UNITED RETAIL GROUP INC/DE - 10-Q Quarterly Report

Back to GetFilings.com

FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 3, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to _____________________

Commission file number 00019774
--------

United Retail Group, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 51 0303670
- ------------------------------ --------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)

365 West Passaic Street, Rochelle Park, NJ 07662
- ------------------------------------------ ------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (201) 845-0880
--------------

- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

YES ___X___ NO _______

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).

YES _______ NO ___X____

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Exchange
Act subsequent to the distribution of securities under a plan confirmed by a
court.

YES _______ NO _______

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

As of May 3, 2003, 12,937,304 units, each consisting of one share of
the registrant's common stock, $.001 par value per share, and one attached
stock purchase right, were outstanding. The units are referred to herein as
"shares."

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNITED RETAIL GROUP INC, AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)

May 3, February 1, May 4,
2003 2003 2002
-------------- ------------- --------------
ASSETS (Unaudited) (Unaudited)
Current assets:

Cash and cash equivalents $12,143 $17,540 $23,141
Accounts receivable 1,626 2,994 1,703
Inventory 67,821 61,569 72,255
Prepaid rents 4,932 4,972 4,932
Other prepaid expenses 1,711 2,290 3,025
-------------- -------------- --------------
Total current assets 88,233 89,365 105,056

Property and equipment, net 84,924 87,720 89,155
Deferred charges and other intangible assets,
net of accumulated amortization of $341, $325
and $2,777 541 557 6,216
Deferred income taxes - - 1,515
Other assets 1,526 1,667 1,146
-------------- ------------- --------------
Total assets $175,224 $179,309 $203,088
============== ============= ==============

LIABILITIES
Current liabilities:
Short-term distribution center financing $998 $1,220 $1,463
Short-term capital leases 1,998 1,963 1,644
Accounts payable and other 31,152 26,596 20,913
Disbursement accounts 8,047 11,922 11,510
Accrued expenses 22,396 22,023 24,178
Deferred income taxes - - 746
-------------- ------------- --------------
Total current liabilities 64,591 63,724 60,454

Long-term distribution center financing 3,807 3,961 4,805
Long-term capital leases 5,241 5,764 6,652
Other long-term liabilities 7,057 6,865 6,440
-------------- ------------- --------------
Total liabilities 80,696 80,314 78,351
-------------- ------------- --------------

STOCKHOLDERS' EQUITY

Preferred stock, $.001 par value; authorized
1,000,000 shares; none issued
Series A junior participating preferred stock,
$.001 par value; authorized 150,000; none issued
Common stock, $.001 par value; authorized
30,000,000 shares; issued 14,248,200; 14,248,200;
14,238,100 shares; outstanding 12,937,304;
12,937,304; 13,205,733 shares 14 14 14
Additional paid-in capital 83,679 83,601 80,465
Retained earnings 18,511 23,056 49,009
Treasury stock (1,310,896; 1,310,896; 1,032,367
shares) at cost (7,676) (7,676) (4,751)
-------------- ------------- --------------
Total stockholders' equity 94,528 98,995 124,737
-------------- ------------- --------------
Total liabilities and stockholders' equity $175,224 $179,309 $203,088
============== ============= ==============

The accompanying notes are an integral part of the Consolidated Financial Statements.

UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)

Thirteen Weeks Ended
---------------------------------

May 3, May 4,
2003 2002
--------------- ---------------

Net sales $101,530 $115,574

Cost of goods sold, including
buying and occupancy costs 79,361 84,789
--------------- ---------------

Gross profit 22,169 30,785

General, administrative and
store operating expenses 26,380 26,013
--------------- ---------------

Operating (loss) income (4,211) 4,772

Interest expense, net 252 204
--------------- ---------------

(Loss) income before income taxes (4,463) 4,568

(Benefit) provision for income taxes (2,019) 1,692

Provision for the valuation allowance
for the net deferred tax assets 2,101 -
--------------- ---------------

Net (loss) income ($4,545) $2,876
=============== ===============

Net (loss) income per share
Basic ($0.35) $0.22
=============== ===============
Diluted ($0.35) $0.21
=============== ===============

Weighted average number of
shares outstanding
Basic 12,937,304 13,204,118
Common stock equivalents
(stock options) - 228,747
--------------- ---------------
Diluted 12,937,304 13,432,865
=============== ===============

The accompanying notes are an integral part of the Consolidated Financial
Statements.

UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)

UNITED RETAIL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The consolidated financial statements include the accounts of United
Retail Group, Inc. and its subsidiaries (the "Company"). All significant
intercompany balances and transactions have been eliminated.

The consolidated financial statements as of and for the thirteen
weeks ended May 3, 2003 and May 4, 2002 are unaudited and are presented
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, the consolidated financial statements should be read
in conjunction with the financial statement disclosures contained in the
Company's 2002 Annual Report and 2002 Form 10-K. In the opinion of management,
the accompanying consolidated financial statements reflect all adjustments
necessary (which are of a normal recurring nature) to present fairly the
financial position and results of operations and cash flows for the interim
periods, but are not necessarily indicative of the results of operations for a
full fiscal year.

Certain prior year balances have been reclassified to conform with
the current year presentation.

2. Net (Loss) Income Per Share

Basic per share data has been computed based on the weighted average
number of shares of common stock outstanding. Diluted per share data has been
computed on the basic plus the dilution of stock options with the exception of
the thirteen weeks ended May 3, 2003, where the effect of stock options is
anti-dilutive.

Options to purchase shares of common stock which were not included in
the computation of diluted net income per share because the exercise prices
were greater than the average market price of the common shares were as
follows:

Thirteen Weeks Ended
-----------------------------
May 3, May 4,
2003 2002
----------- ----------

Options 1,841,572 787,000
Range of option prices per share $2.25 - $15.13 $8.02 - $15.13

The following table illustrates the effect on net (loss) income and
(loss) income per share if the Company had applied the fair value
recognition provision SFAS No. 123, "Accounting For Stock-Based Compensation"
to stock-based employee compensation:

Thirteen Weeks Ended
-----------------------
(dollars in thousands except for income May 3, May 4,
per share amounts) 2003 2002
-------- --------

Reported net (loss) income ($ 4,545) $ 2,876
Add back: Compensation expense 78 78
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (69) (312)
-------- ---------

Pro forma net (loss) income ($ 4,536) $ 2,642

(Loss) income per share:
Basic - as reported ($ 0.35) $ 0.22
Basic - pro forma ($ 0.35) $ 0.20

Diluted - as reported ($ 0.35) $ 0.21
Diluted - pro forma ($ 0.35) $ 0.20

3. Financing Arrangements

In 1993, the Company executed a ten-year $7.0 million note bearing
interest at 7.3%. Interest and principal are payable in equal monthly
installments beginning November 1993. The note is collateralized by the
material handling equipment in the distribution center.

In 1994, the Company executed a fifteen-year $8.0 million loan
bearing interest at 8.64%. Interest and principal are payable in equal monthly
installments beginning May 1994. The loan is collateralized by a mortgage on
the national distribution center owned by the Company in Troy, Ohio.

The Company and certain of its subsidiaries, (collectively, the
"Companies") are parties to a Financing Agreement, dated August 15, 1997 (the
"Financing Agreement"), with The CIT Group/Business Credit, Inc.("CIT"). The
Financing Agreement provides a revolving line of credit for a term ending
August 15, 2005 in the aggregate amount of $40 million for the Companies,
subject to availability of credit according to a borrowing base computation.
The line of credit may be used on a revolving basis by any of the Companies to
support trade letters of credit and standby letters of credit and to finance
loans.

The Companies are required to maintain unused at all times combined
availability of at least $5 million. Except for the maintenance of a minimum
availability of $5 million and a limit on capital expenditures, the Financing
Agreement does not contain any significant financial covenants.

In the event a loan is made to one of the Companies, interest is
payable monthly based on a 360-day year at the prime rate or at two percent
plus the LIBOR rate on a per annum basis, at the borrower's option.

The line of credit is secured by a security interest in inventory and
proceeds and by the balance on deposit from time to time in a bank account
that has been pledged to the lenders.

The Financing Agreement also includes certain restrictive covenants
that impose limitations (subject to certain exceptions) on the Companies with
respect to, among other things, making certain investments, declaring or
paying dividends, making loans, engaging in certain transactions with
affiliates, or consolidating, merging or making acquisitions outside the
ordinary course of business.

At May 3, 2003, the combined borrowing capacity of the Companies was
$22.8 million, no balance was in the pledged account, trade letters of credit
for the account of the Company and supported by CIT were outstanding in the
amount of $13.4 million and standby letters of credit were outstanding in the
amount of $3.9 million and no loan was outstanding. The Company's cash on hand
was unrestricted.

In January 2002, the Company executed a five-year $8.2 million sale
and lease back agreement for certain fixtures in new and remodeled stores. The
lease bears an interest rate of 7.0% per annum. The Company was required to
pay sales tax as part of the agreement. The agreement provides for equal
monthly rent payments beginning February 2002 and gives the Company the option
of buying back the fixtures at the end of the term for a nominal price.

In January 2002 and January 2003, the Company executed a series of
three-year capital lease agreements for call center systems at the Company's
national distribution center in Troy, Ohio, bearing interest at rates between
6.09% and 6.64% per annum aggregating approximately $1.4 million. The Company
has the option of buying the systems at the end of the term for a nominal
price.

4. Income Taxes

The provision for income taxes consists of (dollars in thousands):

Thirteen Weeks Ended
-------------------------
May 3, May 4,
2003 2002
------ -------

Currently payable:
Federal $0 $1,564
State 82 136
-- ---
82 1,700
-- -----

Deferred:
Federal 0 (7)
State 0 (1)
- --
0 (8)
- --
$82 $1,692
=== ======

Reconciliation of the provision for income taxes from the U.S.
Federal statutory rate to the Company's effective rate is as follows (dollars
in thousands):

Significant components of the Company's deferred tax assets and
liabilities as of May 3, 2003 are summarized below (dollars in thousands):

Net long-term asset:
Federal NOL $5,201
State NOL's 3,425
Accruals and reserves 3,407
Compensation 594
Depreciation (2,788)
------
9,839
------

Net current liability:
Prepaid rent 1,652
Accruals and reserves (565)
Inventory (599)
-----
488
-----

Valuation allowance (9,351)
------

Net deferred tax asset $ -
======

The Company recorded a $7.3 million non-cash charge to establish a
valuation allowance for its net deferred tax assets and net operating loss
carryforwards in the fourth quarter of fiscal 2002. The valuation allowance as
of May 3, 2003 is $9.4 million. The valuation allowance was calculated in
accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes"
(SFAS No. 109), which places primary importance on the Company's operating
results in the most recent three-year period when assessing the need for a
valuation allowance. The Company's cumulative loss in the most recent
three-year period, including the net loss reported in the fourth quarter of
fiscal 2002, was sufficient to require a full valuation allowance under the
provision of SFAS No. 109. The Company intends to maintain a valuation
allowance for its net deferred tax assets and net operating loss carryforwards
until sufficient positive evidence exists to support its reversal.

5. Advances To Officers

Advances were made by the Company in February 1998, February 1999 and
November 1999 to Raphael Benaroya, the Company's Chairman of the Board,
President and Chief Executive Officer. The purpose of the advances was to
finance payment of income taxes incurred in connection with the exercise of
stock options, totaling approximately $2.3 million. On November 30, 2001, Mr.
Benaroya signed a consolidated promissory note in the amount of approximately
$2.8 million, representing the cumulative advances and accrued interest as of
that date, with a term of two years. Mr. Benaroya repaid the note with accrued
interest as of July 1, 2002 by surrendering 278,529 shares of Company common
stock. The surrendered shares had a value equivalent to the consolidated note
based on the closing price on the NASDAQ Stock Market on the preceding trading
day. The Compensation Committee of the Board of Directors, which administers
the stock option program, met on the morning of July 1, 2002 and approved the
transaction.

6. Stock Appreciation Rights Plan

In May 2000, May 2001 and May 2002, each nonmanagement Director
received an annual award (a "SAR Award") under the Company's Stock
Appreciation Rights Plan that provides for a cash payment by the Company when
the Director exercises the stock option granted to him contemporaneously. The
payment will be an amount equivalent to the after tax equity in the option
that is being exercised, that is, the excess of the then current market price
of the shares issued over the exercise price of the corresponding option net
of any personal income tax withholding on the gain arising from the exercise.

7. Supplemental Cash Flow Information

Non-cash investing activities include $1.4 million related to capital
lease obligations incurred between January 2002 and January 2003.

Non-cash financing activities include the repayment of officer
advances with accrued interest as of July 1, 2002 with the repayment made by
surrendering 278,529 shares of Company common stock with a market value equal
to the principal and interest, in lieu of cash payment.

8. Contingencies

The Company is involved in legal actions and claims arising in the
ordinary course of business. Management believes (based on advice of legal
counsel) that such litigation and claims will not have a material adverse
effect on the Company's financial position, annual results of operations or
cash flows.

On May 1, 2003, a suit in California Superior Court styled Erik
Stanford vs. United Retail Incorporated was served on the Company by the
former manager of a store in California. The suit is purportedly a class
action on behalf of certain current and former associates in California in the
past four years.

The plaintiff asserts state wage and hour claims.

Based on a very preliminary factual review, management believes there
are meritorious procedural defenses available that the plaintiff does not
adequately represent the classes identified in the lawsuit. The Company
intends to vigorously oppose class certification. Nevertheless, successful
procedural defenses might not be dispositive of all the claims if a more
adequate class representative replaced Mr. Stanford in the case.

The Company also intends to defend the case vigorously on the merits.

Although counsel is unable at this early stage to predict the
ultimate outcome of the case and the amount of any potential liability with
any accuracy, management does not believe that the case will have a material
impact on the Company's financial condition, results of operations or cash
flows.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

First quarter of fiscal 2003 versus first quarter of fiscal 2002
- ----------------------------------------------------------------

Net sales for the first quarter of fiscal 2003 decreased 12.2% from the first
quarter of fiscal 2002, to $101.5 million from $115.6 million from decreases
in units sold and prices. Comparable store sales for the first quarter of
fiscal 2003 decreased 11.7%. Average stores open decreased from 555 to 550.
See, "Stores." Internet and catalog sales were $1.5 million in the first
quarter of fiscal 2003 compared with $2.4 million in the first quarter of
fiscal 2002, primarily from a reduction in the number of catalogs mailed. See,
"Suspension of Catalog Operations."

Gross profit was $22.2 million in the first quarter of fiscal 2003 compared
with $30.8 million in the first quarter of fiscal 2002, decreasing as a
percentage of net sales to 21.8% from 26.6%. Gross profit as a percentage of
net sales decreased principally because (i) net sales declined while occupancy
costs increased somewhat, and (ii) merchandise margins were lower. Gross
profit levels in the future will be subject to the uncertainties and other
risk factors referred to under the caption "Future Results."

General, administrative and store operating expenses increased to $26.4
million in the first quarter of fiscal 2003 from $26.0 million in the first
quarter of fiscal 2002. As a percentage of net sales, general, administrative
and store operating expenses increased to 26.0% from 22.5% principally because
of lower net sales and of increased casualty insurance costs, including
workers' compensation benefits.

The Company incurred an operating loss of $4.2 million in the first quarter of
fiscal 2003 and had operating income of $4.8 million in the first quarter of
the previous year.

Net interest expense was $0.3 million in the first quarter of fiscal 2003 and
$0.2 million in the first quarter of fiscal 2002, as a result of lower cash
balances, lower interest rates on cash balances and higher borrowings.

The Company had a provision for income taxes of $0.1 million in the first
quarter of fiscal 2003 and $1.7 million in the first quarter of fiscal 2002.

The Company incurred a net loss of $4.5 million in the first quarter of fiscal
2003 and had net income of $2.9 million in the first quarter of fiscal 2002.

In the fourth quarter of fiscal 2002, the Company established a valuation
allowance in the amount of $7.3 million for all its net deferred tax assets
and net operating loss carryforwards ("NOL's"). In the first quarter of fiscal
2003, the tax valuation allowance was increased to $9.4 million.

Before recording the increase in the tax valuation allowance, the pro forma
net loss for the first quarter of fiscal 2003 was $2.4 million.

See, "Critical Accounting Policies" for a discussion of estimates made by
management in preparing financial statements in accordance with generally
accepted accounting principles.

May Sales
- ---------

Net sales for May 2003 decreased 10.9% from May 2002, to $36.9 million from
$41.4 million. Comparable store sales for the month decreased 9.4%.

Liquidity and Capital Resources
- -------------------------------

Cash Flow

Cash used in operating activities was $3.9 million in the first quarter of
fiscal 2003 and $0.7 million in the first quarter of fiscal 2002. The
principal differences in cash used in operating activities in the two fiscal
quarters were (i) a net loss of $4.5 million in the first quarter of fiscal
2003 compared with net income of $2.9 million in the first quarter of fiscal
2002 and (ii) an increase in accrued income taxes of $43,000 in the first
quarter of fiscal 2003 compared with $2.9 million in the first quarter of
fiscal 2002, partially offset by inventory increases of $6.3 million in the
first quarter of fiscal 2003 compared with $10.5 million in the first quarter
of fiscal 2002.

Capital expenditures were $0.6 million in the first quarter of fiscal 2003 and
$3.5 million in the first quarter of fiscal 2002.

Capital Expenditure Budget

Capital expenditures for fiscal 2003 are budgeted at approximately $4.5
million, which the Company expects to fund principally from cash reserves. The
largest category of capital expenditures will be new store construction. See,
"Stores." This paragraph constitutes forward-looking information under the
Private Securities Litigation Reform Act of 1995 (the "Reform Act") and is
subject to the uncertainties and other risk factors referred to under the
caption "Future Results."

Balance Sheet Sources of Liquidity

The Company's cash and cash equivalents were $12.1 million at May 3, 2003
compared with $23.1 million at May 4, 2002. Cash and cash equivalents were
$17.5 million at February 1, 2003.

Inventory decreased to $67.8 million at May 3, 2003 from $72.3 million at May
4, 2002, principally as a result of fewer units. Inventory at February 1, 2003
was $61.6 million. (See, "Critical Accounting Policies - Inventory" for a
discussion of estimates made by management in stating inventory in financial
statements prepared in accordance with generally accepted accounting
principles.)

Property and equipment, net decreased to $84.9 million at May 3, 2003 from
$89.2 million at May 4, 2002 and $87.7 million at February 1, 2003.

Other Liquidity Sources

Import purchases by the Company are made in U.S. dollars, are generally
financed by trade letters of credit and constituted approximately 54% of total
purchases in fiscal 2002.

United Retail Group, Inc. and certain of its subsidiaries (collectively, the
"Companies") are parties to a Financing Agreement, dated August 15, 1997, as
amended (the "Financing Agreement"), with The CIT Group/Business Credit, Inc.
("CIT"). The Financing Agreement provides a revolving line of credit for a
term ending August 15, 2005 in the aggregate amount of $40 million for the
Companies, subject to availability of credit as described in the following
paragraphs. The line of credit may be used on a revolving basis by any of the
Companies to support trade letters of credit and standby letters of credit and
to finance loans. As of May 3, 2003, trade letters of credit for the account
of the Companies and supported by CIT were outstanding in the amount of $13.4
million and standby letters of credit were outstanding in the amount of $3.9
million, principally in connection with insurance policies issued to the
Company.

Subject to the following paragraph, the availability of credit (within the
aggregate $40 million line of credit) to any of the Companies at any time is
the excess of its borrowing base over the sum of (x) the aggregate outstanding
amount of its letters of credit and its revolving loans, if any, and (y) at
CIT's option, the sum of (i) unpaid sales taxes, and (ii) up to $500,000 in
total liabilities of the Companies under permitted encumbrances (as defined in
the Financing Agreement). The borrowing base, as to any of the Companies, is
the sum of (x) a percentage of the book value of its eligible inventory (both
on hand and unfilled purchase orders financed with letters of credit), ranging
from 60% to 65% depending on the season, and (y) the balance from time to time
in an account in its name that has been pledged to the lenders (a "Pledged
Account").

The provisions of the preceding paragraph to the contrary notwithstanding, the
Companies are required to maintain unused at all times combined availability
of at least $5 million. Except for the maintenance of a minimum availability
of $5 million and a limit on capital expenditures, the Financing Agreement
does not contain any financial covenants. (At May 3, 2003, the combined
borrowing capacity of the Companies was $22.8 million; the Pledged Account had
a zero balance; the Companies' cash on hand was unrestricted; and no loan was
outstanding.)

The line of credit is secured by a security interest in inventory and proceeds
and by the balance from time to time in the Pledged Account.

The Financing Agreement includes certain restrictive covenants that impose
limitations (subject to certain exceptions) on the Companies with respect to,
among other things, making certain investments, declaring or paying dividends,
making loans, engaging in certain transactions with affiliates, or
consolidating, merging or making acquisitions outside the ordinary course of
business.

In the first quarter of fiscal 2003, the Company drew on the revolving loan
facility under the Financing Agreement to meet its peak working capital
requirements and may do so again from time to time. Interest is payable
monthly based on a 360-day year at the prime rate or at two percent plus the
LIBOR rate on a per annum basis, at the borrower's option.

The Company has used standby letters of credit to provide collateral under
certain insurance policies covering claims and related expenses incurred in a
policy year. Material amounts of additional collateral supported by standby
letters of credit are likely to be required by the insurers when certain of
the policies are renewed for another year, or replaced, in the second quarter
of fiscal 2003. See, "Critical Accounting Policies - Incurred But Not Reported
Claims For Personal Injuries and Medical Benefits."

The Company's obligations to pay customs duties on merchandise imports were
collateralized by an unsecured surety bond for $1.5 million in the first
quarter of fiscal 2002. The tightening market for surety bonds has made it
necessary for the Company to support the surety bond with a standby letter of
credit under the Financing Agreement in the amount of $0.5 million.

Short-term trade credit represents a significant source of financing for
domestic merchandise purchases. Trade credit arises from the willingness of
the Company's domestic vendors to grant extended payment terms for inventory
purchases and is generally financed either by the vendor or a third-party
factor. The availability of trade credit depends on the Company's liquidity in
general and the amount of its cash and cash equivalents and availability of
unused credit under the Financing Agreement in particular.

As of July 1, 2002, an outstanding loan to a Company officer in the principal
amount of approximately $2.8 million plus accrued interest was paid by the
surrender of 278,529 shares of Company stock that the officer owned. The
repurchased shares became treasury stock. The repurchased shares had a value
equivalent to the loan based on the closing price on the NASDAQ Stock Market
on the preceding trading day. (The exchange was approved in advance by the
Compensation Committee of the Board of Directors on the morning of July 1,
2002.)

Principal Contractual Obligations and Certain Other Commercial Commitments
- ------------------------------------------------------------------------

The principal contractual obligations of the Company and certain other
commercial commitments at May 3, 2003 (see, also "Critical Accounting Policies
- - Incurred But Not Reported Claims For Personal Injuries and Medical
Benefits") are summarized in the following charts:

- ----------------------------- --------------- ------------------------------------------------------------------
Payments Due by Period (000's omitted)
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Principal Contractual Item Total Less than After
Obligations (000's 1 Year 1-3 Years 4-5 Years 5 Years
omitted)
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------

Fixture Sale and Lease Back $ 6,290 $1,534 $ 3,483 $ 1,273 $ 0
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Distribution Center Note $ 402 $ 402 $ 0 $ 0 $ 0
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Distribution Center Mortgage $ 4,403 $ 596 $ 1,357 $ 1,613 $ 837
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Call Center Capital Lease $ 949 $ 464 $ 485 $ 0 $ 0
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Total $ 12,044 $2,996 $ 5,325 $ 2,886 $ 837
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------

- ----------------------------- --------------- -------------------------------------------------------------------
Amount of Commitment per Period (000's omitted)
- ----------------------------- --------------- -------------------------------------------------------------------
Certain Other Commercial Item Total Less than Over
Commitments (000's 1 Year 1-3 Years 4-5 Years 5 Years
omitted)
- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------
Operating Leases $ 294,767 $ 45,028 $77,341 $ 60,518 $111,880

- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------
Trade Letters of Credit* $ 13,392 $ 13,392 $ 0 $ 0 $ 0
- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------
Standby Letters of Credit $ 3,850 $ 3,850 $ 0 $ 0 $ 0
- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------
Total $ 312,009 $ 62,270 $77,341 $ 60,518 $111,880
- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------

_____________
*Trade letters of credit support certain Company obligations under purchase
orders for merchandise imports for which payment is not yet due. (Other
purchase orders are not supported by trade letters of credit.)

Total Cash Requirements
- -----------------------

The Company believes that its cash on hand and the availability of short-term
trade credit and of credit under the Financing Agreement on a revolving basis
will be adequate for the next 12 months to meet its cash requirements,
including (i) anticipated working capital needs, including seasonal inventory
financing, (ii) investing activities, including construction costs for the
stores that it is committed to open (see, "Stores") and (iii) financing
activities, including payments due on its principal contractual obligations.
This paragraph constitutes forward-looking information under the Reform Act
and is subject to the uncertainties and other risk factors referred to under
the caption "Future Results."

Critical Accounting Policies
- ----------------------------

Introduction

Financial statements prepared by companies in accordance with generally
accepted accounting principles are affected by the policies followed by their
managements in preparing them. Some accounting policies require difficult,
subjective or complex judgments by corporate management, often as a result of
the need to make estimates about the effect of matters that are inherently
uncertain. Among the most important accounting policies of the Company that
involve such management judgments are (i) the use of the retail method of
accounting for inventory, (ii) the use of estimates of incurred but not
reported claims for uninsured damages for personal injuries, for self-insured
workers' compensation benefits and for benefits under the Company's
self-insured medical, dental and prescription plans for its associates, as
well as future development costs of reported claims (collectively, "IBNR
Claims") and (iii) determining whether to have a valuation allowance for the
Company's net deferred tax assets and NOL's.

Inventory

The margins at which the Company's inventories can be sold are central to its
business. In accordance with generally accepted accounting principles,
inventories are stated at the lower of cost or market. At May 3, 2003,
inventories were stated at $67.8 million. The Company utilizes the retail
method, under which a cost-to-price relationship is developed on the basis of
original cost as compared to initial retail selling price. The valuation of
inventories at cost and the resulting margins are calculated by applying this
cost-to-price relationship to the retail value of inventories. Permanent
markdowns, when taken, reduce both the price and cost components of inventory
on hand, which maintains the established cost-to-price relationship.
Consequently, the use of the retail inventory method results in valuing
inventories at lower of cost or market.

Inherent in the retail inventory method are management estimates on current
and future selling value of the inventory which can significantly impact the
ending inventory valuation at cost, as well as resulting margins. The
necessity for management estimates, coupled with the fact that the retail
inventory method is an averaging process, can produce inventory valuations at
any point in time that are inexact.

Further, deferred markdowns can result in an overstatement of cost under the
lower of cost or market principle. Accordingly, at the end of each fiscal
quarter, management conducts a thorough review of inventory on hand and, based
on its business judgment, may reduce further the carrying value of inventory
by recording a markdown reserve for inventory with sales performance below
expectations and/or unsold quantities in excess of expectations.

Recording a reserve reduces the inventory recorded on the Company's balance
sheet and is charged to the Company's cost of sales. If inventories, net of
reserves, were overestimated at the end of a quarter, assets and income for
that quarter would be overstated and margins for the beginning of the next
quarter would come in lower. (The opposite would be true if inventories were
underestimated.)

Consistency in inventory valuation practices is one of the Company's important
accounting objectives.

The Company's management believes that the inventory shown on the balance
sheets at May 3, 2003 and May 4, 2002 included in the financial statements
contained in this Quarterly Report (this "Report") were properly stated in all
material respects, subject to (i) changes in consumer spending patterns,
consumer preferences and overall economic conditions, (ii) changes in weather
patterns, (iii) the seasonality of the retail industry, (iv) risks related to
consumer acceptance of the Company's products, and (v) war risks.

Incurred But Not Reported Claims For Personal Injuries and Medical Benefits

In accordance with generally accepted accounting principles, the Company
records a liability for IBNR Claims. This liability is based on (i) the number
and size of outstanding claims, (ii) a comparison between the dates paid
claims were incurred and the dates they were paid, (iii) an analysis of the
amounts previously paid, (iv) projections of inflation in medical costs and
(v) advice from time to time from its insurance broker. (The Company has
insurance policies with coverage for personal injury claims but it remains
liable for a self-insured retention. The Company is self-insured for most
workers' compensation benefits and for its medical, dental and prescription
plans for associates but it has stop loss insurance policies to limit its
liability.)

If the outcome of claims made with respect to a fiscal quarter were to exceed
the recorded IBNR liability for that quarter, the liabilities on the balance
sheet would have been understated and income would have been overstated for
the quarter in question. (The opposite would be true if the subsequent outcome
were less than the recorded IBNR liability.)

A consistent approach to estimating liability for IBNR Claims reflected in the
Company's balance sheet is one of the Company's important accounting
objectives.

The estimates underlying the liability for IBNR Claims are matters of judgment
on which insurance experts may differ. The use of different estimates or
assumptions would change the amount recorded.

The Company's management believes that the liability for IBNR Claims reflected
in the balance sheets at May 3, 2003 and May 4, 2002 included in the financial
statements contained in this Report were fairly stated in all material
respects, subject to the uncertainties of litigation and the risk of greater
than anticipated inflation in medical costs.

Tax Valuation Allowance

In fiscal 2002, the Company recorded a $7.3 million non-cash charge to
establish a valuation allowance for its net deferred tax assets and NOL's. The
tax valuation allowance was calculated in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which places
primary importance on the Company's operating results in the most recent
three-year period when assessing the need for a tax valuation allowance. The
Company's cumulative loss in the most recent three-year period, including the
net loss reported in the fourth quarter of fiscal 2002, was sufficient to
require a full tax valuation allowance under the provisions of SFAS No. 109.
In the first quarter of fiscal 2003, the tax valuation allowance was increased
to $9.4 million.

The Company intends to maintain a valuation allowance for its net deferred tax
assets and NOL's until management determines that sufficient positive evidence
regarding operating results exists to support reversal of the allowance
remaining at that time. A reversal of the tax valuation allowance would
improve the Company's results of operations. Accordingly, whether to continue
a tax valuation allowance is one of the Company's important accounting
matters.

Private Label Credit Cards Issued By The Bank
- ---------------------------------------------

The Company and World Financial Network National Bank (the "Bank") are parties
to a Private Label Credit Card Program Agreement, dated January 27, 1998 (as
amended, the "Credit Card Program Agreement").

Under the Credit Card Program Agreement, the Bank issues credit cards to
Company customers who apply to the Bank. Net credit transaction volume with
the Bank was $25.2 million in the first quarter of fiscal 2003 and $25.0
million in the first quarter of fiscal 2002. Customers must meet standards for
creditworthiness set by the Bank with the approval of the Company, provided,
however, that the Bank shall take any actions required to prevent unsafe and
unsound banking practices. The credit cards issued by the Bank are co-branded
with both the Company's AVENUE(R) service mark and the Bank's name. The credit
cards are used only for merchandise offered by the Company. Credit card
holders remit payments to the Bank, generally by mailing personal checks. The
Bank also handles all statement processing, payment processing, cardholder
customer service and collections from delinquent cardholders.

In accordance with generally accepted accounting principles, the Company does
not include the receivable asset created under the Credit Card Program
Agreement in the Company's accounts receivable on its balance sheets because
the Company has no interest in the customer accounts or receivables and,
depending on the circumstances, might not purchase the accounts from the Bank
upon the expiration of the contractual term. In this connection, it should be
noted that the Credit Card Program Agreement states that (i) the Bank is the
sole and exclusive owner of all customer accounts, (ii) the Company has no
interest in the customer accounts and (iii) the Bank is the creditor in
respect of receivables (defined in the Credit Card Program Agreement as
amounts owed with respect to retail purchases, finance charges, deferred
finance charges, other fees and charges for sales tax). Receivables as defined
in the Credit Card Program Agreement were $71.5 million at May 3, 2003 and
$72.5 million at May 4, 2002. Also, when the Credit Card Program Agreement
expires, currently scheduled for February 28, 2007, the Company shall have the
right to purchase the customer accounts from the Bank for a price equal to the
receivables and the Bank shall have the right to require the Company to
purchase the customer accounts at that price if the Company decides to
commence a private label credit card program on its own or through another
issuer of credit cards.

As to the Company's statements of operations, general, administrative and
store operating expenses were offset in part by premiums received from the
Bank of $0.7 million in the first quarter of fiscal 2003 and $0.5 million in
the first quarter of fiscal 2002. The increase in premiums from the Bank was
due to an increase in customer fees paid to the Bank.

The credit card program premium (or discount) reflected in general,
administrative and store operating expenses is an amount equal to royalties
paid to the Company by the Bank minus costs charged by the Bank based on the
volume of credit card program processing activities performed by the Bank.

Royalties are based on program revenues minus receivables written off by the
Bank and the cost of funds for the program, which, for up to the first $85
million of receivables, means the one-year Constant Maturities Treasury
("CMT") rate plus 25 basis points to be reset every three months (the
published CMT rate was 1.25% per annum at May 3, 2003), with the CMT rate not
to be more than 6.75% per annum and not to be less than 5.00% per annum for
the purpose of this calculation. (The Bank's receivables for the program were
less than $85 million at May 3, 2003, but, if they grew larger than that
amount, the cost of funds for the excess would be based primarily on the cost
of borrowing of a trust for the purpose of securitizing receivables.)

Stores
- ------

The Company leased 547 stores at May 3, 2003, of which 412 stores were in
strip shopping centers, 110 stores were in malls, 19 stores were in downtown
shopping districts and 6 stores were in outlet malls. Retail selling space was
approximately 2.4 million square feet both at May 3, 2003 and May 4, 2002.

In the first quarter of fiscal 2003, the Company closed six stores. Management
believes that 15-25 stores will be closed during the entire fiscal year
principally as a result of routine lease maintenance. Store closings generally
take place at lease expiration.

Substantially all the construction cost of new stores has been capitalized.
Depreciation and amortization of property and equipment relate principally to
assets in stores and are estimated at $12.8 million in fiscal 2003.

The Company has made commitments to lease and open approximately six new
stores during fiscal 2003. Start-up costs will be expensed but are not
expected to have a material effect on general, administrative and store
operating expenses. This paragraph constitutes forward-looking information
under the Reform Act, which is subject to the uncertainties and other risk
factors referred to under the caption "Future Results."

E-Commerce
- ----------

The Company has an Internet site (www.avenue.com) that features the Company's
proprietary brands, AVENUE(R) apparel and accessories, AVENUE BODY(R) lingerie
and CLOUDWALKERS(R) footwear. The Company has an e-commerce fulfillment
operation at its national distribution center in Troy, Ohio.

Suspension of Catalog Operations
- --------------------------------

The Company mailed AVENUE catalogs from September 2000 to March 2003, when the
Company suspended catalog operations indefinitely.

During the first quarter of fiscal 2003, the catalog and internet operations
incurred an operating loss before unallocated corporate expenses and net
interest expense of approximately $0.3 million compared with approximately
$1.1 million during the first quarter of the previous year. Such losses were
approximately $1.4 million, approximately $1.1 million and approximately $2.3
million in the second, third and fourth quarters of fiscal 2002, respectively.

Stock Repurchases
- -----------------

The Company did not repurchase shares of its own stock in the first quarter of
fiscal 2003. The Company has no current plans to repurchase shares of its own
stock except with trust funds under the Company's Supplemental Retirement
Savings Plan to satisfy obligations that may arise under that plan to invest a
portion of participants' accounts in Company stock.

Seasonality
- -----------

The fourth quarter of the fiscal year generally has higher sales for the
Company than other quarters.

Corporate Acquisition Reviews
- -----------------------------

As a matter of routine, the Company from time to time conducts "due diligence"
reviews of businesses that are either for sale as a going concern or are in
liquidation. The Company would consider making a bid on a suitable corporate
acquisition at an opportune price if adequate financing at acceptable rates
were available.

Future Results
- --------------

The Company cautions that any forward-looking statements (as such term is
defined in the Reform Act) contained in this Report or otherwise made by
management of the Company involve risks and uncertainties and are subject to
change based on various important factors, many of which may be beyond the
Company's control. Accordingly, the Company's future performance and financial
results may differ materially from those expressed or implied in any such
forward-looking statements. The following factors, among others, could affect
the Company's actual results and could cause actual results to differ
materially from those expressed or implied in any forward-looking statements
included in this Report or otherwise made by management: war risk; changes in
consumer spending patterns, consumer preferences and overall economic
conditions; the impact of competition and pricing; changes in weather
patterns; the seasonality of the retail industry; risks related to consumer
acceptance of the Company's products and the ability to develop new
merchandise; risks associated with the financial performance of the World
Financial Network National Bank private label credit card program; increases
in interest rates; the ability to retain, hire and train key personnel; risks
associated with the ability of the Company's manufacturers to deliver products
in a timely manner; and political instability and other risks associated with
foreign sources of production.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not hold or issue financial instruments for trading purposes.
Management of the Company believes that its exposure to interest rate and
market risk associated with financial instruments is not material. See,
however, (i) the seventh paragraph under the caption ""Management's Discussion
and Analysis of Financial Condition and Results of Operations - Other
Liquidity Sources" regarding the variable interest rate payable on revolving
loans to the Companies and (ii) the last paragraph under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Private Label Credit Cards Issued By The Bank" for a discussion
of the cost of funds associated with the credit cards that are co-branded with
the Company's AVENUE(R) service mark and the name of the issuer of the cards,
World Financial Network National Bank.

ITEM 4. CONTROLS AND PROCEDURES

(a) The Company performed an evaluation, in which the Company's Chief
Executive Officer and Chief Financial Officer participated, of its
disclosure controls and procedures (as defined by Exchange Act Rule
13a-14(c)) with respect to information required to be disclosed by
the Company in filings with the Securities and Exchange Commission
(the "Commission"). The evaluation was performed on a date (the
"Evaluation Date") within 90 days prior to the filing of this Report.
Based on this evaluation, the Company's Chief Executive Officer and
Chief Financial Officer each concluded that these controls and
procedures were effective in all material respects in ensuring that
this information is (i) recorded, accumulated, processed, summarized
and communicated to him on a timely basis and (ii) reported within
the time periods specified in the Commission's rules and forms.

(b) There have not been any significant changes in the Company's internal
controls or in other factors that could significantly affect its
internal controls subsequent to the Evaluation Date.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On May 1, 2003, process in a suit in state Superior Court, Los Angeles County,
styled Erik Stanford vs. United Retail Incorporated was served on the Company
by the former manager of a store in California. The suit is purportedly a
class action on behalf of certain current and former associates in California
in the past four years.

The plaintiff asserts the following state claims:

>> pro rata vacation pay for former associates who had less than a
year's seniority, who were terminated for cause or who resigned with
less than two weeks' notice

>> overtime pay to current and former store managers for work in excess
of 8 hours daily and 40 hours weekly

>> overtime pay to current and former associates for 30-minute meal
breaks not taken

>> statutory penalty of one-hour straight time pay for each unpaid
missed meal break

>> restitution of deductions for shrink performance results from bonuses
paid to current and former store managers and co-managers

>> waiting time penalties of 30 days' pay for each former associate
included in one or more of the above groups

>> an injunction against the continuation of the practices alleged above

Based on a very preliminary factual review, management believes there are
meritorious procedural defenses available that the plaintiff does not
adequately represent the classes identified in the lawsuit, such as certain
former associates who allegedly did not receive vacation pay, all store
managers and certain associates who allegedly did not get paid for meal
breaks. The Company intends to vigorously oppose class certification.
Nevertheless, successful procedural defenses might not be dispositive of all
the claims if a more adequate class representative replaced Mr. Stanford in
the case.

The Company also intends to defend the case vigorously on the merits.

Although counsel is unable at this early stage to predict the ultimate outcome
of the case and the amount of any potential liability with any accuracy,
management does not believe that the case will have a material impact on the
Company's financial condition, results of operations or cash flows.

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

The following exhibits are filed herewith:

Number Description
------ -----------

10* Amendments to Restated Supplemental
Retirement Savings Plan
99 Certification pursuant to Section 906

The 2003 Stock Option Plan set forth as the appendix to the
Corporation's proxy statement on Schedule 14A for its 2003 annual meeting of
stockholders is incorporated herein by reference.*

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended February 1, 2003 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

3 Restated By-laws of the Corporation
10.1 Amendment, dated January 31, 2003, to
Financing Agreement among the
Corporation, United Retail Incorporated,
Cloudwalkers, Inc. and The CIT Group/
Business Credit, Inc., as Agent
and Lender ("CIT")
10.2* Amendment to Restated Supplemental
Retirement Savings Plan
99.1 Certification pursuant to Section 906

The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended November 2, 2002, are incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Amendment, dated December 6, 2002, to
Employment Agreement, dated November
20, 1998 between the Corporation and
Raphael Benaroya ("Benaroya Employment
Agreement")
10.2* Amendment, dated December 6, 2002, to
Employment Agreement, dated November
20, 1998, between the Corporation and
George R. Remeta ("Remeta Employment
Agreement")
10.3* Amendment, dated December 6, 2002, to
Employment Agreement, dated November
20, 1998, between the Corporation and
Kenneth P. Carroll ("Carroll Employment
Agreement")

The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended August 3, 2002 are incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated August 2, 2002, to
Financing Agreement among the
Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and
CIT
10.2 Amendment to Restated Supplemental
Retirement Savings Plan
10.3 Purchase and Sale Agreement, dated as
of July 1, 2002, between Raphael
Benaroya and the Corporation

The following exhibit to the Corporation's Quarterly Report
on Form 10-Q for the period ended May 4, 2002 is incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Amendment, dated May 30, 2002, to
Benaroya Employment Agreement

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended February 2, 2002 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated April 5, 2002, to
Private Label Credit Card Program
Agreement, dated January 27, 1998,
between the Corporation, United Retail
Incorporated and World Financial
Network National Bank ("Private Label
Credit Card Program Agreement")
10.2 Amendment, dated December 29, 1999, to
Private Label Credit Card Program
Agreement
10.3 Amendment, dated August 19, 1999, to
Private Label Credit Card Program
Agreement
10.4* Letter, dated March 1, 2002, from the
Corporation to Raphael Benaroya with
respect to the cost of living
adjustment under the Benaroya
Employment Agreement

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended November 3, 2001 are incorporated herein by
reference:

Numberin Filing Description
--------------- -----------

10.1* Amendment, dated November 29, 2001, to
Benaroya Employment Agreement
10.2* Amendment, dated November 29, 2001, to
Remeta Employment Agreement
10.3* Amendment, dated November 29, 2001, to
Carroll Employment Agreement
10.4* Summary Plan Description for United
Retail Group, Inc. Incentive
Compensation Program for Executives
10.5 Amendment, dated October 1, 2001, to
Private Label Credit Card Program
Agreement (Confidential portions filed
separately with the Secretary of the
Commission)
10.6* Promissory note, dated November 30,
2001, from Raphael Benaroya to the
Corporation (paid as of July 1, 2002)

The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended August 4, 2001 is incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1* Restated Stock Appreciation Rights Plan

The 2001 Stock Option Plan set forth as an appendix to the
Corporation's proxy statement on Schedule 14A for its 2001 annual meeting of
stockholders is incorporated herein by reference.*

The following exhibit to the Corporation's Registration Statement on
Form S-8 (Registration No. 333-44868) is incorporated herein by reference:

Number in Filing Description
---------------- -----------

10 Amendment, dated August 21, 2000, to
Financing Agreement among the
Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and
CIT

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended October 28, 2000 are incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Amendment, dated August 18, 2000, to
Benaroya Employment Agreement
10.2* Amendment, dated August 18, 2000, to
Carroll Employment Agreement

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 29, 2000 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.2 Amendment, dated December 28, 1999, to
Financing Agreement among the
Corporation, United Retail Incorporated
and CIT ("Financing Agreement")
10.3 Amendment, dated January 31, 2000, to
Financing Agreement among the
Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and
CIT

The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended October 30, 1999 is incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated October 6, 1999, to
Financing Agreement

The following exhibit to the Corporation's Current Report on Form
8-K, filed September 23, 1999, is incorporated herein by reference:

Number in Filing Description
---------------- -----------

3 Certificate of Designation, Preferences
and Rights of Series A Junior
Participating Preferred Stock

The stockholders' rights plan filed as the exhibit to the
Corporation's Registration Statement on Form 8-A, dated September 15, 1999, is
incorporated herein by reference.

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 30, 1999 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated March 29, 1999, to
Financing Agreement
21 Subsidiaries of the Corporation

The 1999 Stock Option Plan set forth as the Appendix to the
Corporation's proxy statement on Schedule 14A for its 1999 annual meeting of
stockholders is incorporated herein by reference.*

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended October 31, 1998 are incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Benaroya Employment Agreement
10.2* Remeta Employment Agreement
10.3* Carroll Employment Agreement

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended May 2, 1998 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1* 1998 Stock Option Agreement, dated May
21, 1998, between the Corporation and
Raphael Benaroya
10.2* 1998 Stock Option Agreement, dated May
21, 1998, between the Corporation and
George R. Remeta

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 31, 1998 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1 Restated Stockholders' Agreement, dated
December 23, 1992, between the
Corporation and certain of its
stockholders and Amendment No. 1,
Amendment No. 2 and Amendment No. 3
thereto
10.2 Private Label Credit Card Program
Agreement
10.4* Restated 1990 Stock Option Plan as of
March 6, 1998
10.5* Restated 1990 Stock Option Plan as of
May 28, 1996
10.6* Restated 1996 Stock Option Plan as of
March 6, 1998

The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended November 1, 1997 is incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated September 15, 1997, to
Financing Agreement

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended August 2, 1997 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1 Financing Agreement
10.2* Amendment to Restated Supplemental
Retirement Savings Plan

The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended November 2, 1996 is incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Restated Supplemental Retirement
Savings Plan

The following exhibits to the Corporation's Registration Statement on
Form S-1 (Registration No. 33-44499), as amended, are incorporated herein
by reference:

Number in Filing Description
---------------- -----------

3.1 Amended and Restated Certificate of
Incorporation of the Corporation
4.1 Specimen Certificate for Common Stock
of the Corporation
10.2.1 Software License Agreement, dated as of
April 30, 1989, between The Limited
Stores, Inc. and Sizes Unlimited, Inc.
(now known as United Retail
Incorporated) ("Software License")
10.2.2 Amendment, dated December 10, 1991, to
Software License

____________________
*A compensatory plan for the benefit of the Corporation's management or
a management contract.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

(Registrant) UNITED RETAIL GROUP, INC.
---------------------------------------------------

Date: June 5, 2003

By: /s/ GEORGE R. REMETA
----------------------------------------------------
George R. Remeta, Vice Chairman of the Board and
Chief Administrative Officer - Authorized Signatory

By: /s/ JON GROSSMAN
----------------------------------------------------
Jon Grossman, Vice President - Finance and Chief
Accounting Officer

CERTIFICATIONS
--------------

I, Raphael Benaroya, Chief Executive Officer of United Retail Group,
Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of United
Retail Group, Inc.;

2. based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;

3. based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;

4. the registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and

(c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. the registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):

(a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and

6. the registrant's other certifying officer and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.

Date: June 5, 2003 /s/ RAPHAEL BENAROYA
--------------------------
Chief Executive Officer

I, George R. Remeta, Chief Administrative Officer and Chief Financial
Officer of United Retail Group, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of United
Retail Group, Inc.;

2. based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;

3. based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;

4. the registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and

(c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. the registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):

(a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and

6. the registrant's other certifying officer and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.

Date: June 5, 2003 /s/ GEORGE R. REMETA
-----------------------
Chief Financial Officer

EXHIBIT INDEX

The following exhibits are filed herewith:

Number Description
------ -----------

10* Amendments to Restated Supplemental
Retirement Savings Plan
99 Certification pursuant to Section 906

The 2003 Stock Option Plan set forth as the appendix to the
Corporation's proxy statement on Schedule 14A for its 2003 annual meeting of
stockholders is incorporated herein by reference.*

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended February 1, 2003 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

3 Restated By-laws of the Corporation
10.1 Amendment, dated January 31, 2003, to
Financing Agreement among the
Corporation, United Retail Incorporated,
Cloudwalkers, Inc. and The CIT Group/
Business Credit, Inc., as Agent
and Lender ("CIT")
10.2* Amendment to Restated Supplemental
Retirement Savings Plan
99.1 Certification pursuant to Section 906

The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended November 2, 2002, are incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Amendment, dated December 6, 2002, to
Employment Agreement, dated November
20, 1998 between the Corporation and
Raphael Benaroya ("Benaroya Employment
Agreement")
10.2* Amendment, dated December 6, 2002, to
Employment Agreement, dated November
20, 1998, between the Corporation and
George R. Remeta ("Remeta Employment
Agreement")
10.3* Amendment, dated December 6, 2002, to
Employment Agreement, dated November
20, 1998, between the Corporation and
Kenneth P. Carroll ("Carroll Employment
Agreement")

The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended August 3, 2002 are incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated August 2, 2002, to
Financing Agreement among the
Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and
CIT
10.2 Amendment to Restated Supplemental
Retirement Savings Plan
10.3 Purchase and Sale Agreement, dated as
of July 1, 2002, between Raphael
Benaroya and the Corporation

The following exhibit to the Corporation's Quarterly Report
on Form 10-Q for the period ended May 4, 2002 is incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Amendment, dated May 30, 2002, to
Benaroya Employment Agreement

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended February 2, 2002 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated April 5, 2002, to
Private Label Credit Card Program
Agreement, dated January 27, 1998,
between the Corporation, United Retail
Incorporated and World Financial
Network National Bank ("Private Label
Credit Card Program Agreement")
10.2 Amendment, dated December 29, 1999, to
Private Label Credit Card Program
Agreement
10.3 Amendment, dated August 19, 1999, to
Private Label Credit Card Program
Agreement
10.4* Letter, dated March 1, 2002, from the
Corporation to Raphael Benaroya with
respect to the cost of living
adjustment under the Benaroya
Employment Agreement

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended November 3, 2001 are incorporated herein by
reference:

Numberin Filing Description
--------------- -----------

10.1* Amendment, dated November 29, 2001, to
Benaroya Employment Agreement
10.2* Amendment, dated November 29, 2001, to
Remeta Employment Agreement
10.3* Amendment, dated November 29, 2001, to
Carroll Employment Agreement
10.4* Summary Plan Description for United
Retail Group, Inc. Incentive
Compensation Program for Executives
10.5 Amendment, dated October 1, 2001, to
Private Label Credit Card Program
Agreement (Confidential portions filed
separately with the Secretary of the
Commission)
10.6* Promissory note, dated November 30,
2001, from Raphael Benaroya to the
Corporation (paid as of July 1, 2002)

The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended August 4, 2001 is incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1* Restated Stock Appreciation Rights Plan

The 2001 Stock Option Plan set forth as an appendix to the
Corporation's proxy statement on Schedule 14A for its 2001 annual meeting of
stockholders is incorporated herein by reference.*

The following exhibit to the Corporation's Registration Statement on
Form S-8 (Registration No. 333-44868) is incorporated herein by reference:

Number in Filing Description
---------------- -----------

10 Amendment, dated August 21, 2000, to
Financing Agreement among the
Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and
CIT

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended October 28, 2000 are incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Amendment, dated August 18, 2000, to
Benaroya Employment Agreement
10.2* Amendment, dated August 18, 2000, to
Carroll Employment Agreement

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 29, 2000 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.2 Amendment, dated December 28, 1999, to
Financing Agreement among the
Corporation, United Retail Incorporated
and CIT ("Financing Agreement")
10.3 Amendment, dated January 31, 2000, to
Financing Agreement among the
Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and
CIT

The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended October 30, 1999 is incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated October 6, 1999, to
Financing Agreement

The following exhibit to the Corporation's Current Report on Form
8-K, filed September 23, 1999, is incorporated herein by reference:

Number in Filing Description
---------------- -----------

3 Certificate of Designation, Preferences
and Rights of Series A Junior
Participating Preferred Stock

The stockholders' rights plan filed as the exhibit to the
Corporation's Registration Statement on Form 8-A, dated September 15, 1999, is
incorporated herein by reference.

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 30, 1999 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated March 29, 1999, to
Financing Agreement
21 Subsidiaries of the Corporation

The 1999 Stock Option Plan set forth as the Appendix to the
Corporation's proxy statement on Schedule 14A for its 1999 annual meeting of
stockholders is incorporated herein by reference.*

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended October 31, 1998 are incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Benaroya Employment Agreement
10.2* Remeta Employment Agreement
10.3* Carroll Employment Agreement

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended May 2, 1998 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1* 1998 Stock Option Agreement, dated May
21, 1998, between the Corporation and
Raphael Benaroya
10.2* 1998 Stock Option Agreement, dated May
21, 1998, between the Corporation and
George R. Remeta

The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 31, 1998 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1 Restated Stockholders' Agreement, dated
December 23, 1992, between the
Corporation and certain of its
stockholders and Amendment No. 1,
Amendment No. 2 and Amendment No. 3
thereto
10.2 Private Label Credit Card Program
Agreement
10.4* Restated 1990 Stock Option Plan as of
March 6, 1998
10.5* Restated 1990 Stock Option Plan as of
May 28, 1996
10.6* Restated 1996 Stock Option Plan as of
March 6, 1998

The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended November 1, 1997 is incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1 Amendment, dated September 15, 1997, to
Financing Agreement

The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended August 2, 1997 are incorporated herein by reference:

Number in Filing Description
---------------- -----------

10.1 Financing Agreement
10.2* Amendment to Restated Supplemental
Retirement Savings Plan

The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended November 2, 1996 is incorporated herein by
reference:

Number in Filing Description
---------------- -----------

10.1* Restated Supplemental Retirement
Savings Plan

The following exhibits to the Corporation's Registration Statement on
Form S-1 (Registration No. 33-44499), as amended, are incorporated herein
by reference:

Number in Filing Description
---------------- -----------

3.1 Amended and Restated Certificate of
Incorporation of the Corporation
4.1 Specimen Certificate for Common Stock
of the Corporation
10.2.1 Software License Agreement, dated as of
April 30, 1989, between The Limited
Stores, Inc. and Sizes Unlimited, Inc.
(now known as United Retail
Incorporated) ("Software License")
10.2.2 Amendment, dated December 10, 1991, to
Software License

____________________
*A compensatory plan for the benefit of the Corporation's management or
a management contract.