<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                           ________________________
        
                                   FORM 10-K
                           ________________________

                 Annual Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934
                  For the Fiscal Year Ended January 31, 1998

                          Commission File No. 0-23570

                              JUST FOR FEET, INC.

                             An Alabama Corporation
                  (IRS Employer Identification No. 63-0734234)
                            7400 Cahaba Valley Road
                           Birmingham, Alabama  35242
                                 (205) 408-3000

                Securities Registered Pursuant to Section 12(b)

                    of the Securities Exchange Act of 1934:

                                     None

                Securities Registered Pursuant to Section 12(g)
                    of the Securities Exchange Act of 1934:

                   Common Stock, par value $.0001 per share
                                        
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  ______
                                         ------            

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

The aggregate market value of the Common Stock of the registrant held by
nonaffiliates of the registrant (16,603,769 shares) on April 13, 1998 was
$341,415,000. For the purposes of this response, officers, directors and holders
of 5% or more of the registrant's Common Stock are considered the affiliates of
the registrant at that date.

The number of shares outstanding of the registrant's Common Stock, par value
$.0001 per share, as of April 13, 1998: 30,089,847 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE
                      -----------------------------------

     Portions of the Registrant's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held in 1998 are incorporated by reference into
Part III of this Report, with the exception of information regarding executive
officers required under Item 10 of Part III, which information is included in
Part I, Item 1.
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                                    PART I

ITEM 1.   BUSINESS.
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     The Private Securities Litigation Reform Act of 1995 provides a safe harbor
to encourage companies to provide prospective information so long as it is
identified as forward-looking and accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed. Forward-looking statements are related
to the plans and objectives of management for the future operations, economic
performance, of projections of revenues, income, earnings per share, capital
expenditures, dividends, capital structure, or other financial items. In the
following discussion and elsewhere in this report, statements containing words
such as "expect," "anticipate," "believe," "goal," "objective," or similar words
are intended to identify forward-looking statements. The Company undertakes no
obligation to update such forward-looking statements, and it wishes to identify
important factors that could cause actual results to differ materially from
those projected in the forward-looking statements contained in the following
discussion and elsewhere in this report. The risks and uncertainties that may
affect the operations, performance, development and results of the Company's
business include but are not limited to the following: (1) heightened
competition, particularly intensified price competition; (2) general economic
and business conditions which are less favorable than expected; (3)
unanticipated changes in industry trends; and (4) other risks detailed herein
and from time to time in the Company's other reports.

     Just For Feet, Inc. ("Just for Feet" or the "Company") operates both large
format superstores and smaller specialty stores, each specializing in brand-name
athletic and outdoor footwear and apparel. The Company, which began with a
single mall-based store in 1977, opened its first superstore in 1988 and since
that time has focused on developing and refining its superstore concept. The
Company also entered the specialty store segment of the athletic and outdoor
footwear market with the acquisitions in March 1997 of Athletic Attic and in May
1997 of Imperial Sports, privately owned retailers of athletic and outdoor
footwear and apparel. At January 31, 1998 there were 82 "Just For Feet"
superstores operating in 18 states, including nine superstores operated by Just
For Feet's only superstore franchisee. There were also 92 Company-owned and 48
franchised specialty stores operating in 20 states and Puerto Rico.

     In 1997, total retail sales of athletic and outdoor footwear in the United
States approximated $15 billion. The industry historically has been served by a
variety of distribution channels, including mall-based specialty athletic
footwear retailers, department stores, traditional shoe stores, traditional
sporting goods stores and, more recently, sporting goods superstores. The
Company believes each of these formats serves a unique niche in the industry. To
capitalize on these distinct distribution channels, the Company, which has
historically operated from a superstore format, has recently entered the
specialty store segment of the market.

JUST FOR FEET SUPERSTORES

     Large Store Format. The prototype 15,000 to 20,000 square foot Just For
Feet superstore has approximately three to four times the selling space of
leading mall-based specialty athletic footwear retailers. This large store
format enables each Just For Feet superstore to offer approximately 2,500 to
4,500 footwear styles as compared to an estimated 200 to 700 footwear styles
typically offered by conventional mall-based athletic footwear retailers,
department stores and sporting goods superstores. The store layout permits
customers to locate shoes by brand (e.g. Nike, Reebok, New Balance) or category
(e.g. running, basketball, tennis). One shoe of each regularly stocked style is
located in the appropriate branded concept shop and the other is presented on a
full three-wall display arranged by category which 

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surrounds the fitting area at the back of the store. These displays, which
emphasize current, in-season products, are complemented by the "Combat Zone,"
where Just For Feet regularly highlights special values on close-outs and other
special-purchase merchandise as well as to liquidate old or slow moving
inventory. Just For Feet strives to create an exciting and high-energy shopping
experience in its superstores through the use of bright colors, upbeat music, an
enclosed Ahalf-court" basketball court for use by customers and a multi-screen
video bank.

     Advertising and Promotion. The Company makes extensive use of television
and print media to generate customer store visits. The Company typically runs at
least one television spot on the local affiliate of each major network five days
per week in most of its markets. Promotions are typically of short duration to
instill a sense of urgency in customers. The Company believes that, as it adds
new superstores in existing markets, it will benefit from print and television
cost efficiencies. The Company strives to make each new superstore opening a
major retail event by widely advertising through newspaper and television. The
Company uses unique promotional events which add to the fun and excitement of
Just For Feet superstores, including appearances by sports celebrities such as
Bart Starr, a director of the Company and Company spokesperson as well as former
NFL quarterback Jim Kelly, who also makes appearances and acts as a
spokesperson.

     In-Store Warehousing. Just For Feet does not operate a centralized
distribution center for its superstores, but typically devotes approximately 45%
of the square footage of each superstore to warehouse space. Each superstore
receives regular shipments directly from vendors and stocks merchandise in an
area behind (or above) the selling floor not visible to customers. Just For Feet
employs warehouse personnel at each superstore in order to free sales associates
to attend to customers and to enhance inventory control. This decentralized
distribution system enables Just For Feet to receive merchandise at each
superstore on a timely basis and avoid the time and expense of handling
merchandise twice. Just For Feet believes its in-store warehousing strategy also
permits it to maintain deep inventory positions in core styles and to stock its
superstores more fully in advance of peak selling periods.

     Operations. Just For Feet employs a three-tiered management system for
superstore operations, presently consisting of regional directors, divisional
directors and a store director for each store. Each superstore is managed by a
store director, two or more store managers, an office manager, an operations
manager and up to six assistant managers, depending on the sales volume of the
store. Store directors report to a divisional director, who in turn reports to a
regional director.

     The sales staff of individual superstores ranges from approximately 60 to
180 employees depending on the size of the store and the time of year. The
Company's policy is to staff its superstores sufficiently to ensure that all
customers receive prompt, personalized attention. Store directors and managers
are paid a salary, while all other superstore employees are paid on an hourly
basis. Just For Feet provides an incentive compensation plan for virtually all
employees. Store director and manager incentive plans are based primarily upon a
combination of store sales, payroll level relative to sales and inventory
variance compared to budget. Sales associates are eligible for semi-annual bonus
payments based on their individual sales performance. In addition, the Company's
incentive plans include grants of stock options to senior management and store
directors, store managers and assistant store managers and certain store
operations personnel.

     Just For Feet experiences inventory shrinkage rates which it believes are
below the retail industry average. Management attributes its low shrinkage rate
to stocking footwear off the selling floor, the presence of an operations
manager and security personnel at each superstore, the use of surveillance

                                      -2-
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systems and the reduced handling of merchandise associated with Just For Feet's
in-house warehousing system.

     Customer Convenience. Just For Feet superstores operate seven days per
week. To enhance customer convenience, normal hours for superstores located on
outparcels of shopping malls are typically thirty minutes prior to the mall's
opening until thirty minutes after the mall's closing. Superstores are open on
all holidays except Christmas and Thanksgiving.

SPECIALTY STORES

     As part of its long-term growth strategy, in 1997 the Company entered the
specialty store segment of the athletic and outdoor footwear and apparel market
with the acquisitions of Athletic Attic and Imperial Sports. On March 17, 1997,
the Company acquired Athletic Attic for approximately $9.7 million in cash (net
of cash acquired) and approximately $5.6 million of Common Stock. The Company
also repaid approximately $1.3 million of Athletic Attic's debt. Athletic Attic
was a privately-owned athletic and outdoor footwear and apparel retailer based
in Gainesville, Florida. Athletic Attic stores are located primarily in enclosed
shopping malls.

     On May 14, 1997, the Company acquired Imperial Sports, a privately-owned,
Flint, Michigan-based athletic and outdoor footwear and apparel retailer, for
$5.8 million in cash (net of cash acquired) and $21.5 million in Just For Feet
Common Stock. The Company also repaid approximately $8.7 million of Imperial
Sports' debt. Imperial Sports operates stores in Michigan, Illinois, Indiana and
Ohio, primarily in major enclosed shopping malls and retail strip centers.

     At January 31, 1998 there were 92 Company-owned and 48 franchised specialty
stores operating in 20 states and Puerto Rico.

     The key components of the Company's strategy for its specialty stores are:

     Capitalize on Incremental Expansion Opportunities. The Company believes
that the development of smaller specialty stores provides the Company with
substantial incremental growth opportunities by allowing the Company to target
for expansion a much broader range of markets and real estate locations. Because
of their higher initial investment and fixed costs, Just For Feet superstores
require a much higher level of sales in order to produce an attractive return on
investment and consequently require a larger population base. Whereas
approximately 300,000 to 400,000 people in a trade area are required to generate
the high level of sales expected for Just For Feet superstores, the Company
believes that smaller specialty stores can be successful with as few as 25,000
people in a trade area.

     In order to develop the specialty stores as an incremental opportunity
without significantly reducing Just For Feet's management's focus on its core
superstore business, the Company pursued strategic acquisitions as opposed to
the initial start-up of such stores. The Athletic Attic and Imperial Sports
operations have been combined to form the Specialty Store Division of the
Company. Substantially all of the management functions of the Specialty Store
Division have been consolidated at its Flint, Michigan headquarters. The Company
plans to continue to use both the Athletic Attic and Imperial Sports names in
existing markets, but will primarily use the Athletic Attic name in new markets.
The Company expects to open approximately 25 to 35 new specialty stores during
fiscal 1998.

                                      -3-
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     Improve Store Operations. The Company has focused on four key initiatives
that it believes will provide a solid foundation for successful future growth of
the specialty stores. First, the Company focused on making its expertise in
management information systems available to Athletic Attic and Imperial Sports
and implementing its store level point-of-sale registers and inventory
management systems in its Specialty Store Division. The Company also focused on
remodeling, expanding and refixturing certain outdated and smaller stores. In
addition, the Company has added inventory to and altered the inventory mix of
some stores in an effort to generate higher sales and better gross margins.
Finally, the Company developed a training program based on the concept and
curriculum of the "Just For Feet University" training program. The Company
believes that the above initiatives will provide a solid foundation for the
successful further development and future operation of the Specialty Store
Division.

     Refine Specialty Store Prototype. The Company is developing a specialty
store prototype that combines certain concepts used in the operation of Just For
Feet superstores and Athletic Attic and Imperial Sports specialty stores. The
Company believes that a dominant selection of athletic footwear complemented by
apparel, sales of which are mostly incremental and typically have higher gross
margins and faster inventory turn rates than footwear, will help differentiate
its specialty stores from those of its competitors. As a result, the Company
intends to develop a specialty store prototype of approximately 4,000 to 6,000
square feet, which the Company believes is large enough to effectively
merchandise a broad assortment of athletic and outdoor footwear and apparel. The
Company expects to introduce this prototype in fiscal 1998.

MERCHANDISING

     Just For Feet seeks to offer a larger selection of brand-name athletic and
outdoor footwear in terms of styles, sizes and price points than any of its
competitors. The Company carries most of the leading athletic footwear brands
including Nike, Reebok, New Balance, Adidas, Fila, K-Swiss, Asics and Converse,
as well as outdoor footwear brands such as Timberland and Rockport. Just For
Feet seeks to offer virtually all styles in the brands it carries. The Company's
superstores sell shoes for almost every sport and recreational activity,
including running, basketball, cross training, tennis, aerobics, hiking, golf,
football, baseball, soccer, walking and wrestling. Just For Feet superstores
carry shoes in sizes ranging from infants' size one to men's size 22. In
addition to offering most sizes in most styles, Just For Feet superstores carry
a complete selection of widths in those styles which are offered in multiple
widths.

     Just For Feet also offers a limited selection of brand-name apparel and
accessories including warm-up suits, T-shirts, athletic shorts, caps, socks and
shoe care products. Apparel and accessory brands include Nike, Reebok, Adidas,
Starter, Fila, Timberland, Ridgeview and Thor-lo. These apparel and accessory
items, which include professional and collegiate licensed apparel, add color and
variety to Just For Feet's product offering and generate additional sales. The
Company believes these items also add freshness to the product offering because
they turn faster than footwear.

     Just For Feet constantly monitors product trends through its management
information systems in order to identify and rapidly replenish styles which are,
or may become, popular. Just For Feet seeks to manage the risk associated with
purchasing large volumes of merchandise by first testing new products on a
limited basis in selected stores before placing substantial orders.

     Just For Feet also regularly makes special purchases of merchandise made
available to it by leading vendors at close-out prices. These items are
primarily sold in an area in the front of each superstore called the "Combat
Zone" at prices generally ranging from approximately 33% to 70% below

                                      -4-
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manufacturers' suggested retail prices. This specially priced merchandise
represented approximately 25% of total shoe sales in fiscal 1997. Merchandise
margins on these products are generally consistent with the average margins of
the Company.

     Because Just For Feet is not a discount retailer, management believes it is
able to engender vendor loyalty allowing it to purchase a broad assortment of
the most popular athletic and outdoor footwear. In turn, carrying a broad
selection permits Just For Feet to offer its customers a wide range of prices
appealing to all income levels. Prices for Just For Feet's regularly stocked
footwear generally range from $19.99 to $199.99.  In addition, Just For Feet
superstores guaranty to match any competitor's advertised price.

     Just For Feet superstores use replaceable price signage posted on shelving
instead of directly on each item, enabling rapid price changes on any item.
Just For Feet's policy is to rapidly and aggressively mark down slow moving
merchandise in order to minimize the quantity of outdated inventory in its
stores.

CUSTOMER SERVICE

     The Company believes the level of service it provides to customers is an
important competitive advantage. Just For Feet is committed to making shopping
for athletic and outdoor footwear and apparel an enjoyable experience through
the employment of knowledgeable, well-trained and energetic sales associates.
Because of the large selection of footwear carried, and to further differentiate
its superstores from other retailers, Just For Feet devotes substantial time and
resources to training and testing its employees in footwear technology, the
performance attributes of Just For Feet's merchandise and common foot problems.
The initial phase of employee training entails a two-week program in which the
new employee shadows experienced employees to learn the sales and technical
aspects of the business. Employees are allowed to sell Just For Feet's more
technical products as they demonstrate increased proficiency. In addition, new
store managers and other management personnel undergo an intensive two- to 
three-week training program at "Just For Feet University" to enhance their
understanding of all aspects of Just For Feet's business. Each employee receives
ongoing training through frequent clinics sponsored by vendors and consultation
with Just For Feet's technical specialists. Just For Feet also utilizes
satellite technology for broadcasting from corporate headquarters to the
individual superstores. Management believes that such satellite technology is an
effective and cost-efficient way to facilitate communication and continuing
education throughout Just For Feet superstores.

     Just For Feet strives to staff its superstores with a high ratio of sales
associates to customers. Because Just For Feet superstores sell almost every
athletic shoe offered by leading brands, sales associates are able to act as
problem solvers for customers and to recommend the ideal shoe with less risk of
losing a sale. Just For Feet seeks to retain its nucleus of well-trained sales
personnel through bonus payments and opportunities for advancement.

PURCHASING AND DISTRIBUTION

     Just For Feet primarily purchases regularly stocked merchandise in large
volume and supplements its offering with close-outs and other special-purchase
items. As a result of its consistently large volume of purchases, Just For Feet
believes it has significant purchasing power allowing it to obtain favorable
trade terms from its vendors. The Company further believes that its vendors view
Just For Feet favorably due to the unique presentation of their products and
promotion of the vendor's image. Just For Feet has approximately 120 vendors.
Approximately 48% of Just For Feet's purchases for fiscal 1997 were from 

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Nike and Reebok, combined. Just For Feet purchased approximately 64% of its
merchandise during fiscal 1997 from five vendors.

     Substantially all of Just For Feet's merchandise is shipped directly from
vendors to its superstores. Just For Feet's relationships with commercial
freight carriers permit it to monitor and control the status of merchandise
deliveries by the carrier through electronic data interchange, providing
important inventory management information.  Just For Feet's Specialty Store
Division employs a central distribution strategy, and currently operates two
distribution centers located in Flint, Michigan and Gainesville, Florida.

MANAGEMENT INFORMATION SYSTEM

     The Company believes that its advanced information systems provide a key
competitive advantage in improving its store operations and managing its store
expansion. Control of Just For Feet's merchandising activities is currently
maintained by a fully integrated point-of-sale (POS), inventory, and management
information system which permits management personnel to monitor inventory and
store operations on a daily basis. Bar-coding all merchandise and using scanners
for receiving and at the point of sale allows the inventories of all superstores
to be automatically adjusted and sales automatically logged as customers check
out. Purchasing, tracking and receiving systems provide efficient and timely
distribution of merchandise to each superstore. Systems are in place to review,
on a real-time basis, sales information by store, category, vendor or employee
in order to focus on store needs and employee productivity and motivation. In-
store information systems are linked directly to the corporate office.

     In order to improve operational productivity, facilitate timely decision
making and support the Company's future growth, the Company has implemented
enhanced systems capabilities utilizing a fully integrated software system on an
IBM AS/400 platform, together with store-level systems and equipment. The
Company's enhanced systems provide management with the capability to track
sales, gross margin and inventory levels by superstore on a real-time basis. In
addition, a Human Resource/Time Management/Payroll system allows daily analysis
of labor costs by location. Management believes that the Company's enhanced
systems will be able to support the Company's planned growth for the foreseeable
future. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations C Year 2000" for a discussion of the Company's
systems' Year 2000 compliance.

COMPETITION

     The retail athletic footwear industry is highly competitive. The Company
competes primarily with sporting goods superstores, athletic footwear specialty
stores, department stores, discount stores, traditional shoe stores, traditional
sporting goods stores and mass merchandisers and other athletic footwear
superstores, some of which have developed similar superstore concepts. Within
the past few years, new independent athletic footwear retailers have opened
superstores similar in format to those of the Company that, in some instances,
are competing directly with the Company, although the Company believes that it
operates the only significant superstore chain of its kind. The Company believes
that competition in the retail athletic footwear industry is based primarily on
the number of styles of brand-name athletic and outdoor shoes offered, pricing
and customer service. The Company believes that its superstore concept and, to a
lesser extent its specialty store concept, will allow it to carry and display a
larger number of the more popular styles of athletic and outdoor footwear than
its competitors. Additionally, the Company believes that its pricing strategy
and frequent buyer program encourage repeat shopping and customer loyalty. The
Company may face periods of intense competition in the future which could have
an adverse effect on its financial results.

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EXPANSION STRATEGY

     Superstores. The Company intends to strengthen its position as a leading
operator of athletic footwear superstores by opening approximately 25
superstores in fiscal 1998. In addition to its prototype superstores, Just For
Feet currently operates high visibility, high profile "flagship" superstores at
Caesar's Palace in Las Vegas and in New York and intends to open additional
flagship superstores in other strategic markets, such as Puerto Rico. Flagship
superstores, which are not necessarily larger than the prototypical Just For
Feet superstore, provide added entertainment features designed to generate and
maintain customer excitement and are in high profile locations. The Company's
expansion strategy is to open superstores in new and existing markets, including
those markets with the potential for multiple sites, which enables the Company
to take advantage of advertising and operating efficiencies. In addition, Just
For Feet will continue to open superstores in smaller markets which can only
accommodate one superstore. Just For Feet has either executed or negotiated
leases with respect to all of the stores currently slated to open during fiscal
1998 and is actively reviewing numerous additional sites in fiscal 1999.

     Management generally seeks to open one Just For Feet superstore in a chosen
market for every 300,000 to 400,000 residents. As a result, multiple superstores
opened in larger markets such as Atlanta, Phoenix, Kansas City, Houston, Dallas
and Denver derive significant benefit from advertising and operating
efficiencies. More recently, the Company has also focused on operating single
superstores in mid-sized metropolitan markets such as Jackson, Mississippi and
Montgomery, Alabama. In addition, the Company continues to evaluate select
opportunities to expand internationally.

     Because its vendors drop ship merchandise directly to the superstores, Just
For Feet's expansion plans are dependent more on the attractiveness of
individual superstore sites than the logistical constraints that would be
imposed by a central distribution center. Just For Feet plans to open primarily
free-standing superstores in high traffic, high visibility locations typically
on outparcels of or adjacent to shopping malls. The Company's strategy is to
concentrate its efforts on opening Company-owned stores.

     Just For Feet leases all but three of its existing superstores and intends
to lease all new superstores. The Company estimates that its total cash
requirements to open each new prototype superstore, including store fixtures and
equipment, leasehold improvements, net working capital and store opening costs,
typically ranges from $1.5 to $2.5 million, depending on the extent of vendor
and landlord assistance and the size and projected volume of the store, while
the total cash outlay required to open a flagship superstore typically
approximates $2.5 to $4.0 million.

     Specialty Stores.  As part of its long-term growth strategy, the Company
has entered the small store segment of the athletic and outdoor footwear and
apparel market with the acquisitions of Athletic Attic and Imperial Sports.  The
Company anticipates opening approximately 25 to 35 specialty stores during
fiscal 1998.

EMPLOYEES

     At January 31, 1998, the Company had approximately 7,975 employees, of
which approximately 4,950 were employed on a part-time or seasonal basis. The
number of employees fluctuates during the year primarily due to seasonality.
None of the Company's employees are represented by a labor union.

     Management attributes a large portion of the Company's success in driving
sales and various areas of cost control to its inclusion of virtually all
employees in incentive compensation plans. The Company 

                                      -7-
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also contributes to the cost of medical insurance coverage for those employees
who are eligible to participate in Company sponsored plans. Many employees, from
senior executives to store level management participate in the Company's
incentive stock option plans. All employees also receive discounts on Company
merchandise. The Company considers its relationship with its employees to be
good.

TRADEMARKS

     The Company owns the following federally registered service marks (in
design form): "Just For Feet," "Just For Feet, World's Largest Athletic Shoe
Store," "Just For Feet, Where The 13th Pair is FREE!" and "Athletic Attic."  The
Company believes its marks are valuable and, accordingly, intends to maintain
its marks and the related registrations. The Company is not aware of any pending
claims of infringement or other challenges to the Company's right to use its
marks in the United States.

EXECUTIVE OFFICERS

     The executive officers of the Company are as follows:

         NAME                  AGE                        POSITION
         ----                  ---                        --------
                                     
     Harold Ruttenberg         55      Chairman of the Board, President         
                                       and Chief Executive Officer              
                                                                                
     Eric L. Tyra              48      Executive Vice President - Finance       
                                       and Chief Financial Officer              
                                                                                
     Adam J. Gilburne          35      Executive Vice President; President -
                                       Superstore Division

     Alex M. Bond              28      Executive Vice President -Strategic      
                                       Development                              
                                                                                
     Don-Allen Ruttenberg      31      Executive Vice President - New Store
                                       Development

     Scott C. Wynne            31      Executive Vice President -Operations and
                                       Secretary

     Mr. Harold Ruttenberg is the founder of the Company and has served as its
Chairman, President and Chief Executive Officer since its inception in 1977.
                                        
     Mr. Tyra has served as Executive Vice President - Finance and Chief
Financial Officer since May 1997. From January 1994 to May 1997, Mr. Tyra was
Vice President - Finance, Treasurer and Chief Financial Officer of Club Car,
Inc., a manufacturer of golf cars and utility vehicles. From 1991 to 1993, Mr.
Tyra was a Senior Vice President with First Financial Management Corporation,
serving in various financial management positions. Previously, Mr. Tyra was a
partner with Deloitte & Touche LLP.

     Mr. Gilburne has served as Executive Vice President of the Company and
President - Superstore Division, since August 1997. Mr. Gilburne served as Vice
President-Store Operations of the Company from March 1994 to December 1994, at
which time he was promoted to Executive Vice President - 

                                      -8-
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Merchandising. Mr. Gilburne previously owned and operated a franchised Just For
Feet store in San Antonio, Texas, which the Company acquired in March 1994. From
1986 until 1993, Mr. Gilburne was the President of a chain of baby and
children's furniture stores located in Las Vegas, Nevada.

     Mr. Bond joined the Company in February 1997 as Executive Vice President -
Strategic Development and has primary responsibility for the development and
operation of the Company's Specialty Store Division. From January 1995 to
January 1997, Mr. Bond was Vice President of Strategic Development for Hollywood
Entertainment Corporation, a publicly traded operator of video retail
superstores. From January 1993 to January 1995, Mr. Bond was an investment
banker with Montgomery Securities, where he focused on the high growth specialty
retail sector.

     Mr. Don-Allen Ruttenberg, who joined the Company in 1987, served as Vice
President-Merchandising from January 1994 to February 1997, when he was elected
Executive Vice President-New Store Development. Since 1987, Mr. Ruttenberg also
has been actively involved in various merchandising aspects of the Company,
focusing on footwear technology. Mr. Ruttenberg is the son of Mr. Harold
Ruttenberg.

     Mr. Wynne has been employed by the Company since 1985 and has served as
Operations Manager since 1990 with specific responsibilities in inventory
control, distribution, management information systems and traffic. He was
elected Vice President-Store Operations in January 1994, corporate Secretary in
August 1995 and Executive Vice President-Operations in February 1997.

ITEM 2.   PROPERTIES.
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     The Company operated 73 Just For Feet superstores at January 31, 1998, 10
of which are located in enclosed malls and 63 of which are free-standing. With
the exception of a Birmingham, Alabama store (which is subject to a ground
lease), one store in Orlando, Florida and one store in Knoxville, Tennessee, all
of the Company's facilities are leased. The Company also owned and operated 92
specialty stores, each of which is leased. Specialty stores are located
primarily in enclosed shopping malls and, to a lesser extent, in retail strip
centers.

     Certain leases for existing stores provide for fixed minimum rentals and
provide for contingent rental payments based upon various specified percentages
of sales above minimum levels. Certain leases also contain escalation clauses
for increases in minimum rentals, operating costs and taxes. Certain other
leases provide for future rent increases based upon increases in the Consumer
Price Index. Superstore leases carry varying terms expiring between 2003 and
2016, excluding applicable option periods. Specialty store leases are typically
for shorter initial terms and begin expiring in fiscal 1998, excluding option
periods.

     The Company's corporate headquarters are located in a new 42,000 square
foot building completed in May 1997, on approximately 25 acres of Company-owned
land in Birmingham, Alabama. The headquarters facilities also include a 36,000
square foot warehouse.

ITEM 3.   LEGAL PROCEEDINGS.
-------   ----------------- 
                                        
     On June 27, 1997, a lawsuit was filed by Donald K. Drucker, individually
and on behalf of all others similarly situated, in the United States District
Court for the Northern District of Alabama against the Company, Harold
Ruttenberg, Don-Allen Ruttenberg, Scott C. Wynne, Adam Gilburne, Pamela B.

                                      -9-
<PAGE>
 
Ruttenberg, Robert C. Wabler, William Blair & Company and Montgomery Securities.
The defendants are the Company; its Chairman and Chief Executive Officer; three
other executive officers of the Company; the Company's former Chief Financial
Officer and a former director; another former officer of the Company; and two of
the four managing underwriters in the Company's June 1996 public offering of
Common Stock. The individual defendants were selling shareholders in such
offering. The plaintiff purports to represent a class consisting of all persons
who purchased Common Stock of the Company in or traceable to the June 1996
public offering. The suit alleges that the Company's registration statement and
the prospectus used in such offering contained materially misleading financial
statements. The plaintiffs are seeking an unspecified amount of damages. The
Company and its named officers and directors deny liability on the claims and
are vigorously defending the suit, which is only in the preliminary stages.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
-------   --------------------------------------------------- 

     No matter was submitted to a vote of security holders of the Company during
the fourth quarter ended January 31, 1998.


                                    PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
-------   --------------------------------------------------------------------- 

     The Company's Common Stock trades on The Nasdaq Stock Market under the
symbol FEET.  The following table sets forth, by fiscal quarter, the high and
low sales  prices of the Common Stock reported by The Nasdaq Stock Market for
the last eight fiscal quarters ended January 31, 1998.  Share prices give effect
to a 3-for-2 stock split effected on October 15, 1996.

     Fiscal Year Ended January 31, 1998
     ----------------------------------

<TABLE>
<CAPTION>
                                                 High Sale        Low Sale
                                                 ---------        --------
<S>                                              <C>              <C>
First Quarter ended April 30, 1997                 $30.25           $14.00
                                                          
Second Quarter ended July 31, 1997                  22.25            15.88
                                                          
Third Quarter ended October 31, 1997                20.38            11.88
                                                          
Fourth Quarter ended January 31, 1998               18.00            12.38
</TABLE>


     Fiscal Year Ended January 31, 1997
     ----------------------------------

<TABLE>
<CAPTION>
                                                 High Sale        Low Sale
                                                 ---------        --------
<S>                                              <C>              <C>
 
First Quarter ended April 30, 1996                 $32.92           $18.75  
                                                                            
Second Quarter ended July 31, 1996                  38.25            23.33  
                                                                            
Third Quarter ended October 31, 1996                36.67            24.75  
                                                                            
Fourth Quarter ended January 31, 1997               32.00            22.25  
</TABLE>

                                      -10-
<PAGE>
 
     As of March 24, 1998, the number of shareholders of record of the Company's
Common Stock was approximately 394 and the number of beneficial holders of the
Company's Common Stock was approximately 11,500. The Company has not declared or
paid any cash dividends on its Common Stock. The policy of the Board of
Directors of the Company is to retain earnings for the expansion and development
of the Company's business. Future dividend policy and the payment of dividends,
if any, will be determined by the Board of Directors in light of circumstances
then existing, including the Company's earnings, financial condition,
contractual restrictions and other factors deemed relevant by the Board .

ITEM 6.   SELECTED FINANCIAL DATA.
-------   ----------------------- 

     The following statement of earnings data and balance sheet data, at the end
of and for fiscal 1997, 1996, 1995, 1994 and 1993 have been derived from the
Company's audited consolidated financial statements. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the Company's Consolidated
Financial Statements and related notes and other financial information included
elsewhere herein. The Company's fiscal year ends on January 31. References to
fiscal years by date refer to the fiscal year beginning February 1 of that
calendar year; for example, "fiscal 1997" began on February 1, 1997 and ended on
January 31, 1998.

     As discussed in Note 1 to the Company's Consolidated Financial Statements,
effective February 1, 1996, the Company changed its method of accounting for
store opening costs, which are costs principally for pre-opening employee
salaries and travel that are incremental and directly attributable to the
opening of a new store. Under the new method, the Company charges these costs to
operations in the month that the store opens. Previously, store opening costs
were capitalized and amortized over the twelve months following the store
opening. Pro forma amounts are shown for all periods which are affected to
reflect amounts as if the change had been applied retroactively.

                                      -11-
<PAGE>
 
          (In thousands except per share and selected operating data)

<TABLE>
<CAPTION>
                                                                                    FISCAL YEAR

                                                                 1997         1996         1995         1994         1993
                                                                 ----         ----         ----         ----         ----
<S>                                                         <C>           <C>          <C>           <C>          <C>
STATEMENT OF EARNINGS DATA:

Net sales.................................................   $478,638     $256,397     $119,819      $56,364      $23,678
Cost of sales.............................................    279,816      147,526       68,969       32,492       14,067
                                                             --------     --------     --------      -------      -------
     Gross profit.........................................    198,822      108,871       50,850       23,872        9,611
Franchise fees,  royalties and other  revenue.............      1,101          581          485          379          417
Operating expenses:
     Store operating......................................    139,659       69,329       33,264       16,197        6,628
     Store opening costs..................................      6,728       11,240        2,712          699          130
     Amortization of intangibles..........................      1,200          180          157          155           -- 
     General and administrative...........................     18,040        7,878        3,575        2,429        1,995
     Executive options....................................         --           --           --           --        1,222   /(1)/
                                                                                                                  -------
Operating income..........................................     34,296       20,825       11,627        4,771           53
Interest income (expense), net............................        (76)       3,918        2,931          376          (85)
                                                             --------     --------     --------      -------      -------
Earnings (loss) before income taxes
     and cumulative effect of change in
     accounting principle.................................     34,220       24,743       14,558        5,147          (32)
Provision for income taxes................................     12,817        8,783        4,836        1,928          171
                                                             --------     --------     --------      -------      -------
Earnings (loss) before cumulative
     effect of change in accounting principle.............     21,403       15,960        9,722        3,219         (203)
Cumulative effect on prior years (to January
     31, 1996) of change in accounting principle..........         --        2,041           --           --           --
                                                              -------     --------     --------      -------      -------
   Net earnings (loss)....................................   $ 21,403     $ 13,919     $  9,722      $ 3,219      $  (203)
                                                             ========     ========     ========      =======      =======
Basic net earnings (loss) per share
     before cumulative effect of change in
     accounting principle.................................   $   0.72     $   0.58     $   0.40      $  0.19      $ (0.02)
Cumulative effect on prior years (to January
     31, 1996) of change in accounting principle..........         --         0.08           --           --           --
                                                             --------     --------     --------      -------      -------
Basic net earnings (loss) per share.......................   $   0.72     $   0.50     $   0.40      $  0.19      $ (0.02)
                                                             ========     ========     ========      =======      =======

Diluted net earnings (loss) per share
     before cumulative effect of change in
     accounting principle.................................   $   0.70     $   0.55     $   0.38      $  0.18      $ (0.02)
Cumulative effect on prior years (to January
     31, 1996) of change in accounting principle..........         --         0.07           --           --           --
                                                             --------     --------     --------      -------      ------- 
Diluted net earnings (loss) per share.....................   $   0.70     $   0.48     $   0.38      $  0.18      $ (0.02)
                                                             ========     ========     ========      =======      =======

Basic weighted average shares outstanding.................     29,615       27,627       24,246       17,017       10,553
                                                             ========     ========     ========      =======      =======

Diluted weighted average shares outstanding...............     30,410       29,096       25,546       17,948       11,408
                                                             ========     ========     ========      =======      =======
Pro Forma Amounts Assuming the Change in
     Accounting Principle is Applied
     Retroactively:
     Net earnings (loss)..................................                             $  8,487      $ 2,607       ($ 397)
                                                                                       ========      =======      =======
     Basic net earnings (loss) per share..................                             $   0.35      $  0.15      $ (0.04)
                                                                                       ========      =======      =======
     Diluted net earnings (loss) per share................                             $   0.33      $  0.15      $ (0.03)
                                                                                       ========      =======      =======


SELECTED OPERATING DATA:
Increase in comparable store sales  /(2)/.................        4.5%        24.7%        17.9%        10.2%         6.2%

Number of comparable stores /(2)/.........................         42           27           15            5            3
</TABLE>

                                      -12-
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                      JANUARY 31,
                                                            -------------------------------------------------------------

                                                                 1998         1997         1996         1995         1994
                                                                 ----         ----         ----         ----         ----
<S>                                                        <C>            <C>          <C>           <C>          <C>
BALANCE SHEET DATA:
Working capital..........................................    $155,461     $167,829     $108,304      $64,617      $ 2,192
Total assets.............................................     448,352      375,834      243,580       89,505       16,012
Long-term obligations....................................      16,646        6,488        6,696        3,102          902
Redeemable convertible preferred stock...................          --           --           --           --        3,017
Shareholders= equity.....................................     268,084      218,556      149,270       72,983        1,483
</TABLE>

________________________________

/(1)/  Represents the expense attributable to the issuance of certain executive
       options, primarily a non-cash charge.

/(2)/  Company operated superstores are included in the comparable store sales
       calculation beginning generally in the thirteenth month of operation or
       upon their acquisition, assuming at least twelve months of prior
       operations. Specialty stores will not be included in the comparable store
       sales base until fiscal 1998.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------  ----------------------------------------------------------------
         RESULTS OF OPERATIONS.
         ---------------------

OVERVIEW

          The Company was founded in 1977 with the opening of a small mall-based
store and in 1988, Just For Feet opened its first superstore in Birmingham,
Alabama.  As a result of the success and high sales volume generated by the
larger store format, the Company has focused on developing and refining its
superstore concept.  There were 82 Just For Feet superstores at January 31,
1998, operating in 18 states, including nine stores operated by Just For Feet's
only superstore franchisee.

          Of the 73 Company operated superstores, 23 superstores were opened in
fiscal 1997.  The Company expects to open approximately 25 superstores during
fiscal 1998.  The Company may accelerate the opening of new stores in any one
fiscal quarter.

          As part of its long-term growth strategy, the Company entered the
specialty store segment of the athletic and outdoor footwear and apparel market
in fiscal 1997 through the acquisitions of Athletic Attic and Imperial Sports.
At January 31, 1998 there were 92 Company-owned and 48 franchised specialty
stores in 20 states and Puerto Rico.  The Company anticipates opening
approximately 25 to 35 specialty stores during fiscal 1998.  The specialty
stores have a higher general and administrative expense structure than the
Company's superstores.

          To accommodate the Company's superstore expansion strategy and the
development of the Specialty Store Division, the Company has expanded and
upgraded its corporate staff.  In addition, the specialty stores have a higher
general and administrative expense structure as a percent of net sales than the
superstore operations.  These factors resulted in general and administrative
costs increasing to 3.8% of sales during fiscal 1997 from 3.1% in fiscal 1996
and 3.0% in fiscal 1995.

                                      -13-
<PAGE>
 
          In recent years, the Company has achieved positive comparable store
sales growth on an annual basis. Comparable superstore sales increased 4.5%,
24.7%, 17.9%, 10.2% and 6.2% in fiscal years 1997, 1996, 1995, 1994 and 1993,
respectively.  The Company does not expect comparable store sales to continue to
increase in the future at historical rates, nor can any assurance be given that
increases in comparable store sales will continue.  The Company will not include
the specialty stores in its comparable store sales percentages until fiscal
1998.

          Effective February 1, 1996, the Company changed its method of
accounting for store opening costs, which are costs principally for pre-opening
salaries and travel that are incremental and directly attributable to the
opening of a new store.  Under the new method, the Company charges these costs
to operations in the month that the store opens.  Previously, store opening
costs were capitalized and amortized over the 12 months following the store
opening.  The cumulative effect of this change in accounting principle resulted
in a charge to operations for the year ended January 31, 1997 of $2.0  million,
net of income taxes of $1.1 million.

RESULTS OF OPERATIONS

          The following table sets forth, for the periods indicated, statement
of earnings data expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                                               FISCAL YEAR
                                                  ---------------------------------------
                                                   1997             1996             1995
                                                   ----             ----             ----
<S>                                               <C>              <C>              <C>
Net sales......................................   100.0%           100.0%           100.0%
Cost of sales..................................    58.5             57.5             57.6
                                                   ----             ----             ----
    Gross profit...............................    41.5             42.5             42.4
 Franchise fees, royalties other revenue.......     0.2              0.2              0.5
    Operating expenses:
      Store operating..........................    29.2             27.0             27.7
      Store opening costs......................     1.4              4.4              2.3
      Amortization of intangibles..............     0.2               --              0.1
      General and administrative...............     3.8              3.1              3.0
                                                   ----             ----             ----
         Operating income......................     7.1              8.2              9.8
 Interest income (expense), net................      --              1.5              2.4
                                                   ----             ----             ----
 Earnings before income taxes and cumulative                                              
   effect of change in accounting principle....     7.1              9.7             12.2 
 Provision for income taxes....................     2.6              3.4              4.1
                                                   ----             ----             ----
 Earnings before cumulative effect of change                                             
    in accounting principle....................     4.5              6.3              8.1
  Cumulative effect on prior years (to                                                     
    January 31, 1996) of change in accounting                                              
     principle.................................      --              0.8               -- 
                                                   ----             ----             ----  
         Net earnings..........................     4.5%             5.5%             8.1%
                                                   ====             ====             ====
  Pro Forma Amounts Assuming the Change
    in Accounting Principle is Applied
    Retroactively:
          Net earnings.........................                                       7.1%
                                                                                     ====
</TABLE>                                                           

                                      -14-
<PAGE>
 
FISCAL 1997 COMPARED TO FISCAL 1996

          Net Sales. Net sales increased $222.2 million or approximately 86.7%
for fiscal 1997 to $478.6 million compared to net sales of $256.4 million for
fiscal 1996. This increase was primarily attributable to additional sales of
$68.9 million from the 23 new superstores opened during the year, an increase in
comparable store sales of 4.5%, and additional sales of approximately $60.5
million from the specialty stores acquired during fiscal 1997. The calculation
of comparable store sales for the year included 42 superstores. The Specialty
Stores Division of the Company consists of Athletic Attic and Imperial Sports
which were acquired on March 17, 1997 and May 14, 1997, respectively. Both
acquisitions have been accounted for as purchases and, accordingly, the results
of operations of these acquired businesses are included in the Company=Company's
consolidated statements of earnings from their respective acquisition dates.

          Gross Profit.  Gross profit increased to $198.8 million or 82.6% for
fiscal 1997 from $108.9 million in fiscal 1996 as a result of increased sales.
As a percentage of net sales, gross profit decreased to 41.5% for fiscal 1997
from 42.5% for fiscal 1996, primarily as a result of programs utilized to
increase sales and to reduce inventory in the second half of fiscal 1997.

          Store Operating Expenses.  Store operating expenses increased $70.4
million or 101.6% to $139.7 million in fiscal 1997 from $69.3 million in fiscal
1996.  This increase was primarily attributable to the operating expenses of the
23 superstores opened during fiscal 1997 and the operating expenses of the
acquired specialty stores.  As a percentage of net sales, store operating
expenses increased to 29.2% in fiscal 1997 from 27.0% in fiscal 1996 primarily
as a result of increased superstore regional management payroll and related
expenses and increases in superstore level payroll as a result of the impact of
minimum wage increases in October 1996 and September 1997.

          Store Opening Costs.  Store opening costs are charged to operations in
the month the applicable store opens.  Twenty-three superstores were opened
during each of fiscal 1997 and 1996.  Store opening costs decreased $4.5 million
or 40.1% to $6.7 million in fiscal 1997 from $11.2 million in fiscal 1996,
reflecting a reduction in per store opening costs as a result of increased focus
on controlling costs in this area.

          General and Administrative Expense.  General and administrative
expenses of $18.0 million  increased approximately $10.1 million, or 127.8% in
fiscal 1997 from $7.9 million in fiscal 1996.  As a percentage of net sales,
general and administrative expenses increased to 3.8% in fiscal 1997 as compared
to 3.1% for fiscal 1996, primarily attributable to increased corporate staff and
facilities to support the Company=Company's current and future growth and the
acquisitions of the specialty stores which have higher general and
administrative expenses as a percentage of net sales than the Company had
experienced prior to the acquisitions.

          Amortization of Intangibles.  Amortization of intangibles, which
includes amortization of goodwill and franchise rights, increased to
approximately $1.2 million for fiscal 1997 from approximately $0.2 million for
fiscal 1996.  This increase was primarily attributable to the amortization of
goodwill resulting from the acquisitions of Athletic Attic and Imperial Sports.

          Operating Income.  Operating income increased 64.9% to $34.3 million
in fiscal 1997 from $20.8 million in fiscal 1996 as a result of growth in the
Superstore Division and the results of operations in the acquired Specialty
Store Division.  As a percentage of net sales, operating income decreased from
8.2% in fiscal 1996 to 7.1% in fiscal 1997, due primarily to the percentage
decline in gross profit margin and

                                      -15-
<PAGE>
 
increase, as a percentage of net sales, in store operating expenses, general and
administrative expenses and amortization of intangibles, offset by the decline
in store opening costs as a percentage of net sales, as discussed above.

          Net Interest Income (Expense).  Net interest expense was approximately
$76,000 in fiscal 1997, compared to net interest income of approximately $3.9
million in fiscal 1996.  The decrease was primarily due to the decrease in cash
as a result of financing the acquisitions of the specialty stores, cash outlays
for opening 23 new superstores during fiscal 1997 and the remodeling and
information systems improvements at the Specialty Store Division.

FISCAL 1996 COMPARED TO FISCAL 1995

          Net Sales. Net sales increased $136.6 million or approximately 114.0%
for fiscal 1996 to $256.4 million compared to net sales of $119.8 million for
fiscal 1995. This increase was primarily attributable to 23 new stores opened
during the year. These new stores accounted for $73.7 million in additional net
sales compared to fiscal 1995.  In addition, there was an increase in comparable
store sales of 24.7%.  The calculation of comparable store sales for the period
includes 27 stores.
                                                                                
          Gross Profit. Gross profit as a percentage of net sales increased to
42.5% in fiscal 1996 from 42.4% in fiscal 1995.
                                                                                
          Store Operating Expenses. Store operating expenses increased $36.1
million or approximately 108.4% to $69.3 million in fiscal 1996 from $33.3
million in fiscal 1995. This increase was primarily attributable to the
operating expenses of the 23 stores opened during fiscal 1996.  As a percentage
of net sales, store operating expenses decreased to 27.0% in fiscal 1996 from
27.7% in fiscal 1995.
                                                                                
          Store Opening Costs. As is discussed in Note 1 to the Company's
Consolidated Financial Statements, effective February 1, 1996, the Company
changed its method of accounting for store opening costs, which are costs
principally for pre-opening salaries and travel that are incremental and
directly attributable to the opening of a new store. Under the new method, the
Company charges these costs to operations in the month that the store opens.
Previously, store opening costs were capitalized and amortized over the twelve
months following the store opening. The cumulative effect of this change in
accounting principle resulted in a $2.0 million charge to operations for the
year ended January 31, 1997, net of income taxes of $1.1 million. This change
increased operating expenses for the year ended January 31, 1997 by
approximately $5.1 million and decreased earnings before the cumulative effect
of change in accounting principle by approximately $3.3 million ($0.12 per basic
and $0.11 per diluted share). Had the statements of earnings for the years ended
January 31, 1996 and 1995 been restated for the effects of this change, store
opening costs for these years would have increased from the amounts reported in
the accompanying statements of earnings to approximately $4.6 million and $1.7
million, respectively. The increase in store opening costs in fiscal 1996 to
$11.2 million from the pro forma amount of $4.6 million in fiscal 1995 resulted
from increased store openings and an increase in the dedicated corporate staff
to support new store openings.

         General and Administrative Expense. General and administrative expense
increased $4.3 million or approximately 115.9% from $3.6 million to $7.9
million. The increase was primarily attributable to the addition of corporate
personnel to Just For Feet and in anticipation of continued growth and
development of the small store concept.
                                                                                

                                      -16-
<PAGE>
 
          Operating Income. Operating income increased to $20.8 million in
fiscal 1996 from $11.6 million in fiscal 1995 but decreased as a percentage of
net sales from 9.8% in fiscal 1995 to 8.2% in fiscal 1996.  This decrease is due
to the increase in store opening costs associated with the change in accounting
principle.  Had fiscal 1995 been restated for the effects of the change in
accounting principle, operating income for fiscal 1995 would have decreased to
approximately $9.8 million or 8.1% of sales.
                                                                                
          Net Interest Income. Net interest income increased to $3.9 million in
fiscal 1996 from $2.9 million in fiscal 1995. The change was primarily
attributable to investing the proceeds of the public offering of the Company=s
Common Stock in June 1996.

          Earnings Before Cumulative Effect of Change in Accounting Principle
and Net Earnings.  As a result of the above factors, earnings before cumulative
effect of change in accounting principle increased to $16.0 million in fiscal
1996 from earnings before cumulative effect of change in accounting principle of
$9.7 million ($8.5 million on a pro forma basis) in fiscal 1995.  Net earnings
increased to $13.9 million in fiscal 1996 from net earnings of $9.7 million
($8.5 million on a pro forma basis) in fiscal 1995.

SEASONALITY AND QUARTERLY FLUCTUATIONS
                                                                                
          The Company does not experience significant seasonal fluctuations in
its business. However, the highest sales periods for the Company are the spring,
back-to-school and Christmas selling seasons. The Company also generally
experiences lower gross margins during January and February due to retail
markdowns taken to clear seasonal merchandise. Quarterly results may fluctuate
materially depending on the timing of new store openings and related store
opening expenses, net sales contributed by new stores and increases or decreases
in comparable store sales.
                                                                                
          The following table sets forth certain unaudited results of operations
for the Company's last eight fiscal quarters ended January 31, 1998. The
unaudited information includes all normal recurring adjustments which management
considers necessary for a fair presentation of the information shown. All
amounts shown are in thousands, except per share and store data.

<TABLE>
<CAPTION>
                                                                       FISCAL 1997
                                                     ------------------------------------------------
                                                       FIRST       SECOND       THIRD       FOURTH
                                                      QUARTER     QUARTER      QUARTER      QUARTER
                                                     ----------  ----------  -----------  -----------
<S>                                                  <C>         <C>         <C>          <C>
Net sales..........................................     $92,803    $112,369     $131,033     $142,433
Gross profit.......................................      39,002      47,254       53,567       58,999
Earnings before income taxes.......................       8,253       7,877        8,813        9,277
Net earnings.......................................       5,201       4,805        5,376        6,021
Basic net earnings per common and common
   equivalent share................................     $  0.18    $   0.16     $   0.18     $   0.20
Diluted net earnings per common and common
   equivalent share................................     $  0.18    $   0.16     $   0.18     $   0.20
Basic weighted average shares outstanding..........      28,687      29,796       29,984       29,991
Diluted weighted average shares outstanding........      29,580      30,881       30,611       30,581

Company superstores at period end..................          54          61           66           73
Company specialty stores at period end.............          87          85           87           92
</TABLE>

                                      -17-
<PAGE>
 
<TABLE>
<CAPTION>
                                                                               FISCAL 1996
                                                              -----------------------------------------------
                                                                FIRST       SECOND       THIRD       FOURTH
                                                               QUARTER      QUARTER      QUARTER     QUARTER
                                                              ----------  ----------  -----------  ----------
<S>                                                           <C>         <C>         <C>          <C>
Net sales...................................................     $49,150     $58,379      $69,739     $79,129
Gross profit................................................      20,753      24,812       29,439      33,867
Earnings before income taxes and cumulative effect
   of change in accounting principle........................       4,899       4,535        7,902       7,407
Net earnings before cumulative effect of change
   in accounting principle..................................       3,176       2,930        5,028       4,826
Cumulative effect on prior years of change
   in accounting principle..................................       2,041           -            -           -
Net earnings................................................     $ 1,135     $ 2,930      $ 5,028     $ 4,826
Basic net earnings per common and common
   equivalent share before cumulative effect of
    change in accounting principle..........................     $  0.12     $  0.11      $  0.18     $  0.17
Basic net earnings per common and common
  equivalent share..........................................     $  0.04     $  0.11      $  0.18     $  0.17
Diluted net earnings per common and common
  equivalent share before cumulative effect of
   change in accounting principle...........................     $  0.11     $  0.10      $  0.17     $  0.16
Diluted net earnings per common and common
  equivalent share..........................................     $  0.04     $  0.10      $  0.17     $  0.16
Basic weighted average shares outstanding...................      26,310      27,348       28,373      28,478
Diluted weighted average shares outstanding.................      27,959      28,888       29,763      29,713
Company superstores at end of period........................          30          39           44          50
</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

     Just For Feet's primary sources of working capital are cash flow from
operations and borrowings under its line of credit and other credit facilities.
In addition, the Company's working capital was augmented by a portion of the
proceeds of three public offerings of Common Stock in January and September 1995
and June 1996. The Company had working capital of $155.5 million, $167.8 million
and $108.3 million at January 31, 1998, 1997 and 1996, respectively. The
principal uses of working capital have been to purchase inventory, equipment and
fixtures, to acquire Athletic Attic and Imperial Sports and to complete
construction of the Company's new corporate headquarters. During fiscal 1997,
the Company acquired approximately $43.5 million of property and equipment,
including approximately $14.9 million to open 23 new superstores, approximately
$5.1 million for improvements to existing superstores, approximately $8.0
million for corporate and superstore level management information systems and
approximately $8.5 million for the construction of the new corporate
headquarters and purchased approximately $7.0 million of property and equipment
in the Specialty Store Division to remodel acquired stores and to open ten new
specialty stores and improve management information systems, primarily at the
store level. The Company invested approximately $25.5 of cash in the
acquisitions of Athletic Attic and Imperial Sports. The Company's short-term
operational cash requirements are not highly seasonal.

     In June 1996, the Company completed a public offering of 1,638,750 shares
of Common Stock at $34.25 per share. Net proceeds of approximately $53 million
were used primarily to fund acquisitions 

                                      -18-
<PAGE>
 
and acquire fixed assets and inventory for the opening of new stores. The
Company had $82.5 million and $172.7 million in cash and marketable securities
as of January 31, 1998 and 1997, respectively.

     As an Alabama corporation, the Company is subject to Alabama shares tax on
the book value of the Company's Common Stock less certain exclusions. As part of
its planning for taxes, the Company makes temporary investments in short-term
federal obligations which are excludable for determining the taxable value of
the shares. At January 31, 1998 and January 31, 1997, the Company had borrowed
$75 million and $100 million, respectively, on a short-term basis from a bank
with the funds used to purchase U.S. Treasury securities. The total investment
in U.S. Treasury securities at January 31, 1998 and 1997 was $75 million and
$125 million, respectively. These securities were sold in the following month
(which is the beginning of the next fiscal year) with the proceeds utilized to
repay the short-term borrowings.

     As of January 31, 1998, the Company had borrowed $15.7 million under its
revolving bank line of credit. The line of credit, which expires July 1, 1999,
permits the Company to borrow up to $40.0 million for general working capital
purposes. Borrowings under such line of credit bear interest at a floating rate
above LIBOR (5.6% plus 1.5% at January 31, 1998) and are unsecured. The line of
credit contains certain financial covenants and other restrictions. The Company
also has several lease arrangements with leasing companies that the Company uses
to finance certain store fixtures, point-of-sale equipment and management
information systems.

     Just For Feet's current capital requirements are primarily for the opening
of new superstores and specialty stores. The Company estimates that the total
cash required to open a new 15,000 to 20,000 square foot prototype superstore,
including store fixtures and equipment, leasehold improvements, net working
capital and store opening costs, typically ranges from $1.5 to $2.5 million,
depending on the amount of vendor and landlord assistance. The Company estimates
that the total cash required to open a 4,000 to 6,000 square foot prototype
specialty store will range from $300,000 to $400,000. The Company expects to
open approximately 25 superstores and 25 to 35 specialty stores in fiscal 1998.

     The Company is not currently planning any major expenditures other than
those mentioned above and believes that the proceeds of its public offerings,
internally generated funds, cash on hand and its line of credit will be adequate
to fund its anticipated needs through at least the end of fiscal 1998.

IMPACT OF INFLATION
                                                                                
     The Company does not believe that inflation has had a material, adverse
effect on net sales or results of operations. The Company has generally been
able to pass on increased costs through increases in selling prices.

YEAR 2000

     The Company has established policies and procedures to coordinate changes
to computer systems and applications necessary to achieve a year 2000 date
conversion with no effect on customers or disruption to business operations.
These actions are necessary to ensure that the systems and applications will
recognize and process the year 2000 and beyond. Major areas of potential
business impact have been identified and conversion efforts have been completed
or are underway. The Company's primary operating and financial systems are
already Year 2000 compliant. The Company also is communicating with suppliers,
vendors, financial institutions and others with which it does business to
coordinate year 2000 conversion. The total cost of compliance and its effect on
the Company's future results of 

                                      -19-
<PAGE>
 
operations is being determined as part of the conversion planning, but is not
expected to be material.

1998 ANNUAL MEETING

     At the Company's 1998 Annual Meeting, the Company's shareholders will asked
to vote upon (i) a proposal to change the state of incorporation of the Company
from Alabama to Delaware, and (ii) a proposal to ratify the adoption of an
amendment to the Company's Articles of Incorporation which was approved at the
1996 Annual Meeting of Shareholders and to further ratify certain issuances of
Common Stock of the Company made in reliance upon the original adoption of such
amendment.

     The Board of Directors has proposed the reincorporation in Delaware in
order to take advantage of Delaware's more flexible and modern corporate law.
The Board of Directors has proposed the ratification discussed above in order to
eliminate uncertainty surrounding the shareholders' adoption of an amendment to
the Company's Articles of Incorporation at the Company's Annual Meeting of
Shareholders in 1996. At such meeting, held on May 28, 1996, the shareholders
adopted an amendment to the Company's Articles of Incorporation to increase the
number of authorized capital shares to 75,000,000 shares, consisting of
70,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, and
to eliminate a previously outstanding class of preferred shares which was no
longer outstanding (the "Charater Amendment"). Notice of the 1996 annual meeting
was first given to shareholders on May 8, 1996. The Constitution of the State of
Alabama of 1901 requires at least thirty days notice to shareholders prior to
increasing the number of authorized shares. The Company inadvertently provided
shareholders with only 20 days notice. The Company believes, based in part upon
opinions of counsel, that the inadvertent failure to provide notice of the 1996
annual meeting in a timely manner does not render the Charter Amendment void,
and that the Charter Amendment and subsequent share issuances are valid.
However, the Company has included in its 1998 Proxy Statement a resolution
ratifying the Charter Amendment and related share issuances in order to
eliminate any uncertainty. In the event shareholders fail to ratify the Charter
Amendment and the share issuances at the Annual Meeting, the Company will
continue to treat the Charter Amendment and the share issuances as valid.

     For a more detailed discussion of these proposals and other business to be
conducted at the 1998 Annual Meeting, please refer to the Proxy Statement
relating to such meeting.


ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
------------------------------------------------------------------

No response is required to this Item.

                                      -20-
<PAGE>
 
ITEM 8.   FINANCIAL STATEMENTS
-------   --------------------

The following financial statements are filed with this report:

          Independent Auditors' Report
          Consolidated Balance Sheets as of January 31, 1998 and 1997
          Consolidated Statements of Earnings for the years ended
               January 31, 1998, 1997 and 1996.
          Consolidated Statements of Shareholders' Equity for the years ended
               January 31, 1998, 1997 and 1996.
          Consolidated Statements of Cash Flows for the years ended
               January 31, 1998, 1997 and 1996.
          Notes to Consolidated Financial Statements

                                      -21-
<PAGE>
 
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of Just For Feet, Inc.:

We have audited the accompanying consolidated balance sheets of Just For Feet,
Inc. and subsidiaries as of January 31, 1998 and 1997, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended January 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Just For Feet, Inc. and
subsidiaries as of January 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1998 in conformity with generally accepted accounting principles.

As is discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for store opening costs effective February 1,
1996.


DELOITTE & TOUCHE LLP


Birmingham, Alabama
March 30, 1998

                                      -22-
<PAGE>
 
JUST FOR FEET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1998 AND 1997
(in thousands except per share amounts)
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
ASSETS                                                                        1998               1997  
<S>                                                                       <C>               <C>                              
CURRENT ASSETS:                                                                                        
  Cash and cash equivalents                                               $   82,490        $   138,785
  Marketable securities available for sale                                                       33,961
  Accounts receivable                                                         15,840              6,553
  Merchandise inventories                                                    206,128            133,323
  Other                                                                        6,709              2,121
           Total current assets                                              311,167            314,743
                                                                                                       
PROPERTY AND EQUIPMENT, NET                                                   94,529             54,922
                                                                                                       
REPURCHASED FRANCHISE RIGHTS, NET                                              2,913              3,113
                                                                                                       
GOODWILL, NET                                                                 36,106                   
                                                                                                       
OTHER ASSETS                                                                   3,637              3,056
                                                                          ----------        ----------- 
                                                                          $  448,352        $   375,834
                                                                          ==========        ===========    
LIABILITIES AND SHAREHOLDERS' EQUITY                                                                   
                                                                                                       
CURRENT LIABILITIES:                                                                                   
  Short-term borrowings                                                   $   90,667        $   100,000
  Accounts payable                                                            51,162             38,897
  Accrued expenses                                                             9,292              5,486
  Income taxes                                                                 1,363                425
  Current maturities of long-term obligations                                  3,222              2,106
           Total current liabilities                                         155,706            146,914
                                                                                                       
LONG-TERM OBLIGATIONS                                                         16,646              6,488
                                                                                                       
DEFERRED LEASE RENTALS                                                         7,212              3,036
                                                                                                       
DEFERRED INCOME TAXES                                                            704                840
                                                                          ----------        -----------      
           Total liabilities                                                 180,268            157,278 
                                                                          ----------        ----------- 
COMMITMENTS AND CONTINGENCIES (Notes 7, 11 and 12)

SHAREHOLDERS' EQUITY:
  Common stock - par value $.0001 per share; 70,000 shares authorized;
  29,993 (1998) and 28,495 (1997) shares issued and outstanding                    3                  3  
  Paid-in capital                                                            218,616            190,491
  Retained earnings                                                           49,465             28,062
                                                                          ----------        ----------- 
          Total shareholders' equity                                         268,084            218,556
                                                                          ----------        ----------- 
                                                                          $  448,352        $   375,834
                                                                          ==========        =========== 
</TABLE> 

See notes to consolidated financial statements.

                                      -23-
<PAGE>
 
JUST FOR FEET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS 
FOR THE YEARS ENDED JANUARY 31, 1998, 1997, AND 1996 
(In thousands except per share amounts)
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                           1998           1997          1996
                                                           ----           ----          ----  
<S>                                                     <C>            <C>           <C> 
Net sales                                               $ 478,638      $ 256,397     $ 119,819
                                                                                              
Cost of sales                                             279,816        147,526        68,969
                                                        ---------      ---------     ---------
                                                                                              
Gross profit                                              198,822        108,871        50,850
                                                        ---------      ---------     ---------
                                                                                              
Franchise fee, royalties and other revenue                  1,101            581           485
                                                        ---------      ---------     ---------
                                                                                              
OPERATING EXPENSES:                                                                           
  Store operating                                         139,659         69,329        33,264
  Store opening costs                                       6,728         11,240         2,712
  Amortization of intangibles                               1,200            180           157
  General and administrative                               18,040          7,878         3,575
                                                        ---------      ---------     ---------
    Total operating expenses                              165,627         88,627        39,708
                                                        ---------      ---------     ---------
                                                                                              
Operating income                                           34,296         20,825        11,627
                                                                                              
Interest expense                                           (1,446)          (832)         (703)
                                                                                              
Interest income                                             1,370          4,750         3,634
                                                        ---------      ---------     ---------
                                                                                              
Earnings before income taxes and cumulative                                                   
effect of change in accounting principle                   34,220         24,743        14,558
                                                                                              
Provision for income taxes                                 12,817          8,783         4,836
                                                        ---------      ---------     ---------

Earnings before cumulative effect of change in                                                
 accounting principle                                      21,403         15,960         9,722
                                                                                              
Cumulative effect on prior years (to January 31,                                      
 1996) of change in accounting principle                        0          2,041             0
                                                        ---------      ---------     ---------

    Net earnings                                        $  21,403      $  13,919     $   9,722 
                                                        ---------      ---------     ---------

BASIC EARNINGS  PER  SHARE:
 Before cumulative effect of change in accounting 
  principle                                             $    0.72      $    0.58     $    0.40
 Cumulative effect on prior years (to January 31, 
  1996) of change in accounting principle                       0           0.08             0
                                                        ---------      ---------     ---------

    Net earnings                                        $    0.72      $    0.50     $    0.40
                                                        ---------      ---------     ---------

DILUTED EARNINGS  PER  SHARE:
 Before cumulative effect of change in accounting 
  principle                                             $    0.70      $    0.55     $    0.38
 Cumulative effect on prior years (to January 31, 
  1996) of change in accounting principle                       0           0.07             0
                                                        ---------      ---------     ---------

    Net earnings                                        $    0.70      $    0.48     $    0.38
                                                        ---------      ---------     ---------

WEIGHTED AVERAGE SHARES OUTSTANDING:
  Basic                                                    29,615         27,627        24,246
                                                        ---------      ---------     ---------
  Diluted                                                  30,410         29,096        25,546
                                                        ---------      ---------     ---------
Proforma amounts assuming the change in accounting 
 principle is applied retroactively:
  Net earnings                                                                       $   8,487
                                                                                     ---------
  Basic earnings per share                                                           $    0.35
                                                                                     ---------
  Diluted earnings per share                                                         $    0.33
                                                                                     ---------
</TABLE> 

See notes to consolidated financial statements.
 

                                      -24-
<PAGE>
 
JUST FOR FEET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1998, 1997, AND 1996
(In thousands)

<TABLE> 
<CAPTION> 
---------------------------------------------------------------------------------------------------------------------------
                                                                 Common Stock                Paid-in        Retained
                                                         ----------------------------   
                                                           Shares         Par Value          Capital        Earnings
<S>                                                      <C>              <C>              <C>              <C> 
BALANCE, FEBRUARY 1, 1995                                      23,049       $  2           $  68,560        $  4,421     
                                                                                                                         
Public offering of common stock,                                                                                         
  net of offering costs                                         3,150          1              65,637                     
                                                                                                                         
Exercise of options                                                97                            429                     
                                                                                                                         
Income tax benefit from exercise                                                                                         
  of options                                                                                     468                     
                                                                                                                         
Other capital transactions                                          2                             30                     
                                                              -------       ----           ---------        --------      
Net earnings                                                                                                   9,722      
                                                                                                              
BALANCE, JANUARY 31, 1996                                      26,298          3             135,124          14,143    
Public offering of common stock,                                                                                         
  net of offering costs                                         1,639                         52,900                     
                                                                                                                         
Exercise of options                                               557                          1,822                     
                                                                                                                         
Income tax benefit from exercise                                                                                         
  of options                                                                                     620                     
                                                                                                                         
Other capital transactions                                          1                             25                     
                                                                                                                         
Net earnings                                                                                                  13,919    
                                                              -------       ----           ---------        --------        
BALANCE, JANUARY 31, 1997                                      28,495          3             190,491          28,062    
                                                                                                                         
Common stock issued in connection with                                                                                   
  acquisitions                                                  1,336                         27,123                     
                                                                                                                         
Exercise of options                                               161                            804                     
                                                                                                                         
Income tax benefit from exercise                                                                                         
  of options                                                                                     173                     
                                                                                                                         
Other capital transactions                                          1                             25                     
                                                                                                                         
Net earnings                                                                                                  21,403    
                                                              -------       ----           ---------        --------        
BALANCE, JANUARY 31, 1998                                      29,993       $  3           $ 218,616          49,465    
                                                              =======       ====           ---------        --------       
</TABLE> 
See notes to consolidated financial statements.

                                      -25-
<PAGE>
 
JUST FOR FEET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1998, 1997, AND 1996
(In thousands)
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                                                          1998          1997          1996    
<S>                                                                                     <C>           <C>            <C>      
OPERATING ACTIVITIES:                                                                                                         
  Net earnings                                                                         $  21,403     $  13,919      $  9,722  
                                                                                                                              
 Adjustments to reconcile net earnings to net cash used by operating activities:                                              
      Cumulative effect of change in accounting principle                                                2,041                
      Depreciation and amortization                                                        8,783         3,971         2,209  
      Deferred income taxes                                                                2,194          (744)          515  
      Deferred lease rentals                                                               2,111         1,456         1,029  
  Changes in assets and liabilities providing (using) cash, net of effects of                                                 
    acquisitions in 1998:                                                                                                     
      Accounts receivable                                                                 (8,918)       (3,143)       (3,071) 
      Merchandise inventories                                                            (56,616)      (76,685)      (31,540) 
      Other assets                                                                        (5,643)          271        (2,604) 
      Accounts payable                                                                     7,495        16,628        15,199  
      Accrued expenses                                                                     2,264         2,709           688  
      Income taxes                                                                           543        (2,506)        2,086  
                                                                                       ---------     ---------      --------  
          Net cash used by operating activities                                          (26,384)      (42,083)       (5,767) 
                                                                                       ---------     ---------      --------  
                                                                                                                              
INVESTING ACTIVITIES:                                                                                                         
  Purchases of marketable securities                                                     (14,726)      (44,778)      (94,086) 
  Maturities and sales of marketable securities                                           51,653        63,132        51,600  
  Purchases of property and equipment                                                    (43,446)      (33,206)      (14,380) 
  Acquisitions, net of cash acquired                                                     (25,548)                             
                                                                                       ---------     ---------      --------  
           Net cash used for investing activities                                        (32,067)      (14,852)      (56,866) 
                                                                                       ---------     ---------      --------  
FINANCING ACTIVITIES:                                                                                                         
  Short-term borrowings (repayments), net                                                 (9,333)       45,000        55,000  
  Borrowings of long-term debt                                                            12,739           479         3,102  
  Principal payments on long-term obligations                                             (2,054)       (1,335)       (1,034) 
  Proceeds from exercise of options                                                          804         1,822           429  
  Public offerings of common stock, net                                                                 52,900        65,637  
                                                                                       ---------     ---------      --------  
           Net cash provided by financing activities                                       2,156        98,866       123,134  
                                                                                       ---------     ---------      --------  
                                                                                                                              
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     (56,295)       41,931        60,501  
                                                                                                                              
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                             138,785        96,854        36,353  
                                                                                       ---------     ---------      --------
CASH AND CASH EQUIVALENTS, END OF YEAR                                                 $  82,490     $ 138,785      $ 96,854  
                                                                                       =========     =========      ========  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                                            
  Cash paid for:                                                                                                              
    Interest, net of amounts capitalized                                               $   1,376     $     832      $    724  
                                                                                       =========     =========      ========  
                                                                                                                              
    Income taxes                                                                       $   9,851     $   7,878      $  2,291  
                                                                                       =========     =========      ========  
                                                                                                                              
    Fair value of assets acquired under capital leases                                 $     507     $   1,633      $  1,749  
                                                                                       =========     =========      ========   
</TABLE> 

See notes to consolidated financial statements.

                                      -26-
<PAGE>
 
JUST FOR FEET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      DESCRIPTION OF BUSINESS - Just For Feet, Inc. is a national retailer of
      athletic and outdoor footwear and activewear for men, women and children
      which utilizes both a superstore and smaller specialty store concept. The
      Company's footwear merchandise is purchased principally from five vendors.
      Just For Feet operated 73 company-owned and 9 franchise superstores and 92
      company-owned and 48 franchise specialty stores at January 31, 1998.

      PRINCIPLES OF CONSOLIDATION - The accompanying financial statements
      include the consolidated accounts of Just For Feet, Inc. and its
      wholly-owned subsidiaries (collectively, "the Company"). All significant
      intercompany transactions and balances have been eliminated.

      CASH AND CASH EQUIVALENTS - The Company considers highly liquid
      investments with original maturities of three months or less to be cash
      equivalents.

      MERCHANDISE INVENTORIES - Merchandise inventories consist of athletic and
      outdoor footwear and clothing and are valued at the lower of cost
      (first-in, first-out method) or market. Costs associated with certain
      purchasing and merchandise handling activities are included in
      inventories.

      PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
      Depreciation and amortization are computed using the straight-line method
      over the lesser of the estimated useful lives of the related assets or the
      relevant lease term. Estimated useful lives range from two to ten years
      for furniture, fixtures and equipment, up to 20 years for leasehold
      improvements, and up to 39 years for buildings. Maintenance and repairs
      are expensed as incurred. Renewals and betterments which extend the useful
      lives of assets are capitalized.

      During the year ended January 31, 1998, the Company completed construction
      of new corporate facilities in Birmingham, Alabama. The former corporate
      headquarters and an office and retail center in Michigan with an aggregate
      net book value of $3,331 at January 31, 1998 represent real estate held
      for sale and are classified in other assets in the accompanying
      consolidated balance sheet. The Company expects the ultimate sales prices
      of these properties to exceed their respective carrying values.

      STORE OPENING COSTS - Effective February 1, 1996, the Company changed its
      method of accounting for store opening costs, which are costs principally
      for pre-opening employee salaries and travel which are incremental and
      directly attributable to the opening of a new store. Under the new
      accounting principle, the Company charges store opening costs to
      operations in the month the store opens. Previously, store opening costs
      were capitalized and amortized over the twelve months following the store
      opening. The cumulative effect of this change in accounting principle
      resulted in a $2,041 charge to income, net of income taxes of $1,137, for
      the year ended January 31, 1997 ($0.08 per basic and $0.07 per diluted
      share). This change increased operating expenses for the year ended
      January 31, 1997 by approximately $5,081 and decreased earnings before
      cumulative effect of change in accounting principle by approximately
      $3,277 ($0.12 per basic and $0.11 per diluted share). At January 31, 1998
      and 1997, 

                                      -27-
<PAGE>
 
      capitalized store opening costs of $968 and $624 are included in other
      current assets in the accompanying consolidated balance sheets.

      FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement of Financial Accounting
      Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial
      Instruments requires certain disclosures for financial instruments for
      which it is practicable to estimate the fair value. The Company's
      financial instruments consist of cash and cash equivalents, receivables,
      marketable securities, payables, accrued expenses and interest-bearing
      debt. The fair value of each of the Company's financial instruments
      approximates the carrying values reflected in the accompanying
      consolidated balance sheets at January 31, 1998 and 1997, primarily
      because of the short-term nature of these instruments. The Company's debt
      is a combination of fixed and variable rates which approximate market
      rates at January 31, 1998. As such, the carrying value of the debt
      approximates fair value.

      ACCOUNTING FOR STOCK-BASED COMPENSATION - The Company accounts for stock-
      based compensation in accordance with Accounting Principles Board Opinion
      No. 25, Accounting for Stock Issued to Employees. SFAS No. 123, Accounting
      for Stock-Based Compensation, requires certain pro forma disclosures which
      are presented in Note 11.

      GOODWILL - Goodwill is being amortized on the straight-line basis over 30
      years (Note 2). Periodically, the Company reviews the recoverability of
      goodwill based primarily upon an analysis of cash flow forecasts. Based on
      its most recent review, the Company believes that no impairment of
      goodwill exists. Accumulated amortization of goodwill was $1,000 at
      January 31, 1998.

      REPURCHASED FRANCHISE RIGHTS - Franchise rights repurchased in connection
      with acquisitions of franchisees in 1994 are being amortized over 20 years
      using the straight-line method. Related accumulated amortization was $692
      and $492 at January 31, 1998 and 1997, respectively.

      REVENUE RECOGNITION - Revenues from retail sales are recognized at the
      time of sale. The Company maintains an incentive program for frequent
      buyers of footwear. Estimated future costs associated with providing
      incentives under this program are included in accrued expenses.

      Franchise fee income is recognized when the related franchise store begins
      operations which coincides with substantial performance of initial
      services to the franchisee. Royalty revenues are recognized as earned.
      Sales of merchandise to franchisees (and related cost of sales) are netted
      in net sales in the accompanying statements of operations as such amounts,
      and the resulting gross profit, are immaterial.

      ADVERTISING - The Company expenses the cost of advertising as incurred.
      Advertising expense, net of co-op credits, charged to operations was 
      $27,714, $17,720 and $9,186 for the years ended January 31, 1998, 1997 and
      1996, respectively.

      INCOME TAXES - The Company accounts for income taxes using the liability
      method. Deferred tax assets and liabilities are recorded based on the
      differences between the financial statement and tax basis of assets and
      liabilities and the tax rates in effect.

      EARNINGS PER SHARE - In March 1997, the Financial Accounting Standards
      Board ("FASB") released SFAS No. 128, Earnings Per Share, which is
      effective for fiscal years ending after December 15, 1997. In accordance
      with this standard, the Company is now required to report two separate
      earnings per share numbers, basic and diluted. Accordingly, all historical
      earnings per share data has been restated to 

                                      -28-
<PAGE>
 
      conform to this new standard. Weighted average common shares outstanding
      (diluted), now includes the dilutive effect of stock options as follows:


<TABLE> 
<CAPTION> 
                                                                       1998           1997         1996
          <S>                                                         <C>            <C>          <C> 
          Weighted average common shares outstanding (basic)          29,615         27,627       24,246
          Dilutive effect of stock options                               795          1,469        1,300
                                                                      ------         ------       ------

          Weighted average common shares outstanding (diluted)        30,410         29,096       25,546
                                                                      ======         ======       ======
</TABLE> 

      Diluted earnings per share is the same number as the Company's previously
      reported earnings per share amounts. For the years ended January 31, 1998,
      1997 and 1996 there were options to purchase 1,292, 303 and 31,
      respectively, of common stock excluded from the computation of weighted
      average shares as such options would have been anti-dilutive.

      ACCOUNTING 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 reported period. Actual
      results may differ from those estimates.

      RECLASSIFICATIONS - Certain reclassifications have been made in the
      January 31, 1997 and 1996 presentations to conform to the January 31, 1998
      presentation.

2.    ACQUISITIONS

      In March 1997, the Company acquired Athletic Attic for approximately
      $9,700 in cash, net of cash acquired, the repayment of approximately
      $1,300 of Athletic Attic's debt and approximately $5,600 of the Company's
      common stock (259 shares). In May 1997, the Company acquired Imperial
      Sports for approximately $5,800 in cash, net of cash acquired, the
      repayment of approximately $8,700 of Imperial Sport's debt and
      approximately $21,500 of the Company's common stock (1,077 shares). These
      acquisitions have been accounted for as purchases and, accordingly, each
      purchase price has been allocated to assets acquired and liabilities
      assumed based upon their estimated fair values at the acquisition dates.
      The excess of the consideration paid over the net tangible and
      identifiable intangible assets acquired has been recorded as goodwill. The
      accompanying consolidated statement of earnings for the year ended January
      31, 1998, includes the results of operations of each acquisition from its
      respective purchase date.

                                      -29-
<PAGE>
 
      The estimated fair value of assets acquired and liabilities assumed in
      these acquisitions is summarized as follows:

<TABLE> 
        <S>                                                          <C>  
        Cash                                                         $    907  
        Merchandise inventories                                        16,188  
        Property and equipment                                          5,318  
        Other assets                                                    1,336  
        Goodwill                                                       37,044  
        Deferred income taxes                                           1,759  
        Accounts payable and accrued liabilities                       (6,312) 
        Deferred lease rentals                                         (2,064) 
        Other liabilities                                                (598) 
                                                                     --------- 
                                                                               
                                                                     $ 53,578  
                                                                     ========  
        Consideration consisted of:                                            
          Cash                                                       $ 26,455  
          Stock issued                                                 27,123  
                                                                     --------  
                                                                               
                                                                     $ 53,578  
                                                                     ========  
</TABLE> 

      The common stock issued in connection with these acquisitions represents
      non-cash investing and financing activities for the purpose of the
      consolidated statement of cash flows for the year ended January 31, 1998.
      Certain fees aggregating $222 associated with these acquisitions were paid
      to an entity in which a director of the Company is a partner. Pro forma
      results of operations are not presented because the effects of the
      acquisitions are not significant.

3.    PROPERTY AND EQUIPMENT

        Property and equipment is summarized as follows: 

<TABLE> 
<CAPTION> 
                                                                   1998              1997                                           
          <S>                                                   <C>               <C> 
        Owned:                                                                                                                
          Land                                                  $  3,807          $  3,537                                    
          Store facilities and corporate office                   15,212             7,254                                    
          Furniture, fixtures and equipment                       37,847            21,424                                    
          Leasehold improvements                                  42,765            23,718                                    
          Construction-in-progress                                 4,753             1,752                                    
                                                                --------          --------                                    
                                                                 104,384            57,685                                    
                                                                                                                              
          Accumulated depreciation and amortization              (12,910)           (5,866)                                   
                                                                --------          --------                                    
                                                                  91,474            51,819                                    
                                                                --------          --------                                    
        Under capital lease:                                                                                                  
          Furniture, fixtures and equipment                        4,103             3,796                                    
          Accumulated amortization                                (1,048)             (693)                                   
                                                                --------          --------                                    
                                                                   3,055             3,103                                    
                                                                --------          --------                                    

                                                                $ 94,529          $ 54,922                                    
                                                                ========          ========                                     
</TABLE> 

                                      -30-
<PAGE>
 
4.    MARKETABLE SECURITIES

        Marketable securities consisted of the following:

<TABLE> 
<CAPTION> 
                                                                       1997  
        <S>                                                          <C>   
        Marketable securities available for sale:                            
          Short-term:                                                        
            State and municipal bonds                                $ 32,916
            Other securities                                            1,045
                                                                     --------
                   Total                                               33,961
          Long-term -                                                       
            State and municipal bonds                                   2,966
                                                                     --------
                                                                     $ 36,927
                                                                     ======== 
</TABLE> 

      These investments were accounted for as securities "available for sale"
      under the provisions of SFAS No. 115, Accounting for Certain Investments
      in Debt and Equity Securities, whereby unrealized holding gains and losses
      are reported as a separate component of shareholders' equity until
      realized. At January 31, 1997, there were no material unrealized holding
      gains or losses as the market value of these investments approximated
      their cost. For the years ended January 31, 1998, 1997 and 1996, there
      were no significant realized gains or losses from investments. Gains and
      losses on the sale of marketable securities were determined using the
      specific identification method. Long-term marketable securities are
      classified in other assets.

5.    SHORT-TERM BORROWINGS

      The Company has a $40,000 unsecured line of credit bank agreement which
      expires July 1, 1999. (The president of one of the bank's subsidiaries is
      also a director of the Company.) Commitment fees are computed at 0.125%
      per annum on the unused portion of the line of credit and the Company is
      required to pay a yearly facility fee of $100. No compensating balances
      are required under the agreement. Borrowings under this line of credit
      bear interest at a floating rate above the LIBOR rate (5.6% plus 1.5% at
      January 31, 1998). The agreement contains certain covenants which include
      the maintenance of minimum net worth and certain financial ratios. At
      January 31, 1998, $15,667 was outstanding under this agreement; there were
      no borrowings outstanding under this agreement at January 31, 1997.

      At January 31, 1998 and 1997, the Company had $75,000 and $100,000
      respectively, of short-term borrowings that were used to purchase U.S.
      Treasury securities for Alabama share tax planning purposes. These
      securities, which were pledged as collateral on this debt, were sold in
      early February 1998 and 1997, respectively; the respective sale proceeds
      were utilized to repay such borrowings

                                      -31-
<PAGE>
 
6.    LONG-TERM OBLIGATIONS

      Long-term debt consists of various notes payable due in monthly
      installments through 2010 which bear interest at variable and fixed rates
      ranging from 6.9% to 12.0% at January 31, 1998. Such debt is
      collateralized principally by land, buildings, and equipment with an
      aggregate carrying value of approximately $17,872 at January 31, 1998.
      Scheduled maturities of long-term debt at January 31, 1998 were as
      follows:

<TABLE> 
<CAPTION> 
        Year Ending          
        January 31,      
        <S>                                                           <C> 
        1999                                                          $  2,533  
        2000                                                             2,499  
        2001                                                             2,450  
        2002                                                             2,239  
        2003                                                             1,826  
        Thereafter                                                       6,279  
                                                                      --------  
                                                                                
        Total                                                         $ 17,826  
                                                                      ========
</TABLE> 

      The Company leases certain furniture, fixtures and equipment under
      long-term agreements which are accounted for as capital leases. Scheduled
      maturities of obligations under these capital leases at January 31, 1998
      were as follows:

<TABLE> 
<CAPTION> 

        Year Ending                               
        January 31,                                
        <S>                                                        <C> 
           1999                                                    $      818 
           2000                                                           735 
           2001                                                           474 
           2002                                                            99 
           2003                                                            74 
        Thereafter                                                         60 
                                                                   ----------  
                                                                        2,260 
        Less amounts representing interest                               (218)
                                                                   ---------- 
        Total capital lease obligations                                 2,042 
        Less current portion                                             (689)
                                                                   ---------- 
                                                                              
        Long-term capital lease obligations                        $    1,353 
                                                                   ========== 
</TABLE> 

                                      -32-
<PAGE>
 
7.    OPERATING LEASE COMMITMENTS

      The Company leases certain store facilities and land under agreements
      which are accounted for as operating leases. Lease terms range from
      approximately five years to twenty years. Certain leases contain renewal
      options. At January 31, 1998, future annual minimum lease payments under
      operating leases with remaining terms in excess of one year are as
      follows:

<TABLE> 
<CAPTION> 
        Year Ending                  
        January 31,                  
        <S>                                                   <C>  
          1999                                                $  36,538   
          2000                                                   38,617
          2001                                                   38,562
          2002                                                   38,682
          2003                                                   38,623
          Thereafter                                            316,524
                                                              ---------         
        Total                                                 $ 507,546
                                                              =========
</TABLE> 

      The above table includes lease payments for 16 store facilities not yet
      opened at January 31, 1998. In addition, subsequent to January 31, 1998,
      the Company entered into a lease agreement for a store facility which
      requires aggregate rental payments of $3,465 through 2014. This commitment
      is not reflected in the above table.

      Total rent expense under all operating leases was as follows:

<TABLE> 
<CAPTION> 
                                                        1998             1997            1996
        <S>                                          <C>              <C>             <C>   
        Minimum rentals                              $ 23,891         $ 10,190        $  5,372
        Additional rentals based on sales volume          272              710             475
                                                     --------         --------        --------

                                                     $ 24,163         $ 10,900        $  5,847
                                                     ========         ========        ======== 
</TABLE> 

      Rent expense for operating leases which contain scheduled rent increases
      is recognized for financial reporting purposes on the straight-line
      method. Consequently, amounts which have been expensed for financial
      reporting purposes, but not yet paid, are reflected as deferred lease
      rentals in the accompanying consolidated balance sheets. Certain leases
      provide for future rent increases based upon increases in the Consumer
      Price Index. The Company has subleased a portion of two facilities to
      third parties. Future sublease rentals are not material.

                                      -33-
<PAGE>
 
8.    INCOME TAXES

      The consolidated provision for income taxes is comprised of the following:

<TABLE> 
<CAPTION> 
                              1998              1997             1996 
        <S>                 <C>               <C>              <C> 
        Current:                                                                
          Federal           $ 9,763           $ 7,397          $ 3,983          
          State                 860             1,245              338          
                            -------           -------          -------          
                             10,623             8,642            4,321          
                            -------           -------          -------    
        Deferred:                                                               
          Federal             1,991               130              475          
          State                 203                11               40          
                            -------           -------          -------   
                              2,194               141              515   
                            -------           -------          -------   
                                                                                
                            $12,817           $ 8,783          $ 4,836          
                            ========          ========         =======
</TABLE> 


      Following is a reconciliation of the applicable U.S. federal income tax,
      computed at the statutory rate, to the provision reflected in the
      consolidated statements of earnings, excluding the cumulative effect of
      the 1997 accounting change:

<TABLE> 
<CAPTION> 
                                                               1998          1997         1996       
        <S>                                                  <C>           <C>           <C>      
        Federal income tax at statutory rate                 $ 11,977      $ 8,660       $ 4,950  
        State income taxes, net of federal tax effect             691          820           266  
        Tax exempt interest income                               (270)        (856)         (604) 
        Amortization of goodwill                                  398                             
        Other                                                      21          159           224  
                                                             --------      -------       -------  
                                                                                                  
                                                             $ 12,817      $ 8,783       $ 4,836  
                                                             =========     =======       =======   
</TABLE> 


      Deferred tax assets and liabilities that arise as a result of temporary
      differences are summarized as follows:

<TABLE> 
<CAPTION> 
                                                                       1998        1997
        <S>                                                          <C>         <C> 
        Deferred tax assets:                                                                     
          Accrued expenses                                           $  865      $  625          
          Inventory valuation                                            56         370          
          Deferred lease rentals                                      2,509       1,124          
          Other                                                         381                      
                                                                     ------      ------          
                   Total deferred tax assets                          3,811       2,119          
                                                                     ------      ------          
        Deferred tax liabilities:                                                                
          Store opening costs                                          (358)       (231)         
          Other prepaid expenses                                       (430)       (213)         
          Franchise rights                                             (880)       (954)         
          Depreciation                                               (2,375)     (1,042)         
          Other                                                        (524)                     
                                                                     ------      ------          
                   Total deferred tax liabilities                    (4,567)     (2,440)         
                                                                     ------      ------           
                                                                     $ (756)     $ (321)
                                                                     -------     ------ 
</TABLE> 

                                      -34-
<PAGE>
 
9.    FRANCHISE AND OTHER ACTIVITIES

      Franchise operations consist of one franchisee who operates nine franchise
      superstores in two states and 17 franchisees who operate 48 franchise
      specialty stores in 15 states and Puerto Rico. The Company generally
      receives initial franchise fees for the superstore franchises on a per
      store basis for providing certain services and other advice related to
      opening a franchise store. In addition, the Company receives royalties
      from superstore and specialty franchise stores based on a percentage of
      sales of each franchise.

      Revenues from franchisees included in the accompanying consolidated
      statements of operations are as follows:

<TABLE> 
<CAPTION> 
                                                 1998         1997          1996        
        <S>                                     <C>           <C>          <C> 
        Initial franchisee fees                 $  45         $  15        $   30   
        Royalties                                 841           566           455   
                                                -----         -----         -----   
                                                  886           581           485   
                                                -----         -----         -----   
                                                                                    
        Merchandise sales to franchisees        $ 796         $ 399         $ 135   
                                                =====         =====         =====    
</TABLE> 


      Included in accounts receivable at January 31, 1998 and 1997 is $847 and
      $433, respectively, due from franchisees and $348 and $183, respectively,
      due from officers of the Company.

10.   COMMON STOCK

      In September 1995, the Company completed a third public offering of 3,150
      shares of its common stock at $22 per share. Net proceeds (after offering
      costs) from the sale of this stock approximated $65,638.

      In June of 1996, the Company completed a fourth public offering of 1,639
      shares of its common stock at $34.25 per share. Net proceeds (after
      offering costs) from the sale of this stock approximated $52,900.

      Certain shares of the Company's common stock are subject to registration
      rights.

      At the Company's annual meeting of shareholders on May 28, 1996, the
      Company's shareholders adopted an amendment to the Company's Amended and
      Restated Certificate of Incorporation to increase the number of authorized
      capital shares to 75,000 shares, consisting of 70,000 shares of common
      stock and 5,000 of preferred stock, and to eliminate Series A preferred
      shares then existing (the "Charter Amendment"). Notice of the 1996 meeting
      was first given to shareholders on May 8, 1996. The Revised Alabama
      Business Corporation Act, together with the Constitution of the State of
      Alabama of 1901, requires at least thirty days notice to shareholders
      prior to increasing the number of authorized shares. The Company
      inadvertently provided the shareholders with only twenty days notice. The
      Company believes, based in part upon opinions of counsel, that the
      inadvertent failure to provide notice of the 1996 annual meeting in a
      timely manner does not render the Charter Amendment void, and that the
      Charter Amendment and subsequent share issuances are valid. However, the
      Company has included in its 1998 Proxy Statement a resolution ratifying
      the Charter Amendment and related share issuances. In the event
      shareholders fail to ratify the charter Amendment and the share issuances
      at its 1998 Annual Meeting, the Company will continue to treat the Charter
      Amendment and the share issuances as valid and may in the future seek a
      judicial declaration that the Charter Amendment and the share issuances
      are valid.

                                      -35-
<PAGE>
 
11.   STOCK OPTION PLANS

      The Company maintains its Employee Incentive Stock Option Plan which
      provides for the grant of options covering an aggregate of 4,500 shares of
      the Company's common stock to Company employees. Options may be granted at
      prices which are equal to or greater than the fair market value of the
      shares at the date of grant and become exercisable over periods of
      generally one to five years. Options expire ten years from the date of the
      grant. At January 31 1998, the Company had 652 options available for
      future grants under this plan.

      In June 1995, the Company adopted the Non-Employee Director Stock Option
      Plan. This plan provides for the issuance of stock options to non-employee
      directors of up to 281 shares of the Company's common stock. Options may
      be granted at prices which are equal to or greater than the fair market
      value of the shares at the date of grant and become exercisable ratably
      over the three years commencing on the first anniversary date of the
      grant. At January 31, 1998 the Company had 39 options available for future
      grants under this plan.

      In June 1997, the Company adopted its 1997 Employee Incentive Plan which
      provides for the grant of incentive and non-qualified stock options, stock
      appreciation rights, restricted stock or performance awards covering an
      aggregate of 1,400 shares of the Company's common stock to eligible (as
      defined by the Plan) Company employees. Options may be granted at prices
      which are equal to or greater than the fair market value (as defined by
      the Plan) of the shares at the date of grant, except for options granted
      to employees who own directly or indirectly more than ten percent of the
      total combined outstanding shares of all classes of stock. Grants to such
      employees are to be priced at 110% of the fair market value of the shares
      at the date of grant. Options become exercisable over periods of generally
      one to five years and expire ten years from the date of the grant. During
      the year ended January 31, 1998, 100 options were granted under this plan
      to a director of the Company under a personal services contract;
      compensation expense related to this grant was not significant. At January
      31, 1998, the Company had 75 options available for future grants under
      this plan.

      Information regarding these option plans is as follows:

<TABLE> 
<CAPTION> 
                                                      WEIGHTED      
                                                       AVERAGE       
                                                      EXERCISE      
                                       OPTIONS          PRICE        
        <S>                            <C>            <C> 
        At February 1, 1995             1,820          $ 5.77          
          Granted                         874           13.55       
          Exercised                       (97)           4.52       
          Forfeited                       (95)           8.48       
                                        -----                       
        At January 31, 1996             2,502            8.43       
          Granted                       1,381           25.78       
          Exercised                      (557)           3.38       
          Forfeited                      (280)          21.21       
                                        -----                       
        At January 31, 1997             3,046           16.08       
          Granted                       3,019           14.72       
          Exercised                      (160)           4.99       
          Forfeited                      (752)          13.71       
          Cancelled                      (930)          25.69       
                                        -----                       
        At January 31, 1998             4,223           13.93       
                                        =====                        
</TABLE> 

                                      -36-
<PAGE>
 
      The following table summarizes information about stock options outstanding
      and exercisable at January 31, 1998:

<TABLE> 
<CAPTION> 
                                              OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                                -------------------------------------------------    ----------------------------- 
                                                   WEIGHTED            WEIGHTED                          WEIGHTED
            RANGE OF                                AVERAGE             AVERAGE                           AVERAGE              
            EXERCISE              NUMBER            EXERCISE           REMAINING          NUMBER          EXERCISE         
             PRICE              OUTSTANDING          PRICE           LIFE (YEARS)       EXERCISABLE        PRICE           
        <S>                     <C>                 <C>              <C>                <C>               <C>              
        $ 1.48 - $ 5.13                240          $ 2.96               6.1                  222         $  2.86            
        $ 8.69 - $13.84              1,567           10.87               8.2                  493            9.24             
        $14.09 - $14.75              1,145           14.71               9.3                    5           14.33           
        $15.44 - $19.42                990           16.99               8.9                  138           17.13           
        $20.00 - $37.08                281           26.08               8.2                  118           24.97            
                                ----------                                              ---------                           
                                     4,223                                                    976                           
                                ==========                                              =========                           
</TABLE> 

       The Company has adopted the disclosure-only provisions of SFAS No. 123
       Accounting for Stock-Based Compensation. Accordingly, no compensation
       cost has been recognized in the Company's financial statements for the
       stock option plans. The weighted average fair value of options granted
       during the years ended January 31, 1998, 1997 and 1996 was $5.10, $9.86
       and $4.05, respectively. Had compensation cost for the Company's option
       plans been determined based on the fair value at the grant date for
       awards during the years ended January 31, 1998, 1997 and 1996 consistent
       with the provisions of that statement, the Company's net earnings (and
       basic and diluted earnings per share) prior to the cumulative effect of
       the change in accounting principle would have been reduced to $17,031
       ($0.58 basic and $0.56 diluted earnings per share), $12,668 ($0.46 basic
       $0.44 diluted earnings per share) and $9,003 ($0.37 basic and $0.35
       diluted earnings per share), respectively. The fair value of each option
       grant is estimated on the date of grant using the Black-Scholes
       option-pricing model with the following weighted average assumptions for
       the years ended January 31, 1998 and 1997, respectively: expected
       volatility of 30% and 34%; risk-free interest rate of 6.2% and 6.5%;
       expected lives of 4.5 and 4.6 years and no dividends paid during the life
       of the options.

12.    LITIGATION

       In June 1997, a lawsuit was filed by a shareholder (individually and on
       behalf of others) against the Company and certain of its current and
       former officers, a former director and two of the four managing
       underwriters in the Company's June 1996 public offering of common stock.
       The suit alleges that the Company's registration statement and prospectus
       used in such offering contained certain misleading financial information.
       The Company and its named officers and directors deny liability on the
       claims (the dollar amount of which is currently unspecified) and are
       vigorously defending the suit.

                                   * * * * *

                                      -37-
<PAGE>
 
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------   ---------------------------------------------------------------
          FINANCIAL DISCLOSURE.
          ---------------------

There has been no occurrence requiring a response to this Item.


                                   PART III


     Except as to information with respect to executive officers which is
contained in a separate heading under Item 1 to this Form 10-K, the information
required by Part III of Form 10-K is, pursuant to General Instruction G(3) of
Form 10-K, incorporated by reference from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's 1998 Annual
Meeting of Shareholders (the "Proxy Statement").  The Company will, within 120
days of the end of its fiscal year, file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------  -------------------------------------------------- 

     The information concerning directors and executive officers of the
Registrant is set forth in the Proxy Statement under the headings "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance," which
information is incorporated herein by reference.  The name, age and position of
each executive officer of the Company is set forth under the heading "Executive
Officers" in Item 1 of this Report.

ITEM 11.  EXECUTIVE COMPENSATION.
--------  ---------------------- 

     The information concerning executive compensation is set forth in the Proxy
Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------  -------------------------------------------------------------- 

     The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading "Security
Ownership of Certain Beneficial Owners and Management," which information is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------  ---------------------------------------------- 

     The information concerning certain relationships and related transactions
is set forth in the Proxy Statement under the headings "Certain Transactions"
and "Compensation Committee Interlocks and Insider Participation," which
information is incorporated herein by reference.

                                      -38-
<PAGE>
 
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
--------  ----------------------------------------------------------------

     (a)(1)  Financial Statements.
             ---------------------

        The following financial statements and auditors' report have been filed
with Item 8 in Part II of this report:

     Independent Auditors' Report
     Consolidated Balance Sheets as of January 31, 1998 and 1997
     Consolidated Statements of Earnings for the years ended
        January 31, 1998, 1997 and 1996
     Consolidated Statements of Shareholders' Equity for the years ended
        January 31, 1998, 1997 and 1996
     Consolidated Statements of Cash Flows for the years ended
        January 31, 1998, 1997 and 1996
     Notes to Consolidated Financial Statements

        (2)  Financial Statement Schedules.
             ------------------------------

        All financial statement schedules are omitted as the required
information is inapplicable.

        (3)  Exhibits.
             ---------

        The exhibits listed below are filed with or incorporated by reference
into this Report.  The exhibits which are denominated with an asterisk (*) were
previously filed as part of, and are hereby incorporated by reference from
either (i) the Company's Registration Statement on Form S-1 under the Securities
Act of 1933, Registration No. 33-74404 ("1994 S-1"), (ii) the Company's
Registration Statement on Form S-1 under the Securities Act of 1933,
Registration No. 33-87414 (the "1995 S-1") or (iii) the Company's Annual Report
on Form 10-K for the fiscal year ended January 31, 1997 (the "1997 10-K").
Unless otherwise indicated, the exhibit number corresponds to the exhibit number
in the referenced document.


EXHIBIT NUMBER                           DESCRIPTION
--------------                           -----------

     *2.1      Asset Purchase Agreement dated March 17, 1997 by and between
               Owensboro Investment Company, Inc. and Just For Feet, Inc. (1997
               10-K)

     *2.2      Stock Purchase Agreement dated March 17, 1997 by and among Just
               For Feet, Inc., Premium Sports, Inc. and John Gasser (1997 10-K)

     *2.3      Agreement and Plan of Merger dated March 17, 1997, by and among
               Just For Feet, Inc., an Alabama corporation, IAC Acquisition
               Corporation, a Michigan corporation and wholly owned subsidiary
               of Just For Feet, Imperial Acquisition Corporation, a Michigan
               corporation, and certain of the shareholders of Imperial
               Acquisition Corporation (1997 10-K)

                                      -39-
<PAGE>
 
EXHIBIT NUMBER                           DESCRIPTION
--------------                           -----------

     *3(i)     Amended and Restated Certificate of Incorporation of Just For
               Feet, Inc. (1994 S-1, Exhibit 3(a))

     *3(ii)    Amended and Restated Bylaws of Just For Feet, Inc. (1994 S-1,
               Exhibit 3(b))

     *4        Specimen of Common Stock Certificate of the Company. (1994 S-1)

     *9        Voting Trust Agreement dated August 10, 1993, by and among the
               Company, Pamela Beryl Ruttenberg and Harold Ruttenberg. (1994 
               S-1)

     10.1      Just For Feet. Inc. 1997 Employee Incentive Plan

     *10.2     Employment Agreement dated November 6, 1996, between the Company
               and Alex Bond (1997 10-K)

     10.3      Employment Agreement dated May 1, 1997, between the Company and
               Eric L. Tyra

     10.4.1    Employment Agreement dated January 8, 1998 between the Company
               and Adam J. Gilburne

     10.5      Master Revolving Promissory Note dated January 26, 1998 in the
               principal amount of $40,000,000 payable to Compass Bank

     *10.6     Just For Feet, Inc. Employee Incentive Stock Option Plan, as
               amended. (1994 S-1, Exhibit 10(g))

     *10.6.1   Amendment No. 2 to the Just For Feet, Inc. Employee Incentive
               Stock Option Plan. (1994 S-1)

     *10.6.2   Amendment No. 3 to the Just For Feet, Inc. Employee Incentive
               Stock Option Plan (1997 10-K)

     *10.7     Franchise Agreement dated November 20, 1989, between Casual Wear
               II, Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(h))

     *10.8     Franchise Agreement dated May 19, 1992, between Casual Wear II,
               Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(i))

     *10.9     Franchise Agreement dated April 1, 1993, between Casual Wear II,
               Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(k))

     10.10     Promissory Note dated February 3, 1997 in the principal amount of
               $6,000,000 payable to Compass Bank, as amended.

                                      -40-
<PAGE>
 
     *10.11    Loan Agreement dated January 15, 1988, by and between Harold
               Ruttenberg, Pamela B. Ruttenberg (Borrowers), Casual Wear, Inc.
               (Guarantor) and Warrior Savings Bank, together with Note in the
               amount of $400,000 and Guaranty Agreement. (1994 S-1, Exhibit
               10(bb))

     *10.12    Loan Agreement dated December 1, 1988, by and between Harold
               Ruttenberg, Pamela B. Ruttenberg (Borrowers), Casual Wear, Inc.
               (Guarantor) and Warrior Savings Bank, together with Note in the
               amount of $200,000 and Guaranty Agreement. (1994 S-1, Exhibit
               10(cc))

     *10.13    Purchase and Sale Agreement dated July 14, 1993, between Florida
               Mall Peripheral Associates and the Company. (1994 S-1, Exhibit
               10(dd))

     *10.14    Sales Contract dated January 18, 1994, between Harold Ruttenberg
               and Pam Ruttenberg and the Company. (1994 S-1, Exhibit 10(jj))

     10.15     Personal Service Agreement dated August 22, 1997 between the
               Company and Bart Starr, Sr.

     10.16     Promissory Note dated August 22, 1997 in the principal amount of
               $5,000,000 payable to General Electric Capital Corporation

     10.16.1   Security Agreement dated August 21, 1997 between Just For Feet,
               Inc. and General Electric Capital Corporation

     21        Subsidiaries

     23.1      Consent of Deloitte & Touche LLP

     24.1      Power of Attorney of Randall L. Haines

     24.2      Power of Attorney of Michael P. Lazarus

     24.3      Power of Attorney of Bart Starr

     24.4      Power of Attorney of Edward S. Croft, III

     24.5      Power of Attorney of David F. Bellet



(b)  Reports on Form 8-K.
     ------------------- 

                                      -41-
<PAGE>
 
                                  SIGNATURES

     Pursuant to the requirements of Section 13 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.

                                        JUST FOR FEET, INC.


Date:  April 24, 1998         By:  /s/ Harold Ruttenberg
                                 -----------------------------------------------
                                       Harold Ruttenberg
                                       Chairman of the Board,
                                       President and Chief Executive Officer


Date:  April 24, 1998         By:  /s/ Eric L. Tyra
                                 -----------------------------------------------
                                       Eric L. Tyra
                                       Executive Vice President - Finance
                                       and Chief Financial Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:

Signature                      Title                         Date            
---------                      -----                         ----            
                                                                             
 /s/ Harold Ruttenberg         Chairman of the Board,        April 24, 1998  
--------------------------     President and Chief                           
  Harold Ruttenberg            Executive Officer                             

 /s/ Eric L. Tyra              Executive Vice President -    April 24, 1998  
--------------------------     Finance and Chief Financial                   
 Eric L. Tyra                  Officer                                       
                                                                             
                 *             Director                      April 24, 1998  
--------------------------                                                   
 Michael P. Lazarus                                                          
                                                                             
                 *             Director                      April 24, 1998  
--------------------------                                                   
 Bart Starr, Sr.                                                             
                                                                             
                 *             Director                      April 24, 1998  
--------------------------                                                   
 Randall L. Haines                                                           
                                                                             
                 *             Director                      April 24, 1998  
--------------------------                                                   
David F. Bellet                                                              
                                                                             
                 *             Director                      April 24, 1998  
--------------------------     
Edward S. Croft, III

*By:   /s/ Eric L. Tyra
     ------------------
     Eric L. Tyra, as Attorney-in-Fact pursuant to
     Powers of Attorney filed as exhibits to this Report
<PAGE>
 
                                 EXHIBIT INDEX


                                                                     Sequential
Exhibit Number                           Description                Page Number
--------------                 -------------------------------      -----------

     10.1           Just For Feet. Inc. 1997 Employee Incentive Plan

     10.3           Employment Agreement dated May 1, 1997, between the Company
                     and Eric L. Tyra

     10.4.1         Employment Agreement dated January 8, 1998 between the
                    Company and Adam J. Gilburne

     10.5           Master Revolving Promissory Note dated January 26, 1998 in
                    the principal amount of $40,000,000 payable to Compass Bank

     10.10          Promissory Note dated February 3, 1997 in the principal
                    amount of $6,000,000 payable to Compass Bank, as amended.

     10.15          Personal Service Agreement dated August 22, 1997 between the
                    Company and Bart Starr, Sr.

     10.16          Promissory Note dated August 22, 1997 in the principal
                    amount of $5,000,000 payable to General Electric Capital
                    Corporation

     10.16.1        Security Agreement dated August 21, 1997 between Just For
                    Feet, Inc. and General Electric Capital Corporation

     21             Subsidiaries

     23.1           Consent of Deloitte & Touche LLP

     24.1           Power of Attorney of Randall L. Haines

     24.2           Power of Attorney of Michael P. Lazarus

     24.3           Power of Attorney of Bart Starr

     24.4           Power of Attorney of Edward S. Croft, III

     24.5           Power of Attorney of David F. Bellet