This Quarterly Report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "will," "should," "can have," "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, or strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including the factors described in "Item 1A - Risk Factors" in our fiscal year 2011 Annual Report on Form 10-K.

The forward-looking statements are only predictions based on our current expectations and our projections about future events. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing cautionary statements as well as other cautionary statements that are made from time to time in our other Securities and Exchange Commission ("SEC") filings and public communications. You should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q in the context of these risks and uncertainties. The forward-looking statements included herein are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

The following discussion and analysis should be read in conjunction with our fiscal year 2011 Annual Report on Form 10-K and the unaudited condensed consolidated financial statements and the related notes thereto included in Item 1. Consolidated Financial Statements of this Quarterly Report.

Executive Overview

Gordmans is an everyday value price department store retailer featuring a large selection of the latest brands, fashions and styles at up to 60% off department and specialty store prices every day in a fun, easy-to-shop environment. Our merchandise assortment includes apparel for all ages, accessories (including fragrances), footwear and home fashions. The origins of Gordmans date back to 1915, and as of July 28, 2012, we operated 81 stores in 18 states situated in a variety of shopping center developments, including regional enclosed shopping malls, lifestyle centers and power centers.

We opened seven new stores during the twenty-six weeks ended July 28, 2012 in four new markets and one existing market, of which three new stores were opened during the second quarter of fiscal 2012, compared to four new stores in two new markets during the twenty-six weeks ended July 30, 2011, of which two new stores were opened during the second quarter of fiscal 2011.

In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales and comparable store sales and other individual store performance factors, gross profit and selling, general and administrative expenses.

Net Sales. Net sales reflect our revenues from the sale of our merchandise less returns and discounts and exclusive of sales tax. Net sales include comparable store sales and non-comparable store sales.

Comparable Store Sales. Comparable store sales have been calculated based upon stores that were open at least 16 months as of the end of the reporting period. We also review average sale per transaction and comparable store transactions. Comparable store sales are an important indicator of current operating performance, with higher comparable store sales helping us to leverage our fixed expenses and positively impacting our operating results.

Gross Profit. Gross profit is equal to our net sales minus cost of sales, plus license fee income generated from sales of footwear and maternity apparel in our leased departments. Cost of sales includes the direct cost of purchased merchandise, inventory shrinkage, inventory write-downs and inbound freight to our distribution center. Gross margin measures gross profit as a percentage of our net sales. Our gross profit may not be comparable to other retailers, as some companies include all of the costs related to their distribution network in cost of sales while others, like us, exclude a portion of these costs from cost of sales and include those costs in selling, general and administrative expenses. Our gross margin is evaluated in terms of initial markup and the amount of markdowns, with higher initial markup and lower markdowns positively impacting our operating results.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include all operating costs not included in cost of sales. These expenses include payroll and other expenses related to operations at our corporate office, store expenses, occupancy costs, certain distribution and warehousing costs, depreciation and amortization and advertising expense. Selling general and administrative expenses as a percentage of net sales is generally higher in lower sales volume periods and lower in higher sales volume periods. Our ability to manage store level and certain other operating expenses directly impacts our operating results.

Overview

Net income for the thirteen and twenty-six week periods ended July 28, 2012 was $3.5 million and $11.6 million, respectively, as compared to net income of $2.9 million and $10.2 million, respectively, for the thirteen and twenty-six week periods ended July 30, 2011. The increases in net income were primarily due to higher net sales and a higher gross profit margin, partially offset by higher selling, general and administrative expenses. Higher net sales were primarily driven by an increase in non-comparable store sales due to the addition of four new stores during the first quarter, as well as four new stores opened during the last three quarters of fiscal 2011. The improvement in gross profit margin for the second quarter of fiscal 2012 resulted from lower markdowns and a higher initial mark-up, while the improvement in gross profit margin for the twenty-six weeks ended July 28, 2012 primarily resulted from a higher initial mark-up. Higher selling, general and administrative expenses primarily resulted from our growth and the seven new stores opened during the twenty-six weeks ended July 28, 2012, including three new stores opened at the end of the second quarter of fiscal 2012, and the four new stores opened during the last three quarters of fiscal 2011.

Basis of Presentation and Results of Operations

The consolidated financial statements include the accounts of Gordmans Stores, Inc. and its subsidiaries, Gordmans Intermediate Holding Corp., Gordmans, Inc., Gordmans Management Company, Inc., Gordmans Distribution Company, Inc. and Gordmans LLC. All intercompany transactions and balances have been eliminated in consolidation. We utilize a typical retail 52-53 week fiscal year whereby the fiscal year ends on the Saturday nearest January 31. Fiscal year 2012 represents a fifty-three week year ending February 2, 2013, while fiscal year 2011 was a fifty-two week year ended January 28, 2012. All references to fiscal years are to the calendar year in which the fiscal year begins. The thirteen weeks ended July 28, 2012 and the thirteen weeks ended July 30, 2011 represent the second quarters of fiscal 2012 and fiscal 2011, respectively. The twenty-six weeks ended July 28, 2012 and the twenty-six weeks ended July 30, 2011 represent the first half of fiscal 2012 and fiscal 2011, respectively.

The table below sets forth the consolidated statements of operations data for the periods presented (in thousands):

                                          13 Weeks        13 Weeks         26 Weeks         26 Weeks
                                            Ended           Ended           Ended            Ended
                                          July 28,        July 30,         July 28,         July 30,
                                            2012            2011             2012             2011
Statements of Operation Data:
Net sales                                 $ 128,238       $ 117,020       $  262,160       $  234,699
License fees from leased departments          1,620           1,411            3,557            3,078
Cost of sales                               (71,165 )       (65,947 )       (143,533 )       (129,344 )

Gross profit                                 58,693          52,484          122,184          108,433
Selling, general and administrative
expenses                                    (52,898 )       (47,559 )       (103,384 )        (91,647 )

Income from operations                        5,795           4,925           18,800           16,786
Interest expense, net                          (123 )          (189 )           (248 )           (307 )

Income before taxes                           5,672           4,736           18,552           16,479
Income tax expense                           (2,127 )        (1,800 )         (6,957 )         (6,262 )

Net income                                $   3,545       $   2,936       $   11,595       $   10,217

The table below sets forth the components of the consolidated statements of operations as a percentage of net sales:

                                           13 Weeks          13 Weeks          26 Weeks        26 Weeks
                                            Ended             Ended             Ended           Ended
                                           July 28,          July 30,          July 28,        July 30,
                                             2012              2011              2012            2011
Net sales                                      100.0 %           100.0 %           100.0 %         100.0 %
License fees from leased departments             1.3               1.2               1.4             1.3
Cost of sales                                  (55.5 )           (56.3 )           (54.8 )         (55.1 )

Gross profit                                    45.8              44.9              46.6            46.2
Selling, general and administrative
expenses                                       (41.3 )           (40.7 )           (39.4 )         (39.0 )

Income from operations                           4.5               4.2               7.2             7.2
Interest expense, net                           (0.1 )            (0.2 )            (0.1 )          (0.2 )

Income before taxes                              4.4               4.0               7.1             7.0
Income tax expense                              (1.6 )            (1.5 )            (2.7 )          (2.6 )

Net income                                       2.8 %             2.5 %             4.4 %           4.4 %

Thirteen Weeks Ended July 28, 2012 Compared to Thirteen Weeks Ended July 30, 2011

Net Sales

Net sales for the thirteen weeks ended July 28, 2012 increased $11.2 million, or 9.6%, to $128.2 million as compared to $117.0 million for the thirteen weeks ended July 30, 2011. This increase was primarily the result of an $11.1 million increase in non-comparable store sales due to the addition of four new stores in the last three quarters of fiscal 2011, two of which opened at the end of the second quarter of fiscal 2011 and the opening of four new stores in the first quarter of fiscal 2012. Comparable store sales increased $0.2 million, or 0.1%, primarily due to a 4.3% increase in the average sale per transaction, primarily offset by a 4.0% decrease in comparable transactions.

License Fees from Leased Departments

License fee income related to sales of merchandise in leased departments for the thirteen weeks ended July 28, 2012 increased $0.2 million, or 14.8%, to $1.6 million as compared to $1.4 million for the thirteen weeks ended July 30, 2011 primarily due to new store growth.

Gross Profit

Gross profit, which includes license fees from leased departments, for the thirteen weeks ended July 28, 2012 increased $6.2 million, or 11.8%, to $58.7 million as compared to $52.5 million for the thirteen weeks ended July 30, 2011. Gross profit margin for the thirteen weeks ended July 28, 2012 increased 90 basis points to 45.8% of net sales as compared to 44.9% of net sales for the thirteen weeks ended July 30, 2011. This increase was primarily due to lower markdowns as a percentage of net sales during the second quarter of 2012 and an increase in initial mark-up on merchandise available resulting from competitive pricing opportunities.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the thirteen weeks ended July 28, 2012 increased $5.3 million, or 11.2%, to $52.9 million as compared to $47.6 million for the thirteen weeks ended July 30, 2011. As a percentage of net sales, selling, general and administrative expenses for the thirteen weeks ended July 28, 2012 increased to 41.3% as compared to 40.7% for the thirteen weeks ended July 30, 2011.

Store expenses increased $3.3 million in the second quarter of fiscal 2012 as compared to the second quarter of fiscal 2011 primarily due to increased payroll and benefits, rent and real estate taxes, utilities, maintenance and cleaning expenses associated with new store growth. Store expenses were 26.7% of net sales in the second quarter of fiscal 2012 as compared to 26.5% of net sales in the second quarter of fiscal 2011, a 20 basis point increase, primarily resulting from higher health and workers compensation insurance benefits and higher rent and real estate taxes as a percentage of net sales, partially offset by lower credit card fees as a percentage of net sales.

Distribution center expenses increased $0.7 million primarily as a result of higher payroll expenses and higher outbound freight delivery charges primarily due to the increase in merchandise inventory receipts. Distribution center expenses were 3.9% of net sales in the second quarter of fiscal 2012 as compared to 3.7% of net sales in the second quarter of fiscal 2011, a 20 basis point increase, primarily due to payroll processing costs.

Corporate expenses increased $0.4 million in the second quarter of fiscal 2012 as compared to the second quarter of fiscal 2011 primarily due to higher corporate payroll and benefits due to the addition of corporate positions to support our growth, as well as merit increases. Corporate expenses decreased as a percentage of net sales to 6.2% of net sales in the second quarter of fiscal 2012 as compared to 6.4% of net sales in the second quarter of fiscal 2011.

Depreciation and amortization expenses increased $0.4 million, or 20 basis points as a percentage of net sales, in the second quarter of fiscal 2012 as compared to the second quarter of fiscal 2011 due to increased property additions associated with new store openings and investments in upgrading our information technology systems.

Store pre-opening expenses increased $0.3 million, or 20 basis points as a percentage of net sales, in the second quarter of fiscal 2012 due to opening three new stores late in the second quarter of fiscal 2012 as compared to the two new stores opened in the second quarter of fiscal 2011.

Advertising expenses increased $0.2 million in the second quarter of fiscal 2012 as compared to the second quarter of fiscal 2011 primarily due to higher direct mail advertising costs. Advertising expenses were 2.2% of net sales in the second quarter of fiscal 2012 as compared to 2.3% of net sales in the second quarter of fiscal 2011.

Interest Expense, Net

Interest expense for the thirteen weeks ended July 28, 2012 was $0.1 million as compared to $0.2 million for the thirteen weeks ended July 30, 2011. There were no borrowings on the revolving line of credit during the thirteen weeks ended July 28, 2012 or July 30, 2011.

Income Before Taxes

Income before taxes for the second quarter of fiscal 2012 increased $0.9 million, or 19.8%, to $5.7 million compared to $4.7 million in the second quarter of fiscal 2011. As a percentage of net sales, income before taxes was 4.4% for the second quarter of fiscal 2012 compared to 4.0% for the second quarter of fiscal 2011.

Income Tax Expense

Income tax expense for the thirteen weeks ended July 28, 2012 was $2.1 million compared to income tax expense of $1.8 million for the thirteen weeks ended July 30, 2011. The effective income tax rate for the second quarter of fiscal 2012 was 37.5% compared to an effective rate of 38.0% for the second quarter of fiscal year 2011. The effective rate differed from the federal enacted rate of 35% primarily due to state taxes, net of federal benefits.

Net Income

Net income for the second quarter of fiscal 2012 increased $0.6 million, or 20.7%, to $3.5 million compared to $2.9 million for the second quarter of fiscal 2011. As a percentage of net sales, net income was 2.8% for the second quarter of fiscal 2012 compared to 2.5% for the second quarter of fiscal 2011. The increase in net income as a percentage of net sales was primarily due to the 90 basis point improvement in gross margin in the second quarter of fiscal 2012 versus the same period last year, partially offset by higher selling, general and administrative expenses.

Twenty-six Weeks Ended July 28, 2012 Compared to Twenty-six Weeks Ended July 30, 2011

Net Sales

Net sales for the twenty-six weeks ended July 28, 2012 increased $27.5 million, or 11.7%, to $262.2 million as compared to $234.7 million for the twenty-six weeks ended July 30, 2011. This increase was primarily the result of a $21.9 million increase in non-comparable store sales due to the addition of six new stores in fiscal 2011, four of which opened in the first half of fiscal 2011, and the opening of four new stores in the first quarter of fiscal 2012. Comparable store sales increased $5.6 million, or 2.5%, primarily due to a 4.1% increase in the average sale per transaction, partially offset by a 1.5% decrease in comparable transactions.

License Fees from Leased Departments

License fee income related to sales of merchandise in leased departments for the twenty-six weeks ended July 28, 2012 increased $0.5 million, or 15.6%, to $3.6 million as compared to $3.1 million for the twenty-six weeks ended July 30, 2011 primarily due to new store growth.

Gross Profit

Gross profit, which includes license fees from leased departments, for the twenty-six weeks ended July 28, 2012 increased $13.8 million, or 12.7%, to $122.2 million as compared to $108.4 million for the twenty-six weeks ended July 30, 2011. Gross profit margin for the twenty-six weeks ended July 28, 2012 increased 40 basis points to 46.6% of net sales as compared to 46.2% of net sales for the twenty-six weeks ended July 30, 2011. This increase was primarily due to an increase in initial mark-up on merchandise available.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the twenty-six weeks ended July 28, 2012 increased $11.7 million, or 12.8%, to $103.4 million as compared to $91.6 million for the twenty-six weeks ended July 30, 2011. As a percentage of net sales, selling, general and administrative expenses for the twenty-six weeks ended July 28, 2012 increased to 39.4% as compared to 39.0% for the twenty-six weeks ended July 30, 2011.

Store expenses increased $6.6 million in the first half of fiscal 2012 as compared to the first half of fiscal 2011 primarily due to increased payroll and benefits, rent and real estate taxes, maintenance, utilities and cleaning expenses associated with new store growth. Store expenses were 25.5% of net sales in the first half of fiscal 2012 as compared to 25.6% of net sales in the first half of fiscal 2011, a 10 basis point decrease, primarily resulting from lower credit card fees and lower utilities as a percentage of net sales, partially offset by higher health and workers compensation insurance benefits.

Distribution center expenses increased $1.1 million in the first half of fiscal 2012 primarily due to higher payroll expenses and higher outbound freight delivery charges related to the increase in merchandise inventory receipts. Distribution center expenses were 3.7% of net sales in both the first half of fiscal 2012 and 2011.

Corporate expenses increased $1.2 million in the first half of fiscal 2012 as compared to the first half of fiscal 2011 primarily due to higher corporate payroll and benefits due to the addition of corporate positions to support our growth, as well as merit increases. Corporate expenses decreased as a percentage of net sales to 6.0% of net sales in the first half of fiscal 2012 as compared to 6.2% of net sales in the first half of fiscal 2011.

Advertising expenses increased $1.0 million in the first half of fiscal 2012 as compared to the first half of fiscal 2011 primarily as a result of higher television and direct mail advertising costs. Advertising expenses were 2.2% of net sales in the first half of fiscal 2012 as compared to 2.0% of net sales in the first half of fiscal 2011.

Depreciation and amortization expenses increased $1.0 million, or 30 basis points as a percentage of net sales, in the first half of fiscal 2012 as compared to the first half of fiscal 2011 due to increased property additions associated with new store openings and investments in upgrading our information technology systems.

Store pre-opening expenses increased $0.8 million, or 20 basis points as a percentage of net sales, in the first half of fiscal 2012 due to the opening of seven new stores during the first half of fiscal 2012 as compared to the four new stores opened in the first half of fiscal 2011.

Interest Expense, Net

Interest expense for the twenty-six weeks ended July 28, 2012 decreased $0.1 million to $0.2 million as compared to $0.3 million for the twenty-six weeks ended July 30, 2011. There were no borrowings on the revolving line of credit during the twenty-six weeks ended July 28, 2012 or July 30, 2011.

Income Before Taxes

Income before taxes for the twenty-six weeks ended July 28, 2012 increased $2.1 million, or 12.6%, to $18.6 million compared to $16.5 million for the twenty-six weeks ended July 30, 2011. As a percentage of net sales, income before taxes was 7.1% for the first half of fiscal 2012 compared to 7.0% for the first half of fiscal 2011.

Income Tax Expense

Income tax expense for the twenty-six weeks ended July 28, 2012 was $7.0 million compared to income tax expense of $6.3 million for the twenty-six weeks ended July 30, 2011. The effective income tax rate for the first half of fiscal 2012 was 37.5% compared to an effective rate of 38.0% for the first half of fiscal year 2011. The effective rate differed from the federal enacted rate of 35% primarily due to state taxes, net of federal benefits.

Net Income

Net income for the twenty-six weeks ended July 28, 2012 increased $1.4 million, or 13.5%, to $11.6 million compared to $10.2 million for the twenty-six weeks ended July 30, 2011. As a percentage of net sales, net income was 4.4% for both the first half of fiscal 2012 and the first half of fiscal 2011.

Seasonality

Our business is subject to seasonal fluctuations, which are typical of retailers that carry a similar merchandise offering. A disproportionate amount of our sales and net income are realized during the fourth fiscal quarter, which includes the holiday selling season. In fiscal years 2011, 2010 and 2009, respectively, 33.6%, 32.6% and 33.7% of our net sales were generated in the fourth quarter. Operating cash flows are typically higher in the fourth fiscal quarter due to inventory related working capital requirements in the third fiscal quarter. During fiscal years 2011, 2010 and 2009, we generated net income during the first nine months of $15.0 million, $7.2 million and $9.7 million, respectively, and 40.5%, 54.0% and 39.0% of net income was realized in the fourth quarters of fiscal years 2011, 2010 and 2009, respectively. Our business is also subject, at certain times, to calendar shifts, which may occur during key selling periods close to holidays such as Easter, Thanksgiving and Christmas and regional fluctuations for events such as sales tax holidays.

Liquidity and Capital Resources

Our working capital at July 28, 2012 increased $6.0 million, or 9.9%, to $66.3 million compared to working capital of $60.3 million at January 28, 2012. Our primary ongoing cash requirements are for operating expenses, inventory, capital expenditures related to technology, distribution center and existing store improvements, as well as new store capital investment. Our typical investment in a new store is approximately $1.3 million, which represents pre-opening expenses of $0.4 million and inventory of $0.9 million (of which $0.3 million is typically financed through trade payables). The fixed assets and leasehold improvements associated with a new store opening of approximately $1.1 million of the total cost have typically been financed by landlords through favorable tenant improvement allowances. Our primary sources of funds for our business activities are cash from operations, borrowings under our revolving line of credit facility, tenant improvement allowances and the use of operating leases for new stores.

We had no borrowings under our revolving line of credit facility at July 28, 2012 or January 28, 2012 and had cash and cash equivalents of $44.1 million and $35.4 million as of those dates, respectively. Net cash provided by operating activities was $20.4 million for the twenty-six weeks ended July 28, 2012, compared to net cash provided by operating activities of $5.6 million for the twenty-six weeks ended July 30, 2011. Availability under our revolving line of credit facility increased 42% to $59.5 million at July 28, 2012 compared to $41.9 million at January 28, 2012. Stockholders' equity was $89.9 million as of July 28, 2012 compared to $77.7 million as of January 28, 2012.

During the course of our seasonal business cycle, working capital is needed to support inventory for existing stores, particularly during peak selling seasons. . . .