Forward-Looking Statements

The following discussion and analysis of financial condition and results of operations are based upon our unaudited Condensed Consolidated Financial statements and should be read in conjunction with those statements, the notes thereto and our Annual Report on Form 10-K for the fiscal year ended July 25, 2009. This Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These statements reflect our current views with respect to future events and financial performance. Our actual results of operations and future financial condition may differ materially from those expressed or implied in any such forward-looking statements. We disclaim any intent or obligation to update or revise any forward-looking statements as a result of developments occurring after the period covered by this report or otherwise.

Management Overview

This Management Overview section of Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) provides a high-level summary of the more detailed information elsewhere in this quarterly report and an overview to put this information into context. This section is also an introduction to the discussion and analysis that follows. Accordingly, it necessarily omits details that appear elsewhere in this MD&A. It should not be relied upon separately from the balance of this quarterly report.

General

We operate women's apparel specialty stores, principally under the names "dressbarn", "dressbarn woman" and "maurices". Since our retail business began, we have established, marketed and expanded our business as a source of fashion and value. We offer a lifestyle-oriented, stylish, value-priced assortment of career and casual fashions tailored to our customers' needs. During the first quarter of our fiscal 2010, maurices initiated a soft launch into the new business channel of e-commerce.

Financial Performance Summary

During the thirteen weeks of fiscal 2010 that ended October 24, 2009 (the first quarter), net sales were $404.1 million, an increase of 7.4% from $376.4 million for the thirteen weeks ended October 25, 2008 (the prior period). Our comparable store sales increased 4.3% during the same period (dressbarn increased 4.6% and maurices increased 3.6%), primarily due to our merchandise assortment that resonated with our customers during the quarter. We opened 8 dressbarn Combo stores and 13 maurices stores during the first quarter. There were no store closings during the first quarter. Our total store square footage at the end of the first quarter increased approximately 3.0% from the end of the prior period.

Net earnings for the first quarter increased to $21.7 million from $19.7 million for the prior period. Diluted earnings per share for the first quarter were $0.33 versus $0.30 per share for the prior period.

Company Initiatives

On June 24, 2009, we entered into an agreement pursuant to which one of our subsidiaries will merge with Tween Brands, Inc. in a stock-for-stock transaction. Under the terms of the merger agreement, this consideration would be equal to an aggregate equity value of $157 million. In addition, we expect to issue 11.8 million shares of The Dress Barn, Inc.'s common stock as well as pay off Tween Brands, Inc.'s outstanding bank debt. This transaction, unanimously approved by each of The Dress Barn, Inc.'s and Tween Brands, Inc.'s Board of Directors, is expected to close on November 25, 2009 and is subject to Tween Brands, Inc. stockholder approval and other customary closing conditions.

We will continue our ongoing strategy of opening new stores while closing underperforming locations in this current macroeconomic pressured and competitive environment. We intend to maintain store expansion using cash flow from operations while focusing on both expanding in our major trading markets and developing and expanding into new domestic markets. We currently plan to open approximately 30 additional stores and close approximately 30 stores during the remainder of our fiscal year ending July 31, 2010 (fiscal 2010).

Our management uses a number of key indicators of financial condition and operating performance to evaluate the performance of our business, including the following:

                                                                     Thirteen Weeks Ended
                                                                October 24,         October 25,
                                                                       2009                2008

Net sales growth vs. prior year                                         7.4 %               3.5 %
dressbarn comparable store sales                                        4.6 %               0.2 %
maurices comparable store sales                                         3.6 %              (2.5 )%
Total comparable store sales growth                                     4.3 %              (0.8 )%
Cost of sales, including occupancy & buying (excluding
depreciation), as a percentage of sales                                59.5 %              60.9 %
SG&A as a percentage of sales                                          28.2 %              27.3 %
Square footage growth vs. prior year                                    3.0 %               5.2 %

Total store count                                                     1,580               1,533

Capital expenditures (in millions)                             $       12.4       $        18.2
Diluted earnings per share                                     $       0.33       $        0.30

We consider comparable store sales to be one of the most important indicators of our performance since it impacts the following:

· Leveraging our costs, including store payroll, store supplies and occupancy costs.

· Directly impacting our total net sales, cash and working capital.

We calculate comparable store sales based on the sales of stores open throughout the full period and throughout the full prior period (including stores relocated within the same shopping center and stores with minor square footage additions). If a single-format dressbarn store is converted into a Combo store, the additional sales from the incremental format are not included in the calculation of same store sales. The determination of which stores are included in the comparable store sales calculation only changes at the beginning of each fiscal year except for stores that close during the fiscal year, which are excluded from comparable store sales beginning with the fiscal month the store actually closes.

We include in our cost of sales line item all costs of merchandise (net of purchase discounts and vendor allowances), freight on inbound, outbound and internally transferred merchandise, merchandise acquisition costs (primarily commissions and import fees), occupancy costs (excluding utilities and depreciation), and all costs associated with the buying and distribution functions. Our cost of sales may not be comparable to those of other entities, since some entities include all costs related to their distribution network including depreciation and all buying and occupancy costs in their cost of sales, while other entities, including us, exclude a portion of these expenses from cost of sales and include them in selling, general and administrative expenses or depreciation. We include depreciation related to the distribution network in depreciation and amortization, and utilities and insurance expenses, among other expenses, in selling, general and administrative expenses on the consolidated statements of operations.

Results of Operations

Net sales:
                                                                                  Thirteen Weeks Ended
                                                       October 24,                       October 25,
(Amounts in millions, except for % change amounts)            2009      % of Sales              2008      % of Sales       % Change

dressbarn                                            $       248.0            61.4 %   $       232.8            61.8 %        6.5 %
maurices                                                     156.1            38.6 %           143.6            38.2 %        8.8 %
Consolidated net sales                               $       404.1                     $       376.4                          7.4 %

Net sales for the first quarter increased by 7.4% to $404.1 million from $376.4 million for the prior period. Our net sales increase for the first quarter was boosted by our consolidated comparable store sales increase of 4.3% (dressbarn reported 4.6% while maurices reported 3.6%) and combined with 3.0% net additional store square footage primarily from new store openings. The dressbarn brands' total number of sales transactions increased 1.3%, units per transaction increased 0.2%, and average dollar sale increase 5.1%. Additionally, our average unit retail increased 4.9%. maurices sales for the first quarter were $156.1 million as compared with $143.6 million in the prior period primarily driven by the 3.6% comparable store sales increase and new store growth. maurices average unit retail increased 5.3% and units per transaction decreased 2.4% for a net increase of approximately 2.9% in average dollar sale in addition to the 0.7% increase in total sales transactions.

Cost of sales, including buying and occupancy costs, excluding depreciation (cost of sales):

                                                October 24,       October 25,
(Amounts in millions, except for % amounts)            2009              2008       $ Change      % Change

Thirteen weeks ended                          $       240.3     $       229.2     $     11.1           4.8 %
As a percentage of sales                               59.5 %            60.9 %

Cost of sales for the first quarter decreased 140 basis points as a percent of sales to 59.5% from 60.9% for the prior period. For the dressbarn brands, cost of sales was 61.1% of net sales versus 61.7% for the prior period, a decrease of 60 basis points for the first quarter as compared to the prior period, primarily due to lower markdowns. For the maurices brand, cost of sales was 56.9% of net sales and 59.6% for the prior period, a decrease of 270 basis points for the first quarter as compared to the prior period, primarily the result of a decrease in markdowns and a higher initial mark-on.

SG&A expenses:
                                                October 24,       October 25,
(Amounts in millions, except for % amounts)            2009              2008       $ Change       % Change

Thirteen weeks ended                          $       113.8     $       102.7     $     11.1           10.8 %
As a percentage of sales                               28.2 %            27.3 %

SG&A expenses for the first quarter increased 90 basis points to 28.2% from 27.3% for the prior period. For the dressbarn brands, SG&A increased 80 basis points to 28.3% versus 27.5% for the prior period. The increase was due primarily to merger-related costs of $1.6 million and $2.5 million of charges (benefits) related to our deferred compensation plan that resulted from stock market appreciation that impacts the liability for this plan (a charge of $1.6 million in the first quarter of the current year versus a benefit of $0.9 million in the prior year first quarter) offset by the leveraging of store operating in relation to the comparable store sales increase. maurices SG&A expenses were 27.9% of sales for the first quarter versus 27.0% for the prior period. This increase was primarily attributable to the $2.0 million impairment of the Studio Y trade name in the first quarter and increased health insurance costs offset by lower marketing costs.

Depreciation and amortization:
                                                October 24,       October 25,
(Amounts in millions, except for % amounts)            2009              2008         $ Change       % Change

Thirteen weeks ended                          $        12.2     $        12.2     $          -            0.0 %
As a percentage of sales                                3.0 %             3.2 %

Depreciation expense remained consistent in the first quarter as compared to the prior period.

Operating income:
                                                October 24,       October 25,
(Amounts in millions, except for % amounts)            2009              2008       $ Change       % Change

Thirteen weeks ended                          $        37.8     $        32.3     $      5.5           17.0 %
As a percentage of sales                                9.4 %             8.6 %

As a result of the above factors, operating income as a percent of net sales was 9.4% for the current quarter and 8.6% for the prior quarter. For the dressbarn brands operating income increased to 7.8% as a percent of sales as compared to the prior period. For the maurices brand, operating income as a percent of sales increased to 11.8% versus 9.9% for the prior period.

Interest income:
                                                October 24,       October 25,
(Amounts in millions, except for % amounts)            2009              2008       $ Change       % Change

Thirteen weeks ended                          $         0.7     $         2.0     $     (1.3 )        (65.0 )%
As a percentage of sales                                0.2 %             0.5 %

The decline in interest income resulted primarily from lower interest rates for the first quarter as compared to the prior period.

Interest expense:
                                                October 24,         October 25,
(Amounts in millions, except for % amounts)            2009                2008         $ Change       % Change

Thirteen weeks ended                          $        (2.6 )     $        (2.5 )     $     (0.1 )          4.0 %
As a percentage of sales                               (0.6 ) %            (0.7 ) %

Interest expense for the thirteen weeks ended October 24, 2009 remained consistent to the prior comparable period.

Other Income:
                                                October 24,       October 25,
(Amounts in millions, except for % amounts)            2009              2008         $ Change       % Change

Thirteen weeks ended                          $         0.5     $         0.5     $          -            0.0 %
As a percentage of sales                                0.1 %             0.1 %

Other income remained flat at $0.5 million as compared the prior year. The majority of this amount represents rental income from the two tenants currently occupying space in our corporate headquarters property in Suffern, New York.

Income Tax Expense:
                                                October 24,       October 25,
(Amounts in millions, except for % amounts)            2009              2008       $ Change       % Change

Thirteen weeks ended                          $        14.8     $        12.6     $      2.2           17.5 %
As a percentage of sales                                3.7 %             3.3 %

The effective tax rate is approximately 40.7% for the first quarter compared to 38.9% for the prior year first quarter. The increase in the effective tax rate for the three months ended October 24, 2009 when compared to the prior period was primarily attributable to non-deductible merger-related expenses incurred and a reduction in tax exempt income in the current period. We currently project an effective tax rate for the remainder of fiscal 2010 of approximately 40.8%, which includes interest on our existing uncertain tax positions.

Net earnings:
                                                October 24,       October 25,
(Amounts in millions, except for % amounts)            2009              2008       $ Change       % Change

Thirteen weeks ended                          $        21.7     $        19.7     $      2.0           10.2 %
As a percentage of sales                                5.4 %             5.2 %

Net earnings for the first quarter increased to $0.33 per diluted share, compared to $0.30 per diluted share in the prior period primarily due to the increased sales offset by the increase in cost of goods sold, selling, general and administrative expenses and lower interest income.

Liquidity and Capital Resources

In summary, our cash flows were as follows (amounts in thousands):

 (unaudited)                                                  13 Weeks Ended
                                                        October 24,       October 25,
                                                               2009              2008
Net cash provided by operating activities             $      38,597     $      42,364
Net cash used in investing activities                        (1,416 )         (25,226 )
Net cash provided by/(used in) financing activities           5,627               (89 )

Cash generated from operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Our uses of cash are generally for working capital, the construction of new stores and remodeling of existing stores, information technology upgrades and the purchase of short-term investments. We use lines of credit on our $100 million revolving credit facility to facilitate imports of our products through letters of credit.

On June 24, 2009, we entered into an agreement pursuant to which one of our subsidiaries will merge with Tween Brands, Inc. in a stock-for-stock transaction. Under the terms of the merger agreement, this consideration would be equal to an aggregate equity value of $157 million. In addition, Tween Brands, Inc.'s outstanding bank debt will be repaid. This transaction, unanimously approved by each of The Dress Barn, Inc.'s and Tween Brands, Inc.'s Board of Directors, is expected to close on November 25, 2009 and is subject to Tween Brands, Inc. stockholder approval and other customary closing conditions. We expect to issue an aggregate of approximately 11.8 million shares of our common stock in connection with the transaction.

At October 24, 2009, we had cash, cash equivalents, investment securities and long-term investments of $417.3 million as compared to $384.6 million as of July 25, 2009. The increase was due primarily to the cash generated by operations of $38.6 million partially offset by capital expenditures of $12.4 million.

Net cash provided by operations was $38.6 million for the first quarter compared with $42.4 million during last year's comparable period. The decrease of $3.8 million was primarily driven by the increase in cash used to pay off our accounts payable offset by a decrease of merchandise inventories due to improved inventory management and aggressive promotions.

As of October 24, 2009, $65.3 million was available under a $100.0 million revolving credit facility. The $34.7 million balance of our revolving credit facility consists of $4.2 million of outstanding standby letters of credit, primarily relating to insurance policies, and $30.5 million of trade letters of credit relating to the importation of merchandise. We believe this revolving credit facility gives us ample capacity to fund any short-term working capital needs that may arise in the operation of our business. We expect to enter into a new credit facility simultaneously with the closing of the Tween Brands transaction.

Net cash used in investing activities for the first quarter was $1.4 million consisting primarily of $12.4 million of capital expenditures for property and equipment mainly for new store openings, store remodels and renovations and costs associated with information system implementations and upgrades during the first quarter. The impact of these reductions was partially offset by net cash inflow of $11.0 million from our investment securities which included $9.0 million of ARS redemptions.

Our investments are comprised primarily of money markets, municipal bonds and auction rate securities (ARS), (see Note 4 for further detail). Our ARS are all AAA/Aaa rated with the vast majority collateralized by student loans guaranteed by the U.S. government under the Federal Family Education Loan Program with the remaining securities backed by monoline insurance companies. Our auction rate securities are deemed not currently liquid since there is currently not enough demand to sell the entire issue at auction. As a result of the ARS unfavorable market, we decided to invest our cash in low-risk money market funds. At October 24, 2009, we had a balance of $247.0 million in money market funds. In accordance with FASB guidance, the money market funds are included in our "cash and cash equivalents" line item on our Condensed Consolidated Balance Sheets since these type of investments are considered to be highly liquid.

As of October 24, 2009, we had approximately $27.5 million of long-term security investments which consisted of $35.4 million of ARS at cost, less a valuation allowance of $7.9 million to reflect our estimate of fair value given the current lack of liquidity of these investments while taking into account the current credit quality of the underlying securities. If market conditions deteriorate further, or a recovery in market values does not occur, we may be required to record additional unrealized or realized losses in future quarters. We believe that the current lack of liquidity relating to our ARS investments will not have an impact on our ability to fund our ongoing operations and growth initiatives; for that reason, we have the ability and intent to hold these ARS investments until a recovery of the auction process, redemption by the seller or until maturity.

In November 2008, we accepted a settlement offer whereby UBS would purchase eligible ARS it sold to us prior to February 13, 2008 (the "Settlement Agreement"). Under the terms of the Settlement Agreement, at our option, UBS will purchase eligible ARS from us at par value during the period June 30, 2010 through July 2, 2012. UBS has offered to also provide us with access to "no net cost" loans up to 75% of the par value of eligible ARS until June 30, 2010. We held approximately $7.2 million, at par value, of eligible ARS with UBS as of November 2008. By entering into the Settlement Agreement, we (1) received the right ("Put Option") to sell these auction rate securities back to the investment firm at par, at our sole discretion, anytime during the period from June 30, 2010 through July 2, 2012, and (2) gave the investment firm the right to purchase these auction rate securities or sell them on our behalf at par anytime after the execution of the Settlement Agreement through July 2, 2012. We elected to measure the Put Option under the fair value method in accordance with FASB accounting guidance, and therefore, recorded interest income and a corresponding other asset. Simultaneously, we transferred these long-term auction rate securities from available-for-sale to trading investment securities at market value on our consolidated balance sheets.

We have no reason to believe that any of the underlying issuers of our ARS are presently at risk of default. Although we continue to receive interest payments on these securities in accordance with their stated terms, we expect the interest payments to significantly decrease in accordance with the terms of these securities. In addition, we believe that we will not be able to access funds if needed from these securities until future auctions for these ARS are successful, we sell the securities in a secondary market, which is currently limited, or they are redeemed by the seller. As a result, we may be unable to liquidate our investment in these ARS without incurring significant losses. We may have to hold these securities until final maturity in order to redeem them without incurring any losses. For these reasons, we believe the recovery period for these investments is likely to be longer than 12 months. Based on our expected operating cash flows and our other sources of cash, we do not anticipate the lack of liquidity on these investments will affect our ability to execute our current business plan.

Net cash provided by financing activities was $5.6 million during fiscal 2010 while net cash used in financing activities was $0.1 million during the prior period. The increase in cash flow from financing activity was related to proceeds we received from stock option exercises and the related excess tax benefits.

We do not have any undisclosed material transactions or commitments involving related persons or entities. We held no material options or other derivative instruments at October 24, 2009. We do not have any off-balance sheet arrangements or transactions with unconsolidated, limited purpose entities. In the normal course of business, we enter into operating leases for our store locations and utilize letters of credit principally for the importation of merchandise.

We believe that our cash, cash equivalents, short-term investments and cash flow from operations, along with the credit agreement mentioned above, will be adequate to fund our planned merger with Tween Brands, Inc., capital expenditures and all other operating requirements, including those of Tween Brands, Inc., and other proposed or contemplated expenditures for at least the next 12 months.

Contractual Obligations and Commercial Commitments

There have been no material changes during the period covered by this report, outside of the ordinary course of business, to the contractual obligations specified in the table of contractual obligations included in the section "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Fiscal 2009 Annual Report on Form 10-K.

Seasonality

The dressbarn and maurices brands have historically experienced substantially lower earnings in our second fiscal quarter ending in January than during our other three fiscal quarters, reflecting the intense promotional atmosphere that has characterized the holiday shopping season in recent years. We expect this trend to continue. In addition, our quarterly results of operations may fluctuate materially depending on, among other things, increases or decreases in comparable store sales, adverse weather conditions, shifts in timing of certain holidays, the timing of new store openings, net sales contributed by new stores, and changes in our merchandise mix.

Critical Accounting Policies and Estimates

Management has determined that our most critical accounting policies are those . . .