10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 2, 2008

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 No. 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)

NOT APPLICABLE

(Former name, former address, and former fiscal year, if changed since last report)

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act):

Large Accelerated Filer  x	Accelerated Filer  o
Non-accelerated Filer  o	Smaller Reporting Company  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 number of shares outstanding of the issuer’s Common Stock (par value $.10 per share) as of August 29, 2008 was 113,661,818 shares.

CHARMING SHOPPES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets
	August 2, 2008 and February 2, 2008	2
	Condensed Consolidated Statements of Operations and Comprehensive Income
	Thirteen weeks ended August 2, 2008 and August 4, 2007	3
	Twenty-six weeks ended August 2, 2008 and August 4, 2007	4
	Condensed Consolidated Statements of Cash Flows
	Twenty-six weeks ended August 2, 2008 and August 4, 2007	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Forward-looking Statements	23
	Critical Accounting Policies	26
	Recent Developments	26
	Overview	27
	Results of Operations	29
	Liquidity and Capital Resources	37
	Financing	42
	Market Risk	43
	Impact of Recent Accounting Pronouncements	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION	45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 4.	Submission of Matters to a Vote of Security Holders	47
Item 6.	Exhibits	48
	SIGNATURES	50
	Exhibit Index	51

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	August 2,			February 2,
(In thousands, except share amounts)	2008			2008
ASSETS
Current assets
Cash and cash equivalents	$	131,319		$	61,335
Available-for-sale securities		6,380			13,364
Accounts receivable, net of allowances of $2,105 and $6,262		3,540			33,535
Investment in asset-backed securities		109,301			115,912
Merchandise inventories		337,330			330,216
Deferred advertising		11,269			5,546
Deferred taxes		10,437			9,773
Prepayments and other		179,621			151,716
Current assets of discontinued operations		65,650			119,994
Total current assets		854,847			841,391
Property, equipment, and leasehold improvements – at cost		1,069,830			1,117,559
Less accumulated depreciation and amortization		620,154			658,410
Net property, equipment, and leasehold improvements		449,676			459,149
Trademarks and other intangible assets		189,203			189,562
Goodwill		66,666			66,666
Other assets		40,343			56,536
Total assets	$	1,600,735		$	1,613,304
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	158,711		$	122,629
Accrued expenses		178,511			168,573
Current liabilities of discontinued operations		43,150			46,086
Current portion – long-term debt		8,155			8,827
Total current liabilities		388,527			346,115
Deferred taxes		38,746			38,122
Other non-current liabilities		196,643			192,454
Long-term debt		308,329			306,169
Stockholders’ equity
Common Stock $.10 par value:
Authorized – 300,000,000 shares
Issued – 152,144,426 shares and 151,569,850 shares		15,214			15,157
Additional paid-in capital		412,971			407,499
Treasury stock at cost – 38,482,213 shares and 36,477,246 shares		(347,730	)		(336,761	)
Accumulated other comprehensive income/(loss)		(2	)		22
Retained earnings		588,037			644,527
Total stockholders’ equity		668,490			730,444
Total liabilities and stockholders’ equity	$	1,600,735		$	1,613,304
Certain prior-year amounts have been reclassified to conform to the current-year presentation.
See Notes to Condensed Consolidated Financial Statements

2

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

	Thirteen Weeks Ended
	August 2,			August 4,
(In thousands, except per share amounts)	2008			2007
Net sales	$	648,616		$	694,359
Cost of goods sold, buying, catalog, and occupancy expenses		473,868			485,236
Selling, general, and administrative expenses		164,995			176,223
Restructuring and other charges		14,945			0
Total operating expenses		653,808			661,459
Income/(loss) from operations		(5,192	)		32,900
Other income		792			3,771
Interest expense		(2,201	)		(2,818	)
Income/(loss) from continuing operations before income taxes		(6,601	)		33,853
Income tax (benefit)/provision		(2,891	)		12,959
Income/(loss) from continuing operations		(3,710	)		20,894
Loss from discontinued operations, net of income tax benefit of $3,150 in 2008 and $1,961 in 2007		(4,627	)		(2,615	)
Net income/(loss)		(8,337	)		18,279
Other comprehensive income, net of tax
Unrealized gains on available-for-sale securities, net of income tax
provision of $2 in 2008 and $4 in 2007		1			5
Comprehensive income/(loss)	$	(8,336	)	$	18,284
Basic net income/(loss) per share:
Income/(loss) from continuing operations	$	(.03	)	$	.17
Loss from discontinued operations, net of tax		(.04	)		(.02	)
Net income/(loss)	$	(.07	)	$	.15
Diluted net income/(loss) per share:
Income/(loss) from continuing operations	$	(.03	)	$	.16
Loss from discontinued operations, net of tax		(.04	)		(.02	)
Net income/(loss)	$	(.07	)	$	.14
Certain prior-year amounts have been reclassified to conform to the current-year presentation.
See Notes to Condensed Consolidated Financial Statements

3

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

	Twenty-six Weeks Ended
	August 2,			August 4,
(In thousands, except per share amounts)	2008			2007
Net sales	$	1,289,962		$	1,390,973
Cost of goods sold, buying, catalog, and occupancy expenses		921,051			958,387
Selling, general, and administrative expenses		351,790			356,321
Restructuring and other charges		18,556			0
Total operating expenses		1,291,397			1,314,708
Income/(loss) from operations		(1,435	)		76,265
Other income		1,307			5,101
Interest expense		(4,570	)		(6,081	)
Income/(loss) from continuing operations before income taxes		(4,698	)		75,285
Income tax (benefit)/provision		(1,645	)		27,925
Income/(loss) from continuing operations		(3,053	)		47,360
Loss from discontinued operations, net of income tax benefit of $24,004 in 2008 and $1,961 in 2007		(39,741	)		(2,783	)
Net income/(loss)		(42,794	)		44,577
Other comprehensive income/(loss), net of tax
Unrealized gains/(losses) on available-for-sale securities, net of income tax
(provision)/benefit of $13 in 2008 and ($4) in 2007		(24	)		2
Comprehensive income/(loss)	$	(42,818	)	$	44,579
Basic net income/(loss) per share:
Income/(loss) from continuing operations	$	(.03	)	$	.38
Loss from discontinued operations, net of tax		(.35	)		(.02	)
Net income/(loss)(1)	$	(.37	)	$	.36
Diluted net income/(loss) per share:
Income/(loss) from continuing operations	$	(.03	)	$	.36
Loss from discontinued operations, net of tax		(.35	)		(.02	)
Net income/(loss)(1)	$	(.37	)	$	.34
Certain prior-year amounts have been reclassified to conform to the current-year presentation.
See Notes to Condensed Consolidated Financial Statements
____________________
(1) Results may not add due to rounding.

4

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Twenty-six Weeks Ended
	August 2,			August 4,
(In thousands)	2008			2007
Operating activities
Net income/(loss)	$	(42,794	)	$	44,577
Adjustments to reconcile net income/(loss) to net cash provided by operating activities
Depreciation and amortization		50,566			46,256
Estimated loss on disposition of discontinued operations		42,768			0
Deferred income taxes		(277	)		350
Stock-based compensation		5,014			7,760
Excess tax benefits related to stock-based compensation		0			(780	)
Write-down of deferred taxes related to stock-based compensation		(1,333	)		0
Write-down of capital assets		2,217			0
Net (gain)/loss from disposition of capital assets		(1,066	)		1,191
Net gain from securitization activities		(83	)		(1,170	)
Changes in operating assets and liabilities
Accounts receivable, net		29,995			30,257
Merchandise inventories		95			23,800
Accounts payable		32,242			(13,330	)
Deferred advertising		(1,957	)		5,266
Prepayments and other		(5,295	)		8,580
Accrued expenses and other		1,425			5,358
Net cash provided by operating activities		111,517			158,115
Investing activities
Investment in capital assets		(38,459	)		(74,016	)
Proceeds from sales of capital assets		4,813			0
Gross purchases of securities		(3,489	)		(26,501	)
Proceeds from sales of securities		10,719			2,579
(Increase)/decrease in other assets		459			(7,789	)
Net cash used by investing activities		(25,957	)		(105,727	)
Financing activities
Proceeds from issuance of senior convertible notes		0			275,000
Proceeds from long term borrowings		108			790
Repayments of long-term borrowings		(4,579	)		(5,968	)
Payments of deferred financing costs		(46	)		(7,541	)
Excess tax benefits related to stock-based compensation		0			780
Purchase of hedge on senior convertible notes		0			(90,475	)
Sale of common stock warrants		0			53,955
Purchases of treasury stock		(10,969	)		(149,416	)
Funds deposited with third party for purchases of treasury stock		0			(40,000	)
Net proceeds/(payments) from shares issued under employee stock plans		(62	)		(77	)
Net cash provided/(used) by financing activities		(15,548	)		37,048
Increase in cash and cash equivalents		70,012			89,436
Cash and cash equivalents, beginning of period		61,842			143,838
Cash and cash equivalents, end of period	$	131,854		$	233,274
Non-cash financing and investing activities
Common stock issued on redemption of convertible notes	$	0		$	149,564
Assets acquired through capital leases	$	5,959		$	4,137
See Notes to Condensed Consolidated Financial Statements

5

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Condensed Consolidated Financial Statements

The accompanying interim unaudited condensed consolidated balance sheet as of August 2, 2008, condensed consolidated statements of operations and comprehensive income for the thirteen weeks and twenty-six weeks ended August 2, 2008 and August 4, 2007, and condensed consolidated statements of cash flows for the twenty-six weeks ended August 2, 2008 and August 4, 2007 have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission.  In our opinion, we have made all adjustments (which, except as otherwise disclosed in these notes, include only normal recurring adjustments) necessary to present fairly our financial position, results of operations and comprehensive income, and cash flows.  Certain prior-year amounts in the condensed consolidated balance sheets and condensed consolidated statements of operations and comprehensive income have been reclassified to conform to the current-year presentation.  We have condensed or omitted certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles.  These financial statements and related notes should be read in conjunction with our financial statements and related notes included in our February 2, 2008 Annual Report on Form 10-K.  The results of operations for the thirteen weeks and twenty-six weeks ended August 2, 2008 and August 4, 2007 are not necessarily indicative of operating results for the full fiscal year.

As used in these notes, the term “Fiscal 2009” refers to our fiscal year ending January 31, 2009 and the term “Fiscal 2008” refers to our fiscal year ended February 2, 2008.  The term “Fiscal 2010” refers to our fiscal year ending January 30, 2010.  The term “Fiscal 2009 Second Quarter” refers to our fiscal quarter ended August 2, 2008 and the term “Fiscal 2008 Second Quarter” refers to our fiscal quarter ended August 4, 2007.  The term “Fiscal 2009 First Quarter” refers to our fiscal quarter ended May 3, 2008 and the term “Fiscal 2009 Third Quarter” refers to our fiscal quarter ending November 1, 2008.  The terms “the Company,” “we,” “us,” and “our” refer to Charming Shoppes, Inc. and, where applicable, our consolidated subsidiaries.

Discontinued Operations

On April 25, 2008 we announced that our Board of Directors began exploring a broad range of operating and strategic alternatives for our non-core misses apparel catalog titles in order to provide a greater focus on our core brands and to enhance shareholder value.  The non-core misses apparel catalog titles met the requirements of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS No. 144”) to be accounted for as held for sale.  Accordingly, the results of the non-core misses apparel catalog titles have been reported as discontinued operations in our consolidated statements of operations and balance sheets for all periods presented.  The operations and cash flows of the non-core misses apparel catalog titles will be eliminated from our financial statements upon the sale and we will not have any significant involvement in the operations after the sale.

Subsequent to August 2, 2008 we announced that we have entered into a definitive agreement to sell our non-core misses apparel catalogs (see “Note 14. Subsequent Event” below).  We evaluated the impact of the retained cash flows with regards to the transitional service agreements in accordance with EITF 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations,” and determined that the cash outflows over the transition period are not expected to be significant and accordingly, the reporting of discontinued operations was deemed appropriate in accordance with SFAS 144.

6

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 1. Condensed Consolidated Financial Statements (Continued)

Results from discontinued operations for the thirteen weeks and twenty-six weeks ended August 2, 2008 and August 4, 2007 were as follows:

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	August 2,			August 4,			August 2,			August 4,
(In thousands)	2008			2007			2008			2007
Net sales	$	56,569		$	76,566		$	121,248		$	164,664
Loss from discontinued operations	$	(7,777	)(1)	$	(4,576	)	$	(63,745	)(2)	$	(5,046	)
Income tax benefit		3,150	(1)		1,961			24,004	(2)		2,263
Loss from discontinued operations, net of income tax benefit	$	(4,627	)(1)	$	(2,615	)	$	(39,741	)(2)	$	(2,783	)
____________________
(1)   Includes reduction of estimated loss on disposition of $1,506, net of a reduction in income tax benefit of $977 and loss from operations of ($6,133), net of an income tax benefit of $4,127.
(2)   Includes estimated loss on disposition of ($26,884), net of an income tax benefit of $15,884 and loss from operations of ($12,857), net of an income tax benefit of $8,120.

Current assets and liabilities of discontinued operations as of August 2, 2008 and February 2, 2008 were as follows:

	August 2,			February 2,
(In thousands)	2008			2008
Current assets:
Merchandise inventories	$	54,102		$	61,311
Deferred advertising		11,962			15,728
Intangible assets		44,758			45,397
Deferred taxes and other, net		(2,404	)		(2,442	)
Loss on disposal of discontinued operations		(42,768	)		–
Current assets of discontinued operations	$	65,650		$	119,994
Current liabilities:
Accounts payable	$	14,084		$	17,924
Accrued expenses		12,038			10,884
Other liabilities		17,028			17,278
Current liabilities of discontinued operations	$	43,150		$	46,086

The financial information included in these Notes to Condensed Consolidated Financial Statements reflects only the results of our continuing operations.

7

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Segment Reporting

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 are reported under the Direct-to-Consumer segment.  The Retail Stores segment derives its revenues from sales through retail stores and store-related E-commerce sales under our LANE BRYANT® (including LANE BRYANT OUTLET®), FASHION BUG®, CATHERINES PLUS SIZES®, and PETITE SOPHISTICATE® (including PETITE SOPHISTICATE OUTLET®) brands.  The Direct-to-Consumer segment, excluding discontinued operations, derives its revenues from catalog sales and catalog-related E-commerce sales under our LANE BRYANT WOMAN® and FIGI’S® titles and E-commerce sales under our SHOETRADER.COM website.  See “Discontinued Operations” above and “Note 10. Segment Reporting” and “Note 14. Subsequent Event” below for further information regarding our discontinued operations and segment reporting.

Stock-based Compensation

We have various stock-based compensation plans under which we are currently granting awards, which are more fully described in “Item 8. Financial Statements and Supplementary Data; Note 11. Stock-Based Compensation Plans” in our February 2, 2008 Annual Report on Form 10-K.

Shares available for future grants under our stock-based compensation plans as of August 2, 2008:

2004 Stock Award and Incentive Plan	3,420,785
2003 Non-Employee Directors Compensation Plan	155,924
1994 Employee Stock Purchase Plan	923,155
1988 Key Employee Stock Option Plan	99,358

Stock option and stock appreciation rights activity for the twenty-six weeks ended August 2, 2008:

											Aggregate
				Average							Intrinsic
	Option			Option		Option Prices					Value(1)
	Shares			Price		Per Share					(000’s)
Outstanding at February 2, 2008		1,894,874		$	5.95	$	1.00	–	$	13.84	$	1,777
Granted – option price equal to market price		2,822,957			4.97		4.60	–		5.64
Granted – option price less than market price		14,000			1.00		1.00	–		1.00
Canceled/forfeited		(753,093	)		5.16		1.00	–		12.48
Exercised		(108,931	)		4.42		1.00	–		5.47		124	(2)
Outstanding at August 2, 2008		3,869,807		$	5.42	$	1.00	–	$	13.84	$	122
Exercisable at August 2, 2008		1,619,496		$	6.20	$	1.00	–	$	13.84	$	0
____________________
(1)   Aggregate market value less aggregate exercise price.
(2)   As of date of exercise.

8

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 1. Condensed Consolidated Financial Statements (Continued)

Stock-based compensation expense includes compensation cost for (i) all partially-vested stock-based awards granted prior to the beginning of Fiscal 2007, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), and (ii) 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. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), a revision of SFAS No. 123.  Current grants of stock-based compensation consist primarily of restricted stock, restricted stock unit, and stock appreciation right awards.

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 2,		August 4,		August 2,		August 4,
(In thousands)	2008		2007		2008		2007
Total stock-based compensation expense	$	2,116	$	4,836	$	5,014	$	7,760

During the Fiscal 2009 Second Quarter we granted cash-settled restricted stock units (“RSUs”) under the 2003 Non-Employee Directors Compensation Plan.  These cash-settled RSUs have been accounted for as liabilities in accordance with SFAS No. 123(R).  Excluded from the $2,116,000 and $5,014,000 of compensation expense in the above table is $481,000 of compensation expense related to these cash-settled RSUs.  A liability of $359,000 related to these RSUs is included in accrued expenses in the accompanying condensed consolidated balance sheet as of August 2, 2008.  Total compensation expense for unvested cash-settled RSUs not yet recognized as of August 2, 2008 was $1,080,000, which will be recognized over a one-year period from the date of grant.

We use the Black-Scholes valuation model to estimate the fair value of stock options and stock appreciation rights, and amortize stock-based compensation on a straight-line basis over the requisite service period of an award.  Estimates or assumptions we used under the Black-Scholes model are more fully described in “Item 8. Financial Statements and Supplementary Data; Note 1. Summary of Significant Accounting Policies; Stock-based Compensation” in our February 2, 2008 Annual Report on Form 10-K.

Total stock-based compensation expense not yet recognized, related to the non-vested portion of stock options, stock appreciation rights, and awards outstanding (excluding cash-settled RSUs), was $14,325,000 as of August 2, 2008.  The weighted-average period over which we expect to recognize this compensation expense is approximately 3 years.

Note 2. Accounts Receivable

Accounts receivable consist of trade receivables from sales through our FIGI’S catalog.  Details of our accounts receivable are as follows:

	August 2,			February 2,
(In thousands)	2008			2008
Due from customers	$	5,645		$	39,797
Allowance for doubtful accounts		(2,105	)		(6,262	)
Net accounts receivable	$	3,540		$	33,535

9

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3. Trademarks and Other Intangible Assets

	August 2,		February 2,
(In thousands)	2008		2008
Trademarks, tradenames, and internet domain names	$	188,608	$	188,608
Customer lists, customer relationships, and covenant not to compete		6,172		6,172
Total at cost		194,780		194,780
Less accumulated amortization of customer lists, customer
relationships, and covenant not to compete		5,577		5,218
Net trademarks and other intangible assets	$	189,203	$	189,562

Note 4. Long-term Debt

	August 2,		February 2,
(In thousands)	2008		2008
Long-term debt
1.125% Senior Convertible Notes, due May 2014	$	275,000	$	275,000
Capital lease obligations		16,656		13,698
6.07% mortgage note, due October 2014		10,750		11,078
6.53% mortgage note, due November 2012		5,950		6,650
7.77% mortgage note, due December 2011		7,579		7,897
Other long-term debt		549		673
Total long-term debt		316,484		314,996
Less current portion		8,155		8,827
Long-term debt	$	308,329	$	306,169

On April 30, 2007 we issued $250,000,000 in aggregate principal amount of 1.125% Senior Convertible Notes due May 1, 2014 (the “1.125% Notes”) in a private offering for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.  On May 11, 2007 the initial purchasers of the 1.125% Notes exercised their over-allotment option and purchased an additional $25,000,000 in aggregate principal amount of the notes.  The 1.125% Notes were issued at par plus accrued interest, if any, from April 30, 2007 and interest is payable semiannually in arrears on May 1 and November 1, beginning November 1, 2007.  The 1.125% Notes will mature on May 1, 2014 unless earlier repurchased by us or converted.

We received combined proceeds of approximately $268,125,000 from the issuance, net of underwriting fees of approximately $6,875,000.  The underwriting fees, as well as additional transaction costs of $811,000 incurred in connection with the issuance of the 1.125% Notes, are included in “Other assets” on our condensed consolidated balance sheets and are being amortized to interest expense on an effective interest rate basis over the seven-year life of the notes.  The issuance of the 1.125% Notes is more fully described in “Item 8.  Financial Statements and Supplementary Data; Note 8. Long-term Debt” in our February 2, 2008 Annual Report on Form 10-K.

10

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 4. Long-term Debt (Continued)

On April 30, 2007 we called for the June 4, 2007 redemption of our $149,999,000 outstanding aggregate principal amount of 4.75% Senior Convertible Notes due June 2012 (the “4.75% Notes”).  The holders of the 4.75% Notes had the option to convert their notes into shares of our common stock at a conversion price of $9.88 per share until the close of business on June 1, 2007.  As of June 4, 2007 the holders of $149,956,000 principal amount of the 4.75% Notes had exercised their right to convert their notes into an aggregate of 15,145,556 shares of our common stock and the remaining notes were redeemed for $43,000.  In addition, we paid $392,000 in lieu of fractional shares.

Note 5. Stockholders’ Equity

	Twenty-six
	Weeks Ended
	August 2,
(Dollars in thousands)	2008
Total stockholders’ equity, beginning of period	$	730,444
Cumulative effect of adoption of EITF Issue No. 06-4(1)		(13,696	)
Net loss		(42,794	)
Issuance of common stock (574,576 shares), net of shares withheld for payroll taxes		(62	)
Purchase of treasury shares (2,004,967 shares)		(10,969	)
Stock-based compensation expense		5,014
Tax benefit related to call options		1,910
Write-down of deferred taxes related to stock-based compensation		(1,333	)
Unrealized losses on available-for-sale securities, net of income tax benefit		(24	)
Total stockholders’ equity, end of period	$	668,490
____________________
(1)   See “Note 13. Impact of Recent Accounting Pronouncements” below.

Note 6. 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 join some of these programs by paying an annual membership fee.  For these programs, we recognize revenue 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.  We recognize costs in connection with administering these programs as cost of goods sold when incurred.  During the thirteen weeks ended August 2, 2008 we recognized revenues of $5,276,000 and during the thirteen weeks ended August 4, 2007 we recognized revenues of $5,309,000 in connection with our loyalty card programs.  During the twenty-six weeks ended August 2, 2008 we recognized revenues of $10,374,000 and during the twenty-six weeks ended August 4, 2007 we recognized revenues of $11,011,000 in connection with these programs.

During Fiscal 2008 we began offering loyalty programs in connection with the issuance of our LANE BRYANT and PETITE SOPHISTICATE proprietary credit cards.  Cardholders earn points for purchases using the credit card, which may be redeemed for merchandise coupons upon the accumulation of a specified number of points.  We do not charge membership fees in connection with these programs.  Our FASHION BUG brand also offers a similar loyalty card program that does not charge membership fees.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6. Customer Loyalty Card Programs (Continued)

We accrued $3,260,000 as of August 2, 2008 and $2,000,000 as of February 2, 2008 for the estimated costs of discounts earned and coupons issued and not redeemed under these programs.

Note 7. Net Income/(Loss) Per Share

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	August 2,			August 4,			August 2,			August 4,
(In thousands, except per share amounts)	2008			2007			2008			2007
Basic weighted average common shares outstanding		114,342			123,865			114,465			123,434
Dilutive effect of assumed conversion of
4.75% Senior Convertible Notes(1)		0			4,838			0			10,080
Dilutive effect of stock options, stock appreciation
rights, and awards(2)		0			1,533			0			1,643
Diluted weighted average common shares and
equivalents outstanding		114,342			130,236			114,465			135,087
Income/(loss) from continuing operations	$	(3,710	)	$	20,894		$	(3,053	)	$	47,360
Decrease in interest expense from assumed
conversion of 4.75% Senior Convertible
Notes, net of income tax benefit(1)		0			347			0			1,476
Income/(loss) from continuing operations used to
determine diluted net income/(loss) per share		(3,710	)		21,241			(3,053	)		48,836
Loss from discontinued operations,
net of income tax benefit		(4,627	)		(2,615	)		(39,741	)		(2,783	)
Net income/(loss) used to determine
diluted net income/(loss) per share	$	(8,337	)	$	18,626		$	(42,794	)	$	46,053
Options with weighted average exercise price
greater than market price, excluded from
computation of net income/(loss) per share:
Number of shares	--­(2)				5		--­(2)				4
Weighted average exercise price per share	--­(2)			$	12.17		--­(2)			$	12.87
____________________
(1)   The 4.75% Senior Convertible Notes were converted or redeemed on June 4, 2007 (see “Note 4. Long-term Debt” above).
(2)   Stock options, stock appreciation rights, and awards are excluded from the computation of diluted net loss per share for the Fiscal 2009 periods as their effect would have been anti-dilutive.

Our 1.125% Notes will not impact our diluted net income per share until the price of our common stock exceeds the conversion price of $15.379 per share because we expect to settle the principal amount of the 1.125% Notes in cash upon conversion.  Our call options are not considered for purposes of the diluted net income per share calculation as their effect would be anti-dilutive.  Should the price of our common stock exceed $21.607 per share, we would include the dilutive effect of the additional potential shares that may be issued related to our warrants, using the treasury stock method.  See “Note 4. Long-term Debt” above and “Item 8.  Financial Statements and Supplementary Data; Note 8. Long-term Debt” in our February 2, 2008 Annual Report on Form 10-K for further information regarding our 1.125% Notes, our call options and warrants, and the conversion of our 4.75% Notes.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 8. Income Taxes

Our income tax benefit for the twenty-six weeks ended August 2, 2008 was $1,645,000 on a loss from continuing operations before taxes of $4,698,000 as compared to a provision for income taxes of $27,925,000 on income from continuing operations before taxes of $75,285,000 for the twenty-six weeks ended August 4, 2007. The income tax benefit for the twenty-six weeks ended August 2, 2008 was unfavorably impacted by an increase in our liability for unrecognized tax benefits, interest, and penalties in accordance with FIN No. 48, which was partially offset by the receipt of non-taxable life insurance proceeds and adjustments to certain state tax accruals.

We adopted the provisions of FIN No. 48 effective as of February 4, 2007.  See “Item 8.  Financial Statements and Supplementary Data; Note 7. Income Taxes” in our February 2, 2008 Annual Report on Form 10-K for further information regarding our adoption of FIN No. 48.

As of August 2, 2008 our gross unrecognized tax benefits were $27,381,000.  If recognized, the portion of the liabilities for gross unrecognized tax benefits that would decrease our provision for income taxes and increase our net income was $19,106,000.  The accrued interest and penalties as of August 2, 2008 were $13,108,000.  During the twenty-six weeks ended August 2, 2008 the gross unrecognized tax benefits increased by $716,000 and the portion of the liabilities for gross unrecognized tax benefits that, if recognized, would decrease our provision for income taxes and increase our net income increased by $519,000.  Accrued interest and penalties increased during the twenty-six weeks ended August 2, 2008 by $533,000.

As of August 2, 2008 it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next twelve months by as much as $340,000 due to resolutions of audits or expirations of statutes of limitations related to U.S. Federal and state tax positions.

Our U.S. Federal income tax returns for Fiscal 2005 and beyond remain subject to examination by the U.S. Internal Revenue Service (“IRS”).  The IRS is not currently examining any of our tax returns.  We file returns in numerous state jurisdictions, with varying statutes of limitations.  Our state tax returns for Fiscal 2004 and beyond, depending upon the jurisdiction, generally remain subject to examination.  The statute of limitations on a limited number of returns for years prior to Fiscal 2004 has been extended by agreement between us and the particular state jurisdiction.  The earliest year still subject to examination by state tax authorities is Fiscal 1999.

Note 9. Asset Securitization

Our FASHION BUG, LANE BRYANT, CATHERINES, PETITE SOPHISTICATE, and Crosstown Traders proprietary credit card receivables are originated by Spirit of America National Bank (the “Bank”), our wholly-owned credit card bank.  The Bank transfers its interest in all the receivables, including LANE BRYANT WOMAN catalog credit card receivables but excluding other Crosstown Traders receivables, to the Charming Shoppes Master Trust (the “Trust”) through Charming Shoppes Receivables Corp. (“CSRC”), 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 a 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.

13

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 9. Asset Securitization (Continued)

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. Our asset securitization program is more fully described in “Item 8. Financial Statements and Supplementary Data; Note 17. Asset Securitization” in our February 2, 2008 Annual Report on Form 10-K.

We securitized $455,716,000 of private label credit card receivables during the twenty-six weeks ended August 2, 2008 and had $584,861,000 of securitized credit card receivables outstanding as of August 2, 2008.  We held certificates and retained interests in our securitizations of $109,301,000 as of August 2, 2008, which 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.

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 August 2, 2008 our investment in asset-backed securities included $51,500,000 of QSPE certificates, an I/O strip of $23,501,000, and other retained interests of $34,300,000.  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. does not meet certain financial performance standards, the Trust is obligated to reallocate to third-party investors holding certain certificates issued by the Trust, collections in an amount up to $9,450,000 that otherwise would be available to CSRC.  The result of this reallocation is to increase CSRC’s retained interest in the Trust by the same amount, with the third-party investor retaining an economic interest in the certificates.  Subsequent to such a transfer occurring, and upon certain conditions being met, these same investors are required to repurchase these interests when the financial performance standards are again satisfied.  Our net loss for the third quarter of Fiscal 2008 resulted in the requirement to reallocate collections as discussed above.  Accordingly, $9,450,000 of collections was fully transferred as of February 2, 2008.  The requirement for the reallocation of these collections will cease and such investors would be required to repurchase such interests upon our announcement of a quarter with net income and the fulfillment of such conditions.  With the exception of the requirement to reallocate collections of $9,450,000 that were fully transferred as of February 2, 2008, the Trust was in compliance with its financial performance standards as of August 2, 2008, including all financial performance standards related to the performance of the underlying receivables.

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 or the QSPEs do not 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.  As of August 2, 2008 we and the QSPEs were in compliance with the applicable financial performance standards referred to in this paragraph.

14

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 9. Asset Securitization (Continued)

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.

Note 10. Segment Reporting

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, excluding discontinued operations, are separately reported under the Direct-to-Consumer segment.

The accounting policies of the segments are generally the same as those described in “Item 8. Financial Statements and Supplementary Data; Note 1. Summary of Significant Accounting Policies” in our February 2, 2008 Annual Report on Form 10-K.  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.  We do not allocate certain corporate costs, such as shared service costs, information systems support costs, and insurance costs to our Retail Stores or Direct-to-Consumer segments.  Operating costs for our Retail Stores segment consist primarily of store selling, buying, occupancy, and warehousing costs.  Operating costs for our Direct-to-Consumer segment consist primarily of catalog development, production, and circulation costs; E-commerce advertising costs; warehousing costs; and order processing costs.

Corporate and Other includes unallocated general and administrative costs; shared services costs; insurance 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.  Operating assets for the Retail Stores segment consist primarily of inventories; the net book value of store facilities; goodwill; and intangible assets.  Operating assets for the Direct-to-Consumer segment consist primarily of trade receivables; inventories; deferred advertising costs; the net book value of catalog operating facilities; 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.

Selected financial information for our operations by reportable segment (excluding discontinued operations) and a reconciliation of the information by segment to our consolidated totals is presented in the table on the following page.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 10. Segment Reporting (Continued)

	Retail		Direct-to-			Corporate
(In thousands)	Stores		Consumer(1)			and Other			Consolidated
Thirteen weeks ended August 2, 2008
Net sales	$	622,050	$	22,547		$	4,019		$	648,616
Depreciation and amortization		14,294		36			8,752			23,082	(3)
Income/(loss) before interest and taxes		35,338		(5,599	)		(34,139	)(2)		(4,400	)
Interest expense							(2,201	)		(2,201	)
Income tax benefit							2,891			2,891
Income/(loss) from continuing operations		35,338		(5,599	)		(33,449	)		(3,710	)
Capital expenditures		13,438		275			2,587			16,300	(3)
Twenty-six weeks ended August 2, 2008
Net sales	$	1,235,441	$	49,493		$	5,028		$	1,289,962
Depreciation and amortization		26,221		74			23,687			49,982	(3)
Income/(loss) before interest and taxes		78,366		(9,798	)		(68,696	)(2)		(128	)
Interest expense							(4,570	)		(4,570	)
Income tax benefit							1,645			1,645
Income/(loss) from continuing operations		78,366		(9,798	)		(71,621	)		(3,053	)
Capital expenditures		32,159		275			5,558			37,992	(3)
Thirteen weeks ended August 4, 2007
Net sales	$	684,991	$	5,127		$	4,241		$	694,359
Depreciation and amortization		14,420		94			8,763			23,277	(4)
Income before interest and taxes		67,395		(2,391	)		(28,333	)		36,671
Interest expense							(2,818	)		(2,818	)
Income tax provision							(12,959	)		(12,959	)
Income from continuing operations		67,395		(2,391	)		(44,110	)		20,894
Capital expenditures		25,758		119			10,064			35,941	(4)
Twenty-six weeks ended August 4, 2007
Net sales	$	1,370,772	$	15,401		$	4,800		$	1,390,973
Depreciation and amortization		26,781		116			18,907			45,804	(4)
Income before interest and taxes		142,680		(3,167	)		(58,147	)		81,366
Interest expense							(6,081	)		(6,081	)
Income tax provision							(27,925	)		(27,925	)
Income from continuing operations		142,680		(3,167	)		(92,153	)		47,360
Capital expenditures		55,592		127			17,614			73,333	(4)
____________________
(1)    Current-year periods include LANE BRYANT WOMAN catalog.
(2)    Includes restructuring charges of $5,617 for the thirteen weeks ended August 2, 2008 and $9,228 for the twenty-six weeks ended August 2, 2008 related to the Retail Stores segment and severance costs of $9,328 for the thirteen weeks and twenty-six weeks ended August 2, 2008 related to our Corporate segment (see “Note 11. Restructuring and Other Charges” below).
(3)    Excludes $296 of depreciation and amortization and $145 of capital expenditures for the thirteen weeks ended August 2, 2008, and $584 of depreciation and amortization and $467 of capital expenditures for the twenty-six weeks ended August 2, 2008, related to our discontinued operations.
(4)    Excludes $235 of depreciation and amortization and $564 of capital expenditures for the thirteen weeks ended August 4, 2007, and $452 of depreciation and amortization and $683 of capital expenditures for the twenty-six weeks ended August 4, 2007, related to our discontinued operations.

16

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 11. Restructuring and Other Charges

In November 2007 we announced our plan to relocate our CATHERINES operations located in Memphis, Tennessee to our corporate headquarters in Bensalem, Pennsylvania in conjunction with the consolidation of a number of our operating functions.  The costs of this plan included accelerated depreciation, severance and retention, and relocation costs.

The accelerated depreciation represents the change in the estimated useful life of the Memphis facility and was recognized over the period from the inception of the plan to the closing date of the facility, which was the end of the Fiscal 2009 First Quarter.  Severance and retention costs represent involuntary termination benefits for approximately 80 employees who did not relocate from the Memphis facility to our Bensalem headquarters.  Relocation costs represent estimated costs to relocate approximately 30 employees from Memphis to Bensalem.  The involuntary terminations and relocations were completed during the Fiscal 2009 First Quarter.

On May 21, 2008 we completed the sale of our Memphis, Tennessee distribution center.  We received $4,813,000 of cash in connection with the sale of the facility and we recognized a pre-tax gain on the sale of approximately $1,842,000 during the thirteen weeks ended August 2, 2008.

In February 2008 we announced additional initiatives and actions to: streamline our business operations and further sharpen our focus on our core businesses; reduce selling, general, and administrative expenses and capital expenditures; improve cash flow; and enhance shareholder value.  The initiatives and actions include: the elimination of approximately 150 corporate and field management positions; a decrease in the capital budget for Fiscal 2009, primarily through a significant reduction in the number of planned store openings for Fiscal 2009; the closing of approximately 150 under-performing stores; and the closing of our full-line PETITE SOPHISTICATE stores.  To date, we have completed the elimination of corporate and field positions, closed 78 of the identified under-performing stores, and expect to complete the remainder of these initiatives by the end of Fiscal 2009.

We accounted for the above plans in accordance with the provisions of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” and SFAS No. 112, “Employers’ Accounting for Postemployment Benefits.”

The following table summarizes the costs incurred to date and the total estimated costs to be recognized under the plans:

	Costs		Costs Incurred		Estimated		Total
	Incurred		for Twenty-six		Remaining		Estimated
	as of		Weeks Ended		Costs		Costs as of
	February 2,		August 2,		to be		August 2,
(In thousands)	2008		2008		Incurred		2008
Severance, retention, and related costs	$	2,792	$	391	$	0	$	3,183
Store lease termination costs		0		5,867		3,408		9,275
Asset write-downs and accelerated
Depreciation		11,325		2,217		63		13,605
Relocation and other closing costs		241		753		300		1,294
Total	$	14,358	$	9,228	$	3,771	$	27,357

17

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 11. Restructuring and Other Charges (Continued)

The following table summarizes the severance, retention, and related costs accrued in accordance with SFAS No. 146 and SFAS No. 112 and the payments/settlements for the above plans as of August 2, 2008:

			Costs Accrued
			for Twenty-six					Accrued
	Balance at		Weeks Ended					as of
	February 2,		August 2,		Payments/			August 2,
(In thousands)	2008		2008		Settlements			2008
Severance, retention, and related costs	$	2,688	$	391	$	(3,026	)	$	53

During the thirteen weeks ended August 2, 2008 we recognized $9,328,000 of severance costs in connection with the resignation of our former Chief Executive Officer, Dorrit J. Bern, and $5,336,000 of these costs are included in accrued expenses in the accompanying condensed consolidated balance sheet as of August 2, 2008.

Note 12.  Fair Value Measurements

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.

In February 2008 the FASB issued FSP FAS No. 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13.”  The FSP amends SFAS No. 157 to exclude SFAS No. 13, “Accounting for Leases,” and certain related accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS No. 13.  The scope exception of FSP FAS No. 157-1 does not apply to assets acquired or liabilities assumed in a business combination that are required to be measured at fair value under SFAS No. 141, “Business Combinations,” or SFAS No. 141(R) (see “Note 13. Impact of Recent Accounting Pronouncements” below), regardless of whether those assets and liabilities are related to leases.  The scope exception also does not apply to fair value measurements required by SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” or FASB Interpretation No. 21, “Accounting for Leases in a Business Combination.”  FSP FAS No. 157-1 is effective on the initial adoption of SFAS No. 157.  In February 2008 the FASB  also issued FSP FAS No. 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS 157 until fiscal years beginning after November 15, 2008 for non-financial assets and non-financial liabilities that are not currently recognized or disclosed at fair value on a recurring basis.

Under SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, we use various methods, including discounted cash flow projections based on available market interest rates and management estimates of future cash payments.

18

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 12.  Fair Value Measurements (Continued)

Financial assets and liabilities that are measured and reported at fair value are classified and disclosed in one of the following categories:

·      Level 1 – Quoted market prices in active markets for identical assets or liabilities

·      Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data

·      Level 3 – Unobservable inputs that are not corroborated by market data

With the exception of assets and liabilities included within the scope of FSP FAS No. 157-2, we adopted the provisions of SFAS No. 157 prospectively effective as of the beginning of Fiscal 2009.  For financial assets and liabilities included within the scope of FSP FAS No. 157-2, we will be required to adopt the provisions of SFAS No. 157 prospectively as of the beginning of Fiscal 2010.  The adoption of SFAS No. 157 did not have an impact on our financial position or results of operations, and we do not believe that the adoption of FSP FAS No. 157-2 will have a material impact on our financial position or results of operations.

Our financial assets and liabilities subject to SFAS No. 157 as of August 2, 2008 were as follows:

	Balance
	August 2,		Fair Value Method Used
(In thousands)	2008		Level 2		Level 3(1)
Assets
Available-for-sale securities(2)	$	6,380	$	6,380
Certificates and retained interests in securitized receivables		109,301			$	109,301
Liabilities
Servicing liability		3,198				3,198
____________________
(1)    Fair value is estimated based on internally-developed models or methodologies utilizing significant inputs that are unobservable from objective sources.
(2)   Unrealized gains and losses on our available-for-sale securities are included in stockholders’ equity until realized and realized gains and losses are recognized in income when the securities are sold.

We estimate the fair value of our certificates and retained interests in our securitized receivables based on the present value of future expected cash flows using assumptions for the average life of the receivables sold, anticipated credit losses, and the appropriate market discount rate commensurate with the risks involved.  This cash flow includes 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 servicing fees.

The fair value of our servicing liabilities represents the present value of the excess of our cost of servicing over the servicing fees received.  We determine the fair value 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 to value the certificates and retained interests.

19

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 12.  Fair Value Measurements (Continued)

The table below presents a reconciliation of the beginning and ending balances of our certificates and retained interests and our servicing liability during the twenty-six weeks ended August 2, 2008:

	Retained			Servicing
(In thousands)	Interests			Liability
Balance, February 2, 2008	$	115,912		$	3,038
Additions to I/O strip and servicing liability		20,019			2,745
Net reductions to other retained interests		(6,669	)
Reductions and maturities of QSPE certificates		(185	)
Amortization and valuation adjustments to I/O strip and servicing liability		(19,776	)		(2,585	)
Balance, August 2, 2008	$	109,301		$	3,198

Note 13. Impact of Recent Accounting Pronouncements

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.  We adopted the provisions of EITF Issue No. 06-4 effective as of the beginning of Fiscal 2009 and recognized a cumulative-effect adjustment of $13,696,000, increasing our liabilities related to our split-dollar life insurance agreements with former executive employees and reducing the February 3, 2008 balance of retained earnings.

In February 2007 the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities–Including an amendment of FASB Statement No. 115,” which permits an entity to measure certain financial assets and financial liabilities at fair value.  The intent of SFAS No. 159 is to reduce volatility in reported earnings caused by the measurement of related assets and liabilities using different attributes without the need for applying hedge accounting.  Entities that elect the fair value option will report unrealized gains and losses in earnings as of each subsequent reporting date.  Generally, the fair value option may be elected on an instrument-by-instrument basis as long as it is applied to the instrument in its entirety.  Election of the fair value option is irrevocable unless a new election date occurs.

The provisions of SFAS No. 159 were effective as of the beginning of Fiscal 2009.  We did not elect the fair value option for any existing or new financial assets or liabilities that were not previously accounted for at fair value; therefore, SFAS No. 159 had no impact on our financial position or results of operations.

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CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 13. Impact of Recent Accounting Pronouncements (Continued)

In December 2007 the FASB issued SFAS No. 141(R), “Business Combinations,” and SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.”  As compared to SFAS No. 141 and ARB No. 51, these statements change the accounting for business combinations and non-controlling interests in subsidiaries by requiring:

· The measurement of additional assets acquired and liabilities assumed at fair value as of the acquisition date;

· Re-measurement of liabilities related to contingent consideration at fair value in periods subsequent to acquisition;

· The expensing in pre-acquisition periods of acquisition-related costs incurred by the acquirer; and

· The initial measurement of non-controlling interests in subsidiaries at fair value and classification of the interest as a separate component of equity.

We will be required to adopt the provisions of SFAS No. 141(R) and SFAS No. 160 prospectively effective as of the beginning of Fiscal 2010.

In February 2008 the FASB issued FSP FAS No. 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions.”  FSP FAS No. 140-3 addresses whether there are circumstances that would permit a transferor and a transferee to evaluate the accounting for the transfer of a financial asset separately from a repurchase financing when the counterparties to the two transactions are the same.  The FSP presumes that the initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (a linked transaction) under SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”  However, if certain criteria specified in FSP FAS No. 140-3 are met, the initial transfer and repurchase financing may be evaluated separately under SFAS No. 140.

The provisions of FSP FAS No. 140-3 will be effective prospectively as of the beginning of Fiscal 2010.  We do not expect that the adoption of FSP FAS No. 140-3 will have a material effect on our financial position or results of operations.

In March 2008 the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.”  Under SFAS No. 161, entities are required to provide enhanced disclosures about: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, results of operations, and cash flows.

We will be required to adopt the provisions of SFAS No. 161 as of the beginning of Fiscal 2010.  We do not expect that the adoption of SFAS No. 161 will have a material effect on our financial position or results of operations.

21

CHARMING SHOPPES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 13. Impact of Recent Accounting Pronouncements (Continued)

In May 2008 the FASB issued FASB Staff Position (“FSP”) APB 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlements)” (previously FSP APB 14-a), which will change the accounting treatment for convertible securities that the issuer may settle fully or partially in cash.  Under the final FSP, cash-settled convertible securities will be separated into their debt and equity components.  The value assigned to the debt component will be the estimated fair value, as of the issuance date, of a similar debt instrument without the conversion feature.  As a result, the debt will be recorded at a discount to adjust its below-market coupon interest rate to the market coupon interest rate for the similar debt instrument without the conversion feature.  The difference between the proceeds for the convertible debt and the amount reflected as the debt component represents the value of the conversion feature and will be recorded as additional paid-in capital.  The debt will subsequently be accreted to its par value over its expected life, with an offsetting increase in interest expense on the income statement to reflect the market rate for the debt component at the date of issuance.

FSP APB 14-1 is to be applied retrospectively to all past periods presented, and will apply to our 1.125% Senior Convertible Notes due May 2014.  As compared to our current accounting for the 1.125% Notes, adoption of the proposal will reduce long-term debt, increase stockholders’ equity, and reduce net income and earnings per share.  Adoption of the proposal will not affect our cash flows.  We will be required to adopt the provisions of FSP APB 14-1 as of the beginning of Fiscal 2010.  We are currently evaluating the impact of the adoption of FSP APB 14-1 on our financial statements.

Note 14. Subsequent Event

On August 25, 2008 we announced that we have entered into a definitive agreement to sell our non-core misses apparel catalogs (collectively, “Crosstown Traders”) to Orchard Brands, a portfolio company owned by Golden Gate Capital, for a cash purchase price of approximately $35,000,000.  Subject to certain customary closing conditions, we expect the transaction to close by the end of September 2008.

As part of the definitive agreement we will retain the infrastructure of Crosstown Traders and accordingly we have agreed to provide certain services to Orchard Brands, including distribution, information technology, and call center functions, for a limited transition period.  Subsequent to the transition period we will be responsible for the remaining lease liabilities and disposition costs for the distribution and office facilities, including fixed assets that we expect to fully depreciate over the transition period.  The estimated loss on disposition of Crosstown Traders for the six months ended August 2, 2008, which is included in the loss from discontinued operations (see “Note 1. Condensed Consolidated Financial Statements; Discontinued Operations” above), reflects the above definitive agreement.  Any adjustment to the estimated loss related to the finalization of the sale of Crosstown Traders to Orchard Brands will be recorded in the Fiscal 2009 Third Quarter.

We also announced that we have entered into an agreement for the sale of the misses apparel catalog credit card receivables for approximately $40,000,000 in cash to Alliance Data Systems Corporation.  These receivables are directly related to the catalog titles being sold to Orchard Brands.  We expect this transaction to close prior to the end of Fiscal 2009.  We expect the sale of the catalogs and the related credit card receivables, less securitized indebtedness of approximately $32,000,000, to result in aggregate pre-tax net cash proceeds of approximately $40,000,000.

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Item 2. 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 should be read in conjunction with the financial statements and accompanying notes included in Item 1 of this report. It should also be read in conjunction with the management’s discussion and analysis of financial condition and results of operations, financial statements, and accompanying notes appearing in our Annual Report on Form 10-K for the fiscal year ended February 2, 2008.  As used in this management’s discussion and analysis, “Fiscal 2009” refers to our fiscal year ending January 31, 2009 and “Fiscal 2008” refers to our fiscal year ended February 2, 2008.  “Fiscal 2009 Second Quarter” refers to our fiscal quarter ended August 2, 2008 and “Fiscal 2008 Second Quarter” refers to our fiscal quarter ended August 4, 2007.  “Fiscal 2009 First Quarter” refers to our fiscal quarter ended May 3, 2008, “Fiscal 2009 Third Quarter” refers to our fiscal quarter ending November 1, 2008, and “Fiscal 2008 Fourth Quarter” refers to our fiscal quarter ended February 2, 2008.  The terms “Charming Shoppes, Inc.,” “the Company,” “we,” “us,” and “our” refer to Charming Shoppes, Inc. and its consolidated subsidiaries except where the context otherwise requires or as otherwise indicated.

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,” “could,” “should,” “project,” “estimate,” “predict,” “anticipate,” “plan,” “intend,” “believes,” and similar expressions are also intended to identify forward-looking statements.

We operate in a rapidly changing and competitive environment.  New risk factors emerge from time to time and it is not possible for us to predict all risk factors that may affect us.  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, which speak only as of the date on which they were made.  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.  Given those risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

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 “PART I; Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended February 2, 2008 and in “PART II. OTHER INFORMATION; Item 1A. Risk Factors” below:

· 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.

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

· A continuing slowdown in the United States economy, an uncertain economic outlook, and escalating energy and food 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 cannot assure the successful consummation of our expected sale of our non-core misses apparel catalog titles.

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· We cannot assure the successful implementation of our business plan for our LANE BRYANT WOMAN catalog or the realization of our anticipated benefits from our re-launch of the LANE BRYANT credit card program.

· We cannot assure the successful implementation of our business plan for increased profitability and growth in our Retail Stores or Direct-to-Consumer segments. Recent changes in management may result in a failure to achieve improvement in our operating results.

· We cannot assure the successful implementation of our planned cost reduction and capital budget reduction plans; the effective implementation of our plans for consolidation of our CATHERINES brand, a new organizational structure; and enhancements in our merchandise and marketing; and we cannot assure the realization of our anticipated annualized expense savings from restructuring programs announced in February 2008.

· Our success and our ability to execute our business strategy depend largely on the efforts and abilities of our executive officers and their management teams.  We also must motivate employees to remain focused on our strategies and goals, particularly during a period of changing leadership for the Company and a number of our operating divisions.  The inability to find a suitable permanent replacement for our former Chief Executive Officer within a reasonable time period, as well as management personnel to replace departing executives, could have a material adverse effect on our business.  We do not maintain key-person life insurance policies with respect to any of our employees.

· 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 one 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 any such event 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.

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· 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.

· 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 goodwill and other intangible assets related to acquisitions.  The carrying amount and/or useful life of these assets are subject to periodic and/or annual 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 could 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 required to 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 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.

· The holders of our 1.125% Senior Convertible Notes due May 1, 2014 (the “1.125% Notes”) could require us to repurchase the principal amount of the notes for cash before maturity of the notes under certain circumstances.  Such a repurchase would require significant amounts of cash and could adversely affect our financial condition.

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CRITICAL ACCOUNTING POLICIES

We have prepared the financial statements and accompanying notes included in Item 1 of this report in conformity with United States generally accepted accounting principles.  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 critical accounting policies are discussed in the management’s discussion and analysis of financial condition and results of operations and notes accompanying the consolidated financial statements that appear in our Annual Report on Form 10-K for the fiscal year ended February 2, 2008.

Except as disclosed in the financial statements and accompanying notes included in Item 1 of this report, there were no material changes in, or additions to, our critical accounting policies or in the assumptions or estimates we used to prepare the financial information appearing in this report.

RECENT DEVELOPMENTS

On July 9, 2008 we announced that Dorrit J. Bern tendered her resignation as President, Chief Executive Officer and a Director of the Company.  Our Board of Directors appointed Alan Rosskamm, our Chairman of the Board and a member of our Board of Directors since 1992, to serve as our Interim Chief Executive Officer effective as of July 10, 2008 while a search is conducted for Ms. Bern’s successor.  Mr. Rosskamm previously served as Chief Executive Officer and Chairman of the Board of Directors of Jo-Ann Stores, Inc., and continues as a member of Jo-Ann’s Board of Directors.  Mr. Rosskamm has also advised a number of start-up ventures, including retailer PetSense, Inc.  Our Board of Directors has formed a special committee to undertake an immediate search for a permanent Chief Executive Officer.

We also announced that Brian P. Woolf, the former Chairman and Chief Executive Officer of Caché, Inc., has been appointed President of the LANE BRYANT brand.  Mr. Woolf has served in various retail-industry management and merchandising positions over the past three decades.  Before joining Caché, he held senior merchandising positions at a number of well-known retailers, including Limited Stores, Marshall’s, Lazarus, Bloomingdale’s and Macy’s.  We are continuing our search for presidents for our FASHION BUG and CATHERINES brands.

In support of our strategy to provide a greater focus on our core brands, we announced on August 25, 2008 that we have entered into a definitive agreement to sell our non-core misses apparel catalogs (collectively, “Crosstown Traders”) to Orchard Brands, a portfolio company owned by Golden Gate Capital, for a cash purchase price of approximately $35.0 million.  The transaction includes the following catalog titles and their associated E-commerce sites:  Old Pueblo Traders®, Bedford Fair®, Willow Ridge®, Lew Magram®, Brownstone Studio®, Intimate Appeal®, Monterey Bay Clothing Company®, and Coward® Shoe.  The Crosstown Traders headquarters are expected to remain in Tucson, Arizona.  Subject to certain customary closing conditions, we expect the transaction to close by the end of September 2008.

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As part of the definitive agreement we will retain the infrastructure of Crosstown Traders and accordingly we have agreed to provide certain services to Orchard Brands, including distribution, information technology, and call center functions, for a limited transition period.  Subsequent to the transition period we will be responsible for the remaining lease liabilities and disposition costs for the distribution and office facilities, including fixed assets that we expect to fully depreciate over the transition period.  The estimated loss on disposition of Crosstown Traders for the six months ended August 2, 2008, which is included in the loss from discontinued operations (see “Note 1. Condensed Consolidated Financial Statements; Discontinued Operations” above), reflects the above definitive agreement.  We will adjust the estimated loss in the Fiscal 2009 Third Quarter for the finalization of the sale of Crosstown Traders to Orchard Brands.

We also announced that we have entered into an agreement for the sale of the misses apparel catalog credit card receivables for approximately $40.0 million in cash to Alliance Data Systems Corporation.  These receivables are directly related to the catalog titles being sold to Orchard Brands.  We expect this transaction to close prior to the end of Fiscal 2009.  We expect the sale of the catalogs and the related credit card receivables, less securitized indebtedness of approximately $32.0 million, to result in aggregate pre-tax net cash proceeds of approximately $40.0 million.

Additionally, we announced that we will initiate a process to explore the sale of our Figi’s® Gifts in Good Taste catalog business, based in Wisconsin.  Our decision to explore the sale of Figi’s is based on our strategic direction and is not a reflection of the performance of Figi’s, which continues to perform profitably and generate positive cash flows.  We will only enter into a transaction that we deem favorable.  We can provide no assurance that this process will result in any specific course of action or transaction, and we do not intend to comment further on this evaluation until final determinations have been made.

OVERVIEW

This overview of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) presents a high-level summary of more detailed information contained elsewhere in this Report on Form 10-Q.  The intent of this overview is to put this detailed information into perspective and to introduce the discussion and analysis contained in this MD&A.  Accordingly, this overview should be read in conjunction with the remainder of this MD&A and with the financial statements and other detailed information included in this Report on Form 10-Q and should not be separately relied upon.

During the Fiscal 2009 Second Quarter we continued to experience the downward traffic trends in our stores that we experienced during the latter half of Fiscal 2008 and the Fiscal 2009 First Quarter.  We believe these negative trends are influenced by a challenging retail and economic environment, resulting in a reduced demand for core seasonal and casual merchandise offerings as consumers have become more selective with their purchases.  The reduced demand in our core seasonal and casual merchandise offerings more than offset continued favorable responses to our other merchandise offerings, such as intimate apparel and our Right Fit pant programs.  Our comparable store sales were 10% lower for the Fiscal 2009 Second Quarter and 11% lower for the first half of Fiscal 2009.

As a result of increased markdowns during the Fiscal 2009 Second Quarter to help stimulate sales, our merchandise margins for the Fiscal 2009 Second Quarter declined as compared to the Fiscal 2008 Second Quarter and were relatively flat for the first half of Fiscal 2009 as compared to the first half of Fiscal 2008.  However, we were able to manage the level of markdowns as a result of our focus on inventory levels, which were down 6% on a comparable store basis.

Given the continuing uncertain economic climate, we anticipate continued weak traffic trends for the Fiscal 2009 Third Quarter.  We will continue to work diligently to mitigate our same store sales decreases and continue to address our merchandise offerings in order to meet our customers’ needs.

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Excluding the impact of restructuring charges and severance costs under the terms of Dorrit J. Bern’s employment contract related to her resignation (see “RECENT DEVELOPMENTS” above), we continued to reduce our expenses during the Fiscal 2009 Second Quarter.  Although our expenses increased as a percentage of sales as a result of negative leverage from the decrease in comparable store sales, we were able to reduce expense dollars as compared to the Fiscal 2008 Second Quarter.

We expect to continue to benefit from our previously announced expense control initiatives during the remainder of the year.  These initiatives include:  the relocation of our CATHERINES operations from Memphis, Tennessee to our corporate headquarters in Bensalem, Pennsylvania, which we completed during March 2008; the elimination of 150 corporate and field management positions, which we completed during the Fiscal 2009 First Quarter; and the closing of our full-line PETITE SOPHISTICATE stores, which we expect to complete during the latter half of Fiscal 2009.  We anticipate that these initiatives will result in additional pre-tax expense savings, primarily in payroll and occupancy costs, during the remainder of the year.

We also continued to implement our initiative to close approximately 150 under-performing stores, which will result in the elimination of losses from the under-performing stores upon closing.  During the first half of Fiscal 2009 we closed 78 under-performing stores and expect to complete the remaining store closures during the remainder of Fiscal 2009.

During the Fiscal 2009 First Quarter we announced that we were exploring a broad range of operating and strategic alternatives that are expected to result in the sale of our non-core misses apparel catalog titles.  Accordingly, we classified the results of the non-core misses apparel catalog titles within our Direct-to-Consumer segment as a discontinued operation.  Our Direct-to-Consumer segment results, excluding these discontinued operations, include primarily our LANE BRYANT WOMAN and FIGI’S catalogs and related websites.  On August 25, 2008 we announced that we have entered into a definitive agreement to sell our non-core misses apparel catalogs (see “RECENT DEVELOPMENTS” above).

While we are committed to executing our long-term growth strategy as a multi-brand, multi-channel retailer, we are continuing to take a conservative operating approach given the continuing uncertain economic climate and our expectations for continuing weak traffic trends.  We expect the difficult retail apparel environment to continue and, in response, we will continue to maintain lean inventories and carefully control operating expenses in an effort to generate positive free cash flow.

Our balance sheet remains strong, with ample liquidity through our $137.7 million of cash and available-for-sale securities (an increase of $63.0 million from the end of Fiscal 2008) and our committed $375.0 million revolving credit facility, which had no outstanding borrowings at the end of the Fiscal 2009 Second Quarter.

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The following discussion of our results of operations and liquidity and capital resources is based on our continuing operations, and excludes the impact of our discontinued operations (see “Note 1. Condensed Consolidated Financial Statements; Discontinued Operations” above).

RESULTS OF OPERATIONS

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

							Percentage									Percentage
	Thirteen Weeks Ended(1)						Change			Twenty-six Weeks Ended(1)						Change
	August 2,			August 4,			From Prior			August 2,			August 4,			From Prior
	2008			2007			Period			2008			2007			Period
Net sales		100.0	%		100.0	%		(6.6	)%		100.0	%		100.0	%		(7.3	)%
Cost of goods sold, buying,
catalog, and occupancy expenses		73.1			69.9			(2.3	)		71.4			68.9			(3.9	)
Selling, general, and
administrative expenses		25.4			25.4			(6.4	)		27.3			25.6			(1.3	)
Restructuring and other charges		2.3			0.0			–			1.4			0.0			–
Income/(loss) from operations		(0.8	)		4.7			(115.8	)		(0.1	)		5.5			(101.9	)
Other income		0.1			0.5			(79.0	)		0.1			0.4			(74.4	)
Interest expense		0.3			0.4			(21.9	)		0.4			0.4			(24.8	)
Income tax (benefit)/provision		(0.4	)		1.9			(122.3	)		(0.1	)		2.0			(105.9	)
Income/(loss) from
continuing operations		(0.6	)		3.0			(117.8	)		(0.2	)		3.4			(106.4	)
Loss from discontinued operations,
net of tax		(0.7	)		(0.4	)		76.9			(3.1	)		(0.2	)		–
Net income/(loss)		(1.3	)		2.6			(145.6	)		(3.3	)		3.2			(196.0	)
____________________
(1)   Results may not add due to rounding.

The following table shows details of our consolidated total net sales:

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 2,		August 4,		August 2,		August 4,
(In millions)	2008		2007		2008		2007
Net sales
FASHION BUG	$	248.8	$	279.9	$	471.2	$	536.9
LANE BRYANT		283.3		306.5		581.6		629.7
CATHERINES		83.0		93.7		169.8		194.4
Other retail stores(1)		6.9		5.0		12.8		9.8
Total Retail Stores segment		622.0		685.1		1,235.4		1,370.8
Total Direct-to-Consumer segment		22.5		5.1		49.5		15.4
Corporate and other(2)		4.1		4.2		5.1		4.8
Total net sales	$	648.6	$	694.4	$	1,290.0	$	1,391.0
____________________
(1)   Includes PETITE SOPHISTICATE stores, which began operations in October 2007, and PETITE SOPHISTICATE OUTLET stores, which began operations in September 2006.
(2)   Primarily revenue related to loyalty card fees.

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The following table shows information related to the change in our consolidated total net sales:

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	August 2,			August 4,			August 2,			August 4,
	2008			2007			2008			2007
Retail Stores segment
Increase (decrease) in comparable store sales(1) :
Consolidated retail stores		(10	)%		(3	)%		(11	)%		(2	)%
FASHION BUG		(9	)		(1	)		(11	)		(1	)
LANE BRYANT		(11	)		(5	)		(11	)		(3	)
CATHERINES		(12	)		(2	)		(14	)		1
Sales from new stores as a percentage of total
consolidated prior-period sales(2):
FASHION BUG		1			1			0			1
LANE BRYANT(3)		4			8			2			8
CATHERINES		0			1			0			1
Other retail stores(4)		0			1			0			1
Prior-period sales from closed stores as a percentage
of total consolidated prior-period sales:
FASHION BUG		(2	)		(2	)		(2	)		(2	)
LANE BRYANT		(3	)		(3	)		(3	)		(3	)
CATHERINES		(0	)		(1	)		(0	)		(1	)
Increase/(decrease) in Retail Stores segment sales		(9	)		2			(10	)		6
Direct-to-Consumer segment
Increase in Direct-to-Consumer segment sales		340	(5)		16			221	(5)		15
Increase/(decrease) in consolidated total net sales		(7	)		(9	)		(7	)		(7	)
____________________
(1)   “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 internet sales, are excluded from the calculation of comparable store sales.
(2)   Includes incremental Retail Stores segment E-commerce sales.
(3)   Includes LANE BRYANT OUTLET stores.
(4)   Includes PETITE SOPHISTICATE and PETITE SOPHISTICATE OUTLET stores.
(5)   Primarily due to LANE BRYANT WOMAN catalog which began operations in the Fiscal 2008 Fourth Quarter.

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The following table shows details of our consolidated income from operations:

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	August 2,			August 4,			August 2,			August 4,
(In millions)	2008			2007			2008			2007
Income from operations
FASHION BUG	$	20.8		$	31.6		$	27.6		$	50.7
LANE BRYANT		8.7			26.1			38.4			65.6
CATHERINES		5.5			9.6			12.6			26.5
Other retail stores(1)		0.3			0.0			(0.3	)		(0.1	)
Total Retail Stores segment		35.3			67.3			78.3			142.7
Total Direct-to-Consumer segment		(5.6	)		(2.4	)		(9.8	)		(3.2	)
Corporate and other		(34.9	)		(32.0	)		(69.9	)		(63.2	)
Total income/(loss) from operations	$	(5.2	)	$	32.9		$	(1.4	)	$	76.3
____________________
(1)   Includes PETITE SOPHISTICATE stores, which began operations in October 2007, and PETITE SOPHISTICATE OUTLET stores, which began operations in September 2006.

The following table sets forth information with respect to our year-to-date retail store activity for Fiscal 2009 and planned store activity for all of Fiscal 2009:

	FASHION			LANE
	BUG			BRYANT			CATHERINES			Other(1)			Total
Fiscal 2009 Year-to-Date:
Stores at February 2, 2008		989			896			468			56			2,409
Stores opened		5			24	(2)		5			3			37
Stores closed(3)		(65	)		(12	)		(10	)		(0	)		(87	)
Net change in stores		(60	)		12			(5	)		3			(50	)
Stores at August 2, 2008		929			908			463			59			2,359
Stores relocated during period		9			22			6			0			37
Fiscal 2009:
Planned store openings		6			31-35	(4)		6-7			4	(5)		47-52
Planned store closings(6)		105-108			39-46			12			4	(7)		160-170
Planned store relocations		9-12			36-39	(8)		4-5			0			49-56
____________________
(1)   Includes PETITE SOPHISTICATE and PETITE SOPHISTICATE OUTLET stores.
(2)   Includes 4 LANE BRYANT OUTLET stores.
(3)   Includes 59 FASHION BUG, 9 CATHERINES, 9 LANE BRYANT, and 1 LANE BRYANT OUTLET stores closed as part of the streamlining initiatives announced in February 2008.
(4)   Includes approximately 11-13 LANE BRYANT intimate apparel side-by-side stores and 6-8 LANE BRYANT OUTLET stores.
(5)   PETITE SOPHISTICATE OUTLET stores.
(6)   Includes approximately 150 under-performing stores to be closed as part of the streamlining initiatives announced in February 2008.
(7)   PETITE SOPHISTICATE stores.
(8)   Includes approximately 13-16 conversions to LANE BRYANT intimate apparel side-by-side stores.

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Comparison of Thirteen Weeks Ended August 2, 2008 and August 4, 2007

Net Sales

Consolidated Net Sales

The decrease in consolidated net sales in the Fiscal 2009 Second Quarter as compared to the Fiscal 2008 Second Quarter was primarily a result of decreases in net sales from each of the brands in our Retail Stores segment driven by negative comparable store sales and the closing of 78 under-performing stores during the first half of fiscal 2009 as part of our previously announced initiatives (see “OVERVIEW” above).  These decreases were partially offset by net sales from our new LANE BRYANT WOMAN catalog, launched during the latter half of Fiscal 2008, which is included in our Direct-to-Consumer segment.

Retail Stores Segment Net Sales

Comparable store sales for the Fiscal 2009 Second Quarter decreased at each of our Retail Stores brands as compared to the Fiscal 2008 Second Quarter.  Net sales for all of our brands continued to be negatively impacted by reduced traffic levels and weak consumer spending that we experienced during the latter half of Fiscal 2008 and the Fiscal 2009 First Quarter as well as the closing of the under-performing stores.  The average number of transactions per store decreased for each of our brands, while the average dollar sale per transaction increased for our outlet stores, were flat for LANE BRYANT and FASHION BUG stores, and decreased for our CATHERINES stores.  We operated 2,359 stores as of August 2, 2008 as compared to 2,411 stores as of August 4, 2007.

We offer various loyalty card programs to our Retail Stores segment customers (see “Notes to Condensed Consolidated Financial Statements; Note 6. Customer Loyalty Card Programs” above).  During each of the Fiscal 2009 Second Quarter and Fiscal 2008 Second Quarter we recognized revenues of $5.3 million in connection with our loyalty card programs. As of November 2007 we began offering a loyalty program in connection with the issuance of our new LANE BRYANT proprietary credit card.  Cardholders earn points for purchases using the credit card, which may be redeemed for merchandise coupons upon the accumulation of a specified number of points.  No membership fees are charged in connection with this program.

Direct-to-Consumer Segment Net Sales

The increase in net sales from our Direct-to-Consumer segment was primarily attributable to sales from our LANE BRYANT WOMAN catalog and website, launched in the latter half of Fiscal 2008, and an increase in sales from our FIGI’S catalog.

Cost of Goods Sold, Buying, Catalog, and Occupancy

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

Consolidated cost of goods sold, buying, catalog, and occupancy expenses increased as a percentage of consolidated net sales in the Fiscal 2009 Second Quarter as compared to the Fiscal 2008 Second Quarter primarily as a result of negative leverage on buying and occupancy expenses from the decrease in comparable store sales and an increase in catalog advertising expenses.  However, total consolidated cost of goods sold, buying, and occupancy expenses decreased in dollar amount as compared to the prior-year period as a result of our expense reduction initiatives, including the closing of the under-performing stores, which are discussed in the “OVERVIEW” above.  Consolidated cost of goods sold increased 1.3% as a percentage of consolidated net sales as a result of increased promotional activity during the current-year period to drive traffic and liquidate seasonal merchandise.  Consolidated buying, catalog, and occupancy expenses increased 1.9% as a percentage of consolidated net sales.

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Although consolidated buying and occupancy expenses increased as a percentage of sales, they decreased in dollar amount primarily as a result of the closing of under-performing stores during the first half of Fiscal 2009 and our expense reduction initiatives as discussed in the “OVERVIEW” above, as well as other store-related occupancy savings.  Consolidated occupancy expenses for the Fiscal 2009 Second Quarter include a gain on the sale of our Memphis, Tennessee distribution center of approximately $1.8 million.  Catalog advertising expenses increased in the Fiscal 2009 Second Quarter as compared to the prior-year period as a result of the start-up of our LANE BRYANT WOMAN catalog launched in the latter half of Fiscal 2008.

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.  Net merchandise costs and freight are capitalized as inventory costs.  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.

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.

Retail Stores Segment Cost of Goods Sold, Buying, and Occupancy

For our Retail Stores segment, cost of goods sold, buying, and occupancy expenses as a percentage of net sales were 3.3% higher in the Fiscal 2009 Second Quarter as compared to the Fiscal 2008 Second Quarter.  The merchandise margin in our Retail Stores segment decreased in the current-year period as compared to the prior-year period as a result of the increase in promotional markdowns.  Although buying and occupancy expenses for our Retail Stores segment were 1.5% higher as a percentage of net sales, primarily as a result of negative leverage from the decrease in comparable store sales, expense dollars decreased as a result of the closing of the under-performing stores and expense reduction initiatives discussed above,

Direct-to-Consumer Segment Cost of Goods Sold, Buying, Catalog, and Occupancy

The 20.2% increase in cost of goods sold, buying, catalog, and occupancy expenses as a percentage of net sales for our Direct-to-Consumer segment resulted primarily from higher-than-normal catalog advertising expenses incurred in connection with the start-up of our LANE BRYANT WOMAN catalog which was launched in the latter half of Fiscal 2008.

Selling, General, and Administrative

Consolidated Selling, General, and Administrative

Consolidated selling, general, and administrative expenses for the Fiscal 2009 Second Quarter decreased in dollar amount from the prior-year period and were unchanged as a percentage of consolidated net sales.  The decrease in expense dollars from the prior-year period was primarily attributable to our expense reduction initiatives discussed above.  During the Fiscal 2009 Second Quarter we recognized $2.1 million of expenses in connection with advisory and legal fees relating to a proxy contest which was settled in May 2008.

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Retail Stores Segment Selling, General, and Administrative

Selling, general, and administrative expenses for the Retail Stores segment as a percentage of net sales increased 1.3% for FASHION BUG, 2.4% for CATHERINES, and 0.1% for LANE BRYANT.  Although selling, general and administrative expenses increased as a percentage of net sales, primarily as a result of the lack of leverage on selling expenses from the decrease in comparable store sales, they decreased in dollar amount at each of our brands.  The decrease in expense dollars from the prior-year period was primarily a result of the closing of the under-performing stores and expense reduction initiatives discussed above.

Direct-to-Consumer Segment Selling, General, and Administrative

Selling, general, and administrative expenses as a percentage of net sales decreased 42.0% for our Direct-to-Consumer segment, primarily as a result of new sales from our LANE BRYANT WOMAN catalog and related E-commerce website, which began operations during the latter half of Fiscal 2008.

Restructuring and Other Charges

In November 2007 we announced our plan to relocate our CATHERINES operations located in Memphis, Tennessee to our corporate headquarters in Bensalem, Pennsylvania in conjunction with the consolidation of a number of our operating functions and in February 2008 we announced additional cost-saving and streamlining initiatives as discussed in the “OVERVIEW” above.  During the Fiscal 2009 Second Quarter we recognized pre-tax charges of approximately $5.3 million for lease termination and relocation costs related to these programs and approximately $0.3 million of non-cash pre-tax charges for write-downs of assets related to under-performing stores we expect to close.  We anticipate that the execution of the new organizational structure and cost-saving initiatives will result in approximately $28 million of annualized expense savings, primarily in the areas of non-store payroll, elimination of losses from under-performing stores, and occupancy costs.

During the Fiscal 2009 Second Quarter we recognized $9.3 million of severance costs in connection with the resignation of our former Chief Executive Officer, Dorrit J. Bern, in July 2008 (see “RECENT DEVELOPMENTS” above).

Income Tax Provision

Our income tax benefit for the Fiscal 2009 Second Quarter was $2.9 million on a loss from continuing operations before taxes of $6.6 million as compared to a tax provision of $13.0 million on income from continuing operations before taxes of $33.9 million for the Fiscal 2008 Second Quarter.  The Fiscal 2009 Second Quarter income tax benefit was favorably impacted by the receipt of non-taxable life insurance proceeds and adjustments to certain state tax accruals, partially offset by an unfavorable increase in our liability for unrecognized tax benefits, interest, and penalties in accordance with FIN No. 48.  We adopted the provisions of FASB Interpretation No. 48 as of the beginning of Fiscal 2008.

Discontinued Operations

Discontinued operations consist of the results of operations of the non-core misses catalog titles operated under our Crosstown Traders brand (see “Notes to Condensed Consolidated Financial Statements; Note 1. Condensed Consolidated Financial Statements; Discontinued Operations” above).

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Comparison of Twenty-six Weeks Ended August 2, 2008 and August 4, 2007

Net Sales

Consolidated Net Sales

The decrease in consolidated net sales in the first half of Fiscal 2009 as compared to the first half of Fiscal 2008 was primarily a result of decreases in net sales from each of the brands in our Retail Stores segment driven by negative comparable store sales and the closing of 78 under-performing stores during the first half of Fiscal 2009 as part of our previously announced initiatives (see “OVERVIEW” above).  These decreases were partially offset by net sales from our new LANE BRYANT WOMAN catalog, launched during the latter half of Fiscal 2008, which is included in our Direct-to-Consumer segment.

Retail Stores Segment Net Sales

Comparable store sales for the first half of Fiscal 2009 decreased at each of our Retail Stores brands as compared to the first half of Fiscal 2008.  Net sales for all of our brands continued to be negatively impacted by reduced traffic levels and weak consumer spending that we experienced during the latter half of Fiscal 2008, as well as the closing of the under-performing stores.  The average number of transactions per store decreased for each of our brands, while the average dollar sale per transaction increased for our outlet stores, were flat for LANE BRYANT and FASHION BUG stores, and decreased for our CATHERINES stores.

During the first half of Fiscal 2009 we recognized revenues of $10.4 million in connection with our loyalty card programs as compared to revenues of $11.0 million during the first half of Fiscal 2008.

Direct-to-Consumer Segment Net Sales

The increase in net sales from our Direct-to-Consumer segment was primarily attributable to sales from our LANE BRYANT WOMAN catalog and website launched in the latter half of Fiscal 2008 and an increase in sales from our FIGI’S catalog.

Cost of Goods Sold, Buying, Catalog, and Occupancy

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

Consolidated cost of goods sold, buying, catalog, and occupancy expenses increased 2.5% as a percentage of consolidated net sales in the first half of Fiscal 2009 as compared to the first half of Fiscal 2008.  The increase resulted primarily from negative leverage on buying and occupancy expenses from the decrease in comparable store sales and an increase in catalog advertising expenses.  However, total consolidated cost of goods sold, buying, catalog, and occupancy expense decreased in dollar amount as compared to the prior-year period as a result of our expense reduction initiatives, including the closing of the under-performing stores, which are discussed in the “OVERVIEW” above.  Consolidated cost of goods sold as a percentage of consolidated net sales was comparable to the prior-year period.  Consolidated buying, catalog, and occupancy expenses increased 2.5% as a percentage of consolidated net sales primarily as a result of negative leverage from the decrease in comparable store sales.

Although consolidated buying and occupancy expenses increased as a percentage of sales, they decreased in dollar amount primarily as a result of the closing of under-performing stores during the first half of Fiscal 2009 and our expense reduction initiatives, as well as other store-related occupancy savings, as discussed in the quarterly comparisons above.  Consolidated occupancy expenses for the first half of Fiscal 2009 include a gain on the sale of our Memphis, Tennessee distribution center of approximately $1.8 million.  Catalog advertising expenses increased as compared to the prior-year period as a result of the start-up of our LANE BRYANT WOMAN catalog launched in the latter half of Fiscal 2008.

35

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.  Net merchandise costs and freight are capitalized as inventory costs.  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.

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.

Retail Stores Segment Cost of Goods Sold, Buying, and Occupancy

For our Retail Stores segment, cost of goods sold, buying, and occupancy expenses increased 2.5% as a percentage of net sales in the first half of Fiscal 2009 as compared to the first half of Fiscal 2008.  The merchandise margin in our Retail Stores segment declined in the first half of Fiscal 2009 as compared to the first half of Fiscal 2008 primarily as a result of increased promotional activity during the current-year period to drive traffic and liquidate seasonal merchandise.  Although buying and occupancy expenses were 1.8% higher as a percentage of net sales in the current-year period as compared to the prior-year period, primarily as a result of negative leverage from the decrease in comparable store sales, expense dollars decreased as a result of the closing of the under-performing stores and our expense reduction initiatives.

Direct-to-Consumer Segment Cost of Goods Sold, Buying, Catalog, and Occupancy

The 24.3% increase in cost of goods sold, buying, catalog, and occupancy expenses as a percentage of net sales for our Direct-to-Consumer segment resulted primarily from higher-than-normal catalog advertising expenses incurred in connection with the start-up of our LANE BRYANT WOMAN catalog which was launched the latter half of Fiscal 2008.

Selling, General, and Administrative

Consolidated Selling, General, and Administrative

Although consolidated selling, general, and administrative expenses increased 1.7% as a percentage of consolidated net sales, primarily as a result of negative leverage on selling costs from the decrease in consolidated net sales, they decreased in dollar amount from the prior-year period.  The decrease in expense dollars was primarily attributable to our expense reduction initiatives. During the first half of Fiscal 2009 we recognized $5.9 million of expenses in connection with advisory and legal fees relating to a proxy contest which was settled in May 2008.

Retail Stores Segment Selling, General, and Administrative

Selling, general, and administrative expenses for the Retail Stores segment as a percentage of net sales increased 2.1% for FASHION BUG, 2.9% for CATHERINES, and 0.9% for LANE BRYANT. Although selling, general and administrative expenses increased as a percentage of net sales, primarily reflecting the lack of leverage on selling expenses at each of the brands as a result of the decrease in comparable store sales, they decreased in dollar amount from the prior-year period at each of our brands.  The decrease in expense dollars from the prior-year period was primarily a result of the closing of the under-performing stores and expense reduction initiatives discussed above.

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Direct-to-Consumer Segment Selling, General, and Administrative

Selling, general, and administrative expenses as a percentage of net sales decreased 25.1% for our Direct-to-Consumer segment, primarily as a result of new sales from our LANE BRYANT WOMAN catalog and related E-commerce website, which began operations during the latter half of Fiscal 2008.

Restructuring and Other Charges

As discussed in the overview and quarterly analysis above, we relocated our CATHERINES operations in conjunction with the consolidation of a number of our operating functions and began to implement additional cost-saving and streamlining initiatives announced in February 2008.  During the first half of Fiscal 2009 we recognized pre-tax charges of approximately $7.0 million for lease termination, severance, retention, and relocation costs.  In addition, we recognized approximately $2.2 million of non-cash pre-tax charges for write-downs of assets related to under-performing stores we expect to close and accelerated depreciation related to the closing of our Memphis facility.

During the first half of Fiscal 2009 we recognized $9.3 million of severance costs in connection with the resignation of our former Chief Executive Officer, Dorrit J. Bern, in July 2008 (see “RECENT DEVELOPMENTS” above).

Income Tax Provision

Our income tax benefit for the first half of Fiscal 2009 was $1.6 million on a loss from continuing operations before taxes of $4.7 million as compared to a tax provision of $27.9 million on income from continuing operations before taxes of $75.3 million for the first half of Fiscal 2008.  The unfavorable impact of the increase in our liability for unrecognized tax benefits, interest, and penalties in accordance with FIN No. 48 was partially offset by the receipt of non-taxable life insurance proceeds and adjustments to certain state tax accruals.  We adopted the provisions of FASB Interpretation No. 48 as of the beginning of Fiscal 2008.

Discontinued Operations

Discontinued operations consist of the results of operations of the non-core misses catalog titles operated under our Crosstown Traders brand (see “Notes to Condensed Consolidated Financial Statements; Note 1. Condensed Consolidated Financial Statements; Discontinued Operations” above).  Discontinued operations for the first half of Fiscal 2009 include an estimated after-tax loss from the planned disposal of the discontinued operations of $26.9 million.

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.  The following table highlights certain information related to our liquidity and capital resources:

	August 2,			February 2,
(Dollars in millions)	2008			2008
Cash and cash equivalents	$	131.3		$	61.3
Available-for-sale securities	$	6.4		$	13.4
Working capital	$	466.3		$	495.3
Current ratio		2.2			2.4
Long-term debt to equity ratio		46.1	%		41.9	%

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Our net cash provided by operating activities decreased to $111.5 million for the first half of Fiscal 2009 from $158.1 million for the first half of Fiscal 2008, primarily as a result of a $50.4 million decrease in income from continuing operations.  Our net investment in inventories decreased $21.9 million in the current-year period as compared to the prior-year period as a result of our continued efforts to reduce inventory levels.  On a same-store basis, inventories decreased 6% as of August 2, 2008 as compared to August 4, 2007.

Capital Expenditures

Our gross capital expenditures, excluding construction allowances received from landlords, were $38.5 million during the first half of Fiscal 2009 as compared to $74.0 million for the first half of Fiscal 2008.  Construction allowances received from landlords were $22.2 million for the current-year period as compared to $26.9 million for the prior-year period.

As part of our streamlining initiatives announced in February 2008, we plan to significantly reduce capital expenditures for new store development, store relocations, and corporate technology during Fiscal 2009 in response to the current difficult economic environment.  We plan to open approximately 45-50 new stores in Fiscal 2009 as compared to 103 new stores in Fiscal 2008, and anticipate that our Fiscal 2009 gross capital expenditures will be approximately $79 million before construction allowances received from landlords as compared to gross capital expenditures of $137.7 million for Fiscal 2008.  We expect that approximately 80% of our Fiscal 2009 gross capital expenditures before construction allowances will support store development, including openings, relocations, and store improvements, with the remainder of the expenditures to be primarily for information technology and improvements to our distribution centers.  We expect to finance these capital expenditures primarily through internally-generated funds and to a lesser extent through capital lease financing.

Debt, Lease, and Purchase Commitments

The financial table in “PART II; Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; FINANCIAL CONDITION; Debt, Lease, and Purchase Commitments” in our Annual Report on Form 10-K for the fiscal year ended February 2, 2008 does not include our liability for future benefits payable to former executive employees under split-dollar life insurance agreements that we have recorded in accordance with our adoption of EITF Issue No. 06-4 (see “Notes to Condensed Consolidated Financial Statements; Note 13. Impact of Recent Accounting Pronouncements” above).  As a result of the adoption of EITF Issue No. 06-4, we recognized a $13.7 million increase in our split-dollar life insurance benefits payable through a cumulative effect adjustment as of February 3, 2008.  We recognized $1.6 million of the increase as a current liability (due in less than 1 year) and the remaining $12.1 million as a long-term liability.

Repurchases of Common Stock

During the Fiscal 2009 First Quarter we repurchased an aggregate total of 0.5 million shares of common stock for $2.6 million under a $200 million share repurchase program announced in November 2007 and 1.5 million shares of common stock for $8.3 million under a prior authorization from our Board of Directors.  We did not repurchase any shares of common stock during the Fiscal 2009 Second Quarter.  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.  See “PART II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” below for additional information regarding the share-repurchase program announced in November 2007.

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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.

Off-Balance-Sheet Financing

Asset Securitization Program

Our asset securitization program 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, LANE BRYANT, CATHERINES, PETITE SOPHISTICATE, and Crosstown Traders proprietary credit card programs.  Additional information regarding our asset securitization facility is included in “Notes to Condensed Consolidated Financial Statements; Note 9. Asset Securitization” above; under the caption “MARKET RISK” below; and in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; CRITICAL ACCOUNTING POLICIES; Asset Securitization”and “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; NOTE 17. ASSET SECURITIZATION” of our February 2, 2008 Annual Report on Form 10-K.

As of August 2, 2008, we had the following securitization facilities outstanding:

(Dollars in millions)	Series 1999-2	Series 2004-VFC	Series 2004-1	2005-RPA(1)	Series 2007-1
Date of facility	May 1999	January 2004	August 2004	May 2005	October 2007
Type of facility	Conduit	Conduit	Term	Conduit	Term
Maximum funding	$50.0	$50.0	$180.0	$55.0	$320.0
Funding as of August 2, 2008	$44.0	$0.0	$180.0	$39.0	$320.0
First scheduled principal payment	Not applicable	Not applicable	April 2009	Not applicable	April 2012
Expected final principal payment	Not applicable(2)	Not applicable(2)	March 2010	Not applicable(2)	March 2013
Next renewal date	March 2009	January 2009	Not applicable	May 2009	Not applicable
____________________
(1)   Receivables Purchase Agreement (for the Crosstown Traders catalog proprietary credit card receivables program).
(2)   Series 1999-2 and Series 2004-VFC 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 begin amortizing on the next renewal date subject to the further extension of the renewal date as a result of renewal of the purchase commitment..

In May 2008 the Series 2002-1 facility completed its scheduled amortization, which had begun in August 2007 in accordance with its scheduled terms, and is no longer an outstanding series.

We securitized $455.7 million of private label credit card receivables in the first half of Fiscal 2009 and had $584.9 million of securitized credit card receivables outstanding as of August 2, 2008.  We held certificates and retained interests in our securitizations of $109.3 million as of August 2, 2008 that 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.

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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.  Our investment in asset-backed securities as of August 2, 2008 included $51.5 million of QSPE certificates, an interest-only (“I/O”) strip of $23.5 million, and other retained interests of $34.3 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. does not meet certain financial performance standards, the Trust is obligated to reallocate to third-party investors holding certain certificates issued by the Trust, collections in an amount up to $9.45 million that otherwise would be available to CSRC.  The result of this reallocation is to increase CSRC’s retained interest in the Trust by the same amount, with the third-party investor retaining an economic interest in the certificates.  Subsequent to such a transfer occurring, and upon certain conditions being met, these same investors are required to repurchase these interests when the financial performance standards are again satisfied.  Our net loss for the third quarter of Fiscal 2008 resulted in the requirement to begin the reallocation of collections as discussed above and $9.45 million of collections were fully transferred as of February 2, 2008.  The requirement for the reallocation of these collections will cease and such investors would be required to repurchase such interests upon our announcement of a quarter with net income and the fulfillment of such conditions.  With the exception of the requirement to reallocate collections of $9.45 million that were fully transferred as of February 2, 2008, the Trust was in compliance with its financial performance standards as of August 2, 2008, including all financial performance standards related to the performance of the underlying receivables.

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 or the QSPEs do not 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 although we cannot provide assurance in that regard.  As of August 2, 2008 we and the QSPEs were in compliance with the applicable financial performance standards referred to in this paragraph.

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.

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

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.

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Benefits from Operating Our Proprietary Credit Card Programs

We manage our proprietary credit card programs primarily to enhance customer loyalty and to allow us to integrate our direct-mail marketing strategy when communicating with our core customers.  We also earn revenue from operating the credit card programs.  As discussed above, we utilize asset securitization as the primary funding source for our proprietary credit card receivables programs.  As a result, our primary source of benefits is derived from the distribution of net excess spread revenue from our QSPEs.

The transfer of credit card receivables under our asset securitization program is without recourse and we account for the program in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Under SFAS No. 140, our benefit from the credit card receivables represents primarily the net excess spread revenues we receive from monthly securitization distributions associated with the collections on managed outstanding receivables.  We recognize on an accrual basis these net excess spread revenues, which generally represent finance charge revenues in excess of securitization funding costs, net credit card charge-offs, and the securitization servicing fee.  Finance charge revenues include finance charges and fees assessed to the credit card customers.  Net credit card charge-offs represent gross monthly charge-offs on customer accounts less recoveries on accounts previously charged-off.  For purposes of the table provided below, we also include any collection agency costs associated with recoveries as part of the net excess spread revenues from credit card receivables.

In addition to the actual net excess spread revenues described above we record our beneficial interest in the Trust as an “interest-only strip” (“I/O strip”), which represents the estimated present value of cash flows we expect to receive over the estimated period the receivables are outstanding.  In addition to the I/O strip we recognize a servicing liability, which 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.

The benefits from operating our proprietary credit card programs also include other revenues generated from the programs.  These other net revenues include revenue from additional products and services that customers may purchase with their credit cards, including debt cancellation protection, fee-based loyalty program revenues, and net commissions from third-party products that customers may buy through their credit cards.  Other credit card revenues also include interest income earned on funds invested in the credit entities.  The credit contribution is net of expenses associated with operating the program.  These expenses include the costs to originate, bill, collect, and operate the credit card programs.  Except for net fees associated with the fee-based loyalty programs that we include in net sales, we include the net credit contribution as a reduction of selling, general, and administrative expenses in our consolidated statements of operations and comprehensive income.

Further details of our net credit contribution are as follows:

	Thirteen Weeks Ended					Twenty-six Weeks Ended
	August 2,			August 4,		August 2,		August 4,
(In millions)	2008			2007		2008		2007
Net securitization excess spread revenues	$	26.3		$	18.5	$	49.6	$	34.0
Net additions to the I/O strip and servicing liability		(0.3	)		0.8		0.1		1.1
Other credit card revenues, net(1)		2.5			2.3		5.8		5.6
Total credit card revenues		28.5			21.6		55.5		40.7
Less total credit card program expenses		17.0			11.9		35.0		23.8
Total credit contribution	$	11.5		$	9.7	$	20.5	$	16.9
____________________
(1)   Excludes inter-company merchant fees between our credit entities and our retail entities.

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	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 2,		August 4,		August 2,		August 4,
(In millions)	2008		2007		2008		2007
Average managed receivables outstanding	$	591.9	$	372.0	$	588.6	$	364.1
Ending managed receivables outstanding	$	584.9	$	367.5	$	584.9	$	367.5

Operating Leases

We lease substantially all of our operating stores under non-cancelable operating lease agreements.  Additional details on these leases, including minimum lease commitments, are included in “Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note 18. Leases” of our Annual Report on Form 10-K for the fiscal year ended February 2, 2008.

FINANCING

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.  We had an aggregate total of $1.7 million of unamortized deferred debt acquisition costs related to the facility as of August 2, 2008, which we are amortizing on a straight-line basis over the life of the facility as interest expense.

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.  In addition, the facility agreement provides that if “Excess Availability” falls below 10% of the “Borrowing Base,” through high levels of borrowing or letter of credit issuance for example, we may be required to maintain a minimum “Fixed Charge Coverage Ratio” (terms in quotation marks in this paragraph and the following paragraph are defined in the facility agreement).  The facility is secured by our general assets, except for assets related to our credit card securitization facilities, real property, equipment, the assets of our non-U.S. subsidiaries, and certain other assets.  As of August 2, 2008 the “Excess Availability” under the facility was $306.7 million, or 95.1% of the “Borrowing Base.”  As of August 2, 2008, 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” 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 of August 2, 2008, the applicable rates under the facility were 5.00% for Prime Rate Loans and 3.71% (LIBOR plus 1%) for Eurodollar Rate Loans.  There were no borrowings outstanding under the facility as of August 2, 2008.

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Long-term Debt

On April 30, 2007 we issued $250.0 million in aggregate principal amount of 1.125% Senior Convertible Notes due May 1, 2014 (the “1.125% Notes”) in a private offering for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.  On May 11, 2007 the initial purchasers of the 1.125% Notes exercised their over-allotment option and purchased an additional $25.0 million in principal amount of notes.  The 1.125% Notes were issued at par, and interest is payable semiannually in arrears on May 1 and November 1, beginning November 1, 2007.  The 1.125% Notes will mature on May 1, 2014, unless earlier repurchased by us or converted.

We received proceeds of approximately $268.1 million from the issuance, net of underwriting fees of approximately $6.9 million.  The underwriting fees, as well as additional transaction costs of $0.8 million incurred in connection with the issuance of the 1.125% Notes, are included in “Other assets,” and amortized to interest expense on an effective interest rate basis over the remaining life of the notes.

On April 30, 2007 we called for the redemption on June 4, 2007 of our $149.999 million outstanding aggregate principal amount of 4.75% Senior Convertible Notes due June 1, 2012 (the “4.75% Notes”).  The holders of the 4.75% Notes had the option to convert their notes into shares of our common stock at a conversion price of $9.88 per share until the close of business on June 1, 2007.  As of June 4, 2007, the holders of $149.956 million principal amount of the 4.75% Notes had exercised their right to convert their notes into an aggregate of 15.146 million shares of our common stock and the remaining notes were redeemed for $43 thousand.  In addition, we paid $392 thousand in lieu of fractional shares.

Additional information regarding our long-term borrowings is included in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note 8. Long-term Debt” of our Annual Report on Form 10-K for the fiscal year ended February 2, 2008.

In Fiscal 2009 we plan to continue to utilize our combined financial resources to fund our inventory and inventory-related purchases, catalog advertising and marketing initiatives, and our 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 2009.  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 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, LANE BRYANT, 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.

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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 August 2, 2008 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 for the portion of certificates that are funded at floating rates.

As a result of the Trust entering into a series of fixed-rate interest rate swap agreements with respect to $335.8 million of floating-rate certificates, entering into an interest-rate cap with respect to an additional $28.8 million of floating-rate certificates, and $86.1 million of certificates being issued at fixed rates 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 on a pro-rated basis by the end of Fiscal 2009, an increase of approximately $326 thousand in selling, general, and administrative expenses would result.

As of May 3, 2008, 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 1. Notes To Condensed Consolidated Financial Statements (Unaudited); Note 13. Impact of Recent Accounting Pronouncements” above.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations; MARKET RISK,” above.

Item 4. 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-Q (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.  Furthermore, there has been no change in our internal control over financial reporting that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Other than ordinary routine litigation incidental to our business, there are no other 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 1A. Risk Factors

On April 25, 2008 we announced that our Board of Directors began exploring a broad range of operating and strategic alternatives for our non-core misses apparel catalog titles in order to provide a greater focus on our core brands and to enhance shareholder value.  As of August 2, 2008 we were holding our non-core misses apparel catalog titles for sale.  On August 25, 2008 (subsequent to the end of the period covered by this Report on Form 10-Q) we announced that we have entered into a definitive agreement to sell our non-core misses apparel catalogs (see “PART I Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations; RECENT DEVELOPMENTS” above).  We cannot assure the successful consummation of our expected sale of our non-core misses apparel catalog titles.

Our Form 10-K for the fiscal year ended February 2, 2008 included disclosure of the following risk factor:

Changes to existing accounting rules or the adoption of new rules could have an adverse effect on our reported results of operations.  The Financial Accounting Standards Board (“FASB”) has issued a proposed FASB Staff Position (“FSP”) that, if adopted, would apply to any convertible debt instrument that may be settled in whole or in part with cash upon conversion, which would include our 1.125% Senior Convertible Notes due May 2014.  If the proposed FSP is approved in 2008 we would be required to adopt the proposal as of February 1, 2009 (the beginning of Fiscal 2010), with retrospective application to financial statements for periods prior to the date of adoption.  As compared to our current accounting for the 1.125% Notes, adoption of the proposal would reduce long-term debt, increase stockholders’ equity, and reduce net income and earnings per share.  Adoption of the proposal would not affect our cash flows.

In May 2008 the FASB issued FASB Staff Position (“FSP”) APB 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlements),” which will change the accounting treatment for convertible securities that the issuer may settle fully or partially in cash.  See “Part I Item 1. Notes To Condensed Consolidated Financial Statements (Unaudited); Note 13. Impact of Recent Accounting Pronouncements” above for further information with respect to FSP APB 14-1.

Our Form 10-K for the fiscal year ended February 2, 2008 also included disclosure of the following risk factor:

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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On July 9, 2008 we announced that Dorrit J. Bern tendered her resignation as President, Chief Executive Officer and a Director of the Company.  As a result of the resignation and certain other changes in our management team, we are updating this risk factor as follows:

Our success and our ability to execute our business strategy depend largely on the efforts and abilities of our executive officers and their management teams.  We also must motivate employees to remain focused on our strategies and goals, particularly during a period of changing leadership for the Company and a number of our operating divisions.  The inability to find a suitable permanent replacement for our Chief Executive Officer within a reasonable time period, as well as management personnel to replace departing executives, could have a material adverse effect on our business.  We do not maintain key-person life insurance policies with respect to any of our employees.

Other than the above, we have not become aware of any material changes since February 2, 2008 in the risk factors previously disclosed in “Part I; Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended February 2, 2008.  See also “Part I; Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations; FORWARD-LOOKING STATEMENTS” and “RECENT DEVELOPMENTS” above.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers:

						Total		Maximum
						Number		Number of
						of Shares		Shares that
						Purchased as		May Yet be
	Total					Part of Publicly		Purchased
	Number			Average		Announced		Under the
	of Shares			Price Paid		Plans or		Plans or
Period	Purchased			per Share		Programs(2)		Programs(2)
May 4, 2008 through
May 31, 2008		1,449	(1)	$	5.23		–
June 1, 2008 through
July 5, 2008		8,260	(1)		5.40		–
July 6, 2008 through
August 2, 2008		77,295	(1)		4.71		–
Total		87,004		$	4.78		–		(2)
____________________
(1)   Shares withheld for the payment of payroll taxes on employee stock awards that vested during the period.
(2)   On November 8, 2007 we publicly announced that our Board of Directors granted authority to repurchase shares of our common stock up to an aggregate value of $200 million. Shares may be purchased in the open market or through privately-negotiated transactions, as market conditions allow. As of February 2, 2008 no shares had been purchased under this plan. During the period from February 3, 2008 through May 3, 2008 we repurchased a total of 505,406 shares of stock ($5.21 average price paid per share) in the open market under this program. During the period from May 4, 2008 through August 2, 2008 no shares were purchased under this plan. As of August 2, 2008, $197,364,592 was available for future repurchases under this program. This repurchase program has no expiration date.

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

Our reconvened Annual Meeting of Shareholders (“the Meeting”) was held on June 26, 2008.

As disclosed in our Proxy Statement filed on May 23, 2008 pursuant to Section 14 of the Securities Exchange Act of 1934 (the “Proxy Statement”), Dorrit J. Bern and Alan Rosskamm were nominated for reelection and Arnaud Ajdler and Michael C. Appel were nominated for election to serve three-year terms as Class C Directors, and Richard W. Bennet III and Michael Goldstein were nominated for election to serve three-year terms as Class B Directors.  As a result of the approval of a proposal to amend our Restated Articles of Incorporation and By-laws to declassify our Board of Directors (see below), all members of our Board of Directors, including the Class B and Class C Directors nominated and elected at the Meeting, will serve one-year terms until our 2009 Annual Meeting of Shareholders.

The holders of 103,432,957 shares of our Common Stock, representing 91.3% of the total number of shares outstanding as of the close of business on March 28, 2008 (the record date fixed by our Board of Directors), were present in person or by proxy at the Annual Meeting.  The following table indicates the number of votes cast in favor of election and the number of votes withheld with respect to each of the Directors nominated:

Name	Votes For	Votes Withheld
Dorrit J. Bern	99,252,383	4,180,574
Alan Rosskamm	99,759,959	3,672,998
Arnaud Ajdler	102,805,593	627,364
Michael C. Appel	102,860,795	572,162
Richard W. Bennet III	102,745,328	687,629
Michael Goldstein	102,722,833	710,124

On July 9, 2008 Dorrit J. Bern tendered her resignation as President, Chief Executive Officer, and Director of Charming Shoppes, Inc. (see “Part I; Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations; “RECENT DEVELOPMENTS” above).

A proposal to re-approve the material terms of the performance goals under the 2003 Incentive Compensation Plan to preserve the deductibility of compensation payments in accordance with Section 162(m) of the Internal Revenue Code was approved, with 93,068,908 votes for, 1,120,504 votes against, 36,192 abstentions, and 9,207,353 broker non-votes.

A proposal to amend our Restated Articles of Incorporation to eliminate the approval requirements for business combinations with interested shareholders was approved, with 102,583,193 votes for, 801,382 votes against, and 48,379 abstentions.

A proposal to amend our Restated Articles of Incorporation and By-laws to declassify our Board of Directors was approved, with 103,025,699 votes for, 350,070 votes against, and 57,184 abstentions.  As a result of approval of this proposal, all members of our Board of Directors, including the Class B and Class C Directors elected at the Meeting, will serve one-year terms until our 2009 Annual Meeting of Shareholders.  The incumbent Class A and Class B Directors’ terms will also be shortened to one year, and all of our Directors will stand for re-election at our 2009 Annual Meeting of Shareholders.

A proposal to ratify the appointment of Ernst & Young LLP as our independent auditors for our fiscal year ending January 31, 2009 was approved, with 103,154,483 votes for, 247,996 votes against, and 30,477 abstentions.

Information regarding a settlement agreement between Charming Shoppes, Inc. and The Charming Shoppes Full Value Committee terminating a proxy contest and related litigation in connection with the Meeting is included under the caption “RECENT DEVELOPMENTS” in the Proxy Statement and is incorporated herein by reference.

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Item 6. Exhibits

The following is a list of Exhibits filed as part of this Quarterly Report on Form 10-Q.  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 parentheses.

2.1	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.  (Exhibit 2.1).
3.1	Restated Articles of Incorporation.
3.2	Bylaws, as Amended and Restated through July 10, 2008.
4.1	Indenture between the Company and Wells Fargo Bank, National Association, dated as of April 30, 2007, incorporated by reference to Form 8-K of the Registrant dated April 30, 2007, filed on May 3, 2007.  (Exhibit 4.1).
4.2	Form of 1.125% Senior Convertible Note due 2012 (included in Exhibit 4.1).
10.1	Form of Time-Based Restricted Stock Units Agreement for Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.1).
10.2	Form of Time-Based Stock Appreciation Rights Agreement for Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.2).
10.3	Form of Time-Based Restricted Stock Units Agreement for Other Executive Officers, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.3).
10.4	Form of Time-Based Stock Appreciation Rights Agreement for Other Executive Officers, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.4).
10.5	Form of Performance-Based Restricted Stock Units Agreement for Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.5).
10.6	Form of Performance-Based Stock Appreciation Rights Agreement for Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.6).
10.7	Form of Additional Time-Based Restricted Stock Units Agreement for Other Executive Officers, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.7).
10.8	Form of Additional Time-Based Stock Appreciation Rights Agreement for Other Executive Officers, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.8).
10.9	Form of Performance-Based EBITDA Stock Appreciation Rights Agreement, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.9).
10.10	Form of Stock Appreciation Rights Agreement for Alan Rosskamm.

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10.11	Amendment, dated as of May 15, 2008, to Amended and Restated Receivables Purchase Agreement dated as of June 2, 2005, by and among Catalog Receivables LLC as seller; Spirit of America, Inc. as servicer; Sheffield Receivables Corporation as Purchaser; and Barclays Bank PLC as administrator for the Purchaser, incorporated by reference to Form 10-Q of the Registrant dated May 3, 2008, filed on June 6, 2008.  (Exhibit 10.10).
10.12	Letter Agreement, dated as of June 20, 2008, to Certificate Purchase Agreement, dated as of May 28, 1999, as amended, among Charming Shoppes Receivables Corp., as Seller and Class B Purchaser; Spirit of America, Inc., as Servicer; Clipper Receivables Company, LLC, as Class A Purchaser; and State Street Global Markets, LLC, as Administrator for the Class A Purchaser.
10.13	Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan, Amended and Restated, Effective May 7, 2008, incorporated by reference to Form 10-Q of the Registrant dated May 3, 2008, filed on June 6, 2008.  (Exhibit 10.12).
10.14	Charming Shoppes, Inc. Annual Incentive Program – Fiscal 2009, as amended and restated March 27, 2008, incorporated by reference to Form 10-Q of the Registrant dated May 3, 2008, filed on June 6, 2008.  (Exhibit 10.13).
10.15	Settlement Agreement by and between Charming Shoppes, Inc. and The Charming Shoppes Full Value Committee dated as of May 8, 2008, incorporated by reference to Form 8-K of the Registrant dated May 8, 2008, filed on May 9, 2008.  (Exhibit 10.1).
10.16	Separation Agreement, dated July 8, 2008, by and between Charming Shoppes, Inc. and Dorrit J. Bern.
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.

49

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CHARMING SHOPPES, INC.
	(Registrant)
Date: September 4, 2008	/S/ ALAN ROSSKAMM
	Alan Rosskamm
	Chairman of the Board
	Interim Chief Executive Officer
Date: September 4, 2008	/S/ ERIC M. SPECTER
	Eric M. Specter
	Executive Vice President
	Chief Financial Officer

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Exhibit Index

Exhibit No.	Item
2.1	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. (Exhibit 2.1).
3.1	Restated Articles of Incorporation.
3.2	Bylaws, as Amended and Restated through July 10, 2008.
4.1	Indenture between the Company and Wells Fargo Bank, National Association, dated as of April 30, 2007, incorporated by reference to Form 8-K of the Registrant dated April 30, 2007, filed on May 3, 2007.  (Exhibit 4.1).
4.2	Form of 1.125% Senior Convertible Note due 2012 (included in Exhibit 4.1).
10.1	Form of Time-Based Restricted Stock Units Agreement for Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.1).
10.2	Form of Time-Based Stock Appreciation Rights Agreement for Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.2).
10.3	Form of Time-Based Restricted Stock Units Agreement for Other Executive Officers, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.3).
10.4	Form of Time-Based Stock Appreciation Rights Agreement for Other Executive Officers, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.4).
10.5	Form of Performance-Based Restricted Stock Units Agreement for Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.5).
10.6	Form of Performance-Based Stock Appreciation Rights Agreement for Dorrit J. Bern, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.6).
10.7	Form of Additional Time-Based Restricted Stock Units Agreement for Other Executive Officers, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.7).
10.8	Form of Additional Time-Based Stock Appreciation Rights Agreement for Other Executive Officers, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.8).
10.9	Form of Performance-Based EBITDA Stock Appreciation Rights Agreement, incorporated by reference to Form 8-K of the Registrant dated April 1, 2008, filed on April 7, 2008.  (Exhibit 10.9).
10.10	Form of Stock Appreciation Rights Agreement for Alan Rosskamm.

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10.11	Amendment, dated as of May 15, 2008, to Amended and Restated Receivables Purchase Agreement dated as of June 2, 2005, by and among Catalog Receivables LLC as seller; Spirit of America, Inc. as servicer; Sheffield Receivables Corporation as Purchaser; and Barclays Bank PLC as administrator for the Purchaser, incorporated by reference to Form 10-Q of the Registrant dated May 3, 2008, filed on June 6, 2008.  (Exhibit 10.10).
10.12	Letter Agreement, dated as of June 20, 2008, to Certificate Purchase Agreement, dated as of May 28, 1999, as amended, among Charming Shoppes Receivables Corp., as Seller and Class B Purchaser; Spirit of America, Inc., as Servicer; Clipper Receivables Company, LLC, as Class A Purchaser; and State Street Global Markets, LLC, as Administrator for the Class A Purchaser.
10.13	Charming Shoppes, Inc. 2003 Non-Employee Directors Compensation Plan, Amended and Restated, Effective May 7, 2008, incorporated by reference to Form 10-Q of the Registrant dated May 3, 2008, filed on June 6, 2008.  (Exhibit 10.12).
10.14	Charming Shoppes, Inc. Annual Incentive Program – Fiscal 2009, as amended and restated March 27, 2008, incorporated by reference to Form 10-Q of the Registrant dated May 3, 2008, filed on June 6, 2008.  (Exhibit 10.13).
10.15	Settlement Agreement by and between Charming Shoppes, Inc. and The Charming Shoppes Full Value Committee dated as of May 8, 2008, incorporated by reference to Form 8-K of the Registrant dated May 8, 2008, filed on May 9, 2008.  (Exhibit 10.1).
10.16	Separation Agreement, dated July 8, 2008, by and between Charming Shoppes, Inc. and Dorrit J. Bern.
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-3.1

EXHIBIT 3.1

RESTATED

ARTICLES OF INCORPORATION, AS AMENDED

OF

CHARMING SHOPPES, INC.

(AS AMENDED THROUGH June 26, 2008)

RESTATED

ARTICLES OF INCORPORATION, AS AMENDED

OF

CHARMING SHOPPES, INC.

ARTICLE 1.  The name of the corporation is:

Charming Shoppes, Inc.

ARTICLE 2.  The address of the registered office of the corporation in this Commonwealth is:

450 Winks Lane

Bensalem, PA 19020

ARTICLE 3.  The corporation is incorporated under the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania (the "Business Corporation Law").

ARTICLE 4.  The purpose or purposes for which the corporation is incorporated are to have unlimited power to engage in and to do any lawful act concerning any or all lawful business for which corporations may be incorporated under the Business Corporation Law.

ARTICLE 5.  Capital Stock.

(a)  Authorized Shares.  The aggregate number of shares which the corporation shall have authority to issue is 301,000,000 of which 300,000,000 shares of the par value of $.10 per share shall be Common Stock and 1,000,000 shares of the par value of $1.00 per share shall be Series Preferred Stock.  The board of directors may authorize the issuance from time to time of the Series Preferred Stock in one or more series and with designations, preferences, qualifications, limitations, restrictions and special or relative rights (which may differ with respect to each series) as the Board may fix by resolution. Without limiting the foregoing, the board of directors is authorized to fix with respect to each series:

(1)  the number of shares which shall constitute the series and the name of the series;

(2)  the rate and times at which, and the preferences and conditions under which, dividends shall be payable on shares of the series, and the status of such dividends as cumulative or non-cumulative and as participating or non-participating;

(3)  the prices, times and terms, if any, at or upon which shares of the series shall be subject to redemption;

(4)  the rights, if any, of holders of shares of the series to convert such shares into, or to exchange such shares for, shares of any other class of stock of the corporation;

(5)  the terms of the sinking fund or redemption or purchase account, if any, to be provided for shares of the series;

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(6)  the rights and preferences, if any, of the holders of shares of the series upon any liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the corporation;

(7)  the limitations, if any, applicable while such series is outstanding, on the payment of dividends or making of distributions on, or the acquisition of, the common stock or any other class of stock which does not rank senior to the shares of the series;

(8)  the voting rights, if any, to be provided for shares of the series.

(b)  Series A Preferred Shares.  The first series of the Series Preferred Stock, par value $1.00 per share, shall consist of 500,000 shares designated as Series A Junior Participating Preferred Shares  (the "Series A Preferred Shares").  The voting rights, designations, preferences, qualifications, privileges, limitations, restrictions, options, conversion rights and other special or relative rights of the Series A Preferred Shares are as follows:

(1)Dividends and Distributions.

(A)  The rate of dividends payable per share of Series A Preferred Shares on the first day of March, June, September and  December in each year or such other quarterly payment date as shall be specified by the board of directors (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of the Series A Preferred Shares, shall be (rounded to the nearest cent) equal to the greater of:

(i)  $1.50; or

(ii)  subject to the provision for adjustment hereinafter set forth, 300 times the aggregate per share amount of all cash dividends, and 300 times the aggregate per share amount (payable in cash, based upon the fair market value at the time the non-cash dividend or other distribution is declared or paid as determined in good faith by the board of directors) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, $.10 par value, of the corporation since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of the Series A Preferred Shares.

Dividends on the Series A Preferred Shares shall be paid out of funds legally available for such purpose. In the event the corporation shall at any time after April 26, 1999 (the "Rights Declaration Date"):

(iii)  declare any dividend on Common Stock payable in shares of Common Stock;

(iv)  subdivide the outstanding shares of Common Stock; or

(v)  combine the outstanding shares of Common Stock into a smaller number of shares;

then in each such case the amounts to which holders of Series A Preferred Shares were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying each such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

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(B)  Dividends shall begin to accrue and be cumulative on outstanding Series A Preferred Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such Series A Preferred Shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Series A Preferred Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the Series A Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.

(2)  Voting Rights.  In addition to any other voting rights required by law, the holders of Series A Preferred Shares shall have the following voting rights:

(A)  Subject to the provision for adjustment hereinafter set forth, each Series A Preferred Share shall entitle the holder thereof to 300 votes on all matters submitted to a vote of the shareholders of the corporation.  In the event the corporation shall at any time after the Rights Declaration Date:

(i)  declare any dividend on Common Stock payable in shares of Common Stock;

(ii)  subdivide the outstanding shares of Common Stock; or

(iii)  combine the outstanding shares of Common Stock into a smaller number of shares;

then in each such case the number of votes per share to which holders of Series A Preferred Shares were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B)  (i)  In the event that dividends upon the Series A Preferred Shares shall be in arrears to an amount equal to six full quarterly dividends thereon, the holders of such Series A Preferred Shares shall become entitled to the extent hereinafter provided to vote noncumulatively at all elections of directors of the corporation, and to receive notice of all shareholders' meetings to be held for such purpose.  At such meetings, to the extent that directors are being elected, the holders of such Series A Preferred Shares voting as a class shall be entitled solely to elect two members of the board of directors of the corporation; and all other directors of the corporation shall be elected by the other shareholders of the corporation entitled to vote in the election of directors.  Such voting rights of the holders of such Series A Preferred Shares shall continue until all accumulated and unpaid dividends thereon shall have been paid or funds sufficient therefor set aside, whereupon all such voting rights of the holders of shares of such series shall cease, subject to being again revived from time to time upon the reoccurrence of the conditions above described as giving rise thereto.

(ii)  At any time when such right to elect directors separately as a class shall have so vested, the corporation may, and upon the written request of the holders of record of not less than 20% of the then outstanding total number of shares of all the Series A Preferred Shares having the right to elect directors in such circumstances shall, call a special meeting of holders of such Series A Preferred Shares for the election of directors.  In the case of such a written request, such special meeting shall be held within 90 days after the delivery of such request, and, in either case, at the place and upon the notice provided by law and in the

3

bylaws of the corporation; provided, that the corporation shall not be required to call such a special meeting if such request is received less than 120 days before the date fixed for the next ensuing annual or special meeting of shareholders of the corporation.  Upon the mailing of the notice of such special meeting to the holders of such Series A Preferred Shares, or, if no such meeting be held, then upon the mailing of the notice of the next annual or special meeting of shareholders for the election of directors, the number of directors of the corporation shall, ipso facto, be increased to the extent, but only to the extent, necessary to provide sufficient vacancies to enable the holders of such Series A Preferred Shares to elect the two directors hereinabove provided for, and all such vacancies shall be filled only by vote of the holders of such Series A Preferred Shares as hereinabove provided.  Whenever the number of directors of the corporation shall have been increased, the number as so increased may thereafter be further increased or decreased in such manner as may be permitted by the bylaws and without the vote of the holders of Series A Preferred Shares, provided that no such action shall impair the right of the holders of Series A Preferred Shares to elect and to be represented by two directors as herein provided.

 (iii)  So long as the holders of Series A Preferred Shares are entitled hereunder to voting rights, any vacancy in the board of directors caused by the death or resignation of any director elected by the holders of Series A Preferred Shares, shall, until the next meeting of shareholders for the election of directors, in each case be filled by the remaining director elected by the holders of Series A Preferred Shares having the right to elect directors in such circumstances.

 (iv)  Upon termination of the voting rights of the holders of any series of Series A Preferred Shares the terms of office of all persons who shall have been elected directors of the corporation by vote of the holders of Series A Preferred Shares or by a director elected by such holders shall forthwith terminate.

(C)  Except as otherwise provided herein, in the articles of the corporation or by law, the holders of Series A Preferred Shares and the holders of Common Stock (and the holders of shares of any other series or class entitled to vote thereon) shall vote together as one class on all matters submitted to a vote of shareholders of the corporation.

(D)  Certificated and Uncertificated Shares. All shares of each class and series may be certificated or uncertificated, except as may be otherwise expressly provided in the terms of a particular class or series.  In accordance with Section 1528(f) of the Pennsylvania Business Corporation Law or any successor provision, the rights and obligations of the holders of shares represented by certificates and the rights and obligations of holders of uncertificated shares of the same class and series shall, except as otherwise expressly provided by law, be identical.

(3)  Reacquired Shares.  Any Series A Preferred Shares purchased or otherwise acquired by the corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof.  All such shares shall upon their cancellation become authorized but unissued Series Preferred Stock and may be reissued as part of a new series of Series Preferred Stock to be created by resolution or resolutions of the board of directors.

(4)  Liquidation, Dissolution or Winding Up.  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the holders of Series A Preferred Shares shall be entitled to receive the greater of:

(A)  $1.00 per share, plus accrued dividends to the date of distribution, whether or not earned or declared; or

4

(B)  an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 300 times the aggregate amount to be distributed per share to holders of Common Stock.

In the event the corporation shall at any time after the Rights Declaration Date:

(C)  declare any dividend on Common Stock payable in share of Common Stock;

(D)  subdivide the outstanding shares of Common Stock; or

(E)  combine the outstanding shares of Common Stock into a smaller number of shares;

then in each such case the amount to which holders of Series A Preferred Shares were entitled immediately prior to such event pursuant to subsection 4(B) shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(5)  Consolidation, Merger, etc.  In case the corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the Series A Preferred Shares shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 300 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.  In the event the corporation shall at any time after the Rights Declaration Date:

(A)  declare any dividend on Common Stock payable in shares of Common Stock;

(B)  subdivide the outstanding shares of Common Stock; or

(C)  combine the outstanding shares of Common Stock into a smaller number of shares;

then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Shares shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(6)  No Redemption.  The Series A Preferred Shares shall not be redeemable.

(7)  Ranking.  The Series A Preferred Shares shall rank junior to all other series of the corporation's Series Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.

(8)  Fractional Shares.  Series A Preferred Shares may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Shares.

(The provisions of this Article 5(b) were amended and

adopted by the Board of Directors  on February 10, 1999)

(c)  No Cumulative Voting.  Cumulative voting shall not be allowed upon any vote of the shareholders of this corporation.

5

(d) Certificated and Uncertificated Shares. All shares of each class and series may be certificated  or uncertificated, except as may be otherwise expressly provided in the terms of a particular class or series.  In accordance with Section 1528(f) of the Pennsylvania Business Corporation Law or any successor provision, the rights and obligations of the holders of shares represented by certificates and the rights and obligations of holders of uncertificated shares of the same class and series shall, except as otherwise expressly provided by law, be identical.

(The provisions of this Article 5(d) was approved  and

adopted by the Board of Directors  on September 19, 2007)

(Article 6 has been deleted in its entirety effective June 26, 2008)

(Article 7 has been deleted in its entirety effective June 26, 2008)

6

EX-3.2

EXHIBIT 3.2

BYLAWS

OF

CHARMING SHOPPES, INC.

(AS AMENDED THROUGH JULY 10, 2008)

B Y L A W S

OF

CHARMING SHOPPES, INC.

(a Pennsylvania Registered Corporation)

ARTICLE I

Offices and Fiscal Year

Section 1.01.  Registered Office.  The registered office of the corporation in the Commonwealth of Pennsylvania shall be at 450 Winks Lane, Bensalem, Pennsylvania 19020, until otherwise established by an amendment of the articles of incorporation (the "articles") or by the board of directors and a record of such change is filed with the Department of State in the manner provided by law.

Section 1.02.  Other Offices.  The corporation may also have offices at such other places within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or the business of the corporation may require.

Section 1.03.  Fiscal Year.  The fiscal year of the corporation shall end on the Saturday nearest January 31 in each year.

ARTICLE II

Notice - Waivers - Meetings Generally

Section 2.01.  Manner of Giving Notice.

(a) General Rule -- Whenever written notice is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission, to the address (or to the telex, TWX, facsimile or telephone number) of the person appearing on the books of the corporation or, in the case of directors, supplied by the director to the corporation for the purpose of notice.  If the corporation has more than 30 shareholders, notice of any regular or special meeting of the shareholders, or any other notice required by the Business Corporation Law or by the articles or these bylaws to be given to all shareholders or to all holders of a class or series of shares, may be given by any class of postpaid mail if the notice is deposited in the United States mail at least 20 days prior to the day named for the meeting or any corporate or shareholder action specified in the notice.  If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of facsimile transmission, when received.  A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws.

(b) Adjourned Shareholder Meetings  --  When a meeting of shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting in which event notice shall be given in accordance with Section 2.03.

Section 2.02.  Notice of Meetings of Board of Directors.  Notice of a regular meeting of the board of directors need not be given.  Notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex, TWX or facsimile transmission) or

48 hours (in the case of notice by telegraph, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held.  Every such notice shall state the time and place of the meeting.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in a notice of the meeting.

Section 2.03.  Notice of Meetings of Shareholders.

(a) General Rule  --  Written notice of every meeting of the shareholders shall be given by, or at the direction of, the secretary or other authorized person to each shareholder of record entitled to vote at the meeting at least (1) ten days prior to the day named for a meeting (and, in case of a meeting called to consider a merger, consolidation, share exchange or division, to each shareholder of record not entitled to vote at the meeting) called to consider a fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for the meeting in any other case.  If the secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so.  In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted.

(b) Notice of Action by Shareholders on Bylaws  --  In the case of a meeting of shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws.  There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby.

(c) Notice of Action by Shareholders on Fundamental Change  --  In the case of a meeting of the shareholders that has as one of its purposes action with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each shareholder shall be given, together with written notice of the meeting, a copy or summary of the amendment or plan to be considered at the meeting in compliance with the provisions of Chapter 19.

(d) Notice of Action by Shareholders Giving Rise to Dissenters Rights  --  In the case of a meeting of the shareholders that has as one of its purposes action that would give rise to dissenters rights under the provisions of 15 Pa.C.S. Subchapter 15D, each shareholder shall be given, together with written notice of the meeting:

(1) a statement that the shareholders have a right to dissent and obtain payment of the fair value of their shares by complying with the provisions of Subchapter 15D (relating to dissenters rights); and

(2) a copy of Subchapter 15D.

Section 2.04.  Waiver of Notice.

(a) Written Waiver  --  Whenever any written notice is required to be given under the provisions of the Business Corporation Law, the articles or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice.  Neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting.

(b) Waiver by Attendance  --  Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.

Section 2.05.  Modification of Proposal Contained in Notice.  Whenever the language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose.

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Section 2.06.  Exception to Requirement of Notice.

(a) General Rule  --  Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required.

(b) Shareholders Without Forwarding Addresses  --  Notice or other communications need not be sent to any shareholder with whom the corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the corporation with a current address.  Whenever the shareholder provides the corporation with a current address, the corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders.

Section 2.07.  Use of Conference Telephone and Similar Equipment.  Any director may participate in any meeting of the board of directors, and the board of directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the corporation, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.  Participation in a meeting pursuant to this section shall constitute presence in person at the meeting.

ARTICLE III

Shareholders

Section 3.01.  Place of Meeting.  All meetings of the shareholders of the corporation shall be held at the registered office of the corporation unless another place is designated by the board of directors in the notice of a meeting.

Section 3.02.  Annual Meeting.  The board of directors may fix and designate the date and time of the annual meeting of the shareholders, but if no such date and time is fixed and designated by the board, the meeting for any calendar year shall be held on the second Wednesday in June in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting.  If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter.

Section 3.03.  Special Meetings.  Special meetings of the shareholders may be called at any time by the chairman of the board or the president or by resolution of the board of directors.  The person or resolution calling the meeting may fix the date, time and place of the meeting, but if they are not so fixed, it shall be the duty of the secretary to do so.  A date fixed by the secretary shall not be more than 60 days after the date of the adoption of the resolution of the board calling the special meeting.

Section 3.04.  Quorum and Adjournment.

(a) General Rule  --  A meeting of shareholders of the corporation duly called shall not be organized for the transaction of business unless a quorum is present.  The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purposes of consideration and action on the matter.  Shares of the corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time.

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(b) Withdrawal of a Quorum  --  The shareholders present at a duly organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

(c) Adjournments Generally  --  Any regular or special meeting of the shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended, may be adjourned for such period and to such place as the shareholders present and entitled to vote shall direct.

(d) Electing Directors at Adjourned Meeting  --  Those shareholders entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors.

(e) Other Action in Absence of Quorum  --  Those shareholders entitled to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter.

Section 3.05.  Action by Shareholders.  Except as otherwise provided in the Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the corporation, it shall be authorized upon receiving the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon and, if any shareholders are entitled to vote thereon as a class, upon receiving the affirmative vote of a majority of the votes cast by the shareholders entitled to vote as a class.

Section 3.06.  Organization.  At every meeting of the shareholders, the chairman of the board, if there be one, or, in the case of vacancy in office or absence of the chairman of the board, one of the following persons present in the order stated: the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting.  The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary of the meeting.

Section 3.07.  Voting Rights of Shareholders.  Unless otherwise provided in the articles, every shareholder of the corporation shall be entitled to one vote for every share standing in the name of the shareholder on the books of the corporation.

Section 3.08.  Voting and Other Action by Proxy.

(a) General Rule  --

(1) Every shareholder entitled to vote at a meeting of shareholders may authorize another person to act for the shareholder by proxy.

(2) The presence of, or vote or other action at a meeting of shareholders by a proxy of a shareholder shall constitute the presence of, or vote or action by the shareholder.

(3) Where two or more proxies of a shareholder are present, the corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons.

(b) Execution and Filing  --  Every proxy shall be executed in writing by the shareholder or by the duly authorized attorney-in- fact of the shareholder and filed with the secretary of the corporation.  A telegram, telex, cablegram, datagram or similar transmission from a shareholder or attorney-in-fact, or a photographic, facsimile or similar reproduction of a writing executed by a shareholder or attorney-in-fact:

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(1) may be treated as properly executed for purposes of this subsection; and

(2) shall be so treated if it sets forth a confidential and unique identification number or other mark furnished by the corporation to the shareholder for the purposes of a particular meeting or transaction.

(c) Revocation  --  A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the secretary of the corporation.  An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein.  A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation.

(d) Expenses  --  The corporation shall pay the reasonable expenses of solicitation of votes, proxies or consents of shareholders by or on behalf of the board of directors or its nominees for election to the board, including solicitation by professional proxy solicitors and otherwise.

Section 3.09.  Voting by Fiduciaries and Pledgees.  Shares of the corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee.

Section 3.10.  Voting by Joint Holders of Shares.

(a) General Rule  --  Where shares of the corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise:

(1) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and

(2) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves.

(b) Exception  --  If there has been filed with the secretary of the corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only those persons, shall be entitled to vote the shares but only in accordance therewith.

Section 3.11.  Voting by Corporations.

(a) Voting by Corporate Shareholders  --  Any corporation that is a shareholder of this corporation may vote at meetings of shareholders of this corporation by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the secretary of this corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares.

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(b) Controlled Shares  --  Shares of this corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time.

Section 3.12.  Determination of Shareholders of Record.

(a) Fixing Record Date  --  The board of directors may fix a time prior to the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders.  Only shareholders of record on the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection.  The board of directors may similarly fix a record date for the determination of shareholders of record for any other purpose.  When a determination of shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting.

(b) Determination When a Record Date is Not Fixed  --  If a record date is not fixed:

(1) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given.

(2) the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.

(c) Certification by Nominee  --  The board of directors may adopt a procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons.  Upon receipt by the corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification.

Section 3.13.  Voting Lists.

(a) General Rule  --  The officer or agent having charge of the transfer books for shares of the corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each.  The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof except that, if the corporation has 5,000 or more shareholders, in lieu of the making of the list the corporation may make the information therein available at the meeting by any other means.

(b) Effect of List  --  Failure to comply with the requirements of this section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list.  The original share register or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders.

Section 3.14.  Judges of Election.

(a) Appointment  --  In advance of any meeting of shareholders of the corporation, the board of directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof.  If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting.  The number of judges shall be one or three.  A person who is a candidate for an office to be filled at the meeting shall not act as a judge.

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(b) Vacancies  --  In case any person appointed as a judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof.

(c) Duties  --  The judges of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders or the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders.  The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical.  If there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all.

(d) Report  --  On request of the presiding officer of the meeting or of any shareholder, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them.  Any report or certificate made by them shall be prima facie evidence of the facts stated therein.

Section 3.15.  Minors as Security Holders.  The corporation may treat a minor who holds shares or obligations of the corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the corporation or, in the case of payments or distributions on obligations, the treasurer or paying officer or agent has received written notice that the holder is a minor.

Section 3.16.  Business at Meetings of Shareholders.

(a) Except as otherwise provided by law, or the articles or in these bylaws, or except as permitted by the presiding officer of the meeting in the exercise of such officer's sole discretion in any specific instance, the business which shall be voted upon or discussed at any annual or special meeting of the shareholders (other than the nomination of directors which shall be governed by Section 4.02(b) of these bylaws) shall (i) have been specified in the written notice of the meeting (or any supplement thereto) given by the corporation, (ii) be brought before the meeting at the direction of the board of directors, (iii) be brought before the meeting by the presiding officer of the meeting unless a majority of the directors then in office object to such business being conducted at the meeting, or (iv) in the case of an annual meeting of shareholders have been specified in a written notice given to the corporation by or on behalf of any shareholder who shall have been a shareholder of record on the record date for such meeting and who shall continue to be entitled to vote thereat (the "Shareholder Notice"), in accordance with all of the requirements set forth below.

(b) Each Shareholder Notice must be delivered to, or mailed and received at, the principal executive offices of the corporation addressed to the attention of the president (i) in the case of an annual meeting that is called for a date that is within 30 days before or after the anniversary date of the immediately preceding annual meeting of shareholders, not less than 60 days nor more than 90 days prior to the anniversary of the date on which notice of the date of the immediately preceding annual meeting was mailed, provided that a proposal submitted by a shareholder for inclusion in the corporation's proxy statement for an annual meeting which is appropriate for inclusion therein and otherwise complies with Rule 14a-8 under the Securities Exchange Act of 1934 (including requirements as to timeliness) shall be deemed to have also been submitted timely pursuant to this Section 3.16(b), and (ii) in the case of an annual meeting that is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding annual meeting, not later than the close of business on the later of the 60th day prior to the annual meeting date or  the tenth day following the day on which public disclosure of the meeting date (which shall include disclosure of the meeting date given to the national securities exchange or the National Association of Securities Dealers) was made.  Each such Shareholder Notice must set forth (A) the name and address of the shareholder who intends to bring the business before the annual meeting ("Proposing Shareholder"); (B) the name

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and address of the beneficial owner, if different than the Proposing Shareholder, of any of the shares owned of record by the Proposing Shareholder ("Beneficial Owner"); (C) the number of shares of each class and series of shares of the corporation which are owned of record and beneficially by the Proposing Shareholder and the number which are owned beneficially by any Beneficial Owner; (D) any interest (other than an interest solely as a shareholder) which the Proposing Shareholder or a Beneficial Owner has in the business being proposed by the Proposing Shareholder; (E) a description of all arrangements and understandings between the Proposing Shareholder and any Beneficial Owner and any other person or persons (naming such person or persons) pursuant to which the proposal in the Shareholder Notice is being made; (F) a description of the business which the Proposing Shareholder seeks to bring before the annual meeting, the reason for doing so and, if a specific action is to be proposed, the text of the resolution or resolutions which the Proposing Shareholder proposes that the corporation adopt; and (G) a representation that the Proposing Shareholder is at the time of giving the Shareholder Notice, was or will be on the record date for the meeting, and will be on the meeting date a holder of record of shares of the corporation entitled to vote at such meeting, and intends to appear in person or by proxy at the meeting to bring the business specified in the Shareholder Notice before the meeting.  The presiding officer of the meeting may, in such officer's sole discretion, refuse to acknowledge any business proposed by a shareholder which the presiding officer determines is not made in compliance with the foregoing procedure.

(The provisions of this section were adopted by the board of directors of the corporation on September 22, 1998  and amended by the board of directors on April 28, 1999)

ARTICLE IV

Board of Directors

Section 4.01.  Powers; Personal Liability.

(a) General Rule  --  Unless otherwise provided by statute, all powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors.

(b) Personal Liability of Directors  --  A director shall not be personally liable for monetary damages as such for any action taken, or any failure to take any action, on or after January 27, 1987 unless the director has breached or failed to perform the duties of his office under Section 8363 of the Pennsylvania Directors' Liability Act [now 15 Pa.C.S. Subch. 17B], and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.  The provisions of this subsection shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, state or Federal law.

(The provisions of this subsection (b) were first adopted by the shareholders of the corporation on May 20, 1987.)

(c) Notation of Dissent  --  A director of the corporation who is present at a meeting of the board of directors, or of a committee of the board, at which action on any corporate matter is taken on which the director is generally competent to act, shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files his or her written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the secretary of the corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action.  Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the secretary, in writing, of the asserted omission or inaccuracy.

Section 4.02.  Qualifications and Selection of Directors.

(a) Qualifications  --  Each director of the corporation shall be a natural person of full age who need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the corporation.

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(b) Nomination of Candidates  --  Nominations of candidates for election to the board of directors at a meeting of the shareholders may be made only by the board of directors or a proxy committee appointed by the board of directors or by any shareholder entitled to vote in such election.  A nomination may be made by a shareholder only if written notice of the nomination has been given to the secretary of the corporation not later than the date on which a shareholder proposal would be required to be submitted to the corporation in order to be set forth in the corporation's proxy statement pursuant to the applicable proxy rules of the Securities and Exchange Commission.  Each such notice shall set forth:

(1) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated;

(2) a representation that the shareholder is a holder of record of shares of the corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;

(3) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder;

(4) such other information regarding each nominee proposed by the shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission if the nominee had been nominated by the board of directors; and

(5) the written consent of each nominee, signed by such nominee, to serve as a director of the corporation if so elected.

The chairman of the meeting may refuse to acknowledge the nomination of any person by a shareholder not made in compliance with the foregoing procedure.

(c) Election of Directors  --  In elections for directors, voting need not be by ballot, unless required by vote of the shareholders before the voting for the election of directors begins.  The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected.  If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election.

(d) Alternate Directors  --  A shareholder or group of shareholders entitled to elect, appoint, designate or otherwise select one or more directors may select an alternate for each director for a coextensive term.  After the adoption of this subsection (d) and prior to the 1993 Annual Meeting of Shareholders, any director elected by the shareholders may resign from office and the board of directors may elect the former director as an alternate director, to serve until the 1993 Annual Meeting of Shareholders.  An alternate director may attend all meetings of the board of directors.  In the absence of a director from a meeting of the board, the director's alternate may execute a written consent and exercise at the meeting or in such consent all the powers of the absent director.  When so exercising the powers of the absent director, the alternate shall be subject in all respects to the provisions of the Business Corporation Law, the articles and these bylaws relating to directors of the corporation, and the term "Director", when used in the Business Corporation Law, the articles or these bylaws shall be construed to include and refer to any alternate director, unless the context requires otherwise.

(The provisions of this subsection (d) were first adopted by the board of directors of the corporation on January 21, 1993 and amended by the board of directors on June 29, 1993)

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Section 4.03.  Number and Term of Office.

(a) Number  --  The board of directors shall consist of such number of directors, not less than six nor more than twelve, as may be determined from time to time by resolution of the board of directors.

(b) Term of Office  --  Each director shall hold office  for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal.  A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director.

(The provisions of this Section have been amended effective June 26, 2008 by Shareholder approval)

(c) Resignation  --  Any director may resign at any time upon written notice to the corporation.  The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation.

(d) Transition Period:  Each director serving as of and immediately following the completion of the 2008 annual meeting of shareholders shall hold office for a term of one year and until a successor has been elected and qualified, notwithstanding that such director may have been elected for a term that extended beyond one year.

(The provisions of this Section have been amended effective June 26, 2008 by Shareholder approval)

Section 4.04.  Vacancies.

(a) General Rule  --  Vacancies in the board of directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the board though less than a quorum, or by a sole remaining director.  In the case of  any vacancy in the board of directors , the person selected shall serve until the next annual meeting of shareholders and until a successor has been selected and qualified or until his or her earlier death, resignation or removal.  

(The provisions of this Section have been amended effective June 26, 2008 by Shareholder approval)

(b) Action by Resigned Directors  --  When one or more directors resign from the board effective at a future date, the directors then in office, including those who have so resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective.

Section 4.05.Removal of Directors.

(a) Removal by the Shareholders  --  The entire board of directors or any individual director may be removed from office without assigning any cause only by the affirmative vote of the holders of not less than 80% of the combined voting power of the then outstanding shares of stock of all classes and series of the corporation entitled to vote generally in the election of directors, in each case voting as a single class in accordance with the articles.  In case the board  or any one or more directors are so removed, new directors may be elected at the same meeting.

(The provisions of this Section have been amended effective June 26, 2008 by Shareholder approval)

(b) Removal by the Board  --  The board of directors may declare vacant the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the board of directors.  

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Section 4.06.  Place of Meetings.  Meetings of the board of directors may be held at such place within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or as may be designated in the notice of the meeting.

Section 4.07.  Organization of Meetings.  At every meeting of the board of directors, the chairman of the board, if there be one, or, in the case of a vacancy in the office or absence of the chairman of the board, one of the following officers present in the order stated:  the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or a person chosen by a majority of the directors present, shall act as chairman of the meeting.  The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting.

Section 4.08.  Regular Meetings.  Regular meetings of the board of directors shall be held at such time and place as shall be designated from time to time by a majority of the board of directors or by the chairman or the president.

Section 4.09.  Special Meetings.  Special meetings of the board of directors shall be held whenever called by a majority of the board of directors or by the chairman or the president.

Section 4.10.  Quorum of and Action by Directors.

(a) General Rule  --  A majority of the directors in office of the corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the board of directors.

(b) Action by Written Consent  --  Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the secretary of the corporation.

Section 4.11.  Executive and Other Committees.

(a) Establishment and Powers  --  The board of directors may, by resolution adopted by a majority of the directors in office, establish an Executive Committee and one or more other committees to consist of one or more directors of the corporation.  Any committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all of the powers and authority of the board of directors except that a committee shall not have any power or authority as to the following:

(1) the submission to shareholders of any action requiring approval of shareholders under the Business Corporation Law.

(2) the creation or filling of vacancies in the board of directors.

(3) the adoption, amendment or repeal of these bylaws.

(4) the amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board.

(5) action on matters committed by a resolution of the board of directors to another committee of the board.

(b) Alternate Committee Members  --  The board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee.  In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified

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from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member.

(c) Term  --  Each committee of the board shall serve at the pleasure of the board.

(d) Committee Procedures  --  The term "board of directors" or "board," when used in any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to the Executive Committee or any other committee of the board, except that a meeting of the Executive Committee may be called at any time by any member.

Section 4.12.  Compensation.  The board of directors shall have the authority to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation.

ARTICLE V

Officers

Section 5.01.  Officers Generally.

(a) Number, Qualifications and Designation  --  The officers of the corporation shall be a president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of Section 5.03.  Officers may but need not be directors or shareholders of the corporation.  The president and secretary shall be natural persons of full age.  The treasurer may be a corporation, but if a natural person shall be of full age.  The board of directors may elect from among the members of the board a chairman of the board and one or more vice chairmen of the board, who shall be independent as defined under the listing standards applicable to the corporation’s common stock from time to time except as otherwise provided in Section 5.07, and who, in such capacity, shall be officers of the corporation.  Any number of offices may be held by the same person.

(The provisions of this section were amended by the board of directors on May 5, 2008 with effect immediately following the 2008 Annual Meeting of Shareholders and July 10, 2008)

(b) Bonding  --  The corporation may secure the fidelity of any or all of its officers by bond or otherwise.

(c) Standard of Care  --  In lieu of the standards of conduct otherwise provided by law, officers of the corporation shall be subject to the same standards of conduct, including standards of care and loyalty and rights of justifiable reliance, as shall at the time be applicable to directors of the corporation.  An officer of the corporation shall not be personally liable, as such, to the corporation or its shareholders for monetary damages for any action taken, or any failure to take any action, unless the officer has breached or failed to perform the duties of his or her office under the articles of incorporation, these bylaws, or the applicable provisions of law and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.  The provisions of this subsection shall not apply to the responsibility or liability of an officer pursuant to any criminal statute or for the payment of taxes pursuant to local, state or federal law.

Section 5.02.  Election, Term of Office and Resignations.

(a) Election and Term of Office  --  The officers of the corporation, except those elected by delegated authority pursuant to Section 5.03, shall be elected annually by the board of directors, and each such officer shall hold office for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal.

(b) Resignations  --  Any officer may resign at any time upon written notice to the corporation.  The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as may be specified in the notice of resignation.

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Section 5.03.  Subordinate Officers, Committees and Agents.  The board of directors may from time to time elect such other officers and appoint such committees, employees or other agents as the business of the corporation may require, including one or more assistant secretaries, and one or more assistant treasurers, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws, or as the board of directors may from time to time determine.  The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents.

Section 5.04.  Removal of Officers and Agents.  Any officer or agent of the corporation may be removed by the board of directors with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed.  Election or appointment of an officer or agent shall not of itself create contract rights.

Section 5.05.  Vacancies.  A vacancy in any office because of death, resignation, removal, disqualification, or any other cause, may be filled by the board of directors or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 5.03, as the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term.

Section 5.06.  Authority.

(a) General Rule  --  All officers of the corporation, as between themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided by or pursuant to resolutions or orders of the board of directors or, in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these bylaws.

(b) Voting and Acting with Securities Owned by the Corporation  --  Each of the chairman of the board and the president shall have the power and authority to vote and act with respect to all stock and other securities in any other corporation held by this corporation, unless the board of directors confers such authority, which may be general or specific, upon some other person.  Any person so authorized to vote securities shall have the power to appoint an attorney or attorneys, with general power of substitution, as proxies for this corporation, with full power to vote and act in behalf of this corporation with respect to such stock and other securities.

(The provisions of this subsection (c) were amended by the board of directors August 22, 1995)

Section 5.07.  The Chairman of the Board.  The chairman of the board shall preside at all meetings of the shareholders and of the board of directors and shall perform such other duties as may from time to time be requested by the board of directors.  Subject to a determination by the board that it is in  the corporation’s best interests to permit the Chairman of the board to serve as an executive officer on an interim basis, the Chairman of the board shall not be an executive officer of the corporation.

(The provisions of this section were amended by the board of directors on August 22, 1995,  May 5, 2008 with effect immediately following the 2008 Annual Meeting of Shareholders and July10, 2008)

Section 5.08.  Vice Chairmen of the Board of Directors.  The vice chairmen of the board, in their order of seniority as designated by the board if there be more than one, shall preside during the temporary absence of the chairman of the board at all meetings of the shareholders and of the board of directors and shall perform such other duties as may from time to time be requested by the chairman or the board of directors.

(The provisions of this section were amended by the board of directors on August 22, 1995)

Section 5.09.  The Chief Executive Officer.  The  president shall be the chief executive officer of the corporation.  The chief executive officer shall have general executive power to manage, control and supervise the property, business and affairs of the corporation, subject, however, to the control of the board of directors.  The chief executive officer shall sign, execute, and acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts or other instruments, authorized by the board of directors, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors, or by these bylaws, to some other officer or agent of the corporation.

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(The provisions of this section were adopted by the board of directors on August 22, 1995 and amended by the board of directors on May 5, 2008 with effect immediately following the 2008 Annual Meeting of Shareholders)

Section 5.10.  The President.  The president shall perform such duties  as from time to time may be assigned by the board of directors or the chief executive officer (unless the president shall be the chief executive officer, in which case the president's duties shall be those specified in Section 5.09).

(The provisions of this section were amended by the board of directors on August 22, 1995)

Section 5.11.  The Chief Operating Officer.  The chief operating officer shall perform such duties as from time to time may be assigned by the board of directors or the chief executive officer.

(The provisions of this section were amended by the board of directors on October 13, 1995)

Section 5.12.  The Vice Presidents.  The vice presidents, one or more of whom may be designated executive, senior, group or administrative vice president or given other descriptive titles, shall perform all duties as may from time to time be assigned by the board of directors, the chairman of the board or the president.

Section 5.13.  The Secretary.  The secretary or an assistant secretary shall attend all meetings of the shareholders and of the board of directors and all committees thereof and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the board of directors and of committees of the board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties incident to the office of secretary, and such other duties as may from time to time be assigned by the board of directors or the chairman of the board.

Section 5.14.  The Treasurer.  The treasurer shall be the principal officer in charge of tax and financial matters of the corporation.  The treasurer or an assistant treasurer shall have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the corporation; shall deposit all funds in his or her custody as treasurer in such banks or other places of deposit as the board of directors may from time to time designate; shall, whenever so required by the board of directors, render an account showing all transactions as treasurer, and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the board of directors or the chairman of the board.

Section 5.15.  Delegation of Duties.  In the absence of any officer or for any other reason deemed sufficient by the board of directors or the chairman of the board, the board of directors or the chairman of the board may delegate, for the time being, any of the powers and duties of such officer to any other officer or director or other person.

Section 5.16.  Salaries.  The salaries of the officers elected by the board of directors shall be fixed from time to time by the board of directors or by such officer or committee of the board as may be designated by resolution of the board.  The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the officer or committee to which the power to elect such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 5.03.  No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the corporation.

ARTICLE VI

Certificates of Stock, Transfer, Etc.

Section 6.01.  Share Certificates.

(a) Form of Certificates  --  Certificates for shares of the corporation shall be in such form as approved by the board of directors, and shall state that the corporation is incorporated under the laws of the Commonwealth of

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Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents.  If the corporation is authorized to issue shares of more than one class or series, certificates for shares of the corporation shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the corporation will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the board of directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the corporation.

(b) Share Register  --  The share register or transfer books and blank share certificates shall be kept by the secretary or by any transfer agent or registrar designated by the board of directors for that purpose.

Section 6.02.  Issuance.  The share certificates of the corporation shall be numbered and registered in the share register or transfer books of the corporation as they are issued. They shall be executed in such manner as the board of directors shall determine.

Section 6.03.  Transfer.  Transfers of shares shall be made on the share register or transfer books of the corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing.  No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S.  8101 et seq., and its amendments and supplements.

Section 6.04.  Record Holder of Shares.  The corporation shall be entitled to treat the person in whose name any share or shares of the corporation stand on the books of the corporation as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person.

Section 6.05.  Lost, Destroyed or Mutilated Certificates.  The holder of any shares of the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct.

Section 6.06.  Rights.  Rights issued pursuant to the Rights Agreement, dated April 26, 1999, between the corporation and American Stock Transfer & Trust Company (the "Rights Agreement") may be transferred by an Acquiring Person or an Associate or Affiliate of an Acquiring Person (as such capitalized terms are defined in the Rights Agreement) only in accordance with the terms of, and subject to the restrictions contained in, the Rights Agreement.

(The provisions of this section were amended by the board of directors on July 1, 1999)

ARTICLE VII

Indemnification of Directors, Officers and Other Authorized Representatives

(The provisions of this Article VII were first adopted by the shareholders of the corporation on May 20, 1987.)

Section 7.01.  General Rule.  The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation or otherwise, by reason of the fact that he was a director, officer or employee of the corporation (and may indemnify any person who was an agent of the corporation), or a person serving at the request of the corporation as a director,

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officer, partner, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the fullest extent permitted by law, including without limitation indemnification against expenses (including attorneys' fees and disbursements), damages, punitive damages, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding unless the act or failure to act giving rise to the claim for indemnification is finally determined by a court to have constituted willful misconduct or recklessness.

Section 7.02.  Advancing Expenses.  The corporation shall pay the expenses (including attorneys' fees and disbursements) actually and reasonably incurred in defending a civil or criminal action, suit or proceeding on behalf of any person entitled to indemnification under Section 7.01 in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation, and may pay such expenses in advance on behalf of any agent on receipt of a similar undertaking.  The financial ability of such person to make such repayment shall not be prerequisite to the making of an advance.

Section 7.03.  Definitions.  For the purposes of this Article:

(1) the corporation shall be deemed to have requested an officer, director, employee or agent to serve as fiduciary with respect to an employee benefit plan where the performance by such person of duties to the corporation also imposes duties on, or otherwise involves services by, such person as a fiduciary with respect to the plan;

(2) excise taxes assessed with respect to any transaction with an employee benefit plan shall be deemed "fines"; and

(3) action taken or omitted by such person with respect to an employee benefit plan in the performance of duties for a purpose reasonably believed to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation.

Section 7.04.  Securing of Indemnification Obligations.  To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate.

Section 7.05.  Contract Rights; Amendment or Repeal.  All rights of indemnification under this Article shall be deemed a contract between the corporation and the person entitled to indemnification under this Article pursuant to which the corporation and each such person intend to be legally bound.  Any repeal, amendment or modification hereof shall be prospective only and shall not limit, but may expand, any rights or obligations in respect of any proceeding whether commenced prior to or after such change to the extent such proceeding pertains to actions or failures to act occurring prior to such change.

Section 7.06.  Scope of Article.  The indemnification, as authorized by this Article, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in any other capacity while holding such office.  The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall continue as to a person who has ceased to be an officer, director, employee or agent in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors and administrators of such person.

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ARTICLE VIII

Miscellaneous

Section 8.01.  Corporate Seal.  The corporation shall have a corporate seal in the form of a circle containing the name of the corporation, the year of incorporation and such other details as may be approved by the board of directors.  The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement by the corporation of any instrument or other document.

Section 8.02.  Checks and Other Instruments.  All properly authorized checks, notes, bonds, drafts, bills of exchange or other similar orders, and all evidences of indebtedness of the corporation whatsoever, and all properly authorized deeds, mortgages and other instruments requiring execution by the corporation may be executed and delivered by the president or any vice president or the treasurer of the corporation.  The authority to sign any such orders or instruments, which may be general or confined to specific instances, may be conferred by the board of directors upon any other person or persons, subject to such requirements as to countersignature or other conditions as the board of directors from time to time may determine. Facsimile signatures on checks, notes, bonds and other instruments may be used if authorized by the board of directors. Any person having authority to sign on behalf of the corporation may delegate, from time to time, by instrument in writing, all or part of such authority to any person or persons if authorized to do so by the board of directors.

Section 8.03.  Contracts.  Except as otherwise provided in the Business Corporation Law in the case of transactions that require action by the shareholders, the board of directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the corporation, and such authority may be general or confined to specific instances.

Section 8.04.  Interested Directors or Officers; Quorum.

(a) General Rule  --  A contract or transaction between the corporation and one or more of its directors or officers or between the corporation and another corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director or officer is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if:

(1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum;

(2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or

(3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors or the shareholders.

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(b) Quorum  --  Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board which authorizes a contract or transaction specified in subsection (a).

Section 8.05.  Deposits.  All funds of the corporation shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees of the corporation as the board of directors shall from time to time designate.

Section 8.06.  Corporate Records.

(a) Required Records  --  The corporation shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register  shall be kept at either the registered office of the corporation in the Commonwealth of Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time.

(b) Right of Inspection  --  Every shareholder shall, upon written verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors and to make copies or extracts therefrom.  A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder.  In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder.  The demand shall be directed to the corporation at its registered office in the Commonwealth of Pennsylvania or at its principal place of business wherever situated.

Section 8.07.  Control Transactions.  Pursuant to a resolution of the board of directors adopted on February 23, 1984, the corporation's bylaws were amended (such amendment hereby incorporated in the current amendment and restatement of these bylaws), in pertinent part, as follows:

"Section 910 [now 15 Pa.C.S. Subch. 25E] of the Pennsylvania Business Corporation Law, entitled 'Right of Shareholders to Receive Payment for Shares Following a Control Transaction' [now Control Transactions] shall not be applicable to the Company."

Section 8.08.  Control-Share Acquisitions.  Subchapter 25G (relating to control-share acquisitions) of 15 Pa.C.S. or any corresponding provision of succeeding law shall not be applicable to the corporation.

(The provisions of this section were adopted by the board of directors on July 12, 1990.)

Section 8.09.  Disgorgement.  Subchapter 25H (relating to disgorgement by certain controlling shareholders following attempts to acquire control) of 15 Pa.C.S. or any corresponding provision of succeeding law shall not be applicable to the corporation.

(The provisions of this section were adopted by the board of directors on July 12, 1990.)

Section 8.10.  Amendment of Bylaws.  These bylaws may be amended or repealed, or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the board of directors of the corporation in office at any regular or special meeting of directors.  Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change.

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PENNSYLVANIA BUSINESS CORPORATION

BYLAW DERIVATION TABLE

	Bus. Corp. Law
BYLAW	SECTION
1.01	1507
1.02	1502(a)(15)
1.03	1554
2.01	1702
2.02	1703(b)
2.03(a)	1704(b) and (c)
(b)	1504(a)
(c)	1906(c), 1913(a), 1923(a), 1952(c), 1962(b), 1973
(d)	1571(d)
2.04	1705
2.05	1706
2.06	1707
2.07	1708
3.01	1704(a)
3.02	1755(a)
3.03	1755(b), 2521
3.04(a)	1756(a)(1), 1762(c)
(b)	1756(a)(2)
(c)	1755(c), 1756(a)(3), 2522
(d)	1756(b)(1)
(e)	1756(b)(2)
3.05	1726(a)(4), 1757(a), 1766(a)
3.06	None
3.07	1758(a)
3.08(a)	1759(a)
(b)	1759(b)
(c)	1757(c)
(d)	1759(e)
3.09	1760
3.10	1761
3.11	1762(a), (c)
3.12	1763
3.13	1764
3.14	1765
3.15	1769(a)
3.16	1504(a)

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	BCL
BYLAW	SECTION
4.01(a)	1721
(b)	1712
(c)	1715
4.02(a)	1722
(b)	1758(b)
(c)	1725(a)
(d)	1725(c)
4.03(a)	1723
(b)	1724(a)
(c)	1724(a)
(d)	1724(b); Articles of Incorporation, Section 7(a)
4.04	1725(b); Articles of Incorporation, Section 7(a)
4.05	1726; Articles of Incorporation, Section 7(b)
4.06	1703(a)
4.07	None
4.08	None
4.09	None
4.10	1727
4.11	1731
4.12	1730
5.01	1732(a), 1712
5.02	1732(a)
5.03	1732(a)
5.04	1733
5.05	1732(a)
5.06	1732(b)
5.07	None
5.08	None
5.09	None
5.10	None
5.11	None
5.12	None
5.13	None
6.01(a)	1528(c), (d)
(b)	1508(a), 1732(b)
6.02	None
6.03	1529(a)
6.04	1103 (shareholder), 1764(b)
6.05	None

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	BCL
BYLAW	SECTION
6.06	None
7.01	1746
7.02	1746
7.03	1746
7.04	1746
7.05	1746
7.06	1746
8.01	1502(a)(3); cf. 1109 and 1506(b)
8.02	1504
8.03	1504
8.04	1728
8.05	1504
8.06	1508(a), (b)
8.07	Subch. 25E
8.08	Subch. 25G
8.09	Subch. 25H
8.10	1504

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EX-10.10

EXHIBIT 10.10

CHARMING SHOPPES, INC.

2004 STOCK AWARD AND INCENTIVE PLAN

STOCK APPRECIATION RIGHTS AGREEMENT

Agreement dated as of July 16, 2008 (the “Grant Date”) between CHARMING SHOPPES, INC. (the “Company”) and Alan Rosskamm (the “Rosskamm”).

1. Grant of SAR; Consideration; Rosskamm Acknowledgments.

The Company hereby confirms the grant, under the Company’s 2004 Stock Award and Incentive Plan (the “Plan”), to Rosskamm on the Grant Date of a stock appreciation right (the “SAR”) with respect to 41,152 shares of the Company’s common stock, par value $.10 per share (the “Shares”).  The SAR represents the right to receive, at exercise, a number of Shares with a then Fair Market Value equal to the appreciation in value of the Shares over the base amount.  The base amount is $4.60 per share, which is the fair market value of a Share on the Grant Date (the “Base Amount”).

Rosskamm shall be required to pay no consideration for the grant of the SAR except for his agreement to provide services to the Company prior to exercise and his agreement to abide by the terms set forth in the Plan, this Stock Appreciation Rights Agreement (the “Agreement”), and any Rules and Regulations under the Plan.  Rosskamm acknowledges and agrees that (i) the SAR is nontransferable, except as provided in Sections 8 and 9 hereof and in the Plan, (ii) the SAR is subject to forfeiture in certain circumstances, as specified in Section 7 hereof, and (iii) sales of Shares will be subject to the Company’s policies regulating trading by employees, including any applicable “blackout” or other designated periods in which sales of Shares are not permitted.

2. Incorporation of Plan by Reference.

  The SAR has been granted to Rosskamm under the Plan.  All of the terms, conditions and other provisions of the Plan are hereby incorporated by reference into this Agreement.  Capitalized terms used in this Agreement but not defined herein shall have the same meanings as in the Plan.  If there is any conflict between the provisions of this Agreement and the provisions of the Plan, the provisions of the Plan shall govern.  Rosskamm hereby accepts the grant of the SAR, acknowledges receipt of the Plan, and agrees to be bound by all the terms and provisions hereof and thereof (as presently in effect or hereafter amended), and by all decisions and determinations of the Board or Committee under the Plan.

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3.Date When Exercisable.

(a)This SAR may be exercised only if and to the extent that it has become exercisable as specified in this Agreement.  Subject to the terms and conditions of this Agreement and the approval of the SAR by the Committee, this SAR shall vest and become exercisable in full on the earlier to occur of the following:  (i) on the date that the first permanent Chief Executive Officer immedietely succeeding Dorrit J. Bern, the Company’s former Chief Executive Officer, commences employment, (ii) upon a Change of Control as provided in Section 6, (iii) upon Rosskamm’s death, or (iv) upon termination of Rosskamm’s service as a Director of the Company due to disability.

(b)The SAR shall expire at 5:00 p.m. on the day before the seventh anniversary of the Grant Date, unless the SAR terminates on an earlier date as provided herein.

4.Method of Exercise.

(a)The SAR may be exercised, to the extent the SAR is then vested and exercisable, by delivery to and receipt by the Secretary of the Company at 3750 State Road, Bensalem, Pennsylvania 19020, of a written notice, signed by Rosskamm, specifying the portion of the vested SAR that Rosskamm wishes to exercise.  Simultaneous with or as soon as practicable after the receipt of such notice, the Company shall deliver to Rosskamm a number of whole Shares that will be determined by dividing the Stock Appreciation by the Fair Market Value of a Share on the date of exercise, less applicable tax withholding.  “Stock Appreciation” shall mean the amount that results from multiplying (i) the number of Shares as to which the SAR is exercised by (ii) the amount by which the Fair Market Value of a Share on the date of exercise exceeds the Base Amount.  Only whole Shares will be delivered pursuant to the exercise of the SAR.

(b)Upon exercise of the SAR, the Company will deliver a stock certificate for the Shares to be delivered, with any requisite legend affixed.  Such exercise may include instructions to the Company to deliver Shares due upon exercise of the SAR to any registered broker or dealer designated by the Committee in lieu of delivery to Rosskamm.  Such instructions must designate the account into which the Shares are to be deposited.  The method of exercise and related matters governed by this Section 4 shall be subject to Rules and Regulations adopted by the Committee and in effect at the time Rosskamm’s notice of exercise is received by the Company; such Rules and Regulations may vary from or limit the procedures specified in this Section 4, and may specify other methods of exercise.  Upon exercise of any portion of the SAR, the exercised portion of the SAR shall terminate and cease to be outstanding.

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(c)If, on the date on which the vested SAR will terminate according to its terms, the Executive has not given the Company written notice of exercise, and if the Stock Appreciation amount is a positive number, then the outstanding vested portion of the SAR shall be automatically exercised and taxes shall be withheld as described in Section 5 below.

5. Tax Withholding.

Unless otherwise determined by the Company upon notice to Rosskamm, the Company will withhold from the Shares to be delivered upon the exercise of the SAR a sufficient number of such Shares to satisfy the minimum federal, state and local tax withholding obligations relating to the SAR exercise.  The Shares withheld will be valued at the Fair Market Value, determined in such manner as may be specified under the Plan.

6. Change of Control Provisions.

(a)Acceleration of Exercisability.  In the event of a Change of Control at a time when Rosskamm is employed by the Company or any of its subsidiaries or is serving as a Director of the Company, this SAR shall become immediately and fully vested and exercisable immediately prior to the occurrence of such Change of Control.

(b)Exercise after a Change in Control; Adjustments.  In the event of Rosskamm’s termination of employment after a Change in Control, or in the event that Rosskamm ceases to be a Director of the Company after a Change of Control, the vested SAR, to the extent then outstanding, shall be exercisable for a one year period from the later of (i) the date of such termination, or (ii) the date of such cessation, as the case may be. In the event of a Change in Control, the Committee may make such adjustments and take such other actions with respect to outstanding SARs as the Committee deems appropriate pursuant to Section 10(c) of the Plan.

(c)Definitions of Certain Terms.  For purposes of this Agreement, the following definitions shall apply:

(i)“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 6, “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.

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(ii)“Change of Control” means and shall be deemed to have occurred if

(1)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

(2)those individuals who as of the Grant 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 Grant 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

(3)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

(4)there is implemented or consummated a plan of 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.

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

(iv)“Related Party” means (A) a majority-owned subsidiary of the Company; or (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (C) a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities.  Additionally, a Person would be considered a Related Party, 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,

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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 of Control.

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

7. Termination of Employment; Cessation of Service as a Director

This SAR shall terminate and no longer be exercisable at the earlier of (i) the scheduled expiration time of the SAR, as set forth in Section 3(b) above, or (ii) the expiration of a one year period after Rosskamm ceases to be both a Director and employee of the Company whether by reason of voluntary termination, involuntary termination (other than for cause) or removal (other than for cause), if the SAR granted to him will have already vested and become exercisable pursuant to Section 3(a)(i) hereof at the time of such cessation, or the date of such cessation if the SAR granted to him has not already vested and become exercisable at the time of such cessation, or (iii) the expiration of a one year period after Mr. Rosskamm ceases to be both a Director and employee of the Company by reason of death or disability.

8. Limits on Transfer of SARs; Beneficiaries.

No right or interest of a participant in this SAR shall be pledged, encumbered or hypothecated to or in favor of any third party or shall be subject to any lien, obligation or liability of Rosskamm to any third party.  This SAR shall not be transferable to any third party by Rosskamm otherwise than by will or the laws of descent and distribution, and this SAR shall be exercisable, during the lifetime of Rosskamm, only by Rosskamm; provided, however, that Rosskamm will be entitled to designate a beneficiary or beneficiaries to exercise his rights under this SAR upon the death of Rosskamm, in the manner and to the extent permitted by the Committee under Rules and Regulations adopted by the Committee under the Plan, and the Committee may permit transfers otherwise to the extent permitted under the Plan.

9. Investment Representation.

Unless, at the time of any exercise of this SAR, the issuance and delivery of Shares hereunder to Rosskamm is registered under a then-effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), and complies with all applicable registration requirements under state securities laws, Rosskamm shall provide to the Company, as a condition to the valid exercise of this SAR and the delivery of any certificates representing Shares, appropriate evidence, satisfactory in form and substance to the Company, that he is acquiring the Shares for investment and not with a view to the distribution of the Shares or any interest in the Shares, and a representation to the effect that Rosskamm shall make no sale or other disposition of the Shares unless (i) the Company shall have received an opinion of counsel satisfactory to it in form and substance that such sale or other disposition may be made without registration under the then-applicable provisions of the Securities Act, the related rules and

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regulations of the Securities and Exchange Commission, and applicable state securities laws and regulations, or (ii) the sale or other disposition of the Shares shall be registered under a currently effective registration statement under the Securities Act and complies with all applicable registration requirements under state securities laws.  The certificates representing the Shares may bear an appropriate legend giving notice of the foregoing restriction on transfer of the Shares, and any other restrictive legend deemed necessary or appropriate by the Committee.

10. Miscellaneous.

This Agreement shall be binding upon the heirs, executors, administrators and successors of the parties.  This Agreement constitutes the entire agreement between the parties with respect to the SAR, and supersedes any prior agreements or documents with respect to the SAR.  No amendment, alteration, suspension, discontinuation or termination of this Agreement which may impose any additional obligation upon the Company or impair the rights of Rosskamm with respect to the SAR shall be valid unless in each instance such amendment, alteration, suspension, discontinuation or termination is expressed in a written instrument duly executed in the name and on behalf of the Company and by Rosskamm.

CHARMING SHOPPES, INC.

BY:________________________________

Colin D. Stern, Secretary

EMPLOYEE:

____________________________________

Alan Rosskamm

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EX-10.12

EXHIBIT 10.12

As of June 20, 2008

Charming Shoppes Receivables Corp.

3411 Silverside Road

Wilmington, Delaware 19810

Spirit of America, Inc.

1103 Allen Drive

Milford, Ohio 45150

Re:	Charming Shoppes Master Trust Class A Floating Rate
	Asset Backed Certificates, Series 1999-2

Ladies and Gentlemen:

Reference is made to the Certificate Purchase Agreement, dated as of May 28, 1999 (as amended prior to the date hereof and as it may be amended or otherwise modified from time to time, the “Certificate Purchase Agreement”), among Charming Shoppes Receivables Corp., as the Seller and as the Class B Purchaser, Spirit of America, Inc., as the Servicer, Clipper Receivables Company, LLC, as the Class A Purchaser, and State Street Global Markets, LLC, as Administrator for the Class A Purchaser.  Capitalized terms used in this letter and not defined herein shall have the meanings assigned thereto in the Certificate Purchase Agreement.

Each of CSRC, the Class A Purchaser and the Administrator agrees that clause (i) of the definition of “Purchase Expiration Date” set forth in Section 1.01 of the Certificate Purchase Agreement is hereby amended in its entirety to read as follows: “(i) March 31, 2009, and”.

Upon the execution of this letter agreement, each reference in the Agreement and each other Series Document to “this Agreement” or the “Certificate Purchase Agreement” or references of like import shall mean and be a reference to the Certificate Purchase Agreement as amended hereby. Except as specifically amended above, the Certificate Purchase Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

This letter agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.  This letter agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to its principles of conflicts of laws.  This letter may be executed by the different parties on different counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same agreement.

Please indicate your acceptance of the terms of this letter agreement by signing a copy thereof where indicated below and returning it to my attention.

Sincerely yours,

CLIPPER RECEIVABLES COMPANY, LLC,

as the Class A Purchaser

By:   /s/R. Douglas Donaldson

Name:   R. Douglas Donaldson

Title:     Treasurer

STATE STREET GLOBAL MARKETS, LLC,

as the Administrator

By:   /s/Thomas Loughlin

Name:  Thomas Loughlin

Title:    Senior Vice President

S-1 Charming Shoppes Series 1999-2 Letter Agreement

CHARMING SHOPPES RECEIVABLES CORP.,

as the Seller and as the Class B Purchaser

By:   /s/Kirk R. Simme

Name:  Kirk R. Simme

Title:    Vice President

SPIRIT OF AMERICA, INC.

as the Servicer

By:   /s/Kirk R. Simme

Name:  Kirk R. Simme

Title:    Vice President

S-2 Charming Shoppes Series 1999-2 Letter Agreement

Acknowledged and Agreed:

STATE STREET BANK & TRUST COMPANY,

as Liquidity Agent and Purchaser

By:  /s/Thomas Loughlin

Name:  Thomas Loughlin

Title:    Vice President

S-3 Charming Shoppes Series 1999-2 Letter Agreement

EX-10.16

EXHIBIT 10.16

SEPARATION AGREEMENT

This Separation Agreement (the  "Agreement") is made and entered into this 8th day of July, 2008, by and between Charming Shoppes, Inc., a Pennsylvania corporation having its principal place of business in Bensalem, Pennsylvania (the "Company"), and Dorrit J. Bern, an individual domiciled in Marco Island, Florida (the "Executive").

Witnesseth

Whereas, the Company and the Executive entered into an Employment Agreement dated December 31, 2007, with an effective date of February 1, 2008 (the "Employment Agreement"); and

Whereas,  pursuant to the Employment Agreement, the Executive is employed by the Company as its President and Chief Executive Officer and is a member of the Board of Directors of the Company (the “Board”); and

Whereas, the Executive and the Company desire to sever their employment relationship and the Executive's membership on the Board on amicable and agreeable terms effective July 8, 2008(the "Separation Date").

Now, therefore, in consideration of the foregoing and the mutual covenants herein set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1. Separation from Employment.

The parties agree that the Executive’s separation from employment shall be deemed to be “Without Cause,” as that term is defined in Paragraph 7.4(a) of the Employment Agreement, and effective as of the Separation Date.  The Executive hereby resigns from the Board and from any committees thereof.  The parties waive any advance notice of such termination that may be required under the terms of the Employment Agreement.

2. Separation  Payments.

The Executive is entitled to receive the following payments, subject to applicable withholdings and deductions, on account of her separation (collectively, the "Separation Payments"):

(a) Accrued Base Salary.  The Company will pay to the Executive all accrued, but unpaid, amounts of “Base Salary” (as that term is defined in Paragraphs 2.3 and 5.1 of the Employment Agreement) through the Separation Date.  The payment will be made on or prior to July 31, 2008.

(b) Split Dollar Insurance Replacement Bonus Agreement.  Pursuant to that certain Bonus Agreement, dated January 28, 2005, the Company will pay to the Executive a sum payment of $365,000.00 on October 27, 2008.   The parties agree that no further payments are due under that certain Bonus Agreement.

(c) Utilization of Company Provided Car and Driver.  The Company agrees that the Executive will be permitted to utilize a Company provided car and driver until July 31, 2008, under the same terms as permitted under the Employment Agreement.

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(d) Utilization of Perquisite Allowance.  The Company agrees that the Executive will be permitted to utilize the balance (calculated as of the Separation Date) of the Perquisite Allowance provided under Paragraph 5.7 of the Employment Contract to pay (1) her reasonable legal fees and expenses incurred in the negotiation of this Separation Agreement; and (2) the cost of financial planning services incurred by her in 2008.  Upon the presentation of appropriate documentation, the Company shall pay, or reimburse the Executive, for such fees, expenses or costs.

(e) Utilization of Company Provided Secretarial Support.  The Company agrees that the Executive will be permitted to utilize her Company provided secretary until August 31, 2008, under the same terms as she had under the Employment Agreement.

(f) Waiver of Notice Provision under Apartment Lease.  The Company agrees to waive any termination notice required under that certain Apartment Lease, dated March 12, 2008 and effective as of February 1, 2008, between the Company, as lessor, and the Executive, as lessee.  Notwithstanding anything in the Apartment Lease to the contrary, the Executive may continue to utilize the apartment until July 31, 2008.

(g) Compensation in Lieu of 90 Days' Notice.  In lieu of the notice period required by Paragraph 7.4(a) of the Employment Agreement, the Company will make a lump sum payment to the Executive in an amount equal to the Base Salary to which the Executive would otherwise have been entitled during the 90-day period immediately following the Separation Date.  This payment will be made on or before July 31, 2008.

(h) Severance Benefits Pursuant to the Employment Agreement.  The Company will provide to the Executive the following “Severance Benefits,” as that term is defined in Paragraphs 2.35 and 7.4 of the Employment Agreement:

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(i)The Company shall pay to the Executive, in twenty-four (24) equal monthly installments, an amount equal to two times (2x) the sum of (i) the Executive’s annual Base Salary, plus (ii) the three (3) year average of the actual “Annual Bonus” (as that term is defined in Paragraph 2.2 of the Employment Agreement) paid to the Executive for the most recent three (3) completed Fiscal Years.  These payments shall begin within thirty (30) days following the Separation Date.

(ii)The Executive may continue to participate in the Company’s health plan for twenty seven (27) months following the Separation Date by electing COBRA coverage and by paying the applicable premium cost of such coverage.  The Company shall reimburse the Executive an amount equal to the Executive’s monthly COBRA cost under the Company’s health plan for the twenty seven (27) month period; provided, however, that reimbursement of the COBRA cost shall be discontinued prior to the end of the first eighteen (18) months of this twenty seven (27) month period if the Executive ceases to elect COBRA coverage or, if subsequent to the first eighteen (18) months, she fails to pay the applicable premium cost of such coverage.  In any event, the Executive’s participation in the Company’s health plan shall terminate if the Executive has available substantially similar benefits from a subsequent employer, as determined by the “Compensation Committee,” as that term is defined in Paragraph 2.12 of the Employment Agreement.  The COBRA reimbursement payments shall be paid monthly on the first payroll date of each month, beginning

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within thirty (30) days after the Separation Date, provided the Executive has paid the applicable monthly COBRA cost.  On each date on which a payment is made under this paragraph, the Company will pay the Executive an additional amount equal to the federal, state and local income and payroll taxes that the Executive incurs on all amounts paid under this paragraph.  This gross up payment will be made with respect to each payment hereunder and will cease when COBRA reimbursement payments cease.

(iii) The Company shall pay Executive a lump sum cash reimbursement equal to the cost to the Executive to secure life insurance, accidental death and dismemberment insurance and disability insurance coverage substantially similar to the coverages she enjoyed as an employee for 27 months following the Separation Date.  This lump sum reimbursement shall be net of the amount that the Executive would have paid to the Company for these benefits had the Executive continued participation in the Company’s life insurance, accidental death and dismemberment insurance and disability insurance programs, on the same terms and conditions as in effect immediately preceding the Executive’s Separation Date.  Such lump sum payment shall be made within thirty (30) days following the Separation Date.

(iv) The Company shall pay to the Executive a lump sum amount, payable within thirty (30) days after the Separation Date, equal to the Executive’s unpaid target Annual Bonus established for the Company’s 2008-09 “Fiscal Year” (as that term is defined in Paragraph 2.20 of the Employment Agreement),

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multiplied by a fraction, the numerator of which is the number of days deemed completed in the 2008-09 Fiscal Year (i.e., 250 days), and the denominator of which is the number of days in that Fiscal Year.

(v) The Executive’s accrued benefit in the “SERP” (as that term is defined in Paragraph 2.34 of the Employment Agreement) shall become fully vested as of the Separation Date and such accrued benefit shall be paid in accordance with the terms of the SERP.

(vi) The vesting schedule of the Executive’s outstanding equity awards with respect to stock of the Company or any successor, including outstanding “Options”, “SARs”, “Performance Awards” and “Time Vested Shares” (as those terms are defined in Paragraphs 2.23, 5.3(b), 2.32, 5.3(b), 2.24, 5.3(c), 2.39 and 5.3(a), respectively, of the Employment Agreement) shall be accelerated by two (2) years and the outstanding equity awards that would have vested if the Executive had continued employment for an additional two (2) years following the Separation Date shall become vested on such date, and the outstanding equity awards otherwise shall be treated pursuant to the terms of the applicable plan or agreement.

(vii) The Company shall pay the Executive all other benefits to which the Executive has a vested right at the time, according to the provisions of this Agreement or the governing plan or program.

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(i)Business Expenses  The Executive shall, in accordance with the Company's customary policies and procedures, be reimbursed for all appropriate business expenses incurred through and including the Separation Date for which the Executive submits appropriate invoices and similar records.  Provided, however, that such business expenses must be submitted within ninety (90) days of the Separation Date.

(j)Retirement Benefits.  Except with respect to the SERP, the Executive’s right to any retirement benefits under any qualified defined benefit and defined contribution retirement plans maintained by the Company and in which she participated shall be determined in accordance with the terms of any such plans.

3.Dispute Resolution.

(a)Dispute Resolution.  Any dispute or controversy arising under or in connection with this Agreement, the Employment Agreement, the Executive’s employment with the Company and/or her separation therefrom shall be settled by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of her employment with the Company, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect.

(b)Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.  Subject to the limitation set forth in Paragraph 3(c), related to legal fees incurred by the Executive, all expenses of such arbitration shall be borne by the Company.

(c)Payment of Legal Fees.  To the extent permitted by law, the Company shall pay (or advance, upon the written request of the Executive) legal fees, costs of arbitration, prejudgment interest, and other expenses incurred (or to be incurred) in good faith by the

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Executive as a result of the Company’s refusal to provide the Separation Payments, as defined in Paragraph 2, above, or as a result of the Company’s contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including conflicts related to the calculation of parachute payments) between the parties pertaining to this Agreement, subject to an overall limit on the payment of legal fees incurred by the Executive of fifty thousand dollars ($50,000).

4.Confidentiality and Noncompetition.

(a) Disclosure of Information.  The Executive recognizes that she has had access to and knowledge of certain confidential and proprietary information of the Company which was  essential to the performance of her duties under the Employment Agreement.  The Executive will not, in whole or in part, disclose such information to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever, nor shall she make use of any such information for her own purposes, so long as such information has not otherwise been disclosed to the public or is not otherwise in the public domain except as required by law or pursuant to administrative or legal process.

(b)Covenants Regarding Other Employees.  For a period of twenty-four (24) months following the Separation Date, the Executive agrees not to attempt to induce, directly or indirectly, any merchant, buyer, or manager or higher level employee (a “restricted employee”) of the Company to terminate his or her employment with the Company.  In addition and for the same time period, the Executive agrees that she will not hire, employ, engage as a consultant or otherwise utilize the services of any restricted employee and that she will not authorize, permit or

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suffer any entity for which she is engaged to provide services (whether as an employee, director, consultant or otherwise) to hire, employ, engage as a consultant or otherwise utilize the services of any restricted employee.

(c)Covenants Not To Compete.  For a period of twenty-four (24) months following the Separation Date, the Executive will not:  (i) directly or indirectly own any equity or proprietary interest in (except for ownership of shares in a publicly traded company not exceeding five percent (5%) of any class of outstanding securities), or be an employee, agent, director, advisor, or consultant to or for, any Competitor (as defined below) of the Company in the United States, whether on her own behalf or on behalf of any person, and involved in the procuring, sale, marketing, promotion, or distribution of any product or product lines competitive with any product or product lines of the Company as of the Separation Date, and the Executive will not assist in, manage, or supervise any of the foregone activities, or (ii) undertake any action to induce or cause any supplier to discontinue any part of its business with the Company.  For purposes of this Paragraph of this Agreement, “Competitor” shall have the following meaning:

(1) Except as provided in subsection (2), below, “Competitor” shall mean at any time only a chain of retail stores with fifty (50) or more store locations; provided, however, that the average square footage of the chain’s stores is less than fifteen thousand (15,000) square feet.

(2) During any period in which Executive is receiving Separation Payments under Paragraph 2 hereof, the term “Competitor” shall mean, in addition to a Competitor as described in subsection (1), above, a chain of retail stores with one hundred (100) or more store locations (without regard to

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square footage) whose gross revenues in plus size women’s apparel (sizes 14-34) exceeds five percent (5%) of its total gross revenues.  If Executive waives her right to receive Separation Payments hereunder, or otherwise does not receive such Separation Payments, the term “Competitor” shall have the meaning given that term in subsection (1), above.

5.Indemnification Matters.  Except as provided in Paragraph 6(a), below, the Company hereby covenants and agrees to indemnify and hold harmless the Executive fully, completely, and absolutely against and in respect to any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including attorney’s fees), losses, and damages resulting from the Executive’s good faith performance of her duties and obligations under the terms of this Agreement and her service as a member of the Board of Directors.  The Company agrees to maintain for a period of six (6) years directors and officers liability insurance coverage for the Executive, on the same terms as such coverage is provided for other directors and officers of the Company.

6.Releases.

(a)The Company’s Release of Claims.  In further consideration for the Executive’s entering into this Agreement, the Company, individually and on behalf of its successors and assigns, directors, officers, agents, and employees, hereby irrevocably and unconditionally RELEASES, WAIVES, and DISCHARGES the Executive, her successors, assigns, and heirs, from any and all claims, demands, actions and liabilities whatsoever, whether known or unknown, suspected or unsuspected, that the Company may have or claim to have in any way relating to or arising out of any event or act of omission or commission occurring on or

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before the date of the Executive’s execution of this Agreement, except that this paragraph shall not apply to the following:  (i) claims or actions to enforce the terms and provisions of this Agreement; and  (ii) matters involving fraud or intentional, reckless, or gross misconduct, arising out of the Executive’s employment with the Company.

(b)The Executive’s Release of Claims.

(i) The Executive agrees that she will not file (or ask or let anyone file for her) any charge, complaint, claim or lawsuit of any kind in connection with any claim released by this Agreement against any Released Person.  However, the preceding sentence does not apply to any claim the Executive might file alleging that her waiver of claims under the Age Discrimination in Employment Act of 1967 (“ADEA”) was not knowing and voluntary.  The Executive agrees that she has not already filed a charge, complaint, claim or lawsuit arising out of any claim released by this Agreement against any Released Person.  The Executive acknowledges full and complete satisfaction of, and releases and discharges all Released Persons from, any Claims.  The Executive is giving this release for herself, as well as for her executors, administrators, heirs and assigns.

(ii) “Released Persons” are the Company, its predecessors, successors, parents, subsidiaries and affiliates, successors, and assigns and each of their past, present and future managers, members, members, directors, officers, partners, agents, employees, attorneys, representatives, and fiduciaries.

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(iii) “Claims” are any and all claims, demands and causes of action of whatever kind, including any claims for attorney’s fees, that the Executive now has, or at any time had, against any Released Persons, including, without limitation, those that arise out of or relate in any way to her employment, termination of employment with the Company or the Employment Agreement.  “Claims” includes, without limitation, except as provided in Paragraph 6(b)(4), claims that may arise under the ADEA, Americans with Disabilities Act, Title VII of the Civil Rights Act, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Pennsylvania Human Relations Act, and/or any other statute, regulation or principle or theory of law which the Executive may have now or in the future, except those that arise after the execution of this Agreement.  “Claims” includes claims the Executive may not even know about or suspect, as well as any claims she may have under the ADEA.

(iv) “Claims” does not include (and Executive is not releasing): (1) Any claims against the Company for promises it is making to the Executive in this Agreement; (2) Any claims for benefits under any retirement, savings, or other employee benefit programs (but this Release does cover any claims she may make for benefits or compensation beyond those described or referred to in this Agreement); (3) Any claims covered by workers compensation and

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unemployment compensation laws; (4) Any claims that she did not knowingly and voluntarily waive her Claims under the ADEA, or any claims arising under the ADEA after the execution of this Agreement; or (5) Any claims arising under or in connection with any indemnification agreement, indemnification obligations under the Company’s bylaws or claims covered by any insurance policy obtained by the Company.

(v)

The Executive retains the right to file a claim or a charge of employment discrimination with the Equal Employment Opportunity Commission (“EEOC”) because of race, color, sex, religion, national origin, age, disability and/or equal pay under the statutes enforced by the EEOC with respect to matters preceding the date of this Agreement and to assist or cooperate with such agency in its investigation or prosecution of a claim or charge.  The Executive understands and agrees, however, that as part of this Agreement and Release, she is waiving any and all right to recover damages and other relief in any lawsuit, regardless of whether it is initiated by the Executive or on her behalf by a government agency.  This waiver specifically covers all forms of relief including, without limitation, reinstatement, front pay, back pay, compensatory damages, mental and emotional distress damages, punitive damages and attorneys’ fees.

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7.Company’s Remedies.  In the event that the Executive breaches, or the Company reasonably believes that she is about to breach, any of the covenants of Paragraph 4, the Executive agrees that the Company will be entitled to injunctive relief.  The Executive recognizes that the Company will suffer immediate and irreparable harm and that money damages will not be adequate to compensate the Company or to protect and preserve the status quo.  Therefore, THE EXECUTIVE HEREBY CONSENTS TO THE ISSUANCE OF A TEMPORARY RESTRAINING ORDER, WITH OR WITHOUT NOTICE, AND A PRELIMINARY OR PERMANENT INJUNCTION to enforce the terms of this Agreement.  This injunctive remedy shall be in addition to any other remedies to which the Company may be entitled at law or in equity.  Further, any claim for such injunctive relief by the Company shall not be subject to Paragraph 3, hereof.

8.Compliance with Section 409A of the Code.  The Agreement is intended to comply with the requirements of Section 409A of the Code or an exemption, and shall in all respects be administered in accordance with Section 409A.  Notwithstanding anything in the Agreement to the contrary, any payments or distributions hereunder may only be made upon a “separation from service” as determined under Section 409A.  Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.  All reimbursements provided under the Agreement shall be made in accordance with the requirements of Section 409A of the Code.

Further, given that the Executive is a “specified employee” (as defined in Section 409A of the Code), notwithstanding any provision of this Agreement to the contrary, the payment of

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any amounts payable hereunder that the Company determines are subject to Section 409A of the Code shall be postponed in compliance with Section 409A (without any reduction in such payments ultimately paid or provided to the Executive), until the first payroll date that occurs after the date that is six (6) months following the Executive’s “separation from service” with the Company (within the meaning of such term under Section 409A).  Any such postponed payments will be paid in a lump sum to the Executive on the first payroll date that occurs after the date that is six (6) months following the Executive’s “separation from service” with the Company.  If the Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of Section 409A shall be paid to the personal representative of the Executive’s estate within sixty (60) days after the date of the Executive’s death.

9.No  Admissions.  This Agreement results from a mutual decision and does not constitute an admission by the Executive, or the Company, of any violation of any federal, state or local law, regulation, ordinance or statute or of any employment contract (including the Employment Agreement) whether written or oral.

10.Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof.  Except as set forth herein, this Agreement supersedes any and all other agreements (including, but not without limit, the Employment Agreement), either oral or written, between the parties hereto with respect to the subject matter hereof.

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11.Binding Effect and Assign ability.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, assigns, affiliated entities, and any party-in-interest.  The Executive agrees and understands that, should the Company or the relevant portion of its business or assets be acquired by, merge with, or otherwise combine with another corporation or business entity, the surviving or acquiring entity will have all rights to enforce the terms of this Agreement against the Executive without the need for any formal assignment of the Agreement.  This Agreement shall be deemed assigned upon any such acquisition, purchase, merger or other manner of corporate combination.

12.Notices.  Any notice required or permitted to be given under this Agreement will be sufficient if in writing and if delivered in person or sent by any national overnight delivery service or by certified mail to the following addresses (or to any other address that any party may designate by notice to the other parties hereto):

(a)if to the Executive, to:

Dorrit J. Bern

1069 Bald Eagle Drive #804

Marco Island, FL 34145

with a copy to:

Robert J. Lichtenstein, Esquire

Morgan Lewis

1701 Market St.

Philadelphia, PA 19103-2921

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(b)if to the Company:

Colin Stern, Esquire

General Counsel

Charming Shoppes, Inc.

450 Winks Lane

Bensalem, PA 19020

with a copy to:

Timothy E. Hoeffner, Esquire

Saul Ewing, LLP

1500 Market Street

38th Floor

Philadelphia, PA 19012

13.Governing  Law.  To the extent not preempted by Federal Law, the provisions of this Agreement shall be continued and enforced in accordance with the substantive laws (and not the choice of law rules) of the Commonwealth of Pennsylvania.

14.Severability.   If any provision of this Agreement is held to be unenforceable, then this Agreement will be deemed amended to the extent necessary to render the otherwise unenforceable provision, and the rest of the Agreement, valid and enforceable.  If a court  declines to amend this Agreement as provided therein, the invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the remaining provisions, which shall be enforced as if the offending provision had not been included in this Agreement.

15.No Waiver.  No failure or delay by the Company or the Executive in enforcing or exercising any right or remedy hereunder shall operate as a waiver hereof.  No modification, amendment or waiver of this Agreement nor consent to any departure by either party from any of

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the terms or conditions thereof, shall be effective unless in writing and signed by an authorized officer representative of the respective party.  Any such waiver or consent  shall be effective only in the specific instance and for the purpose for which given.

16.Counterparts.  The parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one Agreement.  The Parties agree that facsimile signatures of this Agreement shall be deemed a valid and binding execution of this Agreement.

17.The Executive’s Understanding.  By signing this Agreement, the Executive admits and agrees that:

(a)She has read the Agreement;

(b)She understands it is legally binding, and she was advised to review it with a lawyer of her choice prior to executing this Agreement;

(c)She has had (or has had the opportunity to take) 21 calendar days to review it and discuss it with a lawyer of her choice before signing it, and, if she signs before the end of that period, she does so of her own free will and with the full knowledge that she could have taken the full period;

(d)She realizes and understands the Release set forth in Paragraph 6 covers all claims, demands, and causes of action against the Company and any Released Persons (but does not apply to claims described in Paragraph 6(b)(iv)), including claims under the ADEA, whether or not she knows or suspects them to exist at the present time; and

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(e)She understands the terms of the Agreement, she is signing voluntarily and with the full understanding of its consequences, and she has not been forced or coerced in any way.

18.Revoking the Agreement.  The Executive has seven days from the date she signs the Agreement to revoke and cancel it.  To do that, a clear, written revocation notice, signed by the Executive must be received by the Company, consistent with the notice provisions hereof, before the close of business on the seventh (7th) calendar day following the date she signs this Agreement.  Upon the expiration of that seven-day-period, this Agreement shall become effective for all purposes.

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have duly executed this Agreement as of the date first above written.

	Executive:
	______________________________
	DORRIT J. BERN
ATTEST:	CHARMING SHOPPES, INC.
By:_______________________________	By:___________________________
Corporate Secretary	Name:
	Title:

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EX-31.1

EXHIBIT 31.1

Certification By Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Alan Rosskamm, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q 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: September 4, 2008	/S/ ALAN ROSSKAMM
	Alan Rosskamm
	Chairman of the Board
	Interim 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 Quarterly Report on Form 10-Q 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: September 4, 2008	/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), Alan Rosskamm, Chairman of the Board and Interim 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 Quarterly Report of the Company on Form 10-Q for the period ended August 2, 2008 (the “Report”) that, to the best of 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: September 4, 2008	/S/ ALAN ROSSKAMM
	Alan Rosskamm
	Chairman of the Board
	Interim Chief Executive Officer
Dated: September 4, 2008	/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.