## A WARNING ABOUT FORWARD LOOKING STATEMENTS: 

This document contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments and results. They include statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “view,” “target” or “estimate.” For example, our forward- looking statements include statements regarding: 

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

• our growth plans, including our plans to add, expand or relocate stores, our anticipated square footage increase, and our ability to renew leases at existing store locations; 

• the average size of our stores to be added in 2005 and beyond; 

• the net sales per square foot, net sales and operating income attributable to smaller and larger stores and store-level cash payback periods; 

• the anticipated effect on 2005 earnings related to the lease accounting changes; 

• the possible effect of inflation and other economic changes on our costs and profitability, including the possible effect of future changes in shipping rates, domestic and foreign freight costs, fuel costs, minimum wage rates and wage and benefit costs; 

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

• our gross profit margin, earnings, inventory levels and ability to leverage selling, general and administrative costs; 

• our seasonal sales patterns including those relating to the length of the holiday selling seasons; 

• changes in our merchandise mix and the effect on gross profit margin and sales; 

• the capabilities of our inventory supply chain technology, planned labor management system and other new systems; 

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

• the capacity, performance and cost of our existing and planned distribution centers, including opening and expansion schedules; 

## MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

• our expectations regarding competition and growth in our retail sector; 

• costs of pending and possible future legal claims; 

• management’s estimates associated with our critical accounting policies, including inventory valuation, accrued expenses, and income taxes; 

• 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. 

You should assume that the information appearing in this annual report is accurate only as of the date it was issued. Our business, financial condition, results of operations and prospects may have changed since that date. 

For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully review the risk factors described below, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 14. Our risk factors include: 

• 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. 

• 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. 

• The resolution of certain legal matters discussed in Part I, Item 3, of this Form 10-K, could have a material adverse effect on our results of operations, accrued liabilities and cash. 

