10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 3, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _____________

Commission File Number: 000-07258

CHARMING SHOPPES, INC.

(Exact Name of Registrant as Specified in Its Charter)

PENNSYLVANIA	23-1721355
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

450 WINKS LANE, BENSALEM, PA 19020	(215) 245-9100
(Address of principal executive offices) (Zip Code)	(Registrant’s telephone number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock (par value $.10 per share)	The NASDAQ Stock Market LLC
Stock Purchase Rights	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large Accelerated Filer x Accelerated Filer o Non-accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the outstanding common stock of the registrant held by non-affiliates as of July 29, 2006 (the last day of the registrant’s most recently completed second fiscal quarter), based on the closing price on July 28, 2006, was approximately $1,244,546,000.

As of March 27, 2007, 123,665,511 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III of this Form 10-K is incorporated by reference herein from the registrant’s definitive proxy statement for its 2007 annual shareholders meeting, which is expected to be filed within 120 days after the end of the fiscal year covered by this Annual Report.

CHARMING SHOPPES, INC.

2006 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

		Page
	PART I
Item 1	Business	1
	General	1
	Retail Stores Segment	3
	Direct-to-Consumer Segment	7
	Proprietary Credit Programs	10
	Competition	11
	Employees	11
	Trademarks and Servicemarks	11
	Executive Offices	12
	Available Information	12
Item 1A	Risk Factors	12
	Risks Related to Our Business and Industry	12
	Other Risks	17
Item 1B	Unresolved Staff Comments	18
Item 2	Properties	18
Item 3	Legal Proceedings	20
Item 4	Submission of Matters to a Vote of Security Holders	20
	Additional Part I Information - Our Executive Officers	20
	PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	21
Item 6	Selected Financial Data	24
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Forward-Looking Statements	26
	Overview	28
	Critical Accounting Policies	31
	Results of Operations	38
	Financial Condition	47
	Market Risk	55
	Impact of Recent Accounting Pronouncements	56
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	56
Item 8	Financial Statements and Supplementary Data	56
	Management’s Report on Internal Control Over Financial Reporting	56
	Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	57
	Report of Independent Registered Public Accounting Firm	59
	Consolidated Balance Sheets	60
	Consolidated Statements of Operations and Comprehensive Income	61

i

TABLE OF CONTENTS

(Continued)

		Page
Item 8	Financial Statements and Supplementary Data (Continued)
	Consolidated Statements of Stockholders’ Equity	62
	Consolidated Statements of Cash Flows	63
	Notes to Consolidated Financial Statements	64
Item 9	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	106
Item 9A	Controls and Procedures	106
Item 9B	Other Information	106
	PART III
Item 10	Directors, Executive Officers, and Corporate Governance	107
Item 11	Executive Compensation	107
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	107
Item 13	Certain Relationships and Related Transactions, and Director Independence	108
Item 14	Principal Accountant Fees and Services	108
	PART IV
Item 15	Exhibits and Financial Statement Schedules	109
	Signatures	120
	Exhibit Index	121

ii

PART I

Item 1. Business

GENERAL

We are a leading multi-brand, multi-channel specialty apparel retailer with a leading market share in women’s plus-size specialty apparel. Our Retail Stores segment operates retail stores and related E-commerce websites through the following distinct brands: LANE BRYANT^®, FASHION BUG^®, CATHERINES PLUS SIZES^®, LANE BRYANT OUTLET^TM and PETITE SOPHISTICATE OUTLET^TM. Our Direct-to-Consumer segment operates numerous apparel, accessories, footwear, and gift catalogs and related E-commerce websites through our Crosstown Traders business, which we acquired in June 2005. During the year ended February 3, 2007 (“Fiscal 2007”), the sale of plus-size apparel represented approximately 74% of our total net sales. Through our multiple channels, fashion content, and broad merchandise assortments, we seek to appeal to customers from a broad range of socioeconomic, demographic, and cultural groups. As of February 3, 2007, we operated 2,378 stores in 48 states.

LANE BRYANT^® is a widely recognized name in plus-size fashion. Through private labels, such as VENEZIA^®, CACIQUE^®, and LANE BRYANT^®, we offer fashionable and sophisticated apparel in plus-sizes 14- 28, including intimate apparel, wear-to-work, and casual sportswear, as well as accessories. LANE BRYANT has a loyal customer base, generally ranging in age from 25 to 45 years old, which shops for fashionable merchandise in the moderate price range. Primarily a mall-based destination store for the plus-size woman, LANE BRYANT operates 777 stores in 46 states that average approximately 5,800 square feet. During Fiscal 2007, our LANE BRYANT website (lanebryant.com) has averaged more than 2.3 million unique visitors per month and has an established on-line community.

During Fiscal 2006, LANE BRYANT introduced and tested a new store concept, the LANE BRYANT^® intimate apparelside-by-sidestore. The new design pairs LANE BRYANT’s casual and wear-to-work sportswear assortments with an expanded line of CACIQUE^® intimates as well as additional national brands, presented in a double store-front. As a result of a successful testing period during Fiscal 2006, many of our LANE BRYANT retail store openings and relocations for Fiscal 2007 were in the newside-by-side format. This larger footprint of approximately 7,000 square feet per combined store compares with the full-line LANE BRYANT store footprint of approximately 5,800 square feet. During Fiscal 2007, we operated 44 stores (which are included in the 777 stores operated by LANE BRYANT) in the LANE BRYANT intimate apparelside-by-side format.

In December 2005, we announced plans to enter the outlet channel through the assumption of outlet store leases from Retail Brand Alliance, and to operate those locations under the name LANE BRYANT OUTLET. A majority of these locations had been operated as side-by-side locations selling more than one brand. Subsequently, in January 2006, we acquired the trademark and internet domain rights to the PETITE SOPHISTICATE^® name. During Fiscal 2007, we opened 82 LANE BRYANT OUTLET stores, including 76 stores in locations that we assumed from Retail Brand Alliance and 3 existing LANE BRYANT stores that we converted to LANE BRYANT OUTLET stores. During Fiscal 2007, we also opened 45 PETITE SOPHISTICATE OUTLET stores, the majority of which are operating with a LANE BRYANT OUTLET store in side-by-side locations assumed from Retail Brand Alliance. These combined outlet locations average approximately 9,400 square feet.

1

LANE BRYANT OUTLET^TM is the only national chain exclusively offering women’s plus-size apparel in the outlet sales channel, with 82 outlet store locations in 32 states throughout the country. Through our private labels, VENEZIA, CACIQUE, and LANE BRYANT, as well as selected national brands, we offer fashionable and sophisticated apparel in plus-sizes 14- 28, including intimate apparel, wear-to-work, casual sportswear, and accessories, as well as footwear and social occasion apparel. LANE BRYANT OUTLET stores average approximately 6,000 square feet.

PETITE SOPHISTICATE OUTLET^TM is the only national chain exclusively offering women’s petite-size apparel in the outlet sales channel, with 45 outlet store locations in 23 states throughout the country. PETITE SOPHISTICATE OUTLET targets women 35 - 55 years old and offers traditional, updated classic, and contemporary apparel in casual and career assortments. We offer clothing tailored to women 4'11'' - 5'4'' who wear petite sizes 0 - 14. PETITE SOPHISTICATE OUTLET stores average approximately 2,700 square feet. During Fiscal 2007, we launched a marketing and informational website (petitesophisticate.com).

FASHION BUG^® stores specialize in selling a wide variety of plus-size, misses, and junior apparel, accessories, intimate apparel, and footwear. FASHION BUG customers generally range in age from 20 to 49 years old and shop in the low-to-moderate price range. Our 1,009 FASHION BUG stores are located in 44 states, primarily in strip shopping centers, and average approximately 8,800 square feet. During Fiscal 2007, our FASHION BUG website (fashionbug.com) has averaged more than 800,000 unique visitors per month.

CATHERINES PLUS SIZES^® is particularly known for extended sizes (over size 28) and petite plus-sizes. CATHERINES offers classic apparel and accessories for wear-to-work and casual lifestyles. CATHERINES customers generally range in age from 40 to 65 years old, shop in the moderate price range, and are concerned with fit and value when purchasing clothes. Our 465 CATHERINES stores are located in 44 states, primarily in strip shopping centers in the Southeast, Mid-Atlantic, and Eastern Central regions of the United States, and average approximately 4,200 square feet. During Fiscal 2007, our CATHERINES website (catherines.com) has averaged more than 400,000 unique visitors per month.

CROSSTOWN TRADERS is a direct marketer of women’s apparel, footwear, accessories, and specialty gifts. Crosstown Traders markets women’s apparel through its OLD PUEBLO TRADERS^®, BEDFORD FAIR LIFESTYLES^®, BEDFORD FAIR SHOESTYLES^®, WILLOW RIDGE^®, LEW MAGRAM^®, BROWNSTONE STUDIO^®, REGALIA^®, INTIMATE APPEAL^®, MONTEREY BAY CLOTHING COMPANY^®, HOME ETC^®, COWARD^® SHOE, and other catalog titles and related E-commerce sites, and markets food and specialty gift products through its FIGI’S^® catalog and related E-commerce site. During Fiscal 2007, our Crosstown Traders websites have collectively averaged approximately 600,000 unique visitors per month. Crosstown Traders also operates two outlet stores.

Financial information by business segment for each of our last three fiscal years is included in “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements; NOTE 18. SEGMENT REPORTING” below.

2

RETAIL STORES SEGMENT

Stores

Our 2,378 retail stores (as of February 3, 2007) are primarily located in suburban areas and small towns. Approximately 74% of these stores are located in strip shopping centers, with the remainder located in community and regional malls. The majority of our FASHION BUG, CATHERINES, and outlet stores are strip-center based. Most of our LANE BRYANT stores are in malls. Over the past few years, LANE BRYANT has expanded into strip and lifestyle centers, and has demonstrated success in such locations. Approximately 38% of our LANE BRYANT stores are currently located in strip and lifestyle shopping centers.

We believe that our customers visit strip shopping centers frequently as a result of the tenant mix and convenience of strip shopping centers. Our long-term retail store growth plans are to expand both LANE BRYANT and CATHERINES into additional strip and lifestyle center locations. Availability of strip and lifestyle center retail space significantly outpaces mall expansion. In addition, we benefit in strip and lifestyle centers from substantially lower occupancy costs as compared to occupancy costs in malls.

Our retail store merchandise displays enable our customers to assemble coordinated and complete outfits that satisfy many of their lifestyle needs. We relocate or remodel our stores as appropriate to convey a fresh and contemporary shopping environment. We frequently test and implement new store designs and fixture packages that are aimed at providing an effective merchandise presentation. We emphasize customer service, including the presence of helpful salespeople in the stores, layaway plans, and acceptance of merchandise returns for cash or credit within a reasonable time period. Typically, our stores are open seven days per week, eleven hours per day Monday through Saturday, and seven hours on Sunday.

Our store openings, closings, and number of locations over the past three fiscal years are as follows:

	Year Ended
	Feb. 3,			Jan. 28,			Jan. 29,
	2007			2006			2005
Store Activity(1):
Number of stores open at beginning of period		2,236			2,221			2,227
Opened during period		198	(2)		70			51
Closed during period		(56	)		(55	)		(57	)
Number of stores open at end of period		2,378			2,236			2,221
Number of Stores Open at End of Period by Brand:
FASHION BUG		1,009			1,025			1,028
LANE BRYANT		859	(3)		748			722
CATHERINES		465			463			471
Other(4)		45			0			0
Number of stores open at end of period		2,378			2,236			2,221
____________________
(1)Does not include 2 outlet stores in Fiscal 2007 and 3 outlet stores in Fiscal 2006 operated by Crosstown Traders, Inc.
(2)Includes 82 LANE BRYANT OUTLET stores and 45 PETITE SOPHISTICATE OUTLET stores.
(3)Includes 82 LANE BRYANT OUTLET stores.
(4)Includes PETITE SOPHISTICATE OUTLET stores.

3

We continue to seek additional locations that meet our financial and operational objectives. We plan to open approximately 95-107 stores and close approximately 40-50 stores during the year ended February 2, 2008 (“Fiscal 2008”). Planned store activity by brand for Fiscal 2008 is as follows:

	Openings	Closings	Relocations
FASHION BUG	10	18-22	20-25
LANE BRYANT	65-75(1)	15-18(2)	45-50(3)
CATHERINES	10	7-10	10-15
Other(4)	10-12	0	0
Total	95-107	40-50	75-90
____________________
(1)Includes approximately 35 LANE BRYANT intimate apparel side-by-side stores and 15 LANE BRYANT OUTLET stores.
(2)Includes 1 LANE BRYANT OUTLET store.
(3)Includes approximately 32 conversions to LANE BRYANT Intimate Apparel side-by-side stores.
(4)Includes 5 PETITE SOPHISTICATE OUTLET stores and 5-7 full-line PETITE SOPHISTICATE stores.

All retail stores are operated under our direct management. Each store has a manager and an assistant manager or supervisor who is in daily operational control of the location. We also employ district managers, who travel to all stores in their district on a frequent basis, to supervise store operations. Each district manager has responsibility for an average of 12 stores. Regional managers, who report to a Vice President of Stores, supervise the district managers. Generally, we appoint store managers from the group of assistant managers and district managers from the group of store managers. We seek to motivate our store personnel through internal advancement and promotion, competitive wages, and various incentive, medical, and retirement plans. We centrally develop store operations, merchandising, and buying policies, and assign to individual store management the principal duties of display, selling, and reporting through point-of-sale terminals.

Merchandising and Buying

We employ a merchandising and buying strategy that is focused on providing an attractive selection of apparel and accessories that reflect the fashion preferences of the core customer for each of our retail store brands. Separate merchandise groups for each of our brands conduct merchandise purchasing using buyers supervised by one or more merchandise managers. We believe that specialization of buyers within our brands enhances the distinctiveness of our brands and their offerings. In addition, we use domestic and international fashion market guidance, fashion advisory services, proprietary design, and in-store and E-commerce testing to determine the optimal product assortments for each of our brands. We believe that this approach results in greater success in predicting customer preferences while reducing our inventory investment and risk. We also seek to maintain high quality standards with respect to merchandise fabrication, construction, and fit. Our merchandising and buying philosophy, coupled with enhancements in inventory management, helps facilitate the timely and orderly purchase and flow of merchandise. This enables our stores to offer fresh product assortments on a regular basis.

4

We continually refine our merchandise assortments to reflect the needs and demands of our diverse customer groups and the demographics of each store location. At LANE BRYANT, we offer a combination of fashion basics, seasonal fashions, and high fashion in casual and wear-to-work merchandise, intimate apparel, and accessories. We strive to translate current trends into plus-sizes and to be first to market with our styles. At FASHION BUG, we offer a broad assortment of both casual and wear-to-work apparel, in plus, misses, and junior sizes as well as girls, at low-to-moderate prices. FASHION BUG’s plus- and misses-size merchandise typically reflects established fashion trends and includes a broad offering of ready-to-wear apparel as well as footwear, accessories, intimate apparel, and seasonal items, such as outerwear. At CATHERINES, we offer a broad assortment of plus-size merchandise in classic styles designed to provide “head-to-toe” dressing for our customers. CATHERINES features casual and career sportswear, dresses, intimate apparel, suits, and accessories in a variety of plus-sizes, including petites and extended sizes. CATHERINES has developed a unique expertise in the fit, design, and manufacturing of extended sizes, making it one of the few retailers to emphasize these sizes.

LANE BRYANT OUTLET features product developed exclusively for our outlet stores, which includes updated key items and best-sellers from our full-line LANE BRYANT brand. Selected national brands and expanded categories, such as footwear and social occasion, are also offered at LANE BRYANT OUTLET. PETITE SOPHISTICATE OUTLET offers career and casual sportswear in petite sizes 0 - 14.

For stores that are identified as having certain attributes, we use our distribution capabilities to stock the stores with products specifically targeted to such attributes. Our merchandising staffs obtain store- and brand-wide inventory information generated by merchandise information systems that use point-of-sale terminals. Merchandise can be followed from the placement of our initial order for the merchandise to the actual sale to our customer. Based upon this data, our merchandise managers compare budgeted-to-actual sales and make merchandising decisions as needed, including re-order, markdowns, and changes in the buying plans for upcoming seasons. In addition, we continue to work to improve inventory turnover by better managing the flow of seasonal merchandise to our stores across all geographic regions.

We employ a realistic pricing strategy for our stores that is aimed at setting the initial price markup of fashion merchandise in order to increase the percentage of sales at the original ticketed price. We believe this strategy has resulted in a greater degree of credibility with the customer. However, our pricing strategy typically does allow sufficient margin to permit merchandise discounts in order to stimulate customer purchases when necessary.

Our stores experience a normal seasonal sales pattern for the retail apparel industry, with peak sales occurring during the spring and Christmas seasons. We generally build inventory levels before these peak sales periods. To maintain current and fashionable inventory, we reduce the price of slow-moving merchandise throughout the year. Much of our merchandise is developed for one or more of our six seasons: spring, summer, summer-fall transitional, fall, holiday, and holiday-spring transitional. End-of-season sales are conducted with the objective of carrying a minimal amount of seasonal merchandise over from one season to another. Retail Stores segment sales for the four quarters of Fiscal 2007, as a percent of annual Retail Stores segment sales, were 23.8%, 25.4%, 23.3%, and 27.5%, respectively.

5

Marketing and Promotions

We use several types of advertising to stimulate retail store customer traffic. Primarily, we use targeted direct-mail advertising to preferred customers selected from a database of approximately 27.8 million proprietary credit card, third-party credit card, and cash customers who have purchased merchandise from us within the past three years. We may also use radio, television, and newspaper advertising and fashion shows to stimulate traffic at certain strategic times of the year. We also use pricing policies, displays, store promotions, and convenient store hours to attract customers. We maintain websites for our LANE BRYANT, FASHION BUG, CATHERINES, and PETITE SOPHISTICATE brands that provide information regarding current fashions and promotions. We believe that, with the planning and guidance of our specialized home-office personnel, each brand provides such displays and advertising as may be necessary to feature certain merchandise or certain promotional selling prices from time to time.

We offer our retail store customers various loyalty card programs. Customers who join these programs are entitled to various benefits, including discounts and rebates on purchases during the membership period. Customers generally join these programs by paying an annual membership fee. Additional information on our loyalty card programs is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; CRITICAL ACCOUNTING POLICIES; Revenue Recognition” below.

figure^® magazine, our periodic fashion and lifestyle magazine for women, features clothing and fashions from our brands. The magazine covers topics such as: beauty; health and fitness; home, food, and entertaining; relationships; and social and community issues. The magazine also advertises our Crosstown Traders catalogs. figure magazine is available by subscription, and is also sold in all of our stores and at selected newsstands and supermarkets, including certain national booksellers. Since its inception in August 2003, the magazine has grown to a per-issue circulation of more than 440,000 copies.

Sourcing

To meet the demands of our customers, we access both the domestic wholesale and overseas markets for our retail store merchandise purchases. This allows us to maintain flexible lead times, respond quickly to current fashion trends, and quickly replenish merchandise inventory as necessary. During Fiscal 2007, we purchased merchandise from approximately 760 suppliers and factories located throughout the world. We use our overseas sourcing operations, which generally require longer lead times, primarily to purchase fashion-basic merchandise for our stores. In Fiscal 2007, our overseas sourcing operations accounted for approximately 36% of retail store merchandise purchases. Overseas sourcing by brand, as a percent of merchandise purchases, was approximately 34% for FASHION BUG, 40% for LANE BRYANT, 26% for CATHERINES, and 54% for LANE BRYANT OUTLET and PETITE SOPHISTICATE OUTLET. In addition, during Fiscal 2007, we purchased a portion of LANE BRYANT merchandise from Mast Industries, Inc. (“Mast”). Mast, a contract manufacturer and apparel importer, is a wholly-owned subsidiary of Limited Brands, Inc. (“Limited Brands”). These purchases from Mast accounted for approximately 8% of our total retail store merchandise purchases and approximately 23% of merchandise purchases for LANE BRYANT during Fiscal 2007. No other vendor accounted for more than 2% of total retail store merchandise purchases during Fiscal 2007.

We pay for a majority of our merchandise purchases outside the United States on an open account basis. We pay for the remainder of our purchases outside the United States through corporate-issued letters of credit and, to a lesser extent, through bank-issued letters of credit where we are the importer of record. To date, we have not experienced difficulties in purchasing merchandise overseas or importing such merchandise into the United States. Should events such as political instability or a natural disaster result in a disruption of normal activities in any single country with which we do business, we believe that we would have adequate alternative sources of supply.

6

Distribution and Logistics

We currently operate two distribution centers for our Retail Stores segment. For our FASHION BUG, LANE BRYANT OUTLET, and PETITE SOPHISTICATE OUTLET stores, we operate a distribution center in Greencastle, Indiana. Located on a 150-acre tract of land, this facility contains a building of approximately 1,000,000 square feet. We estimate that this facility has the capacity to service up to approximately 1,800 stores. For our LANE BRYANT and CATHERINES stores, we operate a distribution center in White Marsh, Maryland. Located on 29 acres of land, the White Marsh facility contains a building of approximately 393,000 square feet, which is currently designed to service up to approximately 1,600 stores.

Substantially all of our merchandise purchases are received at these distribution facilities, where they are prepared for distribution to our stores. Automated sorting systems in the distribution centers enhance the flow of merchandise from receipt to quality control inspection, receiving, ticketing, packing, and final shipment. Merchandise is shipped to each store principally by common carriers. We use computerized automated distribution attributes to combine shipments when possible and improve the efficiency of the distribution operations.

Inventory and fulfillment activities for our store-related E-commerce operations are handled by a third-party warehouse facility in Indianapolis, Indiana. We utilize 150,000 square feet of space that is used for merchandise receipt, storage, picking, packing, shipping, and returns processing. A majority of the merchandise is received from our Greencastle and White Marsh distribution centers.

Our distribution and logistics operations provide adequate current capacity, and we continually evaluate our overall long-term distribution and logistics requirements for both our Retail Stores and our Direct-to-Consumer segments.

DIRECT-TO-CONSUMER SEGMENT

We established our Direct-to-Consumer segment in June 2005 with the acquisition of Crosstown Traders, Inc. Crosstown Traders operates multiple catalog titles and related websites, with the majority of revenues derived from the catalog sales of women's apparel, footwear, and accessories, of which plus-sizes are an important component. Crosstown Traders also derives revenues from the catalog sales of food and gifts, a substantial majority of which occur during the December holiday season. In addition to catalog and catalog-related E-commerce operations, Crosstown Traders operates two catalog outlet stores.

The acquisition of Crosstown Traders provides us with an infrastructure for the development and expansion of our Direct-to-Consumer segment, which includes our catalog and catalog-related E-commerce sales distribution channels. Subsequent to the acquisition, we launched additional catalog titles, including apparel, home, and footwear titles under the FASHION BUG and CATHERINES brands. We will continue to build infrastructure to prepare for the launch of the LANE BRYANT catalog in late Fiscal 2008 when the LANE BRYANT catalog trademark, currently licensed by a third party, reverts to us.

The Direct-to-Consumer segment provides an additional channel to serve our customers’ lifestyle needs with targeted marketing media and merchandise offerings in a wide range of color and size selections not generally available in our retail stores. In addition, we believe that the mail order catalogs and catalog-related E-commerce serve as a cost efficient means of building brand awareness as well as testing market acceptance of new products and new brands.

7

Merchandising and Buying

Generally, the initial sourcing of new merchandise for a catalog begins six to nine months before the catalog is mailed. We target each of our catalogs to its particular market by offering a focused assortment of merchandise designed to meet the needs and preferences of each catalog’s customers. Through market research and ongoing testing of new products and concepts, we develop a separate merchandise strategy for each catalog, including appropriate merchandise assortments, price points, mailing plans, and product presentation. We seek to develop exclusive or private label products for a number of our catalogs on an ongoing basis to further differentiate each catalog’s identity.

Our FIGI’S food and specialty gift catalog experiences a peak sales period during the December holiday season, with approximately 80% of its annual sales occurring during our fourth quarter. We generally build inventory before this peak sales period.

Marketing and Promotions

Our catalogs range in size from approximately 32 - 124 pages, with 4 - 12 editions per year depending on the seasonality and fashion content of the products offered. We may mail each edition several times each season with slight variations in format and content. We mailed approximately 235 million catalogs during Fiscal 2007, which was below our original catalog circulation plans. Our circulation strategy is focused on mailing to existing customers and acquiring new customers through targeted prospecting.

We use outside creative agencies or our own creative staff to develop the designs, layout, copy, feel, and theme of our catalogs. We have created E-commerce-enabled websites for each of our catalogs, which offer all of a particular catalog’s merchandise and more extensive offerings than any single issue of a print catalog. Customers can request catalogs and place orders not only for website merchandise, but also for merchandise from any current print catalog already mailed. The website for each catalog is prominently promoted within each catalog.

We maintain all of our catalog, internet, retail customer, and transaction data in multi-channel customer databases. This cross-channel customer database contains detailed purchasing information and certain demographic information about our customers, E-mail addresses, and the names and addresses of individuals who have requested catalogs from us. This database enables us to analyze how our customers use our various channels to shop.

We continuously analyze our customers’ responses to our catalog mailings and E-commerce promotions in order to understand our customers’ profit contribution. We have developed our own customer selection criteria to segment our customer list according to many variables, allowing our marketing department to analyze each segment's buying patterns. We review the results of each of our catalog mailings. The results are used to further refine the frequency and selectivity of our catalog mailings in an effort to maximize response rates and profitability. We also analyze historical purchasing patterns of existing customers, including recency, frequency, and monetary activity, to assist in merchandising and customer targeting and to increase sales to existing customers.

We acquire lists of prospective customers by renting or exchanging lists with database cooperatives and other sources, including direct competitors. Our most productive prospects tend to come from customer lists of other women's apparel catalogs. We also rent our customer list to others, including direct competitors. In order to determine which prospective customers will receive a particular catalog mailing, we analyze available information concerning such prospects, including historical profit contribution for comparable customer segments and, to the extent possible, use the same type of statistical modeling techniques used to target mailings to our own customers.

8

We strive to develop promotional formats that will stimulate customer purchases from our catalogs and websites. Successful promotional formats include different catalog wraps, multiple-unit purchase discounts, free shipping, and promotional tag lines such as “last chance” offers. We also market our E-commerce websites in our catalogs. This marketing channel has been the principal marketing mechanism to reach our E-commerce target audience.

Leveraging its experience in handling direct-to-consumer transactions, Crosstown Traders continues to refine its technology infrastructure and customer service processes to make catalog shopping as convenient as possible. We maintain toll free numbers, accessible 24 hours a day, seven days a week (except for major holidays), to accept orders and catalog requests, and to answer order and credit-account-related questions. We utilize an 850-seat call center network in multiple locations supported by integrated system platforms designed to provide uninterrupted services to our customers. Telephone calls are answered by knowledgeable call-center associates, who process customer orders, answer questions on merchandise and its availability, and identify opportunities for cross-selling additional merchandise. These customer service associates also assist customers in the selection of merchandise and can provide detailed information regarding size, color, fit, and other merchandise features. Many order taking, order status, and other service inquiry functions can also be conducted on Crosstown’s E-commerce sites, allowing customers to browse and shop at their own pace.

Our call-center associates enter order data into an online computerized system, which systematically updates its customer database and permits us to measure customer responses to our individual merchandise and catalog mailings. Much of the sales and inventory information is available to our buying staff on a real-time basis throughout the business day. We have achieved efficiencies in order processing and fulfillment, which permit the shipment of many orders the following business day.

Sourcing

We primarily use the domestic wholesale markets for our Direct-to-Consumer merchandise purchases. During Fiscal 2007, we purchased merchandise from approximately 1,100 suppliers and factories located throughout the United States. No single vendor accounted for more than 3% of total Direct-to-Consumer merchandise purchases during Fiscal 2007. During Fiscal 2007, we began shifting a portion of the sourcing for our Direct-to-Consumer segment from domestic markets to our international sourcing network, using third-party suppliers.

Distribution and Logistics

We operate several distribution centers and an 850-seat call center network supported by integrated systems platforms for our Direct-to-Consumer segment, which handle receiving, quality control inspection, and distribution directly to our Direct-to-Consumer catalog and E-commerce customers. A 288,000 square foot leased facility in Tucson, Arizona ships approximately 2,800,000 packages per year to customers of our OLD PUEBLO TRADERS, MONTEREY BAY CLOTHING COMPANY, INTIMATE APPEAL, HOME ETC, and REGALIA catalogs. A separate 108,000 square foot leased facility in Tucson, which became fully operational in the first quarter of Fiscal 2007, ships approximately 1,200,000 packages per year and services footwear for all catalogs and catalog-related E-commerce sites. A 240,000 square foot leased facility in Wilmington, North Carolina ships approximately 2,300,000 packages per year to customers of our BEDFORD FAIR, WILLOW RIDGE, BROWNSTONE STUDIO, and LEW MAGRAM catalogs. We own 125,000 square-feet of automated distribution center space in Marshfield, Wisconsin which serves as the main distribution area for our FIGI’S catalog and ships approximately 2,000,000 packages per year. A 122,000 square-foot leased facility in Stevens Point, Wisconsin and a 46,000 square-foot owned facility in Neillsville, Wisconsin also service FIGI’S.

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Our distribution and logistics operations provide adequate current capacity, and we are continually evaluating our overall long-term distribution and logistics requirements for both our Retail Stores and our Direct-to-Consumer segments.

PROPRIETARY CREDIT PROGRAMS

We seek to encourage sales through the promotion of our proprietary credit cards. We believe that our credit cards act as promotional vehicles by engendering customer loyalty, creating a substantial base for targeted direct-mail promotion, and encouraging incremental sales. Our FASHION BUG, LANE BRYANT, CATHERINES, PETITE SOPHISTICATE, and Crosstown Traders brands each offer our customers the convenience of proprietary credit card programs.

Our FASHION BUG credit card program accounted for approximately 31% of FASHION BUG retail sales in Fiscal 2007, and has approximately 2.1 million active accounts. We control credit policies and service the FASHION BUG proprietary credit card file, and, through various agreements, we securitize and sell the credit card receivables generated by this program.

The LANE BRYANT credit card program accounted for approximately 29% of LANE BRYANT retail sales in Fiscal 2007, and has approximately 1.3 million active accounts. During Fiscal 2007, we used a third-party bank to finance and service the LANE BRYANT credit card program. This third-party bank provides new account approval, credit authorization, billing, and account collection services. Under a non-recourse agreement with the third-party bank, we are reimbursed with respect to sales generated by the credit cards. Our agreement with the third-party bank expires in October 2007. Upon termination of the agreement, we have the right to purchase the receivables allocated to the Lane Bryant retail stores under the agreement at book value from the third party.

Our CATHERINES credit card program accounted for approximately 33% of CATHERINES retail sales in Fiscal 2007, and has approximately 0.6 million active accounts. In Fiscal 2006, we purchased the CATHERINES credit card portfolio from the third-party bank that serviced the CATHERINES program. We control credit policies and service the CATHERINES proprietary credit card file, and, through various agreements, we securitize and sell the credit card receivables generated by this program.

We launched the PETITE SOPHISTICATE credit card during the third quarter of Fiscal 2007. This program accounted for approximately 14% of PETITE SOPHISTICATE OUTLET retail sales in Fiscal 2007, and has approximately 10 thousand active accounts. We control credit policies and service the PETITE SOPHISTICATE proprietary credit card file, and, through various agreements, we securitize and sell the credit card receivables generated by this program.

Our Crosstown Traders credit card program accounted for approximately 38% of Crosstown Traders apparel sales in Fiscal 2007, and has approximately 0.9 million active accounts. We control credit policies and service the Crosstown Traders proprietary credit card file, and, through various agreements, we securitize and sell the credit card receivables generated by this program.

In addition to our Crosstown Traders credit card program, FIGI’S, one of Crosstown Traders’ non-apparel catalog brands, offers interest-free, three-payment credit terms over three months to its customers, with the first payment due on a defined date 30 to 60 days after a stated holiday.

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A more comprehensive description of our asset securitization process and our commitments under the third-party bank agreement for the LANE BRYANT credit card program is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; FINANCIAL CONDITION; Off-Balance-Sheet Arrangements” and“Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements; NOTE 16. ASSET SECURITIZATION” below.

COMPETITION

The women's specialty retail apparel and direct-to-consumer businesses are highly competitive, with numerous competitors, including individual and chain fashion specialty stores, department stores, discount stores, catalog retailers, and Internet-based retailers. We cannot reasonably estimate the number of our competitors due to the large number of women’s apparel and direct-to-consumer retailers. The primary elements of competition common to both our Retail Stores segment and our Direct-to-Consumer segment are merchandise style, size, selection, fit, quality, display, price, attractive website/catalog layout, efficient fulfillment of website and catalog mail orders, and personalized service to our customers. For our Retail Stores segment, store location, design, advertising, and promotion are also significant elements of competition.

EMPLOYEES

As of the end of Fiscal 2007, we employed approximately 30,000 associates, which included approximately 19,000 part-time employees. In addition, we hire a number of temporary employees during the December holiday season. Approximately 80 of our employees are represented by unions whose contracts are currently due to expire in August 2009. We believe that overall our relationship with these unions, and our employees in general, is satisfactory.

TRADEMARKS AND SERVICEMARKS

We own, or are in the process of obtaining, all rights to the trademarks and trade names we believe are necessary to conduct our business as presently operated. “FASHION BUG^®”, “FASHION BUG PLUS^®”, “FIGURE^®”, “L.A. BLUES^®”, “CATHERINES^®”, “CATHERINES PLUS SIZES^®”, “MAGGIE BARNES^®”, “ANNA MAXWELL^®”, “LIZ&ME^®”, “SERENADA^®”, “LANE BRYANT^®”, “LANE BRYANT OUTLET^TM” “VENEZIA^®”, “CACIQUE^®”, “PETITE SOPHISTICATE^®”, “PETITE SOPHISTICATE OUTLET^TM”, “OLD PUEBLO TRADERS^®”, “BEDFORD FAIR LIFESTYLES^®”, “BEDFORD FAIR SHOESTYLES^®”, “WILLOW RIDGE^®”, “LEW MAGRAM^®”, “BROWNSTONE STUDIO^®”, “REGALIA^®”, “INTIMATE APPEAL^®”, “MONTEREY BAY CLOTHING COMPANY^®”, “HOME ETC^®”, “COWARD^®”, “FIGI’S^®”, and several other trademarks and servicemarks of lesser importance to us have been registered or are in the process of being registered with the United States Patent and Trademark Office and in other countries.

We also own the following Internet domain name registrations: catherines.com, charming.com, charmingshoppes.com, fashionbug.com, fashionbugcard.com, fashionbugplus.com, figuremag.com, lanebryant.com, petitesophisticate.com, figis.com, bedfordfair.com, brownstonestudio.com, cowardshoe.com, intimateappeal.com, lewmagram.com, willowridgecatalog.com, oldpueblotraders.com, regaliaonline.com, shoetrader.com, shopthebay.com and others of lesser importance.

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EXECUTIVE OFFICES

Charming Shoppes, Inc., was incorporated in Pennsylvania in 1969. Our principal offices are located at 450 Winks Lane, Bensalem, Pennsylvania 19020. Our telephone number is (215) 245-9100.

AVAILABLE INFORMATION

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on or through our website at www.charmingshoppes.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). Our historical filings can also be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549 or can be accessed directly from the SEC’s website at www.sec.gov. Information on the operation of the Public Reference Room can be obtained by calling the SEC at (800) 732-0330. See “PART III; Item 10. Directors, Executive Officers, and Corporate Governance” below for additional information that is available on our Internet website.

Item 1A. Risk Factors

You should carefully consider and evaluate all of the information in this annual report on Form 10-K and the documents incorporated by reference into this report, including the risk factors listed below. Any of these risks could materially and adversely affect our business, financial condition, and operating results, and could cause our actual results to differ materially from our plans, projections, or other forward-looking statements included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” below and elsewhere in this Report on Form 10-K and in our other public filings. The occurrence of one or more of these risks could also materially and adversely affect the price of our common stock.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

Our business is dependent upon our ability to accurately predict rapidly changing fashion trends, customer preferences, and other fashion-related factors.

Customer tastes and fashion trends are volatile and tend to change rapidly, particularly for women's apparel. Our success depends in part on our ability to effectively predict and respond to quickly changing fashion tastes and consumer demands, and to translate market trends into appropriate, saleable product offerings. If we are unable to successfully predict or respond to changing styles or trends and misjudge the market for our products or any new product lines, our sales will be lower and we may be faced with a substantial amount of unsold inventory or missed sales opportunities. In response, we may be forced to rely on additional markdowns or promotional sales to dispose of excess or slow-moving inventory, which could have a material adverse effect on our business, financial condition, and results of operations.

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Existing and increased competition in the women's retail apparel and direct-to-consumer markets may reduce our net revenues, profits, and market share.

The women's specialty retail apparel and direct-to-consumer markets are highly competitive. Our competitors include individual and chain fashion specialty stores, department stores, discount stores, catalog retailers, and Internet-based retailers. As a result of this competition, we are required to effectively market and competitively price our products to consumers in diverse markets, and we may experience pricing pressures, increased marketing expenditures, and loss of market share, which could have a material adverse effect on our business, financial condition, and results of operations. We believe that the principal bases upon which we compete are merchandise style, size, selection, fit, quality, display, price, attractive website/catalog layout, efficient fulfillment of website and catalog mail orders, and personalized service to our customers, as well as store location, design, advertising, and promotion. Other women's apparel and direct-to-consumer companies with greater financial resources, marketing capabilities, or brand recognition may enter the plus-size business. We cannot give assurance that we will be able to compete successfully against existing or future competitors.

A slowdown in the United States economy, an uncertain economic outlook, and escalating energy costs could lead to reduced consumer demand for our products in the future.

Consumer spending habits, including spending for our products, are affected by, among other things, prevailing economic conditions, levels of employment, salary levels, wage rates, availability of consumer credit, consumer confidence, and consumer perception of economic conditions. A general slowdown in the United States economy, an uncertain economic outlook, and escalating energy costs could adversely affect consumer spending habits and customer traffic, which could result in a reduction in our net sales. A prolonged economic downturn could have a material adverse effect on our business, financial condition, and results of operations.

Maintaining and improving our operating margins is dependent on our ability to successfully control our operating costs.

In order to maintain or improve our operating margins, we need to successfully manage our operating costs. Our inability to successfully manage labor costs, increases in certain costs vital to catalog operations, such as postage, paper, and acquisition of prospects, occupancy costs, or other operating costs, or our inability to take advantage of opportunities to reduce operating costs, would adversely affect our operating margins and our results of operations. We are subject to the Fair Labor Standards Act and various state and Federal laws and regulations governing such matters as minimum wages, exempt status classification, overtime, and employee benefits. Changes in Federal or state laws or regulations regarding minimum wages or other employee benefits could cause us to incur additional wage and benefit costs, which could adversely affect our results of operations. In addition, we may be unable to obtain adequate insurance coverage for our operations at a reasonable cost.

We may not be able to obtain sufficient working capital financing.

Our business requires substantial investment in our inventory for a long period before sales occur. Consequently, we require significant amounts of working capital financing. We depend on the availability of credit to fund our working capital, including credit we receive from our suppliers and their agents, on our credit card securitization program, and on our revolving credit facility. If we are unable to obtain sufficient financing at an affordable cost, we might be unable to adequately merchandise our stores, E-commerce, or catalog businesses, which could have a material adverse effect on our business, financial condition, and results of operations.

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Our operating results fluctuate from season to season.

Our retail store and direct-to-consumer operations experience seasonal fluctuations in net sales and consequently in operating income, with peak sales occurring during the Easter, Labor Day, and Christmas seasons. In addition, extreme or unseasonable weather can affect our sales. Any decrease in net sales or margins during our peak selling periods, or in the availability of working capital needed in the months before these periods, could have a material adverse effect on our business, financial condition, and results of operations. We usually order merchandise in advance of peak selling periods and sometimes before new fashion trends are confirmed by customer purchases. We must carry a significant amount of inventory, including perishable products in certain of our direct-to-consumer businesses, before the peak selling periods. If we are not successful in selling our inventory, especially during our peak selling periods, we may be forced to rely on markdowns or promotional sales to dispose of the inventory or we may not be able to sell the inventory at all, which could have a material adverse effect on our business, financial condition, and results of operations.

We face challenges in managing our recent growth.

Our operating challenges and management responsibilities are increasing as we continue to grow and expand into new store formats and additional distribution channels. Successful growth will require that we continue to expand and improve our internal systems and our operations, including our distribution infrastructure.

Our business plan for our Retail Stores segment depends on our ability to open and operate new retail stores and to convert, where applicable, the formats of existing stores on a profitable basis. In addition, we will need to identify, hire, and retain a sufficient number of qualified personnel to work in our stores. During Fiscal 2007, we entered the outlet distribution channel and expanded the number of stores using a new double-store-front format.

We are also completing the integration of Crosstown Traders and our Direct-to-Consumer segment into our current operating structure. Growth in our Direct-to-Consumer segment is dependent on sufficient response rates to our catalogs and Internet websites and access to new customers, which may not occur. In addition, we plan to continue to build infrastructure in our Direct-to-Consumer segment to prepare for the launch of new catalogs, including the launch of the LANE BRYANT catalog in late Fiscal 2008 when the LANE BRYANT catalog trademark, currently licensed by a third party, reverts to us.

These objectives have created, and may continue to create, additional demands on our staff and on our operating systems. We cannot assure the successful implementation of our business plan for our Retail Stores and Direct-to-Consumer segments, or that we will achieve our objectives as quickly or as effectively as we hope.

We depend on key personnel and may not be able to retain or replace these employees or recruit additional qualified personnel.

Our success and our ability to execute our business strategy depend largely on the efforts and abilities of our Chief Executive Officer, Dorrit J. Bern, and her management team. The loss of services of one or more of our key personnel could have a material adverse effect on our business, as we may not be able to find suitable management personnel to replace departing executives on a timely basis. We do not maintain key-person life insurance policies with respect to any of our employees.

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Our business plan is largely dependent upon continued growth in the plus-size women’s apparel market.

Our business is primarily focused on sales of plus-size women’s apparel, which represents a majority of our total net sales. Our operating results could be adversely affected by a lack of continued growth in the plus-size women’s apparel market.

We could be materially and adversely affected if any of our distribution or fulfillment centers are shut down.

We operate distribution centers in Greencastle, Indiana, and Baltimore County, Maryland, and we operate catalog fulfillment centers in Tucson, Arizona; Marshfield, Wisconsin; Stevens Point, Wisconsin; and Wilmington, North Carolina. In addition, we use third-party freight consolidators and service providers in Indianapolis, Indiana; Abingdon, Maryland; Los Angeles, California; Miami, Florida; and North Bergen, New Jersey. Most of the merchandise we purchase is shipped directly to our distribution and fulfillment centers or freight consolidators, where it is prepared for shipment to the appropriate stores or to the customer. If any of our distribution centers, fulfillment centers, or freight consolidators were to shut down or lose significant capacity for any reason, the other locations may not be able to adequately support the resulting additional distribution demands, in part because of capacity constraints and in part because each location services a particular brand or brands. As a result, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores or customers during the time it takes for us to reopen or replace the affected distribution center, fulfillment center, or freight consolidator.

Natural disasters, war, acts of terrorism or other armed conflict, or the threat of either on the United States or international economies may negatively impact the availability of merchandise and otherwise adversely impact our business.

In the event of a natural disaster, war, acts of terrorism or other armed conflict, or if either are threatened, our ability to obtain merchandise for sale in our stores or through our direct-to-consumer business may be negatively impacted. A significant portion of our merchandise is imported from other countries. If imported goods become difficult or impossible to bring into the United States, and if we cannot obtain such merchandise from other sources at similar costs, our net sales and profit margins may be adversely affected. If commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution centers, fulfillment centers, stores, or our direct-to-consumer customers. In the event of a natural disaster or acts of terrorism in the United States, or the threat of either, we may be required to suspend operations in some or all of our stores, which could have a material adverse impact on our business, financial condition, and results of operations.

Our inability to successfully manage customer service or fulfillment for our E-commerce websites or our catalog business could adversely impact our operating results.

Successful management of our E-commerce and catalog operations is dependent on our ability to maintain efficient and uninterrupted customer service and order fulfillment. Inadequate systems capacity, a disruption or slowdown in telecommunications services, changes in technology, changes in government regulations, systems issues, security breaches, a failure to integrate order management systems, or customer privacy issues could result in reduced sales or increases in operating expenses as a result of our efforts or our inability to remedy such issues. In addition, we may not be able to hire sufficient qualified associates to support our E-commerce or catalog operations during peak periods, especially during the December holiday season. The occurrence of one or more of these events could adversely affect our E-commerce or catalog businesses.

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We rely on foreign sources of production.

We purchase a significant portion of our apparel directly in foreign markets and indirectly through domestic vendors with foreign sources. We face a variety of risks generally associated with doing business in foreign markets and importing merchandise from abroad. Such risks include (but are not necessarily limited to):

●   political instability;  

● increased security requirements applicable to imported goods;  

● trade restrictions;  

● imposition of, or changes in, duties, quotas, taxes, and other charges on imports;  

● currency and exchange risks;  

● issues relating to compliance with domestic or international labor standards;  

● concerns over anti-dumping;  

● delays in shipping; or  

● increased costs of transportation.  

New initiatives could be proposed that would have an impact on the trading status of certain countries, and could include retaliatory duties or other trade sanctions that, if enacted, could increase the cost of products purchased from suppliers in such countries or restrict the importation of products from such countries. The future performance of our business will depend on our foreign suppliers and may be adversely affected by the factors listed above, all of which are beyond our control.

Issues of global workplace conditions may adversely affect our business.

If any one of our manufacturers or vendors fails to operate in compliance with applicable laws and regulations, is perceived by the public as failing to meet certain labor standards in the United States, or employs unfair labor practices, our business could be adversely affected. Current global workplace concerns of the public include perceived low wages, poor working conditions, age of employees, and various other employment standards. These globalization issues may affect the available supply of certain manufacturers' products, which may result in increased costs to us. Furthermore, a negative customer perception of any of our key vendors or their products may result in a lower customer demand for our apparel.

We depend on strip shopping center and mall traffic and our ability to identify suitable store locations for our Retail Stores segment.

Our sales are dependent in part on a high volume of strip shopping center and mall traffic. Strip shopping center and mall traffic may be adversely affected by, among other things, economic downturns, the closing of anchor stores, or changes in customer shopping preferences. A decline in the popularity of strip shopping center or mall shopping among our target customers could have a material adverse effect on our business. To take advantage of customer traffic and the shopping preferences of our customers, we need to maintain or acquire stores in desirable locations. We cannot assure that desirable store locations will continue to be available. Acquisition of additional store locations is also dependent on our ability to successfully negotiate lease terms for such locations. In addition, the timely opening of new store locations could be adversely affected by delays in obtaining necessary permits and approvals, lack of availability of construction materials and labor, or work stoppages.

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We may be unable to protect our trademarks and other intellectual property rights.

We believe that our trademarks and servicemarks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks and servicemarks on a worldwide basis. Nevertheless, there can be no assurance that the actions we have taken to establish and protect our trademarks and servicemarks will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as a violation of the trademarks, servicemarks, and proprietary rights of others. Also, others may assert rights in, or ownership of, our trademarks and other proprietary rights, and we may not be able to successfully resolve these types of conflicts to our satisfaction. In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States.

OTHER RISKS

Anti-takeover provisions in our governing documents and Pennsylvania law may discourage other companies from attempting to acquire us.

Some provisions of our articles of incorporation and bylaws and of Pennsylvania law may discourage some transactions where we would otherwise experience a change in control. For example, our articles of incorporation and bylaws contain provisions that:

●   classify our board into three classes, with one class being elected each year;  

● do not permit cumulative voting;  

● permit our board to issue "blank check" preferred stock without shareholder approval;  

● require certain advance notice procedures with regard to the nomination of candidates for election as directors, other than nominations by or at the direction of our board;  

● prohibit us from engaging in some types of business combinations with a holder of 10% or more of our voting securities without super-majority shareholder or board approval;  

● prevent our directors from being removed without cause except upon super-majority shareholder approval; and  

● prevent a holder of 20% or more of our common stock from taking certain actions without certain approvals.

We also have adopted a Shareholder Rights Plan. This plan may make it more difficult and more expensive to acquire us, and may discourage open market purchases of our common stock or a non-negotiated tender or exchange offer for such stock, and, accordingly, may limit a shareholder's ability to realize a premium over the market price of our common stock in connection with any such transaction.

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Failure to comply with the provisions of the Sarbanes-Oxley Act of 2002 could adversely affect our business.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include our assessment of the effectiveness of our internal control over financial reporting in our annual reports. Our independent registered public accounting firm is also currently required to attest to whether or not our assessment is fairly stated in all material respects and to separately report on whether or not they believe that we maintained, in all material respects, effective internal control over financial reporting. If we are unable to maintain effective internal control over financial reporting, or if our independent registered public accounting firm is unable to timely attest to our assessment, we could be subject to regulatory sanctions and a possible loss of public confidence in the reliability of our financial reporting. Such a failure could result in our inability to provide timely and/or reliable financial information and could adversely affect our business.

New accounting rules or regulations or changes in existing rules or regulations could adversely impact our reported results of operations.

Changes to existing accounting rules or the adoption of new rules could have an adverse effect on our reported results of operations.

Changes in estimates related to our property, plant, equipment, goodwill, or intangible assets could adversely affect our reported results of operations.

We make certain significant assumptions, estimates, and projections related to the useful lives of our property, plant, and equipment and the valuation of intangible assets related to acquisitions. The carrying amount and/or useful life of these assets are subject to periodic valuation tests for impairment. Impairment results when the carrying value of an asset exceeds the undiscounted (or for goodwill and indefinite-lived intangible assets the discounted) future cash flows associated with the asset. If actual experience were to differ materially from the assumptions, estimates, and projections used to determine useful lives or the valuation of property, plant, equipment or intangible assets, a write-down for impairment of the carrying value of the assets, or acceleration of depreciation or amortization of the assets, could result. Such a write-down or acceleration of depreciation or amortization would have an adverse impact on our reported results of operations.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We lease all our stores, with the exception of three stores that we own. Typically, store leases have initial terms of 5 to 20 years and generally contain provisions for co-tenancies, renewal options, additional rents based on a percentage of sales, and payment of real estate taxes and common area charges. In addition, we lease certain of our corporate office, distribution center, warehouse, and other administrative facilities. Additional information with respect to our real estate leases is included in “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements; NOTE 17. LEASES” below.

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With respect to leased stores open as of February 3, 2007, the following table shows the number of store leases expiring during the calendar periods indicated, assuming the exercise of our renewal options:

Period	Number of Leases Expiring(1)
2007	174(2)
2008 - 2012	654
2013 - 2017	506
2018 - 2022	539
2023 - 2027	423
2028 - 2032	64
Thereafter	15
____________________
(1)Excludes 2 Crosstown Traders outlet stores.
(2)Includes 133 stores on month-to-month leases.

Additional information with respect to facilities that we own or lease is as follows:

Size in		Leased/
Sq. Feet	Location	Owned	Description
1,000,000	Greencastle, IN	Owned	FASHION BUG, LANE BRYANT OUTLET, and PETITE SOPHISTICATE OUTLET distribution center
393,000	White Marsh, MD	Owned	LANE BRYANT and CATHERINES distribution center
288,000	Tucson, AZ	Leased	Crosstown Traders distribution center
240,000	Wilmington, NC	Leased	Crosstown Traders distribution center
213,000	Memphis, TN	Owned	Warehouse facility (currently leased to a third party)
145,000	Bensalem, PA	Owned	Corporate technology center, outlet operations, and corporate administrative offices
142,000	Bensalem, PA	Leased	Corporate headquarters and FASHION BUG home office
135,000	Columbus, OH	Leased	LANE BRYANT home office
125,000	Marshfield, WI	Owned	Crosstown Traders distribution center
122,000	Stevens Point, WI	Leased	Crosstown Traders distribution and call centers
108,000	Tucson, AZ	Leased	Crosstown Traders distribution center
71,000	Marshfield, WI	Owned	Crosstown Traders warehouse
64,000	Marshfield, WI	Owned	Crosstown Traders administrative offices and call center
63,000	Memphis, TN	Owned	CATHERINES home office
52,000	Tucson, AZ	Leased	Crosstown Traders offices
46,000	Neillsville, WI	Owned	Crosstown Traders distribution center
40,000	Marshfield, WI	Owned	Crosstown Traders warehouse
36,000	Tucson, AZ	Leased	Crosstown Traders offices
30,000	Miami Township, OH	Leased	Spirit of America National Bank (our wholly-owned credit card bank subsidiary) and credit operations
23,000	Hong Kong, PRC	Owned	International sourcing offices
17,000	New York, NY	Leased	E-commerce operations
16,000	Marshfield, WI	Owned	Crosstown Traders manufacturing facility
15,000	Tucson, AZ	Leased	Crosstown Traders offices

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Item 3. Legal Proceedings

Other than ordinary routine litigation incidental to our business, there are no pending material legal proceedings that we or any of our subsidiaries are a party to, or of which any of their property is the subject. There are no proceedings that are expected to have a material adverse effect on our financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

Additional Part I Information - Our Executive Officers

The following list contains certain information relative to our executive officers. There are no family relationships among any of our executive officers.

Dorrit J. Bern, 56, has served as Chairman of the Board of Directors since January 1997. She has also served as President and Chief Executive Officer since September 1995. Ms. Bern’s term as a Director expires in 2008.

Joseph M. Baron, 59, has served as Executive Vice President and Chief Operating Officer since 2002.

James G. Bloise, 63, has served as Executive Vice President - Supply Chain Management, Information Technology, and Shared Business Services since December 2005 and as Senior Vice President - Supply Chain Management from 2002 to December 2005.

Michel Bourlon, 47, has served as Executive Vice President - Sourcing since March 2004. Before that, he served as Managing Director of Eddie Bauer International (Hong Kong) Ltd., from September 1997 to February 2004.

Anthony A. DeSabato, 58, has served as Executive Vice President - Corporate and Labor Relations, and Business Ethics since July 2003. Before that, he served as Executive Vice President and Corporate Director of Human Resources since 1990, and he has been employed by us since 1987.

Eric M. Specter, 49, has served as Executive Vice President- Chief Financial Officer since January 1997, and he has been employed by us since 1983.

Colin D. Stern, 58, has served as Executive Vice President and General Counsel since 1990, and he has been employed by us since 1989. He has also served as Secretary since February 1998.

Gale H. Varma, 56, has served as Executive Vice President - Human Resources since July 2003. Before that, she served as Division Vice President - Human Resources and Ethics Officer for the Prudential Institutional Employee Benefits division of Prudential Financial Services, a division of Prudential Insurance Company of America, from September 1997 to April 2003.

John J. Sullivan, 60, has served as Vice President- Corporate Controller since October 1998.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Our common stock is traded on the over-the-counter market and quoted on the NASDAQ National Market (“NASDAQ”) under the symbol “CHRS,” and is listed and traded on the Chicago Board Options Exchange (“CBOE”) and Pacific Stock Exchange (“PCX”) under the symbol “QSR.” The following table sets forth the high and low sale prices for our common stock during the indicated periods, as reported by NASDAQ.

	Fiscal 2007				Fiscal 2006
	High		Low		High		Low
1st Quarter	$	15.18	$	11.90	$	9.03	$	7.04
2nd Quarter		14.90		9.97		12.25		7.00
3rd Quarter		15.35		9.69		12.34		9.69
4th Quarter		15.57		12.30		14.07		10.86

The approximate number of holders of record of our common stock as of March 27, 2007 was 1,739. This number excludes individual stockholders holding stock under nominee security position listings.

We have not paid any dividends since 1995, and we do not expect to declare or pay any dividends on our common stock in the near future. The payment of future dividends is within the discretion of our Board of Directors and will depend upon our future earnings, if any, our capital requirements, our financial condition, and other relevant factors. Our existing revolving credit facility allows the payment of dividends on our common stock subject to maintaining a minimum level of Excess Availability (as defined in the facility agreement) for 30 days before and immediately after the payment of such dividends. (See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; FINANCIAL CONDITION; Financing; Long-term Debt and Equity Financing” and “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT” below).

Information regarding our equity compensation plans appears in “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” below.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers:

					Total		Maximum
					Number		Number of
					of Shares		Shares that
	Total				Purchased as		May Yet be
	Number		Average		Part of Publicly		Purchased
	of Shares		Price Paid		Announced Plans		Under the Plans
Period	Purchased(1)		per Share		or Programs(2)		or Programs(2)
October 29, 2006 through November 25, 2006		2,057	$	14.80		-
November 26, 2006 through December 30, 2006		0		00.00		-
December 31, 2006 through February 3, 2007		1,344		13.12		-
Total		3,401	$	14.14		-
____________________
(1)Shares withheld for the payment of payroll taxes on employee stock awards that vested during the period.
(2(2)In Fiscal 1998, we publicly announced that our Board of Directors granted authority to repurchase up to 10,000,000 shares of our common stock. In Fiscal 2000, we publicly announced that our Board of Directors granted authority to repurchase up to an additional 10,000,000 shares of our common stock. In Fiscal 2003, the Board of Directors granted an additional authorization to repurchase 6,350,662 shares of common stock issued to Limited Brands in connection with our acquisition of LANE BRYANT. From Fiscal 1998 through Fiscal 2003, we repurchased a total of 21,370,993 shares of common stock, which included shares purchased on the open market as well as shares repurchased from Limited Brands. As of February 3, 2007, 4,979,669 shares of our common stock remain available for repurchase under these programs. Our revolving credit facility allows the repurchase of our common stock subject to maintaining a minimum level of Excess Availability (as defined in the facility agreement) for 30 days before and immediately after such repurchase. As conditions may allow, we may from time to time acquire additional shares of our common stock under these programs. Such shares, if purchased, would be held as treasury shares. No shares were acquired under these programs during the fourteen weeks ended February 3, 2007. The repurchase programs have no expiration date.

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The following graph shows a five-year comparison of cumulative total returns on our Common Stock, the Russell 2000 Composite Index, and the Dow Jones U.S. Retailers - Apparel Index:

                                                             

The above chart was plotted using the following data:

	2/2/02		2/1/03		1/31/04		1/29/05		1/28/06		2/3/07
Charming Shoppes, Inc.	$	100	$	60	$	105	$	144	$	225	$	236
Russell 2000 Composite Index		100		138		144		154		186		208
Dow Jones U.S. Retailers - Apparel Index		100		87		116		140		160		193

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Item 6. Selected Financial Data

The following table presents selected financial data for each of our five fiscal years ended as of February 1, 2003 through February 3, 2007. The selected financial data is taken from our audited financial statements and should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes included under “Item 8. Financial Statements and Supplementary Data.”

CHARMING SHOPPES, INC. AND SUBSIDIARIES

FIVE-YEAR COMPARATIVE SUMMARY

	Year Ended
	Feb. 3,			Jan. 28,			Jan. 29,			Jan. 31,			Feb. 1,
(Dollars in thousands, except per share amounts)	2007(1)(2)			2006(1)(3)			2005			2004			2003
Operating Statement Data:
Net sales	$	3,067,517		$	2,755,725		$	2,334,736		$	2,288,363		$	2,413,356
Cost of goods sold, buying, catalog, and
occupancy expenses		2,141,884			1,914,347			1,642,650			1,645,499			1,727,253
Selling, general, and administrative expenses		753,109			678,753			577,301			558,248			603,502
Expenses related to cost reduction plan		0			0			605	(4)		11,534	(4)		0
Restructuring charge (credit)		0			0			0			0			(4,813	)(5)
Total operating expenses		2,894,993			2,593,100			2,220,556			2,215,281			2,325,942
Income from operations		172,524			162,625			114,180			73,082			87,414
Other income		8,345			7,687			3,098			2,050			2,328
Interest expense		(14,746	)		(17,911	)		(15,610	)		(15,609	)		(20,292	)
Income before income taxes, minority interest,
and cumulative effect of accounting changes		166,123			152,401			101,668			59,523			69,450
Income tax provision		57,200			53,010			37,142			21,623			27,117
Income before minority interest and cumulative
effect of accounting changes		108,923			99,391			64,526			37,900			42,333
Minority interest in net loss of consolidated subsidiary		0			0			0			142			679
Cumulative effect of accounting changes, net of tax		0			0			0			0			(49,098	)(6)
Net income (loss)	$	108,923		$	99,391		$	64,526		$	38,042		$	(6,086	)
Basic net income (loss) per share:
Before cumulative effect of accounting changes	$	.89		$	.83		$	.56		$	.34		$	.38
Net income (loss)		.89			.83			.56			.34			(.05	)
Basic weighted average common shares outstanding		122,388			119,831			116,196			112,491			113,810
Diluted net income (loss) per share:
Before cumulative effect of accounting changes	$	.81		$	.76		$	.52		$	.33		$	.36
Net income (loss)		.81			.76			.52			.33			(.01	)
Diluted weighted average common shares and
equivalents outstanding		139,763			137,064			133,174			128,558			130,937

(Table continued on next page)

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

FIVE-YEAR COMPARATIVE SUMMARY

(Continued)

	Year Ended
(Dollars in thousands)	Feb. 3,			Jan. 28,			Jan. 29,			Jan. 31,			Feb. 1,
	2007(1)(2)			2006(1)			2005			2004			2003
Balance Sheet Data:
Total assets	$	1,710,942		$	1,572,583		$	1,303,771		$	1,173,070		$	1,139,564
Current portion - long-term debt		10,887			14,765			16,419			17,278			12,595
Long-term debt		181,124			191,979			208,645			202,819			203,045
Working capital		443,101			344,229			413,989			266,178			190,797
Stockholders’ equity		947,538			814,348			694,464			587,409			546,555
Performance Data:
Including cumulative effect of accounting changes:
Net return on average stockholders’ equity		12.4	%		13.2	%		10.1	%		6.7	%		(1.1	)%
Net return on average total assets		6.6			6.9			5.2			3.3			(0.5	)
Before cumulative effect of accounting changes:
Net return on average stockholders’ equity		12.4	%		13.2	%		10.1	%		6.7	%		7.6	%
Net return on average total assets		6.6			6.9			5.2			3.3			3.7
____________________
(1)Includes the results of operations of Crosstown Traders, Inc. from the date of acquisition (June 2, 2005).
(2)Fiscal 2007 consisted of 53 weeks.
(3)Certain prior-year amounts have been reclassified to conform to the current-year presentation.
(4)In March 2003, we announced a cost reduction plan designed to take advantage of the centralization of corporate administrative services and to realize certain efficiencies, in order to improve profitability. Costs incurred in connection with the plan during Fiscal 2004 included $2,980,000 of workforce reduction costs, $3,691,000 of lease termination and related costs, $4,195,000 of accelerated depreciation (a non-cash charge), and $668,000 of other facility closure costs. The cost reduction plan was substantially completed during Fiscal 2004. During Fiscal 2005, we revised the estimated sublease income on our Hollywood, Florida credit facility, which was closed in connection with the plan, and recognized an additional $605,000 of lease termination costs.
(5)In January 2002, our Board of Directors approved a restructuring plan that included the closing of our THE ANSWER/ADDED DIMENSIONS chain of 77 stores; the conversion of approximately 20% of the ADDED DIMENSIONS stores to CATHERINES stores; the closing of 130 under-performing FASHION BUG stores; and the conversion of 44 FASHION BUG stores to LANE BRYANT stores. This restructuring plan resulted in a pre-tax charge of $37,708,000 in Fiscal 2002. We completed the restructuring plan by the end of Fiscal 2003, and recognized a pre-tax restructuring credit of $4,813,000, primarily as a result of favorable negotiations of lease terminations.
(6)In Fiscal 2003, we fully adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with the transition provisions of SFAS No. 142, we tested goodwill related to our CATHERINES acquisition for impairment, and recorded a write-down of $43,975,000 to reduce the carrying value of the goodwill to its estimated fair value. In addition, we recognized a charge of $5,123,000, net of income taxes of $2,758,000, in connection with the adoption of FASB Emerging Issues Task Force (“EITF”) Issue 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” This charge represents a reduction in inventory cost for the cumulative effect of cash received from vendors as of the beginning of Fiscal 2003.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the financial statements and accompanying notes appearing elsewhere in this report. As used in this report, the terms “Fiscal 2007,” “Fiscal 2006,” and “Fiscal 2005,” refer to our fiscal years ended February 3, 2007, January 28, 2006, and January 29, 2005, respectively. Fiscal 2007 consisted of 53 weeks, while Fiscal 2006 and Fiscal 2005 each consisted of 52 weeks. The term “Fiscal 2008” refers to our fiscal year which will end on February 2, 2008. The terms “the Company,” “we,” “us,” and “our” refer to Charming Shoppes, Inc. and, where applicable, our consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS

With the exception of historical information, the matters contained in the following analysis and elsewhere in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, projections of revenues, income or loss, cost reductions, capital expenditures, liquidity, financing needs or plans, and plans for future operations, as well as assumptions relating to the foregoing. The words “expect,” “should,” “project,” “estimate,” “predict,” “anticipate,” “plan,” “believes,” and similar expressions are also intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which we cannot predict or quantify. Future events and actual results, performance, and achievements could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. We assume no obligation to update or revise any forward-looking statement to reflect actual results or changes in, or additions to, the factors affecting such forward-looking statements.

Factors that could cause our actual results of operations or financial condition to differ from those described in this report include, but are not necessarily limited to, the following, which are discussed in more detail in “Item 1A. Risk Factors,” above:

●   Our business is dependent upon our ability to accurately predict rapidly changing fashion trends, customer preferences, and other fashion-related factors, which we may not be able to successfully accomplish in the future.  

● A slowdown in the United States economy, an uncertain economic outlook, and escalating energy costs could lead to reduced consumer demand for our products in the future.  

● The women’s specialty retail apparel and direct-to-consumer markets are highly competitive and we may be unable to compete successfully against existing or future competitors.  

● We may be unable to successfully integrate the operations of Crosstown Traders, Inc. (“Crosstown Traders”) with the operations of Charming Shoppes, Inc. In addition, we cannot assure the successful implementation of our business plan for Crosstown Traders, including the successful launch of our LANE BRYANT catalog.  

● We cannot assure the successful implementation of our business plans for entry into the outlet store distribution channel and expansion of our CACIQUE product line through new store formats.  

● We cannot assure the successful implementation of our business plan for increased profitability and growth in our Retail Stores or Direct-to-Consumer segments.  

● Our business plan is largely dependent upon continued growth in the plus-size women’s apparel market, which may not occur.  

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● We depend on key personnel, particularly our Chief Executive Officer, Dorrit J. Bern, and we may not be able to retain or replace these employees or recruit additional qualified personnel.  

● We depend on our distribution and fulfillment centers and third-party freight consolidators and service providers, and could incur significantly higher costs and longer lead times associated with distributing our products to our stores and shipping our products to our E-commerce and catalog customers if operations at any of these locations were to be disrupted for any reason.  

● We depend on the availability of credit for our working capital needs, including credit we receive from our suppliers and their agents, and on our credit card securitization facilities. If we were unable to obtain sufficient financing at an affordable cost, our ability to merchandise our stores, E-commerce, or catalog businesses would be adversely affected.  

● Natural disasters, as well as war, acts of terrorism, or other armed conflict, or the threat of either may negatively impact availability of merchandise and customer traffic to our stores, or otherwise adversely affect our business.  

● We rely significantly on foreign sources of production and face a variety of risks generally associated with doing business in foreign markets and importing merchandise from abroad. Such risks include (but are not necessarily limited to) political instability; imposition of, or changes in, duties or quotas; trade restrictions; increased security requirements applicable to imports; delays in shipping; increased costs of transportation; and issues relating to compliance with domestic or international labor standards.  

● Our Retail Stores and Direct-to-Consumer segments experience seasonal fluctuations in net sales and operating income. Any decrease in sales or margins during our peak sales periods, or in the availability of working capital during the months preceding such periods, could have a material adverse effect on our business. In addition, extreme or unseasonable weather conditions may have a negative impact on our sales.  

● We may be unable to obtain adequate insurance for our operations at a reasonable cost.  

● We may be unable to protect our trademarks and other intellectual property rights, which are important to our success and our competitive position.  

● We may be unable to hire and retain a sufficient number of suitable sales associates at our stores. In addition, we are subject to the Fair Labor Standards Act and various state and Federal laws and regulations governing such matters as minimum wages, exempt status classification, overtime, and employee benefits. Changes in Federal or state laws or regulations regarding minimum wages or other employee benefits could cause us to incur additional wage and benefit costs, which could adversely affect our results of operations.  

● Our manufacturers may be unable to manufacture and deliver merchandise to us in a timely manner or to meet our quality standards.  

● Our Retail Stores segment sales are dependent upon a high volume of traffic in the strip centers and malls in which our stores are located, and our future retail store growth is dependent upon the availability of suitable locations for new stores.  

● Inadequate systems capacity, a disruption or slowdown in telecommunications services, changes in technology, changes in government regulations, systems issues, security breaches, a failure to integrate order management systems, or customer privacy issues could result in reduced sales or increases in operating expenses as a result of our efforts or our inability to remedy such issues.  

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● Successful operation of our E-commerce websites and our catalog business is dependent on our ability to maintain efficient and uninterrupted customer service and fulfillment operations.  

● We may be unable to manage significant increases in certain costs vital to catalog operations, including postage, paper, and acquisition of prospects, which could adversely affect our results of operations.  

● Response rates to our catalogs and access to new customers could decline, which would adversely affect our net sales and results of operations.  

● We may be unable to successfully implement our plan to improve merchandise assortments in our Retail Stores or Direct-to-Consumer segments.  

● We make certain significant assumptions, estimates, and projections related to the useful lives of our property, plant, and equipment and the valuation of intangible assets related to acquisitions. The carrying amount and/or useful life of these assets are subject to periodic valuation tests for impairment. Impairment results when the carrying value of an asset exceeds the undiscounted (or for goodwill and indefinite-lived intangible assets the discounted) future cash flows associated with the asset. If actual experience were to differ materially from the assumptions, estimates, and projections used to determine useful lives or the valuation of property, plant, equipment, or intangible assets, a write-down for impairment of the carrying value of the assets, or acceleration of depreciation or amortization of the assets, could result. Such a write-down or acceleration of depreciation or amortization would have an adverse impact on our reported results of operations.  

● Changes to existing accounting rules or the adoption of new rules could have an adverse impact on our reported results of operations.  

● Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include our assessment of the effectiveness of our internal control over financial reporting in our annual reports. Our independent registered public accounting firm is also currently required to attest to whether or not our assessment is fairly stated in all material respects and to separately report on whether or not they believe that we maintained, in all material respects, effective internal control over financial reporting. If we are unable to maintain effective internal control over financial reporting, or if our independent registered public accounting firm is unable to timely attest to our assessment, we could be subject to regulatory sanctions and a possible loss of public confidence in the reliability of our financial reporting. Such a failure could result in our inability to provide timely and/or reliable financial information and could adversely affect our business.

OVERVIEW

In Fiscal 2007, our diluted earnings per share increased by 7% to $0.81 and our consolidated net sales increased by 11% to $3.068 billion from $2.756 billion in Fiscal 2006. The increase in consolidated net sales was driven by (i) the inclusion of the sales of Crosstown Traders, Inc. (“Crosstown Traders”), which we acquired on June 2, 2005, for the entire Fiscal 2007 period, (ii) sales from new LANE BRYANT, LANE BRYANT OUTLET, and PETITE SOPHISTICATE OUTLET stores opened during Fiscal 2007, (iii) an increase in comparable store sales at our LANE BRYANT and CATHERINES brands, (iv) increases in store-related E-commerce sales at all of our retail store brands, and (v) an additional week of operations in Fiscal 2007. With the acquisition of Crosstown Traders, we operate in two segments: Retail Stores and Direct-to-Consumer. Our Retail Stores segment operates through our LANE BRYANT (including LANE BRYANT OUTLET), FASHION BUG, CATHERINES PLUS SIZES, and PETITE SOPHISTICATE OUTLET stores and store-related E-commerce. Our Direct-to-Consumer segment includes catalog and catalog-related E-commerce.

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In our Retail Stores segment, net sales increased 7.5% during Fiscal 2007 as compared to Fiscal 2006. Sales from new stores (including outlet store sales), an increase in comparable store sales, increased E-commerce sales at all brands, and an additional week of operations in Fiscal 2007 contributed to the increase in consolidated Retail Stores segment net sales. Comparable store sales are based on equivalent 52-week and 13-week periods and are not affected by the additional week of operations in Fiscal 2007.

For Fiscal 2007, LANE BRYANT achieved a 1% increase in comparable store sales as compared to a 4% increase in Fiscal 2006. For the Fiscal 2007 fourth quarter, LANE BRYANT experienced a 3% decrease in comparable store sales, as compared to an increase of 10% in the Fiscal 2006 fourth quarter. Compared to a strong performance in the Fiscal 2006 fourth quarter, LANE BRYANT experienced decreases in both average dollar sale per transaction and traffic levels in the Fiscal 2007 fourth quarter. In addition, LANE BRYANT experienced a sharp downtrend in sales of premium denim products in response to changing fashion trends in the Fiscal 2007 fourth quarter as compared to the prior-year period. The decrease in comparable store sales was offset by new store sales (including outlet store sales), as well as an increase in E-commerce sales.

Our CATHERINES stores achieved a 4% comparable store sales increase in Fiscal 2007 as compared to a 10% increase in Fiscal 2006. For the Fiscal 2007 fourth quarter, CATHERINES achieved a 2% increase in comparable store sales, as compared to an increase of 19% for the Fiscal 2006 fourth quarter. CATHERINES’ strong performance during Fiscal 2006 continued into Fiscal 2007, with significant increases in traffic, the number of transactions per store, and E-commerce sales as compared to the prior-year period.

At FASHION BUG, comparable store sales decreased 1% in Fiscal 2007, as compared to flat comparable store sales in Fiscal 2006. FASHION BUG experienced a 1% decrease in comparable store sales in the Fiscal 2007 fourth quarter, as compared to a 1% increase in the Fiscal 2006 fourth quarter. Sales from the additional week of operations in Fiscal 2007 and an increase in E-commerce sales were partially offset by the decrease in comparable store sales and a decrease in the number of open stores.

Store-related E-commerce sales for our three brands increased from approximately 2.0% of total sales in Fiscal 2006 to approximately 3.0% of total sales in Fiscal 2007. Demand in the E-commerce channel continues to outpace the growth in our retail stores. We have dedicated, and will continue to dedicate, more of our resources to meet the growth in this channel. For Fiscal 2008, we expect our store-related E-commerce sales to increase to more than 4.0 percent of consolidated net sales, and we see opportunities to continue to expand our product offerings into additional categories, such as hard-to-find sizes. This will allow us to offer a greater variety of merchandise categories than those currently offered in our stores.

Total net sales for the Direct-to-Consumer segment were $428 million for Fiscal 2007, as compared to $299 million for Fiscal 2006 from the date of acquisition of Crosstown Traders on June 2, 2005. The Direct-to-Consumer segment performed below our sales plan for Fiscal 2007 as a result of reduced response rates from our core customers to our apparel catalog offerings. The disruption caused by the consolidation of our catalog merchandise operations into Tucson, Arizona during Fiscal 2007 had a greater-than-anticipated negative impact on Crosstown’s apparel catalog operations. As a result, we reduced our catalog prospecting and circulation levels in order to reduce advertising expenditures during the period. We expect to maintain or slightly increase our prospecting and circulation levels in Fiscal 2008.

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For the fourth quarter of Fiscal 2007, total net sales for the Direct-to-Consumer segment were $148 million, as compared to total net sales of $156 million for the fourth quarter of Fiscal 2006. A significant amount of fourth quarter sales were derived from our FIGI’S catalog, which markets food and specialty gift products and does a substantial portion of its business during the December holiday season. Sales from the FIGI’S catalog for the Fiscal 2007 fourth quarter were in line with our sales plan, while sales from our apparel catalogs were below plan for the reasons discussed above.

The apparel industry is highly competitive and is continuously faced with new and existing competitors seeking areas of growth to expand their businesses. Our strategy focuses on increasing our market share in the growing plus-size women’s apparel market through our Retail Stores and Direct-to-Consumer segments. Americans continue to gain weight in all age groups, with an estimate of more than 60% of American adults being overweight (Source: American Obesity Association: Obesity in the U.S. Fact Sheet) and half of American women wearing size 14 or larger (Source: NPD Group). We offer plus-size women’s apparel through multiple channels to a broad range of age groups, with varied fashion tastes and income levels. By continuing to focus on the plus-size market, we believe that we are well-positioned to meet the demands of this growing demographic. In addition to allowing us to expand our multi-channel strategy for our retail store brands, the acquisition of Crosstown Traders provides us with the expertise and infrastructure necessary to service the LANE BRYANT catalog business when the LANE BRYANT catalog trademark reverts back to us in late Fiscal 2008.

We view the growth in our store base and direct-to-consumer channels as an opportunity for us to maintain and increase our market share. We continue to pursue ways to increase our relevance to our customer, and believe that, through offering multiple shopping channels for our customers and other factors such as our expertise in plus-size fit and our figure magazine (a leading plus-size fashion and lifestyle magazine), we continue to differentiate ourselves from our competitors.

We plan to continue the expansion of our market position in the women’s plus-size specialty apparel market. These plans include several strategic initiatives, which are described below:

· Continued expansion of our side-by-side LANE BRYANT intimate apparel store concept, which we successfully tested during Fiscal 2006 and implemented in Fiscal 2007. This concept pairs LANE BRYANT’s casual and wear-to-work sportswear assortments with an expanded line of CACIQUE intimates, as well as additional national brands, presented in a double store-front. During Fiscal 2007, we operated 44 stores in the side-by-side format, including 18 stores that were relocated or remodeled. During Fiscal 2008, we plan to open approximately 60 new LANE BRYANT stores, including 35 stores in the new side-by-side format.

· In Fiscal 2007, we entered the outlet store channel through the assumption of outlet store leases from Retail Brand Alliance and the opening of 82 LANE BRYANT OUTLET stores and 45 PETITE SOPHISTICATE OUTLET stores, many of which are operating as side-by-side stores with LANE BRYANT OUTLET stores. This channel, which we expected would incur an operating loss during Fiscal 2007, performed above-plan, was profitable during the fourth quarter, and broke even for Fiscal 2007. During Fiscal 2008, we plan to open approximately 15 new LANE BRYANT OUTLET stores (including 3 conversions from LANE BRYANT stores), 5 new PETITE SOPHISTICATE OUTLET stores, and 5-7 new full-line PETITE SOPHISTICATE stores.

· In our Direct-to-Consumer segment, we will focus on building infrastructure to prepare for the launch of the LANE BRYANT catalog, as well as improving the performance of our core apparel group catalogs. The LANE BRYANT catalog trademark, currently licensed by a third party, will revert to us in late Fiscal 2008.

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· In addition, we are planning for continued growth in E-commerce and cross-channel selling tools, and exploring opportunities for international expansion.

CRITICAL ACCOUNTING POLICIES

We have prepared the financial statements and accompanying notes included elsewhere in this report in conformity with accounting principles generally accepted in the United States. This requires us to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. These estimates and assumptions are based on historical experience, analysis of current trends, and various other factors that we believe to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions.

We periodically reevaluate our accounting policies, assumptions, and estimates and make adjustments when facts and circumstances warrant. Historically, actual results have not differed materially from those determined using required estimates. Our significant accounting policies are described in the notes accompanying the financial statements included elsewhere in this report. However, we consider the following accounting policies and related assumptions to be more critical to, and involve the most significant management judgments and estimates in, the preparation of our financial statements and accompanying notes.

Revenue Recognition

We recognize revenue in accordance with SEC Codification of Staff Accounting Bulletins Topic 13, “Revenue Recognition.” Our revenues from merchandise sales are net of sales discounts, returns, and allowances and exclude sales tax. We record a reserve for estimated future sales returns based on an analysis of actual returns and we defer recognition of layaway sales to the date of delivery. A change in our actual rates of sales returns and layaway sales experience would affect the level of revenue recognized.

Catalog and E-commerce revenues include shipping and handling fees billed to customers. These revenues are recognized after the following have occurred: execution of the customer’s order, authorization of the customer’s credit card has been received, and the product has been shipped to and received by the customer. We record a reserve for estimated future sales returns based on an analysis of actual returns, and defer recognition of revenue for product shipped but not yet received by the customer based on an estimate of the number of days the shipments are in-transit. A change in our actual rates of sales returns and/or the time it takes for customers to receive our products would affect the level of revenue recognized.

We offer our customers various loyalty card programs. Customers that join these programs are entitled to various benefits, including discounts and rebates on purchases during the membership period. Customers generally join these programs by paying an annual membership fee. We recognize revenue from these loyalty programs as a component of net sales over the life of the membership period based on when the customer earns the benefits and when the fee is no longer refundable. Costs we incur in connection with administering these programs are recognized in cost of goods sold as incurred.

We sell gift cards to our Retail Stores segment customers through our stores, store-related websites, and through a third party. We recognize revenue from gift cards when the gift card is redeemed by the customer. Our gift cards do not currently contain expiration dates or inactivity fees. We recognize gift card breakage (unused gift card balances for which we believe the likelihood of redemption is remote) as net sales based on an analysis of historical redemption patterns. A change in the historical pattern of gift card redemptions would affect the level of revenue recognized.

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Accounts Receivable

Our FIGI’S catalog offers credit to its customers using interest-free, three-payment credit terms over three months, with the first payment due on a defined date 30 to 60 days after a stated holiday. A substantial portion of the FIGI’S catalog business is conducted during the December holiday season. We evaluate the collectibility of our accounts receivable based on a combination of factors, including analysis of historical trends, aging of accounts receivable, write-off experience, past history of recoveries, and expectations of future performance. Significant changes in our historical write-off or recovery experience could have a material impact on the levels of our accounts receivable valuation reserves.

Inventories

We value our merchandise inventories at the lower of cost or market, using the retail inventory method (average cost basis), for our Retail Stores and Direct-to-Consumer segment inventories. Under the retail inventory method, we adjust the valuation of inventories at cost, and the resulting gross margins, in proportion to markdowns and shrinkage on our retail inventories. Our use of the retail inventory method results in valuing inventories at the lower of cost or market if markdowns are currently taken as a reduction of the retail value of inventories. Our estimation of markdowns involves certain management judgments and estimates which significantly affect the ending inventory valuation at cost, as well as the resulting gross margins. Our failure to properly estimate markdowns currently could result in an overstatement or understatement of inventory cost under the lower of cost or market principle.

At the end of Fiscal 2007, Fiscal 2006, and Fiscal 2005, in addition to markdowns that had been recorded in inventory, an additional $9.9 million, $8.6 million, and $9.5 million, respectively, of markdowns, representing markdowns not yet taken on aged inventory, were recorded in order to properly reflect inventory at the lower of cost or market. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) Issue No. 02-16 (see “Accounting for Cash Consideration Received From a Vendor” below), as of February 3, 2007, January 28, 2006, and January 29, 2005, $8.8 million, $9.3 million, and $6.5 million, respectively, of cash received from vendors was deferred into inventory to be recognized as inventory is sold.

Deferred Catalog Advertising Costs

We accumulate all direct costs incurred in the development, production, and circulation of our direct-mail catalogs on our consolidated balance sheet until such time as the related catalog is mailed. These capitalized costs are subsequently amortized as a component of cost of goods sold, buying, catalog, and occupancy expenses over the expected sales realization cycle, generally within one to six months. Our initial estimation of the expected sales realization cycle for a particular catalog merchandise offering is based on, among other possible considerations, our historical sales and sell-through experience with similar catalog merchandise offerings, our understanding of then-prevailing fashion trends and influences, our assessment of prevailing economic conditions, and various competitive factors. We continually track our subsequent sales realization, compile customer feedback for indications of future performance, reassess the marketplace, compare our findings to our previous estimate, and adjust our amortization accordingly. A significant change in our expected sales and sell-through experience could have a material impact on the rate of amortization of deferred catalog advertising costs.

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Impairment of Property, Plant, and Equipment, Goodwill, and Intangible Assets

We evaluate the recoverability of our property, plant, and equipment and amortizable intangible assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Under SFAS No. 144, we are required to assess our long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amounts of long-lived assets may not be recoverable. We consider historical performance and estimated future results in our evaluation of potential impairment, and compare the carrying amount of the asset to the estimated future undiscounted cash flows expected to result from the use of the asset. If the estimated future undiscounted cash flows are less than the carrying amount of the asset, we write down the asset to its estimated fair value and recognize an impairment loss. Our estimate of fair value is generally based on either appraised value or the present value of future cash flows, based on a number of assumptions and estimates.

We test our goodwill and our indefinite-lived intangible assets in accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” We re-evaluate goodwill and other intangible assets for impairment at least annually or more frequently if there is an indication of possible impairment. We performed this annual review during the fourth quarters of Fiscal 2007, Fiscal 2006, and Fiscal 2005 and determined that there has been no impairment of these assets.

If actual experience were to differ materially from the assumptions, estimates, and projections used to determine useful lives or the valuation of property, plant, equipment, or intangible assets, a write-down for impairment of the carrying value of the assets, or acceleration of depreciation or amortization of the assets, could result. Such a write-down or acceleration of depreciation or amortization could have an adverse impact on our reported results of operations.

Acquisitions - Purchase Price Allocation

We account for acquisitions in accordance with the provisions of SFAS No. 141, “Business Combinations.” We assign to all identifiable assets acquired (including intangible assets), and to all identifiable liabilities assumed, a portion of the cost of the acquired company equal to the estimated fair value of such assets and liabilities at the date of acquisition. We record the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed, if any, as goodwill. We make the initial purchase price allocation based on the evaluation of information and estimates available at the date of the financial statements. As final information regarding the fair value of assets acquired and liabilities assumed is evaluated and estimates are refined, we make appropriate adjustments to the amounts allocated to those assets and liabilities and make corresponding changes to the amount allocated to goodwill. We use all available information to make these fair value determinations and, for major business acquisitions, typically engage an outside appraisal firm to assist in the fair value determination of the acquired long-lived assets. We have, if necessary, up to one year after the closing date of an acquisition to finish these fair value determinations and finalize the purchase price allocation.

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Asset Securitization

Asset securitization primarily involves the sale of proprietary credit card receivables to a special-purpose entity, which in turn transfers the receivables to a separate and distinct qualified special-purpose entity (“QSPE”). The QSPE’s assets and liabilities are not consolidated in our balance sheet and the receivables transferred to the QSPEs are isolated for purposes of the securitization program. We use asset securitization to fund the credit card receivables generated by our FASHION BUG, CATHERINES, PETITE SOPHISTICATE, and CROSSTOWN TRADERS proprietary credit card programs. See “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 16. ASSET SECURITIZATION” below for additional discussion of our asset securitization facility.

In accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” we record a beneficial interest, referred to as the interest-only strip (“I/O strip”), in the estimated present value of cash flows we expect to receive over the period the receivables are outstanding. In addition to the I/O strip, we recognize a servicing liability, since the servicing fees we expect to receive from the securitizations do not provide adequate compensation for servicing the receivables. The servicing liability represents the present value of the excess of the costs of servicing over the servicing fees we expect to receive, and is recorded at estimated fair value. We use the same discount rate and estimated life assumptions in valuing the I/O strip and the servicing liability. We amortize the I/O strip and the servicing liability on a straight-line basis over the expected life of the credit card receivables.

We use certain key valuation assumptions related to the average life of the receivables sold and anticipated credit losses, as well as an appropriate market discount rate, in determining the estimated value of the I/O strip and the servicing liability. We estimate the values for these assumptions using historical data, the impact of the current economic environment on the performance of the receivables sold, and the impact of the potential volatility of the current market for similar instruments in assessing the fair value of the retained interests. Changes in the average life of the receivables sold, discount rate, and credit-loss percentage could cause actual results to differ materially from the estimates, and changes in circumstances could result in significant future changes to the assumptions currently being used.

The following table presents the decrease in our I/O strip receivable that would result from hypothetical adverse changes of 10% and 20% in the assumptions used to determine the fair value of the I/O strip:

(In millions)	10% Change		20% Change
Assumption:
Payment rate	$	1.1	$	2.1
Residual cash flows discount rate		0.1		0.1
Credit loss percentage		0.9		1.7

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Costs Associated With Exit or Disposal Activities

In accordance with the provisions of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” we recognize liabilities for costs associated with an exit or disposal activity when the liabilities are incurred. Commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. We recognize severance pay over time rather than “up front” if the benefit arrangement requires employees to render future service beyond a “minimum retention period.” The liability for severance pay is recognized as employees render service over the future service period, even if the benefit formula used to calculate an employee’s termination benefit is based on length of service. We use fair value for the initial measurement of liabilities associated with exit or disposal activities. The provisions of SFAS No. 146 result in the deferral of recognition of certain costs for restructuring plans from the date of commitment to such a plan to the date that costs are incurred under the plan.

Accounting for Cash Consideration Received From a Vendor

EITF Issue 02-16, “Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor,”addresses the accounting for cash consideration received from a vendor, including both a reseller of the vendor’s products and an entity that purchases the vendor’s products from a reseller. In accordance with the provisions of EITF Issue 02-16, as of February 3, 2007 and January 28 2006 we deferred $8.8 million and $9.3 million, respectively, of cash received from vendors into inventory. We will recognize these amounts as a reduction of cost of goods sold as the inventory is sold. We defer the recognition of cash received from vendors during interim periods in order to better match the recognition of the cash consideration to the period the inventory is sold.

Stock-Based Compensation

Through Fiscal 2006, we accounted for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” as permitted by SFAS No. 123, “Accounting for Stock-Based Compensation.” We recorded compensation expense for restricted stock and restricted stock unit awards and for stock options with an exercise price less than the market price of our common stock at the date of grant, based on the difference between the market price and the exercise price of the option at the date of grant. The compensation expense was recognized on a straight-line basis over the vesting period of each award or option. We did not recognize compensation expense for options having an exercise price equal to the market price on the date of grant or for shares purchased under our Employee Stock Purchase Plan.

We disclosed, as pro forma information, compensation expense for all stock options, restricted stock awards, and restricted stock unit awards based on an estimated fair value of the option or award. In accordance with SFAS No. 123, we used the Black-Scholes pricing model to estimate the fair value of stock options. The Black-Scholes model required estimates or assumptions as to the dividend yield and price volatility of the underlying stock, the expected life of the option, and a relevant risk-free interest rate. Our use of different option-pricing models and different estimates or assumptions could have resulted in materially different estimates of compensation expense under the fair value method.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), a revision of SFAS No. 123. Under SFAS No. 123R, we are required to recognize the fair value of stock-based payments as compensation expense in our financial statements beginning in Fiscal 2007. Pro forma disclosures are no longer permitted.

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We elected to adopt SFAS No. 123R on the modified prospective method and, accordingly, prior periods have not been restated. We have provided pro forma disclosure of stock-based compensation determined in accordance with SFAS No. 123, as previously disclosed, for the comparable prior-year periods. Stock-based compensation cost recognized in Fiscal 2007 includes (i) compensation cost for all stock-based awards granted prior to the beginning of Fiscal 2007 but not fully vested as of the beginning of Fiscal 2007, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123, and (ii) compensation cost for all stock-based awards granted subsequent to the beginning of Fiscal 2007, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. The impact of the change from using actual forfeitures to determine compensation expense under the intrinsic value method to using estimated forfeitures in accordance with the provisions of SFAS No. 123R was immaterial. Current grants of stock-based compensation consist primarily of restricted stock and restricted stock unit awards.

Under SFAS No. 123R, we will continue to use the Black-Scholes valuation model to estimate the fair value of stock options, using assumptions consistent with our pro forma disclosures under SFAS No. 123, and straight-line amortization of stock-based compensation. We elected to calculate the initial pool of excess tax benefits related to stock-based compensation and the related presentation of excess tax benefits in our consolidated statements of cash flows in accordance with the provisions of paragraph 81 of SFAS No. 123R.

Adoption of SFAS No. 123R generally results in the recognition of additional stock-based compensation in the financial statements as compared to use of the intrinsic value method. However, beginning in Fiscal 2005, we changed the composition of our stock-based compensation awards to include primarily restricted stock and restricted stock unit awards, which generally yield the same compensation expense under both the intrinsic value method and SFAS No. 123R. In addition, we did not have significant unvested stock options as of the beginning of Fiscal 2007. Accordingly, the adoption of SFAS No. 123R did not have a material incremental impact on our income before taxes and net income, or on our basic or diluted net income per share.

Under the provisions of SFAS No. 123R, we are required to present gross excess tax benefits related to stock-based compensation as cash flows from financing activities in our statements of cash flows instead of as cash flows from operating activities as previously required. Write-offs of deferred tax assets related to an excess of stock-based compensation recognized in the financial statements over amounts deductible for tax purposes will continue to be reflected as cash flows used by operating activities. Net cash used by financing activities for Fiscal 2007 includes $5.1 million of excess tax benefits related to stock-based compensation that would have been classified as a cash inflow in net cash provided by operating activities if we had not adopted the provisions of SFAS No. 123R.

See “Item 8. Financial Statements and Supplementary Data; Note 1. Summary of Significant Accounting Policies; Stock-based Compensation” below for further information on our stock-based compensation expense for Fiscal 2007 and for pro forma disclosures under SFAS No. 123 for the comparable prior-year periods. Total stock-based compensation not yet recognized, related to the non-vested portion of stock options and awards outstanding, was $16.0 million as of February 3, 2007. The weighted-average period over which we expect to recognize this compensation is approximately 2.7 years.

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Insurance Liabilities

We use a combination of third-party insurance and/or self-insurance for certain risks, including workers’ compensation, medical, dental, automobile, and general liability claims. Our insurance liabilities are a component of “Accrued expenses” on our consolidated balance sheet, and represent our estimate of the ultimate cost of uninsured claims incurred as of the balance sheet date. In estimating our self-insurance liabilities, we use independent actuarial estimates of expected losses, which are based on statistical analyses of historical data. Loss estimates are adjusted based upon actual claim settlements and reported claims. Although we do not expect the amounts ultimately paid to differ significantly from our estimates, self-insurance liabilities could be affected if future claim experience differs significantly from the historical trends and the actuarial assumptions. We evaluate the adequacy of these liabilities on a regular basis, modifying our assumptions as necessary, updating our records of historical experience, and adjusting our liabilities as appropriate.

Operating Leases

We lease substantially all of our store properties as well as certain of our other facilities, and account for our store leases in accordance with SFAS No. 13, “Accounting for Leases.” A majority of our store leases contain lease options that we can unilaterally exercise. The lease term we use for such operating leases includes lease option renewal periods only in instances in which the failure to exercise such options would result in an economic penalty for us and exercise of the renewal option is therefore reasonably assured at the lease inception date. Store leasehold improvement assets are depreciated over the shorter of their useful life or the lease term, as determined above.

For leases that contain rent escalations, the lease term for recognition of straight-line rent expense commences on the date we take possession of the leased property for construction purposes, which for stores is generally two months prior to a store opening date. Similarly, landlord incentives or allowances under operating leases (tenant improvement allowances) are recorded as a deferred rent liability and recognized as a reduction of rent expense on a straight-line basis over the lease term, commencing on the date we take possession of the leased property for construction purposes.

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RESULTS OF OPERATIONS

Financial Summary

The following table shows our results of operations expressed as a percentage of net sales and on a comparative basis:

										Percentage Increase
										(Decrease)
	Percentage of Net Sales(1)(2)									From Prior Year(2)
	Fiscal			Fiscal			Fiscal			Fiscal			Fiscal
	2007(3)			2006			2005			2007-2006(3)			2006-2005
Net sales		100.0	%		100.0	%		100.0	%		11.3	%		18.0	%
Cost of goods sold, buying, catalog, and occupancy expenses		69.8			69.5			70.4			11.9			16.5
Selling, general, and administrative expenses		24.6			24.6			24.7			11.0			17.6
Income from operations		5.6			5.9			4.9			6.1			42.4
Other income		0.3			0.3			0.1			8.6			148.1
Interest expense		0.5			0.6			0.7			(17.7	)		14.7
Income tax provision		1.9			1.9			1.6			7.9			42.7
Net income		3.6			3.6			2.8			9.6			54.0
____________________
(1)Results may not add due to rounding.
(2)Includes the results of operations of Crosstown Traders, Inc. from the date of acquisition on June 2, 2005.
(3)Fiscal 2007 consisted of 53 weeks.

The following table shows our net sales by store brand:

	Year Ended				Year Ended				Year Ended
	February 3, 2007(1)				January 28, 2006				January 29, 2005
	Fiscal		Fourth		Fiscal		Fourth		Fiscal		Fourth
(In millions)	Year		Quarter		Year		Quarter		Year		Quarter
FASHION BUG	$	1,058.3	$	269.1	$	1,049.0	$	258.6	$	1,043.8	$	255.0
LANE BRYANT(2)		1,202.3		357.1		1,057.4		299.8		974.6		260.1
CATHERINES		367.7		91.5		346.2		83.0		312.1		70.4
Other retail stores(3)		8.1		6.2		0.0		0.0		0.0		0.0
Total Retail Stores segment sales		2,636.4		723.9		2,452.6		641.4		2,330.5		585.5
Total Direct-to-Consumer segment sales(4)		427.8		148.2		298.9		155.8		0.0		0.0
Corporate and other(5)		3.3		1.9		4.2		2.4		4.2		2.5
Total net sales	$	3,067.5	$	874.0	$	2,755.7	$	799.6	$	2,334.7	$	588.0
____________________
(1)Fiscal Year 2007 and Fourth Quarter 2007 consisted of 53 weeks and 14 weeks, respectively.
(2)Fiscal 2007 includes LANE BRYANT OUTLET stores.
(3)Includes PETITE SOPHISTICATE OUTLET stores.
(4)Includes the results of operations of Crosstown Traders, Inc. from the date of acquisition on June 2, 2005.
(5)Revenue related to loyalty card fees.

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The following table shows additional information related to changes in our net sales:

	Year Ended		Year Ended
	February 3, 2007(1)		January 28, 2006
	Fiscal	Fourth	Fiscal	Fourth
	Year	Quarter	Year	Quarter
Retail Stores segment
Increase (decrease) in comparable store sales:(2)
Consolidated retail stores	1%	(1)%	3%	7%
FASHION BUG	(1)	(1)	0	1
LANE BRYANT	1	(3)	4	10
CATHERINES	4	2	10	19
Sales from new stores as a percentage of
consolidated prior-period net sales:(3)
FASHION BUG	1	1	1	2
LANE BRYANT(4)	6	7	3	4
CATHERINES	1	0	1	1
Other retail stores(5)	0	1	--	--
Prior-period sales from closed stores as a percentage
of consolidated prior-period net sales:
FASHION BUG	(1)	(1)	(1)	(1)
LANE BRYANT	(2)	(2)	(1)	(1)
CATHERINES	(0)	(0)	(1)	(1)
Increase in Retail Stores segment sales	7	13	5	10
Direct-to-Consumer segment
Increase (decrease) in Direct-to-Consumer segment sales	-- (6)	(5)	--	--
Increase in consolidated net sales	11%	9%	18%	36%
____________________
(1)Fiscal Year 2007 and Fourth Quarter 2007 consisted of 53 weeks and 14 weeks, respectively. Comparable store sales and changes in sales from new stores and closed stores are based on equivalent 52-week and 13-week periods. The increase in Retail Stores segment sales, increase (decrease) in Direct-to-Consumer segment sales, and increase in consolidated net sales are based on the 53-week and 14-week periods for Fiscal 2007 and the 52-week and 13-week periods for Fiscal 2006.
(2)“Comparable store sales” is not a measure that has been defined under generally accepted accounting principles. The method of calculating comparable store sales varies across the retail industry and, therefore, our calculation of comparable store sales is not necessarily comparable to similarly-titled measures reported by other companies. We define comparable store sales as sales from stores operating in both the current and prior-year periods. New stores are added to the comparable store sales base 13 months after their open date. Sales from stores that are relocated within the same mall or strip-center, remodeled, or have a legal square footage change of less than 20% are included in the calculation of comparable store sales. Sales from stores that are relocated outside the existing mall or strip-center, or have a legal square footage change of 20% or more, are excluded from the calculation of comparable store sales until 13 months after the relocated store is opened. Stores that are temporarily closed for a period of 4 weeks or more are excluded from the calculation of comparable store sales for the applicable periods in the year of closure and the subsequent year. Non-store sales, such as catalog and E-commerce sales, are excluded from the calculation of comparable store sales.
(3)Includes incremental Retail Stores segment E-commerce sales.
(4)Includes LANE BRYANT OUTLET stores.
(5)Includes PETITE SOPHISTICATE OUTLET stores.
(6)Comparison is not meaningful, as prior-year period includes sales from Crosstown Traders, Inc. from the date of acquisition on June 2, 2005 (approximately 34 weeks).

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The following table sets forth information with respect to store activity for Fiscal 2007 and planned store activity for Fiscal 2008:

	FASHION			LANE
	BUG			BRYANT			CATHERINES			Other(1)			Total
Fiscal 2007:(2)
Stores at January 28, 2006		1,025			748			463			0			2,236
Stores opened		10			135	(3)		8			45			198
Stores closed		(26	)		(24	)		(6	)		(0	)		(56	)
Net change in stores		(16	)		111			2			45			142
Stores at February 3, 2007		1,009			859			465			45			2,378
Stores relocated during period		27			24			11			0			62
Fiscal 2008
Planned store openings		10			65-75	(4)		10			10-12	(5)		95-107
Planned store closings		18-22			15-18	(6)		7-10			0			40-50
Planned store relocations		20-25			45-50	(7)		10-15			0			75-90
____________________
(1)Includes PETITE SOPHISTICATE OUTLET stores.
(2)Excludes 2 Crosstown Traders outlet stores.
(3)Includes 82 LANE BRYANT OUTLET stores.
(4)Includes approximately 35 LANE BRYANT intimate apparel side-by-side stores and 15 LANE BRYANT OUTLET stores.
(5)Includes 5 PETITE SOPHISTICATE OUTLET stores and 5-7 full-line PETITE SOPHISTICATE stores.
(6)Includes 1 LANE BRYANT OUTLET store.
(7)Includes approximately 32 conversions to LANE BRYANT intimate apparel side-by-side stores.

Comparison of Fiscal 2007 to Fiscal 2006

Net Sales

Consolidated net sales increased in Fiscal 2007 as compared to Fiscal 2006, primarily as a result of the inclusion of Crosstown Traders for the entire Fiscal 2007 period, as well as increased net sales from our Retail Stores segment and the inclusion of an additional week of operations in Fiscal 2007. Consolidated net sales for Fiscal 2006 include net sales from Crosstown Traders from the date of acquisition on June 2, 2005. The increase in consolidated Retail Stores segment net sales was a result of sales from new LANE BRYANT, LANE BRYANT OUTLET, and PETITE SOPHISTICATE OUTLET stores opened in Fiscal 2007, an increase in comparable retail store sales at our LANE BRYANT and CATHERINES brands, increases in E-commerce sales at all of our retail store brands, and the additional week of operations. The increases in consolidated net sales and consolidated Retail Stores segment net sales were below our plan for the period.

Total net sales for the LANE BRYANT brand increased as a result of sales from new stores (including LANE BRYANT OUTLET stores), an increase in comparable retail store sales, an increase in E-commerce sales, and inclusion of the additional week in Fiscal 2007. The increase in LANE BRYANT net sales was below our plan for the period. As compared to the prior-year period, a decrease in the average dollar sale per transaction was offset by an increase in the number of transactions per store, while traffic levels were relatively flat.

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Total net sales for the FASHION BUG brand increased slightly as a result of the inclusion of an additional week in Fiscal 2007 and an increase in store-related E-commerce sales, partially offset by slight decreases in both comparable retail store sales and the number of open stores. The increase in FASHION BUG net sales was below our plan for the period. The number of transactions per store decreased during the current-year period while the average dollar sale per transaction was flat as compared to the prior-year period.

Total net sales for the CATHERINES brand increased as a result of increases in comparable retail store sales and store-related E-commerce sales and inclusion of the additional week in Fiscal 2007. CATHERINES’ strong performance during Fiscal 2006 continued into Fiscal 2007, with significant increases in traffic levels, the number of transactions per store, and E-commerce sales as compared to the prior-year period. The increase in CATHERINES net sales was above our plan for the period.

Total net sales for the Direct-to-Consumer segment for Fiscal 2007 were below our sales plan for Fiscal 2007 as a result of reduced response rates from our core customers to our apparel catalog offerings. The disruption caused by the consolidation of our catalog merchandise operations into Tucson, Arizona during Fiscal 2007 had a greater-than-anticipated negative impact on apparel catalog sales. As a result, we reduced our catalog prospecting and circulation levels in order to reduce advertising expenditures during the period. The average order value for the current-year period was above plan, while actual circulation and customer response rates were below plan. Sales from our FIGI’S food and gift catalog performed on plan for the year.

We offer various loyalty card programs to our Retail Stores segment customers. Customers who join these programs are entitled to various benefits, including discounts and rebates on purchases during the membership period. Customers generally join these programs by paying an annual membership fee. We recognize revenue on these loyalty programs as sales over the life of the membership period based on when the customer earns the benefits and when the fee is no longer refundable. Costs we incur in connection with administering these programs are recognized in cost of goods sold as incurred. During Fiscal 2007 and Fiscal 2006, we recognized revenues of $19.1 million and $15.6 million, respectively, in connection with our loyalty card programs.

Cost of Goods Sold, Buying, Catalog, and Occupancy

The increase in consolidated cost of goods sold, buying, catalog, and occupancy expenses as a percentage of consolidated net sales from Fiscal 2006 to Fiscal 2007 was primarily a result of the inclusion of catalog costs for our Direct-to-Consumer segment for all of Fiscal 2007 as compared to eight months of Fiscal 2006 as a result of the acquisition of Crosstown Traders in June 2005. Consolidated cost of goods sold increased 0.7% as a percentage of consolidated net sales, while consolidated buying and occupancy expenses decreased 0.3% as a percentage of consolidated net sales.

For our Retail Stores segment, cost of goods sold, buying, and occupancy expenses as a percentage of net sales were 0.3% lower in Fiscal 2007 as compared to Fiscal 2006. Buying and occupancy expenses for the Retail Stores segment, as a percentage of net sales, were 0.1% lower in Fiscal 2007 as compared to Fiscal 2006. The Retail Stores segment experienced a modest improvement in merchandise margins while also benefiting from leverage on buying and occupancy costs from the increase in retail store net sales. Occupancy expenses for the Retail Stores segment for the first half of Fiscal 2007 included approximately $4.5 million of pre-opening expenses related to the LANE BRYANT OUTLET stores that began operations in July 2006.

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Cost of goods sold for our Direct-to-Consumer segment includes catalog advertising and fulfillment costs, which are significant expenses for catalog operations, and are therefore generally higher as a percentage of net sales than cost of goods sold for our Retail Stores segment. Catalog advertising and fulfillment costs as a percentage of net sales increased significantly in Fiscal 2007 as compared to Fiscal 2006, and were the primary cause of the increase in consolidated cost of goods sold. Conversely, the Direct-to-Consumer segment incurs lower levels of buying and occupancy costs, which resulted in a favorable impact on consolidated buying and occupancy expenses as a percentage of consolidated net sales in the current-year period.

Cost of goods sold includes merchandise costs net of discounts and allowances; freight; inventory shrinkage; shipping and handling costs associated with our Direct-to-Consumer and E-commerce businesses; and amortization of direct-response advertising costs for our Direct-to-Consumer business for periods subsequent to the Crosstown acquisition. Net merchandise costs and freight are capitalized as inventory costs.

Buying expenses include payroll, payroll-related costs, and operating expenses for our buying departments, warehouses, and fulfillment centers. Occupancy expenses include rent; real estate taxes; insurance; common area maintenance; utilities; maintenance; and depreciation for our stores, warehouse and fulfillment center facilities, and equipment. Buying, catalog, and occupancy costs are treated as period costs and are not capitalized as part of inventory.

Selling, General, and Administrative

Consolidated selling, general, and administrative expenses for Fiscal 2007 were flat as a percentage of consolidated net sales as compared to Fiscal 2006 , reflecting the benefit of our continued focus on controlling expenses and an improvement in the contribution from our proprietary credit card operations. Selling, general, and administrative expenses for the first half of Fiscal 2007 included approximately $3.3 million of pre-opening operating expenses related to the LANE BRYANT OUTLET stores that began operations in July 2006. The current-year period was also negatively impacted by a $3.6 million increase in stock-based compensation as compared to the prior-year period, and by inclusion of the Direct-to-Consumer segment for all of Fiscal 2007 as compared to eight months of Fiscal 2006 as a result of the acquisition of Crosstown Traders. Consolidated selling, general, and administrative expenses for the prior-year period included a gain of approximately $3.4 million from the purchase and subsequent securitization of our CATHERINES and Crosstown Traders credit card portfolios and a gain of $1.3 million recognized in connection with our expected share of the VISA/MasterCard antitrust settlement.

Interest Expense

Interest expense decreased by $3.2 million from Fiscal 2006 to Fiscal 2007 as a result of the repayment of borrowings under our revolving line of credit during Fiscal 2007. These borrowings, which were incurred in connection with the acquisition of Crosstown Traders, were fully repaid ahead of our plan.

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Income Tax Provision

The effective income tax rate was 34.4% for Fiscal 2007 as compared to 34.8% for Fiscal 2006. The Fiscal 2007 tax rate was favorably affected by non-taxable insurance proceeds that were included in pre-tax income for the period and by adjustments related to the final reconciliation of our Federal tax return. The Fiscal 2007 tax rate was unfavorably affected by the reconciliation of our state tax provision to our filed state tax returns. The Fiscal 2006 tax rate was unfavorably affected by $1.5 million of taxes, net of foreign tax credits, on the planned repatriation of profits from international operations (see “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES; Income Taxes” below), and was favorably affected by the reconciliation of our state tax provision to our filed state tax returns and by charitable contributions of inventories to hurricane relief efforts.

Comparison of Fiscal 2006 to Fiscal 2005

Net Sales

The increase in consolidated net sales in Fiscal 2006 as compared to Fiscal 2005 was primarily a result of sales from Crosstown Traders, Inc. (our Direct-to-Consumer segment), which we acquired on June 2, 2005, and increased sales across all brands in our Retail Stores segment. The increase in Retail Stores segment sales was primarily a result of an increase in comparable retail store sales at our LANE BRYANT and CATHERINES brands, increases in E-commerce sales at all of our retail store brands, and sales from new LANE BRYANT stores. We operated 2,236 stores in our Retail Stores segment as of January 28, 2006 as compared to 2,221 stores as of January 29, 2005. Additionally, Crosstown Traders operated three outlet stores during Fiscal 2006 that are included in our Direct-to-Consumer segment.

Total net sales for the LANE BRYANT brand increased as the result of a 4% increase in comparable retail store sales, a significant increase in E-commerce sales, and sales from new retail stores. The average dollar sale per transaction increased as a result of a combination of reduced levels of promotional activity and the addition in Fiscal 2006 of products, such as premium denim, fashion knits, and intimate apparel, with higher price points. Traffic levels in LANE BRYANT retail stores were slightly higher in Fiscal 2006 as compared to Fiscal 2005.

Total net sales for the FASHION BUG brand increased primarily as the result of an increase in E-commerce sales. FASHION BUG comparable retail store sales were flat, while reduced sales from closed stores offset sales from new stores. FASHION BUG experienced a higher average dollar sale per transaction that was offset by slightly reduced traffic levels. FASHION BUG commenced E-commerce operations in July 2004.

Total net sales for the CATHERINES brand increased primarily as the result of a 10% increase in comparable retail store sales and to a lesser extent as the result of an increase in E-commerce sales. CATHERINES comparable retail store sales benefited from improved customer response to the brand’s merchandise offerings, which resulted in significantly increased traffic levels during Fiscal 2006. The average dollar sale per transaction was relatively flat, as reduced levels of promotional activity were offset by a slight decrease in the number of units sold per transaction as compared to Fiscal 2005.

Net sales from Crosstown Traders (from the date of acquisition on June 2, 2005) were $298.9 million, or 11% of consolidated net sales for Fiscal 2006, and met our sales objectives for the period. Actual orders, catalog circulation, and response rates were consistent with plan.

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During Fiscal 2006 and Fiscal 2005, we recognized revenues of $15.6 million and $15.1 million, respectively, in connection with our loyalty card programs.

Cost of Goods Sold, Buying, Catalog, and Occupancy

The decrease in consolidated cost of goods sold, buying, catalog, and occupancy expenses as a percentage of consolidated net sales in Fiscal 2006 as compared to Fiscal 2005 reflected improved merchandise margins at our LANE BRYANT and CATHERINES brands and leverage on relatively fixed buying and occupancy costs. Fiscal 2006 included catalog costs from the date of our acquisition of Crosstown Traders in June 2005. Consolidated cost of goods sold increased 1.3% as a percentage of consolidated net sales, while consolidated buying and occupancy expenses decreased 2.2% as a percentage of consolidated net sales, primarily as a result of leverage from increased net sales on relatively fixed occupancy costs and lower levels of occupancy costs associated with our Direct-to-Consumer segment.

For our Retail Stores segment, cost of goods sold as a percentage of segment net sales was 1.4% lower in Fiscal 2006 as compared to Fiscal 2005, reflecting improved customer acceptance of our merchandise offerings and lower levels of promotional activity in Fiscal 2006. In addition, cost of goods sold for the Retail Stores segment for Fiscal 2006 included a net gain of $1.8 million from settlements of hurricane-related insurance claims for damaged inventory. Buying and occupancy expenses for the Retail Stores segment, as a percentage of segment net sales, were 0.6% lower in Fiscal 2006 as compared to Fiscal 2005.

Cost of goods sold for our Direct-to-Consumer segment includes catalog advertising and fulfillment costs, which are significant expenses for catalog operations. Therefore, cost of goods sold for the Direct-to-Consumer segment is generally higher as a percentage of net sales than cost of goods sold for our Retail Stores segment, resulting in the increase in consolidated cost of goods sold as a percentage of consolidated net sales. Conversely, the Direct-to-Consumer segment, which operated only three outlet stores in Fiscal 2006, incurs relatively lower levels of occupancy costs, which resulted in a favorable impact on consolidated buying and occupancy expenses as a percentage of consolidated net sales.

Cost of goods sold includes merchandise costs net of discounts and allowances; freight; inventory shrinkage; shipping and handling costs associated with our E-commerce business; and, in Fiscal 2006, shipping and handling costs and amortization of direct-response advertising costs for our Direct-to-Consumer businesses from the date of acquisition of Crosstown Traders. Net merchandise costs and freight are capitalized as inventory costs.

Buying expenses include payroll, payroll-related costs, and operating expenses for our buying departments, warehouses, and fulfillment centers. Occupancy expenses include rent, real estate taxes, insurance, common area maintenance, utilities, maintenance, and depreciation for our stores, warehouse and fulfillment center facilities, and equipment. Buying, catalog, and occupancy costs are treated as period costs and are not capitalized as part of inventory.

Selling, General, and Administrative

Consolidated selling, general, and administrative expenses for Fiscal 2006 were affected by higher expenses related to incentive-based employee compensation and employee benefit programs, additional investments in marketing programs, and the inclusion of Crosstown Traders in Fiscal 2006 (from the date of acquisition on June 2, 2005), which were offset by improvements in selling expenses. Selling expenses for Fiscal 2006 were 2.2% lower as a percentage of sales as compared to Fiscal 2005, while general and administrative expenses were 2.1% higher as a percentage of net sales.

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Selling expenses were positively affected by leverage on the increase in consolidated net sales and improved performance of our proprietary credit card operations, which benefited from the acquisition of the CATHERINES and Crosstown Traders credit card portfolios in Fiscal 2006, as well as favorable experience in credit losses during Fiscal 2006. Selling expenses for Fiscal 2006 included a gain of approximately $3.4 million from the purchase and subsequent securitization of our CATHERINES and Crosstown Traders credit card portfolios.

The increase in general and administrative expenses as a percentage of net sales primarily reflected relatively higher levels of general and administrative expenses in the Direct-to-Consumer segment. General and administrative expenses for Fiscal 2006 also included a gain of $1.3 million recognized in connection with the VISA/MasterCard antitrust settlement.

General and administrative expenses for Fiscal 2005 were affected by costs related to the purchase of life insurance policies for certain executives. We purchased these policies to replace split-dollar life insurance policies that were terminated as a result of the Sarbanes-Oxley Act of 2002, which prohibits loans to executive officers. As a result of terminating the split-dollar program, we received the cash surrender value of the policies. In return, we agreed to fund the premiums for replacement life insurance policies through bonuses to the affected executive officers, payable in five equal annual amounts on a grossed-up basis to account for taxes on the bonuses incurred by the affected executive officers.

Other Income

The increase in other income was primarily a result of a $3.7 million increase in interest income.

Income Tax Provision

The effective income tax rate was 34.8% in Fiscal 2006, as compared to 36.5% in Fiscal 2005. The tax rate for Fiscal 2006 was unfavorably affected by $1.5 million of taxes, net of foreign tax credits, on the repatriation of profits from international operations for which incremental United States income taxes had not been previously accrued (see “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES; Income Taxes” below), and was favorably affected by the reconciliation of our state tax provision to our filed state tax returns and by charitable contributions of inventories to hurricane Katrina relief efforts.

Comparison of Fourth Quarter 2007 to Fourth Quarter 2006

Net Sales

Consolidated net sales increased in the Fiscal 2007 fourth quarter as compared to the Fiscal 2006 fourth quarter, primarily as a result of an increase in net sales from our Retail Stores segment and the inclusion of an extra week in the Fiscal 2007 fourth quarter, partially offset by a decrease in net sales from our Direct-to-Consumer segment. The increase in consolidated Retail Stores segment net sales was a result of sales from new LANE BRYANT, LANE BRYANT OUTLET, and PETITE SOPHISTICATE OUTLET stores opened in Fiscal 2007, an increase in comparable retail store sales at our CATHERINES brand, and increases in E-commerce sales at all of our retail store brands. The increases in consolidated net sales and consolidated Retail Stores segment net sales were below our plan for the period.

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Total net sales for the LANE BRYANT brand increased primarily as a result of sales from new stores (including LANE BRYANT OUTLET stores), an increase in E-commerce sales, and inclusion of the additional week in the Fiscal 2007 fourth quarter, partially offset by a decrease in comparable store sales. Compared to a strong performance in the Fiscal 2006 fourth quarter, LANE BRYANT experienced decreases in both the average dollar sale per transaction and traffic levels in the Fiscal 2007 fourth quarter. LANE BRYANT experienced a sharp downtrend in sales of premium denim products in response to changing fashion trends in the Fiscal 2007 fourth quarter as compared to the Fiscal 2006 fourth quarter. The increase in LANE BRYANT net sales was below our plan for the period.

Total net sales for the FASHION BUG brand increased as a result of inclusion of the additional week in Fiscal 2007 and an increase in store-related E-commerce sales, partially offset by a decrease in retail store sales as a result of store closures and a slight decrease in comparable store sales. The increase in FASHION BUG net sales was below our plan for the period. Store traffic levels and the average dollar sale per transaction decreased slightly as compared to the prior-year quarter.

Total net sales for the CATHERINES brand increased as a result of increases in comparable retail store sales and store-related E-commerce sales and the inclusion of an additional week in Fiscal 2007. The increase in CATHERINES net sales was in line with our plan for a low-single-digit increase for the period. Traffic levels decreased slightly as compared to the prior-year quarter, while the average dollar sale per transaction increased as compared to the prior-year quarter.

Total net sales for the Direct-to-Consumer segment decreased as compared to the prior-year quarter as a result of reduced response rates from our core customers to our apparel catalog offerings, as discussed in the full-year comparison above. A significant amount of fourth quarter sales were derived from our FIGI’S catalog, which markets food and specialty gift products and does a substantial portion of its business during the December holiday season. Sales from the FIGI’S catalog were $81.2 million in the Fiscal 2007 fourth quarter, as compared to $82.1 million in the Fiscal 2006 fourth quarter. Sales from the FIGI’S catalog for the Fiscal 2007 fourth quarter were in line with our sales plan, while sales from our apparel catalogs were below our sales plan for the reasons discussed in the full-year comparison above.

During the Fiscal 2007 fourth quarter and Fiscal 2006 fourth quarter, we recognized revenues of $5.1 million and $4.3 million, respectively, in connection with our loyalty card programs.

Cost of Goods Sold, Buying, Catalog, and Occupancy

The decrease in consolidated cost of goods sold, buying, catalog, and occupancy expenses as a percentage of consolidated net sales from the Fiscal 2006 fourth quarter to the Fiscal 2007 fourth quarter was primarily as a result of improved merchandise margins for our Retail Stores segment. Consolidated cost of goods sold decreased 1.0% as a percentage of consolidated net sales, while consolidated buying and occupancy expenses were flat as a percentage of consolidated net sales.

For our Retail Stores segment, cost of goods sold, buying, and occupancy expenses as a percentage of net sales decreased 1.8% in the Fiscal 2007 fourth quarter as compared to the Fiscal 2006 fourth quarter. The decrease resulted from a combination of higher merchandise margins in all of our brands despite below-plan sales, and lower buying and occupancy expenses as a percentage of sales as a result of leverage from the increase in net sales. The Fiscal 2007 fourth quarter also included the results of operations of our outlet business, which was profitable during the quarter. Buying and occupancy expenses for the Retail Stores segment, as a percentage of net sales, were 0.9% lower in the Fiscal 2007 fourth quarter as compared to the Fiscal 2006 fourth quarter.

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For our Direct-to-Consumer segment, cost of goods sold, buying, catalog, and occupancy expenses as a percentage of sales were 1.8% higher in the Fiscal 2007 fourth quarter as compared to the Fiscal 2006 fourth quarter. The increase was primarily a result of the impact of higher catalog advertising and fulfillment costs, which were partially offset by improved merchandise margins. Cost of goods sold for our Direct-to-Consumer segment includes catalog advertising and fulfillment costs, which are significant expenses for catalog operations, and are therefore generally higher as a percentage of net sales than cost of goods sold for our Retail Stores segment. Conversely, the Direct-to-Consumer segment incurs lower levels of buying and occupancy costs as compared to the Retail Stores segment.

Selling, General, and Administrative

Consolidated selling, general, and administrative expenses for the fourth quarter of Fiscal 2007, as a percentage of consolidated net sales, increased 0.2% as compared to the fourth quarter of Fiscal 2006, primarily as a result of a lack of leverage from reduced sales in our Direct-to-Consumer segment. General and administrative expenses for the Fiscal 2007 fourth quarter were negatively impacted by a $0.6 million increase in stock-based compensation as compared to the prior-year period.

Income Tax Provision

The effective income tax rate was 29.8% for the Fiscal 2007 fourth quarter as compared to 23.9% for the Fiscal 2006 fourth quarter. The tax rates for the Fiscal 2007 and Fiscal 2006 fourth quarters were affected by the reconciliation of our state tax provision to our filed state tax returns, which we normally complete during the fourth quarter. The Fiscal 2006 fourth quarter tax rate was also favorably affected by charitable contributions of inventories to hurricane relief efforts.

FINANCIAL CONDITION

Liquidity and Capital Resources

Our primary sources of working capital are cash flow from operations, our proprietary credit card receivables securitization agreements, our investment portfolio, and our revolving credit facility described below. The following table highlights certain information related to our liquidity and capital resources:

	Fiscal			Fiscal			Fiscal
(Dollars in thousands)	2007			2006			2005
Cash and cash equivalents	$	143,838		$	130,132		$	273,049
Available-for-sale securities		1,997			20,150			0
Cash provided by operating activities		186,954			164,812			165,940
Working capital		443,101			344,229			413,989
Current ratio		2.1			1.8			2.4
Long-term debt to equity ratio		19.1	%		23.6	%		30.0	%

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Cash Provided by Operating Activities

As of February 3, 2007, we held $145.8 million in cash, cash equivalents, and available-for-sale securities. As is consistent with our industry, our cash balances are seasonal in nature. During Fiscal 2007, we used our cash balances to build our inventory levels in connection with new store openings (particularly in our LANE BRYANT, LANE BRYANT OUTLET, and PETITE SOPHISTICATE OUTLET stores), as well as in preparation for our holiday sales. Excluding inventory purchased for our outlet business, inventories increased 10% year-over-year. On a same-store basis, inventories increased 15% as compared to the end of Fiscal 2006 as a result of increases in Spring and transitional merchandise to accommodate an earlier Easter.

In Fiscal 2007, net cash provided by operating activities was $187.0 million, as compared to $164.8 million in Fiscal 2006 and $165.9 million in Fiscal 2005. The cash provided by operating activities in Fiscal 2007 was primarily attributable to an increase in net income before depreciation and amortization, an increase in deferred rent and landlord allowances due to an increase in retail store openings, improved payment terms from certain of our vendors, and an increase in accrued expenses and other current liabilities. These factors were offset primarily by increased investments in merchandise inventories (as discussed above), an increase in deferred advertising related to our Direct-to-Consumer segment, and the timing of certain prepaid expenses, particularly prepaid income taxes.

Net cash provided by operating activities in Fiscal 2006 was primarily attributable to an increase in net income before depreciation and amortization; an increase in deferred rent and landlord allowances due to an increase in retail store openings; an increase in accrued expenses due to the increase in allowance-related accruals; and the timing of expenditures. These factors were offset primarily by increased investments in merchandise inventories, accounts receivable, and deferred advertising related to our Direct-to-Consumer segment. Our merchandise inventories increased in Fiscal 2006 in order to support the increase in sales in our Retail Stores segment and as a result of our acquisition on June 2, 2005 of Crosstown Traders. The increases in accounts receivable and deferred advertising relate to our Direct-to-Consumer segment and result from the acquisition of Crosstown Traders.

As a result of the adoption of SFAS No. 123R in Fiscal 2007 (see “CRITICAL ACCOUNTING POLICIES” above), we are reporting certain tax benefits related to stock-based compensation as cash provided by financing activities in Fiscal 2007 instead of as cash provided by operating activities as permitted in prior-year periods. This change in reporting classification had a $5.1 million negative impact on cash provided by operating activities for Fiscal 2007, which was offset by a corresponding positive impact on cash used by financing activities.

Capital Expenditures

Our gross capital expenditures, excluding construction allowances received from landlords, were $133.2 million, $103.8 million, and $60.6 million in Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively. Construction allowances received from landlords were $26.1 million, $22.6 million, and $9.3 million in Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively. Total gross investments in property, equipment, and leasehold improvements, including cash expenditures and capital lease financing and excluding construction allowances, were $133.2 million, $107.7 million, and $66.0 million in Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively. Our capital expenditures in each year were primarily for the construction, remodeling, and fixturing of new and existing retail stores, corporate systems technology, and improvements to our corporate and brand home offices and distribution centers. Capital expenditures for Fiscal 2006 also included the relocation of our LANE BRYANT home office from a 130,000 square-foot leased facility in Reynoldsburg, Ohio to a new 135,000 square-foot leased facility in Columbus, Ohio.

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During Fiscal 2006, we acquired $3.9 million of data warehousing and information technology equipment under capital leases with initial terms ranging from 36 months to 48 months and containing a bargain-purchase or fair-market-value-purchase option. Pursuant to a program to replace point-of-sale (“POS”) equipment in our stores, we acquired $3.9 million of POS equipment under capital leases in Fiscal 2005. We also acquired $1.5 million of material handling systems and related equipment and software for our White Marsh, Maryland distribution center under capital leases in Fiscal 2005. These capital leases generally have an initial lease term of 60 months and contain a bargain purchase option. During Fiscal 2005, we entered into an agreement to lease our Memphis, Tennessee distribution center facility to a third party for a three-year period. In December 2004, we refinanced certain material handling equipment at our Greencastle distribution center. The lease obligation of $5.0 million is payable over a term of 48 months at an interest rate of 6.86% and contains a bargain purchase option.

During Fiscal 2008, we plan to continue our new store opening plan, primarily for our LANE BRYANT brand, which includes new side-by-side stores and outlet stores. We also plan to continue to build our infrastructure for the launch of new catalog offerings, including the launch of the LANE BRYANT catalog in late Fiscal 2008, as well as further expansion of our E-commerce operations. We plan to open approximately 95-107 new stores in Fiscal 2008, and anticipate that our Fiscal 2008 gross capital expenditures will be approximately $160-$165 million before construction allowances received from landlords. We expect that approximately 80% of our Fiscal 2008 capital expenditures will support store development, including openings, relocations, and store improvements, with the remainder of the expenditures to be primarily for improvements to our information technology, distribution centers, and corporate infrastructure. We expect to finance these capital expenditures principally through internally-generated funds.

Dividends

We have not paid any dividends since 1995, and we do not expect to declare or pay any dividends on our common stock in the foreseeable future. The payment of future dividends is within the discretion of our Board of Directors and will depend upon our future earnings, if any, our capital requirements, our financial condition, and other relevant factors. Our existing revolving credit facility allows the payment of dividends on our common stock subject to maintaining a minimum level of Excess Availability (as defined in the facility agreement) for 30 days before and immediately after the payment of such dividends.

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Debt, Lease, and Purchase Commitments

At February 3, 2007, our commitments for future payments under our long-term debt obligations, minimum lease payments under our capital leases and operating leases, and payments due under our revolving credit facility, letters of credit, long-term deferred compensation plans, and purchase obligations were as follows:

	Payments Due by Period
					One to		Three		More
			Less Than		Three		To Five		than Five
(In millions)	Total		One Year		Years		Years		Years
Long-term debt, including current portion(1)	$	187.6	$	4.7	$	9.2	$	13.3	$	160.4
Capital leases		13.6		8.6		5.0		0.0		0.0
Operating leases(2)		904.2		221.2		328.7		191.8		162.5
Revolving credit facility(3)		0.0		0.0		0.0		0.0		0.0
Letters of credit(3)		6.3		6.3		0.0		0.0		0.0
Stand-by letters of credit(3)		11.9		11.9		0.0		0.0		0.0
Long-term deferred compensation(4)		3.6		0.5		0.6		0.1		2.4
Purchase commitments(5)		634.3		634.3		0.0		0.0		0.0
Total	$	1,761.5	$	887.5	$	343.5	$	205.2	$	325.3
____________________
(1) Amounts represent the expected cash payments (including interest) of our long-term debt (including our convertible debt through maturity and excluding capital leases) and do not include any fair value adjustments, bond premiums, discounts, or revolving credit facilities.
(2)Commitments under operating leases include $14.3 million payable under the LANE BRYANT master sublease with Limited Brands, which we have guaranteed.
(3)We currently have a $375 million revolving credit facility that expires on July 28, 2010, which provides for cash borrowings and the ability to issue up to $300 million of letters of credit. At February 3, 2007, there were no borrowings outstanding under this facility.
(4) Long term compensation consists of our non-qualified deferred compensation plan and supplemental retirement plan, which are included in “Deferred taxes and other non-current liabilities” on our consolidated balance sheets. We have developed estimates of projected payment obligations for participant planned in-service distributions of the deferred compensation plan liability as of February 3, 2007. We have excluded $36.0 million of retirement/termination benefit distribution obligations as of February 3, 2007 from the above estimates. This amount has been excluded because the value of the obligation and the timing of payments may vary annually due to changes in the fair value of the plan assets and/or assumptions for participant retirement/termination.
(5) Purchase commitments include agreements to purchase goods or services in the ordinary course of business.

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Off-Balance-Sheet Arrangements

Our FASHION BUG, CATHERINES, and PETITE SOPHISTICATE proprietary credit card receivables are originated by Spirit of America National Bank (the “Bank”), our wholly-owned credit card bank, which transfers its interest in the receivables to the Charming Shoppes Master Trust (the “Trust”) through a special-purpose entity. The Trust is a separate and distinct unconsolidated qualified special-purpose entity (“QSPE”). Through Fiscal 2007, our Crosstown Traders catalog proprietary credit card receivables, which we securitized subsequent to our acquisition of Crosstown Traders, were originated in a non-bank program by Crosstown Traders. Crosstown Traders transferred its interest in the receivables to Catalog Receivables LLC, a separate and distinct unconsolidated QSPE, through a special-purpose entity. On February 5, 2007, the Bank acquired the account relationships of the Crosstown Traders catalog proprietary credit cards and all subsequent new receivables are originations of the Bank. These receivables continue to be sold and securitized through the Crosstown securitization program. This acquisition did not cause a change in the securitization entities used by the Crosstown Traders proprietary credit card program. The QSPEs can sell interests in these receivables on a revolving basis for a specified term. At the end of the revolving period, an amortization period begins during which the QSPEs make principal payments to the parties that have entered into the securitization agreement with the QSPEs. The assets of the QSPEs (including the receivables) are isolated for purposes of the securitization program.

As of February 3, 2007, we had the following securitization facilities outstanding:

(Dollars in millions)	Series 1999-2	Series 2002-1	Series 2004	Series 2004-1	2005-RPA(1)
Date of facility	May 1999	November 2002	January 2004	August 2004	May 2005
Type of facility	Conduit	Term	Conduit	Term	Conduit
Maximum funding	$50.0	$100.0	$50.0	$180.0	$55.0
Funding as of February 3, 2007	$32.0	$100.0	$0.0	$180.0	$44.5
First scheduled principal payment	Not applicable	August 2007	Not applicable	April 2009	Not applicable
Expected final principal payment	Not applicable(2)	May 2008	Not applicable(2)	March 2010	Not applicable(2)
Renewal	Annual	Not applicable	Annual	Not applicable	Annual
____________________
(1)Receivables Purchase Agreement (for the Crosstown Traders catalog proprietary credit card receivables program).
(2)Series 1999-2 and Series 2004 have scheduled final payment dates that occur in the twelfth month following the month in which the series begins amortizing. These series and 2005-RPA generally begin amortizing 364 days after the start of the purchase commitment by the series purchaser currently in effect.

On August 5, 2004, the Trust issued $180.0 million of five-year asset-backed certificates (“Series 2004-1”) in a private placement under Rule 144A. Of the $180.0 million of certificates issued, $161.1 million were sold to investors, and we held $18.9 million as a retained interest. The certificates pay interest to investors on a floating-rate basis tied to one-month LIBOR. Concurrently, the Trust entered into a series of fixed-rate interest rate swap agreements with respect to the $161.1 million of certificates sold to investors. The blended weighted-average interest rate on the hedged certificates is 4.90%. The Trust used $61.5 million of the proceeds to pay down other securitization series and placed the remaining proceeds of $118.5 million into a pre-funding cash account. During Fiscal 2006, the Trust used funds from the Series 2004-1 securitization facilities, including the proceeds from the pre-funding cash account, to provide financing for additional receivables, including the $54.6 million acquisition of the CATHERINES proprietary credit card portfolio in March 2005 (see below).

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During Fiscal 2006, Catalog Receivables LLC closed on a dedicated conduit credit card securitization facility that provides funding of up to $55.0 million on a discounted basis for a term of one year, subject to an annual renewal. As of February 3, 2007, we had $44.5 million of credit card receivables funded under this facility. We renewed this facility during Fiscal 2007 on its renewal date, and expect to renew the facility during Fiscal 2008 on its renewal date.

As these credit card receivables securitizations reach maturity, we plan to obtain funding for our proprietary credit card programs through additional securitizations. However, we can give no assurance that we will be successful in securing financing through either replacement securitizations or other sources of replacement financing.

We securitized $619.6 million and $638.6 million of credit card receivables in Fiscal 2007 and Fiscal 2006, respectively, and had $363.7 million of securitized credit card receivables outstanding as of February 3, 2007. We held certificates and retained interests in our securitizations of $60.6 million as of the end of Fiscal 2007, which were generally subordinated in right of payment to certificates issued by the QSPEs to third-party investors. Our obligation to repurchase receivables sold to the QSPEs is limited to those receivables that, at the time of their transfer, fail to meet the QSPE’s eligibility standards under normal representations and warranties. To date, our repurchases of receivables pursuant to this obligation have been insignificant.

Charming Shoppes Receivables Corp. (“CSRC”), Charming Shoppes Seller, Inc., and Catalog Seller LLC, our consolidated wholly owned indirect subsidiaries, are separate special-purpose entities (“SPEs”) created for the securitization program. As of February 3, 2007, our investment in asset-backed securities included $11.0 million of QSPE certificates, an I/O strip of $15.9 million, and other retained interests of $33.7 million. These assets are first and foremost available to satisfy the claims of the respective creditors of these separate corporate entities, including certain claims of investors in the QSPEs. Additionally, with respect to certain Trust Certificates, if either the Trust or Charming Shoppes, Inc. fails to meet certain financial performance standards, the Trust would be obligated to reallocate to third-party investors holding certain certificates issued by the Trust, collections in an amount up to $9.5 million that otherwise would be available to CSRC. The result of this reallocation would be to increase CSRC’s retained interest in the Trust by the same amount. Subsequent to such a transfer occurring, and upon certain conditions being met, these same investors would be required to repurchase these interests. As of February 3, 2007, we were in compliance with these performance standards and, as a result, there were no reallocated collections.

In addition to the above, we could be affected by certain other events that would cause the QSPEs to hold proceeds of receivables, which would otherwise be available to be paid to us with respect to our subordinated interests, within the QSPEs as additional enhancement. For example, if we fail or the QSPEs fail to meet certain financial performance standards, a credit enhancement condition would occur and the QSPEs would be required to retain amounts otherwise payable to us. In addition, the failure to satisfy certain financial performance standards could further cause the QSPEs to stop using collections on QSPE assets to purchase new receivables, and would require such collections to be used to repay investors on a prescribed basis, as provided in the securitization agreements. If this were to occur, it could result in our having insufficient liquidity; however, we believe we would have sufficient notice to seek alternative forms of financing through other third-party providers. As of February 3, 2007, the QSPEs were in compliance with all applicable financial performance standards. Amounts placed into enhancement accounts, if any, that are not required for payment to other certificate holders will be available to us at the termination of the securitization series. We have no obligation to directly fund the enhancement account of the QSPEs, other than for breaches of customary representations, warranties, and covenants and for customary indemnities. These representations, warranties, covenants, and indemnities do not protect the QSPEs or investors in the QSPEs against credit-related losses on the receivables. The providers of the credit enhancements and QSPE investors have no other recourse to us.

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These securitization agreements are intended to improve our overall liquidity by providing sources of funding for our proprietary credit card receivables. The agreements provide that we will continue to service the credit card receivables and control credit policies. This control allows us, absent certain adverse events, to fund continued credit card receivable growth and to provide the appropriate customer service and collection activities. Accordingly, our relationship with our credit card customers is not affected by these agreements. See “CRITICAL ACCOUNTING POLICIES; Asset Securitizations”above, “MARKET RISK” below, and “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 16. ASSET SECURITIZATION” below for additional discussion of our asset securitization facility.

We have a non-recourse agreement under which a third party provides a proprietary credit card sales accounts receivable funding facility for our LANE BRYANT retail and outlet stores. The facility expires in October 2007. Under this agreement, the third party reimburses us daily for sales generated by LANE BRYANT’s proprietary credit card accounts. Upon termination of this agreement, we have the right to purchase the receivables allocated to the LANE BRYANT stores under such agreement at book value from the third party. We currently plan to exercise our option to purchase the LANE BRYANT receivables upon the termination of the agreement. We estimate that the apportionment of receivables allocated to the accounts with respect to the LANE BRYANT retail stores will be approximately $200 million at termination. We anticipate that substantially all proceeds required for this purchase will be funded through the issuance of new securitization series through our off-balance-sheet securitization facilities.

We also had a similar non-recourse agreement for our CATHERINES brand, which was scheduled to expire in March 2005. In accordance with the terms of the Merchant Services Agreement pursuant to which the CATHERINES proprietary credit cards were issued, we exercised our option to purchase the CATHERINES portfolio upon the expiration of the agreement. In March 2005, Spirit of America National Bank purchased the CATHERINES credit card portfolio for a final purchase price of $54.6 million. The purchase was funded through our securitization facilities, including a portion of the proceeds from the sale of certificates under our Series 2004-1 securitization facility.

We lease substantially all of our operating stores and certain administrative facilities under non-cancelable operating lease agreements. Additional details on these leases, including minimum lease commitments, are included in “Liquidity and Capital Resources” above, and in “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 17. LEASES” below.

Revolving Credit Facility

Our revolving credit facility agreement provides for a revolving credit facility with a maximum availability of $375 million, subject to certain limitations as defined in the facility agreement, and provides that up to $300 million of the facility may be used for letters of credit. In addition, we may request, subject to compliance with certain conditions, additional revolving credit commitments up to an aggregate maximum availability of $500 million. The agreement expires on July 28, 2010. As of February 3, 2007, we had an aggregate total of $2.9 million of unamortized deferred debt acquisition costs related to the facility, which we are amortizing on a straight-line basis over the life of the facility as interest expense.

53

The facility includes provisions for customary representations and warranties and affirmative covenants, and includes customary negative covenants providing for certain limitations on, among other things, sales of assets; indebtedness; loans, advances and investments; acquisitions; guarantees; and dividends and redemptions. Under certain circumstances involving a decrease in Excess Availability (as defined in the facility agreement), we may be required to maintain a minimum Fixed Charge Coverage Ratio (as defined in the facility agreement). The facility is secured by our general assets, except for (i) assets related to our credit card securitization facilities, (ii) real property, (iii) equipment, (iv) the assets of our non-U.S. subsidiaries, and (v) certain other assets. As of February 3, 2007, we were not in violation of any of the covenants included in the facility.

The interest rate on borrowings under the facility is Prime for Prime Rate Loans, and LIBOR as adjusted for the Reserve Percentage (as defined in the facility agreement) plus 1.0% to 1.5% per annum for Eurodollar Rate Loans. The applicable rate is determined monthly, based on our average Excess Availability (as defined in the facility agreement). As of February 3, 2007, the applicable rates on borrowings under the facility were 8.25% for Prime Rate Loans and 6.32% (LIBOR plus 1%) for Eurodollar Rate Loans. During Fiscal 2007, we repaid $50.0 million of borrowings outstanding under the facility that were originally incurred in connection with the acquisition of Crosstown Traders. There were no borrowings outstanding under the facility as of February 3, 2007.

Long-term Debt and Equity Financing

Our $150.0 million 4.75% Senior Convertible Notes (the “Senior Notes”) mature on June 1, 2012 and are convertible at any time prior to maturity into shares of our common stock at a conversion price of $9.88 per share, subject to adjustment upon certain events. The Senior Notes are redeemable at our option, in whole or in part, at any time on or after June 4, 2007, at declining redemption prices, starting at 102.38% of principal and decreasing to 100.48% of principal on or after June 1, 2011. Under certain circumstances involving a change in control of the Company, holders of the Senior Notes may require us to repurchase all or a portion of the Senior Notes at 100% of the principal amount plus accrued and unpaid interest, if any. Also, under such circumstances we have the option of paying the repurchase price in shares of our common stock, valued at 95% of the average of the closing prices of the common stock for a five-day trading period immediately before and including the third trading day preceding the repurchase date. There is no sinking fund for the Senior Notes.

During Fiscal 2006, we repaid a variable rate mortgage note, due March 2006, for $5.4 million plus accrued interest.

In October 2004, we borrowed $13.0 million under a 6.07% mortgage note (the “Note”). Repayment of the Note is based on a 15-year amortization schedule, with 119 monthly installments of principal and interest of $110 thousand and a balloon payment of $5.8 million at the end of 10 years. The Note may be prepaid after 2-1/2 years upon the payment of a premium, or, upon certain other events, without the payment of a premium. The Note is secured by a mortgage on real property at our distribution center in Greencastle, Indiana and an Assignment of Lease and Rents and Security Agreement related to the Greencastle facility. The proceeds from this borrowing were used to repay the scheduled maturities of other debt and for other general corporate purposes.

During Fiscal 2007 and Fiscal 2006, we received $8.8 million and $10.1 million, respectively, of cash for approximately 1.8 million shares and 1.9 million shares, respectively, of our common stock that were issued under our stock-based employee compensation plans and our employee stock purchase plan.

54

As of February 3, 2007, under authority granted by our Board of Directors during prior fiscal years, we are authorized to repurchase approximately 5 million shares of our common stock. Our revolving credit facility allows the repurchase of our common stock subject to maintaining a minimum level of Excess Availability (as defined in the facility agreement) for 30 days before and immediately after such repurchase. As conditions may allow, we may from time to time acquire additional shares of our common stock under these programs. Such shares, if purchased, would be held as treasury shares. No shares were acquired under these programs during Fiscal 2007, Fiscal 2006, or Fiscal 2005. The repurchase programs have no expiration date.

Additional information regarding our short-term and long-term borrowings is included in “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT” below.

In Fiscal 2008, we plan to continue to utilize our combined financial resources to fund our inventory and inventory-related purchases, catalog advertising and marketing initiatives, and to support current store development and infrastructure strategies. We believe our cash on-hand, securitization facilities, and borrowing facilities will provide adequate liquidity for our business operations and growth opportunities during Fiscal 2008. However, our liquidity is affected by many factors, including some that are based on normal operations and some that are related to our industry and the economy. We may seek, as we believe appropriate, additional debt or equity financing to provide capital for corporate purposes. We may also seek additional debt or equity financing for the refinancing or redemption of existing debt or to fund strategic business opportunities. At this time, we cannot determine the timing or amount of such potential capital requirements, which will depend on a number of factors, including demand for our merchandise, industry conditions, competitive factors, the condition of financial markets, and the nature and size of strategic business opportunities that we may elect to pursue.

MARKET RISK

We manage our FASHION BUG, CATHERINES, PETITE SOPHISTICATE, and Crosstown Traders proprietary credit card programs through various operating entities that we own. The primary activity of these entities is to service the balances of our proprietary credit card receivables portfolio that we sell under credit card securitization facilities. Under the securitization facilities, we can be exposed to fluctuations in interest rates to the extent that the interest rates charged to our customers vary from the rates paid on certificates issued by the QSPEs.

The finance charges on most of our proprietary credit card accounts are billed using a floating-rate index (the Prime Rate), subject to a floor and limited by legal maximums. The certificates issued under the securitization facilities include both floating- and fixed-interest-rate certificates. The floating-rate certificates are based on an index of either one-month LIBOR or the commercial paper rate, depending on the issuance. Consequently, we have basis risk exposure with respect to credit cards billed using a floating-rate index to the extent that the movement of the floating-rate index on the certificates varies from the movement of the Prime Rate. Additionally, as of February 3, 2007, the floating finance charge rate on the floating-rate indexed credit cards was below the contractual floor rate, thus exposing us to interest-rate risk with respect to these credit cards as well as the fixed-rate credit cards for the portion of certificates that are funded at floating rates. However, as a result of the Trust entering into a series of fixed-rate interest rate swap agreements with respect to the $161.1 million of Series 2004-1 certificates, and $89.5 million of Series 2002-1 being issued at fixed rates (see “Off-Balance-Sheet Financing” above), we have significantly reduced the exposure of floating-rate certificates outstanding to interest-rate risk. To the extent that short-term interest rates were to increase by one percentage point by the end of Fiscal 2008, an increase of approximately $522 thousand in selling, general, and administrative expenses would result.

55

As of February 3, 2007, there were no borrowings outstanding under our revolving credit facility. Future borrowings made under the facility, if any, could be exposed to variable interest rates.

We are not subject to material foreign exchange risk, as our foreign transactions are primarily U.S. Dollar-denominated and our foreign operations do not constitute a material part of our business.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

See “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES; Impact of Recent Accounting Pronouncements” below.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - MARKET RISK” above.

Item 8. Financial Statements and Supplementary Data

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (ii) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Further, because of changes in conditions or the degree of compliance with policies and procedures, the effectiveness of internal control over financial reporting may vary over time.

Management assessed the effectiveness of our internal control over financial reporting as of February 3, 2007. In making this assessment, our management used the criteria set forth in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). Based on this assessment, management concluded that our internal control over financial reporting was effective as of February 3, 2007.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on management’s assessment of our internal control over financial reporting, which appears on page 57 - 58.

56

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL

CONTROL OVER FINANCIAL REPORTING

Stockholders and Board of Directors

Charming Shoppes, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Charming Shoppes, Inc. and subsidiaries maintained effective internal control over financial reporting as of February 3, 2007, based on criteria established in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). Charming Shoppes, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Charming Shoppes, Inc. and subsidiaries maintained effective internal control over financial reporting as of February 3, 2007 is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Charming Shoppes, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of February 3, 2007, based on the COSO criteria.

57

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Charming Shoppes, Inc. and subsidiaries as of February 3, 2007 and January 28, 2006, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three fiscal years in the period ended February 3, 2007, and our report dated April 3, 2007 expressed an unqualified opinion thereon.

/S/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania

April 3, 2007

58

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Charming Shoppes, Inc.

We have audited the accompanying consolidated balance sheets of Charming Shoppes, Inc. and subsidiaries as of February 3, 2007 and January 28, 2006, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three fiscal years in the period ended February 3, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Charming Shoppes, Inc. and subsidiaries at February 3, 2007 and January 28, 2006, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended February 3, 2007, in conformity with United States generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Charming Shoppes, Inc. and subsidiaries’ internal control over financial reporting as of February 3, 2007, based on criteria established in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 3, 2007 expressed an unqualified opinion thereon.

/S/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania

April 3, 2007

59

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	February 3,			January 28,
(In thousands, except share amounts)	2007			2006
ASSETS
Current assets
Cash and cash equivalents	$	143,838		$	130,132
Available-for-sale securities		1,997			20,150
Accounts receivable, net of allowances of $5,083 and $6,588		33,366			38,603
Investment in asset-backed securities		60,643			66,828
Merchandise inventories		429,433			376,409
Deferred advertising		21,707			20,591
Deferred taxes		4,469			19,436
Prepayments and other		145,385			89,245
Total current assets		840,838			761,394
Property, equipment, and leasehold improvements - at cost		996,430			896,835
Less accumulated depreciation and amortization		573,984			525,882
Net property, equipment, and leasehold improvements		422,446			370,953
Trademarks and other intangible assets		249,490			250,074
Goodwill		153,370			154,553
Other assets		44,798			35,609
Total assets	$	1,710,942		$	1,572,583
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	0		$	50,000
Accounts payable		178,629			133,236
Accrued expenses		208,221			217,421
Income taxes payable		0			1,743
Current portion - long-term debt		10,887			14,765
Total current liabilities		397,737			417,165
Deferred taxes		57,340			50,634
Other non-current liabilities		127,203			98,457
Long-term debt		181,124			191,979
Stockholders’ equity
Common stock $.10 par value
Authorized - 300,000,000 shares
Issued - 135,762,531 shares and 133,954,852 shares		13,576			13,395
Additional paid-in capital		285,159			261,077
Treasury stock at cost - 12,265,993 shares		(84,136	)		(84,136	)
Accumulated other comprehensive income (loss)		1			(3	)
Retained earnings		732,938			624,015
Total stockholders’ equity		947,538			814,348
Total liabilities and stockholders’ equity	$	1,710,942		$	1,572,583
Certain prior-year amounts have been reclassified to conform to the current-year presentation.
See Notes to Consolidated Financial Statements.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

	Year Ended
	February 3,			January 28,			January 29,
(In thousands, except per share amounts)	2007			2006			2005
Net sales	$	3,067,517		$	2,755,725		$	2,334,736
Cost of goods sold, buying, catalog, and occupancy expenses		2,141,884			1,914,347			1,642,650
Selling, general, and administrative expenses		753,109			678,753			577,301
Expenses related to cost reduction plan		0			0			605
Total operating expenses		2,894,993			2,593,100			2,220,556
Income from operations		172,524			162,625			114,180
Other income		8,345			7,687			3,098
Interest expense		(14,746	)		(17,911	)		(15,610	)
Income before income taxes		166,123			152,401			101,668
Income tax provision		57,200			53,010			37,142
Net income		108,923			99,391			64,526
Other comprehensive income/(loss), net of tax:
Unrealized gains/(losses) on available-for-sale securities, net of income tax
(provision)/benefit of $(3) in 2007, $3 in 2006, and $(92) in 2005		4			(3	)		113
Reclassification of realized losses on available-for-sale securities
included in net income, net of income tax benefit of $61 in 2005		0			0			124
Reclassification of amortization of deferred loss on termination of derivative,
net of income tax benefit of $68 in 2005		0			0			128
Total other comprehensive income/(loss)		4			(3	)		365
Comprehensive income	$	108,927		$	99,388		$	64,891
Basic net income per share	$	.89		$	.83		$	.56
Diluted net income per share	$	.81		$	.76		$	.52
Certain prior-year amounts have been reclassified to conform to the current-year presentation.
See Notes to Consolidated Financial Statements.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

										Accumulated
							Additional			Other
	Common Stock						Paid-in			Comprehensive			Retained
(Dollars in thousands)	Shares			Amount			Capital			Income (Loss)			Earnings
Balance, January 31, 2004		125,526,573		$	12,553		$	199,259		$	(365	)	$	460,098
Issued to employees, net		411,411			41			382
Exercise of stock options		6,249,634			625			33,062
Shares withheld for payment of employee
payroll taxes due on shares issued
under employee stock plans		(15,082	)		(2	)		(92	)
Shares received in payment of stock
option exercises		(109,246	)		(11	)		(847	)
Deferred compensation related to stock plans								2,537
Tax benefit - employee stock programs								6,469
Unrealized gains, net of income taxes of $(221)											365
Net income														64,526
Balance, January 29, 2005		132,063,290			13,206			240,770			0			524,624
Issued to employees, net		51,909			5			708
Exercise of stock options		1,865,554			187			9,384
Shares withheld for payment of employee
payroll taxes due on shares issued
under employee stock plans		(25,901	)		(3	)		(216	)
Deferred compensation related to stock plans								6,814
Tax benefit - employee stock programs								3,617
Unrealized losses, net of income taxes of $3											(3	)
Net income														99,391
Balance, January 28, 2006		133,954,852			13,395			261,077			(3	)		624,015
Issued to employees, net		361,477			36			783
Exercise of stock options		1,536,580			154			9,011
Shares withheld for payment of employee
payroll taxes due on shares issued
under employee stock plans		(90,378	)		(9	)		(1,217	)
Deferred compensation related to stock plans								10,386
Tax benefit - employee stock programs								5,119
Unrealized gains, net of income taxes of $(3)											4
Net income														108,923
Balance, February 3, 2007		135,762,531		$	13,576		$	285,159		$	1		$	732,938
Certain prior-year amounts have been reclassified to conform to the current-year presentation.
See Notes to Consolidated Financial Statements.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
	February 3,			January 28,			January 29,
(In thousands)	2007			2006			2005
Operating activities
Net income	$	108,923		$	99,391		$	64,526
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		91,244			84,297			77,069
Deferred income taxes		20,719			(10,139	)		11,521
Stock-based compensation		10,386			6,814			2,537
Excess tax benefits related to stock-based compensation		(5,119	)		3,617			6,469
Net (gain)/loss from disposition of capital assets		1,618			(725	)		736
Net gain from securitization activities		(818	)		(3,105	)		(1,182	)
Other, net		0			0			185
Changes in operating assets and liabilities:
Accounts receivable		5,237			(31,315	)		0
Merchandise inventories		(53,024	)		(20,051	)		24,875
Accounts payable		45,393			(6,952	)		(7,958	)
Deferred advertising		(1,116	)		(7,797	)		0
Prepayments and other		(54,390	)		5,636			(28,888	)
Income taxes payable		3,376			1,743			(1,128	)
Accrued expenses and other		14,525			43,398			17,178
Net cash provided by operating activities		186,954			164,812			165,940
Investing activities
Investment in capital assets		(133,156	)		(103,835	)		(60,565	)
Proceeds from sales of capital assets		0			3,432			0
Gross purchases of securities		(37,022	)		(50,630	)		(29,705	)
Proceeds from sales of securities		62,185			18,849			48,206
Acquisition of Crosstown Traders, Inc., net of cash acquired		0			(256,717	)		0
Purchase of Catherines receivables portfolio		0			(56,582	)		0
Securitization of Catherines receivables portfolio		0			56,582			0
Securitization of Crosstown Traders, Inc. apparel-related receivables		0			50,000			0
Increase in other assets		(14,399	)		(5,264	)		(6,984	)
Net cash used by investing activities		(122,392	)		(344,165	)		(49,048	)
Financing activities
Proceeds from short-term borrowings		149,377			382,573			186,173
Repayments of short-term borrowings		(199,377	)		(332,573	)		(186,173	)
Proceeds from long-term borrowings		0			0			18,098
Repayments of long-term borrowings		(14,733	)		(22,212	)		(18,530	)
Payments of deferred financing costs		0			(1,417	)		(350	)
Excess tax benefits related to stock-based compensation		5,119			0			0
Proceeds from issuance of common stock		8,758			10,065			33,158
Net cash provided/(used) by financing activities		(50,856	)		36,436			32,376
Increase/(decrease) in cash and cash equivalents		13,706			(142,917	)		149,268
Cash and cash equivalents, beginning of year		130,132			273,049			123,781
Cash and cash equivalents, end of year	$	143,838		$	130,132		$	273,049
Non-cash financing and investing activities
Equipment acquired through capital leases	$	0		$	3,892		$	5,399
Certain prior-year amounts have been reclassified to conform to the current-year presentation.
See Notes to Consolidated Financial Statements.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

We operate retail specialty stores located throughout the continental United States and related websites that merchandise plus-size, misses, and junior sportswear, dresses, coats, and intimate apparel, as well as accessories and casual footwear, at a wide range of prices. Effective with the acquisition of Crosstown Traders, Inc. (“Crosstown Traders”) on June 2, 2005 (see“NOTE 2. ACQUISITION OF CROSSTOWN TRADERS, INC.” below), we also conduct a direct marketing operation that merchandises women’s apparel, footwear, accessories, and specialty gifts throughout the continental United States through multiple catalogs and related websites.

Principles of Consolidation

The consolidated financial statements include the accounts of Charming Shoppes, Inc. and our wholly-owned and majority-owned subsidiaries. The consolidated financial statements include the results of operations of Crosstown Traders from June 2, 2005, the date of acquisition. All significant inter-company accounts and transactions have been eliminated. We have a 52- 53 week fiscal year ending on the Saturday nearest to January 31. The fiscal year ended February 3, 2007 consisted of 53 weeks. As used herein, the terms “Fiscal 2007,” “Fiscal 2006,” and “Fiscal 2005” refer to our fiscal years ended February 3, 2007, January 28, 2006, and January 29, 2005, respectively. The terms “Fiscal 2008” and “Fiscal 2009” refer to our fiscal years which will end on February 2, 2008 and January 31, 2009, respectively. The terms “the Company,” “we,” “us,” and “our” refer to Charming Shoppes, Inc., and, where applicable, our consolidated subsidiaries.

Business Segments and Related Disclosures

Effective with our acquisition of Crosstown Traders, Inc. (see “NOTE 2. ACQUISITION OF CROSSTOWN TRADERS, INC.” below), we operate in two segments, Retail Stores and Direct-to-Consumer, which are consistent with the way our chief operating decision-makers review our results of operations. The retail store and store-related E-commerce operations under our LANE BRYANT, FASHION BUG, CATHERINES PLUS SIZES, and PETITE SOPHISTICATE brands are aggregated into the Retail Stores segment. The Direct-to-Consumer segment includes catalog and catalog-related E-commerce operations under our Crosstown Traders brands. Our foreign sourcing operations do not constitute a material geographic segment. See “NOTE 18. SEGMENT REPORTING” below for further information regarding our segment reporting.

Foreign Operations

We use a December 31 fiscal year for our foreign subsidiaries in order to expedite our year-end closing. There were no intervening events or transactions with respect to our foreign subsidiaries during the period from January 1, 2007 to February 3, 2007 that would have a material effect on our financial position or results of operations.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires that our management make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Reclassifications

Certain prior-year amounts in the consolidated financial statements for prior years have been reclassified to conform to the current-year presentation.

Cash Equivalents

We consider all highly-liquid investments with a maturity of three months or less when purchased to be cash equivalents. These amounts are stated at cost, which approximates market value.

Available-for-Sale Securities

Our investments are classified as available for sale. Securities traded on an established market are carried at fair value, and unrealized gains and losses are reported in a separate component of stockholders’ equity. We adjust the cost of these investments for amortization of premiums and the accretion of discounts to maturity where applicable. Such adjustments are included in interest income. We include interest income and realized gains and losses from investments in other income. The cost of securities sold is based on the specific identification method.

Short-term available-for-sale securities include investments with an original maturity of greater than three months and a remaining maturity of less than one year. Long-term available-for-sale securities include investments that have an original maturity of greater than one year, but are available on an as-needed basis to support our working capital needs.

Accounts Receivable

Our FIGI’S catalog offers credit to its customers using interest-free, three-payment credit terms over three months, with the first payment due on a defined date 30 to 60 days after a stated holiday. A substantial portion of the FIGI’S catalog business is conducted during the December holiday season. We evaluate the collectibility of our accounts receivable based on a combination of factors, including analysis of historical trends, aging of accounts receivable, write-off experience, past history of recoveries, and expectations of future performance.

Inventories

We value our merchandise inventories at the lower of cost or market, using the retail inventory method (average cost basis) for our Retail Stores and our Direct-to-Consumer segment inventories. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are adjusted in proportion to markdowns currently taken and shrinkage on the retail value of inventories. In addition to markdowns that have been taken (i.e., selling price permanently reduced on the selling floor), we accrue an estimate for markdowns not yet recorded that we believe will be necessary to sell end-of-season inventory on hand at the end of the period. We purchase inventory by season and distinguish aged inventory by tracking inventory quantities on hand by season. We liquidate aged seasonal inventory through markdowns or sale to liquidators. We account for store inventory shrinkage based on periodic physical inventories on a store-by-store basis, with supplemental observations in locations exhibiting high shrinkage rates. We determine interim shrinkage estimates on a store-by-store basis, based on our most recent physical inventory results. We account for distribution and fulfillment center inventory shrinkage based on cycle counts on a center-by-center basis.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Deferred and Non-Deferred Advertising Costs

With the exception of direct-response advertising, we expense advertising costs as incurred. In accordance with American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 93-7, “Reporting on Advertising Costs,” we accumulate all direct costs incurred in the development, production, and circulation of our direct-mail catalogs on our consolidated balance sheet until such time as the related catalog is mailed. These capitalized costs are subsequently amortized as a component of cost of goods sold, buying, catalog, and occupancy expenses over the expected sales realization cycle, generally within one to six months.

Our initial estimation of the expected sales realization cycle for a particular catalog merchandise offering is based on, among other possible considerations, our historical sales and sell-through experience with similar catalog merchandise offerings, our understanding of then-prevailing fashion trends and influences, our assessment of prevailing economic conditions, and various competitive factors. We continually track our subsequent sales realization, compile customer feedback for indications of future performance, reassess the marketplace, compare our findings to our previous estimate, and adjust our amortization accordingly.

Non-deferred advertising costs charged to expense as incurred were $81,028,000, $75,387,000, and $66,666,000 in Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively. Deferred catalog advertising costs amortized to expense were $125,678,000 in Fiscal 2007 and $82,384,000 in Fiscal 2006 (from the date of acquisition of Crosstown Traders on June 2, 2005), and deferred catalog advertising costs as of February 3, 2007 and January 28, 2006 were $21,707,000 and $20,591,000, respectively.

Property and Depreciation

For financial reporting purposes, we compute depreciation and amortization primarily using the straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, over the lease term as determined under our operating lease accounting policy (see “Operating Leases” below), if shorter. We use accelerated depreciation methods for income tax reporting purposes. Depreciation and amortization of property, equipment (including equipment acquired under capital leases), and leasehold improvements was $84,750,000, $77,876,000, and $72,437,000 in Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively.

We evaluate the recoverability of our long-lived assets in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” We assess our long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amounts of long-lived assets may not be recoverable. We consider historical performance and future estimated results when evaluating an asset for potential impairment, then compare the carrying amount of the asset to the estimated future undiscounted cash flows expected to result from the use of the asset. If the estimated future undiscounted cash flows are less than the carrying amount of the asset, we write down the asset to its estimated fair value and recognize an impairment loss. Our estimate of fair value is generally based on either appraised value or the present value of future cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Lease Accounting

We lease substantially all of our store properties as well as certain of our other facilities, and account for our leases in accordance with SFAS No. 13, "Accounting for Leases." A majority of our store leases contain lease options that we can unilaterally exercise. The lease term we use for such operating leases includes lease option renewal periods only in instances in which the failure to exercise such options would result in an economic penalty for us and exercise of the renewal option is therefore reasonably assured at the lease inception date.

For leases that contain rent escalations, the lease term for recognition of straight-line rent expense commences on the date we take possession of the leased property for construction purposes, which for stores is generally two months prior to a store opening date. Similarly, landlord incentives or allowances under operating leases (tenant improvement allowances) are recorded as a deferred rent liability and recognized as a reduction of rent expense on a straight-line basis over the lease term, commencing on the date we take possession of the leased property for construction purposes.

Goodwill and Other Intangible Assets

We account for goodwill and other intangible assets in accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” We own trademarks, tradenames, Internet domain names, customer lists, customer relationships, and a covenant not to compete that we obtained in connection with our acquisitions of LANE BRYANT and Crosstown Traders. The values of these intangible assets were determined by an independent appraisal, using an after-tax discounted cash flow method, based on the estimated future benefits to be received from the assets. We allocated the excess of the cost of the acquisitions over the estimated fair value of the identifiable tangible and intangible net assets acquired to goodwill. In accordance with the provisions of SFAS No. 142, we are not amortizing the goodwill.

The LANE BRYANT and Crosstown Traders trademarks, tradenames, and Internet domain names are well-recognized in their respective markets. We expect to renew and protect these trademarks, tradenames, and Internet domain names indefinitely, and expect that they will generate positive cash flows for the Company for the foreseeable future. Therefore, we are not amortizing the appraised value of the trademarks, tradenames, and Internet domain names. We periodically review the trademarks, tradenames, and Internet domain names for indicators of a limited useful life. We are amortizing the customer lists, customer relationships, and covenant not to compete over their estimated useful lives of four to five years.

During Fiscal 2007, we acquired from third parties the PETITE SOPHISTICATE and Casual Corner trademarks, tradenames, and internet domain names.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

In accordance with the provisions of SFAS No. 142, we are required to re-evaluate goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if there is an indication of possible impairment. During the fourth quarters of Fiscal 2007, Fiscal 2006, and Fiscal 2005, we conducted annual re-evaluations of our goodwill and other indefinite-lived intangible assets and determined that there was no impairment of these assets. In conducting our re-evaluations for impairment, we assigned the values of the goodwill and other indefinite-lived intangible assets, which were recognized in connection with our acquisitions of LANE BRYANT, CATHERINES, and Crosstown Traders, to the respective reporting units within our reportable business segments in accordance with the provisions of SFAS No. 142. The calculation of the estimated fair value of the goodwill and other intangible assets required estimates, assumptions, and judgments, and results might have been materially different if different estimates, assumptions, and judgments had been used. Information on goodwill by business segment is included in “NOTE 18. SEGMENT REPORTING”below.

Asset Securitization

We account for our asset securitization facilities in accordance with the requirements of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Asset securitization primarily involves the sale of proprietary credit card receivables to a separate and distinct special-purpose entity, which in turn transfers the receivables to a separate and distinct qualified special-purpose entity (“QSPE”). The QSPE’s assets and liabilities are not consolidated in our balance sheets and the receivables transferred to the QSPEs are isolated for purposes of the securitization program. The QSPEs issue asset-backed certificates that represent undivided interests in those credit card receivables transferred into the QSPE. These certificates are sold to investors, and we retain any undivided interests that remain unsold. We include these remaining undivided interests, and any other retained interests, in “Investment in asset-backed securities” in our accompanying consolidated balance sheets. The carrying value of these retained interests approximates their fair value.

Transaction expenses related to securitizations are deferred and amortized over the reinvestment period of the transaction. Net securitization income, including revaluation of our interest-only strip, is included as a reduction of selling, general, and administrative expenses in our accompanying consolidated statements of operations and comprehensive income.

Insurance Liabilities

We use a combination of third-party insurance and/or self-insurance for certain risks, including workers’ compensation, medical, dental, automobile, and general liability claims. Our insurance liabilities are a component of “Accrued expenses” in our consolidated balance sheets, and represent an estimate of the ultimate cost of uninsured claims incurred as of the balance sheet date. In estimating our self-insurance liabilities, we use independent actuarial estimates of expected losses, which are based on statistical analyses of historical data. Loss estimates are adjusted based upon actual claim settlements and reported claims. Although we do not expect the amounts ultimately paid to differ significantly from our estimates, self-insurance liabilities could be affected if future claim experience differs significantly from the historical trends and the actuarial assumptions. We evaluate the adequacy of these liabilities on a regular basis, modifying our assumptions as necessary, updating our records of historical experience, and adjusting our liabilities as appropriate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Stock-based Compensation

Through Fiscal 2006, we accounted for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” as permitted by SFAS No. 123, “Accounting for Stock-Based Compensation.” We recorded compensation expense for restricted stock and restricted stock unit awards and for stock options with an exercise price less than the market price of our common stock at the date of grant, based on the difference between the market price and the exercise price of the option at the date of grant. The compensation expense was recognized on a straight-line basis over the vesting period of each award or option. We did not recognize compensation expense for options having an exercise price equal to the market price on the date of grant or for shares purchased under our Employee Stock Purchase Plan.

We disclosed, as pro forma information, compensation expense for all stock options, restricted stock awards, and restricted stock unit awards based on an estimated fair value of the option or award. In accordance with SFAS No. 123, we used the Black-Scholes pricing model to estimate the fair value of stock options. The Black-Scholes model required estimates or assumptions as to the dividend yield and price volatility of the underlying stock, the expected life of the option, and a relevant risk-free interest rate, which are more fully described below.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), a revision of SFAS No. 123. Under SFAS No. 123R, we are required to recognize the fair value of stock-based payments as compensation expense in our financial statements beginning in Fiscal 2007. Pro forma disclosures are no longer permitted.

We elected to adopt SFAS No. 123R on the modified prospective method and, accordingly, prior periods have not been restated. Stock-based compensation cost recognized in Fiscal 2007 includes (i) compensation cost for all stock-based awards granted prior to the beginning of Fiscal 2007 but not fully vested as of the beginning of Fiscal 2007, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123, and (ii) compensation cost for all stock-based awards granted subsequent to the beginning of Fiscal 2007, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. The impact of the change from using actual forfeitures to determine compensation expense under the intrinsic value method to using estimated forfeitures in accordance with the provisions of SFAS No. 123R was immaterial.

Current grants of stock-based compensation consist primarily of restricted stock and restricted stock unit awards. Under SFAS No. 123R, we will continue to use the Black-Scholes valuation model to estimate the fair value of stock options, using assumptions consistent with our pro forma disclosures under SFAS No. 123, and straight-line amortization of stock-based compensation. We elected to calculate the initial pool of excess tax benefits related to stock-based compensation and the related presentation of excess tax benefits in our consolidated statements of cash flows in accordance with the provisions of paragraph 81 of SFAS No. 123R.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Adoption of SFAS No. 123R generally results in the recognition of additional stock-based compensation in the financial statements as compared to use of the intrinsic value method. However, beginning in Fiscal 2005, we changed the composition of our stock-based compensation awards to include primarily restricted stock and restricted stock unit awards, which generally yield the same compensation expense under both the intrinsic value method and SFAS No. 123R. In addition, we did not have significant unvested stock options as of the beginning of Fiscal 2007. Accordingly, the adoption of SFAS No. 123R did not have a material incremental impact on our income before taxes and net income, or on our basic and diluted net income per share.

Total stock-based compensation recognized in our results of operations for Fiscal 2007, Fiscal 2006, and Fiscal 2005 was $10,386,000, $6,814,000, and $2,537,000, respectively. Total stock-based compensation not yet recognized, related to the non-vested portion of stock options and awards outstanding, was $16,025,000 as of February 3, 2007. The weighted-average period over which we expect to recognize this compensation is approximately 2.7 years.

To determine stock-based compensation for stock options under both SFAS No. 123 (for prior-year pro forma disclosures) and SFAS No. 123R (for Fiscal 2007 expense), we estimate the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. In applying the Black-Scholes model, we used a range of estimated stock price volatilities of 35.2 to 50.8; a dividend yield of 0.0%; expected lives of 3 months for the Employee Stock Purchase Plan and 3 to 7 years for stock options; and risk-free interest rates of 0.9% to 5.1% for the Employee Stock Purchase Plan and 2.8% to 5.1% for stock options.

Under the provisions of SFAS No. 123R, we are required to present gross excess tax benefits related to stock-based compensation as cash flows from financing activities in our statements of cash flows instead of as cash flows from operating activities as previously required. In accordance with the provisions of SFAS No. 123R, we will continue to reflect write-offs of deferred tax assets related to an excess of stock-based compensation recognized in the financial statements over amounts deductible for tax purposes as cash flows used by operating activities. Net cash used by financing activities for Fiscal 2007 includes $5,119,000 of excess tax benefits related to stock-based compensation that would have been classified as a cash inflow in net cash provided by operating activities if we had not adopted the provisions of SFAS No. 123R.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

The following table reconciles net income and net income per share as reported, using the intrinsic value method under APB No. 25, to pro forma net income and pro forma net income per share using the fair value method under SFAS No. 123:

(In thousands, except per share amounts)	2006			2005
Net income as reported	$	99,391		$	64,526
Add stock-based employee compensation as reported, using intrinsic
value method, net of income taxes		4,429			1,649
Less stock-based employee compensation, using fair-value method,
net of income taxes		(5,307	)		(3,862	)
Pro forma net income	$	98,513		$	62,313
Basic net income per share:
As reported	$	.83		$	.56
Pro forma		.82			.54
Diluted net income per share:
As reported		.76			.52
Pro forma		.75			.50

Revenue Recognition

Revenues from merchandise sales are net of discounts, returns and allowances, and coupons, and exclude sales tax. We record a reserve for estimated future sales returns based on an analysis of actual returns received, and we defer recognition of layaway sales to the date of delivery. Revenues from sales of gift cards are recorded as deferred revenue and recognized upon the redemption of the gift cards.

Catalog and E-commerce revenues include shipping and handling fees billed to customers. These revenues are recognized after the following have occurred: execution of the customer’s order, authorization of the customer’s credit card has been received, and the product has been shipped to and received by the customer. We record a reserve for estimated future sales returns based on an analysis of actual returns.

We offer our customers various loyalty card programs (see “NOTE 12. CUSTOMER LOYALTY CARD PROGRAMS” below). Customers that join these programs are entitled to various benefits, including discounts and rebates on purchases during the membership period. Customers generally join these programs by paying an annual membership fee. We recognize revenue from these loyalty programs as a component of net sales over the life of the membership period based on when the customer earns the benefits and when the fee is no longer refundable. Costs we incur in connection with administering these programs are recognized in cost of goods sold as incurred.

We sell gift cards to our Retail Stores segment customers through our stores, retail-store-related websites, and through a third party. We recognize revenue from gift cards when the gift card is redeemed by the customer. Our gift cards do not contain expiration dates or inactivity fees. We recognize gift card breakage (unused gift card balances for which we believe the likelihood of redemption is remote) as net sales based on an analysis of historical redemption patterns.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Cost of Goods Sold, Buying, Catalog, and Occupancy Expenses

Cost of goods sold includes merchandise costs net of discounts and allowances, freight, inventory shrinkage, and shipping and handling costs associated with our catalog and E-commerce businesses. We capitalize net merchandise costs and freight as inventory costs. Cost of goods sold also includes costs incurred in connection with our customer loyalty card programs (see “Revenue Recognition”above). Buying expenses include payroll, payroll-related costs, and operating expenses for our buying departments and warehouses. Catalog expenses include the costs of producing and distributing our merchandise catalogs (see “Deferred Catalog Advertising Costs” above). Occupancy expenses include rent, real estate taxes, insurance, common area maintenance, utilities, maintenance, and depreciation for our stores and warehouse facilities and equipment. Buying, catalog, and occupancy expenses are treated as period costs and are not capitalized as part of inventory.

Costs Associated With Exit or Disposal Activities

We recognize liabilities for costs associated with exit or disposal activities when the liabilities are incurred, and value the liabilities at fair value, in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Severance pay is recognized as employees render service over future periods if the severance arrangement requires employees to render future service beyond a minimum retention period.

Income Taxes

We use the liability method of accounting for income taxes as prescribed by SFAS No. 109, “Accounting for Income Taxes.” Under the liability method, we adjust deferred tax assets and liabilities to reflect the effect of changes in enacted tax rates on expected reversals of financial statement and income tax basis differences.

On October 22, 2004, the President of the United States of America signed into law H.R. 4250, “The American Jobs Creation Act of 2004” (the “Act”). The Act includes among its provisions certain tax benefits related to the repatriation to the United States of profits from a company’s international operations provided that certain criteria are met, including the implementation of a qualifying reinvestment plan for the repatriated earnings. The Act permits the repatriation of profits from international operations at a tax rate not to exceed 5.25% for approximately a one-year period, subject to certain limitations.

Prior to Fiscal 2006, we did not record a provision for incremental United States income taxes on profits from our international operations, as it was our intention to permanently reinvest such undistributed profits in our international operations. During Fiscal 2006, based on a formal reinvestment plan approved by our Board of Directors, we repatriated $44,000,000 of profits from our international operations, which resulted in $2,667,000 of United States income taxes, $1,135,000 of applicable foreign tax credits, and net taxes of $1,532,000. Subsequent to Fiscal 2006 we intend to continue to permanently reinvest undistributed profits from our international operations, and to not provide for incremental United States income taxes on such undistributed profits.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Net Income (Loss) Per Share

Net income (loss) per share is based on the weighted-average number of common shares outstanding during each fiscal year. Net income per share assuming dilution is based on the weighted-average number of common shares and share equivalents outstanding. Common share equivalents include the effect of dilutive stock options and stock awards, using the treasury stock method. Common share equivalents also include the effect of assumed conversion of our convertible debt, using the “if-converted” method, when the effect of such assumed conversion is dilutive. Share equivalents are not included in the weighted-average shares outstanding for determining net loss per share, as the result would be anti-dilutive.

Comprehensive Income

The consolidated statements of operations and comprehensive income include transactions from non-owner sources that affect stockholders’ equity. Unrealized gains and losses recognized in comprehensive income are reclassified to net income upon their realization.

Deferred Debt Acquisition Costs

Debt acquisition costs are deferred and amortized to interest expense on a straight-line basis over the life of the related debt agreement.

Costs of Computer Software Developed or Obtained for Internal Use

Costs related to the development of internal-use software, other than those incurred during the application development stage, are expensed as incurred. Costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software.

Cash Consideration Received from Vendors

We record cash consideration received from vendors as a reduction of inventory, and it is recognized in cost of goods sold as inventory is sold, in accordance with FASB Emerging Issues Task Force (“EITF”) Issue 02-16, “Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor.” As of February 3, 2007 and January 28, 2006, $8,767,000 and $9,310,000, respectively, of cash received from vendors has been deferred into inventory and will be recognized as inventory is sold. We defer the recognition of cash received from vendors during interim periods in order to better match the recognition of the cash consideration to the period the inventory is sold.

Impact of Recent Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs - an Amendment of Accounting Research Bulletin No. 43, Chapter 4.” SFAS No. 151 clarifies, among other things, that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials costs should be recognized as current-period expenses rather than being capitalized into inventory. SFAS No. 151 was effective as of the beginning of Fiscal 2007. Our adoption of SFAS No. 151 did not have a material effect on our financial condition or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS No. 154 replaces APB Opinion No. 20, “Accounting Changes,” and supersedes SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements - an amendment of APB Opinion No. 28.” SFAS No. 154 generally requires retrospective application to prior-period financial statements of a change in accounting principle unless it is impracticable to determine either the period-specific effects or cumulative effects of the change. SFAS No. 154 was effective as of the beginning of Fiscal 2007. Our adoption of SFAS No. 154 did not have a material effect on our financial position or results of operations.

In October 2005, the FASB issued FASB Staff Position (“FSP”) FAS 13-1, “Accounting for Rental Costs Incurred during a Construction Period.” FSP FAS 13-1 concludes that rental costs incurred during and after a construction period are for the right to control the use of a leased asset during and after construction of a lessee asset. There is no distinction between the right to use a leased asset during the construction period and the right to use that asset after the construction period. Therefore, rental costs associated with ground or building operating leases that are incurred during a construction period shall be recognized as rental expense and included in income from continuing operations. FSP FAS 13-1 was effective as of the beginning of Fiscal 2007. Our adoption of FSP FAS 13-1 did not have a material effect on our financial position or results of operations.

In March, 2006 the FASB issued SFAS No. 156, “Accounting and Servicing of Financial Assets - an amendment of FASB Statement No. 140.” SFAS No. 156 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” with respect to the accounting for separately recognized servicing assets and liabilities. SFAS No. 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract under certain situations, including a transfer of the servicer’s financial assets that meets the requirements for sale accounting.

SFAS No. 156 requires the servicer to initially measure all separately recognized servicing assets and liabilities at fair value, if practicable. Subsequent to initial recognition of the servicing assets or liabilities, the servicer can choose either of two methods for subsequent measurement of the servicing assets or liabilities:

·   Amortization method - Amortize the servicing assets or liabilities in proportion to, and over the period of, estimated net servicing income or loss and assess the assets or liabilities for impairment or increased obligation based on fair value at each reporting date.

·   Fair value measurement method - Measure the servicing assets or liabilities at fair value at each reporting date and report changes in fair value in earnings in the period in which the changes occur.

SFAS No. 156 also requires separate presentation of servicing assets and liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and liabilities.

We will be required to adopt the provisions of SFAS No. 156 prospectively, effective as of the beginning of Fiscal 2008. We do not expect the adoption of SFAS No. 156 to have a material effect on our financial condition or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

In June 2006, the FASB ratified the consensus of EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).” EITF Issue No. 06-3 provides that gross or net presentation is an accounting policy decision that is dependent on the type of tax, and that similar taxes are to be presented in a consistent manner. The provisions of EITF Issue No. 06-3 will be effective as of the beginning of Fiscal 2008, with early application permitted. Our current accounting policy is to present taxes within the scope of EITF Issue No. 06-3 on a net basis. Our adoption of EITF Issue No. 06-3 will not result in a change in our accounting policy and, accordingly, will not have any effect on our results of operations.

In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” FIN No. 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN No. 48 also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, expanded disclosures regarding tax uncertainties, and transition.

FIN No. 48 applies to all tax positions related to income taxes subject to SFAS No. 109, “Accounting for Income Taxes.” Under FIN No. 48, recognition of a tax benefit occurs when a tax position is more-likely-than-not to be sustained upon examination, based solely on its technical merits. The recognized benefit is measured as the largest amount of benefit which is more-likely-than-not to be realized on ultimate settlement, based on a cumulative probability basis. A tax position failing to qualify for initial recognition is recognized in the first interim period in which it meets the FIN No. 48 recognition standard, or is resolved through negotiation, litigation, or upon expiration of the statute of limitations. De-recognition of a previously recognized tax position would occur if it is subsequently determined that the tax position no longer meets the more-likely-than-not threshold of being sustained. Differences between amounts recognized in balance sheets prior to the adoption of FIN No. 48 and amounts reported after adoption (except for items not recognized in earnings) will be accounted for as a cumulative effect adjustment to retained earnings as of the date of adoption of FIN No. 48, if material.

We will be required to adopt the provisions of FIN No. 48 effective as of the beginning of Fiscal 2008. We are currently evaluating our tax positions and the impact that FIN No. 48 will have on our consolidated financial position.

In September 2006, the FASB ratified the consensus of EITF Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Agreements.” EITF Issue No. 06-4 addresses accounting for separate agreements that split life insurance policy benefits between an employer and an employee. EITF Issue No. 06-4 requires employers to recognize a liability for future benefits payable to the employee under such agreements. The effect of applying the provisions of Issue No. 06-4 should be recognized either through a change in accounting principle by a cumulative-effect adjustment to equity or through the retrospective application to all prior periods. The provisions of EITF Issue No. 06-4 will be effective for fiscal years beginning after December 15, 2007, with earlier application permitted. We are currently analyzing the impact of adoption of EITF Issue No. 06-4, and have not yet determined the impact, if any, of adoption on our consolidated financial position or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

In September 2006, the FASB ratified the consensus of EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance - Determining the Amount That Could be Realized in Accordance with FASB Technical Bulletin 85-4.” EITF Issue No. 06-5 addresses the determination of the amount that could be realized under a life insurance contract in accordance with Technical Bulletin 85-4. EITF Issue No. 06-5 requires a policyholder to consider any additional amounts included in the contractual terms of the policy other than the cash surrender value in determining the amount that could be realized under the insurance contract. Policyholders should determine the amount that could be realized under the life insurance contract assuming the surrender of an individual-life by individual-life policy (or certificate by certificate in a group policy). Any amount that is ultimately realized by the policyholder upon the assumed surrender of the final policy (or final certificate in a group policy) shall be included in the amount that could be realized under the insurance contract. The effect of applying the provisions of Issue No. 06-5 should be recognized either through a change in accounting principle by a cumulative-effect adjustment to equity or through the retrospective application to all prior periods.

We will be required to adopt the provisions of Issue No. 06-5 effective as of the beginning of Fiscal 2008. We are currently analyzing the impact of adoption of Issue No. 06-5 and have not yet determined the impact of adoption on our consolidated financial position or results of operations.

In September 2006, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB 108”), “Financial Statements - Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 provides guidance on how prior-year misstatements should be taken into consideration when quantifying misstatements in current-year financial statements for purposes of determining whether the financial statements are materially misstated. Under SAB 108, companies should take into account the effect of a misstatement on both the current-year balance sheet and the current-year income statement in assessing the materiality of a current-year misstatement. Once a current-year misstatement has been quantified, the guidance in SAB 99, “Financial Statements - Materiality” should be applied to determine whether the misstatement is material. The provisions of SAB 108 are effective for annual financial statements for fiscal years ending after November 15, 2006.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 provides a single definition of fair value, along with a framework for measuring it, and requires additional disclosure about using fair value to measure assets and liabilities. SFAS No. 157 emphasizes that fair value measurement is market-based, not entity-specific, and establishes a fair value hierarchy which places the highest priority on the use of quoted prices in active markets to determine fair value. It also requires, among other things, that entities are to include their own credit standing when measuring their liabilities at fair value.

We will be required to adopt the provisions of SFAS No. 157 prospectively, effective as of the beginning of Fiscal 2009. We do not expect the adoption of SFAS No. 157 to have a material effect on our financial condition or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 2. ACQUISITION OF CROSSTOWN TRADERS, INC.

On June 2, 2005, we acquired 100% of the outstanding stock of Crosstown Traders, Inc. ("Crosstown Traders"), a direct marketer of women’s apparel, footwear, accessories, and specialty gifts, from JPMorgan Partners, the private equity arm of J.P. Morgan Chase & Co.

Crosstown Traders operates multiple catalog titles and related websites, and the majority of Crosstown Traders’ revenues are derived from the catalog sales of women’s apparel, footwear, and accessories, of which plus-sizes are an important component. Crosstown Traders also derives revenues from the catalog sales of food and gifts, the majority of which occur during the fourth quarter of the fiscal year. The acquisition of Crosstown Traders provides us with an infrastructure for the development and expansion of our Direct-to-Consumer segment, which will include our catalog and catalog-related E-commerce sales distribution channels.

Under the terms of the acquisition agreement, we paid $218,015,000 in cash for Crosstown Traders and assumed Crosstown Traders’ debt of $40,728,000. We also incurred direct costs related to the acquisition (primarily advisory, legal, and statutory fees) of approximately $3,789,000. Subsequent to the acquisition, we securitized Crosstown Traders’ apparel-related accounts receivable under a new conduit funding facility established specifically for funding the Crosstown Traders receivables. The majority of the proceeds of approximately $50,000,000 from the securitization were used to retire Crosstown Traders’ debt.

We financed the acquisition with $102,200,000 of our existing cash and cash equivalents (net of cash acquired of $5,815,000) and $110,000,000 of borrowings under our then-existing revolving credit facility. Subsequent to the acquisition, we amended our credit facility (see “Note 8. Short-term Borrowings and Long-term Debt” below).

We accounted for the acquisition under the purchase method of accounting, and included the results of operations of Crosstown Traders in our results of operations from the date of acquisition. Prior-period results have not been restated for the acquisition. Assets acquired and liabilities assumed were recorded at their estimated fair values. In accordance with the provisions of SFAS No. 141, “Business Combinations,” we recognized certain acquired intangible assets (primarily trademarks, tradenames, internet domain names, and customer relationships) separately from goodwill. The fair values of acquired intangible assets, property, and equipment were based on an independent appraisal. Other assets acquired and liabilities assumed were recorded at their estimated fair values. During Fiscal 2007, we increased the fair value of liabilities assumed by $1,100,000 for customer refunds related to the pre-acquisition period.

In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” the acquired trademarks, tradenames, and internet domain names will not be amortized, but will be subject to annual reviews for impairment or for indicators of a limited useful life. Other intangible assets acquired, consisting of Crosstown Traders customer relationships, are being amortized over their estimated useful life of four years.

The excess of the cost of the acquisition over the estimated fair value of the identifiable net assets acquired was allocated to goodwill, which is not deductible for tax purposes. In accordance with the requirements of SFAS No. 142, we are not amortizing the goodwill; however, the goodwill will be subject to an annual review for impairment. We have included the Crosstown Traders goodwill in our Direct-to-Consumer segment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

As of the end of Fiscal 2007, we finalized the purchase price with JPMorgan Partners and, as a result, reduced the purchase price and related goodwill by $1,750,000. In addition, we finalized the purchase price allocation, which resulted in a decrease in the deferred tax effect of the acquisition and a corresponding decrease in goodwill. The final purchase price allocation for the identifiable tangible and intangible assets and liabilities of Crosstown Traders is as follows:

	Purchase
	Price
(In thousands)	Allocation
Fair value of assets acquired:
Cash and cash equivalents	$	5,815
Accounts receivable		60,092
Merchandise inventories		71,238
Deferred advertising		12,794
Property, equipment, and leasehold improvements		19,321
Prepayments and other		8,319
Fair value of liabilities assumed		(59,785	)
Intangible assets subject to amortization		13,100
Intangible assets not subject to amortization (trademarks and tradenames)		70,000
Deferred tax effect of acquisition		(26,816	)
Goodwill		86,704
Total purchase price	$	260,782

Concurrent with the acquisition of Crosstown Traders, we began preparing a formal integration plan (the “Plan”) for Crosstown Traders’ operations, which included exiting and consolidating certain activities of Crosstown Traders, lease terminations, unfavorable contract costs, severance, and certain other exit costs. As of January 28, 2006, we finalized the Plan and recorded a liability for the costs of the Plan, which we recorded as a component of the purchase price of the acquisition in accordance with EITF Issue 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.”

Liabilities recorded in connection with the Plan (which we recorded as adjustments to goodwill and deferred income taxes), adjustments, payments, or settlements of these liabilities for Fiscal 2006 and Fiscal 2007, and the remaining accrual as of February 3, 2007 were as follows:

	Balance at		Fiscal 2007						Balance at
	January 28,					Payments/			February 3,
(In thousands)	2006		Adjustments			Settlements			2007
Severance and related costs	$	4,380	$	(728	)	$	(3,652	)	$	0
Lease termination and related costs		2,180		564			(924	)		1,820
Unfavorable contract costs		900		(900	)					0
Other costs		1,154		(62	)		(853	)		239
Total	$	8,614	$	(1,126	)	$	(5,429	)	$	2,059

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Severance and related costs represent involuntary termination benefits for approximately 275 employees as a result of the decision to close Crosstown Traders’ manufacturing facility and two of its offices, and to consolidate certain back-office operations into our shared-services operations. Lease termination and related costs primarily represent the estimated lease termination obligations related to the closing of Crosstown Traders’ leased manufacturing facility. The unfavorable contract costs represent the estimated costs related to an unfavorable service contract Crosstown Traders entered into prior to the acquisition. Other costs are principally employee relocation costs to relocate certain key Crosstown Traders employees from the closed facilities to Crosstown Traders’ headquarters in Tucson, Arizona.

During Fiscal 2007, we finalized the lease termination and related costs and adjusted severance and related costs for employees who left voluntarily and opted to forego their severance. As a result of our decision to utilize the remaining term of the acquired unfavorable contract, the unfavorable contract costs accrual was reduced. Accordingly, we adjusted the severance and related costs, lease termination and related costs, unfavorable contract costs, and other costs accruals; deferred income taxes; and goodwill.

The following unaudited pro forma information is based on historical data, and gives effect to our acquisition of Crosstown Traders as if the acquisition had occurred on January 31, 2004. The pro forma information includes adjustments having a continuing impact on our consolidated results of operations as a result of using the purchase method of accounting for the acquisition. These adjustments consist of: additional depreciation of fair value adjustments for property, equipment, and leasehold improvements; amortization of the fair value of customer relationships acquired; additional interest expense from borrowings incurred to finance the acquisition and amortization of deferred financing costs related to amending our credit facility; reduced interest expense from the repayment of Crosstown Traders’ debt; and a reduction in interest income from the use of cash and cash equivalents to fund a portion of the acquisition cost.

The unaudited pro forma information has been prepared based on our purchase price allocations, using assumptions that our management believes are reasonable. It is not necessarily indicative of the actual results of operations that would have occurred if the acquisition had occurred as of January 31, 2004, and is not necessarily indicative of the results that may be achieved in the future. The unaudited pro forma information does not reflect adjustments for the effect of non-recurring items or for operating synergies that we may realize as a result of the acquisition.

Unaudited pro forma results of operations:

	Year Ended
	January 28,		January 29,
(In thousands, except per share amounts)	2006		2005
Net sales	$	2,897,904	$	2,793,663
Net income		98,317		75,197
Net income per share:
Basic	$	.82	$	.65
Diluted		.75		.60

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 3. AVAILABLE-FOR-SALE SECURITIES

			Estimated
(In thousands)	Cost		Fair Value
February 3, 2007
U.S. Treasury Bills	$	1,497	$	1,497
Other		500		500
	$	1,997	$	1,997
January 28, 2006
U.S. Treasury Bills	$	19,781	$	19,781
Other		369		369
	$	20,150	$	20,150

During Fiscal 2007 and Fiscal 2006, there were no realized gains or losses on available-for-sale securities. During Fiscal 2005, there was $185,000 of realized losses on sales of available-for-sale securities. The contractual maturities of available-for-sale securities at February 3, 2007 were one year or less.

NOTE 4. ACCOUNTS RECEIVABLE

Accounts receivable consist of trade receivables from sales through our FIGI’S catalog, acquired on June 2, 2005 as part of our acquisition of Crosstown Traders. Details of our accounts receivable are as follows:

(In thousands)	2007			2006
Due from customers	$	38,449		$	45,191
Allowance for doubtful accounts		(5,083	)		(6,588	)
Net accounts receivable	$	33,366		$	38,603

Details of the allowance for doubtful accounts are as follows:

	Year Ended
	February 3,			January 28,
	2007			2006
Beginning balance	$	(6,588	)	$	0	(1)
Provision for doubtful accounts		(4,924	)		(5,661	)
Collections of accounts previously written off		(1,274	)		(1,030	)
Accounts written off		7,703			103
Ending balance	$	(5,083	)	$	(6,588	)
____________________
(1)Balance as of June 5, 2005 (date of acquisition).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 5. PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS

	Lives
(Dollars in thousands)	(Years)		2007		2006
Land			$	5,829	$	5,829
Buildings and improvements		10 to 40		74,125		74,573
Store fixtures		5 to 10		162,879		145,586
Equipment		3 to 10		232,095		208,266
Equipment acquired under capital leases		7		71,909		71,908
Leasehold improvements		10(1)		433,439		382,319
Construction in progress		-		16,154		8,354
Total at cost				996,430		896,835
Less:Accumulated depreciation and amortization				528,912		491,154
Accumulated amortization of capital lease assets				45,072		34,728
Total accumulated depreciation and amortization				573,984		525,882
Net property, equipment, and leasehold improvements			$	422,446	$	370,953
____________________
(1)Or the life of the lease, if shorter.

NOTE 6. TRADEMARKS AND OTHER INTANGIBLE ASSETS

	Life
(Dollars in thousands)	(Years)		2007		2006
Trademarks, tradenames, and Internet domain names			$	241,850	$	238,800
Customer lists, customer relationships,
and covenant not to compete		4 to 5		16,400		16,400
Total at cost				258,250		255,200
Less:accumulated amortization of customer lists,
customer relationships, and covenant not to compete				8,760		5,126
Net trademarks and other intangible assets			$	249,490	$	250,074

Total amortization of other intangible assets was $3,634,000 in Fiscal 2007, $2,844,000 in Fiscal 2006, and $660,000 in Fiscal 2005. Estimated amortization of intangible assets for the next five fiscal years is: Fiscal 2008 and Fiscal 2009- $3,275,000 per year; Fiscal 2010- $1,090,000, thereafter - $0.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 7. INCOME TAXES

Income before income taxes and minority interest:

(In thousands)	2007		2006		2005
Domestic	$	154,025	$	144,753	$	98,144
Foreign		12,098		7,648		3,524
	$	166,123	$	152,401	$	101,668

Income tax provision:

(In thousands)	2007			2006			2005
Current:
Federal	$	38,066		$	50,097		$	20,857
State		5,007			4,255			6,275
Foreign		1,649			892			668
		44,722			55,244			27,800
Deferred:
Federal		12,815			(547	)		8,885
State		(337	)		(1,687	)		457
		12,478			(2,234	)		9,342
	$	57,200		$	53,010		$	37,142

We made income tax payments of $78,138,000, $45,354,000, and $30,829,000 during Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively.

Reconciliation of the statutory Federal income tax rate to the effective tax rate:

	2007			2006			2005
Statutory Federal income tax rate		35.0	%		35.0	%		35.0	%
State income tax, net of Federal income tax		0.8			0.4			2.2
Foreign income		(1.5	)		(1.2	)		(0.6	)
Employee benefits		(0.3	)		(0.6	)		(1.0	)
Other, net		0.4			1.2			0.9
Effective tax rate		34.4	%		34.8	%		36.5	%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Components of deferred tax assets and liabilities:

	Net Current			Net Long-Term
	Assets			Assets
(In thousands)	(Liabilities)			(Liabilities)
February 3, 2007
Property, equipment, and leasehold improvements				$	(11,064	)
Accounts receivable	$	(4,409	)
Tax credit and loss carryforwards		9,303
Prepaid and accrued expenses		(6,367	)
Inventory		2,983
Deferred compensation					17,548
Goodwill and intangible assets					(60,187	)
Investments					(556	)
Deferred rent					12,611
Credit card late fees					(15,428	)
Other		2,959			(264	)
	$	4,469		$	(57,340	)
January 28, 2006
Property, equipment, and leasehold improvements				$	(15,669	)
Accounts receivable	$	(900	)
Tax credit and loss carryforwards		2,406
Prepaid and accrued expenses		7,614
Inventory		3,716
Deferred compensation		4,355			14,641
Goodwill and intangible assets					(57,163	)
Investments					(924	)
Deferred rent					14,036
Credit card late fees					(5,588	)
Other		2,245			33
	$	19,436		$	(50,634	)

We have state tax losses that are generally fully offset by a valuation allowance, as such losses are not more than likely to be realized in the future.

We received approval from the U. S. Internal Revenue Service during Fiscal 2006 to change our tax accounting method for credit card late fees and, as such, have recorded deferred tax liabilities and related tax credit carryforwards. Deferred taxes related to prepaid and accrued expenses were affected by an adjustment to prepaid rent resulting from the additional week included in Fiscal 2007, which was a 53-week fiscal year.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

On October 22, 2004, the President of the United States of America signed into law H.R. 4250, “The American Jobs Creation Act of 2004” (the “Act”). The Act included among its provisions certain tax benefits related to the repatriation to the United States of profits from a company’s international operations provided that certain criteria are met, including the implementation of a qualifying reinvestment plan for the repatriated earnings. The Act permitted the repatriation of profits at a tax rate not to exceed 5.25% for approximately a one-year period, subject to certain limitations. During Fiscal 2006, based on a formal reinvestment plan approved by our Board of Directors, we repatriated $44,000,000 of profits from our international operations, which resulted in $2,667,000 of United States income taxes, $1,135,000 of applicable foreign tax credits, and net taxes of $1,532,000.

NOTE 8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

(In thousands)	2007		2006
Short-term borrowings
Revolving credit facility	$	0	$	50,000
Long-term debt
4.75% Senior Convertible Notes due June 2012	$	149,999	$	150,000
Capital lease obligations		12,853		24,825
6.07% mortgage note, due October 2014		11,696		12,261
6.53% mortgage note, due November 2012		8,050		9,450
7.77% mortgage note due December 2011		8,496		9,050
Other long-term debt		917		1,158
Total long-term debt		192,011		206,744
Less current portion		10,887		14,765
	$	181,124	$	191,979

On July 28, 2005, we amended our existing $300,000,000 revolving credit facility, which was scheduled to expire on August 15, 2008. The amended facility agreement provides for a revolving credit facility with a maximum availability of $375,000,000, subject to certain limitations as defined in the facility agreement, and provides that up to $300,000,000 of the facility may be used for letters of credit. In addition, we may request, subject to compliance with certain conditions, additional revolving credit commitments up to an aggregate of $500,000,000. The amended facility agreement expires on July 28, 2010. As of February 3, 2007, we had an aggregate total of $2,946,000 of unamortized deferred debt acquisition costs related to the facility, which are being amortized on a straight-line basis over the life of the amended facility agreement as interest expense. Of the $110,000,000 borrowed under the facility in connection with the acquisition of Crosstown Traders, Inc. (see “NOTE 2. ACQUISITION OF CROSSTOWN TRADERS, INC.” above), $50,000,000 was outstanding as of January 28, 2006, which was repaid during Fiscal 2007. As of February 3, 2007, no cash borrowings were outstanding, and $6,279,000 of documentary letters of credit and $11,861,000 of issued but undrawn standby letters of credit were outstanding under the credit facility.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

The amended facility includes provisions for customary representations and warranties and affirmative covenants, and includes customary negative covenants providing for certain limitations on, among other things, sales of assets; indebtedness; loans, advances and investments; acquisitions; guarantees; and dividends and redemptions. Under certain circumstances involving a decrease in “Excess Availability” (as defined in the facility agreement), we may be required to maintain a minimum “Fixed Charge Coverage Ratio” (as defined in the facility agreement). The amended facility is secured by our general assets, except for (i) assets related to our credit card securitization facilities, (ii) real property, (iii) equipment, (iv) the assets of our non-U.S. subsidiaries, and (v) certain other assets.

The interest rate on borrowings under the amended facility is Prime for Prime Rate Loans, and LIBOR as adjusted for the Reserve Percentage (as defined in the facility agreement) plus 1.0% to 1.5% per annum for Eurodollar Rate Loans. The applicable rate is determined monthly, based on our average excess availability, as defined in the facility agreement. As of February 3, 2007, the applicable rates on borrowings under the facility were 8.25% for Prime Rate Loans and 6.32% (LIBOR plus 1%) for Eurodollar Rate Loans. As of February 3, 2007, there were no cash borrowings outstanding under the facility.

The 4.75% Senior Convertible Notes will mature on June 1, 2012 and are convertible at any time prior to maturity into shares of our common stock at a conversion price of $9.88 per share, subject to adjustment upon certain events. The Senior Notes are redeemable at our option, in whole or in part, at any time on or after June 4, 2007, at declining redemption prices, starting at 102.38% of principal and decreasing to 100.48% of principal on or after June 1, 2011. Under certain circumstances involving a change in control of the Company, holders of the Senior Notes may require us to repurchase all or a portion of the Senior Notes at 100% of the principal amount plus accrued and unpaid interest, if any. Also, under such circumstances, we have the option of paying the repurchase price in shares of our common stock, valued at 95% of the average of the closing prices of the common stock for the five-day trading period immediately before and including the third trading day preceding the repurchase date. There is no sinking fund for the Senior Notes.

In Fiscal 2006, we acquired $3,892,000 of information technology equipment under capital leases with initial lease terms of 36 to 48 months. During Fiscal 2005, we acquired $3,899,000 of POS equipment under capital leases that generally have an initial lease term of 60 months. During Fiscal 2005, we also refinanced certain material handling equipment at our Greencastle distribution center under a capital lease of $5,000,000 payable over a term of 48 months, and acquired $1,500,000 of equipment and related software for our White Marsh distribution center under a capital lease. Substantially all of our capital leases include a bargain purchase option. As of February 3, 2007, the imputed interest rates on our outstanding capital leases ranged from 5.00% to 7.35%.

Repayment of the 6.07% mortgage note is based on a 15-year amortization schedule, with 119 monthly installments of principal and interest of $110,000 and a balloon payment of $5,800,000 at the end of 10 years. The note may be prepaid after 2-1/2 years upon the payment of a premium, or, upon certain other events, without the payment of a premium. The note is secured by a mortgage on real property at our distribution center in Greencastle, Indiana and an Assignment of Lease and Rents and Security Agreement related to the Greencastle facility. The proceeds from this borrowing were used to repay the scheduled maturities of other debt and for other general corporate purposes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

The 6.53% mortgage note has a ten-year term with 120 monthly installments of principal of $117,000 plus interest. The note is secured by a mortgage on land, a building, and certain fixtures we own at our distribution center in White Marsh, Maryland. The net proceeds from this borrowing were used to finance a substantial portion of the acquisition of the White Marsh facility.

The 7.77% mortgage note has a ten-year term with 119 monthly installments of principal and interest of $103,000 commencing in January 2002 and a final payment of any remaining unpaid principal and interest in December 2011. The note is secured by a mortgage on land, buildings, and fixtures we own at our offices in Bensalem, Pennsylvania and by leases and rents we own or receive from tenants of the Bensalem facility. The net proceeds from this borrowing were used to repay a portion of borrowings that were outstanding under our then-existing revolving credit facility.

During Fiscal 2007, Fiscal 2006, and Fiscal 2005, we made interest payments of $12,752,000, $15,824,000, and $13,609,000, respectively. No interest expense was capitalized during Fiscal 2007, Fiscal 2006, or Fiscal 2005.

Aggregate maturities of long-term debt during the next five fiscal years are as follows:

(In thousands)	2008		2009		2010		2011		2012
Capital lease obligations	$	8,026	$	4,425	$	402	$	0	$	0
Mortgage notes		2,617		2,707		2,801		2,901		7,984
Other long-term debt		244		251		258		120		15
	$	10,887	$	7,383	$	3,461	$	3,021	$	7,999

Minimum lease payments under capital leases for the next five fiscal years are: 2008- $8,618,000; 2009- $4,593,000; 2010 - $406,000; thereafter- $0. Included in these minimum lease payments is aggregate imputed interest of $764,000.

NOTE 9. STOCKHOLDERS’ EQUITY

Our authorized shares consist of:

· 1,000,000 shares of Series Participating Preferred Stock, $1.00 par value, of which 500,000 shares of Participating Series A Junior Preferred Stock, $1.00 par value, have been authorized;

· 300,000,000 shares of common stock, $.10 par value.

In Fiscal 1998, we publicly announced that our Board of Directors granted authority to repurchase up to 10,000,000 shares of our common stock. In Fiscal 2000, we publicly announced that our Board of Directors granted authority to repurchase up to an additional 10,000,000 shares of our common stock. In Fiscal 2003, the Board of Directors granted an additional authorization to repurchase 6,350,662 shares of common stock issued to Limited Brands in connection with our acquisition of LANE BRYANT. The repurchase programs have no expiration date.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

From Fiscal 1998 through Fiscal 2003, we repurchased a total of 21,370,993 shares of common stock, which included shares purchased on the open market as well as the 6,350,662 shares repurchased from Limited Brands. No shares were acquired under these programs during Fiscal 2007, Fiscal 2006, or Fiscal 2005. As of February 3, 2007, 4,979,669 shares of our common stock remain available for repurchase under these programs, and we held 12,265,993 treasury shares with an aggregate cost of $84,136,000.

Our revolving credit facility allows the repurchase of our common stock subject to maintaining a minimum level of Excess Availability (as defined in the facility agreement) for 30 days before and immediately after such repurchase. As conditions may allow, we may from time to time acquire additional shares of our common stock under these programs. Such shares, if purchased, would be held as treasury shares.

NOTE 10. SHAREHOLDER RIGHTS PLAN

On April 12, 1999, pursuant to a Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, our Board of Directors declared a dividend distribution of one Right for each outstanding share of our common stock, payable upon the close of business on April 26, 1999. Each Right entitles the registered holder to purchase from us one three-hundredth of a share of Series A Junior Participating Preferred Stock, or, under certain circumstances, a combination of securities and assets of equivalent value, at a purchase price of $20.00, subject to adjustment. The purchase price may be paid in cash or, if we permit, by the delivery of Rights under certain circumstances. The description and terms of the Rights are set forth in the Rights Agreement.

Initially, ownership of the Rights will be evidenced by the certificates representing shares of common stock then outstanding, and no separate Rights certificates will be distributed. The Rights will separate from the common stock and a “Distribution Date” will occur upon the earlier of: (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of our outstanding common stock (the “Stock Acquisition Date”); or (ii) the close of business on such date as may be fixed by our Board of Directors after the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 20% or more of our outstanding common stock. Until the Distribution Date: (i) the Rights will be evidenced by the certificates representing shares of common stock and will be transferred with, and only with, such certificates; (ii) certificates issued after April 26, 1999 will contain a notation incorporating the Rights Agreement by reference; and (iii) the surrender for transfer of any certificates for our common stock outstanding will also constitute the transfer of the Rights associated with the common stock represented by such certificate.

In the event that, at any time following the Distribution Date, a person becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive, upon exercise, our common stock (or, in certain circumstances, cash, property, or other securities of the Company) having a value equal to two times the exercise price of the Right. In lieu of requiring payment of the purchase price upon exercise of the Rights following any such event, we may permit the holders simply to surrender the Rights under certain circumstances, in which event they will be entitled to receive our common stock (and other property, as the case may be) with a value of 50% of what could be purchased by payment of the full purchase price. Notwithstanding any of the foregoing, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by the Acquiring Person will be null and void. Rights are not exercisable until such time as the Rights are no longer redeemable by us as set forth in the Rights Agreement.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

In the event that, at any time following the Stock Acquisition Date: (i) we are acquired in a merger or other business combination transaction in which we are not the surviving corporation (other than a merger that is described in, or that follows a tender offer or exchange offer described above); or (ii) 50% or more of our assets or earning power is sold or transferred, each holder of a Right (except Rights that previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, common shares of the acquiring company having a value equal to two times the exercise price of the Right. Again, provision is made to permit surrender of the Rights in exchange for one-half of the value otherwise purchasable. The events set forth in this paragraph and above are referred to as the “Triggering Events.”

The purchase price payable and the number of shares of our common stock or other securities or property to be issued upon exercise of the Rights are subject to certain anti-dilution adjustments. With certain exceptions, no adjustment in the purchase price will be required until cumulative adjustments amount to at least 1% of the purchase price. Instead of fractional shares of our common stock, an adjustment in cash will be made based on the market price of our common stock on the last trading date before the date of exercise.

At any time until ten days following the Stock Acquisition Date, we may redeem the Rights in whole, but not in part, at a redemption price of $.01 per Right, subject to adjustment. Our Board of Directors may extend the ten-day period as long as the Rights are still redeemable. Immediately upon the order of our Board of Directors to redeem the Rights, the Rights will terminate and the holders of Rights will only be able to receive the redemption price. Until a Right is exercised, the holder of the Right will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends.

NOTE 11. STOCK-BASED COMPENSATION PLANS

2004 Stock Award and Incentive Plan

Our 2004 Stock Award and Incentive Plan (the “2004 Plan”) was approved by our Board of Directors on April 30, 2004 and by our shareholders on June 24, 2004. This plan replaces our 1993 Employees’ Stock Incentive Plan (the “1993 Plan”), our 1999 Associates’ Stock Incentive Plan (the “1999 Plan”), and our 2000 Associates’ Stock Incentive Plan (the “2000 Plan”) (see below). The plan is administered by our Board of Directors and its Compensation Committee.

The 2004 Plan provides for the grant of options (including both incentive and non-qualified stock options), restricted stock awards, SARs, RSUs, and a variety of other types of awards of up to an aggregate of 6,500,000 shares of our common stock, together with shares remaining available under the 1993 Plan and shares recaptured from outstanding awards under the 1993 Plan, 1999 Plan, and 2000 Plan. Of the aggregate shares available, up to 2,000,000 shares may be issued in connection with “full-value” awards (equity awards other than options, SARs, or other awards for which a participant does not pay at least the grant-date fair market value of the award). Additional shares may be used for full-value awards by reducing the number of shares that remain available for options, SARs, and other non-full-value awards by three shares for each share to be used for full-value awards in excess of the 2,000,000 share limit.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

The aggregate number of shares subject to awards granted under the 2004 Plan in any fiscal year will not exceed 2% of our common stock on a fully diluted basis as of the last day of the preceding fiscal year. The 2004 Plan prohibits the amendment or replacement of options or SARs granted under the plan in a transaction that constitutes a re-pricing under generally accepted accounting principles without shareholder approval.

Additional information related to our 2004 Plan is as follows:

	2007		2006		2005
Restricted stock awards/RSUs granted		926,346		1,092,915		270,900
Weighted average market price at date of grant		$13.21		$8.51		$9.00
Stock awards/RSUs vested with issuance deferred		305,250		104,000		18,000
Shares issued under stock awards/RSUs		17,312		5,769		0
Cancellations of restricted stock awards		11,131		37,500		0
Restricted awards outstanding at year-end		1,791,199		1,198,546		252,900
Options exercisable at year-end		0		0		0

2003 Non-Employee Directors Compensation Plan

Our 2003 Non-Employee Directors Compensation Plan (the “2003 Plan”) was approved by shareholders on June 26, 2003. Directors who are not employed by the Company are eligible for participation in the plan. The Board of Directors administers the plan and approves the form and amount of awards under the plan. This plan provides for the grant of stock options, stock appreciation rights (“SARs”), restricted stock awards, restricted stock units (“RSUs”), or deferred shares of up to an aggregate total of 600,000 shares of our common stock. No more than 50% of the shares reserved for issuance under the plan may be issued as restricted stock awards or RSUs.

The plan provides for a one-time restricted stock award to a newly elected or appointed non-employee director of 10,000 shares of common stock that vest in equal amounts over three years. In June 2005, the plan was amended to provide for annual grants to each non-employee director serving at the date of our Annual Meeting of Shareholders of options for 7,500 shares of common stock that vest in one year and annual grants of 7,500 RSUs that vest in one year. Each RSU represents a right to receive one share of common stock, or cash of equal value at the Company’s option, at the date of vesting, or, if deferred by the director, at a later date after termination of service. Non-employee directors may also elect to receive deferred shares of common stock of an equivalent market value instead of cash director’s fees.

The exercise price of options or SARs granted under the 2003 Plan may not be less than the fair market value of our common stock on the date of grant. The maximum term of options and SARs issued under the plan is ten years. The plan includes a provision that options previously granted under the plan will not be amended or replaced in a transaction that constitutes a “re-pricing” (as defined in the plan) without shareholder approval.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Additional information related to our 2003 Plan is as follows:

	2007		2006		2005
One-time restricted stock awards granted		10,000		10,000		10,000
Weighted average market price at date of grant		$13.84		$12.48		$7.65
Shares issued under stock awards		3,334		3,333		13,333
Restricted awards outstanding at year-end		20,000		13,334		6,667
RSUs granted		61,233		55,582		24,658
Weighted average market price at date of grant		$11.33		$9.29		$8.42
Shares issued under RSUs		5,148		25,834		15,658
RSUs vested with issuance deferred		37,500		9,000		6,000
RSUs outstanding at year-end		63,333		44,748		24,000
Options exercisable at year-end		283,140		455,225		333,325

2000 Associates’ Stock Incentive Plan

The 2000 Plan, adopted by our Board of Directors on January 27, 2000, provided for the grant of options, SARS, restricted stock awards, deferred stock, or other stock-based awards of up to an aggregate total of 5,000,000 shares of our common stock. The form of the grants, exercise price, and maximum term, where applicable, were at the discretion of the Board of Directors and its Compensation Committee.

Additional information related to our 2000 Plan is as follows:

	2007		2006		2005
Restricted stock awards granted		0		0		439,500
Weighted average market price at date of grant		-		-		$7.31
Shares issued under stock awards		57,815		46,551		23,572
Cancellations of restricted stock awards		91,950		53,000		21,903
Restricted awards outstanding at year-end		374,500		524,265		623,816
Options exercisable at year-end		750,857		1,030,009		1,214,113

1999 Associates’ Stock Incentive Plan

The 1999 Plan, adopted by our Board of Directors in February 1999, provided for the grant of options to purchase up to an aggregate total of 1,000,000 shares of our common stock. The exercise price of such options could not be less than the fair market value on the date of grant. The maximum term of options issued under the plan is ten years. As of February 3, 2007, January 28, 2006, and January 29, 2005, 96,095 options, 120,700 options, and 191,200 options, respectively, were exercisable under this plan.

As a result of our adoption of the 2004 Plan, no further options or awards may be granted under the 2000 Plan or the 1999 Plan.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

1993 Employees’ Stock Incentive Plan

Our 1993 Employees’ Stock Incentive Plan (the “1993 Plan”) provided for the grant of options or awards for up to an aggregate total of 10,898,726 shares of common stock plus 1,843,258 unissued shares available under our discontinued 1990 Employees’ Stock Incentive Plan. The form of the grants and exercise price, where applicable, were at the discretion of our Board of Directors and its Compensation and Stock Option Committee. The maximum term of options issued under the 1993 Plan is ten years. As a result of the adoption of the 2004 Stock Award and Incentive Plan, we no longer intend to issue options or awards under this plan.

Additional information related to our 1993 Plan is as follows:

	2007		2006		2005
Restricted stock awards granted		0		0		393,000
Weighted average market price at date of grant		-		-		$7.20
Shares issued under stock awards		160,960		42,810		67,760
Stock awards vested with issuance deferred		0		90,000		90,000
Cancellations of restricted stock awards		0		0		11,400
Restricted awards outstanding at year-end		436,350		597,310		730,120
Options exercisable at year-end		932,540		1,461,360		2,127,498

1988 Key Employee Stock Option Plan

Our 1988 Key Employee Stock Option Plan provides for the grant of options to our key employees to purchase up to an aggregate total of 3,000,000 shares of our common stock. The exercise price of options granted under this plan is $1.00 per share. As of February 3, 2007, January 28, 2006, and January 29, 2005, 14,032 options, 23,321 options, and 32,245 options, respectively, were exercisable under this plan.

The shares issued and options granted under the above plans are subject to forfeiture if the employees do not remain employed by us for a specified period of time. Under the 2003 Plan, shares issued and options granted are subject to forfeiture if the individual does not remain a Director of the Company for a specified period of time except, under certain circumstances, in the case of retirement or voluntary termination.

As of February 3, 2007, the following shares were available for grant under our various stock plans: 2004 Plan - 7,223,675 shares; 2003 Plan - 191,787 shares; and 1988 Plan - 118,306 shares.

The weighted average grant date fair values for options and awards granted under the above plans, using the Black-Scholes model and assumptions described under “NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES;Stock-based Compensation” above, are as follows:

	2007		2006		2005
Option price equal to market price	$	5.41	$	2.44	$	2.44
Option price less than market price		13.06		8.67		7.70

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

The table below summarizes option activity in the above stock-based compensation plans:

				Average
	Option			Option		Option Prices
	Shares			Price		Per Share
Outstanding at January 31, 2004		12,133,986		$	5.637	$	1.000	-	$	12.125
Granted- option price equal to market price		101,925			7.573		6.590	-		8.440
Granted- option price less than market price		12,000			1.000		1.000	-		1.000
Canceled/forfeited		(493,811	)		10.019		1.000	-		15.125
Exercised		(6,249,634	)		5.390		1.000	-		8.460
Outstanding at January 29, 2005		5,504,466			5.549		1.000	-		8.460
Granted- option price equal to market price		55,582			9.287		9.100	-		12.480
Canceled/forfeited		(22,386	)		5.516		1.000	-		8.250
Exercised		(1,865,554	)		5.130		1.000	-		8.460
Outstanding at January 28, 2006		3,672,108			5.819		1.000	-		12.480
Granted- option price equal to market price		61,233			11.332		11.280	-		13.840
Granted- option price less than market price		31,600			1.000		1.000	-		1.000
Canceled/forfeited		(10,571	)		1.502		1.000	-		6.650
Exercised		(1,536,580	)		5.965		1.000	-		9.100
Outstanding at February 3, 2007		2,217,790		$	5.822	$	1.000	-	$	13.840

The table below summarizes information regarding weighted average exercise price and weighted average remaining contractual life in years for options outstanding and options exercisable as of February 3, 2007 for the ranges of exercise prices shown:

					Weighted
			Weighted		Average
			Average		Remaining
	Option		Option		Life
Ranges of Option Prices	Shares		Price		(Years)
$0.00- $1.00:
Options outstanding		72,191	$	1.000		2.8
Options exercisable		14,032		1.000
$1.01- $5.00:
Options outstanding		614,693	$	3.973		1.8
Options exercisable		614,693		3.973
$5.01- $10.00:
Options outstanding		1,466,591	$	6.591		3.6
Options exercisable		1,443,624		6.583
$10.01- $13.84:
Options outstanding		64,315	$	11.387		9.4
Options exercisable		4,315		12.869

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

The aggregate intrinsic value of options outstanding and options exercisable at February 3, 2007 (aggregate market value on February 3, 2007 less aggregate exercise price) was $16,473,000 and $15,501,000, respectively. The aggregate intrinsic value of options exercised during Fiscal 2007 was $11,556,000. The aggregate market value of stock awards vested during Fiscal 2007 and unvested stock awards outstanding as of February 3, 2007 was $8,180,000 and $37,418,000, respectively.

Employee Stock Purchase Plan

Our 1994 Employee Stock Purchase Plan permits employees to purchase shares of our common stock during quarterly offering periods at a price equal to 85% of the lower of the stock’s market price on the first day of, or the fifth business day after the end of, the offering period. Employees purchase shares through accumulation of payroll deductions of up to 10% of the employee’s compensation during each offering period. An aggregate total of 2,000,000 shares are reserved for grant under this plan. During Fiscal 2007, Fiscal 2006, and Fiscal 2005, 79,522 shares, 67,514 shares, and 72,350 shares respectively, were purchased under the plan. The weighted average grant date market value for shares purchased during Fiscal 2007, Fiscal 2006, and Fiscal 2005 was $13.15, $9.35, and $7.23 per share, respectively. At February 3, 2007, 1,156,668 shares were available for future purchases under this plan.

NOTE 12. CUSTOMER LOYALTY CARD PROGRAMS

We offer our customers various loyalty card programs. Customers that join these programs are entitled to various benefits, including discounts and rebates on purchases during the membership period. Customers generally join these programs by paying an annual membership fee. We recognize revenue from these loyalty programs as sales over the life of the membership period based on when the customer earns the benefits and when the fee is no longer refundable. We recognize costs we incur in connection with administering these programs as cost of goods sold when incurred.

Our FASHION BUG brand offers a customer loyalty card program that we operate under our FASHION BUG proprietary credit card program. Like our other loyalty programs, this program entitles customers to various rebates, discounts, and other benefits upon payment of an annual membership fee. Through Fiscal 2007, this program also provided customers with the option to cancel their membership within 90 days, entitling them to a full refund of their annual fee. Additionally, after 90 days, customers that cancelled their membership were entitled to a pro rata fee refund based on the number of months remaining on the annual membership. Accordingly, we recognize 25% of the annual membership fee as revenue after 90 days, with the remaining fee recognized on a pro rata basis over nine months. Effective February 22, 2007, this program was changed to provide customers with the option to cancel their membership within 30 days, entitling them to a full refund of their annual fee. During Fiscal 2007, Fiscal 2006 and Fiscal 2005, we recognized revenues of $10,634,000, $8,085,000, and $7,594,000, respectively, in connection with this program. We accrued $800,000 as of the end of Fiscal 2007, and $700,000 as of the end of Fiscal 2006 and Fiscal 2005, for the estimated costs of discounts earned and coupons issued and not redeemed.

Our CATHERINES brand also offers a loyalty card program. During Fiscal 2007, Fiscal 2006, and Fiscal 2005, we recognized revenues of $8,499,000, $7,553,000, and $7,470,000, respectively, in connection with this program.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 13. EMPLOYEE RETIREMENT BENEFIT PLANS

We provide a comprehensive retirement benefit program for our employees. This program provides for a noncontributory profit-sharing plan that covers substantially all full-time employees who meet age and service requirements. Contributions to this plan are completely discretionary and are determined by our Board of Directors on an annual basis.

The program also includes a 401(k) employee savings plan under which eligible participating employees may elect to contribute up to 80% of their compensation to an investment trust. The 401(k) plan includes a matching Company contribution of 50% of the participant’s elective contribution on up to 6% of the participant’s compensation. Participating employees are immediately vested in their own contributions. Full vesting in the matching Company contribution occurs on the earlier of the participant’s attainment of 5 years of service or upon retirement, death, or disability, as defined in the plan. Company matching contributions are made in cash, and the available trust investment options do not include investment in our own common stock.

As of the date of acquisition, Crosstown Traders provided a 401(k) savings plan for its employees with benefits similar to our plan. Participant account balances in the Crosstown Traders plan were transferred to our plan as of January 1, 2006, and participants in the Crosstown Traders plan retain credited years of service earned under that plan.

The total expense for the above plans was $5,514,000, $3,737,000, and $2,317,000 for Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively.

We provide a non-qualified deferred compensation plan to officers and certain key executives. Under this plan, participants may contribute up to 77% of their base compensation and 100% of bonus compensation. This plan includes a matching Company contribution of 50% of the participant’s contribution on up to 6% of the participant’s compensation, less any matching contributions made for the participant under our 401(k) plan. The total expense for this plan was $297,000, $599,000, and $930,000 for Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively.

We also provide a non-qualified defined contribution supplemental retirement plan for certain management and key executives. Under this plan, we contribute amounts to participant accounts based on age and years of plan service, as well as earnings as defined in the plan. The total expense for this plan was $1,098,000, $1,677,000, and $1,847,000 for Fiscal 2007, Fiscal 2006, and Fiscal 2005, respectively.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 14. EXPENSES RELATED TO COST REDUCTION PLAN

On March 18, 2003, we announced a cost reduction plan, designed to take advantage of the centralization of all corporate administrative services throughout the Company and to realize certain efficiencies, in order to improve profitability. We accounted for the plan in accordance with the provisions of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” and the plan was substantially completed during Fiscal 2004.

Costs incurred in connection with this plan during Fiscal 2004 included lease termination and related costs in connection with the closing of our leased Hollywood, Florida credit facility. These costs primarily represented the estimated fair value of the remaining lease obligation for the facility, reduced by estimated sublease income, which we recognized in accordance with SFAS No. 146 when we closed the facility.

As of January 31, 2004, the accrued lease termination costs related to the closing of the Hollywood facility were $2,596,000. In October 2004, in accordance with SFAS No. 146, we revised our estimated sublease income on the remaining lease obligation and recognized an additional expense of $605,000. In December 2004, we settled our remaining lease obligation for the Hollywood facility.

NOTE 15. NET INCOME PER SHARE

(In thousands)	2007		2006		2005
Basic weighted average common shares outstanding		122,388		119,831		116,196
Dilutive effect of assumed conversion of convertible notes		15,182		15,182		15,182
Dilutive effect of stock options		2,193		2,051		1,796
Diluted weighted average common shares and equivalents outstanding		139,763		137,064		133,174
Net income	$	108,923	$	99,391	$	64,526
Decrease in interest expense from assumed conversion of notes,
net of income taxes		4,514		4,514		4,539
Net income used to determine diluted earnings per share	$	113,437	$	103,905	$	69,065

Options with weighted average exercise price greater than market price, excluded from computation of diluted earnings per share:

	2007		2006		2005
Number of shares (thousands)		1		0		369
Weighted average exercise price per share	$	13.84	$	0.00	$	8.28

Grants of stock awards under our restricted stock award programs generally require continuing employment for a specified period of time as a condition for vesting of the award. Grants that have not vested and are subject to a risk of forfeiture are included in the calculation of diluted earnings per share using the treasury stock method if the impact of the award is dilutive. Upon vesting, shares issued under these award programs are included in the calculation of basic earnings per share.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 16. ASSET SECURITIZATION

Our FASHION BUG, CATHERINES, and PETITE SOPHISTICATE proprietary credit card receivables are originated by Spirit of America National Bank (the “Bank”), our wholly-owned credit card bank, which transfers its interest in the receivables to the Charming Shoppes Master Trust (the “Trust”) through a separate and distinct special-purpose entity. The Trust is an unconsolidated qualified special-purpose entity (“QSPE”). Through Fiscal 2007, our Crosstown Traders apparel-related catalog proprietary credit card receivables, which we securitized subsequent to our acquisition of Crosstown Traders, were originated in a non-bank program by Crosstown Traders. Crosstown Traders transferred its interest in the receivables to Catalog Receivables LLC, a separate and distinct unconsolidated QSPE, through another separate and distinct special-purpose entity. On February 5, 2007, the Bank acquired the account relationships of the Crosstown Traders catalog proprietary credit cards and all subsequent new receivables are originations of the Bank. This acquisition did not cause a change in the securitization entities used by the Crosstown Traders proprietary credit card program. The QSPEs can sell interests in these receivables on a revolving basis for a specified term. At the end of the revolving period, an amortization period begins during which the QSPEs make principal payments to the parties that have entered into the securitization agreement with the QSPEs. All assets of the QSPEs (including the receivables) are isolated and support the securities issued by those entities.

We record gains or losses on the securitization of our proprietary credit card receivables based on the estimated fair value of the assets retained and liabilities incurred in the sale. Gains represent the present value of the estimated cash flows that we have retained over the estimated outstanding period of the receivables. This excess cash flow essentially represents an “interest-only” (“I/O”) strip, consisting of the present value of the finance charges and late fees in excess of the amounts paid to certificate holders, credit losses, and service fees.

During Fiscal 2007, Fiscal 2006, and Fiscal 2005, we recognized the following activity related to the I/O strip:

(In thousands)	2007		2006		2005
Additions to the I/O strip	$	25,425	$	24,861	$	12,396
Amortization and valuation adjustments		24,608		20,190		11,214
Value of the I/O strip at end of year		15,878		15,061		10,390

In addition, we recognized a servicing liability in Fiscal Years 2007, 2006, and 2005 because the servicing fees we expect to receive from the securitizations do not provide adequate compensation for servicing the receivables. The servicing liability represents the present value of the excess of our cost of servicing over the servicing fees received, and is recorded at its estimated fair value. Because quoted market prices are generally not available for the servicing of proprietary credit card portfolios of comparable credit quality, we determine the fair value of the cost of servicing by calculating all costs associated with billing, collecting, maintaining, and providing customer service during the expected life of the securitized credit card receivable balances. We discount the amount of these costs in excess of the servicing fees over the estimated life of the receivables sold.The discount rate and estimated life assumptions used for the present value calculation of the servicing liability are consistent with those used for the I/O strip.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

During Fiscal 2007, Fiscal 2006, and Fiscal 2005, we recognized the following activity related to the servicing liability:

(In thousands)	2007		2006		2005
Additions to the servicing liability	$	2,972	$	3,661	$	2,828
Amortization of the servicing liability		3,166		3,768		3,474
Value of the servicing liability at end of year		2,103		2,297		2,404

We amortize the I/O strip and servicing liability on a straight-line basis over the expected life of the credit card receivables, which is generally less than one year. We estimate the expected life primarily by using the historical average of principal payments as a percent of outstanding trust receivables sold.

The following table presents additional information relating to the QSPEs for Fiscal 2007, Fiscal 2006, and Fiscal 2005:

(In thousands)	2007		2006		2005
Proceeds from sales of new receivables to QSPE	$	619,597	$	638,624	$	335,875
Collections reinvested in revolving-period securitizations		701,859		616,336		409,796
Cash flows received on retained interests		73,899		63,586		46,999
Servicing fees received		6,981		6,510		4,826
Net credit losses		16,822		21,229		18,003
Investor certificates outstanding at end of year		358,100		354,040		295,750
Credit card balances 90 or more days delinquent at end of year		9,904		9,037		7,952

We are the servicer of the receivables transferred to the QSPEs, and we receive a servicing fee of approximately 2% of the investor interest. The investor certificates outstanding as of February 3, 2007 mature as follows: $141,600,000 in the fiscal year ending February 2, 2008, $36,500,000 in the fiscal year ending January 31, 2009, $144,900,000 in the fiscal year ending January 30, 2010, and $35,100,000 in the fiscal year ending January 29, 2011. Our certificates and retained interests in our securitizations, which aggregated $60,643,000 and $66,828,000 at February 3, 2007 and January 28, 2006, respectively, are generally subordinated in right of payment to certificates issued by the QSPEs to third-party investors. Our obligation to repurchase receivables sold to the QSPEs is limited to those receivables that, at the time of their transfer, fail to meet the QSPE’s eligibility standards under normal representations and warranties. To date, our repurchases of receivables pursuant to this obligation have been insignificant.

During Fiscal 2002, the Trust issued $100,000,000 of new five-year asset-backed certificates (“Series 2002-1”) in a private placement, of which $80,000,000 had been sold to investors as of the end of Fiscal 2004. The weighted-average fixed interest rate on the certificates sold is 4.68%. During Fiscal 2005, we sold the remaining $20,000,000 of Series 2002-1 certificates that we had been holding as a retained interest. Of the $20,000,000 of Series 2002-1 certificates sold, $9,500,000 were sold at a fixed interest rate. The weighted average interest rate on the fixed-rate certificates sold is 4.93%.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

During Fiscal 2004, the Trust closed on a new conduit credit card securitization facility of $132,000,000 that provided additional funding of up to $100,000,000 for a term of up to two years, subject to an annual renewal. During Fiscal 2006, this facility was modified to reduce the funding limit to $50,000,000. As of February 3, 2007, no credit card receivables were funded under this facility.

On August 5, 2004, the Trust issued $180,000,000 of new five-year asset-backed certificates (“Series 2004-1”) in a private placement under Rule 144A. Of the $180,000,000 of certificates issued, $161,100,000 were sold to investors and we held $18,900,000 as a retained interest. The certificates pay interest to investors on a floating-rate basis tied to one-month LIBOR. Concurrently, the Trust entered into a series of fixed-rate interest rate swap agreements with respect to the $161,100,000 of certificates sold to investors. The blended weighted-average interest rate on the hedged certificates is 4.90%. The Trust used $61,500,000 of the proceeds to pay down other securitization series and placed the remaining proceeds of $118,500,000 into a pre-funding cash account. During Fiscal 2005 and Fiscal 2006, the Trust used funds from the securitization facilities, including the proceeds from the pre-funding cash account, to fund $88,600,000 of Series 1999-1 amortization as well as to provide financing for additional receivables, including the $54,600,000 acquisition of the CATHERINES proprietary credit card portfolio in March 2005 (see below). During Fiscal 2005, we sold to investors $9,450,000 of the $18,900,000 of Series 2004-1 certificates that we held as a retained interest.

During Fiscal 2006, Catalog Receivables LLC closed on a dedicated conduit credit card securitization facility that provides funding of up to $55,000,000 on a discounted basis for a term of one year, subject to an annual renewal. As of February 3, 2007, $44,500,000 of credit card receivables were funded under this facility. We renewed this facility during Fiscal 2007 on its renewal date, and expect to renew the facility during Fiscal 2008 on its renewal date.

Our management uses key valuation assumptions in determining the fair value of our I/O strip. We estimate the values for these assumptions using historical data, the impact of the current economic environment on the performance of the receivables sold, and the impact of the potential volatility of the current market for similar instruments in assessing the fair value of the retained interests.

The key assumptions used to value our retained interest were as follows:

	February 3,		January 28,
	2007		2006
Payment rate		12.1-17.6%		11.7-17.2%
Residual cash flows discount rate		15.5-16.5%		15.5%
Net credit loss percentage		6.0-11.0%		8.5-12.8%
Average life of receivables sold		0.5-0.7 years		0.5-0.7 years

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

The following table presents the decrease in our I/O strip receivable that would result from hypothetical adverse changes of 10% and 20% in the assumptions used to determine the fair value of the I/O strip. This information is presented in accordance with the requirements of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”

(In thousands)	10% Change		20% Change
Payment rate	$	1,147	$	2,086
Residual cash flows discount rate		62		123
Credit loss percentage		864		1,735

Charming Shoppes Receivables Corp. (“CSRC”), Charming Shoppes Seller, Inc., and Catalog Seller LLC, our consolidated wholly-owned indirect subsidiaries, are separate special-purpose entities (“SPEs”) created for the securitization program. As of February 3, 2007, our investment in asset-backed securities included $11,050,000 of QSPE certificates, an I/O strip of $15,879,000, and other retained interests of $33,714,000. These assets are first and foremost available to satisfy the claims of the respective creditors of these separate corporate entities, including certain claims of investors in the QSPEs. Additionally, with respect to certain Trust Certificates, if either the Trust or Charming Shoppes, Inc. fails to meet certain financial performance standards, the Trust would be obligated to reallocate to third-party investors holding certain certificates issued by the Trust, collections in an amount up to $9,500,000 that otherwise would be available to CSRC. The result of this reallocation would be to increase CSRC’s retained interest in the Trust by the same amount. Subsequent to such a transfer occurring, and upon certain conditions being met, these same investors would be required to repurchase these interests. As of February 3, 2007, we were in compliance with these performance standards and, as a result, there were no reallocated collections.

In addition to the above, we could be affected by certain other events that would cause the QSPEs to hold proceeds of receivables, which would otherwise be available to be paid to us with respect to our subordinated interests, within the QSPEs as additional enhancement. For example, if we fail or the QSPEs fail to meet certain financial performance standards, a credit enhancement condition would occur, and the QSPEs would be required to retain amounts otherwise payable to us. In addition, the failure to satisfy certain financial performance standards could further cause the QSPEs to stop using collections on QSPE assets to purchase new receivables, and would require such collections to be used to repay investors on a prescribed basis, as provided in the securitization agreements. If this were to occur, it could result in our having insufficient liquidity; however, we believe we would have sufficient notice to seek alternative forms of financing through other third-party providers. As of February 3, 2007, the QSPEs were in compliance with all applicable financial performance standards. Amounts placed into enhancement accounts, if any, that are not required for payment to other certificate holders will be available to us at the termination of the securitization series. We have no obligation to directly fund the enhancement account of the QSPEs, other than for breaches of customary representations, warranties, and covenants and for customary indemnities. These representations, warranties, covenants, and indemnities do not protect the QSPEs or investors in the QSPEs against credit-related losses on the receivables. The providers of the credit enhancements and QSPE investors have no other recourse to us.

99

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

We have a non-recourse agreement under which a third party provides an accounts receivable proprietary credit card sales accounts receivable funding facility for sales attributable to our LANE BRYANT brand. The facility expires in October 2007. Upon termination of this agreement, we have the right to purchase the receivables allocated to the Lane Bryant stores under such agreement at book value from the third party. We currently plan to exercise our option to purchase the LANE BRYANT receivables upon the termination of the agreement. We estimate that the apportionment of receivables allocated to the accounts with respect to the LANE BRYANT retail stores will be approximately $200 million at termination. We anticipate that substantially all proceeds required for this purchase will be funded through the issuance of new securitization series through our off-balance-sheet securitization facilities. In March 2005, we exercised our option under a similar non-recourse agreement to purchase the CATHERINES credit card portfolio for a final purchase price of $54,600,000. The purchase was funded through our securitization facilities, including a portion of the proceeds from the sale of certificates under our Series 2004-1 securitization facility (see above).

Under these agreements, the third parties reimburse(d) us daily with respect to the proprietary credit card sales generated by the respective store’s credit card accounts. Additional information for Fiscal 2007, Fiscal 2006, and Fiscal 2005 regarding these agreements is as follows:

(In thousands)	2007			2006			2005
Net funding received from sales of receivables:
LANE BRYANT	$	350,270		$	332,885		$	284,426
CATHERINES		--	(1)		--	(1)		96,717
Net accounts receivable balance held by third party
at end of year:
LANE BRYANT(2)		233,793			209,368			199,098
CATHERINES		--	(1)		--	(1)		58,167
____________________
(1)Spirit of America National Bank acquired the CATHERINES portfolio in Fiscal 2006.
(2)The LANE BRYANT net accounts receivable balances include amounts allocated to the use of the LANE BRYANT credit card at our LANE BRYANT stores and amounts allocated to the use of the LANE BRYANT credit card through a third-party catalog program. Our option to purchase the LANE BRYANT credit card receivables applies only to the receivables associated with accounts whose primary use of the credit card is at our LANE BRYANT stores.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 17. LEASES

We lease substantially all of our store properties under non-cancelable operating lease agreements. Generally, these leases have initial periods of 5 to 20 years and contain provisions for co-tenancies, renewal options, additional rents based on a percentage of sales, and payment of real estate taxes and common area charges. We also lease certain other buildings and equipment.

Our rent expense was:

(In thousands)	2007		2006		2005
Minimum rent	$	236,839	$	207,534	$	193,256
Contingent rent		39,364		34,785		32,709
	$	276,203	$	242,319	$	225,965

Minimum annual rent commitments for all non-cancelable leases for the next five fiscal years and thereafter are: Fiscal 2008- $221,214,000; Fiscal 2009- $181,458,000; Fiscal 2010- $147,251,000; Fiscal 2011- $114,554,000; Fiscal 2012- $77,201,000; Thereafter- $162,472,000.

Rent expense includes charges from Limited Brands for office space in Reynoldsburg, Ohio under an agreement that expired in February 2006. In January 2005, we entered into an agreement with a separate third party that provides for the leasing of a 135,000 square foot facility in Columbus, Ohio to replace the Reynoldsburg facility as a new home office for LANE BRYANT. Minimum annual rent under the lease for the Columbus facility is $1,704,000 per annum in years one through five and $1,759,000 in years six through ten. The lease commenced on January 20, 2006. The lease provides for two five-year renewal periods and an option to purchase, and contains customary termination rights.

LANE BRYANT currently subleases 31 properties from Limited Brands pursuant to a Master Sublease. The properties subject to the Master Sublease were operated as LANE BRYANT stores prior to our acquisition of LANE BRYANT. We have guaranteed the obligations of LANE BRYANT under the Master Sublease. The minimum annual rent commitments shown above include amounts payable under the LANE BRYANT master sublease with Limited Brands which we have guaranteed, as follows: Fiscal 2008- $4,977,000; Fiscal 2009- $4,176,000; Fiscal 2010- $1,682,000; Fiscal 2011- $1,069,000; Fiscal 2012- $673,000; Thereafter- $1,714,000.

During Fiscal 2006, we signed an agreement to assume the leases on 76 outlet store locations. These leases represent the majority of the outlet locations previously operated by Retail Brand Alliance, which ceased its outlet operations early in 2006. The agreement was effective on April 1, 2006, and provided an entry into multiple outlet centers for our LANE BRYANT brand. These stores opened during Fiscal 2007, and average 9,400 square feet. The outlet stores are being operated under the LANE BRYANT OUTLET and PETITE SOPHISTICATE OUTLET nameplates.

Deferred rent liabilities related to rent escalations and landlord incentives or allowances of $86,348,300 and $68,117,000 as of February 3, 2007 and January 28, 2006 respectively, are included in other non-current liabilities on our consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 18. SEGMENT REPORTING

Effective with the acquisition of Crosstown Traders (see “NOTE 2. ACQUISITION OF CROSSTOWN TRADERS, INC.’ above), we operate and report in two segments, Retail Stores and Direct-to-Consumer. We determine our operating segments based on the way our chief operating decision-makers review our results of operations. We consider our retail stores and store-related E-commerce as operating segments that are similar in terms of economic characteristics, production processes, and operations. Accordingly, we have aggregated our retail stores and store-related E-commerce into a single reporting segment (the “Retail Stores” segment). Our catalog and catalog-related E-commerce operations, which resulted from our acquisition of Crosstown Traders on June 2, 2005, are separately reported under the Direct-to-Consumer segment.

The accounting policies of the segments are generally the same as those described in “NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” above. Our chief operating decision-makers evaluate the performance of our operating segments based on a measure of their contribution to operations, which consists of net sales less the cost of merchandise sold and certain directly identifiable and allocable operating costs. Beginning in Fiscal 2007, we discontinued the allocation of certain corporate costs, such as shared service costs, information systems support costs, and insurance costs to our Retail Stores segment (historically, we have not allocated such costs to our Direct-to-Consumer segment). Accordingly, the comparative selected financial information by reportable segment shown below has been adjusted to exclude these costs from the Retail Stores segment. For the Retail Stores segment, operating costs consist primarily of store selling and occupancy costs. For our Direct-to-Consumer segment, operating costs consist primarily of catalog development, production, and circulation costs, E-commerce advertising costs, and order processing costs. Other costs that are currently allocated to the segment include warehousing costs.

Corporate and Other includes unallocated general and administrative costs, shared service center costs, information systems support costs, corporate depreciation and amortization, corporate occupancy costs, the results of our proprietary credit card operations, and other non-routine charges. Operating contribution for the Retail Stores and Direct-to-Consumer segments less Corporate and Other net expenses equals income before interest and taxes.

Operating segment assets are those directly used in, or allocable to, that segment’s operations. For the Retail Stores segment, operating assets consist primarily of inventories; the net book value of store facilities; and goodwill and intangible assets. For the Direct-to-Consumer segment, operating assets consist primarily of trade receivables; inventories; deferred advertising costs; the net book value of catalog operating facilities; and goodwill and intangible assets. Corporate and Other assets include corporate cash and cash equivalents; the net book value of corporate facilities; deferred income taxes; and other corporate long-lived assets.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Selected financial information for our operations by reportable segments and a reconciliation of the information by segment to our consolidated totals is as follows:

	Retail		Direct-to-		Corporate
(In thousands)	Stores(1)		Consumer(2)		and Other			Consolidated
Fiscal 2007
Net sales	$	2,636,409	$	427,760	$	3,348		$	3,067,517
Depreciation and amortization		46,746		3,790		40,708			91,244
Income before interest and taxes		253,982		15,798		(88,911	)		180,869
Interest expense						(14,746	)		(14,746	)
Income tax provision						(57,200	)		(57,200	)
Net income		253,982		15,798		(160,857	)		108,923
Capital expenditures		103,510		9,954		19,692			133,156
As of February 3, 2007
Total assets	$	869,776	$	346,741	$	494,425		$	1,710,942
Fiscal 2006
Net sales	$	2,452,657	$	298,888	$	4,180		$	2,755,725
Depreciation and amortization		44,031		1,235		39,031			84,297
Income before interest and taxes		237,462		19,918		(87,068	)		170,312
Interest expense						(17,911	)		(17,911	)
Income tax provision						(53,010	)		(53,010	)
Net income		237,462		19,918		(157,989	)		99,391
Capital expenditures		74,598		2,394		26,843			103,835
As of January 28, 2006
Total assets	$	745,751	$	345,357	$	481,475		$	1,572,583
Fiscal 2005
Net sales	$	2,330,483			$	4,253		$	2,334,736
Depreciation and amortization		44,341				32,728			77,069
Income before interest and taxes		196,360				(79,082	)		117,278
Interest expense						(15,610	)		(15,610	)
Income tax provision						(37,142	)		(37,142	)
Net income		196,360				(131,834	)		64,526
Capital expenditures		34,115				26,450			60,565
As of January 29, 2005
Total assets	$	700,448			$	603,323		$	1,303,771
____________________
(1)Fiscal 2007 includes 82 LANE BRYANT OUTLET stores and 45 PETITE SOPHISTICATE OUTLET stores.
(2)From date of acquisition of Crosstown Traders, Inc. on June 2, 2005.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

Goodwill by reportable business segment is as follows:

	February 3,		January 28,
(In thousands)	2007		2006
Retail Stores:
LANE BRYANT	$	23,436	$	23,436
CATHERINES		43,230		43,230
Direct-to-Consumer:
Crosstown Traders		86,704		87,887
	$	153,370	$	154,553

NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of our financial instruments are as follows:

	February 3, 2007				January 28, 2006
	Carrying		Fair		Carrying		Fair
(In thousands)	Amount		Value		Amount		Value
Assets:
Cash and cash equivalents	$	143,838	$	143,838	$	130,132	$	130,132
Available-for-sale securities		1,997		1,997		20,150		20,150
Investment in asset-backed securities		60,643		60,643		66,828		66,828
Liabilities:
4.75% Senior Convertible Notes due 2012		149,999		205,686		150,000		203,610
Revolving credit facility		0		0		50,000		50,000
6.07% mortgage note, due October 2014		11,696		11,410		12,261		12,151
6.53% mortgage note, due November 2012		8,050		7,939		9,450		9,397
7.77% mortgage note, due December 2011		8,496		8,675		9,050		9,386
Other long-term debt		917		854		1,158		1,016

The fair value of cash and cash equivalents approximates their carrying amount because of the short maturities of such instruments. The fair value of available-for-sale securities is based on quoted market prices of the securities, except for certain low-income housing partnerships that have no available bid/ask or sales prices as they are not traded in the open market. The fair values of our convertible notes are based on quoted market prices for the securities. The fair values of the mortgage notes and other long-term debt are based on estimated current interest rates that we could obtain on similar borrowings.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED FEBRUARY 3, 2007

(Continued)

NOTE 20. QUARTERLY FINANCIAL INFORMATION (Unaudited)

	First			Second			Third			Fourth
(In thousands, except per share amounts)	Quarter			Quarter			Quarter			Quarter
Fiscal 2007(1)
Net sales	$	734,922		$	763,353		$	695,278		$	873,964
Gross profit		233,850	(2)		228,753	(2)		214,460	(2)		248,570
Net income		32,061			32,563			19,357			24,942
Basic net income per share	$	.26		$	.27		$	.16		$	.20
Diluted net income per share		.24			.24			.15			.19
Fiscal 2006(1)
Net sales	$	603,353		$	689,075		$	663,677		$	799,620
Gross profit		200,650			220,907			200,189			219,632
Net income		30,017			39,424			10,762			19,188
Basic net income per share	$	.25		$	.33		$	.09		$	.16
Diluted net income per share		.23			.30			.09			.15
____________________
(1)Fiscal 2007 is a 53-week fiscal year consisting of three 12-week quarters and a fourth quarter of 17 weeks. Fiscal 2006 is a 52-week fiscal year consisting of three 12-week quarters and a fourth quarter of 16 weeks.
(2)Includes reclassifications to conform to fourth-quarter and full-year presentation.

105

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate and in such a manner as to allow timely decisions regarding required disclosure. Our Disclosure Committee, which is made up of several key management employees and reports directly to the CEO and CFO, assists our management, including our CEO and CFO, in fulfilling their responsibilities for establishing and maintaining such controls and procedures and providing accurate, timely, and complete disclosure.

As of the end of the period covered by this report on Form 10-K (the “Evaluation Date”), our Disclosure Committee, under the supervision and with the participation of management, including our CEO and CFO, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our management, including our CEO and CFO, has concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

Evaluation of Internal Control Over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting as of February 3, 2007 appears on page 56 of this Report on Form 10-K, and is incorporated herein by reference. The Report of our Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting appears on pages 57-58 of this Report on Form 10-K, and is incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

Other than internal control changes resulting from the integration activities of our June 2, 2005 acquisition of Crosstown Traders, and the recent conversion of our E-commerce operating platforms and systems, there has been no change in our internal control over financial reporting that occurred during the fiscal quarter ended February 3, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Not applicable.

106

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Information regarding our directors and executive officers is included under the captions “Directors Standing for Election,”“Biographies of Directors,”“Corporate Governance at Charming Shoppes,”“Compensation of Directors,” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days of the end of our fiscal year, which is incorporated herein by reference. Information regarding Executive Officers is included under “Additional Part I Information - Our Executive Officers,” in Part I of this Report.

We have adopted the Charming Shoppes, Inc. Business Ethics and Standards of Conduct Policy (the “Policy”), that applies to all of our directors, officers, and associates, including our principal executive officer, principal financial officer, and principal accounting officer. The Policy has been filed as Exhibit 14 to this report on Form 10-K. We have also adopted corporate governance guidelines (the “Guidelines”) and charters (the “Charters”) for the audit committee, the compensation committee, the corporate governance and nominating committee, and the finance committee of our Board of Directors. The Policy, Guidelines, and Charters are available on our Internet website, www.charmingshoppes.com, in the “About Us” section, under “Corporate Governance”. A copy of the Policy, Guidelines, and Charters are also available, at no charge, upon written request to Charming Shoppes, Inc., Attn. Director of Investor Relations, 450 Winks Lane, Bensalem, PA, 19020.

Our Board of Directors has sole authority for making any amendments to, or granting waivers from, any provision of the Policy that affects our executive officers or directors, including our principal executive officer, principal financial officer, or principal accounting officer. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any such amendment or waiver by disclosing the nature of such amendment or waiver in a report on Form 8-K within four days.

Item 11. Executive Compensation

Information regarding executive compensation is included under the captions “Compensation of Executive Officers” and “Report of the Compensation Committee”in our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days of the end of our fiscal year, which is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding the security ownership of certain beneficial owners and management and securities authorized for issuance under equity compensation plans is included under the captions “Equity Compensation Plan Information” and “Principal Shareholders and Management Ownership” in our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days of the end of our fiscal year, which is incorporated herein by reference.

107

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships and director independence is included under the captions “Corporate Governance at Charming Shoppes” and “Compensation Committee Interlocks and Insider Participation” in our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days of the end of our fiscal year, which is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Information regarding principal accountant fees and services is included under the caption “Audit and Other Fees” in our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days of the end of our fiscal year, which is incorporated herein by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1)Financial Statements

The following Consolidated Financial Statements of Charming Shoppes, Inc. and its subsidiaries are included in Part II, Item 8:

	Page
Management’s Report on Internal Control over Financial Reporting	56
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	57-58
Report of Independent Registered Public Accounting Firm	59
Consolidated Balance Sheets - January 28, 2006 and January 29, 2005	60
Consolidated Statements of Operations and Comprehensive Income - Years Ended January 28, 2006, January 29, 2005, and January 31, 2004	61
Consolidated Statements of Stockholders' Equity - Years Ended January 28, 2006, January 29, 2005, and January 31, 2004	62
Consolidated Statements of Cash Flows - Years Ended January 28, 2006, January 29, 2005, and January 31, 2004	63
Notes to Consolidated Financial Statements	64

(a)(2) Financial Statement Schedules

All schedules required by Rule 5-04 of Regulation S-X have been omitted as they are not applicable, not required, or the information has been provided in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Report on Form 10-K.

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(b) Exhibits, including those incorporated by reference

The following is a list of Exhibits filed as part of this Annual Report on Form 10-K. Where so indicated, Exhibits that were previously filed are incorporated by reference. For Exhibits incorporated by reference, the location of the Exhibit in the previous filing is indicated in parenthesis.

Plan of Acquisition, Reorganization, Arrangement, Liquidation, or Succession

2.1	Covenant Agreement, dated as of August 16, 2001, between Charming Shoppes, Inc. and Limited Brands, Inc., incorporated by reference to Form 8-K of the Registrant dated August 16, 2001, filed on August 31, 2001. (Exhibit 2.3).
2.2	Master Sublease, dated as of August 16, 2001, between Limited Brands, Inc. and Lane Bryant, Inc., incorporated by reference to Form 8-K of the Registrant dated August 16, 2001, filed on August 31, 2001. (Exhibit 2.4).
2.3	Stock Purchase Agreement dated May 19, 2005 by and among Chestnut Acquisition Sub, Inc., Crosstown Traders, Inc., the Securityholders of Crosstown Traders, Inc. whose names are set forth on the signature pages thereto and J.P. Morgan Partners (BHCA), L.P., as the Sellers’ Representative, incorporated by reference to Form 8-K of the Registrant dated June 2, 2005, filed on June 8, 2005. (File No. 000-07258, Exhibit 2.1).

Articles of Incorporation and By-Laws

3.1	Restated Articles of Incorporation, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (File No. 000-07258, Exhibit 3.1).
3.2	By-Laws, as Amended and Restated, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (File No. 000-07258, Exhibit 3.2).

Instruments Defining the Rights of Security Holders, Including Indentures

4.1	Amended and Restated Rights Agreement, dated as of February 1, 2001, between Charming Shoppes, Inc. and American Stock Transfer & Trust Company, as Rights Agent, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 2001. (File No. 000-07258, Exhibit 4.1).
4.2	Registration Agreement, dated as of August 16, 2001, between Charming Shoppes, Inc. and Limited Brands, Inc., incorporated by reference to Form 8-K of the Registrant dated August 16, 2001, filed on August 31, 2001. (File No. 000-07258, Exhibit 4.1).
4.3	Indenture, dated as of May 28, 2002, between Charming Shoppes, Inc. and Wachovia Bank, National Association, incorporated by reference to Form 10-Q of the Registrant for the quarter ended May 4, 2002. (File No. 000-07258, Exhibit 4.1).

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4.4	Registration Rights Agreement, dated as of May 28, 2002, by and among Charming Shoppes, Inc., as Issuer, and J. P. Morgan Securities, Inc., Bear Stearns & Co., Inc., First Union Securities, Inc., Lazard Freres & Co., LLC, and McDonald Investments, Inc., as Initial Purchasers, incorporated by reference to Form 10-Q of the Registrant for the quarter ended May 4, 2002. (File No. 000-07258, Exhibit 4.2).
4.5	Second Amended and Restated Loan and Security Agreement, dated July 28, 2005, by and among Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., FB Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc., and Crosstown Traders, Inc. as borrowers; a syndicate of banks and other financial institutions as lenders, including Wachovia Bank, National Association as agent for the lenders; and certain of the Company’s subsidiaries as guarantors, incorporated by reference to Form 8-K of the Registrant dated July 28, 2005, filed on August 3, 2005. (File No. 000-07258, Exhibit 10.1).
4.6	Amendment No. 1, dated as of May 17, 2006, to Second Amended and Restated Loan and Security Agreement, dated July 28, 2005, by and among Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., FB Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc., and Crosstown Traders, Inc. as borrowers; a syndicate of banks and other financial institutions as lenders, including Wachovia Bank, National Association as agent for the lenders; and certain of the Company’s subsidiaries as guarantors, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 29, 2006. (File No. 000-07258, Exhibit 99.1).

Our miscellaneous long-term debt instruments and credit facility agreements, under which the underlying authorized debt is equal to less than 10% of our consolidated total assets, may not be filed as exhibits to this report. We agree to furnish to the Commission, upon request, copies of any such instruments not filed.

Material Contracts

10.1.1	Second Amended and Restated Pooling and Servicing Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank as Trustee, incorporated by reference to Form 8-K of Charming Shoppes Master Trust and Charming Shoppes Receivables Corp., (File No. 333-71757) dated July 22, 1999. (Exhibit No. 4.1).
10.1.2	Fourth Amendment, dated as of August 5, 2004, to Second Amended and Restated Pooling and Servicing Agreement, dated as of November 25, 1997, as amended on July 22, 1999 and on May 8, 2001, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association (formerly known as First Union National Bank) as Trustee, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.4).
10.1.3	Amendment, dated as of March 18, 2005, to Second Amended and Restated Pooling and Servicing Agreement, dated as of November 25, 1997, as amended on July 22, 1999, May 8, 2001, and August 5, 2004, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association, as Trustee, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2005. (File No. 000-07258, Exhibit 10.1.3).

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10.1.4	Series 1999-1 Supplement, dated as of July 22, 1999, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, for $150,000,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 1999-1, incorporated by reference to Form 8-K of Charming Shoppes Master Trust and Charming Shoppes Receivables Corp., (File No. 333-71757) dated July 22, 1999. (Exhibit No. 4.2).
10.1.5	Receivables Purchase Agreement, dated as of May 28, 1999, among Charming Shoppes Seller, Inc. as Seller, Spirit of America, Inc., as Servicer, Clipper Receivables Corporation, as Purchaser, State Street Capital Corporation, as Administrator, and State Street Bank & Trust Company, as Relationship Bank, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.1.4).
10.1.6	Series 1999-2 Supplement, dated as of May 28, 1999, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, for $55,750,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 1999-2, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (File No. 000-07258, Exhibit 10.1.23).
10.1.7	Series 2000-VFC Supplement, dated as of November 9, 2000, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, on behalf of the Series 2000-VFC Certificateholders, for up to $60,122,700 Charming Shoppes Master Trust Series 2000-VFC, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 2001. (File No. 000-07258, Exhibit 10.1.16).
10.1.8	Certificate Purchase Agreement, dated as of November 9, 2000, among Charming Shoppes Receivables Corp. as Seller and as the Class B Purchaser, Spirit of America, Inc. as Servicer, Monte Rosa Capital Corporation as the Conduit Purchaser, and ING Baring (U.S.) Capital Markets LLC as Administrator for the Conduit Purchaser, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 2001. (File No. 000-07258, Exhibit 10.1.17).
10.1.9	Purchase Agreement dated as of March 14, 2005 between Citibank USA, N.A., Spirit of America National Bank and Catherines, Inc., incorporated by reference to Form 8-K of the Registrant dated March 18, 2005, filed on March 22, 2005. (File No. 000-07258, Exhibit 99).
10.1.10	Credit Card Processing Agreement, among World Financial Network National Bank, Lane Bryant, Inc., and Sierra Nevada Factoring, Inc., dated as of January 31, 1996, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.1.9).
10.1.11	Amendment to Credit Card Processing Agreement, among World Financial Network National Bank, Lane Bryant, Inc., and Sierra Nevada Factoring, Inc., dated as of January 28, 2005, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2005. (File No. 000-07258, Exhibit 10.1.12).
10.1.12	Purchase and Sale Agreement, among Spirit of America National Bank, as Seller, and Charming Shoppes Receivables Corp., as Purchaser, dated as of November 25, 1997, incorporated by reference to Form S-1/A of Charming Shoppes Receivables Corp. (File No. 333-71757, Exhibit 10.1(a)).

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10.1.13	First Amendment to Purchase and Sale Agreement, among Spirit of America National Bank, as Seller, and Charming Shoppes Receivables Corp., as Purchaser, dated as of July 22, 1999, incorporated by reference to Form 8-K of Charming Shoppes Receivables Corp. (File No. 333-71757, Exhibit 10.1).
10.1.14	Series 2002-1 Supplement, dated as of November 20, 2002, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, as amended on July 22, 1999 and on May 8, 2001, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association, as Trustee, for $100,000,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 2002-1, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.1).
10.1.15	Charming Shoppes Master Trust $63,500,000 Fixed Rate Class A Asset Backed Certificates, Series 2002-1 and $16,500,000 Fixed Rate Class B Asset Backed Certificates, Series 2002-1 Certificate Purchase Agreement, dated as of November 22, 2002, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.2).
10.1.16	Certificate Purchase Agreement, dated as of November 22, 2002, among Wachovia Bank, National Association, as Trustee, Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and The Class C Holders described therein, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.3).
10.1.17	Certificate Purchase Agreement, dated as of November 22, 2002, among Wachovia Bank, National Association, as Trustee, Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and The Class D Holders described therein, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.4).
10.1.18	$14,000,000 Promissory Note, dated October 2002, between White Marsh Distribution, LLC., as Borrower, and General Electric Capital Business Asset Funding Corporation, as Payee and Holder, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.5).
10.1.19	Commercial Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Fixture Filing, made as of October 2002, among the Grantor, White Marsh Distribution, LLC, as Borrower, in favor of James M. Smith, as Trustee, for the benefit of the Beneficiary, General Electric Capital Business Asset Funding Corporation, as Lender, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.6).
10.1.20	Certificate Purchase Agreement, dated as of January 21, 2004, among Charming Shoppes Receivables Corp., as Seller and as the Class B Purchaser, Spirit of America, Inc., as Servicer, Sheffield Receivables Corporation, as the Conduit Purchaser, and Barclay’s Bank PLC as Administrator for the Conduit Purchaser, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 31, 2004. (File No. 000-07258, Exhibit 10.1.17).

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10.1.21	Series 2004-VFC Supplement, dated as of January 21, 2004, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997 and amended as of July 22, 1999 and as of May 8, 2001, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association, as Trustee on behalf of the Series 2004-VFC Certificateholders, for up to $132,000,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 2004-VFC, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 31, 2004. (File No. 000-07258, Exhibit 10.1.18).
10.1.22	Series 2004-1 Supplement, dated as of August 5, 2004, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997 (as amended on July 22, 1999, on May 8, 2001 and on August 5, 2004), among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association, as Trustee, on behalf of the Series 2004-1 Certificateholders, for $180,000,000 Charming Shoppes Master Trust Series 2004-1, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.5).
10.1.23	Certificate Purchase Agreement, dated as of July 21, 2004, among Charming Shoppes Receivables Corp., Fashion Service Corp., Spirit of America, Inc., and Barclay’s Capital Inc. (as representative of the Initial Purchasers), incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.6).
10.1.24	Certificate Purchase Agreement, dated as of August 5, 2004, among Wachovia Bank, National Association as Trustee, Charming Shoppes Receivables Corp. as Seller, Spirit of America, Inc. as Servicer, and Clipper Receivables Company LLC as Initial Class C Holder, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.7).
10.1.25	Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of October 6, 2004, between FB Distro Distribution Center, LLC, as Mortgagor, and BankAtlantic Commercial Mortgage Capital, LLC, as Mortgagee, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.9).
10.1.26	$13,000,000 Mortgage Note, dated October 6, 2004, between FB Distro Distribution Center, LLC, as Maker, and BankAtlantic Commercial Mortgage Capital, LLC, as Payee, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.10).
10.1.27	Guaranty, executed as of October 6, 2004, by Charming Shoppes, Inc., as Guarantor, for the benefit of BankAtlantic Commercial Mortgage Capital, LLC, as Lender, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.11).
10.1.28	Hazardous Substances Indemnity Agreement, dated October 6, 2004, by FB Distro Distribution Center, LLC and by Charming Shoppes, Inc., jointly and severally as Indemnitors, in favor of BankAtlantic Commercial Mortgage Capital, LLC, as Holder, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.12).

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10.1.29	Amended and Restated Class D Certificate Purchase Agreement, dated as of August 25, 2004, among Wachovia Bank, National Association as Trustee, Charming Shoppes Receivables Corp. as Seller and as Initial Class D-1 Holder, Spirit of America, Inc. as Servicer, and Clipper Receivables Company LLC, as the Class D-1 Holder, incorporated by reference to Form 8-K of the Registrant dated August 24, 2004, filed on August 27, 2004. (File No. 000-07258, Exhibit 99.1).
10.1.30	Amended and Restated Certificate Purchase Agreement, dated as of November 22, 2004 and Amended and Restated as of November 18, 2004, among Wachovia Bank, National Association as Trustee, Charming Shoppes Receivables Corp. as Seller, Spirit of America, Inc. as Servicer, and the Class D-2 Certificateholders Described Herein, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.13).
10.1.31	Amended and Restated Receivables Purchase Agreement, dated as of June 2, 2005, among Catalog Receivables LLC as Seller, Spirit of America, Inc. as Servicer, Sheffield Receivables Corporation as Purchaser, and Barclays Bank PLC as Administrator, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 28, 2006 (File No. 000-07258, Exhibit 10.1.31).

Management Contracts and Compensatory Plans and Arrangements

10.2.1	The 1988 Key Employee Stock Option Plan of Charming Shoppes, Inc., as amended and restated January 25, 2006, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 28, 2006 (File No. 000-07258, Exhibit 10.2.1).
10.2.2	Form of Charming Shoppes, Inc. 1988 Key Employee Stock Option Plan Key Employee Stock Option Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 28, 2006 (File No. 000-07258, Exhibit 10.2.2).
10.2.3	The Charming Shoppes, Inc. Non-Employee Directors Compensation Program, As Amended and Restated, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (File No. 000-07258, Exhibit 10.1).
10.2.4	The Charming Shoppes, Inc. Non-Employee Directors Compensation Program, As Amended and Restated at June 27, 2002, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 2003. (File No. 000-07258, Exhibit 10.2.6).
10.2.5	The Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan, Amended and Restated Effective January 1, 2005.
10.2.6	The Charming Shoppes, Inc. Non-Employee Directors Compensation Program Stock Option Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (File No. 000-07258, Exhibit 10.2).
10.2.7	The Charming Shoppes, Inc. Non-Employee Directors Compensation Program Restricted Stock Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (File No. 000-07258, Exhibit 10.3).

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10.2.8	Form of Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan Stock Option Agreement, incorporated by reference to Form 8-K of the Registrant dated June 23, 2005, filed on June 29, 2005. (File No. 000-07258, Exhibit 10.1).
10.2.9	Form of Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan Restricted Share Units Agreement, incorporated by reference to Form 8-K of the Registrant dated June 23, 2005, filed on June 29, 2005. (File No. 000-07258, Exhibit 10.2).
10.2.10	The 1993 Employees’ Stock Incentive Plan of Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (File No. 000-07258, Exhibit 10.2.10).
10.2.11	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Restricted Stock Agreement, dated as of February 11, 2002, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.8).
10.2.12	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Stock Option Agreement (regular vesting schedule), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.20).
10.2.13	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Stock Option Agreement (accelerated vesting schedule), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.21).
10.2.14	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Performance-Accelerated Stock Option Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.22).
10.2.15	The Charming Shoppes, Inc. Employee Stock Purchase Plan, as amended, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (File No. 000-07258, Exhibit 10.2.10).
10.2.16	The Charming Shoppes Inc. 1999 Associates’ Stock Incentive Plan, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1999. (File No. 000-07258, Exhibit 10.2.24).
10.2.17	Charming Shoppes, Inc. 1999 Associates’ Stock Incentive Plan Stock Option Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1999. (File No. 000-07258, Exhibit 10.2.25).
10.2.18	The Charming Shoppes, Inc. Amended and Restated 2000 Associates’ Stock Incentive Plan, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 2001. (File No. 000-07258, Exhibit 10.2.29).
10.2.19	The Charming Shoppes, Inc. Amended and Restated 2000 Associates’ Stock Incentive Plan Stock Option Agreement (regular vesting schedule), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.23).

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10.2.20	The Charming Shoppes, Inc. Amended and Restated 2000 Associates’ Stock Incentive Plan Stock Option Agreement (accelerated vesting schedule), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.24).
10.2.21	The Charming Shoppes, Inc. Amended and Restated 2000 Associates’ Stock Incentive Plan Restricted Stock Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.25).
10.2.22	2004 Stock Award and Incentive Plan, incorporated by reference to Appendix B of the Registrant’s Proxy Statement Pursuant to Section 14 of the Securities Exchange Act of 1934, filed on May 19, 2004.
10.2.23	Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Stock Option Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.15).
10.2.24	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Agreement - Section 16 Officers, incorporated by reference to Form 8-K of the Registrant dated February 7, 2005, filed on February 11, 2005. (File No. 000-07258, Exhibit 99.2)
10.2.25	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Performance Share Agreement, incorporated by reference to Form 8-K of the Registrant dated February 7, 2005, filed on February 11, 2005. (File No. 000-07258, Exhibit 99.4)
10.2.26	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Units Agreement, incorporated by reference to Form 8-K of the Registrant dated March 15, 2006, filed on March 20, 2006. (File No. 000-07258, Exhibit 99.1)
10.2.27	Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Agreement - Associates Other Than Section 16 Officers, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.17).
10.2.28	Charming Shoppes, Inc. Supplemental Retirement Plan, effective February 1, 2003, incorporated by reference to Form 10-Q of the Registrant for the quarter ended May 3, 2003. (File No. 000-07258, Exhibit 10.1).
10.2.29	Amendment 2007-1, Charming Shoppes, Inc. Supplemental Benefit Trust Agreement, dated as of January 25, 2007, to the Charming Shoppes, Inc. Supplemental Retirement Plan.
10.2.30	2003 Incentive Compensation Plan, incorporated by reference to Appendix C of the Registrant’s Proxy Statement Pursuant to Section 14 of the Securities Exchange Act of 1934, filed on May 22, 2003 (File No. 000-07258).
10.2.31	Charming Shoppes Variable Deferred Compensation Plan For Executives, Amended and Restated Effective January 1, 2005, incorporated by reference to Form 8-K of the Registrant dated December 13, 2005, filed December 16, 2005. (File No. 000-07258, Exhibit 99.1).
10.2.32	Amendment 2007-1, Charming Shoppes, Inc. Supplemental Benefit Trust Agreement, dated as of January 25, 2007, to the Charming Shoppes Variable Deferred Compensation Plan for Executives and the Charming Shoppes Non-Employee Director Compensation Plan.

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10.2.33	Form of Bonus Agreement by and between Charming Shoppes, Inc. and the Executive Officer named in the Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.14).
10.2.34	Charming Shoppes, Inc. Annual Incentive Program As Amended and Restated January 19, 2005, incorporated by reference to Form 8-K of the Registrant dated January 19, 2005, filed January 25, 2005. (File No. 000-07258, Exhibit 99.1).
10.2.35	Charming Shoppes, Inc. Annual Incentive Program As Amended and Restated February 2, 2006, incorporated by reference to Form 8-K of the Registrant dated February 2, 2006, filed February 8, 2006. (File No. 000-07258, Exhibit 99.1).
10.2.36	Charming Shoppes, Inc. Annual Incentive Program As Amended and Restated January 24, 2007.
10.2.37	Employment Agreement, dated as of January 1, 2005, by and between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated January 3, 2005, filed on January 4, 2005. (File No. 000-07258, Exhibit 99.1)
10.2.38	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Restricted Stock Agreement, dated as of May 13, 2004, between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.8).
10.2.39	Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Agreement, dated as of January 3, 2005, between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2005. (File No. 000-07258, Exhibit 10.2.37).
10.2.40	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Agreement between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated February 7, 2005, filed on February 11, 2005. (File No. 000-07258, Exhibit 99.1)
10.2.41	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Performance Share Agreement between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated February 7, 2005, filed on February 11, 2005. (File No. 000-07258, Exhibit 99.3)
10.2.42	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Units Agreement between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated February 2, 2006, filed on February 8, 2006. (File No. 000-07258, Exhibit 99.2)
10.2.43	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Performance Share Agreement between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated February 2, 2006, filed on February 8, 2006. (File No. 000-07258, Exhibit 99.3)
10.2.44	Forms of Executive Severance Agreements by and between Charming Shoppes, Inc., the named executive officers in the company’s Proxy Statement for the Annual Meeting held on June 15, 2000, and certain other executive officers and officers of Charming Shoppes, Inc. and its subsidiaries, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (File No. 000-07258, Exhibit 10.2.33).

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10.2.45	Forms of First Amendment, dated as of February 6, 2003, to Forms of Executive Severance Agreements, dated July 15, 1999, by and between Charming Shoppes, Inc., and the executive officers and officers named in the Agreements, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 2003. (File No. 000-07258, Exhibit 10.2.30).
10.2.46	Form of Second Amendment to Form of Executive Severance Agreement, dated July 15, 1999, as amended by First Amendment, dated as of February 6, 2003, by and between Charming Shoppes, Inc. and the executive officers and officers named in the agreements.
10.2.47	Form of Executive Severance Agreement, dated February 6, 2003, by and between Charming Shoppes, Inc. and certain executive officers and officers of Charming Shoppes, Inc. and its subsidiaries, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 2003. (File No. 000-07258, Exhibit 10.2.31).

Other Exhibits

14	Charming Shoppes, Inc. Business Ethics and Standards of Conduct Policy.
21	Subsidiaries of Registrant.
23	Consent of independent registered public accounting firm.
31.1	Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Charming Shoppes, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHARMING SHOPPES, INC.
	(Registrant)
Date: April 2, 2007	/S/ DORRIT J. BERN
	Dorrit J. Bern
	Chairman of the Board
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Charming Shoppes, Inc. and in the capacities and on the dates indicated:

/S/ DORRIT J. BERN	/S/ ERIC M. SPECTER
Dorrit J. Bern	Eric M. Specter
Chairman of the Board	Executive Vice President
President and Chief Executive Officer	Chief Financial Officer
April 2, 2007	April 2, 2007
/S/ JOHN J. SULLIVAN	/S/ WILLIAM O. ALBERTINI
John J. Sullivan	William O. Albertini
Vice President, Corporate Controller	Director
Chief Accounting Officer	April 2, 2007
April 2, 2007
/S/ YVONNE M. CURL	/S/ CHARLES T. HOPKINS
Yvonne M. Curl	Charles T. Hopkins
Director	Director
April 2, 2007	April 2, 2007
/S/ KATHERINE M. HUDSON	/S/ PAMELA LEWIS DAVIES
Katherine M. Hudson	Pamela Lewis Davies
Director	Director
April 2, 2007	April 2, 2007
/S/ JEANNINE STRANDJORD	/S/ ALAN ROSSKAMM
Jeannine Strandjord	Alan Rosskamm
Director	Director
April 2, 2007	April 2, 2007

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Exhibit Index

2.1	Covenant Agreement, dated as of August 16, 2001, between Charming Shoppes, Inc. and Limited Brands, Inc., incorporated by reference to Form 8-K of the Registrant dated August 16, 2001, filed on August 31, 2001. (Exhibit 2.3).
2.2	Master Sublease, dated as of August 16, 2001, between Limited Brands, Inc. and Lane Bryant, Inc., incorporated by reference to Form 8-K of the Registrant dated August 16, 2001, filed on August 31, 2001. (Exhibit 2.4).
2.3	Stock Purchase Agreement dated May 19, 2005 by and among Chestnut Acquisition Sub, Inc., Crosstown Traders, Inc., the Securityholders of Crosstown Traders, Inc. whose names are set forth on the signature pages thereto and J.P. Morgan Partners (BHCA), L.P., as the Sellers’ Representative, incorporated by reference to Form 8-K of the Registrant dated June 2, 2005, filed on June 8, 2005. (File No. 000-07258, Exhibit 2.1).
3.1	Restated Articles of Incorporation, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (File No. 000-07258, Exhibit 3.1).
3.2	By-Laws, as Amended and Restated, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (File No. 000-07258, Exhibit 3.2).
4.1	Amended and Restated Rights Agreement, dated as of February 1, 2001, between Charming Shoppes, Inc. and American Stock Transfer & Trust Company, as Rights Agent, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 2001. (File No. 000-07258, Exhibit 4.1).
4.2	Registration Agreement, dated as of August 16, 2001, between Charming Shoppes, Inc. and Limited Brands, Inc., incorporated by reference to Form 8-K of the Registrant dated August 16, 2001, filed on August 31, 2001. (File No. 000-07258, Exhibit 4.1).
4.3	Indenture, dated as of May 28, 2002, between Charming Shoppes, Inc. and Wachovia Bank, National Association, incorporated by reference to Form 10-Q of the Registrant for the quarter ended May 4, 2002. (File No. 000-07258, Exhibit 4.1).
4.4	Registration Rights Agreement, dated as of May 28, 2002, by and among Charming Shoppes, Inc., as Issuer, and J. P. Morgan Securities, Inc., Bear Stearns & Co., Inc., First Union Securities, Inc., Lazard Freres & Co., LLC, and McDonald Investments, Inc., as Initial Purchasers, incorporated by reference to Form 10-Q of the Registrant for the quarter ended May 4, 2002. (File No. 000-07258, Exhibit 4.2).
4.5	Second Amended and Restated Loan and Security Agreement, dated July 28, 2005, by and among Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., FB Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc., and Crosstown Traders, Inc. as borrowers; a syndicate of banks and other financial institutions as lenders, including Wachovia Bank, National Association as agent for the lenders; and certain of the Company’s subsidiaries as guarantors, incorporated by reference to Form 8-K of the Registrant dated July 28, 2005, filed on August 3, 2005. (File No. 000-07258, Exhibit 10.1).

121

4.6	Amendment No. 1, dated as of May 17, 2006, to Second Amended and Restated Loan and Security Agreement, dated July 28, 2005, by and among Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., FB Apparel, Inc., Catherines Stores Corporation, Lane Bryant, Inc., and Crosstown Traders, Inc. as borrowers; a syndicate of banks and other financial institutions as lenders, including Wachovia Bank, National Association as agent for the lenders; and certain of the Company’s subsidiaries as guarantors, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 29, 2006. (File No. 000-07258, Exhibit 99.1).
10.1.1	Second Amended and Restated Pooling and Servicing Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank as Trustee, incorporated by reference to Form 8-K of Charming Shoppes Master Trust and Charming Shoppes Receivables Corp., (File No. 333-71757) dated July 22, 1999. (Exhibit No. 4.1).
10.1.2	Fourth Amendment, dated as of August 5, 2004, to Second Amended and Restated Pooling and Servicing Agreement, dated as of November 25, 1997, as amended on July 22, 1999 and on May 8, 2001, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association (formerly known as First Union National Bank) as Trustee, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.4).
10.1.3	Amendment, dated as of March 18, 2005, to Second Amended and Restated Pooling and Servicing Agreement, dated as of November 25, 1997, as amended on July 22, 1999, May 8, 2001, and August 5, 2004, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association, as Trustee, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2005. (File No. 000-07258, Exhibit 10.1.3).
10.1.4	Series 1999-1 Supplement, dated as of July 22, 1999, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, for $150,000,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 1999-1, incorporated by reference to Form 8-K of Charming Shoppes Master Trust and Charming Shoppes Receivables Corp., (File No. 333-71757) dated July 22, 1999. (Exhibit No. 4.2).
10.1.5	Receivables Purchase Agreement, dated as of May 28, 1999, among Charming Shoppes Seller, Inc. as Seller, Spirit of America, Inc., as Servicer, Clipper Receivables Corporation, as Purchaser, State Street Capital Corporation, as Administrator, and State Street Bank & Trust Company, as Relationship Bank, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.1.4).
10.1.6	Series 1999-2 Supplement, dated as of May 28, 1999, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, for $55,750,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 1999-2, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (File No. 000-07258, Exhibit 10.1.23).

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10.1.7	Series 2000-VFC Supplement, dated as of November 9, 2000, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, on behalf of the Series 2000-VFC Certificateholders, for up to $60,122,700 Charming Shoppes Master Trust Series 2000-VFC, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 2001. (File No. 000-07258, Exhibit 10.1.16).
10.1.8	Certificate Purchase Agreement, dated as of November 9, 2000, among Charming Shoppes Receivables Corp. as Seller and as the Class B Purchaser, Spirit of America, Inc. as Servicer, Monte Rosa Capital Corporation as the Conduit Purchaser, and ING Baring (U.S.) Capital Markets LLC as Administrator for the Conduit Purchaser, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 2001. (File No. 000-07258, Exhibit 10.1.17).
10.1.9	Purchase Agreement dated as of March 14, 2005 between Citibank USA, N.A., Spirit of America National Bank and Catherines, Inc., incorporated by reference to Form 8-K of the Registrant dated March 18, 2005, filed on March 22, 2005. (File No. 000-07258, Exhibit 99).
10.1.10	Credit Card Processing Agreement, among World Financial Network National Bank, Lane Bryant, Inc., and Sierra Nevada Factoring, Inc., dated as of January 31, 1996, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.1.9).
10.1.11	Amendment to Credit Card Processing Agreement, among World Financial Network National Bank, Lane Bryant, Inc., and Sierra Nevada Factoring, Inc., dated as of January 28, 2005, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2005. (File No. 000-07258, Exhibit 10.1.12).
10.1.12	Purchase and Sale Agreement, among Spirit of America National Bank, as Seller, and Charming Shoppes Receivables Corp., as Purchaser, dated as of November 25, 1997, incorporated by reference to Form S-1/A of Charming Shoppes Receivables Corp. (File No. 333-71757, Exhibit 10.1(a)).
10.1.13	First Amendment to Purchase and Sale Agreement, among Spirit of America National Bank, as Seller, and Charming Shoppes Receivables Corp., as Purchaser, dated as of July 22, 1999, incorporated by reference to Form 8-K of Charming Shoppes Receivables Corp. (File No. 333-71757, Exhibit 10.1).
10.1.14	Series 2002-1 Supplement, dated as of November 20, 2002, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, as amended on July 22, 1999 and on May 8, 2001, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association, as Trustee, for $100,000,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 2002-1, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.1).
10.1.15	Charming Shoppes Master Trust $63,500,000 Fixed Rate Class A Asset Backed Certificates, Series 2002-1 and $16,500,000 Fixed Rate Class B Asset Backed Certificates, Series 2002-1 Certificate Purchase Agreement, dated as of November 22, 2002, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.2).

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10.1.16	Certificate Purchase Agreement, dated as of November 22, 2002, among Wachovia Bank, National Association, as Trustee, Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and The Class C Holders described therein, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.3).
10.1.17	Certificate Purchase Agreement, dated as of November 22, 2002, among Wachovia Bank, National Association, as Trustee, Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and The Class D Holders described therein, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.4).
10.1.18	$14,000,000 Promissory Note, dated October 2002, between White Marsh Distribution, LLC., as Borrower, and General Electric Capital Business Asset Funding Corporation, as Payee and Holder, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.5).
10.1.19	Commercial Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Fixture Filing, made as of October 2002, among the Grantor, White Marsh Distribution, LLC, as Borrower, in favor of James M. Smith, as Trustee, for the benefit of the Beneficiary, General Electric Capital Business Asset Funding Corporation, as Lender, incorporated by reference to Form 10-Q of the Registrant for the quarter ended November 2, 2002. (File No. 000-07258, Exhibit 10.6).
10.1.20	Certificate Purchase Agreement, dated as of January 21, 2004, among Charming Shoppes Receivables Corp., as Seller and as the Class B Purchaser, Spirit of America, Inc., as Servicer, Sheffield Receivables Corporation, as the Conduit Purchaser, and Barclay’s Bank PLC as Administrator for the Conduit Purchaser, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 31, 2004. (File No. 000-07258, Exhibit 10.1.17).
10.1.21	Series 2004-VFC Supplement, dated as of January 21, 2004, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997 and amended as of July 22, 1999 and as of May 8, 2001, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association, as Trustee on behalf of the Series 2004-VFC Certificateholders, for up to $132,000,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 2004-VFC, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 31, 2004. (File No. 000-07258, Exhibit 10.1.18).
10.1.22	Series 2004-1 Supplement, dated as of August 5, 2004, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997 (as amended on July 22, 1999, on May 8, 2001 and on August 5, 2004), among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and Wachovia Bank, National Association, as Trustee, on behalf of the Series 2004-1 Certificateholders, for $180,000,000 Charming Shoppes Master Trust Series 2004-1, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.5).
10.1.23	Certificate Purchase Agreement, dated as of July 21, 2004, among Charming Shoppes Receivables Corp., Fashion Service Corp., Spirit of America, Inc., and Barclay’s Capital Inc. (as representative of the Initial Purchasers), incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.6).

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10.1.24	Certificate Purchase Agreement, dated as of August 5, 2004, among Wachovia Bank, National Association as Trustee, Charming Shoppes Receivables Corp. as Seller, Spirit of America, Inc. as Servicer, and Clipper Receivables Company LLC as Initial Class C Holder, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.7).
10.1.25	Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of October 6, 2004, between FB Distro Distribution Center, LLC, as Mortgagor, and BankAtlantic Commercial Mortgage Capital, LLC, as Mortgagee, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.9).
10.1.26	$13,000,000 Mortgage Note, dated October 6, 2004, between FB Distro Distribution Center, LLC, as Maker, and BankAtlantic Commercial Mortgage Capital, LLC, as Payee, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.10).
10.1.27	Guaranty, executed as of October 6, 2004, by Charming Shoppes, Inc., as Guarantor, for the benefit of BankAtlantic Commercial Mortgage Capital, LLC, as Lender, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.11).
10.1.28	Hazardous Substances Indemnity Agreement, dated October 6, 2004, by FB Distro Distribution Center, LLC and by Charming Shoppes, Inc., jointly and severally as Indemnitors, in favor of BankAtlantic Commercial Mortgage Capital, LLC, as Holder, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.12).
10.1.29	Amended and Restated Class D Certificate Purchase Agreement, dated as of August 25, 2004, among Wachovia Bank, National Association as Trustee, Charming Shoppes Receivables Corp. as Seller and as Initial Class D-1 Holder, Spirit of America, Inc. as Servicer, and Clipper Receivables Company LLC, as the Class D-1 Holder, incorporated by reference to Form 8-K of the Registrant dated August 24, 2004, filed on August 27, 2004. (File No. 000-07258, Exhibit 99.1).
10.1.30	Amended and Restated Certificate Purchase Agreement, dated as of November 22, 2004 and Amended and Restated as of November 18, 2004, among Wachovia Bank, National Association as Trustee, Charming Shoppes Receivables Corp. as Seller, Spirit of America, Inc. as Servicer, and the Class D-2 Certificateholders Described Herein, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.13).
10.1.31	Amended and Restated Receivables Purchase Agreement, dated as of June 2, 2005, among Catalog Receivables LLC as Seller, Spirit of America, Inc. as Servicer, Sheffield Receivables Corporation as Purchaser, and Barclays Bank PLC as Administrator, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 28, 2006 (File No. 000-07258, Exhibit 10.1.31).
10.2.1	The 1988 Key Employee Stock Option Plan of Charming Shoppes, Inc., as amended and restated January 25, 2006, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 28, 2006 (File No. 000-07258, Exhibit 10.2.1).
10.2.2	Form of Charming Shoppes, Inc. 1988 Key Employee Stock Option Plan Key Employee Stock Option Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 28, 2006 (File No. 000-07258, Exhibit 10.2.2).

125

10.2.3	The Charming Shoppes, Inc. Non-Employee Directors Compensation Program, As Amended and Restated, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (File No. 000-07258, Exhibit 10.1).
10.2.4	The Charming Shoppes, Inc. Non-Employee Directors Compensation Program, As Amended and Restated at June 27, 2002, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 2003. (File No. 000-07258, Exhibit 10.2.6).
10.2.5	The Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan, Amended and Restated Effective January 1, 2005.
10.2.6	The Charming Shoppes, Inc. Non-Employee Directors Compensation Program Stock Option Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (File No. 000-07258, Exhibit 10.2).
10.2.7	The Charming Shoppes, Inc. Non-Employee Directors Compensation Program Restricted Stock Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (File No. 000-07258, Exhibit 10.3).
10.2.8	Form of Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan Stock Option Agreement, incorporated by reference to Form 8-K of the Registrant dated June 23, 2005, filed on June 29, 2005. (File No. 000-07258, Exhibit 10.1).
10.2.9	Form of Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan Restricted Share Units Agreement, incorporated by reference to Form 8-K of the Registrant dated June 23, 2005, filed on June 29, 2005. (File No. 000-07258, Exhibit 10.2).
10.2.10	The 1993 Employees’ Stock Incentive Plan of Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (File No. 000-07258, Exhibit 10.2.10).
10.2.11	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Restricted Stock Agreement, dated as of February 11, 2002, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.8).
10.2.12	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Stock Option Agreement (regular vesting schedule), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.20).
10.2.13	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Stock Option Agreement (accelerated vesting schedule), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.21).
10.2.14	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Performance-Accelerated Stock Option Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.22).

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10.2.15	The Charming Shoppes, Inc. Employee Stock Purchase Plan, as amended, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (File No. 000-07258, Exhibit 10.2.10).
10.2.16	The Charming Shoppes Inc. 1999 Associates’ Stock Incentive Plan, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1999. (File No. 000-07258, Exhibit 10.2.24).
10.2.17	Charming Shoppes, Inc. 1999 Associates’ Stock Incentive Plan Stock Option Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1999. (File No. 000-07258, Exhibit 10.2.25).
10.2.18	The Charming Shoppes, Inc. Amended and Restated 2000 Associates’ Stock Incentive Plan, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 2001. (File No. 000-07258, Exhibit 10.2.29).
10.2.19	The Charming Shoppes, Inc. Amended and Restated 2000 Associates’ Stock Incentive Plan Stock Option Agreement (regular vesting schedule) , incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.23).
10.2.20	The Charming Shoppes, Inc. Amended and Restated 2000 Associates’ Stock Incentive Plan Stock Option Agreement (accelerated vesting schedule), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.24).
10.2.21	The Charming Shoppes, Inc. Amended and Restated 2000 Associates’ Stock Incentive Plan Restricted Stock Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 2, 2002. (File No. 000-07258, Exhibit 10.2.25).
10.2.22	2004 Stock Award and Incentive Plan, incorporated by reference to Appendix B of the Registrant’s Proxy Statement Pursuant to Section 14 of the Securities Exchange Act of 1934, filed on May 19, 2004.
10.2.23	Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Stock Option Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.15).
10.2.24	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Agreement - Section 16 Officers, incorporated by reference to Form 8-K of the Registrant dated February 7, 2005, filed on February 11, 2005. (File No. 000-07258, Exhibit 99.2)
10.2.25	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Performance Share Agreement, incorporated by reference to Form 8-K of the Registrant dated February 7, 2005, filed on February 11, 2005. (File No. 000-07258, Exhibit 99.4)
10.2.26	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Units Agreement, incorporated by reference to Form 8-K of the Registrant dated March 15, 2006, filed on March 20, 2006. (File No. 000-07258, Exhibit 99.1)

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10.2.27	Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Agreement - Associates Other Than Section 16 Officers, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.17).
10.2.28	Charming Shoppes, Inc. Supplemental Retirement Plan, effective February 1, 2003, incorporated by reference to Form 10-Q of the Registrant for the quarter ended May 3, 2003. (File No. 000-07258, Exhibit 10.1).
10.2.29	Amendment 2007-1, Charming Shoppes, Inc. Supplemental Benefit Trust Agreement, dated as of January 25, 2007, to the Charming Shoppes, Inc. Supplemental Retirement Plan.
10.2.30	2003 Incentive Compensation Plan, incorporated by reference to Appendix C of the Registrant’s Proxy Statement Pursuant to Section 14 of the Securities Exchange Act of 1934, filed on May 22, 2003 (File No. 000-07258).
10.2.31	Charming Shoppes Variable Deferred Compensation Plan For Executives, Amended and Restated Effective January 1, 2005, incorporated by reference to Form 8-K of the Registrant dated December 13, 2005, filed December 16, 2005. (File No. 000-07258, Exhibit 99.1).
10.2.32	Amendment 2007-1, Charming Shoppes, Inc. Supplemental Benefit Trust Agreement, dated as of January 25, 2007, to the Charming Shoppes Variable Deferred Compensation Plan for Executives and the Charming Shoppes Non-Employee Director Compensation Plan.
10.2.33	Form of Bonus Agreement by and between Charming Shoppes, Inc. and the Executive Officer named in the Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 2004 (File No. 000-07258, Exhibit 10.14).
10.2.34	Charming Shoppes, Inc. Annual Incentive Program As Amended and Restated January 19, 2005, incorporated by reference to Form 8-K of the Registrant dated January 19, 2005, filed January 25, 2005. (File No. 000-07258, Exhibit 99.1).
10.2.35	Charming Shoppes, Inc. Annual Incentive Program As Amended and Restated February 2, 2006, incorporated by reference to Form 8-K of the Registrant dated February 2, 2006, filed February 8, 2006. (File No. 000-07258, Exhibit 99.1).
10.2.36	Charming Shoppes, Inc. Annual Incentive Program As Amended and Restated January 24, 2007.
10.2.37	Employment Agreement, dated as of January 1, 2005, by and between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated January 3, 2005, filed on January 4, 2005. (File No. 000-07258, Exhibit 99.1)
10.2.38	The Charming Shoppes, Inc. 1993 Employees’ Stock Incentive Plan Restricted Stock Agreement, dated as of May 13, 2004, between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 2004 (File No. 000-07258, Exhibit 10.8).
10.2.39	Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Agreement, dated as of January 3, 2005, between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2005. (File No. 000-07258, Exhibit 10.2.37).

128

10.2.40	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Agreement between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated February 7, 2005, filed on February 11, 2005. (File No. 000-07258, Exhibit 99.1)
10.2.41	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Performance Share Agreement between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated February 7, 2005, filed on February 11, 2005. (File No. 000-07258, Exhibit 99.3)
10.2.42	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Restricted Stock Units Agreement between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated February 2, 2006, filed on February 8, 2006. (File No. 000-07258, Exhibit 99.2)
10.2.43	Form of Charming Shoppes, Inc. 2004 Stock Award and Incentive Plan Performance Share Agreement between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated February 2, 2006, filed on February 8, 2006. (File No. 000-07258, Exhibit 99.3)
10.2.44	Forms of Executive Severance Agreements by and between Charming Shoppes, Inc., the named executive officers in the company’s Proxy Statement for the Annual Meeting held on June 15, 2000, and certain other executive officers and officers of Charming Shoppes, Inc. and its subsidiaries, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (File No. 000-07258, Exhibit 10.2.33).
10.2.45	Forms of First Amendment, dated as of February 6, 2003, to Forms of Executive Severance Agreements, dated July 15, 1999, by and between Charming Shoppes, Inc., and the executive officers and officers named in the Agreements, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 2003. (File No. 000-07258, Exhibit 10.2.30).
10.2.46	Form of Second Amendment to Form of Executive Severance Agreement, dated July 15, 1999, as amended by First Amendment, dated as of February 6, 2003, by and between Charming Shoppes, Inc. and the executive officers and officers named in the agreements.
10.2.47	Form of Executive Severance Agreement, dated February 6, 2003, by and between Charming Shoppes, Inc. and certain executive officers and officers of Charming Shoppes, Inc. and its subsidiaries, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 2003. (File No. 000-07258, Exhibit 10.2.31).
14	Charming Shoppes, Inc. Business Ethics and Standards of Conduct Policy.
21	Subsidiaries of Registrant.
23	Consent of independent registered public accounting firm.
31.1	Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-10.2.5

EXHIBIT 10.2.5

CHARMING SHOPPES, INC.

2003 Non-Employee Directors Compensation Plan

Amended and Restated Effective January 1, 2005

1.Purpose and Scope of the Plan.

(a)Purpose. The purpose of this 2003 Non-Employee Directors Compensation Plan (the "Plan") of Charming Shoppes, Inc. (the "Company") is to advance the interests of the Company and its shareholders by providing for fair and adequate equity compensation of non-employee directors and an opportunity for deferral of compensation in order to attract and retain high quality persons to serve as directors and to enable such persons to increase their proprietary interest in the Company. In furtherance of this purpose, the Plan provides for grants of Options, Stock Appreciation Rights, Restricted Stock Units, and/or Restricted Stock, and the opportunity for a director to elect deferred and alter-na-tive forms of compen-sation in lieu of cash fees for service as a director, including Deferred Shares and deferred cash.

(b)Effect of Amendment and Restatement of the Plan. The Company hereby amends and restates the Plan, effective January 1, 2005 (the "Effective Date"). The Plan was initially adopted on August 21, 1996 and was subsequently amended and restated on several occasions. Non-employee director compensation before the Effective Date was governed by the Plan and other policies of the Company then in effect.

(c)Grandfathered Accounts. This January 1, 2005 amendment and restatement shall not affect Grandfathered Accounts (as defined below), which shall continue to be subject to, and governed by, the terms and conditions of the Plan as in effect on December 31, 2004, as set forth on the attached Exhibit A (Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan).

(d)Relation of Plan to Other Director Compensation. The amount, timing, and other terms of cash compensation that may be paid by the Company to non-employee directors are not governed by this Plan, except to the extent that opportunities for deferral of cash compensation otherwise payable to a director, or receipt of such cash compensation in alternative forms, may be made available to a director under this Plan. In addition, adoption of the Plan does not limit the authority of the Board of Directors in adopting other compensation programs in which directors may participate.

2.Definitions. In addition to the terms defined in Section 1, the following terms shall be defined as set forth below:

(a)"Account" means the account established and maintained by the Company for RSUs granted under Section 6 and Deferred Shares and deferred cash credited under Section 8. A subaccount for RSUs and a subaccount for such Deferred Shares and deferred cash may be designated within the Account. The Account and RSUs, Deferred Shares and deferred cash credited to the Account will be maintained solely as bookkeeping entries by the Company to evidence unfunded obligations of the Company.

(b)"Administrator" means the individual or committee specified in Section 3(b) to whom the Board has delegated authority to administer the Plan.

(c)"Beneficiary" means the person(s) or trust(s) which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Administrator to receive the benefits specified under the Plan upon such Participant's death. If, upon a Participant's death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means the person(s) or trust(s) entitled by will or the laws of descent and distribution to receive such benefits.

(d)"Board" means the Board of Directors of the Company. The Board may delegate its functions to a committee of the Board as specified under Section 3(a), in which case references to the Board shall be deemed to include such committee.

(e)"Change in Control" and related terms are defined in Section 12.

(f)"Code" means the Internal Revenue Code of 1986, as amended, including regulations thereunder and successor provisions and regulations thereto.

(g)"Deferred Shares" means a Share Unit credited to a Participant's Account under Section 8 as a result of deferral of cash fees.

(h)"Director Compensation" means annual retainer fees payable to a director in his or her capacity as such for service on the Board and service as chairman of any Board committee, and any other fees payable to a director in his or her capacity as such for attending meetings and other service on the Board and Board committees; provided, however, that the Administrator may determine that specific fees will not be deemed Director Compensation. Reimbursement of expenses does not constitute Director Compensation.

(i)"Disability" means a Participant's termination of service as a director of the Company due to a physical or mental incapacity of long duration which renders the Participant unable to perform the duties of a director of the Company.

(j)"Exchange Act" means the Securities Exchange Act of 1934, as amended, including rules thereunder and successor provisions and rules thereto.

(k)"Grandfathered Account" means that portion of a Participant's Account that was earned and vested as of December 31, 2004, and shall include earnings (including dividends paid in accordance with Section 13(b) and dividends and dividend equivalents paid in accordance with Section 9(a)) credited to such amount under the terms of the Plan. All Grandfathered Accounts shall be calculated in accordance with Section 409A of the Code. The Company shall maintain a separate record of Grandfathered Accounts.

(l)"Fair Market Value" means, with respect to Shares, the fair market value of such Shares determined by such methods or procedures as shall be established from time to time by the Board. Unless otherwise determined by the Board, the Fair Market Value of a Share as of any given date means the closing sale price of a Share reported on the Nasdaq National Market (or, if Shares are then principally traded on a national securities exchange, in the reported "composite transactions" for such exchange) for such date, or, if no Shares were traded on that date, on the next preceding day on which there was such a trade.

(m)“Mandatory Retirement” means the termination of a director's service in accordance with any mandatory retirement policy adopted by the Board of Directors and then in effect.

(n)"Option" means the right, granted to a Participant under Section 7, to purchase a specified number of Shares at the specified exercise price for a specified period of time under the Plan. All Options will be non-qualified stock options.

(o)"Participant" means any person who has been granted an Option which remains outstanding, has RSUs, Deferred Shares or deferred cash credited to his or her Account, or has elected to defer receipt of Director Compensation in the form of Deferred Shares or deferred cash under the Plan.

(p)"Plan Year" means, with respect to a Participant, the period commencing at the time of election of the director at an annual meeting of shareholders (or the election of a class of directors if the Company then has a classified Board of Directors), or the director's initial appointment to the Board if not at an annual meeting of shareholders, and continuing until the close of business of the day preceding the next annual meeting of shareholders.

(q)"Restricted Stock" means Shares granted under Section 6, subject to a risk of forfeiture and restrictions on transfer for a specified period.

(r)"RSU" or "Restricted Share Unit" means a Share Unit credited to a Participant's Account as a grant under Section 6, which is subject to a risk of forfeiture for a specified period.

(s)"Shares" means shares of common stock of the Company and such other securities as may be substituted or resubstituted for Shares pursuant to Section 13(b).

(t)"Share Unit" means a right to receive, at a specified settlement date, delivery of one Share, subject to the terms and conditions of the Plan. Share Units in the form of RSUs shall be subject to a risk of forfeiture, but Share Units in the form of Deferred Shares will be at all times non-forfeitable.

(u)"Stock Appreciation Right" or "SAR" means the right, granted to the Participant under Section 7, to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the SAR as determined by the Board at the time of grant.

(v)"Valuation Date" shall mean the close of business on the last business day of each calendar quarter and, in the case of any final distribution of deferred cash from a Participant's Account, the day as of which such distribution is made; provided, however, that the Administrator may specify a different Valuation Date in order to coordinate the Participant's deferred cash balance with any actual investment by which the deferred cash balance is to be measured.

3.Administration.

(a)Authority. Both the Board and the Administrator (subject to the ability of the Board to restrict the Administrator) shall administer the Plan in accordance with its terms, and shall have all powers necessary to accomplish such purpose, including the power and authority to construe and interpret the Plan, to define the terms used herein, to prescribe, amend and rescind rules and regulations, agreements, forms, and notices relating to the administration of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The Board may delegate any or all of its functions to a committee of the Board, provided that the Board shall approve the form and amount of compensation to directors under any provision of the Plan. The Administrator may perform any function of the Board under the Plan, except for establishing the form and amount of compensation under any provision, adopting material amendments to the Plan under Section 13(e), and any other function from time to time specifically reserved by the Board to itself. Any actions of the Board or the Administrator with respect to the Plan shall be final, conclusive, and binding upon all persons interested in the Plan, except that any action of the Administrator will not be binding on the Board. The Board and Administrator may each appoint agents and delegate thereto powers and duties under the Plan, except as otherwise limited by the Plan.

(b)Administrator. The Administrator shall be the Executive Vice President, General Counsel and Secretary of the Company, or, if that officer is unavailable, the Executive Vice President, Chief Financial Officer, or, if that officer is unavailable, the Executive Vice President and Director of Human Resources; provided, however, that the Board may designate a different individual or committee to serve as Administrator. In any case in which a director is a member of the Administrator, such director shall not act on or decide any matter relating solely to himself or herself or any of his or her rights or benefits under the Plan. No bond or other security need be required of the Administrator or any member thereof in any jurisdiction.

(c)Limitation of Liability. Each member of the Board and the Administrator shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company or any subsidiary, the Company's independent certified public accountants, or any executive compensation consultant, legal counsel, or other professional retained by the Company to assist in the administration of the Plan. No member of the Board or the Administrator, nor any person to whom ministerial duties under the Plan have been delegated, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and any such person shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

4.Shares Available Under the Plan. Subject to adjustment as provided in Section 13(b), the total number of Shares reserved and available for delivery under the Plan for awards granted on or after June 26, 2003 shall be 600,000; provided however, that, in no event may more than 50% of such Shares be delivered in connection with "full-value Awards." For this purpose, "full-value Awards" means awards other than Options or SARs for which a Participant does not pay or surrender rights to payment equal to at least the Fair Market Value of the award determined at the date of grant. Shares subject to and to be delivered in connection with awards granted before June 26, 2003 which remain outstanding at that date shall be drawn from the shares reserved and available under the Plan at the time of grant. The Shares delivered under the Plan may consist, in whole or in part, of authorized and unissued Shares or treasury Shares. For purposes of this Section 4, Shares subject to an award under the Plan (including an award granted before June 26, 2003) that is canceled, expired, forfeited, settled in cash, or otherwise terminated without a delivery of Shares to the Participant, including the number of Shares withheld or surrendered in payment of any exercise or purchase price of an award and including the number of Shares subject to an award but not delivered upon exercise or settlement of the award, will become available for awards under the Plan.

5.Eligibility. Each non-employee director of the Company may participate in the Plan, subject to the terms hereof. No person other than those specified in this Section 5 will be eligible to participate in the Plan. The Administrator will notify each person of his or her eligibility to participate in an elective feature of the Plan not later than 15 days prior to any deadline for filing an election form.

6.Grants of Restricted Stock or RSUs. Restricted Stock and/or RSUs shall be granted to non-employee directors in accordance with policies established from time to time by the Board specifying the directors or classes of directors to be granted such awards, the number of shares of Restricted Stock or RSUs to be granted, and the time or times at which such awards shall be granted. An award granted under this Section 6 shall become vested and non-forfeitable at such dates as may be specified by the Board, and shall have such other terms as may be established by the Board.

(a)Initial Grant Policy -- One-Time Grant Upon First Election as a Non-Employee Director. The initial policy with respect to newly appointed or elected non-employee directors under this Section 6, effective as of the Effective Date and continuing until modified or revoked by the Board, shall be as follows:

(i) Award Type and Amount. 10,000 Shares of Restricted Stock shall be automatically granted to each non-employee director upon the initial election or appointment of the non-employee director, subject to adjustment as provided in Section 13(b). No grants under this Section 6(a) are authorized to directors initially elected or appointed prior to the Effective Date.

(ii) Vesting and Forfeiture Terms. One-third of the number of Shares of Restricted Stock shall vest and become non-forfeitable at the close of business on June 1 of each of the three calendar years following the date of grant of such award, rounded to the nearest number of whole Shares, subject to the following:

(A) In the event of a Change in Control or termination of the Participant's service as a director due to death or Disability, the award, if not previously vested or forfeited, shall immediately vest and become non-forfeitable in full.

(B) In the event of termination of the Participant's service as a director due to Mandatory Retirement by the Participant, the award, if not previously vested or forfeited, shall immediately vest and become non-forfeitable as to that number of Shares of Restricted Stock as would have vested and become non-forfeitable if the Participant had continued to serve as a director through the anticipated date of the next annual meeting of shareholders.

Unless otherwise determined by the Board, an award of Restricted Stock that has not vested at or before the time of termination of the Participant's service as a director (this would include all unvested Restricted Stock in the event of a director's removal from service) will cease to vest and will be forfeited upon such termination.

(b)Initial Grant Policy -- Annual Grant to a Non-Employee Director. The initial policy with respect to annual grants of RSUs under this Section 6, effective as of the Effective Date and continuing until modified or revoked by the Board, shall be as follows:

(i) Award Type and Amount. At the date of an annual meeting of shareholders at which a director is elected or reelected as a member of the Board (or at which members of another class of directors are elected or reelected, if the Company then has a classified Board), 7,500 RSUs shall be automatically granted to each non-employee director eligible to participate in the Plan at the close of business on that date. If a non-employee director is initially elected or appointed at a date that does not coincide with the date of an annual meeting and does not fall on or between June 1 and the date of that year's annual meeting, if he or she is eligible to participate in the Plan at that date, he or she will be automatically granted the number of RSUs equal to 7,500 multiplied by a fraction the numerator of which is the number of days from the date of grant to the anniversary of the most recent annual meeting and the denominator of which is 365 (rounded to the nearest whole share). The number of Shares to be subject to a grant of RSUs under this policy will be subject to adjustment as provided in Section 13(b).

(ii) Vesting and Forfeiture Terms. Such award shall become vested and non-forfeitable as to all RSUs at the close of business on the June 1 following the date of grant, subject to the following:

(A) In the event of a Change in Control or termination of the Participant's service as a director due to death or Disability, the award, if not previously vested or forfeited, shall immediately vest and become non-forfeitable in full.

(B) In the event of termination of the Participant's service as a director due to a voluntary termination of service or Mandatory Retirement by the Participant, the award, if --not previously vested or forfeited, shall immediately vest and become non-forfeitable as to that number of RSUs equal to the total number of RSUs multiplied by a fraction the numerator of which is the number of days from the date of grant to the date of termination of service and the denominator of which is the number of days from the date of grant until the June 1 following the date of grant of such award (such fraction in no event will exceed one).

Unless otherwise determined by the Board, an award of RSUs that has not vested at or before the time of termination of the Participant's service as a director (this would include all unvested RSUs in the event of a director's removal from service) as provided herein will cease to vest and will be forfeited upon such termination.

(c)Dividends and Dividend Equivalents. Unless otherwise determined by the Board, cash dividends on Restricted Stock which are not large, special and non-recurring and which are paid prior to the lapse of the risk of forfeiture on such Restricted Stock shall be paid to the Participant when paid to the Company's shareholders. Other dividends will be payable or not payable and subject to adjustment to the Restricted Stock in accordance with Section 13(b). Dividend Equivalents will be credited on RSUs in accordance with Section 9(a), with the resulting additional RSUs subject to the same terms, including risk of forfeiture, as the RSUs on which the dividend equivalent was paid; provided, however, that such dividend equivalents may instead be paid in cash, subject to such terms as the Administrator may determine, if reinvestment of dividends is determined by the Administrator to be administratively burdensome.

(d)Other Restricted Stock Terms. Restricted Stock shall be nontransferable by the Participant at any time that the award remains subject to a risk of forfeiture. Restricted Stock granted under the Plan may be evidenced in such manner as the Administrator shall determine. Unless otherwise determined by the Administrator, if certificates representing Restricted Stock are registered in the name of the Participant, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, the Company shall retain physical possession of the certificate, and the Participant shall have delivered a stock power to the Company, endorsed in blank, relating to the Restricted Stock. Upon the lapse of restrictions on Restricted Stock, the Share certificate shall be released by the Company to the Participant with any legend relating to such restrictions removed.

(e)Settlement of RSUs.

(i)General Rule. Except as provided in (ii) below, RSUs shall be settled at the time the risk of forfeiture on such RSUs lapses.

(ii)Deferral Election. A director may elect to defer settlement of RSUs by timely filing an election with the Company as provided below:

A.   Timing of Elections. A deferral election must generally be made by the end of the calendar year prior to the Plan Year in which the RSU is granted. However, a Participant may make a deferral election with respect to an initial grant of RSUs under Section 6(b) within 30 days of election or appointment to the Board, or at such other time as is permitted under Section 409A of the Code.

B.   Effect and Irrevocability of Elections. Elections relating to RSUs, other than those subject to Section 9(c), shall become irrevocable at the beginning of the calendar year in which the Plan Year to which they relate begins unless the Administrator specifies a different time. Elections subject to Section 9(c) shall become irrevocable in accordance with Section 9(c). The latest election filed with the Administrator shall be deemed to supersede all prior inconsistent elections that remain revocable at the time of filing of the latest election.

(iii) Matters To Be Elected. The Administrator will provide a form or forms of election which will permit a director to make appropriate elections with respect to all relevant matters under this Section 6. This election form may be included in the document evidencing the grant of RSUs.

(iv) Permitted Elections as to Settlement. Elections as to the time of settlement of deferred RSUs shall conform to the terms of Section 9(c).

A validly deferred RSU will remain forfeitable until the risk of forfeiture lapses. Thereafter, although it will still be referred to as an RSU for purposes of the Plan, it will be non-forfeitable.

7.Grants of Options and SARs. Options and/or SARs shall be granted to non-employee directors in accordance with policies established from time to time by the Board specifying the directors or classes of directors to be granted such awards, the number of shares to be subject to Options or SARs, and the time or times at which such awards shall be granted, vested, exercisable, and expire, and such other terms as may be established by the Board.

(a)Initial Grant Policy -- Annual Grant of Option to a Non-Employee Director. The initial policy with respect to annual grants of Options under this Section 7, effective as of the Effective Date and continuing until modified or revoked by the Board, shall be as follows:

(i) Award Type and Amount. At the date of an annual meeting of shareholders at which a director is elected or reelected as a member of the Board (or at which members of another class of directors are elected or reelected, if the Company then has a classified Board), an Option to purchase 7,500 Shares shall be automatically granted to each non-employee director eligible to participate in the Plan at the close of business on that date. If a non-employee director is initially elected or appointed at a date that does not coincide with the date of an annual meeting, if he or she is eligible to participate in the Plan at that date, he or she will be automatically granted an Option to purchase the number of Shares equal to 7,500 multiplied by a fraction the numerator of which is the number of days from the date of grant to the anniversary of the most recent annual meeting and the denominator of which is 365 (rounded to the nearest whole share). The number of Shares to be subject to Options granted under this policy will be subject to adjustment as provided in Section 13(b).

(ii) Vesting and Forfeiture Terms. The Option shall vest and become exercisable in full at the close of business on the June 1 following the date of grant of such award, subject to the following:

(A) If such Option has not previously vested or been forfeited, it shall vest and become exercisable in full upon a Change in Control, upon the Participant's death, or upon the termination of the Participant's service as a director due to Disability.

(B) If such Option has not previously vested or been forfeited, it shall vest and become exercisable as to the "Pro Rata Shares" upon a termination of the Participant's service as a director due to a voluntary termination of service (i.e., excluding termination due to Disability or Mandatory Retirement). For purposes of this Section 7(a)(ii), the "Pro Rata Shares" shall be the number of Shares determined by multiplying (1) the number of Shares as to which the Option would have vested and become exercisable if the Participant had continued to serve as a director through the anticipated date of the next annual meeting of shareholders by (2) a fraction the numerator of which is the number of days from the date of the latest annual meeting of shareholders through the date of the Participant's termination and the denominator of which is 365 (rounded up to the next whole share).

(C) Any portion of an Option that has not vested and become exercisable at the date of a director's Mandatory Retirement shall remain outstanding and become exercisable in accordance with the first sentence of this Section 7(a)(ii), provided that such Option shall become exercisable in full upon a Change in Control or the death of the director, and each such portion of the Option that becomes exercisable after such Mandatory Retirement shall expire at the end of the one-year period following the date it becomes exercisable as provided in Section 7(a)(iii).

Except in the case of a Mandatory Retirement or as otherwise determined by the Board, any portion of a Participant's Option that has not vested and become exercisable at or before the time of termination of the Participant's service as a director (this would include the entire unvested Option in the event of a director's removal from service) as provided herein will cease to vest and will be forfeited upon such termination.

(iii) Option Term. The Option, to the extent not previously forfeited, shall expire at the earlier of (i) ten years after the date of grant (or such earlier date as may be specified by the Board prior to grant), or (ii) one year after the Participant ceases to serve as a director of the Company for any reason except that, in the case of a termination due to Mandatory Retirement, any portion of the Option that becomes exercisable at a date following the Mandatory Retirement, as provided in Section 7(a)(ii)(C), shall expire one year after the date such portion vests and becomes exercisable. (Note: Portions of any Option that were vested and exercisable at the date of Mandatory Retirement will expire one year after such Mandatory Retirement, but in no event later than ten years after the date of grant).

(b)Exercise Price and Grant Price. The exercise price per Share purchasable under an Option will be equal to 100% of the Fair Market Value of a Share on the date of grant of the Option. The grant price per Share subject to an SAR will be equal to 100% of the Fair Market Value of a Share on the date of grant of the SAR.

(c)Option and SAR Maximum Term.The maximum term of an Option or SAR granted hereunder shall be ten years from the date of grant.

(d)Payment of Exercise Price. The exercise price of an Option shall be paid to the Company either in cash or by the surrender of Shares or the withholding of Shares from those deliverable upon exercise of the Option, or any combination thereof, or in such other lawful form or manner as may be established by the Administrator; provided, however, that, unless otherwise determined by the Administrator, Shares shall not be surrendered or withheld in payment of the exercise price if such surrender or withholding would result in additional accounting expense to the Company.

8.Deferral of Fees In Deferred Shares and Deferred Cash. Each director of the Company who is eligible under Section 5 may elect, in accor-dance with Section 8(a), to defer receipt of Director Compensation in the form of Deferred Shares under Section 8(b) or deferred cash un-der Section 8(c).

(a)Elections. A director shall elect to participate in the deferral feature under this Section 8 and the terms of such participation by timely filing an election with the Company as provided below:

(i) Timing of Elections. A deferral election must generally be made by the end of the calendar year prior to the Plan Year in which the Director Compensation will be earned. However, a newly elected or appointed Participant may make a deferral election with respect to Director's initial Director Compensation (earned after the date of such election) within 30 days of election or appointment to the Board, or at such other time as is permitted under Section 409A of the Code.

(ii) Effect and Irrevocability of Elections. Elections shall be deemed continuing and therefore applicable to Plan Years after the initial Plan Year covered by the election, until the election is modified or superseded by the Participant. Elections other than those subject to Section 9(c) shall become irrevocable at the commencement of the calendar year which includes the first day of the Plan Year to which an election relates. Elections relating to the time and manner of settlement of an Account shall become irrevocable at the specified deadline for the filing of such elections under Section 9(c) unless the Administrator specifies a different time. The latest election filed with the Administrator shall be deemed to supersede all prior inconsistent elections that remain revocable at the time of filing of the latest election prior to the beginning of a Plan Year or at such other date as may be specified by the Administrator, provided that any date so specified shall ensure effective deferral of taxation and otherwise comply with applicable laws.

(iii) Matters To Be Elected. The Administrator will provide a form or forms of election which will permit a director to make appropriate elections with respect to all relevant matters under this Section 8 and Section 9.

(iv) Time of Filing Elections. An election must be received by the Administrator prior to the deadline specified by the Administrator. Under no circumstances may a Participant defer compensation to which the Participant has attained, at the time of deferral, a legally enforceable right to current receipt of such compensation.

(b)Deferral of Director Compensation in the Form of Deferred Shares. If a Participant has elected to defer receipt of a specified amount of Director Compensation in the form of Deferred Shares, a number of Deferred Shares shall be credited to the Participant's Account, as of the date such Director Compensation otherwise would have been payable to the Participant but for such election to defer, equal to (i) such amount otherwise payable divided by (ii) the Fair Market Value of a Share at that date. Deferred Shares credited under this Section 8(b) shall be subject to the terms and conditions of Deferred Shares specified in Sections 9(a), 9(b), and 9(c). The right and interest of each Participant in Deferred Shares credited to the Participant's Account under this Section 8(b) at all times will be nonforfeitable.

(c)Deferral of Director Compensation in the Form of Deferred Cash. If a Participant has elected to defer receipt of a specified amount of Director Compensation in the form of deferred cash, an amount equal to such specified amount shall be credited to the Participant's Account as of the date such Director Compensation otherwise would have been payable to the Participant but for such election to defer. Deferred cash credited to a Participant's Account may be invested in such investment vehicles as may be designated from time-to-time by the Board or a Board committee. The terms of any such investment (including relating to timing, crediting of earnings and losses, and reallocation among investment vehicles) shall be subject to such rules, regulations and determinations as may be adopted by the Administrator. The Company may link the earnings and losses under designated investment vehicles to the returns of actual investments in such vehicles, which investments may be made directly by the Company or through a rabbi trust or other intermediary; provided, however, that the Participant shall have no rights with respect to any specific assets that would cause the Participant to be other than an unsecured creditor of the Company or to be otherwise in constructive receipt of any cash or property. The right and interest of each Participant relating to deferred cash credited to his or her Account at all times will be nonforfeitable.

(d)Cessation of Service as a Director. If any Director Compensation otherwise subject to an election would be paid to a Participant after he or she has ceased to serve as a director, such payment shall not be subject to deferral under this Section 8, but shall instead be paid in accordance with the Company's regular non-employee director compensation policies.

9.Other Terms of Accounts.

(a)Dividend Equivalents on Share Units. Dividend equivalents will be credited on Share Units (i.e., RSUs and Deferred Shares) credited to a Participant's Account as follows:

(i) Cash and Non-Share Dividends. If the Company declares and pays a dividend on Shares in the form of cash or property other than Shares, then a number of additional Share Units shall be credited to a Participant's Account as of the designated crediting date for such dividend equal to (i) the number of Share Units credited to the Account as of the record date for such dividend, multiplied by (ii) the amount of cash plus the Fair Market Value of any property other than Shares actually paid as a dividend on each Share at such payment date, divided by (iii) the Fair Market Value of a Share at such designated crediting date.

(ii) Share Dividends and Splits. If the Company declares and pays a dividend on Shares in the form of additional Shares, or there occurs a forward split of Shares, then a number of additional Share Units shall be credited to the Participant's Account as of the payment date for such dividend or forward Share split equal to (i) the number of Share Units credited to the Account as of the record date for such dividend or split multiplied by (ii) the number of additional Shares actually paid as a dividend or issued in such split in respect of each Share.

(iii) Designated Crediting Date. The Administrator may designate the crediting date for dividend equivalents under Section 9(a)(i), which may be not earlier than the dividend payment date and not later than six months after the dividend payment date. No interest will be credited on cash amounts between the dividend payment date and the designated crediting date.

(b)Reallocation of Accounts. A Participant shall have no right to have amounts credited as cash in his or her Account reallocated or switched to Share Units in such Account or amounts credited as Share Units in such Account reallocated or switched to deferred cash in such Account, unless otherwise determined by the Board. The foregoing notwithstanding, in the event of a Change in Control, unless otherwise specifically elected by the Participant prior to the Change in Control, the Participant's Share Unit balance in his or her Account shall be automatically converted into deferred cash based on the Fair Market Value of Shares as of the close of business on the day of the Change in Control (or, if no Shares remain outstanding at that time, as of the close of business on the day preceding the Change in Control). If and to the extent authorized under Section 8(c), amounts of deferred cash may be reallocated among investment alternatives made available for cash deferrals under the Plan.

(c)Elections as to Settlement. Each Participant, at the time the Participant makes a deferral election under Section 6(e) or Section 8(a) shall file an election with the Administrator specifying the time or times at which the Participant's Account will be settled, following the Participant's termination of service as a director of the Company, and whether distribution will be in a single lump sum or in a number of annual installments not exceeding ten; provided, however, that, if no valid election has been filed as to the time of settlement of a Participant's Account or any portion thereof, such Account or portion thereof shall be distributed in a single lump sum on the first business day of the year following the year in which the Participant ceases to serve as a director. If installments are elected, such installments must be annual installments commencing not later than the first year following the year in which the Participant ceases to serve as a director (on such annual installment date as may be specified by the Administrator) and extending over a period not to exceed ten years.

(i) Matters Covered by Election. Subject to the terms of the Plan, the Administrator shall determine whether all deferrals under the Plan must be subject to a single election as to the time or times of settlement, or whether settlement elections may relate to deferrals relating to a specified Plan Year. If the Administrator permits elections to relate to a specified Plan Year, such election shall apply to the amounts originally credited in respect of such Plan Year and to any additional amounts credited as dividend equivalents or interest in respect of such originally credited amounts and previously credited additional amounts.

(ii) Modifying Elections. A Participant may modify a prior election as to the time at which a Participant's Account (or portion thereof) will be settled and/or the form of settlement (i.e., lump sum or installments, or the number of installments) at any time by filing a new election with the Administrator, subject to, and in accordance with paragraphs (A) and (B), below. The foregoing notwithstanding, elections under this Section 9(c) shall not be permitted, if permitting such an election would result in constructive receipt by the Participant of compensation in respect of the Participant's Account prior to the actual settlement of such Account or would violate Section 409A of the Code.

(A) Second Elections. To the extent permitted under Section 409A of the Code and the regulations issued thereunder, a Participant may change the form of settlement (i.e., lump sum or installments, or the number of installments) and/or the settlement date selected under a deferral election, provided (a) the new election must be must be filed with the Administrator at least 12 full months before settlement would occur under the election in place prior to the change, (b) the new election is not effective for a period of 12 months from the date made, and (c) the settlement date under the modified election defers settlement for at least 5 years from the date settlement would otherwise have occur.

(B) Special 2006 and 2007 Elections. Notwithstanding anything in Section 6, Section 8 or this Section 9 to the contrary, to the extent permitted under Section 409A of the Code and the regulations issued thereunder, a Participant may make a new election on or before December 31, 2007 as to the settlement date and/or form (i.e., lump sum or installments, or the number of installments) of deferred RSUs, deferred cash and/or Deferred Shares credited to the Participant's Account. However a Participant shall not be permitted in 2006 to change an election in a manner that will defer settlement of amounts that the Participant otherwise would have received in 2006 or cause payments to be made in 2006 pursuant to the 2006 election; and a Participant shall not be permitted in 2007 to change an election in a manner that will defer settlement of amounts that the Participant otherwise would have received in 2007 or cause payments to be made in 2007 pursuant to the 2007 election.

(d)Statements. The Administrator will furnish statements to each Participant reflecting the amounts credited to a Partici-pant's Account, transactions therein, and other related information no less frequently than once each calendar year. Statements may be combined with other information, including information with respect to other compensation plans, being provided to the Participant.

(e)Fractional Shares. The amount of Share Units credited to an Account shall include fractional Shares calculated to at least three decimal places.

10.Settlement of Accounts. The Company will settle a Participant's Account by making one or more distributions to the Participant (or his or her Beneficiary, following Participant's death) at the time or times, in a lump sum or installments, as specified in the Participant's election(s) filed in accordance with Sections 6(e) and 9(c); provided, however, that an Account will be settled at times earlier than those specified in such election in accordance with Sections 10(b), or 10(c); and provided further, that RSUs as to which no valid election to defer has been filed will be settled at the date specified in connection with the award under Section 6.

(a)Form of Distribution. Distributions in settlement of a Participant's Account shall be made only in cash with respect to deferred cash and in Shares with respect to Share Units.

(b)Death or Disability. If a Participant ceases to serve as a director due to death or Disability or dies prior to distribution of all amounts from his or her Account, the Company shall make a single lump-sum distribution to the Participant or his or her Beneficiary. Any such distribution shall be made as soon as practicable following notification to the Company of the Participant's death or Disability.

(c)Financial Emergency and Other Payments. Other provisions of the Plan notwithstanding, if, upon the written application of a Participant, the Board determines that the Participant has suffered an unforeseeable financial emergency, the Board may direct the payment to the Participant all or a portion of the balance of the Participant's Account and the time and manner of such payment. For purposes of this Plan, an unforeseeable financial emergency is an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence. Cash needs arising from foreseeable events such as the purchase of a house or education expenses for children shall not be considered to be the result of an unforeseeable financial emergency. It is intended that the Committee's determination as to whether a Participant has suffered an "unforeseeable financial emergency" and the amount of any distribution related to such emergency shall be made consistent with the requirements under Code section 409A.

(d)Distribution Upon a Change in Control. Upon a Change in Control that is a "change in control event" as determined under the regulations under Code Section 409A, the Company shall make a single lump-sum distribution to the Participant in settlement of his or her Account as promptly as practicable following the Change in Control.

11.Limitations on Deferrals and Related Participant Rights. The rights of a Participant with respect to deferrals under Sections 6, 8, 9, and 10, including any right to modify an election as to the time of settlement under Section 9(c) shall be limited or suspended at any time if and to the extent required by law or if the existence of such right would cause a Participant to be deemed to be in constructive receipt of amounts credited to his or her Account or otherwise cause the Participant's deferral of taxation with respect to compensation deferred hereunder to be ineffective. The Plan is intended to comply with the applicable requirements of Code Section 409A and its corresponding regulations and related guidance, and shall be maintained and administrated in accordance with Code Section 409A. Notwithstanding anything in the Plan to the contrary, distributions from the Plan may only be made in a manner, and upon an event, permitted by Code Section 409A.

12.Definitions Relating to Change in Control. For purposes of this Plan, the following definitions shall apply:

(a)"Beneficial Owner," "Beneficially Owns," and "Beneficial Ownership" shall have the meanings ascribed to such terms for purposes of Section 13(d) of the Exchange Act and the rules thereunder, except that, for purposes of this Section 12, "Beneficial Ownership" (and the related terms) shall include Voting Securities that a Person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants, options or otherwise, regardless of whether any such right is exercisable within 60 days of the date as of which Beneficial Ownership is to be determined.

(b)"Change in Control" means and shall be deemed to have occurred if, after the Effective Date,

(i) any Person, other than the Company or a Related Party, acquires directly or indirectly the Beneficial Ownership of any Voting Security of the Company and immediately after such acquisition such Person has, directly or indirectly, the Beneficial Ownership of Voting Securities representing 20 percent or more of the total voting power of all the then-outstanding Voting Securities; or

(ii) those individuals who as of the Effective Date constitute the Board or who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors as of the Effective Date or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(iii)there is consummated a merger, consolidation, recapitalization or reorganization of the Company, a reverse stock split of outstanding Voting Securities, or an acquisition of securities or assets by the Company (a "Transaction"), other than a Transaction which would result in the holders of Voting Securities having at least 80 percent of the total voting power represented by the Voting Securities outstanding immediately prior thereto continuing to hold Voting Securities or voting securities of the surviving entity having at least 60 percent of the total voting power represented by the Voting Securities or the voting securities of such surviving entity outstanding immediately after such Transaction and in or as a result of which the voting rights of each Voting Security relative to the voting rights of all other Voting Securities are not altered; or

(iv)there is implemented or consummated a plan of complete liquidation of the Company or a sale or disposition by the Company of all or substantially all of the Company's assets other than any such transaction which would result in Related Parties owning or acquiring more than 50 percent of the assets owned by the Company immediately prior to the transaction.

(c)"Person" shall have the meaning ascribed for purposes of Section 13(d) of the Exchange Act and the rules thereunder.

(d)"Related Party" means (i) a majority-owned subsidiary of the Company; or (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (iii) a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities; or (iv) if, prior to any acquisition of a Voting Security which would result in any Person Beneficially Owning more than ten percent of any outstanding class of Voting Security and which would be required to be reported on a Schedule 13D or an amendment thereto, the Board approved the initial transaction giving rise to an increase in Beneficial Ownership in excess of ten percent and any subsequent transaction giving rise to any further increase in Beneficial Ownership; provided, however, that such Person has not, prior to obtaining Board approval of any such transaction, publicly announced an intention to take actions which, if consummated or successful (at a time such Person has not been deemed a "Related Party"), would constitute a Change in Control.

(e)"Voting Securities" means any securities of the Company which carry the right to vote generally in the election of directors.

13.General Provisions.

(a)Limits on Transferability. Restricted Stock prior to the lapse of restrictions, Options, RSUs, Deferred Shares, deferred cash, and all other rights under the Plan will not be transferable by a Participant except by will or the laws of descent and distribution, or to a Beneficiary in the event of a Participant's death, and will not otherwise be subject to alienation, anticipation, encumbrance, garnishment, attachment, levy, execution or other legal or equitable process, nor subject to the debts, contracts, liabilities or engagements, or torts of any Participant or his or her Beneficiary. Any attempt to alienate, sell, transfer, assign, pledge, garnish, attach or take any other action subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void. The foregoing notwithstanding, the Administrator may permit a Participant to transfer Options and related rights to one or more trusts, partnerships, or family members during the lifetime of the Participant solely for estate planning purposes, but only if and to the extent then consistent with the registration of any offer and sale of Shares related thereto on Form S-8, Form S-3, or such other registration form of the Securities and Exchange Commission as may then be permitted to be filed with respect to the Plan. The Company may rely upon the beneficiary designation last filed in accordance with this Section 13(a).

(b)Adjustments. In the event that any large, special and non-recurring dividend or other distribution in the form of cash or other property, recapitalization, forward or reverse split, Share dividend, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Board to be appropriate in order to prevent dilution or enlargement of a Participant's rights under the Plan, then the Board shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of Shares reserved and available for delivery under the Plan and to be subject to Restricted Stock, Options, SARs, RSUs and Deferred Shares thereafter granted or credited, (ii) the limits upon the number of Shares that may be subject to Restricted Stock, RSUs, Options and SARs automatically granted under Sections 6 and 7 and any specification of the number automatically granted, (iii) the number and kind of Shares outstanding as Restricted Stock, (iv) the number and kind of Shares deliverable upon exercise of outstanding Options and SARs, and the exercise price per Share thereof (provided that no fractional Shares will be delivered upon exercise of any Option or SAR), and (v) the number and kind of Shares then credited as RSUs and Deferred Shares (taking into account any Share Units credited as dividend equivalents under Section 9(a)) and by reference to which RSUs and Deferred Shares are valued under the Plan.

(c)Receipt and Release. Payments (in any form) to any Participant or Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims for the compensation deferred and relating to the Account to which the payments relate against the Company, the Board, or the Administrator, and the Administrator may require such Participant or Beneficiary, as a condition to such payments, to execute a receipt and release to such effect. In the case of any payment under the Plan of less than all amounts then credited to an Account in the form of RSUs or Deferred Shares, the amounts paid shall be deemed to relate to the RSUs or Deferred Shares credited to the Account at the earliest time.

(d)Compliance. The Company shall have no obligation to settle any Account of a Participant (in any form) until all legal and contractual obligations of the Company relating to establishment of the Plan and such settlement shall have been complied with in full. In addition, the Company shall impose such restrictions on Shares delivered to a Participant hereunder and any other interest constituting a security as it may deem advisable in order to comply with the Securities Act of 1933, as amended, the requirements of the Nasdaq National Market or any other stock exchange or automated quotation system upon which the Shares are then listed or quoted, any state securities laws applicable to such a transfer, any provision of the Company's Articles of Incorporation or By-Laws, or any other law, regulation, or binding contract to which the Company is a party.

(e)Changes to the Plan and Awards. The Board may amend, suspend or discontinue the Plan, the authority to grant awards under the Plan, or any outstanding award (and any agreement relating thereto) without the consent of any other party, including shareholders or Participants; provided, however, that any amendment shall be subject to shareholder approval if and to the extent then required under applicable rules of the Nasdaq National Market or any other stock exchange or automated quotation system upon which the Shares may then be listed or quoted; and provided further, that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under any award theretofore granted. The foregoing notwithstanding, the Board, in its sole discretion, may terminate the Plan (in whole or in part). If the Board terminates the Plan, amounts credited the Participant's Account shall be paid in accordance with the terms of the Plan. In the event of a Change in Control that constitutes a “change in control” event within the meaning of Code Section 409A, the Plan shall terminate as of the date of the Change in Control and the amounts credited to the Participant's Account shall be distributed as soon as practicable thereafter consistent with Code Section 409A.

Without the prior approval of shareholders, the Committee will not amend or replace previously granted Options in a transaction that constitutes a "repricing." For this purpose, a "repricing" means: (1) amending the terms of an Option after it is granted to lower its exercise price; (2) any other action that is treated as a repricing under generally accepted accounting principles; and (3) canceling an Option at a time when its strike price is equal to or greater than the fair market value of the underlying Stock, in exchange for another Option, Restricted Stock, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction. A cancellation and exchange described in clause (3) of the preceding sentence will be considered a repricing regardless of whether the Option, Restricted Stock or other equity is delivered simultaneously with the cancellation, regardless of whether it is treated as a repricing under generally accepted accounting principles, and regardless of whether it is voluntary on the part of the Option holder.

(f)Unfunded Status of Plan; Creation of Trusts. The Plan is intended to constitute an "unfunded" Plan for deferred compensation and Participants shall rely solely on the unsecured promise of the Company for payment hereunder (except insofar as Shares are issued in connection with Restricted Stock). With respect to any payment not yet made to a Participant under the Plan, nothing contained in the Plan shall give a Participant any rights that are greater than those of a general unsecured creditor of the Company; provided, however, that the Board may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Board otherwise determines with the consent of each affected Participant. The establishment and maintenance of, or allocations and credits to, the Account of any Participant shall not vest in any Participant any right, title or interest in and to any Plan assets or benefits except at the time or times and upon the terms and conditions and to the extent expressly set forth in the Plan and in accordance with the terms of any trust.

(g)Other Participant Rights. No Participant shall have any of the rights or privileges of a shareholder of the Company under the Plan, including as a result of the grant of an Option or SAR, or crediting of RSUs, Deferred Shares or other amounts to an Account, or the creation of any Trust and deposit of Shares therein, except at such time as such Option or SAR may have been duly exercised or Shares may be actually delivered in settlement of an Account (in whole or in part); provided, however, that a Participant granted Restricted Stock shall have rights of a shareholder except to the extent that those rights are limited by the terms of the Plan and the agreement relating to the Restricted Stock. No provision of the Plan, document relating to the Plan, or transaction hereunder shall confer upon any Participant any right to continue to serve as a director of the Company or in any other capacity with the Company or a subsidiary or to be nominated for reelection as a director, or interfere in any way with the right of the Company to increase or decrease the amount of any compensation payable to such Participant. Subject to the limitations set forth in Section 13(a), the Plan shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns.

(h)Continued Service as an Employee. If a Participant ceases to serve as a director and, immediately thereafter, is employed by the Company or any subsidiary, then such Participant will not be deemed to have ceased to serve as a director at that time, and his or her continued employment by the Company or any subsidiary will be deemed to be continued service as a director; provided, however, that, for purposes of Section 5, such former director will not be deemed to be a non-employee director eligible for further grants of awards.

(i)Special Rule for Key Employees. If, at the time a Participant ceases to serve as a director, the Participant is a Key Employee as defined in Section 416(i) of the Code, without regard to paragraph 5 thereof, amounts to be distributed from the Participant's Account due to the cessation of service, if required by Code Section 409A and the regulations thereunder, may not be distributed to the Participant earlier than six months following the date of the Participant's s separation from service. If distributions are delayed pursuant to Code section 409A, the accumulated amounts withheld on account of Code section 409A shall be paid on the first business day after the end of the six-month period.

(j)Governing Law. The validity, construction, and effect of the Plan, any rules and regulations under the Plan, and any agreement under the Plan shall be determined in accordance with the Pennsylvania Business Corporation Law, to the extent applicable, other laws (including those governing contracts) of the Commonwealth of Pennsylvania, without giving effect to principles of conflicts of laws, and applicable federal law.

(k)Limitation. A Participant and his or her Beneficiary shall assume all risk in connection with any decrease in value of Restricted Stock, Options, RSUs or Deferred Shares, and neither the Company, the Board nor the Administrator shall be liable or responsible therefor.

(l)Severability. In the event that any provision of the Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of the Plan but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.

(m)Nonexclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as creating any limitation on the power of the Board to adopt such other compensatory arrange-ments for directors as it may deem desirable.

(n)Effective Date and Plan Termination. The Plan, as amended and restated herein, shall be effective as of the Effective Date. Unless earlier terminated by action of the Board, the Plan will remain in effect until such time as no Shares remain available for delivery under the Plan and the Company has no further rights or obligations under the Plan with respect to outstanding awards or Accounts under the Plan.

Approved by the Board of Directors January 25, 2007

EX-10.2.29

EXHIBIT 10.2.29

AMENDMENT 2007-1

CHARMING SHOPPES, INC.

SUPPLEMENTAL BENEFIT TRUST AGREEMENT

FOR THE CHARMING SHOPPES, INC. SUPPLEMENT RETIREMENT PLAN

AMENDMENT 2007-1, dated as of January 25, 2007, by Charming Shoppes, Inc. (the “Company”).

The Company has entered into the Charming Shoppes, Inc. Supplemental Benefit Trust Agreement dated as of September 17, 2003 (the “Trust Agreement”) with the Bryn Mawr Trust Company (the Trustee”) for the purpose of providing a funding source for the Charming Shoppes, Inc. Supplemental Retirement Plan (the “Plan”).

Pursuant to Section 12.1 of the Trust Agreement, the Company may, from time to time, amend or modify the provisions of the Trust Agreement.

The Company desires to amend the Trust Agreement to change the definition of “Change of Control” to be consistent with the terms of the Plan and to provide for the investment of the assets of the trust in life insurance policies.

NOW, THEREFORE, the Trust Agreement is amended as follows:

1.   A new Section 5.1(d) shall be added to read as follows:

(d) Subject to subsection (a), the Trustee may invest all or a portion of the Trust Fund in one or more life insurance policies or contracts. If any portion of the Trust Fund is invested in a life insurance policy or contract on the life of a Participant, the Trustee shall hold legal title to the policy or contract and shall serve as custodian. Prior to a Change of Control, the Company is specifically authorized to act as agent of the Trustee with respect to the administration of the insurance policies or contracts, and in that regard the Company may serve as signatory for the Trustee to execute insurance policy or contract applications and death claims, as well as to transfer assets between or among the separate accounts available within each insurance policy or contract, and shall advise the Trustee, on at least an annual basis, of all actions taken pursuant to this authority. Further, the Company reserves the right to designate the address of record for all notices involving such insurance policies or contracts and their administration and shall provide the Trustee, on at least an annual basis, an accounting of all actions occurring with respect to each such insurance policy or contract. Prior to the closing of any transaction that would result in a Change of Control, the Company shall provide the Trustee with written instructions pursuant to Section 7.2 hereof as to the person who will serve as agent for the Trustee with respect to any insurance policies or contracts following a Change of Control and such instructions shall not thereafter be amended by the Company. Following a Change of Control, the Trustee may substitute or replace the agent for good cause shown. The Company shall have the right at any time, and from time to time, in its sole discretion, to substitute cash or cash equivalents equal to the fair market value of any assets held by the Trust.

2.   Section 6.1(k) is amended in its entirety to read as follows:

(k) To exercise all powers conferred on the Trustee by local law, unless otherwise specifically provided herein, including the right to borrow against an insurance policy or contract for purposes of the Plan or to distribute the proceeds to the Company subject to the provisions of Section 4.7; provided, however, that if an insurance policy or contract is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy or contract other than the Trust, to assign the policy or contract (as distinct from conversion of the policy or contract to a different form) other than to a successor trustee, or to loan to any person other than the Company the proceeds of any borrowing against such policy or contract; provided, further, that the Trustee may make an IRC § 1035 exchange of any such policy or contract with the consent of the insured as to insurability.

3.   Section 16.1 is amended by adding a sentence to follow the first sentence, to read as follows:

Such contribution shall also include any life insurance policies or contracts purchased to be used to provide benefits under any of the Plans, and the Company shall cause the ownership of such policies or contracts to be transferred to the Trustee in its capacity as trustee under this Trust Agreement.

4.   Section 16.3 is amended to read as follows:

16.3“Change of Control” means and shall be deemed to have occurred if:

(a) any Person, other than the Company or a Related Party, acquires directly or indirectly the Beneficial Ownership of any Voting Security and immediately after such acquisition such Person has, directly or indirectly, the Beneficial Ownership of Voting Securities representing 20 percent or more of the total voting power of all the then-outstanding Voting Securities; or

(b) those individuals who as of the day after the Company’s annual shareholders meeting in the calendar year prior to the determination constitute the Board or who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors as of the day after the Company’s annual shareholders meeting in the calendar year prior to the determination or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board ; or

(c) consummation of a merger, consolidation, recapitalization or reorganization of the Company, a reverse stock split of outstanding Voting Securities, or an acquisition of securities or assets by the Company (a “Transaction”), other than a Transaction which would result in the holders of Voting Securities having at least 80 percent of the total voting power represented by the Voting Securities outstanding immediately prior thereto continuing to hold Voting Securities or voting securities of the surviving entity having at least 60 percent of the total voting power represented by the Voting Securities or the voting securities of such surviving entity outstanding immediately after such transaction and in or as a result of which the voting rights of each Voting Security relative to the voting rights of all other Voting Securities are not altered; or

(d) the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets other than any such transaction which would result in Related Parties owning or acquiring more than 50 percent of the assets owned by the Company immediately prior to the transaction.

IN WITNESS WHEREOF, and as evidence of the adoption of the amendment set forth herein, this instrument has been executed by the duly authorized officer of the Company as of this ________ day of ____________________, 2007.

       CHARMING SHOPPES, INC.

       By:  ______________________

       Eric M. Specter

       Executive Vice President

Accepted:

By:  _________________________________

Bryn Mawr Trust Company, as Trustee

EX-10.2.32

EXHIBIT 10.2.32

AMENDMENT 2007-1

CHARMING SHOPPES, INC.

SUPPLEMENTAL BENEFIT TRUST AGREEMENT

FOR THE CHARMING SHOPPES VARIABLE

DEFERRED COMPENSATION PLAN FOR EXECUTIVES

AND

THE CHARMING SHOPPES NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

AMENDMENT 2007-1, dated as of January 25, 2007, by Charming Shoppes, Inc. (the “Company”).

The Company entered into the Charming Shoppes, Inc. Supplemental Benefit Trust Agreement dated as of January 1, 1998 (the “Trust Agreement”) with First Union National Bank (now known as Wachovia) (the “Trustee”) for the purpose of providing a funding source for the Charming Shoppes Variable Deferred Compensation Plan for Executives and the Charming Shoppes Non-Employee Director Compensation Plan (the “Plans”); and

Pursuant to Section 12.1 of the Trust Agreement, the Company may, from time to time, amend or modify the provisions of the Trust Agreement; and

The Company desires to amend the Trust Agreement to change the definition of “Change of Control” to be consistent with the terms of the Variable Deferred Compensation Plan and the Charming Shoppes Non-Employee Director Compensation Plan.

NOW, THEREFORE, the Trust Agreement is amended as follows:

1.   Section 16.3 is amended to read as follows:

16.3“Change of Control” means and shall be deemed to have occurred if:

(a)any Person, other than the Company or a Related Party, acquires directly or indirectly the Beneficial Ownership of any Voting Security and immediately after such acquisition such Person has, directly or indirectly, the Beneficial Ownership of Voting Securities representing 20 percent or more of the total voting power of all the then-outstanding Voting Securities; or

(b)those individuals who as of the day after the Company’s annual shareholders meeting in the calendar year prior to the determination constitute the Board or who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors as of the day after the Company’s annual shareholders meeting in the calendar year prior to the determination or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board ; or

(c)consummation of a merger, consolidation, recapitalization or reorganization of Charming Shoppes, Inc., a reverse stock split of outstanding Voting Securities, or an acquisition of securities or assets by the Company (a “Transaction”) other than a Transaction which would result in the holders of Voting Securities having at least 80 percent of the total voting power represented by the Voting Securities outstanding immediately prior thereto continuing to hold Voting Securities or voting securities of the surviving entity having at least 60 percent of the total voting power represented by the Voting Securities or the voting securities of such surviving entity outstanding immediately after such transaction and in or as a result of which the voting rights of each Voting Security relative to the voting rights of all other Voting Securities are not altered; or

(d)the complete liquidation of the Company or sale or disposition by the Company of all or substantially all of the Company’s assets other than any such transaction which would result in Related Parties owning or acquiring more than 50 percent of the assets owned by the Company immediately prior to the transaction.

IN WITNESS WHEREOF, and as evidence of the adoption of the amendment set forth herein, this instrument has been executed by the duly authorized officer of the Company as of this ________ day of ____________________, 2007.

       CHARMING SHOPPES, INC.

       By:  ______________________

       Eric M. Specter

       Executive Vice President

Accepted:

By:  ________________________

Wachovia, as Trustee

EX-10.2.36

EXHIBIT 10.2.36

CHARMING SHOPPES, INC.

Annual IncentiveProgram

As Amended and Restated January 24, 2007

1.General

This Annual Incentive Program, as amended and restated (the "Program"), of Charming Shoppes, Inc. (the "Company") authorizes the grant of Annual Incentive Awards under the Company's 2003 Incentive Compensation Plan (the "Plan") to executives and key employees and sets forth certain terms and conditions of such Awards. The purpose of the Program is to help the Company secure and retain executives and key employees of outstanding ability and to motivate such persons to help the Company achieve excellent performance, by providing incentives directly linked to measures of annual performance based on corporate consolidated results, divisional results, individual performance, and/or other performance measures, and otherwise to further the purposes of the Plan. The terms and conditions of the Plan are hereby incorporated by reference in this Program. If any provision of this program or an implementing document hereunder conflicts with a provision of the Plan, the provision of the Plan shall govern. The Annual Incentive Awards authorized hereunder for Covered Employees are intended to qualify as "performance-based" compensation under Section 162(m) of the Code.

2.Definitions

Capitalized terms used in this Program but not defined herein have the same meanings as defined in the Plan. In addition to such terms and those terms defined in Section 1 above, the following are defined terms under this Program:

(a)"Annual Incentive Award" or "Award" means the amount of a Participant's Annual Incentive Award Opportunity in respect of a specified Performance Period (typically, one fiscal year) determined by the Committee to have been earned and the Participant's rights to future payments of cash in settlement thereof.

(b)"Annual Incentive Award Opportunity" or "Award Opportunity" means the Participant's opportunity to earn specified dollar-denominated amounts under this Plan based on performance during a Performance Period. An Annual Incentive Award Opportunity constitutes a conditional right to receive settlement of an Annual Incentive Award.

(c)"Participant" means an employee participating in this Program.

(d)"Performance Goal" means the Company, divisional, individual, or other accomplishment required as a condition to the earning of an Award Opportunity. Unless otherwise determined by the Committee at the time Award Opportunities are authorized, Performance Goals shall meet the requirements of Section 6(b) of the Plan.

(e)"Performance Period" means the period of one fiscal year over which an Annual Incentive Award Opportunity may be earned, provided that the Committee may specify a shorter duration for any Performance Period.

(f)“Retirement” shall mean the voluntary termination of a Participant’s employment by the Participant at or after the Participant has attained the age of 62 immediately after which the Participant is not employed by the Company or any Subsidiary.

(g)"Termination of Employment" means (i) the termination of a Participant's employment by the Company or a Subsidiary, or (ii) the voluntary termination of a Participant’s employment (other than a Retirement) immediately after which the Participant is not employed by the Company or any Subsidiary.

3.Eligibility

Employees who are eligible to participate in the Plan may be selected by the Committee to participate in this Program.

4.Designation and Earning of Annual Incentive Award Opportunities

(a)Designation of Award Opportunities and Performance Goals. The Committee shall select employees to participate in the Program for a Performance Period and designate, for each such Participant, the Award Opportunity such Participant may earn for such Performance Period, the nature of the Performance Goal the achievement of which will result in the earning of the Award Opportunity, and the levels of earning of the Award Opportunity corresponding to the levels of achievement of the Performance Goal. In the case of a Covered Employee, the Committee's determinations under this Section 4(a) shall be made not later than 90 days after the Performance Period begins and in no event after 25% of the Performance Period has elapsed. The Award Opportunity earnable by each Participant shall range from 0% to a specified maximum percentage of a specified target Award Opportunity. The Committee shall specify a table, grid, or formula that sets forth the amount of a Participant's Award Opportunity that will be earned corresponding to the level of achievement of a specified Performance Goal. The foregoing notwithstanding, the per-person limitation under Section 5 of the Plan shall apply to each Participant's Award Opportunity. For this purpose, awards under the Plan shall be deemed to use the per-person award limitation thereunder in the order in which the applicable performance periods are scheduled to end, and for performance periods ending on the same date in the order in which the award opportunities were authorized.

(b)Determination of Annual Incentive Award. Within a reasonable time after the end of each Performance Period, the Committee shall determine the extent to which the Performance Goal for the earning of the Participant's Annual Incentive Award Opportunity was achieved during such Performance Period and the resulting Award to the Participant for such Performance Period. To the extent permitted under Section 6(d) of the Plan, the Committee may adjust the amount of an Award in its discretion in light of such considerations as the Committee may deem relevant (but subject to the applicable maximum Award Opportunity authorized for each Participant); provided, however, that, with respect to a Covered Employee, no upward adjustment may be made and such adjustments otherwise shall comply with applicable requirements of Treasury Regulation 1.162-27(e) under the Code. Subject to Section 6 hereof, the Annual Incentive Award shall be deemed earned and vested at the time the Commit-tee makes the determination pursuant to this Section 4(b).

5.Settlement of Awards.

(a)Elective Deferral. A Participant will be permitted to elect to defer settlement of the Annual Incentive Award if and to the extent such Participant is selected to participate in the Company's Variable Deferred Compensation Plan for Executives and deferrals of Awards are authorized and validly deferred in accordance with that plan.

(b)Settlement of Award. Any non-deferred Annual Incentive Award shall be paid and settled by the Company promptly after the date of determination by the Committee under Section 4(b) hereof (such scheduled payment date being the "Stated Settlement Date"). With respect to any deferred amount of a Participant's Annual Incentive Award, such amount will be credited to the Participant's deferral account under the Company's Variable Deferred Compensation Plan for Executives as promptly as practicable at or after the date of determination by the Committee under Section 4(b) hereof.

(c)Tax Withholding. The Company shall deduct from any payment in settlement of a Participant's Annual Incentive Award or other payment to the Participant any Federal, state, or local withholding or other tax or charge which the Company is then required to deduct under applicable law with respect to the Award.

(d)Non-Transferability. An Annual Incentive Award Opportunity, any resulting Annual Incentive Award, including any deferred cash amount resulting from an Annual Incentive Award, and any other right hereunder shall be non-assignable and non-transferable except pursuant to the laws of descent and distribution in the event of the death of the Participant (or pursuant to a beneficiary designation, if permitted by the Committee), and shall not be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a subsidiary or affiliate or subject to any lien, obligation, or liability of the Participant to any party other than the Company or a subsidiary or affiliate.

6.Effect of Termination of Employment; Retirement

Upon a Participant's Termination of Employment prior to completion of a Performance Period or, after completion of a Performance Period but prior to the Stated Settlement Date (i.e., the date of payment and settlement of the Participant’s Annual Incentive Award under Section 5(b) with respect to that Performance Period assuming no elective deferral), the Participant's Annual Incentive Award Opportunity relating to such Performance Period shall cease to be earnable and shall be canceled, and the Participant shall have no further rights or opportun-ities hereunder, unless otherwise provided in an employment agreement or severance agreement between the Company and the Participant in effect at the time of Termination of Employment or otherwise determined by the Committee in its sole discretion.

Upon a Participant’s Retirement prior to completion of a Performance Period, a Pro-Rata Portion of the Participant’s Annual Incentive Award relating to such Performance Period shall be deemed earned and vested in accordance with and at the time that the Committee makes, the determination pursuant to Section 4(b) hereof. For purposes hereof, a Pro-Rata Portion of the Participant’s Annual Incentive Award shall be the product of (i) the Annual Incentive Award determined by the Committee pursuant to Section 4(b) hereof as if the Participant was employed by the Company or any Subsidiary through the completion of the Performance Period and the Stated Settlement Date multiplied by (ii) a fraction, the numerator of which shall be the number of full and partial months that the Participant was employed by the Company or any Subsidiary between the date of commencement of the Performance Period and the date of Retirement, and the denominator of which shall be the number twelve (12). The Retirement of a Participant after completion of a Performance Period will not result in forfeiture or otherwise affect the Participant’s Annual Incentive Award for that Performance Period.

7.General Provisions.

(a)Changes to this Program. The Committee may at any time amend, alter, suspend, discontinue, or terminate this Program, and such action shall not be subject to the approval of the Company's shareholders or Participants; provided, however, that any amendment to the Program beyond the scope of the Committee's authority shall be subject to the approval of the Board of Directors. Nothing shall limit the authority of the Committee, in its discretion, to accelerate the termination of any deferral period and the resulting payment and settlement of deferred amounts, with respect to an individual Participant or all Participants, without the consent of the affected Participants.

(b)Unfunded Status of Participant Rights. Annual Incentive Awards, accounts, deferred amounts, and related rights of a Participant represent unfunded deferred compensation obligations of the Company for ERISA and federal income tax purposes and, with respect thereto, the Participant shall have rights no greater than those of an unsecured creditor of the Company.

(c)Nonexclusivity of the Program. The adoption of this Program shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant, or to pay other amounts as annual bonuses apart from the Program, whether under the Plan or otherwise.

(d)No Right to Continued Employment. Neither the Program nor any action taken hereunder shall be construed as giving any employee the right to be retained in the employ of the Company or any of its subsidiaries or affiliates, nor shall it interfere in any way with the right of the Company or any of its subsidiaries or affiliates to terminate any employee's employment at any time.

(e)Severablity. The invalidity of any provision of the Program or a document hereunder shall not deemed to render the remainder of this Program or such document invalid.

Approved by the Compensation and Stock Option Committee on January 19, 2005;

Approved by the Independent members of the Board of Directors on January 20, 2005

Approved by the Compensation and Stock Option Committee on February 2, 2006

Approved by the Independent members of the Board of Directors on February 2, 2006

Approved by the Compensation Committee on January 24, 2007

Approved b y the Independent members of the Board of Directors on January 25, 2007

Approved by the Compensation Committee on March 23, 2007

Approved b y the Independent members of the Board of Directors on March 29, 2007

Annual Incentive Program - Designation of Fiscal 2008 Performance Period, Performance Goal, and Annual Incentive Award Opportunities

In furtherance of Section 4 of the Annual Incentive Program (the "Program"), for the Company's 2008 fiscal year (the "Fiscal 2008 Performance Period") the Performance Goal, Award Opportunities, and participation shall be as set forth in this Designation. Terms used in this Designation have the meanings defined in the Program.

Part I. Performance Goals and Award Opportunities for the Fiscal 2008 Performance Period

(a) Nature of Performance Goals. For the Fiscal 2007 Performance Period, the Performance Goal shall be based on corporate consolidated results (specifically, operating earnings before income taxes and net interest (i.e. excluding interest income and interest expenses) and excluding extraordinary and non-recurring items (“Operating Earnings”), as defined in the “Charming Shoppes, Inc. 2007 Budget Presentation”), division performance goals and individual performance goals. The specific Performance Goals and the Participants including all Executive Officers and other senior officers to whom they apply are set forth below and in Schedules I and II hereto. The Performance Goals of other Participants shall be determined by the Chief Executive Officer and the Divisional President (to the extent applicable) in consultation with the Chief Financial Officer and the Executive Vice President - Human Resources of the Company (the "Authorized Officers"). In furtherance of the foregoing:

-- The Corporate Operating Earnings Performance Goal for fiscal 2007 shall be a Minimum of $_______________ (the "Minimum Goal"), a Target of $___________________, and a Maximum of $________________.

-- The minimum, target and maximum levels of operating earnings for Lane Bryant, Fashion Bug, Catherines and Crosstown are set forth in Schedule I hereto.

-- An Annual Incentive Award Opportunity based on the consolidated corporate goal and the individual performance goal will be earned only if Operating Earnings equal or exceed the specified Minimum Goal; and

-- With respect to the divisional Presidents:

(i) An Annual Incentive Award Opportunity based on the consolidated corporate goal will be earned only if Operating Earnings equal or exceed the specified Minimum Goal and only if the divisional operating income equals or exceeds the specified Minimum Goal for the Performance Period for that President’s division as specified above; and

(ii) An Annual Incentive Award Opportunity based on divisional operating income and individual performance goals will be earned only if the divisional operating income equals or exceeds the specified minimum level for the Performance Period for that division as specified above.

(b) Designation of Participants and Award Opportunity Terms. Participants in the Program for the Fiscal 2008 Performance Period shall be executive officers, senior officers and other employees designated in Impact Levels 1 through 10 at the date hereof as more fully set forth in Schedule I hereto. For each Participant in Impact Levels 1 through 10, the Fiscal 2008 Performance Period, the Participant's target Annual Incentive Award Opportunity, designated levels of achievement of the Company Performance Goals, range of potential Annual Incentive Awards relating to the level of achievement of the Performance Goal, and other Award Opportunity terms are set forth on Schedule I and Schedule II hereto. Division Performance Goals and related terms shall be determined by the Authorized Officers, subject to the following:

(i) The divisional performance weights shall be allocated in accordance with Schedule I and II.

(ii) The portion of the awards attributable to achievement of the corporate goal (consolidated) shall be determined in accordance with this Designation and any attachment.

For all Participants (corporate and divisional), if the Minimum Goal is achieved (as required above), then awards based on the performance between the applicable minimum and target level or between the applicable target and maximum level will be determined on a pro-rata basis (i.e., interpolated);

(c) Adjustments to Performance Goals. The Committee may determine in its discretion to adjust the Performance Goals specified in (a) above (except as limited by the 2003 Plan and the Program).

Part II.Foreign Participants

Other provisions hereof notwithstanding, the Chief Executive Officer of the Company may modify any Annual Incentive Award Opportunity or Annual Incentive Award granted to any Participant in order to comply with local laws or customs in any jurisdiction other than the United States applicable to such Participant.

EX-14

EXHIBIT 14

Dear Associate,

As Chairman of the Board, CEO and President of Charming Shoppes, I am proud of our rich history, tradition and reputation as an ethical company. We have earned this respect by making decisions based on sound and honest business principles in accordance with the law. The following Standards of Business Conduct have been prepared after considerable research and benchmarking. An established consultant in the field of business ethics facilitated focused interviews and group discussions to assure we were asking the right questions and addressing the appropriate issues in these Standards. Charming Shoppes associates from a variety of levels in corporate and overseas offices, as well as representative associates from the offices and field organizations of the operating retail divisions, participated in the process. As a result, I am confident that these Standards will advance the Charming Shoppes shared value of Acting with Integrity.

No set of Standards, this one included, can be totally comprehensive. For years, the Company has had a functioning Business Conduct Committee chaired by Tony DeSabato—Executive Vice President Corporate and Labor Relations, Business Ethics, and Loss Prevention. Included on the committee are Eric Specter—Executive Vice President and Chief Financial Officer and Colin Stern, Executive Vice President and General Counsel. Questions regarding these Standards or any ethical issues should be directed to Tony DeSabato or any member of the Committee.

Our shared value for Acting with Integrity is also our fundamental standard of conduct. By acting with integrity, we will follow the law with sound and honest business practices.

It is important to me that each of you understand that at Charming Shoppes integrity is not an option

-rather it is the way we do business.

I appreciate your adherence to these practices and strongly encourage you to treat one another with fairness, dignity and respect.

Sincerely,

/S/Dorrit J. Bern

Dorrit J. Bern

1

Contents

A Message from Dorrit J. Bern	1
Our Mission	3
Our Ethical Commitment	3
Our Standards. Our Commitments. Our Stakeholders	3
Customers and Marketplace	4
Associates	4
Our Shareholders	4
Our Communities and the Public	5
Vendors and Suppliers	5
Our Responsibilities as Charming Shoppes Associates	5
The Business Conduct Committee	5
When and Where to Get Help or Report an Ethical Issue	6
Waivers of these Standards	7
Charming Shoppes’ Policy Regarding Retaliation	7
Frequently Asked Questions	7
Our Standards	8
Accuracy of Books, Records and Financial Statements	8
Anti-boycott and Import Laws	9
Antitrust and Competition Laws	9
Associate Privacy	10
Bribery and Corruption	10
Competitive Practices	11
Confidential Information	11
Conflicts of Interest	13
Customer Privacy	14
Drug and Alcohol Use	15
Environment	15
Equal Treatment and Respect	16
Fair Labor Practices	16
Fraudulent Behavior	17
Gifts and Entertainment	17
Health and Safety	19
Loans	20
Marketing Integrity	20
Political Contributions and Activities	20
Public and Media Communications	21
Records Retention	21
Use of Company Assets	22

2

Our Mission

Charming Shoppes’ mission is: It’s all about her - we own her heart, her home, her every experience.

We strive to leverage our leading position as a multi-channel retailer and transition to the lifestyle brand for all women.

We also recognize, however, that to serve our customers properly, we must show our commitment not just through our products but through our actions.

Our Ethical Commitment

Charming Shoppes, Inc. and its retail divisions: Catherines, Fashion Bug, Lane Bryant and Crosstown Traders have made a commitment to Act with Integrity in accordance with our Shared Values:

Exceed Our Customer’s Expectations

Act with Integrity

Be innovative

Collaborate through Teamwork

Deliver Superior Performance

Support the Community

We strive to accomplish this for our:

·   Customers by celebrating and advocating for her and by acting in harmony with ethical customers relations principles, and with such honesty and respect for her to earn her trust, confidence, and loyalty;

·   Associates by ensuring that our environment fosters trust, teamwork, mutual respect, open and honest communication, and creative thinking;

·   Shareholders by taking the necessary steps to deliver our commitments to them and build long-term value;

·   Communities by acting as a committed corporate citizen and by supporting community initiatives that are significant to our customers; and

·   Vendors and Suppliers by creating a mutually advantageous businesslike partnership based on fairness, honesty and respect.

Our Standards. Our Commitments. Our Stakeholders.

Our Standards of Business Conduct (Standards) guide us in acting with integrity and state acceptable and appropriate behavior for all Charming Shoppes associates. Although these Standards do not cover every situation, they set forth our basic philosophy of conducting business lawfully and with integrity. Charming Shoppes is committed to complying with these Standards and all applicable laws and governmental regulations that are applicable to the Company’s activities.

Our Standards reflect the policies and regulations we uphold in order to fulfill our commitments to our stakeholders. Each Commitment is supported by one or more of the underlying Charming Shoppes’ Standards of Business Conduct.

3

Customers and Marketplace

No matter how fierce the competition, Charming Shoppes is committed to competing both lawfully and ethically in the marketplace. Our reputation for honesty and fairness in our business dealings and the trust we have built with our customers provide us with a competitive advantage.

Our customers must be able to trust us. They want to know that their personal information is secure [see Customer Privacy section] and that our advertising and communication with them is honest [see Marketing Integrity section].

Our customers also care about how we do business. That’s why we are committed to fair trade with all parties [see Anti-boycott and Import Laws section] and will maintain the highest standards in our business dealings [see Bribery and Corruption section] [see Competitive Practices section] in the U.S. and abroad.

Fashion is a competitive industry and our customers expect the lowest prices for quality goods. That’s why we strictly adhere to high standards of fair competition [see Antitrust and Competition Laws section].

Associates

Charming Shoppes recognizes that the success of its brands relies on the dedication, hard work, and integrity of all its associates. We are committed to supporting our associates by providing a respectful workplace that fosters trust, teamwork, mutual respect, open and honest communication, and creative thinking.

How we treat our associates affects how our customers are treated. Creating an environment where associates feel valued and respected [see Equal Treatment and Respect section] is essential for our business success.

To earn that respect from our associates, we treat their personal information with respect [see Associate Privacy section] and we provide a safe work environment [see Health and Safety section].

We expect our associates to participate in helping to create a positive workplace by respecting themselves [see Drug & Alcohol Use section] and their co-workers [see Equal Treatment and Respect section].

Being a Charming Shoppes associate also means caring about the health of our Company. We need our associates to respect what belongs to the Company [see Use of Company Assets section], be alert to potential conflicts [see Conflicts of Interest section] that can impair our ability to do business as well as potential signs of fraud or misrepresentation [see Accuracy of Books, Records and Financial Statements section].

While we encourage our associates to play active roles in their communities, they must be careful not to represent, or appear to represent, the Company [see Political Contributions and Activities section] in community or political matters without Company approval.

Our Shareholders

Charming Shoppes is committed to pursuing sound growth and earnings objectives, while conducting business with the highest level of integrity. We will operate in what we perceive to be the best interests of the Company and our shareholders. We will be honest and clear about our operations and performance, exercising care in the use of our assets and resources.

Our Shareholders are the owners of our Company. We have an obligation to protect their assets [see Use of Company Assets section] as well as the market value of our stock. We recognize our responsibility to maintain a fair and open market for our stock by not using our knowledge [see Confidential Information section] as insiders to unfair advantage [see Insider Trading section] or by knowingly withholding information that the market needs to fairly trade our stock [see Accuracy of Books, Records and Financial Statements section] [see Records Retention section].

4

Our Communities and the Public

Charming Shoppes is committed to being a good citizen in the communities in which we do business. We are committed to conducting ourselves in an ethical manner, acting in accordance with our values and standards, while following the laws of the countries in which we operate.

We play a socially-responsible role in the communities we serve. We are sensitive to the impact we make on the environment [see Environment section] as well as how the people who make the products we sell are treated [see Fair Labor Practices section].

We are sensitive to how our messages are conveyed [see Public and Media Communications section] and work towards being open and fair in conveying information.

Vendors and Suppliers

Our Company is committed to creating respectful, trusting relationships with our vendors and suppliers. We believe in fair competition and treating our own vendors and suppliers with respect. Although we will compete hard, we will do so in accordance with commercial business standards. We will take care to avoid conflicts of interest [see Conflicts of Interest section] and the appearance of partiality when working with vendors and suppliers [see Gifts & Entertainment section]. In return, we expect our own vendors and suppliers to act with integrity in our business dealings, particularly by demonstrating compliance with fair labor standards [see Fair Labor Practices section].

Our Responsibilities as Charming Shoppes Associates

As Charming Shoppes associates, we have a responsibility to act with integrity, comply with these Standards and report known or potential violations even when we are not personally involved in an alleged violation. Failure to report violations can have substantial consequences. When possible and permitted by law, the identity of any associate who identifies him/herself when making a report will be kept confidential.

We also have a responsibility to seek answers to any questions we may have about the laws, regulations, or the requirements of these Standards by contacting a manager, the Executive Vice President of Business Ethics or any member of the Business Conduct Committee to obtain further guidance or report an ethical issue. (See “When and Where to Get Help” on the following page.)

Certain activities described in this policy may be taken by you only if you have received prior approval which means the prior approval of your immediate supervisor on certain issues or the prior approval of the Executive Vice President of Business Ethics or any member of the Business Conduct Committee; or in the case of executive officers and Directors, by the Chair of the Audit Committee (and in the case of the Chair of the Audit Committee, by a majority of the members of the Audit Committee.) Prior approval shall not be considered a waiver of any provision of this policy. Designated associates will be required to sign a statement annually that they have read this policy, and have disclosed any violations or are not aware of any violations.

Because these Standards are so critical to ensuring our integrity and our reputation, violations could result in disciplinary action, up to and including termination of employment.

The Business Conduct Committee

The Company’s Business Conduct Committee (which includes our General Counsel, CFO and the Executive Vice President of Business Ethics) is responsible for setting the standards of business conduct set forth in these Standards, updating these Standards as appropriate, and monitoring compliance with, and enforcement of, these Standards. The Executive Vice President of Business Ethics is also responsible for overseeing the procedures designed to implement and enforce these Standards.

5

When and Where to Get Help or Report an Ethical Issue

As an organization, Charming Shoppes welcomes comments, questions, and discussions on our Standards of Business Conduct and all ethical issues relating to the Company. If you have a question about these Standards or wish to report an ethical issue you should contact a member of the Business Conduct Committee:

Tony DeSabato (Chair)	Eric Specter
215 638 6636	215 638 6740
tony.desabato@charming.com	eric.specter@charming.com
Colin Stern
215 638 6898
colin.stern@charming.com

You may also report ethical issues or violations of our Standards by accessing the following anonymous, non-traceable methods.

Financial Compliance Hotline (800-227-4602)

To report an issue regarding the Company’s financial statement disclosures, accounting, internal accounting controls, or auditing matters, call the anonymous, toll-free, non-traceable Financial Compliance Hotline (800-227-4602) or write your concerns and forward them in a sealed envelope to:

Chair of the Audit Committee

c/o General Counsel

Charming Shoppes, Inc.

450 Winks Lane

Bensalem, PA 19020

The envelope must be labeled with “To be opened by the Audit Committee only” or a similar statement. The General Counsel is obligated to forward associates’ concerns, whether they are received from telephone or written communication, to the Chair of the Audit Committee and will do so promptly. He will also keep those communications confidential.

If you wish to discuss any matter with the Audit Committee, indicate this in your submission and include your contact information so that the Audit Committee can contact you if it deems contact appropriate.

The Audit Committee will ensure that proper steps are taken to investigate the issues, resolve them in a timely manner, and take any action that it deems appropriate.

Any Charming Shoppes associate who lawfully discloses information about fraudulent activities within the Company or otherwise assists criminal investigators, federal regulators, Congress, his/her supervisor or other proper people within the Company, or other parties in a judicial proceeding in detecting and stopping fraud is protected by law against retaliation by the Company.

Business Ethics Hotline (800-350-0329)

If you have a business ethics concern not related to the Company’s financial statement disclosures, accounting, internal accounting controls or auditing matters, you can access the anonymous, toll-free, non-traceable Business Ethics Hotline (800-350-0329).

6

You may also express concerns in writing (in an envelope labeled “confidential”) and addressed to:

E.V.P., Business Ethics

Charming Shoppes, Inc.

450 Winks Lane

Bensalem, PA 19020

Waivers of these Standards

No waivers of these Standards for executive officers or members of the Board of Directors can be granted without approval from our Board of Directors and prompt disclosure to the Company’s shareholders, along with the reasons for the waiver. No waivers of these Standards for other associates can be granted without the approval of the Executive Vice President of Business Ethics. Amendments to these standards must be approved by our Board of Directors and will be disclosed to the Company’s shareholders.

Charming Shoppes’ Policy Regarding Retaliation

We are committed to ensuring that Charming Shoppes associates do not face retaliation, reprisals or any career disadvantage for complying with these Standards. Retaliation is strictly prohibited and the Company will take action against individuals engaging in such conduct, up to and including termination of employment. If you suspect that you or someone you know has been retaliated against for complying with these standards or for, in good faith, reporting a violation of or suspected or potential violation of, these standards, contact the Executive Vice President of Business Ethics or any other member of the Business Conduct Committee immediately.

Frequently Asked Questions

Throughout this Code, we have included a series of questions and answers to provide guidance on ethical challenges that many of our associates may encounter in the normal course of doing their jobs. This list of “Q & As” is not an exhaustive list. It does not address all situations and does not answer the many questions on what the law requires. The Company asks that you remain sensitive to any situation that makes you wonder what the proper, legal, ethical response would be and, in advance of acting, seek clarification by contacting:

·   Someone in your reporting structure,

·   A senior leader,

·   Any member of the Business Conduct Committee (Tony DeSabato, Eric Specter, Colin Stern),

·   The Business Ethics Hotline (800-350-0329), or

·   The Financial Compliance Hotline (800-227-4602) in the event of financial disclosure, accounting, internal accounting controls, or auditing matters.

7

Our Standards

Accuracy of Books, Records and Financial Statements

Accurate reporting is essential to ensuring the integrity of Charming Shoppes’ books and accounting records. We maintain a system of internal controls, including procedures to protect Company assets that provide reasonable assurances to management that transactions are properly authorized, completely and accurately recorded and are in compliance with generally-accepted accounting principles (GAAP) at all times.

As part of this commitment we also:

·   Maintain a system of effective internal controls,

·   Maintain books and records that in reasonable detail completely, accurately and fairly reflect the Company’s transactions,

·   Prohibit the unauthorized acquisition, use, or disposition of Company assets, and the establishment of any undisclosed or unrecorded funds or assets, false or misleading entries in the Company’s books and records; and

·   Maintain a system of internal controls and procedures that will provide reasonable assurances to management that material information about the Company is accumulated and communicated to management, including the Chairman, President and CEO and CFO, to allow timely decisions regarding disclosure.

Books and Records

As Charming Shoppes associates, we are responsible for maintaining complete, accurate and timely books and records related to our areas of responsibility. This includes sales records, time cards, expense reports, disbursement records and other financial records, particularly journal entries and financial statements.

Financial Statements

Charming Shoppes executives, board members and associates are responsible for providing fair, accurate, complete and understandable financial information on a periodic and timely basis to its shareholders, the investment community, creditors, governmental agencies and others. The Company’s reports and documents filed with, or submitted to, the Securities and Exchange Commission and other public communications must include fair, accurate, timely, complete and understandable disclosures.

As Charming Shoppes associates, we must ensure that the Company’s periodic reports and public statements comply with all applicable regulations and are fair, accurate, timely, complete, and understandable. In particular, the Company’s financial statements included in its periodic reports must accurately and fairly disclose the Company’s assets, liabilities and other material transactions engaged in by the Company.

Any Charming Shoppes associate, who becomes aware of any non-compliance with applicable regulations, or of any inaccuracy in any of the Company’s reports and public statements, or material omission from the Company’s reports and public statements, must immediately report such inconsistencies or omissions to the Chair of the Audit Committee (using the procedures outlined above). As Charming Shoppes associates, we must never knowingly misrepresent, or cause others to misrepresent, facts about the Company within or outside the Company, including to the Company’s directors and auditors or to government regulators and self-regulatory organizations. We must also engage in due diligence when investigating any such reports.

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Q&A: Accuracy of Books, Records, and Financial Statements

Q: I’m an hourly associate and my supervisor has asked me to help out with some extra work off the clock. What should I do?

A: The law requires that the Company keep accurate time records. Hourly associates are not permitted to work off the clock, and it is inappropriate for a supervisor to make this request. Politely inform your supervisor that you would be happy to do the work, but that you cannot submit an inaccurate time record by not recording your hours. You should then report the incident through the Business Ethics Hotline.

Anti-boycott and Import Laws

Charming Shoppes and its associates must comply with, U.S. anti-boycott laws that prohibit U.S. firms and persons (and their controlled foreign subsidiaries) from:

·   Refusing or agreeing to refuse to do business with a country, it’s nationals or blacklisted companies for boycott-related purposes;

·   Discriminating or agreeing to discriminate against individuals or companies on the basis of race, religion, sex, national origin or nationality;

·   Paying, honoring, negotiating or implementing letters of credit containing prohibited boycott provisions.

As Charming Shoppes associates, we must not participate in any foreign economic boycott unless sanctioned by the U.S. Government, nor engage in any discussion with representatives of other companies, agencies, or governments regarding possible anti-boycott activities. In addition, associates must report any oral or written request to participate in an economic boycott to the Executive Vice President of Business Ethics so that it can be reported to the U.S. government.

As Charming Shoppes associates, we must also ensure that the products we import are imported in compliance with the applicable laws of the importing country. Any associate involved in such activity is required to know the laws of the countries from whom we import products as well as any U.S. import restrictions.

We must also report any violations of anti-boycott or import laws to the Executive Vice President of Business Ethics Associates can also contact the anonymous non-traceable Business Ethics Hotline (800-350-0329) and provide enough information for an investigation to take place.

If you have questions or need clarification on this provision, contact your supervisor, your Human Resources representative or the Executive Vice President of Business Ethics.

Antitrust and Competition Laws

Antitrust and competition laws protect free enterprise by prohibiting activities and agreements that improperly reduce competition and restrict trade. Antitrust law violations occur when people contract, combine or conspire with third parties to engage in certain anti-competitive acts, or when individuals make certain contractual or other business decisions that unfairly affect competition.

Charming Shoppes is committed to competing fairly in the marketplace. Charming Shoppes’ policy is to comply with all provisions of the antitrust laws of the United States, individual states, and applicable laws of the countries where we do business.

Many of the antitrust rules are complex and technical. They prohibit various kinds of agreements with competitors, suppliers, and customers. These rules include such areas as price fixing, refusals to deal with certain vendors, exclusive dealing arrangements, etc. If you encounter a situation that raises a question about antitrust or competition laws or regulations, contact any member of the Business Conduct Committee for clarification.

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Associate Privacy

As part of the employment process, Charming Shoppes gathers certain associate information including (but not limited to) addresses, telephone numbers, social security numbers, and medical and benefits information.

As Charming Shoppes associates, we have a responsibility to protect such information from unlawful use or disclosure. We must follow all Company policies related to protecting the privacy of associate data. Associate information must be provided only to those inside the Company who have a clear business need for the information. Associate information must not be provided to anyone outside the Company without the associate’s prior consent, except (i) to verify employment; (ii) as necessary to provide benefits or services to the associate; or (iii) to comply with legal requirements. We must also immediately contact a manager, or the Executive Vice President of Business Ethics, if such information is compromised.

We must not keep personal items, messages or information that we consider to be private on Company telephone systems or computer systems (including email) as these are Company property and may be monitored by the Company.

Q&A: Associate Privacy

Q: A friend of mine asked me to give her the names and phone numbers of co-workers so she can send them a solicitation for a charity for which she is helping raise money. Can I do this?

A: No. You would have to obtain permission from each co-worker to disclose their information. You should not do that in that it would put your co-worker in an awkward position. When you obtain personal information about a co-worker, such as address, telephone number, social security number, etc, that information is not to be disclosed to others. Of course, you can use the information in performing your duties.

Q: An associate recently asked me if another associate who works with us is HIV-positive. I know that she is. What should I do?

A: Nothing. Her HIV status is private employee medical information. Federal and state laws protect the privacy of such information. Because HIV is not contagious through casual contact it is not a health risk for other associates. You need to respect this associate’s privacy by not sharing this information with anyone else.

Bribery and Corruption

It is illegal and an unethical business practice to give or receive a bribe. A bribe is the payment of anything (money, gifts, and services) to influence a business decision. In addition, Federal law prohibits the offer, promise or gift of anything of value to an employee, agent, or official of the federal government with the intent to influence such an individual within his/her area of responsibility. Charming Shoppes is committed to abiding by all applicable domestic and international laws related to bribery and corruption. (See “Gifts and Entertainment” below for clarification of the Company policy on gifts and entertainment by past, present, or prospective vendors.)

Any Charming Shoppes associate who works with our international operations and partners must learn about and comply with applicable foreign laws. As Charming Shoppes associates, we must discuss with the Executive Vice President of Business Ethics any situation where we believe a bribe has been offered, accepted, or requested. Associates can also contact the anonymous non-traceable Business Ethics Hotline (800-350-0329) and provide enough information for an investigation to take place.

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Q&A: Bribery and Corruption

Q: A government official I am working with on a matter for the Company pulls me aside and says that in his area things go faster and easier if his boss is taken care of and that the going rate for walking these things through is about $1000 in cash. I need to get the job done quickly, what do I do?

A: Tell the official that you work for a public company and cannot make any payments to individuals in cash and report the incident to the Executive Vice President of Business Ethics.

Competitive Practices

Charming Shoppes seeks to achieve superior performance through legal, ethical, and fair competitive business practices. In the normal course of business, it is common to seek out and acquire information about various individuals or organizations, including competitors. Charming Shoppes routinely collects information on competitors, suppliers and vendors, and customers through a variety of legitimate methods. However, competing fairly in the marketplace means showing respect for the confidential information of competitors. As Charming Shoppes associates, we must never use improper means to seek confidential, non-public information about our competitors. We must never misrepresent ourselves, our positions, or our circumstances to persuade another to release such information and never commission a third party to obtain the release of such information. Any associate receiving confidential competitor information, whether accidentally or otherwise, is to report such receipt to the Executive Vice President of Business Ethics or contact the anonymous non-traceable Business Ethics Hotline (800-350-0329) and provide enough information for an investigation to take place.

Q&A: Competitive Practices

Q: Is comparison shopping permitted?

A: Comparison shopping is essential and permissible in our business. However, comparative shopping must be performed legally and ethically with sensitivity and respect for the competitor’s operations. Comparative shopping should not involve any attempt to receive or receipt of confidential non-public information and should never be disruptive to the competitors operation. When in a competitor’s store, do not enter any area of the store that is not open and accessible to the public. Do not ask for or accept documents, including price lists, which are not generally available to the public.

Q: During an interview with a candidate who is or was employed by a competitor can I ask them information about the competitor’s business?

A: Subject to the stated restrictions regarding obtaining material, non-public, confidential information, it is appropriate during the interview to acquire information about the candidates’ business accomplishments and the businesses in which they work or have worked, so as to assess the candidate’s qualifications and how well they would fit in with our organization.

Confidential Information

Some Company-related information we have access to at work is not generally known to the public and provides the Company with a business advantage. This confidential information includes (but is not limited to) strategic and business plans, financial information, sales information, pricing information, customer lists and data, lease terms with landlords, vendor terms with suppliers, product designs, advertising and promotional plans, and proprietary software and computer systems. Our shareholders rely on us to protect these important business assets from unlawful or inadvertent disclosure.

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Because the confidentiality of this information is so critical to our ability to compete effectively in the marketplace, unauthorized or premature disclosure could have a serious financial impact on the Company and may subject the Company and its associates to liability, including penalties for insider trading.

As Charming Shoppes associates, we should never disclose Company confidential information to any third party, except as authorized by the Company as part of our job responsibilities. We must properly label confidential documents. We must also notify a manager or the Executive Vice President of Business Ethics if we know of a situation in which the Company’s confidential information has been compromised.

Intellectual Property Protection

Our obligation to protect the Company’s confidential information includes our intellectual property—those creative ideas and expressions of our associates that have commercial value.

As Charming Shoppes associates, we must disclose any business-related written works, technological advances or unique solutions to business problems to the Legal Department so the Company can provide legal protection by securing copyrights, patents and trademarks. Any written documents whose content is protected under a trademark should be marked with the appropriate symbols such as “®” (registered trademark), “TM” (trademark), or “SM” (service mark) when using our works in text. Copyrighted work should contain the notice “© (Company) (Year).” We must also seek guidance from the legal department if we suspect that a Company patent or trademark is being infringed, or have questions on the use of patents, trademarks or copyrights.

Computer and Network Security

Our computer networks, computers, and software are the foundation of our Company’s information and communications infrastructure. These systems are vital to the continued success of our business. However, left unsecured, these networks can pose a substantial risk to our confidential information.

As Charming Shoppes associates, we must do everything possible to protect our computers and networks from unauthorized access. We must strictly follow all Company security policies and procedures including appropriate use of IDs and passwords, pass codes, building-access key cards, and computer systems, including corporate data, electronic communications and application software.

If you have questions or need clarification on this provision, contact the Executive Vice President of Business Ethics.

Q&A: Confidential Information

Q: A friend of mine has asked me how business is going. What can I tell them?

A: In social settings it is common to have discussions about work. However, you should never reveal any confidential information that has not been publicly disclosed by the Company. It is always permissible to refer back to recent public disclosures of sales information, profit information, or any other information that is set out in an official Company press release. This information is readily accessible on the Charming Shoppes website on the Internet.

Q: I saw a message posted on the internet on the Charming Shoppes message Board that has incorrect information. Can I post a message clarifying it?

A: No. No associate is authorized or permitted to post messages on such a public communication. The Company has a clear policy on the public disclosure of information. See “Public and Media Communications.”

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Conflicts of Interest

As Charming Shoppes associates, we have a responsibility to act in Charming Shoppes’ best interests. Sometimes, however, we may have a personal or financial stake in the outcome of a decision, as well as influence over that decision. In such situations, if we put our own interests ahead of the interests of the Company or its shareholders or customers, a conflict of interest exists. Even the appearance of impropriety in such situations can damage the reputation of both the associate and the Company.

As Charming Shoppes associates, we must avoid the following situations which may influence our judgment and cause us to act outside the best interests of the Company and its shareholders or customers.

Outside Employment

Serving as an officer, director, associate or partner of, or consultant to, a competitor company or a company that has a current or potential business relationship with Charming Shoppes could present a conflict of interest.

As Charming Shoppes associates, we may only work with organizations whose interests do not interfere with our Company responsibilities. We must obtain written approval from the Executive Vice President of Business Ethics before accepting a second job or any affiliation with an organization that is a Company competitor, customer, supplier or provider of goods or services.

Financial Investments

Any Charming Shoppes associate who holds, or has an immediate family member who holds, greater than a 5 percent financial interest in a competitor (or a company that has a current or potential business relationship with Charming Shoppes) has a conflict of interest. “Financial interest” is defined as any stock or ownership interest, particularly issued and outstanding shares of stock of a corporation traded on a national securities exchange or over-the-counter market. “Immediate family member” means a spouse or domestic partner, parent, parent of a spouse or domestic partner, siblings, siblings-in-law, children, stepchildren, grandchildren, grandparents, aunts, uncles, nephews and nieces.

As Charming Shoppes associates, we must disclose to the Executive Vice President of Business Ethics any direct or indirect financial interest of any kind or nature, other than through publicly traded mutual, index, etc. funds over which the associate or immediate family member has no investment control, that we, or an immediate family member, hold in any business, partnership, proprietorship, company or other person which supplies goods and/or services, directly or indirectly, or which competes with any Charming Shoppes business.

An associate must never make or influence any decision on behalf of the Company which could directly or indirectly benefit them or a family member who has a significant interest in a transaction with a competitor or any supplier. Such situations which would create a conflict of interest or the appearance of a conflict of interest should be disclosed to the Executive Vice President of Business Ethics.

Close Personal Relationships

Any Charming Shoppes associate who has an immediate family member or close personal relationship, which might influence him or her to act outside the best interests of the Company, faces a potential conflict of interest. These types of conflicts can have a negative impact on working relationships and result in fairness or even harassment issues.

As a general rule, Charming Shoppes associates must not hire close friends or immediate family members in the same store or business unit, and must not let any immediate family member report to another immediate family member, directly or indirectly. However, because of Charming Shoppes’ history as a family business, some limited exceptions to this policy may be granted. However, any exceptions must be approved by the Executive Vice President of Business Ethics.

Close personal relationships (dating) between supervisors and associates are also discouraged. As Charming Shoppes associates, we must never engage in close personal (dating) relationships with vendors and suppliers.

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As Charming Shoppes associates, we must promptly disclose any potential conflicts of interest, and any conduct that could be perceived by others as a conflict of interest, in writing, to the Executive Vice President of Business Ethics or another member of the Business Conduct Committee. We must direct any questions regarding conflicts of interest to the Executive Vice President of Business Ethics or another member of the Business Conduct Committee.

Upon reporting of the conflict or potential conflict of interest, the Company will determine whether the situation is detrimental to the interests of the Company. Many conflicts of interest can be resolved in a simple and mutually acceptable way. However, while we respect each individual’s right to privacy, if an associate’s personal affairs create, or appear to create, a potential conflict of interest, we may insist on full disclosure of the relevant facts so we can determine whether or not such a conflict exists. In most cases, if it is determined that such a conflict exists; one of the associates involved will likely be reassigned.

Q & A: Conflicts of Interest

Q: I was just hired, but my previous employer called and asked if I could work part-time a few evenings a week and one day on the weekend. The business is a retail clothing store but is not a direct competitor. Can I take the part-time work?

A: It might be okay for you to take this job, but you should talk to Human Resources or the Executive Vice President of Business Ethics first, since this is a potential conflict of interest.

Q: I recently inherited stock in a competitor‘s company. Do I have to sell it?

A: It depends on the size of the investment. You should talk to the Executive Vice President of Business Ethics or another member of the Business Conduct Committee to determine whether or not you will need to sell the stock.

Q: My niece plans to apply for a job in a store I manage. Can I hire her for the position?

A: No. This is not a good idea because it could result in favoritism, or at least the appearance of favoritism. You should ask your niece to apply to another store.

Q: My spouse has his own video production company. I’m about to develop a new video for Charming Shoppes. Can I use my spouse’s company?

A: Probably not. This situation raises serious conflict of interest issues. The Company’s dealings with vendors must be totally at arm’s length. Whether contracting this work out to your spouse’s company is appropriate will depend on a review of all the facts and circumstances. If an issue like this arises, please contact the Executive Vice President of Business Ethics for clarification.

Customer Privacy

Our customers entrust us with certain information, including (but not limited to) addresses, telephone numbers, social security numbers, and account and purchasing information. We have a responsibility to safeguard this information from unauthorized use or disclosure.

As Charming Shoppes associates, we must follow all laws and Company policies related to data privacy. Customer information must be provided only to those inside the Company who have a clear business need for the information and must not be given to outside companies except in the conduct of our business, to comply with applicable privacy laws, to protect against fraud or suspected illegal activity, or to provide customer services. We must also immediately contact a manager or the Executive Vice President of Business Ethics if such information is compromised. Associates can also contact the anonymous non-traceable Business Ethics Hotline (800-350-0329) and provide enough information for an investigation to take place.

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Q&A: Customer Privacy

Q: My cousin is starting a business that does not compete with the Company and has asked me to keep track of the names, address, and phone numbers of some of our customers, so she can send them information on her business. Is it okay to do this?

A: No. Customer information is confidential and is not to be used for any purpose other than authorized business purposes. Names, addresses, telephone numbers, social security numbers, credit card numbers, credit ratings, etc that come to your attention are not to be used for personal use or for any third party use not authorized by the Company.

Drug and Alcohol Use

Being under the influence of alcohol or drugs at work, or improperly using medication, diminishes an associate’s ability to perform and compromises the safety of fellow associates and others with whom they come into contact.

As Charming Shoppes associates, we must not use, sell, purchase or possess alcohol or illegal drugs while on Company property or while conducting Company business, and must not abuse or sell or purchase prescription drugs without a prescription. Limited consumption of alcohol while on Company property or while conducting Company business is permitted, but only for certain authorized Company-sponsored events with pre-approval at the Executive Vice President level or above.

We must also protect the safety of others by talking to a manager or a representative from Human Resources if we observe that an associate’s performance is being impaired by the use of alcohol, illegal substances or drugs, on Company property.

Q&A: Drug and Alcohol Use

Q: An associate often comes back from lunch smelling of alcohol. What should I do?

A: Talk to your manager about your concerns. This person’s drinking could be jeopardizing the safety of the team and needs to be addressed.

Q: I know that one of my associates is using illegal drugs on the job. I want to talk to her instead of telling our manager. Is this the right thing to do?

A: You are doing the right thing by helping your associate, but drug use on the job is of serious concern to the Company. It involves the presence of illegal substances on Company property, other legal issues, safety issues, and customer relations issues. You should bring the matter to the attention of your manager, Human Resources, or the Executive Vice President of Business Ethics.

Environment

Charming Shoppes is committed to protecting the environment and complying with all applicable environmental laws and regulations.

Any Charming Shoppes associate, who works with hazardous chemicals, or other environmental hazards, must be familiar with any federal, state and local environmental laws that apply to his or her job. Such associates must report any violations of such laws to the Executive Vice President of Business Ethics. Associates can also contact the anonymous non-traceable Business Ethics Hotline (800-350-0329) and provide enough information for an investigation to take place.

Charming Shoppes associates must also cooperate with Company initiatives to conserve energy and other resources, to reduce the amount of waste the Company produces, and to participate actively in any recycling efforts.

If you have questions or need clarification on this provision, contact the Executive Vice President of Business Ethics.

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Equal Treatment and Respect

Charming Shoppes is committed to a diverse workplace free from discrimination and harassment. We will recruit, hire, train, promote and provide other terms and conditions of employment without regard to a person’s race, color, religion, gender, age, national origin, sexual orientation, marital status, disabilities or veteran status.

As Charming Shoppes associates, we must treat others with respect on the job and comply with all applicable equal employment opportunity laws, including those related to discrimination and harassment. We must never tolerate discriminatory conduct or harassment of any kind, including that of a sexual nature. We must also refrain from making jokes, slurs or other remarks that are about race, color, religion, gender, age, national or ethnic origin, sexual orientation, martial status, disabilities, veteran’s status or are of a sexual nature that can encourage or create an offensive or hostile environment. We will also not tolerate implicit or explicit verbal threats, intimidation or violence.

Retaliation against a person who makes a complaint of discrimination or harassment in good faith, or who participates in an investigation, is prohibited. Any Charming Shoppes associate who feels discriminated or retaliated against, should promptly report the behavior to his or her manager, Human Resources, or the Executive Vice President of Business Ethics Associates can also contact the anonymous non-traceable Business Ethics Hotline (800-350-0329) and provide enough information for an investigation to take place.

Q&A: Equal Treatment and Respect

Q: One of our vendors is always asking me out on dates. No matter how many times I tell him I’m not interested, he keeps asking me. I told my boss about this behavior and she told me to just ignore him. His behavior really bothers me. What should I do?

A: What this vendor is doing may be sexual harassment since you’ve asked him to stop asking you out, and he hasn’t. Regardless, the behavior is not appropriate. You need to discuss the situation with Human Resources or the Executive Vice President of Business Ethics.

Fair Labor Practices

Charming Shoppes is committed to doing business with vendors who share the Company’s commitment to act with integrity, especially regarding compliance with fair labor laws. Charming Shoppes vendors are expected to comply with fair labor practices in their own operations, and monitor the fair labor practices of their contractors and subcontractors.

Our Fair Labor Compliance Program includes factory compliance inspections. Furthermore, our vendors are all asked to sign a Vendor’s Code of Conduct which includes provisions regarding the use of child labor, use of prison labor, payment of fair wages, overtime, and other working conditions.

As Charming Shoppes associates, we must work to ensure that vendors are complying with our Fair Labor Compliance Program. If we become aware of any vendors who are not in compliance, we must immediately notify the Executive Vice President of Business Ethics.

If you have questions or need clarification on this provision, contact the Executive Vice President of Business Ethics.

Q&A: Fair Labor Practices

Q: I think one of our vendors is not being honest with us about their use of a particular subcontractor because this subcontractor doesn’t comply with fair labor laws. What should I do?

A: You should contact the Executive Vice President of Business Ethics so that your suspicions can be investigated, and an inspection can be conducted through the fair labor compliance program, if appropriate.

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Fraudulent Behavior

Fraud is a broad concept that refers generally to any intentional act to cheat, trick, steal, deceive or lie to secure an unfair or unlawful gain. It is important to understand what fraud is so that you can recognize it and avoid mistakes. Some examples include: submitting false expense reports; forging or altering checks; misusing Company property, or misappropriation of Company assets, including embezzlement, payroll fraud and theft; unauthorized handling or reporting of transactions; and making an entry on the Company’s financial records or financial statements that is not in accordance with proper accounting standards. Intentional acts of fraud by associates are prohibited and are subject to strict disciplinary action, including dismissal and possible civil or criminal action.

Gifts and Entertainment

In a business relationship, exchanging gifts or entertainment of a nominal value can create goodwill and establish trust. This goodwill and trust is severely compromised if we accept gifts or entertainment from suppliers or vendors that are excessive in value or frequency. This is particularly true if they are used, or it appears they are being used, to gain an unfair business advantage.

Using good judgment and moderation, the occasional giving or acceptance of gifts or entertainment of nominal value is appropriate. However, all such gifts or entertainment must be properly recorded in the Company’s books and records, must be within Company guidelines, and must never be intended to influence a business decision.

Following are specific guidelines regarding gifts and entertainment.

Government Associates

Federal law prohibits the offer, promise or gift of anything of value to an employee, agent, or official of the federal government if intended to influence such individual within his/her area of responsibility. As Charming Shoppes associates, we must never give gifts of any kind to government associates, agents or officials. We must also get approval from a manager or the Executive Vice President of Business Ethics if we want to provide nominal entertainment to government associates, agents or officials.

Gifts

As Charming Shoppes associates, we must only accept gifts that are consistent with Company policy and the policies of the giver’s company. We must not accept cash gifts or gifts that are excessive in value. We must not accept gifts from any associate of a current or prospective vendor or supplier if such a gift is or could be construed as a bribe or if the gift would violate any laws or regulations. Store associates must never accept gifts from customers.

All gifts received in excess of nominal value should be returned to the giver with a note explaining our policy and should be reported to the Executive Vice President of Business Ethics Perishable gifts in excess of nominal value that cannot be returned must be donated to charity.

Prior approval must be obtained in order to give gifts to any employee of a vendor, prospect or supplier. Gifts will only be approved if they are:

a) Not a cash gift;

b) Consistent with customary business practices; and

c) Not excessive in value.

In no event may you give such a gift if it could be reasonably construed as a bribe or if giving the gift would violate any law or regulation.

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Purchases from Vendors

As Charming Shoppes associates, we may not purchase samples, products, merchandise, or services from Company vendors or suppliers at cost, wholesale, or at a discount regardless of the vendor’s or supplier’s pricing policy, practice, or program. This standard does not prohibit arms length dealings with vendors or suppliers on the same basis, terms, and conditions as are offered by the vendor or supplier to the public at large, or that have been differently arranged by the Company in advance and are made applicable by the Company to Charming Shoppes associates in general.

If you have questions or need clarification on this provision, contact the Executive Vice President of Business Ethics.

Q & A: Purchases from Vendors.

Q: I was in a vendor’s office and admired one of their products. The vendor offered me a sample. When I told them I couldn’t accept it, they offered to give it to me at a special discount. Can I do this, on this basis?

A: Probably not. You cannot accept a special discount from a vendor based on your status as an associate. However, this does not prohibit you from buying merchandise from a vendor on the same basis that is offered generally to the public. Also, from time to time, the Company may enter into relationships with vendors and arrange for special discounts for any of our associates. Purchases from vendors under terms arranged by the Company are permissible. If you have a question about a purchase from a vendor, please contact the Executive Vice President of Business Ethics.

Entertainment

As Charming Shoppes associates, we must obtain prior approval before participating with vendors and suppliers in meals, sporting, cultural and similar events. We are not permitted to participate in such events when they are excessive in value or frequency, are not in the ordinary course of business, are not consistent with Company policies, or violate the policy of any other party involved.

Corporate Opportunities

As Charming Shoppes associates, we owe a duty to the Company to advance its legitimate interests when the opportunity arises. Therefore, we must never take advantage of personal opportunities that are discovered through the use of corporate property, information, or our position with the Company, unless the Company has knowingly decided not to avail itself of the opportunity and approves our participation in that opportunity. We must not use corporate property, information, or our position for improper personal gain, and associates and Officers may not compete for business with the Company directly or indirectly without the consent of the Board of Directors.

Our family members must not receive compensation, commissions or gifts from current or prospective vendors or suppliers if such receipt could be construed as influencing the Company’s decision as whether to undertake or expand a relationship with that vendor or supplier.

Finally, we must not accept bribes, payoffs, kickbacks or kickback schemes, unexplained rebates, disguised markdown or other allowances or expenses or anything that may be considered illegal, unethical or compromising.

If you have questions or need clarification on this provision, contact the Executive Vice President of Business Ethics.

Q&A: Gifts and Entertainment

Q: I’ve been working very closely with a vendor whose product is selling so well that I’ve placed a large re-order. They recently sent me a handbag from their line with a thank you note. Can I accept it?

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A: No, you cannot accept the handbag. It should be returned to the giver with a note explaining our policy and should be reported to the Executive Vice President of Business Ethics.

Q: In gratitude for business we’ve given them over the years, a supplier wants to host a picnic for the people in my department during business hours. Can I accept?

A: Maybe. You should contact the Executive Vice President of Business Ethics to discuss the situation. Depending on the circumstance it may or may not be appropriate to participate.

Q: Recently I admired a garment that was in a batch of samples a vendor brought me, and the vendor’s representative offered to give it to me for free. Can I accept it?

A: No. Accepting samples from a vendor is not permitted under our policy. For guidance on purchases from vendors, see “Purchases from Vendors” above.

Health and Safety

Charming Shoppes values the contributions made by our associates and strives to provide a safe and secure work environment. Accordingly, we will comply with OSHA and other U.S. health and safety statutes and regulations, as well as any comparable laws in other countries where we do business.

As Charming Shoppes associates, we must comply with any Company health and safety policies, as well as all OSHA or other health and safety laws or regulations related to our jobs and promptly report health and safety violations to a manager or the Executive Vice President of Business Ethics. Associates can also contact the anonymous non-traceable Business Ethics Hotline (800-350-0329) and provide enough information for an investigation to take place.

Q&A: Health and Safety

Q: Someone is always propping open a fire door because it gets hot in that part of the building. How can I deal with this situation?

A: Propping a fire door open is a safety risk that should be reported immediately to your manager. If this is an ongoing problem that isn’t being addressed by your manager, you should speak with his or her manager, or the Executive Vice President of Business Ethics.

Q: The other day an associate was injured moving boxes. The employee hasn’t reported the injury, because she doesn’t feel it’s that serious, and she doesn’t want to jeopardize the team’s safety record. What should I do?

A: You have a responsibility to see that this issue is dealt with. You should encourage your associate to report the injury to your manager. If she fails to do so, you should speak to your manager instead. By doing this, you are protecting your associate’s health and preventing further injury.

Insider Trading

Some of the Company’s confidential information is considered by law to be “material” because it could affect an investor’s judgment about whether or not to buy, sell, or hold Company securities, or the securities of third parties with whom we have a business relationship. When such information has not been adequately disclosed to the public (such as through a Company press release or a filing with a government agency), the information is considered “non-public.” Buying or selling securities based on material, non-public information is called “insider trading” and is illegal.

As Charming Shoppes associates, we must never use material, non-public information in connection with any securities transaction, or communicate that information to anyone outside the Company who may do so. In addition, we must not permit any family member or anyone acting on our behalf to purchase or sell securities based on Company (or third party) material, non-public information.

19

If you have questions or need clarification on this provision, contact General Counsel, Colin Stern.

Q&A: Insider Trading

Q: A vendor gave me a “hot tip” about a merger he knows is being announced at his company in a few weeks. I’m thinking about buying some stock. Can I do this?

A: No. If you buy stock based on the confidential merger information, you would be acting on material, non-public information and violating insider trading laws.

Loans

Associates should not make or accept loans from any persons or entities having or seeking to do business with the Company, other than accepting a loan from a financial institution through the normal course of business at prevailing interest rates at the time of borrowing.

Marketing Integrity

Charming Shoppes’ policy is to engage in marketing, advertising and promotional practices that do not jeopardize the trust placed on the Company by customers, vendors, suppliers, and the public.

Our advertising complies with all laws regarding product information and pricing, comparative pricing, product availability, credit terms, warranty statements, and telephone and mail order processing.

As Charming Shoppes associates, our communication of information about our products and services must be truthful and accurate. Charming Shoppes’ policy is that promotional materials must not be misleading, deceptive, or fraudulent.

Political Contributions and Activities

Charming Shoppes encourages participation in the political process by associates. However, such activity must occur strictly on an individual and private basis and not on behalf of the Company.

As Charming Shoppes associates, we must not conduct personal political activity on Company time or using Company property or equipment. We must not make political contributions or incur political expenditures on behalf of the Company or obtain reimbursement for any such contribution or expenditure.

We must not make any direct or indirect contributions to political candidates, office holders or any political parties on behalf of the Company unless the contribution is legal and directly authorized by the Company’s Chief Executive Officer. This includes (but is not limited to): purchasing tickets to political events, furnishing Company goods or services, loan of Company personnel during working hours or payment for advertisements and other campaign expenses.

We must also never force, direct or in any way coerce another associate to make a political contribution. Contributions and expenditures are not limited to cash contributions to candidates or committees. They also include purchases of tickets to political dinners, advertisements on behalf of candidates, and donations of corporate property, services or personnel.

We must also not make contributions to trade associations or their political action committees where such contributions will be directly or indirectly used for political purposes. This includes campaign contributions and lobbying expenses, except for contributions made by trade associations of which the Company is a member, in support of legitimate lobbying efforts that have been previously approved by the Business Conduct Committee.

20

Q & A: Political Activity

Q: I was recently elected to city council in the community where I live. Charming Shoppes plans to open some stores there and will need to apply for renovation permits through the council. What should I do?

A: You should inform the Executive Vice President of Business Ethics and the council, of the potential conflict of interest, and obtain direction from the Executive Vice President of Business Ethics.

Q: I’m working on a political campaign for a candidate running for local office. I didn’t have time to run off flyers for an upcoming meeting. I only need a hundred copies and it will only take a few minutes. Can I do the copying at work?

A: No. There are two problems with this. This would be an improper use of Company assets. It might lead to a claim that the Company was engaging in inappropriate political activity.

Public and Media Communications

Charming Shoppes is committed to delivering accurate and reliable information to the media, financial analysts, investors, brokers and other members of the public. All public disclosures, including forecasts, press releases, speeches and other communications will be accurate, timely and representative of the facts. No investor, broker or financial analyst will receive special or favored treatment.

As Charming Shoppes associates, we must respect the abilities of our public relations and investor relations professionals and promptly forward all requests for information from outside the Company to them.

Q & A: Public and Media Inquiries

Q: I recently received a phone call from someone outside the Company asking about what we expect the hot trends to be next season. I know what we plan to feature in a big way next season, but am not sure if I should talk to this person. What should I do?

A: Because the question relates to non-public future plans, the caller is asking you to discuss confidential information, which you should not do. You should tell the caller that you will take down his or her contact information and provide it to the appropriate channel for a response. You should then contact Public Relations (Catherine Lippincott) or Investor Relations (Gayle Coolick) and provide them with the information.

Q: I want to post a message on the Company message board on the internet telling everyone how great the Company is. Can I do this?

A: No. All public statements about the Company must go through approved channels. No associate is authorized or permitted to make public statements on behalf of or about the Company without prior approval. If you have a question regarding what you can say publicly or whether a communication is a public communication contact the Executive Vice President of Business Ethics.

Records Retention

In order to maintain the integrity of Charming Shoppes’ record-keeping and reporting systems, it is critical that records retention procedures for each respective area of the Company be followed, including how data is stored and retrieved. Altering or distributing any document without authorization is a violation of Company policy and, in many cases, illegal.

As Charming Shoppes associates, we have a responsibility to know how to document and transact any entries or records for which we are responsible, as well as a responsibility to know and follow all legal requirements regarding retention of those documents. No document—including originals, drafts, duplicates, as well as computer files, disk drives, hard disks, floppy disks, CD-ROMs or any other media -may be destroyed, altered or removed from any file or premises where it is stored other than in accordance with the Company’s records retention policy. Charming Shoppes associates who do so are subject to strict disciplinary action, including dismissal, as well as referral to appropriate authorities.

21

Use of Company Assets

The Company’s assets, including information assets, such as the Internet, intranet, e-mail and other communications equipment, are important business assets and may be used only for Company business and for limited incidental use, such as important communications with close family members.

As Charming Shoppes associates, we must recognize that these Company resources are important assets and use them wisely. We must also safeguard the Company’s tangible assets against loss or unauthorized use.

We must not misuse the Associate Discount privilege or use Company funds or other Company property for illegal, unethical or otherwise improper purposes. These improper purposes include, but are not limited to, use of the Associate Discount for friends, use of funds for commercial or political bribery and diversion of money from legitimate corporate accounts for improper purposes. In addition, we must never establish, for any purpose, any unrecorded or undisclosed accounts or funds.

We must not use or divert Company property (including the services of other associates) for our own advantage or benefit and should not use corporate letterhead for matters not directly related to Company business.

If you have questions or need clarification on this provision, contact the Executive Vice President of Business Ethics.

Q&A: Use of Company Assets

Q: As soon as the school year starts, several associates start taking supplies from the office to give to their children. How can I handle this situation?

A: Tell your associates that supplies are only for office use. Also ask your manager to remind the whole team about the appropriate use of Company property.

Q: The easiest way for me to get hold of family members and close friends is through e-mail. Can I give out my work e-mail address for this purpose?

A: Yes. However, the Company policy permits only incidental use of Company e-mail for personal purposes.

Q: I am a store associate, and one of the other associates in my store is giving her employee discount to her friends. I don’t think it’s my place to say anything because I’m not her supervisor. What should I do?

A: Misuse of the associate discount is an abuse of Company assets. You have a responsibility to tell your store manager about it or report what you have seen to the Business Ethics Hotline (800-350-0329).

22

EX-21

EXHIBIT 21
Subsidiaries of the Registrant
	State or
	Jurisdiction of
Name	Incorporation
Arizona Mail Order Company, Inc.	Delaware
Bedford Fair Apparel, Inc.	Delaware
C.S.A.C., Inc.	Delaware
C.S.F., Corp.	Delaware
C.S.I.C., Inc.	Delaware
Catalog Fulfillment Co, Inc.	Arizona
Catalog Receivables, LLC	Delaware
Catalog Seller, LLC	Delaware
Catherines C.S.A.C., Inc.	Delaware
Catherines C.S.I.C., Inc.	Delaware
Catherines Direct, LLC	Delaware
Catherines of California, Inc.	California
Catherines of Nevada, Inc.	Nevada
Catherines of Pennsylvania, Inc.	Tennessee
Catherines Partners-Washington, G.P.	Washington
Catherines Partners-Texas, L.P.	Tennessee
Catherines Partners-Indiana, L.L.P.	Indiana
Catherines Stores Corporation	Tennessee
Catherines Stores of Indiana, Inc.	Indiana
Catherines Stores of Texas, Inc.	Texas
Catherines, Inc.	Delaware
Catherines.com, Inc.	Tennessee
CCTM, Inc.	Delaware
Charm-Fin Stores, Inc.	Delaware
Charming.com, Inc.	Delaware
Charming J V, Inc.	Delaware
Charming Shoppes Interactive, Inc.	Delaware
Charming Shoppes of Delaware, Inc.	Pennsylvania
Charming Shoppes Outlet Stores, LLC	Delaware
Charming Shoppes Receivables Corp.	Delaware
Charming Shoppes Seller, Inc.	Delaware
Charming Shoppes Street, Inc.	Delaware
Chestnut Acquisition Sub, Inc.	Delaware
Crosstown Traders, Inc.	Delaware
CS Insurance Ltd.	Bermuda
CS Investment Company	Delaware
CSD Acquisition Corp.	Delaware
CSGC, Inc.	Ohio
CSI Charities, Inc.	Pennsylvania
CSI Industries, Inc.	Delaware
CSI-DR, Inc.	Dominican Republic
CSIM, Inc.	Delaware
CSPE, LLC	Pennsylvania
Ericool Co. Ltd.	Hong Kong
Evatone Trading Ltd.	Hong Kong
Fashion Bug of California, Inc.	California
Fashion Bug Direct, LLC	Delaware
Fashion Service Corp.	Delaware
Fashion Service Fulfillment Corporation	Delaware
FB Apparel, Inc.	Indiana
FB Clothing, Inc.	Indiana
FB Distro, Inc.	Indiana
FB Distro Distribution Center, LLC	Delaware
Fashion Bug Retail Companies, Inc.	Delaware
FB Distro SM, Inc.	Indiana
Figi’s Business Services, Inc.	Wisconsin
Figi’s Gifts, Inc.	Wisconsin
Figi’s, Inc.	Wisconsin
Figi’s Mail Order Gifts, Inc.	Wisconsin
FSHC, Inc.	Delaware
Home ETC, Inc.	Delaware
KAFCO Development Co., Inc.	Pennsylvania
Kirkstone Ltd.	Hong Kong
KS Investments Ltd.	Bermuda
LANCO, Inc.	Delaware
Lane Bryant Direct, LLC	Delaware
Lane Bryant of Pennsylvania, Inc.	Pennsylvania
Lane Bryant Purchasing Corp.	Ohio
Lane Bryant Purchasing Corporation	Delaware
Lane Bryant, Inc.	Delaware
LM&B Catalog, Inc.	Delaware
M and A Joint Ventures, LLC	Delaware
Modern Woman Catalog, Inc.	Delaware
Modern Woman Specialty, Inc.	California
Modern Woman, Inc. (Delaware)	Delaware
Modern Woman, Inc. (MI)	Michigan
Monterey Bay Clothing Company, Inc.	Delaware
Outlet Division Management Co., Inc.	Delaware
Outlet Division Store Co., Inc.	Delaware
Petite Sophisticate, Inc.	Delaware
Petite Sophisticate Management Co., Inc.	Delaware
PSTM, Inc.	Delaware
Rose Merge Sub, Inc.	Tennessee
Sentani Trading Ltd.	Hong Kong
Sierra Nevada Factoring, Inc.	Nevada
Spirit of America, Inc.	Delaware
White Marsh Distribution, LLC	Maryland
Winks Lane, Inc.	Pennsylvania
Yardarm Trading Ltd.	Hong Kong
3710 Other companies(1)	Various

____________________

(1)Consists primarily of consolidated wholly-owned subsidiary companies that have done, are doing, or will be doing business as retail women’s apparel stores under our Fashion Bug, Fashion Bug Plus, Catherines, Lane Bryant, Lane Bryant Outlet, and Petite Sophisticate Outlet brand names.

EX-23

EXHIBIT 23

Consent Of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements No. 333-119638, 333-111004, 333-109220, 333-70862, 333-45750, 333-88899, 333-43117, 333-22323, 033-56145, and 033-56147 on Form S-8 and Registration Statements No. 333-91966 and 333-98741 on Form S-3 of Charming Shoppes, Inc., of our reports dated April 3, 2007, with respect to the consolidated financial statements of Charming Shoppes, Inc., Charming Shoppes, Inc. management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Charming Shoppes, Inc. included in this Annual Report (Form 10-K) for the year ended February 3, 2007.

  /S/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania

April 3, 2007

EX-31.1

EXHIBIT 31.1

Certification By Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dorrit J. Bern, certify that:

1. I have reviewed this Annual Report on Form 10-K of Charming Shoppes, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 2, 2007	/S/ DORRIT J. BERN
	Dorrit J. Bern
	Chairman of the Board
	President and Principal Executive Officer

EX-31.2

EXHIBIT 31.2

Certification By Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Eric M. Specter, certify that:

1. I have reviewed this Annual Report on Form 10-K of Charming Shoppes, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 2, 2007	/S/ ERIC M. SPECTER
	Eric M. Specter
	Executive Vice President
	Principal Financial Officer

EX-32

EXHIBIT 32

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted

Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), Dorrit J. Bern, Chairman of the Board, President, and Chief Executive Officer and Eric M. Specter, Executive Vice President and Chief Financial Officer of Charming Shoppes, Inc. (the “Company”), each certifies with respect to the Annual Report of the Company on Form 10-K for the period ended February 3, 2007 (the “Report”) that, to the best of her/his knowledge:

(1) The Report fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 2, 2007	/S/ DORRIT J. BERN
	Dorrit J. Bern
	Chairman of the Board
	President and Chief Executive Officer
Dated: April 2, 2007	/S/ ERIC M. SPECTER
	Eric M. Specter
	Executive Vice President
	Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.