10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended August 27, 2011

or

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

For the transition period from                   to                   .

Commission File Number 001-31390

CHRISTOPHER & BANKS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	06 - 1195422
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
2400 Xenium Lane North, Plymouth, Minnesota	55441
(Address of principal executive offices)	(Zip Code)

(763) 551-5000

(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  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.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES oNO x

As of September 24, 2011, 35,921,747 shares of the registrant’s common stock were outstanding.

CHRISTOPHER & BANKS CORPORATION

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets (Unaudited) As of August 27, 2011, February 26, 2011 and August 28, 2010	3
	Condensed Consolidated Income Statements (Unaudited) For the Three Months Ended August 27, 2011 and August 28, 2010	4
	Condensed Consolidated Income Statements (Unaudited) For the Six Months Ended August 27, 2011 and August 28, 2010	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended August 27, 2011 and August 28, 2010	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	30
Item 4.	(Removed and Reserved)	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
	Signatures	31
	Index to Exhibits	32

2

PART I — FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

CHRISTOPHER & BANKS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	August 27,			February 26,			August 28,
	2011			2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	36,747		$	43,712		$	37,760
Short-term investments	35,263			33,060			58,231
Accounts receivable	5,938			3,967			5,136
Merchandise inventories	53,666			39,211			40,109
Prepaid expenses	3,356			1,989			3,213
Income taxes receivable	2,782			6,439			1,195
Current deferred tax asset	—			—			4,376
Total current assets	137,752			128,378			150,020
Property, equipment and improvements, net	72,943			76,647			88,466
Long-term investments	23,806			28,824			13,408
Deferred tax asset	—			—			8,600
Other assets	278			314			317
Total assets	$	234,779		$	234,163		$	260,811
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	31,617		$	15,149		$	11,841
Accrued salaries, wages and related expenses	6,544			7,883			7,890
Other accrued liabilities	22,236			21,931			17,129
Total current liabilities	60,397			44,963			36,860
Non-current liabilities:
Deferred lease incentives	14,256			14,982			17,245
Deferred rent obligations	6,909			7,457			8,372
Other	2,664			2,532			3,509
Total non-current liabilities	23,829			24,971			29,126
Commitments	—			—			—
Stockholders’ equity:
Preferred stock — $0.01 par value, 1,000 shares authorized, none outstanding	—			—			—
Common stock — $0.01 par value, 74,000 shares authorized, 45,713, 45,432 and 45,635 shares issued and 35,922, 35,641 and 35,844 shares outstanding at August 27, 2011, February 26, 2011 and August 28, 2010, respectively	457			454			456
Additional paid-in capital	116,412			114,909			115,109
Retained earnings	146,272			161,642			191,890
Common stock held in treasury, 9,791 shares at cost at August 27, 2011, February 26, 2011 and August 28, 2010, respectively	(112,711		)	(112,711		)	(112,712		)
Accumulated other comprehensive income (loss)	123			(65		)	82
Total stockholders’ equity	150,553			164,229			194,825
Total liabilities and stockholders’ equity	$	234,779		$	234,163		$	260,811

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

CHRISTOPHER & BANKS CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	August 27,			August 28,
	2011			2010
Net sales	$	96,230		$	101,340
Costs and expenses:
Merchandise, buying and occupancy	68,403			65,536
Selling, general and administrative	34,505			33,795
Depreciation and amortization	6,267			6,434
Total costs and expenses	109,175			105,765
Operating loss	(12,945		)	(4,425		)
Other income	76			127
Loss before income taxes	(12,869		)	(4,298		)
Income tax provision (benefit)	113			(1,760		)
Net loss	$	(12,982	)	$	(2,538	)
Basic loss per share:
Net loss	$	(0.37	)	$	(0.07	)
Basic shares outstanding	35,520			35,354
Diluted loss per share:
Net loss	$	(0.37	)	$	(0.07	)
Diluted shares outstanding	35,520			35,354
Dividends per share	$	0.06		$	0.06

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

CHRISTOPHER & BANKS CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share data)

(Unaudited)

	Six Months Ended
	August 27,			August 28,
	2011			2010
Net sales	$	220,062		$	227,574
Costs and expenses:
Merchandise, buying and occupancy	149,229			138,393
Selling, general and administrative	69,936			69,994
Depreciation and amortization	11,851			12,964
Total costs and expenses	231,016			221,351
Operating income (loss)	(10,954		)	6,223
Other income	155			243
Income (loss) before income taxes	(10,799		)	6,466
Income tax provision	293			2,664
Net income (loss)	$	(11,092	)	$	3,802
Basic earnings (loss) per share:
Net income (loss)	$	(0.31	)	$	0.11
Basic shares outstanding	35,512			35,329
Diluted earnings (loss) per share:
Net income (loss)	$	(0.31	)	$	0.11
Diluted shares outstanding	35,512			35,525
Dividends per share	$	0.12		$	0.12

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

CHRISTOPHER & BANKS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	August 27,			August 28,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	(11,092	)	$	3,802
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	11,851			12,964
Amortization of premium on investments	35			243
Excess tax benefit on stock-based compensation	—			(224		)
Deferred income taxes	—			(1,864		)
Stock-based compensation expense	1,631			1,646
Loss on disposal of furniture, fixtures and equipment	—			18
Gain on investments, net	(18		)	(56		)
Changes in operating assets and liabilities:
Increase in accounts receivable	(1,971		)	(891		)
Increase in merchandise inventories	(14,455		)	(1,613		)
Increase in prepaid expenses	(1,367		)	(1,571		)
(Increase) decrease in income taxes receivable	3,657			(576		)
Decrease in other assets	36			35
Increase (decrease) in accounts payable	16,534			(1,664		)
Decrease in accrued liabilities	(1,034		)	(3,048		)
Decrease in deferred lease incentives	(726		)	(2,333		)
Decrease in other liabilities	(416		)	(818		)
Net cash provided by operating activities	2,665			4,050
Cash flows from investing activities:
Purchases of property, equipment and improvements	(8,213		)	(5,488		)
Purchases of investments	(76,367		)	(37,696		)
Sales of investments	79,353			43,786
Net cash provided by (used in) investing activities	(5,227		)	602
Cash flows from financing activities:
Exercise of stock options	—			84
Excess tax benefit on stock-based compensation	—			224
Shares redeemed for payroll taxes	(124		)	—
Dividends paid	(4,279		)	(4,273		)
Net cash used in financing activities	(4,403		)	(3,965		)
Net increase (decrease) in cash and cash equivalents	(6,965		)	687
Cash and cash equivalents at beginning of period	43,712			37,073
Cash and cash equivalents at end of period	$	36,747		$	37,760

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

CHRISTOPHER & BANKS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Christopher & Banks Corporation and its subsidiaries (collectively referred to as “Christopher & Banks,” “the Company,” “we,” “us” or “our”) pursuant to the current rules and regulations of the United States Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed, or omitted, pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended February 26, 2011.

The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year.  In the opinion of management, the information contained herein reflects all adjustments, consisting only of normal adjustments, except as otherwise stated in these notes, necessary to present fairly our financial position as of August 27, 2011, February 26, 2011 and August 28, 2010, our results of operations for the three and six month periods ended August 27, 2011 and August 28, 2010 and our cash flows for the six month periods ended August 27, 2011 and August 28, 2010.

Revision to Fiscal 2010 Consolidated Statement of Cash Flows

In connection with the preparation of our financial statements for the fiscal year ended February 26, 2011, we determined that cash flows from the redemption of our investments in auction rate securities should be classified as cash inflows from investing activities.  We previously classified certain of these cash flows as cash inflows from operating activities.

We have revised our statement of cash flows for the six months ended August 28, 2010 to properly classify proceeds from the redemption of our investments of Auction Rate Securities (“ARS”) as cash inflows from investing activities.  The effect of this revision was to decrease cash provided by operating activities by $14.9 million and decrease cash used in investing activities by $14.9 million, hence there was no impact on the net change in cash and cash equivalents or on our total balance of cash and cash equivalents as previously reported.  We have concluded that this correction is immaterial to the financial statements taken as a whole.

Recently Issued Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRSs.”  ASU 2011-04 amends ASC 820, “Fair Value Measurement,” by expanding existing disclosure requirements for fair value measurements and modifying certain definitions in the guidance, which may change how the fair value measurement guidance of ASC 820 is applied.  ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and must be applied prospectively.  We are in the process of evaluating ASU 2011-04 and its impact on our consolidated financial statements.

In June 2011 FASB issued ASU 2011-05, “Presentation of Comprehensive Income.”  ASU 2011-05 amends Accounting Standards Codification (“ASC”) 220-10, “Comprehensive Income,” and requires that all changes in comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and also requires the presentation of reclassification adjustments on the face of the financial statements from other comprehensive income to net income.  ASU 2011-05 is effective for the first interim or annual reporting period beginning on or after December 15, 2011.  Early adoption is permitted.  We are in the process of evaluating ASU 2011-05 and its impact on the presentation of our consolidated financial statements, however these changes are not expected to impact the consolidated financial statements other than the change in presentation.

7

Recently Adopted Accounting Pronouncements

In October 2009, the FASB issued ASU 2009-13, “Multiple Deliverable Revenue Arrangements.” ASU 2009-13 amends ASC 605-10, “Revenue Recognition,” and addresses accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit, and provides guidance regarding how to measure and allocate arrangement consideration to one or more units of accounting.  The adoption of ASU 2009-13 at the beginning of fiscal 2012 had no impact on our consolidated financial statements.

NOTE 2 — INVESTMENTS

Investments consisted of the following (in thousands):

	Aug 27, 2011
	Amortized		Unrealized		Unrealized		Estimated
Description	Cost		Gains		Losses		Fair Value
Short-term investments:
Available-for-sale securities:
Commercial paper	$	5,898	$	—	$	2	$	5,896
Municipal bonds	10,132		23		4		10,151
U.S. Agency securities	19,196		20		—		19,216
Total short-term investments	35,226		43		6		35,263
Long-term investments:
Available-for-sale securities:
Municipal bonds	19,061		159		10		19,210
U.S. Agency securities	4,578		18		—		4,596
Total long-term investments	23,639		177		10		23,806
Total investments	$	58,865	$	220	$	16	$	59,069

	Feb 26, 2011
	Amortized		Unrealized		Unrealized		Estimated
Description	Cost		Gains		Losses		Fair Value
Short-term investments:
Available-for-sale securities:
Variable rate demand obligations	$	6,505	$	—	$	—	$	6,505
Commercial paper	5,794		—		3		5,791
Municipal bonds	16,118		15		1		16,132
U.S. Agency securities	4,631		1		—		4,632
Total short-term investments	33,048		16		4		33,060
Long-term investments:
Available-for-sale securities:
Municipal bonds	18,714		37		91		18,660
U.S. Agency securities	10,162		2		—		10,164
Total long-term investments	28,876		39		91		28,824
Total investments	$	61,924	$	55	$	95	$	61,884

8

	Aug 28, 2010
	Amortized		Unrealized		Unrealized		Estimated
Description	Cost		Gains		Losses		Fair Value
Short-term investments:
Available-for-sale securities:
Variable rate demand obligations	$	28,320	$	—	$	—	$	28,320
Municipal commercial paper	1,000		—		—		1,000
Municipal bonds	23,087		13		4		23,096
U.S. Agency securities	5,800		19		4		5,815
Total short-term investments	58,207		32		8		58,231
Long-term investments:
Available-for-sale securities:
Municipal bonds	13,295		119		6		13,408
Total investments	$	71,502	$	151	$	14	$	71,639

We account for our investments in accordance with ASC 320-10, “Investments — Debt and Equity Securities” and, accordingly, our investment securities have been characterized as either available-for-sale or trading.  As of August 27, 2011, our available-for-sale investment securities were comprised of municipal bonds, commercial paper and U.S. Agency securities.  These securities were classified as available-for-sale as we did not enter into these investments for speculative purposes or intend to actively buy and sell the securities in order to generate profits on differences in price.  Our primary investment objective is preservation of principal.  During the first six months of fiscal 2012, purchases of available-for-sale securities totaled approximately $76.4 million, while proceeds from the sale of available-for-sale securities were approximately $79.4 million.  Gross realized gains and losses on the sale of available-for-sale securities during the six months ended August 27, 2011 were not material.

Our available-for-sale securities are reviewed for possible impairment at least quarterly, or more frequently if circumstances arise which may indicate impairment.  When the fair value of the securities declines below the amortized cost basis, impairment is indicated and it must be determined whether it is other-than-temporary.  Impairment is considered to be other-than-temporary if we (i) intend to sell the security, (ii) will more likely than not be forced to sell the security before recovering its cost, or (iii) do not expect to recover the securities’ amortized cost basis.  If the decline in fair value is considered other-than-temporary, the cost basis of the security is adjusted to its fair market value and the realized loss is reported in earnings.  Subsequent increases or decreases in fair value are reported in equity as other comprehensive income (loss).  As of August 27, 2011, there were no other-than-temporary impairments of our available-for-sale securities.

Expected maturities of our investments are as follows (in thousands):

	August 27,
	2011
Due in one year or less	$	35,263
Due after one year through three years	22,192
Due greater than three years	1,614
Total investment securities	$	59,069

9

We had $6.5 million and $28.3 million of Variable Rate Demand Obligations (“VRDO”) as of February 26, 2011 and August 28, 2010, respectively.  These investments maintain a constant par value, have variable rates of return tied to short-term interest rates which reset weekly, and may be tendered for sale upon notice to the trustee.  Although our VRDO were issued and rated as long-term securities, with maturities ranging from 2013 through 2041, they were priced and traded as short-term investments as each VRDO contained a put feature, which was supported by highly rated financial institutions.  We classified our VRDO as short-term investments maturing in one year or less as we expected to realize the proceeds from our VRDO within that time period.  We liquidated our remaining holdings of VRDO in the first quarter of fiscal 2012 and had no investments in VRDO as of August 27, 2011.

NOTE 3 — MERCHANDISE INVENTORIES AND SOURCES OF SUPPLY

Our merchandise inventories consisted of the following (in thousands):

	August 27,		February 26,		August 28,
Description	2011		2011		2010
Merchandise - in store/e-Commerce	$	46,585	$	34,186	$	37,180
Merchandise - in transit	7,081		5,025		2,929
	$	53,666	$	39,211	$	40,109

We do not have long-term purchase commitments or arrangements with any of our suppliers or agents.  During the quarter ended August 27, 2011, one of our vendors supplied approximately 19% of our merchandise compared to 28% of our total merchandise purchases during the second quarter of fiscal 2011.  No other vendor supplied greater than 10% of our total merchandise purchases during the second quarter of fiscal 2012.  A second vendor supplied approximately 17% of our merchandise purchases during the second quarter of fiscal 2011.  For the six months ended August 27, 2011, the Company purchased approximately 20% of its merchandise from one vendor and 11% from another vendor, compared to 29% and 18% from these two vendors, respectively, during the first six months of fiscal 2011.

Although we have strong relationships with these vendors, there can be no assurance that these relationships can be maintained in the future or that the vendors will continue to supply merchandise to us.  If there should be any significant disruption in the supply of merchandise from these vendors, management believes that it will be able to shift production to other suppliers so as to continue to secure the required volume of product.  Nevertheless, it is possible that any significant disruption in supply could have a material adverse impact on our financial position or results of operations.

NOTE 4 — PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET

Property, equipment and improvements, net consisted of the following (in thousands):

	Estimated	August 27,			February 26,			August 28,
Description	Useful Life	2011			2011			2010
Land	—	$	1,597		$	1,597		$	1,597
Corporate office, distribution center and related building improvements	25 years	12,101			12,101			12,053
Store leasehold improvements	Term of related lease, typically 10 years	88,319			91,237			91,570
Store furniture and fixtures	3-10 years	108,388			110,754			110,664
Point of sale hardware and software	5 years	9,919			9,858			14,881
Computer hardware and software	3-5 years	26,919			26,858			24,736
Corporate office and distribution center furniture, fixtures and equipment	7 years	5,457			5,401			5,366
Construction in progress		4,737			465			4,193
		257,437			258,271			265,060
Less accumulated depreciation and amortization		(184,494		)	(181,624		)	(176,594		)
Net property, equipment and improvements		$	72,943		$	76,647		$	88,466

10

We review long-lived assets with definite lives at least annually, or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.  While no impairments of long-lived assets were recorded in the six month period ended August 27, 2011, the current challenging economic environment, combined with continued instability in the housing and labor markets, and general economic uncertainty affecting the retail industry, make it reasonably possible that long-lived asset impairments could be identified and recorded in future periods.

NOTE 5 — ACCRUED LIABILITIES

Other accrued liabilities consisted of the following (in thousands):

	August 27,		February 26,		August 28,
Description	2011		2011		2010
Gift card and store credit liabilities	$	6,727	$	10,150	$	7,118
Accrued merchandise inventory receipts not yet invoiced	4,668		1,872		2,048
Accrued Friendship Rewards loyalty liability	3,008		2,938		1,745
Accrued income, sales and other taxes payable	2,615		2,017		2,428
Accrued workers compensation liability	362		456		285
Accrued occupancy-related expenses	737		1,145		738
Other	4,119		3,353		2,767
	$	22,236	$	21,931	$	17,129

NOTE 6 — CREDIT FACILITY

We maintain an Amended and Restated Revolving Credit Facility (the “Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”).  The Credit Facility provides us with revolving credit loans and letters of credit of up to $50 million, in the aggregate, subject to a borrowing base formula based on inventory levels.

Interest under the Credit Facility is payable monthly in arrears.  The Credit Facility carries a facility fee of 0.25%, based on the unused portion as defined in the agreement, a collateral monitoring fee and a guaranteed service charge.  Borrowings under the Credit Facility are collateralized by our equipment, intangible assets, inventory, inventory letters of credit and letter of credit rights.  We had no revolving credit loan borrowings under the Credit Facility during the first six months of fiscal 2012 or fiscal 2011.  Historically, we have utilized the Credit Facility only to open letters of credit.  The borrowing base at August 27, 2011 was $29.5 million.  As of August 27, 2011, we had open on-demand letters of credit in the amount of $1.0 million.  Accordingly, the availability of revolving credit loans under the Credit Facility was $28.5 million at August 27, 2011.

The Credit Facility contains certain restrictive covenants, including restrictions on incurring additional indebtedness and limitations on certain types of investments, as well as requiring the maintenance of certain financial covenants.  As of August 27, 2011, the most recent measurement date, we were in compliance with all financial covenants under the Credit Facility.

On June 29, 2011, we entered into the Sixth Amendment to the Credit Facility (the “Sixth Amendment”) with Wells Fargo.  The Sixth Amendment extended the maturity date of the Credit Facility by three years from June 30, 2011 to June 30, 2014.  In addition, the Sixth Amendment changed the interest calculation under the Credit Facility.  Previously, interest was calculated based on either the prime rate minus 0.25% or the one, three or six month London Interbank Market Offered Rate (“LIBOR”) based on the length of time the corresponding advance was outstanding.  Under the Sixth Amendment, interest is calculated based on the three-month LIBOR plus 2.0%, reset daily.

11

NOTE 7 — STOCK-BASED COMPENSATION

We account for stock-based compensation in accordance with the provisions of ASC 718-10, “Stock Compensation.” Under various plans, we may grant options to purchase common stock to employees and non-employee members of our Board of Directors at a price not less than 100% of the fair market value of our common stock on the option grant date.  In general, options granted to employees vest over three to five years and are exercisable up to ten years from the date of grant, and options granted to Directors generally vest over a three year period and are exercisable up to ten years from the grant date.

We may also grant shares of restricted stock to our employees and non-employee members of our Board of Directors.  The grantee cannot transfer the shares before the respective shares vest.  Shares of nonvested restricted stock are considered to be currently issued and outstanding.  Restricted stock grants to employees typically vest over a three year period, while restricted grants to Directors are fully vested on the date of grant.

Our restricted stock awards are generally subject to forfeiture if employment or service terminates prior to the lapse of the restrictions.  In addition, certain of our restricted stock awards have performance-based vesting provisions and are subject to forfeiture in whole or in part if these performance conditions are not achieved.  We assess, on an ongoing basis, the probability of whether the performance criteria will be achieved and, once it is deemed probable, we begin recognizing compensation expense over the relevant performance period.  For those awards not subject to performance criteria, we expense the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, on a straight-line basis over the vesting period.  The fair market value of our restricted stock is determined based on the closing price of our common stock on the grant date.

Total pre-tax compensation expense related to stock-based awards for each of the three months ended August 27, 2011 and August 28, 2010 was $1.0 million.   Total pre-tax compensation expense related to stock-based awards for each of the six months ended August 27, 2011 and August 28, 2010 was $1.6 million.

Methodology Assumptions

We use the Black-Scholes option-pricing model to value our stock options for grants to our employees and non-employee directors.  Using this option-pricing model, the fair value of each stock option award is estimated on the date of grant and is expensed on a straight-line basis over the vesting period, as the stock options are subject to pro-rata vesting.  The expected volatility assumption is based on the historical volatility of our stock over a term equal to the expected term of the option granted.  The expected term of stock option awards granted is derived from historical exercise experience and represents the period of time that awards are expected to be outstanding.  The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted.

The weighted average assumptions relating to the valuation of our stock options granted during the three and six month periods ended August 27, 2011 and August 28, 2010 were as follows:

	Three Months Ended				Six Months Ended
	August 27,		August 28,		August 27,		August 28,
	2011		2010		2011		2010
Expected dividend yield	3.91	%	2.73	%	3.92	%	3.02	%
Expected volatility	71.02	%	70.73	%	70.99	%	70.15	%
Risk-free interest rate	1.52	%	1.78	%	2.11	%	2.36	%
Expected term in years	5.0		5.0		5.0		4.9

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Stock-Based Compensation Activity

The following table presents a summary of our stock option activity for the six months ended August 27, 2011:

									Weighted
			Weighted		Aggregate				Average
	Number		Average		Intrinsic		Weighted		Remaining
	of		Exercise		Value		Average		Contractual
	Shares		Price		(in thousands)		Fair Value		Life
Outstanding, beginning of period	2,572,735		$	8.70	$	33	$	3.59
Vested	750,152		14.83		7		5.60
Unvested	1,822,583		6.18		26		2.76
Granted	457,541		6.25		—		2.84
Exercised	—		—		—		—
Canceled - vested (expired)	(45,783	)	18.37		—		6.43
Canceled - unvested (forfeited)	(30,190	)	7.00		—		3.12
Outstanding, end of period	2,954,303		8.19		33		3.43		8.18
Vested	810,778		13.76		13		5.29		5.10
Unvested	2,143,525		6.09		20		2.73		9.35
Exercisable, end of period	810,778		13.76		13		5.29		5.10

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on August 27, 2011.

The following table presents a summary of our restricted stock activity for the six months ended August 27, 2011:

	Number		Weighted
	of		Average
	Shares		Fair Value
Unvested, beginning of period	183,070		$	8.22
Granted	371,786		6.24
Vested	(136,188	)	6.93
Canceled - unvested (forfeited)	(66,854	)	8.78
Unvested, end of period	351,814		$	6.52

The total fair value of shares of restricted stock that vested during the six months ended August 27, 2011 and August 28, 2010 was approximately $0.9 million and $1.3 million, respectively.  As of August 27, 2011, there was approximately $4.0 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted average period of approximately 2.3 years.

NOTE 8 — INCOME TAXES

As of August 27, 2011, our liability for unrecognized tax benefits associated with uncertain tax positions was approximately $2.1 million and the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.3 million. We recognize interest and penalties related to unrecognized tax benefits as components of income tax expense. At August 27, 2011, we had accrued approximately $0.7 million for the potential payment of interest and penalties.

We are subject to U.S. federal income tax and the income tax of various state and local jurisdictions.  Fiscal years 2008 through 2011 remain subject to examination by the Internal Revenue Service.  With few exceptions, we are not subject to state income tax examination by tax authorities for taxable years prior to fiscal 2007.  At August 27, 2011, we had ongoing audits in various jurisdictions.  We do not believe that the resolution of these examinations will have a significant impact on our liability for unrecognized tax benefits.

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At August 27, 2011, we had a full valuation allowance against our net deferred tax assets.  Deferred income tax assets represent potential future income tax benefits.  Realization of these assets is ultimately dependent upon future taxable income.  We have incurred a net cumulative loss as measured by the results of the prior three years.  ASC 740 “Income Taxes,” requires that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is considered more likely than not that some or all of the recorded deferred tax assets will not be realized in a future period.  Forming a conclusion that a valuation allowance is not needed is difficult when negative evidence such as cumulative losses exists.  As a result of our evaluation, we have concluded that there is insufficient positive evidence to overcome the negative evidence related to our cumulative losses.  Accordingly, we have maintained the full valuation allowance against our net deferred tax assets established in the third quarter of fiscal 2011.  Recording the valuation allowance does not prevent us from using the deferred tax assets in the future when profits are realized.

As of August 27, 2011, we had federal and state net operating loss carryforwards which will reduce future taxable income.  Approximately $0.6 million in federal tax benefits are available from these loss carryforwards and an additional $0.5 million is available in tax credit carryforwards.  The state loss carryforwards will result in state tax benefits of approximately $0.4 million.  The federal net loss carryforwards expire in 2031.  The state net loss carryforwards will expire beginning in fiscal 2014 and in subsequent years.  Additionally, we have charitable contribution carryforwards that will expire in fiscal 2014.

NOTE 9 — EARNINGS PER SHARE

We calculate earnings per share under the guidance in ASC 260-10, “Earnings per Share,” which clarifies that unvested share-based payment awards that contain nonforfeitable rights to receive dividends or dividend equivalents (whether paid or unpaid) are considered participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”).  Participating securities under this statement include our unvested employee restricted stock awards with time-based vesting, which receive nonforfeitable dividend payments.

The calculation of EPS for common stock shown below excludes the income attributable to these unvested employee restricted stock awards from the numerator and excludes the dilutive impact of these shares from the denominator.

	Three Months Ended
	August 27,			August 28,
	2011			2010
Numerator (in thousands):
Net loss attributable to Christopher & Banks Corporation	$	(12,982	)	$	(2,538	)
Income allocated to participating securities	(14		)	(21		)
Net loss available to common shareholders	(12,996		)	(2,559		)
Denominator (in thousands):
Weighted average common shares outstanding - basic	35,520			35,354
Dilutive shares	—			—
Weighted average common and common equivalent shares outstanding - diluted	35,520			35,354
Net loss per common share:
Basic	$	(0.37	)	$	(0.07	)
Diluted	$	(0.37	)	$	(0.07	)

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	Six Months Ended
	August 27,			August 28,
	2011			2010
Numerator (in thousands):
Net income (loss) attributable to Christopher & Banks Corporation	$	(11,092	)	$	3,802
Income allocated to participating securities	(24		)	(38		)
Net income (loss) available to common shareholders	(11,116		)	3,764
Denominator (in thousands):
Weighted average common shares outstanding - basic	35,512			35,329
Dilutive shares	—			196
Weighted average common and common equivalent shares outstanding - diluted	35,512			35,525
Net income (loss) per common share:
Basic	$	(0.31	)	$	0.11
Diluted	$	(0.31	)	$	0.11

Stock options of approximately 2.9 million were excluded from the shares used in the computation of diluted earnings per share for the three and six month periods ended August 27, 2011 as they were anti-dilutive.  Stock options of approximately 1.6 million and 1.5 million were excluded from the shares used in the computation of diluted earnings per share for the three and six month periods ended August 28, 2010 as they were anti-dilutive.

NOTE 10 — FAIR VALUE MEASUREMENTS

Under ASC 820-10, “Fair Value Measurements and Disclosures,” fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.  ASC 820-10 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of us.  Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability that are developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels.  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.  Level 3 inputs are unobservable inputs for the asset or liability.  Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis:

For the six month periods ended August 27, 2011 and August 28, 2010, fair value under ASC 820-10 applied to our available-for-sale securities, ARS and ARS rights.  These financial assets are carried at fair value following the requirements of ASC 820-10.

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The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis (in thousands):

			Fair Value Measurements
	Fair Value at		Using Inputs Considered as
Description	August 27, 2011		Level 1		Level 2		Level 3
Short-term Investments
Available-for-sale securities:
Commercial paper	5,896		$	—	$	5,896	$	—
Municipal bonds	10,151		—		10,151		—
U.S. Agency securities	19,216		—		19,216		—
Total short-term investments	35,263		—		35,263		—
Long-term investments:
Available-for-sale securities:
Municipal bonds	19,210		—		19,210		—
U.S. Agency securities	4,596		—		4,596		—
Total long-term investments	23,806		—		23,806		—
Total assets	$	59,069	$	—	$	59,069	$	—

			Fair Value Measurements
	Fair Value at		Using Inputs Considered as
Description	February 26, 2011		Level 1		Level 2		Level 3
Short-term Investments
Available-for-sale securities:
Variable rate demand obligations	$	6,505	$	—	$	6,505	$	—
Commercial paper	5,791		—		5,791
Municipal bonds	16,132		—		16,132
U.S. Agency securities	4,632		—		4,632
Total short-term investments	33,060		—		33,060		—
Long-term investments:
Available-for-sale securities:
Municipal bonds	18,660		—		18,660		—
U.S. Agency securities	10,164		—		10,164		—
Total long-term investments	28,824		—		28,824		—
Total assets	$	61,884	$	—	$	61,884	$	—

			Fair Value Measurements
	Fair Value at		Using Inputs Considered as
Description	August 28, 2010		Level 1		Level 2		Level 3
Short-term investments:
Available-for-sale securities:
Variable rate demand obligations	$	28,320	$	—	$	28,320	$	—
Municipal commercial paper	1,000		—		1,000		—
Municipal bonds	23,096		—		23,096		—
U.S. Agency securities	5,815		—		5,815		—
Total short-term investments	58,231		—		58,231		—
Long-term investments:
Available-for-sale securities:
Municipal bonds	13,408		—		13,408		—
Total long-term investments	13,408		—		13,408		—
Total assets	$	71,639	$	—	$	71,639	$	—

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Following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value:

Available-for-sale securities:  As of August 27, 2011, February 26, 2011 and August 28, 2010 our available-for-sale securities were valued based on quoted prices for similar assets in active markets or quoted prices for identical or similar assets in markets in which there were fewer transactions.

Assets and Liabilities that are Measured at Fair Value on a Non-recurring Basis:

We measure certain assets and liabilities at fair value on a non-recurring basis.  Specifically, our nonfinancial long-lived asset groups are measured at fair value for impairment assessments.  There were no impairment charges related to assets measured at fair value on a non-recurring basis recorded during the three and six months ended August 27, 2011 and August 28, 2010.

NOTE 11 — COMPREHENSIVE INCOME

Comprehensive income consisted of the following (in thousands):

	Three Months Ended						Six Months Ended
	August 27,			August 28,			August 27,			August 28,
	2011			2010			2011			2010
Net income (loss)	$	(12,982	)	$	(2,538	)	$	(11,092	)	$	3,802
Fair value adjustment on investments	49			58			188			43
Total comprehensive income (loss)	$	(12,933	)	$	(2,480	)	$	(10,904	)	$	3,845

NOTE 12 — LEGAL PROCEEDINGS

We are subject, from time to time, to various claims, lawsuits or actions that arise in the ordinary course of business.  Although the amount of any liability that could arise with respect to any current proceedings cannot, in our opinion, be accurately predicted, the range of reasonably possible losses on these matters, individually and in the aggregate, is not expected to have a material adverse impact on our financial position, results of operations or liquidity.

NOTE 13 — SEGMENT REPORTING

We operate in the retail apparel industry in which we primarily design, source and sell women’s apparel and accessories catering to customers who are typically between 45 to 55 years of age.  We have identified two operating segments (Christopher & Banks and C.J. Banks) as defined by ASC 820, “Disclosures about Segments of an Enterprise and Related Information.”  Our Christopher & Banks and C.J. Banks operating segments have been aggregated into one reportable segment based on the similar nature of products sold, methods of sourcing, merchandising and distribution processes involved, target customers, and economic characteristics of the two brands.

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In the table below, the “Christopher & Banks/C.J. Banks” reportable segment includes activity generated by our Christopher & Banks and C.J. Banks operations.  The “Corporate/Administrative” column, which primarily represents operating activity at our corporate office and distribution center, is presented to allow for reconciliation of segment-level net sales, operating income and total assets to our consolidated net sales, operating income and total assets.  Segment operating income includes only net sales, merchandise gross margin and direct store expenses with no allocation of corporate overhead.

Segment Reporting (in thousands):

	Christopher & Banks/		Corporate/
	C.J. Banks		Administrative			Consolidated
Three Months Ended August 27, 2011
Net sales	$	96,230	$	—		$	96,230
Operating income (loss)	333		(13,278		)	(12,945		)
Total assets	131,723		103,056			234,779
Three Months Ended August 28, 2010
Net sales	$	101,340	$	—		$	101,340
Operating income (loss)	7,688		(12,113		)	(4,425		)
Total assets	149,673		111,138			260,811

Segment Reporting (in thousands):

	Christopher & Banks/		Corporate/
	C.J. Banks		Administrative			Consolidated
Six Months Ended August 27, 2011
Net sales	$	220,062	$	—		$	220,062
Operating income (loss)	15,375		(26,329		)	(10,954		)
Total assets	131,723		103,056			234,779
Six Months Ended August 28, 2010
Net sales	$	227,574	$	—		$	227,574
Operating income (loss)	32,490		(26,267		)	6,223
Total assets	149,673		111,138			260,811

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the consolidated financial statements and notes included in Item 1 of this Form 10-Q and the consolidated financial statements, notes and MD&A contained in our Annual Report on Form 10-K for the fiscal year ended February 26, 2011.

Executive Overview

Christopher & Banks Corporation, a Delaware corporation, is a Minneapolis-based retailer of women’s apparel and accessories, which operates retail stores through its wholly-owned subsidiaries.  As of August 27, 2011, we operated 770 stores in 46 states, including 503 Christopher & Banks stores, 238 C.J. Banks stores, 19 outlet stores and ten dual concept stores.  Our Christopher & Banks brand offers distinctive fashions featuring exclusively designed, coordinated assortments of women’s apparel in sizes four to 16.  Our C.J. Banks brand offers similar assortments of women’s apparel in sizes 14W to 26W.   Our dual concept and outlet stores offer an assortment of both Christopher & Banks and C.J. Banks apparel servicing the petite, missy and plus size customer in one location.  We also operate e-Commerce web sites for our two brands at www.christopherandbanks.com and www.cjbanks.com which, in addition to offering the apparel and accessories found in our stores, also offer exclusive sizes and styles available only online.

We strive to provide our customers quality apparel at a reasonable price with a consistent fit.  Our overall strategy for our two brands, Christopher & Banks and C.J. Banks, is to offer a compelling, evolving assortment of unique and classic apparel through our stores and e-Commerce web sites in order to satisfy our customers’ expectations for style, quality, value and fit, while providing exceptional, personalized customer service.

Fiscal 2012 Second Quarter Summary

The Company reported an 8% decrease in same-store sales and a loss of $0.37 per share for the second quarter of fiscal 2012.  Declines in customer traffic levels and conversion rates (the percentage of customers who enter our stores and make a purchase, as compared to the total number of customers entering our stores) contributed to the reduction in sales.  Promotional activity was increased during the quarter in an effort to drive customer traffic, increase transactions, lift customer conversion and clear slower moving product which resulted in reduced merchandise margins.  In addition, we continued our accelerated clearance markdown cadence in order to mark inventory out of stock on a more timely basis.

Our customers resisted increased prices, which were approximately 20% higher in the second quarter of fiscal 2012, compared to the second quarter of fiscal 2011.  However, customers did respond favorably to distinctive items which also provided versatile wardrobe options, but not enough of our product assortment reflected these characteristics in the second quarter.

We ended the first half of fiscal 2012 with cash, cash equivalents, and short and long-term investments of $95.8 million, compared to $109.4 million as of August 28, 2010.  Total inventory was $53.7 million at August 27, 2011, compared to $40.1 at August 28, 2010.  Total inventory per store excluding e-commerce inventory was up approximately 30% at the end of the second quarter when compared to the end of the second quarter of fiscal 2011, while in-store inventory per store was up approximately 13% on a dollar basis.  The increase in total inventory per store excluding e-commerce was partially due to an increase in inventory-in-transit at the end of the second quarter resulting from shifts in the timing of merchandise receipts and a change in terms for a few key suppliers from FOB destination to FOB shipping point.

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Fiscal 2012 Outlook

Based on the sales and margin performance we experienced through the end of the second quarter of fiscal 2012, coupled with our limited ability to make adjustments in merchandise costs and cancellations due to long lead times, we anticipate we will need to continue to be highly promotional in the second half of the year.  During the third quarter, the Company is planning two large promotional events, which will have a significant impact on the Company’s results for the quarter.  As a result, merchandise margins will continue to face increasing pressure in the second half of fiscal 2012 which will have a significant negative impact on our results of operations in the third and fourth quarters and the Company currently anticipates an operating loss in the range of $11 million to $14 million for the third fiscal quarter.

Other Developments

Our Board of Directors elected Lisa W. Pickrum to our Board of Directors effective June 1, 2011.  Effective July 27, 2011 Robert Ezrilov’s term as director ended and Mr. Ezrilov did not seek reelection and retired from the Board of Directors.  As of August 27, 2011, the Board of Directors consisted of eight directors, seven of whom are independent directors.

Fiscal 2012 Initiatives

As the Company entered fiscal 2012, it developed and began implementing several key initiatives, with the goal of returning the Company to sales growth and profitability over the long-term.  The key elements of the program included a merchandise revitalization plan, a more sales-centric culture, a comprehensive brand marketing campaign, E-commerce growth and a real estate strategy focused on outlet and dual store expansion.

Merchandise

The Company’s merchandising efforts continue to evolve as there was a disappointing customer response to some of the early fall assortment, particularly at full retail price.  We are reevaluating our merchandise assortments to more effectively balance style, quality and price.  We will continue to modify our offerings and strive to add uniqueness, versatility and value to our product assortments.  The Company continues to work with its product sourcing vendors to identify opportunities for cost savings and has begun to see some reduction in the costs of raw materials for goods to be delivered in early fiscal 2013.  We intend to maintain and enhance our commitment to offer quality merchandise to our customer at a reasonable price, while working to reduce the impact of merchandise cost increases.

Customer Experience

The Company has re-introduced a selling program that focuses on grassroots clientelling and improved product knowledge to promote a more focused selling culture.  In addition, the Company continues to evaluate, refine and add new visual elements to its stores presentation of merchandise and product outfitting options to promote sales.

Marketing

The Company anticipates spending between 1.5% and 1.7% of net sales on marketing in fiscal 2012.  The marketing efforts will continue to be focused on communicating with customers primarily through direct mail and targeted email campaigns.  Through the second fiscal quarter, the Company has delivered five direct mail pieces and anticipates five more for the remainder of fiscal 2012.  In the second fiscal quarter, the Company introduced a new brand look and feel with a goal of ensuring consistency in brand messaging.

E-commerce

Over the past few years, the Company has seen growth in its E-commerce sales and is focused on continuing to grow this business channel.  During the quarter, we have increased our promotional activity in the E-commerce channel to lift customer conversion and increase sales.  We continue to offer extended plus sizes and petites, plus dresses and outerwear.

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Real Estate

The Company is reevaluating its real estate strategy and in the second half of fiscal 2012 we are placing more focus on closing underperforming locations, converting and combining existing Christopher & Banks and C.J. Banks locations into more productive dual-concept stores, while reducing the number of new dual and outlet store openings. We opened 25 new stores in the first half of fiscal 2012, including one Christopher & Banks store, 16 outlet stores and eight dual stores. We closed 15 Christopher & Banks stores, 14 CJ Banks stores and one dual store, for a total of 30 store closures in the first half of the year. In the remainder of fiscal 2012, we plan to open four new outlet stores and four additional dual stores. We expect to close approximately 17 stores in the last two quarters of fiscal 2012 which will result in approximately 47 store closures for the year, which exceeds our original plan to close approximately 35 stores in fiscal 2012. The majority of the store closures in fiscal 2012 were executed in conjunction with lease expirations or early termination rights. The Company expects to operate 14 fewer stores at the end of fiscal 2012 as compared to the end of fiscal 2011. In addition, the Company currently plans to convert approximately 31 existing stand-alone Christopher & Banks stores into dual stores in the second half of fiscal 2012 in order to improve the productivity of these stores by supplementing their existing missy product assortments with petite and plus size merchandise.

Key Performance Indicators

Our management evaluates the following items, which are considered key performance indicators, in assessing our performance:

Same-store sales

Our same-store sales data is calculated based on the change in net sales for stores that have been open for more than 13 full months and includes stores, if any, that have been relocated within the same mall.  Stores where square footage has been changed by more than 25 percent are excluded from the same-store sales calculation for 13 full months.  In addition, stores which are closed and converted to a different store concept resulting in a significant change in the product mix are also excluded from the calculation of same-store sales for 13 full months.  Stores closed during the year are included in the same-store sales calculation only for the full months of the year the stores were open.  In addition, sales which are initiated in stores but fulfilled through our e-Commerce websites are included in the calculation of same store sales.

Management considers same-store sales to be an important indicator of our performance.  Same-store sales results are important in achieving leveraging of costs, including store payroll, store occupancy, depreciation and other general and administrative expenses.  Year-over-year increases in same-store sales contribute to greater leveraging of costs, while declining same-store sales contribute to deleveraging of costs.  Same-store sales results also have a direct impact on our total net sales, cash, cash equivalents, investments and working capital.

Merchandise, buying and occupancy costs

Merchandise, buying and occupancy costs, exclusive of depreciation and amortization, measure whether we are appropriately optimizing the price of our merchandise.  Merchandise, buying and occupancy costs include the cost of merchandise, markdowns, shrink, freight, buyer and distribution center salaries, buyer travel, rent and other occupancy-related costs, various merchandise design and development costs, miscellaneous merchandise expenses and other costs related to our distribution network.

Operating income

Our management views operating income as a key indicator of our success.  The key drivers of operating income are same-store sales, merchandise, buying and occupancy costs and our ability to control our other operating costs.

Store productivity

Store productivity measures are evaluated by management in assessing the operational performance of individual stores and include sales per square foot, average unit retail selling price, average number of transactions per store, number of units per transaction, average retail dollars per transaction, customer traffic and conversion rates.

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Inventory turnover

Our management evaluates inventory turnover as a measure of how productively inventory is bought and sold.  Inventory turnover is important as it can signal slow-moving inventory, which can be critical in determining the need to take markdowns on merchandise.

Cash flow and liquidity

Management evaluates free cash flow and cash flow from operations, investing activities and financing activities in determining the sufficiency of our cash position.  Cash flow from operations has historically been sufficient to provide for our uses of cash.  We expect our cash, cash equivalents and short and long-term investments, combined with cash flows from operations, to be sufficient to fund anticipated capital expenditures, working capital and other requirements for liquidity during fiscal 2012.

Critical Accounting Policies and Estimates

Our critical accounting policies are more fully described in Note 1 of the notes to consolidated financial statements contained within our Annual Report on Form 10-K for the fiscal year ended February 26, 2011.  There have been no material changes in our critical accounting policies or estimates in the six months ended August 27, 2011. Management’s discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

On an ongoing basis, we evaluate our estimates, including those related to customer product returns, inventories, income taxes, customer loyalty programs, medical and workers’ compensation claims and contingencies.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

We review long-lived assets with definite lives at least annually, or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.  While no impairments of long-lived assets were recorded in the six month period ended August 27, 2011, the current challenging economic environment, combined with continued instability in the housing and labor markets, and general economic uncertainty affecting the retail industry, make it reasonably possible that long-lived asset impairments could be identified and recorded in future periods.

As of August 27, 2011, we had a full valuation allowance against our net deferred tax assets.  Deferred income tax assets represent potential future income tax benefits.  Realization of these assets is ultimately dependent upon future taxable income.  We have incurred a net cumulative loss as measured by the results of the prior three years.  ASC 740 “Income Taxes,” requires that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is considered more likely than not that some or all of the recorded deferred tax assets will not be realized in a future period.  Forming a conclusion that a valuation allowance is not needed is difficult when negative evidence such as cumulative losses exists.  As a result of our evaluation, we have concluded that there is insufficient positive evidence to overcome the negative evidence related to our cumulative losses.  Accordingly, we have maintained the full valuation allowance against our net deferred tax assets established in the third quarter of fiscal 2011.  Recording the valuation allowance does not prevent us from using the deferred tax assets in the future when profits are realized.

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Results of Operations

The following table sets forth condensed consolidated income statement data expressed as a percentage of net sales for the periods indicated:

	Three Months Ended				Six Months Ended
	August 27,		August 28,		August 27,		August 28,
	2011		2010		2011		2010
Net sales	100.0		100.0		100.0		100.0
Merchandise, buying and occupancy costs	71.1		64.7		67.8		60.8
Selling, general and administrative expenses	35.9		33.3		31.8		30.7
Depreciation and amortization	6.5		6.3		5.4		5.7
Operating income (loss)	(13.5	)	(4.3	)	(5.0	)	2.8
Other income	0.1		0.1		0.1		0.1
Income tax provision (benefit)	0.1		(1.7	)	0.1		1.2
Net income (loss)	(13.5	)	(2.5	)	(5.0	)	1.7

Three Months Ended August 27, 2011 Compared to Three Months Ended August 28, 2010

Net Sales. Net sales for the three months ended August 27, 2011 were $96.2 million, a decrease of $5.1 million, or approximately 5%, from $101.3 million for the three months ended August 28, 2010.  The decrease in net sales resulted from an 8% decrease in same store sales combined with a decrease in the number of stores we operated during the quarter.  These reductions were partially offset by increases in revenues at our Christopher & Banks and C.J. Banks e-Commerce web sites.

The 8% decrease in same store sales was driven by a decline in customer traffic and average transaction values combined with a decrease in the number of transactions per store.  Average transactions values were down in the second quarter of fiscal 2012 as compared to the prior year period, as our customers purchased fewer units per transaction at a slightly higher average price per unit.

We operated 770 stores at August 27, 2011, compared to 789 stores as of August 28, 2010.

Merchandise, Buying and Occupancy Costs.  Merchandise, buying and occupancy costs, exclusive of depreciation and amortization, were $68.4 million, or 71.1% of net sales, during the second quarter of fiscal 2012, compared to $65.5 million, or 64.7% of net sales, during the same period in fiscal 2011, resulting in an approximate 640 basis point decrease in our gross margin.

Our merchandise margins decreased by approximately 550 basis points in the second quarter of fiscal 2012, when compared to the second quarter of fiscal 2011, driven mainly by elevated markdown levels and increased promotional activity necessary to drive customer traffic and clear slower moving product.  To a lesser extent, increases in product costs related to higher prices for cotton and synthetic fibers, along with increased production labor and transportation costs, also contributed to the merchandise margin erosion encountered in the second quarter of fiscal 2012.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses, exclusive of depreciation and amortization, for the three months ended August 27, 2011 were $34.5 million, or 35.9% of net sales, compared to $33.8 million, or 33.3% of net sales, for the three months ended August 28, 2010.  The approximate 2% increase in selling, general and administrative expenses primarily resulted from increases in marketing expenditures, e-commerce-related charges and store-related expenses offset by lower medical claims in the second quarter of fiscal 2012, compared to the second quarter of fiscal 2011.

Depreciation and Amortization.  Depreciation and amortization was $6.3 million, or 6.5% of net sales, in the second quarter of fiscal 2012, compared to $6.4 million, or 6.3% of net sales, in the second quarter of fiscal 2011.

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Operating Income.  As a result of the foregoing factors, we recorded an operating loss of $12.9 million, or 13.5% of net sales, for the quarter ended August 27, 2011, compared to an operating loss of $4.4 million, or 4.3% of net sales, for the quarter ended August 28, 2010.

Other Income.  For the three months ended August 27, 2011, interest income was $76,000, compared to $127,000 for the three months ended August 28, 2010.  Other income for the second quarter of fiscal 2011 included $50,000 of gains related to the disposition of our Auction Rate Securities.

Income Taxes.  Income tax expense in the second quarter of fiscal 2012 was $0.1 million, with an effective tax rate of -0.9%, compared to income tax benefit of $1.8 million, with an effective tax rate of 40.9%, in the second quarter of fiscal 2011.  Our negative effective tax rate in the second quarter of fiscal 2012 resulted from state income taxes and reflects the ongoing impact of the full valuation allowance on our net deferred tax assets.

Net Loss.  As a result of the foregoing factors, we recorded a net loss of $13.0 million, or 13.5% of net sales and $0.37 per diluted share, for the three months ended August 27, 2011, compared to a net loss of $2.5 million, or 2.5% of net sales and $0.07 per diluted share, for the three months ended August 28, 2010.

Six Months Ended August 27, 2011 Compared to Six Months Ended August 28, 2010

Net Sales. Net sales for the six months ended August 27, 2011 were $220.1 million, a decrease of $7.5 million, or approximately 3%, from $227.6 million for the six months ended August 28, 2010.  The decrease in net sales resulted from a 5% decrease in same store sales combined with a decrease in the number of stores we operated during the first half of the year.  These reductions were partially offset by increases in revenues at our Christopher & Banks and C.J. Banks e-Commerce web sites.

The 5% decrease in same stores sales was driven by a decline in customer traffic and the number of transactions per store combined with a decrease in average transaction values.  Average transactions values were down in the first half of fiscal 2012 as compared to the prior year period as our customers purchased fewer units per transaction at a slightly higher average price per unit.

We operated 770 stores at August 27, 2011, compared to 789 stores as of August 28, 2010.

Merchandise, Buying and Occupancy Costs.  Merchandise, buying and occupancy costs, exclusive of depreciation and amortization, were $149.2 million, or 67.8% of net sales, during the first half of fiscal 2012, compared to $138.4 million, or 60.8% of net sales, during the same period in fiscal 2011, resulting in an approximate 700 basis point decrease in our gross margin.

Our merchandise margins decreased by approximately 670 basis points in the first half of fiscal 2012, when compared to the first half of fiscal 2011, driven mainly by elevated markdown levels and increased promotional activity necessary to drive customer traffic and clear slower moving product.  To a lesser extent, increases in product costs related to higher prices for cotton and synthetic fibers, along with increased production labor and transportation costs, also contributed to the merchandise margin erosion encountered in the first half of fiscal 2012.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses, exclusive of depreciation and amortization, for the six months ended August 27, 2011 were $69.9 million, or 31.8% of net sales, compared to $70.0 million, or 30.7% of net sales, for the six months ended August 28, 2010.  Increases in marketing expenditures and store salaries expense were offset by savings in medical claims and severance charges during the first half of fiscal 2012 compared to the first half of fiscal 2011.

Depreciation and Amortization.  Depreciation and amortization was $11.9 million, or 5.4% of net sales, in the first half of fiscal 2012, compared to $13.0 million, or 5.7% of net sales, in the first half of fiscal 2011.  The decrease in depreciation and amortization is primarily the result of operating fewer stores and the impairment of store assets recorded in the fourth quarter of fiscal 2011.

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Operating Income.  As a result of the foregoing factors, we recorded an operating loss of $11.0 million, or 5% of net sales, for the six months ended August 27, 2011, compared to operating income of $6.2 million, or 2.8% of net sales, for the six months ended August 28, 2010.

Other Income.  For the six months ended August 27, 2011, interest income was $155,000, compared to $243,000 for the six months ended August 28, 2010.  Other income for the first half of fiscal 2011 included $50,000 of gain related to the disposition of our Auction Rate Securities.

Income Taxes.  Income tax expense in the first half of fiscal 2012 was $0.3 million, with an effective tax rate of -2.7%, compared to income tax expense of $2.7 million, with an effective tax rate of 41.2%, in the first half of fiscal 2011.  Our negative effective tax rate in the first half of fiscal 2012 resulted from state income taxes and reflects the ongoing impact of the full valuation allowance on our net deferred tax assets.

Net Income (Loss).  As a result of the foregoing factors, we recorded a net loss of $11.1 million, or 5% of net sales and $0.31 per diluted share, for the six months ended August 27, 2011, compared to net income of $3.8 million, or 1.7% of net sales and $0.11 per diluted share, for the six months ended August 28, 2010.

Liquidity and Capital Resources

Our principal on-going cash requirements are to fund working capital needs, such as purchasing merchandise inventory, financing the construction of new stores and remodeling certain existing stores and making information technology-related and other capital expenditures.  Merchandise purchases vary on a seasonal basis, typically peaking in the fall.  As a result, our cash requirements historically reach their peak in October or November, during our third fiscal quarter.  Conversely, our cash balances peak in January, during our fourth fiscal quarter, after the holiday season is completed.

Net cash provided by operating activities

Net cash provided by operating activities totaled $2.7 million in the first six months of fiscal 2012, a decrease of approximately $1.4 million from $4.1 million in the first six months of fiscal 2011.  The decrease was primarily the result of a decrease in net earnings in the first half of fiscal 2012, compared to the first half of fiscal 2011, offset by fluctuations in our working capital accounts.  We reported a net loss of $11.1 million for the six months ended August 27, 2011, compared to net income of $3.8 million for the six months ended August 28, 2010.

Significant fluctuations in our working capital accounts in the first half of fiscal 2012 included a $14.5 million increase in inventory and a $16.5 million increase in accounts payable.  The increases in inventory and accounts payable were a result of seasonal fluctuations in inventory levels combined with a change in our merchandise vendor terms for several key suppliers from FOB destination to FOB shipping point.  The shift in terms resulted in an increase in inventory-in-transit and accounts payable of approximately $4.2 million at the end of the second quarter of fiscal 2012, compared to the end of the second quarter of fiscal 2011.

The remainder of the change in cash provided by operating activities was substantially the result of the net loss realized during the first six months of fiscal 2012, after adjusting for non-cash charges, including depreciation and amortization expense and stock-based compensation expense, and various changes in our other operating assets and liabilities.

Net cash provided by (used in) investing activities

Net cash used in investing activities totaled $5.2 million for the first half of fiscal 2012, a change of $5.8 million from cash provided by investing activities of $0.6 million during the first half of fiscal 2011.  Net cash used in investing activities in the first six months of fiscal 2012 consisted of $8.2 million of capital expenditures which funded 25 new store openings during the first half of fiscal 2012 partially offset by $3.0 million of net sales of investments.

We expect to fund approximately $8 million of additional capital expenditures in the second half of fiscal 2012.  During the balance of the year we plan to open approximately four new outlet stores and four new dual stores.  We also plan to convert 31 existing Christopher & Banks stores into dual stores,.  In addition, we expect that a portion of these capital expenditures will relate to stores with planned openings in the first quarter of fiscal 2013.

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Net cash used in financing activities

Cash used in financing activities totaled $4.4 million for the six month period ended August 27, 2011, an increase of $0.4 million from $4.0 million of cash used in financing activities for the six month period ended August 28, 2010.  In the first six months of fiscal 2012, approximately $4.3 million was used in financing activities for the payment of two quarterly cash dividends.

We anticipate that our cash, cash equivalents and short and long-term investments, combined with cash flows from operations, will be sufficient to meet our capital expenditure, working capital and other requirements for liquidity in fiscal 2012.

Credit facility

We maintain an Amended and Restated Revolving Credit Facility (the “Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”).  The Credit Facility provides us with revolving credit loans and letters of credit of up to $50 million, in the aggregate, subject to a borrowing base formula based on inventory levels.

Interest under the Credit Facility is payable monthly in arrears.  The Credit Facility carries a facility fee of 0.25%, based on the unused portion as defined in the agreement, a collateral monitoring fee and a guaranteed service charge.  Borrowings under the Credit Facility are collateralized by our equipment, intangible assets, inventory, inventory letters of credit and letter of credit rights.  We had no revolving credit loan borrowings under the Credit Facility during the first six months of fiscal 2012 or fiscal 2011.  Historically, we have utilized the Credit Facility only to open letters of credit.  The borrowing base at August 27, 2011 was $29.5 million.  As of August 27, 2011, we had open on-demand letters of credit in the amount of $1.0 million.  Accordingly, the availability of revolving credit loans under the Credit Facility was $28.5 million at August 27, 2011.

The Credit Facility contains certain restrictive covenants, including restrictions on incurring additional indebtedness and limitations on certain types of investments, as well as requiring the maintenance of certain financial covenants.  As of August 27, 2011, the most recent measurement date, we were in compliance with all financial covenants under the Credit Facility.

On June 29, 2011, we entered into the Sixth Amendment to the Credit Facility (the “Sixth Amendment”) with Wells Fargo.  The Sixth Amendment extended the maturity date of the Credit Facility by three years from June 30, 2011 to June 30, 2014.  In addition, the Sixth Amendment changed the interest calculation under the Credit Facility.  Previously, interest was calculated based on either the prime rate minus 0.25% or the one, three or six month London Interbank Market Offered Rate (“LIBOR”) based on the length of time the corresponding advance was outstanding.  Under the Sixth Amendment, interest is calculated based on the three-month LIBOR rate plus 2.0%, reset daily.

Merchandise Sourcing

We directly imported approximately 10% and 7% of our total merchandise purchases in the six month periods ended August 27, 2011 and August 28, 2010, respectively.  Substantially all of our remaining merchandise purchases were made from U.S. based companies which import the goods from overseas.  This reliance on sourcing from foreign countries may cause us to be exposed to certain risks as indicated below and as discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended February 26, 2011.

Import restrictions, including tariffs and quotas, and changes in such restrictions, could affect the import of apparel and might result in increased costs, delays in merchandise receipts or reduced supplies of apparel available to us, and could have an adverse effect on our financial condition, results of operations and liquidity.  Our merchandise flow could also be adversely affected by political instability in any of the countries where our merchandise is manufactured or by changes in the United States’ governmental policies toward such foreign countries.  In addition, merchandise receipts could be delayed due to interruptions in air, ocean and ground shipments.

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We do not have long-term purchase commitments or arrangements with any of our suppliers or agents.  During the quarter ended August 27, 2011, one of our vendors supplied approximately 19% of our merchandise compared to 28% of our total merchandise purchases during the second quarter of fiscal 2011.  No other vendor supplied greater than 10% of our total merchandise purchases during the second quarter of fiscal 2012.  A second vendor supplied approximately 17% of our merchandise purchases during the second quarter of fiscal 2011.  For the six months ended August 27, 2011, the Company purchased approximately 20% of its merchandise from one vendor and 11% from another vendor, compared to 29% and 18% from these two vendors, respectively, during the first six months of fiscal 2011.

Although we have strong relationships with these vendors, there can be no assurance that these relationships can be maintained in the future or that the vendors will continue to supply merchandise to us.  If there should be any significant disruption in the supply of merchandise from these vendors, management believes that it will be able to shift production to other suppliers so as to continue to secure the required volume of product.  Nevertheless, it is possible that any significant disruption in supply could have a material adverse impact on our financial position or results of operations.

Quarterly Results and Seasonality

Our quarterly results may fluctuate significantly depending on a number of factors, including general economic conditions, timing of promotional events and new store openings, adverse weather conditions, shifts in the timing of certain holidays and customer response to our seasonal merchandise mix.

Inflation

In the first half of fiscal 2012, our merchandise costs were impacted by higher prices for cotton and synthetic fibers, along with increased production labor and transportation costs.  In addition, improvements in quality, construction and fit also resulted in higher product costs.  While we passed some of these price increases on to our customers in fiscal 2012, there was resistance to the higher prices.  As a result, we intend to increase our efforts in the second half of the year to provide quality merchandise to our customers at an attractive price, which likely will result in continued pressure on merchandise margins.

Management does not believe that inflation had a material effect on our results of operations for the first half of fiscal 2011.

Forward-Looking Statements

We may make forward-looking statements reflecting our current views with respect to future events and financial performance.  These forward-looking statements, which may be included in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including this Quarterly Report on Form 10-Q, in press releases and in other documents and materials as well as in written or oral statements made by or on behalf of the Company, are subject to certain risks and uncertainties, including those discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 26, 2011, which could cause actual results to differ materially from historical results or those anticipated.

The words or phrases “will likely result,” “are expected to,” “will continue,” “estimate,” “project,” “believe,” “expect, “ “anticipate,” “forecast,” “plans to,” “intend,” “intends” and similar expressions are intended to identify forward-looking statements within the meaning of Section 21e of the Exchange Act and Section 27A of the Securities Act of 1933, as amended, as enacted by the Private Securities Litigation Reform Act of 1995 (“PSLRA”).  In particular, we desire to take advantage of the protections of the PSLRA in connection with the forward-looking statements made in this Quarterly Report on Form 10-Q.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date such statements are made.  In addition, we wish to advise readers that the factors listed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 26, 2011, as well as other factors, could affect our performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed about such future performance or results.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates.  Our results of operations could be negatively impacted by decreases in interest rates on our investments.

We are potentially exposed to market risk from changes in interest rates relating to our Credit Facility with Wells Fargo Bank.  Loans under the Credit Facility bear interest at the 3-month London Interbank Market Offered Rate (“LIBOR”) plus 2.0%.  However, we had no revolving credit loan borrowings under the Credit Facility during the first six months of fiscal 2012 or fiscal 2011.  Given our existing liquidity position, we do not expect to utilize the Credit Facility in the reasonably foreseeable future other than to use letters of credit to support the import of merchandise.  The credit facility was amended on June 29, 2011 (see note 6 to the condensed consolidated financial statements).

We enter into certain purchase obligations outside the United States, which are denominated and settled in U.S. dollars.  Therefore, we have only minimal exposure to foreign currency exchange risks.  We do not hedge against foreign currency risks and believe that our foreign currency exchange risk is immaterial.

We do not have any derivative financial instruments and do not hold any derivative financial instruments for trading purposes.

ITEM 4.

CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness and design of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in applicable rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

(b)Internal Control Over Financial Reporting.

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended August 27, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are subject, from time to time, to various claims, lawsuits or actions that arise in the ordinary course of business.  Although the amount of any liability that could arise with respect to any current proceedings cannot, in our opinion, be accurately predicted, the range of reasonably possible losses on these matters, individually and in the aggregate, is not expected to have a material adverse impact on our financial position, results of operations or liquidity.

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ITEM 1A.

RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the following risk factor which could materially affect our business, financial condition or future results.  We have updated the risk factor discussion to reflect changes during the six months ended August 27, 2011 in addition to the risk factors set forth in and more fully described in our Annual Report on Form 10-K for the fiscal year ended February 26, 2011 and in other reports filed with the Securities and Exchange Commission.

Additional risks and uncertainties that are not currently known or currently deemed immaterial may also adversely affect the business, financial condition, or future results of the Company.

If we are unable to anticipate or react to changing consumer preferences in a timely manner and offer a compelling product at an acceptable price, our sales, gross margins and results of operations could be adversely impacted.

Forecasting consumer demand for our merchandise is difficult.  Our success largely depends on our ability to consistently gauge and respond on a timely basis to fashion trends and provide a balanced assortment of merchandise at a compelling price that results in sales at a healthy merchandise margin.  Customer tastes and fashion trends change rapidly.  In addition, our merchandise assortment differs from season to season and at any given time our assortment may not resonate with our customers.  On average, we begin the design process for apparel six to eight months before the merchandise is available to customers, and we typically begin to make purchase commitments four to six months in advance of delivery to stores.  These lead times make it difficult for us to respond quickly to changes in the demand for our products or to adjust the cost of the product in response to customers’ fashion or price preferences.  Any missteps may affect merchandise desirability, gross margins and inventory levels.  Our failure to anticipate, identify or react appropriately in a timely manner to changes in customers’ preferences could lead to lower sales, missed opportunities and higher inventories.  This in turn could lead to more frequent and larger markdowns, which could result in lower sales and gross margins, reduce our profits and negatively impact our results of operations.

ITEM 2.

UNREGISTERED SALES OF EQUITY

SECURITIES AND USE OF PROCEEDS

				Total Number	Approximate
				of Shares	Dollar Value
				Purchased as	of Shares that May
	Total Number	Average		Part of Publicly	Yet Be Purchased
	of Shares	Price Paid		Announced Plans	Under the Plans
Period	Purchased (1)	per Share		or Programs	or Programs
May 29, 2011-June 25, 2011	719	$	5.52	—	—
June 26, 2011-July 30, 2011	678	$	6.44	—	—
July 30, 2011-August 27, 2011	—	$	—	—	—
	1,397	$	5.97	—	—

(1)The shares of common stock in this column represent shares that were surrendered to us by stock plan participants in order to satisfy withholding tax obligations related to restricted stock awards.

29

ITEM 3.

DEFAULTS UPON

SENIOR SECURITIES

None.

ITEM 4.

(REMOVED AND RESERVED)

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

3.1	Restated Certificate of Incorporation of Christopher & Banks Corporation (incorporated herein by reference to Exhibit 4.1 to Registration Statement on Form S-8 (Registration No. 333-174509) filed on May 26, 2011)
10.3*	Form of Indemnification Agreement between Christopher & Banks Corporation, its directors and certain of its executive officers
10.4*	Christopher & Banks Corporation Non-Employee Director Deferred Stock Plan
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS^	XBRL Instance
101.SCH^	XBRL Taxonomy Extension Schema
101.CAL^	XBRL Taxonomy Extension Calculation
101.DEF^	XBRL Taxonomy Extension Definition
101.LAB^	XBRL Taxonomy Extension Label
101.PRE^	XBRL Taxonomy Extension Presentation

*Filed with this report.

^ Pursuant to rule 406T of Regulation S-T, these interactive data files are demmed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability under these sections.

30

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.

	CHRISTOPHER & BANKS CORPORATION
Dated: October 6, 2011	By	/s/ LARRY C. BARENBAUM
		Larry C. Barenbaum
		President and Chief Executive Officer
		(Principal Executive Officer)
Dated: October 6, 2011	By	/s/ MICHAEL J. LYFTOGT
		Michael J. Lyftogt
		Senior Vice President,
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

31

CHRISTOPHER & BANKS CORPORATION

QUARTERLY REPORT ON FORM 10-Q

INDEX TO EXHIBITS

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of Christopher & Banks Corporation (incorporated herein by reference to Exhibit 4.1 to Registration Statement on Form S-8 (Registration No. 333-174509) filed on May 26, 2011)
10.3*	Form of Indemnification Agreement between Christopher & Banks Corporation, its directors and certain of its executive officers
10.4*	Christopher & Banks Corporation Non-Employee Director Deferred Stock Plan
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS^	XBRL Instance
101.SCH^	XBRL Taxonomy Extension Schema
101.CAL^	XBRL Taxonomy Extension Calculation
101.DEF^	XBRL Taxonomy Extension Definition
101.LAB^	XBRL Taxonomy Extension Label
101.PRE^	XBRL Taxonomy Extension Presentation

* Filed with this report.

^ Pursuant to rule 406T of Regulation S-T, these interactive data files are demmed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability under these sections.

32

EX-10.3

Exhibit 10.3

CHRISTOPHER & BANKS CORPORATION

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is effective as of                        , by and between Christopher & Banks Corporation, a Delaware corporation (the “Company”), and                       (“Indemnitee”).

RECITALS

A.The Company recognizes that competent and experienced persons are increasingly reluctant to serve or to continue to serve as directors and officers of corporations unless they are protected by comprehensive liability insurance or indemnification, or both, due to the increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure to or risks of shareholder claims or litigation frequently bears no reasonable relationship to the compensation of such directors and officers;

B.The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors and officers with adequate, reliable information as to the legal risks to which they are exposed or regarding the proper course of action to take;

C.The Company and Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal financial resources of individual directors and officers;

D.The Company believes that it is unfair for its directors and officers to assume the risk of huge judgments and other expenses which may occur in cases in which the director and officer received no personal profit and in cases where the director or officer was not culpable;

E.The Company, after reasonable investigation, has determined that the liability insurance coverage presently available to the Company may be inadequate in certain circumstances to cover all possible claims for which Indemnitee would be protected. The Company believes that the interests of the Company and its stockholders would be best served by a combination of such insurance and the indemnification by the Company of the directors and officers of the Company;

F.The Company’s Certificate of Incorporation and Bylaws require the Company to indemnify its directors and officers to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”).  The Bylaws expressly provide that the indemnification provisions set forth therein are not exclusive, and contemplate that contracts may be entered into between the Company and its directors and officers with respect to indemnification;

G.Section 145 of DGCL (“Section 145”), under which the Company is organized, empowers the Company to indemnify its officers, directors, employees and agents by agreement and to indemnify persons who serve, at the request of the Company, as the directors, officers,

1

employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive;

H.Section 102(b)(7) of the DGCL allows a corporation to include in its certificate of incorporation a provision limiting or eliminating the personal liability of a director for monetary damages in respect of claims by shareholders or corporations for breach of certain fiduciary duties, and the Company has so provided in its Certificate of Incorporation that each director shall be exculpated from such liability to the maximum extent permitted by law;

I.The Board of Directors of the Company has determined that contractual indemnification as set forth herein is not only reasonable and prudent but also promotes the best interests of the Company and its stockholders;

J.The Company desires and has requested Indemnitee to serve or continue to serve as a director or officer of the Company free from undue concern for unwarranted claims for damages arising out of or related to such services to the Company; and

K.Indemnitee is willing to serve, continue to serve or to provide additional service for or on behalf of the Company on the condition that Indemnitee is furnished the indemnity provided herein.

NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.

1.Certain Definitions.

a.“Change in Control” shall mean, and shall be deemed to have occurred if, on or after the date of this Agreement, (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company’s then outstanding Voting Securities, (ii) during any period of 24 consecutive, full-calendar months, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of such 24-month period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the

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Company (in one transaction or a series of related transactions) of all or substantially all of the Company’s assets.

b.“Claim” shall mean with respect to a Covered Event, any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other.

c.References to the “Company” shall include, in addition to Christopher & Banks Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which Christopher & Banks Corporation (or any of its wholly owned Subsidiaries) is a party which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

d.“Covered Event” shall mean any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any Subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity.

e.“Expenses” shall mean any and all expenses (including attorneys’ fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) of any Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement.

f.“Expense Advance” shall mean a payment of Expenses to Indemnitee pursuant to Section 3 in advance of the settlement of or final judgment in any action, suit, proceeding or alternative dispute resolution mechanism, hearing, inquiry or investigation that constitutes a Claim.

g.“Independent Legal Counsel” shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(d) hereof, who shall not have otherwise performed services for the Company or one or more indemnitees (including Indemnitee) within the last two years (other than acting as an Independent Legal Counsel in accordance with the terms of this Agreement).

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h.References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

i.“Reviewing Party” shall mean, subject to the provisions of Section 2(d), any person or body appointed by the Board of Directors in accordance with applicable law to review the Company’s obligations hereunder and under applicable law, which may include (i) a majority of the directors who are not parties to such action, suit or proceeding, even though less than a quorum or (ii) a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by Independent Legal Counsel designated in writing by such directors or the Board of Directors.

j.“Section” refers to a section of this Agreement unless otherwise indicated.

k.“Subsidiary” shall mean a corporation or other entity (i) 50% or more of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but 50% or more of whose ownership interest representing the right to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company, or one or more Subsidiaries.

l.“Voting Securities” shall mean any securities of the Company that vote generally in the election of directors.

2.Indemnification.

a.Indemnification of Expenses.  Subject to the provisions of Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant with respect to, or is threatened to be made a party to or witness or other participant with respect to, any Claim, including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses.

b.Review of Indemnification Obligations.  Notwithstanding the foregoing, in the event any Reviewing Party shall have determined, in good faith ( and in a written opinion, in any case in which Independent Legal Counsel is the Reviewing Party), that Indemnitee is not entitled to be indemnified hereunder, whether pursuant to Section 11 or otherwise, (i) the Company shall have no further obligation under Section 2(a) to make any payments to

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Indemnitee not made prior to such determination by such Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder; provided, however, that if the Reviewing Party’s determination is based on Section 11(a) hereof and Indemnitee has commenced or thereafter commences a legal proceeding or proceedings in a court of competent jurisdiction to secure a determination that Indemnitee is entitled to be indemnified hereunder under applicable law, any determination made by any Reviewing Party that Indemnitee is not entitled to be indemnified shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expenses theretofore paid in indemnifying Indemnitee until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed).  Indemnitee’s obligation to reimburse the Company for any Expenses shall be unsecured and no interest shall be charged thereon unless and until a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is required to reimburse the Company, after which the Company may charge interest from the date of such determination at such rates as are permitted by applicable law.

c.Indemnitee Rights on Unfavorable Determination; Binding Effect.  If any Reviewing Party determines that Indemnitee substantively is not entitled to be indemnified hereunder in whole or in part, Indemnitee shall have the right to commence litigation seeking an initial determination by the court challenging any such determination by such Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and, subject to the provisions of Section 17, the Company hereby consents to service of process and to appear in any such proceeding and to use its reasonable efforts to cause the Reviewing Party to cooperate with respect to such proceeding.  Absent such litigation, any determination by any Reviewing Party shall be conclusive and binding on the Company and Indemnitee.

d.Selection of Reviewing Party; Change in Control.  If there has not been a Change in Control (or, there has been a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control), any Reviewing Party shall be selected by the Board of Directors.  If there has been a Change in Control (other than a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control), any Reviewing Party with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnification of Expenses under this Agreement or any other agreement or under the Company’s Certificate of Incorporation (or articles of incorporation in the case of a Subsidiary incorporated in a state other than Delaware) or Bylaws as now or hereafter in effect, or under any other applicable law, if desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld or delayed).  Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be entitled to be indemnified hereunder under applicable law, and the Company agrees to abide by such opinion.  The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or the engagement of such counsel pursuant hereto.  Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of

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more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the employment of separate counsel by one or more Indemnitees has been previously authorized by the Company in writing, or (ii) an Indemnitee shall have provided to the Company a written statement that such Indemnitee has reasonably concluded that there may be a conflict of interest between such Indemnitee and the other Indemnitees with respect to the matters arising under this Agreement.

e.Mandatory Payment of Expenses.  Notwithstanding any other provision of this Agreement other than Section 11 hereof, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any Claim, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith.

3.Expense Advances.

a.Obligation to Make Expense Advances.  Upon receipt of a written undertaking by or on behalf of the Indemnitee to repay such amounts if it shall ultimately be determined in accordance with Section 2 that the Indemnitee is not entitled to be indemnified therefor by the Company hereunder under applicable law, the Company shall make Expense Advances to Indemnitee.

b.Form of Undertaking.  Any obligation to repay any Expense Advances hereunder pursuant to a written undertaking by the Indemnitee shall be unsecured and no interest shall be charged thereon unless and until a court having jurisdiction in such matter has finally judicially determined (as to which determination all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is so obligated, after which the Company may charge interest from the date of such determination at such rates as are permitted by applicable law.

c.Determination of Reasonable Expense Advances.  The parties agree that, for the purposes of any Expense Advance for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such Expense Advance that are certified by affidavit of Indemnitee’s counsel as being reasonable shall be presumed conclusively to be reasonable.

4.Procedures for Indemnification and Expense Advances.

a.Timing of Payments.  All payments of Expenses (including without limitation Expense Advances) by the Company to the Indemnitee pursuant to this Agreement shall be made to the fullest extent permitted by law as soon as practicable after written demand by Indemnitee therefor is presented to the Company, but in no event later than thirty (30) business days after such written demand by Indemnitee is presented to the Company, except in the case of Expense Advances, which shall be made no later than ten (10) business days after such written demand by Indemnitee is presented to the Company.

b.Notice/Cooperation by Indemnitee.  Indemnitee shall, as a condition precedent to Indemnitee’s right to be indemnified or Indemnitee’s right to receive Expense Advances under this Agreement, give the Company notice in writing as soon as practicable of

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any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement.  Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee).  In addition, Indemnitee shall give the Company such information and cooperation as the Company may reasonably require and as shall be within Indemnitee’s power.  Indemnitee shall also not make any admission or enter into or otherwise agree to any settlement with respect to any Claim without the consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed).

c.No Presumptions; Burden of Proof.  For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or upon a plea of nolo contendere or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by this Agreement or applicable law.  In addition, neither the failure of any Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by any Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under this Agreement under applicable law, shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief.  In connection with any determination by any Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder under applicable law, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

d.Notice to Insurers.  If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies.

e.Selection of Counsel.  In the event the Company shall be obligated hereunder to provide indemnification for or make any Expense Advances with respect to the Expenses of any Claim, the Company, if appropriate, shall be entitled to assume the defense of such Claim upon the delivery to Indemnitee of written notice of the Company’s election to do so.  The Company shall be entitled to select legal counsel for purposes of such defense and shall consult with Indemnitee regarding the selection of counsel.  After delivery of such notice and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently retained by or on behalf of Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee’s separate counsel in any such Claim at Indemnitee’s expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and

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expenses of Indemnitee’s separate counsel shall be Expenses for which Indemnitee may receive indemnification or Expense Advances hereunder.

5.Additional Indemnification Rights:  Nonexclusivity.

a.Scope.  In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware (or such other state, in the case of a Subsidiary incorporated in a state other than Delaware) corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change.  In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware (or such other state, in the case of a Subsidiary incorporated in a state other than Delaware) corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder, except as otherwise set forth in Section 11(a).

b.Nonexclusivity.  Subject to Section 7, the indemnification and the payment of Expense Advances provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company’s Certificate of Incorporation (or articles of incorporation in the case of a Subsidiary incorporated in a state other than Delaware), its Bylaws, any other agreement, any vote of stockholders or disinterested directors, the Delaware General Corporation Law (or such other state’s applicable business corporation law, in the case of a Subsidiary incorporated in a state other than Delaware), or otherwise.  The indemnification and the payment of Expense Advances provided under this Agreement shall continue as to \Indemnitee for any action taken or not taken while serving in an indemnified capacity even though subsequent thereto Indemnitee may have ceased to serve in such capacity.

6.Settlement.  The Company shall have no obligation to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Claim effected without the Company’s prior written consent.  The Company shall not settle any Claim in which it takes the position that Indemnitee is not entitled to indemnification in connection with such settlement without the prior written consent of Indemnitee, nor shall the Company settle any Claim in any manner which would impose any fine, penalty or any obligation on Indemnitee, without Indemnitee’s prior written consent.  Neither the Company nor Indemnitee shall unreasonably withhold, condition or delay their consent to any proposed settlement.

7.No Duplication of Payments.  The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company’s Certificate of Incorporation, any applicable Subsidiary’s articles of incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.

8.Partial Indemnification.  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company

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shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

9.Mutual Acknowledgment.  Both the Company and Indemnitee acknowledge that, in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise.  Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s ability under public policy to indemnify Indemnitee.

10.Liability Insurance.  To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary.

11.Exceptions.  Notwithstanding any other provision of this Agreement, the Company shall not be obligated pursuant to the terms of this Agreement:

a.Indemnification Prohibited by Law.  To indemnify or make Expense Advances to Indemnitee with respect to Claims arising out of acts, omissions or transactions for which Indemnitee is prohibited from receiving indemnification under applicable law.

b.Fraud, Willful Misconduct or Crime.  To indemnify or make Expense Advances to Indemnitee with respect to Claims arising out of acts, omissions or transactions (i) that a court having jurisdiction in such matter has finally judicially determined (as to which determination all rights of appeal therefrom have been exhausted or lapsed) constitute fraud or willful misconduct by Indemnitee; (ii) that Indemnitee has admitted in writing or under testimony constitute fraud or willful misconduct by Indemnitee; or (iii) for which Indemnitee has been convicted of a crime related to the Claim.

c.Claims Initiated by Indemnitee.  To indemnify or make Expense Advances to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i) with respect to actions or proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company’s Certificate of Incorporation (or articles of incorporation in the case of a Subsidiary incorporated in a state other than Delaware) or Bylaws now or hereafter in effect relating to Claims for Covered Events, (ii) in specific cases, if the Board of Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law (or other applicable section of the business corporation law of a Subsidiary incorporated in a state other than Delaware), regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advances, or insurance recovery, as the case may be.

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d.Lack of Good Faith.  To indemnify Indemnitee for any Expenses incurred by the Indemnitee with respect to any action instituted (i) by Indemnitee to enforce or interpret this Agreement, if a court having jurisdiction over such action determines, as provided in Section 15, that the Indemnitee’s action was not made in good faith or was frivolous, or (ii) by or in the name of the Company to enforce or interpret this Agreement, if a court having jurisdiction over such action determines, as provided in Section 15, that the defense asserted by Indemnitee in such action was not made in good faith or was frivolous.

e.Claims Under Section 16(b).  To indemnify Indemnitee for Expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or any similar successor statute, rule or regulation.

f.Non-compete and Non-disclosure.  To indemnify Indemnitee in connection with proceedings or claims involving the enforcement of non-compete and/or non-disclosure agreements or the non-compete and/or non-disclosure provisions of employment, consulting or similar agreements the Indemnitee may be a party to with the Company, or any subsidiary of the Company or any other applicable foreign or domestic Company, partnership, joint venture, trust or other enterprise, if any.

12.Contribution.

a.In order to provide for just and equitable contribution in circumstances in which the indemnification provided for herein is held by a court of competent jurisdiction to be unavailable to Indemnitee in whole or in part, it is agreed that, in such event, the Company shall, to the fullest extent permitted by law, contribute to the payment of Indemnitee’s costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, in an amount that is just and equitable in the circumstances, taking into account, among other things, contributions by other directors and officers of the Company or others pursuant to indemnification agreements or otherwise; provided, that, without limiting the generality of the foregoing, such contribution shall not be required where such holding by the court is due to (i) the failure of Indemnitee to meet the standard of conduct required by applicable law, or (ii) any limitation on indemnification set forth in Sections 6, 7 or 11 hereof.

b.The Company shall not enter into any settlement of any action, suit, claim or proceeding in which the Company is jointly an severally liable with Indemnitee (or would be, if joined in such action, suit, claim or proceeding) unless such settlement provides for a full and final release of al claims asserted against Indemnitee.

c.The Company hereby agrees to fully indemnify and hold harmless Indemnitee from any and all claims for contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.

13.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

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14.Binding Effect:  Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs and personal and legal representatives.  The Company shall require and cause any successor (whether direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.  This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Company’s request.

15.Expenses Incurred in Action Relating to Enforcement or Interpretation.  In the event that any action is instituted by Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee with respect to such action (including without limitation attorneys’ fees), regardless of whether Indemnitee is ultimately successful in such action, unless, as a part of such action, a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee’s action was not made in good faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action.  In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee in defense of such action (including without limitation costs and expenses incurred with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless, as a part of such action, a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that the defense asserted by Indemnitee in such action was not made in good faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action.

16.Period of Limitations.  Except for legal actions based on Indemnitee’s fraud or willful misconduct as to which the period of limitations shall be governed by applicable law, no legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s estate, spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.

17.Term.  All agreements and obligations of the Company contained in this Agreement shall continue during the period Indemnitee serves as a director or officer of the Company or, at the request of the Company (or any wholly owned subsidiary of the Company),

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serves as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, fiduciary, partner or manager or similar capacity) of another company (including any subsidiaries of the Company), partnership, joint venture, trust, employee benefit plan or other enterprise, and shall continue thereafter so long as Indemnitee may be subject to any possible action, suit, claim or proceeding (including any rights of appeal thereto and any proceeding commenced by Indemnitee pursuant to Section 2(c) or Section 15 hereof) by reason of Indemnitee’s service described herein, whether or not Indemnitee is acting in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement.

18.Notice.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed for by the party addressed, on the date of such delivery, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked.  Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.

19.Consent to Jurisdiction.  The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim.

20.Severability.  The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law.  Furthermore, to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

21.Choice of Law.  This Agreement, and all rights, remedies, liabilities, powers and duties of the parties to this Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely in the State of Delaware without regard to principles of conflicts of laws.

22.Subrogation.  In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

23.Amendment and Termination.  No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties

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hereto.  No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

24.Integration and Entire Agreement.  This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

25.No Construction as Employment Agreement; Conflicts with Employment Agreements.  Nothing contained in this Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its Subsidiaries or affiliated entities.  In the event the Indemnitee is a party to an Employment Agreement with the Company or any of its subsidiaries or affiliated entities and the terms of this Agreement conflict with the terms of the Employment Agreement, the Employment Agreement shall control and this Agreement shall be deemed modified to the extent necessary to give effect to the terms of the Employment Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.

CHRISTOPHER & BANKS CORPORATION
By:
Name:	[Insert name of President & CEO]
Title:	President & Chief Executive Officer
Address:	2400 Xenium Lane North
	Plymouth, MN 55441
AGREED TO AND ACCEPTED
INDEMNITEE:
[Insert name of officer]

13

EX-10.4

Exhibit 10.4

CHRISTOPHER & BANKS CORPORATION
NON-EMPLOYEE DIRECTOR DEFERRED STOCK PLAN
Plan Adopted October 15, 2008

1.Purpose.  The purpose of the Plan is to provide an opportunity for non-employee members of the Board of Directors (the “Board”) of Christopher & Banks Corporation (the “Company”) to voluntarily defer receipt of shares of common stock granted by the Company in connection with their performance of services as a director.  This will be accomplished by allowing each participating director to elect voluntarily to forego receipt of shares of common stock, par value $0.01 per share of the Company (“Common Stock”) in return for the right to receive shares of Common Stock at a later date (such right being referred to as a “Stock Unit”) pursuant to elections, if any, made by such director under this Plan.

2.Relation to Stock Incentive Plans.  All Stock Units credited and shares of Common Stock issued pursuant to this Plan are subject to any applicable terms, conditions and restrictions of the 2006 Equity Incentive Plan for Non-Employee Directors, as amended from time to time (the “Equity Plan”), including, but not limited to, limitations on the number of shares of Common Stock available for issuance under this Plan, and any adjustments to prevent the dilution or enlargement of the rights of participating directors.

3.Eligibility.  Each individual who is a member of the Board (a “Director”) and who is not also an officer or employee of the Company or its subsidiaries is eligible to participate in this Plan (an “Eligible Director”).

4.Administration.  This Plan shall be administered by the Governance and Nominating Committee of the Board, or its successor (the “Committee”).  All questions of interpretation of this Plan shall be determined by the Committee, unless the Board makes such determination.  Each determination, interpretation or other action that the Committee (or the Board, as applicable) makes or takes pursuant to the provisions of this Plan shall be conclusive and binding for all purposes and on all persons.  Neither the Board, the Committee nor any member thereof shall be liable for any action or determination made in good faith with respect to this Plan.

5.Deferred Stock Election.  Unless otherwise prohibited by the Committee or the Board (in its or their sole discretion), an Eligible Director may elect to defer receipt of shares of Common Stock granted to such Director in connection with his or her services as a Director in return for an equal number of Stock Units that represent the Company’s promise to issue such Common Stock at a later date, subject to the following:

5.1.Manner of Making Deferral Elections.  A written election to defer receipt of Common Stock (a “Deferral Election”) shall be made on forms approved by the Committee or the Board and shall conform to such other procedural and substantive rules as the Committee or the Board shall make consistent with the terms of this Plan and the Equity Plan.  Deferral Elections must be made at such time as the Committee shall determine, which in all events shall be no later than the applicable deadlines described below.

(a)In General.  A Deferral Election pertaining to shares of Common Stock may be made by timely delivering an election no later than December 31 of the calendar year immediately preceding the calendar year in which the Director commences the performance of services to which the shares relate.  Notwithstanding the foregoing, an individual who first becomes an Eligible Director during a calendar year (and has not previously been eligible to participate in this Plan or any similar plan that must be aggregated with this Plan for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)) shall have 30 days after initial eligibility to make a Deferral Election, which shall apply only to shares of Common Stock granted with respect to services as a Director that are to be provided following the filing of such Deferral Election.  The Committee or the Board, in its discretion, may provide for an earlier filing deadline with respect to Deferral Elections.

(b)Common Stock Subject to Forfeiture.  Notwithstanding the foregoing, if the Committee so authorizes, a Deferral Election pertaining to shares of Common Stock granted subject to a time-based forfeiture condition requiring the Eligible Director’s continued services for a period of at least twelve (12) months from the date of grant may be made by timely delivering an election no later than thirty (30) days after the grant date, and at least twelve (12) months in advance of the earliest date at which the forfeiture condition could lapse.  In all events, the forfeiture condition must create a “substantial risk of foreiture” (as that term is defined in Treasury regulations issued under Section 409A of the Code).

5.2.Effect of Election.  Once a Deferral Election is made and accepted by the Committee, such election shall be irrevocable, except to the extent that the Committee or the Board, in its sole discretion, allows such election to be cancelled or modified prior to the applicable deadlines described in Section 5.1(a) and (b) above.  Deferral Elections are effective only with respect to the shares of Common Stock specified in the election, and such election shall not continue in effect for additional shares of Common Stock that may be granted in the future.  The Eligible Director must affirmatively make a new Deferral Election in order to defer receipt of any shares of Common Stock granted at a later date.

5.3.Deferrals Credited to Deferred Stock Account.  An account shall be established for each Eligible Director who makes a Deferral Election (a “Deferred Stock Account”).  As of the date on which the shares of Common Stock would have been granted absent a Deferral Election, the Eligible Director’s Deferred Stock Account shall be credited with a number of Stock Units equal to the number of shares of Common Stock subject to the Eligible Director’s Deferral Election.  Notwithstanding the foregoing, if shares of Common Stock are first issued, and then an Eligible Director subsequently makes a timely Deferral Election in accordance with Section 5.1(b) above (i.e., in the case of a share issued subject to a vesting schedule greater than twelve (12) months measured from the date of grant), then, as of the date on which the deferral election is made, the shares shall be cancelled, and the Eligible Director’s Deferred Stock Account shall be credited with the number of Stock Units equal to the number of shares of Common Stock subject to the Deferral Election.  All Stock Units credited to the Eligible Director’s Deferred Stock Account shall remain subject to any forfeiture conditions applicable to the shares of Common Stock deferred.

5.4.Dividend Equivalent Payments.  Subject to any applicable terms, conditions and restrictions required by the Equity Plan:

2

(a)Each time a cash dividend is paid on shares of Common Stock, the Eligible Director shall receive a cash payment equal to the amount of the dividend that would have been payable on the number of shares of Common Stock equal to the number of Stock Units credited to the Eligible Director’s Deferred Stock Account on the dividend record date.  Such cash payment shall be made on the same dividend payment date as is set for shares of Common Stock.

(b)Each time a dividend is paid on shares of Common Stock in property other than cash, the Eligible Director shall receive a credit of Stock Units to his or her Deferred Stock Account equal to either the number of shares of Common Stock (if a dividend is paid in shares of Common Stock) or that number of shares of Common Stock (rounded up to the nearest whole share) having a Fair Market Value on the dividend payment date (if a dividend is paid in property other than Common Stock) equal to the amount of the dividend that would have been payable on the number of shares of Common Stock equal to the number of Stock Units credited to the Eligible Director’s Deferred Stock Account on the dividend record date.  For purposes of converting dollar amounts into shares of Common Stock, “Fair Market Value” shall mean the per share closing price of the Common Stock on the New York Stock Exchange as reported in the consolidated transaction reporting system on the determination date or, if such Exchange is not open for trading on such date, on the most recent preceding date when such Exchange is open for trading.

6.Receipt of Shares.

6.1.Time of Receipt.  At the time of making the Deferral Election, each Eligible Director shall also specify in writing the time and manner of issuance of the shares of Common Stock subject to the Deferral Election.  The Eligible Director may elect to receive the deferred shares of Common Stock as soon as practicable after the following:  (i) his/her Separation from Service (as that term is defined in Section 6.4) with the Company; or (ii) on any date certain specified by the Director.  Notwithstanding the foregoing, if the Eligible Director incurs a Separation from Service prior to the date certain specified in his or her Deferral Election, issuance of the entire balance of the Director’s Deferred Stock Account shall commence upon Separation from Service.

6.2.Manner of Receipt.  At the time of making the Deferral Election, each Eligible Director shall also specify whether the shares of Common Stock deferred pursuant to the Deferral Election shall be issued in a lump sum pursuant to Section 6.2(a), or in installments pursuant to Section 6.2(b).

(a)Lump Sum.  Unless an Eligible Director elects to receive issuance of his or her shares of Common Stock in installments as described in Section 6.2(b), shares of Common Stock shall be issued within 60 days following the earlier of:  (i) the Eligible Director’s Separation from Service or (ii) such earlier date certain specified by the Director pursuant to Section 6.1.  All obligations under the Plan shall be made in shares of Common Stock, with one share of Common Stock issued for each vested Stock Unit, and any vested fractional Stock Unit shall be rounded up to the nearest whole share.

3

(b)Installments.  An Eligible Director may elect to have his or her shares of Common Stock issued in consecutive annual installments commencing within 60 days following the earlier of:  (i) the Eligible Director’s Separation from Service or (ii) such earlier date certain specified by the Director pursuant to Section 6.1 (the “Distribution Event”).  Remaining installments shall be made within 60 days of each consecutive annual anniversary of the applicable Distribution Event.  All obligations under the Plan shall be made in shares of Common Stock, with one share of Common Stock issued for each vested Stock Unit, and any fractional vested Stock Unit shall be rounded up to the nearest whole share.  The amount of each installment shall be computed as the number of shares Common Stock issuable, multiplied by a fraction, the numerator of which is one and the denominator of which is the total number of installments elected (not to exceed three) minus the number of installments previously made.  Installments made prior to the final installment shall be rounded up to the nearest whole number of shares, and the final installment shall be for the whole number of remaining shares of Common Stock in the Director’s Deferred Stock Account.

6.3.Change of Control.  Notwithstanding the foregoing, in the event of a Eligible Director’s Separation from Service within six months following a Change of Control, the the entire balance of the Director’s Deferred Stock Account shall be issued in a lump sum (notwithstanding any prior election to the contrary) to the Eligible Director, in whole shares of Common Stock (and any fractional Stock Unit shall be rounded up to the nearest whole share).  “Change of Control” means the occurrence of a “change in the ownership of the Company,” “change in effective control of the Company,” and/or a “change in the ownership of a substantial portion of the Company’s assets” as defined under Treasury Regulation § 1.409A-3(i)(5).

6.4.Separation from Service.  For purposes of this Section 6, a “Separation from Service” shall mean a complete severance of a Director’s relationship as a director of the Company and all affiliates, if any, and as an independent contractor of the Company and all affiliates, if any, for any reason.   A Director may have a Separation from Service upon resignation as a director even if the Director then becomes an officer or employee.   Separation from Service shall be construed to have a meaning consistent with the term “separation from service” as used and defined in Section 409A of the Code.  If an Eligible Director is a “specified employee” (as that term is defined under Section 409A of the Code), any shares of Common Stock that become issuable upon the Director’s Separation from Service shall be issued on the first day of the seventh month following such Separation from Service.

6.5.Beneficiary Designation.  Each Eligible Director who elects to participate in this Plan may file with the Committee a notice in writing, on a form provided by the Committee, designating one or more beneficiaries to whom the distribution shall be made in the event of the Director’s death prior to receiving the entire distribution of the balance in the Eligible Director’s Deferred Stock Account.  If no beneficiary designation is made, or in the event that a beneficiary designated predeceases the Eligible Director, the distribution shall be made to the Director’s estate.

7.Limitations.

7.1.Service as a Director.  Nothing in this Plan will interfere with or limit in any way the right of the Company’s Board or its stockholders to remove an Eligible Director

4

from the Board.  Neither this Plan nor any action taken pursuant to it will constitute or be evidence of any agreement or understanding, express or implied, that the Company’s Board or its stockholders have retained or will retain an Eligible Director for any period of time or at any particular rate of compensation.

7.2.Nonexclusivity of the Plan.  Nothing contained in this Plan is intended to effect, modify or rescind any of the Company’s existing compensation plans or programs (including, but not limited to, the Equity Plan) or to create any limitations on the Board’s power or authority to modify or adopt compensation arrangements as the Board may from time to time deem necessary or desirable.

8.Plan Amendment, Modification and Termination.  The Board may suspend or terminate this Plan at any time.  The Board may amend this Plan from time to time in such respects as the Board may deem advisable in order that this Plan will conform to any change in applicable laws or regulations or in any other respect that the Board may deem to be in the Company’s best interests.  If there is a termination of the Plan with respect to all participants, the Board shall have the right, in its sole discretion, and notwithstanding any elections made by the participant, to amend the Plan to immediately issue all shares of Common Stock in a lump sum following such Plan termination, to the extent permissible under Section 409A of the Code.

9.Effective Date and Duration of the Plan.  This Plan shall become effective as of the date the Board approves this Plan and will continue until the earlier to occur of (i) the termination of the Plan by the Board or (ii) the termination of the Equity Plan in accordance with its terms.

10.Participants Are General Creditors of the Company.  The Eligible Directors and beneficiaries thereof shall be general, unsecured creditors of the Company with respect to any obligations owed to them pursuant to this Plan and shall not have any preferred interest by way of trust, escrow, lien or otherwise in any specific assets of the Company.  Any monies or other assets set aside to meet its obligations hereunder (there being no obligation to do so), the same shall be regarded as a part of the general assets of the Company subject to the claims of its general creditors, and neither any Eligible Director nor any beneficiary thereof shall have a legal, beneficial or security interest therein.

11.Rights as Stockholder.  An Eligible Director shall have no rights as a holder of shares of Common Stock with respect to any Stock Units until the date the Eligible Director becomes the holder of record of shares of Common Stock that relate to such Stock Units.

12.Miscellaneous.

12.1.Securities Law and Other Restrictions.  Notwithstanding any other provision of this Plan or any Deferral Election delivered pursuant to this Plan, the Company will not be required to issue any shares of Common Stock under this Plan and an Eligible Director may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to this Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act of 1933, as amended (the “Securities Act”) and any applicable state securities laws or an exemption from such registration under the Securities Act and applicable state

5

securities laws and (b) there has been obtained any other consent, approval or permit from any other regulatory body that the Committee, in its sole discretion, deems necessary or advisable.  The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company, in order to comply with such securities laws or other restrictions.

12.2.Governing Law.  The Plan and all rights hereunder shall be subject to and interpreted in accordance with (i) the laws of the State of Delaware, without reference to the principles of conflicts of laws, and (ii) to applicable Federal securities laws.

6

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Larry C. Barenbaum, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Christopher & Banks Corporation;

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: October 6, 2011
	/s/ Larry C. Barenbaum
	Larry C. Barenbaum
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Lyftogt, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Christopher & Banks Corporation;

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: October 6, 2011
	/s/ Michael J. Lyftogt
	Michael J. Lyftogt
	Senior Vice President,
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Larry C. Barenbaum, President and Chief Executive Officer of Christopher & Banks Corporation (the “Company”) certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.  The quarterly report of the Company on Form 10-Q for the period ended August 27, 2011 as filed with the United States Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;  and

2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 6, 2011
	By:	/s/ Larry C. Barenbaum
		Larry C. Barenbaum
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Lyftogt, Senior Vice President, Chief Financial Officer of Christopher & Banks Corporation (the “Company”) certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.  The quarterly report of the Company on Form 10-Q for the period ended August 27, 2011 as filed with the United States Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;  and

2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 6, 2011
	By:	/s/ Michael J. Lyftogt
		Michael J. Lyftogt
		Senior Vice President,
		Chief Financial Officer

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CONDENSED CONSOLIDATED INCOME STATEMENTS (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Aug. 27, 2011	Aug. 28, 2010	Aug. 27, 2011	Aug. 28, 2010
Net sales	$ 96,230	$ 101,340	$ 220,062	$ 227,574
Costs and expenses:
Merchandise, buying and occupancy	68,403	65,536	149,229	138,393
Selling, general and administrative	34,505	33,795	69,936	69,994
Depreciation and amortization	6,267	6,434	11,851	12,964
Total costs and expenses	109,175	105,765	231,016	221,351
Operating income (loss)	(12,945)	(4,425)	(10,954)	6,223
Other income	76	127	155	243
Income (loss) before income taxes	(12,869)	(4,298)	(10,799)	6,466
Income tax provision (benefit)	113	(1,760)	293	2,664
Net income (loss)	$ (12,982)	$ (2,538)	$ (11,092)	$ 3,802
Basic earnings (loss) per share:
Net income (loss) (in dollars per share)	$ (0.37)	$ (0.07)	$ (0.31)	$ 0.11
Basic shares outstanding (in shares)	35,520	35,354	35,512	35,329
Diluted earnings (loss) per share:
Net income (loss) (in dollars per share)	$ (0.37)	$ (0.07)	$ (0.31)	$ 0.11
Diluted shares outstanding (in shares)	35,520	35,354	35,512	35,525
Dividends per share (in dollars per share)	$ 0.06	$ 0.06	$ 0.12	$ 0.12

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands	6 Months Ended
	Aug. 27, 2011	Aug. 28, 2010
Cash flows from operating activities:
Net income (loss)	$ (11,092)	$ 3,802
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	11,851	12,964
Amortization of premium on investments	35	243
Excess tax benefit on stock-based compensation		(224)
Deferred income taxes		(1,864)
Stock-based compensation expense	1,631	1,646
Loss on disposal of furniture, fixtures and equipment		18
Gain on investments, net	(18)	(56)
Changes in operating assets and liabilities:
Increase in accounts receivable	(1,971)	(891)
Increase in merchandise inventories	(14,455)	(1,613)
Increase in prepaid expenses	(1,367)	(1,571)
(Increase) decrease in income taxes receivable	3,657	(576)
Decrease in other assets	36	35
Increase (decrease) in accounts payable	16,534	(1,664)
Decrease in accrued liabilities	(1,034)	(3,048)
Decrease in deferred lease incentives	(726)	(2,333)
Decrease in other liabilities	(416)	(818)
Net cash provided by operating activities	2,665	4,050
Cash flows from investing activities:
Purchases of property, equipment and improvements	(8,213)	(5,488)
Purchases of investments	(76,367)	(37,696)
Sales of investments	79,353	43,786
Net cash provided by (used in) investing activities	(5,227)	602
Cash flows from financing activities:
Exercise of stock options		84
Excess tax benefit on stock-based compensation		224
Shares redeemed for payroll taxes	(124)
Dividends paid	(4,279)	(4,273)
Net cash used in financing activities	(4,403)	(3,965)
Net increase (decrease) in cash and cash equivalents	(6,965)	687
Cash and cash equivalents at beginning of period	43,712	37,073
Cash and cash equivalents at end of period	$ 36,747	$ 37,760

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands	Aug. 27, 2011	Feb. 26, 2011	Aug. 28, 2010
Current assets:
Cash and cash equivalents	$ 36,747	$ 43,712	$ 37,760
Short-term investments	35,263	33,060	58,231
Accounts receivable	5,938	3,967	5,136
Merchandise inventories	53,666	39,211	40,109
Prepaid expenses	3,356	1,989	3,213
Income taxes receivable	2,782	6,439	1,195
Current deferred tax asset			4,376
Total current assets	137,752	128,378	150,020
Property, equipment and improvements, net	72,943	76,647	88,466
Long-term investments	23,806	28,824	13,408
Deferred tax asset			8,600
Other assets	278	314	317
Total assets	234,779	234,163	260,811
Current liabilities:
Accounts payable	31,617	15,149	11,841
Accrued salaries, wages and related expenses	6,544	7,883	7,890
Other accrued liabilities	22,236	21,931	17,129
Total current liabilities	60,397	44,963	36,860
Non-current liabilities:
Deferred lease incentives	14,256	14,982	17,245
Deferred rent obligations	6,909	7,457	8,372
Other	2,664	2,532	3,509
Total non-current liabilities	23,829	24,971	29,126
Commitments
Stockholders' equity:
Preferred stock - $0.01 par value, 1,000 shares authorized, none outstanding
Common stock - $0.01 par value, 74,000 shares authorized, 45,713, 45,432 and 45,635 shares issued and 35,922, 35,641 and 35,844 shares outstanding at August 27, 2011, February 26, 2011 and August 28, 2010, respectively	457	454	456
Additional paid-in capital	116,412	114,909	115,109
Retained earnings	146,272	161,642	191,890
Common stock held in treasury, 9,791 shares at cost at August 27, 2011, February 26, 2011 and August 28, 2010, respectively	(112,711)	(112,711)	(112,712)
Accumulated other comprehensive income (loss)	123	(65)	82
Total stockholders' equity	150,553	164,229	194,825
Total liabilities and stockholders' equity	$ 234,779	$ 234,163	$ 260,811

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INCOME TAXES

6 Months Ended

Aug. 27, 2011

INCOME TAXES

INCOME TAXES

NOTE 8 — INCOME TAXES

As of August 27, 2011, our liability for unrecognized tax benefits associated with uncertain tax positions was approximately $2.1 million and the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.3 million. We recognize interest and penalties related to unrecognized tax benefits as components of income tax expense. At August 27, 2011, we had accrued approximately $0.7 million for the potential payment of interest and penalties.

We are subject to U.S. federal income tax and the income tax of various state and local jurisdictions.  Fiscal years 2008 through 2011 remain subject to examination by the Internal Revenue Service.  With few exceptions, we are not subject to state income tax examination by tax authorities for taxable years prior to fiscal 2007.  At August 27, 2011, we had ongoing audits in various jurisdictions.  We do not believe that the resolution of these examinations will have a significant impact on our liability for unrecognized tax benefits.

At August 27, 2011, we had a full valuation allowance against our net deferred tax assets.  Deferred income tax assets represent potential future income tax benefits.  Realization of these assets is ultimately dependent upon future taxable income.  We have incurred a net cumulative loss as measured by the results of the prior three years.  ASC 740 “Income Taxes,” requires that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is considered more likely than not that some or all of the recorded deferred tax assets will not be realized in a future period.  Forming a conclusion that a valuation allowance is not needed is difficult when negative evidence such as cumulative losses exists.  As a result of our evaluation, we have concluded that there is insufficient positive evidence to overcome the negative evidence related to our cumulative losses.  Accordingly, we have maintained the full valuation allowance against our net deferred tax assets established in the third quarter of fiscal 2011.  Recording the valuation allowance does not prevent us from using the deferred tax assets in the future when profits are realized.

As of August 27, 2011, we had federal and state net operating loss carryforwards which will reduce future taxable income.  Approximately $0.6 million in federal tax benefits are available from these loss carryforwards and an additional $0.5 million is available in tax credit carryforwards.  The state loss carryforwards will result in state tax benefits of approximately $0.4 million.  The federal net loss carryforwards expire in 2031.  The state net loss carryforwards will expire beginning in fiscal 2014 and in subsequent years.  Additionally, we have charitable contribution carryforwards that will expire in fiscal 2014.

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SEGMENT REPORTING

6 Months Ended

Aug. 27, 2011

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 13 — SEGMENT REPORTING

We operate in the retail apparel industry in which we primarily design, source and sell women’s apparel and accessories catering to customers who are typically between 45 to 55 years of age.  We have identified two operating segments (Christopher & Banks and C.J. Banks) as defined by ASC 820, “Disclosures about Segments of an Enterprise and Related Information.”  Our Christopher & Banks and C.J. Banks operating segments have been aggregated into one reportable segment based on the similar nature of products sold, methods of sourcing, merchandising and distribution processes involved, target customers, and economic characteristics of the two brands.

In the table below, the “Christopher & Banks/C.J. Banks” reportable segment includes activity generated by our Christopher & Banks and C.J. Banks operations.  The “Corporate/Administrative” column, which primarily represents operating activity at our corporate office and distribution center, is presented to allow for reconciliation of segment-level net sales, operating income and total assets to our consolidated net sales, operating income and total assets.  Segment operating income includes only net sales, merchandise gross margin and direct store expenses with no allocation of corporate overhead.

Segment Reporting (in thousands):

	Christopher & Banks/		Corporate/
	C.J. Banks		Administrative			Consolidated
Three Months Ended August 27, 2011
Net sales	$	96,230	$	—		$	96,230
Operating income (loss)	333		(13,278		)	(12,945		)
Total assets	131,723		103,056			234,779
Three Months Ended August 28, 2010
Net sales	$	101,340	$	—		$	101,340
Operating income (loss)	7,688		(12,113		)	(4,425		)
Total assets	149,673		111,138			260,811

Segment Reporting (in thousands):

	Christopher & Banks/		Corporate/
	C.J. Banks		Administrative			Consolidated
Six Months Ended August 27, 2011
Net sales	$	220,062	$	—		$	220,062
Operating income (loss)	15,375		(26,329		)	(10,954		)
Total assets	131,723		103,056			234,779
Six Months Ended August 28, 2010
Net sales	$	227,574	$	—		$	227,574
Operating income (loss)	32,490		(26,267		)	6,223
Total assets	149,673		111,138			260,811

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PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET

6 Months Ended

Aug. 27, 2011

PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET

PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET

NOTE 4 — PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET

Property, equipment and improvements, net consisted of the following (in thousands):

	Estimated	August 27,			February 26,			August 28,
Description	Useful Life	2011			2011			2010
Land	—	$	1,597		$	1,597		$	1,597
Corporate office, distribution center and related building improvements	25 years	12,101			12,101			12,053
Store leasehold improvements	Term of related lease, typically 10 years	88,319			91,237			91,570
Store furniture and fixtures	3-10 years	108,388			110,754			110,664
Point of sale hardware and software	5 years	9,919			9,858			14,881
Computer hardware and software	3-5 years	26,919			26,858			24,736
Corporate office and distribution center furniture, fixtures and equipment	7 years	5,457			5,401			5,366
Construction in progress		4,737			465			4,193
		257,437			258,271			265,060
Less accumulated depreciation and amortization		(184,494		)	(181,624		)	(176,594		)
Net property, equipment and improvements		$	72,943		$	76,647		$	88,466

We review long-lived assets with definite lives at least annually, or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.  While no impairments of long-lived assets were recorded in the six month period ended August 27, 2011, the current challenging economic environment, combined with continued instability in the housing and labor markets, and general economic uncertainty affecting the retail industry, make it reasonably possible that long-lived asset impairments could be identified and recorded in future periods.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Aug. 27, 2011

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 10 — FAIR VALUE MEASUREMENTS

Under ASC 820-10, “Fair Value Measurements and Disclosures,” fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.  ASC 820-10 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of us.  Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability that are developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels.  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.  Level 3 inputs are unobservable inputs for the asset or liability.  Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis:

For the six month periods ended August 27, 2011 and August 28, 2010, fair value under ASC 820-10 applied to our available-for-sale securities, ARS and ARS rights.  These financial assets are carried at fair value following the requirements of ASC 820-10.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis (in thousands):

			Fair Value Measurements
	Fair Value at		Using Inputs Considered as
Description	August 27, 2011		Level 1		Level 2		Level 3
Short-term Investments
Available-for-sale securities:
Commercial paper	5,896		$	—	$	5,896	$	—
Municipal bonds	10,151		—		10,151		—
U.S. Agency securities	19,216		—		19,216		—
Total short-term investments	35,263		—		35,263		—
Long-term investments:
Available-for-sale securities:
Municipal bonds	19,210		—		19,210		—
U.S. Agency securities	4,596		—		4,596		—
Total long-term investments	23,806		—		23,806		—
Total assets	$	59,069	$	—	$	59,069	$	—

			Fair Value Measurements
	Fair Value at		Using Inputs Considered as
Description	February 26, 2011		Level 1		Level 2		Level 3
Short-term Investments
Available-for-sale securities:
Variable rate demand obligations	$	6,505	$	—	$	6,505	$	—
Commercial paper	5,791		—		5,791
Municipal bonds	16,132		—		16,132
U.S. Agency securities	4,632		—		4,632
Total short-term investments	33,060		—		33,060		—
Long-term investments:
Available-for-sale securities:
Municipal bonds	18,660		—		18,660		—
U.S. Agency securities	10,164		—		10,164		—
Total long-term investments	28,824		—		28,824		—
Total assets	$	61,884	$	—	$	61,884	$	—

			Fair Value Measurements
	Fair Value at		Using Inputs Considered as
Description	August 28, 2010		Level 1		Level 2		Level 3
Short-term investments:
Available-for-sale securities:
Variable rate demand obligations	$	28,320	$	—	$	28,320	$	—
Municipal commercial paper	1,000		—		1,000		—
Municipal bonds	23,096		—		23,096		—
U.S. Agency securities	5,815		—		5,815		—
Total short-term investments	58,231		—		58,231		—
Long-term investments:
Available-for-sale securities:
Municipal bonds	13,408		—		13,408		—
Total long-term investments	13,408		—		13,408		—
Total assets	$	71,639	$	—	$	71,639	$	—

Following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value:

Available-for-sale securities:  As of August 27, 2011, February 26, 2011 and August 28, 2010 our available-for-sale securities were valued based on quoted prices for similar assets in active markets or quoted prices for identical or similar assets in markets in which there were fewer transactions.

Assets and Liabilities that are Measured at Fair Value on a Non-recurring Basis:

We measure certain assets and liabilities at fair value on a non-recurring basis.  Specifically, our nonfinancial long-lived asset groups are measured at fair value for impairment assessments.  There were no impairment charges related to assets measured at fair value on a non-recurring basis recorded during the three and six months ended August 27, 2011 and August 28, 2010.

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COMPREHENSIVE INCOME

6 Months Ended

Aug. 27, 2011

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME

NOTE 11 — COMPREHENSIVE INCOME

Comprehensive income consisted of the following (in thousands):

	Three Months Ended						Six Months Ended
	August 27,			August 28,			August 27,			August 28,
	2011			2010			2011			2010
Net income (loss)	$	(12,982	)	$	(2,538	)	$	(11,092	)	$	3,802
Fair value adjustment on investments	49			58			188			43
Total comprehensive income (loss)	$	(12,933	)	$	(2,480	)	$	(10,904	)	$	3,845

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EARNINGS PER SHARE

6 Months Ended

Aug. 27, 2011

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 9 — EARNINGS PER SHARE

We calculate earnings per share under the guidance in ASC 260-10, “Earnings per Share,” which clarifies that unvested share-based payment awards that contain nonforfeitable rights to receive dividends or dividend equivalents (whether paid or unpaid) are considered participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”).  Participating securities under this statement include our unvested employee restricted stock awards with time-based vesting, which receive nonforfeitable dividend payments.

The calculation of EPS for common stock shown below excludes the income attributable to these unvested employee restricted stock awards from the numerator and excludes the dilutive impact of these shares from the denominator.

	Three Months Ended
	August 27,			August 28,
	2011			2010
Numerator (in thousands):
Net loss attributable to Christopher & Banks Corporation	$	(12,982	)	$	(2,538	)
Income allocated to participating securities	(14		)	(21		)
Net loss available to common shareholders	(12,996		)	(2,559		)
Denominator (in thousands):
Weighted average common shares outstanding - basic	35,520			35,354
Dilutive shares	—			—
Weighted average common and common equivalent shares outstanding - diluted	35,520			35,354
Net loss per common share:
Basic	$	(0.37	)	$	(0.07	)
Diluted	$	(0.37	)	$	(0.07	)

	Six Months Ended
	August 27,			August 28,
	2011			2010
Numerator (in thousands):
Net income (loss) attributable to Christopher & Banks Corporation	$	(11,092	)	$	3,802
Income allocated to participating securities	(24		)	(38		)
Net income (loss) available to common shareholders	(11,116		)	3,764
Denominator (in thousands):
Weighted average common shares outstanding - basic	35,512			35,329
Dilutive shares	—			196
Weighted average common and common equivalent shares outstanding - diluted	35,512			35,525
Net income (loss) per common share:
Basic	$	(0.31	)	$	0.11
Diluted	$	(0.31	)	$	0.11

Stock options of approximately 2.9 million were excluded from the shares used in the computation of diluted earnings per share for the three and six month periods ended August 27, 2011 as they were anti-dilutive.  Stock options of approximately 1.6 million and 1.5 million were excluded from the shares used in the computation of diluted earnings per share for the three and six month periods ended August 28, 2010 as they were anti-dilutive.

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INVESTMENTS

6 Months Ended

Aug. 27, 2011

INVESTMENTS

INVESTMENTS

NOTE 2 — INVESTMENTS

Investments consisted of the following (in thousands):

	Aug 27, 2011
	Amortized		Unrealized		Unrealized		Estimated
Description	Cost		Gains		Losses		Fair Value
Short-term investments:
Available-for-sale securities:
Commercial paper	$	5,898	$	—	$	2	$	5,896
Municipal bonds	10,132		23		4		10,151
U.S. Agency securities	19,196		20		—		19,216
Total short-term investments	35,226		43		6		35,263
Long-term investments:
Available-for-sale securities:
Municipal bonds	19,061		159		10		19,210
U.S. Agency securities	4,578		18		—		4,596
Total long-term investments	23,639		177		10		23,806
Total investments	$	58,865	$	220	$	16	$	59,069

	Feb 26, 2011
	Amortized		Unrealized		Unrealized		Estimated
Description	Cost		Gains		Losses		Fair Value
Short-term investments:
Available-for-sale securities:
Variable rate demand obligations	$	6,505	$	—	$	—	$	6,505
Commercial paper	5,794		—		3		5,791
Municipal bonds	16,118		15		1		16,132
U.S. Agency securities	4,631		1		—		4,632
Total short-term investments	33,048		16		4		33,060
Long-term investments:
Available-for-sale securities:
Municipal bonds	18,714		37		91		18,660
U.S. Agency securities	10,162		2		—		10,164
Total long-term investments	28,876		39		91		28,824
Total investments	$	61,924	$	55	$	95	$	61,884

	Aug 28, 2010
	Amortized		Unrealized		Unrealized		Estimated
Description	Cost		Gains		Losses		Fair Value
Short-term investments:
Available-for-sale securities:
Variable rate demand obligations	$	28,320	$	—	$	—	$	28,320
Municipal commercial paper	1,000		—		—		1,000
Municipal bonds	23,087		13		4		23,096
U.S. Agency securities	5,800		19		4		5,815
Total short-term investments	58,207		32		8		58,231
Long-term investments:
Available-for-sale securities:
Municipal bonds	13,295		119		6		13,408
Total investments	$	71,502	$	151	$	14	$	71,639

We account for our investments in accordance with ASC 320-10, “Investments — Debt and Equity Securities” and, accordingly, our investment securities have been characterized as either available-for-sale or trading.  As of August 27, 2011, our available-for-sale investment securities were comprised of municipal bonds, commercial paper and U.S. Agency securities.  These securities were classified as available-for-sale as we did not enter into these investments for speculative purposes or intend to actively buy and sell the securities in order to generate profits on differences in price.  Our primary investment objective is preservation of principal.  During the first six months of fiscal 2012, purchases of available-for-sale securities totaled approximately $76.4 million, while proceeds from the sale of available-for-sale securities were approximately $79.4 million.  Gross realized gains and losses on the sale of available-for-sale securities during the six months ended August 27, 2011 were not material.

Our available-for-sale securities are reviewed for possible impairment at least quarterly, or more frequently if circumstances arise which may indicate impairment.  When the fair value of the securities declines below the amortized cost basis, impairment is indicated and it must be determined whether it is other-than-temporary.  Impairment is considered to be other-than-temporary if we (i) intend to sell the security, (ii) will more likely than not be forced to sell the security before recovering its cost, or (iii) do not expect to recover the securities’ amortized cost basis.  If the decline in fair value is considered other-than-temporary, the cost basis of the security is adjusted to its fair market value and the realized loss is reported in earnings.  Subsequent increases or decreases in fair value are reported in equity as other comprehensive income (loss).  As of August 27, 2011, there were no other-than-temporary impairments of our available-for-sale securities.

Expected maturities of our investments are as follows (in thousands):

	August 27,
	2011
Due in one year or less	$	35,263
Due after one year through three years	22,192
Due greater than three years	1,614
Total investment securities	$	59,069

We had $6.5 million and $28.3 million of Variable Rate Demand Obligations (“VRDO”) as of February 26, 2011 and August 28, 2010, respectively.  These investments maintain a constant par value, have variable rates of return tied to short-term interest rates which reset weekly, and may be tendered for sale upon notice to the trustee.  Although our VRDO were issued and rated as long-term securities, with maturities ranging from 2013 through 2041, they were priced and traded as short-term investments as each VRDO contained a put feature, which was supported by highly rated financial institutions.  We classified our VRDO as short-term investments maturing in one year or less as we expected to realize the proceeds from our VRDO within that time period.  We liquidated our remaining holdings of VRDO in the first quarter of fiscal 2012 and had no investments in VRDO as of August 27, 2011.

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ACCRUED LIABILITIES

6 Months Ended

Aug. 27, 2011

ACCRUED LIABILITIES

ACCRUED LIABILITIES

NOTE 5 — ACCRUED LIABILITIES

Other accrued liabilities consisted of the following (in thousands):

	August 27,		February 26,		August 28,
Description	2011		2011		2010
Gift card and store credit liabilities	$	6,727	$	10,150	$	7,118
Accrued merchandise inventory receipts not yet invoiced	4,668		1,872		2,048
Accrued Friendship Rewards loyalty liability	3,008		2,938		1,745
Accrued income, sales and other taxes payable	2,615		2,017		2,428
Accrued workers compensation liability	362		456		285
Accrued occupancy-related expenses	737		1,145		738
Other	4,119		3,353		2,767
	$	22,236	$	21,931	$	17,129

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CREDIT FACILITY

6 Months Ended

Aug. 27, 2011

CREDIT FACILITY

CREDIT FACILITY

NOTE 6 — CREDIT FACILITY

We maintain an Amended and Restated Revolving Credit Facility (the “Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”).  The Credit Facility provides us with revolving credit loans and letters of credit of up to $50 million, in the aggregate, subject to a borrowing base formula based on inventory levels.

Interest under the Credit Facility is payable monthly in arrears.  The Credit Facility carries a facility fee of 0.25%, based on the unused portion as defined in the agreement, a collateral monitoring fee and a guaranteed service charge.  Borrowings under the Credit Facility are collateralized by our equipment, intangible assets, inventory, inventory letters of credit and letter of credit rights.  We had no revolving credit loan borrowings under the Credit Facility during the first six months of fiscal 2012 or fiscal 2011.  Historically, we have utilized the Credit Facility only to open letters of credit.  The borrowing base at August 27, 2011 was $29.5 million.  As of August 27, 2011, we had open on-demand letters of credit in the amount of $1.0 million.  Accordingly, the availability of revolving credit loans under the Credit Facility was $28.5 million at August 27, 2011.

The Credit Facility contains certain restrictive covenants, including restrictions on incurring additional indebtedness and limitations on certain types of investments, as well as requiring the maintenance of certain financial covenants.  As of August 27, 2011, the most recent measurement date, we were in compliance with all financial covenants under the Credit Facility.

On June 29, 2011, we entered into the Sixth Amendment to the Credit Facility (the “Sixth Amendment”) with Wells Fargo.  The Sixth Amendment extended the maturity date of the Credit Facility by three years from June 30, 2011 to June 30, 2014.  In addition, the Sixth Amendment changed the interest calculation under the Credit Facility.  Previously, interest was calculated based on either the prime rate minus 0.25% or the one, three or six month London Interbank Market Offered Rate (“LIBOR”) based on the length of time the corresponding advance was outstanding.  Under the Sixth Amendment, interest is calculated based on the three-month LIBOR plus 2.0%, reset daily.

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Document and Entity Information	6 Months Ended
	Aug. 27, 2011	Sep. 24, 2011
Document and Entity Information
Entity Registrant Name	CHRISTOPHER & BANKS CORP
Entity Central Index Key	0000883943
Document Type	10-Q
Document Period End Date	Aug. 27, 2011
Amendment Flag	false
Current Fiscal Year End Date	--03-03
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		35,921,747
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

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STOCK-BASED COMPENSATION

6 Months Ended

Aug. 27, 2011

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 7 — STOCK-BASED COMPENSATION

We account for stock-based compensation in accordance with the provisions of ASC 718-10, “Stock Compensation.” Under various plans, we may grant options to purchase common stock to employees and non-employee members of our Board of Directors at a price not less than 100% of the fair market value of our common stock on the option grant date.  In general, options granted to employees vest over three to five years and are exercisable up to ten years from the date of grant, and options granted to Directors generally vest over a three year period and are exercisable up to ten years from the grant date.

We may also grant shares of restricted stock to our employees and non-employee members of our Board of Directors.  The grantee cannot transfer the shares before the respective shares vest.  Shares of nonvested restricted stock are considered to be currently issued and outstanding.  Restricted stock grants to employees typically vest over a three year period, while restricted grants to Directors are fully vested on the date of grant.

Our restricted stock awards are generally subject to forfeiture if employment or service terminates prior to the lapse of the restrictions.  In addition, certain of our restricted stock awards have performance-based vesting provisions and are subject to forfeiture in whole or in part if these performance conditions are not achieved.  We assess, on an ongoing basis, the probability of whether the performance criteria will be achieved and, once it is deemed probable, we begin recognizing compensation expense over the relevant performance period.  For those awards not subject to performance criteria, we expense the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, on a straight-line basis over the vesting period.  The fair market value of our restricted stock is determined based on the closing price of our common stock on the grant date.

Total pre-tax compensation expense related to stock-based awards for each of the three months ended August 27, 2011 and August 28, 2010 was $1.0 million.   Total pre-tax compensation expense related to stock-based awards for each of the six months ended August 27, 2011 and August 28, 2010 was $1.6 million.

Methodology Assumptions

We use the Black-Scholes option-pricing model to value our stock options for grants to our employees and non-employee directors.  Using this option-pricing model, the fair value of each stock option award is estimated on the date of grant and is expensed on a straight-line basis over the vesting period, as the stock options are subject to pro-rata vesting.  The expected volatility assumption is based on the historical volatility of our stock over a term equal to the expected term of the option granted.  The expected term of stock option awards granted is derived from historical exercise experience and represents the period of time that awards are expected to be outstanding.  The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted.

The weighted average assumptions relating to the valuation of our stock options granted during the three and six month periods ended August 27, 2011 and August 28, 2010 were as follows:

	Three Months Ended				Six Months Ended
	August 27,		August 28,		August 27,		August 28,
	2011		2010		2011		2010
Expected dividend yield	3.91	%	2.73	%	3.92	%	3.02	%
Expected volatility	71.02	%	70.73	%	70.99	%	70.15	%
Risk-free interest rate	1.52	%	1.78	%	2.11	%	2.36	%
Expected term in years	5.0		5.0		5.0		4.9

Stock-Based Compensation Activity

The following table presents a summary of our stock option activity for the six months ended August 27, 2011:

									Weighted
			Weighted		Aggregate				Average
	Number		Average		Intrinsic		Weighted		Remaining
	of		Exercise		Value		Average		Contractual
	Shares		Price		(in thousands)		Fair Value		Life
Outstanding, beginning of period	2,572,735		$	8.70	$	33	$	3.59
Vested	750,152		14.83		7		5.60
Unvested	1,822,583		6.18		26		2.76
Granted	457,541		6.25		—		2.84
Exercised	—		—		—		—
Canceled - vested (expired)	(45,783	)	18.37		—		6.43
Canceled - unvested (forfeited)	(30,190	)	7.00		—		3.12
Outstanding, end of period	2,954,303		8.19		33		3.43		8.18
Vested	810,778		13.76		13		5.29		5.10
Unvested	2,143,525		6.09		20		2.73		9.35
Exercisable, end of period	810,778		13.76		13		5.29		5.10

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on August 27, 2011.

The following table presents a summary of our restricted stock activity for the six months ended August 27, 2011:

	Number		Weighted
	of		Average
	Shares		Fair Value
Unvested, beginning of period	183,070		$	8.22
Granted	371,786		6.24
Vested	(136,188	)	6.93
Canceled - unvested (forfeited)	(66,854	)	8.78
Unvested, end of period	351,814		$	6.52

The total fair value of shares of restricted stock that vested during the six months ended August 27, 2011 and August 28, 2010 was approximately $0.9 million and $1.3 million, respectively.  As of August 27, 2011, there was approximately $4.0 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted average period of approximately 2.3 years.

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BASIS OF PRESENTATION

6 Months Ended

Aug. 27, 2011

BASIS OF PRESENTATION

BASIS OF PRESENTATION

NOTE 1 — BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Christopher & Banks Corporation and its subsidiaries (collectively referred to as “Christopher & Banks,” “the Company,” “we,” “us” or “our”) pursuant to the current rules and regulations of the United States Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed, or omitted, pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended February 26, 2011.

The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year.  In the opinion of management, the information contained herein reflects all adjustments, consisting only of normal adjustments, except as otherwise stated in these notes, necessary to present fairly our financial position as of August 27, 2011, February 26, 2011 and August 28, 2010, our results of operations for the three and six month periods ended August 27, 2011 and August 28, 2010 and our cash flows for the six month periods ended August 27, 2011 and August 28, 2010.

Revision to Fiscal 2010 Consolidated Statement of Cash Flows

In connection with the preparation of our financial statements for the fiscal year ended February 26, 2011, we determined that cash flows from the redemption of our investments in auction rate securities should be classified as cash inflows from investing activities.  We previously classified certain of these cash flows as cash inflows from operating activities.

We have revised our statement of cash flows for the six months ended August 28, 2010 to properly classify proceeds from the redemption of our investments of Auction Rate Securities (“ARS”) as cash inflows from investing activities.  The effect of this revision was to decrease cash provided by operating activities by $14.9 million and decrease cash used in investing activities by $14.9 million, hence there was no impact on the net change in cash and cash equivalents or on our total balance of cash and cash equivalents as previously reported.  We have concluded that this correction is immaterial to the financial statements taken as a whole.

Recently Issued Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRSs.”  ASU 2011-04 amends ASC 820, “Fair Value Measurement,” by expanding existing disclosure requirements for fair value measurements and modifying certain definitions in the guidance, which may change how the fair value measurement guidance of ASC 820 is applied.  ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and must be applied prospectively.  We are in the process of evaluating ASU 2011-04 and its impact on our consolidated financial statements.

In June 2011 FASB issued ASU 2011-05, “Presentation of Comprehensive Income.”  ASU 2011-05 amends Accounting Standards Codification (“ASC”) 220-10, “Comprehensive Income,” and requires that all changes in comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and also requires the presentation of reclassification adjustments on the face of the financial statements from other comprehensive income to net income.  ASU 2011-05 is effective for the first interim or annual reporting period beginning on or after December 15, 2011.  Early adoption is permitted.  We are in the process of evaluating ASU 2011-05 and its impact on the presentation of our consolidated financial statements, however these changes are not expected to impact the consolidated financial statements other than the change in presentation.

Recently Adopted Accounting Pronouncements

In October 2009, the FASB issued ASU 2009-13, “Multiple Deliverable Revenue Arrangements.” ASU 2009-13 amends ASC 605-10, “Revenue Recognition,” and addresses accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit, and provides guidance regarding how to measure and allocate arrangement consideration to one or more units of accounting.  The adoption of ASU 2009-13 at the beginning of fiscal 2012 had no impact on our consolidated financial statements.

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MERCHANDISE INVENTORIES AND SOURCES OF SUPPLY

6 Months Ended

Aug. 27, 2011

MERCHANDISE INVENTORIES AND SOURCES OF SUPPLY

MERCHANDISE INVENTORIES AND SOURCES OF SUPPLY

NOTE 3 — MERCHANDISE INVENTORIES AND SOURCES OF SUPPLY

Our merchandise inventories consisted of the following (in thousands):

	August 27,		February 26,		August 28,
Description	2011		2011		2010
Merchandise - in store/e-Commerce	$	46,585	$	34,186	$	37,180
Merchandise - in transit	7,081		5,025		2,929
	$	53,666	$	39,211	$	40,109

We do not have long-term purchase commitments or arrangements with any of our suppliers or agents.  During the quarter ended August 27, 2011, one of our vendors supplied approximately 19% of our merchandise compared to 28% of our total merchandise purchases during the second quarter of fiscal 2011.  No other vendor supplied greater than 10% of our total merchandise purchases during the second quarter of fiscal 2012.  A second vendor supplied approximately 17% of our merchandise purchases during the second quarter of fiscal 2011.  For the six months ended August 27, 2011, the Company purchased approximately 20% of its merchandise from one vendor and 11% from another vendor, compared to 29% and 18% from these two vendors, respectively, during the first six months of fiscal 2011.

Although we have strong relationships with these vendors, there can be no assurance that these relationships can be maintained in the future or that the vendors will continue to supply merchandise to us.  If there should be any significant disruption in the supply of merchandise from these vendors, management believes that it will be able to shift production to other suppliers so as to continue to secure the required volume of product.  Nevertheless, it is possible that any significant disruption in supply could have a material adverse impact on our financial position or results of operations.

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LEGAL PROCEEDINGS

6 Months Ended

Aug. 27, 2011

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

NOTE 12 — LEGAL PROCEEDINGS

We are subject, from time to time, to various claims, lawsuits or actions that arise in the ordinary course of business.  Although the amount of any liability that could arise with respect to any current proceedings cannot, in our opinion, be accurately predicted, the range of reasonably possible losses on these matters, individually and in the aggregate, is not expected to have a material adverse impact on our financial position, results of operations or liquidity.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data	Aug. 27, 2011	Feb. 26, 2011	Aug. 28, 2010
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000	1,000	1,000
Preferred stock, shares outstanding	0	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized	74,000	74,000	74,000
Common stock, shares issued	45,713	45,432	45,635
Common stock, shares outstanding	35,922	35,641	35,844
Common stock held in treasury, shares	9,791	9,791	9,791