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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

      (Mark One)

        [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2003
                                       OR
        [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from______ to______

                        Commission file number 000-23157

                         A.C. MOORE ARTS & CRAFTS, INC.
             (Exact name of registrant as specified in its charter)

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<S>                                                                           <C>
                     Pennsylvania                                             22-3527763
(State or other jurisdiction of incorporation or organization)         (I.R.S. Employer Identification No.)


             500 University Court, Blackwood, NJ                                     08012
           (Address of principal executive offices)                                (Zip code)

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       Registrant's telephone number, including area code: (856) 228-6700


        Securities registered pursuant to section 12(b) of the Act: None

           Securities registered pursuant to section 12(g) of the Act:
                           Common Stock, no par value
                                (Title of Class)

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 (ss.229.405 of this Chapter) is not contained herein, and will
not be contained, to the best of the 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. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

Yes    X          No
    -------          ---------

As of June 30, 2003 the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $268,000,000 based on $20.12,
the closing price of the registrant's common stock on such date, as reported on
the Nasdaq Stock Market. (1)

The number of shares of the registrant's common stock outstanding as of March
10, 2004 was 19,376,481.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the 2004 Annual Meeting of
Shareholders are incorporated into Part III of this Form 10-K; provided,
however, that the Compensation Committee Report, the Audit Committee Report, the
graph showing the performance of the Company's stock and any other information
in such proxy statement that is not required to be included in this Annual
Report on Form 10-K, shall not be deemed to be incorporated herein by reference.

----------------
         (1) The aggregate market value of the voting stock set forth above
equals the number of shares of the registrant's common stock outstanding,
reduced by the number of shares of common stock held by executive officers,
directors and shareholders owning in excess of 10% of the registrant's common
stock, multiplied by the last reported sale price for the registrant's common
stock on the last business day of the registrant's most recently completed
second fiscal quarter. The information provided shall in no way be construed as
an admission that any person whose holdings are excluded from this figure is an
affiliate of the registrant or that any person whose holdings are included in
this figure is not an affiliate of the registrant and any such admission is
hereby disclaimed. The information provided herein is included solely for record
keeping purposes of the Securities and Exchange Commission.


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                                     PART I

ITEM 1. BUSINESS.

Our Company

         We are a rapidly growing specialty retailer offering a vast selection
of arts, crafts, and floral merchandise to a broad demographic of consumers. Our
target customers are primarily women between the ages of 25 and 55 who are
looking for ideas to decorate their homes, create handmade items, or otherwise
engage in arts and crafts activities. We have grown from 17 stores in January
1997 to 81 stores in December 2003. In 2003, for stores open for the full
calendar year, our average sales per square foot were $260, which we believe to
be the highest in our industry, and our average sales per store were
approximately $5.8 million.

         Our stores are located in the eastern United States from New England to
Alabama. For the next few years we intend to locate our new stores within 800
miles of our suburban Philadelphia distribution center, an area encompassing
approximately 50% of the United States population. We believe we can support at
least 150 stores in this geographic area from our new distribution center which
we expect to open during the second quarter of 2004.

         Our assortment of merchandise consists of more than 60,000 stock
keeping units, or SKUs, with approximately 45,000 SKUs offered at each store at
any one time. We believe we offer a superior shopping experience that is
differentiated by our broad merchandise assortment, high in-stock positions,
exciting stores, attentive and knowledgeable sales associates and competitive
prices.

         Due to the importance of our peak selling season, which includes
Fall/Halloween, Thanksgiving and Christmas, the fourth quarter has historically
contributed, and is expected to continue to contribute, virtually all of our
profitability for the entire year. As a result, any factors negatively affecting
us during the fourth quarter of any year, including adverse weather and
unfavorable economic conditions, would have a material adverse effect on our
results of operations for the entire year.

         We have a highly experienced management team which is comprised of
executives who have each participated in the expansion of several large
retailers. Collectively, our top management team, consisting of our Chief
Executive Officer, President and Chief Operating Officer, Chief Financial
Officer, two Executive Vice Presidents of Merchandising, and our Executive Vice
President of Store Operations, has more than 180 years experience in retailing.

         We became a holding company in July 1997 by incorporating in
Pennsylvania and exchanging 4,300,000 shares of our common stock for all the
capital stock of our operating subsidiary which was organized in Delaware in
1984.

Our Market

         The Hobby Industry Association (HIA) announced that its Consumer Usage
& Purchase Study revealed that industry sales for 2002 were approximately $29
billion, a 13% increase from $25.7 billion in 2001. Our market is comprised
primarily of arts and crafts products, silk and dried flowers and picture
frames. Our market is highly fragmented and is served by multi-store arts and
crafts retailers, mass merchandisers, small, local specialty retailers, mail
order vendors, hardware stores and a variety of other retailers.

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         The size and growth of our market is sustained by the popularity of
arts and crafts. According to a 2002 HIA report, 60% of U.S. households
participated in crafts and craft-related hobbies. Further, a June 2001 Harris
Poll reports that the popularity of crafts is similar to the popularity of
watching sports, listening to music, playing golf, boating, hunting, and other
similar leisure activities. The current popularity of crafts is reflected in the
national media in addition to the many craft publications. For example, major
newspapers such as the Wall Street Journal, the New York Times, and the Chicago
Tribune have published articles highlighting the success of craft retailers and
how the industry is at the right place at the right time.

Our Merchandise

         Our merchandising strategy is to offer the broadest and deepest
assortment of arts, crafts and floral merchandise and to provide our customers
with all of the components necessary for their crafting projects on a regular
basis. Below is a representative list of our merchandise:

         o        Art Supplies, Scrapbooking and Frames: paints, brushes,
                  canvas, drawing tools, rubber stamps and stationery,
                  scrapbooking supplies, stencils and frames.

         o        Traditional Crafts: stitchery, yarn, cake and candy making
                  supplies, glass crafts, wood crafts, kids crafts, felt,
                  glitter, dollmaking, dollhouses and furniture, and
                  instructional books.

         o        Floral and Accessories: silk and dried flowers, accessories
                  like vases and other products to assist in the arrangement of
                  flowers, pre-made and custom made floral arrangements, ribbon
                  and lace, wedding related items, potpourri, candles, candle
                  making supplies and wicker baskets.

         o        Fashion Crafts: t-shirts and sweatshirts, decorative items
                  like patches and rhinestones and jewelry making supplies like
                  beads.

         o        Seasonal Items: craft making materials, decorations and floral
                  products for all major holidays and seasons, including
                  Christmas, Fall/Halloween, Spring/Easter, Valentine's Day and
                  St. Patrick's Day.

Business and Operating Strategy

         We believe that our customers expect exceptional service and a broad
assortment of in-stock merchandise at competitive prices in an exciting and
easy-to-shop store. Our goal is to consistently deliver an overall value
proposition that exceeds our customers' expectations and offers them a superior
shopping experience. In order to achieve this goal we pursue the following five
primary business and operating strategies:

         We strive to offer the broadest and deepest assortment of arts, crafts
and floral merchandise.

         We believe that key elements in a customer's decision where to shop are
variety and selection of merchandise. We believe our stores offer the broadest
and deepest selection of arts, crafts and floral merchandise in our industry.
Each of our stores stocks more than 60,000 SKUs across five major merchandise
categories during the course of a year, with approximately 45,000 SKUs offered
at each store at any one time. Our buyers actively seek new merchandising
opportunities by monitoring industry trends, working with domestic and
international vendors, attending trade shows and craft fairs and regularly
interacting with our customers. We believe that our ability to provide new
merchandise to our customers on a continuous basis differentiates us from our
competitors.

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         We strive to maintain a superior in-stock merchandise position.

         Craft projects usually require multiple components. Providing all of
the components for a particular craft project in a single store on a regular
basis is critical to meeting the demands of our customers. Therefore, we
designed our merchandise distribution systems to ensure rapid replenishment of
inventory and the highest levels of in-stock positions in our stores. Our
distribution center delivers merchandise to each of our stores three to five
times per week during our peak selling season of October to December, and two to
three times per week throughout the balance of the year. In our peak selling
season, our store managers can replenish 65% of their shelf merchandise
assortment within two to three days.

         We strive to operate exciting, easy-to-shop stores.

         We provide our customers with project ideas by displaying samples of
completed craft projects throughout our stores. We believe that these displays
generate excitement and foster impulse buying and return visits to our stores.
We regularly provide video and live in-store crafting demonstrations. We offer
frequent in-store classes for children and adults in most of our stores on a
wide variety of craft skills. Our stores are designed to be uncluttered, well
organized, and well lit. Wide aisles and easy to read signage help our customers
locate merchandise and make our stores easy-to-shop.

         To ensure prompt and personalized service, we staff our stores with a
high ratio of store personnel to customers, typically including a store manager,
two or three associate managers, eight department managers and a staff of
full-time and part-time team members. Store personnel, many of whom are crafters
themselves, assist customers with merchandise selection and project ideas.

         We strive to attract and retain experienced and entrepreneurial store
management.

         To provide optimal customer service, we strive to foster merchandising
creativity and an entrepreneurial culture throughout all levels of our
organization. Store managers are empowered and encouraged to identify
merchandising opportunities and to tailor displays to local preferences for
craft projects. While receiving direction and support from corporate level
management, this autonomy allows store managers to use individual creativity to
cater to the needs and demands of customers. If proven successful, merchandising
ideas generated by a store manager can be implemented quickly throughout our
chain. We believe this helps us to increase sales and profitability. Store
managers and associate managers earn incentive bonuses based on annual increases
in the profitability of their stores. We believe our focus on empowering and
rewarding our employees, all of whom are "team members," helps in recruiting,
hiring and retaining talented personnel.

         We strive to provide superior price/value for our customers.

         We believe that our customers consider the relationship between the
quality and price of our merchandise to be important factors in their buying
decisions. Therefore, we strive to be the price/value leader in all of our
merchandise categories. Our purchasing professionals and store managers actively
monitor competitors' prices to ensure we maintain low prices while preserving
merchandise quality and value. Our policy to beat any competitor's advertised
price by 10% is clearly displayed in our stores. In addition, on a weekly basis,
we advertise select items at 20% to 50% off their everyday low prices. We
believe that our price/value strategy exceeds our customers' expectations and
enhances customer loyalty.

                                       3
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Growth Strategy

         The market in which we operate is large and fragmented. We believe that
this presents an opportunity to continue to grow our business for the
foreseeable future. Our objective is to improve our market share in existing
geographic markets and to expand into new geographic markets while enhancing our
profitability through greater leverage of our corporate infrastructure. To
support our growth, we expect to expand our facilities, upgrade our management
information systems and hire additional corporate personnel. We believe by
increasing our store base we can obtain economies of scale in advertising,
distribution, purchasing and management costs and, as a result, improve our
operating margins.

         Opening New Stores:

         During the next two years we intend to increase our store base of 81
locations at December 31, 2003 by approximately 20% per year. Our current
strategy is to open new stores within an 800 mile radius of our corporate
headquarters and distribution center located in suburban Philadelphia. This
geographic area contains approximately 50% of the United States population.
Ultimately, we believe that we can almost double the number of our existing
stores within this geographic area without significantly diluting the sales in
our existing stores. In the future, we may open stores in other regions.

         Our site selection strategy is overseen by a Vice President of Real
Estate who is responsible for identifying favorable store locations in both
existing and new geographic markets. Our site selection criteria includes an
assessment of population and demographic characteristics of the market area,
customer traffic, performance of other retailers within the area, co-tenants at
the proposed site, projected profitability and cash return on investment.

         We have developed a standardized procedure for opening new stores. Our
new store opening team develops the floor plan and inventory layout based on our
store prototype and hires and trains team members in connection with the opening
of each new store. For each new store we plan to open in the next two years, we
expect to spend approximately $1.3 million, which includes $365,000 for fixtures
and equipment, $195,000 in pre-opening costs, and $700,000 for in-store
inventory, net of accounts payable.

         Increasing Sales in Existing Stores:

         In 2003, for stores open at least one full calendar year, our average
sales per square foot were $260, which we believe to be the highest in our
industry, and our average sales per store were approximately $5.8 million. Our
comparable store sales growth was 2% in 2003, 5% in 2002, 8% in 2001, 3% in 2000
and 6% in 1999. Stores are added to the comparable store base at the beginning
of their fourteenth full month of operation. Our primary method of increasing
sales in our existing stores is to successfully execute our business and
operating strategies, including:

         o        providing the broadest and deepest merchandise assortment,

         o        maintaining a superior in-stock position,

         o        operating exciting and easy-to-shop stores,

         o        providing new merchandise and crafting ideas to our customers,

         o        hiring and retaining entrepreneurial and knowledgeable store
                  managers and sales teams, and

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         o        providing superior price/value for our customers.

Merchandising

         Our merchandising strategy is to offer the broadest and deepest
assortment of arts, crafts and floral merchandise and to provide our customers
with all of the components necessary for their crafting projects on a regular
basis. We believe our merchandise appeals to a wide range of recreational and
professional crafters of all ages and economic backgrounds. However, our primary
customers are women ages 25 to 55. We maintain a fresh and exciting shopping
environment by frequently introducing new merchandise into our stores and by
regularly updating our displays of completed craft projects. Our buyers actively
seek new merchandising opportunities by monitoring industry trends, working with
domestic and international vendors, and regularly attending trade shows and
craft fairs.

         The following table describes net sales for each of our merchandise
categories as a percentage of our total net sales for the years ended December
31, 2001 through 2003:

                                                 Year Ended December 31,
                                            -------------------------------
                                              2003         2002        2001
                                              ----         ----        ----
Art supplies, scrapbooking and frames...      35.0%        35.0%       32.0%
Traditional crafts......................      30.0         29.0        30.0
Floral and accessories..................      24.0         24.0        25.0
Fashion crafts..........................       7.0          7.0         8.0
Seasonal items..........................       4.0          5.0         5.0
                                             -----        -----       -----
Total...................................     100.0%       100.0%      100.0%


         Our buyers develop a planogram for each of our basic and seasonal
merchandise categories which is implemented at the store level. A planogram is a
diagram that shows how and where each specific retail product should be placed
on shelves or displays. The planograms are developed by a team consisting of our
buyers and members of our planogram department, with input from key vendors. The
planograms are developed using information about the products, such as size,
shape, colors, or theme, sales volume and inventory levels. By analyzing past
and current sales patterns, we can then adjust our planograms to present
merchandise in a manner that helps maximize sales.

         Our point of sale, or POS, system allows us to make better
merchandising decisions by identifying sales volume and seasonality patterns of
particular items of merchandise. With this information we can make better
decisions regarding when to stock, reorder, mark-down and discontinue
merchandise.

         Our purchasing staff and store managers actively monitor competitors'
prices to ensure we maintain low prices while preserving merchandise quality and
value. Our policy of beating any competitor's advertised price by 10% is clearly
displayed in our stores. On a weekly basis, we advertise select items at 20% to
50% off their everyday low prices. We also accept competitors' coupons. We
believe that our strategy of price/value leadership enhances customer loyalty
and provides superior value.

         Our stores regularly feature seasonal merchandise that complements our
core merchandising strategy. Seasonal merchandise is offered for all major
holidays and seasons, including Christmas, Fall/Halloween, Spring/Easter,
Valentine's Day and St. Patrick's Day. By far the greatest portion of our
seasonal merchandise is sold during the Christmas season. This includes
merchandise in our seasonal department as well as seasonal products sold in
other merchandise categories. Our Christmas holiday merchandise is given floor
and shelf space in our stores beginning in late summer. The Christmas holiday
season is longer for our stores than for many traditional retailers because of
the project-oriented nature of Christmas crafts and gift-making ideas. We
believe that our holiday merchandise assortment differs from some of our
competitors because a substantial amount of our seasonal merchandise is used to
create holiday crafts and gifts rather than consisting of traditional Christmas
trees and decorations.

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Stores

         Our stores are typically 20,000 to 25,000 square feet. Most of our
stores are located in strip centers that are easily accessible from main traffic
arteries and have convenient parking. Our store size varies based on market
demographics and real estate availability. Most of our store leases have an
average initial term of ten years, with two five year renewal options, and
provide for predetermined escalations in future minimum annual rent or
additional rent contingent upon store sales levels. Our stores are generally
open from 9:30 a.m. to 9:00 p.m., Monday through Saturday, and from 10:00 a.m.
to 6:00 p.m. on Sunday.

         Store layout and operations

         Our stores provide a "one-stop-shopping" destination for arts, crafts
and floral merchandise in an exciting and spacious shopping environment. We
design our stores to be attractive and easy-to-shop with a layout intended to
lead customers through the entire store in order to expose them to all of our
merchandise categories. Wide aisles and easy to read signage help our customers
locate merchandise. We use end-of-aisle displays to feature best-selling items
and promotional merchandise. Generally, the center of the store contains the
floral area, which includes a ribbon center and counter for free floral
arrangement services. Our stores also contain a customer service area and eight
to 11 registers for quick checkout. Our prototype store is apportioned
approximately 80% to selling space with the remainder devoted to delivery,
storage, classroom and office areas.

         We emphasize the display of completed craft projects in each department
to provide customers with crafting ideas. Because many customers browse for new
craft ideas, we believe eye-catching displays of completed craft projects are
effective at motivating impulse purchases. Our knowledgeable store team members,
many of whom are crafters themselves, are available to explain the displays in
detail to customers and to offer assistance on related craft projects.

         We offer frequent in-store classes for children and adults in most of
our stores in a dedicated classroom. Classes are taught by team members and
outside professionals. Typical classes provide instruction on oil painting, cake
decorating, advanced stamping, or scrapbooking.

         Store management and training

         Each store is managed by a store manager who is assisted by two or
three associate store managers and eight department managers, and a staff of
full-time and part-time team members. Our store managers and associate store
managers are responsible primarily for customer service, training, hiring store
level team members, and inventory management. The department managers are
responsible for merchandise ordering, inventory management and customer service.
We develop new store managers by promoting from within our organization. We
selectively hire experienced store managers from other retailers who start at
our stores as associate store managers.

         A key part of our strategy and management style is to foster an
entrepreneurial culture and merchandising creativity throughout all levels of
our organization which we believe helps to promote customer loyalty. Store
managers are empowered and encouraged to identify merchandising opportunities
and to tailor displays to local preferences for craft projects. While receiving
direction and support from corporate level management, this autonomy allows
store managers to use their own creativity to cater to the needs and demands of
their customers. If proven successful, merchandising ideas generated by a store
manager can be implemented throughout our chain. We believe this helps to
increase sales and profitability. Our store managers and associate store
managers earn incentive bonuses based upon annual increases in the profitability
of their stores. We believe our focus on empowering and rewarding our team
members helps in recruiting, hiring and retaining talented personnel.

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         Our training program for store managers and associate store managers
includes several annual company-sponsored conferences to refine and develop
their skills in merchandising, merchandise trends, store operations, financial
controls, human resources and general management. Many of our team members are
crafters themselves and we provide them with the industry's most extensive
product training to create a sales staff with a strong focus on customer service
and a willingness to assist customers in assembling and coordinating their craft
projects.

Purchasing

         Our purchasing programs are designed to support our business strategy
of providing customers with the broadest and deepest assortment of high quality
arts, crafts and floral merchandise at value prices while maintaining high
in-stock positions. Our buying staff of 20 professionals oversees all of our
purchasing. Buyers and store management regularly attend trade shows and craft
fairs to monitor industry trends and to obtain new craft ideas.

         In-store department managers are responsible for daily reordering of
merchandise for their departments. In 2003, approximately 99% of our merchandise
orders were placed through our EDI (electronic data interchange) system.
Approximately 66% of our orders were shipped directly from vendors to our
stores; the remaining 34%, approximately one-third of which are floral and
seasonal items, were shipped from our distribution center. Merchandise
assortments at our stores can be enhanced by products ordered by store managers
to meet the unique needs of their customers. All purchases are monitored through
centralized system controls.

         In 2003, we purchased our inventory from more than 500 vendors
worldwide. One of the key criteria for the selection of vendors is their
responsiveness to our delivery requirements and timing needs. In 2003:

         o        the largest 25 domestic vendors accounted for approximately
                  50% of our purchases,

         o        the largest vendor, SBAR'S, Inc., a specialty distributor of
                  arts and crafts merchandise, primarily to independent arts and
                  crafts retailers, accounted for approximately 20% of our
                  purchases, and

         o        approximately 11% of our merchandise, primarily floral and
                  seasonal items, was directly imported from foreign
                  manufacturers or their agents, almost exclusively from the
                  People's Republic of China.

All of our overseas purchases are denominated in U.S. dollars.

Distribution

         Our distribution strategy is focused on supporting our stores and
maintaining high in-stock positions in all of our merchandise categories. Our
stores receive merchandise deliveries three to five times per week from our
distribution center during our peak selling season, and two to three times per
week throughout the balance of the year, depending on store size.

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         We lease 633,000 square feet of distribution and warehouse facilities,
consisting of our 253,000 square foot distribution center and adjoining 10,000
square foot office complex in suburban Philadelphia and our two nearby satellite
warehouses which total an additional 380,000 square feet. Our distribution
center is leased for a term which expires in March 2005, subject to our option
to renew the term for an additional six years. Our satellite warehouses are
leased for a term which expires in June 2004.

         Our distribution center and warehouse operations are supported by our
real-time warehouse management system which uses hand-held computers and radio
frequency communication technology to track merchandise. Our warehouse
management system enables us to update our inventory records instantly to
reflect all of the merchandise receiving and shipping activities that occur at
our distribution center throughout the day. We believe our warehouse management
system helps to make our distribution center and warehouse operations efficient
and is instrumental in helping us meet our commitment to provide superior
inventory replenishment to each of our stores.

         We lease a fleet of tractors and trailers to deliver merchandise to 45
of our 81 stores directly from our distribution center. Additionally, we have
contracted with a dedicated third party carrier to deliver merchandise to the 36
stores where an overnight stay is required because of travel time. In 2003,
approximately 34% of our merchandise was delivered from our distribution center
to our stores.

         We are currently in the process of building a new distribution center
and office complex which we plan to open in the second quarter of 2004. This new
facility, which will be located near our existing distribution center, will be
700,000 square feet for distribution and warehousing plus 60,000 square feet of
office space. The total cost of the land and building for this facility is
estimated to be $43.0 million. We expect to finance $30.0 million of this
project through long-term debt. We believe that our new facility, when
completed, will enable us to effectively service all of our existing locations
and a total of approximately 150 store locations within an 800-mile radius of
the new distribution center.

Marketing

         Our marketing and advertising is designed to attract our target
customers consisting primarily of women between the ages of 25 and 55. A study
published in Craftrends in November 2001, surveyed 1,000 craft customers across
the country. Of the 1,000 participants, 66% were between the ages of 26 and 54,
89% were female and 46% had an income greater than $60,000. We believe that our
target customer is consistent with this demographic profile.

         We advertise 51 weeks per year, typically in midweek editions of local
and/or regional newspapers. In 2003 we ran 19 multi-page newspaper inserts in
local and regional newspapers. In addition, prior to store openings, we use
radio advertisements to develop customer awareness and we place special
pre-opening advertisements, normal advertising copy and/or grand opening inserts
in newspapers. We create all of our advertising in-house. Our net advertising
expense was 1.3% of net sales in 2003.

         Our website, www.acmoore.com, is designed to drive additional store
traffic by providing information, inspiration and ideas to our visitors. It also
serves as another marketing channel to build brand name awareness. Our website
features weekly advertisements, a store locator and an in-store class schedule,
as well as suggested craft projects for children and adults with accompanying
instructions and shopping lists for merchandise to be purchased at our stores.
Additionally, our website displays over 100 proprietary on-line video segments
that allow customers to learn the latest crafting tips, techniques and project
ideas. This exclusive video collection and our craft projects are updated both
seasonally and according to new trends. We have initiated a complete redesign of
our website scheduled to launch in early spring 2004 that will reemphasize our
brand name and support our other marketing efforts. We do not sell our
merchandise on our website, although gift cards may be purchased online.

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Management Information Systems

         We believe that we have implemented leading information technology
systems which support merchandising, store ordering, warehouse inventory
management, finance and administration. Our management information systems are
secure, redundant and scalable. We expect to continue to enhance the performance
of our systems through software and hardware upgrades and other improvements,
such as the systems integration of our stores and distribution center to improve
our inventory processing capabilities.

         In August 2000, we completed the installation of our POS system in
every store. This system, which includes merchandise universal product code or
bar code scanning at the registers along with the expansion of our radio
frequency re-order system, allows our stores to reduce or re-deploy employee
team members that had previously been used to price mark each SKU. With the POS
data capturing capabilities, faster and more detailed sales and margin
information is available. We have improved our merchandising efforts by polling
the POS system on a regular basis to evaluate sale and pricing trends for each
SKU. In addition, we are able to generate data to assess the performance of our
advertising and promotional programs. This system also improves the speed of the
check-out process, reduces pricing errors and provides greater control over
register operations.

         Our real-time management information and control system has been
designed to support our key business objective of maintaining a high in-stock
position. Utilizing a radio frequency based hand-held computer, our department
managers electronically record and then transmit their orders to the corporate
office. These orders are then automatically sent to the appropriate vendor. This
internally developed system is based upon electronic data interchange, or EDI,
and connects with most of our vendors as well as with our distribution center.
Those vendors that lack EDI capability are given an option to use a web-based
solution that links with our systems.

Competition

         The market in which we compete is highly fragmented, containing
multi-store arts and crafts retailers, mass merchandisers, small local specialty
retailers, mail order vendors, hardware stores and a variety of other retailers.
We believe we are one of only seven retailers in the United States dedicated to
serving the arts and crafts market that have annual sales in excess of $100
million. We compete with many retailers and classify our principal competition
within the following three categories:

         o        Multi-store arts and crafts retailers. This category includes
                  several multi-store arts and crafts chains operating more than
                  35 stores and comprises: Michaels Stores, Inc., a chain which
                  operates approximately 800 Michaels Stores throughout the
                  United States; Jo-Ann Stores, Inc. which operates
                  approximately 810 Jo-Ann Stores and approximately 90 Jo-Ann
                  etc. stores nationwide; Hobby Lobby Stores, Inc. a chain which
                  operates approximately 310 stores primarily in the Midwestern
                  United States; Garden Ridge, Inc., which operates
                  approximately 45 stores primarily in the southeast and midwest
                  United States; and Rag Shops, Inc. which operates
                  approximately 70 stores located primarily in New Jersey and
                  Florida.

                                       9
<PAGE>

         o        Mass merchandisers. This category includes Wal-Mart Stores,
                  Inc., and other mass merchandisers. These retailers typically
                  dedicate only a relatively small portion of their selling
                  space to a limited assortment of arts and crafts supplies and
                  floral merchandise.

         o        Small, local specialty retailers. This category includes
                  thousands of local "Mom & Pop" arts and crafts retailers.
                  Typically, these are single store operations managed by the
                  owner. The stores generally offer a limited selection and have
                  limited resources for advertising, purchasing and
                  distribution. Many of these stores have established a loyal
                  customer base within a given community and compete on customer
                  service.

         We believe that the principal competitive factors of our business are
pricing, breadth of merchandise selection, in-stock position and customer
service. We believe that we are well positioned to compete on each of these
factors.

Team Members

         As of December 31, 2003, we had 1,950 full-time and 2,867 part-time
team members, 4,513 of whom worked at our stores, 132 at the distribution center
and 172 at the corporate offices. None of our team members are covered by a
collective bargaining agreement, and we believe our relationship with our team
members to be good.

Trademarks

         "A.C. Moore", "Fashion Forward" and "Creations for All Generations" are
trademarks that have been registered with the United States Patent and Trademark
Office. We use the "A.C. Moore" name and logo as a tradename and as a service
mark in connection with sale of our merchandise. The "Fashion Forward" name and
logo is used on the exclusive packaging of some of our picture frames. The
"Creations for All Generations" is used in advertising campaigns.

Website and Availability of Information

         Our internet address is www.acmoore.com. We make available free of
charge on or through www.acmoore.com our annual report on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act, as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC.

         In addition, we will provide, at no cost, paper or electronic copies of
our reports and other filings made with the SEC. Requests should be directed to:

                                    Leslie H. Gordon
                                    A.C. Moore Art & Crafts, Inc.
                                    500 University Court
                                    Blackwood, NJ   08012

         The information on the website listed above, is not and should not be
considered part of this annual report on Form 10-K and is not incorporated by
reference in this document. This website is only intended to be an inactive
textual reference.


                                       10
<PAGE>


Cautionary Statement Relating to Forward-Looking Statements

         Certain oral statements made by our management from time to time and
certain statements contained herein or in other reports filed by us with the
Securities and Exchange Commission or incorporated by reference herein or
therein are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), with respect to our results
of operations and our business. All such statements, other than statements of
historical facts, including those regarding market trends, our financial
position and results of operations, business strategy, projected costs, and
plans and objectives of management for future operations, are forward-looking
statements. In general, such statements are identified by the use of
forward-looking words or phrases including, but not limited to, "intended,"
"will," "should," "may," "believes," "expects," "expected," "anticipates," and
"anticipated" or the negative thereof or variations thereon or similar
terminology. These forward-looking statements are based on our current
expectations. Although we believe that the expectations reflected in such
forward- looking statements are reasonable, there can be no assurance that such
expectations will prove to be correct. These forward-looking statements
represent our current judgment. We disclaim any intent or obligation to update
our forward-looking statements. Because forward-looking statements involve risks
and uncertainties, our actual results could differ materially. Important factors
that could cause actual results to differ materially from our expectations
("Cautionary Statements") include those that are discussed below. All subsequent
written and oral forward-looking statements attributable to us or persons acting
on our behalf are expressly qualified in their entirety by the Cautionary
Statements.

An increase in our sales, profitability and cash flow will depend on our ability
to increase the number of stores we operate and increase the productivity and
profitability of our existing stores.

         The key components of our growth strategy are to increase the number of
stores we operate and increase the productivity and profitability of our
existing stores. If we are unable to implement this strategy, our ability to
increase our sales, profitability and cash flow could be significantly impaired.
To the extent we are unable to open new stores as planned, our sales growth
would come only from increases in comparable store sales. Growth in
profitability in that case would depend significantly on our ability to increase
margins or reduce our costs as a percentage of sales. There are many factors,
some of which are beyond our control, which could impact our ability to
implement our strategy for opening new stores. These factors include:

         o        our ability to identify suitable markets in which to expand,

         o        the availability of suitable sites for additional stores,

         o        the ability to negotiate acceptable lease terms for sites we
                  identify,

         o        the availability of acceptable financing to support our
                  growth, and

         o        our ability to hire, train and retain a sufficient number of
                  qualified managers and other store personnel.



                                       11
<PAGE>

Our success will depend on how well we manage our growth.

         Even if we are able to implement, to a significant degree, our key
growth strategies of expanding our store base and increasing the productivity
and profitability of our existing stores, we may experience problems relating to
our growth, which may prevent any significant increase in profitability or
negatively impact our cash flow. For example:

         o        The costs of opening and operating new stores may offset the
                  increased sales generated by the additional stores;

         o        The opening of additional stores in an existing market could
                  reduce net sales from existing stores in that market;

         o        The opening of stores in new geographic markets may present
                  competitive and merchandising challenges that are different
                  than those we face in our existing geographic markets;

         o        The closing or relocation of under-performing stores may
                  result in us retaining liability for expensive leases;

         o        Our growth may outpace our ability to expand, upgrade and
                  improve our administrative, operational and management
                  systems, controls and resources;

         o        We may be unable to hire and train sufficient qualified
                  managers and other store personnel;

         o        Our suppliers may be unable to meet our increased demand for
                  merchandise as a result of the additional stores and increased
                  productivity of our existing stores; and

         o        We may be unable to expand our existing distribution
                  capabilities, or employ third-party distribution services on a
                  cost-effective basis, to provide sufficient merchandise for
                  sale by our new stores.

A weak fourth quarter would have a material adverse effect on our operating
results for the year.

         Our business is affected by the seasonality pattern common to most
retailers. Due to the importance of our peak selling season, which includes
Fall/Halloween, Thanksgiving and Christmas, the fourth quarter has historically
contributed, and is expected to continue to contribute, virtually all of our net
income for the entire year. In anticipation of increased sales activity during
the fourth quarter, we incur significant additional expense both prior to and
during the fourth quarter. These expenses may include acquisition of additional
inventory, advertising, in-store promotions, seasonal staffing needs and other
similar items. As a result, any factors negatively affecting us during the
fourth quarter of any year, including adverse weather and unfavorable economic
conditions, would have a material adverse effect on our results of operations
for the entire year.

Our quarterly results fluctuate due to a variety of factors and are not a
meaningful indicator of future performance.

         Our quarterly results have fluctuated in the past and may fluctuate
significantly in the future depending upon a variety of factors, including,
among other things:

         o        the mix of merchandise sold,

         o        the timing and level of markdowns,

                                       12
<PAGE>

         o        promotional events,

         o        adverse weather conditions,

         o        store openings and closings,

         o        remodels or relocations of our stores,

         o        length and timing of the holiday seasons,

         o        competitive factors, and

         o        general economic and political conditions.

We believe that period-to-period comparisons of past operating results cannot be
relied upon as indicators of future performance. If our operating results in any
future period fall below the expectations of securities analysts and investors,
the market price of our securities would likely decline.

Our success depends on key personnel whom we may not be able to retain or hire.

         We are currently dependent upon the continued services, ability and
experience of our senior management team, particularly John E. ("Jack") Parker,
our Chief Executive Officer and Lawrence H. Fine, our President and Chief
Operating Officer. The loss of the services of Mr. Parker or Mr. Fine or other
members of senior management could have a material adverse effect on us. We do
not maintain any key man life insurance on any members of our senior management
team. Our success in the future will also be dependent upon our ability to
attract and retain other qualified personnel, including store managers.

We face an extremely competitive retail business market.

         The arts and crafts retailing business is highly competitive. We
currently compete against a diverse group of retailers, including multi-store
arts and crafts retailers, mass merchandisers, small local specialty retailers,
mail order vendors, hardware stores and a variety of other retailers. Almost all
of our stores face aggressive competition in their market area from one or more
of our major competitors. In addition, alternative methods of selling crafts,
such as over the Internet or direct marketing, could result in additional future
competitors and increased price competition because our customers could more
readily comparison shop. Some of our competitors, particularly the mass
merchandisers and national arts and crafts chains, have substantially greater
financial resources and operate more stores than we do. We also compete with
these and other retailers for customers, suitable retail locations, suppliers
and qualified employees and management personnel. Moreover, increased
competition may result in potential or actual litigation between us and our
competitors relating to such activities as competitive sales and hiring
practices, exclusive relationships with key suppliers and manufacturers and
other matters. As a result, increased competition may adversely affect our
future financial performance, and we cannot assure you that we will be able to
compete effectively in the future.

We may not be able to successfully anticipate changes in merchandise trends and
consumer demands and our failure to do so may lead to loss of sales and the
closing of under-performing stores.

         Our success depends, in large part, on our ability to anticipate and
respond in a timely manner to changing merchandise trends and consumer demand.
Accordingly, any delay or failure by us in identifying and correctly responding
to changing merchandise trends and consumer demand could adversely affect
consumer acceptance of the merchandise in our stores. In addition, we make
decisions regarding merchandise well in advance of each of the seasons in which
such merchandise will be sold. Significant deviations from projected demand for
merchandise would have a material adverse effect on our results of operations
and financial condition, either from lost sales due to insufficient inventory or
lower margins due to the need to mark down excess inventory.

                                       13
<PAGE>

         A material decline in sales and other adverse conditions resulting from
our failure to accurately anticipate changes in merchandise trends and consumer
demands may require us to close under-performing stores. Closing stores would
subject us to additional costs including, but not limited to, taking reserves on
impaired assets, loss of customer goodwill and costs associated with outstanding
lease obligations.

Because of our small store base adverse events could have a greater impact on us
than if we had a larger store base.

         As of December 31, 2003, we operated a chain of 81 stores. The results
achieved to date by our relatively small store base may not be indicative of the
results of the larger number of stores which we intend to operate in existing
and new geographic markets. Because our current and planned stores are located
in the eastern United States, the effect on us of adverse events in this region
(such as weather or unfavorable regional economic conditions) may be greater
than if our stores were more geographically dispersed. Because overhead costs
are spread over a smaller store base, increases in our general and
administrative expenses could affect our profitability more negatively than if
we had a larger store base. Due to our relatively small store base, one or more
unsuccessful new stores, or a decline in sales at an existing store, will have a
more significant effect on our results of operations than would be the case if
we had a larger store base.

A disruption in the operations of our distribution center could have a material
adverse effect on our financial condition and results of operations.

         Our distribution center in suburban Philadelphia handles much of the
distribution for our stores. Our distribution center, and thus our distribution
operations, are vulnerable to damage or interruption from fire, flood, power
loss, break-ins and similar events. We have no formal disaster recovery plan.
The occurrence of unanticipated problems at our distribution center, all of
which may not be covered by insurance, could cause interruptions or delays in
our business which would have a material adverse effect on our financial
condition and results of operations.

We depend on a number of key vendors to supply our merchandise, and the loss of
any one of our key vendors may result in a loss of sales and significantly harm
our operating results.

         Our performance depends on our ability to purchase our merchandise in
sufficient quantities at competitive prices. Although we have many sources of
merchandise, SBAR'S, our largest supplier of merchandise, accounted for
approximately 20% of the aggregate dollar volume of our purchases in 2003. We
depend on SBAR'S to provide us with low-cost merchandise that would be less
efficient for us to obtain directly from other vendors or manufacturers. Our
future success is dependent upon our ability to maintain a good relationship
with SBAR'S and our other principal suppliers. We do not have any long-term
purchase agreements or other contractual assurances of continued supply, pricing
or access to new products, and any vendor or distributor could discontinue
selling to us at any time. We may not be able to acquire desired merchandise in
sufficient quantities or on terms acceptable to us in the future, or be able to
develop relationships with new vendors to replace discontinued vendors. Our
inability to acquire suitable merchandise in the future or the loss of one or
more key vendors and our failure to replace any one or more of them may have a
material adverse effect on our business, results of operations and financial
condition. Our smaller vendors generally have limited resources, production
capacities and operating histories, and some of our vendors have limited the
distribution of their merchandise in the past. These vendors may be susceptible
to cash flow problems, downturns in economic conditions, production
difficulties, quality control issues and difficulty delivering agreed-upon
quantities on schedule. We also cannot assure you that we would be able, if
necessary, to return product to these vendors and obtain refunds of our purchase
price or obtain reimbursement or indemnification from any of our vendors if
their products prove defective.


                                       14
<PAGE>

We face risks associated with sourcing and obtaining merchandise from foreign
sources.

         We have in recent years placed increased emphasis on obtaining floral
and seasonal items from overseas vendors, with approximately 11% of all of our
merchandise being purchased from overseas vendors in 2003. In addition, many of
our domestic suppliers purchase a portion of their merchandise from foreign
sources. Our future success will depend in large measure upon our ability to
maintain our existing foreign supplier relationships and to develop new ones.
While we rely on our long-term relationships with our foreign vendors, we have
no long-term contracts with them. In addition, virtually all of the merchandise
which we purchase from foreign sources is manufactured in the People's Republic
of China. Since adoption of an "open-door policy" in 1978, the Chinese
government has been pursuing economic reform policies, including the
encouragement of foreign trade and investment and greater economic
decentralization. We cannot assure you, however, that China will continue to
pursue these policies. Many of our imported products are subject to duties,
tariffs and quotas that may limit the quantity of some types of goods which we
may import into the United States. Our dependence on foreign imports also makes
us vulnerable to risks associated with products manufactured abroad, including,
among other things:

         o        changes in import duties, tariffs and quotas,

         o        loss of "most favored nation" trading status by the United
                  States in relation to a particular foreign country, including
                  the People's Republic of China,

         o        work stoppages,

         o        delays in shipments,

         o        revaluation of the Chinese currency,

         o        freight cost increases,

         o        economic uncertainties, including inflation,

         o        foreign government political unrest, and

         o        trade restrictions, including the United States retaliating
                  against protectionist foreign trade practices.

If any of these or other factors were to render the conduct of business in
particular countries undesirable or impractical, our financial condition and
results of operations could be materially and adversely affected because we
would have difficulty sourcing the merchandise we need to remain competitive. An
interruption or delay in supply from our foreign sources, or the imposition of
additional duties, taxes or other charges on these imports could have a material
adverse effect on our business, financial condition and results of operations
unless and until alternative supply arrangements are secured. Products from
alternative sources may be of lesser quality and/or more expensive than those we
currently purchase, resulting in a loss of sales to us.

                                       15
<PAGE>

Transition to a new distribution center may cause disruption in our operations.

         We are currently building a new 700,000 square foot distribution center
in suburban Philadelphia which we plan to open during the second quarter of 2004
to replace our current distribution center and to support our growing store
base. If the systems and controls we set up for the new facility do not work as
planned, or if the new facility is not ready at the time we anticipate, our
ability to supply our stores could be impaired, which could have a material
adverse effect on our sales and financial performance.

We face risks relating to inventory.

         We depend upon our in-store department managers to reorder the majority
of our merchandise. The failure of these department managers to accurately
respond to inventory requirements could adversely affect consumer acceptance of
the merchandise in our stores and negatively impact sales which could have a
material adverse effect on our results of operations and financial condition. If
we misjudge the market, we may significantly overstock unpopular products and be
forced to take significant inventory markdowns, which would have a negative
impact on our operating results and cash flow. Conversely, shortages of key
items could have a material adverse impact on our operating results. In
addition, we conduct a physical inventory in our stores once a year, and
quarterly results are based on an estimated gross margin and accrual for
estimated inventory shrinkage.

Our management information systems may prove inadequate.

         We depend on our management information systems for many aspects of our
business. Some of our key software has been developed by our own programmers and
this software may not be easily integrated with other software and systems. Our
business will be materially and adversely affected if our management information
systems are disrupted or if we are unable to improve, upgrade, integrate or
expand upon our systems, particularly in light of our intention to significantly
increase the number of stores that we operate and our planned move to a new
distribution center.

Our two largest shareholders will continue to have substantial influence over
matters requiring a shareholder vote.

         Our two largest shareholders own approximately 28% of our outstanding
common stock. These shareholders, therefore, have the ability to exert
significant influence over our board of directors and the outcome of shareholder
votes.

An increase in the cost of fuel oil and oil-based products could impact our
earnings and margins.

         Prices for oil have fluctuated dramatically in the past and have risen
in recent months as a result of disruptions in oil producing countries. These
fluctuations impact our distribution costs and the distribution costs of our
vendors. If the price of fuel oil continues to increase, our distribution costs
will increase, which could impact our earnings. In addition, many of the
products we sell, such as paints, are oil-based. If the price of oil continues
to increase, the price of the oil-based products we purchase and sell may
increase, which could impact our margins.

                                       16
<PAGE>

Terrorist attacks and threats or actual war may impact all aspects of our
operations, revenues, costs and stock price in unpredictable ways.

         Terrorist attacks in the United States, as well as future events
occurring in response or in connection to them, including, without limitation,
future terrorist attacks against U.S. targets, rumors or threats of war, actual
conflicts involving the United States or its allies or military or trade
disruptions impacting our domestic or foreign suppliers of merchandise, may
impact our operations, including, among other things, causing delays or losses
in the delivery of merchandise to us and decreased sales of the products we
carry. More generally, any of these events could cause consumer confidence and
spending to decrease or result in increased volatility in the United States and
worldwide financial markets and economy. They also could result in a deepening
of any economic recession in the United States or abroad. These events could
also temporarily increase demand for our products as consumers respond by
traveling less and engaging in home-based leisure activities which could
contribute to a temporary increase in our sales which may not be sustainable.
Any of these occurrences could have a significant impact on our operating
results, revenues and costs and may result in the volatility of the market price
for our common stock and on the future price of our common stock.

EXECUTIVE OFFICERS OF THE REGISTRANT

         Our executive officers are as follows:
<TABLE>
<CAPTION>

                 Name                     Age                    Position
                 ----                     ---                    --------
<S>                                       <C>
John E. (Jack) Parker.................    62     Chief Executive Officer and Director
Lawrence H. Fine......................    50     President, Chief Operating Officer and Director
Patricia A. Parker....................    61     Executive Vice President, Merchandising
Leslie H. Gordon......................    60     Executive Vice President and Chief Financial Officer
Janet Parker..........................    41     Executive Vice President, Merchandising and Marketing
Jack Robinson.........................    52     Executive Vice President, Store Operations

</TABLE>

         Mr. Parker, our co-founder, has been Chief Executive Officer and a
director since our inception and was our President from inception until June
2001. From 1959 to 1984, Mr. Parker worked for the F.W. Woolworth Company, a
general merchandise retailer, in various management positions, most recently as
President and Chief Executive Officer of the United States General Merchandise
Group where he was responsible for more than 1,000 stores, including the entire
domestic chain of Woolworth retail stores. Mr. Parker is the husband of Patricia
A. Parker and the father of Janet Parker.

         Mr. Fine has served as our President since June 2001 and our Chief
Operating Officer since February 2003. Mr. Fine was elected as a director in
August 2002. Previously Mr. Fine was Executive Vice President - General
Merchandise Manager for arts and crafts retailer Michaels Stores, Inc., a
position he held since December 1996. From 1995 until joining Michaels in
December 1996, he was Senior Vice President of Merchandising for Party City
Corp., a specialty retailer of party merchandise. Prior to joining Party City,
Mr. Fine held a variety of merchandising positions with the Jamesway
Corporation, a retail mass-merchandiser, for nearly 16 years.

         Ms. Patricia Parker has served as our Executive Vice President,
Merchandising since September 1990. From 1985 to 1990, she served as our Vice
President. Ms. Parker is responsible for purchasing all of our floral and
seasonal merchandise and our import purchasing program. Ms. Parker served as a
director of the Company until August 2002. Ms. Parker is the wife of Jack Parker
and the mother of Janet Parker.

         Mr. Gordon has served as our Executive Vice President and Chief
Financial Officer since February 1999. From March 1996 to January 1999, Mr.
Gordon served as our Senior Vice President, Treasurer and Chief Financial
Officer. From 1992 to 1995, Mr. Gordon was Senior Vice President, Finance of C &
J Clark America, Inc., a shoe manufacturer, wholesaler and retailer. From 1986
to 1992, Mr. Gordon served as Senior Vice President, Finance, of SILO, Inc., an
electronics retailer.

                                       17
<PAGE>

         Ms. Janet Parker has served as our Executive Vice President,
Merchandising and Marketing since February 2003. From 2001 to January 2003 Ms.
Parker served as Senior Vice President, Merchandising and Marketing and from
1994 to 2001 Ms. Parker served as Senior Vice President, Merchandising. From
1990 to 1994, Ms. Parker served as our Vice President of Administration and from
1985 to 1990, she served as our Accounting Manager. Ms. Parker is the daughter
of Jack and Patricia A. Parker.

         Mr. Robinson has been Executive Vice President, Store Operations since
February 2003. From 1997 to 2003 Mr. Robinson served as our Senior Vice
President, Store Operations and prior to that, as Vice President, Store
Operations from 1993 to 1997. From 1990 to 1993, Mr. Robinson was a store
manager for the Company. Prior to 1990, Mr. Robinson held various management
positions with the F.W. Woolworth Company.



                                       18
<PAGE>


ITEM 2.  PROPERTIES.

         As of December 31, 2003, we operated 81 stores in seventeen states, all
of which are leased and located within an 800 mile radius of our suburban
Philadelphia distribution center. The number of our stores located in each state
and the city in which each store is located is shown in the following table:
<TABLE>
<CAPTION>

<S>                       <C>                          <C>                       <C>
Alabama (1)               Massachusetts (9)            New York (12)             Rhode Island (1)
-----------               -----------------            ---------                 ----------------
  Montgomery                  Bellingham                                           Warwick
                              Brockton                     Amherst
                              Danvers                      Binghamton
                              Framingham                   Hamburg
Connecticut (4)               Holyoke                      Ithaca
---------------               Hyannis                      Latham                South Carolina (3)
   Manchester                 North Dartmouth              Middletown            ------------------
   New London                 Woburn                       Nanuet                  Columbia
   Orange                     Worcester                    Poughkeepsie            Greenville
   Plainville                                              Saratoga Springs        N. Charleston
                                                           Syracuse
                                                           Utica
                                                           Yorktown Heights

Delaware (2)                                                                     Tennessee (1)
------------                                                                     -------------
  Dover                                                                             Knoxville
  Wilmington

Georgia (1)                New Hampshire (2)           North Carolina (7)        Virginia (3)
-----------                -----------------           ------------------        ------------
  Columbus                   Nashua                      Cary                       Fairfax
                             Salem                       Concord                    Falls Church
                                                         Fayetteville               Virginia Beach
                                                         Hickory
                                                         Raleigh
                                                         Wilmington
                                                         Winston-Salem
Maine (1)                 New Jersey (11)                                        West Virginia (2)
---------                 ---------------                                        -----------------
   Portland                 Brick Town                                               Clarksburg
                            Clifton                                                  Huntington
                            Deptford                   Pennsylvania (16)
Maryland (5)                East Brunswick             -----------------
------------                English Creek                Allentown
   Frederick                Hamilton                     Altoona
   Glen Burnie              Linden                       Bensalem
   Hagerstown               Moorestown                   Erie
   Rockville                Parsippany                   Broomall
   White Marsh              Shrewsbury                   Exton
                            Watchung                     Hanover
                                                         Harrisburg
                                                         Lancaster
                                                         Langhorne
                                                         Mechanicsburg
                                                         Montgomeryville
                                                         Muncy
                                                         Philadelphia
                                                         Reading
                                                         Scranton


</TABLE>

         Most store leases have an average initial term of ten years, with two
five-year renewal options, and provide for predetermined escalations in future
minimum annual rent or additional rent contingent upon store sales levels. The
pro rata portion of scheduled rent escalations has been included in other
long-term liabilities in our balance sheet.

                                       19
<PAGE>

         We select store sites on the basis of various factors, including
physical location, demographics, anchor and other tenants, location within the
center, parking and available lease terms. We look for co-tenants that generate
a high rate of shopping traffic, such as specialty value-oriented women's
retailers, leading chain supermarkets, discount chains, home improvement
centers, book stores and domestics stores. We believe our stores are attractive
to developers because they attract high rates of customer traffic and generate
above average net sales per square foot.

         We lease 633,000 square feet of distribution and warehouse facilities,
consisting of our 253,000 square foot distribution center and adjoining 10,000
square foot office complex in suburban Philadelphia and our two nearby satellite
warehouses which total an additional 380,000 square feet. Our distribution
center is leased for a term which expires in March 2005, subject to our option
to renew the term for an additional six years. Our satellite warehouses are
leased for a term which expires in June 2004.

         We are currently in the process of building a new distribution center
and office complex, which we plan to open in the second quarter of 2004. This
new facility, which will be located near and will replace our existing
distribution center, will be 700,000 square feet for distribution and
warehousing plus 60,000 square feet of office space. The total cost of the land
and building for this facility is estimated to be $43.0 million. We expect to
finance $30.0 million of this project through long term debt. We believe that
our new facility, when completed, will enable us to effectively service all of
our existing and planned store locations within an 800 mile radius of the new
distribution center.

ITEM 3.  LEGAL PROCEEDINGS.

         From time to time, we are involved in litigation arising in the
ordinary course of our business. None of the pending litigation, in the opinion
of management, is likely to have a materially adverse effect on our results of
operations or financial condition. We maintain general liability insurance in
amounts deemed adequate by management.

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

          No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 2003, through the solicitation of proxies or otherwise.

                                       20
<PAGE>


                                     PART II

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

         Our common stock is quoted on the Nasdaq National Market and trades
under the symbol "ACMR." The following table sets forth the high and low sales
prices per share of our common stock as reported on the Nasdaq National Market
for the periods indicated. All prices have been adjusted for the 2 for 1 stock
split paid on July 31, 2002.

                                                    High              Low
                                                    ----              ---
             Year Ended December 31, 2003
First Quarter..................................    $15.15            $ 9.95
Second Quarter.................................     20.47             13.52
Third Quarter..................................     27.83             19.15
Fourth Quarter.................................     26.10             18.26

             Year Ended December 31, 2002
First Quarter..................................    $19.36            $13.12
Second Quarter.................................     24.30             18.03
Third Quarter..................................     23.96             14.81
Fourth Quarter.................................     22.28             12.71



         The number of record holders of our common stock as of March 10, 2004
was approximately 114.

         Since becoming a public company we have never declared or paid any cash
dividends on our common stock. We currently intend to retain our future
earnings, if any, to finance the expansion of our business and do not expect to
pay any cash dividends in the foreseeable future.

         See Part III, Item 12 for a description of our equity compensation
plans.



                                       21
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA.

         The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related
notes included elsewhere herein. The statement of income data for the years
ended December 31, 2003, 2002 and 2001 and the balance sheet data at December
31, 2003 and 2002 are derived from our audited consolidated financial statements
appearing elsewhere herein. The statement of income data for the years ended
December 31, 2000 and 1999 and the balance sheet data at December 31, 2001, 2000
and 1999 are derived from our audited consolidated financial statements not
included herein.


<TABLE>
<CAPTION>

                                                               Year Ended December 31,
                                                -----------------------------------------------------
                                                2003        2002        2001        2000         1999
                                                ----        ----        ----        ----         ----
                                                 (In thousands, except per share and operating data)
Statement of Income Data:
<S>                                           <C>         <C>         <C>         <C>         <C>
  Net sales ...............................   $433,928    $393,392    $332,413    $262,057    $222,998
  Gross margin ............................    161,894     148,791     124,098      96,207      79,920
  Selling, general and administrative
    expenses...............................    132,108     123,117     105,447      83,516      70,336
  Store pre-opening expenses ..............      2,176       2,340       2,518       1,928         609
  Income from operations ..................     27,610      23,334      16,133      10,763       8,975
  Net income ..............................     17,311      14,457       9,507       6,557       5,664
  Net income per share, diluted (1) .......   $   0.88    $  0.77     $   0.61    $   0.44    $   0.38


Weighted average shares outstanding,            19,729      18,828      15,505      14,888      14,810
  diluted(1)
Balance Sheet Data (as of):
  Working capital .........................   $112,751    $123,811    $ 56,422    $ 47,168    $ 46,625
  Total assets ............................    231,794     196,658     123,811     107,392      90,617
  Total debt ..............................        504       1,846       3,174       1,201       1,568
  Shareholders' equity ....................    166,711     144,031      73,727      63,681      56,972

Other Data:
  Cash flows from operating activities ....     21,473       8,171       6,768       6,709       9,808
  Number of stores open at end of period ..         81          71          61          50          40
  Net sales per total square foot (2) .....   $    260    $    272    $    273    $    271    $    271
  Average net sales per store (000's) (2) .   $  5,839    $  6,064    $  6,070    $  5,919    $  5,915
  Comparable store sales increase (3) .....         2%          5%          8%          3%          6%
</TABLE>

----------------------------
(1)  All share and per share data reflect the 2 for 1 stock split paid July 31,
     2002.
(2)  Includes only stores open during the entire period.
(3)  Stores are added to the comparable store base at the beginning of their
     fourteenth full month of operation.


                                       22
<PAGE>



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

Overview

         We are a rapidly growing specialty retailer offering a vast selection
of arts, crafts and floral merchandise to a broad demographic of consumers. Our
target customers are primarily women between the ages of 25 and 55 who are
looking for ideas to decorate their homes, create handmade items, or otherwise
engage in arts and crafts activities. We have grown from 17 stores in January
1997 to 81 stores in December 2003. Our stores are located in the eastern United
States from New England to Alabama.

         We established our first store in Moorestown, New Jersey in 1984 and
grew to five stores by the end of 1993. We added a total of 12 additional stores
in 1994 and 1995. In 1995, we began implementing an aggressive expansion plan
and built our infrastructure to position us for that growth. By the end of 1996,
we had recruited experienced senior retail executives in the areas of
operations, merchandising and finance, and made key additions and changes in
other areas such as buying, information systems, human resources and real
estate. From 1997 through 2003 we continued to strengthen and expand our
management team including the addition of Lawrence H. Fine as our President in
June 2001.

         We continued to develop our operating systems including a point of sale
system, a radio frequency re-order system, a real time merchandise information
and control system, a warehouse management system and an automated ordering
system using EDI to link us electronically with most of our vendors. We also
implemented updated general ledger and payroll systems.

         In 1997, we received financing for our growth through an initial public
offering of our common stock with net proceeds, after the payment of outstanding
debt, of approximately $16 million. We received an additional $52.1 million from
the sale of shares in March 2002.

         Our expansion plans continued as we opened ten new stores in 2000, 11
new stores in 2001, 12 new stores in 2002 and 10 new stores in 2003. In 2002 we
closed two stores; one was destroyed by fire and the other was in an area which
had negative demographic changes and the lease had expired. During the next two
years, we intend to increase our store base by approximately 20% per year, all
within 800 miles of our suburban Philadelphia distribution center, an area
encompassing approximately 50% of the U.S. population. We believe we can operate
at least 150 stores in this area without significantly diluting sales in our
existing stores. To accommodate this growth, we are in the process of
constructing a new distribution center to replace our existing facility. The new
distribution center will be 700,000 square feet plus 60,000 square feet of
office space and will be located near our existing facility.

         Our sales for the year ended December 31, 2003, were $433.9 million, an
increase of 10.3% over 2002 sales of $393.4 million. Same store sales increased
2%. Net income for the year 2003 increased by 20% to $17.3 million or $0.88 per
fully-diluted share compared to net income of $14.5 million or $0.77 per
fully-diluted share in 2002.

         Our success depends, in large part, on our ability to anticipate and
respond in a timely manner to changing merchandise trends and consumer demands.
Accordingly, any delay or failure by us in identifying and correctly responding
to changing merchandise trends and consumer demand could adversely affect
consumer acceptance of the merchandise in our stores. In addition, we make
decisions regarding merchandise well in advance of each of the seasons in which
such merchandise will be sold. Significant deviations from projected demand for
merchandise would have a material adverse effect on our results of operations
and financial condition, either from lost sales due to insufficient inventory or
lower margins due to the need to mark down excess inventory.


                                       23
<PAGE>

         In addition, our success depends on our ability to locate and open new
store locations. We plan to open 16 new stores in 2004. We expect to open three
stores in the first quarter, two in the second and the remainder split between
quarters three and four. We will also relocate two stores.

         Starting in 2004, vendor monies which support our advertising programs
will now be recorded as a reduction in the cost of inventory, and will be
recognized as a reduction to cost of goods sold when the inventory is sold.
Through 2003, they were accounted for as an offset to advertising costs. This
accounting change results in a timing difference as to when these monies are
recognized in our income statement and we estimate that the change will reduce
2004 EPS by approximately $.12 per share.

         The Financial Accounting Standards Board is working on a project to
develop a new standard for accounting for stock-based compensation. Tentative
decisions by the FASB indicate that expensing of stock options will be required
beginning January 1, 2005. The FASB expects to issue an exposure draft, which
will be subject to public comment, in the first quarter 2004 and issue its final
standard in the second half of 2004.

Results of Operations

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

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                                -----------------------
                                                           2003         2002          2001
                                                           ----         ----          ----

<S>                                                       <C>          <C>           <C>
Net sales.............................................    100.0%       100.0%        100.0%
Cost of sales.........................................     62.7         62.2          62.7
                                                          -----        -----         -----
Gross margin..........................................     37.3         37.8          37.3
Selling, general and administrative expenses..........     30.4         31.3          31.7
Store pre-opening expenses............................       .5          0.6           0.7
                                                          -----        -----         -----
Income from operations................................      6.4          5.9           4.9
Interest expense (income), net........................     (0.1)        (0.2)          0.2
                                                          -----        -----         -----
Income before income taxes............................      6.5          6.1           4.7
Provision for income taxes............................      2.5          2.4           1.8
                                                          -----        -----         -----
Net income............................................      4.0%         3.7%          2.9%
                                                          =====        =====         =====
</TABLE>

2003 Compared to 2002

         Net Sales. Net sales increased $40.5 million, or 10.3%, to $433.9
million in 2003 from $393.4 million in 2002. This increase resulted from (i) net
sales of $19.4 million from ten new stores opened in 2003, (ii) net sales of
$14.6 million from stores opened in 2002 which were not included in the 2002
comparable store base, and (iii) a comparable store sales increase of $6.5
million, or 2%. Sales were significantly impacted by the adverse weather
conditions we experienced in the first and fourth quarters. Stores are added to
the comparable store base at the beginning of the fourteenth full month of
operation.

         Gross Margin. Gross margin is net sales minus the cost of merchandise
including certain distribution and purchasing costs. The gross margin decreased
to 37.3% of net sales in 2003 from 37.8% in 2002. The decrease is due to a) a
relative decline in our spring and summer floral and accessories business due to
unseasonable weather conditions we experienced during the first eight months of
the year, b) general industry wide increases in domestic and international
freight costs, and c) the result of accelerated markdowns to clear seasonal
inventory after major snow storms in the first and fourth quarters of 2003.
Included in gross margin for 2003 is $422,000, the net insurance proceeds of
retail value over cost resulting from an insurance claim from a fire in one of
our warehouses.

                                       24
<PAGE>

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses include (i) direct store level expenses, including rent
and related operating costs, payroll, advertising, depreciation and other direct
costs, and (ii) corporate level costs not directly associated with or allocable
to cost of sales including executive salaries, accounting and finance, corporate
information systems, office facilities and other expenses.

         Selling, general and administrative expenses decreased to 30.4% of net
sales in 2003 from 31.3% in 2002. The decrease was the result of strong expense
controls both in our stores and in the corporate office where we continue to
leverage our costs over a greater sales base. These expenses were 3.0% of sales
in 2003 compared with 3.5% in 2002.

         Selling, general and administrative costs benefited from the receipt of
$3.5 million in additional vendor co-operative advertising funds over 2002 and a
net credit of $322,000 which is comprised of a) the proceeds in excess of costs
resulting from an insurance claim for a fire which destroyed one of our stores
and b) the costs relating to the early termination of a lease on a store which
we relocated.

         Store Pre-Opening Expenses. We expense store pre-opening costs as they
are incurred. Pre-opening expenses for the 10 new stores opened in 2003 and one
store which was relocated during the year, amounted to $2.2 million. In 2002, we
opened twelve new stores and incurred pre-opening expenses of $2.3 million.

         Income Taxes. Our effective income tax rate was 38.2% for 2003 and
39.3% for 2002. In 2002, we provided additional state taxes due to changes in
state tax laws which impacted 2002 and prior years.

2002 Compared to 2001

         Net Sales. Net sales increased $61.0 million, or 18.3%, to $393.4
million in 2002 from $332.4 million in 2001. This increase resulted from (i) net
sales of $29.2 million from twelve new stores opened in 2002, (ii) net sales of
$15.9 million from stores opened in 2001 which were not included in the 2001
comparable store base, and (iii) a comparable store sales increase of $15.9
million, or 5%.

         Gross Margin. The gross margin increased to 37.8% of net sales in 2002
from 37.3% in 2001. The increase is due to changes in our product mix, cost
reductions obtained from our vendors and from leveraging our buying and
distribution expense over a larger store base.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $17.7 million, or 16.8%, in 2002 to $123.1
million from $105.4 million in 2001. Of the $17.7 million increase, $15.7
million was attributable to the stores opened in 2002 which were not open during
2001 and the stores opened in 2001 which were not included in the 2001
comparable store base. The remaining increase of $2.0 million is attributable to
the increase in corporate costs to support our growth. As a percentage of net
sales, selling, general and administrative costs decreased to 31.3% of net sales
in 2002 from 31.7% of net sales in 2001. This decrease is primarily due to
leveraging store and central costs over a greater sales base.

                                       25
<PAGE>

         Store Pre-Opening Expenses. Pre-opening expenses for the 12 new stores
opened in 2002, amounted to $2.3 million. In 2001, we opened eleven new stores
and relocated two stores and incurred pre-opening expenses of $2.5 million.

         Interest Expense. Interest was $277,000 for 2002, a decrease of
$504,000 from 2001. The decrease is due to the reduction in short term
borrowings as a result of cash received from the sale of shares in March 2002.

         Interest Income. Interest income was $750,000 in 2002, an increase of
$644,000 from 2001. The increase was due to income from cash investments made
with the proceeds of our 2002 sale of shares.

         Income Taxes. Our effective income tax rate was 39.3% for 2002 and
38.5% for 2001. The increase in our effective rate is principally due to
increases in our state taxes.

Quarterly Results and Seasonality

         The following table sets forth our unaudited quarterly operating
results for our eight most recent quarterly periods and the number of stores
open at the end of each period (dollars in thousands, except share and store
data).
<TABLE>
<CAPTION>

                                                             2003                                    2002
                                             --------------------------------------   ---------------------------------------
                                              First    Second     Third     Fourth     First    Second     Third     Fourth
                                             Quarter   Quarter   Quarter    Quarter   Quarter   Quarter    Quarter   Quarter
                                             -------   -------   -------   --------   -------   -------    -------   --------
<S>                                          <C>       <C>       <C>       <C>        <C>       <C>        <C>       <C>
Net sales ................................   $91,952   $93,686   $98,600   $149,690   $85,853   $82,866    $89,726   $134,947
Cost of sales ............................    58,417    58,893    61,987     92,737    54,162    52,170     56,423     81,846
                                             -------   -------   -------   --------   -------   -------    -------   --------
  Gross margin ...........................    33,535    34,793    36,613     56,953    31,691    30,696     33,303     53,101
  Selling, general and administrative ....    32,585    32,838    33,842     32,842    29,585    29,514     31,180     32,838
  Pre-opening expense ....................       379       372       821        605       654       384        850        452
                                             -------   -------   -------   --------   -------   -------    -------   --------
Income from operations ...................       571     1,583     1,950     23,506     1,452       798      1,273     19,811
  Interest expense (income), net .........      (109)     (118)      (92)       (85)       11      (187)      (150)      (147)
                                             -------   -------   -------   --------   -------   -------    -------   --------
Income before income taxes ...............       680     1,701     2,042     23,591     1,441       985      1,423     19,958
Income tax expense .......................       260       650       780      9,013       565       401        566      7,818
                                             -------   -------   -------   --------   -------   -------    -------   --------
Net income ...............................       420     1,051     1,262     14,578       876       584        857     12,140
                                             =======   =======   =======   ========   =======   =======    =======   ========
Net income per share, diluted ............   $  0.02   $  0.05   $  0.06   $   0.73   $  0.05   $  0.03    $  0.04   $   0.62
Diluted average shares outstanding .......    19,603    19,762    19,980     20,011    16,936    19,780     19,807     19,710

Number of stores open at end of period ...        73        74        78         81        63        65         70         71
Comparable store sales increase (decrease)       (2%)       4%        2%         3%       14%       10%         4%        (2%)
</TABLE>

         Due to the importance of our peak selling season, which includes
Fall/Halloween, Thanksgiving and Christmas, the fourth quarter has historically
contributed, and is expected to continue to contribute, virtually all of our
profitability for the entire year. As a result, any factors negatively affecting
us during the fourth quarter of any year, including adverse weather and
unfavorable economic conditions, would have a material adverse effect on our
results of operations for the entire year.

         Our quarterly results of operations also may fluctuate based upon such
factors as the length of holiday seasons, the date on which holidays fall, the
number and timing of new store openings, the amount of store pre-opening
expenses, the amount of net sales contributed by new and existing stores, the
mix of products sold, the amount of sales returns, the timing and level of
markdowns and other competitive factors.

                                       26
<PAGE>

Liquidity and Capital Resources

         Our cash is used primarily for working capital to support our inventory
requirements and fixtures and equipment, pre-opening expenses and beginning
inventory for new stores. In recent years, we have financed our operations and
new store openings primarily with cash from operations, the net proceeds we
received from our initial public offering in 1997 and with borrowings under bank
financing agreements during portions of the year when our inventories peak.

         In March 2002 we completed a secondary offering in which we sold
3,500,000 new post-split shares with net cash proceeds of $52,125,000.

         At December 31, 2003 and 2002, our working capital was $112.8 million
and $123.8 million, respectively. During 2003, 2002 and 2001, cash of $21.5
million, $8.2 million and $6.7 million was generated by operations,
respectively. In these three periods, $19.0 million, $16.8 million and $12.9
million of cash, respectively, was used to increase inventory levels to support
both new and existing stores. In these periods, part of the inventory increase
was financed through increases in accounts payable of $9.8 million, $2.6 million
and $1.3 million, respectively. We also had the tax benefit from our executives
exercising stock options in the amount of $2.7 million in 2003 and $1.9 million
in 2002.

         Net cash used in investing activities during 2003, 2002 and 2001 was
$40.7 million, $9.7 million and $8.7 million, respectively. In 2003 this use of
cash was for capital expenditures of $26.6 million and $14.1 million invested in
marketable securities. We spent $16.6 million for land and the construction of
our new distribution center, $6.3 million for new stores and the remainder for
remodeling existing stores, upgrading systems and warehouse equipment. In 2002
and 2001, cash used in investing activities was for capital expenditures
including new stores, remodeling existing stores, upgrading systems and
warehouse equipment. In 2004, we expect to spend approximately $39.0 million on
capital expenditures, which includes approximately $26.0 million related to the
building, equipment and systems for our new distribution center, $9.0 million
for new store openings, and the remainder for remodeling existing stores,
upgrading systems in existing stores, and corporate systems development. The
total cost of the new distribution center is estimated to be $43.0 million. We
expect to finance $30.0 million of this project.

         In the year ended December 31, 2002, net cash provided by financing
activities was principally the $52.1 million proceeds from our sale of shares in
March 2002.

         In the year ended December 31, 2001, net cash provided by financing
activities was $2.4 million, principally as a result of $2.8 million of proceeds
received from equipment financing.

        We currently have a $25.0 million line of credit agreement with Wachovia
Bank, which expires on January 1, 2005. Borrowings under this line will bear
interest at LIBOR plus 95 basis points. At December 31, 2003 there were no
borrowings outstanding under this agreement.

        On October 28, 2003 we signed two mortgage agreements with Wachovia Bank
relating to the new corporate offices and distribution center. The mortgages
make available $30.0 million and are secured by land, building, and equipment.
Borrowings under the mortgages are repayable at between seven and 15 years and
will bear interest rates that will vary between LIBOR plus 85 basis points and
LIBOR plus 135 bassis points, depending on the debt service coverage ratio and
the length of the mortgage payment. We have the option of fixing the interest
rate at any time. At December 31, 2003 there were no borrowings outstanding
under these mortgages.

                                       27
<PAGE>

        We believe the cash generated from operations during the year, funds
received through the financing of the new distribution center and available
borrowings under the credit agreement will be sufficient to finance our working
capital and capital expenditure requirements for at least the next 12 months.

         We lease our retail stores, distribution center, satellite warehouse
facilities, vehicles, and corporate headquarters under noncancelable operating
leases. At December 31, 2003 our total obligations under these operating leases
were $220 million. In addition, we had capital lease obligations of $504,000 at
December 31, 2003. The following table reflects as of December 31, 2003 the
payments due for the periods indicated under our capital and operating leases.

<TABLE>
<CAPTION>

                                                         Payments Due By Period ($000)
      Contractual         --------------------------------------------------------------------------------------
      Obligations               Total         Less than 1 Year      1-3 Years        4-5 Years     After 5 Years
------------------------- ------------------- ------------------ ---------------- ---------------- -------------
<S>                         <C>                 <C>                <C>              <C>              <C>
Capital Lease
  Obligations ...........      $    504          $    504           $     --        $     --         $     --
Store Operating
  Leases (1) ............      $218,897          $ 25,709           $ 77,919        $ 43,908         $ 71,361
Vehicle and
  Equipment Leases.......      $  1,285          $    413           $    702        $    157         $     13
Purchase
  Obligations (2)........      $    291          $     87           $    204              --               --
Deferred Income
  Taxes (3) .............            --                --                 --              --               --
Total Contractual
  Cash Obligations.......      $220,997          $ 26,713           $ 78,825        $ 44,065         $ 71,374

</TABLE>

(1)  Most store leases have an average initial term of ten years, with two five
     year renewal options, and provide for predetermined escalation in future
     minimum annual rent. The pro rata portion of scheduled rent escalations has
     been included in other long-term liabilities in the balance sheet.

(2)  Purchase obligations include agreements for goods and services that are
     enforceable and legally binding on the Company and that specify all
     significant terms. As of December 31, 2003, such obligations include
     telephone services and software licenses and maintenance contracts for
     information technology.

(3)  The amount of deferred income taxes has been excluded from the above table
     as the timing of any cash payment is uncertain. See Note 5 of the Notes to
     Consolidated Financial Statements for additional information regarding our
     deferred tax position.


General

        On June 25, 2002, our Board of Directors approved a two-for-one stock
split to shareholders of record as of the close of business on July 15, 2002.
The shares were distributed on July 31, 2002.

Critical Accounting Estimates

        Our accounting policies are more fully described in Note 1 of the Notes
to Consolidated Financial Statements included herein. As disclosed in Note 1 of
the Notes to Consolidated Financial Statements, the preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions about future events that affect the
amounts reported in the Consolidated Financial Statements and accompanying
notes. Since future events and their effects cannot be determined with absolute
certainty, actual results may differ from those estimates. Management makes
adjustments to its assumptions and judgments when facts and circumstances
dictate. The amounts currently estimated by us are subject to change if
different assumptions as to the outcome of future events were made. We evaluate
our estimates and judgments on an ongoing basis and predicate those estimates
and judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances. Management believes the
following critical accounting estimates encompass the more significant judgments
and estimates used in preparation of the Consolidated Financial Statements.

                                       28
<PAGE>

        Merchandise Inventories. We value our inventories at stores at the lower
of cost or market as determined using the retail inventory method. Because we do
not have perpetual inventory records for inventory in our stores, we perform
complete physical inventories in each of our stores at the end of each year. The
actual physical count of merchandise is made principally by third party
inventory counting service firms.

         Inventory valuation methods also require certain management estimates
and judgments. These include estimates of net realizable value on product
designated for clearance or on slow moving merchandise. The accuracy of our
estimates can be affected by many factors, some of which are outside of our
control, including changes in economic conditions and consumer buying trends.
Historically, we have not experienced significant differences in our estimates
of recovery compared with actual results. We believe our process results in
reasonable estimates of our retail inventory on hand at year-end.

        Impairment of Long-Lived Assets. We periodically review long-lived
assets for impairment by comparing the carrying value of assets with their
estimated future undiscounted cash flows. To the extent these future estimates
change, the conclusion regarding impairment may differ from our current
estimates, and the loss, if any, would be recognized at that time. The
impairment loss is calculated as the difference between asset carrying values
and the present value of estimated net cash flows or comparable market values,
giving consideration to recent operating performance and pricing trends.

        Income Taxes. We do business in various jurisdictions that impose income
taxes. Management determines the aggregate amount of income tax expense to
accrue and the amount currently payable based upon the tax statutes of each
jurisdiction. This process involves adjusting income determined using generally
accepted accounting principles for items that are treated differently by the
applicable taxing authorities. Deferred tax liabilities are reflected on our
balance sheet for temporary differences that will reverse in subsequent years.
If different judgments had been made, our tax expense, assets and liabilities
could have been different.

        Other Estimates. Management uses estimates in the determination of the
required accruals for general liability, workers' compensation, and health
insurance. These estimates are based upon examination of historical trends,
industry claims experience and, in certain cases, calculations performed by
third-party experts. Projected claims information may change in the future and
may require management to revise these accruals.

         We are periodically involved in various legal actions arising in the
normal course of business. Management is required to assess the probability of
any adverse judgments as well as the potential range of any losses. Management
determines the required accruals after a careful review of the facts of each
legal action. Our accruals may change in the future due to new developments in
these matters.

Recent Accounting Pronouncements

         In November 2002, the Emerging Issues Task Force reached consensus on
Issue 02-16, "Accounting by a Customer (including a Reseller) for Cash
Consideration Received from a Vendor." EITF Issue 02-16 addresses the accounting
for cash consideration received by a customer from a vendor (e.g., slotting
fees, cooperative advertising payments, buydowns) and rebates or refunds from a
vendor that is payable only if the customer completes a specified cumulative
level of purchases or remains a customer for a specified time period. The
Company has adopted the EITF effective for agreements modified or entered into
after January 1, 2003.

                                       29
<PAGE>

         The Company has historically treated cooperative advertising allowances
as a reduction of advertising expense. Under EITF 02-16, cooperative advertising
allowances should be treated as a reduction of inventory cost unless they
represent a reimbursement of specific, incremental and identifiable costs
incurred by the customer to sell the vendor's product. Since substantially all
of the cooperative advertising allowance agreements for 2003 were entered into
prior to January 1, 2003, this issue did not have a material impact on the 2003
financial statements.

         The Company has assessed the historic volume of cooperative advertising
reimbursements that have been received in order to determine which of these
reimbursements would meet the specific, identifiable and incremental criteria
outlined under this issue and accordingly, qualify as a direct offset to
advertising expense. Based on the Company's analysis of the impact on net
income, and the administrative cost to identify and track reimbursements between
those qualifying for expense offset and those requiring inventory cost
reduction, beginning in 2004 the Company will treat all cooperative advertising
funds received from vendors as a reduction in the cost of inventory and
recognize them as a reduction to cost of goods sold when the inventory is sold.
We estimate that the prospective change in the timing of income recognition will
reduce 2004 EPS by approximately $0.12 per share.

         The adoption of this issue does not change the ultimate cash to be
received under these agreements, only the timing of when it is reflected in net
income.

         Statement of Financial Accounting Standards, or SFAS No. 143,
"Accounting for Asset Retirement Obligations" requires the recognition of a
liability for the estimated cost of disposal as part of the initial cost of a
long-lived asset. We adopted SFAS 143 in 2003 and it did not have a material
impact on our consolidated results of operations, financial position or cash
flows.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and supercedes Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF 94-3, a
liability for an exit cost was recognized at the date of commitment to an exit
or disposal plan. This Statement also establishes that fair value is the
objective for initial measurement of the liability. The adoption of this
pronouncement did not have a material impact on our consolidated results of
operations, financial position or cash flows.

         In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities". FIN 46 clarifies the application
of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The disclosure requirements of FIN 46 are effective
for financial statements issued after January 31, 2003. The initial recognition
provisions of FIN 46 are applicable immediately to new variable interests in
variable interest entities created after January 31, 2003. For a variable
interest in a variable interest entity created before February 1, 2003, the
initial recognition provisions of FIN 46 are to be implemented no later than the
beginning of the first interim or annual reporting period beginning after June
15, 2003. We have determined that we do not have any variable interests in any
variable interest entities. Therefore, no disclosure was required for the Form
10-K issued for the fiscal year ended December 31, 2002 and the adoption of the
initial recognition provisions of FIN 46 did not have a material impact on our
financial position, results of operations, or cash flows.

                                       30
<PAGE>

         FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others", ("FIN45"), details the disclosures to be made by a guarantor about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The Company has issued no guarantees, and therefore, the adoption of
FIN 45 has not had a material impact on the Company's financial position,
results of operations, or cash flows.

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

         Not applicable.


                                       31
<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                         A.C. MOORE ARTS & CRAFTS, INC.

                                                                            Page
                                                                            ----
Report of Independent Auditors.............................................. 33

Consolidated Balance Sheets at December 31, 2003 and 2002................... 34

Consolidated Statements of Income for each of the three years
      in the period ended December 31, 2003................................. 35

Consolidated Statements of Changes in Shareholders' Equity for each of the
      three years in the period ended December 31, 2003..................... 36

Consolidated Statements of Cash Flows for each of the three
      years in the period ended December 31, 2003........................... 37

Notes to Consolidated Financial Statements.................................. 38



                                       32
<PAGE>


                         Report of Independent Auditors


To the Board of Directors and Shareholders of
A.C. Moore Arts & Crafts, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
statements of income, shareholders' equity and cash flows present fairly, in all
material respects, the financial position of A.C. Moore Arts & Crafts, Inc. and
its subsidiaries at December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States of America. 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 of these
statements in accordance with auditing standards generally accepted in the
United States of America which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.



/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
February 19, 2004

                                       33
<PAGE>




                         A.C. MOORE ARTS & CRAFTS, INC.
                           CONSOLIDATED BALANCE SHEETS

                             (dollars in thousands)
<TABLE>
<CAPTION>

                                                                  December 31,
                                                               -------------------
                                                                 2003       2002
                                                               --------   --------
ASSETS
Current assets:
<S>                                                            <C>        <C>
   Cash and cash equivalents ...............................   $ 43,700   $ 61,584
   Accounts receivable .....................................      1,827      1,858
   Inventories .............................................    121,493    102,497
   Prepaid expenses and other current assets ...............      1,135        871
                                                               --------   --------
                                                                168,155    166,810

Marketable securities ......................................     14,132         --
Property and equipment, net ................................     47,706     27,997
Other assets ...............................................      1,801      1,851
                                                               --------   --------
                                                               $231,794   $196,658
                                                               ========   ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current portion of equipment leases .....................   $    504   $  1,342
   Trade accounts payable ..................................     33,558     24,253
   Accrued payroll and payroll taxes .......................      4,501      5,737
   Accrued expenses ........................................     10,015      8,326
   Income taxes payable ....................................      6,826      3,341
                                                               --------   --------
                                                                 55,404     42,999
                                                               --------   --------
Long-term liabilities:
   Capitalized equipment leases, less current portion ......         --        504
   Deferred tax liability ..................................      4,950      5,150
   Other long-term liabilities .............................      4,729      3,974
                                                               --------   --------
                                                                  9,679      9,628
                                                               --------   --------
                                                                 65,083     52,627
                                                               --------   --------
Commitments and contingencies

Shareholders' equity:
   Preferred stock, no par value, 10,000,000 shares
     authorized; none issued ...............................         --         --

   Common stock, no par value, 40,000,000 shares authorized;
     issued and outstanding 19,357,541 shares at December
     31, 2003 and 18,806,047 shares at December 31, 2002  ..    105,023     99,654

   Retained earnings .......................................     61,688     44,377
                                                               --------   --------
                                                                166,711    144,031
                                                               --------   --------
                                                               $231,794   $196,658
                                                               ========   ========

==================================================================================
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                       34
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

                  (dollars in thousands except per share data)
<TABLE>
<CAPTION>

                                                            December 31,
                                         -------------------------------------------------
                                             2003               2002               2001
                                         ------------       ------------       ------------

<S>                                      <C>                <C>                <C>
Net sales .........................      $    433,928       $    393,392       $    332,413
Cost of sales (including buying and
   distribution costs) ............           272,034            244,601            208,315
                                         ------------       ------------       ------------
Gross margin ......................           161,894            148,791            124,098
Selling, general and
  administrative expenses..........           132,108            123,117            105,447

Store pre-opening expenses ........             2,176              2,340              2,518
                                         ------------       ------------       ------------
Income from operations ............            27,610             23,334             16,133
   Interest expense ...............                92                277                781
   Interest income ................              (496)              (750)              (106)
                                         ------------       ------------       ------------
Income before income taxes ........            28,014             23,807             15,458
  Provision for income taxes ......            10,703              9,350              5,951
                                         ------------       ------------       ------------
Net income ........................      $     17,311       $     14,457       $      9,507
                                         ============       ============       ============

Basic net income per share ........      $       0.91       $       0.81       $       0.64
                                         ============       ============       ============
Weighted average shares outstanding        19,112,816         17,861,897         14,874,398
                                         ============       ============       ============


Diluted net income per share ......      $       0.88       $       0.77       $       0.61
                                         ============       ============       ============

Weighted average shares outstanding
   plus impact of stock options ...        19,729,418         18,828,130         15,505,290
                                         ============       ============       ============


</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       35
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                        (in thousands except share data)
<TABLE>
<CAPTION>

                                                                          Common          Retained
                                                        Shares            Stock           Earnings           Total
                                                     ----------        ----------        ----------        ----------
<S>                                                  <C>                   <C>               <C>               <C>
Balance, December 31, 2000 ..................        14,830,666            43,268            20,413            63,681
Net income ..................................                --                --             9,507             9,507
Exercise of stock options ...................           101,346               439                --               439
Tax benefit from exercise of stock options ..                --               100                --               100
                                                     ----------        ----------        ----------        ----------
Balance, December 31, 2001 ..................        14,932,012            43,807            29,920            73,727
Net income ..................................                --                --            14,457            14,457
Proceeds from the sale of common stock ......         3,500,000            52,125                --            52,125
Exercise of stock options ...................           374,035             1,481                --             1,481
Compensation expense related to stock options                --               300                --               300
Tax benefit from exercise of stock options ..                --             1,941                --             1,941
                                                     ----------        ----------        ----------        ----------
Balance, December 31, 2002 ..................        18,806,047            99,654            44,377           144,031
Net income ..................................                --                --            17,311            17,311
Exercise of stock options ...................           551,494             2,719              --               2,719
Tax benefit from exercise of stock options ..                --             2,650              --               2,650
                                                     ----------        ----------        ----------        ----------
Balance, December 31, 2003 ..................        19,357,541        $  105,023        $   61,688        $  166,711
                                                     ==========        ==========        ==========        ==========
</TABLE>

================================================================================

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       36
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                        Year Ended December 31,
                                                                 --------------------------------------
                                                                   2003           2002           2001
                                                                 --------       --------       --------
Cash flows from operating activities:
<S>                                                              <C>            <C>            <C>
Net income ................................................      $ 17,311       $ 14,457       $  9,507
Adjustments to reconcile net income to net cash provided by
   operating activities:
   Depreciation and amortization ..........................         6,893          6,203          5,220
   Compensation expense related to stock options ..........            --            300             --
   Provision for deferred income taxes.....................          (200)         1,723          1,107
   Changes in assets and liabilities:
     Accounts receivable ..................................            31           (703)           127
     Inventories ..........................................       (18,996)       (16,823)       (12,888)
     Prepaid expenses and other current assets ............          (264)           (48)           399
     Accounts payable, accrued payroll and payroll taxes
       and accrued expenses ...............................         9,758          2,649          1,334
     Income taxes payable .................................         6,135            682          1,342
     Other long-term liabilities ..........................           755            758            617
     Other assets .........................................            50         (1,027)             3
                                                                 --------       --------       --------
Net cash provided by operating activities .................        21,473          8,171          6,768
                                                                 --------       --------       --------
Cash flows from investing activities:
   Capital expenditures ...................................       (26,602)        (9,683)        (8,672)
   Investment in marketable securities.....................       (14,132)            --             --
                                                                 --------       --------       --------
Cash flows (used in) investing activities .................       (40,734)        (9,683)        (8,672)
                                                                 --------       --------       --------
Cash flows from financing activities:
   Proceeds from sale of shares, net.......................            --         52,125             --
   Proceeds from exercise of stock options ................         2,719          1,481            439
   Proceeds from line of credit ...........................            --          2,000         20,250
   Repayment of line of credit ............................            --         (2,000)       (20,250)
   Proceeds from capital leases ...........................            --             --          2,791
   Repayment of capital leases ............................        (1,342)        (1,328)          (818)
                                                                 --------       --------       --------
Net cash provided by financing activities .................         1,377         52,278          2,412
                                                                 --------       --------       --------
Net increase (decrease) in cash and cash equivalents ......       (17,884)        50,766            508
Cash and cash equivalents at beginning of period ..........        61,584         10,818         10,310
                                                                 --------       --------       --------
Cash and cash equivalents at end of period ................      $ 43,700       $ 61,584       $ 10,818
                                                                 ========       ========       ========

Supplemental cash flow information:
Cash paid during the year for:
   Interest ...............................................      $     95       $    316       $    756
                                                                 ========       ========       ========
   Income taxes ...........................................      $  4,807       $  6,945       $  3,399
                                                                 ========       ========       ========
Non-cash items:
   Tax benefit of stock options ...........................      $  2,650       $  1,941       $    100
                                                                 ========       ========       ========

</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                       37
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Summary of Significant Accounting Policies

Organization and basis of presentation. A.C. Moore Arts & Crafts, Inc. became a
holding company in July 1997 by incorporating in Pennsylvania and exchanging its
common stock for all of the capital stock of A.C. Moore Inc. held by its
shareholders. The consolidated financial statements include the accounts of A.C.
Moore Arts & Crafts, Inc. and its wholly owned subsidiaries (collectively the
"Company"). All intercompany accounts and transactions have been eliminated. As
of December 31, 2003, the Company operated an 81-store chain of retail arts and
crafts stores in the eastern region of the United States.

Cash and cash equivalents. Cash and cash equivalents are stated at cost, which
approximates market value. Cash equivalents include only securities having an
original maturity of three months or less.

Concentration of credit risk. Financial instruments, which potentially subject
the Company to concentrations of credit risk, are cash and cash equivalents. The
Company limits its credit risk by placing its investments in highly rated,
highly liquid funds.

Inventories. Inventories, which consist of general consumer merchandise held for
sale, are stated at the lower of cost or market. The cost of store inventories
is determined by the retail inventory method. Warehouse inventories are
determined on a first-in, first-out basis. The Company includes as inventoriable
costs certain indirect costs, principally purchasing, warehousing and
distribution.

Marketable Securities. Marketable securities represent investments in municipal
bonds with maturities of twelve months or longer from time of purchase. They are
classified as held-to-maturity and recorded at amortized cost.

Property and equipment. Property and equipment are stated at cost. Depreciation
is provided on a straight-line basis over the estimated useful lives of the
assets. Furniture, fixtures and equipment are depreciated over periods of five
to ten years and leasehold improvements are depreciated over the shorter of
their estimated useful lives or the term of the related lease. Maintenance and
repairs are charged to operations as incurred and major improvements are
capitalized. Amortization of assets recorded under capital leases is included in
depreciation expense.

The Company periodically reviews long-lived assets for impairment by comparing
the carrying value of assets with their estimated future undiscounted cash
flows. If it is determined that an impairment loss has occurred, the loss would
be recognized during that period. The impairment loss is calculated as the
difference between the carrying values of the asset and the present value of
estimated net cash flows or comparable market values, giving consideration to
recent operating performance and pricing trends. The Company had no impairment
losses related to long-lived assets during 2003, 2002 or 2001.

The Company capitalizes contain costs incurred in connection with developing or
obtaining internal use software in accordance with Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." These capitalized software costs are included in Property and
Equipment, net in the consolidated balance sheets. These costs are being
amortized over the estimated useful life of the software, not to exceed five
years.


                                       38
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Other Assets. In 2002 the Company paid $982,000 for the rights to obtain a lease
at a favorable rate for a new store which opened in September 2003. This amount
is being amortized over a ten-year period which commenced with the opening of
the store.

Revenue recognition.  Revenue is recognized at point of retail sale.

Store pre-opening expenses. Direct incremental costs incurred to prepare a store
for opening are charged to expense as incurred.

Advertising costs. The costs incurred for advertising are expensed the first
time the advertising takes place and are offset by reimbursements received under
cooperative advertising programs with certain vendors. Co-op advertising funds
are only recognized when we have performed our contractual obligations under a
co-op advertising agreement. Net advertising expense during 2003, 2002 and 2001
was $5,501,000, $7,864,000, and $8,173,000, respectively.

In November 2002, the Emerging Issues Task Force reached consensus on Issue
02-16, "Accounting by a Customer (including a Reseller) for Cash Consideration
Received from a Vendor." EITF Issue 02-16 addresses the accounting for cash
consideration received by a customer from a vendor (e.g., slotting fees,
cooperative advertising payments, buydowns) and rebates or refunds from a vendor
that is payable only if the customer completes a specified cumulative level of
purchases or remains a customer for a specified time period. The Company has
adopted the EITF effective for agreements modified or entered into after January
1, 2003.

The Company has historically treated cooperative advertising allowances as a
reduction of advertising expense. Under EITF 02-16, cooperative advertising
allowances should be treated as a reduction of inventory cost unless they
represent a reimbursement of specific, incremental and identifiable costs
incurred by the customer to sell the vendor's product. Since substantially all
of the cooperative advertising allowance agreements for 2003 were entered into
prior to January 1, 2003, this issue did not have a material impact on the 2003
financial statements.

The Company has assessed the historic volume of cooperative advertising
reimbursements that have been received in order to determine which of these
reimbursements would meet the specific, identifiable and incremental criteria
outlined under this issue and accordingly, qualify as a direct offset to
advertising expense. Based on the Company's analysis of the impact on net
income, and the administrative cost to identify and track reimbursements between
those qualifying for expense offset and those requiring inventory cost
reduction, beginning in 2004 the Company has elected to treat all cooperative
advertising funds received from vendors as a reduction in the cost of inventory
and recognize them as a reduction to cost of goods sold when the inventory is
sold.

The adoption of this issue does not change the ultimate cash to be received
under these agreements, only the timing of when it is reflected in net income.

Fair value of financial instruments. The carrying amounts of cash, cash
equivalents and marketable securities, accounts receivable, other current
assets, accounts payable, accrued expenses and other liabilities approximate
fair value because of the short maturity of these instruments. The carrying
amount of capital lease obligations approximate fair value, as the interest
rates on the obligations approximate rates currently available to the Company
for obligations with similar terms and remaining maturities.



                                       39
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, and the amount
of revenues and expenses during the reporting period. Differences from those
estimates, if any, are recorded in the period they become known.

Stock option plan. The Company accounts for its employee stock options using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). Compensation cost for stock
options is measured as the excess of the quoted market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock.

Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant date for awards under those
plans, consistent with the requirements of SFAS No. 123, "Accounting for
Stock-Based Compensation," net income and earnings per share would have been
reduced to the following pro-forma amounts:

<TABLE>
<CAPTION>

                                                                            2003           2002         2001
                                                                        -----------   -----------    ----------
<S>                                                                     <C>           <C>            <C>
Net income ..................   -- As reported                          $17,311,000   $14,457,000    $9,507,000
                                -- Compensation cost, net of tax          1,268,000       725,000       478,000
                                -- Pro forma                             16,043,000    13,732,000     9,029,000

Basic earnings per share.....   -- As reported                          $       .91   $       .81    $      .64
                                -- Pro forma                                    .84           .77           .61

Diluted earnings per share...   -- As reported                          $       .88   $       .77    $      .61
                                -- Pro forma                                    .81           .73           .58
</TABLE>


The pro forma results may not be representative of the effects on reported
operations for future years. The fair value of the options was calculated using
a Black-Scholes options pricing model with the following weighted-average
assumptions: risk-free interest rate of 3.2% for 2003, 4.1% for 2002, 5.1% for
2001, 6.3% for 2000 and; no dividend yield; and a weighted average expected life
of the options of 4.5 years for 2003 and seven years for 2002, 2001, and 2000.
In accordance with the provisions of SFAS No. 123 the expected stock price
volatility was 56.0% for 2003, 45.2% for 2002, 48.4% for 2001, and 46.6% for
2000.

Income Taxes. The Company uses the asset and liability method of accounting for
income taxes. The Company does business in various jurisdictions that impose
income taxes. Management determines the aggregate amount of income tax expense
to accrue and the amount currently payable based upon the tax statutes of each
jurisdiction. This process includes adjusting income determined using generally
accepted accounting principles for items that are treated differently by the
applicable taxing authorities. Deferred tax liabilities are reflected on the
Company's balance sheet for temporary differences that will reverse in
subsequent years.

Recent Accounting Pronouncements. Statement of Financial Accounting Standards,
or SFAS No. 143, "Accounting for Asset Retirement Obligations" requires the
recognition of a liability for the estimated cost of disposal as part of the
initial cost of a long-lived asset. The Company adopted SFAS No. 143 in 2003 and
it did not have a material impact on its consolidated results of operations,
financial position or cash flows.



                                       40
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and supercedes
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under EITF 94-3, a liability for an exit cost
was recognized at the date of commitment to an exit or disposal plan. This
Statement also establishes that fair value is the objective for initial
measurement of the liability. The adoption of this pronouncement did not have a
material impact on the Company's consolidated results of operations, financial
position or cash flows.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities". FIN 46 clarifies the application of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," to certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The disclosure requirements of FIN 46 are effective
for financial statements issued after January 31, 2003. The initial recognition
provisions of FIN 46 are applicable immediately to new variable interests in
variable interest entities created after January 31, 2003. For a variable
interest in a variable interest entity created before February 1, 2003, the
initial recognition provisions of FIN 46 are to be implemented no later than the
beginning of the first interim or annual reporting period beginning after June
15, 2003. The Company has determined that it does not have any variable
interests in any variable interest entities. Therefore, no disclosure was
required for the Form 10-K issued for the fiscal year ended December 31, 2002
and the adoption of the initial recognition provisions of FIN 46 did not have a
material impact on the Company's financial position, results of operations, or
cash flows.

FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others",
("FIN45"), details the disclosures to be made by a guarantor about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The Company has issued no guarantees, and therefore, the adoption of
FIN 45 has not had a material impact on the Company's financial position,
results of operations, or cash flows.

2.       Earnings Per Share

The following is a reconciliation of the denominators of the basic and diluted
earnings per share computations:

                                              Year Ended December 31,
                                       -------------------------------------
                                        2003           2002            2001
                                       ------          ------         ------
                                                  (in thousands)
Basic..............................    19,113          17,862         14,874
Effect of dilutive options.........       616             966            631
                                       ------          ------         ------
Diluted............................    19,729          18,828         15,505
                                       ======          ======         ======

         Options whose exercise price is in excess of the average market price,
614,719 shares in 2003, 309,850 shares in 2002 and 406,700 shares in 2001, have
not been considered as dilutive options.

                                       41
<PAGE>



                         A.C. MOORE ARTS & CRAFTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       Property and Equipment

Property and equipment consists of:
<TABLE>
<CAPTION>

                                                                 December 31,
                                                            -----------------------
                                                               2003          2002
                                                            ---------     ---------
                                                                 (in thousands)
<S>                                                        <C>           <C>
Land.....................................................  $    2,238    $      200
Furniture, fixtures and equipment........................      54,138        44,602
Leasehold improvements...................................         480           492
Distribution Center under construction...................      15,399           820
Equipment for future stores..............................         711           287
Capital leases...........................................       4,715         4,715
                                                            ---------     ---------
                                                               77,681        51,116
Less:  Accumulated depreciation and amortization.........     (29,975)      (23,119)
                                                            ---------     ---------
                                                            $  47,706     $  27,997
                                                            =========     =========
</TABLE>


4.   Financing Agreement

We currently have a $25.0 million line of credit agreement with Wachovia Bank,
which expires on January 1, 2005. Borrowings under this line will bear interest
at LIBOR plus 95 basis points.

On October 28, 2003 we signed two mortgage agreements with Wachovia Bank
relating to the new corporate offices and distribution center. The mortgages
make available $30.0 million and are secured by land, building, and equipment.
Borrowings under the mortgages are repayable at between seven and 15 years and
will bear interest rates that will vary between LIBOR plus 85 basis points and
LIBOR plus 135 basis points, depending on the debt service coverage ratio and
the length of the mortgage payment. We have the option of fixing the interest
rate at any time.

The credit agreements contain certain financial covenants including those
related to tangible net worth and funded debt. The Company was in compliance
with these agreements at December 31, 2003. There were no amounts outstanding at
December 31, 2003 under any of our financing agreements nor were there amounts
outstanding at December 31, 2002 under the previous revolving line of credit.

5.       Income Taxes

The Company utilizes the asset and liability method of accounting for income
taxes. Under this method, deferred tax liabilities and assets are recognized for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. As of December 31,
2003 and 2002, the deferred tax liability of $4,950,000 and $5,150,000,
respectively is comprised principally of temporary differences related to
depreciation.


                                       42
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



A reconciliation of income tax expense at the federal income tax rate to the
income tax provision is as follows:
<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
                                                               ----------------------------------------
                                                                 2003            2002            2001
                                                               --------        --------        --------
                                                                          (in thousands)
<S>                                                            <C>             <C>             <C>
United States federal taxes at statutory rate........          $  9,805        $  8,332        $  5,410
State and local taxes, net...........................             1,172           1,002             514
Non-deductible stock option expense..................                --             105              --
Other................................................              (274)            (89)             27
                                                               --------        --------        --------
Income tax provision.................................          $ 10,703        $  9,350        $  5,951
                                                               ========        ========        ========

The income tax provision consists of the following:

                                                                      Year Ended December 31,
                                                               ----------------------------------------
                                                                 2003            2002            2001
                                                               --------        --------        --------
Current tax expense:
  Federal..............................................         $ 8,083        $  6,245        $  4,253
  State................................................           2,820           1,382             591
                                                               --------        --------        --------
     Total current.....................................        $ 10,903           7,627           4,844
                                                               --------        --------        --------
Deferred tax expense:
  Federal.............................................             (183)          1,564             909
  State..................................................           (17)            159             198
                                                               --------        --------        --------
     Total deferred....................................            (200)          1,723           1,107
                                                               --------        --------        --------
     Total income tax provision........................        $ 10,703        $  9,350        $  5,951
                                                               ========        ========        ========
</TABLE>


6.       Shareholders' Equity

The Company has authorized 10,000,000 shares of undesignated preferred stock.
The Company may issue preferred stock in one or more series by vote of its Board
of Directors having the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption, redemption prices and liquidation
preferences approved by the Board of Directors.

On June 25, 2002 the Company's Board of Directors approved a two-for-one common
stock split to shareholders of record as of the close of business on July 15,
2002. The shares were distributed on July 31, 2002. All references to the number
of shares of Common Stock (except for shares authorized), per share prices, and
earning per share amounts in the consolidated financial statements and related
notes thereto have been adjusted to reflect the stock split on a retroactive
basis, unless otherwise expressly stated.

Under the Company's Employee, Director and Consultant Stock Option Plan (the
"1997 Plan"), the Company may grant up to 2,000,000 shares of common stock.
Stock options expire ten years from the date of grant and vest ratably over a
three year period. Shares available for future grants under the 1997 Plan
amounted to 375 at December 31, 2003 and 42,528 at December 31, 2002.



                                       43
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2002, the Company's Board of Directors adopted the Company's 2002 Stock
Option Plan (the "2002 Plan"). This Plan was approved by majority shareholder
vote at the Company's Annual Meeting of Shareholders on May 16, 2002. Under the
2002 Plan, the Company may grant up to 1,500,000 shares of common stock. Stock
options expire ten years from the date of grant and vest ratably over a three
year period. Shares available for future grants under the 2002 Plan amounted to
1,036,632 at December 31, 2003 and 1,292,150 at December 31, 2002.

For 2003, 2002 and 2001, the Company's stock option activity is summarized
below:
<TABLE>
<CAPTION>


                                                 2003                      2002                    2001
                                        ----------------------   ---------------------    --------------------
                                                     Weighted                Weighted                 Weighted
                                                      Average                Average                  Average
                                                     Exercise                Exercise                 Exercise
                                         Options       Price      Options      Price       Options     Price
                                        ---------    ---------   ---------   ---------    ---------   --------

<S>                                     <C>          <C>         <C>         <C>          <C>         <C>
Outstanding at beginning of year ....   1,798,275    $    7.48   1,752,708   $    5.02    1,582,566   $   3.61
Granted .............................     322,375        26.63     312,300       19.13      306,600       7.58
Forfeited ...........................      24,704        15.44      21,698        6.27       35,112       4.49
Exercised ...........................     551,494         4.93     245,035        4.82      101,346       4.33
                                        ---------    ---------   ---------   ---------    ---------   --------
Outstanding at end of year ..........   1,544,452    $   12.23   1,798,275   $    7.48    1,752,708   $   5.02
                                        =========    =========   =========   =========    =========   ========
Exercisable at end of year ..........     931,224    $    6.12   1,188,980   $    4.68    1,124,894   $   4.74
                                        =========    =========   =========   =========    =========   ========
</TABLE>

         Also in 2002, options were exercised for 129,000 shares at an exercise
price of $2.33 by a Board Member. These shares had been granted in 1995 in
recognition of financial consulting services.

The following table summarizes information about stock options outstanding at
December 31, 2003.
<TABLE>
<CAPTION>


                                     Stock Options Outstanding                      Stock Options Exercisable
                            -----------------------------------------------      -----------------------------
                                      Weighted Average
  Range of Exercise                    Remaining Life      Weighted Average                   Weighted Average
       Prices               Shares        (Years)           Exercise Price        Shares       Exercise Price
  -----------------         ------    -----------------     --------------        ------       --------------

<S>   <C>  <C>             <C>               <C>              <C>                <C>                <C>
      2.88-3.94            395,226           6.1               $   3.49          395,226            $3.49
      4.50-5.45            290,650           4.3                   4.69          257,316             4.59
      7.10-8.32            241,837           6.6                   8.13          179,769             8.06
     10.00-14.03             2,020           8.4                  11.98              353            10.00
     19.11-21.64           295,794           8.6                  19.11           98,560            19.11
        26.67              318,925           9.7                  26.67               --            26.67
                         ---------           ---               --------          -------          -------
                         1,544,452           7.1               $  12.23          931,224          $  6.12
                         =========           ===               ========          =======          =======
</TABLE>



7.       Retirement Plan

In January 1999 the Company established a 401(k) savings plan (the "401(k)
Plan") for eligible team members. Participation in the 401(k) Plan is voluntary
and available to any team member who is 21 years of age and has completed a
three month eligibility period. Participants may elect to contribute up to 20%
of their compensation. In accordance with the provisions of the 401(k) Plan, the
Company makes a matching contribution to the account of each participant in an
amount equal to 25% of the first 6% of eligible compensation contributed by each
participant with a maximum match of $1,500. The Company's matching contribution
expense for 2003, 2002 and 2001 was $287,000, $277,000, and $206,000,
respectively.



                                       44
<PAGE>


                         A.C. MOORE ARTS & CRAFTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.       Commitments and Contingencies

Commitments

The Company leases its retail stores, administrative offices and warehouse
facilities and vehicles under noncancelable operating leases. The lease for the
administrative offices and distribution center has an initial lease term of six
years with a six-year renewal option. Most store leases have an average initial
term of ten years, with two five year renewal options, and provide for
predetermined escalations in future minimum annual rent or additional rent
contingent upon store sales levels. The pro rata portion of scheduled rent
escalations has been included in other long-term liabilities in the accompanying
balance sheet. For the years 2003 and 2002 the amounts of accrued rent expense
recognized over the amounts paid were $754,000 and $758,000, respectively, and
has been included in other long-term liabilities in the accompanying
consolidated balance sheet.

Rent expense under operating leases consists of:

                                            Year Ended December 31,
                                      --------------------------------------
                                       2003            2002           2001
                                      -------         -------        -------
                                                (in thousands)
Minimum rentals ..................    $23,503         $20,450        $16,124
Contingent payments ..............        107             148            150
                                      -------         -------        -------
                                      $23,610         $20,598        $16,274
                                      =======         =======        =======

As of December 31, 2003, the Company entered into ten leases for stores to open
in 2004.

Future minimum lease payments (including those for unopened stores) as of
December 31, 2003 for non-cancelable operating leases with terms in excess of
one year are as follows (in thousands):

             2004....................................          $26,122
             2005....................................           26,384
             2006....................................           26,506
             2007....................................           25,732
             2008....................................           22,902
             Thereafter..............................           92,536
                                                              --------
             Total minimum future rentals............         $220,182
                                                              ========

         The Company is currently in the process of building a new distribution
center and office complex which the Company plans to open in the second quarter
of 2004. This new facility, which will be located near the Company's existing
distribution center, will be 700,000 square feet for distribution and
warehousing plus 60,000 square feet of office space. The total cost of the land
and building for this facility is estimated to be $43.0 million. The Company
believes that the new facility, when completed, will enable the Company to
effectively service all of the Company's existing locations and a total of
approximately 150 store locations within an 800-mile radius of the new
distribution facility.

Contingencies

The Company is not a party to any material legal proceedings other than routine
litigation incidental to its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially affect
the financial position, operating results or cash flows of the Company.

                                       45
<PAGE>


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

         We had no changes in or disagreements with accountants on accounting
and financial disclosure of the type referred to in Item 304 of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES.

         Our management, with the participation of our chief executive officer
and chief financial officer, conducted an evaluation as of the end of the period
covered by this report, of the effectiveness of our disclosure controls and
procedures, as defined in Exchange Act Rule 13a-15(e). Based on that evaluation,
our chief executive officer and chief financial officer concluded that our
disclosure controls and procedures were effective in reaching a reasonable level
of assurance that management is timely alerted to material information relating
to us during the period when our periodic reports are being prepared. Our
management, with the participation of our chief executive officer and chief
financial officer, also conducted an evaluation of our internal control over
financial reporting, as defined in Exchange Act Rule 13a-15(f), to determine
whether any changes occurred during the quarter ended December 31, 2003 that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting. Based on that evaluation, there was
no such change during the quarter ended December 31, 2003.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         Incorporated by reference from our Proxy Statement relating to our 2004
Annual Meeting of Shareholders to be filed in accordance with General
Instruction G(3) to Form 10-K, except information concerning our executive
officers which is set forth in Part I of this Annual Report on Form 10-K and
which is incorporated herein by reference.

         Code of Ethics

         We have adopted a Code of Business Ethics and Conflict of Interest
Policy that applies to all of our directors and employees including, without
limitation, our principal executive officer, our principal financial officer,
our principal accounting officer and all of our employees performing financial
or accounting functions. Our Code of Business Ethics and Conflict of Interest
Policy is posted on our website, www.acmoore.com, and may be found under the
"Investor Relations" section in "Corporate Profile." Effective on or about May
1, 2004 it can be found under the "Investor Relations" section in "Corporate
Governance." We intend to satisfy the disclosure requirement under Item 10 of
Form 8-K regarding an amendment to a provision of our Code of Business Ethics
and Conflict of Interest Policy by posting such information on our website at
the location specified above.

ITEM 11.  EXECUTIVE COMPENSATION.

         Incorporated by reference from our Proxy Statement relating to our 2004
Annual Meeting of Shareholders to be filed in accordance with General
Instruction G(3) to Form 10-K.

                                       46
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

         Incorporated by reference from our Proxy Statement relating to our 2004
Annual Meeting of Shareholders to be filed in accordance with General
Instruction G(3) to Form 10-K.

Equity Compensation Plan Information

The following table details information regarding our existing equity
compensation plans as of December 31, 2003:

<TABLE>
<CAPTION>

                                                                                                       (c)
                                                                                              Number of securities
                                                    (a)                                      remaining available for
                                            Number of securities             (b)              future issuance under
                                             to be issued upon        Weighted-average         equity compensation
                                                exercise of           exercise price of         plans (excluding
                                            outstanding options,    outstanding options,     securities reflected in
              Plan Category                 warrants and rights      warrants and rights           column (a))
              -------------                 --------------------    --------------------     ------------------------
<S>                                        <C>                       <C>                      <C>
Equity compensation plans approved by
  security holders (1)...................        1,544,452                 $12.23                   1,037,007
Equity compensation plans not approved
  by security holders....................                -                      -                           -
Total....................................        1,544,452                 $12.23                   1,037,007
</TABLE>

____________________
(1)  These plans are our 1997 Employee, Director and Consultant Stock Option
     Plan and our 2002 Stock Option Plan.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Incorporated by reference from our Proxy Statement relating to our 2004
Annual Meeting of Shareholders to be filed in accordance with General
Instruction G(3) to Form 10-K.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         Incorporated by reference from our Proxy Statement relating to our 2004
Annual Meeting of Shareholders to be filed in accordance with General
Instruction G(3) to Form 10-K.


                                       47
<PAGE>

                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES. AND REPORTS ON FORM 8-K.

         (a) `The following documents are filed as part of this Annual Report on
Form 10-K:

                  (1)      Financial Statements:

                           Report of Independent Auditors

                           Consolidated Balance Sheets at December 31, 2003
                           and 2002

                           Consolidated Statements of Income for each of the
                           three years in the period ended December 31, 2003

                           Consolidated Statements of Changes in Shareholders'
                           Equity for each of the three years in the period
                           ended December 31, 2003

                           Consolidated Statements of Cash Flows for each of the
                           three years in the period ended December 31, 2003

                           Notes to Consolidated Financial Statements

                  (2)      Financial Statement Schedules:

                           No financial statement schedules are required to be
                           filed as part of this report.

                  (3)      Exhibits:

                           The exhibits filed as part of this report are listed
                           under exhibits at subsection (c) of this Item 14.

         (b) Reports on Form 8-K filed or furnished in the quarter ended
December 31, 2003:

                  8-K, Item 12, furnished on October 2, 2003 regarding a Company
                  press release concerning earnings and other information.

                  8-K, Item 12, furnished on October 15, 2003 regarding a
                  Company press release concerning earnings and other
                  information.

                  8-K, Item 5, filed on November 19, 2003 regarding the plan of
                  Mr. Leslie H. Gordon under Rule 10b5-1 under the Exchange Act.

                                       48
<PAGE>

         (c) Exhibits:

         Exhibit Number     Description
         --------------     -----------

         3.1(1)            Articles of Incorporation

         3.2(1)            Bylaws

         +10.1(1)          1997 Employee, Director and Consultant Stock Option
                           Plan

         +10.2(3)          2002 Stock Option Plan

         +10.3(1)          Form of Stock Option Award Agreement

         10.4(1)           Tax Indemnification Agreement, dated July 22, 1997,
                           among the Company, John E. Parker and William Kaplan

         10.5(2)           Lease, dated August 14, 1995, between Freeport 130
                           L.L.C. and A.C. Moore, Inc.

         10.6(4)           Second Amendment to Lease, dated as of March 25,
                           1998, between Freeport 130 L.L.C. and A.C. Moore,
                           Inc.

         10.7(5)           Employment Agreement, dated June 11, 2001, between
                           Lawrence H. Fine and A.C. Moore, Inc.

         +10.8(6)          Separation Agreement dated January 31, 2003 between
                           Rex Rambo and the Company.

         10.9(7)           Loan Agreement dated as of October 28, 2003, by and
                           between Wachovia Bank, National Association and A.C.
                           Moore Arts & Crafts, Inc., A.C. Moore Incorporated,
                           Moorestown Finance, Inc., Blackwood Assets, Inc. and
                           A.C. Moore Urban Renewal, LLC. A.C. Moore will
                           furnish to the Securities and Exchange Commission a
                           copy of any omitted exhibits or schedules upon
                           request.

         10.10(7)          Construction Loan Agreement dated as of October 28,
                           2003, by and between Wachovia Bank, National
                           Association and A.C. Moore Arts & Crafts, Inc., A.C.
                           Moore Incorporated, Moorestown Finance, Inc.,
                           Blackwood Assets, Inc. and A.C. Moore Urban Renewal,
                           LLC. A.C. Moore will furnish to the Securities and
                           Exchange Commission a copy of any omitted exhibits or
                           schedules upon request.

         10.11(7)          Mortgage, Assignment of Rents and Security Agreement
                           and Financing Statement dated as of October 28, 2003,
                           by and between A.C. Moore Urban Renewal, LLC and
                           Wachovia Bank, National Association. A.C. Moore will
                           furnish to the Securities and Exchange Commission a
                           copy of any omitted exhibits upon request.

                                       49
<PAGE>

         21.1(4)           Subsidiaries of the Company

         23.1              Consent of PricewaterhouseCoopers LLP

         31.1              Certification of Chief Executive Officer pursuant to
                           Rule 13a-14(a) promulgated under the Securities
                           Exchange Act of 1934, as amended (the "Exchange
                           Act").

         31.2              Certification of Chief Financial Officer pursuant to
                           Rule 13a-14(a) promulgated under the Exchange Act.

         32                Certification of the Company's Chief Executive
                           Officer and Chief Financial Officer pursuant to 18
                           U.S.C. Section 1350, as adopted pursuant to Section
                           906 of the Sarbanes-Oxley Act of 2002.

-------------------

+    Management contract or compensatory plan or arrangement.

(1)  Incorporated by reference to the Company's Registration Statement on Form
     S-1 (File No. 333-32859), filed on August 5, 1997.

(2)  Incorporated by reference to Amendment No. 1 to the Company's Registration
     Statement on Form S-1 (File No. 333-32859), filed on September 16, 1997.

(3)  Incorporated by reference to the Company's definitive proxy statement filed
     on April 22, 2002.

(4)  Incorporated by reference to the Company's Form 10-K for the year ended
     December 31, 1998.

(5)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     June 30, 2001.

(6)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     March 31, 2003.

(7)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     September 30, 2003.



                                       50
<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.

                                  A.C. MOORE ARTS & CRAFTS, INC.

Date: March 12, 2004                     By:  /s/ John E. Parker
                                              ----------------------------------
                                              John E. Parker
                                              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.

<TABLE>
<CAPTION>

              SIGNATURE                                   CAPACITY                            DATE
-----------------------------------------------------------------------------------------------------------

<S>                                     <C>                                              <C>
/s/ John E. Parker                      Chief Executive Officer and Director             March 12, 2004
----------------------------------      (Principal Executive Officer)
John E. Parker


/s/ Leslie H. Gordon                    Executive Vice President and Chief Financial     March 12, 2004
----------------------------------      Officer (Principal Financial and Accounting
Leslie H. Gordon                        Officer)


/s/ William Kaplan                      Chairman of the Board
----------------------------------                                                       March 12, 2004
William Kaplan


/s/ Lawrence H. Fine                    Director
----------------------------------                                                       March 12, 2004
Lawrence H. Fine


/s/ Richard Lesser                      Director
----------------------------------                                                       March 12, 2004
Richard Lesser


/s/ Richard J. Bauer                    Director
----------------------------------                                                       March 12, 2004
Richard J. Bauer


/s/ Richard J. Drake                    Director
----------------------------------                                                       March 12, 2004
Richard J. Drake


/s/ Eli J. Segal                        Director
----------------------------------                                                       March 12, 2004
Eli J. Segal

</TABLE>


                                       51
<PAGE>



                                  EXHIBIT INDEX

         3.1(1)   Articles of Incorporation

         3.2(1)   Bylaws

         +10.1(1) 1997 Employee, Director and Consultant Stock Option Plan

         +10.2(3) 2002 Stock Option Plan

         +10.3(1) Form of Stock Option Award Agreement

         10.4(1)  Tax Indemnification Agreement, dated July 22, 1997, among the
                  Company, John E. Parker and William Kaplan

         10.5(2)  Lease, dated August 14, 1995, between Freeport 130 L.L.C. and
                  A.C. Moore, Inc.

         10.6(4)  Second Amendment to Lease, dated as of March 25, 1998, between
                  Freeport 130 L.L.C. and A.C. Moore, Inc.

         10.7(5)  Employment Agreement, dated June 11, 2001, between Lawrence H.
                  Fine and A.C. Moore, Inc.

         +10.8(6) Separation Agreement dated January 31, 2003 between Rex Rambo
                  and the Company.

         10.9(7)  Loan Agreement dated as of October 28, 2003, by and between
                  Wachovia Bank, National Association and A.C. Moore Arts &
                  Crafts, Inc., A.C. Moore Incorporated, Moorestown Finance,
                  Inc., Blackwood Assets, Inc. and A.C. Moore Urban Renewal,
                  LLC. A.C. Moore will furnish to the Securities and Exchange
                  Commission a copy of any omitted exhibits or schedules upon
                  request.

         10.10(7) Construction Loan Agreement dated as of October 28, 2003, by
                  and between Wachovia Bank, National Association and A.C. Moore
                  Arts & Crafts, Inc., A.C. Moore Incorporated, Moorestown
                  Finance, Inc., Blackwood Assets, Inc. and A.C. Moore Urban
                  Renewal, LLC. A.C. Moore will furnish to the Securities and
                  Exchange Commission a copy of any omitted exhibits or
                  schedules upon request.

         10.11(7) Mortgage, Assignment of Rents and Security Agreement and
                  Financing Statement dated as of October 28, 2003, by and
                  between A.C. Moore Urban Renewal, LLC and Wachovia Bank,
                  National Association. A.C. Moore will furnish to the
                  Securities and Exchange Commission a copy of any omitted
                  exhibits upon request.

         21.1(4)  Subsidiaries of the Company
<PAGE>

         23.1     Consent of PricewaterhouseCoopers LLP

         31.1     Certification of Chief Executive Officer pursuant to Rule
                  13a-14(a) promulgated under the Securities Exchange Act of
                  1934, as amended (the "Exchange Act").

         31.2     Certification of Chief Financial Officer pursuant to Rule
                  13a-14(a) promulgated under the Exchange Act.

         32       Certification of the Company's Chief Executive Officer and
                  Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.
-------------------

+    Management contract or compensatory plan or arrangement.

(1)  Incorporated by reference to the Company's Registration Statement on Form
     S-1 (File No. 333-32859), filed on August 5, 1997.

(2)  Incorporated by reference to Amendment No. 1 to the Company's Registration
     Statement on Form S-1 (File No. 333-32859), filed on September 16, 1997.

(3)  Incorporated by reference to the Company's definitive proxy statement filed
     on April 22, 2002.

(4)  Incorporated by reference to the Company's Form 10-K for the year ended
     December 31, 1998.

(5)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     June 30, 2001.

(6)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     March 31, 2003.

(7)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     September 30, 2003.