(X)

Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

( )

Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

(Exact name of registrant as specified in its charter)
 

Virginia		54-1387365
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

Yes

(X)

No

( )

 

 

		Page
Item 1.	Financial Statements:
	Condensed Consolidated Income Statements for the 13 Weeks and 39 Weeks Ended October 29, 2005 and October 30, 2004	3
	Condensed Consolidated Balance Sheets as of October 29, 2005 and January 29, 2005	4
	Condensed Consolidated Statements of Cash Flows for the 39 Weeks Ended October 29, 2005 and October 30, 2004	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	15

Item 1.	Legal Proceedings	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
Item 5.	Other Information	16
Item 6.	Exhibits	16
	Signatures	18

 

 

 

 

 

·	our anticipated sales, including comparable store net sales, net sales growth, earnings growth and new store growth;

·	the average size of our stores to be added in 2005;

·	the possible effect of inflation and other economic changes on our future costs and profitability, including the possible effect of future changes in shipping rates and fuel costs;

·	the impact that advertising and the acceptance of additional tender types will have on comparable store net sales;

·	our cash needs, including our ability to fund our future capital expenditures and working capital requirements;

·	the impact, capacity, performance and cost of our existing distribution centers;

·	the future reliability of, and cost associated with, our sources of supply, particularly imported goods such as those sourced from China and Hong Kong;

·	costs of pending and possible future legal claims;

·	the adequacy of our internal controls over financial reporting;

·	the possible effect on our financial results of changes in generally accepted accounting principles relating to accounting for stock-based compensation.

·

Adverse economic conditions, such as reduced spending due to lack of consumer confidence, inflation, gasoline prices, or other factors, or bad weather, could significantly reduce our sales. The outbreak of war and other national and international events, such as terrorism, could lead to disruptions in our supply chain or the economy.

·

Failure to meet our goals for opening or expanding stores on a timely basis could cause our sales to suffer. We may not anticipate all the challenges that expanding our operations will impose and, as a result, we may not meet our targets for opening new stores and expanding profitably. In addition, new stores or expanded stores may cause sales at nearby stores to suffer, and we could have difficulties profitably renewing or replacing expiring leases.

·	Our profitability is vulnerable to future increases in operating and merchandise costs including shipping rates, freight costs, fuel costs, wage levels, inflation, competition and other adverse economic factors because we sell goods at the fixed $1.00 price point.

·	The resolution of certain legal matters could have a material adverse effect on our results of operations, accrued liabilities and cash.

·

Our merchandise mix relies heavily on imported goods. An increase in the cost of these goods, because of inflation in the country of origin or currency revaluations, or disruption in the flow of these goods may significantly decrease our sales and profits. Any transition to alternative sources may not occur in time to meet our demands. In addition, products from alternative sources may be of lesser quality or more expensive than those we currently import.

·	Our sales may be below expectations during the Christmas selling season, which may cause our operating results to suffer materially.

·	The performance of our distribution system is critical to our operations. Unforeseen disruptions or costs in our receiving and distributing merchandise could harm our sales and profitability.

·	Disruptions in the availability of quality, low-cost merchandise in sufficient quantities to maintain our growth may reduce sales and profits.

 

 

·	Occupancy costs increased 60 basis points due primarily to deleveraging associated with the comparable stores sales decrease in the quarter.

 

·

Merchandise costs, including inbound freight, increased 70 basis points due primarily to a slight shift in mix to more consumables, which have a lower margin, and increased inbound freight costs. The increase in consumables was partially the result of the effect of Hurricanes Katrina and Rita in the quarter. Inbound freight costs have increased primarily due to higher fuel costs.

·

These cost increases were partially offset by a 30 basis point decrease in shrink expense and a 10 basis point decrease in markdown expense. The shrink expense decrease resulted from the final reconciliation of our physical inventories for the year. The markdown expense decrease is primarily the result of hurricane markdowns and increases to the estimated markdown reserve in the prior year quarter, partially offset by current year hurricane markdowns.

·	Payroll-related costs decreased approximately 30 basis points due primarily to lower field payroll costs and a reduction in incentive compensation accruals that are based on forecasted earnings amounts for fiscal 2005.

·

Operating and corporate expenses decreased approximately 10 basis points primarily due to decreased store supplies expense as a result of better pricing and the receipt of insurance proceeds resulting from a fire at one of our locations. These increases were partially offset by increased bank service charges related to the rollout of debit card acceptance in our stores and hurricane related fixed asset write-offs.

·

Partially offsetting the aforementioned decreases was an approximate 20 basis point increase in store operating costs primarily due to higher utility costs due to higher rates and consumption, decreased leverage associated with the decrease in comparable store net sales and hurricane related repairs in the current quarter.

 

·	Occupancy costs increased 80 basis points due primarily to deleveraging associated with the comparable stores sales decrease in the period.

·

Merchandise costs, including inbound freight, increased 40 basis points due primarily to a shift in mix to slightly more consumables, which have a lower margin, and increased inbound freight costs. Inbound freight costs have increased due to higher fuel costs and slightly higher import rates. The higher import rates are the result of newly negotiated contracts in May 2005.

·	Shrink expense also increased 20 basis points due to a slightly higher shrink rate for the stores in the current year as compared to the prior year and slightly higher shrink in the distribution centers.

 

·

Operating and corporate expenses decreased approximately 30 basis points primarily due to the decrease in store supplies expense as a result of better pricing and decreased professional fees, partially offset by increased bank service charges resulting from the rollout of our debit card program which started in May 2005.

·	Payroll-related costs decreased approximately 25 basis points due primarily to a reduction in incentive compensation accruals that are based on forecasted earnings amounts for fiscal 2005 and lower workers compensation claims in the current period.

·

Partially offsetting the aforementioned decreases was an approximate 20 basis point increase in store operating costs primarily due to higher utility costs due to higher rates and consumption in the current year, the decreased leverage associated with the decrease in comparable store net sales and hurricane related repairs in the current year.

·	Depreciation expense for stores also increased approximately 10 basis points primarily due to the deleveraging associated with negative comparable store net sales for the year.

 

 

 

 

 

 

·	employment-related matters;

·	the infringement of the intellectual property rights of others.

·	product safety matters, including product recalls by the Consumer Products Safety Commission; and

·	personal injury claims.

 

											Approximate
								Total number			dollar value
								of shares			of shares that
								purchased as			may yet be
								part of publicly			purchased under
		Total number			Average			announced			the plans or
		of shares			price paid			plans			programs
Period		purchased			per share			or programs			(in thousands)
July 31, 2005 to August 27, 2005			691,100		$	23.37			691,100		$	208,800
August 28, 2005 to October 1, 2005			1,503,508			22.53			1,503,508			174,900
October 2, 2005 to October 29, 2005			-			-			-			-
Total			2,194,608		$	22.80			2,194,608		$	174,900