ONE PRICE CLOTHING STORES INC - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|x| Annual Report Pursuant To Section 13 or 15(d) Of The Securities Exchange Act
of 1934 (No Fee Required)
For the fiscal year ended February 1, 1997
AND
|x| Transition Report Pursuant To Section 13 or 15(d) Of The Securities Exchange
Act of 1934 (No Fee Required) For the transition period from December 31,
1995 to February 3, 1996

Commission file number 0-15385

ONE PRICE CLOTHING STORES, INC.
(Exact name of registrant as specified in its charter)

Delaware 57-0779028
(State or other jurisdiction of organization) (I.R.S. Employer Identification No.)

1875 East Main Street
Highway 290, Commerce Park
Duncan, South Carolina 29334
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (864) 433-8888

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 Par Value
(Title of Class)

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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 17, 1997:
Common Stock, $0.01 Par Value - $28,346,650

The number of shares outstanding of the issuer's classes of common stock as of
April 17, 1997: Common Stock, $0.01 Par Value - 10,435,031 shares

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement to be filed with respect to the annual
shareholders meeting to be held June 4, 1997 are incorporated by reference into
Part III.

PART I

ITEM 1. BUSINESS

General

One Price Clothing Stores, Inc. (the "Registrant" or the "Company") operates a
chain of off-price retail women's and children's specialty stores offering a
wide variety of first quality, contemporary, in-season apparel and accessories.
In January 1997, the Company announced its plans to expand its merchandise
offering to include additional categories and styles to be offered at retail
price points other than its previous uniform retail price of $7. This expansion
of its product line at alternative retail price points is initially expected to
comprise approximately 20 percent of a typical store's assortment. At this time,
the Company plans to continue to price its core inventory at the $7 retail
price. The Company purchases merchandise at heavily discounted prices in large
quantities from a broad mix of manufacturers, jobbers, importers and other
suppliers. The Company is able to acquire such merchandise at heavily discounted
prices because of imbalances between supply and demand, order cancellation and
vendor needs for liquidity. The Company is able to take advantage of these
circumstances because of its willingness to purchase large quantities and odd
lots and to buy goods later in the season than many other retailers. This
purchasing strategy allows the Company to obtain a price advantage and to react
quickly to seasonal fashion preferences and weather conditions affecting
consumer spending. It is the Company's policy to offer only first quality
apparel; the Company does not purchase "seconds" or irregular merchandise from
its suppliers.

Change in Fiscal Year

In March 1996, the Company elected to change its fiscal year from the Saturday
nearest December 31 to the Saturday nearest January 31, beginning in fiscal
1996. This change was made to conform the Company's fiscal calendar to the
seasonal patterns it experiences, as well as to enhance comparability of its
fiscal quarterly and annual results with those of other retail companies. Except
as otherwise noted in this Annual Report on Form 10-K, "fiscal 1996" is the
52-week period ended February 1, 1997, "the Transition Period" is the five-week
period ended February 3, 1996, "fiscal 1995" is the 52-week period ended
December 30, 1995 and "fiscal 1994" is the 52-week period ended December 31,
1994.

Company History and Organization

The Company opened its first store in August 1984. The Company changed its
corporate domicile from South Carolina to Delaware on April 9, 1987 and
completed the initial public offering of its Common Stock on May 27, 1987. All
information contained herein has been adjusted to reflect the issuance of
10.120811 shares of the Company's Common Stock, $.01 par value, (the "Common
Stock") in exchange for each share of Common Stock then outstanding in
connection with the Company's re-incorporation in Delaware, a 3-for-2 stock
split effected in the form of a stock dividend paid on October 15, 1987, and a
3-for-2 stock split effected in the form of a stock dividend paid on April 29,
1994. On February 9, 1994, a wholly-owned subsidiary of the Company, One Price
Clothing of Puerto Rico, Inc., was incorporated in Puerto Rico. It commenced
operations on May 28, 1994. As used herein, unless the context otherwise
indicates, the "Company" refers to One Price Clothing Stores, Inc., a Delaware
corporation, to its immediate predecessor, a South Carolina corporation of the
same name, to the South Carolina corporation's predecessor, a North Carolina
corporation organized in 1984 under the name J. K. Apparel, Inc. and to One
Price Clothing of Puerto Rico, Inc.

On January 31, 1997, a subsidiary of the Company, One Price Clothing -- U.S.
Virgin Islands, Inc. was incorporated in the Virgin Islands. It commenced
operations on March 20, 1997.

Industry Segments

The Company operates in only one industry segment. All of the Company's assets
and significant revenues and pre-tax earnings relate to retail sales of women's
and children's apparel and accessories to the general public through
Company-operated stores. Other than operations in Puerto Rico, the Company had
no operations outside the continental United States at the end of fiscal 1996
and no export sales. Reference is hereby made to the financial statements
included in Part II for information about the Company's assets, net sales and
profitability.

Operations

The Company operates a chain of off-price retail women's and children's
specialty stores offering a wide variety of first quality, contemporary,
in-season apparel and accessories. The stores' core merchandise is offered at
the uniform retail price of $7. Beginning in fiscal 1997, the Company will offer
an expanded selection of merchandise at alternative price points. The Company
registered the trademark "One Price" with the United States Patent and Trademark
Office in June 1990 for a ten-year period with the option to renew upon
expiration. The Company intends to apply for renewal for this trademark. This
trademark was accorded incontestable status by the United States Patent and
Trademark Office. The Company considers the "One Price" trademark to be valuable
and significant to the conduct of its business. The Company registered "One
Price" and "Un Solo Precio" in Mexico in June, 1993. Management has decided to
forego use of this mark at this time in Mexico which may result in the lapsing
of such registration in Mexico. The Company has been notified of approval to
register "One Price" and "One Price Plus" in Canada. Management has decided to
forego use of these trademarks in Canada at this time, which may result in
lapsing of the applications in Canada. The Company has registered "Ropa a un
Precio" in the United States and is using this trademark in its stores with
Spanish-speaking customers.

The One Price Store. The Company's typical store has approximately 3,300 square
feet, of which approximately 2,400 square feet is devoted to selling space. All
of the Company's stores are located in leased facilities with convenient access
to adequate parking or public transportation. At February 1, 1997, approximately
85% of the Company's stores were located in strip shopping centers and the
remaining stores were located in central business districts or malls. The
Company does not franchise its stores.

The Company's stores are primarily located in or near communities with a
population of at least 40,000 - 50,000, as well as in large metropolitan areas.
Most of the Company's stores are open seven days a week and typical hours of
operation are from 10:00 a.m. until 7:00 p.m. or 9:00 p.m., Monday through
Saturday, with shorter hours on Sunday. A typical store employs a full-time
manager, one or two full-time assistant managers and up to ten additional
part-time sales associates.

The Company's stores are designed for customer convenience and for attractive
presentation of merchandise. All apparel is displayed on hangers and is
organized by classification, style and color, promoting a pleasant shopping
environment and customer convenience.

The Company's store operations department is headed by a Senior Vice President
of Stores who is assisted by two Directors of Store Operations and Regional and
District Sales Managers. Each Regional Sales Manager is responsible for
approximately 9 districts. Each District Sales Manager is responsible for
approximately 10 to 12 stores and visits each store in his or her district on a
regular or as-needed basis to provide assistance in promoting sales, training,
store layout and merchandise presentation, and to monitor adherence to the
Company's operational and management policies.

Store Locations and Expansion. At February 1, 1997, the Company operated 645
stores in 27 states and Puerto Rico. The Company opened 23 stores, relocated 11
stores and closed 66 underperforming stores in fiscal 1996. The Company's
expansion plans in 1997 include opening approximately 65 new stores primarily in
existing markets, closing approximately 30 stores, and relocating approximately
10 stores.

Purchasing. The Company's practice is to offer value to its customers by selling
desirable women's and children's apparel and accessories at considerably lower
prices than generally would be available from department stores and other
specialty retailers. The Company purchases its merchandise at heavily discounted
prices and on favorable terms from manufacturers, jobbers, importers and other
vendors.

The Company typically is able to purchase merchandise from vendors at
substantially discounted prices as a result of the following circumstances: the
inability of a manufacturer or importer to dispose of merchandise through
regular channels, the discontinuance of merchandise because of changes in color
or style, over-production by manufacturers, cancellation of orders by
conventional retail stores, the need of catalog retailers to dispose of
inventories of unordered catalog merchandise, and manufacturers' need to utilize
excess capacity or import quota or need for liquidity. The Company's ability and
willingness to purchase in large quantities and in odd-lot or broken-size
assortments and its reputation for reliability in the industry provide the
Company with purchasing advantages. The Company buys its merchandise
opportunistically which includes the purchase of merchandise close to and during
each selling season, later than department stores and other specialty retailers.
This purchasing strategy permits the Company to react to fashion trends and
opportunistic developments during a selling season. The Company also purchases
selected merchandise in advance of a selling season.

During fiscal 1996, the Company purchased merchandise from approximately 900
vendors, including manufacturers, jobbers, importers and other vendors. No
vendor accounted for more than 10% of the Company's total purchases for the
year.

Although there can be no assurance that the Company will be able to continue to
acquire sufficient quantities of first quality merchandise at such low prices
and on favorable terms, the Company continues to add new vendors and believes
that adequate sources of first quality merchandise are available at appropriate
price levels. The Company does not maintain long-term or exclusive purchase
commitments or arrangements with any vendor.

Corporate Offices and Distribution Center. The Company's Corporate Offices and
Distribution Center are located in Duncan, South Carolina. With the exception of
functions performed by certain merchandise buyers, regional directors of real
estate, district and regional sales managers, and certain administrative
functions performed in Puerto Rico, substantially all purchasing, accounting and
other administrative functions are centralized at the Corporate Offices.

Merchandising. The Company's merchandising strategy emphasizes contemporary and
in-season apparel for juniors, misses, large-sized women and children. The
Company's target customers are value-and fashion-conscious women, primarily in
lower and middle income brackets. The Company offers only first quality
merchandise and emphasizes the value of its merchandise compared to similar
merchandise sold elsewhere at higher prices. Women's apparel sold by the Company
includes contemporary sportswear such as knit tops, pants, blouses, shirts,
skirts, sweaters, jackets and shorts. In addition, the Company sells other types
of merchandise such as dresses, swimsuits, lingerie and other related items. The
Company also offers selected accessories such as scarves, socks, belts,
handbags, jewelry and fragrances, in addition to apparel. For the first time,
the Company will be able to offer with consistency additional categories of
merchandise such as jeans, silk jogging sets, sweaters and heavier jackets.
Accessory sales as a percentage of net sales were 12% in fiscal 1996 and 11% in
both fiscal 1995 and fiscal 1994. Sales of children's clothing comprised less
than 10% of net sales in each of the last three fiscal years.

Inventory Monitoring. The Company's management information system, featuring
point-of-sale cash registers and a computerized inventory management system,
permits management to review each store's sales and inventory on a daily and a
weekly basis, thereby enabling the Company to tailor its purchasing strategies
and merchandise shipments to stores based on customer demand.

Distribution Systems.

Substantially all merchandise is shipped directly from vendors to the Company's
Distribution Center where the goods are inspected, processed and sent to the
Company's stores. The majority of shipments to stores are made by common
carriers. During fiscal 1995, the Company implemented a new warehouse management
system to improve the management of the location and flow of merchandise within
the Distribution Center.

Seasonality

The Company's sales and operating results are seasonal, as is typical in the
women's retail apparel industry. Based on the former fiscal calendar (January -
December), the Company's sales historically were lowest during the first quarter
(January - March) and third quarter (July - September) and highest during the
second quarter (April - June) and fourth quarter (October - December). Reduced
sales volumes in the first and third quarters coincided with the transition of
seasonal merchandise. Therefore, increased levels of markdowns occurred during
those transitional periods, and operating expenses, when expressed as a
percentage of sales, were typically higher. As discussed above, the Company
changed its fiscal year end to conform the fiscal calendar to the seasonal
patterns it experiences. As a result, the Company's historical quarterly
patterns have changed. Fiscal 1996 and proforma fiscal 1995 produced higher
sales and operating results in the first quarter (February - April) and second
quarter (May - July) compared to the third quarter (August - October) and fourth
quarter (November - January). Management is unable to predict if this trend will
continue in the future. Management does believe, however, that the pricing
flexibility afforded by the new merchandising strategy should enable the Company
to increase its absolute and relative sales performance in the second half of
the fiscal year since the Company will be able to offer its customers a greater
selection of fall and winter apparel categories.

Working Capital Requirements

In March 1996, the Company replaced its then existing credit facilities with an
agreement with a new lender which provides for a revolving loan facility of up
to $37,500,000 (including a letter of credit sub-facility of up to $25,000,000)
and a $7,500,000 term loan facility. Borrowings under the new credit agreement,
based upon a borrowing base formula, are collateralized by all assets owned by
the Company during the term of the agreement which expires in March 1998. The
agreement contains certain covenants and terms described in Item 7 of this
report.

Merchandise inventories are typically purchased on credit, including the use of
letters of credit. Letters of credit are used to purchase merchandise
inventories from foreign suppliers. All such purchases are paid in United States
dollars; thus, the Company is not subject to foreign currency risks. As a result
of the Company's opportunistic buying strategy and to ensure that an adequate
supply of merchandise is available for shipment to its stores, the Company may,
at times, invest a significant amount of its working capital in merchandise
inventories.

Revenues from retail sales are recognized at the time of the sale. The Company
accepts cash, checks, and, in the majority of its stores, certain major credit
cards. All stores offer a liberal exchange and return policy. An estimate for
merchandise returns is recorded in the period that the merchandise is sold.

Customers

No material part of the business of the Company is dependent upon a single
customer or a few customers.

Competition

The women's retail apparel industry is highly competitive. In order to compete
effectively, the Company is dependent upon its ability to purchase merchandise
at substantial discounts. The Company competes with department stores, specialty
stores, discount stores, other off-price retailers and manufacturer-owned outlet
stores, many of which are owned by large national or regional chains with
substantially greater resources than the Company. There are also other
competitors which employ a ceiling price concept of $10. There can be no
assurance that other retailers with substantially greater financial resources
than the Company will not adopt a purchasing and marketing concept similar to
that of the Company. Management believes that the primary competitive factors in
the retail apparel industry are price, quality, variety of merchandise, good
site selection and low cost of operation. The Company believes that it is well
positioned in all of these areas to compete in its markets.

Environmental Factors

The Company is not aware of any federal, state or local environmental
regulations that will materially affect its operations or competitive position
or require material capital expenditures. The Company cannot predict, however,
the impact of possible future legislation or regulation on its operations.

Employees

At February 1, 1997, the Company had approximately 4,100 employees, of which
approximately 52 % were full-time employees. The Company, like other retailers,
experiences a high turnover rate of full-time and part-time store employees but
has generally not experienced difficulties in hiring qualified personnel. None
of the Company's employees are covered by a collective bargaining agreement, and
management believes that the Company's relationship with its employees is good.

Private Securities Litigation Reform Act of 1995

All statements contained in this Annual Report on Form 10-K as to future
expectations and financial results should be considered forward-looking
statements subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. The Company cautions readers of this Annual
Report on Form 10-K that a number of important factors could cause the Company's
actual results in 1997 and beyond to differ materially from those expressed in
such forward-looking statements. These factors include, but are not limited to,
the general economic conditions and consumer demand; consumer preferences;
weather patterns; competitive factors, including pressure from pricing and
promotional activities of competitors; the impact of excess retail capacity and
the availability of desirable store locations on suitable terms; whether or not
the Company's merchandising strategy to offer expanded categories of merchandise
at alternative price points will increase sales and operating results or
increase and attract new customers; the availability, selection and purchasing
of attractive merchandise on favorable terms; import risks, including potential
disruptions and duties, tariffs and quotas on imported merchandise; and other
factors that may be described in the Company's filings with the Securities and
Exchange Commission from time to time. The Company does not undertake to
publicly update or revise its forward-looking statements even if experience or
future changes make it clear that any projected results expressed or implied
therein will not be realized.

ITEM 2. PROPERTIES

The Company leases all of its store locations. At February 1, 1997, the Company
had 645 stores operating in 27 states and Puerto Rico. The Company leases its
stores under operating leases generally with initial terms of five to ten years
and with one to two renewal option periods of five years each. The leases
typically contain kickout provisions based on that store's annual sales volume
or the shopping center's occupancy. The leases generally provide for increased
rents resulting from increases in operating costs and property taxes. Certain of
the leases provide contingent or percentage rentals based upon sales volume, and
other stores are leased on a month-to-month basis. To date, the Company has not
experienced difficulty in obtaining leases for suitable locations for its stores
on satisfactory terms. Approximately 70 existing store leases expire or have
initial lease terms containing lessee renewal options which may be exercised
during fiscal 1997. Management believes that the Company will not experience a
significant increase in lease expense as a result of exercising renewal options
or negotiating additional lease terms for such locations. The following is a
list of store locations by state as of February 1, 1997:

NUMBER OF
STATE STORES
Alabama................................................................................................ 16
Arizona............................................................................................... 9
Arkansas.............................................................................................. 4
California............................................................................................. 50
Florida................................................................................................ 63
Georgia............................................................................................... 41
Illinois.............................................................................................. 33
Indiana................................................................................................ 11
Kansas................................................................................................ 3
Kentucky.............................................................................................. 10
Louisiana............................................................................................. 18
Maryland............................................................................................... 15
Michigan............................................................................................... 16
Mississippi............................................................................................ 11
Missouri............................................................................................... 15
North Carolina......................................................................................... 38
New Jersey............................................................................................ 8
New Mexico............................................................................................ 7
New York.............................................................................................. 16
Ohio.................................................................................................. 23
Oklahoma............................................................................................. 7
Pennsylvania.......................................................................................... 26
Puerto Rico........................................................................................... 28
South Carolina......................................................................................... 35
Tennessee.............................................................................................. 26
Texas.................................................................................................. 87
Virginia............................................................................................... 23
Wisconsin............................................................................................. 6
TOTAL STORES...........................................................................................645

The Company's Corporate Offices and Distribution Center are located in Duncan,
South Carolina on approximately 82 acres which are owned by the Company. In
fiscal 1993, the Company completed a 28,000 square foot expansion of its
Corporate Offices. During fiscal 1995, the Company expanded the Distribution
Center by approximately 90,000 square feet. These expansions increased the total
size of the Corporate Offices and Distribution Center to approximately 500,000
square feet. The Company's Distribution Center should be able to support the
Company's growth over the next several years. The Company's borrowings under its
new credit facility are secured by all assets owned by the Company during the
term of the agreement.

ITEM 3. LEGAL PROCEEDINGS

From time to time the Company is a defendant in legal actions involving claims
arising in the normal course of its business. The Company believes that, as a
result of its legal defenses and insurance arrangements, none of these actions
presently pending, if decided adversely, would have a material adverse effect on
its financial position and results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS

The Company's common stock is traded under the symbol ONPR in the National
Market System of NASDAQ. As of April 17, 1997, there were approximately 400
shareholders of record.

The Company has never paid cash dividends since its inception. The Company's
credit agreement contains covenants which, among other things, prohibit the
Company from paying dividends. Currently, the Board of Directors intends to
continue its policy of retaining earnings for operations and expansion of the
business.

The quarterly high and low sales prices of the Company's Common Stock as quoted
by NASDAQ are shown below.

Fiscal Year Ended Fiscal Year Ended
February 1, December 30,
1997 1995
------------------------------------------------------------------------------------
High Low High Low

First .................................4 3/4 2 3/4 8 3/8 6 1/8
Second ................................6 1/8 3 7/8 7 1/2 3 3/4
Third .................................4 1/2 2 7/8 6 1/8 3 3/4
Fourth ................................3 3/4 2 1/2 5 1/2 2 3/4

The high and low sales prices of the Company's Common Stock during the 5-week
transition period ended February 3, 1996 were $3.37 and $2.50, respectively.

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected financial data for the Company for each of
the five fiscal years ended January 2, 1993 through February 1, 1997, including
the 5-week Transition Period ended February 3, 1996, resulting from the
Company's change in fiscal year end. All of the selected financial data are
extracted from the Company's audited financial statements and should be read in
conjunction with the financial statements and the notes thereto included under
Item 8 of this Form 10-K and Management's Discussion and Analysis of Financial
Condition and Results of Operations included under Item 7 of this Form 10-K.

Fiscal Transition
Year Ended Period Ended Fiscal Year Ended
Feb. 1, Feb. 3, Dec. 30, Dec. 31, Jan. 1 Jan. 2,
1997 1996 1995 1994 1994 1993 (a)
-------- -------- -------- ----- ------ --------
Dollars in thousands except per share amounts

1 Net sales $ 298,986 15,022 294,692 283,326 234,698 184,149
2 (Loss) income before taxes and cumulative effect
of changes in accounting principles $ (1,994) (9,091) (2,595) 7,138 13,959 10,913
3 (Loss) income before cumulative effect of changes
in accounting principles $ (1,267) (5,634) (1,304) 4,389 8,724 6,846
4 Cumulative effect on prior years of changes
in accounting principles $ -- (1,090) -- -- -- --
5 Net (loss) income $ (1,267) (6,724) (1,304) 4,389 8,724 6,846
6 Current assets $ 61,891 52,517 35,990 31,252 35,336 27,253
7 Long-term assets $ 39,076 41,663 43,374 36,678 28,865 23,465
8 Total assets $ 100,967 94,180 79,364 67,930 64,201 50,718
9 Current liabilities $ 48,722 40,669 18,594 13,035 14,798 10,861
10 Long term debt and note payable $ 4,868 6,447 6,579 -- -- --
11 Deferred income taxes $ 718 818 1,482 1,449 1,166 1,061
12 Other noncurrent liabilities $ 2,317 1,089 828 372 411 447
13 Shareholders' equity $ 44,342 45,157 51,881 53,074 47,826 38,349
14 Total investment $ 66,068 62,378 59,554 `53,226 48,158 39,228
15 Stores (closed) opened during the period, net # (43) (13) 60 101 94 81
16 Stores operating at period-end # 645 688 701 641 540 446
17 Number of employees # 4,105 4,574 4,841 4,907 4,199 3,723
18 Weighted average common shares (000) # 10,401 10,335 10,314 10,525 10,404 10,304
19 Common shares outstanding at period-end (000) # 10,436 10,335 10,335 10,305 10,221 10,123
20 (Loss) income per common share before cumulative
effect of changes in accounting principles $ (0.12) (0.55) (0.13) 0.42 0.84 0.66
21 Cumulative effect on prior years per common share
of changes in accounting principles $ -- (0.10) -- -- -- --
22 Net (loss) income per common share $ (0.12) (0.65) (0.13) 0.42 0.84 0.66
23 Book value per common share $ 4.25 4.37 5.02 5.15 4.68 3.79
24 Cash dividends declared per common share $ 0 0 0 0 0 0

Notes to Summary of Selected Financial Data

a. Fiscal year 1992 was a 53-week year, while all other years presented consisted of 52 weeks.

Line Definitions
14 Total investment -- Total of all interest-bearing debt, capitalized
leases, net deferred taxes, and shareholders' equity.
17 Number of employees -- Number of full and part-time employees at year-end.
23 Book value per common share -- Book value of shareholders' equity per outstanding common share (line
13 divided by line 19).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

In March 1996, the Company elected to change its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest January 31. This change was
made to conform the Company's calendar to the seasonal patterns it experiences,
as well as to enhance the comparability of its quarterly and annual results with
other retail companies.

For comparability purposes, the Company elected to disclose in Item 8 of this
report certain unaudited financial information for the 53-week period ended
February 3, 1996 ("proforma fiscal 1995") and for the 52-week period ended
January 28, 1995 ("proforma fiscal 1994").

The Company's operating results reflect the change in fiscal year, as well as
the impact of certain changes in accounting for merchandise inventories and the
adoption of the new accounting standard (SFAS 121) relating to long-lived
assets. The cumulative effect of these changes in accounting methods was
included in the five-week transition period ended February 3, 1996 ("the
Transition Period").

FINANCIAL SUMMARY

The following table sets forth, for the three most recent fiscal years and for
the five-week transition period ended February 3, 1996, certain financial
statement elements as a percentage of net sales:

Fiscal Transition
Year Period
Ended Ended Fiscal Year Ended
Feb. 1, Feb. 3, Dec. 30, Dec. 31,
1997 1996 1995 1994
--------- ---------- ----------- -----------
PERCENT OF NET SALES:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold, distribution and
buying costs 64.7% 96.8% 66.3% 66.8%
-------- --------- -------- ---------
Gross margin 35.3% 3.2% 33.7% 33.2%
-------- ---------- -------- ---------
Selling, general and administrative expenses 25.3% 46.3% 24.3% 22.2%
Store rent and related expenses 8.6% 13.5% 8.4% 7.1%
Depreciation and amortization expense 1.6% 2.7% 1.5% 1.3%
Interest expense 0.6% 1.2% 0.4% 0.1%
--------- --------- --------- ----------

36.0% 63.7% 34.6% 30.7%
Interest income 0.0% 0.0% 0.0% 0.0%
--------- --------- --------- ----------
Net expenses 36.0% 63.7% 34.6% 30.7%
-------- -------- -------- ---------

(Loss) income before income taxes and
cumulative effect of changes in accounting
principles (0.7)% (60.5)% (0.8)% 2.5%
(Benefit from) provision for income taxes (0.2)% (23.0)% (0.4)% 1.0%
-------- -------- ---------- ----------
(Loss) income before cumulative effect
of changes in accounting principles (0.4)% (37.5)% (0.4)% 1.5%
Cumulative effect of changes in
accounting principles, net of income tax
benefit -- (7.3)% -- --
------- ------- ---------- ----------
Net (loss) income (0.4)% (44.8)% (0.4)% 1.5%
======= ======= ========= ==========

Stores in operation at period-end 645 688 701 641
========= ======= ========== ==========

FISCAL YEAR ENDED FEBRUARY 1, 1997 (FISCAL 1996) COMPARED TO FISCAL YEAR ENDED
DECEMBER 30, 1995 (FISCAL 1995)

Net sales in fiscal 1996 increased 1% to $299.0 million compared to $294.7
million in fiscal 1995. Total net sales for fiscal 1996 compared to the 52-week
period ended February 3, 1996 ("adjusted fiscal 1995") increased 2%. This
increase in net sales (fiscal 1996 compared to adjusted fiscal 1995) is
primarily due to improvements in the fourth quarter, particularly during the
last six weeks of fiscal 1996. In fiscal 1996, comparable store sales decreased
3% year-to-date through the third quarter and increased 5% during the fourth
quarter, resulting in a comparable store sales decrease of 1% for the year
compared to adjusted fiscal 1995. Comparable stores are those stores in
operation at least 18 months. Average store sales in fiscal 1996 showed some
improvements over adjusted fiscal 1995 but were still less than historically
high levels experienced prior to fiscal 1995. Total average store sales in
fiscal 1996 compared to adjusted fiscal 1995 were flat on a year-to-date basis
through the third quarter and increased 10% in the fourth quarter, resulting in
an increase for the full year of 3%.

Sales trends thus far in fiscal 1997 remain encouraging with a comparable store
sales increase of 9% for the first two months of the fiscal year compared to
last year. Management believes these trends are, in part, due to recent
improvements in the women's apparel industry, a new merchandise replenishment
system, improved merchandising mix with added focus on merchandise quality,
value, sizing and presentation, as well as the favorable weather patterns
experienced thus far in the Company's trade area. During the fourth quarter, the
Company tested and, beginning in fiscal 1997, launched the implementation of its
previously announced strategy to add new categories and styles of merchandise at
alternative price points. The Company also tested and executed direct mail
advertising campaigns during the second half of fiscal 1996. Advertising expense
in fiscal 1997 is not expected to increase materially compared to fiscal 1996.
Management believes the new merchandising concept will provide opportunities to
improve sales and operating results in fiscal 1997 and strengthen the Company's
position in the marketplace.

The Company aggressively closed underperforming stores in fiscal 1996 and the
Transition Period and was very focused and selective in its new store site
selections during the year. The Company opened 23 stores and closed 66
underperforming stores in fiscal 1996 compared to opening 83 stores and closing
23 underperforming stores in fiscal 1995. The Company closed 13 underperforming
stores in the Transition Period. In fiscal 1996, eleven stores were relocated
compared to 14 relocations in fiscal 1995. The Company's present plan for fiscal
1997 is to open approximately 65 stores, primarily in existing markets, and
relocate approximately 10 stores. Additionally, approximately 30 stores are
expected to close in fiscal 1997, a number of stores more consistent with
historical averages.

The Company's sales and operating results are seasonal, as is typical in the
women's retail apparel industry. Based on the former fiscal calendar (January -
December), the Company's sales historically were lowest during the first quarter
(January - March) and third quarter (July - September) and highest during the
second quarter (April - June) and fourth quarter (October - December). Reduced
sales volumes in the first and third quarters coincided with the transition of
seasonal merchandise. Therefore, increased levels of markdowns occurred during
those transitional periods, and operating expenses, when expressed as a
percentage of sales, were typically higher. As discussed above, the Company
changed its fiscal year end to conform the fiscal calendar to the seasonal
patterns it experiences. As a result, the Company's historical quarterly
patterns have changed. Fiscal 1996 and proforma fiscal 1995 produced higher
sales and operating results in the first quarter (February - April) and second
quarter (May - July) compared to the third quarter (August - October) and fourth
quarter (November - January). Management is unable to predict if this trend will
continue in the future. Management does believe, however, that the pricing
flexibility afforded by the new merchandising strategy should enable the Company
to increase its absolute and relative sales performance in the second half of
the fiscal year since the Company will be able to offer its customers a greater
selection of fall and winter apparel categories.

Gross margin as a percentage of net sales was 35.3% in fiscal 1996 compared to
33.7% in fiscal 1995. For fiscal 1995 and 1994, distribution and merchandise
acquisition costs were reclassified as a component of cost of goods sold from
selling, general and administrative expenses to conform to the current year
presentation. This increase in gross

margin as a percentage of net sales primarily resulted from efficiencies in the
Company's distribution center and lower levels of markdowns taken due to
management's efforts to control inventory levels and flow. Decreases as a
percentage of net sales in distribution costs and markdowns were slightly offset
by higher buying costs primarily due to additions to the merchandising staff at
the Company's home office. Distribution costs in dollars on an average store
basis decreased 16% in fiscal 1996 compared to fiscal 1995. This decrease in
distribution costs was the result of efficiencies associated with the
distribution center's first full year of operation since expansion of the
facility and the implementation of a new warehouse management system.

Selling, general and administrative expenses as a percentage of net sales were
25.3% in fiscal 1996 compared to 24.3% in fiscal 1995. When expressed as a
percentage of net sales, store operating costs decreased while home office and
other expenses increased. Selling, general and administrative expenses in
dollars on an average store basis increased 6%. This increase resulted primarily
from rolling out a direct mail advertising campaign in the fourth quarter, a
one-time charge to record certain post-retirement benefits and recording a
greater loss on fixed assets as a result of closing more underperforming stores
than in fiscal 1995. Average salaries and wages in the Company's stores
increased 1% in fiscal 1996 compared to fiscal 1995. This increase, affecting
primarily part-time associates, is largely due to the increase in the Federal
Minimum Wage which was effective in October 1996. In September 1997, the second
phase of the Federal Minimum Wage increase will take effect. Management
estimates the incremental impact of the increases in the Federal Minimum Wage
will increase store payroll expense in fiscal 1997 by approximately $900,000.

Store rent expense as a percentage of net sales was 8.6% in fiscal 1996 compared
to 8.4% in fiscal 1995. Average store rent expense in dollars increased 3% in
fiscal 1996 compared to fiscal 1995 primarily due to the Company's store
expansion strategy of increasing the proportion of higher volume stores, and,
thus entering more costly sites with higher rents, and the closing of older,
underperforming stores which had lower average rent costs. Management
anticipates that this trend of increasing average store rents may continue. The
Company has approximately 70 existing leases that expire or have initial lease
terms containing lessee renewal options which may be exercised during fiscal
1997. Management believes that the Company will not experience a material
increase in aggregate store rents as a result of renewal options or negotiating
new lease terms for such locations.

Depreciation and amortization expense was 1.6% of net sales in fiscal 1996
compared to 1.5% of net sales in fiscal 1995. This increase in depreciation and
amortization expense resulted primarily from the completion of the distribution
center expansion late in the second half of fiscal 1995.

The effective income tax rate for fiscal 1996 was 36.5% compared to 49.7% in
fiscal 1995. This decrease was primarily due to tax benefits generated in fiscal
1995 that did not recur in fiscal 1996. These tax benefits included the
carryback of the Federal Targeted Jobs Tax Credit and the recognition in fiscal
1995 of the deferred income tax asset associated with the remaining net
operating loss carryforward generated by the Company's Puerto Rico subsidiary in
1994. Management estimates the Company's effective income tax rate will be
approximately 40% in fiscal 1997.

FIVE-WEEK TRANSITION PERIOD ENDED FEBRUARY 3, 1996 COMPARED TO FOUR-WEEK
PERIOD ENDED JANUARY 28, 1995 (UNAUDITED - SEE NOTE I)

Net sales for the five-week period ended February 3, 1996 were $15,022,000
compared to $12,173,000 for the four- week period ended January 28, 1995. On an
average store basis, net sales decreased 9%. Comparable store sales (adjusted
for the calendar shift to compare the five-week period ended February 3, 1996 to
the five-week period ended February 4, 1995) decreased 22%. Management believes
the decline in sales reflected the continued softness in the women's apparel
market experienced throughout fiscal 1995 and the impact of adverse weather
conditions incurred nationwide in January 1996.

During January 1996, there were no new stores opened, one store was relocated
and 13 stores were closed.

Gross margin was 3.2% in January 1996 compared to a deficiency of 5.7% in
January 1995. January 1995

distribution and buying costs were reclassified as a component of cost of goods
sold from selling, general and administrative expenses to conform to the current
presentation. The improvement in gross margin was principally due to the change
in accounting for merchandise inventories discussed below and efficiencies in
the Company's distribution center. Like most retailers, the month of January is
historically the lowest sales month of the year, both in absolute dollars and on
an average store basis, resulting in substantial markdowns to increase sell-off
of Fall merchandise.

Selling, general and administrative expenses increased to 46.3% of net sales in
January 1996 compared to 41.4% in January 1995. This increase in selling,
general and administrative expenses as a percentage of net sales is largely due
to the decrease in average store sales. Selling, general and administrative
expenses on an average store basis, adjusted for the additional week in January
1996 compared to January 1995, increased 1%, primarily due to an increase in
store operations expenses.

Store rent and related expenses decreased to 13.5% of net sales in January 1996
compared to 14.7% of net sales in January 1995. This decrease in store rent and
related expenses as a percentage of net sales is due to recording rent expense
on a monthly basis in 1996 rather than a weekly basis as in the preceding year.
Accordingly, rent expense in January 1996, a five-week operating period,
included one calendar month of rent expense.

Depreciation and amortization expense as a percentage of net sales increased to
2.7% in January 1996 compared to 2.4% in January 1995. This increase in
depreciation and amortization expense was due to the decrease in average store
sales and due to the completion of the expansion of the Company's distribution
center late in the second half of fiscal 1995.

Interest expense increased to 1.2% of net sales in January 1996 compared to 0.3%
in January 1995 due to the increased level of borrowings under the Company's
credit facilities. Borrowing levels increased primarily to fund approximately
$9.3 million in capital expenditures for the period February 1995 through
January 1996.

The Company's effective tax rate for January 1996 was 38.0%. The Company's
effective tax rate for January 1995 was 39.0%.

The Financial Accounting Standards Board ("FASB") issued Statement No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." This statement essentially requires that when the
Company commits to closing specific stores and for other stores which may be
impaired, the fixed assets for such stores must be written down to estimated
fair market value. The Company's adoption of SFAS 121, required for years
beginning after December 15, 1995, resulted in a decrease in net fixed assets of
approximately $1,630,000 and a charge of approximately $1,397,000 (net of income
taxes) which is included in the cumulative effect of changes in accounting
principles in the Statement of Operations for the Transition Period.

The Company also elected to change certain methods of accounting for merchandise
inventories beginning in the Transition Period. The Company changed from the
lower of average first-in, first-out (FIFO) cost or market method of accounting
to the lower of cost (computed using the FIFO retail method) or market. The
Company believes that the FIFO retail method provides improved information for
the operation of its business in a manner consistent with the method used widely
in the retail industry. The Company is also capitalizing into inventory certain
merchandise acquisition and distribution costs to provide a better matching of
revenues and expenses, particularly in interim periods. The effect of the change
to the FIFO retail method was to reduce merchandise inventories by approximately
$1,207,000, and the effect of capitalizing into inventory certain merchandise
acquisition and distribution costs was to increase merchandise inventories by
approximately $1,698,000. These changes in accounting for merchandise
inventories resulted in a net increase in merchandise inventories of
approximately $491,000 and a benefit of approximately $307,000 (net of income
taxes) which is included in the cumulative effect of changes in accounting
principles in the Statement of Operations for the Transition Period.

FISCAL YEAR ENDED DECEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994

Net sales in fiscal 1995 increased 4% to $294.7 million compared to $283.3
million in fiscal 1994. This increase in sales was due to the net addition of 60
stores during the year. Comparable store sales decreased 13% during fiscal 1995.
Management believes the decline in comparable store sales in 1995 compared to
1994 was due to the continued softness in the women's apparel market.

The Company opened 83 stores and closed 23 underperforming stores in fiscal 1995
compared to opening 128 stores and closing 27 underperforming stores in fiscal
1994. In fiscal 1995, fourteen stores were relocated compared to 6 relocations
in fiscal 1994.

Gross margin as a percentage of net sales increased to 33.7% in fiscal 1995
compared to 33.2% in fiscal 1994. The improvement in gross margin was primarily
the result of management's efforts to control inventory levels and flow which
resulted in fewer markdowns when expressed as a percentage of net sales and to
the completion of the distribution center conversion from hanging merchandise
to a flat pack operation. Net sales of apparel and of accessories represented
approximately 89% and 11%, respectively, of annual sales in both fiscal 1995 and
fiscal 1994.

Selling, general and administrative expenses increased as a percentage of net
sales to 24.3% in fiscal 1995 compared to 22.2% in fiscal 1994. This increase in
selling, general and administrative expenses, when expressed as a percentage of
net sales, was principally due to the 10% reduction in average store sales
volumes during fiscal 1995 compared to fiscal 1994. Selling, general and
administrative expenses in dollars on an average store basis decreased 2% during
fiscal 1995 compared to fiscal 1994 primarily as a result of management's
stringent efforts to control costs. Store operations expenses and expenses at
the Company's home office in dollars on an average store basis decreased 1% and
6%, respectively.

Store rent expense as a percentage of net sales increased to 8.4% in fiscal 1995
compared to 7.1% in fiscal 1994. This increase was principally due to the lower
sales volumes during fiscal 1995 compared to fiscal 1994. Average store rent
expense increased 6% in fiscal 1995 compared to fiscal 1994, primarily due to
the Company's store expansion strategy of increasing the proportion of higher
volume stores, and, thus entering into more costly sites with higher rents, and
the closing of older, underperforming stores which had lower average rent costs.

Depreciation and amortization expense increased to 1.5% of net sales in fiscal
1995 from 1.3% of net sales in fiscal 1994. This increase resulted primarily
from the completion of the distribution center expansion.

The effective income tax rate for fiscal 1995 was 49.7% compared to 38.5% in
fiscal 1994. This increase was primarily due to the tax benefit arising in
fiscal 1995 from the carryback of the Federal Targeted Job Tax Credits and the
recognition in fiscal 1995 of the deferred income tax asset associated with the
remaining net operating loss carryforward generated by the Company's Puerto Rico
subsidiary in fiscal 1994.

INFLATION

During its three most recent fiscal years, the Company believes that the impact
of inflation has not been material to its financial condition or results of
operations. However, the impact of the Federal Minimum Wage increase is expected
to negatively impact future results of operations as previously discussed.
Occasionally, the Company may experience slight increases in the average
purchase price per unit of merchandise; however, such increases also reflect the
impact of an increase in the quality of goods purchased in addition to minimal
inflationary factors.

LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary needs for liquidity and capital have been to
fund its new store expansion, the related growth in merchandise inventories and
the expansion of the home office and distribution center. Until fiscal 1995,
these needs were met principally through cash provided by operations and the
Company's available line of credit. Beginning in fiscal 1995, additional sources
of financing were necessary to fund the Company's liquidity and capital needs.
As a result, the Company amended its credit agreement to include a term loan
facility. In fiscal 1996, the Company replaced this facility with a new 2-year
agreement which, together with cash provided by operations, is expected to meet
liquidity and capital needs during the period of the agreement .

In March 1996, the Company entered into the new agreement referenced above with
a lender providing a revolving loan facility of up to $37,500,000 (including a
letter of credit sub-facility of up to $25,000,000) and a $7,500,000 term loan
facility. The new credit facilities expire in March 1998 and may be extended at
the lender's option for an additional year. Borrowings under the credit
agreement are collateralized by all assets owned by the Company during the term
of the agreement and bear interest, at the Company's option (subject to certain
limitations in the agreement), at the prime rate plus 0.5% or the Adjusted
Eurodollar Rate, as defined, plus 2.5%. Maximum borrowings under the revolving
credit facility and utilization of the letter of credit facility are based on a
borrowing base formula determined with respect to eligible inventory (as defined
in the agreement). Availability under the revolving facility fluctuates in
accordance with the Company's seasonal variations in inventory levels. At
February 1, 1997, when the Company's inventories were building in anticipation
of the spring selling season, the Company had approximately $3.7 million of
excess availability under the borrowing base formula. The lending formula may be
revised from time to time by the lender in response to changes in the
composition of the Company's inventory or other business conditions. Commencing
July 1996, the term loan is payable in 57 consecutive equal monthly installments
plus interest. If the new credit facility is not renewed in March 1998, the
outstanding balance under the term loan will be due and payable at that time.
Certain fees may be payable by the Company for early termination of the credit
agreement.

The new credit agreement contains certain covenants which, among other things,
restricts the ability of the Company to incur indebtedness, or encumber or
dispose of assets, and prohibits the Company from repurchasing its Common Stock
or paying dividends. Additionally, the Company must maintain a minimum adjusted
net worth (as defined in the agreement) of $34,000,000 and maintain minimum
working capital, exclusive of amounts outstanding under the credit facilities,
of $5,000,000. The Company was in compliance with these covenants as of February
1, 1997 and as of the date of this document.

The maximum and average amounts outstanding during fiscal 1996, the Transition
Period and fiscal 1995 and amounts outstanding at the end of such periods for
both the term loan and revolving credit facility are disclosed in Note B to the
Consolidated Financial Statements.

The Company's weighted average interest rate for all borrowings was 7.9%, 8.4%
and 8.2% in fiscal 1996, the Transition Period and fiscal 1995, respectively.
The Company had outstanding letters of credit for the purchase of merchandise
inventories totaling approximately $12,490,000 and $11,314,000 at February 1,
1997 and February 3, 1996, respectively.

At February 1, 1997, total merchandise inventories increased 22% to $48,371,000
compared to $39,773,000 at February 3, 1996. Merchandise inventories located in
the Company's stores increased 8% on a per average store basis due to a higher
proportion of spring merchandise in anticipation of improved February and March
sales performance. The increase in total merchandise inventories is principally
due to an increase in merchandise in- transit to the Company's distribution
center from its vendors. In-transit inventories increased compared to last year
because of an increase in spring merchandise purchases from foreign suppliers.
In fiscal 1996, import purchases (including freight and duty) were 31% of total
purchases compared to 20% in fiscal 1995. The level and source of merchandise
inventories are subject to fluctuations because of the Company's opportunistic
buying strategy and prevailing business conditions. In fiscal 1997, the Company
intends to continue this strategy and to purchase merchandise in advance of the
selling seasons when advantageous. This strategy may affect the level of total

merchandise inventories at the end of each quarter in fiscal 1997, the
proportion of domestic versus imported merchandise and the Company's liquidity
and working capital needs.

Net cash provided by operating activities for fiscal 1996, 1995 and 1994 was
$2,352,000, $3,694,000 and $3,627,000, respectively. The decrease in cash
provided by operating activities in fiscal 1996 compared to fiscal 1995 resulted
primarily from the Company's net operating losses and an increase in merchandise
inventories (which was only partially offset by an increase in accounts payable
and other liabilities and the Company's loss on disposal of property and
equipment). The loss on disposal of property and equipment in fiscal 1996 was
larger than this loss in prior years due to closing more underperforming stores
in fiscal 1996.

Net cash used in investing activities for fiscal 1996, 1995 and 1994 was
$3,033,000, $11,277,000 and $12,625,000, respectively, primarily for leasehold
improvements and equipment for new stores opened in each year, as well as
expansions to the distribution center including information systems and hardware
in fiscal 1995 and fiscal 1994 and expansion of the home office in fiscal 1994.

Net cash provided by financing activities for fiscal 1996 was $2,834,000,
primarily due to replacing the Company's existing credit facilities with a new
agreement, the effect of which was to provide $7,500,000 from the new term loan
of which $5,500,000 was used to pay off the former term loan. In addition,
$1,053,000 was used to pay down the new term loan facility. Net cash provided by
financing activities for fiscal 1995 was $7,889,000 primarily due to the
issuance of $6,000,000 of long term debt. Net cash provided by financing
activities for fiscal 1994 was $820,000, primarily due to the exercise of
options with respect to the Company's Common Stock.

During the Transition Period, net cash of $10,536,000 was used in operating
activities, due to the operating loss for the period, the increases in
merchandise inventories, miscellaneous receivables, prepaid expenses (payment of
the subsequent month's store rents) and prepaid income taxes which were
partially offset by an increase in accounts payable and other liabilities. Net
borrowings under the Company's credit facilities of $10,403,000 during the
Transition Period were used to fund the cash requirements incurred during the
month.

In fiscal 1997, the Company plans to spend approximately $4.0 million on capital
expenditures, most of which will be used to open approximately 65 new stores, to
relocate approximately 10 stores and to remodel existing stores. The Company's
liquidity requirements in fiscal 1997 and the foreseeable future are expected to
be met principally through its existing credit facilities and cash provided by
operating activities. If deemed by management to be in the best interest of the
Company, additional long term debt, capital leases or other permanent financing
may be explored.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

The FASB issued SFAS 128, "Earnings Per Share," effective for periods ending
after December 15, 1997. The new standard requires a dual presentation of
"basic" and "diluted" EPS on the face of the income statement. If the Company
had applied the principles of SFAS 128 for the fiscal year ended February 1,
1997, weighted average shares for basic EPS and diluted EPS would have been
10,400,789, the same as that computed under APB Opinion No. 15, the current EPS
accounting standard.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

All statements contained in this document as to future expectations and
financial results should be considered forward-looking statements subject to the
safe harbor created by the Private Securities Litigation Reform Act of 1995. The
Company cautions readers of this Annual Report on Form 10-K that a number of
important factors could cause the Company's actual results in 1997 and beyond to
differ materially from those expressed in such forward-looking statements. These
factors include, but are not limited to, the general economic conditions and
consumer demand; consumer preferences; weather patterns; competitive factors,
including pressure from pricing and promotional activities of competitors; the
impact of excess retail capacity and the availability of desirable store
locations on suitable terms; whether or not the Company's merchandising strategy
to offer expanded categories of merchandise at alternative price points will
increase sales and operating results or increase and attract new customers; the
availability, selection and purchasing of attractive merchandise on favorable
terms; import risks, including potential disruptions and duties, tariffs and
quotas on imported merchandise; and other factors described in the Company's
filings with the Securities and Exchange Commission from time to time. The
Company does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any projected
results expressed or implied therein will not be realized.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
One Price Clothing Stores, Inc.
Duncan, South Carolina

We have audited the accompanying consolidated balance sheets of One Price
Clothing Stores, Inc. and subsidiary (the "Company") as of February 1, 1997 and
February 3, 1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the years ended February 1, 1997,
December 30, 1995 and December 31, 1994 and for the one-month period ended
February 3, 1996. Our audits also included the financial statement schedule
listed in the Index at Item 14 (d). These consolidated financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of February 1, 1997
and February 3, 1996, and the results of its operations and its cash flows for
the years ended February 1, 1997, December 30, 1995 and December 31, 1994 and
for the one-month period ended February 3, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

As discussed in Note J to the financial statements, in the one-month period
ended February 3, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 and changed its method of accounting for inventories.

DELOITTE & TOUCHE LLP
Greenville, South Carolina

March 14, 1997

ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

February 1, February 3,
1997 1996
Assets -- Note B
CURRENT ASSETS
Cash and cash equivalents $ 2,557,000 $ 404,000
Miscellaneous receivables, net of allowance for
doubtful accounts of $144,000 (1996) and
$233,000 (1995) 1,120,000 1,182,000
Merchandise inventories 48,371,000 39,773,000
Federal and state income taxes receivable 4,237,000 4,674,000
Prepaid expenses 3,671,000 4,203,000
Deferred income taxes -- Note D 1,935,000 2,281,000
--------------- ------------
TOTAL CURRENT ASSETS 61,891,000 52,517,000
PROPERTY AND EQUIPMENT, net -- Note C 36,388,000 39,281,000

OTHER ASSETS 2,688,000 2,382,000
--------------- -------------
$100,967,000 $94,180,000
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable $25,908,000 $22,998,000
Current portion of long-term debt and note payable
-- Note B 16,565,000 11,868,000
Accrued salaries and wages 1,504,000 1,107,000
Accrued employee benefits 2,327,000 2,404,000
Sales tax payable 775,000 693,000
Other accrued and sundry liabilities 1,643,000 1,599,000
--------------- -------------
TOTAL CURRENT LIABILITIES 48,722,000 40,669,000
-------------- ------------
LONG-TERM DEBT -- Note B 4,868,000 6,447,000
--------------- -------------
DEFERRED INCOME TAXES -- Note D 718,000 818,000
---------------- --------------
OTHER NONCURRENT LIABILITIES -- Note G 2,317,000 1,089,000
--------------- -------------
COMMITMENTS AND CONTINGENCIES -- Note E
SHAREHOLDERS' EQUITY -- Notes B, F and H
Preferred Stock, par value $0.01 - authorized
and unissued 500,000 shares
Common Stock, par value $0.01 - authorized 35,000,000
shares; issued and outstanding 10,435,531
(1996) and 10,335,031 (1995) shares 104,000 103,000
Additional paid-in capital 11,453,000 11,002,000
Retained earnings 32,785,000 34,052,000
-------------- ------------
44,342,000 45,157,000
$100,967,000 $94,180,000

See notes to consolidated financial statements

ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Transition
Year Ended Period Ended Fiscal Year Ended
February 1, February 3, December 30, December 31,
1997 1996 - Note I 1995 1994
--------------------------------- -----------------------------

NET SALES $298,986,000 $ 15,022,000 $294,692,000 $283,326,000
Cost of goods sold, distribution and buying costs 193,318,000 14,545,000 195,304,000 189,176,000
-------------- -------------- ------------- ------------
GROSS MARGIN 105,668,000 477,000 99,388,000 94,150,000
Selling, general and administrative
expenses -- Notes C and G 75,564,000 6,957,000 71,498,000 63,008,000
Store rent and related expenses 25,566,000 2,030,000 24,810,000 20,210,000
Depreciation and amortization expense 4,778,000 411,000 4,394,000 3,612,000
Interest expense 1,897,000 173,000 1,326,000 271,000
-------------- --------------- ------------- ------------
107,805,000 9,571,000 102,028,000 87,101,000
Interest income 143,000 3,000 45,000 89,000
-------------- --------------- ------------- ------------

NET EXPENSES 107,662,000 9,568,000 101,983,000 87,012,000
-------------- --------------- ------------- ------------
(LOSS) INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES (1,994,000) (9,091,000) (2,595,000) 7,138,000

(Benefit from) provision for income taxes
-- Note D (727,000) (3,457,000) (1,291,000) 2,749,000
--------------- -------------- -------------- ------------

(LOSS) INCOME BEFORE CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES (1,267,000) (5,634,000) (1,304,000) 4,389,000

Cumulative effect of changes in accounting
principles, net of income tax
benefit of $706,0000 -- Note J -- (1,090,000) -- --
-------------- ------------ -------------- ------------

NET (LOSS) INCOME $ (1,267,000) $(6,724,000) $ (1,304,000) $ 4,389,000
=============== ============ ============== ============

PER COMMON SHARE AMOUNTS
-- Notes J and L:
(Loss) income before cumulative effect
of changes in accounting principles $ (0.12) $ (0.55) $ (0.13) $ 0.42
Cumulative effect of changes in accounting
principles, net of income tax benefit -- (0.10) -- --
-------------- ------------ --------------- ------------

NET (LOSS) INCOME PER COMMON SHARE $ (0.12) $ (0.65) $ (0.13) $ 0.42
============== ============ =============== =============

Weighted average shares outstanding 10,400,789 10,335,031 10,313,860 10,524,978
=============== ============ =============== ==============

See notes to consolidated financial statements

ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
Balance at January 1, 1994 10,221,498 $102,000 $10,033,000 $37,691,000 $47,826,000
Stock options exercised 83,758 1,000 858,000 859,000
Net income 4,389,000 4,389,000
----------- -------- ----------- ----------- -----------
Balance at December 31, 1994 10,305,256 103,000 10,891,000 42,080,000 53,074,000
Stock options exercised 29,775 111,000 111,000
Net loss (1,304,000) (1,304,000)
---------- -------- ----------- ----------- ----------
Balance at December 30, 1995 10,335,031 103,000 11,002,000 40,776,000 51,881,000
Net loss (6,724,000) (6,724,000)
---------- -------- ----------- ----------- -------------
Balance at February 3, 1996 10,335,031 103,000 11,002,000 34,052,000 45,157,000
Stock options exercised 100,500 1,000 451,000 452,000
Net loss (1,267,000) (1,267,000)
---------- -------- ---------- ----------- ------------
Balance at February 1, 1997 10,435,531 $104,000 $11,453,000 $32,785,000 $44,342,000
========== ========== =========== ============ ===========

See notes to consolidated financial statements

ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Transition
Year Ended Period Ended Fiscal Year Ended
February 1, February 3, December 30, December 31,
1997 1996 - Note I 1995 1994
--------------------------------------------------------
OPERATING ACTIVITIES
Net (loss) income $(1,267,000) $ (6,724,000) $ (1,304,000) $ 4,389,000
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating activities:
Depreciation and amortization 4,778,000 411,000 4,394,000 3,612,000
Changes in accounting principles -- 1,090,000 -- --
Provision for supplemental post-retirement
benefits 970,000 -- -- --
Deferred income taxes 246,000 (146,000) (351,000) (145,000)
Loss (gain) on disposal of property and equipment 1,261,000 (31,000) 789,000 947,000
Decrease (increase) in other noncurrent assets 579,000 (161,000) (522,000) 253,000
Increase in other noncurrent liabilities 151,000 271,000 500,000 --
Changes in operating assets and liabilities:
Decrease (increase) in miscellaneous
receivables and prepaid expenses 594,000 (2,520,000) (42,000) (644,000)
(Increase) in merchandise inventories (8,598,000) (10,321,000) (2,624,000) (3,022,000)
Decrease (increase) in Federal and
state income taxes receivable 437,000 (3,311,000) (1,292,000) (2,661,000)
Increase in accounts payable and other liabilities 3,201,000 10,906,000 4,146,000 898,000
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 2,352,000 (10,536,000) 3,694,000 3,627,000
--------------- ------------- ----------- ----------

INVESTING ACTIVITIES
Purchases of property and equipment (2,674,000) (80,000) (10,865,000) (12,294,000)
Purchases of other noncurrent assets (359,000) (41,000) (412,000) ( 331,000)
-------------- ------------------------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (3,033,000) (121,000) (11,277,000) (12,625,000)
-------------- --------------- ------------- ------------

FINANCING ACTIVITIES
Net borrowings from revolving credit facility 2,171,000 10,403,000 2,412,000 --
Proceeds from long term debt borrowings 7,500,000 -- 6,000,000 --
Repayment of long term debt (6,553,000) -- (500,000) --
Debt financing costs incurred (698,000) -- (90,000) --
Decrease in amount due to related party (38,000) (10,000) (44,000) (39,000)
Proceeds from exercise of Common Stock options 452,000 -- 111,000 859,000
------------- --------------- ------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,834,000 10,393,000 7,889,000 820,000
------------- --------------- ----------- -----------

INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,153,000 (264,000) 306,000 (8,178,000)

CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 404,000 668,000 362,000 8,540,000
---------------- --------------- ----------- ----------

CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,557,000 $ 404,000 $ 668,000 $ 362,000
============== ============= ============= ============

SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 1,777,000 $ 244,000 $ 1,117,000 $ 298,000
Income taxes paid 68,000 -- 477,000 5,330,000
Noncash financing activities - capital leases 237,000 -- -- --

See notes to consolidated financial statements

ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 1, 1997

NOTE A - Operations and Summary of Significant Accounting Policies

Business: One Price Clothing Stores, Inc. and subsidiary (the "Company")
operates a chain of off-price retail women's and children's specialty stores
offering a wide variety of first quality, contemporary, in-season apparel and
accessories. The majority of the stores' core merchandise is offered at the
uniform retail price of $7. Beginning in fiscal 1997, the Company will offer an
expanded selection of merchandise at higher price points. At February 1, 1997,
the Company operated 645 stores in 27 states and Puerto Rico.

Fiscal Year: Beginning in fiscal 1996, the Company's year ends on the Saturday
nearest January 31. See Note I. "Fiscal 1996" is the 52-week period ended
February 1, 1997; "the Transition Period" is the five-week period ended February
3, 1996; "fiscal 1995" is the 52-week period ended December 30, 1995 and "fiscal
1994" is the 52-week period ended December 31, 1994. Certain disclosures related
to the Transition Period were not included in these Notes to Consolidated
Financial Statements due to immateriality.

Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents: The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash
equivalents.

Merchandise Inventories: Beginning in January 1996, merchandise inventories are
stated at the lower of cost (computed using the first-in, first-out (FIFO)
retail method) or market. See Note J.

Depreciation: Depreciation is computed by the straight-line method, based on
estimated useful lives of 10 years for land improvements, 33 to 40 years for
buildings, 5 to 10 years for leasehold improvements and 3 to 15 years for
fixtures and equipment.

Income Taxes: Deferred income tax assets and liabilities represent the future
income tax effect of temporary differences between the book and tax bases of the
Company's assets and liabilities, assuming they will be realized and settled at
the amount reported in the Company's financial statements.

Purchased Software: Purchased software is included in other assets and is
amortized over its estimated useful life of 5 years using the straight-line
method.

Revenue Recognition: Revenues from retail sales are recognized at the time of
the sale. An estimate for merchandise returns is recorded in the period that
the merchandise is sold.

Store Preopening Costs: Costs associated with the opening of new stores are
expensed as incurred.

Store Closing Costs: At the time management commits to close a store and for
other stores which may be impaired as determined using the principles of SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived
Assets to be Disposed of," the fixed assets are written down to estimated fair
market value and a provision is made for any remaining store lease obligation
after closing or penalty, if any, to cancel the lease obligation. See Note J.

Advertising and Promotional Costs: Advertising and promotional costs are
expensed when incurred. Such expenses were $987,000, $324,000 and $347,000 in
fiscal 1996, 1995 and 1994, respectively.

Net (Loss) Income Per Common Share: Net (loss) income per common share is
computed by dividing net (loss) income by the weighted average number of shares
of Common Stock and dilutive common stock equivalent shares for stock options
outstanding, unless antidilutive, during the period. See Notes F and L.

Reclassifications: Certain amounts included in prior periods' financial
statements have been reclassified to conform to the fiscal 1996 presentation.

NOTE B - Credit Facilities

In March 1996, the Company entered into a credit agreement with a new lender,
providing a revolving loan facility of up to $37,500,000 (including a letter of
credit sub-facility of up to $25,000,000) and a $7,500,000 term loan facility.
The credit facilities expire in March 1998 and may be extended at the lender's
option for an additional year. Borrowings under the credit agreement are
collateralized by all assets owned by the Company during the term of the
agreement and bear interest, at the Company's option (subject to certain
limitations in the agreement), at the prime rate plus 0.5% or the Adjusted
Eurodollar Rate, as defined, plus 2.5%. Maximum borrowings under the revolving
credit facility and utilization of the letter of credit facility are based on a
borrowing base formula determined with respect to eligible inventory (as defined
in the agreement). Availability under the revolving facility fluctuates in
accordance with the Company's seasonal variations in inventory levels. At
February 1, 1997, when the Company's inventories are building in anticipation of
the Spring selling season, the Company had approximately $3.7 million of excess
availability under the borrowing base formula. The lending formula may be
revised from time to time by the lender in response to changes in the
composition of the Company's inventory or other business conditions. Commencing
July 1996, the term loan is payable in 57 consecutive equal monthly installments
plus interest. If the credit facility is not renewed in March 1998, the
outstanding balance under the term loan will be due and payable at that time.
Certain fees may be payable by the Company for early termination of the credit
agreement.

The credit agreement contains certain covenants which, among other things,
restricts the ability of the Company to incur indebtedness, or encumber or
dispose of assets, and prohibits the Company from repurchasing its Common Stock
or paying dividends. Additionally, the Company must maintain a minimum adjusted
net worth (as defined in the agreement) of $34,000,000 and maintain minimum
working capital, exclusive of amounts outstanding under the credit facilities,
of $5,000,000. The Company was in compliance with these covenants as of February
1, 1997.

At February 3, 1996, current obligations totaling $2,947,000 under the former
credit agreement were classified as long term, as the Company had the intent and
ability to refinance such obligations on a long-term basis.

The maximum and average amounts outstanding during fiscal 1996, the Transition
Period and fiscal 1995 and amounts outstanding at the end of such periods for
both the term loan and revolving credit facility are presented as follows:

Fiscal Transition Fiscal
Year Ended Period Ended Year Ended
February 1, February 3, December 30,
1997 1996 1995

Revolving Credit Facility:
Maximum amounts outstanding $19,241,000 $13,281,000 $20,689,000
Average amounts outstanding 10,792,000 7,488,000 13,217,000
Outstanding at period end 14,986,000 12,815,000 2,412,000

Term Loan:
Maximum amounts outstanding 7,500,000 5,500,000 6,000,000
Average amounts outstanding 6,889,000 5,500,000 3,047,000
Outstanding at period end 6,447,000 5,500,000 5,500,000

The Company's weighted average interest rate for all borrowings was 7.9%, 8.4%
and 8.2% in fiscal 1996, the Transition Period and fiscal 1995, respectively.
The Company had outstanding letters of credit for the purchase of merchandise
inventories totaling approximately $12,490,000 and $11,314,000, at February 1,
1997 and February 3, 1996, respectively.

The fair value of the Company's outstanding debt at February 1, 1997
approximates the carrying value.

NOTE C - Property and Equipment

February 1, February 3,
1997 1996
Land $ 914,000 $ 914,000
Land improvements 494,000 494,000
Building 16,028,000 16,005,000
Leasehold improvements 11,392,000 10,702,000
Fixtures and equipment 29,017,000 29,015,000
------------- ------------
57,845,000 57,130,000
Less accumulated depreciation (21,457,000) (17,849,000)
------------- -------------
$36,388,000 $39,281,000
============ ===========

In accordance with the principles of SFAS 121 (which was adopted on December 31,
1995 - See Note J), the Company evaluates whether assets, largely store lease-
hold improvements and fixtures and equipment, may be impaired based on store
lease termination and renewal decisions and estimated undiscounted
future cash flows of the individual stores. For stores which are determined to
be impaired, leasehold improvements are written off and fixtures and equipment
are written down based upon management's estimate of recoverability. Such
impairment loss for fiscal 1996 was approximately $600,000 and is included
in selling, general and administrative expenses in the accompanying Consolidated
Statement of Operations.

NOTE D - Income Taxes

The (benefit from) provision for income taxes consists of the following:

Fiscal Transition
Year Ended Period Ended Fiscal Year Ended
February 1, February 3, December 30, December 31,
1997 1996 1995 1994
------------------------------------------------------------
Current:
Federal $(982,000) $(2,875,000) $(1,001,000) $2,400,000
State and local 1,000 (436,000) 62,000 494,000
Puerto Rico 8,000 -- -- --
Deferred:
Federal 265,000 (63,000) (5,000) (116,000)
State and local (149,000) (13,000) (145,000) (29,000)
Puerto Rico 130,000 (70,000) (202,000) --
----------- -------------- ------------- ----------
Total (benefit from) provision for income taxes $(727,000) $(3,457,000) $(1,291,000) $2,749,000
========== ============ ============ ==========

Presented below are the elements which comprise deferred income tax assets and
liabilities:

February 1, February 3,
1997 1996
Gross deferred income tax assets:
Accrued employee benefits deductible
for tax purposes when paid $ 773,000 $ 792,000
Excess of tax over financial statement
basis of inventory 923,000 1,060,000
Accrued retirement benefits deductible
for tax purposes when paid 502,000 142,000
Accrued store closing costs deductible
for tax purposes when paid 634,000 784,000
State and local net operating loss carryforwards 973,000 121,000
Puerto Rico net operating loss carryforward 154,000 284,000
Miscellaneous 94,000 302,000
-------------- ------------
Gross deferred income tax assets 4,053,000 3,485,000
----------- -----------

Gross deferred income tax liabilities:
Excess of financial statement over tax basis
of property and equipment (2,422,000) (1,931,000)
Miscellaneous (60,000) (91,000)
-------------- ------------
Gross deferred income tax liabilities (2,482,000) (2,022,000)
------------ ------------
Valuation allowance (354,000) --
------------- ------------
Net deferred income tax asset $ 1,217,000 $ 1,463,000
============ ===========

The net deferred income tax asset is recognized in the accompanying balance
sheets as follows:

February 1, February 3,
1997 1996
Current assets $1,935,000 $2,281,000
Noncurrent liabilities (718,000) (818,000)
------------- ------------

Net deferred income tax asset $1,217,000 $1,463,000
=========== ==========

At February 1, 1997, the Company had net operating loss and credit carryforwards
for state income tax purposes aggregating approximately $973,000 of tax benefit
which is available to offset future taxable income through 2011. Management
cannot be assured that the deferred income tax asset related to these
carryforwards will be fully utilized before expiration. Accordingly, a valuation
allowance for $354,000 was provided for this deferred tax asset.

In fiscal 1994, the Company's Puerto Rico subsidiary generated a net operating
loss of approximately $696,000 which is available to offset future taxable
income in Puerto Rico through 2001. As of February 1, 1997, $395,000 of such net
operating loss remains unused and is available to be carried forward. Management
believes that scheduled reversals of temporary differences and anticipated
future taxable income are sufficient to realize the remaining Puerto Rico net
operating loss. Accordingly, no valuation allowance was provided for this
deferred tax asset.

A reconciliation of the statutory Federal income tax rate to the annual
effective income tax rate follows:

Fiscal Transition Fiscal Fiscal
Year Ended Period Ended Year Ended Year Ended
February 1, February 3, December 30, December 31,
1997 1996 1995 1994

Federal income tax at statutory rate 35.0 % 35.0 % 35.0 % 35.0 %
State and local income tax, net of Federal
tax benefit 4.6 % 4.2 % 3.2 % 4.5 %
Puerto Rico net operating loss -- -- 7.8 % 3.4 %
Tax benefit from carryback of Federal
Targeted Jobs Tax Credits -- -- 5.9 % --
Other, net (3.1)% (1.2)% ( 2.2)% (4.4)%
------- -------- -------- -------
36.5 % 38.0 % 49.7 % 38.5%
======= ======== ======== =======

NOTE E - Leases

The Company leases its stores under operating leases with initial terms of five
years with one to two renewal option periods of five years each. The leases
generally provide for increased payments resulting from increases in operating
costs, common area maintenance costs and property taxes. Substantially all store
leases also provide the Company with an option to terminate the agreement
without penalty if certain conditions are present. Most of the leases provide
contingent or percentage rentals based upon sales volume and others are leased
on a month-to-month basis.

In addition, the Company has operating leases for automobiles, trucks, trailers
and certain computer and other equipment with one to ten year terms.

Future minimum rental commitments as of February 1, 1997 for noncancelable
leases (including those which may qualify for early termination) are
approximately as follows:

Fiscal Year Stores Other Total

1997 $18,679,000 $1,436,000 $ 20,115,000
1998 14,471,000 1,210,000 15,681,000
1999 10,979,000 519,000 11,498,000
2000 6,967,000 53,000 7,020,000
2001 4,018,000 22,000 4,040,000
Later 10,591,000 19,000 10,610,000
------------ ------------- -------------
Total $65,705,000 $3,259,000 $ 68,964,000
=========== ========== ============

Total rental expense for operating leases was as follows:

Fiscal Transition Fiscal Fiscal
Year Ended Period Ended Year Ended Year Ended
February 1, February 3, December 30, December 31,
1997 1996 1995 1994

Minimum rentals $22,061,000 $ 1,792,000 $21,686,000 $16,962,000
Contingent rentals 5,103,000 331,000 4,739,000 3,836,000
------------- ------------- ------------- -------------
$27,164,000 $ 2,123,000 $26,425,000 $20,798,000
=========== =========== =========== ===========

The Company's capital leases for certain office equipment and computer software
were calculated using interest rates appropriate at the inception of each lease.
Future minimum lease payments for capitalized lease obligations as of February
1, 1997 were as follows:

Fiscal Year:
1997 $105,000
1998 105,000
1999 54,000
----------
Total minimum obligations 264,000
Less interest (27,000)
-----------
Present value of net minimum obligations 237,000
Less current portion (88,000)
----------
Long-term obligations at February 1, 1997 $149,000
=========

NOTE F - Employee Benefits

Stock Option Plans: The Company has three stock option plans (the 1991, 1988,
and 1987 Plans) which provide for grants to certain officers, directors, and key
employees of stock options to purchase shares of Common Stock of the Company.
Options granted under the plans expire ten years from the date of grant and, to
date, have been granted at prices not less than the fair market value at the
date of grant. Effective October 27, 1988, the Board of Directors retired all
unissued options under the Company's 1987 Plan. Options canceled subsequent to
October 27, 1988 under the 1987 Plan are retired. Options canceled under the
1991 and 1988 Plans are available for reissuance. At February 1, 1997, a total
of 304,000 shares of Common Stock were reserved for issuance under the Company's
option plans.

Effective April 1995, the Company adopted the 1995 Director Stock Option
Plan which provides for annual grants to non-employee members of the Board of
Directors. Such grants are immediately exercisable on the date of grant and
expire ten years from the date of grant. At February 1, 1997, 70,000 shares of
Common Stock were reserved for issuance under the 1995 Director Stock Option
Plan.

A summary of the activity in the Company's stock option plans for the
fiscal year ended February 1,1997, the Transition Period ended February 3, 1996,
the fiscal year ended December 30, 1995 and the fiscal year ended December 31,
1994 is presented below.

Fiscal Transition Fiscal Fiscal
1996 Period 1995 1994
---------------------------------------------------- ----------------------- ----------
Weighted Weighted Weighted
Number Average Number Average Number Average Number
of Exercise of Exercise of Exercise of
Shares Price Shares Price Shares Price Shares

Outstanding at beginning of period 588,245 $7.84 561,145 $8.11 550,943 $8.45 601,967
Options granted 234,250 $3.80 31,500 $3.12 108,000 $6.33 77,250
Options exercised (100,500) $3.92 -- -- (29,775) $3.59 (83,825)
Options canceled (166,150) $8.04 (4,400) $8.12 (68,023) $9.99 (44,449)
--------- -------- --------
Outstanding at end of period 555,845 $6.79 588,245 $7.84 561,145 $8.11 550,943
========= ======== ======== =======

Exercisable at end of period 237,015 249,775 247,175 --
========= ======= ========

Weighted average fair value of
options granted during the
period (see below) $1.86 $1.70 $3.54 --

The following table summarizes information about stock options
outstanding at February 1, 1997:

Options Outstanding Options Exercisable
Weighted
Number Average Weighted Weighted
Range of of Remaining Average Number Average
Exercise Shares Contractual Exercise of Exercise
Prices Outstanding Life (Years) Price Shares Price

$ 2.75 to $ 3.12 109,500 9.6 $ 2.86 6,900 $ 3.09
$ 3.19 to $ 4.12 103,150 8.7 $ 4.06 9,500 $ 3.54
$ 4.50 to $ 5.83 96,795 6.9 $ 5.13 77,295 $ 5.04
$ 6.25 to $ 8.67 94,650 6.9 $ 6.95 49,800 $ 7.13
$ 9.06 to $12.42 103,600 6.0 $10.90 73,420 $ 10.85
$14.00 to $19.00 48,150 7.3 $15.81 20,100 $ 15.77
-------- ------
$ 2.75 to $19.00 555,845 7.6 $ 6.79 237,015 $ 8.07
======= =======

The Company applies the principles of APB Opinion 25 in accounting
for employee stock option plans. Accordingly, no compensation cost has been
recognized in the Company's financial statements. Had compensation cost been
determined on the basis of SFAS 123, "Accounting for Stock-Based Compensation,"
compensation expense would have been recorded based on the estimated fair value
of stock options granted during the fiscal years presented. The total fair value
of stock options granted was estimated at $435,000 and $382,000 for the fiscal
years ended February 1, 1997 and December 30, 1995, respectively, based upon the
Black-Scholes option pricing model. The following weighted-average assumptions
were used in the Black-Scholes option pricing model for stock options granted:
risk- free interest rates of approximately 6.0% and 6.5% for fiscal 1996 and
1995, respectively, an expected life of approximately one year from the vest
date for fiscal 1996 and 1995 and 65% expected volatility for fiscal 1996 and
1995. The expected life of the stock options granted and the stock price
volatility during the expected life of the options were estimated based upon
historical experience and management's expectations. Had compensation cost for
the Company's stock option plans been determined based on the estimated fair
value at the grant dates for awards under those plans consistent with the method
of SFAS 123, the Company's net loss and net loss per common share would have
been impacted as indicated in the proforma amounts below.

Fiscal Year Ended
February 1, December 30,
1997 1995
------------ ------------
Net loss Actual $(1,267,000) $(1,304,000)
============ ============
Proforma $(1,373,000) $(1,356,000)
============ ============
Net loss per common share Actual $ (0.12) $ (0.13)
============ ============
Proforma $ (0.13) $ (0.13)
============ ============

Retirement Plan: The Company has a 401(k) and profit-sharing plan, the One
Price Clothing Stores, Inc. Retirement Plan (the "Plan"). All employees in the
United States who are 21 years of age or older with at least one year of
service are eligible to participate in the Plan. Effective January 1995, the
Company increased its contribution obligation to 50% of each participant's
contribution with a maximum contribution of 2.5% of the participant's base
compensation. Prior to January 1995, the Company was obligated under the Plan
to make a matching contribution of 25% of each participant's contribution with
a maximum matching contribution of 1.25% of the participant's base
compensation. In addition, the Company may make an annual discretionary
contribution on behalf of the participants; no such discretionary
contributions have been made by the Company. Employer contributions
(approximately $296,000, $292,000 and $132,000 in fiscal 1996, 1995 and 1994,
respectively) vest ratably over five years.

Stock Purchase Plan: The Company adopted a Stock Purchase Plan, effective
March 1995, that allows participating employees to purchase, through payroll
deductions, shares of the Company's Common Stock at prevailing market prices.
All full-time associates who are 18 years of age or older with at least six
months of service are eligible to participate in the Stock Purchase Plan. The
Stock Purchase Plan provides that participants may authorize the Company to
withhold from net earnings and deposit such amounts with an independent
custodian. The custodian purchases Common Stock of the Company at prevailing
market prices and distributes the shares purchased to the participants upon
request. The Company pays expenses associated with the purchases of the Common
Stock and administration of the Stock Purchase Plan.

NOTE G - Related Party Transactions

In fiscal 1996, the Company entered into a deferred compensation agreement
with its Chairman of the Board of Directors and Chief Executive Officer. The
agreement provides for 120 consecutive monthly payments of $13,750 (including
interest) beginning upon the earlier of the date of retirement or death. The
estimated present value of the obligation, approximately $970,000, was charged
to selling, general and administrative expenses in fiscal 1996 and is included
in other noncurrent liabilities at February 1, 1997.

The Company also has a deferred compensation agreement with a former executive
officer who is currently a member of the Company's Board of Directors. The
agreement provides for monthly payments aggregating $75,000 annually
(including interest) through July 2002.

The Company paid approximately $64,000, $171,000 and $32,000 in fiscal 1996,
1995 and 1994, respectively, for legal services provided by the law firm of
which a Company Director is a member.

NOTE H - Shareholders' Equity

In March 1994, the Company declared a 3-for-2 stock split effected in the form
of a stock dividend payable April 29, 1994 to shareholders of record as of the
close of business on April 15, 1994. Accordingly, Common Stock outstanding,
the weighted average number of common and common equivalent shares and per
share amounts were retroactively adjusted to give effect to the stock split.

The Company adopted a Shareholders Rights Plan in November 1994. Each
shareholder of record on November 15, 1994 is entitled to one Right for each
share of Common Stock held on such date. Each Right entitles the registered
holder to purchase from the Company one half share of Common Stock at a
specified price. The Rights become exercisable only upon the occurrence of
certain conditions set forth in the Shareholders Rights Plan relating to the
acquisition of 20% or more of the outstanding shares of Common Stock.

NOTE I - Change in Fiscal Year End

Beginning in fiscal 1996, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest January 31. This change
was made to conform the Company's fiscal calendar to the seasonal patterns it
experiences, as well as to enhance comparability of its fiscal quarter and
annual results with other retail companies. The Consolidated Statement of
Operations and the Consolidated Statement of Cash Flows for the five- week
period ended February 3, 1996 are presented in the financial statements. For
comparative purposes, the Condensed Consolidated Statement of Operations
(Unaudited) and the Condensed Consolidated Statement of Cash Flows (Unaudited)
for the four-week period ended January 28, 1995, are as follows:

Condensed Consolidated Statement of Operations (Unaudited)

Four-Week Period
Ended January 28,
1995

NET SALES $ 12,173,000
Cost of goods sold, distribution and buying costs 12,861,000
-------------
(688,000)

Selling, general and administrative expenses 5,042,000
Store rent and related expenses 1,792,000
Depreciation and amortization expense 297,000
Interest expense 34,000
-------------
7,165,000
Interest income 3,000
-------------
NET EXPENSES 7,162,000
-------------
LOSS BEFORE BENEFIT FROM INCOME TAXES (7,850,000)
Benefit from income taxes (3,061,000)
--------------
NET LOSS $ (4,789,000)
==============

NET LOSS PER COMMON SHARE $ (0.46)
==============
Weighted average common shares outstanding 10,305,738
==============

Condensed Consolidated Statement of Cash Flows (Unaudited)

Four-Week Period
Ended January 28,
1995
Net cash used in operating activities $ (4,864,000)
--------------
Net cash used in investing activities - purchases of property and
equipment (1,664,000)
Financing activities:
Net borrowings from revolving credit facility 8,064,000
Decrease in amount due to related party (4,000)
Proceeds from exercise of Common Stock options 11,000
-------------
Net cash provided by financing activities 8,071,000
-------------
Increase in cash and cash equivalents 1,543,000
Cash and cash equivalents at beginning of period 362,000
-------------
Cash and cash equivalents at end of period $ 1,905,000
=============

To aid in comparative analysis, the Company has elected to present the
unaudited proforma results of operations for the 12 month period (53 weeks)
ended February 3, 1996 and the 12 month period (52 weeks) ended January 28,
1995 below. The unaudited proforma results presented for the year ended
January 28, 1995 do not reflect the impact of the changes in accounting
principles effective in January 1996.

Condensed Consolidated Statements of Operations (Unaudited)

Proforma Proforma
53 Weeks 52 Weeks
Ended Ended
February 3, January 28,
1996 1995
------------- -----------
NET SALES $297,541,000 $284,994,000
Cost of goods sold, distribution and buying costs 196,987,000 191,490,000
-------------- -------------
GROSS MARGIN 100,554,000 93,504,000
-------------- --------------
Selling, general and administrative expenses 73,414,000 64,099,000
Store rent and related expenses 25,048,000 20,597,000
Depreciation and amortization expense 4,508,000 3,665,000
Interest expense 1,465,000 302,000
-------------- --------------
104,435,000 88,663,000
Interest income 45,000 79,000
-------------- --------------
NET EXPENSES 104,390,000 88,584,000
-------------- -------------

(LOSS) INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES (3,836,000) 4,920,000
(Benefit from) provision for income taxes (1,687,000) 1,840,000
-------------- -------------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES (2,149,000) 3,080,000
Cumulative effect of changes in accounting principles
net of income tax benefit of $706,000 (1,090,000) --
-------------- --------------
NET (LOSS) INCOME $ (3,239,000) $ 3,080,000
============== ==============
PER COMMON SHARE AMOUNTS:
(Loss) income before cumulative effect
of changes in accounting principles $ (0.21) $ 0.29
Cumulative effect of changes in accounting principles,
net of income tax benefit (0.10) --
------------- --------------
NET (LOSS) INCOME PER COMMON SHARE $ (0.31) $ 0.29
============= ==============

Weighted average common shares outstanding 10,316,471 10,515,237
============ ============

NOTE J - Changes in Accounting Principles

The Financial Accounting Standards Board ("FASB") issued Statement No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This statement essentially requires that
when the Company commits to closing specific stores and for other stores which
may be impaired, the fixed assets for such stores must be written down to
estimated fair market value. The Company's adoption of SFAS 121, required for
years beginning after December 15, 1995, resulted in a decrease in net fixed
assets of approximately $1,630,000 and a charge of approximately $1,397,000
(net of income taxes) which is included in the cumulative effect of changes in
accounting principles in the Statement of Operations for the Transition
Period.

The Company also elected to change certain methods of accounting for
merchandise inventories beginning in the Transition Period. The Company
changed from the lower of average first-in, first-out (FIFO) cost or market
method of accounting to the lower of cost (computed using the FIFO retail
method) or market. The Company believes that the FIFO retail method provides
improved information for the operation of its business in a manner consistent
with the method used widely in the retail industry. The Company is also
capitalizing into inventory certain merchandise acquisition and distribution
costs to provide a better matching of revenues and expenses, particularly in
interim periods. The effect of the change to the FIFO retail method was to
reduce merchandise inventories by approximately $1,207,000, and the effect of
capitalizing into inventory certain merchandise acquisition and distribution
costs was to increase merchandise inventories by approximately $1,698,000.
These changes in accounting for merchandise inventories resulted in a net
increase in merchandise inventories of approximately $491,000 and a benefit of
approximately $307,000 (net of income taxes) which is included in the
cumulative effect of changes in accounting principles in the Statement of
Operations for the Transition Period.

NOTE K - Quarterly Results (Unaudited)

The following is a summary of quarterly (13 weeks) operations for the years
ended February 1, 1997 and December 30, 1995 (in thousands except per share
data). In management's opinion, the unaudited quarterly information includes
all adjustments, consisting of normal recurring adjustments, necessary for
a fair presentation of the information shown.

1996 Quarters Ended
May 4, August 3, November 2, February 1,
1996 1996 1996 1997
Net sales $76,294 $87,450 $63,899 $71,343
Gross margin 28,727 31,220 21,277 24,444
Net income (loss) 1,237 2,940 (2,763) (2,681)
Net income (loss) per common share 0.12 0.28 (0.26) (0.26)

1995 Quarters Ended
April 1, July 1, September 30, December 30,
1995 1995 1995 1995
------------------------------------------------------------

Net sales $54,639 $86,647 $74,307 $79,099
Gross margin 14,572 32,932 24,437 27,447
Net (loss) income (5,084) 4,314 (1,135) 601
Net (loss) income per common share (0.49) 0.42 (0.11) 0.06

Unaudited proforma fiscal 1995 quarterly results (before the cumulative effect
of the changes in accounting principles effective in January 1996) are
presented below (in thousands except per share data) to reflect the change in
fiscal year end. Each quarter consists of 13 weeks except the fourth quarter
of 1995 which consists of 14 weeks. Unaudited proforma fiscal 1994 quarterly
results are also presented below (in thousands except per share data) to
reflect the change in fiscal year. Each quarter of fiscal 1994 consists of 13
weeks.

Fiscal 1995 Quarters Ended - Proforma
April 29, July 29, October 28, February 3,
1995 1995 1995 1996
---------- ---------- --------------- ---------
Net sales $67,722 $86,157 $69,451 $74,211
Gross margin 24,727 31,141 22,712 21,974
Income (loss) before cumulative effect
of changes in accounting principles 667 2,936 (2,276) (3,476)
Net income (loss) per common share
before cumulative effect of changes
in accounting principles 0.06 0.28 (0.22) (0.34)

Fiscal 1994 Quarters Ended - Proforma
April 30, July 30, October 29, January 28,
1994 1994 1994 1995
---------- -------- -------------- ----------
Net sales $ 69,504 $ 80,898 $ 61,825 $ 72,767
Gross margin 25,849 27,362 19,311 20,982
Net income (loss) 3,885 3,204 (1,904) (2,105)
Net income (loss) per common share 0.37 0.30 (0.18) (0.20)

In the above presentation, certain distribution and buying costs were
reclassified to cost of sales from selling, general and administrative
expenses to enhance comparability to fiscal 1996 operating results.

NOTE L - Effect of New Accounting Pronouncements

The FASB issued SFAS 128, "Earnings Per Share," effective for periods ending
after December 15, 1997. The new standard requires a dual presentation of
"basic" and "diluted" EPS on the face of the income statement. If the Company
had applied the principles of SFAS 128 for the fiscal year ended February 1,
1997, weighted average shares for basic EPS and diluted EPS would have been
10,400,789, the same as that computed under APB Opinion No. 15, the current
EPS accounting standard.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
On April 1, 1997, the Company filed a report on Form 8-K dated April 1, 1997
to report that Henry D. Jacobs, Jr., the Company's Chairman, President and
Chief Executive Officer announced his resignation of his positions as
President and Chief Executive Officer. He will continue as Chairman of the
Board of Directors of the Company. Mr. Larry I. Kelley, formerly President and
Chief Executive Officer of Casual Male Big and Tall, a division of J. Baker,
Inc., was appointed to the position of President and Chief Executive Officer,
effective April 24, 1997.

The remaining information required under this item is incorporated herein by
reference to the sections entitled "Election of Directors" and "Executive
Officers of the Company" and "Section 16(a) Beneficial Ownership Reporting
Compliance" of the Company's definitive Proxy Statement (the "Proxy
Statement") filed with the Securities and Exchange Commission in connection
with the Annual Meeting of Shareholders to be held June 4,1997.

ITEM 11. EXECUTIVE COMPENSATION

The information required under this item is incorporated herein by reference
to the sections entitled "Compensation Committee Interlocks and Insider
Participation," "Compensation of Executive Officers," "Employment Contracts
and Deferred Compensation Arrangements," "Compensation Committee Report on
Executive Compensation," "Performance Graph" and "Election of Directors -
Directors' Fees" of the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required under this item is incorporated herein by reference
to the sections entitled "Security Ownership of Certain Beneficial Owners,"
"Election of Directors" and "Security Ownership of Management" of the Proxy
Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required in this item is incorporated herein by reference to
the sections entitled "Compensation Committee Interlocks and Insider
Participation" and "Employment Contracts and Deferred Compensation
Arrangements" of the Proxy Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K

(a) 1. Financial Statements
The following financial statements of One Price Clothing Stores,
Inc. are included in Part II, Item 8:

Independent Auditors' Report

Consolidated Balance Sheets as of February 1, 1997, and February 3,
1996

Consolidated Statements of Operations for the fiscal year ended
February 1, 1997, the Transition Period ended February 3, 1996, and
the fiscal years ended December 30, 1995 and December 31, 1994

Consolidated Statements of Shareholders' Equity for the
fiscal year ended February 1, 1997, the Transition Period
ended February 3, 1996 and the fiscal years ended December
30, 1995 and December 31, 1994

Consolidated Statements of Cash Flows for the fiscal year
ended February 1, 1997, the Transition Period ended February
3, 1996 and the fiscal years ended December 30, 1995 and
December 31, 1994

Notes to Consolidated Financial Statements

(a) 2. Financial Statement Schedule

The following financial statement schedule of One Price Clothing
Stores, Inc. is included in Item 14 (d):

Schedule II -- Valuation and Qualifying Accounts.

Schedules not listed above have been omitted because they are
not applicable or the information is included in the
financial statements or notes thereto.

(a) 3. Exhibits including those incorporated by reference:

Exhibit
Number Description

3(a) Certificate of Incorporation of the Registrant, as amended
through April 1987: Incorporated by reference to exhibit of the
same number to Registrant's Registration Statement on Form S-1,
filed April 10, 1987 (File No. 33-13321) ("the S-1").

3(a)(1) Certificate of Amendment of Certificate of Incorporation of the
Registrant: Incorporated by reference to exhibit of the same
number to Registrant's Annual Report on Form 10-K for the year
ended January 1, 1994 (File No. 0-15385)("the 1993 Form 10-K").

3(b) Restated By-Laws of the Registrant, as of July 22, 1992 and
amended as of July 20, 1994 and March 14, 1996. Incorporated by
reference to exhibit of the same number to Registrant's Annual
Report on Form 10-K for the year ended December 30, 1995 (File
No. 0-15385)("the 1995 Form 10-K").

4(a) See Exhibits 3(a), 3(a)(1), and 3(b).

4(b) Specimen of Certificate of the Registrant's Common Stock:
Incorporated by reference to Exhibit 1 to the Registrant's
Registration Statement on Form 8-A filed with the Securities
and Exchange Commission on June 23, 1987 (File No. 0-15385).

4(c) Shareholder Rights Agreement by and between the Registrant and
Wachovia Bank of North Carolina, N. A. as Rights Agent dated
November 3, 1994: Incorporated by reference to Exhibit 2 to
the Registrant's Form 8-K filed November 10, 1994
(File No. 0-15385).

4(d) Loan and Security Agreement by and between Congress Financial
Corporation (Southern) as Lender and the Registrant and One
Price Clothing of Puerto Rico, Inc., as Borrowers dated March
25, 1996: Incorporated by reference to exhibit of same number
to the 1995 Form 10-K.

4(e) The Company hereby agrees to furnish to the Commission upon
request of the Commission a copy of any instrument with respect
to long-term debt not being registered in a principal amount
less than 10% of the total assets of the Company and its
subsidiaries on a consolidated basis.

Material Contracts -- Executive Compensation Plans and Arrangements:

10(a)* Stock Option Plan of the Registrant dated February 20, 1987 and
related forms of Incentive and Non- qualified Stock Option
Agreements: Incorporated by reference to Exhibit 10(d) to the
S-1.

10(b)* Stock Option Plan of the Registrant dated December 12, 1988 and
related forms of Incentive and Non-qualified Stock Option
Agreements: Incorporated by reference to Exhibit 10(a) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988 (File No. 0-15385) ("the 1988
Form 10-K").

10(c)* One Price Clothing Stores, Inc. 1991 Stock Option Plan:
Incorporated by reference to Exhibit 10(b) to the Registrant's
Annual Report on Form 10-K for the year ended December 28, 1991
(File No. 0-15385) ("the 1991 Form 10-K").

10(d)* Summary of Officer Bonus Plan: Incorporated by reference to
Exhibit 10 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended May 4, 1996
(File No. 0-15385) ("the April 1996 Form 10-Q").

10(e)* Form of Employment Agreement between Registrant and Henry D.
Jacobs, Jr.: Incorporated by reference to Exhibit 10(j) to the
1988 Form 10-K.

10(f)* Key man term insurance policy, issued February 20, 1993, on the
life of Henry D. Jacobs, Jr.:
Incorporated by reference to Exhibit 10(g) to the Registrant's
Annual Report on Form 10-K for the year ended January 2, 1993
(File No. 0-15385)("the 1992 Form 10-K").

10(g)* Employment Agreement dated January 16, 1995 and Amendment to
Employment Agreement dated January 20, 1997 between the
Registrant and Stephen A. Feldman.

10(h)* Disability Income Policy for the benefit of Henry D. Jacobs,
Jr.: Incorporated by reference to Exhibit 10(i) to the 1992
Form 10-K.

10(i)* Agreement dated June 24, 1992 between the Registrant and
Raymond S. Waters: Incorporated by reference to Exhibit 10(l)
to the 1992 Form 10-K.

10(j)* Directors' Stock Option Plan effective April 19, 1995:
Incorporated by reference to Exhibit 10(m) in to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 0-15385)("the 1994 Form 10-K").

10(k)* Amendment Number One to One Price Clothing Stores, Inc.
Director Stock Option Plan dated March 14, 1996: Incorporated
by Reference to Exhibit 10(a) to the April 1996 Form 10-Q.

10(l)* Employment Agreement dated March 30, 1992 and Amendment to
Employment Agreement dated February 4, 1997 between the
Registrant and Ronald Swedin.

10(m)* Employment Agreement dated December 12, 1995 between the
Registrant and Thomas Unrine. Incorporated by reference to
Exhibit 10(o) to the 1995 Form 10-K.

10(n)* Agreement dated March 25, 1997 between the Registrant and Henry
D. Jacobs, Jr.

10(o)* Employment Agreement dated March 26, 1997 between the
Registrant and Larry I. Kelley.

10(p)* Addendum to Employment Agreement dated March 6, 1997 between
the Registrant and Henry D. Jacobs, Jr.

Material Contracts -- Other: None

11 Statement regarding computation of per share earnings

21 Subsidiaries of the Registrant

23 Consent of Deloitte & Touche LLP

27 Financial Data Schedule (electronic filing only)
---------------------------------------

* Denotes a management contract or compensatory plan or agreement.

(b) Reports on Form 8-K.

On January 22, 1997, the Company filed a report on Form 8-K dated
January 21, 1997 to announce that the Company is expanding its
merchandise offering to include other retail price points.

No other reports on Form 8-K were required to be filed during the
last quarter of the period covered by this report.

On April 1, 1997, the Company filed a report on Form 8-K dated
April 1, 1997 to report that Henry D. Jacobs, Jr., the Company's
Chairman, President and Chief Executive Officer announced his
resignation of his positions as President and Chief Executive
Officer. He will continue as Chairman of the Board of Directors of
the Company. Mr. Larry I. Kelley, formerly President and Chief
Executive Officer of Casual Male Big and Tall, a division of J.
Baker, Inc., was appointed to the position of President and Chief
Executive Officer, effective April 24, 1997.

(c) Exhibits.

The response to this portion of Item 14 is submitted as a separate
section of this report.

(d) Financial Statement Schedules.

The response to this portion of Item 14 is submitted as a separate
section of this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

ONE PRICE CLOTHING STORES, INC.

Date: April 23, 1997 /s/ Henry D. Jacobs, Jr.
------------------------
Henry D. Jacobs, Jr.
Chairman of the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Date: April 23, 1997 /s/ Henry D. Jacobs, Jr.
------------------------
Henry D. Jacobs, Jr.
Chairman of the Board of Directors
(principal executive officer)

Date: April 23, 1997 /s/ Stephen A. Feldman
----------------------
Stephen A. Feldman
Executive Vice President and Chief Financial Officer
(principal financial officer)

Date: April 23, 1997 /s/ David F. Bellet
-------------------
David F. Bellet
Director

Date: April 23, 1997 /s/ Cynthia R. Cohen
--------------------
Cynthia R. Cohen
Director

Date: April 23, 1997 /s/ Charles D. Moseley, Jr.
---------------------------
Charles D. Moseley, Jr.
Director

Date: April 23, 1997 /s/ Laurie M. Shahon
--------------------
Laurie M. Shahon
Director

Date: April 23, 1997 /s/ Malcolm L. Sherman
----------------------
Malcolm L. Sherman
Director

Date: April 23, 1997 /s/ James M. Shoemaker, Jr.
---------------------------
James M. Shoemaker, Jr.
Director

Date: April 23, 1997 /s/ Raymond S. Waters
---------------------
Raymond S. Waters
Director

ONE PRICE CLOTHING STORES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

COL. A
COL. B COL. C COL. D COL. E

DESCRIPTION ADDITIONS
Balance at Charged to Charged Deduction - Balance
Beginning of Cost & to Other- Describe (1) at End of
Period Expenses Describe Period

------------------- ------------------ -------------- ----------- ----------- -------------

YEAR ENDED
FEBRUARY 1, 1997

Allowance for
doubtful accounts $233,000 $685,000 $774,000 $144,000
======== ======== ======== ========

Valuation allowance
for deferred income
tax assets -- $354,000 -- $354,000
======== ========
TRANSITION
PERIOD ENDED
FEBRUARY 3, 1996

Allowance for
doubtful accounts $205,000 $108,000 $ 80,000 $233,000
======== ======== ======== ========

YEAR ENDED
DECEMBER 30, 1995

Allowance for
doubtful accounts $189,000 $607,000 $591,000 $205,000
======== ======== ======== ========

YEAR ENDED
DECEMBER 31, 1994

Allowance for
doubtful accounts $135,000 $822,000 $768,000 $189,000
======== ======== ======== ========

(1) Write-offs charged against the allowance for returned customer checks

ONE PRICE CLOTHING STORES, INC.
EXHIBIT INDEX

Exhibit
Number Description

3(a) Certificate of Incorporation of the Registrant, as amended through
April 1987: Incorporated by reference to exhibit of the same number
to Registrant's Registration Statement on Form S-1, filed April 10,
1987 (File No. 33-13321) ("the S-1").

3(a)(1) Certificate of Amendment of Certificate of Incorporation of the
Registrant: Incorporated by reference to exhibit of the same number
to Registrant's Annual Report on Form 10-K for the year ended
January 1, 1994 (File No. 0-15385)("the 1993 Form 10-K").

3(b) Restated By-Laws of the Registrant, as of July 22, 1992 and amended
as of July 20, 1994 and March 14, 1996. Incorporated by reference
to exhibit of the same number to Registrant's Annual Report on Form
10-K for the year ended December 30, 1995 (File No. 0-15385)("the
1995 Form 10-K").

4(a) See Exhibits 3(a), 3(a)(1), and 3(b).

4(b) Specimen of Certificate of the Registrant's Common Stock: Incorporated
by reference to Exhibit 1 to the Registrant's Registration Statement
on Form 8-A filed with the Securities and Exchange Commission on
June 23, 1987 (File No. 0-15385).

4(c) Shareholder Rights Agreement by and between the Registrant and
Wachovia Bank of North Carolina, N. A. as Rights Agent dated
November 3, 1994: Incorporated by reference to Exhibit 2 to the
Registrant's Form 8-K filed November 10, 1994 (File No. 0-15385).

4(d) Loan and Security Agreement by and between Congress Financial
Corporation (Southern) as Lender and the Registrant and One Price
Clothing of Puerto Rico, Inc., as Borrowers dated March 25, 1996:
Incorporated by reference to exhibit of same number to the 1995
Form 10-K.

4(e) The Company hereby agrees to furnish to the Commission upon request
of the Commission a copy of any instrument with respect to
long-term debt not being registered in a principal amount less than
10% of the total assets of the Company and its subsidiaries on a
consolidated basis.

Material Contracts -- Executive Compensation Plans and Arrangements:

10(a)* Stock Option Plan of the Registrant dated February 20, 1987 and
related forms of Incentive and Non- qualified Stock Option
Agreements: Incorporated by reference to Exhibit 10(d) to the S-1.

10(b)* Stock Option Plan of the Registrant dated December 12, 1988 and
related forms of Incentive and Non- qualified Stock Option
Agreements: Incorporated by reference to Exhibit 10(a) to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1988 (File No. 0-15385) ("the 1988 Form 10-K").

10(c)* One Price Clothing Stores, Inc. 1991 Stock Option Plan: Incorporated by reference to Exhibit 10(b) to the
Registrant's Annual Report on Form 10-K for the year ended December 28, 1991 (File No. 0-15385) ("the
1991 Form 10-K").

10(d)* Summary of Officer Bonus Plan: Incorporated by reference to Exhibit 10 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended May 4, 1996 (File No. 0-15385) ("the April 1996 Form 10-Q").

10(e)* Form of Employment Agreement between Registrant and Henry D. Jacobs, Jr.: Incorporated by reference
to Exhibit 10(j) to the 1988 Form 10-K.

10(f)* Key man term insurance policy, issued February 20, 1993, on the life of Henry D. Jacobs, Jr.:
Incorporated by reference to Exhibit 10(g) to the Registrant's Annual Report on Form 10-K for the year
ended January 2, 1993 (File No. 0-15385)("the 1992 Form 10-K").

10(g)* Employment Agreement dated January 16, 1995 and Amendment to Employment Agreement dated
January 20, 1997 between the Registrant and Stephen A. Feldman.

10(h)* Disability Income Policy for the benefit of Henry D. Jacobs, Jr.: Incorporated by reference to Exhibit 10(I)
to the 1992 Form 10-K.

10(i)* Agreement dated June 24, 1992 between the Registrant and Raymond S. Waters: Incorporated by
reference to Exhibit 10(l) to the 1992 Form 10-K.

10(j)* Directors' Stock Option Plan effective April 19, 1995: Incorporated by reference to Exhibit 10(m) in to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 0-15385)("the
1994 Form 10-K").

10(k)* Amendment Number One to One Price Clothing Stores, Inc. Director Stock Option Plan dated March 14,
1996: Incorporated by Reference to Exhibit 10(a) to the April 1996 Form 10-Q.

10(l)* Employment Agreement dated March 30, 1992 and Amendment to
Employment Agreement dated February 4, 1997 between the Registrant
and Ronald Swedin.

10(m)* Employment Agreement dated December 12, 1995 between the Registrant
and Thomas Unrine. Incorporated by reference to Exhibit 10(o) to
the 1995 Form 10-K.

10(n)* Agreement dated March 25, 1997 between the Registrant and Henry D. Jacobs, Jr.

10(o)* Employment Agreement dated March 26, 1997 between the Registrant and Larry I. Kelley.

10(p)* Addendum to Employment Agreement dated March 6, 1997 between the Registrant and Henry D. Jacobs,
Jr.

Material Contracts -- Other: None

11 Statement regarding computation of per share earnings

21 Subsidiaries of the Registrant

23 Consent of Deloitte & Touche LLP

27 Financial Data Schedule (electronic filing only)
---------------------------------------

* Denotes a management contract or compensatory plan or agreement.

(b) Reports on Form 8-K.

On January 22, 1997, the Company filed a report on Form 8-K dated
January 21, 1997 to announce that the Company is expanding its
merchandise offering to include other retail price points.

No other reports on Form 8-K were required to be filed during the
last quarter of the period covered by this report.

On April 1, 1997, the Company filed a report on Form 8-K dated
April 1, 1997 to report that Henry D. Jacobs, Jr., the Company's
Chairman, President and Chief Executive Officer announced his
resignation of his positions as President and Chief Executive
Officer. He will continue as Chairman of the Board of Directors of
the Company. Mr. Larry I. Kelley, formerly President and Chief
Executive Officer of Casual Male Big and Tall, a division of J.
Baker, Inc., was appointed to the position of President and Chief
Executive Officer, effective April 24, 1997.

(c) Exhibits.

The response to this portion of Item 14 is submitted as a separate
section of this report.

(d) Financial Statement Schedules.

The response to this portion of Item 14 is submitted as a separate
section of this report.