Forward-Looking Statements

Various statements in this Form 10-Q, in future filings by us with the Securities and Exchange Commission (the "SEC"), in our press releases and in oral statements made from time to time by us or on our behalf constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and are indicated by words or phrases such as "anticipate," "estimate," "expect," "project," "we believe," "is or remains optimistic," "currently envisions" and similar words or phrases and involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from the future results, performance or achievements expressed in or implied by such forward-looking statements.

These forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control. A detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations is included in our Annual Report on Form 10-K for the fiscal year ended July 28, 2012 (the "Fiscal 2012 10-K"). There are no material changes to such risk factors, nor are there any identifiable previously undisclosed risks as set forth in Part II, Item 1A - "Risk Factors" of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

INTRODUCTION

Management discussion and analysis of financial condition and results of operations ("MD&A") is provided as a supplement to the accompanying unaudited interim consolidated financial statements and footnotes to help provide an understanding of our financial condition and liquidity, changes in financial condition and results of our operations. MD&A is organized as follows:

· Overview. This section provides a general description of our business and a summary of financial performance for the three-month period ended October 27, 2012. In addition, this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.

· Results of operations. This section provides an analysis of our results of operations for the three-month periods ending October 27, 2012 and October 29, 2011.

· Financial condition and liquidity. This section provides an analysis of our cash flows for the three-month periods ending October 27, 2012 and October 29, 2011, as well as a discussion of our financial condition and liquidity as of October 27, 2012. The discussion of our financial condition and liquidity includes (i) our available financial capacity under our credit facility, (ii) a summary of our key debt compliance measures, (iii) anticipated capital expenditures, and (iv) any material changes in financial condition and commitments since the end of Fiscal 2012.

· Market risk management. This section discusses any significant changes in our risk exposures related to interest rates, foreign currency exchange rates and our investments, as well as the underlying market conditions since the end of Fiscal 2012.

· Critical accounting policies. This section discusses any significant changes in our accounting policies since the end of Fiscal 2012. Significant changes include those considered to be important to our financial condition and results of operations, which require significant judgment and estimation on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Notes 3 and 4 to our audited consolidated financial statements included in our Fiscal 2012 10-K.

· Recently issued accounting pronouncements. This section notes that we have assessed the potential impact to our reported financial condition and results of operations of accounting standards that have been recently issued.

In this Form 10-Q, references to "Ascena," "ourselves," "we," "our," "us" and the "Company" refer to Ascena Retail Group, Inc. and its subsidiaries, unless the context indicates otherwise. We utilize a 52-53 week fiscal year ending on the last Saturday in July. As such, fiscal year 2013 will end on July 27, 2013 and will be a 52-week period ("Fiscal 2013"). Fiscal 2012 ended on July 28, 2012 and reflected a 52-week period ("Fiscal 2012"). The first quarter of Fiscal 2013 ended on October 27, 2012 and was a 13-week period. The first quarter of Fiscal 2012 ended on October 29, 2011 and was also a 13-week period.

OVERVIEW

Our Business

On June 14, 2012, the Company acquired Charming Shoppes, Inc. ("Charming Shoppes") and its related family of retail brands. Accordingly, the Company now operates, through its wholly owned subsidiaries, the following principal retail brands: Justice; Lane Bryant; maurices; dressbarn and Catherines. The Company now operates (through its subsidiaries) approximately 3,900 stores throughout the United States, Puerto Rico and Canada, with annual revenues on a pro forma basis of over $4.5 billion for Fiscal 2012, giving effect to the acquisition of Charming Shoppes as of the beginning of such year.

We classify our businesses into five segments following a brand-oriented approach: Justice; Lane Bryant; maurices; dressbarn and Catherines. The Justice segment includes approximately 961 specialty retail and outlet stores, e-commerce operations, and certain licensed franchises in international territories. The Justice brand offers fashionable apparel to girls who are ages 7 to 14 in an environment designed to match the energetic lifestyle of tween girls. The Lane Bryant segment includes approximately 815 specialty retail and outlet stores, and e-commerce operations. The Lane Bryant brand offers fashionable and sophisticated plus-size apparel under multiple private labels to female customers in the 35 to 55 age range. The maurices segment includes approximately 840 specialty retail and outlet stores, and e-commerce operations. The maurices brand offers up-to-date fashion designed to appeal to the 17 to 34 year-old female, with stores concentrated in small markets (approximately 25,000 to 100,000 people). The dressbarn segment includes approximately 840 specialty retail and outlet stores, and e-commerce operations. The dressbarn brand primarily attracts female consumers in the mid-30's to mid-50's age range and offers moderate-to-better quality career, special occasion and casual fashion to the working woman. The Catherines segment includes approximately 417 specialty retail and outlet stores, and e-commerce operations. The Catherines brand offers classic apparel and accessories for wear-to-work and casual lifestyles in a full range of plus sizes, generally catering to the female customer 45 years and older.

Seasonality of Business

Our business is typically affected by seasonal sales trends primarily resulting from the timing of holiday and back-to-school shopping periods. In particular, Justicesales and operating profits tend to be significantly higher during the fall season which occurs during the first and second quarters of our fiscal year, as this includes the back-to-school period and the holiday selling period which is focused on gift-giving merchandise. The dressbarn and maurices brands have historically experienced lower earnings in the second fiscal quarter ending in January than during the three other fiscal quarters, reflecting the intense promotional environment that generally has characterized the holiday shopping season in recent years. The newly acquired Lane Bryant and Catherines brands typically experience peak sales during the Easter, Memorial Day and December holiday seasons. In addition, our operating results and cash flows may fluctuate materially in any quarterly period depending on, among other things, increases or decreases in comparable store sales, adverse weather conditions, shifts in the timing of certain holidays and changes in merchandise mix.

Basis of Presentation

Discontinued Operations

In June 2012, the Company announced, contemporaneously with the closing of the Charming Shoppes Acquisition, its intent to cease operating the acquired Fashion Bug business. The Fashion Bug business, consisting of approximately 600 retail stores, is expected to be closed down by early in calendar year 2013 through an orderly liquidation of the related net assets.

In addition, the Company also announced, contemporaneously with the closing of the Charming Shoppes Acquisition, its intent to sell the acquired Figi's business. The Figi's business, which markets food and specialty gift products, is expected to be sold by the one-year anniversary date of the closing of the Charming Shoppes Acquisition.

Given the Company's intent to exit both of those businesses, their financial position and operating results have been classified as discontinued operations within the accompanying consolidated financial statements of the Company.

Reclassifications

Buying, Distribution and Occupancy Costs

Historically, the Company included buying, distribution and occupancy costs within cost of goods sold on the face of its statement of operations. However, in the fourth quarter of Fiscal 2012, in connection with conforming the financial presentation of Charming Shoppes, the Company decided to present each of the aggregate of buying, distribution and occupancy costs and gross margin separately on the face of its statement of operations. In addition, certain costs, such as store utility costs, were reclassified from selling, general and administrative expenses to buying, distribution and occupancy costs. Financial information for all prior periods has been reclassified in order to conform to the current period's presentation. There have been no changes in historical operating income or historical net income for any period as a result of these changes.

Summary of Financial Performance

General Economic Conditions

Our performance is subject to macroeconomic conditions and their impact on levels of consumer spending. Some of the factors negatively impacting discretionary consumer spending include general economic conditions, wages and high unemployment, high consumer debt, reductions in net worth based on severe market declines (such as in residential real estate markets), increased taxation, higher fuel, energy and other prices, increasing interest rates, and low consumer confidence. In addition, any significant volatility in our financial markets, as has been experienced in the past, could also negatively impact the levels of future discretionary consumer spending. While the U.S. and certain other international economies have improved since the global financial crisis commenced in Fall 2008, a prolonged economic downturn and slow recovery, including high rates of unemployment, rising commodity prices and declining real estate market values, could have a material effect on our business, financial condition and results of operations.

Operating Results

Three Months Ended October 27, 2012 compared to Three Months Ended October 29, 2011

For the three months ended October 27, 2012, we reported net sales of $1,137.5 million, income from continuing operations of $46.2 million and net income from continuing operations per diluted share of $0.29. This compares to net sales of $768.3 million, income from continuing operations of $47.5 million and net income from continuing operations per diluted share of $0.30 for the three months ended October 29, 2011. Including a $3.1 million loss on discontinued operations, net income was $43.1 million and net income per diluted share was $0.27 for the three months ended October 27, 2012. The decrease in net income and net income per diluted share during the three months ended October 27, 2012 was a direct result of the incurrence of an aggregate of $26.3 million of non-recurring purchase accounting costs and certain acquisition-related, integration and restructuring costs relating to the Charming Shoppes Acquisition, as discussed more fully hereinafter.

Our operating performance for the three months ended October 27, 2012 was positively affected by a 48.1% increase in net sales, consisting of 8.7% organic growth from our legacy family of brands and 39.4% growth from the Charming Shoppes Acquisition. The increase in net sales from our legacy family of brands was driven by both our comparable store sales and new store growth, as well as strong growth in e-commerce sales. Our gross margin rate increased 40 basis points to 57.6%, primarily due to stronger margin at maurices, dressbarn, Lane Bryant, and Catherines, which more than offset lower margins at Justice due to increased promotional activity. In addition, the gross margin performance in the first quarter of Fiscal 2013 was negatively affected by the incurrence of $19.9 million of one-time, non-cash inventory expense associated with the write-up of Charming Shoppes's inventory to fair market value as of the acquisition date.

Operating income decreased $3.6 million, consisting of a $18.4 million, or 24.1% increase from our legacy family of brands and a $22.0 million decrease relating to the Charming Shoppes Acquisition. The operating loss from Charming Shoppes reflected the approximate $19.9 million of one-time, non-cash inventory expense and $6.4 million of certain acquisition-related, integration and restructuring costs. In turn, the increased operating income from our legacy family of brands primarily reflected the flow-through of margin on the higher sales volume and an increase in gross margin rate.

The provision for income taxes from continuing operations decreased by $7.5 million to $22.2 million. The effective tax rate decreased 600 basis points, to 32.5% for three months ended October 27, 2012 from 38.5% for the three months ended October 29, 2011. The decrease in the effective tax rate was primarily the result of the reversal of certain liabilities associated with uncertain tax positions due largely to the expiration of applicable federal and state income tax statutes of limitations for certain years in the first quarter of Fiscal 2013.

Income from continuing operations decreased $1.3 million to $46.2 million as the decrease in operating income and $4.6 million of higher interest expense relating to debt incurred to fund the Charming Shoppes Acquisition more than offset the lower tax provision described above. Net income from continuing operations per diluted share decreased by $0.01, or 3.3%, to $0.29 per share for three months ended October 27, 2012 from $0.30 per share for the three months ended October 29, 2011. The decrease in diluted earnings per share results was primarily due to the lower level of net income and an increase in the weighted average diluted common shares outstanding.

Financial Condition and Liquidity

We ended the first quarter of Fiscal 2013 in a net debt position of $167.8 million compared to $157.7 million as of the end of Fiscal 2012. The increase in our net debt position as of October 27, 2012 as compared to July 28, 2012 was primarily due to the use of cash to support our capital expenditures and the repayment of debt under our revolving credit agreement, offset in part by our operating cash flows.

Our equity increased to $1.406 billion as of October 27, 2012, compared to $1.341 billion as of July 28, 2012, primarily due to our net income during the first quarter of Fiscal 2013.

We generated $31.3 million of cash from operations during the three months ended October 27, 2012, compared to $56.8 million during the three months ended October 29, 2011. During the first quarter of Fiscal 2013, a significant portion of our available cash was used in the repayment of debt and to reinvest in our business through capital spending. In particular, we used $60.5 million for capital expenditures primarily associated with our retail store expansion and investments in our facilities and technological infrastructure.

Transactions Affecting Comparability of Results of Operations and Financial Condition

The comparability of the Company's operating results for three-month periods ended October 27, 2012 and October 29, 2011 presented herein has been affected by certain transactions, including:

· The Charming Shoppes Acquisition that closed on June 14, 2012, as described in Note 4 to the accompanying unaudited consolidated financial statements;

· Certain acquisition-related, integration and restructuring costs;

· Certain non-recurring purchase accounting costs;

· Pretax charges related to certain one-time, executive contractual obligation costs incurred in the first quarter of Fiscal 2012.

A summary of the effect of certain of these items on pretax income for each applicable period presented is noted below:

                                                                  Three Months Ended
                                                            October 27,         October 29,
                                                               2012                2011
                                                                      (millions)
Acquisition-related, integration and restructuring costs
(a)                                                        $        (6.4 )     $        (1.4 )
One-time, non-cash inventory expense associated with the
write-up of inventory to fair market value                         (19.9 )                 -
Executive contractual obligation costs                                 -                (5.4 )
Total                                                      $       (26.3 )     $        (6.8 )

The following discussion of results of operations highlights, as necessary, the significant changes in operating results arising from these items and transactions. However, unusual items or transactions may occur in any period. Accordingly, investors and other financial statement users individually should consider the types of events and transactions that have affected operating trends.

RESULTS OF OPERATIONS

Our segment reporting structure reflects a brand-focused approach, designed to optimize the operational coordination and resource allocation of our businesses across multiple functional areas, including specialty retail, e-commerce and licensing. The five reportable segments described below represent our brand-based activities for which separate financial information is available, and which is utilized on a regular basis by our executive team to evaluate performance and allocate resources. In identifying our reportable segments, we consider economic characteristics, as well as products, customers, sales growth potential and long-term profitability. As such, we report our operations in five reportable segments as follows:

• Justice segment - consists of the specialty retail, outlet, e-commerce and licensing operations of the Justice brand.

• Lane Bryant segment - consists of the specialty retail, outlet and e-commerce operations of the Lane Bryant brand.

• maurices segment - consists of the specialty retail, outlet and e-commerce operations of the maurices brand.

• dressbarn segment - consists of the specialty retail, outlet and e-commerce operations of the dressbarn brand.

• Catherines segment - consists of the specialty retail, outlet and e-commerce operations of the Catherines brand.

Three Months Ended October 27, 2012 compared to Three Months Ended October 29, 2011

The following table summarizes our results of operations and expresses the percentage relationship to net sales of certain financial statement captions:

                                                     Three Months Ended
                                              October 27,           October 29,
                                                 2012                   2011            $ Change       % Change
                                             (millions, except per share data)         (millions)
Net sales                                  $         1,137.5       $        768.3     $      369.2          48.1 %

Cost of goods sold                                    (481.9 )             (328.5 )         (153.4 )        46.7 %
Cost of goods sold as % of net sales                    42.4 %               42.8 %
Gross margin                                           655.6                439.8            215.8          49.1 %
Gross margin as a % of net sales                        57.6 %               57.2 %
Other costs and expenses:
 Buying, distribution and occupancy
costs                                                 (205.8 )             (126.3 )          (79.5 )        62.9 %
Buying, distribution and occupancy costs
as % of net sales                                       18.1 %               16.4 %
 Selling, general and administrative
expenses                                              (339.3 )             (212.9 )         (126.4 )        59.4 %
SG&A as % of net sales                                  29.8 %               27.7 %
 Depreciation and amortization expense                 (37.6 )              (24.1 )          (13.5 )        56.0 %
Total other costs and expenses                        (582.7 )             (363.3 )         (219.4 )        60.4 %
Operating income                                        72.9                 76.5             (3.6 )        (4.7 )%
Operating income as % of net sales                       6.4 %               10.0 %

Interest expense                                        (4.8 )               (0.2 )           (4.6 )     2,300.0 %
Interest and other income, net                           0.3                  0.9             (0.6 )       (66.7 )%
Income from continuing operations before
provision for income taxes                              68.4                 77.2             (8.8 )       (11.4 )%
Provision for income taxes from
continuing operations                                  (22.2 )              (29.7 )            7.5         (25.3 )%
Effective tax rate(a)                                   32.5 %               38.5 %
Income from continuing operations                       46.2                 47.5             (1.3 )         2.7 %
Loss from discontinued operations, net
of taxes (b)                                            (3.1 )                  -             (3.1 )          NM
Net income                                 $            43.1       $         47.5     $       (4.4 )        (9.3 )%

Net income (loss) per common share -
basic:
Continuing operations                      $            0.30       $         0.31     $      (0.01 )        (3.2 )%
Discontinued operations                                (0.02 )                  -            (0.02 )          NM
Total net income per basic common share    $            0.28       $         0.31     $      (0.03 )        (9.7 )%

Net income (loss) per common share -
diluted:
Continuing operations                      $            0.29       $         0.30     $      (0.01 )        (3.3 )%
Discontinued operations                                (0.02 )                  -            (0.02 )          NM
Total net income per diluted common
share                                      $            0.27       $         0.30     $      (0.03 )       (10.0 )%

(b) Loss from discontinued operations is presented net of a $3.1 million tax benefit for the three months ended October 27, 2012.

(NM) Not Meaningful

Net Sales. Net sales increased by $369.2 million, or 48.1%, to $1,137.5 million for the three months ended October 27, 2012 from $768.3 million for the three months ended October 29, 2011. The increase in net sales consisted of 8.7% organic growth from our legacy family of brands and 39.4% from the Charming Shoppes Acquisition. The increase in net sales from our legacy family of brands was driven by both our comparable store sales growth and new store growth, as well as strong growth in e-commerce sales. On a consolidated basis, comparable store sales increased 1% during the three months ended October 27, 2012. Our brand sales increases were as follows: $38.3 million at Justice, $229.8 million at Lane Bryant, $21.7 million at maurices, $6.6 million at dressbarn, and $72.8 million at Catherines.

Net sales and comparable store sales data for our five business segments is presented below.

                                        Three Months Ended
                                  October 27,       October 29,                                          Comparable
                                      2012             2011            $ Change         % Change      Store Sales (a)
                                            (millions)                 (millions)
Net sales:
Justice                           $      358.3     $       320.0     $        38.3           12.0 %                  4 %
Lane Bryant (b)                          229.8                 -             229.8             NM %                 (4 )%
maurices                                 224.6             202.9              21.7           10.7 %                  3 %
dressbarn                                252.0             245.4               6.6            2.7 %                  1 %
Catherines (b)                            72.8                 -              72.8             NM %                  4 %
Total net sales                   $    1,137.5     $       768.3     $       369.2           48.1 %                  1 %

(b) The Charming Shoppes Acquisition was consummated on June 14, 2012; therefore the data related to the Lane Bryant and Catherines segments for the prior reporting period is not presented.

(NM)Not Meaningful

Justice net sales. The net increase primarily reflects:

· an increase of $11.3 million, or 4%, in comparable store sales during the three months ended October 27, 2012;

· a $14.0 million increase in non-comparable stores sales, primarily driven by an increase related to 44 net new store openings during the last twelve months;

· an increase of $5.9 million in revenues from its e-commerce operations; and

· a $7.1 million increase in wholesale, licensing operations, and other revenues.

Lane Bryant net sales. Net sales reflect the operation of 815 stores in the current year, as the acquisition was consummated on June 14, 2012, which resulted in $229.8 million of net sales during the three months ended October . . .