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                November 1, 1997
                               -------------------------------

                                            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, 16,346,958 shares outstanding as of
December 5, 1997.




<PAGE>


                          Goody's Family Clothing, Inc.
                               Index to Form 10-Q
                     Quarterly Period Ended November 1, 1997



Part I - Financial Information:

     Item 1 - Consolidated Financial Statements

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

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

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

              Notes to Consolidated Financial Statements...............   6

              Independent Accountants' Review Report...................   7

     Item 2 - Management's Discussion and Analysis of Financial 
               Condition and Results of Operations.....................   8-11


Part II - Other Information............................................   12
          -----------------

     Item 1.  Legal Proceedings
     Item 2.  Changes in Securities
     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..............................................................  13
















<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 Weeks Ended                 Thirty-nine Weeks Ended
                                          November 1,        November 2,        November 1,       November 2,
                                             1997                1996               1997               1996
                                          -------------      ------------       -------------     ---------

<S>                                     <C>                 <C>                  <C>              <C>   

Sales                                       $  234,908         $  211,380         $  637,171        $  545,558
Cost of sales and occupancy expenses           172,874            159,197            461,990           405,493
                                          ------------       ------------       ------------      ------------
     Gross profit                               62,034             52,183            175,181           140,065

Selling, general, and administrative
  expenses                                      53,335             46,800            150,380           129,310
                                          ------------       ------------       ------------      ------------
     Earnings from operations                    8,699              5,383             24,801            10,755

Interest expense                                   151                233                370               513
Investment income                                  308                276              1,186               936
                                          ------------       ------------       ------------      ------------
     Earnings before income taxes                8,856              5,426             25,617            11,178

Provision for income taxes                       3,321              2,062              9,606             4,248
                                          ------------       ------------       ------------      ------------
Net earnings                                $    5,535         $    3,364         $   16,011        $    6,930
                                          ============       ============       ============      ============

Earnings per common share                   $     0.33         $    0. 21         $     0.95        $     0.43
                                          ============       ============       ============      ============

Weighted average common
    shares outstanding                          16,976            16, 134            16, 776            16,129
                                          ============       ============       ============      ============

</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>

                                                              November 1,         February 1,       November 2,
                                                                 1997                1997               1996
                                                              (unaudited)                           (unaudited)
<S>                                                         <C>                 <C>                <C>

ASSETS
Current Assets
   Cash and cash equivalents                                   $   28,947          $   43,316        $   25,321
   Investments                                                      1,518               1,453             1,421
   Inventories                                                    215,234             107,495           177,967
   Accounts receivable and other current assets                    17,153               9,689            12,174
                                                             ------------        ------------      ------------
   Total current assets                                           262,852             161,953           216,883
Property and equipment, net                                        96,376              88,955            92,508
Other assets                                                        3,205               3,439             3,442
                                                             ------------        ------------      ------------

Total assets                                                   $  362,433          $  254,347        $  312,833
                                                             ============        ============      ============


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
    Accounts payable                                           $  134,845          $   75,900      $    124,983
    Accrued expenses                                               46,404              34,841            37,474
    Income taxes payable                                                0               6,957               921
    Current portion of long- term debt                                239                 239               217
                                                             ------------       -------------    --------------
    Total current liabilities                                     181,488             117,937           163,595
Long-term debt                                                     25,871                 871            25,110
Other long-term liabilities                                         2,757               2,578             2,354
Deferred income taxes                                               9,659               9,385             8,867
                                                             ------------       -------------    --------------
    Total liabilities                                             219,775             130,771           199,926
                                                             ------------       -------------    --------------

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 - 16,545,508, 16,364,832 and 16,336,012 shares;
      Outstanding - 16,345,508, 16,164,832 and
         16,136,012 shares                                         28,139              26,466            26,142
    Paid-in capital                                                 4,657               3,259             3,135
    Retained earnings                                             112,964              96,953            86,732
    Treasury stock, at cost - 200,000 shares                       (3,102)             (3,102)           (3,102)
                                                             ------------        ------------      ------------
         Total shareholders' equity                               142,658             123,576           112,907
                                                             ------------        ------------      ------------

Total liabilities and shareholders' equity                     $  362,433          $  254,347        $  312,833
                                                             ============        ============      ============

</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>

                                                                                   Thirty-nine Weeks Ended
                                                                                 November 1,       November 2,
                                                                                    1997               1996
                                                                                 -------------     --------
<S>                                                                             <C>               <C> 

Cash Flows from Operating Activities:
     Net earnings                                                                   $  16,011          $  6,930
     Adjustments to reconcile net earnings to net cash used in
     operating activities:
         Depreciation and amortization                                                  8,438             7,280
         Net loss on asset disposals and write-down                                       581               734
         Changes in assets and liabilities:
             Inventories                                                             (107,740)          (99,701)
             Accounts payable                                                          58,609            59,415
             Income taxes                                                              (7,222)              506
             Other assets & liabilities                                                 6,395             9,613
                                                                                 -------------     ------------
                 Cash used in operating activities                                    (24,928)          (15,223)
                                                                                 ------------      -------------

Cash Flows from Investing Activities:
     Acquisitions of property and equipment                                           (16,452)          (15,067)
     Proceeds from sale of property and equipment                                          12               260
                                                                                 -------------     ------------
                 Cash used in investing activities                                    (16,440)          (14,807)
                                                                                 -------------     -------------

Cash Flows from Financing Activities:
     Net advances on long-term debt                                                    25,000            24,000
     Exercise of stock options                                                          1,649                92
     Changes in cash management accounts                                                  350            (1,728)
                                                                                 -------------     -------------
                  Cash provided by financing activities                                26,999            22,364
                                                                                 -------------     ------------

Cash and cash equivalents:
Net decrease for the period                                                           (14,369)           (7,666)
Balance, beginning of period                                                           43,316            32,987
                                                                                 -------------     ------------
Balance, end of period                                                             $   28,947        $   25,321
                                                                                 =============     ============

Supplemental Disclosures:
     Interest payments                                                             $      199        $      362
     Income tax payments                                                               16,857             3,988



</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)  Unaudited Financial Information

In  the  opinion  of  the  Company's  management,   the  accompanying  unaudited
consolidated   financial  statements  of  Goody's  Family  Clothing,   Inc.  and
subsidiaries (the "Company")  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.  These  financial
statements should be read in conjunction with the audited consolidated financial
statements  and the notes thereto  contained in the Company's 1996 Annual Report
on Form 10-K.

(2)  Use of estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

(3)  Credit Arrangements

     The  Company  has a credit  agreement  with a  consortium  of banks  for an
unsecured  revolving line of credit which provides for both cash  borrowings for
general  corporate  purposes  and the  issuance of letters of credit of up to an
aggregate  of $120  million  which  expires  on May 31,  1999.  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, capital expenditures, and payment of dividends.

(4)  Earnings per share

Weighted  average  common shares  outstanding  for the thirteen and  thirty-nine
weeks ended November 1, 1997,  include common  equivalent  shares to account for
the  dilutive  effect  of  stock  options.  Common  equivalent  shares  were not
materially  dilutive in the thirteen  and  thirty-nine  weeks ended  November 2,
1996, and therefore were not included in the earnings per share computations for
such periods.

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards  No. 128,  "Earnings  per Share"  ("SFAS No.
128").  This  Statement  establishes  new standards for computing and presenting
earnings per share ("EPS") information.  SFAS No. 128 simplifies the computation
of earnings per share currently required by Accounting  Principles Board Opinion
No. 15, "Earnings per Share," and its related interpretations. The new Statement
replaces the  presentation  of "primary"  and, when  required,  "fully  diluted"
earnings  per share with  "basic" and  "diluted"  earnings  per share.  This new
Statement will be initially applicable to the Company's financial statements for
the thirteen  weeks and year ending  January 31, 1998;  earlier  adoption is not
permitted.  Once  adopted,  all  previously  reported  EPS  information  will be
restated.  The Company's computation of basic and diluted EPS under SFAS No. 128
for the thirteen and  thirty-nine  weeks ended November 1, 1997, and November 2,
1996,  will not be materially  different  than EPS currently  reported for those
periods.

 (5) Reclassifications

Certain  reclassifications  have been made to the financial  statements of prior
periods to conform to the current period presentation.


<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 November 1, 1997,  and
November  2,  1996,  and  the  related  condensed  consolidated   statements  of
operations  and cash flows for the  thirteen and  thirty-nine  weeks 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 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 February 1, 1997, 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 19,  1997,  we  expressed an
unqualified  opinion  on  those  financial  statements.   In  our  opinion,  the
information set forth in the accompanying  condensed  consolidated balance sheet
as of February 1, 1997, is fairly stated, in all material respects,  in relation
to the consolidated balance sheet from which it has been derived.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Atlanta, Georgia
November 18, 1997











<PAGE>


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

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, customer demand and trends in
the apparel and retail  industry and to the acceptance of  merchandise  acquired
for  sale  by  the  Company,   the  effectiveness  of  planned  advertising  and
promotional events, the impact of competitors' pricing, new store openings,  the
Company's ability to enter into leases for new store locations, individual store
performance,   including  new  stores,  adverse  weather  conditions,   employee
relations, and the general economic conditions within the Company's markets. 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 factors that could  potentially  affect the Company's  financial
results may be found in the  Company's  other  filings with the  Securities  and
Exchange Commission.

Results of Operations

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

                                                     Thirteen Weeks Ended            Thirty-nine Weeks Ended
                                                   November 1,    November 2,       November 1,    November 2,
                                                      1997            1996             1997            1996
                                                   ------------   ------------      ------------   --------
<S>                                               <C>             <C>               <C>            <C>

    Sales                                              100.0%        100.0%           100.0%           100.0%
    Cost of  sales and occupancy expenses               73.6          75.3             72.5             74.3
                                                   ---------      --------          -------        ---------
    Gross profit                                        26.4          24.7             27.5             25.7
    Selling, general, and administrative expenses       22.7          22.1             23.6             23.7
                                                   ---------      --------          -------        ---------
    Earnings from operations                             3.7           2.6              3.9              2.0
    Interest expense                                     -             0.1              0.1              0.1
    Investment income                                    0.1           0.1              0.2              0.2
                                                   ---------      --------          -------        ---------
    Earnings before income taxes                         3.8           2.6              4.0              2.1
    Provision for income taxes                           1.4           1.0              1.5              0.8
                                                   ---------      --------          -------        ---------
    Net earnings                                         2.4%          1.6%             2.5%             1.3%
                                                   =========      ========          =======        =========
</TABLE>

Thirteen Weeks Ended November 1, 1997, Compared with Thirteen Weeks Ended 
November 2, 1996

     Overview - During the third  quarter of fiscal  1997,  the  Company  opened
eight new stores,  relocated  four stores,  remodeled  two stores and closed two
stores, bringing the total number of stores in operation at November 1, 1997, to
218 compared with 197 at November 2, 1996.  During the  corresponding  period of
the previous  fiscal year,  the Company  opened four new stores,  relocated  one
store and closed one store.  Net earnings  for the third  quarter of fiscal 1997
were $5,535,000,  or 2.4% of sales, compared with $3,364,000,  or 1.6% of sales,
for the third quarter of fiscal 1996.

Sales - Sales for the third quarter of fiscal 1997 were  $234,908,000,  an 11.1%
increase  over the  $211,380,000  in sales for the third quarter of fiscal 1996.
This increase of  $23,528,000  consisted of a 1.6% increase in comparable  store
sales of $2,982,000  over the  corresponding  period of the previous fiscal year
and additional  sales from new and transition  stores of $20,546,000.  Sales for
the quarter were favorably affected by continuing customer acceptance of certain
brand-name and private label merchandise.

Gross  Profit  -  Gross  profit  for  the  third  quarter  of  fiscal  1997  was
$62,034,000,  or 26.4% of sales, a $9,851,000  increase over the  $52,183,000 in
gross profit, or 24.7% of sales, generated for the third quarter of the previous
fiscal year.  The 1.7% increase in gross profit,  as a percent of sales,  in the
third  quarter of fiscal  1997  compared  with the third  quarter of fiscal 1996
resulted  primarily  from  well-positioned  inventories  at the beginning of the
third quarter of fiscal 1997,  better  inventory  management and control,  and a
higher  sales mix of certain key  merchandise  items,  including  private  label
merchandise, which carry higher gross margins.


<PAGE>



Selling,   General,  and  Administrative   Expenses  -  Selling,   general,  and
administrative  expenses for the third quarter of fiscal 1997 were  $53,335,000,
or 22.7% of sales,  an  increase of  $6,535,000  from  $46,800,000,  or 22.1% of
sales,  for the third  quarter of fiscal  1996.  The 0.6%  increase  in selling,
general,  and  administrative  expenses,  as a percent  of  sales,  in the third
quarter of fiscal 1997  compared  with the third quarter of fiscal 1996 resulted
from (i) a 0.1% increase in advertising and promotional  expenses,  (ii) an 0.3%
increase  in  payroll  expenses,  and (iii) a 0.2%  increase  in other  selling,
general, and administrative expenses.

     Interest  Expense - Interest  expense for the third  quarter of fiscal 1997
decreased by $82,000 compared with the third quarter of the previous fiscal year
primarily  as a result of lower  borrowings  during the third  quarter of fiscal
1997 compared with the third quarter of the previous fiscal year.

Investment  Income -  Investment  income for the third  quarter  of fiscal  1997
increased by $32,000 compared with the third 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 third  quarter of fiscal
1997 was  $3,321,000,  an effective tax rate of 37.5% of earnings  before income
taxes,  compared  with  $2,062,000,  an effective  tax rate of 38.0% of earnings
before income  taxes,  for the third  quarter of the previous  fiscal year.  The
decrease in the overall  effective  tax rate is primarily  due to a reduction in
the combined effective state income tax rate.

Thirty-nine Weeks Ended November 1, 1997,  Compared with Thirty-nine Weeks 
Ended November 2, 1996

     Overview - During the thirty-nine weeks ended November 1, 1997, the Company
opened 19 new stores,  relocated  eight stores,  remodeled two stores and closed
four  stores,  bringing  the total  number of stores in operation at November 1,
1997,  to 218 compared  with 197 at November 2, 1996.  During the  corresponding
period of the previous fiscal year, the Company opened 14 new stores,  relocated
five  stores,  remodeled  one store and closed one store.  Net  earnings for the
thirty-nine weeks ended November 1, 1997, were $16,011,000, or 2.5% as a percent
of sales,  compared  with  $6,930,000,  or 1.3% as a percent  of sales,  for the
thirty-nine weeks ended November 2, 1996.

     Sales - Sales for the  thirty-nine  weeks  ended  November  1,  1997,  were
$637,171,000,   a  16.8%  increase  over  the  $545,558,000  in  sales  for  the
corresponding  period of the previous  fiscal year. This increase of $91,613,000
consisted of a 7.3% increase in comparable  store sales of $36,863,000  over the
sales for the  corresponding  period of the previous  fiscal year and additional
sales from new and transition  stores of $54,750,000.  Sales for the thirty-nine
weeks ended  November 1, 1997,  were favorably  affected by continuing  customer
acceptance of certain brand-name and private label merchandise.

     Gross Profit - Gross  profit for the  thirty-nine  weeks ended  November 1,
1997,  was  $175,181,000,  or 27.5% of sales,  a  $35,116,000  increase over the
$140,065,000 in gross profit, or 25.7% of sales, generated for the corresponding
period of the previous  fiscal year.  The 1.8%  increase in gross  profit,  as a
percent of sales,  for the  thirty-nine  weeks ended November 1, 1997,  compared
with the thirty-nine  weeks ended November 2, 1996,  primarily  resulted from an
increase in gross margins as a result of better inventory management and control
and a higher sales mix of certain key merchandise items, including private label
merchandise, which carry higher gross margins.

Selling,   General,  and  Administrative   Expenses  -  Selling,   general,  and
administrative  expenses for the  thirty-nine weeks ended November 1, 1997, were
$150,380,000,  or 23.6% of sales, an increase of $21,070,000 from  $129,310,000,
or 23.7% of sales, for the corresponding period of the previous fiscal year. The
0.1% decrease in selling,  general, and administrative expenses, as a percent of
sales,  for the  thirty-nine  weeks  ended  November 1, 1997, compared  with the
thirty-nine  weeks  ended  November  2, 1996, resulted  from a 0.2%  decrease in
advertising  and  promotional  expenses  and a 0.1%  decrease in other  selling,
general,  and administrative  expenses,  which were offset by a 0.2% increase in
payroll  expenses.   Selling,  general,  and  administrative  expenses  for  the
thirty-nine weeks ended  November 2, 1996, included a provision of $691,000,  or
0.1% as a percent of sales, in connection with the early  termination of a lease
of one of the Company's stores which closed in August 1996.

     Interest  Expense  -  Interest  expense  for the  thirty-nine  weeks  ended
November 1, 1997,  decreased by $143,000 compared with the corresponding  period
of the previous fiscal year primarily as a result of lower borrowings during the
thirty-nine  weeks ended November 1, 1997,  compared with the thirty-nine  weeks
ended November 2, 1996.

     Investment  Income -  Investment  income for the  thirty-nine  weeks  ended
November 1, 1997,  increased by $250,000 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  thirty-nine  weeks ended
November  1, 1997, was $9,606,000,  an  effective  tax rate of 37.5% of earnings
before income taxes, compared with $4,248,000, an effective tax rate of 38.0% of
earnings  before  income  taxes,  for the  corresponding  period of the previous
fiscal year. The decrease in the overall  effective tax rate is primarily due to
a reduction in the combined effective state income tax rate.


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.  The Company's working capital was $81,364,000 at November
1, 1997,  compared  with  $53,288,000  at November 2, 1996. At November 1, 1997,
compared  with  November 2, 1996,  (i) cash,  cash  equivalents  and  investment
securities  increased  $3,723,000,  (ii) net  property and  equipment  increased
$3,868,000,  (iii) inventories increased $37,267,000,  and (iv) accounts payable
increased  $9,862,000.  The increase in  inventories  primarily  consists of (i)
additional  inventories needed for new and transition stores, (ii) the Company's
strategic  build-up of inventories in various  departments and certain other new
lines, including Dockers, gifts and decorative home accessories for the upcoming
holiday season,  (iii) the early receipt of imported  holiday  merchandise,  and
(iv) the  advantageous  special purchase of spring 1998  merchandise,  primarily
denim shorts. Trade payables, as a percent of inventories, decreased to 62.7% at
November 1, 1997, compared with 70.2% at November 2, 1996.

     At November 1, 1997, the Company had an unsecured  revolving line of credit
from a consortium of banks,  which provides for both cash borrowings for general
corporate  purposes  and the issuance of letters of credit of up to an aggregate
of $120  million  which  expires  on May 31,  1999.  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,  capital  expenditures,  and payment of  dividends.  At November 1,
1997,  the  Company  had   $25,000,000   outstanding  for  cash  borrowings  and
$48,812,000  outstanding  for  letters  of credit  under this  credit  agreement
compared  with  $24,000,000  outstanding  for cash  borrowings  and  $35,774,000
outstanding for letters of credit at November 2, 1996. Cash borrowings  averaged
$1,484,000  during the thirty-nine  weeks ended November 1, 1997,  compared with
$4,171,000 during the thirty-nine weeks ended November 2, 1996, with the highest
balance of  $25,000,000  in October 1997  compared with  $24,000,000  in October
1996. Letters of credit outstanding  averaged $56,075,000 during the thirty-nine
weeks ended November 1, 1997,  compared with $28,888,000  during the thirty-nine
weeks  ended  November  2,  1996.  The  highest  balance  of  letters  of credit
outstanding during the thirty-nine weeks ended November 1, 1997, was $71,937,000
(in June 1997) compared with $39,929,000 (in August 1996) during the thirty-nine
weeks ended November 2, 1996.

     Cash  Flows  -  Operating  activities  used  cash  of  $24,928,000  in  the
thirty-nine weeks ended November 1, 1997,  compared with $15,223,000 used in the
corresponding  period of the previous  fiscal year.  Cash used for  increases in
inventory  during the thirty-nine  weeks ended November 1, 1997, and November 2,
1996, were $107,740,000 and $99,701,000, respectively. Accounts payable provided
cash of $58,609,000 and  $59,415,000 in the thirty-nine  weeks ended November 1,
1997, and November 2, 1996, respectively. Depreciation and amortization expenses
were $8,438,000 and $7,280,000 for the thirty-nine weeks ended November 1, 1997,
and November 2, 1996, respectively.

     Cash  flows  from  investing   activities   reflected  a  $16,440,000   and
$14,807,000  net use of cash for the  thirty-nine  weeks ended November 1, 1997,
and  November 2, 1996,  respectively.  Cash was used  primarily  to fund capital
expenditures  for new and relocated  stores opened during the first  thirty-nine
weeks of fiscal 1997 and 1996 as well as those planned for opening in the fourth
quarter of fiscal 1997 and 1996.

     Cash  provided by  financing  activities  for the  thirty-nine  weeks ended
November 1, 1997, was $26,999,000 compared with cash provided of $22,364,000 for
the corresponding  period of the previous fiscal year. Cash management  programs
maintained  by the Company  provided cash of $350,000 in the  thirty-nine  weeks
ended  November  1,  1997,  compared  with  cash  used  of  $1,728,000  for  the
corresponding  period of the previous fiscal year.  During the thirty-nine weeks
ended November 1, 1997,  the Company  received  $1,649,000  from the issuance of
common stock on the exercise of stock  options  compared  with $92,000  received
during the corresponding period of the previous year.

Outlook - During November 1997, the Company opened five new stores  (including a
temporary store in Sumter, South Carolina),  relocated one store and expanded or
remodeled five stores,  bringing the total number of new stores opened in fiscal
1997 to 24 and the total number of stores currently  operating to 223 (including
the temporary  store).  Depending on the performance of the temporary store, the
Company may open a permanent  store in Sumter  during  fiscal  1998.  Management
estimates  that capital  expenditures  will total  approximately  $23,000,000 in
fiscal 1997 primarily for opening new stores,  upgrading  existing  stores,  and
purchasing  computer systems and equipment as well as other capital  expenditure
requirements.

The Company's  primary needs for capital resources are for the purchase of store
inventories,  capital expenditures and for normal operating expenses. Management
believes that 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 through fiscal
1998.

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 the Saturday
preceding Easter) collectively  accounted for approximately 36% of the Company's
annual sales,  based on the Company's  last three fiscal years ended February 1,
1997. 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.  To date,  inflation  has not adversely
affected  the  Company's  business,  although  there  can be no  assurance  that
inflation will not have a material adverse effect in the future.


<PAGE>



PART II - OTHER INFORMATION


Item 1 - Legal Proceedings  -  None
----------------------------       

Item 2. -  Changes in Securities  -  None

Item 3.  -  Defaults Upon Senior Securities  -  None

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

Item 5.  -  Other Information  - None

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

        a)   Exhibits -

             10.49         Underwriting Agreement dated September 3, 1997, among
                           The Robinson-Humphrey Company, Inc., and J.C. 
                           Bradford & Co., as representatives of the several 
                           underwriters named in Schedule I thereto, Goody's 
                           Family Clothing, Inc. and the selling  shareholders  
                           named in Schedule II thereto.  (Incorporated  by 
                           reference to Exhibit 9 to  Amendment  No.  6 to the 
                           Schedule  13D  filed by Robert M.  Goodfriend  on 
                           December 2, 1997 in respect of Goody's Family 
                           Clothing, Inc.)

              10.50        Amendment to the Goody's Family Clothing, Inc. 
                           Employee Payroll Investment Plan

              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:    December 10, 1997           /s/ Harry M. Call
                    ------------------------      -----------------
                                                  Harry M. Call
                                                  Director, President and
                                                  Chief Operating Officer



             Date:    December 10, 1997           /s/ Edward R. Carlin
                    ------------------------      --------------------
                                                  Edward R. Carlin
                                                  Executive Vice President,
                                                  Chief Financial Officer and 
                                                  Secretary
                                                  (Principal Financial Officer)



             Date:    December 10, 1997           /s/ David G. Peek
                    ------------------------      -----------------
                                                  David G. Peek
                                                  Vice President, Corporate 
                                                  Controller and Chief 
                                                  Accounting Officer
                                                  (Principal Accounting Officer)







<PAGE>


                                                                  Exhibit 15

Goody's Family Clothing, Inc.
Knoxville, Tennessee

We have made a review, in accordance with standards  established by the American
Institute of Certified Public Accountants, of the unaudited interim consolidated
financial information of Goody's Family Clothing,  Inc. and subsidiaries for the
periods ended November 1, 1997, and November 2, 1996, as indicated in our report
dated  November 18, 1997;  because we did not perform an audit,  we expressed no
opinion on that information.

     We are aware that our report referred to above,  which was included in your
Quarterly  Reports on Form 10-Q for the  quarters  ended  November 1, 1997,  and
November 2, 1996, is incorporated  by reference in Registration  Statements Nos.
33-32357,  33-51210, 33-68520, 333-00052 and 333-09595 on Form S-8 and 333-32409
on Form S-3.

We also are aware that the aforementioned report,  pursuant to Rule 436(c) under
the  Securities  Act of  1933,  is not  considered  a part  of the  Registration
Statement  prepared  or  certified  by an  accountant  or a report  prepared  or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Atlanta, Georgia
December 10, 1997