UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 1O-Q

(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended October 31, 1998

                                       Or

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the transition period from        to
                         Commission File Number: 1-10089

                           FAMILY BARGAIN CORPORATION
             (Exact name of registrant as specified in its charter)

         Delaware                                             51-0299573
         (State or other jurisdiction of                   (I.R.S. Employer
         incorporation or organization)                    Identification No.)


         4000 Ruffin Road, San Diego, CA                      92123-1866
         (Address of principal executive office)              (Zip Code)

                                 (619) 627-1800
              (Registrant's telephone number, including area code)


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.
       [X] YES    [  ] NO

The number of shares outstanding, adjusted for a 1 for 3.32 reverse stock split,
of the registrant's of common stock, as of October 31, 1998, was 1,507,892
shares.

<PAGE> 2

                           FAMILY BARGAIN CORPORATION

            FORM 10-Q FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998

                                      INDEX


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Family Bargain Corporation and Subsidiary Consolidated Balance
         Sheets as of October 31, 1998 (Unaudited) and January 31, 1998 ....F-1

         Family Bargain Corporation and Subsidiary Consolidated Statements
         of Operations (Unaudited) for the 13 weeks ended October 31, 1998
         and November 1, 1997 ..............................................F-3

         Family Bargain Corporation and Subsidiary Consolidated Statements
         of Operations (Unaudited) for the 39 weeks ended October 31, 1998
         and November 1, 1997 ..............................................F-4

         Family Bargain Corporation and Subsidiary Consolidated Statements
         of Cash Flows (Unaudited) for the 39 weeks ended October 31, 1998
         and November 1, 1997 ..............................................F-5

         Family Bargain Corporation and Subsidiary Notes to Consolidated
         Financial Statements (Unaudited) ..................................F-7

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations ...............................................3

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings ...................................................9
Item 2.  Changes in Securities................................................9
Item 3.  Defaults Upon Senior Securities......................................9
Item 4.  Submission of Matters to a Vote of Security Holders..................9
Item 5.  Other Information ...................................................9
Item 6.  Exhibits and Reports on Form 8-K ....................................9
         Signatures .........................................................10
         Exhibit Index ......................................................11

<PAGE> F-1

                                     PART I

Item 1.   Financial Statements

                    FAMILY BARGAIN CORPORATION AND SUBSIDIARY
                           Consolidated Balance Sheets
                        (in thousands, except share data)


                                                     October 31,     January 31,
                                                        1998            1998
                                                     (Unaudited)
                  Assets

Current assets:
         Cash                                        $   5,279       $   3,167  
         Merchandise inventories                        41,566          29,820
         Prepaid expenses and other assets               2,828             727
                                                     ---------       ---------


                  Total current assets                  49,673          33,714

Leasehold improvements and equipment, net               16,831          15,066

Other assets, net                                        2,591           3,326

Excess of cost over net assets acquired,
less accumulated amortization of $8,137
and $6,935 at October 31, 1998 and
January 31, 1998, respectively                          31,509          32,711
                                                     ---------       ---------

                  Total assets                       $ 100,604        $ 84,817
                                                     =========       =========

                                   (continued)

                                       F-1

<PAGE> F-2

                    FAMILY BARGAIN CORPORATION AND SUBSIDIARY
                           Consolidated Balance Sheets
                        (in thousands, except share data)
                                   (continued)

                                                     October 31,     January 31,
                                                        1998            1998
                                                     (Unaudited)
Liabilities and Stockholders' Equity

Current liabilities:
       Current maturities of long-term debt
              and capital lease obligations          $   1,570       $   4,873  
       Accounts payable                                 28,184          19,003
       Accrued expenses                                 14,492          12,587
                                                     ---------       ---------
              Total current liabilities                 44,246          36,463

Revolving credit notes                                  25,920          12,657
Long-term debt, less current maturities                 14,611          12,922
Capital lease and other long-term obligations            2,882           3,306
Deferred rent                                            1,896           2,251
                                                     ---------       ---------
              Total liabilities                         89,555          67,599
                                                     ---------       ---------

Stockholders' equity:
 Series A convertible preferred stock,
 $.01 par value, 4,500,000 shares authorized,
 3,638,690 shares issued and outstanding
 (aggregate liquidation preference of $36,387)
 at October 31, 1998 and January 31, 1998                  36               36

 Series B junior convertible, exchangeable preferred stock,
 $.01 par value, 40,000 shares authorized,
 35,360 and 33,714 shares issued and outstanding
 (aggregate liquidation preference of $35,360 and $33,714)
 at October 31, 1998 and January 31, 1998, respectively     -                -

 Common stock, $.01 par value,
 80,000,000 shares authorized,
 1,507,892 and 1,485,292 shares issued and outstanding
 at October 31, 1998 and January 31, 1998, respectively    15               15

Stock subscription notes receivable                    (4,087)          (2,115)
Additional paid-in capital                             90,432           85,461
Accumulated deficit                                   (75,347)         (66,179)
                                                     ---------        ---------

              Total stockholders' equity               11,049           17,218
                                                    ----------         -------

Total liabilities and stockholders' equity          $ 100,604         $ 84,817
                                                    =========         =========

            See accompanying notes to consolidated financial statements.

                                       F-2

<PAGE> F-3

                    FAMILY BARGAIN CORPORATION AND SUBSIDIARY
                      Consolidated Statements of Operations
                      (in thousands, except per share data)
                                   (Unaudited)



                                                          13 Weeks Ended
                                                    ----------------------------
                                                    October 31,      November 1,
                                                       1998             1997

Net sales                                           $  84,978        $  77,263
Cost of sales                                          56,193           50,802
                                                    ---------        ---------

       Gross profit                                    28,785           26,461

Selling and administrative expenses                    24,812           22,908
Amortization of intangibles                               591              589
                                                    ---------        ---------

       Operating income                                 3,382            2,964

Other expense:
       Interest expense                                (1,071)          (1,358)
                                                    ----------        ---------

Income before income taxes                              2,311            1,606

Income taxes                                              (60)               -
                                                    ----------        ---------

       Income before dividends                          2,251            1,606

Preferred stock dividends - Series A                     (865)            (864)

Preferred stock dividends - Series B                     (779)            (671)
                                                    ----------        ---------

       Net income available to common stockholders  $     607         $     71
                                                    ==========        =========

Basic earnings per share                            $    0.40         $   0.05
Diluted earnings per share                          $    0.23         $   0.05

Weighted average common shares outstanding:
Basic                                                   1,508            1,485
Diluted                                                 9,962            1,485




          See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE> F-4

                    FAMILY BARGAIN CORPORATION AND SUBSIDIARY
                      Consolidated Statements of Operations
                      (in thousands, except per share data)
                                   (Unaudited)



                                                           39 Weeks Ended
                                                    ----------------------------
                                                    October 31,      November 1,
                                                       1998             1997

Net sales                                           $ 224,929        $ 207,074
Cost of sales                                         149,336          140,388
                                                    ---------        ---------

       Gross profit                                    75,593           66,686

Selling and administrative expenses                    70,336           63,247
Amortization of intangibles                             1,770            1,649
Special charges                                         1,500            1,750
                                                    ---------        ---------

       Operating income                                 1,987               40

Other expense:
       Interest expense                                (3,443)          (3,964)
                                                    ----------       ----------

Loss before income taxes and
       extraordinary item                              (1,456)          (3,924)

Income taxes                                             (159)               -
                                                    ----------       ----------

       Loss before extraordinary item                  (1,615)          (3,924)

Extraordinary item - debt extinguishment
       (less applicable income taxes of $0)            (2,750)               -
                                                    ----------       ----------

       Loss before dividends                           (4,365)          (3,924)

Preferred stock dividends - Series A                   (2,593)          (2,592)

Preferred stock dividends - Series B                   (2,210)          (1,963)
                                                    ----------       ----------

       Net loss available to common stockholders    $  (9,168)       $  (8,479)
                                                    ==========       ==========

Basic earnings per share:
Loss before extraordinary item                      $   (4.28)       $   (5.75)
Extraordinary item                                  $   (1.83)       $       -
Net loss available to common stockholders           $   (6.11)       $   (5.75)

Weighted average common shares outstanding              1,501            1,474



       See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE> F-5

                    FAMILY BARGAIN CORPORATION AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (Unaudited)


                                                            39 Weeks Ended
                                                    ----------------------------
                                                    October 31,      November 1,
                                                       1998             1997
                                                    -----------      -----------
 Cash Flows from Operating Activities:
    Loss before dividends                           $   (4,365)      $  (3,924)
    Adjustments to reconcile net loss to net
       cash used in operating activities:
          Depreciation and amortization                  5,258           4,307
          Debt discount amortization                     1,161           1,596
          Extraordinary loss on debt extinguishment      2,750               -
          Loss on disposal of equipment                    159              94
          Deferred rent expense                           (355)            386
          Gain on repurchase of subordinated notes           -             (75)
          Changes in operating assets and liabilities:
             Merchandise inventories                   (11,746)        (14,295)
             Prepaid expenses and other assets          (2,101)           (669)
             Accounts payable and accrued expenses      11,086           5,805
             Other                                        (798)           (398)
                                                    -----------      -----------

Net cash used in operating activities                    1,049          (7,173)
                                                    -----------      -----------

Cash Flows from Investing Activities:
   Purchase of leasehold improvements
           and equipment                                (4,299)         (5,282)
                                                    -----------      -----------
Net cash used in investing activities                   (4,299)         (5,282)
                                                    -----------      -----------

Cash Flows from Financing Activities:
   Borrowings on revolving credit notes                253,509         248,830
   Payments on revolving credit notes                 (240,246)       (239,487)
   Payments on notes payable and capital
       lease obligations                                (5,239)         (3,636)
   Payment of deferred debt issuance costs                 (70)           (196)
   Net proceeds from issuance of preferred
       stock                                                 -           9,594
   Payment of dividends on Series A preferred stock     (2,592)         (2,592)
                                                    -----------       ----------

Net cash provided by financing activities                5,362          12,513
                                                    -----------       ----------

                                   (continued)
                                       F-5

<PAGE> F-6

                    FAMILY BARGAIN CORPORATION AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (Continued)


                                                         39 Weeks Ended
                                                    October 31,      November 1,
                                                       1998             1997
                                                    -----------      -----------

Net increase in cash                                 $  2,112         $     58

Cash at the beginning of the period                     3,167            3,261
                                                     --------         --------

Cash at the end of the period                        $  5,279         $  3,319
                                                     ========         ========
Supplemental disclosure of cash flow information:

   Cash paid during the period for interest           $ 2,112         $  1,991

   Cash paid during the period for income taxes       $    74         $     16

Supplemental disclosure of non-cash investing activities:

   Capital lease purchases                            $   936         $    793

Supplemental disclosure of non-cash financing activities:

   Series B preferred stock dividends                 $ 2,210         $  1,963


          See accompanying notes to consolidated financial statements.

                                       F-6

<PAGE> F-7

                    FAMILY BARGAIN CORPORATION AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

(1)      Unaudited Interim Financial Statements

         The accompanying  unaudited  consolidated  financial  statements do not
         include all of the  information  and  footnotes  required by  generally
         accepted  accounting  principles  for annual  financial  statements and
         should be read in  conjunction  with the financial  statements  for the
         fiscal  year ended  January 31,  1998  included  in the Family  Bargain
         Corporation and Subsidiary's  (the Company) Form 10-K/A-2 as filed with
         the  Securities  and Exchange  Commission.  The unaudited  consolidated
         financial statements include the accounts of Family Bargain Corporation
         and it's subsidiary.  All significant  intercompany  transactions  have
         been eliminated in consolidation.

         In the opinion of  management,  the  unaudited  consolidated  financial
         statements  as of and for the  thirteen  and  thirty-nine  weeks  ended
         October 31, 1998 and  November 1, 1997 reflect all  adjustments  (which
         include normal recurring  adjustments)  necessary to present fairly the
         financial  position,  results  of  operations  and cash  flows  for the
         periods  presented.  Due  to  the  seasonal  nature  of  the  Company's
         business,  the results of  operations  for the  interim  period may not
         necessarily be indicative of the results of operations for a full year.

(2)      Long-term Debt and Revolving Credit Notes

         On July 31, 1998 the  company's  two  operating  subsidiaries,  General
         Textiles  and  Factory  2-U,  Inc.,  merged  to  form  a  new  Delaware
         corporation named General Textiles, Inc (the "Subsidiary Merger"). As a
         result of the  Subsidiary  Merger,  the  Company  and its  lender  have
         amended certain terms and conditions of its revolving  credit facility.
         Under the amended terms and conditions, covenants have been reset to be
         reflective of anticipated earnings,  capital expenditures and cash flow
         over the remaining  term of the revolving  credit  facility for General
         Textiles, Inc.

         The General Textiles'  bankruptcy plan of reorganization  requires that
         certain  events,   such  as  the  Subsidiary  Merger,   result  in  the
         acceleration  of  payment  of  the  trade   subordinated   notes.   The
         outstanding  balance of trade  subordinated  notes of $1.7  million was
         paid in October 1998.

         General  Textiles, Inc. finances its operations through credit provided
         by suppliers, amounts borrowed under its $50.0
         million revolving credit facility and internally generated cash flow.

         General Textiles, Inc. may borrow up to 65% of eligible inventory, as
         defined, subject to a maximum of $50.0 million of amounts outstanding
         at any time. As of October 31, 1998, General Textiles, Inc. had $25.9
         million outstanding and $15.1 million available to borrow under its
         revolving credit facility.

         Effective  April  30,  1998 the  Company  entered  into  agreements  to
         exchange the subordinated and junior  subordinated notes for new notes.
         The new  notes  removed  an  estimated  excess  cash  flow  calculation
         previously  used to  determine  the  timing  and  amount  of  payments.
         Further,  the new notes  provide a fixed  schedule  for debt  principal
         payments.  In  accordance  with EITF 96-19,  the Company  recorded  the
         exchange of the subordinated  debt agreements as an  extinguishment  of
         debt, and in connection therewith,  recorded an extraordinary loss, net
         of taxes,  of $2.8  million.  This  loss  represents  increases  in the
         present  value of the  principal  amount  of debt and fees  paid to the
         lenders.  The fees  included  the  issuance of 75,000  shares of common
         stock and warrants to purchase  274,418  shares of common  stock,  both
         stated at fair market value.

         The new subordinated notes total $3.3 million and bear interest at 9.2%
         per annum. Principal payments in the amount of $0.2 million are payable
         on December 31, 1999 and  December  31, 2000,  with $0.4 million due on
         December  31, 2001 and  December  31, 2002 and a final  payment May 28,
         2003 for $2.1 million.  If any principal balance remains outstanding on
         April 1, 1999,  the  interest  rate will  increase  on such  date,  and
         thereafter on the first day of each successive  calendar quarter by one
         percent (1%) provided, however, that the interest rate shall not exceed
         13.2% per annum.

         The new junior  subordinated  notes total $17.3 million with  principal
         payments at December 31, 1999 and  December 31, 2000 for $1.0  million,
         December 31, 2001 and December 31, 2002 for $2.0 million,  December 31,
         2003 and December 31, 2004 for $3.0 million and a final payment May 28,
         2005 for $5.3 million.

         At  October  31,  1998,   General  Textiles,   Inc.  was  obligated  to
         non-affiliate holders of its subordinated and junior subordinated notes
         in the face  amount of $20.6  million  with a  carrying  value of $13.9
         million.

(3)      Provision for Income Taxes

         The Company  recorded a tax  provision  for federal  alternate  minimum
         taxes for the  thirty-nine  weeks  ended  October  31,  1998.  No other
         provision  for  income  taxes has been  reflected  in the  accompanying
         consolidated  statements of operations for the thirty-nine  weeks ended
         October 31, 1998 and November 1, 1997 since the Company  generated  tax
         losses during these  periods.  Although such losses would  increase the
         Company's net operating loss carry forwards (NOLs), realization of such
         NOLs is currently  considered to be less than likely due to limitations
         on  utilization  of NOLs and the  Company's  history  of  losses.  As a
         result, a full valuation  allowance has been recognized against the net
         deferred tax assets  arising from the increased NOLs and no benefit for
         income taxes is reflected in the accompanying  consolidated  statements
         of operations.

<PAGE> F-8

(4)      Earnings per Share

         In February  1997,  the  Financial  Accounting  Standards  Board issued
         Statement of Financial  Accounting Standard No. 128, Earnings per Share
         (SFAS No. 128),  which the Company adopted as of January 31, 1998. This
         Statement sets forth the basis for the computation of "basic"  earnings
         per share and "diluted"  earnings per share from the previous method of
         computing both "primary" and "fully diluted" earnings per share.

         The  preferred  stock  and  other  common  stock  equivalents  were not
         considered  for the thirteen week period ended November 1, 1997 and the
         thirty-nine  week periods ended October 31, 1998, and November 1, 1997,
         as converted because the calculation was anti-dilutive.  At October 31,
         1998 there were  8,454,058  potentially  dilutive  shares of  preferred
         stock  and  other  common  stock  equivalents  (options  and  warrants)
         outstanding.

         On November  23,  1998 the  Company's  stockholders  approved a plan of
         recapitalization  under which all of the Company's  stock was converted
         into a single class of Common Stock. As part of the recapitalization, a
         1.0 for 3.32 reverse stock split was  effected.  Earnings per share and
         shares  outstanding  have been  restated  to give effect to the reverse
         split in the unaudited consolidated financial statements. See Note 7.

(5)      Dividends

         The Series B Junior Convertible,  Exchangeable  Preferred Stock pays no
         dividend through December 31, 2001.  Beginning in 2002, the Company was
         obligated to pay a dividend to holders of the Series B Preferred  Stock
         in the amount of $60 per share  subject to  increases  of $20 per share
         every year thereafter until 2005 up to a maximum of $120 per share. The
         Company imputes dividends on the Series B Preferred Stock utilizing the
         effective  interest method to provide a level yield until the permanent
         dividend of $120 per share is payable.  The accreted dividends increase
         the carrying value of the additional  paid in capital  attributable  to
         the Series B Preferred  Stock.  See Note 7 discussing the conversion of
         the  Series  B  Junior  Convertible,  Exchangeable  Preferred  Stock in
         accordance with a shareholder vote at the annual meeting.

(6)      New Accounting Pronouncements

         On  February  1, 1998 the  Company  adopted  SFAS No.  130,  "Reporting
         Comprehensive   Income,"   which   requires   companies  to  report  as
         comprehensive income all changes in equity during a period except those
         resulting from investments by owners and  distributions to owners.  The
         Company had no other comprehensive income as identified in SFAS No. 130
         for the periods presented in the accompanying financial statements.

<PAGE> F-9

(7)      Subsequent Events

         On November  23,  1998 the  Company's  stockholders  approved a plan of
         recapitalization  under which all of the Company's  stock was converted
         into a single class of Common Stock, the subsidiary  General  Textiles,
         Inc. was merged into the parent and the  Company's  name was changed to
         "Factory 2-U Stores, Inc."

         Under the plan of  recapitalization,  each  share of  common  stock was
         converted  into .30133  shares of  post-recapitalization  Common Stock,
         each share of Series A Preferred  Stock was converted into one share of
         post-recapitalization Common Stock and each share of Series B Preferred
         Stock was converted into 173.33 shares of post-recapitalization  Common
         Stock.  Dividends  are no  longer  payable  to the  Series A  Preferred
         Shareholders  nor will  dividends be imputed for the Series B Preferred
         Stock. As a result of the recapitalization,  the Company has 11,306,000
         shares of Common  Stock  outstanding.  Additionally,  the  Company  has
         commenced a rights offering under which an additional 800,000 shares of
         Common Stock will be sold for $13.00 per share.

         The following table sets forth the Company's pro forma consolidated net
         income  (loss) and basic  income  (loss) per share for the thirteen and
         thirty-nine  weeks ended  October 31, 1998.  The pro forma results give
         effect to the conversion of Series A and B preferred stock into common,
         elimination of dividends and  adjustment of interest  expense as though
         the recapitalization had occurred at February 1, 1998.

                                                   Period Ended October 31, 1998
                                                   13 Weeks             39 Weeks
(in thousands, except per share amounts)
Pro forma net income (loss)                        $ 2,291             $ (4,305)

Pro forma basic and diluted earnings per share:
  Income (loss) before extraordinary item           $ 0.20              $ (0.14)
  Extraordinary item                                     -              $ (0.25)
  Net income (loss)                                 $ 0.20              $ (0.39)

Pro forma weighted average shares outstanding       11,306               11,165

         Factory 2-U Stores, Inc. Common Stock began trading on a
         post-recapitalization  basis November 25, 1998 on the Nasdaq Small Cap
         under the symbol "FTUS."

(8)      Reclassifications

         Certain  reclassifications  have  been  made to the  January  31,  1998
         amounts to conform to the October 31, 1998 presentation.

<PAGE> 3

Item 2.   Management's Discussion and Analysis
            of Financial Condition and Results of Operations

General

Management's discussion of the results of operations provides analysis of the
Company's operations during the 13 and 39 weeks ended October 31, 1998 and
November 1, 1997.

Results of Operations

The following  discussion and analysis  should be read in  conjunction  with the
Company's Consolidated Financial Statements and notes thereto included elsewhere
in this Form 10-Q.  As of October  31,  1998 there were 168 stores in  operation
versus 168 at November 1, 1997.

13 Weeks Ended October 31, 1998 Compared to the 13 Weeks Ended November 1, 1997

Net sales were $85.0 million for the 13 weeks ended October 31, 1998 compared to
$77.3  million  for the 13 weeks  ended  November  1, 1997,  an increase of $7.7
million, or 10.0%. Comparable store sales increased 11.4%.

Gross profit was $28.8  million for the 13 weeks ended October 31, 1998 compared
to $26.5  million  for the 13 weeks  ended  November  1, 1997,  an  increase  of
approximately  $2.3 million,  or 8.7% increase.  As a percentage of sales, gross
profit was 33.9% for the 13 weeks ended  October 31, 1998  compared to 34.2% for
the 13 weeks ended  November 1, 1997. The decrease in the gross profit margin as
a percentage of sales is primarily attributable to higher markdowns.

Selling and  administrative  expenses  were $24.8 million for the 13 weeks ended
October 31, 1998  compared to $22.9  million for the 13 weeks ended  November 1,
1997,  an increase of $1.9 million,  or 8.3%. As a percentage of sales,  selling
and  administrative  expenses were 29.2% for the 13 weeks ended October 31, 1998
compared to 29.6% for the 13 weeks ended  November  1, 1997.  The  decrease as a
percentage of sales is primarily a result of operating  leverage from  increased
comparable  store sales in relation  to fixed  occupancy  costs as well as lower
preopening  costs  partially  offset by higher  advertising  and  administrative
support expenses.

Amortization  of intangibles was $0.6 million for the 13 weeks ended October 31,
1998 and for the 13 weeks ended November 1, 1997.

Interest  expense was $1.1  million for the 13 weeks ended  October 31, 1998 and
$1.4  million  for the 13 weeks  ended  November  1, 1997.  The  exchange of the
subordinated  and  junior  subordinated  notes for new notes,  discussed  in the
"Liquidity  and Capital  Resources"  section,  resulted in a lower debt discount
amortization in the current year.

Federal income taxes were accrued in  anticipation  of an alternate  minimum tax
for fiscal 1998.

The net income  available  to common  stockholders  was $0.6  million for the 13
weeks  ended  October  31,  1998  compared  to net  income  available  to common
stockholders  of $0.1  million  for the 13 weeks  ended  November  1, 1997.  The
increase  in net income for the 13 weeks  ended  October 31, 1998 is a result of
the operating factors cited above.

<PAGE> 4

39 Weeks Ended October 31, 1998 Compared to the 39 Weeks Ended November 1, 1997

Net sales were $224.9  million for the 39 weeks ended  October 31, 1998 compared
to $207.1  million for the 39 weeks ended November 1, 1997, an increase of $17.8
million, or 8.6%. Comparable store sales increased 7.1%.

Gross profit was $75.6  million for the 39 weeks ended October 31, 1998 compared
to $66.7  million for the 39 weeks ended  November 1, 1997,  an increase of $8.9
million,  or 13.3%. As a percentage of sales,  gross profit was 33.6% for the 39
weeks ended October 31, 1998  compared to 32.2% for the 39 weeks ended  November
1, 1997.  The increase in the gross profit margin is primarily  attributable  to
lower shrinkage and higher markup partially offset by higher markdowns.

Selling and  administrative  expenses  were $70.3 million for the 39 weeks ended
October 31, 1998  compared to $63.2  million for the 39 weeks ended  November 1,
1997, an increase of  approximately  $7.1 million,  or 11.2%. As a percentage of
sales,  selling and  administrative  expenses  were 31.3% for the 39 weeks ended
October 31, 1998 compared to 30.5% for the 39 weeks ended  November 1, 1997. The
increase as a  percentage  of sales is  primarily a result of higher  store wage
rates,  due  in  part  to  an  increase  in  the  minimum  wage,  and  increased
administrative support expenses.

Amortization  of intangibles was $1.8 million for the 39 weeks ended October 31,
1998  compared  to $1.6  million for the 39 weeks  ended  November 1, 1997.  The
increase is attributable to the non-compete agreement with the former president.

The special charge of $1.5 million in fiscal 1998  represents  various  expenses
incurred in  connection  with hiring the  current  President  and CEO of General
Textiles.  In fiscal 1997, a charge of $1.8 million was incurred when the former
president resigned.

Interest  expense was $3.4  million for the 39 weeks ended  October 31, 1998 and
$4.0  million  for the 39 weeks  ended  November  1, 1997.  The  exchange of the
subordinated  and  junior  subordinated  notes for new notes,  discussed  in the
"Liquidity  and Capital  Resources"  section,  resulted in a lower debt discount
amortization in the current year.

Federal  income  taxes  of $0.2  million  were  accrued  in  anticipation  of an
alternate minimum tax for fiscal 1998.

An  extraordinary  charge of $2.8  million was  incurred  for the 39 weeks ended
October 31, 1998 because  notes  payable  associated  with the General  Textiles
bankruptcy were  extinguished  and new notes with terms favorable to the Company
were issued.

The net loss available to common  stockholders was $9.2 million for the 39 weeks
ended October 31, 1998 compared to a net loss  available to common  stockholders
of $8.5  million for the 39 weeks ended  November 1, 1997.  The  increase in net
loss for the 39 weeks  ended  October  31,  1998 is a  result  of the  operating
factors cited above.

<PAGE> 5

Liquidity and Capital Resources

On  November   23,  1998  the   Company's   stockholders   approved  a  plan  of
recapitalization  under which all of the Company's  stock was  converted  into a
single class of Common Stock, the subsidiary  General Textiles,  Inc. was merged
into the parent and the Company's name was changed to "Factory 2-U Stores, Inc."

Under the plan of  recapitalization,  each share of common  stock was  converted
into .30133 shares of post-recapitalization Common Stock, each share of Series A
Preferred  Stock was converted  into one share of  post-recapitalization  Common
Stock and each  share of Series B  Preferred  Stock was  converted  into  173.33
shares of post-recapitalization Common Stock. Dividends are no longer payable to
the Series A Preferred Shareholders nor will dividends be imputed for the Series
B  Preferred  Stock.  As a  result  of the  recapitalization,  the  Company  has
11,306,000  shares of Common Stock  outstanding.  Additionally,  the Company has
commenced a rights  offering under which an additional  800,000 shares of Common
Stock will be sold for $13.00 per share.

The following table sets forth the Company's pro forma  consolidated  net income
(loss) and basic income (loss) per share for the thirteen and thirty-nine  weeks
ended October 31, 1998.  The pro forma results give effect to the  conversion of
Series A and B  preferred  stock  into  common,  elimination  of  dividends  and
adjustment of interest  expense as though the  recapitalization  had occurred at
February 1, 1998.

                                                   Period Ended October 31, 1998
                                                   13 Weeks             39 Weeks
(in thousands, except per share amounts)
Pro forma net income (loss)                        $ 2,291             $ (4,305)

Pro forma basic and diluted earnings per share:
  Income (loss) before extraordinary item          $  0.20              $ (0.14)
  Extraordinary item                                     -              $ (0.25)
  Net income (loss)                                 $ 0.20              $ (0.39)

Pro forma weighted average shares outstanding       11,306               11,165

Factory 2-U Stores, Inc.Common Stock began trading on a post-recapitalization
basis November 25, 1998 on the Nasdaq Small Cap under the symbol "FTUS."

Family Bargain Corporation

As of October  31,  1998,  Family  Bargain  Corporation  (the  "Parent")  had no
outstanding indebtedness compared to its debt obligations at January 31, 1998 of
$0.7 million.

<PAGE> 6

General Textiles, Inc.

On July 31, 1998, the Company's two operating subsidiaries, General Textiles and
Factory  2-U,  Inc.,  merged  (the  Subsidiary  Merger)  to form a new  Delaware
corporation named General Textiles,  Inc. As a result of the Subsidiary  Merger,
the Company and its lender have  amended  certain  terms and  conditions  of its
revolving credit facility. Under the amended terms and conditions covenants have
been reset to be reflective of anticipated  earnings,  capital  expenditures and
cash flow over the remaining term of the revolving  credit  facility for General
Textiles, Inc.

The General Textiles'  bankruptcy plan of  reorganization  requires that certain
events, such as the Subsidiary Merger,  result in the acceleration of payment of
the trade  subordinated  notes.  The outstanding  balance of trade  subordinated
notes of $1.7 million was paid in October 1998.

General  Textiles, Inc. finances its operations through credit provided by
suppliers, amounts borrowed under its $50.0 million revolving credit facility
and internally generated cash flow.

General Textiles, Inc. may borrow up to 65% of eligible inventory, as defined,
subject to a maximum of $50.0 million of amounts outstanding at any time. As o
October 31, 1998, General Textiles, Inc. had $25.9 million outstanding and $15.1
million available to borrow under its revolving credit facility.

Effective  April 30, 1998 the Company  entered into  agreements  to exchange the
subordinated and junior  subordinated notes for new notes. The new notes removed
an estimated  excess cash flow  calculation  previously  used to  determine  the
timing and amount of payments.  Further,  the new notes provide a fixed schedule
for debt principal payments. In accordance with EITF 96-19, the Company recorded
the exchange of the subordinated  debt agreements as an  extinguishment of debt,
and in connection  therewith,  recorded an extraordinary  loss, net of taxes, of
$2.8  million.  This  loss  represents  increases  in the  present  value of the
principal  amount of debt and fees paid to the  lenders.  The fees  included the
issuance of 75,000  shares of common  stock and  warrants  to  purchase  274,418
shares of common stock, both stated at fair market value.

The new  subordinated  notes total $3.3  million  and bear  interest at 9.2% per
annum.  Principal payments in the amount of $0.2 million are payable on December
31, 1999 and December  31, 2000,  with $0.4 million due on December 31, 2001 and
December  31, 2002 and a final  payment May 28,  2003 for $2.1  million.  If any
principal  balance remains  outstanding on April 1, 1999, the interest rate will
increase  on such  date,  and  thereafter  on the first  day of each  successive
calendar quarter by one percent (1%) provided,  however,  that the interest rate
shall not exceed 13.2% per annum.

The new junior subordinated notes total $17.3 million with principal payments at
December 31, 1999 and December 31, 2000 for $1.0 million,  December 31, 2001 and
December 31, 2002 for $2.0 million,  December 31, 2003 and December 31, 2004 for
$3.0 million and a final payment May 28, 2005 for $5.3 million.

At October 31,  1998,  General  Textiles,  Inc. was  obligated to  non-affiliate
holders of its subordinated and junior  subordinated notes in the face amount of
$20.6 million with a carrying value of $13.9 million.

<PAGE> 7

Capital Expenditures

The Company's  planned  future  capital  expenditures  include costs to open new
stores,  to renovate  and/or  relocate  existing  stores,  to expand its central
administrative  and  distribution  facilities  and to  upgrade  its  information
systems.  Management  believes  that future  expenditures  will be financed from
internal cash flow and the revolving credit facilities. Through October 31, 1998
the  Company  has spent  approximately  $5.2  million  on  capital  expenditures
(including capital leases). The Company anticipates spending  approximately $1.7
million during the remainder of the current fiscal year.

Inflation

In general,  the Company  believes that it will be able to offset the effects of
inflation  by  increasing  operating  efficiency,   monitoring  and  controlling
expenses and increasing prices to the extent permitted by competitive factors.

Seasonality and Quarterly Fluctuations

The Company  historically  has  realized  its highest  level of sales and income
during the third and fourth  quarters of the fiscal year (the quarters ending in
fiscal  October  and  January)  as a result of the "Back to School"  (August and
September) and Christmas (November and December) seasons. If the Company's sales
are  substantially  below  seasonal  expectations  during  the third and  fourth
quarters, the Company's annual operating results will be adversely affected. The
Company  historically has realized lower sales in its first two quarters,  which
often has resulted in the Company incurring losses during those quarters.

Deferred Tax Assets

The  Company  has net  operating  loss  ("NOL")  carryforwards  for  Federal and
California income tax purposes.  The utilization of these NOLs will be partially
limited  due to  restrictions  imposed  under the  Federal and State laws upon a
change in ownership.

At October 31,  1998,  the  Company's  total net deferred  income tax assets,  a
significant  portion  of  which  relates  to NOLs  discussed  above,  have  been
subjected to a 100% valuation  allowance since realization of such assets is not
likely in light of the Company's recurring losses from operations.

Year 2000 Issue

The Company uses various computer programs that would fail to perform accurately
if not replaced before the year 2000 affects any  transactions.  The Company has
selected and is currently  implementing  a new  integrated  software  package to
support future growth and which is capable of addressing  the issues  associated
with  the  year  2000.  As  part of its  capital  expenditure  plans  previously
discussed,  the Company  anticipates the new software  installation in 1998 will
cost  approximately $2.0 to $3.0 million and does not anticipate that conversion
issues will materially influence operations or operating results.

<PAGE> 8

Cautionary Statement Regarding Forward-Looking Information

Statements,   other  than  those  based  on  historical  facts,   which  address
activities,  events or developments  that the Company expects or anticipates may
occur in the future are forward-looking statements which are based upon a number
of assumptions  concerning  future  conditions  that may ultimately  prove to be
inaccurate.  Actual events and results may  materially  differ from  anticipated
results  described in such  statements.  The  Company's  ability to achieve such
results  is  subject  to certain  risks and  uncertainties,  including,  but not
limited to,  economic and weather  conditions that affect buying patterns of the
Company's  customers,  changes in consumer spending and the Company's ability to
anticipate  buying  patterns and  implement  appropriate  inventory  strategies,
continued  availability of capital and financing,  competitive factors and other
factors  affecting  the  Company's   business  beyond  the  Company's   control.
Consequently,  all of the  forward-looking  statements  are  qualified  by these
cautionary  statements  and  there  can be no  assurance  that  the  results  or
developments  anticipated by the Company will be realized or that they will have
the expected effects on the Company or its business or operations.

<PAGE> 9

                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

The Company is at all times  subject to pending and  threatened  legal  actions,
which arise out of the normal course of business.  In the opinion of management,
based in part on the advice of legal counsel,  the ultimate disposition of these
matters will not have a material  adverse  effect on the  financial  position or
results of operations of the Company.

Item 2.    Changes in Securities
                  None.

Item 3.     Defaults Upon Senior Securities
                  None.

Item 4.    Submission of Matters to a Vote of Security Holders
                  None.

Item 5.    Other Information
                  None.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

11.1     Computation of per share loss (1 page)

27       Financial Data Schedule (1 page)

(b)      Reports on Form 8-K
                  None.

<PAGE> 10

                                   SIGNATURES

Pursuant  to the  requirements  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.


FAMILY BARGAIN CORPORATION

Date: December 7, 1998




By:    /s/  Jonathan W. Spatz____          
       Name:  Jonathan W. Spatz
         Title:    Executive Vice President and Chief Financial Officer
                   (duly authorized officer and principal financial officer)

<PAGE> 11


                                  EXHIBIT INDEX

Exhibit
Number   Description                                                      Page

11.1     Computation of per share loss                                     12
27       Financial Data Schedule (for EDGAR filing only)                   13