UNITED STATES
                                        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 EXCHANGE ACT OF 1934
For the quarterly period ended                July 31, 1999
                            -----------------------------------------------

                                            OR

 [    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
              SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number        0-19526
                                    Goody's Family Clothing, Inc.
           (Exact name of registrant as specified in its charter)

         Tennessee                                     62-0793974
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                       Identification Number)
400 Goody's Lane,               Knoxville, Tennessee              37922
(Address of principal executive offices)                        (Zip Code)

                            (423) 966-2000
           (Registrant's telephone number, including area code)

         (Former name,  former  address and former fiscal year, if changed since
last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

                                       APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.
                 Common Stock, no par value, 33,199,180 shares outstanding as of
August 28, 1999.




<PAGE>


                                           Goody's Family Clothing, Inc.
                                                Index to Form 10-Q
                                                   July 31, 1999



Part I - Financial Information:

     Item 1 - Financial Statements

         Consolidated Statements of Operations..........................   3

         Consolidated Balance Sheets....................................   4

         Consolidated Statements of Cash Flows..........................   5

         Notes to Consolidated Financial Statements....................   6 - 7

         Independent Accountants' Review Report.........................   8

     Item 2 - Management's Discussion and Analysis of Financial Condition and
                Results of Operations.................................   9 - 15

     Item 3 - Quantitative and Qualitative Disclosures about Market Risk.  15


Part II - Other Information............................................ 16 - 17
          -----------------

     Item 1.  Legal Proceedings
     Item 2.  Changes in Securities and Use of Proceeds
     Item 3.  Defaults upon Senior Securities
     Item 4.  Submission of Matters to a Vote of Security Holders
     Item 5.  Other Information
     Item 6.  (a)  Exhibits
     Item 6.  (b)  Reports on Form 8-K


Signatures...............................................................  18















<PAGE>



PART 1 - FINANCIAL INFORMATION

--------------------------------------------------------------------------------

Item 1  - Consolidated Financial Statements

Goody's Family Clothing, Inc. and Subsidiaries
Consolidated Statements of Operations - Unaudited
(In thousands, except per share amounts)
<TABLE>

                                                     Thirteen                            Twenty-six
                                                  Weeks Ended                           Weeks Ended
                                            July 31,           August 1,           July 31,         August 1,
                                             1999                1998               1999               1998
                                          -------------      ------------       -------------     ------------
<S>                                              <C>               <C>               <C>               <C>

Sales                                     $    277,260         $  249,489       $   537,191$        476,203
Cost of sales and occupancy expenses           195,790            178,345            381,520        337,139
                                          ------------       ------------            -------      ------------
Gross profit                                    81,470             71,144            155,671        139,064

Selling, general and administrative
   expenses                                     66,545             57,632            128,699        113,536
                                          ------------       ------------       ------------      ------------
Earnings from operations                        14,925             13,512             26,972         25,528

Interest expense                                    53                 87                106            181
Investment income                                  699                462              1,277            998
                                          ------------       ------------       ------------      ------------
Earnings before income taxes                    15,571             13,887             28,143         26,345

Provision for income taxes                       5,864              5,229             10,553          9,919
                                          ------------       ------------       ------------      ------------
Net earnings                              $      9,707       $      8,658         $   17,590      $  16,426
                                          ============       ============       ============      ============

Earnings per common share
   Basic                                  $       0.29       $       0.26       $       0.53      $    0.49
                                          ============       ============       ============      ============
   Diluted                                $       0.29       $       0.25       $       0.52      $    0.47
                                          ============       ============       ============      ============

Weighted average common
shares outstanding
   Basic                                        33,318             33,538             33,325         33,384
                                          ============       ============       ============      ============
   Diluted                                      33,900             34,989             33,909         34,836
                                          ============       ============       ============      ============

</TABLE>










See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.


<PAGE>


Goody's Family Clothing, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
                                                                July 31,         January 30,        August 1,
                                                                 1999               1999             1998
                                                              (unaudited)                         (unaudited)
<S>                                                               <C>                <C>                <C>

ASSETS
Current Assets
   Cash and cash equivalents                                 $     70,858        $     89,292      $     41,872
   Inventories                                                    209,666             165,687           201,295
   Accounts receivable and other current assets                    14,897              14,195            23,178
                                                             ------------        ------------      ------------
   Total current assets                                           295,421             269,174           266,345
Property and equipment, net                                       113,343             104,789           100,446
Other assets                                                        3,647               3,210             3,037
                                                             ------------        ------------      ------------

   Total assets                                              $    412,411        $    377,173      $    369,828
                                                             ============        ============      ============


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
   Accounts payable                                          $    133,885        $    122,776      $    126,420
   Accrued expenses                                                49,043              43,190            44,341
   Income taxes payable                                             1,764                 321                 -
   Current portion of long-term debt                                  289                 289               263
                                                             ------------        ------------      ------------
   Total current liabilities                                      184,981             166,576           171,024
Long-term debt                                                        318                 318               608
Other long-term liabilities                                         3,790               3,782             3,381
Deferred income taxes                                              11,223              11,020            10,368
                                                             ------------        ------------      ------------
   Total liabilities                                              200,312             181,696           185,381
                                                             ------------        ------------      ------------

Commitments and Contingencies


Shareholders' Equity
   Preferred stock, $1.00 par value;
     Authorized - 2,000,000 shares;
       Issued and outstanding - none
   Class B Common stock, no par value;
     Authorized - 50,000,000 shares;
       Issued and outstanding - none
   Common stock, no par value;
     Authorized - 50,000,000 shares;
       Issued  and outstanding - 33,245,480; 33,330,780
        and 33,326,130 shares, respectively                        27,104              28,102            28,034
   Paid-in capital                                                  9,479               9,449             9,748
   Retained earnings                                              175,516             157,926           146,665
                                                             ------------        ------------      ------------
   Total shareholders' equity                                     212,099             195,477           184,447
                                                             ------------        ------------      ------------

   Total liabilities and shareholders' equity                $    412,411        $    377,173      $    369,828
                                                             ============        ============      ============
</TABLE>


See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.


<PAGE>



Goody's Family Clothing, Inc.  and Subsidiaries
Consolidated Statements of Cash Flows - Unaudited
(In thousands)
<TABLE>
                                                                                   Twenty-six Weeks Ended
                                                                                   July 31,          August 1,
                                                                                    1999                1998
                                                                                 ---------         ------------
<S>                                                                                 <C>                <C>

Cash Flows from Operating Activities
Net earnings                                                                       $    17,590       $   16,426
Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
     Depreciation and amortization                                                       7,819            6,587
     Net loss on asset disposals and write-down                                            289              649
     Changes in assets and liabilities:
         Inventories                                                                   (43,979)         (49,628)
         Accounts payable                                                               26,794           17,862
         Income taxes                                                                    2,569          (12,754)
         Other assets and liabilities                                                    4,965           (3,035)
                                                                                 -------------     -------------
             Cash provided by (used in) operating activities                            16,047          (23,893)
                                                                                   -----------     -------------

Cash Flows from Investing Activities
Acquisitions of property and equipment                                                 (16,690)         (10,242)
Proceeds from sale of property and equipment                                                28               28
                                                                                 -------------     ------------
             Cash used in investing activities                                         (16,662)         (10,214)
                                                                                 --------------    -------------

Cash Flows from Financing Activities
Exercise of stock options                                                                  103            7,964
Purchase of Common Stock                                                                (1,071)               -
Changes in cash management accounts                                                    (16,851)           3,841
                                                                                 --------------    ------------
             Cash (used in) provided by financing activities                           (17,819)          11,805
                                                                                   ------------    ------------

Cash and cash equivalents
Net decrease for the period                                                            (18,434)         (22,302)
Cash and cash equivalents, beginning of period                                          89,292           64,174
                                                                                --------------      -----------
Cash and cash equivalents, end of period                                         $      70,858     $     41,872
                                                                                 =============     ============

Supplemental Disclosures
     Income tax payments                                                         $       7,866     $     17,205
     Interest payments                                                                      75              133





</TABLE>




See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.


<PAGE>



Goody's Family Clothing, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

(1)  Basis of presentation

The accompanying  condensed  consolidated financial statements of Goody's Family
Clothing,  Inc. and  subsidiaries  (the  "Company")  are unaudited and have been
prepared  pursuant to the rules and  regulations  of the Securities and Exchange
Commission.   Although  certain  information   normally  included  in  financial
statements prepared in accordance with generally accepted accounting  principles
has been condensed or omitted,  the Company  believes that the  disclosures  are
adequate to make the information presented not misleading. In the opinion of the
Company's  management,   the  accompanying   unaudited  condensed   consolidated
financial statements include all adjustments, consisting primarily of normal and
recurring  adjustments,  necessary  for a fair  presentation  of  the  Company's
financial position, results of operations and cash flows for the interim periods
presented.  Due to the seasonal nature of the Company's business, the results of
operations for the interim periods are not necessarily indicative of the results
that may be achieved for the entire year. The condensed  consolidated  financial
statements should be read in conjunction with the audited consolidated financial
statements  and the notes thereto  contained in the Company's 1998 Annual Report
on Form 10-K for its fiscal year ended January 30, 1999.

(2)  Credit arrangements

     The Company  has a credit  agreement  for an  unsecured  revolving  line of
credit which provides for cash borrowings for general corporate purposes as well
as for the issuance of letters of credit of up to an  aggregate of  $130,000,000
and which  expires in May 2001.  The Company is committed to pay (i) interest on
the cash  borrowings  at a  fluctuating  base rate or LIBOR  plus an  applicable
margin,  (ii)  letter of  credit  fees  based on the  number of days a letter of
credit is outstanding times an applicable fee and (iii) an annual commitment fee
payable quarterly in advance. The terms of this credit agreement require,  among
other things,  maintenance of minimum levels of shareholders' equity, compliance
with certain financial ratios and Mr. Robert M. Goodfriend remaining as Chairman
of the Board or Chief Executive Officer of the Company,  and place  restrictions
on  additional   indebtedness,   asset   disposals,   investments   and  capital
expenditures.

(3)  Earnings per common share

Basic  earnings  per common  share is computed by dividing  net  earnings by the
weighted  average  number of common  shares  outstanding.  Diluted  earnings per
common share is computed by dividing net earnings by the weighted average number
of common shares  outstanding and potentially  dilutive common shares.  Weighted
average diluted shares  outstanding  differs from weighted  average basic shares
outstanding solely from the effect of stock options.

(4)  Recent accounting pronouncements

Accounting for costs of computer software

At the  beginning  of the first  quarter of fiscal  1999,  the  Company  adopted
Statement of Position No. 98-1,  "Accounting for the Costs of Computer  Software
Developed or Obtained for Internal  Use" ("SOP No.  98-1") which  requires  that
certain  costs  incurred  to  develop or obtain  software  for  internal  use be
capitalized.  The  effect  of the  adoption  of SOP No.  98-1  on the  Company's
financial position or results of operations was not material.

Accounting for derivative instruments and hedging activities

     In June 1998, the American Institute of Certified Public Accountants issued
Statement of Financial  Accounting  Standards No. 133 "Accounting for Derivative
Instruments and Hedging  Activities" ("SFAS No.133").  SFAS No. 133, as amended,
is effective  beginning with the Company's fiscal year 2001 and requires that an
entity  recognize  all  derivatives  as  either  assets  or  liabilities  in its
statement of financial position and measure those instruments at fair value. The
Company has not yet  completed its analysis of the effect of SFAS No. 133 on its
financial statements.


<PAGE>


Goody's Family Clothing, Inc. and Subsidiaries
Notes to Consolidated Financial Statements  -  continued
(Unaudited)

(5) Contingencies

     In February 1999 a lawsuit was filed against the Company by nine individual
plaintiffs  at  one  of  the  Company's  retail  stores,  who  generally  allege
discrimination with respect to employment opportunities,  including, among other
things,  discrimination  through  their  constructive  discharge,  failure to be
promoted and failure to be paid wages equal to white employees. One plaintiff in
this  first  lawsuit  has  agreed in  principle,  subject  to the  execution  of
definitive  agreements,  to accept  nominal  consideration  from the  Company in
exchange for a release,  five plaintiffs have filed or agreed to file motions to
dismiss with prejudice and the remaining three plaintiffs remain in this action.

     Also in February 1999, a second  lawsuit was filed by 20 named  plaintiffs,
who  generally  allege  that  the  Company  discriminated  against  a  class  of
African-American   employees   at  its  retail   stores   through   the  use  of
discriminatory selection and compensation procedures, and by maintaining unequal
terms and  conditions of employment  and that the Company  maintained a racially
hostile  working  environment.  The  plaintiffs in the second lawsuit also named
Robert M. Goodfriend,  the Company's Chairman and Chief Executive Officer,  as a
defendant,  and are seeking to have this action certified as a class action.  By
way of damages,  the  plaintiffs in this second action are seeking,  among other
things, injunctive relief, back pay and other monetary relief.

     In  addition,  the  Company has been named as the sole  defendant  in three
separate  actions,  two of which  were  served in May 1999 and one was served in
August 1999.  Each of these  actions is brought by former  employees  who allege
that the Company retaliated  against them for opposing unlawful  discrimination.
Each of the plaintiffs seek monetary  damages,  including lost pay and benefits,
mental and emotional suffering and punitive damages.

     The Company disputes the claims in these lawsuits and intends to defend the
the unresolved  claims  vigorously.  It is too early to estimate the effect,  if
any, these lawsuits may have on the Company's  financial  position or results of
operations.

The  Company  is a party to  certain  other  legal  proceedings  arising  in the
ordinary course of its business. Management currently believes that the ultimate
outcome of these other proceedings,  individually and in the aggregate, will not
have a material adverse effect on the Company's financial position or results of
operations.


>




<PAGE>



INDEPENDENT ACCOUNTANTS' REVIEW REPORT

Board of Directors and Shareholders
Goody's Family Clothing, Inc.
Knoxville, Tennessee:

We have  reviewed the  accompanying  condensed  consolidated  balance  sheets of
Goody's Family Clothing, Inc. and subsidiaries as of July 31, 1999 and August 1,
1998 and the related  consolidated  statements of operations  and cash flows for
the thirteen and twenty-six week periods then ended. These financial  statements
are the responsibility of the Company's management.

We  conducted  our  reviews in  accordance  with  standards  established  by the
American  Institute  of  Certified  Public  Accountants.  A  review  of  interim
financial  information consists principally of applying analytical procedures to
financial data and of making inquiries of persons  responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the  expression  of an opinion  regarding the  financial  statements  taken as a
whole.
Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to such condensed  consolidated  financial  statements for them to be in
conformity with generally accepted accounting principles.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the consolidated balance sheet of Goody's Family Clothing,  Inc. and
subsidiaries as of January 30, 1999 and the related  consolidated  statements of
operations,  shareholders'  equity,  and cash flows for the year then ended (not
presented  herein);  and in our report  dated March 17,  1999,  we  expressed an
unqualified opinion on those consolidated financial statements.  In our opinion,
the information set forth in the  accompanying  condensed  consolidated  balance
sheet as of January 30, 1999 is fairly  stated,  in all  material  respects,  in
relation to the consolidated balance sheet from which it has been derived.

/s/Deloitte & Touche LLP
Atlanta, Georgia
August 17, 1999











<PAGE>


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

Forward-looking Statements

This Quarterly  Report contains  certain  forward-looking  statements  which are
based upon current expectations,  plans and estimates and involve material risks
and uncertainties  including,  but not limited to, (i) weather conditions;  (ii)
the timely  availability of branded and private label  merchandise in sufficient
quantities to satisfy customer  demand;  (iii) customer demand and trends in the
apparel,  shoe and retail industry and to the acceptance of merchandise acquired
for sale by the Company;  (iv) the  effectiveness of advertising and promotional
events;  (v) the impact of competitors'  pricing and store  expansion;  (vi) the
ability  to enter  into  leases  for new  store  locations;  (vii)  the  timing,
magnitude and costs of opening new stores;  (viii) individual store performance,
including new stores;  (ix)  employee  relations;  (x) the Company's  ability to
properly  staff the new shoe  departments  on a timely  basis;  (xi) the general
economic conditions within the Company's markets;  (xii) the Company's financing
plans;  (xiii) trends affecting the Company's  financial condition or results of
operations;  (xiv) the  Company's  business and growth  strategies  and (xv) the
effect of the Year 2000 issue on the Company and third parties who provide goods
and services to the Company. Any "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities  Exchange Act of 1934, as amended,  which generally can be identified
by the use of  forward-looking  terminology  such as  "may,"  "will,"  "expect,"
"estimate,"  "anticipate,"  "believe," "target," "plan," "project" or "continue"
or the negatives thereof or other variations thereon or similar terminology, are
made on the basis of management's plans and current analysis of the Company, its
business  and the  industry  as a whole.  Readers  are  cautioned  that any such
forward-looking  statement is not a guarantee of future performance and involves
risks and  uncertainties,  and that actual  results may differ  materially  from
those projected in the forward-looking statement as a result of various factors.
The Company does not undertake to publicly update or revise its  forward-looking
statements even if experience or future changes make it clear that any projected
results   expressed  or  implied  therein  will  not  be  realized.   Additional
information  on  risk  factors  that  could  potentially  affect  the  Company's
financial  results  may be  found  in the  Company's  public  filings  with  the
Securities  and  Exchange  Commission.  Certain of such  filings may be accessed
through the Securities and Exchange Commission's web site, http://www.sec.gov.

Results of Operations

The following table sets forth unaudited results of operations,  as a percent of
sales, for the periods indicated:
<TABLE>

                                                             Thirteen                    Twenty-six
                                                           Weeks Ended                 Weeks Ended
                                                       July 31,    August 1,         July 31,   August 1,
                                                      1999            1998          1999          1998
                                                   ------------   -----------    -----------   -----------
<S>                                                  <C>              <C>          <C>            <C>

    Sales                                            100.0%          100.0%        100.0%        100.0%
    Cost of  sales and occupancy expenses             70.6            71.5          71.0          70.8
                                                     -----           -----         -----         -----
    Gross profit                                      29.4            28.5          29.0          29.2
    Selling, general and administrative expenses      24.0            23.1          24.0          23.8
                                                     -----           -----         -----         -----
    Earnings from operations                           5.4             5.4           5.0           5.4
    Interest expense                                     -               -             -           0.1
    Investment income                                  0.2             0.2           0.3           0.2
                                                     -----           -----         -----         -----
    Earnings before income taxes                       5.6             5.6           5.3           5.5
    Provision for income taxes                         2.1             2.1           2.0           2.1
                                                     -----           -----         -----         -----
    Net earnings                                       3.5%            3.5%          3.3%          3.4%
                                                     =====           =====         =====         =====
</TABLE>

Thirteen Weeks Ended July 31, 1999 Compared with Thirteen Weeks Ended August 1,
1998

Overview - During the second  quarter of fiscal 1999, the Company opened two new
stores,  relocated  five stores and  remodeled  two stores,  bringing  the total
number of stores in  operation  at July 31,  1999 to 269,  compared  with 233 at
August 1, 1998. During the corresponding period of the previous fiscal year, the
Company opened five new stores,  relocated three stores, remodeled one store and
closed one  store.  Net  earnings  for the  second  quarter of fiscal  1999 were
$9,707,000,  or 3.5% of sales,  compared with $8,658,000,  or 3.5% of sales, for
the second quarter of fiscal 1998.

Sales - Sales for the second quarter of fiscal 1999 were $277,260,000,  an 11.1%
increase over the  $249,489,000  in sales for the second quarter of fiscal 1998.
This  increase  of  $27,771,000  consisted  of  additional  sales  from  new and
transition  stores of  $35,713,000,  which was  offset  by a 3.4%  decrease,  or
$7,942,000,  in comparable store sales.  Management of the Company believes that
this negative  trend in sales was due, in part,  to the  difficulty in balancing
the Company's  strategies of margin expansion and inventory reduction and to the
Company's failure to identify certain emerging fashion trends on a timely basis.

Shoe Corporation of America,  Inc. ("SCOA"),  under a license agreement with the
Company,  operated  shoe  departments  in most of the  Company's  stores and the
resulting shoe sales are included in the Company's  reported  sales. On June 14,
1999, SCOA filed for bankruptcy protection under Chapter 11 in the United States
Bankruptcy  Court  for the  Southern  District  of Ohio.  As a result  of SCOA's
financial  difficulties,  the Company's  licensed shoe department  sales for the
second  quarter  ended July 31, 1999,  declined  approximately  28% in total and
approximately  41% on a comparable store basis from the same period in the prior
year, which negatively affected the Company's overall comparable store sales for
the second quarter of 1999 by  approximately  1.5%.  Pursuant to the terms of an
agreement,  SCOA removed its shoe inventory from the Company's stores during the
first week of August 1999 and  subsequently,  the Company began stocking its own
shoe   departments.   In  August  1999,  the  Company   recorded  net  sales  of
approximately  $50,000  from the licensed  shoe  departments  and  approximately
$855,000 from its own shoe departments  compared with approximately $3.2 million
from the  licensed  shoe  departments  in  August  1998.  If all shoe  sales are
excluded from August 1999, the Company's  overall  comparable  store sales would
have decreased  approximately  6.9% from August 1998. It is not anticipated that
the Company will achieve an appropriate  shoe inventory mix until February 2000,
the date when the SCOA agreement was originally set to expire.

     Gross  Profit - Gross  profit  for the second  quarter  of fiscal  1999 was
$81,470,000,  or 29.4% of sales, a $10,326,000  increase over the $71,144,000 in
gross  profit,  or 28.5% of  sales,  generated  for the  second  quarter  of the
previous fiscal year. The 0.9% increase in gross profit,  as a percent of sales,
in the second  quarter of fiscal 1999 compared with the second quarter of fiscal
1998  resulted  from a  decrease  in cost of sales of 1.3% which was offset by a
0.4%  increase in occupancy  costs.  The decrease in cost of sales was primarily
the result of (i) better  inventory  management  and control,  (ii) a shift from
basic  denim to fashion  denim  products  that carry  higher  margins,  (iii) an
increase  in basic  denim  margins  and (iv) a  decrease  in the  licensed  shoe
departments  sales which carry lower  margins.  The increase in occupancy  costs
primarily  resulted from higher rents  associated with new and relocated  stores
and a decrease in comparable store sales as discussed above.

Selling,   General   and   Administrative   Expenses  -  Selling,   general  and
administrative  expenses for the second quarter of fiscal 1999 were $66,545,000,
or 24.0% of sales,  an  increase of  $8,913,000  from  $57,632,000,  or 23.1% of
sales,  for the second  quarter of fiscal  1998.  The 0.9%  increase in selling,
general  and  administrative  expenses,  as a percent  of sales,  for the second
quarter of fiscal 1999 compared with the second  quarter of fiscal 1998 resulted
from (i) a 0.2% increase in advertising  and promotional  expenses,  (ii) a 0.5%
increase in store payroll  expenses,  (iii) a 0.3% increase in  maintenance  and
repairs  expenses,  and (iv) a 0.4%  increase  in  other  selling,  general  and
administrative  expenses which were partially offset by a 0.5% decrease in bonus
expenses  related to the  Company's  Short-Term  Incentive  Plan and other bonus
plans.

Interest  Expense -  Interest  expense  for the second  quarter  of fiscal  1999
decreased by $34,000  compared  with the second  quarter of the previous  fiscal
year as a result of decreases in various interest  expenses  incurred during the
period.

Investment  Income -  Investment  income for the second  quarter of fiscal  1999
increased by $237,000  compared with the second  quarter of the previous  fiscal
year primarily as a result of an increase in invested funds during the period.

Income Taxes - The provision  for income taxes for the second  quarter of fiscal
1999 was  $5,864,000,  an effective tax rate of 37.7% of earnings  before income
taxes,  compared  with  $5,229,000,  an effective  tax rate of 37.7% of earnings
before income taxes,  for the second  quarter of the previous  fiscal year.  The
increase from a 37.3% effective tax rate recorded in the first quarter of fiscal
1999 to a 37.7% effective tax rate recorded in the second quarter of fiscal 1999
resulted from state tax law changes.

Twenty-Six Weeks Ended July 31, 1999 Compared with Twenty-Six Weeks Ended August
 1, 1998

Overview - During the  twenty-six  weeks ended July 31, 1999, the Company opened
12 new stores, relocated 12 stores and remodeled four stores, bringing the total
number of stores in  operation  at July 31,  1999 to 269,  compared  with 233 at
August 1, 1998. During the corresponding period of the previous fiscal year, the
Company opened 12 new stores,  relocated  four stores,  remodeled two stores and
closed two stores.  Net  earnings for the  twenty-six  weeks ended July 31, 1999
were $17,590,000,  or 3.3% as a percent of sales, compared with $16,426,000,  or
3.4% as a percent of sales, for the twenty-six weeks ended August 1, 1998.

Sales - Sales for the twenty-six weeks ended July 31, 1999 were $537,191,000,  a
12.8% increase over the  $476,203,000 in sales for the  corresponding  period of
the previous fiscal year.  This increase of $60,988,000  consisted of additional
sales from new and transition  stores of $66,610,000  which was offset by a 1.2%
decrease, or $5,622,000, in comparable store sales. The licensed shoe department
sales for the twenty-six weeks ended July 31, 1999 declined approximately 10% in
total and  approximately 24% on a comparable store basis from such sales for the
corresponding  period of the previous fiscal year, which negatively affected the
overall Company's comparable store sales for the twenty-six weeks ended July 31,
1999 by approximately 1%.

     Gross  Profit - Gross profit for the  twenty-six  weeks ended July 31, 1999
was  $155,671,000,   or  29.0%  of  sales,  a  $16,607,000   increase  over  the
$139,064,000 in gross profit, or 29.2% of sales, generated for the corresponding
period of the previous  fiscal year.  The 0.2%  decrease in gross  profit,  as a
percent of sales, for the twenty-six weeks ended July 31, 1999 compared with the
twenty-six  weeks ended August 1, 1998 resulted from a decrease in cost of sales
of 0.1% which was offset by a 0.3% increase in occupancy  costs. The decrease in
cost of sales  was  primarily  the  result of better  inventory  management  and
control.  The increase in occupancy costs  primarily  resulted from higher rents
associated  with new and  relocated  stores and a decrease in  comparable  store
sales as discussed above.

     Selling,  General  and  Administrative  Expenses  -  Selling,  general  and
administrative  expenses  for the  twenty-six  weeks  ended  July 31,  1999 were
$128,699,000,  or 24.0% of sales, an increase of $15,163,000 from  $113,536,000,
or 23.8% of sales, for the corresponding period of the previous fiscal year. The
0.2% increase in selling,  general and administrative  expenses, as a percent of
sales, for the twenty-six weeks ended July 31, 1999 compared with the twenty-six
weeks ended August 1, 1998 resulted from (i) a 0.1% increase in advertising  and
promotional  expenses (ii) a 0.4% increase in store payroll expenses and (iii) a
0.2% increase in maintenance and repairs expenses which were partially offset by
a 0.5% decrease in bonus expenses related to the Company's  Short-Term Incentive
Plan and other bonus plans.

Interest Expense - Interest expense for the twenty-six weeks ended July 31, 1999
decreased  by $75,000  compared  with the  corresponding  period of the previous
fiscal  year as a result of  decreases  in various  interest  expenses  incurred
during the period.

Investment  Income - Investment  income for the twenty-six  weeks ended July 31,
1999  increased  by  $279,000  compared  with the  corresponding  period  of the
previous  fiscal year  primarily  as a result of an  increase in invested  funds
during the period.

     Income  Taxes - The  provision  for income taxes for the  twenty-six  weeks
ended July 31, 1999 was $10,553,000,  an effective tax rate of 37.5% of earnings
before income taxes, compared with $9,919,000, an effective tax rate of 37.7% of
earnings  before  income  taxes,  for the  corresponding  period of the previous
fiscal year. The Company expects the effective tax rate for the third and fourth
quarter and fiscal year 1999 to be 37.5%.

Liquidity and Capital Resources

Financial  Position - The Company's  primary sources of liquidity are cash flows
from  operations,  including  credit terms from vendors and borrowings under its
credit  agreement.   At  July  31,  1999,  the  Company's  working  capital  was
$110,440,000  compared  with  $95,321,000  at August 1, 1998.  At the end of the
second quarter of fiscal 1999,  compared with the second quarter of the previous
fiscal year, (i) cash and cash  equivalents  increased by $28,986,000,  (ii) net
property and equipment increased by $12,897,000,  (iii) inventories increased by
$8,371,000 and (iv) accounts payable  increased by $7,465,000.  The net increase
in inventories was primarily due to inventories for new stores offset by a lower
inventories on a store by store basis for existing  stores.  Trade payables as a
percent of  inventories  increased  to 63.9% at July 31, 1999 as  compared  with
62.8% at August 1, 1998.

The Company has a credit  agreement  for an unsecured  revolving  line of credit
which provides for cash borrowings for general corporate purposes as well as for
the  issuance of letters of credit of up to an  aggregate  of  $130,000,000  and
which  expires in May 2001.  The Company is committed to pay (i) interest on the
cash borrowings at a fluctuating  base rate or LIBOR plus an applicable  margin,
(ii)  letter of credit  fees  based on the  number of days a letter of credit is
outstanding  times an applicable fee and (iii) an annual  commitment fee payable
quarterly in advance.  The terms of this credit agreement  require,  among other
things,  maintenance of minimum levels of shareholders' equity,  compliance with
certain  financial ratios and Mr. Robert M. Goodfriend  remaining as Chairman of
the Board or Chief Executive Officer of the Company,  and place  restrictions on
additional indebtedness, asset disposals, investments and capital expenditures.

At July 31,  1999,  the  Company  had no cash  borrowings  and  $54,187,000  was
outstanding  for  letters  of  credit  compared  with  no  cash  borrowings  and
$68,840,000 outstanding for letters of credit at August 1, 1998. Cash borrowings
averaged  $19,000 (with the highest  balance of $2,000,000 in March 1999) during
the twenty-six weeks ended July 31, 1999 compared with no cash borrowings during
the  twenty-six  weeks  ended  August 1,  1998.  Letters  of credit  outstanding
averaged  $47,128,000  during the twenty-six  weeks ended July 31, 1999 compared
with  $66,988,000  during the twenty-six weeks ended August 1, 1998. The highest
balance of letters of credit  outstanding during the twenty-six weeks ended July
31, 1999 was $58,464,000 (in July 1999) compared with  $80,142,000 (in May 1998)
during the twenty-six weeks ended August 1, 1998.

Cash Flows - Operating activities provided cash of $16,047,000 in the twenty-six
weeks  ended  July 31,  1999  compared  with  cash  used of  $23,810,000  in the
corresponding  period of the previous  fiscal year.  Cash used for  increases in
inventory during the twenty-six weeks ended July 31, 1999 and August 1, 1998 was
$43,979,000 and  $49,628,000,  respectively.  Accounts  payable provided cash of
$26,794,000  and  $17,862,000  in the  twenty-six  weeks ended July 31, 1999 and
August 1,  1998,  respectively.  Depreciation  and  amortization  expenses  were
$7,819,000  and  $6,587,000  for the  twenty-six  weeks  ended July 31, 1999 and
August 1, 1998, respectively.

Cash flows from investing activities reflected a $16,662,000 and $10,214,000 net
use of cash for the  twenty-six  weeks  ended July 31,  1999 and August 1, 1998,
respectively.  Cash was used  primarily  to fund capital  expenditures  for new,
relocated and remodeled stores and for general corporate purposes.

     Cash used by financing  activities for the twenty-six  weeks ended July 31,
1999  was  $17,819,000  compared  with  cash  provided  of  $11,722,000  for the
corresponding  period of the previous fiscal year. The Company's cash management
program used cash of  $16,851,000  in the  twenty-six  weeks ended July 31, 1999
compared with cash provided of $3,841,000  for the  corresponding  period of the
previous  fiscal year.  During the  twenty-six  weeks ended July 31,  1999,  the
Company received $73,000 in cash and realized a tax benefit of $30,000, compared
with $2,937,000 in cash and a tax benefit of $4,944,000 during the corresponding
period of the previous  year from the issuance of common stock upon the exercise
of stock options. In June 1999, the Company's Board of Directors  authorized the
Company to spend up to $20 million to repurchase  shares of its common stock. As
a result, the Company  repurchased 100,000 shares of its common stock during the
second quarter of fiscal 1999 for approximately $1,071,000.

     Outlook  - The  Company  plans  to open  approximately  32 new  stores  and
relocate or remodel  approximately  21 stores and close one store during  fiscal
1999.  During the third quarter to date, the Company opened three new stores and
relocated  one  store.   Management   estimates  that  capital  expenditures  of
approximately  $23,300,000  will be required  for (i)  opening new stores,  (ii)
upgrading existing stores, (iii) distribution center enhancements, (iv) computer
systems  and  equipment  and (v)  for  general  corporate  purposes  during  the
remainder of fiscal 1999.  The Company  also plans to  repurchase  shares of its
common  stock from time to time in the open  market or in  privately  negotiated
transactions,  depending  upon price,  prevailing  market  conditions  and other
factors.

The Company's  primary needs for capital resources are for the purchase of store
inventories,  capital  expenditures and for normal operating purposes.  Based on
the Company's current growth plans, it is estimated that the existing  Knoxville
distribution center can service its stores through fiscal 2000. In order to meet
the merchandise distribution  requirements beginning in fiscal 2001, the Company
is contemplating  acquiring or building a new distribution facility at a cost of
approximately  $20 million  which will be  operational  some time  during fiscal
2001. Management believes that its existing working capital,  together with cash
flows from operations,  including credit terms from vendors,  and the borrowings
available  under the credit  agreement  will be sufficient to meet the Company's
operating and capital expenditure requirements.

     In February 1999 a lawsuit was filed against the Company by nine individual
plaintiffs  at  one  of  the  Company's  retail  stores,  who  generally  allege
discrimination with respect to employment opportunities,  including, among other
things,  discrimination  through  their  constructive  discharge,  failure to be
promoted and failure to be paid wages equal to white employees. One plaintiff in
this  first  lawsuit  has  agreed in  principle,  subject  to the  execution  of
definitive  agreements,  to accept  nominal  consideration  from the  Company in
exchange for a release,  five plaintiffs have filed or agreed to file motions to
dismiss with prejudice and the remaining three plaintiffs remain in this action.

     Also in February 1999, a second  lawsuit was filed by 20 named  plaintiffs,
who  generally  allege  that  the  Company  discriminated  against  a  class  of
African-American   employees   at  its  retail   stores   through   the  use  of
discriminatory selection and compensation procedures, and by maintaining unequal
terms and  conditions of employment  and that the Company  maintained a racially
hostile  working  environment.  The  plaintiffs in the second lawsuit also named
Robert M. Goodfriend,  the Company's Chairman and Chief Executive Officer,  as a
defendant,  and are seeking to have this action certified as a class action.  By
way of damages,  the  plaintiffs in this second action are seeking,  among other
things, injunctive relief, back pay and other monetary relief.

     In  addition,  the  Company has been named as the sole  defendant  in three
separate  actions,  two of which  were  served in May 1999 and one was served in
August 1999.  Each of these  actions is brought by former  employees  who allege
that the Company retaliated  against them for opposing unlawful  discrimination.
Each of the plaintiffs seek monetary  damages,  including lost pay and benefits,
mental and emotional suffering and punitive damages.

     The Company disputes the claims in these lawsuits and intends to defend the
the unresolved  claims  vigorously.  It is too early to estimate the effect,  if
any, these lawsuits may have on the Company's  financial  position or results of
operations.

The  Company  is a party to  certain  other  legal  proceedings  arising  in the
ordinary course of its business. Management currently believes that the ultimate
outcome of these other proceedings,  individually and in the aggregate, will not
have a material adverse effect on the Company's financial position or results of
operations.

Impact of the Year 2000 Issue

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  date-sensitive  software may recognize a date using
"00" as the year 1900  rather  than the year 2000.  This could  result in system
failure or miscalculations causing disruptions of operations,  including,  among
other things, a temporary inability to process transactions or engage in similar
normal business activities.

The state of readiness

During fiscal 1998, the Company established an oversight  committee,  consisting
of individuals from each of its functional areas, to review all of the Company's
computer  systems and  programs,  as well as the  computer  systems of the third
parties  upon whose data or  functionality  the Company  relies in any  material
respect,  and to assess their ability to process  transactions in the year 2000.
This committee meets regularly to review the progress of the Company's Year 2000
compliance  issues.  At July 31, 1999,  substantially  all internal systems have
been modified to be Year 2000 compliant. Throughout the remainder of fiscal 1999
the Company plans to continue  testing and monitoring  its internal  systems for
Year 2000 compliance. In addition, the oversight committee will continue to meet
throughout  the  remainder  of fiscal  1999 and into the year 2000 to review the
progress  of the  Company's  Year  2000  efforts  and to  address  any  problems
encountered with third parties.

In addition,  the Company has  contacted  its  significant  suppliers  and other
service  providers to determine the extent to which the Company is vulnerable to
those third parties'  failure to remediate their own Year 2000 issues.  Although
most suppliers have responded that they expect to be in substantial  compliance,
there can be no guarantee  that the computer  systems of these third  parties on
which the Company's systems rely will be timely converted,  or that a failure to
convert  by another  company,  or a  conversion  that is  incompatible  with the
Company's systems,  would not have a material adverse effect on the Company. The
Company is not yet in a position to assess any third party's  compliance efforts
with the Year 2000 issue or the impact on the Company, if any, of the failure of
one or more third party's Year 2000 compliance efforts.

Costs to address Year 2000 issues

Through  July 31, 1999,  the costs  incurred by the Company for Year 2000 issues
amounted to approximately  $995,000 for external and existing internal resources
that were  expensed as incurred.  The  Company's  remaining  costs for Year 2000
issues are estimated at $585,000,  which  primarily  consist of (i) $246,000 for
the purchase of software and hardware and (ii)  $339,000  representing  external
and existing internal resources that will be expensed as incurred.

Risks of Year 2000 issues

The risks  associated  with failing to remediate  the Year 2000 issues  include,
among  other  things,  temporary  disruptions  in  (i)  store  operations,  (ii)
ordering,  receiving and distributing  merchandise,  (iii) services  provided by
banks such as credit  card  processing  and  authorization,  (iv)  communication
services,  (v) city and government services and (vi) utility services as well as
other vital and necessary operations.

Contingency plans

The oversight  committee is currently in the process of developing a contingency
plan for each area  within the  organization  that could be affected by the Year
2000  issue.   Although  management   currently   anticipates  minimal  business
disruption,  the  failure  of either the  Company  or one of its major  business
partners to remediate the Year 2000 issue could have a materially adverse impact
on the Company's business, operations and financial condition.

Seasonality  and  inflation The  Company's  business is seasonal by nature.  The
Christmas  season  (beginning the Sunday before  Thanksgiving  and ending on the
first  Saturday  after   Christmas),   the   back-to-school   season  (beginning
approximately the first week of August and continuing  through the first week of
September)  and the Easter  season  (beginning  approximately  two weeks  before
Easter  Sunday  and  ending  on  the  Saturday  preceding  Easter)  collectively
accounted for  approximately  33.7% of the  Company's  annual sales based on the
Company's  last three fiscal years ended  January 30,  1999.  In general,  sales
volume varies directly with customer traffic, which is heaviest during the third
and  fourth  quarters  of a  fiscal  year.  Because  of the  seasonality  of the
Company's  business,  results for any quarter are not necessarily  indicative of
the results that may be achieved for the full year.

Inflation  can affect the costs  incurred by the Company in the  purchase of its
merchandise,  the leasing of its stores and certain  components  of its selling,
general and  administrative  expenses.  During the last three fiscal years ended
January 30, 1999,  inflation has not materially affected the Company's business,
although  there can be no  assurance  that  inflation  will not have a  material
adverse effect on the Company in the future.

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

The  Company  has no  material  investments  or risks in market  risk  sensitive
instruments.




<PAGE>


PART II - OTHER INFORMATION


Item 1 - Legal Proceedings

     In February 1999 a lawsuit was filed against the Company by nine individual
plaintiffs  at  one  of  the  Company's  retail  stores,  who  generally  allege
discrimination with respect to employment opportunities,  including, among other
things,  discrimination  through  their  constructive  discharge,  failure to be
promoted and failure to be paid wages equal to white employees.  The plaintiffs'
claims were brought  under the Civil Rights Act of 1866.  One  plaintiff in this
first  lawsuit has agreed in  principle,  subject to the execution of definitive
agreements,  to accept nominal  consideration from the Company in exchange for a
release,  five  plaintiffs  have filed or agreed to file motions to dismiss with
prejudice and the remaining three plaintiffs remain in this action.

     Also in February 1999, a second  lawsuit was filed by 20 named  plaintiffs,
who  generally  allege  that  the  Company  discriminated  against  a  class  of
African-American   employees   at  its  retail   stores   through   the  use  of
discriminatory selection and compensation procedures, and by maintaining unequal
terms and  conditions of employment  and that the Company  maintained a racially
hostile working environment. The plaintiffs' claims were brought under Title VII
of the Civil Rights Act of 1964,  as amended,  and under the Civil Rights Act of
1866. The plaintiffs in the second lawsuit also named Robert M. Goodfriend,  the
Company's Chairman and Chief Executive Officer, as a defendant,  and are seeking
to  have  this  action  certified  as a class  action.  By way of  damages,  the
plaintiffs  in this second action are seeking,  among other  things,  injunctive
relief, back pay and other monetary relief.

In addition,  the Company has been named as the sole defendant in three separate
actions  arising under Title VII of the Civil Rights Act of 1964,  and 42 U.S.C.
Section 1981,  two of which were served in May 1999 and one was served in August
1999. Each of these actions is brought by former  employees who allege that the
Company  retaliated against them for opposing unlawful  discrimination.  Each of
the plaintiffs seek monetary  damages,  including lost pay and benefits,  mental
and emotional suffering and punitive damages.

     The Company disputes the claims in these lawsuits and intends to defend the
the unresolved  claims  vigorously.  It is too early to estimate the effect,  if
any, these lawsuits may have on the Company's  financial  position or results of
operations.

The  Company  is a party to  certain  other  legal  proceedings  arising  in the
ordinary course of its business. Management currently believes that the ultimate
outcome of these other proceedings,  individually and in the aggregate, will not
have a material adverse effect on the Company's financial position or results of
operations.

Item 2.  -  Changes in Securities  -  None

Item 3.  -  Defaults Upon Senior Securities  -  None

Item 4.  -  Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Shareholders  (the "Meeting") on June 16,
1999 at which the election of directors was submitted to a vote of shareholders.

At the Meeting,  the following  persons were elected as directors of the Company
for three year terms expiring at the 2002 Annual Meeting of Shareholders:

Irwin L.  Lowenstein - 30,859,475  shares of common stock were voted in favor of
his election;  81,951 shares of common stock were withheld and 2,392,054  shares
of common stock were not voted.

Cheryl L.  Turnbull -  30,858,925  shares of common stock were voted in favor of
her election;  82,501 shares of common stock were withheld; and 2,392,054 shares
of common stock were not voted.

The other  directors of the Company  include Harry M. Call and Samuel J. Furrow,
whose terms  expire at the 2000  Annual  Meeting of  Shareholders  and Robert M.
Goodfriend  and Robert F. Koppel,  whose terms expire at the 2001 Annual Meeting
of Shareholders.

Item 5.  -  Other Information  - None

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

              10.71   Goody's Family Clothing, Inc. Executive Deferral Plan

              11      Statement re: Computation of Per Share Earnings

              15      Accountants' Awareness Letter

              27      Financial Data Schedule

        b)   Reports on Form 8-K  -  None



<PAGE>





                                           GOODY'S FAMILY CLOTHING, INC.



                                                    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.





                          GOODY'S FAMILY CLOTHING, INC.
                                                                   (Registrant)


             Date:    September 9, 1999             /s/ Robert M. Goodfriend
                 ------------------------        ----------------------------
                                                       Robert M. Goodfriend
                                                       Chairman of the Board and
                                                       Chief Executive Officer


             Date:    September 9, 1999             /s/ Harry M. Call
                ------------------------         ------------------------------
                                                       Harry M. Call
                                                       Director, President and
                                                       Chief Operating Officer



             Date:    September 9, 1999             /s/ Edward R. Carlin
                   ------------------------------------------------------------
                                                       Edward R. Carlin
                                                       Executive Vice President,
                                                       Chief Financial Officer
                                                        and Secretary
                                                   (Principal Financial Officer)



             Date:    September 9, 1999             /s/ David G. Peek
                    -----------------------------------------------------------
                                                    David G. Peek
                                                    Vice President, Corporate
                                                    Controller and
                                                    Chief Accounting Officer
                                                  (Principal Accounting Officer)
<PAGE>