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4-Traders Homepage  >  Equities  >  Nyse  >  New York & Company, Inc.    NWY

NEW YORK & COMPANY, INC. (NWY)
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New York mpany : & COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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12/06/2017 | 10:36pm CET

Overview

    New York & Company, Inc. (together with its subsidiaries, the "Company") is
an omni-channel women's fashion retailer designing on-trend and versatile
collections at a great value. The specialty retailer, first incorporated in
1918, has grown to now operate 459 retail and outlet locations in 39 states
while also growing a substantial eCommerce business. The Company's branded
merchandise, including collaborations with Eva Mendes and Gabrielle Union, is
sold exclusively at these locations and online at www.nyandcompany.com. The
target customers for the Company's merchandise are fashion-conscious,
value-sensitive women between the ages of 25 and 45.

    During fiscal year 2017, the Company's key strategic initiatives are as
follows: (i) evolve as a broader lifestyle brand through the growth of the
Company's sub-brand strategy, including 7th Avenue Design Studio, Soho Jeans and
Soho Street, Eva Mendes Collection, and Gabrielle Union Collection which
launched in August 2017; (ii) enhance brand image and increase customer loyalty,
including growth in both the number of new private label credit card holders and
the Company's existing customer database, to drive traffic online and into
stores; (iii) drive growth in eCommerce sales and continue to evolve as an
omni-channel retailer; (iv) optimize the Company's existing store base; and
(v) continue ongoing Project Excellence initiatives, including leveraging the
Company's Go-To-Market process improvements to provide more rapid delivery of
product from concept to in-store, and remaining focused on cost savings
opportunities and increasing operating efficiencies across the organization.

    Net sales for the three months ended October 28, 2017 were $214.2 million,
as compared to $213.9 million for the three months ended October 29, 2016.
Comparable store sales increased 2.2% for the three months ended October 28,
2017, as compared to a decrease of 0.7% for the three months ended October 29,
2016. A store is included in the comparable store sales calculation after it has
completed 13 full fiscal months of operations from the store's opening date or
once it has been reopened after remodeling if the gross square footage did not
change by more than 20%. Sales from the Company's eCommerce store and private
label credit card royalties and related revenue are included in comparable store
sales.

    Net income for the three months ended October 28, 2017 was $0.4 million, or
earnings of $0.01 per diluted share, as compared to a net loss of $2.5 million,
or a loss of $0.04 per diluted share, for the three months ended October 29,
2016. On a non-GAAP basis, adjusted net income for the three months ended
October 28, 2017 was $1.0 million, or earnings of $0.02 per diluted share, which
excludes $0.6 million of non-operating adjustments. This compares to non-GAAP
adjusted net loss for the three months ended October 29, 2016 of $3.0 million,
or a loss of $0.05 per diluted share, which excludes a $0.5 million
non-operating benefit. Please refer to the "Results of Operations" and
"Reconciliation of GAAP to non-GAAP Financial Measures" sections below for a
further discussion of the Company's operating results.

    Capital spending for the nine months ended October 28, 2017 was
$7.8 million, as compared to $13.3 million for the nine months ended October 29,
2016, primarily reflecting the remodeling/refreshing of 13 existing locations,
the opening of 8 New York & Company stores and 3 Outlet stores, and continued
investment in the Company's information technology infrastructure. Of the 11 new
stores opened during the nine months ended October 28, 2017, 10 stores are in
locations that were previously occupied by a competitor and therefore required
relatively low capital investment to open. These are highly desirable locations,
with short-term leases and competitively priced rents. During the nine months
ended October 28, 2017, the Company closed 17 New York & Company stores and 1
Outlet store, ending the quarter with 459 stores, including 125 Outlet stores,
and 2.3 million selling square feet in operation. Included in the New York &
Company store count at October 28, 2017 are 18 Eva

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Mendes side-by-side stores, 52 Eva Mendes shop-in-shop stores, and 1 free-standing Eva Mendes boutique.

    As previously disclosed, during the third quarter of fiscal year 2014, the
Company engaged a leading global business advisory firm to assist the Company in
analyzing its business processes and organizational structure in an effort to
improve sales productivity and operating efficiencies, as well as to reduce the
Company's overall cost structure. The Company refers to this ongoing business
re-engineering program as "Project Excellence." Remaining focused on Project
Excellence in fiscal year 2016, the Company negotiated a new private label
credit card agreement with Alliance Data Systems Corporation (the "ADS
Agreement"), the third-party administrator of its proprietary credit card. In
connection with the execution of the ADS Agreement, the Company received
$40.0 million in signing bonuses. The signing bonuses were payable in two
installments, of which $17.5 million was received on July 28, 2016 and
$22.5 million was received on January 10, 2017. In addition, over the 10-year
term of the ADS Agreement, the Company will receive an increased level of
royalty payments based on a percentage of private label credit card sales. For a
further description of Project Excellence, please refer to the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
April 12, 2017.

    The Company launched the next phase of Project Excellence, which includes a
comprehensive review of its pricing and logistics strategies in consultation
with third-party experts in these areas. In addition, the Company remains
focused on identifying areas to improve operational efficiency and reduce
expenses.

    The Company views the retail apparel market as having two principal selling
seasons: spring (first and second fiscal quarters) and fall (third and fourth
fiscal quarters). The Company's business experiences seasonal fluctuations in
net sales and operating income, with a significant portion of its operating
income typically realized during its fourth quarter. Any decrease in sales or
margins during either of the principal selling seasons in any given year could
have a disproportionate effect on the Company's financial condition and results
of operations. Seasonal fluctuations also affect inventory levels. The Company
must carry a significant amount of inventory, especially before the holiday
season selling period in the fourth fiscal quarter and prior to the Easter and
Mother's Day holidays toward the latter part of the first fiscal quarter and
beginning of the second fiscal quarter.

Results of Operations

The following tables summarize the Company's results of operations as a percentage of net sales and selected store operating data for the three and nine months ended October 28, 2017 and October 29, 2016:

                           Three months    Three months      Nine months     Nine months
                               ended           ended            ended           ended
                            October 28,     October 29,      October 28,     October 29,
As a % of net sales            2017            2016             2017            2016
Net sales                          100.0 %         100.0 %          100.0 %         100.0 %
Cost of goods sold,
buying and occupancy
costs                               68.4 %          70.1 %           69.1 %          71.2 %

Gross profit                        31.6 %          29.9 %           30.9 %          28.8 %
Selling, general and
administrative expenses             31.3 %          30.9 %           30.6 %          29.7 %

Operating income (loss)              0.3 %          (1.0 )%           0.3 %          (0.9 )%
Interest expense, net                0.1 %           0.1 %            0.1 %           0.1 %

Income (loss) before
income taxes                         0.2 %          (1.1 )%           0.2 %          (1.0 )%
Provision for income
taxes                                  - %           0.1 %            0.1 %           0.1 %

Net income (loss)                    0.2 %          (1.2 )%           0.1 %          (1.1 )%





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                           Three months    Three months      Nine months     Nine months
                               ended           ended            ended           ended
                            October 28,     October 29,      October 28,     October 29,
Selected operating data:       2017            2016             2017            2016
                                  (Dollars in thousands, except square foot data)
Comparable store sales
increase (decrease)                  2.2 %          (0.7 )%           0.1 %          (0.9 )%
Net sales per average
selling square foot(1)     $          93   $          86    $         279   $         266
Net sales per average
store(2)                   $         467   $         442    $       1,406   $       1,361
Average selling square
footage per store(3)               5,026           5,113            5,026           5,113

--------------------------------------------------------------------------------

º (1)

º Net sales per average selling square foot is defined as net sales divided

by the average of beginning and monthly end of period selling square feet.

º (2)

º Net sales per average store is defined as net sales divided by the average

     of beginning and monthly end of period number of stores.

   º (3)
   º Average selling square footage per store is defined as end of period
     selling square feet divided by end of period number of stores.

                                           Three months            Three months             Nine months             Nine months
                                               ended                   ended                   ended                   ended
                                         October 28, 2017        October 29, 2016        October 28, 2017        October 29, 2016
                                       Store      Selling      Store     

Selling Store Selling Store Selling Store count and selling square feet: Count Square Feet Count Square Feet Count Square Feet Count Square Feet Stores open, beginning of period 460 2,313,026 486 2,488,307 466 2,367,194 490 2,511,429 New stores

                                  2         11,238        1          5,019       11         48,826        2         10,536
Closed stores                              (3 )      (15,931 )     (4 )     

(23,783 ) (18 ) (100,282 ) (9 ) (52,574 ) Net impact of remodeled stores on selling square feet

                         -         (1,431 )      -              -        -         (8,836 )      -            152

Stores open, end of period                459      2,306,902      483      2,469,543      459      2,306,902      483      2,469,543




Three Months Ended October 28, 2017 Compared to Three Months Ended October 29, 2016

    Net Sales.  Net sales for the three months ended October 28, 2017 were
$214.2 million, as compared to $213.9 million for the three months ended
October 29, 2016. Comparable store sales increased 2.2% for the three months
ended October 28, 2017, as compared to a decrease of 0.7% for the three months
ended October 29, 2016. Included in comparable store sales for the three months
ended October 28, 2017 and October 29, 2016 are royalties and other revenue
totaling $6.1 million and $3.1 million recognized as a result of the ADS
Agreement, respectively. In the comparable store base, average dollar sales per
transaction increased by 1.6%, and the number of transactions per average store
increased 0.7%, as compared to the same period last year. For further
information related to the ADS Agreement, please refer to Note 3, "Proprietary
Credit Card" in the Notes to Condensed Consolidated Financial Statements
appearing elsewhere in this Quarterly Report on Form 10-Q.

    Gross Profit.  Gross profit for the three months ended October 28, 2017 was
$67.6 million, or 31.6% of net sales, as compared to $64.0 million, or 29.9% of
net sales, for the three months ended October 29, 2016. The increase in gross
profit as a percentage of net sales for the three months ended October 28, 2017,
as compared to the three months ended October 29, 2016, reflects a 210 basis
point improvement in buying and occupancy costs primarily reflecting a decrease
in occupancy costs, partially offset by a 40 basis point decrease in merchandise
margin. The decrease in merchandise margin during the three months ended
October 28, 2017, as compared to the three months ended October 29, 2016, is
primarily driven by an increase in promotional activity combined with a
$1.5 million increase in variable shipping costs resulting from significant
growth in the Company's eCommerce business, partially offset by a $3.0 million
increase in royalties and other revenue recognized as a result of the ADS
Agreement.

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    Selling, General and Administrative Expenses.  Selling, general and
administrative expenses were $67.0 million, or 31.3% of net sales, for the three
months ended October 28, 2017, as compared to $66.1 million, or 30.9% of net
sales, for the three months ended October 29, 2016. Included in selling, general
and administrative expenses for the three months ended October 28, 2017 is
$0.8 million of non-operating charges, comprised of severance expense associated
with the integration of brick-and-mortar channels into one merchant, planning,
allocation and stores team, along with certain legal expense accruals, and
consulting expenses related to new initiatives under Project Excellence.
Selling, general and administrative expenses for the three months ended
October 29, 2016 included a $0.5 million non-operating benefit from the
reduction of a legal accrual.

    Selling, general, and administrative expenses during the three months ended
October 28, 2017, as compared to the three months ended October 29, 2016,
reflects a reduction in store selling expenses due to a lower store count,
partially offset by an increase in variable compensation expense, a $0.9 million
increase in eCommerce expenses largely due to variable expenses associated with
the growth in eCommerce sales, and an increase in marketing expenses primarily
due to the elimination of $0.6 million of marketing credits earned under the old
ADS private label credit card agreement, which have been replaced by royalty
fees under the new ADS Agreement and classified by the Company as revenue in
accordance with generally accepted accounting principles.

    Operating Income (Loss).  For the reasons discussed above, operating income
for the three months ended October 28, 2017 was $0.6 million, as compared to an
operating loss of $2.1 million for the three months ended October 29, 2016.

    Interest Expense, Net.  Net interest expense was $0.2 million and
$0.3 million for the three months ended October 28, 2017 and October 29, 2016,
respectively, primarily related to interest on a $15.0 million, 5-year term loan
(the "Term Loan"), described further in the "Long-Term Debt and Credit
Facilities" section below.

    Provision for Income Taxes.  As previously disclosed, the Company continues
to provide for adjustments to the deferred tax valuation allowance initially
recorded during the three months ended July 31, 2010. The provision for income
taxes for both the three months ended October 28, 2017 and October 29, 2016 was
$0.1 million.

    Net Income (Loss).  For the reasons discussed above, net income for the
three months ended October 28, 2017 was $0.4 million, or earnings of $0.01 per
diluted share, as compared to a net loss of $2.5 million, or earnings of $0.04
per diluted share, for the three months ended October 29, 2016.

Nine months Ended October 28, 2017 Compared to Nine months Ended October 29, 2016

    Net Sales.  Net sales for the nine months ended October 28, 2017 decreased
2.2% to $648.2 million, as compared to $662.8 million for the nine months ended
October 29, 2016. Comparable store sales increased 0.1% for the nine months
ended October 28, 2017, as compared to a decrease of 0.9% for the nine months
ended October 29, 2016. Included in comparable store sales for the nine months
ended October 28, 2017 and October 29, 2016 are royalties and other revenue
totaling $17.7 million and $5.6 million recognized as a result of the ADS
Agreement, respectively. In the comparable store base, average dollar sales per
transaction increased by 2.4%, while the number of transactions per average
store decreased by 2.0%, as compared to the same period last year. For further
information related to the ADS Agreement, please refer to Note 3, "Proprietary
Credit Card" in the Notes to Condensed Consolidated Financial Statements
appearing elsewhere in this Quarterly Report on Form 10-Q.

    Gross Profit.  Gross profit for the nine months ended October 28, 2017 was
$200.6 million, or 30.9% of net sales, as compared to $190.9 million, or 28.8%
of net sales, for the nine months ended October 29, 2016. The increase in gross
profit as a percentage of net sales during the nine months

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ended October 28, 2017, as compared to the nine months ended October 29, 2016,
was due to a 60 basis point increase in merchandise margin and a 150 basis point
improvement in buying and occupancy costs primarily reflecting a decrease in
occupancy costs. The increase in merchandise margin during the nine months ended
October 28, 2017, as compared to the nine months ended October 29, 2016, is
primarily due to reduced product costs and a $12.1 million increase in royalties
and other revenue recognized as a result of the ADS Agreement, partially offset
by a $4.0 million increase in variable shipping costs resulting from significant
growth in the Company's eCommerce business.

    Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased to $198.7 million, or 30.6% of net sales, for
the nine months ended October 28, 2017, as compared to $197.1 million, or 29.7%
of net sales, for the nine months ended October 29, 2016. Included in selling,
general and administrative expenses for the nine months ended October 28, 2017
is $0.2 million of non-operating adjustments, comprised of severance expense
associated with the integration of brick-and-mortar channels into one merchant,
planning, allocation and stores team, consulting expenses related to new
initiatives under Project Excellence, and certain executive relocation expense,
partially offset by the reversal of a portion of the legal expense accrual
related to an ongoing trademark infringement case. Selling, general and
administrative expenses for the nine months ended October 29, 2016 included a
$0.5 million non-operating benefit from the reduction of a legal accrual.

    Selling, general, and administrative expenses during the nine months ended
October 28, 2017, as compared to the nine months ended October 29, 2016,
reflects a reduction in store selling expenses due to the lower store count, a
decrease in share-based compensation expense, and a decrease in insurance costs
due to insurance credits. These improvements were offset by an increase in
variable compensation expense, a $1.9 million increase in eCommerce expenses
largely due to variable expenses associated with the growth in eCommerce sales,
and an increase in marketing expenses primarily due to the elimination of
$3.0 million of marketing credits earned under the old ADS private label credit
card agreement, which have been replaced by royalty fees under the new ADS
Agreement and classified by the Company as revenue in accordance with generally
accepted accounting principles.

    Operating Income (Loss).  For the reasons discussed above, operating income
for the nine months ended October 28, 2017 was $1.9 million, as compared to an
operating loss of $6.2 million for the nine months ended October 29, 2016.

    Interest Expense, Net.  Net interest expense was $0.7 million for the nine
months ended October 28, 2017, as compared to $0.9 million for the nine months
ended October 29, 2016, primarily related to interest on the Term Loan,
described further in the "Long-Term Debt and Credit Facilities" section below.

    Provision for Income Taxes.  As previously disclosed, the Company continues
to provide for adjustments to the deferred tax valuation allowance initially
recorded during the three months ended July 31, 2010. The provision for income
taxes for the nine months ended October 28, 2017 was $0.3 million, as compared
to $0.2 million for the nine months ended October 29, 2016.

    Net Income (Loss).  For the reasons discussed above, net income for the nine
months ended October 28, 2017 was $0.9 million, or earnings of $0.01 per diluted
share, as compared to a net loss of $7.3 million, or a loss of $0.12 per diluted
share.

Reconciliation of GAAP to Non-GAAP Financial Measures

    A reconciliation of the Company's GAAP to non-GAAP financial statement
information for the three and nine months ended October 28, 2017 and October 29,
2016 is indicated below. This information reflects, on a non-GAAP basis, the
Company's adjusted operating results after excluding certain non-operating
adjustments, as described below. This non-GAAP financial information is provided
to enhance the reader's overall understanding of the Company's current financial

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performance. Specifically, the Company believes the non-GAAP adjusted results provide useful information to both management and investors by excluding expenses and credits that the Company believes are not indicative of the Company's continuing operating results. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, measures of financial performance prepared in accordance with GAAP.

                                                                                  Three months ended October 28, 2017
                                                    Cost of goods                      Selling, general
                                                    sold, buying                             and                                          Earnings
                                                    and occupancy                       administrative      Operating                    per diluted

(Amounts in thousands, except per share amounts) costs Gross profit expenses income Net income share GAAP as reported

                                   $       146,584   $       67,598   $           66,980   $       618   $        352   $        0.01
Adjustments affecting comparability
Certain severance expense                                     (206 )           (206 )                633           427            427
Consulting expense                                               -                -                  114           114            114
Legal settlement fees                                            -                -                  102           102            102

Total adjustments(1)                                          (206 )           (206 )                849           643            643            0.01

Non-GAAP as adjusted                               $       146,790   $       67,392   $           66,131   $     1,261   $        995   $        0.02







                                                                                 Three months ended October 29, 2016
                                                    Cost of goods                      Selling, general
                                                    sold, buying                             and                                         Loss
                                                    and occupancy                       administrative      Operating                 per diluted

(Amounts in thousands, except per share amounts) costs Gross profit expenses

           loss       Net loss        share
GAAP as reported                                   $       149,917   $       63,984   $           66,087   $    (2,103 ) $  (2,532 ) $       (0.04 )
Adjustments affecting comparability
Legal accrual reduction                                          -                -                 (473 )        (473 )      (473 )

Total adjustments(1)                                             -                -                 (473 )        (473 )      (473 )         (0.01 )

Non-GAAP as adjusted                               $       149,917   $       63,984   $           66,560   $    (2,576 ) $  (3,005 ) $       (0.05 )







                                                                                  Nine months ended October 28, 2017
                                                    Cost of goods                     Selling, general
                                                    sold, buying                             and                                         Earnings
                                                    and occupancy                      administrative      Operating                    per diluted

(Amounts in thousands, except per share amounts) costs Gross profit expenses income Net income share GAAP as reported

                                   $       447,574   $      

200,581 $ 198,659 $ 1,922 $ 928 $ 0.01 Adjustments affecting comparability Certain severance expenses

                                     342              342                 633           975            975
Consulting expense                                               -                -               1,195         1,195          1,195
Certain executive relocation expense                             -                -                 401           401            401
Legal settlement fees net accrual reversal
(trademark infringement case)                                    -                -              (2,051 )      (2,051 )       (2,051 )

Total adjustments(1)                                           342              342                 178           520            520            0.01

Non-GAAP as adjusted                               $       447,232   $      200,923   $         198,481   $     2,442   $      1,448   $        0.02





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                                                                                 Nine months ended October 29, 2016
                                                    Cost of goods                     Selling, general
                                                    sold, buying                             and                                        Loss
                                                    and occupancy                      administrative      Operating                 per diluted

(Amounts in thousands, except per share amounts) costs Gross profit expenses

           loss       Net loss        share
GAAP as reported                                   $       471,837   $      

190,921 $ 197,082 $ (6,161 ) $ (7,303 ) $ (0.12 ) Adjustments affecting comparability Legal accrual reduction

                                          -                -                (473 )        (473 )      (473 )

Total adjustments(1)                                             -                -                (473 )        (473 )      (473 )             -

Non-GAAP as adjusted                               $       471,837   $     
190,921   $         197,555   $    (6,634 ) $  (7,776 ) $       (0.12 )




--------------------------------------------------------------------------------

º (1)

º The tax effect of the $0.6 million and $0.5 million of non-operating

adjustments during the three months ended October 28, 2017 and October 29,

2016, respectively, is offset by a full valuation allowance against

deferred tax assets. The tax effect of the $0.5 million of non-operating

adjustments during the nine months ended October 28, 2017 and October 29,

2016 is offset by a full valuation allowance against deferred tax assets.

Liquidity and Capital Resources

    The Company's primary uses of cash are to fund working capital, operating
expenses, debt service and capital expenditures related primarily to the
construction of new stores, remodeling/refreshing of existing stores and the
development of the Company's information technology infrastructure and
omni-channel strategy. Historically, the Company has financed these requirements
from internally generated cash flow. The Company intends to fund its ongoing
capital and working capital requirements, as well as debt service obligations,
primarily through cash flows from operations, supplemented by borrowings under
its credit facility, if needed. As of the date of this Quarterly Report on
Form 10-Q, the Company is in compliance with all debt covenants.

    The Company may also use cash to repurchase shares of its common stock. On
July 13, 2017, the Company's board of directors authorized a 12-month extension
of a previously approved share repurchase plan of up to $5.0 million of the
Company's common stock, as described in the Company's press release issued on
July 14, 2016. Purchases will be made in compliance with SEC rules and
regulations, subject to market conditions, applicable legal requirements, and
other relevant factors. The Company is not obligated to acquire any particular
amount of common stock. As of October 28, 2017, the Company had $3.3 million
available under this plan to repurchase shares of its common stock.

    The following tables contain information regarding the Company's liquidity
and capital resources:

                                    October 28,     January 28,     October 29,
                                       2017            2017            2016
                                              (Amounts in thousands)
       Cash and cash equivalents   $      69,235   $      88,369   $      54,012
       Working capital             $      63,457   $      59,587   $      69,810


                                                  Nine months         Nine months
                                                     ended               ended
                                               October 28, 2017    October 29, 2016
                                                      (Amounts in thousands)
Net cash (used in) provided by operating
activities                                     $          (8,617 ) $        

8,523

Net cash used in investing activities $ (7,744 ) $

  (13,332 )
Net cash used in financing activities          $          (2,773 ) $        

(2,611 )

Net decrease in cash and cash equivalents $ (19,134 ) $

  (7,420 )





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Operating Activities

    Net cash used in operating activities was $8.6 million for the nine months
ended October 28, 2017, as compared to net cash provided by operating activities
of $8.5 million for the nine months ended October 29, 2016. The increase in net
cash used in operating activities during the nine months ended October 28, 2017,
as compared to the net cash provided by operating activities during the nine
months ended October 29, 2016, is primarily the result of an increase in net
income and the $17.5 million signing bonus received in connection with the ADS
Agreement on July 28, 2016, partially offset by fluctuations in accrued
expenses.

Investing Activities

    Net cash used in investing activities was $7.7 million for the nine months
ended October 28, 2017, as compared to $13.3 million for the nine months ended
October 29, 2016. Net cash used in investing activities during the nine months
ended October 28, 2017 represents capital expenditures of $3.5 million for
store-related projects and $4.3 million related primarily to the Company's
information technology infrastructure. During the nine months ended October 28,
2017, the Company opened 8 New York & Company stores and 3 Outlet stores,
remodeled/refreshed 13 existing stores, and closed 17 New York & Company stores
and 1 Outlet store, ending the third quarter of fiscal year 2017 with 459
stores, including 125 Outlet stores, and 2.3 million selling square feet in
operation. Included in the New York & Company store count at October 28, 2017
are 18 Eva Mendes side-by-side stores, 52 Eva Mendes shop-in-shop stores, and 1
free-standing Eva Mendes boutique. Of the 11 new stores opened during the nine
months ended October 28, 2017, 10 stores are in locations that were previously
occupied by a competitor and therefore required relatively low capital
investment to open. These are highly desirable locations, with short-term leases
and competitively priced rents.

    Net cash used in investing activities during the nine months ended
October 29, 2016 represents capital expenditures of $8.7 million for
store-related projects and $4.7 million primarily related to the Company's
information technology infrastructure. During the nine months ended October 29,
2016, the Company converted 50 New York & Company stores to Outlet stores,
opened 2 New York & Company stores, remodeled/refreshed 20 existing stores, and
closed 9 stores, ending the third quarter of fiscal year 2016 with 483 stores,
including 130 Outlet stores, and 2.5 million selling square feet in operation.
Included in the New York & Company store count at October 29, 2016, are 18 Eva
Mendes side-by-side, 24 Eva Mendes shop-in-shop stores, and 2 free-standing Eva
Mendes boutiques.

    For fiscal year 2017, capital expenditures are expected to be between
$12 million and $14 million. In total, fiscal year 2017 capital expenditures
reflect continued investments in the Company's information technology, including
its omni-channel infrastructure, eCommerce store and mobile applications, and
real estate spending to support opening a select number of new stores and
remodeling/refreshing existing locations. The Company expects to end fiscal year
2017 having remodeled/refreshed 14 existing stores, opened 11 stores, and closed
46 stores, ending the fiscal year with approximately 431 stores, including 118
Outlet stores, and 2.2 million selling square feet.

As of October 28, 2017, more than 65% of its store leases could be terminated by the Company before fiscal year end 2019.

    On November 28, 2017, the Company issued a press release announcing that it
has entered into an asset purchase agreement to acquire certain assets of
Fashion to Figure®, a U.S. based retailer of trendy plus-size fashions,
including intellectual property rights related to the Fashion to Figure brand,
for a cash purchase price of $1.4 million plus no more than $1.0 million of fees
and expenses.

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Financing Activities

    Net cash used in financing activities for the nine months ended October 28,
2017 was $2.8 million, which consists primarily of $1.2 million of principal
payments on capital lease obligations, $0.8 million in quarterly amortization
payments of the Term Loan, $0.6 million for the purchase of treasury stock, and
$0.2 million of employee payroll taxes for which shares were withheld. Net cash
used in financing activities for the nine months ended October 29, 2016 was
$2.6 million, which consists of $0.9 million for the purchase of treasury stock,
$0.8 million in quarterly amortization payments of the Term Loan, $0.8 million
of principal payments on capital lease obligations, and $0.3 million of employee
payroll taxes for which shares were withheld, partially offset by $0.1 million
of proceeds from the exercise of stock options.

Long-Term Debt and Credit Facilities

    On October 24, 2014, Lerner New York, Inc., Lernco, Inc. and Lerner New York
Outlet, LLC (f.k.a. Lerner New York Outlet, Inc.), wholly-owned indirect
subsidiaries of New York & Company, Inc., entered into a Fourth Amended and
Restated Loan and Security Agreement (the "Loan Agreement") with Wells Fargo
Bank, National Association, as Agent and Term Loan Agent and the lender party
thereto. The obligations under the Loan Agreement are guaranteed by New York &
Company, Inc. and its other subsidiaries.

    The Loan Agreement consists of: (i) a revolving credit facility that
provides the Company with up to $100 million of credit, consisting of a
$75 million revolving credit facility (which includes a sub-facility for
issuance of letters of credit up to $45 million) with a fully committed
accordion option that allows the Company to increase the revolving credit
facility up to $100 million or decrease it to a minimum of $60 million, subject
to certain restrictions, and (ii) a $15 million, 5-year term loan, bearing
interest at the Adjusted Eurodollar Rate plus 4.50%. The Company used a portion
of the proceeds from the Term Loan to pay for costs associated with the
relocation and build-out of its new corporate headquarters in fiscal year 2014
at 330 West 34th Street, New York, New York and for general corporate purposes.

    Under the terms of the Loan Agreement, the interest rates applicable to
Revolving Loans are, at the Company's option, either at a floating rate equal to
the Adjusted Eurodollar Rate plus a margin of between 1.50% and 1.75% per year
for Eurodollar Rate Loans or a floating rate equal to the Prime Rate plus a
margin of between 0.50% and 0.75% per year for Prime Rate Loans, depending upon
the Company's Average Compliance Excess Availability. The Company pays to the
lender under the revolving credit facility a monthly fee on outstanding
commercial letters of credit at a rate of between 0.75% and 0.875% per year and
on standby letters of credit at a rate of between 1.50% and 1.75% per year,
depending upon the Company's Average Compliance Excess Availability, plus a
monthly fee on a proportion of the unused commitments under the revolving credit
facility at a rate of 0.25% per year.

    The maximum borrowing availability under the Company's revolving credit
facility is determined by a monthly borrowing base calculation based on applying
specified advance rates against eligible inventory and certain other eligible
assets. As of October 28, 2017, the Company had availability under its revolving
credit facility of $59.4 million, net of letters of credit outstanding of
$14.7 million, as compared to availability of $36.7 million, net of letters of
credit outstanding of $14.5 million, as of January 28, 2017, and availability of
$54.3 million, net of letters of credit outstanding of $15.7 million, as of
October 29, 2016. The $14.7 million in letters of credit outstanding at
October 28, 2017 represents $2.5 million of trade letters of credit and
$12.2 million of standby letters of credit primarily related to the Company's
new corporate headquarters and certain insurance contracts. Standby letters of
credit related to the Company's corporate headquarters are scheduled to be
reduced by $2.0 million annually, which began in October 2017, for a total
reduction of $6.0 million by October 2019.

                                       22

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Table of Contents

    Under the terms of the Loan Agreement, the Company is subject to a Minimum
Excess Availability covenant of $7.5 million. The Loan Agreement contains other
covenants and conditions, including restrictions on the Company's ability to pay
dividends on its common stock, prepay the Term Loan, incur additional
indebtedness and to prepay, redeem, defease or purchase other indebtedness.
Subject to such restrictions, the Company may incur more indebtedness for
working capital, capital expenditures, stock repurchases, acquisitions and for
other purposes.

    The lender has been granted a pledge of the common stock of Lerner New York
Holding, Inc. and certain of its subsidiaries, and a first priority security
interest in substantially all other tangible and intangible assets of New York &
Company, Inc. and its subsidiaries, as collateral for the Company's obligations
under the Loan Agreement. In addition, New York & Company, Inc. and certain of
its subsidiaries have fully and unconditionally guaranteed the obligations under
the Loan Agreement, and such guarantees are joint and several.

Critical Accounting Policies

    Management has determined the Company's most critical accounting policies
are those related to inventories, long-lived assets, intangible assets and
income taxes. Management continues to monitor these accounting policies to
ensure proper application of current rules and regulations. There have been no
significant changes to these policies as discussed in the Company's Annual
Report on Form 10-K filed with the SEC on April 12, 2017.

Adoption of New Accounting Standards

Please refer to Note 2, "New Accounting Pronouncements" in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.

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