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                                                                    EXHIBIT 10.3

                                   BELK, INC.
                              ANNUAL INCENTIVE PLAN

      The Belk, Inc. ("Company") Annual Incentive Plan is set forth in this
document and the Bonus Eligible Associate Compensation Guidelines attached to
this document as Exhibit A and shall be effective beginning with the fiscal year
ending in January 2006.

                                 ADMINISTRATION

      The Annual Incentive Plan shall be administered by the Compensation
Committee of the Board of Directors ("Compensation Committee"), each member of
which is an "outside director" within the meaning of section 162(m) of the
Internal Revenue Code.

                                   ELIGIBILITY

      Employees who are deemed to be key employees by the Compensation Committee
in its sole discretion shall be eligible to be participants in the Annual
Incentive Plan for any fiscal year.

                               PERFORMANCE GOALS

      The Compensation Committee shall establish performance goals for each
participant for a fiscal year no later than 90 days after the beginning of such
year. The performance goals for each participant may be different and, further,
each participant's performance goals may be based on different business
criteria, as referenced in the attached Bonus Eligible Associate Compensation
Guidelines. However, all performance goals for a participant who is a covered
employee (within the meaning of Section 162(m) of the Internal Revenue Code)
shall be based on one or both of the following business criteria as applied to
the Company or any division, department or other part of the Company: (1) sales
and (2) normalized earnings before interest and taxes.

      The Compensation Committee no later than 90 days after the beginning of
each fiscal year shall establish objective rules for determining whether each
participant's performance goals for such fiscal year have been satisfied.
Further, in determining whether the performance goals have been satisfied, the
Compensation Committee may look at the performance of the Company as constituted
on the first day of the fiscal year, the last day of the fiscal year, or either
such date if there is an acquisition, disposition, or other corporate
transaction involving the Company during such fiscal year.

      A bonus shall be paid to a participant under the Annual Incentive Plan for
a fiscal year only to the extent the participant satisfies his or her
performance goals for the bonus for such fiscal year and the Compensation
Committee shall certify the extent, if any, to which a participant has satisfied
his or her performance goals for a fiscal year. Finally, the Compensation
Committee shall have the discretion to reduce (but not to increase) the bonus
payable under the Annual Incentive Plan to any participant if the Compensation
Committee for any reason deems such reduction appropriate under the
circumstances.

                              MAXIMUM BONUS ACCOUNT

      The maximum annual bonus payable under the Annual Incentive Plan to any
participant for any fiscal year is $1,500,000.

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                        INTERNAL REVENUE CODE SECTION 162(m)

      The Compensation Committee intends for the bonus payable under the Annual
Incentive Plan to a participant who is a "covered employee" within the meaning
of Section 162(m) of the Internal Revenue Code to be deductible under such
section and for these Administrative Rules to be construed to effect such
intent.

                            AMENDMENT AND TERMINATION

      The Compensation Committee has the power to amend the Annual Incentive
Plan from time to time as the Compensation Committee deems necessary or
appropriate and to terminate the plan if the Compensation Committee deems such
termination is in our best interest.

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                                    EXHIBIT A

                      BONUS ELIGIBLE ASSOCIATE COMPENSATION
                                   GUIDELINES
                                      FY06

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PURPOSE OF       The purpose of the bonus plan is to pay for performance by
BONUS            rewarding those who achieve their financial objectives versus
                 plan.

BONUS            To be eligible for a bonus, the following criteria must be met:
ELIGIBILITY
                 -     The position must be a bonus eligible position.

                 -     New hires/new bonus eligible associates must be assigned
                       to a store, division, area or department for a minimum
                       of three months/13 weeks of THE FISCAL YEAR.

                 -     All associates must achieve a "Good" rating or better on
                       the performance appraisal.

BONUS            -     Actual bonus percent payout will be calculated at the
CALCULATIONS           nearest 10th of plan attainment (ROUNDED DOWN).

                 -     All bonus calculations will be prorated based upon
                       number of weeks assigned to that store, division, area,
                       or department. For example, for every week that a new
                       store manager has been in the position, he/she will
                       receive 1/52th of the bonus they would have normally
                       received had they been in the position for one year. If
                       a manager has been in a store for 26 weeks, then his
                       bonus would be pro-rated by 26/52 or 50% of the total
                       bonus amount.

                 -     New Hires will be evaluated against plan for the ENTIRE
                       FISCAL YEAR of the store, division, area or department
                       they are in and prorated for the number of weeks that
                       they are actually in the position.

                       For Merchandising and Planning & Allocation associates,
                       the following procedure should be used for setting
                       Sales, Gross Margin $, Gross Margin %, and Turnover
                       Goals on Section A of the Performance Appraisal:

                        -     Use the MAP plan from the "I" (Initial) plan for
                              Spring to establish MID-YEAR GOALS. This plan
                              should be in place by Jan. 1.

                        -     Use the MAP plan from the "I" (Initial) plan for
                              Fall to establish YEAR-END GOALS. This plan should
                              be in place by July 1.

                        -     Associates will be evaluated at year-end based on
                              year-end actual results versus the "I" (Initial)
                              Plan.

                       For BSS non-merchandising executives & for bonus
                       eligible associates in the division, use the Revised
                       Original Budget to establish "plan" for sales, DCP,
                       EBIT, payroll, and other financial measurements.

                 -     Associates with over 12 months service with Belk will be
                       evaluated against plan for each FULL MONTH they are in
                       the assignment.

BONUS            Each bonus eligible position has a trigger or triggers. A
TRIGGERS         trigger is a predefined financial achievement that must be
                 reached to be eligible for any portion of a bonus.

                 -     For all executives (exceptions listed below), Total Belk
                       must achieve 90% of EBIT as reflected on line T015 of the
                       income statement.

                 -     For Division/Store/Salon executives (excluding Chairman
                       & DOS), the division, region, store or salon must
                       achieve 95.0% of DIRECT CONTROLLABLE NET PROFIT $ plan
                       as reflected on line T006 of the income statement.

                 -     For BSS Merchants and Planning & Allocation (excluding
                       President of Merchandising, GMM, EVP & SVP) associates
                       must achieve their gross margin % goal within 150 basis
                       points.

                 DUAL TRIGGER POSITIONS

                 -     EVP GMM and EVP Private Brands have additional trigger
                       to achieve 100 basis points of Individual MAP GM% Rate
                       Plan.

                 -     SVP Allocation has additional trigger to achieve 75
                       basis points of Total MAP GM% Rate Plan.

                 -     Division Chairman and SVP Director of Stores have
                       additional trigger of 90% Total EBIT.

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LEAVE            -     Bonus eligible associates that have taken a Leave of
OF ABSENCE             Absence will not be prorated for the first 12 weeks of a
                       Leave of Absence. This time frame taken on leave will be
                       included in the financial data pulled for bonus
                       calculation.

                 -     For leaves greater than 12 weeks, the bonus will be
                       prorated for the number of weeks in position minus
                       number of weeks taken on leave IN EXCESS of 12 weeks.
                       This time frame taken on leave will not be included in
                       the financial data pulled for bonus calculation.

TRANSFERS &      -     The associate will be evaluated on store, division,
PROMOTIONS             area, or department results during the time period they
                       are in the store, division, area, or department.

                 -     Before an associate is transferred or promoted, a
                       performance evaluation should be completed using the
                       planned results for the months the associate was in the
                       original position.

                 -     If an earned bonus is due, it should be prorated for the
                       number of weeks employed in that position and will be
                       calculated for that time period with the LAST salary
                       earned AT THAT POSITION.

                 -     EARNED BONUS WILL BE AWARDED DURING THE SAME TIME FRAME
                       AS OTHER BONUS ELIGIBLE ASSOCIATES.

                 -     At the start of the second job, a performance evaluation
                       should be completed in which the goals for the remaining
                       weeks of the year are reviewed with the associate.

                 -     The associate will be held accountable for these goals
                       as it relates to bonus eligibility.

FORFEITURE             -     An associate who voluntarily terminates employment
OF BONUS                     prior to the end of the fiscal year or who is
                             terminated for cause will forfeit the award as
                             will anyone no longer employed at the time the
                             awards are actually paid. Exceptions are in the
                             case of death or total and permanent disability or
                             retirement. If an associate retires, all bonus
                             calculations will be prorated based upon time
                             assigned to store, division, area, or department.
                             Retirees will receive any bonus due during the
                             same time frame as other bonus eligible
                             associates.

                       -     An associate that has a current written
                             disciplinary warning, signed by the associate (or
                             witness) and supervisor, with time frames, at the
                             time bonuses are awarded, will not be eligible for
                             an award.