RISK FACTORS

Any investment in our common stock involves a high degree of risk. You should consider carefully the following information about these risks, together with the other information contained in this prospectus, before buying shares of our common stock.

Risks Relating to Our Business

Our growth strategy includes the addition of a significant number of new stores each year. We may not be able to successfully implement this strategy on a timely basis or at all. In addition, our growth strategy may strain our resources and cause the performance of our existing stores to suffer.

        Our growth will largely depend on our ability to open and operate new stores successfully. We intend to continue to open a significant number of new stores in future years while remodeling a portion of our existing store base annually. We plan to open approximately 25 stores in fiscal 2004 at a net estimated capital cost of $10 million, and an additional 40 to 50 stores in each of fiscal 2005 and fiscal 2006. Nine new stores were opened in the six months ended July 31, 2004. The success of this strategy is dependent upon, among other things, the identification of suitable markets and sites for store locations, the negotiation of acceptable lease terms, the hiring, training and retention of competent sales personnel, and the effective management of inventory to meet the needs of new and existing stores on a timely basis. Our proposed expansion also will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of our existing stores. In addition, to the extent that our new store openings are in existing markets, we may experience reduced net sales volumes in existing stores in those markets. We expect to fund our expansion through cash flow from operations and, if necessary, by borrowings under our revolving credit facilities; however, if we experience a decline in performance, we may slow or discontinue store openings. We may not be able to successfully execute any of these strategies on a timely basis. If we fail to successfully implement these strategies, our financial condition and results of operations would be adversely affected.

Our net sales, operating income and inventory levels fluctuate on a seasonal basis and decreases in sales or margins during our peak seasons could have a disproportionate effect on our overall financial condition and results of operations.

        Our business experiences seasonal fluctuations in net sales and operating income, with a significant portion of our operating income typically realized during our fourth quarter. In fiscal 2003, we realized 61.8% of our net income during the fourth quarter. Any decrease in sales or margins during this period could have a disproportionate effect on our financial condition and results of operations. Seasonal fluctuations also affect our inventory levels. We must carry a significant amount of inventory, especially before the holiday season selling period. If we are not successful in selling our inventory, we may have to write down our inventory or sell it at significantly reduced prices or we may not be able to sell such inventory at all, which could have a material adverse effect on our financial condition and results of operations.

Fluctuations in comparable store sales and results of operations could cause the price of our common stock to decline substantially.

        Our results of operations for our individual stores have fluctuated in the past and can be expected to continue to fluctuate in the future. Since the beginning of fiscal 2001, our quarterly comparable store sales have ranged from an increase of 14.1% to a decrease of 8.6%. In addition, our recent comparable store sales have been higher than our historical average and we cannot assure you that we will be able to maintain these levels of comparable store sales in the future.

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        Our comparable store sales and results of operations are affected by a variety of factors, including:

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fashion trends;



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calendar shifts of holiday or seasonal periods;



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the effectiveness of our inventory management;



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changes in our merchandise mix;



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the timing of promotional events;



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weather conditions;



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changes in general economic conditions and consumer spending patterns; and



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actions of competitors or mall anchor tenants.

        If our future comparable store sales fail to meet expectations, then the market price of our common stock could decline substantially. You should refer to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.

If we are not able to respond to fashion trends in a timely manner or launch new product lines successfully, we may be left with unsold inventory, decreased profits or losses and our brand image may suffer reputational harm.

        Our success depends in part on management's ability to respond to changing fashion tastes and consumer demands and to translate market trends into appropriate, saleable product offerings. Customer tastes and fashion trends change rapidly. If we are unable to successfully identify or react to changing styles or trends and misjudge the market for our products or any new product lines, our sales will be lower and we may be faced with a significant amount of unsold finished goods inventory. In response, we may be forced to increase our marketing promotions or price markdowns, which could have a material adverse effect on our financial condition and results of operations. Our brand image may also suffer if customers believe that we are no longer able to offer the latest fashions.

A reduction in the volume of mall traffic could significantly reduce our sales and leave us with unsold inventory, reducing our profits or creating losses.

        Many of our stores are located in shopping malls. Sales at these stores are derived, in part, from the volume of traffic in those malls. Our stores benefit from the ability of the mall's other tenants and other area attractions to generate consumer traffic in the vicinity of our stores and the continuing popularity of malls as shopping destinations. Sales volume and mall traffic may be adversely affected by economic downturns in a particular area, competition from internet retailers, non-mall retailers and other malls where we do not have stores and the closing of other stores in the malls in which we are located. A reduction in mall traffic as a result of these or any other factors could materially adversely affect our business.

Because of our focus on keeping our inventory at the forefront of fashion trends, extreme and/or unseasonable weather conditions could have a disproportionately large effect on our business, financial conditions and results of operations because we would be forced to mark down inventory.

        Extreme weather conditions in the areas in which our stores are located could have a material adverse effect on our business, financial condition and results of operations. For example, heavy snowfall or other extreme weather conditions over a prolonged period might make it difficult for our customers to travel to our stores. Our business is also susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm temperatures during the winter season or cool weather during the summer season could render a portion of our inventory incompatible with those unseasonable conditions. These prolonged

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unseasonable weather conditions could adversely affect our business, financial condition and results of operations.

If third parties who manage some aspects of our business do not adequately perform their functions, we might experience disruptions in our business leaving us with inadequate or excess inventories resulting in decreased profits or losses.

        Limited Brands handles the distribution of our merchandise through its distribution facility in Columbus, Ohio pursuant to a transition services agreement. The efficient operation of our stores is dependent on our ability to distribute merchandise to locations throughout the United States in a timely manner. We depend on Limited Brands to receive, sort, pack and distribute substantially all of our merchandise. As part of our transition services agreement, Limited Brands contracts with third-party transportation companies to deliver our merchandise from foreign ports to their warehouses and to our stores. Any failure by any of these third parties to respond adequately to our warehousing and distribution needs would disrupt our operations and negatively impact our profitability.

        Additional services are also provided by Limited Brands and its subsidiaries and affiliates pursuant to the transition services agreement. Independent Production Services ("IPS"), a unit of Limited Brands, assists us with our monitoring of country of origin and point of fabrication compliance for U.S. Customs. IPS also monitors compliance with our code of business conduct and labor standards and our supply chain security. Any failure of Limited Brands or IPS to fulfill their obligations under the transition services agreement would disrupt our operations and negatively impact our profitability.

        Limited Brands may terminate those portions of the transition services agreement which provide for the distribution of our merchandise, and the compliance monitoring provided by IPS, upon the earlier of November 2007, the occurrence of certain types of changes of control or our failure to perform any of our material obligations under the transition services agreement. This offering does not constitute a change of control under the transition services agreement. If Limited Brands terminates a portion or all of our transition services agreement, we may not be able to replace the services on terms acceptable to us or at all. Our failure to successfully replace the services could have a material adverse effect on our business and prospects. See "Certain Relationships and Transactions—Relationships with Our Former Parent and Its Affiliates."

The raw materials used to manufacture our products and our distribution and labor costs are subject to availability constraints and price volatility, which could result in increased costs.

        The raw materials used to manufacture our products are subject to availability constraints and price volatility caused by high demand for petroleum-based synthetic fabrics, weather, supply conditions, government regulations, economic climate and other unpredictable factors. In addition, our transportation and labor costs are subject to price volatility caused by the price of oil, supply of labor, governmental regulations, economic climate and other unpredictable factors. Increases in demand for, or the price of, raw materials, distribution services and labor could have a material adverse effect on our business, results of operations and financial condition.

Since we rely significantly on foreign sources of production, we are at risk from a variety of factors that could leave us with inadequate or excess inventories, resulting in decreased profits or losses.

        We purchase apparel and accessories in foreign markets with a significant portion coming from China, Taiwan, Indonesia, or Sri Lanka. We do not have any long-term merchandise supply contracts and many of our imports are subject to existing or potential duties, tariffs or quotas. We compete with other companies for production facilities and rights to import merchandise under quota limitations.

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        We also face a variety of other risks generally associated with doing business in foreign markets and importing merchandise from abroad, such as:

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political or labor instability in countries where suppliers are located;



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political or military conflict involving the United States, which could cause a delay in the transportation of our products to us and an increase in transportation costs;



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heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods or could result in decreased scrutiny by customs officials for counterfeit goods, leading to lost sales and damage to the reputation of our brand;



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disease epidemics and health related concerns, such as the outbreaks of SARS and other diseases, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas;



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the migration and development of manufacturers, which can affect where our products are or will be produced;



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imposition of regulations and quotas relating to imports and our ability to adjust in a timely manner to changes in trade regulations, which among other things, could limit our ability to source products from countries that have the labor and expertise needed to manufacture our products on a cost-effective basis; and



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imposition of duties, taxes and other charges on imports.

        Any of the foregoing factors, or a combination thereof could have a material adverse effect on our business.

Our manufacturers may be unable to manufacture and deliver products in a timely manner or meet our quality standards, which could result in lost sales, cancellation charges or excessive markdowns.

        We purchase apparel and accessories from importers and directly from third-party manufacturers. Similar to most other specialty retailers, we have short selling seasons for much of our inventory. Factors outside our control, such as manufacturing or shipping delays or quality problems, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns.

We rely on our manufacturers to use acceptable ethical business practices, and if they fail to do so, the New York & Company brand name could suffer reputational harm and our sales could decline or our inventory supply could be interrupted.

        We require our manufacturers to operate in compliance with applicable laws, rules and regulations regarding working conditions, employment practices and environmental compliance. Additionally, we impose upon our business partners operating guidelines that require additional obligations in order to promote ethical business practices. Our staff, the staff of IPS and the staff of our non-exclusive buying agents and importers periodically visit and monitor the operations of our manufacturers to determine compliance. However, we do not control our manufacturers or their labor and other business practices. If one of our manufacturers violates labor or other laws or implements labor or other business practices that are generally regarded as unethical in the United States, the shipment of finished products to us could be interrupted, orders could be cancelled, relationships could be terminated and our reputation could be damaged. Any of these events could have a material adverse effect on our revenues and, consequently, our results of operations.

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We may be unable to protect our trademarks, which could diminish the value of our brand.

        Our trademarks are important to our success and our competitive position. Our major trademarks are New York & Company , Lerner , Lerner New York, City Crepe, City Spa, City Stretch and New York Jeans and are protected in the United States and internationally. We engage in the following steps to protect our trademarks: prosecution of trademark applications in those countries where the marks are not yet registered; response to office actions and examining attorneys in those countries where the marks are not yet registered; maintenance of trademark portfolio in the United States and foreign countries; filings of statements of use, renewal documents, assignments, change of name and address forms; policing of marks and third party infringements; initiating and defending opposition and/or cancellation proceedings, including engaging in discovery and preparation of evidence; and litigation, including filing enforcement lawsuits against third party infringers. We are susceptible to others imitating our products and infringing our intellectual property rights. Imitation or counterfeiting of our products or other infringement of our intellectual property rights could diminish the value of our brand or otherwise adversely affect our revenues. The actions we have taken to establish and protect our trademarks may not be adequate to prevent imitation of our products by others or to prevent others from seeking to invalidate our trademarks or block sales of our products as a violation of the trademarks and intellectual property rights of others. In addition, others may assert rights in, or ownership of, trademarks and other intellectual property rights of ours or in marks that are similar to ours or marks that we license and/or market and we may not be able to successfully resolve these types of conflicts to our satisfaction. In some cases, there may be trademark owners who have prior rights to our marks because the laws of certain foreign countries may not protect intellectual property rights to the same extent as do the laws of the United States. In other cases, there may be holders who have prior rights to similar marks. Failure to protect our trademarks could result in a material adverse effect on our business.

Because our brand is associated with all of our products in addition to our stores, our success depends heavily on the value associated with our brand. If the value associated with our brand were to diminish, our sales could decrease, causing lower profits or losses.

        Our success depends on our New York & Company brand and its value. The New York & Company name is integral to our existing business, as well as to the implementation of our strategy for growing and expanding our business. The New York & Company brand could be adversely affected if our public image or reputation were to be tarnished, which could result in a material adverse effect on our business.

We may be unable to compete favorably in the highly competitive retail industry, and if we lose customers to our competitors, our sales could decrease causing a decrease in profits or losses.

        The sale of apparel and accessories is highly competitive. Increased competition could result in price reductions, increased marketing expenditures and loss of market share, all of which could have a material adverse effect on our financial condition and results of operations.

        We compete for sales with a broad range of other retailers, including individual and chain fashion specialty stores and department stores. Our competitors include Express, The Limited, Gap, Ann Taylor LOFT, Old Navy and JCPenney, among others. In addition to the traditional store-based retailers, we also compete with direct marketers that sell similar lines of merchandise and target customers through catalogs and e-commerce.

        Some of our competitors may have greater financial, marketing and other resources available to them. In many cases, our competitors sell their products in stores that are located in the same shopping malls as our stores. In addition to competing for sales, we compete for favorable site locations and lease terms in shopping malls.

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We are subject to numerous regulations that could affect our operations. Changes in such regulations could impact the operation of our business through delayed shipments of our goods, fines or penalties that could affect our profitability.

        We are subject to customs, truth-in-advertising, truth-in-lending and other laws, including consumer protection regulations and zoning and occupancy ordinances, that regulate retailers generally and/or govern the importation, promotion and sale of merchandise, the use of our proprietary credit cards and the operation of retail stores and warehouse facilities. Although we undertake to monitor changes in these laws, if these laws change without our knowledge, or are violated by our employees, importers, buying agents, manufacturers or distributors, we could experience delays in shipments and receipt of goods or be subject to fines or other penalties under the controlling regulations, any of which could have a material adverse effect on our business, financial condition and results of operations.

The covenants in our amended and restated credit facilities impose restrictions that may limit our operating and financial flexibility.

        Our amended and restated credit facilities contain a number of significant restrictions and covenants that limit our ability to:

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incur additional indebtedness;



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declare dividends, make distributions or redeem or repurchase capital stock, including our common stock, or to make certain other restricted payments or investments;



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sell assets, including capital stock of restricted subsidiaries;



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agree to payment restrictions affecting our restricted subsidiaries;



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consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;



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incur liens;



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alter the nature of our business;



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enter into sale/leaseback transactions;



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conduct transactions with affiliates; or



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designate our subsidiaries as unrestricted subsidiaries.

        In addition, our amended and restated credit facilities include other and more restrictive covenants and prohibit us from prepaying our other indebtedness while indebtedness under our amended and restated credit facilities is outstanding. The agreement governing our amended and restated credit facilities also requires us to achieve specified financial and operating results and maintain compliance with specified financial ratios. Our ability to comply with these ratios may be affected by events beyond our control.

        The restrictions contained in the agreement governing our amended and restated credit facilities could:

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limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans; and



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adversely affect our ability to finance our operations, strategic acquisitions, investments or other capital needs or to engage in other business activities that would be in our interest.

        A breach of any of these restrictive covenants or our inability to comply with the required financial ratios could result in a default under the agreement governing our amended and restated credit facilities. If a default occurs, the lenders under our amended and restated credit facilities may elect to declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable.

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        The lenders also have the right in these circumstances to terminate any commitments they have to provide further borrowings. If we are unable to repay outstanding borrowings when due, the lenders under our amended and restated credit facilities also have the right to proceed against the collateral, including our available cash, granted to them to secure the indebtedness.

Risks Related to this Offering

Shares eligible for sale in the near future may cause the market price for our common stock to decline.

        Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that these sales could occur, may depress the market price for our common stock. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future.

        The number of shares of common stock available for sale in the public market is limited by restrictions under federal securities law and under agreements that our executive officers, directors and each holder of 5% or more of our common stock have entered into with the underwriters of this offering. Those agreements restrict these persons from selling, pledging or otherwise disposing of their shares for a period of 180 days after the date of this prospectus without the prior written consent of Bear, Stearns & Co. Inc. and J.P. Morgan Securities Inc. However, Bear, Stearns & Co. Inc. and J.P. Morgan Securities Inc. may, in their sole discretion, release all or any portion of the common stock from the restrictions of the lock-up agreements. Upon completion of this offering, our restated certificate of incorporation will authorize us to issue 300.0 million shares of common stock, of which 52,480,883 shares of common stock will be outstanding and 9,665,941 shares will be issuable upon the exercise of outstanding stock options. Of these shares, the 10,000,000 shares sold in this offering will be freely tradeable upon consummation of the offering. The remaining 42,480,883 shares are restricted. Of these shares, 42,409,633 are subject to lockup agreements which expire 180 days from the date of this prospectus.

        Also, beginning 180 days after the date of this offering, holders of 39,759,298 shares of our common stock will be able to require us to conduct a registered public offering of their shares. In addition, holders of 42,409,633 shares of our common stock will be entitled to have their shares included for sale in subsequent registered offerings of our common stock. See "Certain Relationships and Transactions—Stockholders Agreement." Registration of such shares under the Securities Act would, except for shares purchased by affiliates, result in such shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of such registration.

The shares you purchase in this offering will experience immediate and substantial dilution.

        The initial public offering price of our common stock will be substantially higher than the tangible book value per share of our outstanding common stock. Assuming an initial public offering price of $15.00 per share, purchasers of our common stock will incur dilution of $13.82 per share in the net tangible book value of their purchased shares. The shares of our common stock owned by existing stockholders will receive a material increase in the net tangible book value per share. You may experience additional dilution if we issue common stock in the future. As a result of this dilution, you may receive significantly less than the full purchase price you paid for the shares in the event of a liquidation.

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Since our common stock has never been publicly traded, a trading market may not develop for our common stock, and you may not be able to sell your stock.

        There has not been a public market for our common stock. A liquid trading market for our common stock may not develop. The initial public offering price will be determined in negotiations among representatives of the underwriters, the selling stockholders and us and may not be indicative of prices that will prevail in the trading market.

We are a "controlled company," controlled by Bear Stearns Merchant Banking, whose interests in our business may be different from yours.

        Upon completion of this offering, Bear Stearns Merchant Banking will own approximately 75.8% of our outstanding common stock. Pursuant to a stockholders agreement among stockholders of New York & Company, Bear Stearns Merchant Banking is able to, subject to applicable law, designate a majority of the members of the board of directors and control actions to be taken by us and our board of directors, including amendments to our restated certificate of incorporation and amended and restated bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. The directors so elected will have the authority, subject to the terms of our indebtedness and the rules and regulations of the New York Stock Exchange, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. Because Bear Stearns Merchant Banking will own more than 50% of the voting power of New York & Company after giving effect to this offering, we are considered a "controlled company" for the purposes of the New York Stock Exchange listing requirements. As such, we are permitted to, and have opted out of, the New York Stock Exchange corporate governance requirements that: our board of directors, our compensation committee and our nominating and corporate governance committee meet the standard of independence established by those corporate governance requirements. As a result, our board of directors and those committees may have more directors who do not meet the New York Stock Exchange independence standards than they would if those standards were to apply. Although all directors have a duty to act in our and our stockholders best interests, the New York Stock Exchange independence standards are intended to ensure that directors who meet the independence standard are free of any conflicting interest that could influence their actions as directors. Four of our directors are employees of the merchant banking group of Bear, Stearns & Co. Inc. and manage the investments of Bear Stearns Merchant Banking, our largest stockholder. It is possible that the interests of Bear Stearns Merchant Banking may in some circumstances conflict with our interests and the interests of our other stockholders.

        Our restated certificate of incorporation includes a provision stating that we have elected not to be governed by Section 203 of the Delaware General Corporation Law, which would have imposed additional requirements regarding mergers and other business combinations with significant stockholders. Section 203 would have offered shareholder protection by requiring prior board or stockholder approval for mergers and other business combinations with significant stockholders, but because we have opted out of Section 203, this pre-approval protection is not available, including with respect to future acquisitions of our common stock by Bear Stearns Merchant Banking and its affiliates. In addition, our restated certificate of incorporation contains a provision renouncing our interest and expectancy in corporate opportunities identified by Bear Stearns Merchant Banking or by its officers, directors, employees or affiliates.

Provisions in our restated certificate of incorporation and Delaware law may delay or prevent our acquisition by a third party.

        Our restated certificate of incorporation contains a "blank check" preferred stock provision. Blank check preferred stock enables our board of directors, without stockholders approval, to designate and issue additional series of preferred stock with such dividend, liquidation, conversion, voting or other rights, including the right to issue convertible securities with no limitation on conversion, as our board of directors may determine, including rights to dividends and proceeds in a liquidation that are senior to the common stock.

        These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding voting common stock. We are also subject to certain provisions of Delaware law which could delay, deter or prevent us from entering into a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their stock.

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ABOUT THIS PROSPECTUS

        You should rely only on the information contained in this document. We and the selling stockholders have not, and the underwriters have not, authorized anyone to provide you with information that is different. If anyone provides you with different or inconsistent information, you should not rely on it. We and the selling stockholders are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS

        This prospectus includes forward-looking statements. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "may," "plan," "project," "predict" and similar expressions and include references to assumptions that we believe are reasonable and relate to our future prospects, developments and business strategies.

        Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements, include, but are not limited to:

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our ability to open and operate new stores successfully;



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seasonal fluctuations in our business;



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our ability to anticipate and respond to fashion trends and launch new product lines successfully;



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our dependence on mall traffic for our sales;



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the susceptibility of our business to extreme and/or unseasonable weather conditions;



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our reliance on third parties to manage some aspects of our business;



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changes in the cost of raw materials, distribution services or labor;



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our reliance on foreign sources of production;



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the ability of our manufacturers to manufacture and deliver products in a timely manner while meeting our quality standards;



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our reliance on manufacturers to maintain ethical business practices;



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our ability to protect our trademarks and other intellectual property rights;



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our dependence on the success of our brand;



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competition in our market, including promotional and pricing competition;



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the effects of government regulation;



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restrictions imposed by the covenants in our amended and restated credit facilities that may limit our flexibility; and



•

the control of our company by our sponsors.

        We undertake no obligation to revise the forward-looking statements included in this prospectus to reflect any future events or circumstances. Our actual results, performance or achievements could differ materially from the results expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include those discussed under the heading "Risk Factors" in this prospectus.

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