Charming Shoppes 2006 Annual Report

2006 Annual Review it’s all her about Charming Shoppes, Inc. A Leading Multi-Brand, Multi-Channel Lifestyle Apparel Retailer Charming Shoppes continues on a path of growth, and has achieved many important market-leading positions along the way. Today, as a leading multi-brand, multi-channel lifestyle apparel retailer, we are providing our customers with more apparel choices and more ways to shop than ever. She shops us where she wants, how she wants, and when she wants. Whether through our 2,378 retail stores, or our broad variety of catalog titles and e-commerce sites, we offer her every solution to suit her lifestyle apparel needs. Charming Shoppes—It’s all about her. Our Brands The most widely recognized name in women’s plus apparel Lane Bryant offers stylish, sophisticated and high-quality apparel. Our emphasis on fashion and style—not merely size—makes us a market leader. Today’s trends at an exceptional value From the newest trends to casual, updated basics, Fashion Bug offers something for everyone in plus, misses, juniors and girls sizes. Forward-Looking Statements: This publication contains certain forward-looking statements concerning the Company’s operations, performance, and financial condition. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated. Such risks and uncertainties may include, but are not limited to: the failure to implement the Company’s business plan for increased profitability and growth in the Company’s Retail Stores and Direct-to-Consumer segments, the failure to successfully implement the Company’s expansion of Cacique through new store formats, the failure to successfully implement the Company’s integration of operations of, and the business plan for, Crosstown Traders, Inc., adverse changes in costs vital to catalog operations, such as postage, paper and acquisition of prospects, declining response rates to catalog offerings, failure to maintain efficient and uninterrupted order-taking and fulfillment in our Direct-to-Consumer business, changes in or miscalculation of fashion trends, extreme or unseasonable weather conditions, economic downturns, escalation of energy costs, a weakness in overall consumer demand, failure to find suitable store locations, increases in wage rates, the ability to hire and train associates, trade and security restrictions and political or financial instability in countries where goods are manufactured, the interruption of merchandise flow from the Company’s centralized distribution facilities, competitive pressures, and the adverse effects of natural disasters, war, acts of terrorism or threats of either, or other armed conflict, on the United States and international economies. These, and other risks and uncertainties, are detailed in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2007 and other Company filings with the Securities and Exchange Commission. Charming Shoppes assumes no duty to update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. Classic apparel and accessories for career and casual lifestyles A leading plus-size specialty retailer, our Catherines brand offers apparel exclusively in plus, petite plus and extended plus-sizes. Updated, classic women’s casual and career petite apparel A specialty retailer with 45 outlet store locations throughout America, Petite Sophisticate® is Charming Shoppes’ newest family member and a fit specialist in women’s petites. A leading direct marketer of women’s apparel, footwear, accessories and specialty gifts Crosstown Traders offers quality women’s apparel through its multiple catalog titles, including Old Pueblo Traders, Monterey Bay and specialty foods through its Figis Gifts In Good Taste catalog. Financial Highlights Selected Income Statement Data Net sales (in thousands, except percentages and per share amounts) 2006(1) % of sales 2005(2)(3) % of sales 2004(3) more for her in 2006... 44 Lane Bryant® and Intimate Apparel Stores 29.6% 24.7% 4.9% 4.4% 2.8% % of sales Gross profit Selling, general, and administrative expenses Income from operations Income before income taxes Net income $ 3,067,517 925,633 753,109 172,524 166,123 $ 108,923 30.2% 24.6% 5.6% 5.4% 3.6% $ 2,755,725 841,378 678,753 162,625 152,401 $ 99,391 30.5% 24.6% 5.9% 5.5% 3.6% $ 2,334,736 692,086 577,301 114,180 101,668 $ 64,526 Selected Per Share Data, Assuming Dilution Diluted net income per share Diluted weighted average common shares and equivalents outstanding $ 0.81 139,763 $ 0.76 137,064 $ 0.52 133,174 Lane Bryant introduced a new store concept, the Lane Bryant and intimate apparel side-by-side store in 2005. Our new design pairs Lane Bryant’s casual and wear-to-work sportswear assortments with an expanded line of Cacique® intimates, presented in a double store-front. Many of our Lane Bryant retail store openings and relocations in 2006 were in the new side-by-side format. At the end of 2006, we operated 44 side-by-side stores, and plan to operate more than 100 by the end of 2007. Selected Balance Sheet Data Cash and cash equivalents Total assets Total long-term debt, including current portion Working capital Stockholders’ equity Long-term debt to equity ratio Current ratio $ 143,838 1,710,942 192,011 443,101 947,538 19.1% 2.1 12.4% 6.6% $ 130,132 1,572,583 206,744 344,229 814,348 23.6% 1.8 13.2% 6.9% $ 273,049 1,303,771 225,064 413,989 694,464 30.0% 2.4 10.1% 5.2% 82 Lane Bryant Outlet™ Stores In 2006, Charming Shoppes launched Lane Bryant Outlet. We executed our strategy to enter this important channel and immediately increase our market position, as well as expand our Lane Bryant brand. This new distribution channel gives our flagship chain a significant presence in many of the country’s leading outlet centers, providing an additional venue through which we may service and expand our Lane Bryant customer base. $ $ $ Performance Data Return on average stockholders’ equity Return on average total assets 45 Petite Sophisticate Outlet™ Stores (1) 2006 consisted of 53 weeks. (2) Includes the results of operations of Crosstown Traders, Inc. from the date of acquisition (June 2, 2005). (3) Certain amounts have been reclassified to conform to the current-year presentation. Net Sales (dollars in millions) Income From Operations (dollars in millions) $3,068 $2,756 $163 $114 $173 Diluted Earnings Per Share $0.76 $0.52 $0.81 $2,335 During 2006, we also launched Petite Sophisticate Outlet, the majority of which are operating with a Lane Bryant Outlet store in side-by-side locations. Petite Sophisticate® is the only national chain exclusively offering women’s petite size apparel in the outlet sales channel. Petite Sophisticate Outlet offers updated, classic and contemporary apparel in casual and career assortments. Leveraging our expertise in special sizes, Petite Sophisticate Outlet offers clothing tailored to women who wear petite sizes 0-14. 04 05 06 04 05 06 04 05 06 2006 Annual Review pg.1 to our shareholders: outstanding under our revolving credit facility, from which we had partially funded our 2005 acquisition of Crosstown Traders. Our balance sheet remains strong, and our stockholders’ equity is at its highest in our history. Our multi-brand, multi-channel strategy affords us many growth and expansion opportunities. Of our many successes in 2006, one of the most notable was the launch of our Lane Bryant Outlet business. Marking Charming Shoppes’ bold entrance into an entirely new channel, this move allowed us the opportunity to gain a new customer, increase our market share and better serve women wearing plus-size apparel. Through the hard work of our dedicated team and the utilization of our strong and scalable infrastructure, we were able to open flawlessly 82 new outlet locations within a very short window of time. As we moved to launch Lane Bryant Outlet, we seized upon another unique opportunity to attract and serve a new customer base, by acquiring the rights to a once-leading brand name for the styleconscious petite woman. On September 29, 2006, the Petite Sophisticate® brand was reborn. In a single day, an entire chain of 43 Petite Sophisticate Outlet stores opened their doors for business. To say our entry into the outlet business was the right decision is an understatement. Our new outlet division has proven to be a major success, contributing to our operating margin expansion, and exceeding even our own expectations. We certainly expect it to be a long-term growth driver for Charming Shoppes. Our record sales and earnings in 2006 can be attributed to our creativity, seizing opportunities, sound execution and growth. These attributes are derived from our strong commitment to serve our customer and fulfill our mission to be the leading lifestyle brand that can unequivocally claim: It’s all about her. As America’s leading women’s specialty plus-size apparel retailer, we consider it our responsibility and a privilege to find new ways to further our mission. Our commitment to serve our customer in a meaningful way has led us to offer her a superior fit, innovative fashion, new distribution channels and expanded product assortments. During the past year, revenues increased 11 percent to a record $3.1 billion. Our Retail Stores segment— which includes our Lane Bryant,® Fashion Bug® and Catherines® brands, and now Lane Bryant Outlet™ and Petite Sophisticate Outlet™—achieved record revenues, with each store brand posting increases in its gross margin. Net income was also at a record high for the year, increasing 10 percent. Considering the pre-opening operating expenses related to our outlet launch, and last year’s impressive 54 percent improvement in net income, this year’s increase speaks volumes about our continuing success. Once again we generated significant cash flow from operations, and completely repaid amounts Our record sales and earnings in 2006 can be attributed to our creativity, seizing opportunities, sound execution and growth. pg.2 2006 Annual Review Similarly, our other retail initiatives have also contributed to our growth. A year ago, I reported on the early development of Lane Bryant’s new side-by-side store format with its intimate apparel brand, Cacique.® In 2006, we moved well beyond the development stage and into full implementation. By the end of the year, 44 of these locations were in operation. Our award winning, side-by-side format has attracted new customers, increased revenues, and contributed to our market share gains in plus intimates. Our e-commerce businesses have achieved dramatic growth for the fifth year in a row, leading to significant revenue gains across our retail brands, and contributing to expansion in our operating margin. We have even leveraged our e-commerce structure within our stores, allowing us to access our full inventory assortments through a point-of-sale program that permits us to fulfill customer orders, even when an item may be out of stock at a particular store. Lane Bryant piloted this technology in 2005, and we rolled out the program to all our retail stores in 2006. It has been a resounding success, and continues to gain strength as an opportunity to provide our customer with unparalleled service. Our Catherines brand delivered a great year, achieving a four percent comparable store sales increase, on top of a 10 percent increase in the prior year. We have developed a very strong relationship with our Catherines customer. She views us as friendly, sisterly and caring; this type of personalized attention continues to win over new customers, and is leading Catherines to national recognition as a fit specialist in plus and extended plus-sizes. At Lane Bryant, we ended the year with a one percent same-store sales gain. We continued to make progress toward our 1,000 store goal, ending the year with 777 full-line Lane Bryant stores. Our Lane Bryant store count has grown by 20 percent since our acquisition of Lane Bryant in 2001, and we are challenging ourselves to accelerate our growth each and every year. In business for more than 100 years, Lane Bryant is one of America’s oldest and longest operating brands, yet it continues to expand, gain market share, and develop unique opportunities to serve its core customer. Much of our expansion has occurred in strip and lifestyle centers, which allows us to be more accessible and convenient to our customer. Also, with the benefit of lower rents than in our mall locations, and nearly comparable sales volumes, this expansion has achieved higher operating margin levels. In 2006, Fashion Bug posted strong same-store gains in its plus-size apparel business. This segment represents more than half of its assortments, and has been an area of strength and continuing growth for many years. Offset by difficult performance in other categories, Fashion Bug ended the year with a one percent same-store sales decrease. Our Fashion Bug brand today is undergoing change, and is examining new and innovative ways to create an improved shopping experience for its customer. Over the next year, we anticipate notable improvements in the overall merchandise assortments, including compelling new offerings of select national brands that resonate strongly with our customer. Crosstown Traders, our direct marketer of women’s apparel, footwear and specialty gifts, has been part of the Charming Shoppes family for nearly two years, and the benefits have been mutual. Crosstown has Dorrit J. Bern Chairman of the Board of Directors, President and Chief Executive Officer Assets (dollars in millions) Debt $225 (dollars in millions) Stockholders’ Equity (dollars in millions) $1,711 $1,573 $207 $948 $192 $814 $694 $1,304 04 05 06 04 05 06 04 05 06 2006 Annual Review pg.3 taken advantage of many infrastructure improvements and changes offered by Charming Shoppes, including shared services, enhanced credit operations, a robust customer database and direct sourcing. To Charming Shoppes, Crosstown Traders has brought increased revenues, opportunities for expanded catalog titles and the tools and infrastructure integral to the launch of our own Lane Bryant catalog toward the end of 2007. During the year, we consolidated two of our Crosstown Traders’ remote apparel offices into Crosstown’s Tucson, Arizona home office. Although this move caused a short-term disruption in apparel sales at several of our catalogs and therefore impacted overall financial results in our Direct-to-Consumer segment in the second half of 2006, we expect the consolidation to reap long-term benefits of increased efficiency in the management of the apparel group. We have addressed the issues impacting our apparel-related catalogs, and have placed new leadership as well as additional resources at the helm of the business. We look forward to these actions resulting in improved performance during the second half of 2007. Our food and gift business, ® Figi’s, performed well in its key season, the fourth quarter, and delivered its sales and profitability plan. We have much to be proud of on the operational front. Our supply chain management group was honored by Kurt Salomon Associates, which named Charming Shoppes #1 in logistics performance in a peer benchmarking study of distribution operations. With our growing track record of improving financial performance, we met the appropriate financial and liquidity criteria to be added to the NASDAQ Global Select Market. Additionally, we were added to the S&P MidCap 400 index during the year. We continue to grow direct sourcing for each of our businesses— which contributes directly to increases in our operating margin—and are planning a new sourcing office in northern China to further facilitate increases in our direct sourcing volumes. Looking forward, we are continuing on our path to reach $4 billion in annual sales with increased operating margins, driven by additional growth in our existing businesses, as well as new opportunities. Our plans for growth at our Lane Bryant brand continue, and include the expansion of the Lane Bryant side-by-side design to over 100 stores by year end. In the long term, we expect to operate more than 300 stores in this more productive format. The immediate success of our outlet strategy has enabled us to accelerate our growth plans for this new channel. Strong and positive customer response to our outlet offerings has increased the demand for our stores in premium outlet centers, resulting in the planned opening of an additional 15-20 outlet stores this year. Our growth in the outlet channel is a multi-year opportunity, and, over time, we plan to operate stores in over 150 outlet centers. Finally, the long-awaited launch of the Lane Bryant catalog is nearly upon us. This is an opportunity for which we have been planning since our acquisition of Lane Bryant in 2001. The trademark for the Lane Bryant catalog reverts to us at the end of this October, and we plan to release our first catalog by early November. At that time, we also intend to purchase the Lane Bryant proprietary credit file, which is currently being serviced by a third party, and integrate that file into our existing platform. Our plans for 2007 include appropriate increases in spending to support a successful launch of this new catalog. Each of our initiatives support our overall strategy—to grow to in revenues, while significantly expanding operating margins. $4 billion pg.4 2006 Annual Review Each of our initiatives support our overall strategy—to grow to $4 billion in revenues, while significantly expanding operating margins. The growth of our Lane Bryant brand to 1,000 stores will shift a growing portion of our revenues to higher-productivity venues, such as lifestyle centers and our side-by-side store format. We expect additional revenue growth as we continue to expand our outlet store channel and take full advantage of new opportunities, such as Petite Sophisticate. Continuing growth in our e-commerce businesses, increased penetration of direct sourcing and credit sales, enhanced inventory productivity and supply chain effectiveness are all continuing drivers of margin expansion. And, of course, our launch of the Lane Bryant catalog is expected to provide exciting growth and profitability in our Direct-to-Consumer segment. Our great success over the past year has been a positive confirmation of our strategy, our hard work, and our creativity, seizing opportunities, sound execution, and growth. But central to all our plans, initiatives and strategy is our commitment to meet the lifestyle needs of our customer. After all, it’s all about her. Shifting the mix to higher operating margin businesses $3.1 Billion in Revenues in 2006 Lane Bryant stores Fashion Bug stores Catherines stores 35% 34% 12% E-commerce Catalog Outlet 3% 14% 2% Our Dorrit J. Bern Lane Bryant brand contributing more than 45% of total revenues Lane Bryant stores Fashion Bug stores Catherines stores 37% 25% 12% E-commerce Catalog Outlet 5% 17% 4% $4 Billion*Goal Chairman of the Board of Directors, President and Chief Executive Officer Charming Shoppes, Inc. *management estimate 2006 Annual Review pg.5 giving her what she The style she loves The quality she expects The brands she trusts wants pg.6 2006 Annual Review anticipating what she Assortments for her many lifestyles Providing her more ways to shop Giving her the right fit needs 2006 Annual Review pg.7 how we that’s LANE BRYANT AND INTImATE AppAREL sToREs Side-by-side stores in 2006 Side-by-side stores planned for 2007* *management estimate grow... 44 57 At the end of 2007, we plan to operate more than 100 Lane Bryant and Intimate Apparel side-by-side stores. Our design pairs Lane Bryant’s casual and Lane Bryant—total 1,000 stores wear-to-work sportswear assortments with an expanded line of plus intimate apparel, presented in a side-by-side store-front. Many of our Lane Bryant retail store openings and relocations in 2006 were in this new format. pg.8 2006 Annual Review ...and grow ouTLET CENTER LoCATIoNs Outlet centers in 2006 82 Outlet centers planned for 2007* 18 *management estimate At the end of 2007, we plan to operate stores in approximately 100 outlet center locations. In 2006, Charming Shoppes entered the outlet channelBryant—total 1,000 stores Lane with our Lane Bryant and Petite Sophisticate Outlet stores. This new distribution channel gives us a significant presence in many of the country’s leading outlet centers, providing an additional venue through which we may service our customer and immediately increase our market position. 2006 Annual Review 2006 annual review pg.9 the brands she knows and trusts Our Retail Brands 2,378 retail stores in 48 states #1 market share position in women’s specialty plus apparel* #1 market share in women’s specialty plus intimate apparel* #1 market share in women’s specialty plus denim* #2 market share in all women’s plus apparel* Our plus apparel brands cater to more than half of the female population in the United States *derived from NPD Group data pg.10 2006 Annual Review The nation’s leader in women’s specialty plus apparel, providing stylish, sophisticated, high-quality fashion for women sizes 14-28. Lane Bryant is a widely recognized name in women’s plus fashion. Through private labels, such as Venezia,® Cacique,® and Lane Bryant,® we offer fashionable and sophisticated apparel, including Cacique intimate apparel, wear-to-work, and casual sportswear, as well as accessories. Lane Bryant has a loyal customer base, which shops for fashionable merchandise in the moderate price range. During the year, we increased the number of Lane Bryant stores, and made further progress toward our 1,000 store goal. Another 55-60 Lane Bryant store openings are planned for 2007, with the majority in our new side-by-side store design. www.lanebryant.com Lane Bryant Profile ashion, quality and lifestyle are F key brand elements xclusively plus-sizes E irst Lane Bryant store opened in F New York City in 1904 ur customer is contemporary, O generally 25-45 years old 77 full-line stores in 46 states 7 2 Lane Bryant premier outlet 8 stores in 32 states 2006 Annual Review pg.11 Today’s trends at an exceptional value. From the newest trends to casual, updated basics, Fashion Bug offers something for everyone. Fashion Bug stores specialize in selling a wide variety of women’s plus, misses, junior and girls apparel, accessories, intimate apparel, and footwear. At Fashion Bug, women of all life stages and lifestyles—from teens to mothers and from casual to career—find better selection, better styles and better value. Fashion Bug customers generally shop in the low-to-moderate price range, and our Priced Just Right™ program offers her low, low prices on the newest wardrobe basics—guaranteed. There’s just no better value. Our private labels include Fashion Bug,® L.A. Blues,® Studio 1940,® and Enchanted.® www.fashionbug.com Fashion Bug Profile alue and fashion are key V pdated plus, misses, U considerations for our customer juniors and girls apparel opened in Philadelphia in 1940 generally 20-49 years old irst Fashion Bug store F ur customer is mainstream, O ,009 stores in 44 states 1 pg.12 2006 Annual Review The plus-size fashion fit experts, providing classic and sophisticated plus-size and extended plus-size apparel and accessories for all occasions. Catherines offers classic apparel and accessories for wear-to-work and casual lifestyles. Our stores recognize the fashion needs of women who wear sizes 16 to 26. Additionally, our business fills a much-needed niche for women who wear sizes 28 to 34, a range not readily offered elsewhere. To the delight of our customers, petite and tall styles are also available. Catherines customers generally shop in the moderate price range, and are concerned with fit and value when selecting apparel. www.catherines.com Catherines Profile Our customers’ fashion tastes tend toward classic apparel Exclusively plus-sizes, with offerings in petite and extended plus-sizes Memphis in 1960 First Catherines store opened in specialist Fit Our customer is a baby-boomer, generally 40-65 years old 465 stores in 44 states 2006 Annual Review pg.13 At Petite Sophisticate Outlet,™ we’ve perfected the petite fit—from shoulder width to sleeve length, and from inseam to hemline. Petite Sophisticate® is the only national chain exclusively offering women’s petite size apparel in the outlet sales channel. Our first store opened at Franklin Mills in Philadelphia, Pennsylvania in September 2006. Petite Sophisticate offers updated classic, casual and career assortments. We are exclusively petites—offering clothing tailored to women 4’11’’-5’4’’ who wear petite sizes 0-14. The majority of our 45 Petite Sophisticate Outlet stores operate side-by-side with our Lane Bryant Outlet chain. www.petitesophisticate.com Petite Sophisticate Profile it and special sizes are F key differentiators xclusively petite sizes, 0p-14p E ur first Petite Sophisticate O Outlet store opened in Philadelphia in 2006 tend toward updated classics and collections generally 35-55 years old outlet stores in 23 states ur customers’ fashion tastes O ur customer is contemporary, O 5 Petite Sophisticate premier 4 pg.14 2006 Annual Review Direct-to- We established our Direct-to-Consumer segment in 2005 with the acquisition of Crosstown Traders, Inc. Crosstown Traders operates multiple catalog titles and related websites, with the majority of revenues derived from sales of women’s apparel, footwear, and accessories, of which plus-sizes are an important component. Crosstown Traders also derives significant revenues from the sales of food and gifts, a substantial majority of which occur during the December holiday season. Consumer ® ® The Direct-to-Consumer segment complements our Retail Stores segment by providing an additional channel to serve our customers’ lifestyle needs. Catalogs and catalog-related e-commerce sites can also serve as an efficient means of building brand awareness as well as testing market acceptance of new products and new brands. Charming Shoppes retail brands—Lane Bryant, Fashion Bug and Catherines Plus-sizes— offer our customers the convenience of online shopping. Our retail brands’ online businesses have grown rapidly, and continue to contribute strongly to our plans for additional top-line growth. During 2006, each of our retail store brands was provided with a virtual inventory system. This tool allows our store associates to service the customer, even when the size or the style she wants isn’t available in one of our stores. By accessing our chain-wide inventory at the point-of-sale terminal, our store associates can locate any size or item the customer needs, and have the item shipped to the customer immediately. Direct-to-Consumer Profile Apparel catalogs 8 Footwear catalogs 3 ome and Food and Gift catalogs H 35 million catalogs circulated during 2006 2 4 e-commerce catalog sites 1 retail brand-related e-commerce sites 3 50-seat call center 8 1% growth in retail brand-related 5 e-commerce sales during 2006 2006 Annual Review pg.15 knowing our customers An ample array of fashion and beauty advice extends the shopping experience into the home, empowering readers to re-create fashion looks from Lane Bryant, Fashion Bug and Catherines for themselves— with confidence. And figure is more than a magazine. It’s a brand that focuses on celebrating real women. At www.figuremagazine.com, our readers can register to receive figure Email Update, which provides timely fashion tips and trends, health advice, and more. Readers can make connections by posting messages to the figure Community message boards, and can download podcasts to take figure on the go, to hear fashion trends and interviews with celebrities. www.figuremagazine.com figure appreciates every woman for who she is, just as she is, today. Through our communications with our customers, a recurring opinion emerged, relating to the portrayal of women in fashion magazines. Our customers longed for a magazine that would celebrate the beauty, health and lifestyle of the everyday average American woman. In August 2003, figure magazine debuted, and Charming Shoppes presented a fashion and lifestyle magazine, created just for plus-size women, in all of our stores, on select newsstands and at well-known retailers nationwide. figure is a bi-monthly magazine for plus-size women who desire inspirational and attainable content especially for them, featuring fashion, beauty, relationships and more. The magazine is in touch with how they live and the unique issues they face, and provides a sense of community—a place readers can go that’s just for them. The magazine speaks to them in a friend-to-friend voice that is engaging, uplifting, reassuring, inspiring and solution based. Our readers come to figure to meet an ethnically diverse community of real women who are beautiful and feel great about themselves. Through in-depth profiles, readers get a glimpse into celebrities’ and non-celebrities’ lifestyles and learn about their successes, their relationships, and their lives. At Charming Shoppes, we not only listen to our customer, but actively and continually seek her input from comments on our clothing and stores to the concerns she faces in her community. Our Chairman and CEO, Dorrit Bern, is passionate about issues pertaining to women and children. Through a column called “Speaking Woman to Woman,” she has created an ongoing dialogue with customers to better understand their needs, desires and lifestyles. In “Speaking Woman to Woman,” our customers can read about topics that matter. Our messages, designed to provoke thought as well as action, encourage women to reply with their thoughts and opinions. figure Magazine Profile Launched August 2003 America’s only plus lifestyle magazine issues are produced each year 6 Nearly 500,000 in annual circulation and 50,000 subscriptions pg.16 2006 Annual Review a great company is made of great people brand. Crosstown Traders’ apparel and footwear businesses reside in Tucson, Arizona, and Wisconsin is home to Figi’s. Additionally, we have offices in New York, New York; distribution facilities in Greencastle, Indiana, White Marsh, Maryland, Tucson, Arizona, and Wilmington, North Carolina. Spirit of America National Bank, our affiliated bank, is located in Milford, Ohio. Charming Shoppes also has overseas direct sourcing offices in Hong Kong, Singapore, Dhaka and New Delhi. Our common thread…our people At Charming Shoppes, our values are to: Exceed Our Customer’s Expectations, Act with Integrity, Be Innovative, Collaborate Through Teamwork, Deliver Superior Performance and Support the Community. Our associates genuinely embrace these values and project an image of professionalism, attentiveness and responsibility, all with the aim of supporting our Company goals. This effort is built upon a common thread of values that reinforces our commitment to our customers, to our fellow associates and to our shareholders. We are always looking for passionate and self-motivated team players who are ready for a challenge. The Company’s formula for success is built around innovation, leading-edge technology and a strong customer service effort that reinforces our position as a leading multi-brand, multi-channel lifestyle apparel retailer. Our Company’s facilities span the United States. Our corporate headquarters is located in Bensalem, Pennsylvania. We also have buying offices in Bensalem for our Fashion Bug and Outlet businesses. Catherines’ home office is in Memphis, Tennessee, and Columbus, Ohio is the home to our Lane Bryant Corporate Profile orporate Headquarters: C Bensalem, Pennsylvania ncorporated in 1940 I 0,000 Charming Shoppes 3 Charming Shoppes’ Corporate Headquarters Bensalem, Pennsylvania associates worldwide rading on NASDAQ since 1971 T he nation’s 7th largest in-house T proprietary credit program irect sourcing operations D headquartered in Hong Kong Index and NASDAQ Global Select Market ember of S&P MidCap 400 M New Lane Bryant Home Office Building Columbus, Ohio 2006 Annual Review pg.17 warming hearts and warming lives Through monetary and in-kind giving to charitable organizations such as United Way and the Police Athletic League, and by providing funding for disaster relief efforts, Charming Shoppes contributed more than 2 million charitable dollars to those in need in 2006. Charming Shoppes In The Community In addition to meeting the fashion needs of women, Charming Shoppes is committed to addressing and raising awareness of the many issues that exist in our communities. We believe it’s our responsibility to give back to the communities we serve, and we demonstrate this philosophy through programs designed to better the lives of women, offer help to those in need, inspire community spirit and truly make a difference. Charming Shoppes is committed to ongoing partnerships with non-profit organizations which share the same goal of supporting members of the community. KEEpING KIDs WARm CommuNITIEs Keeping Kids Warm® Celebrates 11 Years of Giving Having warmed hearts and lives for many years, the Keeping Kids Warm program completed its eleventh exciting season of sharing in November 2006. Our program started in 1996 in Philadelphia, Pennsylvania and has grown into a nationwide program. The Company, in conjunction with its vendors and suppliers, donates coats to elementaryschool children in need. To date, Keeping Kids Warm has donated 70,000 new coats and school supplies to children in 56 communities in 26 states and the District of Columbia. In 2006, our program included schools in Connecticut, Georgia, Indiana, Iowa, Massachusetts, Nebraska, North Carolina, New Jersey, New York, Ohio, Oregon, Pennsylvania, Tennessee, Virginia and West Virginia. “ Thank you for the wonderful coats. I think mine’s the best. Mine is pink with light pink stripes and a black stripe above it. I love my coat. It is very warm.” Jordan 4th Grade Program-to-date 56 pg.18 2006 Annual Review celebrating women’s leadership Voices. One voice can lead to a chorus for change.® “I am proud and honored to have been selected one of the five finalists as all other four women are amazing leaders making a huge difference in their respective communities. By recognizing me you have in essence recognized the successes of thousands of our inner-city kids who have successfully completed our programs and are striving to become leaders now!” Anna Ouroumian Academy of Business Leadership President and CEO and 2006 Voices Recipient Charming Shoppes’ commitment to community service is manifested in the Voices campaign, which celebrates women’s leadership in grassroots causes throughout the United States. Charming Shoppes launched Voices in 2002 to recognize remarkable women who raise their voices to create positive change. Charming Shoppes honors all of the 2006 nominees, each of whom has given a piece of herself and a special gift—her voice—to make a difference in her local community. The Company chose five winners from the essays received, and celebrated each woman’s commitment to community service, on-air, with Montel Williams. Our winners received grants from Charming Shoppes to further their work in their communities. This year’s program recognized women championing the following causes: Academy of Business Leadership www.goabl.org Hats Off for Cancer Girl Talk leadership program for at-risk teens, A ats for kids who have lost their hair to cancer, H mentoring program, pairing middle school A girls with high school girls, to the homeless, www.hatsoffforcancer.org www.desiretoinspire.org ecovery of prepared food and distribution R free flights program providing access A Chefs to the Rescue www.idahofoodbank.org/chefs.htm Miracle Flights for Kids www.miracleflights.org to medical treatment for children in need. 2006 Annual Review pg.19 Charming Shoppes, Inc. board of directors (from left to right) Dr. Pamela Davies President Queens University of Charlotte M. Jeannine Strandjord Former Senior Vice President and Chief Integration Officer Sprint Corporation Alan Rosskamm Former Chairman of the Board, President and Chief Executive Officer Jo-Ann Stores, Inc. Dorrit J. Bern Chairman of the Board of Directors, President and Chief Executive Officer William O. Albertini Former Executive Vice President and Chief Financial Officer Bell Atlantic Global Wireless, Inc. Yvonne M. Curl Former Chief Marketing Officer Avaya, Inc. Charles T. Hopkins Former Managing Partner KPMG LLP, Philadelphia Katherine M. Hudson Lead Independent Director Former Chairman of the Board Brady Corporation Design: Creative Strategy Group, Inc. | csg-design.com Corporate Executive Officers Dorrit J. Bern Chairman of the Board of Directors, President and Chief Executive Officer Joseph M. Baron Executive Vice President and Chief Operating Officer James G. Bloise Executive Vice President Supply Chain Management, Information Technology and Shared Business Services Michel Bourlon Executive Vice President Sourcing Anthony A. DeSabato, Esq. Executive Vice President Corporate and Labor Relations, and Business Ethics Eric M. Specter Executive Vice President and Chief Financial Officer Colin D. Stern, Esq. Executive Vice President General Counsel and Secretary Gale H. Varma Executive Vice President Human Resources John J. Sullivan Senior Vice President Corporate Controller Independent Auditors Ernst & Young LLP Philadelphia, Pennsylvania Transfer Agent and Registrar American Stock Transfer & Trust Company New York, New York 1-800-937-5449 Executive Offices 3750 State Road Bensalem, Pennsylvania 19020 Form 10-K A copy of the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, is available to stockholders without charge upon written request: Charming Shoppes, Inc. Investor Relations 3750 State Road Bensalem, Pennsylvania 19020 Quarterly reports available upon request. Charming Shoppes, Inc. 3750 State Road Bensalem, PA 19020 www.charmingshoppes.com