create table #mdelgado (item char(6) not null primary key, qty tinyint not null)
insert #mdelgado (item,qty)
select 'Shirts',2 union select 'Socks',3

create table #numbers (n tinyint)
declare @i tinyint
select @i = 1
while @i <= 10
begin
    insert #numbers select @i
    select @i = @i + 1
end
go

select
    identity(int,1,1) as no,
    m.item,
    m.qty as total,
    convert(varchar,n.n) + ' of ' + convert(varchar,m.qty) as counter
into
    #final
from
    #mdelgado m
    inner join #numbers n
        on m.qty >= n.n
go

select * from #final
go

SELECT
  (SELECT SUM(Qty) FROM YourTable AS T1 WHERE T1.Item < T2.Item) + n AS No,
  Item,
  Qty AS Total
  CAST(N AS varchar) + ' of ' + CAST(Qty AS varchar)
FROM YourTable
INNER JOIN (
    SELECT 1 AS n UNION ALL SELECT 2 UNION ALL SELECT 3 ...
  ) AS Tally ON n <= Qty
ORDER BY Item, n