(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 the 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 9, 2012.

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 women's fashion apparel and accessories, and the modern wear-to-work destination for women, providing perfectly fitting pants and NY Style that is feminine, polished, on-trend and versatile. The Company's proprietary branded New York & Company® merchandise is sold exclusively through its national network of retail stores and eCommerce 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 July 28, 2012, the Company operated 537 stores in 43 states.

During the six months ended July 28, 2012, the Company remained focused on its six strategic initiatives: maximizing sales and profitability, particularly during peak traffic times of the year; increasing marketing efforts to grow traffic in stores and on-line; maintaining dominance in the Company's wear-to-work assortment, while redefining its casual assortment; improving average unit cost; optimizing the Company's real estate portfolio; and expanding its eCommerce and Outlet businesses. Progress made on each of these fronts continues to drive improved operating results.

Net sales for the three months ended July 28, 2012 were $227.7 million, as compared to $228.6 million for the three months ended July 30, 2011. Comparable store sales were flat for the three months ended July 28, 2012, as compared to a comparable store sales decrease of 3.4% for the three months ended July 30, 2011. Net loss for the three months ended July 28, 2012 narrowed to $4.3 million, or $0.07 per diluted share. This compares to a net loss of $15.4 million, or $0.25 per diluted share, for the three months ended July 30, 2011.

Capital spending for the six months ended July 28, 2012 was $9.5 million, as compared to $5.9 million for the six months ended July 30, 2011. The $9.5 million of capital spending represents $8.5 million related to the opening of 16 new stores, including 15 New York & Company Outlet stores, and the remodeling of seven existing stores, and $1.0 million related to non-store capital projects, which principally represent information technology enhancements. The Company ended the second quarter of

fiscal year 2012 operating 537 stores, including 41 New York & Company Outlet stores, and 2.8 million selling square feet. Capital spending during the six months ended July 30, 2011 represents $4.2 million related to the remodeling of six existing stores and $1.7 million related to non-store capital projects, which principally represent information technology enhancements.

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 its fourth quarter. Any decrease in sales or margins during either of the principal selling seasons in any given year could have a disproportionate effect on the Company's financial condition and results of operations. Seasonal fluctuations also affect inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period in the fourth quarter and prior to the Easter and Mother's Day holidays toward the end of the first quarter and beginning of the second quarter.

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 and six
months ended July 28, 2012 and July 30, 2011:

                       Three months       Three months        Six months         Six months
                           ended              ended              ended              ended
As a % of net sales    July 28, 2012      July 30, 2011      July 28, 2012      July 30, 2011
Net sales                       100.0 %            100.0 %            100.0 %            100.0 %
Cost of goods sold,
buying and
occupancy costs                  74.7 %             79.5 %             73.2 %             76.7 %

Gross profit                     25.3 %             20.5 %             26.8 %             23.3 %
Selling, general
and administrative
expenses                         27.2 %             27.1 %             27.8 %             27.3 %

Operating loss                   (1.9 )%            (6.6 )%            (1.0 )%            (4.0 )%
Interest expense,
net                                 - %              0.1 %                - %              0.1 %

Loss before income
taxes                            (1.9 )%            (6.7 )%            (1.0 )%            (4.1 )%
(Benefit) provision
for income taxes                    - %                - %                - %                - %

Net loss                         (1.9 )%            (6.7 )%            (1.0 )%            (4.1 )%

                            Three months      Three months        Six months         Six months
                                ended             ended              ended              ended
Selected operating data:    July 28, 2012     July 30, 2011      July 28, 2012      July 30, 2011
                                       (Dollars in thousands, except square foot data)
Comparable store sales
increase (decrease)(1)                 0.0 %            (3.4 )%            (1.5 )%            (0.4 )%
Net sales per average
selling square foot(2)       $          79     $          77      $         159      $         157
Net sales per average
store(3)                     $         422     $         417      $         851      $         852
Average selling square
footage per store(4)                 5,299             5,423              5,299              5,423


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

º (2)
º Net sales per average selling square foot is defined as net sales divided by the average of beginning and end of period selling square feet.

º (3)
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 (4)
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            Three months             Six months              Six months
                                               ended                   ended                   ended                   ended
                                           July 28, 2012           July 30, 2011           July 28, 2012           July 30, 2011
                                       Store      Selling      Store      Selling      Store      Selling      Store      Selling
Store count and selling square feet:   Count    Square Feet    Count    Square Feet    Count    Square Feet    Count    Square Feet
Stores open, beginning of period          541      2,883,199      553      3,013,070      532      2,873,436      555      3,026,483
New stores                                  6         21,992        -              -       16         57,159        -              -
Closed stores                             (10 )      (55,403 )    (10 )      (49,025 )    (11 )      (60,688 )    (12 )      (58,408 )
Net impact of remodeled stores on
selling square feet                         -         (4,033 )      -        (19,232 )      -        (24,152 )      -        (23,262 )

Stores open, end of period                537      2,845,755      543      2,944,813      537      2,845,755      543      2,944,813

Three Months Ended July 28, 2012 Compared to Three Months Ended July 30, 2011

Net Sales. Net sales for the three months ended July 28, 2012 decreased 0.4% to $227.7 million, as compared to $228.6 million for the three months ended July 30, 2011. Comparable store sales were flat for the three months ended July 28, 2012, as compared to a decrease of 3.4% for the three months ended July 30, 2011. In the comparable store base, average dollar sales per transaction decreased by 1.0%, while the number of transactions per average store increased by 1.0%, as compared to the same period last year, largely driven by an improvement in traffic in the core New York & Company stores.

Gross Profit. Gross profit for the three months ended July 28, 2012 increased to $57.7 million, or 25.3% of net sales, as compared to $46.9 million, or 20.5% of net sales, for the three months ended July 30, 2011. The improvement in gross profit during the three months ended July 28, 2012, as compared to the three months ended July 30, 2011, is due to a 340 basis point increase in merchandise margin, primarily attributable to reduced product costs and sourcing efficiencies, combined with a 140 basis point decrease in buying and occupancy costs largely due to the Company remaining focused on cost savings and reducing rent expense.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $62.1 million, or 27.2% of net sales, for the three months ended July 28, 2012, as compared to $62.0 million, or 27.1% of net sales, for the three months ended July 30, 2011. Selling, general and administrative expenses during the three months ended July 28, 2012 reflect improved leverage of store selling expenses, as compared to the three months ended July 30, 2011, and includes a benefit of $1.1 million related to insurance recoveries and a reduction of share-based compensation, which was offset by additional marketing expenses and variable-based compensation. In addition, during the three months ended July 28, 2012 and July 30, 2011, the Company recorded in selling, general and administrative expenses a $0.4 million and a $0.9 million impairment charge, respectively, related to underperforming stores.

Operating Loss. For the reasons discussed above, operating loss for the three months ended July 28, 2012 was $4.4 million, as compared to an operating loss of $15.1 million for the three months ended July 30, 2011.

Interest Expense, Net. Net interest expense was $0.1 million for both the three months ended July 28, 2012 and the three months ended July 30, 2011.

(Benefit) Provision for Income Taxes. The benefit for income taxes for the three months ended July 28, 2012 was $0.2 million, as compared to a provision of $0.2 million for the three months ended July 30, 2011. As previously disclosed, the Company continues to provide for adjustments to the deferred tax valuation allowance initially recorded during the three months ended July 31, 2010, substantially offsetting any tax provisions or benefits. For further information related to the deferred tax valuation allowance, please refer to Note 6, "Income Taxes" in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Net Loss. For the reasons discussed above, net loss for the three months ended July 28, 2012 was $4.3 million, or $0.07 per diluted share, as compared to a net loss of $15.4 million, or $0.25 per diluted share, for the three months ended July 30, 2011.

Six Months Ended July 28, 2012 Compared to Six Months Ended July 30, 2011

Net Sales. Net sales for the six months ended July 28, 2012 decreased 2.7% to $455.4 million, as compared to $467.9 million for the six months ended July 30, 2011. Contributing to the decline in net sales was the Company's lower store base, which consisted of 532 stores at the beginning of fiscal year 2012, as compared to 555 stores at the beginning of fiscal year 2011. Comparable store sales for the six months ended July 28, 2012 decreased by 1.5%, as compared to a decrease of 0.4% for the six months ended July 30, 2011. In the comparable store base, average dollar sales per transaction increased by 0.4%, while the number of transactions per average store decreased by 1.9%, as compared to the same period last year.

Gross Profit. Gross profit for the six months ended July 28, 2012 increased to $122.3 million, or 26.8% of net sales, as compared to $108.9 million, or 23.3% of net sales, for the six months ended July 30, 2011. The improvement in gross profit during the six months ended July 28, 2012, as compared to the six months ended July 30, 2011, is due to a 250 basis point increase in merchandise margin, primarily attributable to reduced product costs and sourcing efficiencies, combined with a 100 basis point decrease in buying and occupancy costs largely due to the Company remaining focused on cost savings and reducing rent expense.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $126.7 million, or 27.8% of net sales, for the six months ended July 28, 2012, as compared to $127.6 million, or 27.3% of net sales, for the six months ended July 30, 2011. Selling, general and administrative expenses during the six months ended July 28, 2012 reflect improved leverage of store selling expenses, as compared to the six months ended July 30, 2011, and includes a benefit of $1.1 million related to insurance recoveries and a reduction of share-based compensation, which was partially offset by additional marketing expenses and variable-based compensation. In addition, during the six months ended July 28, 2012 and July 30, 2011, the Company recorded in selling, general and administrative expenses a $0.4 million and a $0.9 million impairment charge, respectively, related to underperforming stores.

Operating Loss. For the reasons discussed above, operating loss for the six months ended July 28, 2012 was $4.5 million, as compared to an operating loss of $18.7 million for the six months ended July 30, 2011.

Interest Expense, Net. Net interest expense was $0.2 million for the six months ended July 28, 2012, as compared to $0.3 million for the six months ended July 30, 2011.

(Benefit) Provision for Income Taxes. The benefit for income taxes for the six months ended July 28, 2012 was $0.1 million, as compared to a provision of $0.1 million for the six months ended July 30, 2011. As previously disclosed, the Company continues to provide for adjustments to the deferred tax valuation allowance initially recorded during the three months ended July 31, 2010,

substantially offsetting any tax provisions or benefits. For further information related to the deferred tax valuation allowance, please refer to Note 6, "Income Taxes" in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Net Loss. For the reasons discussed above, net loss for the six months ended July 28, 2012 was $4.5 million, or $0.07 per diluted share, as compared to a net loss of $19.1 million, or $0.32 per diluted share, for the six months ended July 30, 2011.

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 facility, if needed. The Company is in compliance with all debt covenants as of July 28, 2012.

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

                                       July 28,     January 28,    July 30,
                                         2012          2012          2011
                                              (Amounts in thousands)
           Cash and cash equivalents    $ 39,364    $     50,787    $ 36,215
           Working capital              $ 28,441    $     27,018    $ 36,572




                                                     Six months        Six months
                                                        ended             ended
                                                    July 28, 2012     July 30, 2011
                                                        (Amounts in thousands)
Net cash used in operating activities               $       (1,951 )  $      (34,428 )
Net cash used in investing activities               $       (9,549 )  $       (5,898 )
Net cash provided by (used in) financing
activities                                          $           77    $         (851 )

Net decrease in cash and cash equivalents           $      (11,423 )  $      (41,177 )

Operating Activities

Net cash used in operating activities was $2.0 million for the six months ended July 28, 2012, as compared to $34.4 million for the six months ended July 30, 2011. The reduction in net cash used in operating activities during the six months ended July 28, 2012, as compared to the six months ended July 30, 2011, is primarily due to a decrease in net loss and changes in income taxes receivable, inventories, prepaid expenses, accounts payable, accrued expenses and deferred rent, partially offset by changes in accounts receivable, income taxes payable and other assets and liabilities.

Investing Activities

Net cash used in investing activities was $9.5 million for the six months ended July 28, 2012, as compared to $5.9 million for the six months ended July 30, 2011. Net cash used in investing activities during the six months ended July 28, 2012 reflects capital expenditures of $8.5 million related to the opening of 16 new stores, including 15 New York & Company Outlet stores, and the remodeling of seven existing stores, and $1.0 million related to non-store capital projects, which principally represent information technology enhancements. Net cash used in investing activities during the six months ended July 30, 2011 reflects capital expenditures of $4.2 million related to the remodeling of six existing stores and $1.7 million related to non-store capital projects, which principally represent information technology enhancements.

As of July 28, 2012, the Company operated 537 stores, including 41 New York & Company Outlet stores. During fiscal year 2012, the Company expects to open 19 to 21 new stores, remodel 10 to 15 existing locations, and close between 25 and 30 stores, ending the year with between 521 and 528 stores, including 44 to 46 Outlet 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

Net cash provided by financing activities was $0.1 million for the six months ended July 28, 2012, as compared to net cash used in financing activities of $0.9 million for the six months ended July 30, 2011. Net cash provided by financing activities for the six months ended July 28, 2012 consists of proceeds from the exercise of stock options. Net cash used in financing activities for the six months ended July 30, 2011 consists of quarterly payments totaling $3.0 million against a term loan that was paid in full on August 10, 2011, as discussed below, partially offset by $2.1 million of proceeds from the exercise of stock options.

Long-Term Debt and Credit Facilities

On August 10, 2011, Lerner New York, Inc., Lernco, Inc. and Lerner New York Outlet, Inc., wholly-owned indirect subsidiaries of New York & Company, Inc., entered into a Third Amended and Restated Loan and Security Agreement (the "Loan Agreement") with Wells Fargo Bank, N.A., as Agent and sole lender. The Loan Agreement expires on August 10, 2016. Concurrent with the closing of the Loan Agreement, the Company repaid in full the $4.5 million outstanding balance on the term loan under the prior agreement and wrote off $0.1 million of unamortized deferred financing costs related to the prior agreement.

The Loan Agreement provides the Company with up to $100 million of credit, consisting of a $75 million revolving credit facility (which includes a subfacility for issuance of letters of credit up to $45 million) with a fully committed accordion option that allows the Company to increase the revolving credit facility to a maximum of $100 million or decrease it to a minimum of $60 million, subject to certain restrictions. Under the Loan Agreement, the Company is currently subject to a Minimum Excess Availability (as defined in the Loan Agreement) covenant of $7.5 million. The Company's credit facility contains other covenants, including restrictions on the Company's ability to pay dividends on its common stock; to incur additional indebtedness; and to prepay, redeem, defease or purchase other debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, stock repurchases, acquisitions and for other purposes.

Under the terms of the Loan Agreement, the revolving loans under the credit facility bear interest, at the Company's option, either at a floating rate equal to the Eurodollar rate plus a margin of between 1.75% and 2.00% per year for Eurodollar rate loans or a floating rate equal to the Prime rate plus a margin of between 0.75% and 1.00% per year for Prime rate loans, depending upon the Company's Average Compliance Excess Availability (as defined in the Loan Agreement). The Company pays the lender under the revolving credit facility a monthly fee on outstanding commercial letters of credit at a rate of between 0.875% and 1.00% per year and on standby letters of credit at a rate of between 1.75% and 2.00% per year, depending upon the Company's Average Compliance Excess Availability, plus a monthly fee on a proportion of the unused commitments under the revolving credit facility at a rate of 0.375% per year.

The maximum borrowing availability under the Company's revolving credit facility is determined by a monthly borrowing base calculation that is based on the application of specified advance rates against inventory and certain other eligible assets. As of July 28, 2012, the Company had availability under its revolving credit facility of $38.5 million, net of letters of credit outstanding of $12.7 million, as

compared to availability of $36.6 million, net of letters of credit outstanding of $7.2 million, as of January 28, 2012, and $54.8 million, net of letters of credit outstanding of $7.7 million, as of July 30, 2011.

The lender has been granted a pledge of the common stock of Lerner Holding and certain of its subsidiaries, and a first priority security interest in substantially all other tangible and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the credit facility. In addition, New York & Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the credit facility, and such guarantees are joint and several.

Critical Accounting Policies

Management has determined that the Company's most critical accounting policies are those related to inventory, long-lived assets, intangible assets and income taxes. Management continues to monitor these accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to these policies as discussed in the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

Adoption of New Accounting Standards

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and IFRSs" ("ASU 2011-04"), which amends Accounting Standards CodificationTM ("ASC") Topic 820, "Fair Value Measurements and Disclosures." The updated guidance amends U.S. generally accepted accounting principles ("GAAP") to create more commonality with International Financial Reporting Standards ("IFRS") by changing some of the wording used to describe requirements for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and has been applied prospectively. The Company's adoption of ASU 2011-04 on January 29, 2012 did not have a material impact on its financial position and results of operations.

In June 2011, the FASB issued ASU No. 2011-05, "Presentation of Comprehensive Income" ("ASU 2011-05"), which amends FASB ASC Topic 220, "Comprehensive Income." The objective of ASU 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to . . .