UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

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

OR

o 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      1-10767

RETAIL VENTURES, INC.

(614) 471-4722

Not applicable

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 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES þ NO o

The number of outstanding Common Shares, without par value, as of May 27, 2005 was 38,985,196.

RETAIL VENTURES, INC.
TABLE OF CONTENTS

-2-

RETAIL VENTURES, INC.

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

-3-

RETAIL VENTURES, INC.

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

-4-

RETAIL VENTURES, INC.

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

-5-

RETAIL VENTURES, INC.

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

-6-

RETAIL VENTURES, INC.

1.	BUSINESS OPERATIONS

Retail Ventures, Inc. (“Retail Ventures”) and its wholly owned subsidiaries are herein referred to collectively as the “Company”. The Company operates three segments in the United States of America (“United States”). Value City Department Stores LLC (“Value City”) and Filene’s Basement, Inc. (“Filene’s Basement”) segments operate full-line, off-price department stores. The DSW Inc. (“DSW”) segment sells better-branded shoes and accessories. As of April 30, 2005, there are a total of 114 Value City stores located principally in the Midwestern, Eastern and Southern United States, 177 DSW stores located throughout the United States and 27 Filene’s Basement stores located primarily in major metropolitan areas of the United States. DSW also supplies, under supply arrangements, to 206 locations for other non-related retailers in the United States.

On October 8, 2003, the Company reorganized its corporate structure into a holding company form whereby Retail Ventures, an Ohio corporation, became the successor issuer to Value City Department Stores, Inc. As a result of the reorganization, Value City Department Stores, Inc. became a wholly-owned subsidiary of Retail Ventures. In connection with the reorganization, holders of common shares of Value City Department Stores, Inc. became holders of an identical number of common shares of Retail Ventures. The reorganization was affected by a merger which was previously approved by the Company’s shareholders. Since October 2003, the Company’s common shares have been listed for trading under the ticker symbol “RVI” on the New York Stock Exchange.

In December 2004, the Company completed another corporate reorganization whereby Value City Department Stores, Inc. merged with and into Value City Department Stores, LLC a newly created, wholly-owned subsidiary of Retail Ventures. In connection with this reorganization, Value City transferred all the issued and outstanding shares of DSW and Filene’s Basement to Retail Ventures in exchange for a promissory note.

The Company announced on March 14, 2005 that DSW had filed a registration statement with the Securities and Exchange Commission (the “SEC”) and will pursue an initial public offering (the “IPO”). The Company expects that DSW will complete the IPO in fiscal 2005, subject to market conditions. After the IPO, Retail Ventures expects to own a majority of the outstanding common shares of DSW. Prior to the completion of the IPO, Retail Ventures will enter into agreements with DSW related to the separation of its business from DSW, including, among others, a master separation agreement, a shared services agreement and a tax separation agreement. Retail Ventures’ current intent is to continue to hold its DSW common shares following the offering, except to the extent necessary to satisfy obligations under warrants it has granted to certain of its lenders. Following the IPO, Retail Ventures will be subject to contractual obligations with its lenders to retain ownership of at least 55% by value of the Common Shares of DSW for so long as the Value City Convertible Loan (as hereinafter defined) remains outstanding and (b) contractual obligations with its warrantholders to retain enough DSW Common Shares to be able to satisfy its obligations to deliver such shares to its warrantholders if the warrantholders elect to exercise their warrants in full for DSW Class A Common Shares. In addition, Retail Ventures has agreed not to sell or otherwise dispose of any of the DSW common shares for a period of 180 days following the IPO without prior written consent of the underwriters.

-7-

RETAIL VENTURES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Value City. Located in the Midwestern, Eastern and Southern United States and operating principally under the name Value City for over 80 years this segment’s strategy has been to provide exceptional value by offering a broad selection of brand name merchandise at prices substantially below conventional retail prices.

DSW.  Located throughout the United States, the DSW stores offer a wide selection of brand name and designer dress, casual and athletic footwear for men and women. Additionally, pursuant to a license agreement with Filene’s Basement, DSW operates leased shoe departments in most Filene’s Basement stores. Results of operations of the leased shoe departments are included with the DSW segment. In July 2002 and June 2004, respectively, DSW entered into supply agreements with Stein Mart, Inc. (“Stein Mart”) and Gordmans, Inc. (“Gordmans”) to supply merchandise to some of the Stein Mart’s and all of the Gordmans’ shoe departments. As of April 30, 2005, we operated 154 leased departments for Stein Mart, 51 for Gordmans and one Frugal Fannie’s Fashion Warehouse. Results of the supply agreements are included with the DSW segment. During the three months ended April 30, 2005, we opened seven new DSW stores and re-categorized two DSW/Filene’s Basement combination locations as leased shoe departments which are included in the DSW segment.

Filene’s Basement. Filene’s Basement stores are located primarily in major metropolitan areas of the United States such as Boston, New York, Atlanta, Chicago and Washington, D.C. Filene’s Basement focuses on providing top tier brand name merchandise at everyday low prices for men’s and women’s apparel, jewelry, shoes, accessories and home goods.

2.	BASIS OF PRESENTATION

The accompanying unaudited interim financial statements should be read in conjunction with the Company’s 2004 Annual Report for the fiscal year ended January 29, 2005 on Form 10-K, as amended and filed with the SEC on May 12, 2005 (the “2004 Annual Report”).

In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, which are necessary to present fairly the condensed consolidated financial position and results of operations for the periods presented. To facilitate comparisons with the current year, certain previously reported balances have been reclassified to conform to the current period presentation.

3.	STOCK BASED COMPENSATION

The Company has various stock-based employee compensation plans. The Company accounts for those plans in accordance with APB No. 25, “Accounting For Stock Issued to Employees,” and related Interpretations. Accordingly, no stock-based employee compensation cost has been recognized for the fixed stock option plans or the stock purchase plan. The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition of SFAS 123, “Accounting for Stock-Based Compensation.”

-8-

RETAIL VENTURES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

4.	TRADENAMES AND OTHER INTANGIBLES

During the three months ended May 1, 2004, the Company acquired the “Leslie Fay” tradename for approximately $4.1 million. The anticipated life of the amortizing asset has been assigned 15 years.

5.	LONG-TERM OBLIGATIONS

In March 2005, the Company increased the ceiling under its Revolving Credit Facility (as hereinafter defined) to $425 million. The $75 million increase to the Revolving Credit Facility was accomplished by amendment under substantially the same terms to the existing Revolving Credit Facility which expires in June 2006.

6.	PENSION BENEFIT PLANS

The Company has three qualified defined pension benefit plans which it assumed at the time of previous acquisitions of three separate companies. The Company’s funding policy is to contribute an amount annually that satisfies the minimum funding requirements of ERISA and that is tax deductible under the Internal Revenue Code. Contributions are provided not only for benefits attributed to service to date but also for those anticipated to be earned in the future. The Company uses a January 31 measurement date for its plans.

-9-

RETAIL VENTURES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The following table shows the components of net periodic benefit cost of the Company’s pension benefit plans for the three months ended April 30, 2005 and May 1, 2004:

The Company anticipates contributing approximately $2.5 million in fiscal 2005 to meet minimum funding requirements. As of April 30, 2005, the Company has contributed $0.4 million of the $2.5 million contribution required in fiscal 2005.

7.	OTHER BENEFIT PLANS

The Company maintains a Profit Sharing and 401(k) Plan (the “401(k) Plan”) for its employees. Employees who attain age twenty-one are eligible to defer compensation as of the first day of the month following 60 days of employment and may contribute up to thirty percent of their compensation to the 401(k) Plan on a pre-tax basis, subject to Internal Revenue Service limitations. As of the first day of the month following an employee’s completion of one year of service as defined under the terms of the 401(k) Plan, the Company matches employee deferrals into the 401(k) Plan, 100% on the first 3% of eligible compensation deferred and 50% on the next 2% of eligible compensation deferred. Additionally, the Company may contribute a discretionary profit sharing amount to the 401(k) Plan each year.

The Company has identified an issue involving its 401(k) Plan. From September 2001 until July 13, 2004, the Company failed to register the Company’s common shares transferred to participants in its 401(k) Plan and the interests of those participants in that plan, which may also be deemed securities requiring registration. In addition, prior to November 2004, the Company failed to deliver a prospectus to the 401(k) Plan participants that complied in all respects with SEC requirements. The Company intends to offer a 30-day right of rescission to those participants who received its common shares in violation of applicable securities laws during the one-year period preceding the date of the rescission offer, which is the statute of limitations’ period the Company believes may apply to claims for rescission under applicable laws, or possibly a longer or shorter period.

Under the rescission offer, the participants will be entitled to require the Company to repurchase shares at the price per share of the Company’s common shares when the shares were transferred to the participant’s account, plus interest at a rate to be determined. Based upon the Company’s preliminary investigation, it currently believes that up to approximately

-10-

RETAIL VENTURES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

700,000 common shares transferred to 401(k) Plan participants since September 2001 may not have been properly registered in accordance with the Securities Act of 1933 (the Securities Act”).

The Company has undertaken certain curative action under the applicable securities laws and is also investigating its obligations to undertake any other curative action which may be required under applicable laws. While the Company cannot predict the possible effect of federal or state regulatory action, the Company does not believe that these violations will have a material adverse effect on the Company’s financial position or results of operations.

The Company also provides an Employee Stock Purchase Plan (“ESPP”) for its employees. Eligibility requirements are similar to those of the 401(k) Plan. Eligible employees can purchase common shares of the Company through payroll deductions. The Company will match 15% of employee investments up to a maximum investment level. Plan costs to the Company for all fiscal periods presented are not material to the consolidated financial statements.

While investigating the unregistered sale of shares in connection with the 401(k) Plan, it was also discovered that approximately 640,000 of our common shares acquired by our employees through the ESPP may not have complied with applicable federal or state law. While all of our common shares were acquired on the open market and in compliance with the provisions of the ESPP, because the shares were not registered, ESPP participants may have a right to rescind their purchases. The Company has not yet determined whether or not it will make a rescission offer to participants in the ESPP and accordingly may be liable for the purchase price of their shares acquired through the ESPP which were not issued in compliance with the Securities Act or applicable state securities laws.

The Company discontinued the ESPP plan at the end of May, 2005.

8.	SHAREHOLDERS’ EQUITY

On September 26, 2002, the Company issued 2,954,792 warrants (“Warrants”) to purchase common shares, at an initial exercise price of $4.50 per share, to Cerberus Partners, L.P. (“Cerberus”), Schottenstein Stores Corporation (“SSC”) and Back Bay Capital Funding LLC (the “Term Loan C Lenders”). The Warrants are exercisable at any time prior to June 11, 2012. The Company has granted the Term Loan C Lenders registration rights with respect to the shares issuable upon exercise of the Warrants. The $6.1 million value ascribed to the Warrants was estimated as of the date of issuance using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 5.6%; expected life of 10 years; expected volatility of 47%; illiquidity discount of 10%; and an expected dividend yield of 0%. The related debt discount is amortized into interest expense over the life of the debt.

The number of shares issuable upon exercise of the Warrants varies upon the occurrence of the following: (i) the issuance of additional common shares without consideration or for a consideration per share less than the Warrant exercise price; (ii) the declaration of any dividend; (iii) the combination or consolidation of the outstanding common shares into a

-11-

RETAIL VENTURES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

lesser number of shares; (iv) the issuance or sale of additional shares at a price per share less than the current market price but greater than the Warrant exercise price; (v) the issuance of convertible securities which are convertible into common shares; and/or (vi) the exchange of shares in a merger or other business combination.

$75 Million Senior Subordinated Convertible Loan – Related Parties

The Company amended and restated its $75.0 million Senior Subordinated Convertible Loan Agreement on June 11, 2002 (the “Convertible Loan”). As amended, borrowings under the Convertible Loan will bear interest at 10% per annum. At the Company’s option, interest may be paid-in-kind (“PIK”), from the closing date to the second anniversary thereof, and thereafter, at the option of the Company, up to 50% of the interest due may be PIK until maturity. PIK interest accrued with respect to the Convertible Loan is added to the outstanding principal balance, on a quarterly basis and is payable in cash upon the maturity of the debt. The Convertible Loan is guaranteed by all principal subsidiaries and is secured by a lien on assets junior to liens granted in favor of the lenders on the Revolving Credit Agreement and Term Loans. The Convertible Loan is not subject to prepayment until June 11, 2007. The agent has the right to designate two observers to the Company’s Board of Directors for so long as the agent is the beneficial owner of at least 50% of the advances initially made by it and has the right to designate two individuals to the Company’s Board of Directors for so long as the agent is the beneficial owner of at least 50% of the conversion shares issued or issuable upon conversion of the advances initially made by it.

The Convertible Loan is convertible at the option of the holders into common shares of the Company and has a conversion price of $4.50. The maturity date is June 10, 2009.

9.	EARNINGS PER SHARE

Basic earnings per share are based on the net loss and a simple weighted average of common shares outstanding. Diluted earnings per share reflects the potential dilution of common shares, related to outstanding stock options, Stock Appreciation Rights (“SARS”) and warrants, calculated using the treasury stock method and convertible debt calculated using the if-converted method. The numerator for the diluted earnings per share calculation is the net loss adjusted to remove the effect of interest, adjusted for tax, on the convertible debt. The denominator is the weighted average shares outstanding.

-12-

RETAIL VENTURES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

For the three months ended April 30, 2005 and May 1, 2004, all potentially dilutive instruments: stock options, stock appreciation rights, warrants and convertible debt, were anti-dilutive.

The potentially dilutive instruments were as follows:

Compensation costs of $1.1 million and $0.3 million, net of tax, were expensed during the three months ended April 30, 2005 and May 1, 2004, respectively, relating to the stock appreciation rights.

10.	ADOPTION OF ACCOUNTING STANDARDS

The Financial Accounting Standards Board (“FASB”) periodically issues Statements of Financial Accounting Standards (“SFAS”), some of which require implementation by a date falling within or after the close of the fiscal year.

In December 2004, the FASB issued SFAS No. 123 (revised 2004) (“SFAS No. 123R”), Share-Based Payment. This statement revised SFAS No. 123, Accounting for Stock-Based Compensation, (“SFAS No. 123”) and requires a fair value measurement of all stock-based payments to employees, including grants of employee stock options and recognition of those expenses in the statements of operations. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services and focuses on accounting for transactions in which an entity obtains employee services in share-based payment transactions. In addition, SFAS No. 123R will require the recognition of compensation expense over the period during which an employee is required to provide service in exchange for an award. The effective date of this standard was originally established to be interim and annual periods beginning after June 15, 2005. In April 2005, the SEC delayed the compliance date for SFAS No. 123R until the beginning of the Company’s fiscal year 2006. The Company is currently evaluating the impact of this statement and has not yet determined the method of adoption under SFAS No. 123R and whether the adoption will result in amounts that are similar to the pro forma disclosures required under SFAS No. 123.

11.	ACCUMULATED OTHER COMPREHENSIVE LOSS

The balance sheet caption “Accumulated other comprehensive loss” of $7.1 million at April 30, 2005 and January 29, 2005, relates to the Company’s minimum pension liability, net of

-13-

RETAIL VENTURES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

income tax. For the three months ended April 30, 2005 and May 1, 2004, the other comprehensive loss was the same as the net loss for the respective period.

12.	TAX VALUATION

The Company establishes valuation allowances for deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. The Company has determined that there is a probability that future taxable income may not be sufficient to fully utilize deferred tax assets (state net operating losses and charitable contribution carry forwards) which expire in future years at various dates depending on the state jurisdiction. The allowance as of January 29, 2005 was $4.2 million. During the three months ended April 30, 2005, $5.5 million of additional valuation allowances have been provided for state net operating loss carry forwards the Company determined that it was more likely than not that future taxable income may not be sufficient to fully utilize deferred tax assets. Based on available data, the Company believes it is more likely than not that the remaining deferred tax assets will be realized.

The tax rate of 39.9% reflects the negative impact of the non-deductible warrant amortization included for book income but not tax and the increase in the valuation allowance during the three months ended April 30, 2005. The negative impacts above were offset by the positive impact of significant number of stock option exercises during three months ended April 30, 2005 that are deductible for tax but not book.

13.	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

A supplemental schedule of non-cash investing and financing activities is presented below:

14.	SEGMENT REPORTING

The Company is managed in three operating segments: Value City, DSW and Filene’s Basement. All of the operations are located in the United States. The Company has identified such segments based on chief operating decision maker responsibilities and measures segment profit as operating profit (loss), which is defined as income (loss) before interest expense and income taxes.

-14-

RETAIL VENTURES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Business segments were realigned at the beginning of fiscal 2005 to reflect how the Company establishes strategic goals and manages the business. The realignment resulted in the Filene’s Basement shoe business being included within the DSW segment. The fiscal 2004 presentation has been restated to conform to this realignment.

The tables below present segment statement of operations information for the three months ended April 30, 2005 and for the three months ended May 1, 2004.