New York & Company, Inc. Reports a 75% Increase in Second Quarter 2008 Earnings Per Share, Exceeding Expectations and Raising Guidance

For the second quarter of fiscal year 2008, net sales were $295.7 million, as compared to $285.0 million for the second quarter of fiscal year 2007. Comparable store sales for the second quarter of fiscal year 2008 decreased 2.2%, compared to a 4.9% increase in the prior year second quarter. Net income from continuing operations for the second quarter of fiscal year 2008 was $8.6 million, or $0.14 per diluted share, as compared to prior year second quarter net income from continuing operations of $5.0 million, or $0.08 per diluted share, representing a 75% increase in earnings per diluted share.

For the six month period ended August 2, 2008, net sales were $565.7 million, as compared to $559.2 million for the six months ended August 4, 2007. Comparable store sales decreased 4.3% for the six month period ended August 2, 2008, as compared to a 2.0% increase in the prior year period. Net income from continuing operations for the six month period ended August 2, 2008 was $15.3 million, or $0.25 per diluted share, as compared to prior year six month net income from continuing operations of $10.2 million, or $0.17 per diluted share, representing a 47% increase in earnings per diluted share.

Richard P. Crystal, New York & Company's Chairman and CEO, stated: "We are pleased to continue our positive momentum and deliver better than expected second quarter results. Our performance this quarter demonstrates the success of our strategies to maximize profitability in a tough environment and our ability to deliver compelling assortments and value to our customers. During the quarter, our sales met our expectations and we achieved a significant increase in gross profit margin driven by the strength of our offerings and our actions to tightly control inventory and eliminate non brand-building promotions. As we begin the second half of the year, we believe we are well positioned to accomplish our goals and will continue to emphasize the strategies that generated our strong first half performance."

Significant highlights with respect to the second quarter included the following:

-- A favorable customer response to merchandise assortments, which, coupled with the elimination of non-brand building promotions, resulted in a 230 basis point increase in gross profit margin versus the same period a year ago;

-- A 22.3% decline in inventory per average store as compared to the end of last year's second quarter. This reduction reflects the Company's planned optimization of inventory flow and establishes inventory support at the proper level;

-- Controlling costs which resulted in selling, general and administrative expenses declining by 1.6% on an average store basis;

-- The opening of 10 new stores during the quarter, expanding the store base to 596 stores and 3.4 million selling square feet; and

-- Further strengthening of the balance sheet which resulted in a cash balance of $87 million versus $27 million at the end of last year's second quarter.

Outlook

The Company expects to continue its successful strategy of improving margin through targeted well-planned promotions and tight inventory control during what we anticipate to be a challenging business environment throughout the third and fourth quarters. The Company's outlook for the third quarter of fiscal year 2008 reflects comparable store sales in the low to mid negative single-digit range with gross margins improving versus the same period a year ago. This outlook includes the effect of a shift in the timing of a key promotional program from the last week of the third quarter into early November in order to optimize sales and margins for the fall season. The Company's current outlook for earnings per diluted share in the third quarter of fiscal year 2008 is in the range of $0.08 to $0.12. This compares to actual third quarter of fiscal year 2007 earnings per diluted share of $0.09. During the third quarter of fiscal year 2008, the Company plans to open approximately five stores, close two stores and remodel seven stores, ending the quarter with approximately 599 stores and 3.4 million selling square feet.

The Company expects comparable store sales to be in the low to mid negative single-digit range for the full fiscal year 2008 and now expects earnings per diluted share to be in the range of $0.52 to $0.60. This compares to the Company's previous guidance range of $0.44 to $0.54 and compares to actual fiscal year 2007 earnings per diluted share of $0.44.

During fiscal year 2008, the Company plans to open 25 to 30 stores, close approximately 12 stores and remodel approximately 13 stores, ending the fiscal year with 591 to 596 stores and approximately 3.3 million selling square feet in operation, with new stores representing approximately 105,000 selling square feet. Capital expenditures are estimated in the range of $52.0 million to $54.0 million in fiscal year 2008 versus $75.5 million in fiscal year 2007. Depreciation expense for the year is estimated at $44.0 million.

Conference Call Information

A conference call to discuss the second quarter of fiscal year 2008 results is scheduled for today Friday, August 15, 2008 at 9:00 am Eastern Daylight Time. Investors and analysts interested in participating in the call are invited to dial 800-922-9655, referencing conference ID number 56606385, approximately ten minutes prior to the start of the call. The conference call will also be web-cast live at www.nyandcompany.com. A replay of this call will be available until midnight on August 22, 2008 and can be accessed by dialing 800-642-1687 and enter conference ID number 56606385 and pin: 1079.

Forward Looking Statements: This press release contains certain forward looking statements. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "may," "plan," "project," "predict", and similar expressions and include references to assumptions that we believe are reasonable and relate to our future prospects, developments and business strategies. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These include, but are not limited to: (i) our ability to open and operate stores successfully and the potential lack of availability of suitable store locations on acceptable terms; (ii) seasonal fluctuations in our business; (iii) our ability to anticipate and respond to fashion trends, develop new merchandise and launch new product lines successfully; (iv) general economic conditions, consumer confidence and spending patterns; (v) our dependence on mall traffic for our sales; (vi) our dependence on the success of our brand; (vii) competition in our market, including promotional and pricing competition; (viii) our reliance on the effective use of customer information; (ix) our ability to service any debt we incur from time to time as well as our ability to maintain the requirements that the agreements related to such debt impose upon us; (x) the susceptibility of our business to extreme and/or unseasonable weather conditions; (xi) our ability to retain, recruit and train key personnel; (xii) our reliance on third parties to manage some aspects of our business; (xiii) changes in the cost of raw materials, distribution services or labor, including federal and state minimum wage rates; (xiv) the potential impact of national and international security concerns on the retail environment, including any possible military action, terrorist attacks or other hostilities; (xv) our reliance on foreign sources of production, including the disruption of imports by labor disputes, political instability, legal and regulatory matters, duties, taxes, other charges and quotas on imports, local business practices, potential delays in shipping and related pricing impacts and political issues and fluctuation in currency and exchange rates; (xvi) the potential impact of natural disasters and health concerns relating to outbreaks of widespread diseases, particularly on manufacturing operations of our vendors; (xvii) the ability of our manufacturers to manufacture and deliver products in a timely manner while meeting our quality standards; (xviii) our ability to successfully integrate new or acquired businesses into our existing business; (xix) our reliance on manufacturers to maintain ethical business practices; (xx) our ability to protect our trademarks and other intellectual property rights; (xxi) our ability to maintain, and our reliance on, our information technology infrastructure; (xxii) the effects of government regulation; (xxiii) the control of the company by our sponsors and any potential change of ownership of those sponsors; and (xxiv) other risks and uncertainties as described in our documents filed with the SEC, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to revise the forward looking statements included in this press release to reflect any future events or circumstances.

About New York & Company, Inc.

New York & Company, Inc., founded in 1918, is a leading specialty retailer of fashion-oriented, moderately-priced women's apparel. The Company's proprietary branded New York & Company (TM) merchandise is sold exclusively through its national network of New York & Company retail stores and E-commerce store at www.nyandcompany.com. The Company currently operates 596 stores in 44 states. Additionally, certain product, press release and SEC filing information concerning the Company are available at the Company's website: www.nyandcompany.com.

Exhibit (1) New York & Company, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Three months months ended % ended % August of August of (Amounts in thousands, except per 2, net 4, net share amounts) 2008 sales 2007 sales ---------------------------------- -------- ----- -------- ----- Net sales $295,668 100.0% $284,966 100.0% Cost of goods sold, buying and occupancy costs 207,286 70.1% 206,275 72.4% -------- ----- -------- ----- Gross profit 88,382 29.9% 78,691 27.6% Selling, general and administrative expenses 73,928 25.0% 70,051 24.6% -------- ----- -------- ----- Operating income 14,454 4.9% 8,640 3.0% Interest expense, net of interest income 56 --% 219 0.1% -------- ----- -------- ----- Income from continuing operations before income taxes 14,398 4.9% 8,421 2.9% Provision for income taxes 5,788 2.0% 3,385 1.1% -------- ----- -------- ----- Income from continuing operations 8,610 2.9% 5,036 1.8% Income (loss) from discontinued operations, net of taxes 167 0.1% (1,537) (0.6)% -------- ----- -------- ----- Net income $ 8,777 3.0% $ 3,499 1.2% ======== ===== ======== ===== Basic earnings per share from continuing operations $ 0.15 $ 0.09 Basic loss per share from discontinued operations -- (0.03) -------- -------- Basic earnings per share $ 0.15 $ 0.06 ======== ======== Diluted earnings per share from continuing operations $ 0.14 $ 0.08 Diluted loss per share from discontinued operations -- (0.02) -------- -------- Diluted earnings per share $ 0.14 $ 0.06 ======== ======== Weighted average shares outstanding: Basic shares of common stock 59,426 58,262 ======== ======== Diluted shares of common stock 61,395 60,954 ======== ======== Selected operating data for continuing operations: (Dollars in thousands, except square foot data) ---------------------------------- Comparable store sales (decrease) increase (2.2)% 4.9% Net sales per average selling square foot (a) $ 88 $ 87 Net sales per average store (b) $ 500 $ 517 Average selling square footage per store (c) 5,671 5,905

(a) Net sales per average selling square foot is defined as net sales divided by the average of beginning and end of period selling square feet. (b) Net sales per average store is defined as net sales divided by the average of beginning and end of period number of stores. (c) Average selling square footage per store is defined as end of period selling square feet divided by end of period number of stores.

Exhibit (2) New York & Company, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Six Six months months ended % ended % August of August of (Amounts in thousands, except per 2, net 4, net share amounts) 2008 sales 2007 sales ---------------------------------- -------- ----- -------- ----- Net sales $565,737 100.0% $559,152 100.0% Cost of goods sold, buying and occupancy costs 393,414 69.5% 401,018 71.7% -------- ----- -------- ----- Gross profit 172,323 30.5% 158,134 28.3% Selling, general and administrative expenses 146,503 25.9% 140,576 25.2% -------- ----- -------- ----- Operating income 25,820 4.6% 17,558 3.1% Interest expense, net of interest income 180 --% 480 0.1% -------- ----- -------- ----- Income from continuing operations before income taxes 25,640 4.6% 17,078 3.0% Provision for income taxes 10,307 1.9% 6,865 1.2% -------- ----- -------- ----- Income from continuing operations 15,333 2.7% 10,213 1.8% Income (loss) from discontinued operations, net of taxes 167 --% (5,912) (1.0)% -------- ----- -------- ----- Net income $ 15,500 2.7% $ 4,301 0.8% ======== ===== ======== ===== Basic earnings per share from continuing operations $ 0.26 $ 0.17 Basic loss per share from discontinued operations -- (0.10) -------- -------- Basic earnings per share $ 0.26 $ 0.07 ======== ======== Diluted earnings per share from continuing operations $ 0.25 $ 0.17 Diluted loss per share from discontinued operations -- (0.10) -------- -------- Diluted earnings per share $ 0.25 $ 0.07 ======== ======== Weighted average shares outstanding: Basic shares of common stock 59,350 58,033 ======== ======== Diluted shares of common stock 61,314 60,911 ======== ======== Selected operating data for continuing operations: (Dollars in thousands, except square foot data) ---------------------------------- Comparable store sales (decrease) increase (4.3)% 2.0% Net sales per average selling square foot (a) $ 169 $ 171 Net sales per average store (b) $ 964 $ 1,022 Average selling square footage per store (c) 5,671 5,905

(a) Net sales per average selling square foot is defined as net sales divided by the average of beginning and end of period selling square feet. (b) Net sales per average store is defined as net sales divided by the average of beginning and end of period number of stores. (c) Average selling square footage per store is defined as end of period selling square feet divided by end of period number of stores.

Exhibit (3) New York & Company, Inc. and Subsidiaries Condensed Consolidated Balance Sheets August 2, February 2, August 4, (Amounts in thousands) 2008 2008 2007 ---------------------------------- ----------- ----------- ----------- (Unaudited) (Audited) (Unaudited) Assets Current assets: Cash and cash equivalents $ 86,699 $ 73,734 $ 27,452 Accounts receivable 16,229 18,523 18,027 Income taxes receivable -- 11,730 -- Inventories, net 98,796 103,923 118,883 Prepaid expenses 27,441 21,991 26,922 Other current assets 2,336 1,913 3,023 Current assets of discontinued operations 493 716 5,350 ----------- ----------- ----------- Total current assets 231,994 232,530 199,657 Property and equipment, net 249,055 239,557 219,359 Intangible assets 14,869 14,843 14,843 Other assets 1,343 1,500 1,294 Non-current assets of discontinued operations -- 26 35,812 ----------- ----------- ----------- Total assets $ 497,261 $ 488,456 $ 470,965 =========== =========== =========== Liabilities and stockholders' equity Current liabilities: Current portion - long-term debt $ 6,000 $ 6,000 $ 6,000 Accounts payable 74,722 77,177 65,485 Accrued expenses 52,602 53,618 49,935 Deferred income taxes 3,710 3,928 3,644 Current liabilities of discontinued operations 1,002 7,328 3,600 ----------- ----------- ----------- Total current liabilities 138,036 148,051 128,664 Long-term debt, net of current portion 16,500 19,500 22,500 Deferred income taxes 3,119 3,747 1,377 Deferred rent 77,207 72,537 64,440 Other liabilities 4,697 4,660 4,594 Non-current liabilities of discontinued operations -- -- 2,270 ----------- ----------- ----------- Total liabilities 239,559 248,495 223,845 Total stockholders' equity 257,702 239,961 247,120 ----------- ----------- ----------- Total liabilities and stockholders' equity $ 497,261 $ 488,456 $ 470,965 =========== =========== ===========

Exhibit (4) New York & Company, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Six Six months months ended ended August 2, August 4, (Amounts in thousands) 2008 2007 ------------------------------------------------- --------- --------- Operating activities Net income $ 15,500 $ 4,301 Less: Income (loss) from discontinued operations, net of taxes 167 (5,912) ------- ------- Income from continuing operations 15,333 10,213 Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations: Depreciation and amortization 21,243 18,450 Amortization of deferred financing costs 89 139 Share-based compensation expense 734 931 Deferred income taxes (846) (1,392) Changes in operating assets and liabilities: Accounts receivable 2,294 (4,241) Income taxes receivable 11,730 -- Inventories, net 5,127 (16,627) Prepaid expenses (5,450) (7,339) Accounts payable (2,455) 2,531 Accrued expenses (1,016) (9,258) Income taxes payable -- (8,704) Deferred rent 4,670 10,607 Other assets and liabilities (402) 3,324 -------- --------- Net cash provided by (used in) operating activities of continuing operations 51,051 (1,366) -------- --------- Investing activities Acquisition of trademarks (26) -- Capital expenditures (30,657) (35,331) -------- --------- Net cash used in investing activities of continuing operations (30,683) (35,331) -------- --------- Financing activities Repayment of debt (3,000) (3,000) Proceeds from exercise of stock options 62 162 Excess tax benefit from exercise of stock options 1,445 3,240 Other -- (64) -------- --------- Net cash (used in) provided by financing activities of continuing operations (1,493) 338 -------- --------- Cash flows from discontinued operations Operating cash flows (6,133) (3,649) Investing cash flows -- (307) Financing cash flows -- -- ------- ------- Net cash used in discontinued operations (6,133) (3,956) ------- ------- Net increase (decrease) in cash and cash equivalents 12,742 (40,315) Cash and cash equivalents at beginning of period (including cash at discontinued operations of $223 and $206, respectively) 73,957 68,064 -------- --------- Cash and cash equivalents at end of period (including cash at discontinued operations of $0 and $297, respectively) $ 86,699 $ 27,749 ======== =========

Exhibit (5) New York & Company, Inc. and Subsidiaries Store Count and Selling Square Footage (Unaudited) Total stores Number open of Number of Number of Total at stores stores stores stores beginning opened remodeled closed open at of during during during end of Fiscal the the the the the Year 2008 quarter quarter quarter quarter quarter ------------------- ---------- -------- ---------- --------- --------- 1st Quarter (Actual) 578 10 2 (2) 586 2nd Quarter (Actual) 586 10 4 -- 596 3rd Quarter (Projected) 596 5 7 (2) 599 4th Quarter (Projected) 599 -- -- (8) 591 Reduction Reduction of Selling of selling Total square selling square selling feet square feet Total square for feet for selling feet at stores for stores square beginning opened stores closed feet at of during remodeled during end of Fiscal the the during the the the Year 2008 quarter quarter quarter quarter quarter ------------------- ---------- -------- ---------- --------- --------- 1st Quarter (Actual) 3,327,450 42,139 (8,761) (14,122) 3,346,706 2nd Quarter (Actual) 3,346,706 40,321 (6,858) -- 3,380,169 3rd Quarter (Projected) 3,380,169 22,796 (21,351) (10,415) 3,371,199 4th Quarter (Projected) 3,371,199 -- -- (54,484) 3,316,715

SOURCE: New York & Company, Inc.

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