during the second half of 2007 with a further decline of 0.8%, but then accelerated in the second half of 2008 to a decline of 7.5% particularly in the fourth quarter which had a decline of 9.3%.

In spite of the 4.3% drop in overall sales, or $19.9 million from fiscal 2007 levels, we did not allow our financial position to erode. We decreased our inventory position at the end of fiscal 2008 by $19.2 million, or 16%, as compared to the prior year and we reduced our capital expenditures by $8.8 million, or 41%, from prior year levels. At January 31, 2009, our total outstanding debt decreased by $7.1 million, or 12%, compared to February 2, 2008 and our availability under our credit facility at January 31, 2009 was $30.8 million. Our free cash flow (as defined below under "Presentation of Non-GAAP Measures") for fiscal 2008 improved by over $20 million and was approximately $10.6 million compared to negative free cash flow of $9.7 million for fiscal 2007. Our primary focus has shifted to:

• optimizing our free cash flow;

• maximizing our liquidity available under our revolving line of credit;

• efficiently managing inventory levels and monthly receipts to optimize gross margins; and

• continuing to develop and implement innovative practices and technology to improve customer service.

Also, we have taken further measures to maintain a positive free cash flow posture. In planning for another difficult year in 2009, with sales expected to drop by as much as 10%, we have prepared for generating positive free cash flow by:

• reducing our capital expenditures by over $7 million to less than $5 million for 2009, while still maintaining an innovative posture towards customer service;

• reducing our selling, general and administrative ("SG&A") expense levels for 2009 by almost 9%, or over $15 million, to an expected level of $162.5 million;

• appropriately maintaining fashion inventory levels such that our overall merchandise margins in fiscal 2009 are expected to improve by 225 to 275 basis points;

• managing fiscal 2009 inventory levels for further reductions of approximately 10%, or $10 million; and

• expecting to further reduce bank debt by over $10 million during 2009.

Based on these changes in our business and in spite of the expectation that sales will drop in 2009 by 10%, we are planning to generate free cash flow in 2009 of $15 million. The free cash flow generated will be used to further reduce

our existing bank debt. We started the year with liquidity under our revolving line of credit of over $30 million, which is expected to improve during the year from free cash flow generation. Our revolving line of credit does not expire until October, 2011 and it contains no financial covenants.

In addition, our objectives to further enhance our customer service and improve sales productivity will continue into 2009, unaffected by the poor economic conditions and the impact on our overall sales, by:

• continuing to transform our cultural focus towards an enhanced customer experience by providing our store sales associates and management with better sales training, development tools and monitoring capabilities;

• improving upon our methodology of planning and allocating appropriate assortments to each store, considering the demographics and lifestyle tendencies of each store location;

• continuing to grow, albeit more deliberately going forward, our direct businesses, including Living XL, Shoes XL and B&T Factory Direct;

• building our primary brands, Casual Male XL and Rochester Clothing, on web sites in the European Union which were launched in the third quarter of fiscal 2008; and

• focusing on growing our market share within the smaller size component of the big & tall target market.

As a result of the impact upon our shorter term profitability, and the decrease in our market value, we recorded substantial non-cash charges totaling $100.0 million, or $(2.42) per diluted share. Included in the $100.0 million of charges is $71.4 million related to the impairment of goodwill, trademarks and long-lived assets and $28.6 million for a valuation allowance against our deferred tax assets.

These non-cash charges masked our operating results for the year. Before considering these non-cash charges and an additional $2.0 million associated with certain one-time charges more fully described in "Selling, General and Administrative Expenses" below, our operating loss for fiscal 2008 was $3.6 million, compared to operating income for fiscal 2007 of $10.5 million. The adjusted operating loss of $3.6 million is a Non-GAAP measure, see Results of Operations - Net Income (Loss). The approximate $14.1 million drop in profitability on a sales decrease of approximately $20 million is more fully described below.

Presentation of Non-GAAP Measure

The presentation of non-GAAP free cash flow is not a measure determined by generally accepted accounting principles ("GAAP") and should not be considered superior to or as a substitute for net income (loss) or cash flows from operating activities or any other measure of performance derived in accordance with GAAP.

In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, "free cash flows" presented in this report may not be comparable to similar measures used by other companies. We calculate free cash flows as cash flow from operating activities ($23.2 million in 2008 and $11.7 million in 2007) less capital expenditures ($12.6 million in 2008 and $21.4 million in 2007). With respect to 2009 projected free cash flows of $15 million, the amount was calculated by subtracting estimated capital expenditures of approximately $5 million from estimated cash flow from operations of $20 million.

We believe that inclusion of this non-GAAP measure helps investors gain a better understanding of our performance, especially when comparing such results to previous periods.

SEGMENT REPORTING

We report our operations as one reportable segment, Big & Tall Men's Apparel, which consists of our two operating segments - Casual Male and Rochester. We consider our operating segments to be similar in terms of economic characteristic, production processes and operations, and have therefore aggregated them into a single reporting segment.

RESULTS OF OPERATIONS

Our fiscal year is a 52- or 53-week period ending on the Saturday closest to January 31. Both fiscal 2008 and fiscal 2007 were 52- week periods. Fiscal 2006, which ended February 3, 2007, covered 53 weeks. Comparable sales for fiscal 2007 were based on a 52-week comparison to fiscal 2006. Sales and operating income for the additional 53rd week in fiscal 2006 approximated $6.7 million and $1.0 million, respectively.

Comparable sales for all periods include our retail stores that have been open for at least one full fiscal year together with our e-commerce and catalog sales. Stores that have been remodeled, expanded or re-located during the period are also included in our determination of comparable sales. We include our direct businesses as part of our calculation of comparable sales since we are a multi-channel retailer, offering our customers convenient alternatives for their shopping. The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other companies.

SALES

Sales for fiscal 2008 decreased $19.9 million, or 4.3%, to $444.2 million as compared to $464.1 million for fiscal 2007. This decrease reflects the difficult economic and retail environment that we experienced this year. Reduced consumer spending and therefore lack of traffic to our stores has resulted in a very challenging year for us. The sales shortfall of $19.9 million was primarily attributable to a decrease in our comparable sales of 4.3%, which includes a 5.6% decrease from our core Casual Male and Rochester businesses. With a total decrease of 12.5%, our higher-end Rochester business has been affected the most by the downturn in the economy. Conversely, our value-oriented Casual Male XL outlet stores performed significantly better, with a comparable sales decrease of only 1% over the prior year. Our non-core businesses, which include Living XL, Shoes XL, B&T Factory Direct and our International Web stores, generated sales of $15.7 million for fiscal 2008 as compared to $8.9 million for fiscal 2007. Sales in our retail channel declined by 6.0%, while sales increased 4.4% in its direct channel.

Lack of traffic continues to be a substantial contributor to our sales shortfall. For fiscal 2008, our traffic was down 9.2% over last year. However, our conversion metric, which measures the percentage of people who come into the store and make a purchase, increased 6.3% over last year, helping to mitigate the lack of traffic.

Sales for the 52 weeks in fiscal 2007 were $464.1 million as compared to $465.4 million for the 53 weeks in fiscal 2006. Sales for the additional week in fiscal 2006 approximated $6.7 million. On a 52-week comparable basis, total sales for fiscal 2007 increased $5.4 million as compared to sales of $458.7 million for the 52 weeks of fiscal 2006.

The sales increase in fiscal 2007, on a 52 week comparable basis, was due to increases in our direct channels, including our new businesses, Living XL, Shoes XL and B&T Factory Direct, which had aggregate sales of $8.9 million for fiscal 2007. These increases were offset by decreases from both our Rochester Clothing and Casual Male XL stores. During the last six months of fiscal 2007, we started to feel the impact of the change in the economy and its negative impact on our holiday season. We felt a sharp drop in customer traffic during the fourth quarter, which approached almost a 7% decrease as we neared our holiday selling season. Comparable sales for fiscal 2007 increased 2% as compared to fiscal 2006, of which the retail channel had a decrease of 0.5% and our direct channel had an increase of 16.5%. Comparable sales from our core Casual Male and Rochester businesses, excluding the new businesses, for fiscal 2007 were up 0.3% from fiscal 2006.

In fiscal 2009, we are planning for an approximate 10% drop in our sales volume, based on our trends in the fourth quarter of fiscal 2008 and the economic conditions that are expected to continue through the year.

GROSS MARGIN

Gross margin rate for fiscal 2008 was 42.7% as compared to 44.4% for fiscal 2007 and 45.5% for fiscal 2006. The decrease of 170 basis points in the gross margin rate was comprised of a 60 basis point decrease in merchandise margin and a 110 basis point increase in occupancy costs, primarily due to a lower sales base.

Throughout fiscal 2008, we took additional markdowns on our seasonal merchandise to ensure that our inventory levels remained appropriate and, in some cases, accelerated our fourth quarter markdowns as a result of our fourth quarter sales shortfall. This impacted our merchandise margin for fiscal 2008; however, we believe that our inventory levels at January 31, 2009 are current and appropriate considering the continued uncertainty regarding the economy and its impact on our revenues for the early part of 2009.

The increase in our occupancy costs for fiscal 2008 was only 4.0% over the prior year. However, because of the lower sales base, the percentage impact to our gross margin rate is considerably higher. As part of our effort to control costs going into fiscal 2009, we are in discussions with many of our landlords to renegotiate existing rents and escalation provisions in our attempt to reduce our occupancy costs given the current economic climate.

The decrease in gross margin for fiscal 2007 of 110 basis points over fiscal 2006 was due to an 80 basis point increase in merchandise margin offset by a 60 basis point increase in occupancy costs, due to a lower sales base. The remaining change was due to a 130 basis point decrease in margin as the result of recording a $6.1 million charge for the write-down of inventory. The 80 basis point improvement in merchandise margin included the impact of approximately $2.0 million in accelerated markdowns incurred during the fourth quarter of fiscal 2007 to clear seasonal merchandise.

We are expecting a 225 to 275 basis point improvement in merchandise gross margin in fiscal 2009, as we continue to execute our merchandising and marketing strategies, and build upon our direct sourcing activities to lower our merchandise purchase costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses as a percentage of sales for fiscal 2008, 2007 and 2006 were 40.1%, 38.4% and 36.3%, respectively.

On a dollar basis, SG&A expenses of $178.1 million for fiscal 2008 were flat to fiscal 2007. SG&A expenses for our core businesses decreased $5.0 million, or 2.9%, as compared to fiscal 2007. The majority of the savings was from decreases in marketing, as a result of decreasing circulation of catalogs, productivity savings in our distribution center as a result of improved infrastructure and overall cost savings throughout the business. These cost savings were primarily offset by an increase of approximately $3.5 million related to expenses to support our growing non-core direct businesses, which include Shoes XL, Living XL, B&T Factory Direct and our International Web stores. Fiscal 2008 also includes a non-cash charge of $1.5 million for the acceleration of stock compensation expense associated with the repurchase of certain stock options and an additional $0.5 million related to non-recurring severance expense during the fourth quarter of fiscal 2008.

SG&A expenses in fiscal 2007 increased $9.2 million, or 5.5%, as compared to fiscal 2006. Fiscal 2006 included additional expenses of approximately $3.0 million attributable to the 53rd week in fiscal 2006. The total increase in SG&A expenses of $12.2 million, on a comparable basis to fiscal 2006 was due partly to our new businesses, B&T Factory Direct, Living XL and Shoes XL, which had total SG&A expenses of approximately $6.1 million. A substantial portion of these expenses were marketing costs associated with the new catalogs as well as our direct advertising campaigns. We also recognized an increase of approximately $2.0 million associated with our other direct businesses to support our increased growth from our Casual Male XL and Rochester Clothing catalogs and e-commerce sites. Legal expenses associated with protecting proprietary intangibles and contract rights related to our Rochester Clothing direct business, as well as other litigation, increased by $1.0 million. Also, we expended another $1.5 million in distribution costs associated primarily with start up costs associated with the investment in new sortation systems during 2007.

Tantamount to our strategy of improving profitability and growing operating margins is maintaining a firm control on the growth of our SG&A expenses. Although we believe that we can limit SG&A growth rates, except for certain programs to support our growth activities, unanticipated cost increases by our suppliers, or unanticipated costs that are necessary to support our overall activities could negatively impact our growth in profitability. For fiscal 2009, we have planned to reduce our SG&A costs by approximately $15.0 million. The majority of the reduction relates to: (i) decreased marketing costs for fiscal 2009 due to minimizing mass-media advertising and a more concentrated direct mail program, (ii) reduced corporate payroll costs as a result of head count reductions and pay freezes, (iii) cost savings

in our distribution center as a result of system enhancements and (iv) overall cost savings in store payroll as a result of changing our store operating hours to maximize selling productivity.

PROVISION FOR IMPAIRMENT OF ASSETS, INCLUDING GOODWILL

For fiscal 2008, we recorded a total impairment charge of $71.4 million. This total includes: (i) a charge of $63.1 million for the full impairment of our goodwill for both of our reporting units, (ii) a partial impairment of $2.5 million against our Rochester trademark and (iii) an impairment of long-lived assets of $5.8 million. For more information regarding these impairments, see "Critical Accounting Policies - Goodwill and Intangibles" and "Critical Accounting Policies - Impairment of Long-Lived Assets."

PROVISION FOR EMPLOYMENT CONTRACT TERMINATION

In the third quarter of fiscal 2006, we terminated certain employment agreements with Rochester management as part of our plan to integrate the remaining San Francisco-based Rochester operations into our headquarters in Canton, MA. In connection with that decision to terminate these agreements, we incurred a charge of $1.2 million in the third quarter of fiscal 2006 to accrue our remaining obligations pursuant to these employees' employment agreements. No accrual remains at January 31, 2009.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was $17.1 million for fiscal 2008, $17.4 million for fiscal 2007 and $15.0 million for fiscal 2006. The slight decrease in depreciation and amortization for fiscal 2008 as compared to fiscal 2007 is due to a reduction of assets related to the closing of Jared M. in fiscal 2007. The increase in fiscal 2007 as compared to fiscal 2006 was directly attributable to the capital expenditures associated with improving our infrastructure as well as new store growth, our re-branding efforts and remodeling of some of our older locations.

OTHER INCOME (EXPENSE)

During the first quarter of fiscal 2006, we sold our loss prevention subsidiary, LP Innovations, Inc. ("LPI"), for a purchase price of $5.2 million. At the time of the sale, we recognized an initial gain in the amount of $1.5 million which was recorded as other income for fiscal 2006. The gain of $1.5 million was offset slightly by approximately $0.4 million of unrelated non-operating expenses, primarily related to legal costs.

In connection with the LPI sale, we received a note for $2.2 million, representing a portion of the sale price, which we fully reserved against at the time of the sale. We are recognizing income as realizability of this note is assured. Accordingly, for each of the fiscal years 2008 and fiscal 2007, we recognized other income of $0.5 million.

INTEREST EXPENSE, NET

Net interest expense was $3.0 million in fiscal 2008 as compared to $4.3 million in fiscal 2007 and $5.5 million in fiscal 2006. The decrease in interest expense during fiscal 2008 as compared to fiscal 2007 was primarily due to a decreased interest rate on borrowings under our credit facility. In total, including our long-term debt, we had a slight increase in average borrowings during fiscal 2008 as compared to fiscal 2007; however, at January 31, 2009 our total debt is $7.1 million, or 12%, lower than at February 2, 2008.

See "Liquidity and Capital Resources" for more discussion regarding our current debt obligations and future liquidity needs.

DISCONTINUED OPERATIONS

The following table summarizes the results of operations for our Jared M.
business which we exited during the fourth quarter of fiscal 2007.



(in millions)                                    Fiscal 2008 (1)        Fiscal 2007 (2)         Fiscal 2006
Sales                                            $             -        $            3.1       $         2.1
Gross margin                                                   -                     0.4                 0.9

Selling, general and administrative expenses                  0.9                    4.5                 2.1
Provision for impairment of assets                             -                     1.5                  -
Depreciation and amortization                                  -                     0.2                  -

Loss before taxes                                            (0.9 )                 (5.8 )              (1.2 )
Provision for income taxes                                     -                     2.3                 0.5

Loss from discontinued operations                $           (0.9 )     $           (3.5 )              (0.7 )

(1) During the first quarter of fiscal 2008, we sold our Jared M. business to a third party for a cash purchase price of $250,000 and no gain or loss was realized on the sale. During the fourth quarter of fiscal 2008, we recorded a charge of $895,000 for the outstanding lease obligation for the Jared M. showroom. In fiscal 2007, when we decided to exit our Jared M. operations, the Jared M. showroom was being sub-leased and we did not believe any accrual was needed at that time. However, during fiscal 2008, we were not able to secure a sub-lease agreement to completely satisfy our obligations under the lease agreement. No income tax benefit was realized on this charge during fiscal 2008 due to the establishment of our full valuation allowance against all of our deferred tax assets.

(2) Discontinued operations for fiscal 2007 include a charge of $2.6 million, of which $1.1 million relates to the write-down of inventory and is included as part of gross margin. The remainder of the charge is for the impairment of fixed assets of $1.4 million and other current assets of $0.1 million.

INCOME TAXES

Pursuant to accounting rules, realization of our deferred tax assets, which relate principally to federal net operating loss carryforwards, which expire from 2018 through 2028, is dependent on generating sufficient taxable income in the near term. We had previously established a full valuation allowance against our deferred tax assets during fiscal years 2001 and 2002, based on the historical losses in those years. Then, as a result of transforming our Company, through acquisitions and divestures, from an operator of Levi'sฎ/Dockersฎ outlet stores to the market leader of men's big & tall apparel, our big & tall business had become profitable from an operating perspective. In fiscal 2005, we reversed $3.1 million and in fiscal 2006, we reversed the majority of the remaining valuation allowance, or $31.0 million.

At the end of fiscal 2006, we considered the positive evidence of thirteen consecutive quarters of positive comparable store sales, our continued improvement in operating income from fiscal 2002 to fiscal 2006, our expectations regarding the generation of future taxable income, and our market position and expected growth of our industry. However, the effect of the weakening economy on our retail business, especially in fiscal 2008, has had a significant impact to our revenue and profitability. Further, the conditions of the economy have also negatively impacted our market value as a result of the deterioration of the capital markets and resulted in substantial impairments which contributed to our operating loss. Accordingly, due to our cumulative operating losses as well as our uncertainty regarding the economy and our ability to generate future taxable income to realize all of our deferred tax assets, in the fourth quarter of fiscal 2008, we recorded a charge of $28.6 million to establish a full valuation allowance against our deferred tax assets.

As of January 31, 2009, we have net operating loss carryforwards of $79.6 million for federal income tax purposes and $54.1 million for state income tax purposes that are available to offset future taxable income, subject to certain annual usage limitations, through fiscal year 2028. As a result of the Casual Male acquisition and the issuance of additional equity in fiscal 2002, the utilization of approximately $24.7 million of the $79.6 million in federal net operating losses is subject to an annual limitation of approximately $4.8 million per year. Additionally, we have alternative minimum tax credit carryforwards of $2.2 million, which are available to further reduce income taxes over an indefinite period.

NET INCOME

The net loss for fiscal 2008 was $(109.3) million, or $(2.64) per diluted share,
compared to net income for fiscal 2007 of $0.4 million, or $0.01 per diluted
share, and $42.6 million, or $0.98 per diluted share, in fiscal 2006.



(in millions)                                 Fiscal 2008             Fiscal 2007           Fiscal 2006
Operating income (loss) before non-cash
and severance charges (1)                    $        (3.6 )         $        10.5         $        27.8
Severance costs and non-cash
acceleration of stock compensation
expense                                               (2.0 )                    -                   (1.2 )
Provision for impairment of assets,
including goodwill                                   (71.4 )                    -                     -

Operating income (loss)                      $       (77.0 ) (2)     $       10.5  (3)     $       26.6  (4)

Other income (expense)                                 0.5                     0.5                   1.1
Interest expense                                      (3.0 )                  (4.3 )                (5.5 )

Provision (benefit) for income taxes                 (28.9 ) (2)              (2.8 )               21.1  (3)
Loss from discontinued operations                     (0.9 )                  (3.5 )                (0.7 )

Net income (loss)                            $      (109.3 )         $         0.4         $        42.6

(1) Operating income (loss) before non-cash and severance charges of $(3.6) million is a Non-GAAP measure and is not meant to be considered superior to or as a substitute for operating income (loss), on a GAAP basis, of $(77.0) . . .