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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission File No. 000-32911

Galyan’s Trading Company, Inc.
(Exact name of registrant as specified in its charter)

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

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

          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. 

          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 o.

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

          This document contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please refer to pages 37-44 of Form 10-K for a discussion of factors that could cause actual results to differ from expectations.

          The aggregate market value of voting stock held by non-affiliates of the registrant was approximately  $80,823,089 as of August 1, 2003 based upon the closing price of the registrant’s common stock on the Nasdaq National Market reported for August 1, 2003. Shares of voting stock held by each executive officer and director and by each person who, as of such date, may be deemed to have beneficially owned more than 5% of the outstanding voting stock have been excluded. This determination of affiliate status is not necessarily a conclusive determination of affiliate status for any other purpose.

          17,362,368 shares of the registrant’s common stock were outstanding on March 19, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

          Part III of this Form 10-K incorporates certain information from the Registrant’s definitive proxy statement for its Annual Meeting of Shareholders to be held on May 21, 2004 (the “2004 Proxy Statement”).

TABLE OF CONTENTS

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PART I

Forward-Looking Statements

          We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained or incorporated by reference in this Form 10-K or made by our management involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” and similar expressions may identify forward-looking statements. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  Any such forward-looking statements are subject to risks and uncertainties, including those described at the end of Item 7 of this Report.  If any of these risks or uncertainties actually occur, our business, financial condition or operating results could be materially and adversely affected, and the trading price of our common stock could decline.  We do not undertake to publicly update or revise our 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 1.   BUSINESS

General

          Galyan’s Trading Company, Inc. (referred to herein as the “Company” or in the first person notations “we”, “us” and “our”) is a specialty retailer that offers a broad range of outdoor and athletic equipment, apparel, footwear and accessories, as well as casual apparel and footwear. Our store format and our merchandising strategy are targeted to appeal to consumers with active lifestyles, from the casual consumer to the avid sports enthusiast.  We currently operate 45 stores in 21 states, including two stores that we opened after the end of fiscal 2003.  We operate on a 52 or 53 week fiscal year ending on the Saturday closest to January 31.  Our 2003 fiscal year (52 weeks) ended on January 31, 2004.  For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 hereof.

          We commenced business more than 40 years ago when the Galyan family opened its first outdoor store in the greater Indianapolis market, and our current corporate entity was organized in Indiana in 1980. Limited Brands, Inc. (formerly known as The Limited, Inc. and hereafter, “Limited Brands”) purchased all of our stock from the Galyan family in 1995, and FS Equity Partners IV, L.P. (hereafter, “Freeman Spogli”) purchased a majority interest in us from Limited Brands in 1999. In July 2001, we completed our initial public offering and became a publicly traded company on the NASDAQ National Market.

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Business Strategy

          We are focused on being the premier active lifestyle retailer in the United States and the primary outdoor and athletic equipment, apparel, footwear and accessory destination for the entire family.  In recent years, we have grown our business primarily by adding new stores, having opened 20 stores since February 1, 2002.  Our current strategy is to grow our business by maximizing the performance of our existing stores and by adding new stores, primarily in our existing markets.  We expect to open nine stores during fiscal 2004, one of which is a replacement store in our Indianapolis market, and expect to open an additional three to five stores in fiscal 2005.  The key elements of our strategy are:

          Maximize Performance of Existing Stores.  We have recently announced our intention to slow our new store growth rate, and intend to open an additional three to five new stores in fiscal 2005 as compared to the nine new stores we expect to open in fiscal 2004, one of which is a replacement store in our Indianapolis market, and the nine stores we opened in fiscal 2003.  As a result, management expects to be able to concentrate its efforts on maximizing the performance of the existing store base.  We intend to improve the performance of our existing stores by, among other things, strengthening our merchandise assortment, maintaining the freshness of our inventory, including promotions to clear aged inventory, and implementing a balanced marketing campaign that combines our marketing and promotional efforts to support the price/value message.

          Expand Our Store Base, Primarily in Existing Markets. We believe our retail concept has broad national appeal and that we have new store expansion opportunities in existing and new markets. Over the last several years we have rapidly expanded our store base, having opened 20 stores since February 1, 2002.  We expect to open an additional nine stores in fiscal 2004, including the two stores already opened through March. One of the fiscal 2004 stores is a replacement store in our Indianapolis market.  We expect to open an additional three to five stores in fiscal 2005. Our strategy for fiscal 2005 and the next few years thereafter will be to open additional stores in existing markets.  We would also consider a few new markets, primarily where potential multiple store opportunities exist.   We expect to continue to implement our store format in multiple venues, including freestanding stores, power strip shopping centers, malls and lifestyle centers.  Power strip centers are large, open-air shopping centers primarily comprised of large tenants with stores greater than 20,000 square feet.  Lifestyle centers are large open-air complexes usually comprised of a combination of retailers, restaurants, movie theaters and interactive entertainment facilities.

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          Feature an Innovative and Appealing Store Environment.  The large size, open layout and interactive environment of our typical store creates a distinctive atmosphere that we believe is appealing to both the casual consumer and the serious sports enthusiast and makes us a destination for the entire family. Our stores are large in size and generally feature a two-story layout with 80,000 to 100,000 gross square feet.  We have recently opened stores in a large one-story layout with approximately 65,000 gross square feet, and expect to continue to open such one-story stores, especially in existing markets.  We organize our typical store into over 40 distinct departments, each focusing on a particular activity or product category. The large size and modular design of our typical store provide us with the flexibility to expand and contract our departments in response to seasonal needs and important merchandise trends.

          Employ Differentiated Merchandising and Disciplined Inventory Management.  We provide a product assortment that emphasizes middle to high-end merchandise. In addition to the widely recognized brands typically sold in traditional sporting goods stores, we emphasize higher quality and more technically advanced products often confined to more narrowly focused specialty retailers, and we offer private label merchandise which serves to complement our branded product offerings. Our broad and expansive product range enables us to demonstrate the advantages of our high-end merchandise to the customer, which we believe increases our sales of these higher priced products. In order to maintain appropriate inventory levels and freshness, we intend to employ a more disciplined approach to managing inventory, including sales events to promote key items and promotions to clear inventory as seasons or fashions change.

          Provide Superior Customer Service and Product Knowledge.  We seek to distinguish ourselves from our competitors by emphasizing customer service and product knowledge. We strive to hire sales associates who are experienced, enthusiastic and knowledgeable about one or more activities or sports. In addition, during their first several months with us, we provide our new sales associates with approximately 56 hours of training focusing on our products, operations and customer service culture. We emphasize training because we believe experienced, enthusiastic and knowledgeable sales associates have greater credibility with our customers and a greater ability to influence their purchasing decisions. As part of our commitment to customer service, we also provide our customers with specialized pro shop services such as tennis racquet stringing, a full service bicycle and ski shop, ice skate sharpening, basketball goal installation, golf club re-gripping, team uniforms and hunting and fishing equipment setup, repairs and licenses.

          Enhance Our Image and Extend Our Reach.  We seek to build and enhance the recognition, appeal and reach of the Galyan’s image through our marketing efforts, competitive pricing, superior customer service, private label products and community commitment campaign. Our marketing efforts include magazine style newspaper inserts, direct mail, newspaper, radio and television advertising. We have also created a preferred customer and a private label credit card program designed to build customer loyalty by rewarding significant purchasing activity, which enables us to specifically target our mailings to the interests of our preferred customers. In addition, through participation in numerous community level events, primarily focused on athletic and outdoor activities, we strive to increase our visibility in the local community and further enhance our image as an active lifestyle retailer and a destination for the entire family.

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Our Stores

          We have two primary store formats.  Our typical store built over the past several years has two shopping levels, ranges in size from approximately 80,000 to 100,000 gross square feet, and features an open, airy atmosphere with a fifty five foot high interior atrium, metal appointments and interactive elements, such as rock climbing walls and putting greens, that are designed to create an enjoyable and interactive shopping experience appealing to both the casual consumer and the serious sports enthusiast.  We have more recently introduced a one-level store format, which is generally about 65,000 gross square feet, contains many of the same features as our two-level stores, including a thirty foot climbing wall.  We intend to use both formats in the future, depending on many factors, including market size, available space, and store cost considerations.  We opened a single one-level store in fiscal 2003 and have plans to open an additional three one-level stores in fiscal 2004, including one store opened in March 2004.  We organize our typical store into over 40 distinct departments, each focusing on a particular activity or product category, creating an environment similar to a collection of specialty shops under one roof. In addition, the large size and modular design of both our typical store formats provide us with the flexibility to expand and contract our departments in response to seasonal needs and important merchandise trends.

          We currently expect to open nine new stores in fiscal 2004, including two stores already opened through March 2004, one each in Alabama (in Patton Creek, located in Birmingham, Alabama) and Wisconsin (in Greenway Station, located in Middleton (a suburb of Madison), Wisconsin).  The Middleton, Wisconsin store represents the second opening of our one-level store format.  The remaining seven stores scheduled to open in fiscal 2004, for which we have fully executed leases, are located in Indiana (one-level store), Colorado, North Carolina, Ohio, New Jersey, Virginia and Illinois (one-level store).  The Indiana store is a replacement store for an existing store we plan to close in fiscal 2004.  Expansion in future years will depend on, among other things, general economic and business conditions affecting consumer confidence and spending and, in particular, the level of consumer demand for our products, the availability of adequate capital, desirable locations at acceptable terms, qualified management personnel, our ability to manage the operational aspects of our growth and comparable store sales performance.  Our primary focus over the next 36 months will be to open additional stores in existing markets.  We would also consider a few new markets, primarily where potential multiple store opportunities exist.

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Merchandising

          We strive to provide a broad product range and selection that emphasize our strategy of brand tiering our merchandise assortments. We carry a broad range of products for men, women, boys and girls at different price points to attract shoppers at every income, interest and skill level. 

          The following table sets forth the approximate percentage of sales attributable to athletic equipment, athletic and casual apparel, footwear, outdoor equipment and outdoor apparel for fiscal 2003:

          We showcase products from a large number of widely recognized vendors such as Nike, Columbia, adidas, The North Face, Under Armour, New Balance and Merrell. In some cases, the breadth of our product categories allows us to show a wide variety of a vendor’s products, which strengthens our relationships with these vendors and provides us with favorable privileges, such as increased access to new product introductions, exclusive limited edition goods, color updates and size extensions. We purchase merchandise from approximately 1,300 vendors, of which the top twenty vendors accounted for 37.1% of our total purchases in fiscal 2003.

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          We provide private label merchandise in selected areas in which we believe we have a competitive advantage in terms of price or quality. We also offer private label merchandise to fill a niche or gap in branded product offerings. We expect to maintain our current  penetration of our private label offerings in those selected areas where we can capture the higher margins they generate,  offer a more comprehensive assortment of merchandise to our customers and  further enhance our image as a retailer of high quality active lifestyle products. In general, we strive to position our private label offerings as equal or superior in quality to their branded counterparts at competitive price points.

          We customize our merchandise selection based on local customer interest and demand, as well as the seasonal variances in our markets. For example, our fishing department may feature ice and walleye fishing products in the Minneapolis/St. Paul market, bass fishing products in the Atlanta market, salt water fishing products in the Washington, D.C. market and fly fishing products in the Denver market. Additionally, we typically arrange the baseball department in early February in the Atlanta, Dallas and the Washington, D.C. markets to accommodate the earlier season while waiting until April in markets such as Minneapolis and Buffalo.

Marketing

          Our marketing strategy reflects our strategic positioning of Galyan’s as an active lifestyle retailer. Our active lifestyle brand image is emphasized in each  marketing message we create, from newspaper, direct mail, magazine, radio and television advertising, to our in-store visual presentation and support of national and local events and community activities.  Our marketing efforts are intended both to enhance our brand and promote the price/value message.

          Our marketing effort integrates the broad reach of newspaper supplements, television, and strategic national magazine inserts, with targeted direct mail vehicles, event-based radio advertising, newspaper and e-mail campaigns. We use this integrated and balanced media mix to reach each of the three customer segments that we target: recreational, enthusiast and avid customers. 

          In addition, our preferred customer program has a rapidly expanding database of loyal shoppers who are rewarded for ongoing purchases and encouraged through special offers and incentives.  We ask our preferred customers about their interests to understand their individual preferences and purchasing decisions. We use this information to send customized mailings highlighting brands, products, promotions and events related to their particular areas of interest.

          Another key component of our strategy is our event marketing campaigns.  We combine our strategic media partnerships and strong vendor relationships with regional community commitment efforts to build major company-wide events, differentiating us from our competitors. 

          Through local activities, events and organizations, we pursue relationships with local organizations and groups related to our business to develop loyalty and impact at the community level in all markets.  We believe our community commitment program generally positions us as a positive force in our communities and further enhances our image as an active lifestyle retailer.

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New Store Site Selection

          We generally seek to enter major metropolitan markets across the United States in prime real estate locations with high visibility and easy access to major roadways. We target a variety of locations, including malls, lifestyle centers, power strip centers and freestanding locations, in areas with upscale demographics, which fit well with our middle to high-end merchandise profile. We have historically operated primarily in areas with marked seasonal variation and expect these areas to be our primary focus in the next few years.  In addition, our primary focus over the next 36 months will be to open additional stores in existing markets. We would also consider a few new markets, primarily where potential multiple store opportunities exist.

          After we identify potential markets, we combine the market research, demographic and competitive data with an analysis of our store characteristics to develop forecasts for each proposed store location. To assess the costs of a potential site, we also gather preliminary proposals from developers and have our store planning group estimate the total cost of constructing the store, including both the exterior and the interior materials and fixtures, which our store planning group generally procures for new stores. Based on our revenue and cost estimates, we build a detailed store level model to assess the potential profitability and return on capital from a site. We also use this analysis to determine our store size and whether to use a one or two-story store format.  We present information on potential sites to the real estate committee of our board of directors for their review. If our real estate committee determines that a potential site may be sufficiently desirable, it recommends the site for approval to the full board of directors.

New Store Financing

          We seek to obtain financing for new stores from real estate developers, real estate investment companies and other sources, which is important for achieving our growth strategy.  In our experience, developer financing is often available for malls, lifestyle centers and power strip centers.  In addition, it is also possible to receive financing for freestanding locations through a real estate investment company. Financing for new stores typically involves a per square foot cash allowance that is generally sufficient to cover all or a significant portion of the building construction costs.   Sometimes, in lieu of all or a portion of the cash allowance, the developer, at their own cost, will build our building to our specifications and supply the major fixtures. In general, the financing party owns the building and, in some cases, also the land, and leases the property to us under a lease to operate the store. Our leases generally have an initial term of 15 to 20 years and most of them provide for multiple five-year renewal options at increased rents. We prefer these methods of financing our new stores because it often requires us to supply only the capital necessary to purchase the interior fixtures and initial inventory and to fund pre-opening costs.  We will need to continue to receive significant financing from developers or real estate investment companies in order to continue expanding our store base.  In fiscal 2004, we will receive developer financing for all nine new stores.  As more fully described in the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for those stores where we receive developer financing, we anticipate receiving higher relative levels of developer financing, on a per store basis, in fiscal 2004 than we received in fiscal 2003 from those stores where developer financing was available. We can make no assurances that this type of financing will continue to be available on terms that are favorable to us.

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          If developer or real estate investment company financing is not available, we may seek construction loans, secured by a mortgage, or rely on our revolving credit facility.  Under a construction loan, we generally borrow money from a financial institution, with a mortgage against the building being built as security for the loan.  Construction loans typically require payment of all outstanding principal no later than two years after the store opens. When repayment on these loans becomes due, we seek alternative financing transactions, which might include a sale-leaseback transaction under which we sell our ownership interests in the store building and, if we own it, the land, and enter into a capital or operating lease covering the building and, if we own it, the land, or we may seek to do longer term mortgage financing on the building to replace the initial construction loan.  We may also use funds available under our revolving credit facility to retire these construction loans. 

          We previously entered into construction loans for our Buffalo, New York and Rochester, New York stores.  On July 1, 2002, we paid all amounts due under the construction loan for the Buffalo, New York store with funds available under our revolving credit facility.  On May 1, 2003 we paid all amounts due under the construction loan for the Rochester, New York store with funds available under our revolving credit facility.

          On August 8, 2003 we sold our interest in buildings and leasehold improvements for two store locations, for approximately $12.0 million to CPA®:15, which is a member of the W.P. Carey Group and simultaneously entered into lease agreements for these two store locations. The transaction included our store locations in Buffalo, New York, and Greenwood, Indiana.  Although we leased back the properties, this transaction was accounted for as a financing obligation, with the future lease payments classified as a liability in our financial statements and quarterly lease payments classified as payments of principal and interest expense relating to a financing obligation.  The net proceeds from this transaction were used to repay current borrowings under our revolving credit facility.  As of January 31, 2004, we had an outstanding obligation of $11.7 million, with a fixed interest rate of 10.6% that matures in 2024.  Simultaneously with entering into the sale leaseback financing transaction, we assigned our rights under an existing ground lease to CPA®:15, which is a member of the W.P. Carey Group, for a third store in Freehold, New Jersey that had not yet been constructed and is scheduled to open in the summer of 2004. 

Distribution

          We operate a 364,000 square foot distribution center in Plainfield, Indiana.  This distribution center serves as our primary receiving, distribution and warehousing facility, supplemented by smaller regional warehouse facilities in Minnesota, Missouri, Kansas, and Virginia. We contract with common carriers to deliver merchandise to our stores outside of the Indianapolis area, and we operate our own trucks for delivery of merchandise from the distribution center to our five greater Indianapolis market stores. Merchandise not distributed through the distribution center is shipped directly to the stores. 

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          Approximately 60% of our product received at the distribution center is pre-packaged and pre-ticketed by the vendor so it can be immediately cross-docked to trucks bound for our stores. Due to the efficiencies cross-docking creates, we require many of our vendors to pre-package their products to increase the percentage of merchandise that we cross-dock.  The remaining product received at the distribution center is processed by unpacking and verifying the contents received and then sorting the contents by store for delivery. 

          During 2003, we purchased from Limited Brands a parcel of land adjacent to our existing distribution facility to provide for potential development in the event expansion of our current facility becomes necessary to accommodate future growth.

Management Information Systems

          We have management information software systems for our store point of sale transactions, warehouse transactions, inventory and merchandise management, financial systems, human resource, payroll and new store planning and construction reporting. We track our store level point of sale transactions using a software system from Datavantage (previously known as Applied Digital Solutions). This software features basic cash register functions and gathers batch transaction data for inventory management and loss prevention. We monitor our warehouse transactions and track both the shipments we receive from our vendors and the shipments we make to our stores, using software from Retek.  For inventory and merchandise management, we currently collect transactional information gathered by our Datavantage and Retek software systems and transfer that information into a software system provided by JDA. Also, we have sales audit and loss prevention systems from Datavantage as well as the PeopleSoft human resource and payroll modules. Our financial tracking and reporting software is from PeopleSoft, which includes the general ledger, accounts payable, new store planning and construction reporting and asset management modules.

          We believe our management information systems are adequate to support our current operations and planned new store expansion.

Store Management and Operations

          We manage our stores through national, regional and store based personnel. Our Senior Vice President, Store Operations has general oversight responsibility for all of our stores. We employ regional vice presidents who oversee stores in several states and report directly to the Senior Vice President, Store Operations. Each of our stores has a general manager who is responsible for all aspects of store operations and reports directly to a regional vice president. Each general manager has at least one assistant manager reporting to them who assists in the management of the selling departments, store operations and other administrative functions. Additionally, we employ several department managers who report directly to the general manager or assistant manager. Each department manager is typically responsible for several related merchandise departments.

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Competition

          The retail market for athletic and outdoor equipment, footwear and outdoor and specialty apparel is highly competitive. We face competition largely from five general categories of retailers: sporting goods stores, outdoor specialty stores, casual apparel retailers, athletic specialty stores and mass merchandisers. We compete on the basis of selection, customer service, style, price and quality.

          Sporting Goods Stores. Stores in this category include large format sporting goods stores, such as Dick’s Sporting Goods, Inc. and The Sports Authority, Inc. These stores typically range from 30,000 to 60,000 square feet in size and tend to be freestanding or located in strip shopping center anchor locations. Also in this category are traditional sporting goods chains and local independent sporting goods retailers, whose stores typically range from 5,000 to 20,000 square feet and are typically located in regional malls and strip shopping centers.  Although these competitors, including Henry Modell & Company, Inc., Champs Sports (owned by Foot Locker, Inc.), Big 5 Sporting Goods Corporation, Academy Sports and Outdoors and Hibbetts Sporting Goods, Inc., carry many of the same items as we do and several have a larger number of stores and more widely recognized name, we believe we carry more high-end, technical merchandise, and more apparel, and have a more appealing store environment.  In addition, with respect to the traditional and local sporting goods stores, we have significantly larger stores and carry a much broader and deeper merchandise selection.

          Outdoor Specialty Stores.  Stores in this category include specialty stores and pro shops such as Cabela’s, Inc., Bass Pro Shops, Inc., Gander Mountain, Eastern Mountain Sports, Inc. and Recreational Equipment, Inc. Although these competitors do not carry as broad a merchandise selection as we do, they are generally well recognized for their customer service and product selection in their respective areas of specialization, such as hunting, fishing or backpacking equipment. 

          Casual Apparel Retailers.  Companies in this category include national outdoor apparel retailers such as L.L. Bean, Inc., Lands End, Inc. (owned by Sears, Roebuck and Co.)  and Eddie Bauer, Inc.  These companies use multiple channels to sell their products, including catalogs, e-commerce, traditional retail stores and outlet mall locations.  These retailers focus primarily on casual apparel, and generally carry significantly less outdoor and athletic equipment.

          Athletic Specialty Stores.  Stores in this category include The Athlete’s Foot Stores, Inc., Finish Line, Inc., Foot Locker, Inc, Golf Galaxy, Inc., and Nevada Bob’s Golf, Inc.  These stores typically range in size from 1,000 to 10,000 square feet and are frequently located in regional malls and strip shopping centers.  These competitors have greater national name recognition and more stores than we do, but carry a more limited selection of merchandise.

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          Mass Merchandisers.  Stores in this category include national discount retailers such as Target Corporation and Wal-Mart Stores, Inc., warehouse clubs such as Costco Wholesale Corporation, and department stores such as JC Penney Company, Inc., Sears, Roebuck and Co. and Kohl’s Corporation.  These stores range in size from approximately 50,000 to 200,000 square feet and are primarily located in regional malls and power strip shopping centers. Sporting goods merchandise and athletic apparel represent a very small portion of the total merchandise in these stores and, in general, the selection is limited and focused on entry-level price points.

Trademarks and Tradenames

          Through a wholly owned subsidiary, we have registered our trademark  “Galyan’s”, “Galyan’s Sports and Outdoor Adventure” and our bear design with the United States Patent and Trademark Office.  Through a wholly owned subsidiary, we are in the registration process for registering “Galyans Sports and Outdoor” as an additional registered trademark.  “Galyan’s” is also a federally registered servicemark. In addition, through our wholly owned subsidiary, we own several other trademarks and servicemarks involving advertising slogans and other names and phrases used in our business.

Governmental Regulation

          We are a licensed retail firearms dealer in each jurisdiction in which we do business.  As such we are required to comply with federal, state and local regulations governing the handling and transfer of firearms.  At the federal level, these include The Gun Control Act of 1968, Title 18, Chapter 44, United States Code, as amended; and the National Firearms Act, Title 26, Chapter 53, United States Code, as amended.  In certain circumstances, local governmental restrictions prohibit the sale of firearms.  Two of our 45 currently open stores are in local jurisdictions that currently prohibit us from selling firearms.

          In addition, many of our imported products are subject to existing or potential duties, tarriffs or quotas that may limit the quantity of products that we may import into the U.S. and other countries or impact the cost of such products. To date, we have not been restricted by quotas in the operation of our business and customs duties have not comprised a material portion of the total cost of our products.

Employees

          On March 1, 2004, we operated 44 stores and had approximately 6,100 employees, of whom approximately 2,700 worked full time, approximately 2,600 worked part time and approximately 800 were full time and part time seasonal employees. During our fiscal fourth quarter, the number of our employees increases significantly. For example, on December 1, 2003, we operated 43 stores and had approximately 7,100 employees of whom approximately 2,800 worked full time, approximately 2,800 worked part time and approximately 1,500 were full time and part time seasonal employees. None of our employees are covered by a collective bargaining agreement and we believe our relations with our employees are good.

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Seasonality and Inflation

          Our business cycle is seasonal, with higher sales and profits generally occurring in the second and fourth fiscal quarters.  In fiscal 2003, our sales results were as follows:  18.7% in the first quarter, 23.7% in the second quarter, 21.4% in the third quarter and 36.2% in the fourth quarter.  We have significantly higher cash outlays in the fiscal fourth quarter due to higher purchase volumes and increased staffing.

          Management does not believe inflation had a material effect on the consolidated financial statements for the periods presented. There can be no assurance, however, that our business will not be affected by inflation in the future.

Galyan’s Website and Access to Filings

          We post all of our periodic reports on Form 10-K and 10-Q, and current reports on Form 8-K, on our website at www.galyans.com as soon as reasonably practical after the reports are filed with or furnished to the Securities and Exchange Commission.  Access to these reports is free of charge.

Item 2.   PROPERTIES

          Our principal executive offices are located in newly leased facilities at One Galyans Parkway, Plainfield, Indiana 46168. The lease for our new executive offices is for 10 years with two additional five-year options. We believe the new corporate offices are adequate to accommodate our future growth.  We are currently assessing our options available under our lease agreement for our former principal executive offices that expires in October of 2005. 

          We lease our main distribution center in Plainfield, Indiana and small regional satellite distribution warehouses located in Minnesota, Missouri, Kansas and Virginia. While we believe our distribution facilities are in good condition and are currently suitable for our current business needs, we have acquired a parcel of land adjacent to our existing distribution facility for potential development in the event expansion of our current facility becomes necessary to accommodate future growth.

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          The following table describes each of our 45 stores in the order in which they were opened, starting with the most recent:

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          Our former Greenwood, Indiana store which opened in 1985 and had 42,189 gross square feet, closed on September 20, 2002 as a result of a tornado.  On April 25, 2003, we reopened our former Greenwood, Indiana location as a clearance center.   We did not include this location in our store count or in our comparable store sales calculation, as it is not part of our long-term strategy.

          Currently, we lease the land and building improvements for 43 of our stores.  We own the building improvements for the remaining two stores, which are located in Plainfield, Indiana, and Rochester, New York. Our store leases provide for original lease terms that generally range from 15 to 20 years and most of them provide for multiple five-year renewal options at increased rents.

Item 3.   LEGAL PROCEEDINGS

          There are no material pending legal proceedings against us. We are, however, involved in routine litigation arising in the ordinary course of our business. We believe that the final outcome of such proceedings should not have a material adverse effect on our consolidated financial condition or 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 fiscal year covered by this annual report.

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PART II

Item 5.   MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

          Our common stock is listed on the Nasdaq National Market System under the symbol “GLYN.” The closing price of our common stock on Nasdaq was $10.62 on March 19, 2004.  The market price of our common stock has fluctuated significantly in the past, and is likely to continue to be highly volatile. In addition, the trading volume in our common stock has fluctuated, and significant price variations can occur as a result. More generally, the U.S. equity markets have from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the stocks of emerging-growth companies such as ours. These broad market fluctuations may be the result of changes in the trading characteristics that prevail in the market for our common stock, including low trading volumes, trading volume fluctuations and other similar factors that are particularly common among highly volatile securities of emerging-growth companies. Variations also may be the result of changes in our business, operations or prospects, announcements or activities by our competitors, new contractual relationships with key suppliers or manufacturers by us or our competitors, proposed acquisitions by us or our competitors, financial results that fail to meet public market analysts expectations, changes in stock market analysts’ recommendations regarding us, other retail companies or the retail industry in general, and domestic and international market and economic conditions.

Stockholders

          The number of our common stockholders of record as of March 19, 2004 was 96.  This number excludes stockholders whose stock is held in nominee or street name by brokers.

Dividend Policy

          We have not paid cash dividends in the two most recent fiscal years and we do not currently intend to pay any dividends.  Our revolving credit facility currently prohibits us from declaring or paying cash dividends or other distributions on any shares of our capital stock.  Any payments or cash dividends in the future will be at the discretion of our board of directors and will depend upon our results of operations, earnings, capital requirements, contractual restrictions contained in our revolving credit facility or other agreements, and other factors deemed relevant by our board of directors.

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Stock Price Information

          Set forth below are the high and low closing sale prices for shares of our common stock for each quarter during fiscal 2003 and 2002 as reported by the Nasdaq National Market System.

Securities Authorized for Issuance Under Equity Compensation Plans

          The information relating to securities authorized for issuance under equity compensation plans is incorporated by reference herein from our definitive Proxy Statement in connection with our Annual Meeting of Stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year end January 31, 2004.

Recent Sales of Unregistered Securities

          None.

Issuer Repurchases of Equity Securities

          We did not repurchase any of our registered securities during the fourth quarter of fiscal 2003.

Item 6.   SELECTED FINANCIAL DATA

          The following table sets forth our summary of selected consolidated financial data, which should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included elsewhere in this Report. The selected statement of operations data for fiscal 2003, 2002 and 2001 and selected balance sheet data for fiscal 2003 and 2002 are derived from our audited consolidated financial statements that are included in this Report.  The following historical results of consolidated operations are not necessarily indicative of results to be expected for any subsequent period.

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          The following discussion and analysis of our financial condition and results of operations for the fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002  should be read in conjunction with “Selected Consolidated Financial Data” and our audited consolidated financial statements and the notes to those statements that are included elsewhere in this Report.  Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions.  Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” below and elsewhere in this report.

Business Overview

          We are a specialty retailer that offers a broad range of products appealing to consumers with active lifestyles, from the casual consumer to the serious sports enthusiast. We sell outdoor and athletic equipment, apparel, footwear and accessories, as well as casual apparel and footwear. We have two primary store formats.  Our typical store built over the past several years has two shopping levels, ranges in size from approximately 80,000 to 100,000 gross square feet, and features an open, airy atmosphere with a fifty five foot high interior atrium, metal appointments and interactive elements, such as rock climbing walls and putting greens, that are designed to create an enjoyable and interactive shopping experience appealing to both the casual consumer and the serious sports enthusiast.  Our one-level stores, which are generally about 65,000 gross square feet, contain many of the same features as our two-level stores, including a thirty-foot climbing wall.  We intend to use both formats in the future, depending on many factors, including market size, available space, and store cost considerations.  We currently operate 45 stores in 21 states, including two stores opened through March 2004.

          In March 2004, we redefined our strategy to emphasize growth by maximizing performance in our existing stores and by adding new stores, primarily in existing markets. Specifically, we announced that we would slow future store commitments, so that we can focus on maximizing the performance of our existing stores.  We are becoming more selective in opening new stores, and will concentrate new store growth primarily in existing markets because of the leveraging opportunities for marketing expense and also to provide additional shopping locations for the convenience of our customers.  We would also consider a few new markets, primarily where potential multiple store opportunities exist.  We have commitments to open nine new stores during fiscal 2004, including the two stores already opened through March.  One of our fiscal 2004 stores is a replacement store in our Indianapolis market.  We expect to open three to five additional stores in fiscal 2005.

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Critical Accounting Policies

          The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us 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 revenue and expenses during the reporting period.

          We believe the application of our accounting policies, and the estimates inherently required therein, are reasonable and generally accepted for companies in the retail industry.  We believe that the following addresses the more critical accounting policies used in the preparation of our consolidated financial statements and require management’s most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

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Effect of Certain Non-Recurring Items

          Our audited consolidated statements of operations include the following non-recurring items and events that affect comparability with other periods:

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     Net Sales

          Net sales consist of sales from comparable stores, non-comparable stores and new stores. A store is not included in comparable store sales until the start of its fourteenth month of operation. New store sales include sales from stores we opened in the current fiscal year. Non-comparable store sales include sales in the current fiscal year from our stores opened during the previous fiscal year before they have begun their fourteenth month of operation.

     Cost of Sales

          Cost of sales includes the cost of merchandise, inventory markdowns, inventory shrinkage, inbound freight, distribution and warehousing, payroll and related benefits for our buying personnel and store occupancy costs. Store occupancy costs include rent, contingent rents, common area maintenance, real estate and personal property taxes, utilities, and repairs and maintenance.

     Selling, General and Administrative Expenses

          Selling, general and administrative expenses include selling, store management and corporate expenses, including payroll and related employee benefits (other than for our buying personnel), employment taxes, management information systems, marketing, insurance, legal, depreciation, amortization of non-financing intangibles, store pre-opening and other corporate level expenses. Store pre-opening expenses include store level payroll, employee relocation, grand opening event marketing, travel, supplies, and other store opening expenses. Corporate level expenses are primarily attributable to our corporate offices in Plainfield, Indiana and, to a lesser extent, to our corporate personnel located in some of our markets. Depreciation and amortization of non-financing intangibles consists primarily of the depreciation of leasehold improvements, fixtures and equipment owned by us.

     Interest Expense, net

          Interest expense, net of interest income, primarily includes interest relating to our revolving credit facility, financing obligations, and construction loans, as well as the amortization of financing intangibles arising from the sale leaseback transaction with a member of the W.P. Carey group. Fiscal 2001 includes non-cash pay-in-kind interest relating to subordinated and junior subordinated notes.

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Results of Operations

          The following table sets forth our statement of operations data as a percent of net sales for the periods indicated:

(1) Due to rounding, columns may not add.

Fiscal Year 2003 (52 weeks) compared to Fiscal Year 2002 (52 weeks)

     Net Sales

          Net sales increased by 15.6%, or $93.0 million, to $690.7 million in fiscal 2003 from $597.7 million in fiscal 2002. The increase resulted from new store sales of $80.2 million from nine new stores opened during the fiscal year, an increase of $46.0 million in non-comparable store sales associated with nine stores opened during fiscal 2002 that had not yet entered the comparable store sales base and a decrease in comparable store sales of 5.8%, or $33.2 million. We believe a number of factors contributed to the decrease in comparable store sales for the fiscal 2003, including the sluggish economy, a highly promotional retail environment, aggressive discounting to clear aged and excess inventory, and unseasonably warm weather in October.

          Our former Greenwood, Indiana location was closed on September 20, 2002 as a result of a tornado. For purposes of comparison to the current fiscal period, we have treated net sales for fiscal 2003 at that location as non-comparable store sales.  On April 25, 2003, we reopened our former Greenwood, Indiana location as a clearance center.  Because the clearance center is not part of our long-term strategy, we have included sales at this location as non-comparable store sales. 

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     Gross Profit

          Gross profit, which is net sales less cost of sales, increased by 4.9%, or $8.9 million, to $190.4 million in fiscal 2003 from $181.5 million in fiscal 2002.  Gross profit was 27.6% of net sales in fiscal 2003 compared to 30.4% in fiscal 2002.   This decrease as a percentage of net sales was primarily the result of higher markdowns, including markdowns associated with the clearance of excess inventory, and higher store occupancy costs partially offset by the adoption of Emerging Issues Task Force (“EITF”) 02-16, Accounting by a Reseller for Cash Consideration Received from a Vendor.

     Selling, General and Administrative Expenses

          Selling, general and administrative expenses increased by 21.6%, or $32.1 million, to $180.5 million in fiscal 2003 from $148.4 million in fiscal 2002. Selling, general and administrative expenses were 26.1% of net sales in fiscal 2003, compared to 24.8% in fiscal 2002. The increase as a percentage of net sales was due primarily to higher depreciation expense for stores opened during and subsequent to fiscal 2002, higher expenses for marketing primarily resulting from the adoption of EITF 02-16, and increases in insurance costs.

     Operating Income

          Operating income decreased by $23.3 million, to $9.9 million in fiscal 2003 from $33.2 million in fiscal 2002. Operating income was 1.4% and 5.5% of net sales in fiscal 2003 and 2002, respectively.  The negative impact on operating results for fiscal 2003 as compared to fiscal 2002 was the result of higher markdowns, including markdowns associated with the clearance of excess inventory, higher store occupancy costs, higher expenses for depreciation, and higher marketing expenses primarily from the adoption of EITF 02-16.

     Interest Expense, net

          Interest expense, net of interest income of $162,000 was $2.7 million in fiscal 2003, compared to interest expense, net of interest income of $257,000 was $1.8 million for fiscal 2002.  This increase was due primarily to higher average outstanding balances on our revolving credit facility.

     Income Taxes

          The effective income tax rate for fiscal 2003 was 49.9%.  This rate reflects the effect of the anticipated federal tax rate and aggregated state tax rates in the various states in which we currently conduct business.  This rate also includes the impact of a $715,000 valuation allowance for capital loss carryforwards that we do not expect to utilize before it expires. The effective income tax rate for 2002 was 40.3%.

     Net Income

          As a result of the foregoing, net income decreased by $15.1 million to $3.6 million in fiscal 2003 from $18.7 million in fiscal 2002.

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Fiscal Year 2002 (52 weeks) compared to Fiscal Year 2001 (52 weeks)

     Net Sales

          Net sales increased by 23.9%, or $115.2 million, to $597.7 million in fiscal 2002 from $482.5 million in fiscal 2001.  The increase resulted from new store sales of $77.6 million from nine new stores opened during the fiscal year, an increase of $35.3 million in non-comparable store sales associated with five stores opened during fiscal 2001 that had not yet entered the comparable store sales base and an increase in comparable store sales of 0.5%, or $2.3 million. The increase in comparable store sales was primarily attributable to higher sales in the winter sports, athletic apparel, athletic footwear and accessories categories.  Because our Greenwood, Indiana location was closed on September 20, 2002 as a result of a tornado, for purposes of comparison to the prior fiscal period, we have treated last year’s net sales subsequent to the comparable date of the store closing as non-comparable store sales. 

     Gross Profit

          Gross profit, which is net sales less cost of sales, increased by 25.6%, or $36.9 million, to $181.5 million in fiscal 2002 from $144.6 million in fiscal 2001.  Gross profit was 30.4% of net sales in fiscal 2002 compared to 30.0% in fiscal 2001. The increase was due primarily to the leveraging of buying, selling and occupancy costs.

     Selling, General and Administrative Expenses

          Selling, general and administrative expenses increased by 25.7%, or $30.3 million, to $148.4 million in fiscal 2002 from $118.1 million in fiscal 2001.  Selling, general and administrative expenses were 24.8% of net sales in fiscal 2002, compared to 24.5% in fiscal 2001. The increase as a percentage of net sales was due primarily to increased marketing costs of $5.5 million mainly in support of our expansion program, higher pre-opening costs of $2.0 million resulting from opening nine stores in fiscal 2002 as compared to five stores in fiscal 2001 and higher depreciation expense primarily from stores opened during and subsequent to fiscal 2001.  During fiscal 2002, we recognized $1.1 million of net insurance proceeds related to the Greenwood, Indiana location that was destroyed by a tornado.  As a result of adopting SFAS No. 142, Goodwill and Other Intangible Assets, on February 3, 2002, no amortization expense was recorded in fiscal 2002.  During fiscal 2001, we recorded goodwill amortization expense of $783,000. 

     Operating Income

          Operating income increased by 25.1% or $6.7 million, to $33.2 million in fiscal 2002 from $26.5 million in fiscal 2001. Operating income was 5.5% of net sales in fiscal 2002 and 2001, respectively.  The increase in gross margin was offset by higher costs for marketing, new store pre-opening costs and depreciation.

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     Interest Expense, net

          Interest expense, net of interest income of $257,000, was $1.8 million in fiscal 2002.  Interest expense primarily consisted of interest of $1.2 million related to the revolving credit facility and amortization of $525,000 of financing intangibles.

     Loss on Early Extinguishment of Debt

          During fiscal 2001, we paid all the outstanding amounts due under our subordinated and junior subordinated notes.  We incurred a loss of $7.8 million, related to the write-off of the unamortized discount and the deferred financing cost associated with these notes.  In addition, we refinanced our revolving credit facility during the first quarter of fiscal 2001 which resulted in a charge of $2.6 million related to the write-off of the remaining deferred financing costs associated with the prior revolving credit facility.  In accordance with SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, gains and losses from the extinguishment of debt should be reported as part of on-going operations, unless the extinguishment of debt meets the criteria of both unusual and infrequent as established in APB No. 30.  SFAS No. 145 is effective for us beginning February 2, 2003, including all prior period presentations.  The loss on early extinguishment of debt has been reclassified in the comparative consolidated financial statements to be included within earnings before income taxes.

     Income Taxes

          The effective income tax rate for fiscal 2002 was 40.3%.  This rate reflects the effect of the anticipated federal tax rate and aggregated state tax rates in the various states in which we currently conduct business.  The effective income tax rate for 2001 was 42.2%.

     Net Income

          As a result of the foregoing, net income increased by $14.1 million to $18.7 million in fiscal 2002 from $4.6 million in fiscal 2001.

     Liquidity and Capital Resources

          Our primary liquidity and capital requirements have been to fund new store construction, working capital and general corporate needs. For fiscal 2003, these capital and liquidity requirements were primarily funded from funds available under our revolving credit facility, proceeds from a financing transaction we entered into with a member of the W.P. Carey Group, and by cash and cash equivalents on hand at the beginning of the year. 

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          Cash flows from operating, investing, and financing activities for fiscal 2003 are summarized below:

          Net cash provided by operating activities was $34.8 million for fiscal 2003 compared to $45.8 million for fiscal 2002. The decrease from fiscal 2002 was due primarily to lower net income and changes in working capital, partially offset by higher depreciation expense and higher deferred income taxes. The changes in working capital resulted primarily from increases in merchandise inventories and receivables for landlord construction contributions, related primarily to new stores, partially offset by higher trade accounts payables.

          Net cash used in investing activities was $82.8 million for fiscal 2003 compared to $66.6 million for fiscal 2002.  The increase from fiscal 2002 was due primarily to higher capital expenditures associated with the nine new stores opened during fiscal 2003 as well as the remodel of four of our existing stores.  Only six of the nine new stores opened during fiscal 2003 had landlord construction contributions compared to eight of the nine stores opened during fiscal 2002. 

          Net cash provided by financing activities was $43.2 million for fiscal 2003 compared to net cash used in financing activities of $4.0 million in fiscal 2002.  The increase from fiscal 2002 was due primarily to an increase in net borrowings under the revolving credit facility, the proceeds of a financing transaction we entered into with a member of the W.P. Carey Group and an increase in proceeds from the sale of common stock through the exercise of related stock options, partially offset by the payment of financing costs associated with the amended and restated credit agreement and the repayment of the construction loan for our store in Rochester, New York.

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          On April 25, 2003, we entered into an amended and restated credit agreement with JPMorgan Chase Bank, as administrative agent, for the syndication of participating banks, which matures on April 24, 2008.  Under this agreement, our revolving credit facility maximum borrowing capacity is $250.0 million of which $30.0 million may be used for the issuance of letters of credit.  The revolving credit facility is an asset-based loan with a borrowing base calculated on certain percentages of eligible inventory, eligible accounts receivables, and certain real property as defined in the agreement.  The revolving credit facility bears interest, at our election, at either an adjusted prime rate or an adjusted LIBOR, in each case plus additional interest, which varies depending on our availability level or EBITDA measured at each quarter end.  Availability is defined as the lesser of the monthly borrowing base or $250.0 million; minus the total borrowings, including letters of credit.  We pay an annual commitment fee on the unused portions of the revolving credit facility at a variable amount based on utilization of the total facility.  As of January 31, 2004, the commitment fee rate was 0.425%.  We will not be subject to any financial covenants, provided we maintain a minimum of $35.0 million of availability.  The revolving credit facility contains other covenants, including covenants that restrict our ability to incur indebtedness or to create various liens, and restrict our ability to engage in mergers or acquisitions, sell assets, or make junior payments, including cash dividends. As of January 31, 2004, we were in compliance with all applicable covenants. The revolving credit facility is secured by a first priority security interest in our cash, inventory, intellectual property, and certain real estate that is included in the borrowing base.  Our subsidiaries have guaranteed, and any future subsidiaries will be required to guarantee, our obligations under the revolving credit facility. As of March 19, 2004, we had $53.1 million in outstanding borrowings and an availability of $50.9 million, net of $5.7 million used in support of letters of credit, under our revolving credit facility.

          On August 8, 2003 we sold our interest in buildings and leasehold improvements for two store locations, for approximately $12.0 million to CPA®:15, which is a member of the W.P. Carey Group and simultaneously entered into lease agreements for these two store locations. The transaction included our store locations in Buffalo, New York, and Greenwood, Indiana.  Although we leased back the properties, this transaction was accounted for as a financing obligation, with the future lease payments classified as a liability in our financial statements and quarterly lease payments classified as payments of principal and interest expense relating to a financing obligation.  The net proceeds from this transaction were used to repay current borrowings under our revolving credit facility.  As of January 31, 2004, we had an outstanding obligation of $11.7 million, with a fixed interest rate of 10.6% that matures in 2024.  Simultaneously, we assigned our rights under an existing ground lease to CPA®:15, which is a member of the W.P. Carey Group, for a third store in Freehold, New Jersey that had not yet been constructed and is scheduled to open in the summer of 2004. 

          During fiscal 2001, we entered into a $6.0 million line of credit agreement with a bank to be used for the construction of a new store building.  On May 1, 2003, we paid all remaining outstanding principal and interest on this loan.

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          Our net working capital at January 31, 2004 was $67.9 million, compared to $54.3 at the end of the prior fiscal year.  Net working capital is calculated as the difference between current assets (excluding cash) and current liabilities (excluding current portion of long-term debt).  The increase in working capital resulted primarily from increases in merchandise inventories and receivables for landlord construction contributions, related to new stores, partially offset by higher trade accounts payables.

          Our typical two-level and one-level new stores, if leased with a landlord construction contribution adequate to cover the cost of construction of the building, generally require capital expenditures between $3.0 to $5.0 million for interior finish and fixtures depending on the size of the store, and an inventory investment between $2.5 to $3.5 million, net of vendor payables, depending on the size of the store.  Pre-opening expense, consisting primarily of store set-up costs, training of new store employees, and travel expenses, averages approximately $550,000 and is expensed as incurred.

          Our future capital requirements will depend on the number and size of new stores we open, the timing of those openings within a given year and the extent of landlord construction contributions received.  For fiscal 2004, we currently estimate our total capital expenditures to be approximately $40.0 million, net of agreed-upon landlord construction contributions.  In addition to this capital expenditures estimate, we currently anticipate approximately $4.6 million of non-capitalizable pre-opening costs for new stores. The capital expenditures estimate contemplates $31 million for nine new stores that we intend to open during fiscal 2004, including the two stores we opened through March 2004.  The total capital expenditure estimate also includes an estimate for construction-in-progress disbursements for anticipated fiscal 2005 openings.  The capital expenditures estimate also reflects the fact that all of our planned nine store openings for fiscal 2004 have landlord construction contributions as compared to six of nine new stores in fiscal 2003 that had landlord construction contributions. Although all of our fiscal 2004 new stores have landlord contributions, some potential store locations that we seek to develop in the future may not have landlord construction contributions available. The total capital expenditure estimate for fiscal 2004 also includes approximately $9.0 million for improvements relating to our existing stores, the new principal executive offices, technology, supply chain initiatives and other corporate capital expenditures. We believe that developer or real estate investment company financing, longer term mortgage financing, cash flows from operations and funds available under our existing revolving credit facility will be sufficient to satisfy our current capital and inventory requirements for the stores we plan to open in the next 12 months.

          We have entered into agreements that create contractual obligations and commercial commitments.  These obligations and commitments will have an impact on future liquidity and capital resources. The tables set forth below present a summary of these obligations and commitments as of January 31, 2004.

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Contractual Obligations:

Commercial Commitments: