SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q
   Mark One

    -----
     X          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    -----
             THE SECURITIES AND EXCHANGE ACT OF 1934 For the Quarter
                             Ended February 1, 1998

                                       OR

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


                           Commission File No. 1-5400


                               FARAH INCORPORATED
             (Exact name of registrant as specified in its charter)


                     Texas                           74-1061146
        (State or other jurisdiction of           (I.R.S. Employer
        incorporation or organization)            Identification No.)

4171 N. Mesa, Building D, Suite 500, El Paso, Texas   79902-1433
    (Address of principal executive offices)          (Zip Code)



          Registrant's telephone number, including area code   (915) 496-7000





         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 and Exchange Act
of 1934  during the  preceding  12 months (or for such  shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .

         As of March 13, 1998  there  were outstanding  10,322,632 shares of the
registrant's  common stock,  no par value,  which is the only class of common or
voting stock of the registrant.




<PAGE>


PART 1.  FINANCIAL INFORMATION

Item 1.  Financial Statements
<TABLE>

                       FARAH INCORPORATED AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
              QUARTERS ENDED FEBRUARY 1, 1998 AND FEBRUARY 2, 1997
                                   (Unaudited)

                                    (Thousands of dollars except share
                                        and per share data)
                                   February 1,           February 2,
                                      1998                   1997
                                -----------------      ----------------
<S>                               <C>                       <C>    
Net sales                         $      59,044               61,938
Cost of sales                            43,140               44,230
                                -----------------      ----------------

    Gross profit                         15,904                 17,708

Selling, general and
    administrative expenses             (14,420)               (16,046)
Royalty income                              345                     45
Termination of foreign
    operations                           (3,980)                (2,462)
Relocation expenses                        (792)                     -
Production conversion expenses                -                   (272)
                                -----------------      ----------------
     Operating loss                      (2,943)                (1,027)

Other income (expense):
     Interest expense                      (707)                (1,199)
     Interest income                         30                    191
     Foreign currency
        transaction gains                   156                    111
     Other, net                             (83)                    42
                                -----------------      ----------------
                                         (1,096)                  (363)
                                                                              
     Loss before for
       income taxes                      (4,039)                (1,390)

Income tax provision (benefit)             (969)                   565
                                -----------------      ----------------

     Net loss                            (3,070)                (1,955)

Retained earnings:
     Beginning                            8,586                  8,316
                                -----------------      ----------------
     Ending                       $       5,516                  6,361
                                =================      ================

Net loss per share -
   basic and diluted              $       (0.30)                 (0.19)
                                =================      ================

Weighted average shares of
   common stock outstanding 
   - basic and diluted               10,278,239             10,191,103
                                =================      ================
</TABLE>

See accompanying notes to condensed consolidated financial statements.




<PAGE>

<TABLE>
                       FARAH INCORPORATED AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        FEBRUARY 1, 1998 AND NOVEMBER 2,
                                1997 (Unaudited)

                                   (Thousands of dollars except share data)
                                      February 1,           November 2,
                                         1998                  1997
                                    ---------------       --------------
<S>                                    <C>                     <C>
ASSETS
Current assets:
   Cash                                $    3,351                2,332
   Trade receivables, net                  29,144               43,053
   Inventories:
        Raw materials                      16,053               12,339
        Work in process                    16,756               18,457
        Finished goods                     45,059               43,996
                                     ---------------      --------------
           Total inventories               77,868               74,792
   Other current assets                    10,079               10,851
                                     ---------------      --------------
           Total current assets           120,442              131,028

Property, plant and equipment, net                                                  34,249                    36,033
Other non-current assets                   12,403                8,531
                                     ---------------      --------------
                                       $  167,094              175,592
                                     ===============      ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Short-term debt                     $   33,982               35,572
   Current installments of
      long-term debt                        5,647                5,301
   Trade payables                          17,587               20,600
   Other current liabilities               11,949               13,492
                                     ---------------      --------------
           Total current liabilities       69,165               74,965

Long-term debt, excluding current
   installments                            15,083               13,771
Other non-current liabilities               2,845                2,957

Deferred gain on sale of building             677                1,185

Shareholders' equity:
   Common stock, no par value, 
      $.01 stated value, 20,000,000 
      shares authorized; issued 
      10,315,264 in 1998 and 1997          46,026               46,026
   Additional paid-in capital              30,627               30,627
   Cumulative foreign currency
     translation adjustment                (2,736)              (2,416)
   Retained earnings                        5,516                8,586
                                     ---------------      ---------------
                                           79,433               82,823

   Less: Treasury stock, 36,275
    shares in 1998 and 1997, at cost          109                  109
                                     ---------------      ---------------
        Total shareholders' equity         79,324               82,714
                                     ---------------      ---------------
                                       $  167,094              175,592
                                     ===============      ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.


<PAGE>

<TABLE>

                       FARAH INCORPORATED AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              QUARTERS ENDED FEBRUARY 1, 1998 AND FEBRUARY 2, 1997
                                   (Unaudited)
               
                                                                                        (Thousands of dollars)
                                                                                   February 1,            February 2,
                                                                                      1998                   1997
                                                                                -----------------     ------------------
<S>                                                                              <C>                           <C>   
Cash flows from (used in) operating activities:
     Net loss                                                                    $        (3,070)              (1,955)
     Adjustments to reconcile net loss to net cash from
          operating activities:
               Depreciation and amortization                                               1,684                1,256
               Amortization of deferred gain on building sale                              (508)                 (508)
               Amortization of deferred gain on subsidiary sale                                -                 (784)
               Writedown of property, plant and equipment                                  2,856                1,360
               Loss on sale of assets                                                         10                    -
               Deferred income taxes                                                     (1,086)                  421
    Decrease (increase) in:
               Trade receivables                                                          13,909                8,094
               Inventories                                                               (3,076)               (4,272)
               Other current assets                                                         (31)                  337
     Increase (decrease) in:
               Trade payables                                                            (3,013)               (1,442)
               Other current liabilities                                                 (1,542)               (1,863)
                                                                                -----------------     ------------------

                  Net cash from operating activities                                      6,133                  644
                                                                                -----------------     ------------------
Cash flows used in investing activities:
     Purchases of property, plant and equipment                                          (1,643)               (1,837)
                                                                                -----------------     ------------------

                  Net cash used in investing activities                                  (1,643)               (1,837)
                                                                                -----------------     ------------------
Cash flows from (used in) financing activities:
     Net increase (decrease) in short-term debt                                          (1,590)                2,587
     Repayment of long-term debt                                                         (1,506)                 (366)
     Proceeds from sale of common stock                                                        -                  491
     Other                                                                                 (307)               (1,013)
                                                                                -----------------     ------------------
                  Net cash from (used in) financing activities                           (3,403)                1,699
                                                                                -----------------     ------------------
Effect of exchange rate changes on cash                                                     (68)                 (121)
                                                                                -----------------     ------------------
Net increase in cash                                                                       1,019                  385

Cash, beginning of quarter                                                                 2,332                3,777
                                                                                -----------------     ------------------

Cash, end of quarter                                                               $       3,351                4,162
                                                                                =================     ==================

Supplemental cash flow disclosures:
     Interest paid                                                                 $       1,243                  611
     Income taxes paid                                                                        84                  161
     Assets acquired through direct financing
        loans or capital leases                                                            3,163                  809
     Property, plant and equipment held for sale and
        transferred to other non-current assets                                            2,063                    -
</TABLE>

See accompanying notes to condensed consolidated financial statements.


<PAGE>


                       FARAH INCORPORATED AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   The attached condensed consolidated financial statements have been prepared
     pursuant  to the rules  and  regulations  of the  Securities  and  Exchange
     Commission.  As a result,  certain  information  and  footnote  disclosures
     normally  included in  financial  statements  prepared in  accordance  with
     generally  accepted  accounting  principles have been condensed or omitted.
     The Company  believes  that the  disclosures  made are adequate to make the
     information   presented  not  misleading.   These  condensed   consolidated
     financial  statements  should be read in conjunction  with the consolidated
     financial  statements  and related  notes  included in the  Company's  1997
     Annual Report on Form 10-K.

2.   The foregoing financial information reflects all adjustments (which consist
     only  of  normal  recurring  adjustments)  which  are,  in the  opinion  of
     management, necessary to present a fair statement of the financial position
     and the  results  of  operations  and cash flows for the  interim  periods.
     Certain  prior year  amounts  have been  reclassified  to conform  with the
     fiscal 1998 presentation.

3.   During the first  quarter of fiscal 1998, the Company  decided to close its
     finishing  facility in Cartago, Costa  Rica and  reduce  sewing  operations
     in the  Company's  San Jose,  Costa Rica  facility.  The Company recorded a
     pre-tax  charge  of $4.0 million in the first quarter of fiscal 1998 on the
     write-down of its Costa Rican assets to expected  realizable  value and the
     accrual of severance payments and other closing expenses.  This  amount has
     been classified as "Termination  of foreign  operations"  in the  Condensed
     Consolidated Statement of Operations and Retained Earnings.  The  reduction
     of activity in Costa Rica will result in the termination  of  approximately
     700 employees at the two facilities.  The Company expects the reduction  in
     activity and the termination of the employees  to occur prior to the end of
     fiscal  1998.  The Company will hold the Cartago facility for sale, as well
     as some of the manufacturing equipment in both locations. These assets have
     a book  value  of $2.1 million,  after a write-down for impairment, and are
     included in  "Other non-current assets"  on the Company's  February 1, 1998
     Condensed Consolidated  Balance Sheet.  The Company is uncertain as  to the
     timing of the disposal of the Costa Rican assets held for sale.

4.   The Company  completed  the  move of  its inventory to its new distribution
     center in March 1998.   In  moving  to  the new  distribution  center,  the
     Company  incurred  duplicate   operating   costs,  moving  expenses,  costs
     associated  with  testing  and modification of systems and procedures,  and
     professional  fees of  $792,000 in the first  quarter  of fiscal  1998 (see
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations - Risk Factors Affecting the Company's Business and Prospects").

5.   In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share."
     SFAS  128 supersedes  APB  Opinion No. 15,  "Earnings Per Share."  SFAS 128
     requires  dual  presentation  of basic and diluted  earnings  per share for
     entities  with  complex  capital  structures.   SFAS 128  is  effective for
     interim and annual periods ending after December 15, 1997.  The Company has
     implemented  SFAS  128  for  the first  quarter of fiscal  1998.  The first
     quarter of fiscal  1997 has been restated to conform with the  presentation
     required by SFAS 128. The  implementation of this  standard  did not have a
     material  impact on the  Company's  calculation  of earnings  per share for
     the first quarter of fiscal 1997 or 1998.

     Basic earnings per share is computed by dividing income available to common
     shareholders  by the weighted  average number of common shares  outstanding
     during the period.  Diluted earnings per share is computed by including the
     potential  dilutive  effect of securities or contracts that are convertible
     to common stock such as options and convertible  debt.  Because the Company
     experienced  net losses in the first  quarter of fiscal  1998 and the first
     quarter of fiscal 1997, the inclusion of the potential  common shares would
     be antidilutive. Therefore, the first quarter fiscal 1998 and first quarter
     fiscal 1997  calculations of basic net loss per share were identical to the
     calculations of diluted net loss per share;  and no  reconciliation  of the
     basic and diluted loss per share calculations is presented.

6.   On  January  5, 1997,  a fire  occurred  at the  Company's  leased  garment
     manufacturing  plant in Galway,  Ireland,  in which  certain  inventory and
     manufacturing  equipment  owned by the  Company  were either  destroyed  or
     damaged.  As a result  of the  fire and its  related  impact,  the  Company
     recorded a charge (after tax and net of insurance proceeds) of $2.5 million
     in the first  quarter of fiscal 1997.  This amount has been  classified  as
     "Termination  of  foreign operations"  in  the  first  quarter  fiscal 1997
     Condensed Consolidated Statement of Operations and Retained  Earnings.  The
     Company recognized an additional pre-tax loss of $2.6 million in the fourth
     quarter  of fiscal  1997 in  connection  with  the  closure  of  its  Irish
     facilities.





<PAGE>


                       FARAH INCORPORATED AND SUBSIDIARIES


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

Results of Operations

         The following  sets forth certain  financial data as percentages of net
sales:
<TABLE>

                                                    First Quarter Ended
                                              -------------- --- --------------
                                                 1998                 1997
                                              --------------     --------------
<S>                                                  <C>                <C>   
      Net sales:
           Farah U.S.A.                               75.7%              76.7%
           Farah International                        16.6               16.8
           Savane Direct                               7.7                6.5
                                              --------------     --------------
      Total net sales                                100.0              100.0
      Cost of sales                                   73.1               71.4
                                              --------------     --------------
      Gross profit                                    26.9               28.6
      Selling, general and
        administrative expenses                      -24.4              -25.9
      Royalty income                                   0.6                0.0
      Termination of foreign operations               -6.7               -4.0
      Relocation expenses                             -1.3                0.0
      Production conversion expenses                     -               -0.4
                                              --------------     --------------
           Operating income (loss)                    -4.9               -1.7
      Other expense, net                               1.9                0.6
                                              --------------     --------------
           Loss before income taxes                   -6.8               -2.3
      Income tax expense (benefit)                    -1.6                0.9
                                              --------------     --------------
             Net loss                                 -5.2%              -3.2%
                                              ==============     ==============
</TABLE>
                                             
         Consolidated  sales during the first  quarter of fiscal 1998  decreased
$2.9 million (4.7%) compared to the first quarter of fiscal 1997.  First quarter
sales increased at Savane Direct  (formerly known as Value Slacks) and decreased
at Farah U.S.A. and Farah International.

         Farah  U.S.A.  sales for the first  quarter  of fiscal  1998 were $44.7
million, compared to $47.5  million in the first  quarter of fiscal 1997, a 6.0%
decrease.  Unit  sales  decreased  8.0% while the  average  unit  selling  price
increased  2.2%.  Sales of Savane product  declined 3.8% in the first quarter of
fiscal 1998,  compared to the same period in fiscal 1997.  Sales of Savane men's
dress products and women's wear increased 3.6% and 29.8%,  respectively,  during
the first quarter of fiscal 1998.  Savane shirt sales increased  154.0% compared
to the first  quarter of fiscal 1997. A 6.9%  reduction in sales of Savane men's
casual products,  combined with a 28.0% decrease in men's coat sales,  more than
offset the increases in sales of men's dress products, shirts, and women's wear.
Additionally, boys' pant sales decreased 46.8% due in part to conversion of some
retailers  from  Savane  boy's  products  to private  label  products.  The poor
Christmas  retail selling season affected overall Savane sales. A slight decline
in the average per unit selling price for Savane  products also  contributed  to
the sales decrease  during the first quarter of fiscal 1998.  Competition in the
men's apparel business  continues to make the achievement of increases in market
share and unit price difficult.  The Company  is  pursuing  an  expansion of its
Savane  business  through the introduction of products, including its new cotton
stretch  wrinkle-free  pant (see "Risk  Factors Affecting the Company's Business
and Prospects").

         During  the first  quarter  of fiscal  1998,  John  Henry  label  sales
increased 61.5% versus the first quarter of fiscal 1997.  Replenishment sales of
John Henry product to Sears continue to increase. The introduction of John Henry
suit separates to Sears contributed to the increase in John Henry dress pant and
coat sales during the first quarter of fiscal 1998. Additionally, the Company is
attempting to expand distribution of the John Henry line to new retail customers
within the same  market  segment  (see "Risk  Factors  Affecting  the  Company's
Business and Prospects").

         Sales of Farah label  products  increased 4.9% during the first quarter
of fiscal  1998,  compared to the first  quarter of fiscal  1997.  Sales for the
first  quarter of fiscal 1997  included  initial  shipments to a large number of
stores of a retailer  in the  mass-merchant  distribution  channel,  while first
quarter fiscal 1998 sales were comprised of replenishment orders.  Replenishment
orders of Farah product to this  retailer  continue to grow.  Additionally,  the
Company is working with the same  mass-merchant  to expand  distribution  of the
Farah  label  beyond the  domestic  market  (see  "Risk  Factors  Affecting  the
Company's Business and Prospects").

         Private  label  sales for the first  quarter of fiscal  1998  decreased
33.6%,  compared to the first quarter of fiscal 1997. The decrease was primarily
the result of the conversion of private label business with one of the Company's
major customers to branded business with that same customer.   In addition,  the
Company's  strategy to improve  profit margins within the private label division
has caused the Company to be more selective with existing and new private  label
programs (see "Risk Factors Affecting the Company's Business and Prospects").

         Farah  International  sales  decreased  5.7%, from $10.4 million in the
first  quarter of fiscal  1997 to $9.8  million  in the first  quarter of fiscal
1998. Unit sales at Farah  International  increased 4.8%, while the average unit
selling  price was 10.0% lower in the first quarter of fiscal 1998 than the same
period in fiscal 1997.

         Farah U.K.  sales  comprised  61.1% of first quarter  fiscal 1998 Farah
International  sales,  compared  to 59.0% in the first  quarter of fiscal  1997.
Farah  U.K.  sales  decreased  2.5% for the first  quarter  of fiscal  1998 when
compared to the same period in fiscal 1997.  The average per unit selling  price
at Farah U.K. decreased 3.9%, while unit sales increased 1.5%.  Concession sales
(sales on which the  Company  pays the  retailer a  commission)  decreased  as a
percentage of  total Farah U.K. sales  during the first  quarter of fiscal 1998,
compared to the first quarter of fiscal 1997.  Concession  sales generate higher
per  unit  prices  than other sales.  This  decrease in concession sales was the
primary factor behind the drop in total sales and the  average selling price per
unit at Farah U.K.

         Sales at Farah Australia and Farah New Zealand  accounted for 38.9% and
39.4% of Farah  International  sales in the first quarter of fiscal 1998 and the
first  quarter of fiscal 1997,  respectively.  Unit sales in  Australia  and New
Zealand  increased  15.1% in the first  quarter of fiscal 1998,  compared to the
first quarter of fiscal 1997.  However,  the average  selling price per unit and
total sales declined 19.0% and 6.7%, respectively.  An increase in private label
sales was the primary factor behind the higher unit sales at Farah Australia and
New  Zealand.  Lower  average  selling  prices  more than offset the higher unit
sales. The increase in private label sales as a percentage of Farah  Australia's
total sales  contributed to the reduction in the average selling price per unit,
as private label products generate lower sales prices than branded products.  In
addition  to the  increase  in  private  label  sales as a  percentage  of Farah
Australia's business, the weakness of the Australian and New Zealand currencies,
relative to the U.S.  dollar  further  depressed the average price per unit when
translated to the Company's reporting currency.

         First  quarter  fiscal  1998 sales at the  Company's  retail  division,
Savane Direct, were $4.6 million,  compared to $4.0 million in the first quarter
of fiscal 1997, a 13.4%  increase.  The average selling price per unit at Savane
Direct was 6.8% higher during the first quarter of fiscal 1998 than in the first
quarter of fiscal  1997.  Same store  sales at Savane  Direct  were 7.5%  higher
during the first  quarter of fiscal 1998 compared to the first quarter of fiscal
1997. The implementation of a strategy built around closing the least profitable
Savane Direct stores,  opening new stores in better  locations, and converting a
higher proportion of Savane Direct's product mix to first quality merchandise is
the  primary reason  for the sales increase  and for the increase in the average
sales price per unit. In addition,  after-Christmas  sales at Savane Direct were
better  in  the first  quarter of fiscal 1998 than for the same period of fiscal
1997.

         As a percent of sales,  gross profit was 26.9% in the first  quarter of
fiscal 1998, versus 28.6% in the first quarter of fiscal 1997. Gross profit as a
percentage  of sales  increased  at Farah  International  and Savane  Direct and
decreased at Farah U.S.A.

         Farah U.S.A.  gross profit as a percent of sales was 22.9% in the first
quarter of fiscal  1998  compared  to 26.4% in the same  period of fiscal  1997.
Sales of the  Farah  label,  which is sold  within  the mass- merchant  channel,
increased as a percentage of total unit sales. This increase reduced the average
unit selling price and resulting  gross profit as a percentage of sales at Farah
U.S.A., as sales of Farah label  product  generally  earn lower  average  prices
and generate lower gross  margins  than sales of the Company's  other  products.
Additionally, the  average  cost  of  sales per unit at Farah  U.S.A.  increased
7.1% during  the first  quarter of fiscal 1998,  compared  to the same period in
fiscal 1997. Lower overall production  rates  resulted in higher costs per unit.
Higher markdown  expenses during the first quarter of fiscal 1998 on some of the
Company's  seasonal  shirts and patterned  cotton pants also  contributed to the
increased cost of sales per unit at Farah U.S.A.

         Farah  International  gross profit as a percent of sales increased from
31.5% in the first  quarter  of fiscal  1997 to 36.0% in the  first  quarter  of
fiscal 1998. The Company's new strategy of sourcing its United Kingdom  products
entirely from outside  contractors  contributed  to the  increased  gross profit
margins in the first  quarter of fiscal  1998 by reducing  the  average  cost of
sales  per  unit.  Additionally,  since  Farah  Australia  sources  much  of its
production in Fiji and pays for that  production in Fiji currency,  the weakness
of  Fiji's  currency,   relative  to  the  Australian   dollar,   lowered  Farah
International's first quarter fiscal 1998 cost of sales. Finally, the absence of
fixed costs  incurred in Ireland  after the fire at one of the  Company's  Irish
facilities  in the first  quarter of fiscal 1997 lowered  Farah  International's
average cost per unit sold in the first quarter of fiscal 1998,  relative to the
same  period  in fiscal  1997.  Higher  markdown  expenses  and lower  levels of
concession  sales at Farah U.K.  combined to partially  offset this  increase in
gross profit.

         Savane Direct's gross profit as a percent of sales increased from 46.4%
in the first  quarter  of fiscal  1997 to 47.2% in the first  quarter  of fiscal
1998. The move to more first quality  merchandise  was the primary factor behind
the higher first quarter fiscal 1998 gross profit margins at Savane Direct.

         Selling,  general and  administrative  expense ("SG&A") as a percent of
sales was 24.5% and  25.9% in the  first  quarter  of fiscal  1998 and the first
quarter of fiscal 1997,  respectively.  SG&A as a percentage of sales  decreased
1.7, 1.3 and 4.9  percentage  points at Farah U.S.A.,  Farah  International  and
Savane Direct, respectively. At Farah U.S.A., the decrease in SG&A was primarily
attributable to lower selling  expenses  resulting from the Company's  effort to
decrease advertising and other selling costs. In addition,  the Company incurred
lower  professional  fees,  outside services and freight  expenses.  The drop in
Farah U.K. concession sales, which generate higher selling costs than most other
Farah U.K. sales, played a role in the decrease in SG&A at Farah  International.
Additionally, the disposal of the Company's Irish operation eliminated a portion
of the SG&A costs formerly  incurred by Farah  International.  At Savane Direct,
increased sales resulted in a decrease in SG&A as a percentage of sales as fixed
costs remained constant at the higher sales levels.

         During the first quarter of fiscal 1998,  the Company  decided to close
its finishing  facility in Cartago,  Costa Rica and reduce sewing  operations in
the Company's San Jose,  Costa Rica  facility.  As a result of this action,  the
Company will transition some product that is currently  sourced in Costa Rica to
Mexico,  with the goal of saving the duties that it would otherwise  incur.  The
Company recorded a pre-tax charge of $4.0 million in the first quarter of fiscal
1998 on the  write-down of its Costa Rican assets to expected  realizable  value
and the accrual of severance  payments and other closing  expenses.  This amount
has been  classified as  "Termination  of foreign  operations"  in the Condensed
Consolidated  Statement of Operations  and Retained  Earnings.  The reduction of
activity  in Costa Rica will  result in the  termination  of  approximately  700
employees  at the  two  facilities,  with  the  reduction  in  activity  and the
termination of the employees  expected to occur prior to the end of fiscal 1998.
The Company will hold the Cartago facility, as well as some of the manufacturing
equipment in both locations for sale. These assets have a net book value of $2.1
million,  after  a  write-down  for  impairment,   and  are  included  in "Other
non-current  assets"  on  the  Company's February 1, 1998 Condensed Consolidated
Balance Sheet.  The Company is uncertain as to the timing of the disposal of the
Costa Rican  assets  held  for sale  (see "Risk Factors Affecting  the Company's
Business and Prospects").

         The Company  recently  completed  the  move of its inventory to its new
distribution  center as scheduled. In moving to the new distribution center, the
Company  incurred duplicate  operating  costs, moving expenses, costs associated
with  testing  and  modification  of  systems  and  procedures, and professional
fees  of  $792,000  in  the  first  quarter  of  fiscal  1998 (see "Risk Factors
Affecting the Company's Business and Prospects").

         On January 5, 1997, a fire  occurred at the  Company's  leased  garment
manufacturing  plant  in  Galway,   Ireland,  in  which  certain  inventory  and
manufacturing  equipment owned by the Company were either  destroyed or damaged.
As a result of the fire and its related  impact,  the Company  recorded a charge
(after tax and net of insurance  proceeds) of $2.5 million in the first  quarter
of fiscal  1997.  This amount has been  classified  as  "Termination  of foreign
operations" in the first quarter fiscal 1997 Condensed Consolidated Statement of
Operations and Retained Earnings.  The Company  recognized an additional pre-tax
loss of $2.6 million in  the fourth  quarter of fiscal 1997 in  connection  with
the closure of its Irish facilities.

         The Company recorded a tax benefit on a consolidated  loss in the first
quarter of fiscal  1998 and tax  expense  on a  consolidated  loss in  the first
quarter of fiscal 1997.  The Company's effective tax rates for the first quarter
of fiscal 1998 and the first quarter  of  fiscal  1997  were  24.0% and  -40.6%,
respectively.  In  the first  quarter of fiscal 1998, the Company recorded a tax
benefit on only a portion of the $4.0 million  charge it recorded in  connection
with  the  decision  to  reduce  activity  in Costa  Rica.  Most significant  in
fiscal 1997 was  that  the  Company  did not provide tax benefits on the loss in
connection  with  the  fire at its  Irish  facility.   The  Company's  effective
tax  rate also varies with the mix of income or loss in  countries  in which the
Company conducts its business.

Financial Condition

         At February 1, 1998, the Company's primary Credit Agreement provided up
to $75 million of credit through July 1, 2001,  for the Company's  United States
and United Kingdom  operations for either  borrowings or letters of credit.  The
Credit Agreement includes a term loan payable in monthly  installments over a 48
month period and a revolving line of credit. The outstanding balance of the term
loan was $8.5 million as of February 1, 1998.  Formulas  derived  from  accounts
receivable and inventory define borrowing  capacity for the revolving portion of
the Credit  Agreement.  The Credit  Agreement  states that the interest  rate on
outstanding  borrowings  (both  term  and  revolving)  will be  prime (8 1/2% at
February  1, 1998) plus 1/2% for  borrowings  and 1/6% per month for  letters of
credit.  An unused  credit  line fee of 1/2% per annum is  charged on the unused
portion  below $17.5  million  when  outstanding borrowings are  less than $17.5
million.  The Company may also from time to time convert all or part of the loan
outstanding  under  the  Credit  Agreement into a loan based on the LIBOR  Rate.
Upon conversion, the interest rate is the LIBOR rate plus 2.75%.  The conversion
to  and   continued   applicability  of   the LIBOR  Rate  is  conditioned  upon
specific  notification requirements,  a minimum  of  $5.0  million of LIBOR Rate
loans  outstanding,  and  various other  requirements.  At February 1, 1998, the
Company had $33.5 million, including $8.0 million of the term loan  balance,  in
LIBOR loans  outstanding under the Credit Agreement. Interest rates on the LIBOR
contracts  outstanding  at  February 1, 1998  ranged  from  8.36% to  8.69%.  At
February 1, 1998,  usage  under  the  Agreement  was  $43.5  million, with $35.0
million  and  $8.5  million  related  to  the  revolving facility and term loan,
respectively.  The  excess  credit  line  available  was  $15.9  million.  As of
February  1, 1998,  the  Company  was in  compliance with all covenants pursuant
to the Credit Agreement.

         The Company's operations provided net cash of $6.1 million in the first
quarter  of fiscal  1998.  Decreased  trade  receivables,  offset  by  increased
inventory levels and decreased trade payables were the largest factors producing
the net increase in cash from operations during the first quarter.  The decrease
in trade receivables is consistent with the normal  seasonality of the Company's
business.   The  increase  in  inventory levels is a result of sales not meeting
expectations  and  the  Company's  attempt  to  build inventory in order to meet
second quarter demand.  The decrease in trade payables  resulted  mainly  from a
decrease in payables  for piece  goods.  This reduction  is due to the fact that
the Company made the bulk of its first quarter piece good purchases early in the
quarter.

         Capital   expenditures  through  February  1,  1998  approximated  $4.8
million.  Expenditures  were mainly for leasehold  improvements and equipment in
connection with the Company's move to a new distribution  center. As of February
1, 1998,  the  Company  had  commitments  for  future  capital  expenditures  of
approximately $600,000.

Year 2000 Systems Conversion

                  The Year 2000 Issue is the result of computer  programs  being
written using two digits, rather than four to define the applicable year. Any of
the  Company's  computer  programs  that have the  date-sensitive  software  may
recognize a date using "00" as the year 1900 rather than as the year 2000.  This
could  result in a system  failure or  miscalculations  causing  disruptions  of
operations,  including,  among other  things,  a temporary  inability to process
transactions,  send invoices,  or engage in similar normal business  activities.
The  Company is  currently  in the  process of  replacing  its entire  inventory
management,  warehouse  distribution and order processing  systems so that those
systems  will  utilize  dates beyond  December  31, 1999  properly.  The Company
believes that the planned modifications and conversions will be completed timely
and  will  allow  it  to  mitigate  the  Year  2000  Issue.   However,  if  such
modifications  are not  completed  timely,  the Year  2000  Issue  could  have a
material  effect on the Company's  operations  (see "Risk Factors  Affecting the
Company's Business and Prospects").


Risk Factors Affecting the Company's Business and Prospects

         The Company  cautions  readers  that  various  factors  could cause the
actual  results of the  Company to differ  materially  from those  indicated  by
forward-looking  statements  made from time to time in news  releases,  reports,
proxy  statements,  registration  statements  and other  written  communications
(including the preceding sections of this Management's Discussion and Analysis),
as well as oral  statements  made  from time to time by  representatives  of the
Company. Except for historical  information,  matters discussed in such oral and
written  communications  are  forward-looking  statements that involve risks and
uncertainties,  including,  but not limited to, economic and business conditions
in the U.S. and abroad; the level of demand for apparel products and the success
of planned  marketing  programs;  the intensity of  competition  and the pricing
pressures that may result;  changes in labor and import and export  regulations;
the ability of the Company to timely and effectively  manage  production  levels
and sourcing;  the ability of the Company to access the credit market to finance
capital expenditures; and currency fluctuations.

         The Company completed its relocation to a new distribution  facility in
March 1998 after testing the new equipment and computer systems at the facility.
However,  should the relocation produce shipping difficulties not anticipated in
the testing of the new facility,  the Company could  experience  disruptions  in
shipments.   In addition,  the Company  will  continue  to  incur certain  costs
associated with its old distribution center  through  May 1998,  when the  lease
on that facility expires.






<PAGE>


                           PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

             Exhibit 11   Statement regarding computation of net loss per share

             Exhibit 27   Financial Data Schedule

      (b)  Reports on Form 8-K.

             No reports on Form 8-K have been filed during the quarter for which
the report is filed.



                                   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.

                               FARAH INCORPORATED




Date:        March 17, 1998

                          Russell G. Gibson    /s/ Russell G. Gibson
                                               Executive Vice President
                                               Principal Financial Officer



                          Polly H. Vaughn       /s/ Polly H. Vaughn
                                                Principal Accounting Officer






<PAGE>

<TABLE>

                       FARAH INCORPORATED AND SUBSIDIARIES

                           FORM 10-Q INDEX TO EXHIBITS

                                FEBRUARY 1, 1998
                                                                   Page
                               Description                        Number
<S>                      <C>                                         <C> 
Exhibit 11               Statement regarding computation of
                         net loss per share.                         13

Exhibit 27               Financial Data Schedule                     14

</TABLE>

<PAGE>