(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

This Quarterly Report on Form 10-Q includes forward looking statements. Certain matters discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and other sections of this Quarterly Report on Form 10-Q are forward looking statements intended to qualify for safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "may," "plan," "project," "predict" and similar expressions and include references to assumptions that the Company believes are reasonable and relate to its future prospects, developments and business strategies. Factors that could cause the Company's actual results to differ materially from those expressed or implied in such forward looking statements, include, but are not limited to those discussed under the heading "Item 3. Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report on Form 10-Q and:

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º the Company's business is impacted by general economic conditions and their effect on consumer confidence and spending patterns, which have been deteriorating significantly and may continue to do so for the foreseeable future;

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º the deteriorating economic conditions could negatively impact the Company's merchandise vendors and their ability to deliver products;

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º the Company's ability to successfully integrate its restructuring and cost reduction program;

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º the Company's ability to open and operate stores successfully and the potential lack of availability of suitable store locations on acceptable terms;

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º seasonal fluctuations in the Company's business;

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º the Company's ability to anticipate and respond to fashion trends, develop new merchandise and launch new product lines successfully;

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º the Company's dependence on mall traffic for its sales;

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º the Company's dependence on the success of its brand;

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º competition in the Company's market, including promotional and pricing competition;

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º the Company's reliance on the effective use of customer information;

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º the Company's ability to service any debt it incurs from time to time as well as its ability to maintain the requirements that the agreements related to such debt impose upon the Company;

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º the susceptibility of the Company's business to extreme and/or unseasonable weather conditions;

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º the Company's ability to retain, recruit and train key personnel;

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º the Company's reliance on third parties to manage some aspects of its business;

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º changes in the cost of raw materials, distribution services or labor, including federal and state minimum wage rates;

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º the potential impact of national and international security concerns on the retail environment, including any possible military action, terrorist attacks or other hostilities;

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º the Company's reliance on foreign sources of production, including the disruption of imports by labor disputes, political instability, legal and regulatory matters, duties, taxes, other charges and

quotas on imports, local business practices, potential delays in shipping and related pricing impacts and political issues and fluctuation in currency and exchange rates;

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º the potential impact of natural disasters and health concerns relating to outbreaks of widespread diseases, particularly on manufacturing operations of the Company's vendors;

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º the ability of the Company's manufacturers to manufacture and deliver products in a timely manner while meeting its quality standards;

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º the Company's ability to successfully integrate new or acquired businesses into its existing business;

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º the Company's reliance on manufacturers to maintain ethical business practices;

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º the Company's ability to protect its trademarks and other intellectual property rights;

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º the Company's ability to maintain, and its reliance on, its information technology infrastructure;

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º the effects of government regulation;

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º the control of the Company by its sponsors and any potential change of ownership of those sponsors; and

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º risks and uncertainties as described in the Company's documents filed with the SEC, including its Annual Report on Form 10-K, as filed on April 7, 2009.

The Company undertakes no obligation to revise the forward looking statements included in this Quarterly Report on Form 10-Q to reflect any future events or circumstances. The Company's actual results, performance or achievements could differ materially from the results expressed or implied by these forward looking statements.

Overview

The Company is a leading specialty retailer of fashion oriented, moderately priced women's apparel. The Company designs and sources its proprietary branded New York & Company merchandise sold exclusively through its national network of retail stores and E-commerce store at www.nyandcompany.com. The target customers for the Company's merchandise are fashion conscious, value sensitive women between the ages of 25 and 45. As of May 2, 2009, the Company operated 588 stores in 44 states.

Net sales for the three months ended May 2, 2009 decreased 13.8% to $232.9 million, as compared to $270.1 million for the three months ended May 3, 2008. Comparable store sales decreased 15.0% for the three months ended May 2, 2009, as compared to a comparable store sales decrease of 6.6% for the three months ended May 3, 2008. Loss from continuing operations for the three months ended May 2, 2009 was $4.9 million, or $0.08 per diluted share, as compared to income from continuing operations of $6.7 million, or $0.11 per diluted share, for the three months ended May 3, 2008.

Despite the challenging macroeconomic and consumer environment throughout the three months ended May 2, 2009, the Company continued to execute the initiatives of its multi-year restructuring program, reduced selling, general and administrative expenses by 8.3% on an average store basis, as compared to last year, and maintained tight control over inventory.

Capital spending for the three months ended May 2, 2009 was $2.7 million, as compared to $14.7 million for the three months ended May 3, 2008. The reduction of $11.9 million, as compared to last year, is in-line with the Company's plans to reduce store-related capital expenditures and to conserve cash. The Company did not open any new stores or remodel any existing stores during the three months ended May 2, 2009, as compared to opening 10 new stores and completing two remodels during the three months ended May 3, 2008.

The Company views the retail apparel market as having two principal selling seasons: spring (first and second quarter) and fall (third and fourth quarter). The Company's business experiences seasonal fluctuations in net sales and operating income, with a significant portion of its operating income typically realized during the fourth quarter. Seasonal fluctuations also affect inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period.

General

Net Sales. Net sales consist of sales from comparable and non-comparable stores and the Company's E-commerce store. A store is included in the comparable store sales calculation after it has completed 13 full fiscal months of operation from the store's original opening date or once it has been reopened after remodeling. Beginning in February 2008, sales from the Company's E-commerce store are included in comparable store sales. Non-comparable store sales include stores which have not completed 13 full fiscal months of operations, sales from closed stores, and sales from stores closed or in temporary locations during periods of remodeling. In addition, in a year with 53 weeks, sales in the last week of the year are not included in determining comparable store sales. Net sales from the sale of merchandise at the Company's stores are recognized when the customer takes possession of the merchandise and the purchases are paid for, primarily with either cash or credit card. Net sales from the sale of merchandise at the Company's E-commerce store are recognized when the merchandise is shipped to the customer. A reserve is provided for projected merchandise returns based on prior experience.

The Company issues gift cards which do not contain provisions for expiration or inactivity fees. The portion of the dollar value of gift cards that ultimately is not used by customers to make purchases is known as breakage. The Company estimates gift card breakage and records such amount as revenue as gift cards are redeemed. The Company's estimate of gift card breakage is based on analysis of historical redemption patterns as well as the remaining balance of gift cards for which the Company believes the likelihood of redemption to be remote.

Cost of Goods Sold, Buying and Occupancy Costs. Cost of goods sold, buying and occupancy costs is comprised of direct inventory costs for merchandise sold, distribution, payroll and related costs for design, sourcing, production, merchandising, planning and allocation personnel, and store occupancy and related costs.

Gross Profit. Gross profit represents net sales less cost of goods sold, buying and occupancy costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include selling, store management and corporate expenses, including payroll and employee benefits, employment taxes, management information systems, marketing, insurance, legal, store pre-opening and other corporate level expenses. Store pre-opening expenses include store level payroll, grand opening event marketing, travel, supplies and other store opening expenses.

Results of Operations

    The following tables summarize the Company's results of operations as a
percentage of net sales and selected store operating data for the three months
ended May 2, 2009 and May 3, 2008:

                                                        Three        Three
                                                       months       months
                                                        ended        ended
                                                       May 2,       May 3,
                                                        2009         2008
         Net sales                                        100.0 %      100.0 %
         Cost of goods sold, buying and occupancy          74.7 %       68.9 %
         costs

         Gross profit                                      25.3 %       31.1 %
         Selling, general and administrative               29.0 %       26.9 %
         expenses

         Operating (loss) income                           (3.7 )%       4.2 %
         Interest expense, net                              0.1 %          - %

         (Loss) income from continuing operations          (3.8 )%       4.2 %
         before income taxes
         (Benefit) provision for income taxes              (1.7 )%       1.7 %

         (Loss) income from continuing operations          (2.1 )%       2.5 %
         Income from discontinued operations, net             - %          - %
         of taxes

         Net (loss) income                                 (2.1 )%       2.5 %

                                                        Three        Three
                                                       months       months
                                                        ended        ended
                                                       May 2,       May 3,
                                                        2009         2008
                                                      (Dollars in thousands,
                                                        except square foot
                                                              data)
       Selected operating data:
       Comparable store sales decrease                    (15.0 )%      (6.6 )%
       Net sales per average selling square foot(1)     $    71      $    81
       Net sales per average store(2)                   $   395      $   464
       Average selling square footage per store(3)        5,595        5,711


--------------------------------------------------------------------------------
   º (1)

º (2)
º Net sales per average store is defined as net sales divided by the average of beginning and end of period number of stores.

º (3)
º Average selling square footage per store is defined as end of period selling square feet divided by end of period number of stores.

                                          Three months ended              Three months ended
                                              May 2, 2009                     May 3, 2008
                                                        Selling                         Selling
                                      Store Count     Square Feet     Store Count     Square Feet
Store count and selling square
feet:
Stores open, beginning of period               589       3,294,779             578       3,327,450
New stores                                       -               -              10          42,139
Closed stores                                   (1 )        (4,830 )            (2 )       (14,122 )
Net impact of remodeled stores on                -               -               -          (8,761 )
selling square feet

Stores open, end of period                     588       3,289,949             586       3,346,706

Three Months Ended May 2, 2009 Compared to Three Months Ended May 3, 2008

Net Sales. Net sales for the three months ended May 2, 2009 decreased 13.8% to $232.9 million, as compared to $270.1 million for the three months ended May 3, 2008. The decrease in net sales is primarily due to a decrease in comparable store sales of 15.0% for the three months ended May 2, 2009, partially offset by a slight increase in non-comparable store sales, driven by net sales from new store openings not yet included in comparable store sales. In the comparable store base, average dollar sales per transaction decreased by 6.3%, and the number of transactions per average store decreased by 9.3%, as compared to the same period last year.

Gross Profit. Gross profit decreased $25.1 million to $58.9 million, or 25.3% of net sales, for the three months ended May 2, 2009, as compared to $83.9 million, or 31.1% of net sales, for the three months ended May 3, 2008. The 580 basis point decrease in gross profit as a percentage of net sales during the three months ended May 2, 2009 is due to a 180 basis point decrease in merchandise margins resulting from increased promotional activity, and a 400 basis point increase in buying and occupancy costs, primarily attributable to the decline in comparable store sales partially offset by savings recognized in connection with the Company's multi-year restructuring and cost reduction program.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $5.2 million to $67.4 million, or 29.0% of net sales, for the three months ended May 2, 2009, as compared to $72.6 million, or 26.9% of net sales, for the three months ended May 3, 2008. The increase in selling, general and administrative expenses as a percentage of net sales is primarily a result of the decrease in comparable store sales, partially offset by savings recognized in connection with the Company's multi-year restructuring program. On an average store basis, selling, general and administrative expenses declined by 8.3% during the three months ended May 2, 2009, as compared to the three months ended May 3, 2008, reflecting the impact of the Company's cost reduction program.

Operating (Loss) Income. For the reasons discussed above, operating loss for the three months ended May 2, 2009 was $8.5 million, or 3.7% of net sales, as compared to operating income of $11.4 million, or 4.2% of net sales, for the three months ended May 3, 2008.

Interest Expense, Net. Net interest expense was $0.2 million for the three months ended May 2, 2009, as compared to $0.1 million for the three months ended May 3, 2008.

(Benefit) Provision for Income Taxes. The effective tax rate for the three months ended May 2, 2009 reflects a benefit of 44.0%, as compared to a provision of 40.2% for the three months ended May 3, 2008. The change in the effective tax rate is primarily due to a tax benefit recognized during the three months ended May 2, 2009 in connection with the reduction of tax positions for prior years.

(Loss) Income from Continuing Operations. For the reasons discussed above, loss from continuing operations for the three months ended May 2, 2009 was $4.9 million, or 2.1% of net sales, as compared to income from continuing operations of $6.7 million, or 2.5% of net sales, for the three months ended May 3, 2008.

Income from Discontinued Operations, Net of Taxes. Income from discontinued operations, net of taxes, represents the Company's discontinued JasmineSola business.

Non-GAAP Financial Measure

The Company has provided a non-GAAP financial measure to adjust (loss) income from continuing operations for the three months ended May 2, 2009 and May 3, 2008. This information reflects, on a non-GAAP adjusted basis, the Company's (loss) income from continuing operations before interest expense, net; (benefit) provision for income taxes; and depreciation and amortization

("EBITDA"). The calculation for EBITDA is provided to enhance the user's understanding of the Company's operating results. EBITDA is provided because management believes it is an important measure of financial performance commonly used to determine the value of companies and to define standards for borrowing from institutional lenders. The non-GAAP financial information should be considered in addition to, not as an alternative to, (loss) income from continuing operations, as an indicator of the Company's operating performance, and cash flows from operating activities of continuing operations, as a measure of the Company's liquidity, as determined in accordance with accounting principles generally accepted in the United States. The Company may calculate EBITDA differently than other companies.

      Reconciliation of (Loss) Income from Continuing Operations to EBITDA

                                         Three months ended             Three months ended
                                             May 2, 2009                    May 3, 2008
                                      Amounts in      As a % of      Amounts in      As a % of
                                      thousands       net sales      thousands       net sales
(Loss) income from continuing         $    (4,888 )         (2.1 )%  $     6,723            2.5 %
operations
Add back:
   Interest expense, net                      220            0.1 %           124              - %
   (Benefit) provision for income          (3,848 )         (1.7 )%        4,519            1.7 %
   taxes
   Depreciation and amortization           10,466            4.5 %        10,397            3.9 %

EBITDA                                $     1,950            0.8 %   $    21,763            8.1 %

Liquidity and Capital Resources

The Company's primary uses of cash are to fund working capital, operating expenses, debt service and capital expenditures related primarily to the construction of new stores, remodeling of existing stores and development of the Company's information technology infrastructure. Historically, the Company has financed these requirements from internally generated cash flow. The Company intends to fund its ongoing capital and working capital requirements, as well as debt service obligations, primarily through cash flows from operations, supplemented by borrowings under its credit facilities, if needed. The Company is in compliance with all debt covenants as of May 2, 2009.

The following tables contain information regarding the Company's liquidity and capital resources:

                                           May 2, 2009     January 31, 2009     May 3, 2008
                                                        (Amounts in thousands)
Cash and cash equivalents (including
cash at discontinued operations of $0,
$1 and $1, respectively)                   $     31,080     $         54,281    $     61,313
Working capital                            $     71,308     $         70,599    $     88,966




                                                       Three         Three
                                                      months        months
                                                       ended         ended
                                                    May 2, 2009   May 3, 2008
                                                     (Amounts in thousands)
       Net cash (used in) provided by operating
       activities of continuing
       operations                                     $ (18,505 )   $   8,698
       Net cash used in investing activities of
       continuing operations                          $  (2,741 )   $ (14,679 )
       Net cash used in financing activities of
       continuing operations                          $  (1,951 )   $  (1,385 )
       Net cash used in discontinued operations       $      (4 )   $  (5,278 )

       Net decrease in cash and cash equivalents      $ (23,201 )   $ (12,644 )

Operating Activities of Continuing Operations

Net cash used in operating activities of continuing operations was $18.5 million for the three months ended May 2, 2009, as compared to net cash provided by operating activities of continuing operations of $8.7 million for the three months ended May 3, 2008. The decrease in net cash provided by operating activities for the three months ended May 2, 2009, as compared to the three months ended May 3, 2008, is primarily related to the loss from continuing operations and changes in accounts receivable, income taxes receivable, inventory, prepaid expenses, accrued expenses, deferred rent and other assets and liabilities, partially offset by changes in accounts payable.

Investing Activities of Continuing Operations

Net cash used in investing activities of continuing operations was $2.7 million for the three months ended May 2, 2009, as compared to $14.7 million of net cash used in investing activities of continuing operations for the three months ended May 3, 2008. The reduction in net cash used in investing activities is in-line with the Company's plans to reduce store-related capital expenditures and to conserve cash. The Company did not open any new stores or remodel any existing stores during the three months ended May 2, 2009, as compared to opening 10 new stores and completing two remodels during the three months ended May 3, 2008.

The Company currently plans to open approximately three new stores, close 10 to 15 stores and remodel approximately four stores during fiscal year 2009, ending the fiscal year with 577 to 582 stores. The Company's future capital requirements will depend primarily on the number of new stores it opens, the number of existing stores it remodels and the timing of these expenditures.

Financing Activities of Continuing Operations

Net cash used in financing activities of continuing operations was $2.0 million for the three months ended May 2, 2009, as compared to $1.4 million of net cash used by financing activities of continuing operations for the three months ended May 3, 2008. Net cash used by financing activities of continuing operations for the three months ended May 2, 2009 primarily consists of a $1.5 million quarterly payment against the Company's outstanding term loan and $0.5 million used for the repurchase of 142,400 shares of the Company's common stock under its authorized share repurchase program. Net cash used in financing activities of continuing operations for the three months ended May 3, 2008 consists of a $1.5 million quarterly payment against the Company's outstanding term loan and $0.1 million of proceeds from the exercise of stock options and the related tax benefit to the Company.

Discontinued Operations Cash Flows

There were no material payments or receipts during the three months ended May 2, 2009 that related to the discontinued operations of JasmineSola. Net cash used in discontinued operations of $5.3 million during the three months ended May 3, 2008 consisted primarily of lease termination payments and the payment of other exit related liabilities.

Long-Term Debt and Credit Facilities

The Company's credit facilities currently consist of a term loan, of which $18.0 million was outstanding at May 2, 2009, and a $90.0 million revolving credit facility (which includes a sub-facility available for issuance of letters of credit of up to $75.0 million), both having a maturity date of March 17, 2012.

As of May 2, 2009, the Company had availability under its revolving credit facility of $73.2 million, net of letters of credit outstanding of $6.9 million, as compared to availability of $74.1 million, net of letters of credit outstanding of $6.8 million, as of May 3, 2008.

The revolving loans under the credit facilities bear interest, at the Company's option, either at a floating rate equal to the Eurodollar rate plus a margin of between 1.00% and 1.25% per year, depending upon the Company's financial performance, or the Prime rate. The Company pays the lenders under the revolving credit facility a monthly fee on outstanding commercial letters of credit at a rate of 0.625% per year and on standby letters of credit at a rate of between 1.00% and 1.25% per year, depending upon the Company's financial performance, plus a monthly fee on a proportion of the unused commitments under that facility at a rate of 0.20% per year. The term loan bears interest at a floating rate equal to the Eurodollar rate plus 2.50% per year. If any default were to exist under the revolving credit facility and for so long as such default were to continue, at the option of the agent or lenders, the monthly fee on outstanding standby letters of credit may increase to 3.25% per year, . . .