Accrual for Store Closures

6 Months Ended

Jul. 31, 2011

Accrual for Store Closures

Accrual for store closures

5.           Accrual for Store Closures

During the quarter, the Company closed three of the five underperforming retail locations that it had plans to close.  The stores being closed did not perform at a level the company expects for a mature store location.  As a result of the closure of the three stores with unexpired leases, the Company has recorded an accrual of $4.2 million, which represents the present value of remaining lease obligations and anticipated ancillary occupancy costs, net of estimated sublease income. The accrual, net of the write-off of the straight-line lease accrual and tenant improvement allowances related to the stores being closed of approximately $0.6 million resulted in a charge in the current period’s statement of operations of approximately $3.7 million. The estimate is based on the Company’s best projection of the sublease rates it believes can be obtained for such properties and its best estimate of the marketing time it will take to find tenants to sublet such stores. Revisions to these projections in estimated buyout terms or sublease rates will be made to the obligation as further information related to the actual terms and costs become available. During the quarter ended July 31, 2011, the Company made lease and related payments of approximately $0.1 million for the closed stores that was taken against the accrual. Additionally, The Company estimates that it will incur additional store closing and lease exit costs of approximately $0.5 million in the next fiscal year in connection with the remaining store closures.