SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

   Quarterly Report Under Section 13 or 15(d) of the

X  Securities Exchange Act of 1934

For the quarter ended September 30, 1998


    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       1-5893

                                MOVIE STAR, INC.
             ------------------------------------------------------  
             (Exact name of Registrant as specified in its charter)

                New York                      13-5651322
     -------------------------------      -------------------
     (State or other jurisdiction of      (I.R.S. Employer
      incorporation or organization)       Identification Number)

        136 Madison Avenue, New York, N.Y.         10016
     -------------------------------------------------------
      (Address of principal executive offices)   (Zip Code)

                              (212) 684-3400
          ----------------------------------------------------
          (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 |_|

The number of common shares outstanding on October 30, 1998 was 14,116,982.



<PAGE>

                                MOVIE STAR, INC.

                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In Thousands)



                                                September 30,         June 30,
                                                    1998               1998*
                                               --------------       -----------
                                                 (Unaudited)

                               Assets

Current Assets
  Cash                                            $   715             $   546
  Receivables, net                                 12,482               6,330
  Inventory                                        21,611              20,945
  Deferred income taxes                             2,291               2,200
  Prepaid expenses and other current assets           389                 456
                                                 --------             -------
         Total current assets                      37,488              30,477

Property, plant and equipment, net                  3,595               3,551
Other assets                                          892                 906
Deferred income taxes                               1,718               1,809
                                                 --------             -------
          Total assets                            $43,693             $36,743
                                                 ========             =======


                Liabilities and Stockholders' Equity

Current Liabilities
  Notes payable                                   $ 7,254             $   328
  Current maturities of long-term debt                 34                  40
  Accounts payable and accrued expenses             9,048              10,193
                                                 --------             -------
         Total current liabilities                 16,336              10,561

Long-term debt                                     20,972              20,980
                                                 --------             -------

Commitments and Contingencies                           -                   -

Stockholders' equity
  Common Stock                                        161                 161
  Additional paid-in capital                        3,789               3,789
  Retained Earnings                                 6,053               4,870
                                                 --------             -------
                                                   10,003               8,820

 Less: Treasury stock, at cost                      3,618               3,618
                                                 --------             -------
         Total stockholders' equity                 6,385               5,202
                                                 --------             -------

Total liabilities and stockholders' equity        $43,693             $36,743
                                                 ========             =======


* Derived from audited financial statements.

See notes to consolidated condensed financial statements.


<PAGE>


                                MOVIE STAR, INC.

                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)

                    (In Thousands, Except Per Share Amounts)



                                                       Three Months Ended
                                                         September 30,
                                                 ---------------------------- 
                                                    1998               1997
                                                 --------             -------
Net sales                                         $18,958             $15,202
                                   
Cost of sales                                      13,301              10,918
                                                 --------             -------

  Gross profit                                      5,657               4,284

Selling, general and administrative
 Expenses                                           3,718               3,449
                                                 --------             -------

  Income from operations                            1,939                 835

Interest income                                        (1)                (24)

Interest expense                                      733                 694
                                                 --------             -------

  Income before provision for income taxes          1,207                 165

Provision for income taxes                             24                   -
                                                 --------             -------

  Net income                                      $ 1,183             $   165
                                                 ========             =======

Basic net income per share                           $.08                $.01
                                                     ====                ====

Diluted net income per share                         $.08                $.01
                                                     ====                ====

Basic weighted average number of shares
 Outstanding                                       14,117              13,960
                                                   ======              ======

Diluted weighted average number of shares
 Outstanding                                       15,068              15,868
                                                   ======              ======







See notes to consolidated condensed financial statements.


<PAGE>


                                MOVIE STAR, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In Thousands)



                                                       Three Months Ended
                                                          September 30,
                                                 ---------------------------- 
                                                   1998                1997
                                                 --------             -------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                       $ 1,183             $   165
 Adjustments to reconcile net income to net cash
  used in operating activities:
   Depreciation and amortization                      137                 157
 (Increase) decrease in operating assets:
   Receivables                                     (6,152)             (4,798)
   Inventory                                         (666)             (1,445)
   Prepaid expenses and other current assets           67                (138)
   Other assets                                       (20)                 36
  (Decrease) increase in operating liabilities:
   Accounts payable and accrued expenses           (1,145)                321
                                                 --------             -------

     Net cash used in operating activities         (6,596)             (5,702)
                                                 --------             -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment         (147)                (42)
                                                 --------             -------

Net cash used in investing activities                (147)                (42)
                                                 --------             -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of long-term debt and capital
   Lease obligations                                  (14)                (21)
  Net proceeds from revolving line of credit        6,926               3,334
                                                 --------             -------

     Net cash provided by financing activities      6,912               3,313
                                                 --------             -------

NET INCREASE (DECREASE) IN CASH                       169              (2,431)
CASH, beginning of period                             546               3,035
                                                 --------             -------

CASH, end of period                               $   715             $   604
                                                 ========             =======


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during period for:
     Interest                                        $216                $101
                                                     ====                ====

     Income taxes (net of refunds received)          $ 10                $ (1)
                                                     ====                ====






See notes to consolidated condensed financial statements.


<PAGE>


                                MOVIE STAR, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS




1.   In the opinion of the  Company,  the  accompanying  consolidated  condensed
     financial  statements  contain all  adjustments  (consisting of only normal
     recurring  accruals)  necessary to present fairly the financial position as
     of September 30, 1998 and the results of operations for the interim periods
     presented and cash flows for the three months ended  September 30, 1998 and
     1997, respectively.

     The condensed  consolidated financial statements and notes are presented as
     required by Form 10-Q and do not contain  certain  information  included in
     the Company's  year-end  consolidated  financial  statements.  The year-end
     condensed consolidated balance sheet was derived from the Company's audited
     financial statements. This Form 10-Q should be read in conjunction with the
     Company's  consolidated financial statements and notes included in the 1998
     Annual Report on Form 10-K.


2.   The results of operations for the three months ended September 30, 1998 are
     not necessarily indicative of the results to be expected for the full year.


3.   Certain items included in these  statements are based upon  estimates.  The
     cost of sales is determined  utilizing  estimated  gross profit rates.  The
     calculation  of the  actual  cost of sales is  predicated  upon a  physical
     inventory taken at the end of each fiscal year.


     An approximate breakdown of the inventory in thousands is as follows:



                                               September 30,       June 30,
                                                  1998               1998
                                               ------------        --------

            Raw materials                        $  5,275          $ 8,762
            Work-in process                         2,577            2,431
            Finished goods                         13,759            9,752
                                                 --------          -------
                                                 $ 21,611          $20,945
                                                 ========          =======   


4.   The Company's  calculation of Basic and Diluted Net Income Per Share are as
     follows (in thousands, except per share amounts):


<PAGE>



<TABLE>

                                                                                  Three Months Ended
                                                                                      September 30,
                                                                                 ------------------------
                                                                                  1998              1997
                                                                                 --------         -------
<S>     <C>                                                                     <C>              <C> 
          Basic Net Income Per Share:

           Net Income  to Common Stockholders                                    $ 1,183          $    165
           Basic Weighted Average Shares Outstanding                              14,117            13,960
           Basic Net Income Per  Share                                              $.08              $.01
                                                                                   =====              ====

          Diluted Net Income Per Share:

            Net Income to Common Stockholders                                    $ 1,183         $    165
            Plus: Interest Expense on 8% Convertible Senior Notes                      7               14
                                                                                 -------          -------
            Adjusted Net Income                                                  $ 1,190         $    179
                                                                                 =======         ========
  
            Weighted Average Shares Outstanding                                   14,117           13,960
            Plus: Shares Issuable Upon Conversion of
                      8% Convertible Senior Notes                                    951            1,908
                                                                                 -------          -------
            Diluted Weighted Average Shares Outstanding                           15,068           15,868
                                                                                 =======          =======
            Diluted Net Income Per Share                                            $.08             $.01
                                                                                    ====             ====

</TABLE>

     All shares of potential  exercisable  stock options are not included in the
     Diluted  Net  Income  Per Share  calculation  because  they are  considered
     antidilutive.


5.   In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
     "Disclosure About Segments of an Enterprise and Related Information," which
     is  effective  for the  Company  for the year ended June 30,  1999  (fiscal
     1999).  SFAS No.  131  requires  disclosure  about  operating  segments  in
     complete sets of financial statements and in condensed financial statements
     of interim periods issued to  shareholders.  The new standard also requires
     that the  Company  report  certain  information  about their  products  and
     services,  the geographic areas in which they operate, and major customers.
     The Company has not yet  determined  the impact of the adoption of SFAS No.
     131.


<PAGE>


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

The  following  discussion  contains  certain  forward-looking  statements  with
respect  to  anticipated  results,  which are  subject  to a number of risks and
uncertainties.  Among the  factors  that could  cause  actual  results to differ
materially are:  business  conditions and growth in the  Registrant's  industry;
general economic conditions;  the addition or loss of significant customers; the
loss of key personnel;  product  development;  competition;  foreign  government
regulations;  fluctuations in foreign currency  exchange rates;  rising costs of
raw materials and the  unavailability of sources of supply; the timing of orders
placed by the Registrant's  customers;  and the risk factors listed from time to
time in the Company's SEC reports .

Results of Operations

Net sales for the three months ended  September  30, 1998  increased by 24.7% to
$18,958,000 from  $15,202,000 in the comparable  period in 1997. The increase in
sales  resulted  from  higher  sales  in  the  intimate   apparel   division  of
approximately  $4,050,000  offset partially by a decrease in the retail division
of approximately  $280,000. Net sales in the intimate apparel division increased
to  $17,154,000  due to the  retailers'  positive  acceptance  of the  Company's
moderately  priced fashion forward  products.  Net sales in the Company's retail
division decreased to $1,804,000 primarily due to extreme heat and hurricanes in
the  geographic  areas in which  the  stores  are  located,  resulting  in fewer
customers.

The gross  profit  percentage  increased  to 29.8% for the  three  months  ended
September 30, 1998 from 28.2% in the similar period in 1997. The gross margin in
the Company's intimate apparel division increased to 29.8% in 1998 from 28.2% in
the similar period in 1997. The higher margins in the intimate  apparel division
resulted  primarily  from the  Company's  shift of  production  to  Mexico-based
contractors,  operational efficiencies and a more favorable sales mix. The shift
in  production  to  Mexico-based  contractors  has  enabled  the Company to take
advantage  of lower duty rates that  result from the North  American  Free Trade
Agreement ("NAFTA").  Certain of the raw materials used in the production of the
Company's  products in Mexico are  subject to export  limitations  under  NAFTA,
called Tariff  Protection  Levels  ("TPL"),  that are similar to quotas.  TPL is
assigned  annually to various  categories  of  textiles  and is  available  on a
"first-come first-served" basis to U.S. companies exporting products from Mexico
containing  the textiles  subject to the TPL. In September  1998,  for the first
time since 1996,  when the Company  began its efforts to increase  production in
Mexico,  certain of the raw textile  materials  used in the  Company's  products
reached the maximum annual TPL. As a result,  the rate of duty for this category
of products  shipped from Mexico to the United States in the last four months of
calendar year 1998 will increase from 2.8% of the value of the finished  product
to 16.6% of that value.  The Company is continuing its  investigation of various
alternatives to minimize the impact of this increase,  including the possibility
of deferring the shipment of finished  products  until the beginning of calendar
year 1999 when the full amount of TPL for that year will be available.  Although
the  actual  cost to the  Company  of the  increased  duty  cannot be  precisely
quantified  at this  time,  the  Company  believes  it will not have a  material
adverse impact on the Company's financial results for the 1999 fiscal year.


<PAGE>

The gross margin for the retail division increased to 30.1% for 1998 as compared
to 28.1% in the  similar  period  in 1997.  The  higher  margins  in the  retail
division   resulted   primarily  from  lower  markdowns  taken  in  the  current
three-month period as compared to the same period in the prior year.

Selling, general and administrative expenses increased by $269,000 to $3,718,000
for the three months ended September 30, 1998 as compared to 1997. This increase
resulted  primarily from increases in salary expense and salary related costs of
approximately  $256,000,  shipping  expense  of  approximately  $139,000  offset
partially by decreases in  advertising  expense of $116,000 and  commissions  of
approximately $34,000.

Income from  operations  increased  to  $1,939,000  for the three  months  ended
September 30, 1998,  from $835,000 for the similar period in 1997. This increase
was due to higher sales and margins  partially offset by an increase in selling,
general and  administrative  expenses.  The Company's retail division had a loss
from  operations  of $78,000 for the three  months ended  September  30, 1998 as
compared to a loss from  operations  of $93,000 for the similar  period in 1997.
The operational  results for the retail  division are based on direct  operating
expenses and do not include any indirect corporate overhead.

Interest  income for the three  months  ended  September  30, 1998  decreased by
$23,000 from the comparable period in 1997.

Interest  expense for the three months  ended  September  30, 1998  increased by
$39,000 from the  comparable  period in 1997  primarily due to higher short-term
borrowings needed to fund the additional increase in business.

The Company provided for an income tax provision of $24,000 for the three months
ended  September  30, 1998 as compared to no income tax provision or benefit for
the same period in 1997.

The Company had net income of $1,183,000 and $165,000 for the three months ended
September 30, 1998 and 1997,  respectively.  This  improvement was due to higher
sales and margins  offset  partially  by an  increase  in  selling,  general and
administrative  expenses,  interest  costs,  and income  taxes and a decrease in
interest income.


Liquidity and Capital Resources

For the three months ended  September 30, 1998,  the Company's  working  capital
increased by $1,236,000 to $21,152,000, principally from operating profits.


<PAGE>

During the three months ended September 30, 1998, the Company used $6,596,000 in
its  operations,  $147,000  for the purchase of fixed assets and $14,000 for the
repayment of long-term debt. Cash increased by $169,000 to $715,000. An increase
in short-term borrowings of $6,926,000 funded these activities.

Receivables at September 30, 1998  increased by $6,152,000 to  $12,482,000  from
$6,330,000 at June 30, 1998.  This increase is due to normal  seasonal  shipping
fluctuations within the period in the Company's intimate apparel division.

Inventory  at  September  30, 1998  increased  by $666,000 to  $21,611,000  from
$20,945,000  at June 30, 1998.  This  increase in both the intimate  apparel and
retail divisions  resulted from the normal  fluctuation in sales during the July
through December period. The inventory for the retail division also increased as
a result of the early receipt of goods due to favorable buying opportunities and
an expanded product line that includes higher priced brand name products.

The Company does not anticipate making any additional purchases of its stock and
anticipates  that  capital  expenditures  for  fiscal  1999  will be  less  than
$700,000.

The Company has  $20,893,500 in long-term  debt and a secured  revolving line of
credit of up to  $13,500,000.  The  long-term  debt  consists of  $9,987,000  of
12.875%  Subordinated  Debentures,  $10,550,000  8% Senior  Notes,  $278,500  8%
Convertible  Senior  Notes held by  affiliates  of the  Company  and  $78,000 8%
Convertible  Senior Notes held by non-affiliates  of the Company.  The remaining
sinking fund requirement for the 12.875%  Subordinated  Debentures is $3,737,000
due on  October  1,  2000 and the  balance  of the  principal  in the  amount of
$6,250,000 is due on October 1, 2001. The 8% Senior Notes and the 8% Convertible
Senior  Notes do not require any  amortization  and mature on September 1, 2001.
The 8%  Convertible  Senior Notes held by affiliates of the Company are required
to be converted into 742,667  shares of the Company's  common stock on or before
March 31, 1999. The $78,000 8% Convertible  Senior Notes held by  non-affiliates
of the Company are  convertible  into the Company's  common  stock,  at any time
prior to maturity, at a price of $0.375 per share prior to maturing.

The Company's secured revolving line of credit is in effect until June 30, 1999,
and, by its terms, shall be renewed from year to year thereafter,  unless sooner
terminated or  renegotiated  by the Company and its lender.  This line of credit
covers the Company's projected needs for operating capital and letters of credit
to fund the purchase of imported goods.  Direct  borrowings under this line bear
interest  at the annual  rate of 2.0%  above the prime  rate of Chase  Manhattan
Bank.  Availability  under the line of credit is subject to certain  agreed upon
formulas.  Under the terms of this  financing,  the Company has agreed to pledge
substantially  all of its assets,  except the Company's  domestic  inventory and
real property.

Management  believes its available borrowing under its secured revolving line of
credit, along with anticipated internally generated funds, will be sufficient to
cover its working capital  requirements.  Management is also currently exploring
alternatives for refinancing the long-term debt.

<PAGE>


Recently Issued Accounting Standard

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards ("SFAS") No. 131,  "Disclosures about Segments of
an  Enterprise  and  Related  Information."  This  statement  is  effective  for
financial  statements issued for fiscal years beginning after December 15, 1997.
The statement requires that public enterprises report certain  information about
operating segments in complete sets of financial statements of an enterprise and
in condensed financial statements of interim periods issued to stockholders.  It
also requires that public  enterprises  report certain  information  about their
products  and  services,  geographic  areas in which  they  operate,  and  major
customers.

The Company is  required to adopt SFAS No. 131 in fiscal 1999 and the  Company's
year  end  consolidated   financial  statements  will  reflect  the  appropriate
disclosures.


YEAR 2000

Overview
The Year 2000 issue is primarily the result of computer  programs only accepting
a  two-digit  date code,  as  opposed  to four  digits,  to  indicate  the year.
Beginning  in the Year 2000,  and in certain  instances  prior to the Year 2000,
these date code  fields will need to accept  four digit  entries to  distinguish
21st century dates from 20th century  dates.  As a result,  the  Company's  date
critical  functions may be adversely  affected unless these computer systems and
software products are, or become, able to accept four digit entries.


Internal systems and equipment
The Company has commenced a  comprehensive  program  consisting of  identifying,
assessing  and,  if  necessary,  upgrading  and/or  replacing  its  systems  and
equipment that may be vulnerable to Year 2000 problems.  The first stage of this
program,   identifying  the  systems  and  equipment,   has  been  substantially
completed.  The Company has prioritized the identified  items as either critical
or  non-critical  to the  operations  of  the  Company.  The  Company  has  made
substantial  progress  through  the  second  and third  stages of this  program,
assessing  and  upgrading  and/or  replacing  the  equipment it has deemed to be
non-compliant.  The Company is also in the beginning  stage of developing a plan
to test its entire system for Year 2000 compliance. The Company believes that it
will have completed all of its necessary  upgrades and/or  replacements  and the
testing of its systems by April 1999.


Third party relationships
The Company has begun to formally communicate with its significant suppliers and
customers to determine if those  parties have  appropriate  plans to remedy Year
2000 issues  when their  systems  interface  with the  Company's  systems or may
otherwise  impact the  operations  of the  Company.  There can be no  assurance,
however,  that the systems of other  companies on which the Company's  processes
rely will be timely  converted,  or that a failure  to  successfully  convert by
another  company,  or a  conversion  that is  incompatible  with  the  Company's
systems,  would not have an  impact on the  Company's  operations.  The  Company
believes that by February 1999 it will complete its  assessment of the status of
its customers' and suppliers' compliance with Year 2000 issues.

<PAGE>

Contingency plans
Based on the  assessment  efforts  to date,  the  Company  has  focused on three
separate contingency plans (1) if the Company's systems are non-compliant (2) if
the Company's customers are non-compliant and (3) if the Company's suppliers are
non-compliant.  The Company is in the early stages of developing these plans and
believes  that it will be able to fully  determine  its worst case  scenarios by
April 1999.  There can be no  assurance  that the Company will be able to have a
contingency  plan in place for a significant  supplier and/or customer that does
not become Year 2000 compliant.


Costs/Risks  
Management  currently  estimates that the cost, in connection  with bringing its
own systems and  equipment  into  compliance,  was less than  $50,000 for fiscal
1998,  less than $25,000 in the first quarter of fiscal 1999 and does not expect
the additional cost to exceed $225,000. Although the Company is not aware of any
material  operational  issues or costs  associated  with  preparing its internal
systems for the Year 2000,  there can be no  assurance  that there will not be a
delay  in,  or  increased  costs  associated  with,  the  implementation  of the
necessary systems and changes to address the Year 2000.

Potential  sources of risk  include but are not limited to (a) the  inability of
principal  suppliers to be Year 2000 compliant,  which could result in delays in
product  deliveries from such  suppliers,  (b) the inability of our customers to
become  compliant,  which could  result in them not  accepting  our product in a
timely  manner  causing  the  Company  to  be in an  over  inventoried  position
resulting  in a  disruption  of  its  cash  flow,  and  (c)  disruption  of  the
distribution channel,  including ports and transportation vendors as a result of
general  failure of systems  and  necessary  infrastructure  such as  electrical
supply.



<PAGE>


              SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE
                    SECURITIES LITIGATION REFORM ACT OF 1995


Except for historical  information  contained  herein,  this Report on Form 10-Q
contains forward-looking statements within the meaning of the Private Securities
Litigation  Reform Act of 1995,  which involve certain risks and  uncertainties.
The  Company's  actual  results or  outcomes  may differ  materially  from those
anticipated. Important factors that the Company believes might cause differences
are  discussed  in the  cautionary  statement  under the  caption  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
this Form  10-Q.  In  assessing  forward-looking  statements  contained  herein,
readers are urged to carefully read those statements.



<PAGE>


PART II       Other Information

Item 1   -    Legal proceedings - Not Applicable

Item 2   -    Changes in Securities - Not Applicable

Item 3   -    Defaults Upon Senior Securities - Not Applicable

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

Item 5   -    Other Information - None

Item 6   -    (a) Exhibits - None

              (b) Form 8-K Report - None


                                   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 hereunto duly authorized.


                                                  MOVIE STAR, INC.


                                                  By: /s/ MARK M. DAVID
                                                     ---------------------
                                                     MARK M. DAVID
                                                     Chairman of the Board;
                                                     Chief Executive Officer


                                                  By: /s/ SAUL POMERANTZ
                                                      ----------------------
                                                      SAUL POMERANTZ
                                                      Executive Vice President;
                                                      Chief Financial Officer


November 10, 1998

<PAGE>