Note 7 — Related Party Transactions

In July 2009, the Company entered into an agreement with a related party vendor to purchase merchandise inventory. The vendor is considered a related party for financial reporting purposes because one of its principals is the spouse of the Company’s Vice President of Merchandising. During the first quarter of fiscal 2012 and 2011, purchases from this vendor totaled approximately $5.8 million, or 12% of total merchandise purchases, and $4.5 million, or 10% of merchandise purchases, respectively. Included in cost of sales for the first quarter of fiscal 2012 and 2011 were $5.8 million and $4.5 million, respectively related to this vendor. Payable amounts outstanding to this vendor were approximately $800,000 and $1.3 million as of April 28, 2012 and April 30, 2011, respectively. The Company’s payable terms with this vendor are consistent with the terms offered by other vendors in the ordinary course of business.