(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant (1) has filed all reports 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.

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 [ ]

At March 15, 2002 the aggregate market value of the Registrant's Common Stock held by non-affiliates was $7,308,737 based on a value of $2.20 per share, the closing price of Common Stock as quoted by the American Stock Exchange on that date.

On March 15, 2002 the registrant had 6,089,128 shares of Common Stock outstanding.

Portions of the Registrant's Annual Report to Stockholders for the year ended February 2, 2002 ("Annual Report") are incorporated by reference into Part II.

Portions of the Registrant's Proxy Statement for its 2002 Annual Meeting of Stockholders ("Proxy Statement") are incorporated by reference into Part III.

Harold's Stores, Inc. and its wholly-owned subsidiaries (collectively "Harold's" or the "Company"), through a 52-store location chain of women's and men's specialty apparel stores in 22 states, offers high-quality, classically inspired apparel to the upscale, quality-conscious consumer primarily in the 30 to 50 year old age group. The stores typically are strategically located in shopping centers and malls with other upscale specialty retailers and are enhanced by an eclectic mix of antiques, together with specially designed fixtures and visual props, to create an appealing stage for presentation of the Company's distinctive women's and men's apparel and accessories. More than 95% of sales consists of the Company's designs controlled by Harold's own designers and merchants and sourced by Harold's manufacturing staff from domestic, European and Asian manufacturers. The remainder consists of merchandise selected to complement Harold's merchandise presentation. See "Business - Product Development and Sourcing Programs."

The Company's 52 stores are comprised of 44 full-price retail stores and eight outlet stores to clear markdowns and slow-moving merchandise, in addition to limited merchandise produced specifically for the outlets. Store occupancy costs include base and percentage rent, common area maintenance expense, utilities and depreciation of leasehold improvements.

There was a decline in comparable store sales of 16.3% for 2001, compared to a decline of 11.9% for 2000. The Company believes that the declines experienced in comparable store sales during 2001 were primarily attributable to disappointing sales in its spring, summer and fall transitional merchandise. The Company's average sales per square foot for retail stores excluding outlets open during the entire year were $346 and $398 for 2001 and 2000, respectively.

The Company believes that its future success will be achieved by focusing on the fashion needs of its target customer, increasing sales momentum at existing stores, and expanding the number of its women's and men's apparel stores. In February 2001, the Company hired a new Chief Executive Officer, Clark Hinkley, to lead these efforts. Mr. Hinkley has spent his entire career in the retail industry, joining Harold's from The Children's Place where he was Executive Vice President - Merchandising since 1998. From 1987 to 1997 he was at Talbot's, where he was Executive Vice President and a member of the Board of Directors. Prior to 1987, Mr. Hinkley was a merchandising executive at Dayton Hudson. During 2001, the Company has ceased new store growth to focus on reinvigorating the Harold's brand. Once a profitable growth trend has been re-established, the Company plans to continue a store expansion program. The Company's expansion program will continue to focus primarily on marke ts currently served by the Company and in new markets that represent a geographical progression from existing markets. The Company currently does not plan to open any new stores during 2002. See Management's Discussion and Analysis - Liquidity for further information.

The Company operates on a 52-53 week year, which ends on the Saturday closest to January 31. References herein to 2002, 2001, 2000, and 1999 refer to the years ended February 1, 2003, February 2, 2002, February 3, 2001, and January 29, 2000, respectively.

The Company's merchandise mix in women's apparel includes coordinated sportswear, dresses, outerwear, shoes and accessories, in updated classic styles. A fundamental feature of the Company's marketing strategy is the development of original exclusive apparel items. The Company estimates that more than 95% of its women's apparel sales are attributable to the Company's product development and proprietary label programs. In 2001 and 2000, women's apparel accounted for approximately 76% and 77% of sales, respectively.

The men's apparel product line includes tailored clothing, furnishings, sportswear, and shoes. The style is principally what is known in the apparel trade as "updated traditional," classic styling. In 2001, the Company's proprietary label apparel accounted for more than 95% of total men's sales. The majority of the men's proprietary label sales are in the Company's Old School Company, Harold's and Harold Powell Clothing lines. In 2001 and 2000, men's apparel accounted for approximately 24% and 23% of sales, respectively.

The following table sets forth the approximate percentage of sales attributable to the various merchandise categories offered by the Company in the past three years:

The Company's 52 stores range in size from 3,000 to 13,402 square feet, with the typical store ranging from 4,000 to 6,000 square feet. The Company's stores generally are open seven days per week and evenings. The following table lists Harold's store locations as of February 2, 2002, with selected information for each location.

The employee population of a typical full-line Harold's store consists of a store manager, two assistant managers (women's and men's), one or two desk associates, and five to seven sales associates, most of whom work on a flex-time basis (20-25 hours per week). The majority of sales associates are generally paid a commission against a draw. Commissions range from 6% to 9% based on the type of product sold and the tenure and productivity of the associate. Store managers are paid a salary plus a performance bonus based on attainment of sales goals, expense control, inventory shrinkage and random store shop scores.

The Company's product development and sourcing programs enable it to offer exclusive items not available in competing stores or catalogs. More than 95% of sales is merchandise where the Company has created or controlled the design, demonstrating the Company's commitment to a unique product mix. The Company believes that this unique product mix enables it to compete with, and differentiates it from, larger apparel chains by offering customers an exclusive garment at a price below designers and similar open market merchandise. Direct creation and control of merchandise also enables the Company to improve its initial mark up. The Company's private label merchandise consists of items developed by the Company and manufactured exclusively for the Company.

An important component of the Company's product development programs is market research of styles and fabrics. The Company's designers shop European and domestic markets for emerging fashion trends and for fabric, artwork and samples for new garment designs. The product development staff adapts and develops fabric designs and garment models. These design models assist the Company in sourcing and in negotiations with mills and vendors. The Company's product development programs allow it to participate directly in the design and manufacturing of an exclusive product without investing in costly manufacturing equipment. The Company's development program is complemented by its offices in New York and Dallas, Texas and its association with independent agents in Florence, Italy; Istanbul,Tukey; Porto, Portugal; and Hong Kong. The Company imports a significant portion of its merchandise directly from Italy and the Far East.

The Company's designers travel to Europe several times each year, searching out new styles and collecting vintage fabrics and antique wallpaper, and original art for pattern development. In addition to purchasing original artwork created for pattern development, merchandisers have ongoing contact with several art studios in Europe where artists hand paint intricate patterns and prints exclusively for the Company. The European development work helps the Company identify emerging trends for development into the Company's classically inspired merchandise.

The Company's merchandisers review the collected material, analyze fashion directions and select the best pieces to convert into prints and patterns for the next season. Once the new patterns are selected, the team then determines the specifications of various styles - detailing a garment's cut, fit, fabric, color and trim. After the specifications have been finalized, the fabric is ordered from domestic and international fabric mills. The finished fabric is then shipped to manufacturers who cut, sew and trim the completed design. Additionally, a growing percentage of merchandise is purchased as finished goods.

The Company's line of leather goods, which are sold in all store locations, is made primarily in Italy. Shoes, belts, handbags and wallets are co-designed by the Company's merchandisers and Italian manufacturers.

On February 18, 2000, the Company entered into a stock purchase agreement pursuant to which the Company purchased all the issued and outstanding shares of CMT Enterprises, Inc. ("CMT"), a New York corporation. The Company issued a promissory note in the amount of $2.54 million and assumed long-term debt of CMT, payable to the Company, in the amount of $1.385 million. The excess of the purchase price over the fair value of the net assets acquired, approximately $3,576,000, was recorded as goodwill. The goodwill was originally being amortized over a 15-year period, but this estimated life was changed to seven years during 2001. During the third quarter of 2001, management's analysis indicated the remaining goodwill balance should be written off.

The specialty retail apparel business fluctuates according to changes in customer preferences dictated by fashion and season. These fluctuations affect the inventory owned by apparel retailers, since merchandise usually must be ordered well in advance of the season and sometimes before fashion trends are evidenced by customer purchases. The Company's policy of carrying basic merchandise items in full assortments of sizes and colors requires it to carry a significant amount of inventory. The Company must enter into contracts for the purchase and manufacture of proprietary label apparel well in advance of its selling seasons.

The Company continually reviews its inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of styles, colors and sizes) and may use markdowns to clear this merchandise. Markdowns also may be used if inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, or if it is determined that the inventory in stock will not sell at its currently marked price. Such markdowns may have an adverse impact on earnings, depending on their extent and the amount of inventory affected. The Company utilizes its eight outlet stores to dispose of prior season or slow moving merchandise as well as merchandise developed specifically for the outlet division. In addition, in lieu of utilizing outside liquidation resources ("jobbers"), slow moving merchandise is periodically cleared through regional off-site discount sales which are promoted under the name "Harold's Warehouse Sale".

The Company operates an 85,000 square foot distribution facility in Norman, Oklahoma capable of processing merchandise for 74 stores. With a modest additional investment, the facility will have the capability of processing merchandise for 138 stores. All of the Company's merchandise is routed through the distribution center from various manufacturers. The majority of merchandise arrives at the distribution center with bar coded tickets placed on the garment by the vendor. Each item is examined, sorted and boxed for shipment by common carrier to the Company's 52 stores. This process is done in a time sensitive manner in a substantially paperless environment, utilizing computers, bar codes and scanners.

The Company's business has historically followed a seasonal pattern, peaking twice per year during the early fall (September through October) and holiday (Thanksgiving through Christmas) periods. During 2001, approximately 52% of the Company's sales occurred and the majority of the Company's net loss was incurred during the third and fourth quarters.

The Company's business is highly competitive. The Company's stores compete with national and local department stores, specialty and discount store chains, catalogers and independent retail stores which offer similar lines of specialty apparel. Many of these competitors have significantly larger sales volumes and assets than the Company.

Important factors in competing successfully in the retail industry include the following: depth of selection in sizes and colors and styles of merchandise, merchandise procurement and pricing, ability to anticipate fashion trends and customer preferences, inventory control, reputation, quality of private-label merchandise, store design and location, marketing and customer service. Given the large number of companies in the retail industry, the Company cannot estimate the number of its competitors or its relative competitive position.

In addition, the success of the Company's operations depends upon a number of factors relating to economic conditions and general consumer spending. If current economic conditions worsen and consumer spending is restricted, the Company's growth and profitability could be negatively impacted.

The Company's stores accept the proprietary "Harold's" credit card, and Visa, MasterCard, Discover and the American Express credit cards. Credit card sales were 79% in 2001, 69% in 2000 and 70% in 1999. In 2001, 23% of sales were made with the Harold's credit card and 56% were made with third-party credit cards. The Company maintains a credit department for customer service, credit authorizations, credit investigation, billing and collections. As of February 2, 2002, the provision for bad debts from Company credit card sales was approximately 1.0% of Harold's proprietary credit card sales for 2001.

Harold's has offered customers its proprietary credit card since 1974. The Company believes that providing its own credit card enhances customer loyalty while providing customers with additional credit at costs to the Company significantly lower than those charged by outside credit card companies (i.e. Visa, MasterCard, Discover and American Express). At February 2, 2002, the Company had approximately 21,223 active credit accounts and the average cardholder had a line of $1,300 and an outstanding balance of $289. Charges by holders of the Company's credit card during 2001 totaled approximately $24,231,000.

The Company maintains an in-house advertising department, which produces in-house print advertising for daily and weekly newspapers and other print media, and designs the Company's direct mail pieces. In 2001, the Company spent approximately $3,889,000 (3.7% of sales) on advertising and direct mail production costs as compared to approximately $6,269,000 (4.9% of sales) in 2000. This expenditure includes the production and mailing costs associated with the Company's direct response catalog which was converted to an in-home mailing piece to drive store traffic late in 2000. The advertising department is also involved in the production of annual reports to the Company's stockholders, sales training materials, internal marketing materials, and all corporate logos and labeling.

The Company places great emphasis on upgrading and integrating its management information systems ("MIS"). The Company believes these upgrades will enable it to maintain more efficient control of its operations and facilitate faster and more informed responses to potential opportunities and problems. The Company maintains an MIS team to oversee these management information systems, which include credit, sales reporting, accounts payable, and merchandise control, reporting and distribution.

The Company uses an integrated point-of-sale ("POS") inventory and management system to control merchandising and sales activities. This system automatically polls each location every 24 hours and provides a detailed report by merchandise category the next morning. Management evaluates this information daily and implements merchandising controls and strategies as needed. The POS system provides personnel scheduling and time keeping capabilities, as well as, a customer profile function to better identify and track consumer demographics.

The Company continues to implement newer and better inventory control systems. During 1999, the Company began utilizing an independent third-party company to conduct its inventory counts. POS scanning devices record and track SKU bar codes, which are assigned, to every piece of merchandise. This information is downloaded into the Company's IBM AS400® computer, which generates a detailed report within 24 hours of the physical inventory.

The Company has also implemented ARTHUR®, a computerized merchandise planning system, which interacts with the Company's AS400® and Island Pacific Systems® software. ARTHUR® facilitates seasonal planning by department and store, and provides certain data for financial planning. The Company implemented the allocation product offered by JDA Software Group, Inc. during 2001.

"Harold's", "Harold Powell", "Old School Clothing Company", "OSCC Bespoke" and other trademarks either have been registered, or have trademark applications pending, with the United States Patent and Trademark Office and with the registries of various foreign countries. The Company files U.S. copyright registration on the original design and artwork purchased or developed by the Company.

The Company's three Houston stores and the Katy, Texas outlet bear the name "Harold Powell" rather than "Harold's" to avoid confusion with an existing local men's apparel store which operates in Houston under the name "Harold's" with prior usage in this market predating the Company's federal registration.

On March 15, 2002, the Company had approximately 523 full-time and 656 part-time employees. Additionally, the Company hires temporary employees during the peak late summer and holiday seasons. None of the Company's employees belong to any labor union and the Company believes it has good relations with its employees.

At February 2, 2002, the Company owned the Austin outlet store and leased 51 stores. The Company believes rent payable under its store leases is a key factor in determining the sales volume at which a store can be profitably operated. The leases typically provide for an initial term of 12 years. In most cases, the Company pays a base rent plus a contingent rent based on the store's net sales in excess of a certain threshold, typically four to five percent of net sales in excess of the applicable threshold. Among current store leases, two store leases have percentage rent only. All other store leases provide for a base rent with percentage rent payable above specified minimum net sales. Six of the leased stores open during all of 2001 operated at sales volumes above the breakpoint (the sales volume below which only base rent is payable). Based on the Company's current level of sales per square foot, the Company believes that some of the risk from any decline in future sale s volume in these stores is reduced because a corresponding decline in occupancy expense would occur.

Substantially all of the leases require the Company to pay property taxes, insurance, utilities and common area maintenance charges. The current terms of the Company's leases, including automatic renewal options, expire as follows:

The Company generally has been successful in renewing its store leases as they expire.

During 2001, the Company did not enter into any new store leases. Management believes the terms of its leases are comparable with other similar national retailers in these locations. Base rent (minimum rent under terms of lease) in current leases ranges from $6 per square foot to $60 per square foot annually over the terms of the leases. Total base rent has continued to increase based on new store leases. Occupancy costs have increased slightly as the Company has entered new markets. The following table sets forth the fixed and variable components of the Company's rent expense for the years indicated:

The Company leases a 50,000 square foot building used primarily as its corporate headquarters and a men's and ladies' buying office in Dallas, Texas. The lessor of the Dallas location is a limited partnership whose partners include Rebecca Powell Casey, Michael T. Casey, H. Rainey Powell and Lisa Powell Hunt, all of whom are stockholders of the Company. Rebecca Powell Casey is also an executive officer and a director of the Company. The term of the lease expires September, 2010 with annual rent payments of $478,382, plus insurance, utilities and property taxes until August, 2004 at which time the annual rent will be $503,560, plus insurance, utilities and property taxes until August, 2007 at which time annual rent will be $528,728, plus insurance, utilities and property taxes until expiration of the lease. This lease contains two renewal options of five years each.

During 2001, the Company owned two contiguous buildings in Norman, Oklahoma comprised of approximately 22,000 square feet. This space was being utilized by the Company for its administrative functions.

On July 23, 2001, the Company entered into a real estate transaction with the related-party limited partnership mentioned above. Under this sale agreement, some land and a building owned by the Company was sold, at appraised value, to this limited partnership for a total sales price of $176,000. Total proceeds to the Company were approximately $174,000 after selling expenses and the total gain recognized by the Company was approximately $150,000. The limited partnership obtained its own financing for the purchase price. All surveys, inspections and appraisals related to this transaction were performed by independent professionals with no affiliation to the Company.

The Company leases an 85,000 square foot warehouse distribution center facility located in Norman, Oklahoma. The lessor of the distribution center is the same limited partnership which owns the Dallas locations mentioned above. The term of the distribution center lease expires in June 2012, with annual rent increases on a fixed scale up to a maximum of $419,951 during the final year of the lease.

The Company is from time to time involved in routine litigation incidental to the conduct of its business. As of this date, the Company is not a party to, nor is any of its property subject to, any material pending legal proceedings.

No matters were submitted to a vote of security holders during the fourth quarter of the year covered by this report.

At March 15, 2002, there were 670 record holders of the Company's common stock, ("Common Stock"). The Company's Common Stock is listed on the American Stock Exchange under the symbol "HLD". The table below presents the range of the high and low sales prices, for the periods indicated.

The Company has never declared or paid cash dividends on its Common Stock and presently intends to retain all earnings for the operation and expansion of its business for the foreseeable future. Any future determination as to the payment of cash dividends will depend on the Company's earnings, capital requirements, financial condition and other factors as the Board of Directors may deem relevant.

On February 28, 2001, the Company executed a definitive preferred stock agreement. See Note 12 to the Consolidated Financial Statements for additional information. Under this preferred stock agreement, each of the 300,000 initially issued shares of preferred stock are convertible into 15.6863 shares of common stock of the Company. Until converted, the preferred stock is entitled to receive quarterly dividends that cumulate annually at a rate of 10% per annum, which would be reduced to 8% per annum if the Company's operating income for any fiscal year ending after February 28, 2001 exceeds $4,735,000. Dividends are payable 50% in cash and 50% in additional shares of preferred stock until February 28, 2003 and thereafter in additional shares of preferred stock or cash as the holder of the preferred stock may elect. Shares of preferred stock issued in respect of dividends are convertible into common stock based upon an average market price of the common stock as of the respective div idend dates.

During 2001, approximately $571,000 of preferred stock dividends were paid. Approximately $256,000 of the total preferred stock dividends was paid in additional shares of preferred stock and approximately $315,000 was paid in cash. The Company's primary lending agreement does not currently allow for the payment of dividends on common stock. This agreement does, however, allow for the distribution of preferred stock dividends.

The following selected consolidated financial information is derived from the audited Consolidated Financial Statements of the Company and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the notes thereto, appearing elsewhere herein.

The following table reflects the increases and decreases in Company sales for the periods indicated:

Total Company sales decreased 17.9% in 2001 as compared to a decrease of 6.4% in 2000 and an increase of 5.4% in 1999. No new locations were opened during 2001 compared to the opening of two new locations during 2000. The Company believes the sales decrease in 2001was primarily because the ladies' merchandise assortment for the first half of the year was not meeting the needs of the Company's target customer of age 40, but instead was targeting a younger audience in terms of styling and fit. During the fourth quarter of 2001, the Company reported a significant improvement in sales trends as customer response to the holiday and preview merchandise assortments continued to improve. Comparable store sales declined 0.8% during the fourth quarter in the 44 full-price retail stores as compared to a decline of 14.9% for the full year of 2001 and decreased 3.4% total company for the quarter. Like many other retailers, the Company's sales were significantly impacted by the tragic events of S eptember 11, 2001. During 2001, comparable store sales declined 16.3% in total for the year. Excluding the week of September 11, 2001, the decline in comparable store sales was 15.3% for the year. In early 2001, the Company ceased conducting business through the catalog and internet, resulting in a decrease in sales of $2.3 million for the year as compared to 2000.

Total Company sales decreased 6.4% in 2000 as compared to an increase of 5.4% in 1999. The Company believes that the declines experienced in 2000 were the result of the merchandise assortments not meeting the needs of the more conservative and professional customers. While the fall merchandise began to be more positively received, the Company was challenged with convincing its customers that it had returned to the more traditional merchandise which the customer had come to expect. The increases in 1999 were primarily due to the addition of new stores. The Company opened two outlets during 2000, relocated one store and closed one store. The two new outlets are located in Dawsonville, Georgia and San Marcos, Texas. The relocated store is in Atlanta, Georgia at the Perimeter Mall and the store that was closed was in Buford, Georgia (Atlanta metro area). The Company opened seven stores and two outlets during 1999 and closed two stores. Stores were opened in Palo Alto, California; Southl ake and Houston, Texas; Tampa, Florida; Indianapolis, Indiana; and Marietta and Buford, Georgia (near Atlanta). The two new outlets are located in Phoenix, Arizona and Williamsburg, Virginia. The two stores that were closed were in Birmingham, Alabama and downtown Oklahoma City, Oklahoma.

Comparable store sales declined 16.3% during 2001, compared to a decline of 11.9% in 2000. The Company believes that the declines experienced in comparable store sales during 2001 were primarily attributable to disappointing sales in ladies' merchandise assortments. The declines experienced in comparable store sales during 2000 were primarily attributable to disappointing sales in fall and holiday merchandise combined with winter storms that severely impacted January business.

The Company's gross margin decreased to 21.6% in 2001 from 26.4% in 2000, or 4.8% of sales. Higher occupancy costs that did not leverage due to lower sales represented 0.4% of the total 4.8% decrease. Additional declines are primarily attributed to additional markdowns on slow-selling merchandise inventory incurred due to sales shortfalls, aggressive efforts to liquidate prior season inventory and continued editing of assortments in an effort to improve inventory turnover. The Company's gross margin decreased to 26.4% in 2000 from 30.2% in 1999, or 3.8% of sales. Higher occupancy costs that did not leverage due to lower sales represented 1.3% of the total 3.8% decrease. In addition, increased markdowns were taken during the period as a result of lower than expected sales of fall and holiday merchandise.

Selling, general and administrative expenses increased by 2.3% of sales in 2001 compared to a decrease of 1.2% of sales in 2000. The increase in selling, general and administrative expenses as a percentage of sales in 2001 was primarily due to the sales declines experienced for the year and the lack of leverage of fixed payroll costs. Selling, general and administrative expenses decreased by 1.2% of sales in 2000. The decrease in selling, general and administrative expenses as a percentage of sales in 2000 was primarily due to reductions in advertising and catalog expenditures as well as declines in controllable store level expenses and corporate overhead.

During the third quarter of 2001, after a review of the goodwill balance originating from the purchase of CMT Enterprises, Inc. in February 2000, and the material changes that had occurred in the operation, it was determined that a write-off of the entire goodwill balance was deemed appropriate. The net amount of goodwill which was written off was approximately $3,015,000 which represented 2.9% of sales for the year 2001.

During 2001, the total interest costs decreased $599,000 from 2000 due to lower outstanding debt balances. Lower average interest rates were also a contributing factor. The average balance on total outstanding debt was $23,780,000 in 2001, compared to $28,346,000 in 2000. The decrease in average debt balances resulted principally from the sale of preferred stock in the amount of $6,000,000 and the application of the proceeds of such sale to reduce debt. As the Company's growth continues, cash flow may require additional borrowed funds, which may cause further increases in interest expense. During 2000, interest costs (including capitalized interest) increased $691,000 as compared to 1999 primarily due to higher outstanding debt balances.

The Company's effective income tax rate was 17.4% in 2001, and 40.0% in 2000 and 1999. The Company did not elect to record the full tax benefit for all 2001 losses in the financial statements.

Cash Flows From Operating Activities. For 2001, net cash provided by operating activities was $1,743,000 as compared to $4,455,000 net cash provided by operating activities for 2000. The decrease in cash flows can be primarily attributed to the change in the net loss between 2001 and 2000. For 2001, the Company's net loss was $14,630,000, compared to a net loss of $4,916,000 for 2000. This was partially offset by a decrease in merchandise inventories of $10,728,000 in 2001, compared to a decrease in merchandise inventories of $6,665,000 in 2000.

The Company's merchandise inventories decreased $10,728,000 in 2001 compared to an decrease of $6,665,000 for 2000 as a result of an effort to edit assortments, reduce inventory levels and improve inventory turnover. These efforts were begun in 2000 and contributed to the decline in inventory levels in that year also.

Cash Flows From Investing Activities. For 2001, net cash used in investing activities was $770,000, as compared to $1,223,000 for 2000. Capital expenditures totaled $1,118,000, compared to $2,107,000 for 2000. Capital expenditures during 2001 and 2000 were invested principally in remodeling of existing stores and equipment expenditures in existing operations. Capital expenditures during 2000 also included the opening of two new stores.

Cash Flows From Financing Activities. During 2001, the Company made periodic borrowings under its revolving credit facility to finance its inventory purchases, product development and private label programs, store remodeling and equipment purchases for the fiscal year (see "Liquidity").

On February 28, 2001, the Company executed a definitive agreement for the purchase by Inter-Him N.V., of which Ronald de Waal is a Managing Director, from the Company of 300,000 shares of a new Series 2001-A Preferred Stock for a total purchase price of $6 million. See Note 12 to the Consolidated Financial Statements for additional information.

The Company has available a line of credit with its bank. This line had average balances of $17,680,000 and $22,057,000 for 2001 and 2000, respectively. During 2001, this line of credit had a high balance of $22,240,000 and a balance of $15,531,000 as of February 2, 2002. The balance at March 15, 2002 was $18,478,000.

The Company has no off-balance sheet arrangements or transactions with unconsolidated, limited purpose entities, nor does it have any undisclosed material transactions or commitments involving related persons or entities.

The Company considers the following as measures of liquidity and capital resources as of the dates indicated (dollars in thousands).

The Company's primary needs for liquidity are to finance its inventories and revolving charge accounts and to invest in new stores, remodeling, fixtures and equipment. Cash flow from operations and proceeds from credit facilities represent the Company's sources of liquidity. Management anticipates these sources of liquidity, combined with expected tax refund receipts, to be sufficient in the foreseeable future. As a result of recently-enacted tax legislation, the Company will be able to carry back losses for an additional three years, resulting in expected federal tax refunds in 2002 of approximately $4.2 million. Until received, the Company will be able to borrow against 75% of these tax receivables under its debt agreement which was amended subsequent to February 2, 2002. The Company's capital expenditures budget for 2002 is approximately $2,000,000 to be used for the purchase of fixtures and equipment as well as store remodeling expenses.

See Notes 5 and 14 to the Consolidated Financial Statements for information about restrictions and covenants under the Company's revolving line of credit.

The Company's business is subject to seasonal influences, with the major portion of sales realized during the fall season (third and fourth quarters) of each year, which includes the fall and holiday selling seasons. In light of this pattern, selling, general and administrative expenses are typically higher as a percentage of sales during the spring seasons (first and second quarters) of each year.

Inflation affects the costs incurred by the Company in its purchase of merchandise and in certain components of its selling, general and administrative expenses. The Company attempts to offset the effects of inflation through price increases and control of expenses, although the Company's ability to increase prices is limited by competitive factors in its markets. Inflation has had no meaningful effect on sales or net earnings of the Company.

In 2001, approximately 23% of the Company's net retail sales were made under its proprietary credit card program, which resulted in customer accounts receivable balances of approximately $6,386,000 at February 2, 2002. The Company has significant experience in managing its credit card program. Each month, the Company reviews all of its credit card accounts and writes off those deemed uncollectible. The allowance for uncollectible accounts is maintained and periodically reviewed. The allowance is primarily based on account write-off trends and aging information. The Company does not expect actual results to vary significantly from our estimate.

The Company uses the retail inventory method. Under this method, the Company records markdowns to value merchandise inventories at net realizable value. The Company closely monitors actual and forecasted sales trends, current inventory levels, and aging information by merchandise categories. If forecasted sales are not achieved, additional markdowns may be needed in future periods to clear excess or slow-moving merchandise, which may result in lower gross margins.

When a store experiences unfavorable operating performance, the Company evaluates whether an impairment charge should be recorded. A store's assets are evaluated for impairment by comparing the store's estimated undiscounted cash flows to the assets' carrying value. If the cash flows are not sufficient to recover the carrying value, the assets are written down to fair value. Impairment losses associated with these reviews have not been significant. However, if comparative store sales decline and general negative economic trends continue, future impairment losses could be significant.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires that an impairment loss be recognized only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and that the measurement of any impairment loss be the difference between the carrying amount and the fair value of the asset. Adoption of SFAS No. 144 is required for financial statements for periods beginning after December 15, 2001. The Company will adopt this new standard effective February 3, 2002 and management believes the adoption of this new standard will not have a material impact on its consolidated financial position or results of operation.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded or followed by or otherwise include the words "anticipates", "believes", "expects", "intends", "estimates", "will", "would", "could" or similar expressions. Such forward-looking statements, which reflect the Company's current views of future events and financial performance, involve known and unknown risks and uncertainties that may cause the Company's actual results to differ materially from planned or expected results. Those risks and uncertainties include, but are not limited to the impact of competition, pricing pressure, product demand and market acceptance risks, mergers and acquisitions, reliance on key strategic alliances, the ability to attract and retain key employees, the availability of cash for growth, fluctuations in operating results, ability to continue funding operating losses, and the ability of new manag ement to improve the Company's financial condition and performance. For all of these reasons, actual results may vary materially from the forward-looking statements. The Company assumes no obligation to update any forward-looking statements.

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about the Company's potential exposure to market risks. The term "market risk" for the Company refers to the risk of loss arising from adverse changes in interest rates and various foreign currencies. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how the Company views and manages its ongoing market risk exposures.

At February 2, 2002, the Company had long-term debt outstanding of approximately $20.4 million. Of this amount, $2.0 million bears interest at a weighted average fixed rate of 7.55%. The remaining $18.4 million bears interest at variable rates which averaged approximately 6.91% during 2001. A 10% increase in short-term interest rates on the variable rate debt outstanding at February 2, 2002 would approximate 69 basis points. Such an increase in interest rates would increase the Company's interest expense by approximately $121,000 assuming borrowed amounts remain outstanding.

The above sensitivity analysis for interest rate risk excludes accounts receivable, accounts payable and accrued liabilities because of the short-term maturity of such instruments. The analysis does not consider the effect this movement may have on other variables including changes in sales volumes that could be indirectly attributed to changes in interest rates. The actions that management would take in response to such a change is also not considered. If it were possible to quantify this impact, the results could well be different than the sensitivity effects shown above.

The table below provides information about the Company's debt obligations that are sensitive to changes in interest rates:

Substantially all of the Company's purchases are priced in U.S. dollars. However, some European purchases are denominated in local currency and, therefore, are subject to the fluctuation in currency exchange rates. From time to time the Company utilizes forward exchange contracts to secure firm pricing related to purchase commitments to be denominated in foreign currencies. The contracts are of varying short-term durations and amounts include a window delivery feature, which provides the Company with an option to enter into a swap agreement in the event that all of the currency is not utilized at the end of the contract's delivery term. The Company's objective in managing its exposure to foreign currency exchange rate fluctuations is to reduce the impact of adverse fluctuations in earnings and cash flows associated with foreign currency exchange rate changes. The principal currency hedged is the Italian lira. The Company regularly monitors its foreign exchange exposures to ensure the overall effectiveness of its foreign currency hedge positions. However, there can be no assurance the Company's foreign currency hedging activities will substantially offset the impact of fluctuations in currency exchange rates on its results of operations and financial position.

The Company had no foreign exchange instruments outstanding at February 2, 2002; therefore, a sensitivity analysis would result in no impact to earnings. Anticipated transactions, firm commitments, and accounts payable denominated in foreign currencies would be excluded from the sensitivity analysis. Additionally, as the Company utilizes foreign currency instruments for hedging anticipated and firmly committed transactions, a loss in fair value for those instruments is generally offset by increases in the value of the underlying exposure. Foreign currency fluctuations did not have a material impact on the Company during 2001, 2000 or 1999.

The consolidated financial statements of the Company and related information described below are set forth in the Company's Annual Report to Stockholders for the year ended February 2, 2002 (on pages 3-22) and are incorporated herein by reference.

1. Independent Auditors' Reports.

2. Consolidated Balance Sheets as of February 2, 2002 and February 3, 2001.

3. Consolidated Statements of Operations for the Years Ended February 2, 2002, February 3, 2001 and January 29, 2000.
4. Consolidated Statements of Stockholders' Equity for the Years Ended February 2, 2002, February 3, 2001 and January 29, 2000.
5. Consolidated Statements of Cash Flows for the Years Ended February 2, 2002, February 3, 2001 and January 29, 2000.
6. Notes to Consolidated Financial Statements.

None.

The information required under Item 10 will be contained in the definitive Proxy Statement of the Company for its 2002 Annual Meeting of Stockholders (the "Proxy Statement") under the headings "Election of Directors", "Executive Officer Compensation and Other Information" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" and is incorporated herein by reference. The Proxy Statement will be filed pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after February 2, 2002.

The information required under Item 11 will be contained in the Proxy Statement under the heading "Executive Officer Compensation and Other Information" and is incorporated herein by reference.

The information required under Item 12 will be contained in the Proxy Statement under the heading "Security Ownership of Certain Beneficial Owners and Management" and is incorporated herein by reference.

The information required under Item 13 will be contained in the Proxy Statement under the headings "Related Party Transactions" and "Executive Officer Compensation and Other Information-Compensation Committee Interlocks and Insider Participation" and is incorporated herein by reference.

1. The following documents are filed as part of this Report:

1. Consolidated Financial Statements: The response to this portion of Item 14 is set forth in Item 8 of Part II of this Report.
2. Financial Statement Schedules: Schedule II - Harold's Stores, Inc. and Subsidiaries Valuation Account and Independent Auditors' Report of Consolidated Financial Statement Schedule (see pages 18-19) of this report. All other schedules have been omitted because they are inapplicable, not required, or the information is included elsewhere in the financial statements or notes thereto.
3. Exhibits: See accompanying Index to Exhibits. The Company will furnish to any stockholder, upon written request, any exhibit listed in the accompanying Index to Exhibits upon payment by such stockholder of the Company's reasonable expenses in furnishing any such exhibit.

1. Reports on Form 8-K: There were no reports on Form 8-K for the quarter ended February 2, 2002.

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.

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 shown, and on the dates indicated.

To the Board of Directors and Stockholders of Harold's Stores, Inc.:

We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements, included in Harold's Stores, Inc.'s Annual Report to Stockholders, for the years ended February 2, 2002, February 3, 2001, and January 29, 2000 incorporated by reference in this Form 10-K, and have issued our report thereon dated March 18, 2002. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the change in accounting for computer software costs as discussed in Note 1 to the consolidated financial statements. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed on Page 19 Item 14 (a) 2. for the years ended February 2, 2002, February 3, 2001, and January 29, 2000, is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolid ated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole for the years ended February 2, 2002, February 3, 2001, and January 29, 2000.

Dallas, Texas

March 18, 2002

(In Thousands)

* Constitutes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this report.