(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 October 27, 2012, the Company operated 536 stores in 43 states.

During the nine months ended October 27, 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 October 27, 2012 were $219.3 million, as compared to $216.7 million for the three months ended October 29, 2011. Comparable store sales increased 0.7% for the three months ended October 27, 2012, as compared to a comparable store sales decrease of 5.2% for the three months ended October 29, 2011. Net loss for the three months ended October 27, 2012 narrowed to $3.8 million, or $0.06 per diluted share. This compares to a net loss for the three months ended October 29, 2011 of $9.0 million, or $0.15 per diluted share, which includes a $2.5 million charge to income tax expense related to an additional valuation allowance established resulting from temporary differences identified in an IRS income tax audit that relate to tax years 2002 and prior.

Capital spending for the nine months ended October 27, 2012 was $13.9 million, as compared to $9.4 million for the nine months ended October 29, 2011. The $13.9 million of capital spending represents $11.7 million related to the opening of 18 new stores, including 17 New York & Company

Outlet stores, and the remodeling of 12 existing stores, and $2.2 million related to non-store capital projects, which principally represent information technology enhancements. The Company ended the third quarter of fiscal year 2012 operating 536 stores, including 43 New York & Company Outlet stores, and 2.8 million selling square feet. Capital spending during the nine months ended October 29, 2011 represents $7.0 million related to the remodeling of 10 existing stores and $2.4 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 nine
months ended October 27, 2012 and October 29, 2011:

                         Three months     Three months      Nine months      Nine months
                             ended            ended            ended            ended
                          October 27,      October 29,      October 27,      October 29,
As a % of net sales          2012             2011             2012             2011
Net sales                        100.0 %          100.0 %          100.0 %          100.0 %
Cost of goods sold,
buying and occupancy
costs                             72.2 %           75.3 %           72.8 %           76.3 %

Gross profit                      27.8 %           24.7 %           27.2 %           23.7 %
Selling, general and
administrative
expenses                          29.5 %           27.5 %           28.4 %           27.3 %

Operating loss                    (1.7 )%          (2.8 )%          (1.2 )%          (3.6 )%
Interest expense, net              0.1 %            0.1 %              - %            0.1 %
Loss on modification
and extinguishment of
debt                                 - %            0.1 %              - %              - %

Loss before income
taxes                             (1.8 )%          (3.0 )%          (1.2 )%          (3.7 )%
(Benefit) provision
for income taxes                     - %            1.1 %              - %            0.4 %

Net loss                          (1.8 )%          (4.1 )%          (1.2 )%          (4.1 )%

                           Three months    Three months      Nine months      Nine months
                               ended           ended            ended            ended
                            October 27,     October 29,      October 27,      October 29,
Selected operating data:       2012            2011             2012             2011
                                   (Dollars in thousands, except square foot data)
Comparable store sales
increase (decrease)(1)               0.7 %          (5.2 )%          (0.8 )%          (2.0 )%
Net sales per average
selling square foot(2)      $         77    $         74     $        236     $        230
Net sales per average
store(3)                    $        408    $        399     $      1,263     $      1,247
Average selling square
footage per store(4)               5,291           5,412            5,291            5,412


--------------------------------------------------------------------------------
   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           Nine months            Nine months
                                              ended                  ended                  ended                  ended
                                         October 27, 2012       October 29, 2011       October 27, 2012       October 29, 2011
                                                  Selling                Selling                Selling                Selling
                                       Store      Square      Store      Square      Store      Square      Store      Square
Store count and selling square feet:   Count       Feet       Count       Feet       Count       Feet       Count       Feet
Stores open, beginning of period          537     2,845,755      543     2,944,813      532     2,873,436      555     3,026,483
New stores                                  2         7,065        -             -       18        64,224        -             -
Closed stores                              (3 )     (12,250 )     (1 )      (5,503 )    (14 )     (72,938 )    (13 )     (63,911 )
Net impact of remodeled stores on
selling square feet                         -        (4,731 )      -        (5,899 )      -       (28,883 )      -       (29,161 )

Stores open, end of period                536     2,835,839      542     2,933,411      536     2,835,839      542     2,933,411

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

Net Sales. Net sales for the three months ended October 27, 2012 increased to $219.3 million, as compared to $216.7 million for the three months ended October 29, 2011. Comparable store sales increased 0.7% for the three months ended October 27, 2012, as compared to a decrease of 5.2% for the three months ended October 29, 2011. In the comparable store base, average dollar sales per transaction increased by 1.6%, while the number of transactions per average store decreased by 0.9%, as compared to the same period last year.

Gross Profit. Gross profit for the three months ended October 27, 2012 increased to $60.9 million, or 27.8% of net sales, as compared to $53.5 million, or 24.7% of net sales, for the three months ended October 29, 2011. The improvement in gross profit during the three months ended October 27, 2012, as compared to the three months ended October 29, 2011, is due to a 140 basis point increase in merchandise margin, primarily attributable to reduced product costs and sourcing efficiencies, combined with a 170 basis point decrease in buying and occupancy costs as a percentage of net sales 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 $64.7 million, or 29.5% of net sales, for the three months ended October 27, 2012, as compared to $59.6 million, or 27.5% of net sales, for the three months ended October 29, 2011. The increase in selling, general and administrative expenses during the three months ended October 27, 2012, as compared to the three months ended October 29, 2011, is primarily due to an increase in variable-based compensation expense and investments in marketing, eCommerce and Outlet initiatives.

Operating Loss. For the reasons discussed above, operating loss for the three months ended October 27, 2012 was $3.8 million, or 1.7% of net sales, as compared to an operating loss of $6.0 million, or 2.8% of net sales, for the three months ended October 29, 2011.

Interest Expense, Net. Net interest expense was $0.1 million for both the three months ended October 27, 2012 and the three months ended October 29, 2011.

Loss on Modification and Extinguishment of Debt. In connection with the repayment in full of the $4.5 million outstanding balance on the Company's term loan and entering into a Third Amended and Restated Loan and Security Agreement with Wells Fargo Bank, N.A. on August 10, 2011, the Company wrote off $0.1 million of unamortized deferred financing costs related to its previous credit facilities during the three months ended October 29, 2011. No such charges were incurred during the three months ended October 27, 2012.

(Benefit) Provision for Income Taxes. The benefit for income taxes for the three months ended October 27, 2012 was $0.1 million, as compared to a provision of $2.7 million for the three months ended October 29, 2011. The provision for income taxes during the three months ended October 29, 2011 includes a $2.5 million charge related to an additional valuation allowance established resulting from temporary differences identified in an IRS income tax audit that relate to tax years 2002 and prior. 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. 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 October 27, 2012 was $3.8 million, or 1.8% of net sales, as compared to a net loss of $9.0 million, or 4.1% of net sales, for the three months ended October 29, 2011.

Nine Months Ended October 27, 2012 Compared to Nine Months Ended October 29, 2011

Net Sales. Net sales for the nine months ended October 27, 2012 decreased to $674.7 million, as compared to $684.6 million for the nine months ended October 29, 2011. Comparable store sales for the nine months ended October 27, 2012 decreased by 0.8%, as compared to a decrease of 2.0% for the nine months ended October 29, 2011. In the comparable store base, average dollar sales per transaction increased by 0.8%, while the number of transactions per average store decreased by 1.6%, as compared to the same period last year.

Gross Profit. Gross profit for the nine months ended October 27, 2012 increased to $183.2 million, or 27.2% of net sales, as compared to $162.4 million, or 23.7% of net sales, for the nine months ended October 29, 2011. The improvement in gross profit during the nine months ended October 27, 2012, as compared to the nine months ended October 29, 2011, is due to a 210 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 as a percentage of net sales 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 $191.5 million, or 28.4% of net sales, for the nine months ended October 27, 2012, as compared to $187.2 million, or 27.3% of net sales, for the nine months ended October 29, 2011. The increase in selling, general and administrative expenses during the nine months ended October 27, 2012, as compared to the nine months ended October 29, 2011, is primarily due to an increase in variable-based compensation expense and investments in marketing, eCommerce and Outlet initiatives, which was partially offset by improved leverage of store selling expenses. During the nine months ended October 27, 2012 and October 29, 2011, the Company recorded in selling, general and administrative expenses a $0.4 million and a $0.9 million asset impairment charge, respectively, related to underperforming stores.

Operating Loss. For the reasons discussed above, operating loss for the nine months ended October 27, 2012 was $8.3 million, or 1.2% of net sales, as compared to an operating loss of $24.8 million, or 3.6% of net sales, for the nine months ended October 29, 2011.

Interest Expense, Net. Net interest expense was $0.3 million for the nine months ended October 27, 2012, as compared to $0.4 million for the nine months ended October 29, 2011.

Loss on Modification and Extinguishment of Debt. In connection with the repayment in full of the $4.5 million outstanding balance on the Company's term loan and entering into a Third Amended and Restated Loan and Security Agreement with Wells Fargo Bank, N.A. on August 10, 2011, the Company

wrote off $0.1 million of unamortized deferred financing costs related to its previous credit facilities during the nine months ended October 29, 2011. No such charges were incurred during the nine months ended October 27, 2012.

(Benefit) Provision for Income Taxes. The benefit for income taxes for the nine months ended October 27, 2012 was $0.2 million, as compared to a provision of $2.8 million for the nine months ended October 29, 2011. The provision for income taxes during the nine months ended October 29, 2011 includes a $2.5 million charge related to an additional valuation allowance established resulting from temporary differences identified in an IRS income tax audit that relate to tax years 2002 and prior. 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. 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 nine months ended October 27, 2012 was $8.4 million, or 1.2% of net sales, as compared to a net loss of $28.0 million, or 4.1% of net sales, for the nine months ended October 29, 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 October 27, 2012.

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

                                    October 27,     January 28,     October 29,
                                       2012            2012            2011
                                              (Amounts in thousands)
       Cash and cash equivalents    $     23,500    $     50,787    $     20,666
       Working capital              $     27,365    $     27,018    $     31,024




                                                   Nine months     Nine months
                                                      ended           ended
                                                   October 27,     October 29,
                                                      2012            2011
                                                     (Amounts in thousands)
      Net cash used in operating activities        $    (13,449 )  $    (53,666 )
      Net cash used in investing activities        $    (13,921 )  $     (9,367 )
      Net cash provided by financing activities    $         83    $      6,307

      Net decrease in cash and cash equivalents    $    (27,287 )  $    (56,726 )

Operating Activities

Net cash used in operating activities was $13.4 million for the nine months ended October 27, 2012, as compared to $53.7 million for the nine months ended October 29, 2011. The decrease in net cash used in operating activities during the nine months ended October 27, 2012, as compared to the nine months ended October 29, 2011, is primarily due to a lower net loss and changes in inventories,

accounts payable, accrued expenses, deferred rent and other assets and liabilities, partially offset by changes in accounts receivable, income tax receivable, prepaid expenses and income tax payable.

Investing Activities

Net cash used in investing activities was $13.9 million for the nine months ended October 27, 2012, as compared to $9.4 million for the nine months ended October 29, 2011. Net cash used in investing activities during the nine months ended October 27, 2012 reflects capital expenditures of $11.7 million related to the construction of 18 new stores and the remodeling of 12 existing stores, and $2.2 million related to non-store capital projects, which principally represent information technology enhancements. Net cash used in investing activities during the nine months ended October 29, 2011 reflects capital expenditures of $7.0 million related to the remodeling of 10 existing stores and $2.4 million for non-store capital projects, which principally represent information technology enhancements.

The Company plans to end fiscal year 2012 with between 516 and 520 stores, including 44 New York & Company Outlet stores, and 2.7 million selling square feet. 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 nine months ended October 27, 2012, as compared to $6.3 million for the nine months ended October 29, 2011. Net cash provided by financing activities for the nine months ended October 27, 2012 consists of proceeds from the exercise of stock options. Net cash provided by financing activities for the nine months ended October 29, 2011 consists of $12.0 million of proceeds from borrowings under the Company's revolving credit facility and $2.2 million of proceeds from the exercise of stock options, partially offset by quarterly payments totaling $7.5 million against a term loan that was paid in full on August 10, 2011 and the payment of $0.4 million of financing costs in connection with the completion of the Company's amended credit facility on August 10, 2011.

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 October 27, 2012, the Company had availability under its revolving credit facility of $56.1 million, net of letters of credit outstanding of $12.3 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 $53.7 million, net of letters of credit outstanding of $8.3 million, as of October 29, 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 . . .