On behalf of the Board of Directors, I am pleased to provide the results of Le Château Inc. for the third quarter ended October 30, 2010.

interim report For the nine months ended October 30, 2010

MESSAGE TO SHAREHOLDERS On behalf of the Board of Directors, I am pleased to provide the results of Le Château Inc. for the third quarter ended October 30, 2010. Sales for the third quarter ended October 30, 2010 decreased 1.2% to $74.4 million as compared with sales of $75.3 million the previous year and comparable store sales decreased 3.5%. Net earnings for the third quarter ended October 30, 2010 were $2.7 million or $0.11 per share (diluted) compared to $5.6 million or $0.23 per share for the third quarter ended October 31, 2009. Sales for the nine months ended October 30, 2010 increased 1.5% to $231.9 million as compared to $228.5 million last year while comparable store sales decreased 2.3% versus the same period a year ago. Net earnings for the first nine months were $15.3 million or $0.62 per share (diluted) compared to $18.4 million or $0.76 per share the previous year. At the Board of Directors meeting held December 10, 2010, a quarterly cash dividend of $0.175 per share was declared on the Class A subordinate voting and Class B voting shares outstanding. The dividend is payable on February 15, 2011 to shareholders of record at the close of business on January 28, 2011. I wish to thank our employees, customers, suppliers and our shareholders for their continued support. (signed) Jane Silverstone Segal, B.A.LLL Chairman of the Board and Chief Executive Officer December 10, 2010

Management s Discussion & Analysis Management s Discussion and Analysis ( MD&A ) should be read in conjunction with the unaudited interim consolidated financial statements for the nine months ended October 30, 2010 and the audited consolidated financial statements and MD&A for the year ended January 30, 2010. The risks and uncertainties faced by the Company are substantially the same as those outlined in the Company s 2009 Annual Information Form and in the annual MD&A contained in the 2009 Annual Report. The MD&A has been prepared as at December 10, 2010. Results of Operations Sales for the third quarter ended October 30, 2010 decreased 1.2% to $74.4 million from $75.3 million for the third quarter ended October 31, 2009. Comparable store sales decreased 3.5% as compared to the same period last year. From a divisional perspective, the ladies and men s clothing divisions produced an increase in total sales of 3.6% and 1.9%, respectively, in the third quarter while the footwear and accessories divisions recorded a decline of 9.8% and 14.1%, respectively. The Company s comparable store sales were negatively impacted by reduced traffic during third quarter as consumers remained cautious on discretionary spending. On a year-to-date basis, sales increased 1.5% to $231.9 million as compared with $228.5 million last year. Comparable store sales decreased 2.3% for the first nine months as compared to last year. From a divisional perspective, total sales in the ladies clothing division increased 6.2% on a year-to-date basis, while sales for the men s clothing division remained flat. Sales in the footwear and accessories divisions decreased 5.4% and 8.8%, respectively. Earnings before interest, income taxes, depreciation and amortization ( EBITDA ) (see supplementary measures below) for the third quarter amounted to $8.7 million or 11.7% of sales, compared to $12.8 million or 17.0% of sales last year. The Company s gross margin percentage (excluding the licensing division) for the third quarter increased to 71.8% from 71.0% last year, primarily due to the strengthening of the Canadian dollar. Gross margin dollars for the third quarter remained flat to last year, with the increases of $1.9 million in the ladies and men s clothing divisions being offset by decreases of a similar amount for the footwear and accessories divisions. EBITDA was negatively impacted by (a) an increase of 1.2% in store compensation costs, as a percentage of sales, due to higher minimum wage costs, b) an increase in store occupancy costs of $1.0 million as a result of additional footage from new and expanded stores, and (c) an increase of $1.0 million in selling and administrative costs related to the Company s new e-commerce website which launched at the end of November. EBITDA for the first nine months decreased to $36.3 million or 15.7% of sales, from $41.1 million or 18.0% of sales last year. The Company s gross margin percentage (excluding the licensing division) for the first nine months increased to 71.4% from 70.7% last year. Net earnings for the third quarter decreased to $2.7 million or $0.11 per share (diluted) from $5.6 million or $0.23 per share last year. For the nine months ended October 30, 2010, net earnings were $15.3 million or $0.62 per share (diluted) compared to $18.4 million or $0.76 per share the previous year. During the first nine months of the year, the Company opened 9 stores, closed 4 and expanded 17 existing locations, resulting in the addition of 66,000 square feet or 5.8% to the Le Château network, bringing the total floor space at end of period to 1,212,000 square feet. As at October 30, 2010, there were 235 stores (including 37 fashion outlets) in operation as compared with 229 stores (including 33 fashion outlets) and 1,135,000 square feet at the end of the same period last year. At the end of November, as planned, Le Château launched an online shopping initiative targeted at further broadening its customer base to online shoppers in both Canada and the United States and to enhance the shopping experience of existing shoppers. The E-Commerce website provide an important new vehicle for attracting new customers, and extends the Company s reach well beyond its network of stores. Liquidity and Capital Resources Cash flow used for operating activities amounted to $6.0 million for the third quarter ended October 30, 2010, compared with cash flow from operating activities of $9.8 million for the same period last year. The increase in cash flow utilized for operating activities of $15.8 million was mainly the result of an increase of $13.0 million in non-cash working capital requirements and lower net earnings of $2.9 million for the third quarter. On a year-to-date basis, cash flow used for operating activities amounted to $2.0 million, compared with cash flow from operating activities of $17.5 million. The increase in cash flow utilized for operating activities of $19.5 million was mainly the result of an increase of $15.7 million in non-cash working capital requirements and lower net earnings of $3.1 million for the nine-month period. The Company continues to be in a strong financial position with cash, cash equivalents and short and long-term investments of $35.0 million at the end of the third quarter, compared with $63.5 million as at October 31, 2009 and $78.4 million as at January 30, 2010. The decrease in the cash position as compared to last year is primarily attributable to the timing of the long-term debt financing of $15.0 million which was drawn upon in the third quarter ended October 31, 2009. Short and long-term investments are conservatively invested in guaranteed investment certificates with major Canadian chartered banks. Page 1

Management s Discussion & Analysis Liquidity and Capital Resources (continued) Capital expenditures for the third quarter amounted to $8.3 million, compared to $4.5 million for the same period last year. Capital expenditures for the first nine months of 2010 amounted to $22.4 million, compared to $16.4 million for the same period last year. Of the $22.4 million, $15.9 million related to the opening of 9 new stores and the renovation and/or expansion of existing stores and the balance of $6.5 million related to investments in information technology and infrastructure. The latter included $2.0 million for the investment in the e- commerce website. Capital expenditures were financed with cash and cash equivalents. The Company expects its capital expenditures for the year ending January 29, 2011 to approximate $25.0 million. Financial Position Working capital stood at $89.0 million at the end of the third quarter of 2010, compared to $84.8 million as at October 31, 2009 and $91.9 million as at January 30, 2010. Total inventories as at October 30, 2010 amounted to $92.3 million compared to $62.8 million a year earlier and $61.2 million as at January 30, 2010. Finished goods inventory, which totaled $75.7 million at the end of the third quarter, were up 42.6% in dollars and 15.8% on a unit basis, year over year. On a per square footage basis, inventory units increased 8.4% compared to last year. The increase in finished goods inventory is attributable to a 6.8% increase in total square footage to 1,212,000 year over year and to higher average unit costs due to changes in product mix as a result of the Company s rebranding strategy to appeal to a more mature, broader customer base. Long-term debt, including the current portion, amounted to $24.5 million as at October 30, 2010, compared with $35.9 million as at October 31, 2009. The decrease of $11.4 million is attributable to the repayments made during the past 12 months. The long-term debt to equity ratio decreased to 0.15:1 as at October 30, 2010 from 0.24:1 the previous year. Dividends On September 8, 2010, the Board of Directors declared a quarterly dividend of $0.175 per Class A subordinate voting share and Class B voting share. The dividend was paid on November 16, 2010 to shareholders of record at the close of business on October 29, 2010. On December 10, 2010, the Board of Directors declared a quarterly dividend of $0.175 per Class A subordinate voting share and Class B voting share. The dividend is payable on February 15, 2011 to shareholders of record at the close of business on January 28, 2011. This represents the 69 th consecutive quarterly dividend declared by Le Château. The Company designated the above dividends to be eligible dividends pursuant to the Income Tax Act (Canada) and its provincial equivalents. Share Capital As at December 10, 2010, there are 20,226,864 Class A subordinate voting shares and 4,560,000 Class B voting shares outstanding. Furthermore, there are 1,052,400 stock options outstanding with exercise prices ranging from $9.40 to $15.14, of which 402,580 are exercisable. The Company announced on June 9, 2010 that it intended to proceed with a normal course issuer bid which was subsequently approved by the Toronto Stock Exchange ( TSX ). Under the bid, the Company may purchase up to 1,003,328 Class A subordinate voting shares of the Company, representing 5% of the issued shares of such class as at June 8, 2010. The bid commenced on June 21, 2010 and may continue to June 20, 2011, or on such earlier date as the Company may complete its purchases pursuant to the bid. The average daily trading volume for the 6-month period preceding June 1, 2010 was 16,921 shares. In accordance with TSX requirements, a maximum daily repurchase of 25% of this average may be made, representing 4,230 shares. The shares will be purchased on behalf of the Company by a registered broker through the facilities of the TSX. The price paid for the shares will be the market price at the time of acquisition, and the number of shares purchased and the timing of any such purchases will be determined by the Company. All shares purchased by the Company will be cancelled. Since June 21, 2010, no Class A subordinate voting shares have been purchased by the Company. The directors of the Company have concluded that purchases of up to 5% of the issued and outstanding Class A subordinate voting shares, in the appropriate circumstances, would be a desirable use of the Company's available funds and, therefore, would be in the best interests of the shareholders. As a result of such purchases, the number of issued shares would be decreased and, consequently, the proportionate share interest of all remaining shareholders would be increased on a pro rata basis. Page 2

Management s Discussion & Analysis Accounting Policies Critical Accounting Estimates: The Company s critical accounting estimates are substantially the same as those disclosed in the Management s Discussion and Analysis section of its 2009 Annual Report. Accounting Standards Implemented in 2010: There were no new accounting standards implemented during the first nine months of 2010. International Financial Reporting Standards In February 2008, the Canadian Accounting Standards Board confirmed that publicly-accountable enterprises would be required to use International Financial Reporting Standards ( IFRS ) in the preparation of interim and annual financial statements for fiscal years beginning on or after January 1, 2011. The Company will be required to begin reporting under IFRS for the quarter ending April 30, 2011 and will be required to prepare an opening balance sheet and provide information that conforms to IFRS for comparative periods presented. The Company began planning its transition to IFRS in 2009. A project team was formed and a detailed conversion plan was created outlining the major phases of the transition to IFRS. External advisors were also engaged to assist in the IFRS conversion plan. The project team reports quarterly to the Audit Committee. The conversion plan consists of the following three phases: initial scoping and diagnostic phase, detailed analysis and design phase and the implementation phase. Initial Scoping and Diagnostic Phase: The Company has completed the initial scoping and diagnostic phase which included the review and identification of major differences between current Canadian generally accepted accounting principles ( GAAP ) and IFRS as well as an initial evaluation of IFRS 1 transition exemptions. Activities in this phase also included the training of key employees. The first phase was completed in the second quarter of 2009. Detailed Analysis and Design Phase: The second phase of the conversion plan entailed a detailed analysis of all relevant accounting differences between IFRS and GAAP, as identified in the initial scoping and diagnostic phase, which will be impacted by the conversion to IFRS. The analysis included a review of the changes required to the current accounting policies as well as any policy alternatives. The implications of these changes on business processes, information systems and internal control over financial reporting were also analyzed. Training was provided to key employees. The second phase was completed in the third quarter of 2010. Implementation Phase: The final phase of the Company s IFRS changeover plan will entail the implementation of the changes identified in the second phase as well as the approval of IFRS financial statements. Training is being provided on a continuous basis to employees. The Company is also in the process of preparing draft financial statements and related note disclosure in accordance with IAS 1 Presentation of Financial Statements. The third and final phase is expected to be completed by the end of the fourth quarter of 2010. At the current time, the following are some of the significant accounting policy changes that have been identified as having a potential impact on the Company s financial statements. The Company is in the process of reviewing other accounting policies and will disclose additional information when available. IFRS 1 First-Time Adoption of International Financial Reporting Standards, which is designed to provide guidance to first time adopters on first IFRS accounts and the method to determine the opening balance sheet as well as to address the specific issues faced by first time adopters as they transition from Canadian GAAP. The general requirement of IFRS 1 is to apply IFRS standards retrospectively at the time of transition. IFRS 1 however does provide certain optional exemptions from the retrospective application. At this time, the Company does not intend to elect any of the optional exemptions as provided by IFRS 1. IAS 1 Presentation of Financial Statements, which will require classification changes to the Statement of Earnings by using either the Function of Expense Method or the Nature of Expense Method, as well as additional disclosure requirements. The Company is currently working on draft financial statements and related note disclosures. IAS 17 Leases, which will require changes to the basis of the expense recognition over the lease term. The financial impact of this change in policy is not yet determined. Page 3

Management s Discussion & Analysis International Financial Reporting Standards (continued) IAS 36 Impairment of Assets, which will require the impairment of assets to be applied to the Cash Generating Units (CGU), the lowest level at which separately independent cash inflows can be identified. Assets will be assessed using a one-step test, where the carrying value of an asset or group of assets will be compared directly to its recoverable amount on a discounted cash flow basis. This change in policy is not expected to have a significant financial impact. IAS 39 Financial Instruments, which will require changes to the process required to measure effectiveness as it relates to hedge accounting. This change in policy is not expected to have a significant financial impact. The Company is currently evaluating the implications of these changes on business processes, information systems, internal controls over financial reporting and disclosure controls and procedures. Based on progress to date, the Company is the process of updating all impacted business process documentation. The Company does not expect significant changes to its information systems. Internal controls over financial reporting and disclosure controls and procedures are being revised as a result of the changes in policy and processes under IFRS. The Company's IFRS conversion plan is progressing according to schedule. As the conversion plan progresses, the Company will be able to provide a more detailed assessment of the financial impact of the transition to IFRS in its 2010 annual MD&A. Supplementary Measures In addition to discussing earnings measures in accordance with GAAP, this MD&A provides EBITDA as a supplementary earnings measure. Depreciation and amortization include the write-off of fixed assets. EBITDA is provided to assist readers in determining the ability of the Company to generate cash from operations and to cover financial charges. It is also widely used for valuation purposes for public companies in our industry. The following table reconciles EBITDA to GAAP measures disclosed in the unaudited interim consolidated statements of earnings for the three and nine-month periods ended October 30, 2010 and October 31, 2009: For the three months ended For the nine months ended (in thousands of dollars) October 30, 2010 October 31, 2009 October 30, 2010 October 31, 2009 Earnings before income taxes $ 3,881 $ 8,334 $ 22,137 $ 27,454 Depreciation and amortization 4,470 4,256 13,029 13,043 Write-off of fixed assets 168 78 383 167 Interest on long-term debt and capital lease obligations 363 298 1,209 1,001 Interest income (146) (170) (456) (605) EBITDA $ 8,736 $ 12,796 $ 36,302 $ 41,060 The Company also discloses comparable store sales which are defined as sales generated by stores that have been opened for at least one year. The above measures do not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. Page 4

Management s Discussion & Analysis Summary of Quarterly Results The table below sets forth selected financial data for the eight most recently reported quarters. This unaudited quarterly information has been prepared on the same basis as the annual financial statements. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period. Earnings before Net Earnings per Share (in thousands of dollars, except per share amounts) Sales Income Taxes Earnings Basic Diluted Third quarter ended October 30, 2010 $ 74,458 $ 3,881 $ 2,686 $ 0.11 $ 0.11 Second quarter ended July 31, 2010 86,536 11,777 8,157 0.33 0.33 First quarter ended May 1, 2010 70,896 6,479 4,484 0.18 0.18 Fourth quarter ended January 30, 2010 93,216 15,792 11,388 0.47 0.46 Third quarter ended October 31, 2009 75,305 8,334 5,599 0.23 0.23 Second quarter ended August 1, 2009 81,437 11,550 7,780 0.32 0.32 First quarter ended May 2, 2009 71,775 7,570 5,070 0.21 0.21 Fourth quarter ended January 31, 2009 102,555 19,352 13,167 0.54 0.54 The Company s business is seasonal in nature. As the Company executes its strategy of broadening its customer base, the Company expects that its business will become less seasonal. However, retail sales are traditionally higher in the fourth quarter due to the holiday season. In addition, fourth quarter earnings results are usually reduced by post holiday sale promotions. Controls and Procedures Disclosure controls and procedures The Chief Executive Officer ( CEO ) and the Chief Financial Officer ( CFO ) have designed disclosure controls and procedures ( DC&P ), or have caused them to be designed under their supervision, to provide reasonable assurance that material information relating to the Company has been made known to them and has been properly disclosed in the annual and quarterly regulatory filings. Internal controls over financial reporting The CEO and CFO have designed internal controls over financial reporting ( ICFR ), or have caused them to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with Canadian GAAP. The CEO and CFO have evaluated whether there were changes to its ICFR during the three and nine-month periods ended October 30, 2010 that have materially affected, or are reasonably likely to materially affect, its ICFR. No such changes were identified through their evaluation. Forward-looking Statements This Management s Discussion and Analysis may contain forward-looking statements relating to the Company and/or the environment in which it operates that are based on the Company's expectations, estimates and forecasts. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond the Company's control. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors include those set forth in other public filings of the Company. Therefore, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Company disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise, except to the extent required under applicable securities law. Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its business initiatives and whether such business initiatives will yield the expected benefits; competitive conditions in the businesses in which the Company participates; changes in consumer spending; general economic conditions and normal business uncertainty; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Company s relationship with its suppliers; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Company. Page 5

FINANCIAL HIGHLIGHTS (Unaudited) (In units except where otherwise stated) October 30, 2010 October 31, 2009 Working capital ($'000) $ 89,010 $ 84,814 Current ratio 2.88 3.07 Quick ratio 0.93 1.54 Long-term debt to equity * 0.15 0.24 Capital expenditures ($'000) $ 22,433 $ 16,403 Number of stores at end of quarter 235 229 Total number of square feet ('000) 1,212 1,135 Book value per share $ 6.56 $ 6.10 *Including capital lease obligations CONSOLIDATED BALANCE SHEETS (Unaudited) As at As at As at (In thousands of dollars) October 30, 2010 October 31, 2009 January 30, 2010 ASSETS Current Cash and cash equivalents $ 9,746 $ 23,510 $ 23,411 Short-term investments (note 3) 25,300 30,000 45,000 Accounts receivable 3,062 2,638 2,454 Income taxes refundable 3,608 5,278 1,602 Derivative financial instruments 75 254 59 Inventories (note 4) 92,281 62,750 61,234 Prepaid expenses 2,392 1,396 1,308 Total current assets 136,464 125,826 135,068 Long-term investments (note 3) - 10,000 10,000 Fixed assets 95,161 89,585 88,437 Intangible assets 4,824 2,251 2,527 $ 236,449 $ 227,662 $ 236,032 LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities $ 30,848 $ 24,859 $ 27,151 Dividend payable 4,338 4,269 4,293 Current portion of long-term debt 12,246 11,803 11,752 Future income taxes 22 81 19 Total current liabilities 47,454 41,012 43,215 Long-term debt 12,217 24,060 21,464 Future income taxes 3,910 3,176 3,910 Deferred lease inducements 10,175 10,491 10,222 Total liabilities 73,756 78,739 78,811 Shareholders' equity Capital stock (note 6) 37,707 32,683 34,335 Contributed surplus (note 6) 1,880 2,475 2,159 Retained earnings 123,053 113,592 120,687 Accumulated other comprehensive income (note 7) 53 173 40 Total shareholders' equity 162,693 148,923 157,221 $ 236,449 $ 227,662 $ 236,032 Page 6

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Unaudited) For the three months ended For the nine months ended (In thousands of dollars) October 30, 2010 October 31, 2009 October 30, 2010 October 31, 2009 Balance, beginning of period $ 124,705 $ 112,263 $ 120,687 $ 107,914 Net earnings 2,686 5,599 15,327 18,449 127,391 117,862 136,014 126,363 Dividends declared 4,338 4,270 12,961 12,771 Balance, end of period $ 123,053 $ 113,592 $ 123,053 $ 113,592 CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) For the three months ended For the nine months ended (In thousands of dollars, except per share data) October 30, 2010 October 31, 2009 October 30, 2010 October 31, 2009 Sales $ 74,458 $ 75,305 $ 231,890 $ 228,517 Cost of sales and expenses Cost of sales and selling, general and administrative 65,722 62,509 195,588 187,457 Depreciation and amortization 4,470 4,256 13,029 13,043 Write-off of fixed assets 168 78 383 167 Interest on long-term debt and capital lease obligations 363 298 1,209 1,001 Interest income (146) (170) (456) (605) 70,577 66,971 209,753 201,063 Earnings before income taxes 3,881 8,334 22,137 27,454 Provision for income taxes 1,195 2,735 6,810 9,005 Net earnings $ 2,686 $ 5,599 $ 15,327 $ 18,449 Net earnings per share (note 8) Basic $ 0.11 $ 0.23 $ 0.62 $ 0.76 Diluted 0.11 0.23 0.62 0.76 Weighted average number of shares outstanding ('000) 24,700 24,365 24,628 24,300 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) For the three months ended For the nine months ended (In thousands of dollars) October 30, 2010 October 31, 2009 October 30, 2010 October 31, 2009 Net earnings $ 2,686 $ 5,599 $ 15,327 $ 18,449 Other comprehensive income Change in fair value of forward exchange contracts 73 329 368 (1,374) Realized forward exchange contracts reclassified to net earnings (256) 1,202 (352) 98 Income tax recovery (expense) 55 (487) (3) 406 (128) 1,044 13 (870) Comprehensive income $ 2,558 $ 6,643 $ 15,340 $ 17,579 Page 7

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the three months ended For the nine months ended (In thousands of dollars) October 30, 2010 October 31, 2009 October 30, 2010 October 31, 2009 OPERATING ACTIVITIES Net earnings $ 2,686 $ 5,599 $ 15,327 $ 18,449 Adjustments to determine net cash from operating activities Depreciation and amortization 4,470 4,256 13,029 13,043 Write-off of fixed assets 168 78 383 167 Amortization of deferred lease inducements (431) (392) (1,300) (1,121) Stock-based compensation (note 6) 154 160 377 323 7,047 9,701 27,816 30,861 Net change in non-cash working capital items related to operations (13,608) (610) (31,048) (15,310) Deferred lease inducements 578 745 1,253 1,921 Cash flows related to operating activities (5,983) 9,836 (1,979) 17,472 FINANCING ACTIVITIES Repayment of capital lease obligations - (341) - (1,008) Proceeds of long-term debt - 15,000-15,000 Repayment of long-term debt (2,560) (2,231) (8,753) (6,865) Issue of capital stock upon exercise of options 1,646 368 2,716 1,378 Dividends paid (4,313) (4,263) (12,916) (12,741) Cash flows related to financing activities (5,227) 8,533 (18,953) (4,236) INVESTING ACTIVITIES Decrease (increase) in short-term investments 13,320 (10,000) 19,700 26,643 Decrease (increase) in long-term investments - - 10,000 (10,000) Additions to fixed assets and intangible assets (8,331) (4,485) (22,433) (16,403) Cash flows related to investing activities 4,989 (14,485) 7,267 240 Increase (decrease) in cash and cash equivalents (6,221) 3,884 (13,665) 13,476 Cash and cash equivalents, beginning of period 15,967 19,626 23,411 10,034 Cash and cash equivalents, end of period $ 9,746 $ 23,510 $ 9,746 $ 23,510 Supplementary information: Interest paid during the period $ 363 $ 298 $ 1,209 $ 1,001 Income taxes paid during the period 2,863 4,675 8,456 16,019 Page 8

Notes to the Interim Consolidated Financial Statements (Unaudited Tabular figures in thousands of dollars except share information) 1. Basis of presentation The unaudited interim consolidated financial statements (the financial statements ) have been prepared in accordance with Canadian generally accepted accounting principles with the exception that they do not include all disclosure required for annual financial statements. The financial statements should be read in conjunction with the audited annual consolidated financial statements and related notes contained in the Company s 2009 Annual Report. The Company s business is seasonal in nature. As the Company executes its strategy of broadening its customer base, the Company expects that its business will become less seasonal. However, retail sales are traditionally higher in the fourth quarter due to the holiday season. In addition, fourth quarter earnings results are usually reduced by post holiday sale promotions. 2. Accounting policies These financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements for the 52-week period ended January 30, 2010. 3. Investments Short-term investments amount to $25.3 million (2009 $30.0 million) and include investments with original maturity terms between 90 and 365 days as well as any long-term investments with remaining maturity terms of less than 365 days. As at October 30, 2010, the weighted average effective interest rate was 1.78% and their maturity dates vary over periods ending up to September 14, 2011. The Company did not hold any long-term investments as at October 30, 2010. As at October 31, 2009, long-term investments amounted to $10.0 million and included an investment with an original maturity term of more than 365 days. The effective interest rate was 3.00% with a maturity date of March 11, 2011. Short and long-term investments are invested in guaranteed investment certificates with major Canadian chartered banks. 4. Inventories October 30, 2010 October 31, 2009 Raw materials $ 9,351 $ 6,047 Work-in-process 3,324 1,199 Finished goods 75,753 53,115 Finished goods in transit 3,853 2,389 $ 92,281 $ 62,750 The cost of inventory recognized as an expense and included in cost of sales and selling, general and administrative expenses for the three and nine-month periods ended October 30, 2010 is $21.1 million and $67.0 million, respectively (2009 $21.9 million and $67.5 million, respectively). There were no write-downs to net realizable value in the third quarter of 2010 (2009 nil) and no inventory write-downs recognized in prior periods were reversed 5. Credit facilities The Company has a credit facility in the amount of $15 million available until February 21, 2011 to finance the renovation and re-fixturing of various stores throughout Canada. Drawdowns under this facility are repayable over 48 months and will bear interest at a fixed rate based on the three year Government of Canada bond interest rate at the drawdown date. This facility is collateralized by the store fixtures and equipment financed. As at October 30, 2010, no amounts were drawn under this facility. Page 9

Notes to the Interim Consolidated Financial Statements 6. Capital stock a) Issued and outstanding October 30, 2010 Number of shares $ Class A subordinate voting shares Balance, beginning of period 19,973,464 33,933 Issuance of subordinate voting shares upon exercise of options 253,400 2,716 Reclassification from contributed surplus due to exercise of share options - 656 Balance, end of period 20,226,864 37,305 Class B multiple voting shares 4,560,000 402 24,786,864 37,707 b) Stock option plan The status of the Company s stock option plan is summarized as follows: October 30, 2010 Weighted average Number of options exercise price $ Outstanding at beginning of period 1,074,300 13.14 Granted 234,500 12.34 Exercised (253,400) 10.72 Cancelled/Expired (2,000) 12.84 Outstanding at end of period 1,053,400 13.54 Options exercisable at end of period 402,580 14.97 During the third quarter ended October 30, 2010, the Company granted 20,000 options to purchase Class A subordinate voting shares (2009 nil). The fair value of options granted was determined using the Black Scholes option pricing model with the following weighted average assumptions: Expected dividend yield 5.3% Expected volatility 38.0% Risk-free interest rate 2.28% Expected life 3.0 years Weighted average grant-date fair value per option $2.43 c) Contributed surplus The changes in contributed surplus are summarized as follows: For the three months ended For the nine months ended October 30, 2010 October 31, 2009 October 30, 2010 October 31, 2009 Contributed surplus, beginning of period $ 2,121 $ 2,389 $ 2,159 $ 2,460 Stock-based compensation expense 154 160 377 323 Exercise of share options (395) (74) (656) (308) Contributed surplus, end of period $ 1,880 $ 2,475 $ 1,880 $ 2,475 d) Normal course issuer bid The Company announced on June 9, 2010 that it intended to proceed with a normal course issuer bid which was subsequently approved by the Toronto Stock Exchange ( TSX ). Under the bid, the Company may purchase up to 1,003,328 Class A subordinate voting shares of the Company, representing 5% of the issued shares of such class as at June 8, 2010. The bid commenced on June 21, 2010 and may continue to June 20, 2011, or on such earlier date as the Company may complete its purchases pursuant to the bid. The average daily trading volume for the 6-month period preceding June 1, 2010 was 16,921 shares. In accordance with TSX requirements, a maximum daily repurchase of 25% of this average may be made, representing 4,230 shares. The shares will be purchased on behalf of the Company by a registered broker through the facilities of the TSX. The price paid for the shares will be the market price at the time of acquisition, and the number of shares purchased and the timing of any such purchases will be determined by the Company. All shares purchased by the Company will be cancelled. Since June 21, 2010, no Class A subordinate voting shares have been purchased by the Company. Page 10

Notes to the Interim Consolidated Financial Statements 7. Accumulated other comprehensive income (loss) Changes in accumulated other comprehensive income (loss) was as follows: For the three months ended For the nine months ended October 30, 2010 October 31, 2009 October 30, 2010 October 31, 2009 Balance, beginning of period $ 181 $ (871) $ 40 $ 1,043 Other comprehensive income (loss) for the period (128) 1,044 13 (870) Balance, end of period $ 53 $ 173 $ 53 $ 173 8. Earnings per share The numbers of shares used in the earnings per share calculation is as follows: For the three months ended For the nine months ended October 30, 2010 October 31, 2009 October 30, 2010 October 31, 2009 Weighted average number of shares outstanding - basic 24,699,544 24,364,510 24,627,788 24,300,113 Dilutive effect of stock options 59,646 92,473 71,161 59,594 Weighted average number of shares outstanding - diluted 24,759,190 24,456,983 24,698,949 24,359,707 As at October 30, 2010, a total of 660,800 stock options were excluded from the calculation of diluted earnings per share as these were deemed to be anti-dilutive. 9. Segmented information For the three months ended October 30, October 31, 2010 2009 For the nine months ended October 30, October 31, 2010 2009 Sales by country Canada $ 73,903 $ 74,425 $ 229,538 $ 224,943 United States 555 880 2,352 3,574 $ 74,458 $ 75,305 $ 231,890 $ 228,517 Sales by division Ladies' Clothing $ 43,635 $ 42,118 $ 136,691 $ 128,690 Men's Clothing 12,315 12,088 37,512 37,507 Footwear 8,166 9,055 24,364 25,767 Accessories 10,342 12,044 33,323 36,553 $ 74,458 $ 75,305 $ 231,890 $ 228,517 Net earnings (loss) Canada $ 3,215 $ 6,158 $ 16,654 $ 19,585 United States (529) (559) (1,327) (1,136) $ 2,686 $ 5,599 $ 15,327 $ 18,449 Fixed assets and intangible assets Canada $ 99,416 $ 91,037 $ 99,416 $ 91,037 United States 569 799 569 799 $ 99,985 $ 91,836 $ 99,985 $ 91,836 Page 11

Notes to the Interim Consolidated Financial Statements 10. Financial instruments Financial assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost. The disclosures in the Financial Instruments section of note 1 to the Company s 2009 annual consolidated financial statements describe how the categories of financial instruments are measured and how income and expenses, including fair value gains and losses, are recognized. Financial instrument risk management There has been no change with respect to the Company s overall risk exposure during the three and nine-month periods ended October 30, 2010. Disclosures relating to exposure to risks, in particular credit risk, liquidity risk, foreign exchange risk and interest rate risk are provided below. Credit risk Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company s financial instruments that are exposed to concentrations of credit risk are primarily cash and cash equivalents, short and longterm investments and foreign exchange contracts. The Company limits its exposure to credit risk with respect to cash, cash equivalents, short and long-term investments by investing available cash in bank bearer deposits notes and bank term deposits with major Canadian chartered banks. The Company only enters into foreign exchange contracts with Canadian chartered banks to minimize credit risk. The Company s cash is not subject to any external restrictions. The Company has an investment policy that monitors the safety and preservation of principal and investments, which limits the amount invested by issuer. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet liabilities when due. The Company has a high level of liquidity, more than sufficient to cover its operating requirements, as well as a strong financial position. The Company s liquidity follows a seasonal pattern based on the timing of inventory purchases and capital expenditures. As at October 30, 2010, the Company had a high level of liquidity with $35.0 million in cash and cash equivalents and short-term investments. In addition, the Company has an operating line of credit totalling $16.0 million of which $9.0 million is currently used due to outstanding letters of credit. The letters of credit represent guarantees for payment of purchases from foreign suppliers and reduce available credit under this facility. Aside from the outstanding letters of credit, no other amounts were drawn under this facility as at October 30, 2010. The Company finances its store expansion and renovation program through cash flows from operations and long-term debt. The Company expects that its accounts payable and accrued liabilities and dividend payable will be discharged within 90 days and its long-term debt discharged as contractually agreed and as disclosed elsewhere in these interim consolidated financial statements or as disclosed in its annual consolidated financial statements. Market risk foreign exchange risk The Company s foreign exchange risk is primarily limited to currency fluctuations between the Canadian and U.S. dollars. In order to protect itself from the risk of losses, should the value of the Canadian dollar decline compared to the foreign currency, the Company uses forward contracts to fix the exchange rate of a substantial portion of its expected U.S. dollar requirements. The contracts are matched with anticipated foreign currency purchases. Their nominal values and contract values as at October 30, 2010 are as follows: Average contractual exchange rate Nominal foreign currency value Contract value $ $ (000's) (000's) Purchase contracts U.S. dollars 1.0190 21,200 21,603 The range of maturity of these contracts is from November 29, 2010 to May 2, 2011. As at October 30, 2010, the fair value of these contracts resulted in an unrealized foreign exchange gain of $75,000 (2009 unrealized foreign exchange gain of $254,000), all of which is expected to be reclassified to income within the next 12 months. Page 12

Notes to the Interim Consolidated Financial Statements 10. Financial instruments (continued) Market risk interest rate risk Financial instruments that potentially subject the Company to cash flow interest rate risk include financial assets and liabilities with variable interest rates and consist of cash and cash equivalents. As at October 30, 2010, cash and cash equivalents consisted only of cash. Financial assets and financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Company s short-term investments are the only financial assets bearing fixed interest rate, and the long-term debt is the only financial liability bearing a fixed interest rate. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to fixed interest rates on the short-term investments, owing to their relative short-term nature. The long-term debt is recorded at amortized cost. To manage the interest rate risk, the Company s investments are made to achieve the highest rate of return while complying with the two primary objectives for its investment portfolio: liquidity and capital preservation. 11. Related party transactions Companies that are directly or indirectly controlled by a director sublease real estate from the Company. Total amounts earned under the sublease during the three and nine-month periods ended October 30, 2010 amounted to $48,000 and $118,000, respectively (2009 $47,000 and $126,000, respectively). In addition, one of the related parties sold merchandise to the Company during the third quarter. Total amounts paid to the related party during the three and nine-month periods ended October 30, 2010 amounted to $219,000 (2009 nil). There were no amounts receivable as at October 30, 2010 (2009 $21,000). Amounts payable as at October 30, 2010 amounted to $219,000 (2009 nil). These amounts are recorded at their exchange value. 12. Comparative figures Certain comparative figures have been reclassified to conform to the presentation adopted in the current period. Page 13