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 NOVEMBER 7, 1998
      COMMISSION FILE NUMBER 1-11722

                             CHIC BY H.I.S, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                   DELAWARE                                 13-3494627
        (State or other jurisdiction of                  (I.R.S. Employer
        incorporation or organization)                  Identification No.)

       1372 BROADWAY, NEW YORK, NEW YORK                       10018
   (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (212) 302-6400

           Securities registered pursuant to Section 12(b) of the Act:

                                                      NAME OF EACH EXCHANGE
              TITLE OF EACH CLASS                      ON WHICH REGISTERED
              -------------------                     ---------------------

                 Common Stock                      New York Stock Exchange, Inc.
                $0.01 par value

       Securities registered pursuant to Section 12(g) of the Act:  NONE

      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 [ ].

      As of January 15,  1999,  the  aggregate  market value of the voting stock
held by  non-affiliates  of the registrant was  approximately  $31,586,928 based
upon the closing  market  price of a share of Common Stock on the New York Stock
Exchange as reported by the Wall Street Journal.

      As of January 15, 1999,  the  registrant  had  9,870,793  shares of Common
Stock outstanding.






<PAGE>



                       DOCUMENTS INCORPORATED BY REFERENCE


      (1) Portions of the  registrant's  Annual Report to  Stockholders  for the
fiscal year ended  November 7, 1998 are  incorporated  by reference into Parts I
and II hereof.

      (2) Portions of the  registrant's  Proxy  Statement,  which has been filed
with  the  Securities  and  Exchange  Commission,  for  the  Annual  Meeting  of
Stockholders to be held on February 24, 1999 are  incorporated by reference into
Part III hereof.

                                  * * * * * * *

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      The  Private  Securities  Litigation  Reform Act of 1995  provides a "safe
harbor" for forward- looking statements.  Except for the historical  information
contained or incorporated by reference in this filing,  the matters discussed or
incorporated  by  reference   herein  are   forward-looking   statements.   Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that may cause the actual results, performance, or achievements of
the Company,  or industry  results,  to be materially  different from any future
results,   performance,   or   achievements   expressed   or   implied  by  such
forward-looking  statements. Such factors include, among others, those set forth
below  under  the  heading  "Additional  Cautionary  Statements"  as well as the
following: general economic and business conditions; industry capacity; fashion,
apparel and other industry trends; competition;  overseas expansion; the loss of
major  customers;  changes  in  demand  for the  Company's  products;  cost  and
availability  of raw  materials;  changes in business  strategy  or  development
plans; quality of management; and availability, terms and deployment of capital.
Special  attention should be paid to the  forward-looking  statements  contained
herein  including,  but not limited  to,  statements  relating to the  Company's
ability to obtain sufficient financial resources to meet its capital expenditure
and  working   capital  needs,   financial   risks   associated  with  customers
experiencing  financial  difficulties,  the benefits expected to be derived from
the   restructuring   and  Mexican  plant  opening  described  in  this  report,
international expansion and competition.

ADDITIONAL CAUTIONARY STATEMENTS

      Dependence on Major  Customers.  During fiscal 1998 and 1997, sales to one
major customer (with sales in excess of 10% of total sales),  Kmart  Corporation
("K-Mart"),  accounted  for  approximately  23.5%  and  23.4%  of the  Company's
consolidated net sales, respectively. For the year ended November 2, 1996, sales
to two major customers (with sales in excess of 10% of total sales) approximated
25.5% and 12.2% of consolidated  net sales on an individual  basis.  The loss of
such a major  customer  could  have an  adverse  effect  on the  results  of the
Company's  operations.  In addition,  several of the  Company's  licensees  sell
products bearing the Company's trademarks to the same retailer.  The Company has
no long-term commitments or long-term contracts with any of its customers.

      Recent Apparel  Industry  Trends.  Competition in the apparel industry has
been exacerbated by the recent consolidations and closings of major stores. Like
many of its  competitors,  the  Company  sells  to  certain  retailers  who have
recently  experienced  financial  difficulties  and some of whom  are  currently
operating  under the  protection of the federal  bankruptcy  laws.  Although the
Company  monitors the financial  condition of its customers,  the Company cannot
predict what effect, if any, the financial condition of such customers will have
on the Company.  The Company  believes  that  developments  to date within these
companies  have not had a material  adverse  effect on the  Company's  financial
position or results of operations.




<PAGE>



      Nature of Industry;  Dependence on Jeans.  The apparel  industry is highly
competitive and characterized  generally by ease of entry. Many of the Company's
competitors are substantially  larger and have greater financial,  marketing and
other resources than the Company. The Company's revenues are derived principally
from sales of jean  products.  Although the Company's  products for the domestic
market  have  historically  been less  sensitive  to fashion  trends than higher
fashion  lines,  the apparel  industry is subject to rapidly  changing  consumer
preferences,  which may have an adverse  effect on the results of the  Company's
operations if the Company materially misjudges such preferences.

      Risks of Doing Business  Overseas.  In general,  the Company believes that
the  demand  for jeans in  foreign  markets  is more  susceptible  to changes in
fashion preferences than in the domestic market. In addition, it is not possible
to  predict  accurately  the  effect  that the  continued  elimination  of trade
barriers  among  members  of the  European  Union  will  have  on the  Company's
operations in Europe.  The Company is also  expanding its  activities in Eastern
Europe, where economic, political and financial conditions are changing rapidly,
and  commenced  manufacturing  operations  in Mexico in fiscal 1997. In general,
there can be no assurance that the results of the Company's European  operations
or the  operations  in Mexico will not be adversely  affected by factors such as
restrictions  on  transfer of funds,  political  instability,  competition,  the
relative strength of the U.S. dollar, changes in fashion preferences and general
economic conditions.

      Absence of  Dividends.  Except for the  shareholder  rights  redemption in
fiscal  1998,  the  Company  has not,  in recent  years,  paid any cash or other
dividends on its Common  Stock,  and there can be no assurance  that the Company
will pay cash dividends in the foreseeable  future.  As a holding  company,  the
ability  of the  Company  to pay  dividends  is  dependent  upon the  receipt of
dividends or other payments from its subsidiaries. The Company's domestic credit
agreements (the "Loan Agreements")  contain certain limitations on the Company's
ability to pay dividends.

      Leverage and Financial  Covenants.  Although debt and equity  transactions
have improved the Company's  operating  and financial  flexibility,  the Company
continues  to have  indebtedness  that could  adversely  affect  its  ability to
respond to changing business and economic  conditions.  At November 7, 1998, the
Company  had  an  aggregate  of  approximately  $70.4  million  of  indebtedness
(including capital leases)  outstanding and the Company's  stockholders'  equity
was  approximately  $59.5 million.  In addition,  the Company's Loan  Agreements
contain  covenants that impose certain  operating and financial  restrictions on
the Company.  Such restrictions  affect, and in many respects limit or prohibit,
among other things, the ability of the Company to incur additional indebtedness,
create  liens,  sell  assets,  engage in mergers or  acquisitions,  make capital
expenditures and pay dividends.

      Y2K. The Company continues to assess the potential impact of the Year 2000
(Y2K) computer processing issue on its management and information  systems.  The
Company believes that it has a prudent approach in place to address these issues
and monitor remedial action.  The approach  includes:  an assessment of internal
programs and  equipment;  communication  with major  customers  and vendors with
respect to the state of readiness of their  systems;  an  evaluation of facility
related  issues and the  development  of a  contingency  plan.  This approach is
designed to maintain an  uninterrupted  supply of goods and services to/from the
Company.

      The Company is  incorporating  the Y2K programming  modifications  with an
overall  upgrade  in its  computer  programming  language.  While  this  project
involves a significant  effort from its programming  staff, the Company believes
that it is on schedule for a timely completion.  All programs are expected to be
reviewed,  remediated  and  converted  by  mid-1999.  The Company is also in the
process of assessing  all hardware  components  and is not aware of any material
investment  required for its mainframe and critical hardware equipment to be Y2K
compliant.




<PAGE>



      The Company is in a  continuous  process of  communicating  with its major
customers  and  suppliers.   This  contact  is  designed  to  determine  systems
compatibility  and  compliance.  The  Company  has  been  assured  by its  major
suppliers  that  there  will be no  disruption  in the  delivery  of  goods  and
services.  The Company  believes that  adequate  resources are available for the
supply of its raw materials and facility related equipment will be operational.

      The Company has relied  entirely on internal  programming  and operational
resources for review and remediation of Y2K issues.  Accordingly, no incremental
costs have been expended for such activities.

      At this time, the Company is not aware of any internal or external systems
related to the Y2K  programming  issues  which  would  prevent or  significantly
impair the Company from continuing operations after the turn of the century. The
Company  continues to assess the risks associated with program failures and will
develop a formal contingency plan with its business partners to address specific
risks. At this point, no serious risks of failure have been identified.

      The  failure  to  correct  a  material  Y2K  problem  could  result  in an
interruption  in normal  business  activity.  The Company's  plan is expected to
significantly reduce the risk associated with the Y2K issue. However, due to the
inherent uncertainty of the Y2K issue and dependence on third-party  compliance,
no assurance can be given that potential Y2K failures will not adversely  effect
the Company's operations, liquidity and financial position.





<PAGE>



                                    PART I



ITEM 1.     BUSINESS

GENERAL

     Chic by H.I.S,  Inc.  (the  "Company")  was  incorporated  in  Delaware  in
December 1988 under the name Henry I. Siegel  Holding Corp. and changed its name
to Chic by H.I.S,  Inc. on  December  15,  1992.  All  references  herein to the
"Company" include Chic by H.I.S, Inc. and its domestic and foreign  subsidiaries
unless otherwise indicated by the context.

      The Company designs,  manufactures and markets  moderately  priced,  basic
style,  cotton denim jeans,  casual pants and shorts for women,  girls,  men and
boys,  which are sold  throughout  the United  States  principally  through mass
merchandisers.  The Company also markets similar apparel in Europe, primarily in
Germany.  In the United  States,  women's and girls'  jeans and casual pants are
generally  marketed  under the Chic(R) brand name, and men's and boys' jeans and
casual pants are  generally  marketed  under the H.I.S(R)  brand name,  while in
Europe all of the Company's apparel is sold under the H.I.S brand name.

      The Company also  licenses the use of its  trademark,  primarily  the Chic
brand name, to  manufacturers of a variety of products that the Company does not
manufacture,   including   women's   sportswear,   intimate   apparel,   shirts,
accessories,  hosiery and footwear.  Many of these products are sold by the same
retailers  that sell the Company's  products and are  generally  promoted at the
retail level in a manner that complements the Company's products.  In the United
States,  the Company  sells its apparel  primarily  to mass  merchandisers.  The
Company's marketing and advertising strategy emphasizes the quality, comfortable
fit and competitive  pricing of its jeans and pants.  The Company  believes that
its ability to respond quickly to its domestic  customers' needs, as a result of
its experienced  manufacturing  capabilities and its state-of-the-art  ordering,
inventory and management information systems, gives it an advantage over many of
its competitors,  particularly  those which import finished goods. The Company's
excellence in servicing mass  merchandisers has been recognized by industry-wide
awards and, in the opinion of management,  is an important  asset in maintaining
and broadening its business.

      Information  with  respect to sales,  operating  income  and  identifiable
assets attributable to each of the Company's geographic areas appears in Note 10
of Notes to Consolidated Financial Statements on page 21 of the Company's Annual
Report to  Stockholders  for the fiscal year ended November 7, 1998 (the "Annual
Report to Stockholders") and is incorporated herein by reference.

UNITED STATES OPERATIONS

      United States sales increased  during fiscal 1992 primarily as a result of
greater  sales to major mass  merchandiser  customers,  which  generally  gained
market share in the jeans market relative to other  retailers,  and an improving
United  States  economy.  During  fiscal  1993,  United  States  sales  remained
relatively constant. During fiscal 1994, United States sales increased primarily
due to increased  advertising and remained  relatively  constant  through fiscal
1995. During fiscal 1996, United States sales decreased primarily as a result of
a shrinking  market share and  substantial  price  competition.  This  condition
continued  through fiscal 1998,  while the Company  continued to compete against
private label merchandise at the mass merchant channel of distribution.



                                      1

<PAGE>



      During the first and fourth quarters of fiscal 1996, management authorized
and committed the Company to undertake  significant  downsizing and  operational
changes which, during 1996, resulted in restructuring and special charges of $30
million.

      The  charge  in  the  first  quarter   included  the  closing  of  certain
manufacturing facilities in Tennessee and Kentucky. These first quarter closures
resulted in the  termination  of  approximately  940 employees and resulted in a
total charge against  earnings  aggregating $15 million.  In the fourth quarter,
the Company  identified  additional  manufacturing  facilities to be closed. The
Company has also started to move certain manufacturing operations to Mexico. The
additional  closures  resulted in the termination of approximately 700 employees
and a total charge against earnings aggregating $15 million.

      In fiscal 1997, the Company proceeded to implement changes in advertising,
marketing  and  manufacturing  policies  adopted in the prior  year.  Additional
advertising  costs were  incurred  related to  special  cooperative  advertising
programs  designed  to  stimulate  over  the  counter  sales  and  manufacturing
operations were established in Mexico. By the end of fiscal 1997, over 1 million
pair of jeans  had been  produced  in  Mexico  and a second  facility  was under
construction.

      In the second  quarter of fiscal 1998,  as  production  capacity in Mexico
increased,  the Company  announced its intention to continue to close additional
manufacturing  facilities in the United  States.  In connection  therewith,  the
Company recorded  restructuring and special charges of $24.1 million  consisting
of a write-down in the value of related property and equipment, the write-off of
operating inefficiencies incurred during the shut-down period and the accrual of
estimated costs of disposition.  The plant closings  resulted in the termination
of approximately 1,300 employees.

APPAREL

Women's and Girls' Jeans

      The Company's  principal product line is women's and girls' jeans marketed
under the Chic and Chic Kids brand  names,  respectively,  and other brand names
owned by the Company, including ZnO(R) and Sunset Blues(R). The Company believes
that its women's jeans were the best selling women's jeans to mass merchandisers
in the United  States in 1998 based on the N.P.D.  Report  dated July 1998.  The
Company's  jeans are  available in a variety of finishes,  such as prewashed and
stonewashed.  By altering the laundry time and ingredients used in the finishing
process,  the  Company  is able to  produce  various  colors and shades in denim
products.

      The Company was the originator of  "proportioned  to fit" jeans for women,
which it introduced in 1975. The Company's women's and girls' jeans are designed
to provide a more  comfortable fit by tailoring their  measurements to a woman's
or girl's height in addition to her waist size. Each size is offered for sale in
a variety of inseam lengths. Women's and girls' jeans are available in a relaxed
fit, slim fit and classic fit.

      The  Company's  jeans are offered in four  general size  categories:  Chic
misses is offered  in sizes 2 to 20 in petite,  average  and tall  lengths;  ZnO
juniors is offered in sizes 1 to 15 in petite,  average and tall  lengths;  Chic
plus is offered in sizes 18 to 26 in petite and average  lengths;  and Chic Kids
is offered in sizes 7 to 14 for young girls.

      Currently,  the Company's  women's  jeans are generally  priced to sell at
retail for  between  $14.99 and  $19.99,  with most  products  priced to sell at
retail for $17.99.  The Company's  girls' jeans are generally  priced to sell at
retail for between $12.99 and $15.99.


                                      2

<PAGE>



Women's and Girls' Casual Pants and Shorts

      The Company  markets  women's casual pants and shorts under the Chic brand
name and girls'  casual  pants and shorts  under the Chic Kids brand  name.  The
Company's casual pants are available in the same  "proportioned to fit" sizes as
Chic jeans.  The Company  believes  that Chic pants have the same  advantages as
Chic jeans in terms of fit,  quality and value.  Casual pants are generally more
fashion-oriented  and are more susceptible than basic jeans to changing consumer
preferences.  The Company's two primary casual pant styles, the "Chic Spectator"
which is made of 100% cotton wrinkle resistant,  and the "Chic Schooners," which
is all-cotton, are both basic design casual pants.

      Currently, the Company's women's casual pants are generally priced to sell
at retail  for  between  $15.99 and $19.99  and the  women's  casual  shorts are
generally priced to sell at retail for between $12.99 and $15.99.

Women's and Girls' Jean Shorts

      The Company markets women's and girls' jean shorts under the Chic and Chic
Kids brand names,  respectively.  Traditional five-pocket jean shorts constitute
the  Company's  core product in this line.  The Company  complements  this basic
product with jean shorts that are slightly more fashion-oriented. Currently, the
Company's women's jean shorts are generally priced to sell at retail for between
$12.99 and $16.99. The Company's girls' jean shorts are generally priced to sell
at retail for between $9.99 and $12.99.

Men's and Boys' Jeans and Jean Shorts and Men's Casual Pants and Shorts

The Company markets men's and boys' jeans and jean shorts and men's casual pants
and shorts under the H.I.S and Hardware(R)  brand names.  The Company offers its
men's and boys' apparel in a broad range of sizes, colors, fabrics and finishes.
All of the men's and boys'  five-pocket  jeans  manufactured  by the Company are
available in two styles:  a relaxed fit and a classic  fit.  The Company  offers
men's jeans in 38 different  sizes by waist and inseam  length.  Boys' jeans are
offered in sizes 8 to 18 in regular fit and slim fit.

      The Company's  line of men's casual pants is marketed  under the H.I.S and
Hardware  label and is  available  in casual,  classic and basic styles that are
generally more fashion-oriented and are more susceptible than its men's or boys'
jeans to changing consumer preferences.

      Currently,  the  Company's  men's  jeans are  generally  priced to sell at
retail for between $15.99 and $19.99;  jean shorts are generally  priced to sell
at retail for between $12.99 and $16.99;  and casual pants are generally  priced
to sell at retail for  between  $19.99 and  $21.99.  Boys'  jeans are  generally
priced to sell at retail for between $12.99 and $15.99.

SALES AND DISTRIBUTION

      During  fiscal  1998,  the  Company  sold its  products to more than 1,000
retailers,  which the Company believes,  operate over 7,000 stores in the United
States.  The Company also started to sell  merchandise  in the Canadian  market.
Most of the Company's sales in fiscal 1998 were made to mass  merchandisers  and
the remainder was made  primarily to department and specialty  stores.  Sales of
the Chic and H.I.S product lines to the Company's two largest  accounts,  K-mart
Corporation and Target (a division of Dayton Hudson Corporation),  accounted for
approximately 55% of United States sales.



                                      3

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      Sales are made primarily  through the Company's  full-time sales force and
also  through  showrooms  and trade  shows,  with an emphasis on selling to mass
merchandisers.  The Company has a direct sales force, which includes individuals
located in the Company's New York City showroom as well as showrooms in Chicago,
Dallas and other  locations.  The  Company  pays only sales  commissions  to its
salespeople.  Although  the  Company  pays a base salary to its  regional  sales
managers,  a portion of the income of such  managers is in the form of incentive
bonuses,   traditionally  based  on  increases  in  the  Company's  sales.  Each
salesperson  is equipped with a personal  computer  that has a direct  satellite
linkup with the mainframe  located in the  Company's  executive  offices,  which
allows each  salesperson to access readily various types of information  such as
product  availability.  The Company maintains its principal showroom in New York
and additional showrooms in Chicago and Dallas to service regional markets. Each
showroom is staffed by local sales representatives.

      The Company  currently  operates  eight  retail  stores in  Tennessee  and
Kentucky  that sell seconds and  closeouts of Chic and H.I.S brand  merchandise,
including licensed products. At the present time, the Company does not intend to
increase significantly the number of its retail stores.

      The Company's  warehouse and  distribution  center  facility is located in
Bruceton,  Tennessee.  All goods are sewn either at the Company's  manufacturing
facilities or outside contractors.  As of November 7, 1998, the Company operated
one domestic assembly plant and two plants located in Mexico. Goods manufactured
in the Company's manufacturing  facilities are sent to independent laundries and
returned  to  the  factory  for  pressing  and  finishing.   Goods  produced  by
contractors  are  sewn,  laundered  and  finished  by the  contractor.  Finished
products  are  shipped to  Bruceton  for  warehousing  and  distribution  to the
Company's customers throughout the United States and Canada.

      Substantially  all of the Company's  sales in the United States and Europe
are to  retailers.  For the year ended  November  7, 1998 and  November 1, 1997,
sales to one  major  customer  (with  sales  in  excess  of 10% of total  sales)
approximated  23.5% and 23.4% of consolidated net sales,  respectively.  For the
year ended November 2, 1996,  sales to two major customers (with sales in excess
of 10% of total sales) approximated 25.5% and 12.2% of consolidated net sales on
an  individual  basis.  The  receivables  from the Company's  major  customer at
November  7,  1998  represented   approximately  13.0%  of  the  total  accounts
receivable  balance.  See  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations."  The Company  reviews a customer's  credit
history before extending credit. An allowance for possible losses is established
based upon factors surrounding the credit risk of specific customers, historical
trends and other information.

MARKETING, ADVERTISING AND PROMOTION

      The Company  advertises  its products  nationwide  through  television and
print  media.  The  Company's   advertising  strategy  emphasizes  the  quality,
comfortable fit and competitive  pricing of its jeans and pants. At the national
level,  the Company's  advertising  is image  oriented.  Television  commercials
promote the Chic name and are designed to create a personality for the brand. In
fiscal 1998,  the Company  signed a contract  with a new  advertising  agency to
coordinate its fiscal 1999 campaign. The Company expects that this campaign will
present  a  cohesive  marketing   presentation  and  revitalize  its  nationally
recognized brands.

      Consumer  advertising  for the  Company's  Chic line of  products  is done
primarily  through  consumer  print and, to a lesser  extent,  network and cable
television.  Print advertising of the Chic line consists primarily of spreads in
magazines  oriented  toward  women.   National  television   advertisements  are
generally run during the fall back-to-school, spring and Christmas selling


                                      4

<PAGE>



seasons.  The  Company's  advertising  of its H.I.S  line has been  accomplished
primarily through the use of print advertising. The Company targets women in the
18-49 age group for its Chic brand  women's  products,  with and emphasis on the
18-34 age  group,  and  targets  men in the 18-49 age group for its H.I.S  brand
men's  products.  The  Company  believes  that  consumers  of its  products  are
generally in the moderate-income bracket.

      The Company supplements its national  advertising campaign through the use
of cooperative  advertising in radio and newspaper media, in which the Company's
products are among those featured by various retailers in their  advertisements.
In addition, the Company advertises to retailers through print advertisements in
a variety of trade magazines and newspapers.

      The Company  believes  that there are  opportunities  for  increasing  the
Company's  share of the mass  merchandise  market for men's  jeans in the United
States,  which the Company believes is substantially  larger than the market for
women's jeans. Based on its reputation as a reliable supplier of branded women's
jeans  and its  previous  history  as a  manufacturer  of men's  jeans and other
apparel  under the H.I.S brand name,  the Company  believes  that  opportunities
exist to expand the  distribution  of its men's jeans.  The Company  anticipates
that there will be a positive correlation between an increase in advertising and
an  increase  in sales,  but there can be no  assurance  that the  Company  will
realize  its  objective  of  increasing  its share of the men's and boys'  jeans
market,  which is highly competitive and in which the Company currently has only
a limited presence.

      The Company works with retailers to provide custom displays to stores. The
Company  provides to its customers,  free of charge,  a variety of point of sale
display  materials  such as signs,  size markers,  graphics,  in-store  posters,
photographs and other visual supports.

PRODUCT DESIGN

      The Company's in-house merchandising  department develops jeans and casual
pants product  lines,  including  the pricing and  packaging for each line.  The
merchandising   group  interprets   market  trends  by  visiting  retail  stores
throughout the United States, Canada and Europe,  attending trade shows, working
with textile mills and retailers and  conducting  market  research.  The Company
also  researches  and tests denim finishes in order to develop new wash finishes
and treatments to add to the Company's product mix.

      After the  merchandising  group  has  researched  the  retail  market  and
domestic fabric market, consulted with the various fashion and color forecasting
services  to which the  Company  subscribes  and  decided  on the  details to be
incorporated into the new lines,  prototype  samples,  fit, colors and packaging
are  developed  in the New York  office.  The  prototypes  are then  sent to the
Company's main manufacturing facility in Bruceton,  Tennessee,  which produces a
manufactured sample.

      In keeping with the  Company's  emphasis on a quality fit, the garment has
several fit evaluations using a professional fit model from prototype stage to a
finished  manufactured  garment. The samples produced in Tennessee are evaluated
for fit,  color  and  finish  and then  sent to the sales  force to  display  to
prospective  customers.  When the garment has been sold and the first production
run of  garments  is  produced,  a full size range is sent to New York where the
garment is fitted on models of various sizes to allow the  merchandisers to make
any final  adjustments  that may be needed to improve the fit and  appearance of
the new lines for different body types.



                                      5

<PAGE>



MANUFACTURING AND RAW MATERIALS

      The Company performs all phases of the manufacturing process in converting
raw  materials  into  finished  goods.  The  Company  purchases  all of its  raw
materials  domestically  and  manufactures all of its products in North America.
Consequently,  the Company enjoys a shorter  lead-time in filling orders than is
usually  associated with  competitors  that rely on imports of finished goods or
offshore manufacturing processes.

      The Company currently buys finished fabric in bulk from domestic suppliers
and generally has no supply  contracts with terms longer than three months.  The
Company  believes that through its domestic  suppliers it is able to obtain good
quality materials in a timely manner at competitive prices.  During fiscal 1998,
the  Company  purchased  approximately  56.9% of its raw  materials  from  three
suppliers,  which  were  the  only  companies  supplying  more  than  10% of the
Company's raw materials  during fiscal 1998. The Company  maintains a portion of
its  inventories  in commodity raw  materials,  which  consist  mainly of cotton
fabrics,  including denim and twills. These raw materials, the Company believes,
are readily available from numerous  domestic and foreign sources.  Although the
Company  relies  heavily on certain  suppliers for its raw material  needs,  the
Company  believes  that the loss of any one source of raw  materials,  though no
such loss is presently anticipated,  would not have a material adverse effect on
its  business  since many other  alternative,  comparable  sources  are  readily
available.

      The Company operates manufacturing  facilities in Tennessee and Mexico. In
the  second  quarter  of  fiscal  1997,  the  Company   established   its  first
manufacturing   facility  in  Durango,   Mexico.  A  second  facility  commenced
operations in the second quarter of fiscal 1998. Concurrent with the increase in
the Company's  productive  capacity in Mexico, the Company closed certain United
States  manufacturing  facilities.  During the first  quarter of fiscal  1999, a
third  manufacturing  facility  in  Mexico  commenced  operations.  The  Company
currently is  constructing  a laundry  facility in Mexico that is expected to be
operational by the fourth quarter of fiscal 1999.

      With  its   manufacturing   systems,   which  the  Company   believes  are
state-of-the-art, the Company is usually capable of converting raw material into
a finished  garment and  delivering  such garment to the  retailer  within three
weeks from the date the Company  receives  the  retailer's  order as compared to
importers, which the Company believes generally take eight to ten weeks from the
date of order to delivery of a finished  garment to the retailer.  The Company's
facilities and systems,  together with exclusively  domestic  sourcing of fabric
and other raw  materials,  enable it to adapt to changing  consumer  preferences
quickly and to respond swiftly to customer orders.

      The Company generally cuts fabric only after receiving  confirmed purchase
contracts from customers.  Each contract is for a specified amount of product at
a  specified  price and usually  provides  for  several  preliminary,  staggered
delivery dates.  Customers then place specific orders for delivery  against such
contract.  By manufacturing in response only to a confirmed  purchase  contract,
the Company is able to determine its finished inventory needs in advance of such
delivery dates so as to be able to respond quickly to a customer's  order and at
the same time  minimize  its finished  inventory  risk.  Occasionally,  based on
agreements  with  customers,   preliminary  delivery  dates  are  extended.  The
postponement of a delivery date may cause the Company to lose sales it otherwise
might  have  made to the  customer  for the  period  during  which  delivery  is
eventually made. Should a delivery date be postponed,  the Company is often able
to arrange with its suppliers to delay delivery of raw materials the Company has
ordered.

      The  Company  uses  contract  carriers to pick up raw  materials  from its
suppliers and transport  such raw  materials to the  Company's  central  cutting
facility in Bruceton,  Tennessee. In Bruceton, the fabric is cut and trimmed and
then shipped to the US/Mexico border by the


                                      6

<PAGE>



Company's  own fleet of  tractors  and  trailers  and,  from there to one of the
Company's  manufacturing  facilities in Mexico, by contract carriers,  where the
garments are sewn, laundered,  pressed and finished. Assembled garments are then
returned to Bruceton for final warehousing and distribution.

EUROPEAN OPERATIONS

      In  Europe,  where mass  merchandisers  have  limited  market  share,  the
Company's  H.I.S brand jeans are sold primarily  through  department  stores and
mail order catalogs.  Most of the Company's sales in Europe are made in Germany.
In recent  years,  European  sales have  expanded  beyond  Germany,  Austria and
Switzerland into surrounding  countries,  including Poland,  the Czech Republic,
Slovakia, Belgium,  Luxembourg and the Netherlands.  The Company markets women's
and men's jeans and casual  pants  under the H.I.S brand name.  As in the United
States, the Company's core business in Europe is basic, five-pocket denim jeans.
The Company  believes  that its jeans  continue to be the best  selling  women's
jeans in Germany during fiscal 1998.

      Prior to fiscal 1997,  the Company had been licensing the H.I.S brands for
sale in the Czech Republic for the previous three years.  Commencing fiscal 1997
the Company ended the licensing  arrangement and marketed its products  directly
with its own contracting, sales force and distribution center.

      The Company believes that in many European  countries basic jeans, such as
those manufactured by the Company, are perceived to be a fashion item as well as
a  basic,  functional  product  and are  therefore  worn in a  broader  range of
settings than in the United States,  which contributes to a high level of demand
for jeans in Europe. The Company believes that approximately 50 million pairs of
women's and men's jeans are sold in Germany  each year,  and that  approximately
one-half of such jeans sold do not bear a  recognized  brand name.  Due to their
fashion   versatility  and  the  absence  of  mass  merchandisers  and  discount
retailers,  jeans are priced much higher, in relative terms, at the retail level
in Europe than in the United States.

      The  Company's  European  headquarters  are located in  Garching,  Germany
(outside  of  Munich),  where the  Company  has its own staff of  merchandising,
sales,  production,  management and finance personnel.  The Company does not own
any manufacturing  facilities in Europe, but currently has long-term  agreements
with  approximately  thirty-five  manufacturers in the Czech Republic,  Germany,
Greece, Italy, Malta,  Portugal,  Tunisia and Turkey, where the Company believes
quality  products can be  manufactured at competitive  prices.  Due to the large
number of  manufacturers,  the  Company  believes  that the  termination  of any
existing  manufacturing contract would not have a material adverse effect on its
operations.  All of the raw  materials  used to assemble the jeans and pants are
purchased  by the  Company in Europe and are  readily  available  from  numerous
suppliers.  Raw materials are shipped to subcontractors in foreign countries for
assembly.  Finished  goods are shipped by the  subcontractors  to the  Company's
distribution  centers for washing,  finishing,  warehousing and then shipment to
the Company's customers.

      Most European customers are traditional  department stores such as Kaufhof
AG, Mac Fash  TextilHandels-GessellschaftmbH,  Hertie  Waren-und  Kaufhaus GmbH,
Horten AG and specialty


                                      7

<PAGE>



stores  such  as  Leffers  AG  and  Peek  &  Cloppenburg  KG in  Germany.  Other
significant  customers include German-based Otto Versand GmbH & Co., the world's
largest  mail-order firm, and Quelle,  Europe's largest mail-order firm, as well
as Spar Osterreichische  Warenhandels-AG  (Hervis Modekaufhaus GmbH), one of the
largest retail operations in Austria.

      The Company employs a merchandising  staff that creates styles and selects
fabrics  designed to meet the demands of the  European  consumer.  Approximately
2,500  retail  accounts  and  mail-order  houses are  serviced  by fewer than 25
commissioned sales people.  The Company's  European  advertising is aimed at men
and women between the ages of 16 and 39 through television and print media.

      It is not  possible to predict  accurately  the effect that the  continued
elimination  of trade  barriers among members of the European Union will have on
the Company's operations in Europe. The Company considers other Western European
countries,  such as the  United  Kingdom,  France  and  Italy,  to be  extremely
competitive  markets and does not  anticipate  that it will seek to expand sales
significantly in such countries.

      In the second  quarter of fiscal  1997,  the Company  completed an initial
public  offering  of  its  previously  wholly-owned  German  subsidiary,  H.I.S.
Sportswear  AG,  resulting  in  the  sale  of  2,120,000  shares,   representing
approximately  47.5% of the  stock,  at an  offering  price  of DM 39 per  share
(approximately   $22.61).   The  net   proceeds   received  by  the  Company  of
approximately  $43.1  million  were used to repay  indebtedness  and for general
corporate purposes.

CENTRAL OFFICE AND COMPUTER SYSTEM

      The Company  maintains  its principal  executive  offices in New York City
from which it provides its department managers with integrated  information with
respect to inventory,  production,  manufacturing and distribution operations as
well as financial  matters.  The Company believes that it has a state-of-the-art
computer  information  system,  substantially  all of the software for which was
developed internally. This sophisticated system allows the Company's salespeople
to enter sales orders  electronically.  Many large customers submit their orders
directly  to  the  Company  over  an  electronic  data  interchange  system  via
satellite.  Such linkups allow the Company to process  customer  orders quickly,
reducing the lead-time between orders and deliveries.

      Major customers customarily place confirmed purchase contracts for a total
unit  quantity by price,  style and delivery  date.  Through  point of sale data
collection devices, many of these customers monitor their sales to consumers and
report directly to the Company their  over-the-counter level of sales as well as
the desired  inventory levels they wish to maintain at their individual  stores.
On a weekly basis the Company receives  information as well as detailed shipment
orders for each of the stores of such customers. These detailed store orders are
designed to replenish  the inventory  levels of the  individual  retail  stores,
which the Company is generally able to do in five to eight business days.

      The  Company  also  receives on a daily  basis  orders  taken by its sales
force. These orders are electronically  transmitted to the Company by members of
the sales force through their own


                                      8

<PAGE>



computer  terminals,  which are connected to the Company's main computer  system
via satellite.  Such orders are then  electronically  reviewed for style, color,
size,  creditworthiness  and requested  delivery  dates.  If the results of such
reviews are  satisfactory,  the orders are  considered to be confirmed  purchase
contracts and are added to backlog.

      The computer system allows the Company to monitor production in real time,
so that the  location  and  status  of every  cut and  production  plan in every
factory  is known at any  moment  in time.  In the  highly  competitive  apparel
industry,  the  Company  believes  that its  "just-in-time"  ability  to respond
quickly to customer  demand gives it a  significant  advantage  over many of its
competitors, especially with respect to mass merchandisers.

LICENSING

      Pursuant to  approximately 20 license  agreements  between the Company and
various  manufacturers  and/or  importers,  such licensees  produce and market a
variety of products under the Chic name and/or H.I.S name including: sportswear,
intimate  apparel,  accessories,  hosiery and footwear.  Most of these  products
complement apparel products marketed by the Company.

      The Company  began  licensing  its  trademarks  in fiscal 1989.  Licensing
revenues have  increased  from  approximately  $0.8 million in fiscal 1990,  the
first full year of licensing operations, to approximately $6.4 million in fiscal
1996.  Licensing  revenues declined to approximately $2.7 million in fiscal 1998
due to poor retail business in the United States and the  discontinuation of the
licensing agreement in the Czech Republic.

      The current license  agreements expire on various dates through 2002. Many
of the agreements,  however, permit the licensee to renew its agreement, subject
to  certain  conditions,  prior  to  expiration,  generally  for  an  additional
three-year  period.  The majority of the agreements require that licensees pay a
specified  guaranteed  minimum  royalty to the Company at the  beginning of each
quarter  during  the term of the  licensing  agreement  and  then pay a  certain
percentage  (generally  five  percent) of the  licensee's  net sales of products
bearing a trademark  licensed by the  Company.  Such  payments are due within 30
days after the end of each quarter,  against which amount the guaranteed royalty
is deducted. Generally, each licensee is required to spend specified amounts for
advertising  and promotion of the licensed  products and most licensees  offer a
matching  cooperative  advertising  plan to retailers for  advertising in weekly
circulars that are used by some  retailers to advertise sale items.  The Company
has  received no  indication  from its  licensees  that they intend to terminate
their licensing agreement with the Company prior to its expiration.

      The Company's  strategy is to identify market leaders in their  respective
fields who will  generate  increased  sales over an extended  period of time and
entrench the brand names in key categories.  The Company often consults with its
largest customers to identify and evaluate  potentially  suitable licensees.  In
evaluating a potential licensee, the Company considers the experience, financial
stability,  manufacturing  performance  and  marketing  ability of the potential
licensee.  It also evaluates the  marketability  of the products  proposed to be
licensed and the compatibility of such products with other products manufactured
or licensed by the Company.


                                      9

<PAGE>



The Company  believes that strong  consumer  acceptance of the Chic and/or H.I.S
brand name and the care that the Company  uses in selecting  suitable  licensees
have been major contributors to its licensing program.

      The Company  continues to explore  opportunities  to expand its  licensing
program to other related  products and  geographic  regions to strengthen  brand
identity.

      By  increasing  consumer  awareness  of its brand names  through  expanded
advertising of its products,  and  continuing to use care in selecting  suitable
licensees,  the  Company  anticipates  that it will  be able to  strengthen  its
licensing  business.  As the demand for licensed products  expands,  competition
will  increase  among  licensors  and no assurance can be given that the Company
will be able to expand or maintain its market  position  with respect to various
licensed goods in the future. In addition, no assurance can be given that demand
will expand.

      The Company  coordinates the efforts of its licensees in a number of ways.
The Company  communicates  its color  schemes,  styling and market trends to its
licensees prior to each season,  presents a coordinated in-store presentation of
proprietary and licensed products, and coordinates the advertising of the family
of Chic and/or H.I.S. products through planned promotions.

      As a general policy matter,  in the United States the Company licenses its
brand names for use only on products it does not manufacture.

COMPETITION

      The apparel industry is highly competitive and characterized  generally by
ease of entry.  Although the  Company's  products  have been  historically  less
sensitive to fashion trends than higher fashion lines,  the apparel  industry is
subject  to rapidly  changing  consumer  preferences,  which may have an adverse
effect on the  results  of the  Company's  operations  if the  Company  does not
accurately judge such preferences.  Among the factors that shape the competitive
environment are quality of garment  construction and design,  price,  fit, brand
name, style and color selection,  advertising and the manufacturer's  ability to
respond  quickly to the  retailer on a national  basis.  Customer  and  consumer
acceptance  and  support  are also  important  aspects  of  competition  in this
industry.  The Company  believes that its ability to market its products  though
its broad distribution network,  which consists primarily of mass merchandisers,
is  important  to its ability to compete.  The Company  also  believes  that its
continued  success will depend upon its ability to remain  competitive  in these
areas.

      The Company  competes  with numerous  domestic and foreign  manufacturers,
many of which are larger or are associated  with  companies  with  substantially
greater  resources than the Company.  The Company faces  competition in sales on
both the retail and consumer level. In general,  mass merchandisers  limit their
product  selection  to  moderately  priced  products.  Accordingly,  the Company
believes  that  the  domestic  jeans  market  with  respect  to  sales  to  mass
merchandisers  is  stratified  by a  more  narrow  price  range  than  sales  to
consumers,  who might be willing to buy products in a broader price range. Since
certain retailers generally carry only


                                      10

<PAGE>



moderately  priced  products,  particularly  mass  merchandisers,   the  Company
competes for sales to such retailers  only with companies that market  similarly
priced products.

      The Company  considers its  significant  competitive  advantages to be the
high consumer  recognition and acceptance of the Chic brand name and its ability
to  respond  quickly  to its  customers'  needs  as a  result  of the  Company's
experienced manufacturing capabilities and advanced computer information system.
Although brand recognition is an important element of competition in the apparel
business,  in the mass merchandising retail industry,  brand recognition is less
significant  in the  marketing of casual  pants than in the  marketing of jeans.
Most mass merchandisers  carry only casual pants bearing their own private label
and a limited  number,  if any, of other brands of casual  pants.  Consequently,
with respect to its mass  merchandising  customers,  the Company's  casual pants
compete with fewer brands than its jeans.

      In Germany,  Austria  and  Switzerland,  the Company  competes in a higher
priced market against various European and  multinational  companies,  including
Mustang Bekleidungswerke, manufacturer of Mustang brand jeans, and Levi Strauss,
manufacturer  of Levi's  brand  jeans.  The  Company  believes  that its pricing
strategy in Europe,  which is to position  its products in the price range below
the range for Levi  Strauss,  along with its  reputation in Europe for marketing
jeans in a variety of sizes especially  suited for women,  distinguishes it from
its competitors in Europe.  Certain jeans suppliers,  such as Levi Strauss, have
traditionally  spent more than the Company on advertising in Europe. The Company
believes that increased advertising in Europe has increased the Company's market
share by attracting consumers who traditionally have bought unbranded products.

BACKLOG

      The  Company's  backlog  consists  of  confirmed  purchase  contracts.  At
November 7, 1998,  the Company had  unfilled  customer  orders of  approximately
$115.2 million of  merchandise,  of which  approximately  $69.8 million were for
domestic orders and approximately  $45.4 million (based on the exchange rate for
the  deutsche  mark on November 7, 1998) were for European  orders,  compared to
approximately  $135.2 million at November 1, 1997, of which  approximately $94.4
million were for domestic orders and  approximately  $40.8 million (based on the
exchange  rate for the  deutsche  mark on  November  1, 1997) were for  European
orders.  The Company believes that the change in backlog in the United States is
attributable  largely to the weak  retail  climate for basic  five-pocket  jeans
which leads to the placement of future orders. Substantially all of the unfilled
orders at  November  7, 1998 are  expected  to be shipped  before the end of the
Company's  fiscal year ending November 6, 1999. The Company believes that in the
past it has  shipped  at least  95% of its  confirmed  purchase  contracts.  The
Company has not generally  experienced  difficulty in filling orders on a timely
basis.

SEASONALITY

      Demand for the Company's apparel products and its level of sales fluctuate
moderately during the course of the calendar year as a result of seasonal buying
trends.  A moderate  surge in sales of denim  jeans and casual  pants  generally
occurs during the fall back-to-school and Christmas


                                      11

<PAGE>



holiday selling seasons (the Company's third and fourth quarter,  respectively).
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations   Seasonality  of  Business-Quarterly   Results."  To  balance  these
fluctuations in demand, the Company has developed  competitively priced packages
of jean shorts and casual shorts,  which are sold primarily during the Company's
first and second quarters.  This enables the Company to market to the year-round
apparel  needs  of  consumers,  thereby  stabilizing  production  levels  at the
Company's manufacturing facilities during traditionally slower periods.

TRADEMARKS

      Several of the Company's  trademarks,  including Chic, H.I.S, Hardware and
ZnO, are  registered in the United States  Patent and  Trademark  Office.  These
registrations  expire on various dates through  2005,  subject to renewal.  From
time to time the Company adopts new trademarks in connection  with the marketing
of its products.  The Company considers its trademarks to be significant  assets
of the Company and to have significant value in the marketing of its products.

      The Company has registered and filed applications for various  trademarks,
including  H.I.S,  which is the primary  trademark used by the Company to market
its products in Europe,  in  approximately  20 countries  throughout  the world,
primarily  Germany,  Austria and  Switzerland.  The Company  believes that these
foreign  trademarks  constitute  significant  assets  and  are  material  to its
European marketing operations.

     The  Company has  recently  registered  a new  trademark,  Slax,  to market
women's casual pants in Europe.  This marketing effort  represents a significant
diversification  in the  Company's  product  line in  Europe.  Depending  on the
European  success of this line,  the  Company  may  introduce  this label in the
United States.

EMPLOYEES

      As of November 7, 1998, the Company employed approximately 1,000 full-time
people in the United  States,  1,600  people in Mexico and 150 people in Europe.
Most of the Company's  domestic  work force is employed in Tennessee,  where the
Company believes that it is one of the largest private employers.

      None of the Company's  employees are  represented by a union.  The Company
believes that its relationship with its employees is good.

      The  Company  believes  that all of its  manufacturing  facilities  are in
material compliance with applicable occupational health and safety laws.

RECENT DEVELOPMENTS

      In January 1999, the Company entered into an asset purchase and consulting
agreement (the "Stuffed Shirt  Agreement") with Stuffed Shirt,  Inc. ("SSI") and
its principals. The Stuffed Shirt Agreement provides for the purchase of certain
assets of SSI, including: all inventory, open


                                      12

<PAGE>



orders,  and intangible  assets as of the closing date, and the retention of its
principals as consultants  on a monthly basis.  The purchase price of the assets
of approximately  $4,336,000 is payable $1 million at the closing date, with 1/3
of the purchase  price payable in 30 days (less the $1 million paid at closing),
60 days and 90 days from the closing date.




                                      13

<PAGE>



ITEM 2.     PROPERTIES

      The Company owns its principal manufacturing and distribution  facilities,
which are  located in  Tennessee  and  Mexico.  The  Company  leases  additional
facilities, including its corporate headquarters and showrooms in New York City,
and other  offices,  factories,  warehouses,  showrooms and retail stores in the
United States,  Germany,  Austria and Switzerland  from unrelated third parties.
The Company's  principal owned and leased  properties are described in the chart
below.

<TABLE>
<CAPTION>

                      PRINCIPAL OWNED AND LEASED PROPERTIES


                                                     Location          Square Footage
                                                     --------          --------------
      Owned/Leased
      ------------
<S>                                                <C>                     <C>    
North America
      Manufacturing and Assembly Facilitiies....   Bruceton, TN            200,094        Owned
                                                   Bruceton, TN            150,000        Owned
                                                   Durango, Mexico         108,000        Owned
                                                   Durango, Mexico         220,000        Owned
                                                   Gleason,TN               53,103        Owned  (1)
                                                   Hickman, KY             280,000        Leased (1)
                                                   Monticello, KY           58,000        Owned  (1)
                                                   Saltillo, TN             48,028        Owned  (1)
                                                   South Fulton, TN         70,269        Owned  (1)
                                                   Trezevant, TN            42,008        Owned  (1)
      Warehouse and Distribution................   Bruceton, TN            422,087        Owned
      Showrooms.................................   Chicago, IL               1,242        Leased
                                                   Dallas, TX                1,325        Leased
                                                   New York, NY              8,721        Leased
      Retail Stores.............................   Bowling Green, KY         7,200        Leased
                                                   Bruceton, TN              5,500        Leased
                                                   Clarksville, IN           6,420        Leased
                                                   Cookeville, KY           11,200        Leased
                                                   Goodlettsville, TN        5,310        Leased
                                                   Louisville, KY            7,100        Leased
                                                   Murfreesboro, TN          5,200        Leased
                                                   Paducah, KY               5,000        Leased
      Machine Shop and Equipment Warehouse         Bruceton, TN             41,000        Owned
                                                   Bruceton, TN             12,000        Owned
      Corporate Offices.........................   New York, NY             34,034        Leased
                                                                                       
Europe                                                                               
      Office and Warehouse......................  Prague, Czech Republic     1,534        Leased
                                                  Garching, Germany         90,000        Leased
                                                  Warsaw, Poland             8,216        Leased
      Showrooms.................................  Bergheim, Austria          2,000        Leased
                                                  Prague, Czech Republic       347        Leased
                                                  Berlin, Germany              600        Leased
                                                  Munich, Germany            1,500        Leased
                                                  Neuss, Germany             1,100        Leased
                                                  Warsaw, Poland               137        Leased
                                                  Zurich, Switzerland          700        Leased
</TABLE>
                 
(1) Facility not in operation. Asset held for sale.      

                                      14                                       
                               
<PAGE>                      


     The Company believes that its existing  facilities are well maintained,  in
good  operating  condition  and are adequate for its present level of operations
and sufficient to accommodate any increased  output for the  foreseeable  future
after consideration of the operational changes anticipated to be made.
                
ITEM 3.   LEGAL PROCEEDINGS    

      After a period of  negotiation  regarding  the  separation  of Mr.  Robert
Luehrs from the Company,  the Company commenced a lawsuit in state court on July
15, 1998, which was removed to the United States District Court for the Southern
District of New York against Mr. Robert Luehrs seeking a declaration that he had
retired from the Company in May 1998, or, in the  alternative,  that he had been
properly  terminated for cause. Mr. Luehrs  counterclaimed  against the Company,
alleging that the Company had breached his employment contract and discriminated
against him on the basis of his age and disability.  Mr. Luehrs contends that he
was  terminated  without  cause and so is  entitled  to  $511,875  for breach of
contract,  in  addition  to the amount he  alleges he is due under a  disability
benefits clause in his employment  agreement,  and unspecified  damages stemming
from his allegations of age discrimination.

      From time to time,  the Company is also involved in litigation  incidental
to the conduct of its business.  The Company believes that no currently  pending
litigation  to which it is a party  will have a material  adverse  effect on its
consolidated financial condition or results of operations.

      ENVIRONMENTAL MATTERS

      The  Company  believes it is in material  compliance  with all  applicable
environmental laws to which it is subject,  including, among others, the Federal
Water  Pollution  Control  Act,  and the  Tennessee  Solid Waste  Disposal  Act.
Although the Company is unable to predict what legislation or regulations may be
adopted in the future with respect to  environmental  protection  and what their
impact  on  the  Company  may  be,  compliance  with  existing  legislation  and
regulations has not had a material  adverse effect on its capital  expenditures,
results of operations or competitive position.

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

      Not applicable.




                                      15

<PAGE>



                                     PART II


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

      The  information  required  by this item is  included  under the  captions
"PRICE  RANGE OF COMMON  STOCK" and  "DIVIDEND  POLICY" on page 22 of the Annual
Report to Stockholders and is incorporated herein by reference.


ITEM 6.   SELECTED FINANCIAL DATA

      The  information  required  by this item is  included  under  the  caption
"SELECTED  CONSOLIDATED  FINANCIAL  DATA"  on  page 4 of the  Annual  Report  to
Stockholders and is incorporated herein by reference.


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

      The  information  required  by this item is  included  under  the  caption
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS" on page 5 of the Annual Report to  Stockholders  and is incorporated
herein by reference.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK

      Not Applicable.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The  consolidated   financial   statements,   notes  thereto,   report  of
independent   certified  public  accountants  thereon  and  quarterly  financial
information  (unaudited) appearing in the Annual Report to Stockholders and made
a  part  of the  Annual  Report  to  Stockholders  are  incorporated  herein  by
reference.

      Except as  specifically  set forth herein and elsewhere in this Form 10-K,
no information appearing in the Annual Report to Stockholders is incorporated by
reference  into this report and the Annual Report to  Stockholders  shall not be
deemed  to be  filed,  as part of this  report  or  otherwise,  pursuant  to the
Securities and Exchange Act of 1934.




                                      16

<PAGE>



ITEM 9.   CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

      Not Applicable.



                                      17

<PAGE>



                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The  information  required  by this item is  included  under the  captions
"ELECTION  OF  DIRECTORS"  AND  "EXECUTIVE  OFFICERS"  of  the  Company's  Proxy
Statement for the Annual Meeting of  Stockholders  ("the 1999 Proxy  Statement")
and is incorporated herein by reference.



ITEM 11.  EXECUTIVE COMPENSATION

      The  information  required  by this item is  included  under  the  caption
"EXECUTIVE  COMPENSATION" of the 1999 Proxy Statement and is incorporated herein
by  reference,  except that the  subsections  entitled  "Report of  Compensation
Committee on Executive  Compensation" and "Performance  Graph" of the 1999 Proxy
Statement shall not be deemed to be so incorporated.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

      The  information  required  by this item is  included  under  the  caption
"PRINCIPAL  STOCKHOLDERS  OF THE  COMPANY"  of the 1999 Proxy  Statement  and is
incorporated herein by reference.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The  information  required  by this item is  included  under  the  caption
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" of the 1999 Proxy Statement and
is incorporated herein by reference.



                                      18

<PAGE>



                                     PART IV


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

     (a)  The following  documents are filed or  incorporated  by reference as a
part of this report:

          1.   Thefinancial  statements which are incorporated by reference from
               the Annual Report to Stockholders pursuant to Item 8 as follows:

               Report of Independent Certified Public
               Accountants

               Consolidated Balance Sheets at November 1, 1997
               and November 7, 1998

               Consolidated Statements of Operations For the
               Years Ended

               November 2, 1996, November 1, 1997, and
               November 7, 1998

               Consolidated Statement of Stockholders' Equity
               For the Years Ended

               November 2, 1996, November 1, 1997, and
               November 7, 1998

               Consolidated  Statement  of Cash  Flows  for the  Years  Ended
               November 2, 1996, November 1, 1997, and November 7, 1998

               Notes to Consolidated Financial Statements

          2.   The  schedule  and  report  of   independent   certified   public
               accountants  thereon,  listed on the Index to Financial Statement
               Schedules attached hereto.

     (b)  No reports on Form 8-K were  filed by the  registrant  during the last
          quarter of the period covered by this report.


                                      19

<PAGE>



     (c)  Exhibits


Exhibit No.    Description of Exhibit
-----------    ----------------------

3.1            Restated   Certificate   of   Incorporation   of   the   Company.
               (Incorporated herein by reference to Exhibit 3.2 to the Company's
               Registration Statement on Form S-1 No. 33-56270).

3.2            By-laws of the  Company.  (Incorporated  herein by  reference  to
               Exhibit 3.4 to the Company's  Registration  Statement on Form S-1
               No. 33-56270).

4.1            Loan Agreement,  dated as of May 1, 1990,  between the Industrial
               Development  Board of the County of Carroll  (the "ID Board") and
               Henry I. Siegel Company, Inc. ("Siegel"). (Incorporated herein by
               reference to Exhibit 4.12 to the Company's Registration Statement
               on Form S-1 No. 33-56270).

4.2            Financing Agreement dated as of October 30, 1998 by and among the
               Company,  the  Financial  Institutions  from  Time to Time  Party
               thereto, as Lenders, and the CIT Group/Commercial Services, Inc.,
               as agent.

4.3            Lease,  dated as of September  1, 1993,  between the ID Board and
               Siegel. (Incorporated herein by reference to Exhibit 10.30 to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               November 6, 1993)

4.4            Lease,  dated as of August 1, 1994,  between the City of Hickman,
               Kentucky,  and  H.I.S.  Kentucky,  Inc.  (Incorporated  herein by
               reference to Exhibit 4.5 to the  Company's  Annual Report on Form
               10-K for the fiscal year ended November 5, 1994).

4.5            Note  Agreement,  dated as of June 30,  1995,  by the Company and
               each of the  Purchasers  listed on Schedule 1 thereto  (the "Note
               Agreement"). (Incorporated herein by reference to Exhibit 10.1 of
               the  Company's  Quarterly  Report on Form 10-Q for quarter  ended
               August 5, 1995).

4.6            Waiver and  Amendment  Agreement,  dated as of February 14, 1996,
               among the Company and each of the Purchasers listed on Schedule I
               attached to the Note Agreement. (Incorporated herein by reference
               to Exhibit 4.8 to the  Company's  Annual  Report on Form 10-K for
               the fiscal year ended November 4, 1995).



                                      20

<PAGE>



4.7            Lease,  dated as of  February  1, 1995,  between  Fulton  County,
               Kentucky  and  H.I.S.  Kentucky,  Inc.  (Incorporated  herein  by
               reference to Exhibit 10.1 to the  Company's  Quarterly  Report on
               Form 10-Q for quarter ended May 6, 1995).

4.8            Loan Agreement,  dated as of April 1, 1995,  between the ID Board
               and Siegel.  (Incorporated herein by reference to Exhibit 10.2 of
               the Company's Quarterly Report on Form 10-Q for the quarter ended
               May 6, 1995).

10.1           Registration  Rights  Agreement,  dated as of November  20, 1992,
               among  the  Company,  Chrysler  Capital  Corporation,   Whirlpool
               Financial Corporation,  NatWest, B.T. Expedition, Inc., and Jesse
               S. Siegel.  (Incorporated  herein by reference to Exhibit 4.14 to
               the Company's Registration Statement on Form S-1 No. 33-56270).

10.2           Registration Rights Agreement,  dated January 22, 1993, among the
               Company  and  its  stockholders  as of such  date.  (Incorporated
               herein by reference to Exhibit 4.4 to the Company's Annual Report
               on Form 10-K for the fiscal year ended November 6, 1993).

10.3           Representatives'  Warrant  Agreement,  dated as of  February  18,
               1993, among the Company, Nomura Securities  International,  Inc.,
               Josephthal   Lyon  &  Ross   Incorporated   and  Tucker   Anthony
               Incorporated,   including   Form  of   Representatives'   Warrant
               Certificate.  (Incorporated herein by reference to Exhibit 4.5 to
               the  Company's  Annual  Report on Form 10-K for the  fiscal  year
               ended November 6, 1993).

10.4           Agreement and General  Release,  dated as of March 14, 1998 among
               the Company and Burton M. Rosenberg.

10.5           Employment Agreement, dated as March 15, 1996, among the Company,
               Siegel and Roland L. Kimberlin. (Incorporated herein by reference
               to Exhibit 10.6 to the  Company's  Annual Report on Form 10-K for
               the fiscal year ended November 4, 1996).

10.6           Employment  Agreement,  dated as of March  15,  1996,  among  the
               Company,  Siegel and Robert F.  Luehrs.  (Incorporated  herein by
               reference to Exhibit 10.7 to the Company's  Annual Report on Form
               10-K for the fiscal year ended November 4, 1996).

10.7           Employment  Agreement,  dated as of March  15,  1996,  among  the
               Company, Siegel and Stephen Weiner. (Incorporated herein by


                                      21

<PAGE>



               reference to Exhibit 10.8 to the Company's  Annual Report on
               Form 10-K for the fiscal  year ended  November  4, 1996).

10.8           Lease,   dated  November   1989,   between   Tishomingo   County,
               Mississippi,  and Siegel.  (Incorporated  herein by  reference to
               Exhibit 10.14 to the Company's Registration Statement on Form S-1
               No. 33-56270).

10.9           Lease,   dated  December  1,  1989,  between  Tishomingo  County,
               Mississippi,  and Siegel.  (Incorporated  herein by  reference to
               Exhibit 10.15 to the Company's Registration Statement on Form S-1
               No. 33-56270).

10.10          Agreement of Lease,  dated as of May 10, 1985,  between  Nineteen
               New York Properties Limited Partnership and Siegel. (Incorporated
               herein  by   reference   to  Exhibit   10.16  to  the   Company's
               Registration  Statement on Form S-1 No.  33-56270).  

10.11          Lease,  dated November 1, 1968,  between Keystone  Associates and
               Siegel, as amended.  (Incorporated herein by reference to Exhibit
               10.17 to the  Company's  Registration  Statement  on Form S-1 No.
               33-56270).

10.12          Lease,  dated September 11, 1979,  between the Mayor and Board of
               Aldermen of the Town of Tiptonville,  Lake County, Tennessee, and
               Siegel. (Incorporated herein by reference to Exhibit 10.18 to the
               Company's Registration Statement on Form S-1 No. 33-56270).

10.13          Chic by H.I.S,  Inc.  1993 Stock Option Plan and First  Amendment
               thereto.  (Incorporated  herein by reference to Exhibit  10.19 to
               the Company's Registration Statement on Form S-1 No. 33-56270).

10.14          Chic by  H.I.S,  Inc 1995  Stock  Option  Plan  for  Non-Employee
               Directors.  (Incorporated herein by reference to Exhibit 10.16 to
               the  Company's  Annual  Report on Form 10-K for the  fiscal  year
               ended November 5, 1994).

10.15          Phoenix Home Life Insurance Plan (Disability Plan). (Incorporated
               herein  by   reference   to  Exhibit   10.20  to  the   Company's
               Registration Statement on Form S-1 No. 33-56270).

10.16          Pension  Plan for  Eligible  Employees,  including  amendments  I
               through IV  thereto.  (Such  Plan and  Amendments  I through  III
               thereof  incorporated herein by reference to Exhibit 10.21 to the
               Company's Registration Statement on Form S-1 No. 33-56270).


                                      22

<PAGE>



10.17          Security Agreement, dated as of May 1, 1990, between the ID Board
               and Siegel. (Incorporated herein by reference to Exhibit 10.22 to
               the Company's Registration Statement on Form S-1 No. 33-56270).

10.18          Guaranty  Agreement,  dated as of May 1, 1990,  by the Company in
               favor of Trust company Bank, as trustee.  (Incorporated herein by
               reference  to  Exhibit  10.23  to  the   Company's   Registration
               Statement on Form S-1 No. 33- 56270).

10.19          Letter,  dated  May 11,  1990,  from the  Company  and  Siegel to
               Bayerische Hypotheken-Und  Weschsel-Bank AG. (Incorporated herein
               by  reference  to  Exhibit  10.24 to the  Company's  Registration
               Statement on Form S-1 No. 33- 56270).

10.20          Lease,   dated   October  27,  1986,   between   Sportswear   and
               Erbengemeinschaft  Kellerer,   including  an  amendment  thereto.
               (Translated).  (Incorporated herein by reference to Exhibit 10.28
               to the  Company's  Registration  Statement  on Form  S-1 No.  33-
               56270).

10.21          Agreement,  dated  December 28,  1992,  between  Commerzbank  and
               Sportswear.  (Translated).  (Incorporated  herein by reference to
               Exhibit 10.29 to the Company's Registration Statement on Form S-1
               No. 33-56270).

10.22          Agreement,   dated  December  18,  1992,   among  Deutsche  Bank,
               Sportswear, Siegel and the Company.  (Translated).  (Incorporated
               herein  by   reference   to  Exhibit   10.30  to  the   Company's
               Registration Statement on Form S-1 No. 33- 56270).

10.23          Agreement, dated June 26, 1991, between Hypo Bank and Sportswear.
               (Translated).  (Incorporated herein by reference to Exhibit 10.31
               to  the  Company's   Registration   Statement  on  Form  S-1  No.
               33-56270).

10.24          Licensing  and  Cooperation  Agreement,  dated  November 2, 1990,
               between   Sportswear   and   Odevni   Prumysl,   Statni   Podnik.
               (Incorporated  herein  by  reference  to  Exhibit  10.32  to  the
               Company's Registration Statement on Form S-1 No. 33-56270).

10.25          Licensing  Agreement,  dated May 29, 1992, between Sportswear and
               CONSINVEST Ltd.  (Translated).  (Incorporated herein by reference
               to Exhibit 10.33 to the Company's  Registration Statement on Form
               S-1 No. 33- 56270).



                                      23

<PAGE>



10.26          Guaranty Agreement, dated as of September 1, 1993, by the Company
               in  favor  of  First   American   National   Bank,   as  Trustee.
               (Incorporated  herein  by  reference  to  Exhibit  10.31  to  the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               November 6, 1993).

10.27          Guaranty Agreement, dated as of August 1, 1994, by the company in
               favor of First American  National Bank.  (Incorporated  herein by
               reference to Exhibit 10.29 to the Company's Annual Report on Form
               10-K for the fiscal year ended November 5, 1994).

10.28          Guaranty Agreement,  dated as of February 1, 1995, by the Company
               in  favor  of  First   American   National   Bank,   as  trustee.
               (Incorporated   herein  by  reference  to  Exhibit  10.3  of  the
               Company's Quarterly Report on Form 10-Q for the quarter ended May
               6, 1995).

10.29          Guaranty Agreement,  dated as of April 1, 1995, by the Company in
               favor of First American National Bank, as trustee.  (Incorporated
               herein by reference to Exhibit  10.4 of the  Company's  Quarterly
               Report on Form 10-Q for the quarter ended May 6, 1995).

10.30          Guaranty Agreement, dated as of June 30, 1995, by Siegel in favor
               of the Purchasers listed on Annex 1 thereto. (Incorporated herein
               by reference to Exhibit 10.2 of the Company's Quarterly Report on
               Form 10-Q for the quarter ended August 5, 1995).

10.31          Guaranty  Agreement,  dated as of June 30, 1995, by Chic Holdings
               Corp.  in  favor of the  Purchasers  listed  on Annex 1  thereto.
               (Incorporated   herein  by  reference  to  Exhibit  10.3  of  the
               Company's  Quarterly  Report on Form 10-Q for the  quarter  ended
               August 5, 1995).

10.32          Guaranty Agreement,  dated as of June 30, 1995, by Chic by H.I.S.
               Licensing  Corporation in favor of the Purchasers listed on Annex
               1 thereto.  (Incorporated  herein by reference to Exhibit 10.4 of
               the Company's Quarterly Report on Form 10-Q for the quarter ended
               August 5, 1995).

10.33          Guaranty  Agreement,  dated  as  of  June  30,  1995,  by  H.I.S.
               Kentucky,  Inc.  in favor  of the  Purchasers  listed  on Annex 1
               thereto. (Incorporated herein by reference to Exhibit 10.5 of the
               Company's  Quarterly  Report on Form 10-Q for the  quarter  ended
               August 5, 1995).


                                      24

<PAGE>



10.34          Guaranty Agreement,  dated as of June 30, 1995, by H.I.S. Limited
               in  favor  of  the   Purchasers   listed  on  Annex  1   thereto.
               (Incorporated   herein  by  reference  to  Exhibit  10.6  of  the
               Company's  Quarterly  Report on Form 10-Q for the  quarter  ended
               August 5, 1995).

13.1           Annual Report to  Stockholders of the Company for the fiscal year
               ended November 7, 1998 (including attachment thereto).

21.1           Subsidiaries of the Company. (Incorporated herein by reference to
               Exhibit 21.1 to the Company's  Annual Report on Form 10-K for the
               fiscal year ended November 5, 1994).

27             Financial Data Schedule.




                                      25

<PAGE>



                                   SIGNATURES


     Pursuant  to  the  requirements  of Section  13 or 15(d) 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,  in the City of New
York, State of New York, on February 2, 1999.

                                    CHIC BY H.I.S, INC.

                                    By  /s/ Daniel Rubin    
                                        ----------------------
                                        (Daniel Rubin)
                                        Chairman of the Board and
                                          Chief Executive 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 and in the capacities and on the dates indicated.



Signature                      Capacity                       Date
---------                      --------                       ----   

/s/ Daniel Rubin               Co-Chairman of the Board,      February 2, 1999
----------------
(Daniel Rubin)                 Chief Executive Officer and
                               Director
                               (Principal Executive Officer)

/s/ Arnold Amster              Co-Chairman of the Board,      February 2, 1999
-----------------
(Arnold Amster)                Director

/s/ Christine A. Hadjigeorge   Chief Financial Officer        February 2, 1999
----------------------------   Secretary and Treasurer
(Christine A. Hadjigeorge)     (Principal Financial Officer)

/s/ Peter Brown                Director                       February 2, 1999
---------------
(Peter Brown)

/s/ Michael Conroy             Director                       February 2, 1999
------------------
(Michael Conroy)




                                      26

<PAGE>



Signature                      Capacity                       Date
---------                      --------                       ----

/s/ Herbert Denton             Director                       February 2, 1999
------------------
(Herbert Denton)

/s/ Richard K. Howe            Director                       February 2, 1999
-------------------
(Richard K. Howe)

/s/ Roland L. Kimberlin        Director                       February 2, 1999
-----------------------
(Roland L. Kimberlin)

/s/ Mark Metzger               Director                       February 2, 1999
----------------
(Mark Metzger)

/s/ Kenneth Zimmerman          Director                       February 2, 1999
---------------------
(Kenneth Zimmerman)






                                      27

<PAGE>



                         FINANCIAL STATEMENT SCHEDULE


Report of Independent Certified Public Accountants on
     Financial Statement Schedule                           S - 1

Schedule II- Valuation and Qualifying Accounts              S - 2



All other  schedules are not submitted  because they are not required or because
the  required  information  is included  in the  financial  statements  or notes
thereto.



                                      28

<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Shareholders of
Chic by H.I.S., Inc. and Subsidiaries


The audits  referred  to in our report  dated  January 7, 1999,  relating to the
consolidated  financial  statements  of Chic by H.I.S.,  Inc. and  Subsidiaries,
which is  referred  to in Item S of this Form  10-K,  included  the audit of the
accompanying financial statement schedule.  This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.

In our opinion,  such  financial  statement  schedule  presents  fairly,  in all
material respects, the information set forth therein.



BDO Seidman, LLP

New York, New York
January 7, 1999



                                     S-1

<PAGE>


                               CHIC BY H.I.S, INC.
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)





YEAR ENDED
NOVEMBER 2, 1996
COLUMN A                COLUMN B       COLUMN C      COLUMN D      COLUMN E
----------------------  -----------    ----------    -----------   -----------
                        BALANCE AT                                 BALANCE
                        BEGINNING OF                               AT END OF
DESCRIPTION                PERIOD      ADDITIONS     DEDUCTIONS      PERIOD
----------------------  -----------    ----------    -----------   -----------


RESERVE FOR
  UNCOLLECTIBLE ACCOUNTS
  AND RETURNS AND
  ALLOWANCES                $371            $0            $246         $125
                        =========      =========     ===========   ==========


YEAR ENDED
NOVEMBER 1, 1997
COLUMN A                COLUMN B       COLUMN C      COLUMN D     COLUMN E
----------------------  -----------    ----------    -----------   -----------
                        BALANCE AT                                 BALANCE
                        BEGINNING OF                               AT END OF
DESCRIPTION                PERIOD      ADDITIONS     DEDUCTIONS      PERIOD
----------------------  -----------    ----------    -----------   -----------



RESERVE FOR
  UNCOLLECTIBLE ACCOUNTS
  AND RETURNS AND
  ALLOWANCES                $125           $65              $0         $190
                        =========      =========     ===========  ===========


YEAR ENDED
NOVEMBER 7, 1998
COLUMN A                COLUMN B       COLUMN C      COLUMN D      COLUMN E
----------------------  -----------    ----------    -----------   -----------
                        BALANCE AT                                 BALANCE
                        BEGINNING OF                               AT END OF
DESCRIPTION                PERIOD      ADDITIONS     DEDUCTIONS      PERIOD
----------------------  -----------    ----------    -----------   -----------


RESERVE FOR
  UNCOLLECTIBLE ACCOUNTS
  AND RETURNS AND
  ALLOWANCES                $190           $47              $0         $237
                        =========      =========     ===========   ===========




                                     S-2