Gadzooks, Inc., incorporated in 1982, is a mall-based specialty retailer of casual apparel and related accessories for young women, principally between the ages of 16 and 22. At the end of the fiscal year ended January 31, 2004 (fiscal 2003), the Company operated 406 Gadzooks stores in both metropolitan and middle markets in 41 states. During fiscal 2003, it opened one new Gadzooks store, one new Orchid store, closed 30 Gadzooks stores and closed one Orchid store. During the 2004, the Company closed 158 stores. At May 1, 2004, it operated 252 stores. The stores are located in metropolitan markets, such as Dallas, Chicago, Atlanta, Boston and Kansas City, as well as middle markets, such as Amarillo, Texas; Biloxi, Mississippi, and Roanoke, Virginia. On February 3, 2004, Gadzooks filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Dallas. The filing was made in response to continued negative sales trends stemming from the Company's completion of its conversion to an all-girl merchandise assortment in fiscal 2003, and reduced factor and vendor terms, both of which had a negative impact on its cash flow. Under Chapter 11, the Company expects to continue to operate its business as debtor-in-possession under court protection from its creditors and claimants, while using the Chapter 11 process to complete the reorganization of its core business around approximately 250 stores that were chosen to strengthen its market share in the junior apparel business. On January 9, 2003, the Company announced plans to focus exclusively on apparel and accessories for females. The conversion of the Gadzooks stores to an all-female merchandise assortment took place early in fiscal 2003. Prior to the conversion, all men's merchandise was liquidated. The Gadzooks store environment was updated to have more of a feminine appeal both in its signage and fixture presentations. The Company classifies all its merchandise into one of the three categories: Juniors, Accessories and Footwear. The Juniors category includes casual sportswear separates designed for fashion-current teenage girls, such as knit tops, woven shirts and vests, denim, dresses and swimwear. Key brands in this category include Von Dutch, Dollhouse, Hot Kiss, Billabong and Roxy. The Accessories category includes a variety of accessories, including sunglasses, watches, hair accessories, backpacks, necklaces, hats and other accessories. Key brands in this category include Von Dutch, Dollhouse, Dickies, Disney and Hot Kiss. The Company offers a limited selection of footwear, including sandals and active footwear. Key brands in this category include Converse, Roxy, Sugar and Chinese Laundry. Private brands comprised 38% and 17% of net sales in fiscal 2003, and during the fiscal year ended February 01, 2003 (fiscal 2002), respectively. Gadzooks continues to supplement its national and teen branded merchandise with private-brand offerings in order to better meet the needs of its customers. Private brands allow the Company the opportunity to expand its customer base by providing merchandise of comparable quality to brand name merchandise at competitive prices and to capitalize on fashion trends, when branded merchandise vendors are not offering the latest in trends. The private-brand merchandise is designed internally by the Company's product design team and buying staff. This merchandise is primarily sourced domestically to allow the buying staff to react quickly to developing trends. Private brand sales, including merchandise designed and sourced by Gadzooks under the Candie's label, accounted for approximately 38% and 17% of sales in fiscal 2003 and fiscal 2002, respectively. During the fiscal year ended February 02, 2002 (fiscal 2001), the Company began testing a new retail concept with the opening of four Orchid stores in two states. The Orchid concept catered to the innerwear and sleepwear needs of females between the ages of 14 and 22. In January 2004, Gadzo

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