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 August 3, 1997

                                       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 September 10, 1997 there were  outstanding  10,315,264  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
         QUARTER AND NINE MONTHS ENDED AUGUST 3, 1997 AND AUGUST 4, 1996
-------------------------------------------------------------------------------------------------------------------
                                   (Unaudited)

<CAPTION>
                                                                   Quarter Ended                Nine Months Ended
                                                          -----------------------------    ---------------------------
                                                           August 3,       August 4,        August 3,     August 4,
                                                              1997           1996              1997          1996
                                                          -------------  --------------    ------------- -------------
                                                                (Thousands of dollars except per share data)
<S>                                                         <C>             <C>              <C>           <C> 
Net sales                                                   $   64,256          55,973          196,965       171,541
                                                               
Cost of sales                                                   48,103          41,411          144,065       127,048
                                                          -------------  --------------    ------------- -------------
    Gross profit                                                16,153          14,562           52,900        44,493

Selling, general and administrative expenses                    17,244          14,208           50,126        43,789
Non-recurring charge                                                 -               -            2,462             -
                                                          -------------  --------------    ------------- -------------

     Operating income (loss)                                   (1,091)             354              312           704
                                                          -------------  --------------    ------------- -------------

Other income (expense):
     Interest expense                                          (1,091)           (751)          (2,719)       (3,384)
     Interest income                                               193             199              589           629
     Foreign currency transaction gains                            118              81              242           174
     Gain (loss) on sale of assets                                (44)           9,327             (25)         9,970
     Other, net                                                    565             193              670           514
                                                          -------------  --------------    ------------- -------------
                                                                 (259)           9,049          (1,243)         7,903

Income (loss) before income taxes                              (1,350)           9,403            (931)         8,607

      Income tax provision (benefit)                             (947)           2,516          (1,784)         2,885
                                                          -------------  --------------    ------------- -------------

     Net income (loss)                                           (403)           6,887              853         5,722

Retained earnings:
     Beginning                                                   9,572             395            8,316         1,560
                                                          -------------  --------------    ------------- -------------
     Ending                                                 $    9,169           7,282            9,169         7,282
                                                          =============  ==============    ============= =============

Net income (loss) per share                                 $   (0.04)            0.67             0.08          0.56
                                                          =============  ==============    ============= =============
Weighted average shares of common stock
     (all periods) and common stock equivalents
     (income periods only) outstanding                      10,276,022      10,235,374       10,300,384    10,182,030
                                                          =============  ==============    ============= =============

See accompanying notes to condensed consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
                       FARAH INCORPORATED AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       AUGUST 3, 1997 AND NOVEMBER 3, 1996
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                     (Unaudited)
                                                                                      August 3,       November 3,
                                                                                        1997              1996
                                                                                   ----------------  ---------------
                                                                                        (Thousands of dollars)
<S>                                                                                      <C>                <C>    
                                                                                 
Assets
Current assets:
   Cash                                                                                  $   2,653            3,777
                                                                                            
   Trade receivables, net                                                                   40,284           41,671
   Inventories:
        Raw materials                                                                       16,002           11,404
        Work in process                                                                     17,666           15,251
        Finished goods                                                                      47,857           35,378
                                                                                   ----------------  ---------------
                                                                                            81,525           62,033
   Other current assets                                                                     12,664           10,857
                                                                                   ----------------  ---------------
                Total current assets                                                       137,126          118,338

Note receivable                                                                              4,984            5,260
Property, plant and equipment, net                                                          32,651           25,370
Other non-current assets                                                                     7,324            4,895
                                                                                   ----------------  ---------------
                                                                                         $ 182,085          153,863
                                                                                   ================  ===============
Liabilities and Shareholders' Equity
Current liabilities:
   Short-term debt                                                                       $  39,452           20,744
   Current installments of long-term debt                                                    4,690            1,288
   Trade payables                                                                           25,992           24,038
   Other current liabilities                                                                12,659           13,737
                                                                                   ----------------  ---------------
                 Total current liabilities                                                  82,793           59,807

Long-term debt, excluding current installments                                              12,758            4,706
   Other non-current liabilities                                                             2,388            3,992

  Deferred gain on sale of building                                                          1,693            3,218

Shareholders' equity:
   Common stock, no par value, $.01 stated value,
    authorized  20,000,000 shares; issued 10,278,989
    shares in 1997 and 10,209,246 shares in 1996                                            46,026           46,024
   Additional paid-in capital                                                               30,627           29,894
   Cumulative foreign currency translation adjustment                                      (2,017)            (742)
   Minimum pension liability adjustment                                                    (1,243)          (1,243)
   Retained earnings                                                                         9,169            8,316
                                                                                   ----------------  ---------------
                                                                                            82,562           82,249
   Less: Treasury stock, 36,275 shares in
    1997 and 1996, at cost                                                                     109              109
                                                                                   ----------------  ---------------
                 Total shareholders' equity                                                 82,453           82,140
                                                                                   ----------------  ---------------
                                                                                         $ 182,085          153,863
                                                                                   ================  ===============

See accompanying notes to condensed consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
                       FARAH INCORPORATED AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               NINE MONTHS ENDED AUGUST 3, 1997 AND AUGUST 4, 1996
--------------------------------------------------------------------------------------------------------------------
                                 (Unaudited) 
<CAPTION>

                                                                                      August 3,        August 4,
                                                                                        1997             1996
                                                                                   ---------------  ----------------
                                                                                          (Thousands of dollars)
<S>                                                                                      <C>               <C>
Cash flows from (used in) operating activities:
     Net income                                                                          $    853             5,722
     Adjustments to  reconcile  net income to net cash from (used in)  operating
          activities:
                 Depreciation and amortization                                              3,930             3,937
                 Amortization of deferred gain on sale of building                        (1,525)           (1,524)
                 Amortization of deferred gain on sale of subsidiary                      (1,493)           (1,322)
                 Deferred income taxes                                                    (2,140)             1,996
                 Loss (gain) on sale of assets                                                 25           (9,970)
                 Non-recurring charge                                                       2,462                 -
                 Insurance proceeds from fire damage                                        1,070                 -
     Decrease (increase) in:
                 Trade receivables                                                          1,387             5,509
                 Inventories                                                             (20,367)             8,783
                 Other current assets                                                     (1,372)             1,339
     Increase (decrease) in:
                 Trade payables                                                             1,954             3,786
                 Other                                                                    (3,133)           (2,853)
                                                                                   ---------------  ----------------

                        Net cash from (used in) operating activities                     (18,349)            15,403
                                                                                   ---------------  ----------------

Cash flows from (used in) investing activities:
     Purchases of property, plant and equipment                                           (9,249)           (1,968)
     Proceeds from sale of assets                                                              52            22,588
                                                                                   ---------------  ----------------
                        Net cash from (used in) investing activities                      (9,197)            20,620

Cash flows from (used in) financing activities:
     Net change in revolving credit facility                                               18,708          (26,931)
     Proceeds from issuance of debt                                                        10,000                 2
     Repayment of long-term debt                                                          (1,846)           (9,132)
     Receipts from sale of common stock                                                       566                 -
     Other                                                                                  (489)               116
                                                                                   ---------------  ----------------

                          Net cash from (used in) financing activities                     26,939          (35,945)
                                                                                   ---------------  ----------------

Foreign currency translation adjustment                                                     (517)              (41)
                                                                                   ---------------  ----------------

Net increase (decrease) in cash flow                                                      (1,124)                37

Cash, beginning of year                                                                     3,777             3,657
                                                                                   ---------------  ----------------

Cash, end of period                                                                      $  2,653             3,694
                                                                                   ===============  ================

Supplemental cash flow disclosures:
     Interest paid                                                                       $  2,663             4,103
     Income taxes paid                                                                        496               837
     Assets acquired through direct financing loans or  capital leases                      3,301               723

See accompanying notes to condensed consolidated financial statements.

</TABLE>


<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  1996
     Annual Report on Form 10-K.

2.   The foregoing financial information reflects all adjustments (which consist
     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.

3.   During the second  quarter of fiscal  1997,  the  Company  reevaluated  the
     realizability  of its  deferred  tax assets  pursuant  to the  criteria  of
     Statement of Financial  Accounting  Standards  No. 109, and concluded it is
     more likely than not that the Company will realize tax benefits  associated
     with a portion of its domestic net operating losses,  together with certain
     other  tax  benefits,  that  were  previously  subject  to  an  established
     valuation allowance.  Accordingly,  the Company reversed approximately $2.2
     million  from its deferred tax  valuation  allowance  during the first nine
     months of fiscal 1997. The remaining  valuation allowance at August 3, 1997
     is approximately $2.4 million.  The Company continues to believe that it is
     more likely than not that it will not realize the benefits of its Irish net
     operating  loss   carryforwards,   certain   domestic  net  operating  loss
     carryforwards, a portion of its foreign tax credits, and other deferred tax
     assets totaling approximately $1.6 million.

     Income  (loss)  before  taxes for the nine months  ended August 3, 1997 and
     August 4, 1996 and income taxes for the same periods are shown below:
<TABLE>
<CAPTION>

                                                                                Nine months ended
                                                                   --------------------------------------------
                                                                     August 3, 1997           August 4, 1996
                                                                   --------------------     -------------------
                                                                                Thousands of dollars
      <S>                                                             <C>                                <C>
                                                                                
      INCOME (LOSS) BEFORE INCOME TAXES:
         Domestic operations                                          $            510                   6,657
         Foreign operations                                                    (1,441)                   1,950
                                                                   ====================     ===================
                         Total consolidated                           $          (931)                   8,607
                                                                   ====================     ===================

      INCOME TAX PROVISION (BENEFIT):
         Domestic operations
            Current                                                   $             10                     296
            Deferred                                                           (2,141)                   2,006
                                                                   --------------------     -------------------
                Total domestic                                                 (2,131)                   2,302

         Foreign operations
            Current                                                                347                     583
            Deferred                                                                 -                       -
                                                                   --------------------     -------------------
                Total foreign                                                      347                     583
                                                                   --------------------     -------------------
                         Total consolidated                           $        (1,784)                   2,885
                                                                   ====================     ===================
</TABLE>



<PAGE>


         The Company's effective tax rate differs from the U.S.statutory rate of
34% as summarized below:
<TABLE>
<CAPTION>
                                                                                  Nine months ended
                                                                   --------------------------------------------
                                                                     August 3, 1997           August 4, 1996
                                                                   --------------------      ------------------
                                                                                Thousands of dollars
      <S>                                                           <C>                                  <C>

      Income tax provision (benefit) at
          statutory rate                                            $            (317)                   2,926
      Non-deductible expenses                                                      308                     130
      Reversal of valuation allowance for deferred tax
           benefits                                                            (2,219)                       -
      Effect of differing tax rates in foreign countries                           504                    (64)
      Other                                                                       (60)                   (107)
                                                                   ====================      ==================
      Income tax provision (benefit), as reported                   $          (1,784)                   2,885
                                                                   ====================      ==================
</TABLE>

4.   On  January  5, 1997,  a fire  occurred  at the  Company's  leased  garment
     manufacturing  plant in  Galway,  Ireland.  The fire  destroyed  or damaged
     certain  inventory and  manufacturing  equipment  owned by the Company.  In
     addition,  the  Company's  other Irish  facility  located in Kiltimagh  was
     adversely  affected  because of its  dependency  on the  operations  of the
     Galway  facility.  As  a  result  of  the  fire,  the  Company  recorded  a
     non-recurring  charge  (after tax) of $2.5 million in the first  quarter of
     fiscal 1997.  During the second quarter of 1997,  the Company received $1.1
     million of insurance  proceeds  related to the fire.

     On  July  25,  1997,  the  Company sold  its  Irish operations to a company
     comprised of the former management of the Irish operations.  In conjunction
     with  the  sale,   the  Company  entered  into a long-term supply agreement
     whereby the purchaser will produce garments for Farah U.K. at the Kiltimagh
     facility.   In  addition  to  the  long-term supply agreement,  the Company
     expects to utilize contractors to meet future  production  requirements for
     Farah U.K.   No  gain  or  additional  loss  was  recognized  on  the final
     disposition of the Irish operations. 
     
5.   On June 5, 1997,  the Company entered  into  an Amended and Restated Credit
     Agreement.   The  Credit  Agreement  provides  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
     is collateralized by substantially  all assets of Farah U.S.A., Farah U.K.,
     and  Value  Slacks  and  is  guaranteed   by  its  parent   company  (Farah
     Incorporated)  and  each  of  Farah U.S.A.'s  domestic  affiliates.    Such
     guarantees  are  collateralized  by  substantially all of the assets of the
     related  affiliates.   A  term  loan of  $10 million is included in the $75
     million  of  credit  provided  by  the Credit  Agreement.  The term loan is
     payable in 47 monthly  installments  of  $208,333,  plus interest, with the
     48th and final monthly installment equal to the unpaid principal balance of
     the loan.  The term  loan matures  on July 1, 2001.   The  Credit Agreement
     states  that  the interest rate on  outstanding  borrowings  will be  prime
     (8 1/2% at August 3, 1997) plus 1/2% for borrowings  and 1/6% per month for
     letters of credit.  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  would be 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 million of Libor Rate loans outstanding,  and various other
     requirements.  Under the Credit  Agreement,  an unused  credit  line fee is
     charged on the  unused  portion  of the line when borrowings decrease below
     $17.5  million.    The  Credit  Agreement  restricts   certain   additional
     indebtedness  and requires the  maintenance of minimum  tangible net worth,
     minimum working  capital  and maximum capital expenditures. Maximum capital
     expenditures for fiscal 1997 under the Credit Agreement are $30 million.

6.   In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share."
     SFAS 128 will supersede APB Opinion No. 15,  "Earnings Per Share." SFAS 128
     requires dual  presentation of basic and diluted  earnings per share on the
     face of the income statement for entities with complex capital  structures.
     SFAS 128 is effective for annual and interim  periods ending after December
     15, 1997. Earlier application is not permitted.  Implementation of SFAS 128
     would not have had a material  impact on the  Company's  earnings per share
     for the third  quarter of fiscal  1997 or the nine months  ended  August 3,
     1997.









<PAGE>


                       FARAH INCORPORATED AND SUBSIDIARIES

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

Results of Operations
<TABLE>
<CAPTION>
                                                     Third Quarter Ended                  Nine Months Ended
                                            ---------------------------------     -----------------------------------
                                                   1997             1996                 1997               1996
                                            ---------------   ---------------     ----------------   ----------------
<S>                                               <C>              <C>                  <C>                <C>    <C>    <C>
Net sales:
     Farah U.S.A.                                  74.3 %           73.6 %               76.3 %             73.6 %
     Farah International                           18.4             18.1                 17.4               19.0
     Value Slacks                                   7.3              8.3                  6.3                7.4
                                            ------------      -----------         ------------       ------------
Total net sales                                   100.0            100.0                100.0              100.0
Cost of sales                                      74.9             74.0                 73.2               74.1
                                            ------------      -----------         ------------       ------------
     Gross profit                                  25.1             26.0                 26.8               25.9
Selling, general and
    administrative expenses                        26.8             25.4                 25.4               25.5
Non-recurring charge                                  -                -                  1.3                  -
                                            ------------      -----------         ------------       ------------
     Operating income (loss)                      (1.7)              0.6                  0.1                0.4
Other income (expense), net                       (0.4)             16.2                (0.6)                4.6
                                            ------------      -----------         ------------       ------------
     Income (loss) before  income taxes           (2.1)             16.8                (0.5)                5.0
Income tax expense (benefit)                      (1.5)              4.5                (0.9)                1.7
                                            ------------      -----------         ------------       ------------
     Net income (loss)                            (0.6) %           12.3 %                0.4 %              3.3 %
                                            ============      ===========         ============       ============
</TABLE>


         Consolidated  sales for the third  quarter of fiscal 1997  increased by
$8.3 million (14.8%) compared to the third quarter of fiscal 1996. For the first
nine months of 1997,  sales increased by $25.4 million  (14.8%)  compared to the
same period of 1996.  Sales  increased  during both periods at Farah U.S.A.  and
Farah International.  At Value Slacks, third quarter sales decreased while sales
for the first nine months of 1997 increased.

         Farah  U.S.A. sales  for  the third quarter of fiscal  1997 were  $47.8
million  compared  to  $41.2  million  in  the  third quarter of 1996,  a  16.0%
increase.  Unit sales  also  increased  by  13.1%,  while the  average  per unit
selling  price  increased by 2.6%.   In the first  nine  months  of 1997,  Farah
U.S.A. sales were $150.2  million  compared to $126.3 million in the same period
of 1996, an 18.9% increase.   Unit sales and the average selling price increased
by 17.7% and 1.1%, respectively.

         Sales of Savane product  increased by 18.9% during the third quarter of
1997 and by 20.1% during the first nine months of the fiscal  year,  compared to
the same periods in 1996.  Substantially all the growth in Savane sales resulted
from increased volume levels in men's shirts and women's casual wear, which were
introduced  during the latter part of fiscal 1996.  Growth in the men's Deep-Dye
casual products also contributed to the overall increase in Savane sales.

         As stated above, Savane  sales for the third  quarter  and  first  nine
months  of 1997  were higher  than comparative 1996 levels,  but were lower than
expected.   Softness in the retail  market during the Spring 1997 season  had an
adverse effect on overall Savane sales.   The  average  selling  price  for  all
Savane  products during the third  quarter of 1997 was slightly  lower  compared
to  the  same  period  last year.  In addition,  the Company  anticipated better
sales results from its newly introduced cotton/lycra Savane Golf  pant. Finally,
competition in the men's  casual  wear  market continues  to be intense,  making
it more  difficult  for the Company to achieve higher prices.

        John Henry  product  sales  decreased by approximately  $500,000 (14.3%)
during the third quarter and increased by $4.8 million (128.2%) during the first
nine  months  of fiscal  1997,  versus  the same periods in 1996.  In 1996,  the
Company  repositioned the John Henry label by  introducing it to Sears,   with a
"roll-out" program  occurring in the third  quarter of 1996.   Exclusive of this
program,  John Henry  sales in the third quarter of 1997 were higher compared to
the  same  period a year ago.   Since  the "roll-out"  to  Sears,  replenishment
orders have continued to increase, accounting for the overall  increase in  John
Henry sales.

        Sales of Farah  product  increased  by $5.3  million for both the  third
quarter and first nine months of fiscal  1997,  compared to the same  periods in
fiscal 1996.  Third  quarter  sales were 262.7% higher than the same period last
year.   Sales  for the  first nine  months of 1997 increased 45.2%, versus 1996.
Late in fiscal 1996,  the Company moved  its Farah  label to  the  mass-merchant
distribution  channel as part of its overall strategy to realign its labels into
three  distinct  markets.   As a result,  shipments  of  the  Farah  product  to
department stores declined significantly in the  third quarter  of 1996 and were
ultimately eliminated.   In the  fourth  quarter of 1996, the Company  began its
initial shipments of Farah product to a major mass-merchant.  Since this initial
roll-out, the  Company  has  continued  to ship  replenishment  orders,  and  as
discussed below,  converted an existing private label program with this retailer
to Farah  branded product.   Continuing  with its  plan,  the Company rolled out
Farah  product  to a significant  number  of new stores with  this same customer
during the third quarter of 1997.

         During the third quarter and first nine months of fiscal 1997, sales of
private label product decreased by $2.9 million (28.9%) and $2.7 million (9.4%),
respectively,  when compared to the same periods in fiscal 1996.  The transition
of Farah branded product to the mass-merchant  distribution  channel contributed
to the decline in private  label sales  during the third  quarter and first nine
months  of 1997,  as a large  customer  within  the  mass-merchant  distribution
channel  converted from private label to Farah branded  garments.  Additionally,
the number of private  label  customers  has  decreased  in 1997 as the  Company
reduced its volume of business with customers who provided lower gross  margins.
Additionally,  during  the first  nine  months  of 1996,  the  Company  recorded
significant  non-recurring  private label sales in  connection  with that year's
Atlanta Summer Olympics.

         Sales at Farah  International  were $11.8 million for the third quarter
of fiscal 1997, a 16.6% increase over third quarter 1996 sales of $10.1 million.
Unit  sales  and the  average  selling  price  per unit  were up 10.7% and 5.3%,
respectively.  For the first nine months of 1997,  Farah  International's  sales
were $34.3  million,  compared to $32.5  million for the same period in 1996,  a
5.6%  increase.  Unit sales for the first nine months of 1997 decreased by 0.1%,
while the average  selling  price per unit  increased by 5.6%,  compared to same
period in fiscal 1996.

         Farah  U.K.  sales  accounted  for 67.7% of third  quarter  1997  Farah
International sales and increased by 20.8%, compared to the same period in 1996.
Sales at Farah U.K. represented 64.0% of Farah International sales for the first
nine months of fiscal 1997. Farah U.K. sales increased by 5.3% over that period,
versus the first nine months of 1996.  Inventory losses resulting from a fire at
the Company's plant in Galway,  Ireland negatively  affected sales at Farah U.K.
for the first  nine  months of fiscal  1997.  Third  quarter  Farah  U.K.  sales
increased  versus the same period last year due partially to the weakness of the
U.S.  dollar,  relative to the British Pound Sterling.  In addition,  during the
third quarter of 1997, Farah U.K. shipped orders that had been backlogged due to
the Irish fire earlier in the year.

         Farah  Australia  and Farah New Zealand  sales  accounted  for 31.2% of
third quarter 1997 Farah International sales and increased 9.3%, versus the same
period in 1996.  Sales at Farah Australia and Farah New Zealand during the first
nine  months  of  fiscal  1997  made up 34.7% of Farah  International  sales and
increased  5.7%,  compared to the same period in 1996.  Increased  private label
business and continued consumer  acceptance of the Savane  wrinkle-free  product
contributed to the sales increases for the third quarter and nine months.

         Third quarter 1997 sales at Value Slacks were $4.7 million, compared to
$4.6 million in 1996, a 0.3%  increase.  For the first nine months of the fiscal
year,  sales decreased 2.3% from $12.7 million in 1996 to $12.4 million in 1997.
Value Slacks same store sales,  exclusive of three  satellite  sales held during
the second and third quarters of 1996,  increased 7.7% and 0.3% during the third
quarter  and first  nine  months  of 1997,  respectively,  compared  to the same
periods in 1996. During the first nine months of fiscal 1997, the Company closed
seven low performance stores and opened three new stores at different locations.
Although this net decrease in stores has  negatively  impacted  unit sales,  the
average  price per unit has  increased by more than 18% during the third quarter
and first nine months of 1997 due to changes in product mix.

         Gross  profit as a  percentage  of sales was 25.1% and 26.0% during the
third quarter of fiscal 1997 and fiscal 1996,  respectively.  For the first nine
months of fiscal 1997, gross profit as a percentage of sales was 26.9%, compared
to 25.9% during the same period in 1996.

         Farah U.S.A. gross profit as a percentage of sales was 21.1% during the
third quarter of fiscal 1997,  compared to 22.4% in the same period in 1996. For
the first nine months of fiscal 1997 and 1996,  Farah  U.S.A.  gross profit as a
percentage of sales was 23.6% and 22.1%,  respectively.  Costs associated with a
transition  to more  contract  sewing and start-up  costs at the  Company's  new
finishing facilities contributed to a higher cost of sales. Additionally, fabric
performance  difficulties  with the  Company's  cotton/lycra  Savane  Golf  pant
resulted in  additional  production  costs and higher than normal third  quarter
markdowns.  The average  sales price per unit at Farah U.S.A.  increased by 2.6%
and 1.1% during  the third quarter and first nine months of 1997,  respectively.
The  increases  in  sales  price  per  unit  for  the  quarter  and nine  months
partially  offset the increased markdowns  and the  effects  of the  transitions
in the  sewing  and finishing areas.

         Farah International gross profit as a percentage of sales was 32.9% for
the third  quarter of fiscal  1997,  compared to 33.7% during the same period in
1996. The third quarter  decrease was primarily due to higher markdowns at Farah
U.K. Gross profit as a percentage of sales was comparable  during the first nine
months of 1997 and 1996.

         Value Slacks gross profit as a percentage of sales increased from 41.3%
in the third  quarter  of fiscal  1996 to 47.1% in the third  quarter  of fiscal
1997.  Value Slacks  gross  profit as a  percentage  of sales for the first nine
months of fiscal 1997 was 47.3%,  compared to 45.4% for the same period in 1996.
Value Slacks'  transition to a higher  volume of first quality  merchandise  has
decreased promotional markdowns during fiscal 1997. In addition, satellite sales
held in the second and third  quarters of 1996  negatively  impacted  margins as
products were sold at lower than normal selling prices.

         Selling,  general, and administrative expenses ("SG&A") as a percentage
of sales  increased  to 26.8% in the third  quarter of fiscal 1997 from 25.4% in
the third quarter of 1996. For the first nine months of 1997,  SG&A was 25.4% of
sales,  compared to 25.5% for the same period in 1996.  SG&A as a percentage  of
sales at Farah U.S.A.  increased 2.6 percentage  points during the third quarter
and  increased  0.2  percentage  points  for  the  first  nine  months  of 1997,
compared  to the same periods in 1996.  The third  quarter 1997 increase in SG&A
as a percentage  of sales at Farah U.S.A.  was partially  attributable to higher
advertising   costs  incurred  in  introducing  the  new  Savane  Golf,   Savane
Womenswear,  and Savane Shirt lines.   Additionally,  general and administrative
expense for the third  quarter included costs associated with the  move to a new
corporate headquarters.

         Value  Slacks SG&A as a  percentage  of sales  decreased by 6.1 and 3.1
percentage  points  during  the third  quarter  and first  nine  months of 1997,
respectively,  when compared to the same periods in 1996. The reductions in SG&A
as a percentage of Value Slacks sales  resulted  largely from store closings and
from continued  cost  reduction  efforts.  Also  contributing  to the difference
between 1997 and 1996 SG&A as a  percentage  of sales was the  incremental  SG&A
incurred in  connection  with three  satellite  sales held during the second and
third quarters of 1996.

         SG&A as a percentage of sales at Farah  International  increased by 1.5
and 2.6  percentage  points  during the third  quarter  and first nine months of
1997,  respectively,  compared to the same  periods in 1996.  The third  quarter
increase was primarily  attributable  to legal fees  associated with the sale of
the  Company's  Irish  facilities,  the hiring of additional  quality  assurance
personnel at Farah U.K., and severance  payments.  These factors,  combined with
higher  concession  and  exhibition  expenses  at Farah  U.K.,  were the primary
components  of the increase in SG&A as a percentage  of sales for the first nine
months of 1997.

         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.
In addition,  the Company's  other Irish facility  located in Kiltimagh has been
adversely  affected  because of its  dependency on the  operations of the Galway
facility. As a result of the fire and its related impact, the Company recorded a
non-recurring  charge (after tax) of  $2.5 million in the first quarter of 1997.
There  was  some  shortfall in sales in the Company's United Kingdom  operations
during  the  first  six  months of fiscal 1997 because of the fire.  On July 25,
1997,  the  Company  entered  into  an  agreement  to sell its Irish facilities.
Management  believes  the fire and subsequent sale of its Irish facilities  will
not have a long term material  impact on Farah's United Kingdom operations.

        The  Company  recorded a tax benefit on consolidated  net income for the
first nine months of fiscal  1997,  primarily  as a result of  recognizing  $2.2
million of tax benefits  previously not  recognized.  In addition,  in the first
quarter of fiscal 1997,  the Company did not record a tax benefit on the loss in
connection with the fire at the Irish facility.

Financial Condition

        At August 3, 1997, 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.  The  balance  of the term loan was $9.8  million  as of August 3, 1997.
Formulas  derived  from  accounts  receivable  and  inventory  define  borrowing
capacity under the Credit  Agreement.   The  Credit Agreement  states  that  the
interest rate on outstanding borrowings will be prime (8 1/2% at August 3, 1997)
plus 1/2% for borrowings  and 1/6% per month for letters of credit.  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  would be 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  million  of  Libor  Rate  loans
outstanding,  and various  other  requirements.  At August 3, 1997,  usage under
the Agreement was $40.2  million  and the excess credit line available was $19.7
million. The Credit Agreement allows for  consolidated  capital  expenditures of
$30 million in fiscal 1997.  As of August 3, 1997, the Company was in compliance
with all covenants pursuant to the Credit Agreement.

         Net cash used in operations in the first nine months of fiscal 1997 was
$18.3  million.  The  largest  factor  contributing  to the use of  cash  was an
increase in  inventories.  Production  levels were  increased  in the first nine
months of 1997 in an attempt  to better  match  inventory  levels  with  current
demand.  Sales, however, were lower than expected resulting in a net increase in
inventory  balances.  In  addition,  $9.2  million in cash was used for  capital
expenditures.

         Capital expenditures through August 3, 1997 approximated $12.6 million.
Expenditures were mainly for manufacturing  equipment,  information systems, and
leasehold improvements at the new corporate headquarters. At August 3, 1997, the
Company had commitments for future capital  expenditures of  approximately  $4.6
million.

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards No. 128 (SFAS 128),  "Earnings Per
Share." SFAS 128 will  supersede APB Opinion No. 15,  "Earnings Per Share." SFAS
128 requires dual  presentation  of basic and diluted  earnings per share on the
face of the income statement for entities with complex capital structures.  SFAS
128 is effective for annual and interim  periods ending after December 15, 1997.
Earlier application is not permitted.  Implementation of SFAS 128 would not have
had a material impact on the Company's  earnings per share for the third quarter
of fiscal 1997 or the nine months ended August 3, 1997.

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 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.

         Last  year  the  Company  terminated its shirt licensing agreement with
Oxford and re-introduced wrinkle free shirtings as a significant addition to the
Savane label.  Due to timing and sourcing complexities  and  market  acceptance,
risk  factors associated with shirts are greater than those associated with  the
Company's traditional men's casual wear product lines.

         The Company has undertaken several new projects  during  1997 including
relocating  to a new distribution facility.   The Company  established a  target
date of December 31, 1997 to complete its move to the new distribution facility.
However, based on current discussions with its contractors and suppliers,  it is
possible  that  a delay in moving will occur.  The Company may incur significant
additional  costs  in  attempting  to meet the original deadline; and if a delay
does occur, the Company may experience disruptions in shipments.

<PAGE>


                           PART II. OTHER INFORMATION

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

(a)            Exhibit 11                 Statement regarding computation of net
                                          income (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:        September 17, 1997
                                                  /s/ Russell G. Gibson
                                                  Russell G. Gibson
                                                  Executive Vice President
                                                  Principal Financial Officer




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



<PAGE>




                       FARAH INCORPORATED AND SUBSIDIARIES

                           FORM 10-Q INDEX TO EXHIBITS

                                 August 3, 1997


                                                                       Page
                              Description                             Number

Exhibit 11                    Statement regarding computation 
                              of net income (loss) per share.           15

Exhibit 27                    Financial Data Schedule                   16


<PAGE>