SECURITIES AND EXCHANGE COMMISSION
                    Washington, D.C.  20549
                     ---------------------
                           FORM 10-K

      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

           For the fiscal year ended February 3, 2001
           ------------------------------------------

            Commission file number     33-27126
                                       --------

                          PEEBLES INC.
     (Exact name of registrant as specified in its charter)

          Virginia                         54-0332635
          --------                         ----------
  (State of incorporation)              (I.R.S. Employer
                                         Identification No.)


      One Peebles Street
     South Hill, Virginia                  23970-5001
     --------------------                  ----------
(Address of principal executive offices)    (Zip Code)

Registrant's telephone number, including area code (804) 447-5200
                                                    -------------

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

      Indicate by check mark whether the registrant (1) has filed
all  reports required to be filed by Section 13 or 15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.  Yes  X  .  No      .

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

     State the aggregate market value of the voting stock held by
non-affiliates  of the registrant $-0- (determined  by  including
all shares of Peebles common stock owned by persons, (1) who hold
less  than 10% of the outstanding shares of common stock and  (2)
are  not an executive officer of the registrant. Aggregate  value
is  based  upon the estimated fair value of common  stock  as  of
February 1, 2001.)

     As of April 1, 2001, 1,000 shares of common stock of Peebles
Inc. were outstanding.

<PAGE>
               DOCUMENTS INCORPORATED BY REFERENCE

      List  hereunder the following documents if incorporated  by
reference  and the Part of the Form 10-K into which the  document
is  incorporated:  (1) Any annual report to security holders; (2)
Any  proxy or information statement; and (3) Any prospectus filed
pursuant to Rule 424(b) or (c) under the Securities Act of  1933.
The   listed   documents   should  be   clearly   described   for
identification purposes.

                              NONE
<PAGE>

                             PART I

ITEM 1.  BUSINESS.

GENERAL

     Peebles Inc. and its subsidiaries (together, "Peebles"
or the "Company") operate 124 specialty department stores
offering predominately soft-apparel, fashion merchandise for
the entire family and selected decorative home accessories.
Founded in 1891, the Company operates primarily in smaller
communities in 15 southeastern and mid-Atlantic states.
Peebles positions itself as the leading fashion retailer in
these communities, which typically do not have a traditional
mall-based department store, and locates its stores in the
primary shopping destinations in its markets.  Peebles
offers its customers consistent value by providing a broad
assortment of moderately priced national brands supplemented
with quality private label merchandise.  Peebles' attractive
stores and visual presentation, advertising and promotional
programs further reinforce its image as the market's fashion
leader.

     Peebles Inc. is a wholly owned subsidiary of PHC Retail
Holding Company ("PHC Retail").  PHC Retail is a closely
held company, which has no significant assets other than the
shares of Peebles common stock it owns.  The subsidiaries of
Peebles Inc. are Carlisle Retailers, Inc. ("Carlisle's"),
acquired in May 1996, and Ira A. Watson Co. ("Watson's"),
acquired in June 1998.  All store locations operate under
the Peebles name.

     The Company's corporate headquarters is located in
South Hill, Virginia.  The Company operates two distribution
centers, one adjacent to the corporate offices, and the
other in Knoxville, Tennessee.  The Knoxville facility was
acquired in June 1998 in connection with the acquisition of
Watson's.

     References to 1996, 1997, 1998, 1999 and 2000 relate to
the Company's fiscal years ended February 1, 1997, January
31, 1998, January 30, 1999, January 29, 2000 and February 3,
2001, respectively.  Fiscal years 1996, 1997, 1998 and 1999
each include 52 weeks.  Fiscal year 2000 consisted of fifty-
three weeks.

OPERATING STRATEGY

     The following are key elements of Peebles' operating
strategy:

     FOCUS ON SMALL MARKETS, DELIVER VALUE.  Peebles locates
     its stores in smaller communities that typically do not
     have a fashion retailer.  A Peebles market is generally
     between 10,000 and 25,000 households, but the Company
     is able to successfully operate in communities with as
     few as 5,000 households.  Peebles provides the
     community with a shopping experience similar to that
     found in a larger, mall-based department store, but
     with a value emphasis.  Lower initial markons and less
     promotional pricing result in a higher level of
     credibility with customers.  Peebles' commitment to
     providing value to its customers is integral to
     developing repeat customers, a critical ingredient for
     success in smaller markets.

     OPERATE SMALLER, FLEXIBLE STORES.  Peebles operates
     stores that are significantly smaller than the
     traditional full-line department store.  Peebles'
     stores range in size from 11,000 to 72,000 square feet
     and average 29,400 gross square feet, 23,800 of which,
     on average, is devoted to selling.  The Company
     operates profitably by varying the store size and
     layout to meet the needs of the individual market.  A
     Peebles store remains as dynamic as the market, with
     space re-allocations performed regularly to meet
     changing customer demand.

<PAGE>

     TAILOR FASHION TO LOCAL TASTES.  The merchandise mix is
     tailored to individual stores to cater to local tastes
     and preferences.  Soft-apparel fashion merchandise is
     predominate on the selling floor, as the Company
     emphasizes a broad selection of moderately-priced
     national brands and private label merchandise, which
     generally is not available through other retailers in
     the market.  Cosmetics and selected home accessories
     are the primary complements to the apparel assortment,
     as fewer hard-line merchandise categories are offered.
     Customer feedback and store level, detailed sales
     information allow corporate buyers and store associates
     to work together to optimize the use of Peebles'
     smaller, yet flexible selling spaces to best meet
     customer demand.  The store layout and visual
     presentation, customized to the individual market,
     targeted advertising and promotional programs, complete
     the Peebles image as the market's fashion leader.

     DEVOTION TO THE SALES FLOOR THROUGH A CENTRALIZED BACK
     OFFICE.  Peebles believes successful operations are
     directly related to the time devoted to the sales
     floor. Store management and sales associates spend over
     85% of their hours in a selling and customer service
     capacity.  To make this possible, "back office"
     functions are centralized where efficient.

     ADAPT TO LOCAL REAL ESTATE OPPORTUNITIES.  Smaller
     stores and a flexible store format give the Company the
     ability to locate in a variety of new or existing
     sites. As a result, Peebles' growth does not depend
     upon the development of new malls. Peebles attempts to
     position its stores in the primary shopping destination
     in its markets, which are typically strip shopping
     centers co-anchored by leading discount, grocery and
     drug retailers.  The Company also operates successfully
     in enclosed malls and downtown locations.

EXPANSION STRATEGY

     From 1996 to 2000, the Company has expanded from 77
stores to 124, by both developing new locations and
acquiring existing stores.  In addition, the Company has
expanded sales capacity by relocating its stores within
existing markets and by remodeling and reallocating selling
space.  The Company anticipates continued expansion as
follows:

     DEVELOPING NEW LOCATIONS.  The Company plans to open
     Peebles stores in two new markets in 2001.  The new
     locations are planned in existing states and in
     contiguous markets where distribution efficiencies can
     be realized and where the Peebles concept and
     merchandise mix will correspond to local demographics.
     The Company explores a wider range of real estate
     options than retailers relying only on new shopping
     center development, and Peebles actively considers
     space vacated by other retailers.

     ACQUIRING EXISTING STORES. The Company is continually
     evaluating acquisitions of individual stores, groups of
     stores or entire chains for opportunities to compliment
     or expand existing markets.  The Company currently
     plans to open nine acquired store locations in the
     third fiscal quarter of 2001 and management believes
     the economic environment in 2001 will continue to
     present acquisition opportunities.  Since 1996, the
     Company acquired 29 new store locations from other
     retailers.

     REMODELING AND RELOCATING STORES.  In 2001, the Company
     is planning for major remodeling/space reallocations at
     10 existing store locations.  The Company strives to
     ensure its customers experience an updated, pleasant
     and fashion-oriented shopping environment, planned
     specifically to meet the needs of the specific market.

<PAGE>

PEEBLES STORES

     Peebles stores are designed to create an appealing and
satisfying shopping experience for the customer.  The layout
is bright, modern and accessible, with an emphasis on the
visual presentation of the merchandise and the creation of
cross-selling opportunities. The Company's stores are
significantly smaller than the traditional full-line
department store and do not have a standard format. Rather,
they are designed for operational efficiency, including
flexible inventory management adapted to meet the needs of
the individual community.

     The Company targets communities having between 10,000
and 25,000 households, although the Company operates
profitably in markets with as few as 5,000 households.  In
addition, the Company enters larger markets and suburban
areas with 25,000 to 40,000 households where the customer
base and competitive factors exhibit characteristics similar
to markets where the Company's operating strategy has proven
successful.  The Company prefers to locate its stores in
strip shopping centers and enclosed malls where other
anchors such as a leading grocery, discount and drug
retailers will create a destination shopping location.  Of
the 124 stores currently in operation, 91 are located in
strip shopping centers, 23 in enclosed malls and 10 in
downtown locations.

MERCHANDISING

     The Company's merchandise, approximately 85% of which
is apparel, is targeted to middle income customers shopping
for their families and homes.  The Company has fewer
departments than a traditional full-line department store,
but strives to carry a wide assortment of merchandise within
its targeted categories in order to appeal to a broad range
of customers.  To position itself as the primary fashion
retailer in the community with merchandise not found
elsewhere in the market, the Company emphasizes moderately-
priced national brands, supplemented by a limited selection
of prestige brand names and a selection of quality private
label merchandise.  Peebles merchandise is fashion
responsive rather than fashion forward, limiting the
Company's inventory exposure.  The Company's stores carry
apparel for the entire family, accessories and cosmetics,
and decorative home accessories.

     Management believes that brand name merchandise is a
significant attraction to its customers and intends to
continue emphasizing such merchandise in its stores.  For
example, the Company carries nationally branded cosmetics in
as many of its stores as possible because Peebles is
typically the only retailer in the community where consumers
can purchase that merchandise.  While the gross margins on
cosmetics are typically lower than the Company's average
gross margin, the availability of this merchandise generates
store traffic, which facilitates the sale of higher margin
merchandise.

      In  2000,  a majority of the merchandise sold  by  the
Company  was  nationally  branded merchandise.   Key  brands
featured by the Company include:

 Ladies                   Alfred Dunner, Koret, Etienne Aigner,
                          Liz Claiborne, Kellwood, Halmode
                          Apparel, Lady Dorby, Woolrich,
                          Playtex, Vanity Fair, Levi, Item
                          Eyes;

 Men's                    Ralph Lauren, Haggar, Arrow, Levi,
                          Van Heusen, Foria International, Nike,
                          Izod, Swank;

 Young Men's and Juniors  Levi, Tommy Hilfiger Jeans,
                          Currants Jeri-Jo, Union Bay,
                          Global Gold, Calvin Klein,
                          L.E.I/R.S.V. Sport, Byer of
                          California, Nautica Jeans, Jones
                          Apparel;

 Children's               Tommy Hilfiger, H.H. Cutler, Levi,
                          Kids Headquarters, Gerson & Gerson,
                          Baby Togs, Samara Brothers,
                          Fishman & Tobin, American Character,
                          William Carter;
<PAGE>

 Shoes                    Nike, Reebok, Sketchers, Nine West,
                          Easy Spirit, Keds/Stride Rite, Brown
                          Shoe, Aerosoles, Wolverine,
                          Maxwell Shoe, Adidas;

 Home                     International Silver, Seymour Mann,
                          PEM-America, White Collection,
                          Mikasa, Springs, Westpoint-
                          Stevens, New Creative Enterprises,
                          Pacific Rim, Baum Bothers;

 Cosmetics                Estee Lauder, Elizabeth Arden, Clinique,
                          Liz Claiborne, Calvin Klein, Belae
                          Brands, Designer Fragrance,
                          Markwins International, Aramis,
                          Lancaster Group;

     As a complement to its national brand merchandise, the
Company offers private label merchandise in selected
departments to give its customers a wider range of products.
Management believes that its private label merchandise
provides value to the Peebles customer by offering a quality
merchandise alternative at prices lower than national
brands.  In addition, private label merchandise often has
higher gross margins than brand name merchandise and allows
the Company to avoid direct price competition.

     In order to efficiently utilize its selling space,
Peebles tailors the merchandise selection at individual
stores.  The Company utilizes its knowledge of its markets
and customers, along with input from the store managers and
sales associates, to allocate merchandise to the stores. The
Company also maintains an inventory tracking system, which
provides daily information as to sales and inventory levels
by store, department, vendor, class, style, size and color.
Based on this information, the Company analyzes market
trends, identifies fast or slow moving merchandise and makes
reordering, reallocation and pricing decisions on a daily
basis.

     Peebles emphasizes value pricing and is less
promotional than the traditional department store.  It is
the Company's pricing strategy to use lower initial markons
and promote less, thereby maintaining a high level of
credibility with its customers.  Peebles' commitment to
providing value to its customers is integral to creating
repeat customers, a critical ingredient for success in
smaller markets.  Peebles is committed to offering "Great
Fashions, Great Prices, Everyday".  With this program,
Peebles prices merchandise as low as possible in order to
generate sales.  Products in this program are marketed
through special point of sale displays and are featured in
the Company's advertising.

ADVERTISING AND PROMOTION

     The Company's advertising and promotion strategy is
designed to support its marketing goals of providing quality
merchandise at value-oriented prices and reinforces the
Company's image as the leading fashion retailer in its
markets.  Peebles emphasizes direct mail and newsprint over
television and radio, due to the size and nature of the
markets served.  Peebles uses both black and white
advertisements and full color mailers to highlight
promotional items and events as well as products in its
"Great Fashions, Great Prices, Everyday" program.  In
addition, the Company's advertising and promotional staff
organizes special events at the stores and arranges for all
Grand Opening and Grand Reopening events.

     The Company's net advertising expenses in 1998, 1999
and 2000 were 2.4%, 2.7% and 2.2% of net sales,
respectively, which the Company believes is lower than
traditional department stores due to emphasis on an everyday
fair price policy and a less promotional strategy.  Net
advertising expenses were higher in 1998 and 1999 due to the
significant number of new store locations added in 1998.

<PAGE>

PURCHASING AND DISTRIBUTION

     The Company employs 30 buyers and 6 merchandise
managers who are responsible for most merchandising
decisions including purchasing, pricing, sales promotions,
inventory allocations and markdowns.  While these decisions
are made centrally, the Company endeavors to refine its
merchandise assortment to appeal to the customers in each
market.  Peebles' buying staff has developed specific
knowledge with regard to purchasing, inventory and
promotions for the Company's smaller sized stores.  The
merchandising group participates in an incentive plan based
on sales, gross margin dollars generated and inventory
turnover.

     The Company places special emphasis on maintaining all
merchandise in stock, particularly advertised and basic
merchandise, to build and maintain credibility with its
customers.  By monitoring unit sale information by store,
buyers are able to quickly determine the styles, colors and
sizes of merchandise to be reordered and distributed to
individual stores.

     The Company purchases its merchandise from over 1,200
suppliers and is not dependent on any single source of
supply.  The Company had been a member of an international
cooperative buying service (the "Co-Operative"), which the
Company used primarily as a resource for its imported
private label merchandise. In 1998 and 1999, the Co-
Operative was the Company's largest supplier, representing
approximately 9% and 7%, respectively, of total purchases.
In 2000, the Co-Operative ceased operation in the third
fiscal quarter, and as a result, represented approximately
3% of total purchases.  The Company has obtained resources
to supply its private label programs.  The disruption to the
flow of merchandise as a result of the Co-Operative no
longer being available as a resource was not material to the
overall purchasing process or the Company's merchandise mix.

     Virtually all merchandise is shipped directly from
vendors to the Company's distribution centers.  In
partnership with its vendors, the Company actively pursues
efficiencies by having merchandise shipped floor ready and
packed by store.  Otherwise, merchandise is shipped in bulk
to the distribution centers where it is inspected, sorted,
marked, ticketed and packed by store.  The Company does not
warehouse merchandise and has a three-day processing goal
through the distribution centers.  All merchandise is
shipped floor ready to each store an average of twice a week
on Company-owned trucks.

     The Company's distribution centers feature modern
merchandise handling equipment and are located close to
major interstates.  Using one eight hour shift at each
facility, future growth in existing and contiguous markets
can be supported to approximately 200 store locations.

STORE OPERATIONS

     The Company has structured its store operations to
maintain what management believes are key operating
advantages, including a thorough knowledge of its customer
base, the ability to share information between the stores,
and cost efficient operations through centralization.

     Peebles performs as many traditional "back-office"
functions as possible at the corporate level so that store
management and sales associates can spend most of their time
with customers.  Non-sales store personnel are kept to a
minimum due to control functions performed at the corporate
offices, including sales associate scheduling, customer
credit and merchandise ticketing.  All stores use at least
85% of their total payroll hours in a selling capacity.

<PAGE>

     Peebles encourages active participation of all store
level management and sales associates in decisions affecting
store operations and merchandise mix.  Management regularly
solicits input and suggestions from its employees who are
closest to the customer.  In addition to its management
information systems, Peebles stays in close contact with
store operations through its eleven regional managers.  Each
store manager reports to a regional manager.  Regional
managers visit their stores regularly to review merchandise
presentation, personnel training and performance,
enforcement of the Company's security procedures and
adherence to Company operating procedures.  Each quarter,
corporate merchandising and operations executives meet with
the regional managers to share information.

     The Company conducts a management training program,
where on-the-job training with seasoned store management and
regional managers is coordinated with instruction at the
Company's corporate headquarters.  The Company stresses
promotion from within, and substantially all of the current
store managers have been selected in this manner.

     Most stores typically employ several assistant managers
and approximately 30 sales associates, a number of whom are
part-time.  All Peebles' store personnel, including
assistant store managers and sales associates, participate
in incentive plans.  The Company uses periodic productivity
reports and personal reviews to inform each employee of his
or her performance.

PEEBLES CHARGE CARD

     As a service to its customers, the Company offers
credit through the use of its own Peebles Charge card.  The
Peebles Charge card customer usually resides in the local
community immediately surrounding the individual store
location and the Company does not require collateral.
Peebles administers all aspects of its credit card program
in-house.  The Company believes Peebles Charge card
customers are its most active and loyal customers, and these
customers represent an important part of its advertising and
marketing programs.

     The extension of credit is governed by risk models and
matrices, which are developed and reviewed by corporate
credit executives.  A satellite communication network links
the store locations to the corporate office, automating the
extension of credit and the authorization of individual
purchases.  Credit applications entered at a store location
are scored within minutes and the actual credit limit is
assigned and available for purchases.  Individual charge
transactions are authorized through this communications
network, checked against established open-to-buy limits for
each Peebles Charge account.  In addition, frequently asked
questions from Peebles Charge customers can be answered by
store sales associates at any register.  These questions
include total balance due, available credit, account number
look-up, minimum payment amount due and the next payment
date.  Also supporting questions or concerns from Peebles
Charge card customers is an in-house customer service
department, which can be accessed directly by phone, through
an automated voice response system and through the internet.

     The Company produces all monthly billing statements,
processes all payments and performs all collection
activities at the corporate office.  Management believes
this in-house credit program provides the Company with an
important customer relations advantage over competing
retailers which administer their credit programs from remote
processing locations or contract for such services from
unrelated third parties.

     In 1998, 1999 and 2000, 28.5%, 27.6% and 27.6%,
respectively, of net sales were made using the Company's
proprietary credit card.  As of February 3, 2001, the
Company had approximately 730,000 credit card accounts, of
which 190,000 were billed that month.  The Company collects
income in the form of finance charges and late fees, and
bears the risk related to uncollectible accounts.  In 1998,
1999 and 2000, income from finance charges and late fees
totaled $5.5 million, $5.8 million and $6.9 million,
respectively.  Uncollectible accounts considered bad debts
totaled $1.3 million, $1.6 million and $2.7 million,
respectively, in 1998, 1999 and 2000.

<PAGE>

MANAGEMENT INFORMATION SYSTEMS

     The Company's management information systems provide
the daily financial and merchandising information to make
timely and effective pricing decisions and for inventory
control.  The Company is able to allocate its inventory
effectively as a result of its management information
systems and can tailor the merchandise mix to meet the
individual customer demands at each store.

     The Company maintains central information and data
processing systems at its corporate headquarters.  Each of
its stores is equipped with compatible point-of-sale
registers, which are polled every evening by the central
system to gather sales, accounts receivable and inventory
information.

     The Company's management information and data
processing systems primarily use internally developed
software.  The Company believes this allows management to
more closely control the quality, suitability and expense of
information systems and data processing.  The Company
continues to make selected improvements in computer hardware
technology as well as enhancements to software applications
as needed.

EMPLOYEES

     At February 3, 2001, the Company had 1,489 full-time
employees and 2,017 part-time employees.  None of the
Company's employees is covered by a collective bargaining
agreement.  The Company considers its relations with its
employees to be good.

COMPETITION

     The retail industry is highly competitive, with
selection, price, quality, service, location and store
environment being the principal competitive factors.  The
Company competes with national and local retail stores,
specialty apparel chains, department stores, discount stores
and mail order merchandisers, many of which have
substantially greater financial and marketing resources than
the Company.   Demographic changes may alter the character
of the Company's markets, which can result in increased
competition from other retailers.

TRADEMARKS

     The Peebles name is registered as a trademark and a
servicemark of the Company. Additionally, the Company has
registered several merchandise labels as trademarks under
which it sells quality merchandise such as Cape ClassicT,
Private ExpressionsT, Meherrin River OutfittersT and Sonoma
BayT.

REGULATION

     The Company is subject to federal, state and local laws
and regulations affecting retail department stores
generally.  The Company believes that it is in substantial
compliance with these laws and regulations.

<PAGE>

ITEM 2.  PROPERTIES

     All but one of the Company's stores are leased, and
most of the leases contain renewal options.  In gross square
footage, the stores range in size from 11,000 square feet to
72,000 square feet, and average 29,400 square feet. In net
selling square footage by state at February 3, 2001, the
Company's stores were as follows:

  State    Stores   Net SQ Ft    State      Stores     Net SQ Ft
  -----    ------   ---------    -----      ------     ---------
Virginia     36      798,252     Pennsylvania  6        134,933
Tennessee    14      369,393     New York      5        122,221
North                            Ohio          4         75,971
Carolina     14      270,223     Delaware      3         80,611
Kentucky     11      297,083     New Jersey    2         52,807
Maryland      8      250,838     Indiana       2         49,614
South	                           Missouri      1         24,625
Carolina      6      149,557
West
Virginia      6      130,580
Alabama       6      107,039
                                    Totals     124    2,913,747


     Store leases generally provide for a base rent of
between $1.00 and $8.00 per square foot per year.  Most
leases also have formulas requiring the payment of
additional rent based on a percentage of net sales above
specified levels.  In 1998, 1999 and 2000, the Company's
aggregate rental payments on operating leases were
approximately $12.5 million, $15.3 million and $15.4
million, respectively.

     The Company's owns, subject to deeds of trust and
security interests granted in connection with the Company's
Credit Agreement, i) the corporate headquarters and the
150,000 square foot distribution center facility located on
31 acres in South Hill, Virginia; and ii) the 100,000 square
foot distribution center in Knoxville, Tennessee.  The
Company believes these locations provide the Company with
adequate undeveloped space to expand the corporate
headquarters and/or distribution centers to meet future
growth requirements.

ITEM 3.   LEGAL PROCEEDINGS

     The Company is from time to time involved in routine
litigation.  Based on consultations with legal counsel, the
Company believes that none of the litigation in which it is
currently involved is material to its financial condition or
results of operations.

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

                           None
<PAGE>
                         PART II

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

MARKET INFORMATION

     All of the Company's common stock is owned by PHC
Retail.  See Item 12. "Security Ownership of
Certain Beneficial Owners and Management."  There is no
existing market for the Common Stock, nor is the Common
Stock listed or traded on any exchange or other market.  All
currently outstanding shares of common stock were issued
pursuant to exemptions from registration under the
Securities Act of 1933, as amended (the "Act"), and any
resale of such shares of Common Stock can only be made
pursuant to an effective registration statement or an
exemption from the registration requirements of the Act.

DIVIDENDS

     The Company's Credit Agreement limits,
absent the consent of the lender, the payment of dividends,
to the repurchase of PHC Retail common stock.
The Company did not pay any dividends in 1998,1999 or 2000.



(This space intentionally left blank)
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

The following selected historical consolidated financial data for
Peebles for the five fiscal years ended February 3, 2001 are
derived from the Company's audited consolidated financial
statements.  The data should be read in conjunction with the
consolidated financial statements, related notes and other
financial information included on Page F-0 of this annual
report on Form 10-K.

(Dollars in thousands except shares and per share amounts
and selected other data)

<TABLE>
<CAPTION>
                       Fiscal    Fiscal   Fiscal   Fiscal    Fiscal
                        Year      Year     Year     Year      Year
                       Ended     Ended    Ended    Ended     Ended
                      February  January  January  January   February
                         1,        31,      30,      29,       3,
                        1997      1998     1999     2000      2001
                        ----      ----     ----     ----      ----
INCOME STATEMENT DATA:
<S>                   <C>       <C>      <C>      <C>       <C>
Net sales             $194,206  $217,694 $265,215 $300,839  $306,608
Cost of sales          116,236   130,820  159,067  178,657   181,681
                       -------   -------  -------  -------   -------
Gross margin            77,970    86,874  106,148  122,182   124,927
Selling, general
 and administrative
 expenses               54,400    60,324   76,402   86,139    85,615
Depreciation and
 amortization            7,499     6,648    8,057    9,926    10,534
Asset impairment           ---       ---      ---    2,182       ---
Asset revaluation       20,782       ---      ---      ---       ---
                       -------    -------  -------  -------  -------
Operating income
 (loss)                 (4,711)   19,902   21,689   23,935    28,777
Other income               687       444        9       --        94
Interest expense         9,148     9,609   10,804   11,521    11,133
                       -------   -------  -------  -------   -------
Income (loss)
  before income
  taxes (benefit)      (13,172)   10,737   10,894   12,414    17,738
Income taxes             1,743     4,687    4,837    5,385     7,627
                       -------   -------  -------  -------   -------
Net income (loss)     $(14,915)  $ 6,050  $ 6,057  $ 7,029   $10,111
                       =======   =======  =======  =======   =======
Net income (loss)
   per share          $(14,915)  $ 6,050  $ 6,057  $ 7,029   $10,111
Average common
  stock and common
  stock equivalents
  outstanding            1,000     1,000    1,000    1,000     1.000

SELECTED OTHER DATA:

Net sales per
  store (000's)(1)     $ 2,921   $ 2,835  $ 2,750  $ 2,705    $2,522
Selling sq. ft. per
  store (1)             26,032    24,550   24,305   24,070    23,585
Net sales per
  selling sq. ft.(2)      $108      $113     $113     $112      $107
Comparable store
  net sales increase
  (decrease) (1)         (1.3%)      5.3%     0.9%     1.3%       .3%

Number of stores
  (end of period)           77        84      117      121       124
Total selling sq.ft.
  (end of period)    1,879,000 2,022,000 2,803,000 2,880,000 2,913,000
Capital
  expenditures(000's)   $8,783   $10,226   $13,394    $9,151    $4,797

Balance Sheet Data:
                       February  January   January  January   February
                          1,        31,       30,      29,       3,
                         1997      1998      1999     2000      2001
                         ----      ----      ----     ----      ----
Working capital        $ 58,213 $ 63,459  $ 75,246 $ 78,495  $ 70,016
Net property and
   equipment             33,460   38,749    51,949   53,063    50,132
Total assets            163,568  172,456   208,286  211,060   202,849
Total debt (3)           90,962   87,299   110,921  106,991    86,304
Stockholders'
  equity (4)             49,423   55,473    61,530   68,559    78,670


SELECTED FINANCIAL DATA FOOTNOTE LEGEND
---------------------------------------
1)   Only reflects data for comparable stores.  Comparable stores
  for the current year are those stores which were open for the
  entire period in the immediately preceding year.
2)   Net sales per selling square feet per store is based on
  stores open one full year.
3)   Includes the long-term portion of the capital lease
  obligations and the current portion of long-term debt.
4)   Retained earnings, included in stockholders' equity has been
  accumulated since May 27, 1995.
</TABLE>

<PAGE>

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

     The discussion and analysis included under the caption
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" appears on Page F-13 of this
annual report on Form 10-K.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
          MARKET RISK

     Information with respect to this Item is included under
the caption "Market Risk" on Page F-16 of this annual report
on Form 10-K.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Information with respect to this Item is contained in
the consolidated financial statements indicated on the
indices on Page F-0 of this annual report on Form 10-K.

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

                              NONE
<PAGE>
                           PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The Company's executive officers and Directors, their ages,
positions and years with the Company as of April 2, 2001, are as
follows:
                                                              YEARS
                                                             WITH THE
      NAME               AGE           POSITION               COMPANY
      ----               ---           --------               --------
Michael F. Moorman       58   Chairman of the Board,            36
                              President and Chief
                              Executive Officer

Ronnie W. Palmore        51   Senior Vice President,            28
                              Merchandising
                              and Assistant Secretary

E. Randolph Lail         45   Senior Vice President,            13
                              Finance, Chief Financial
                              Officer, Secretary and
                              Treasurer

Russell A. Lundy II      38   Senior Vice President, Stores     16

Marvin H. Thomas,Jr.     45   Senior Vice President,            19
                              Operations

William C. DeRusha       51   Director                           9

Malcolm S. McDonald      62   Director                           9

Wellford L.Sanders, Jr.  55   Director                           8

Thomas R. Wall, IV       42   Director                           6

Frank T. Nickell         53   Director                           6

     Michael F. Moorman has been Chairman of the Board,
Chief Executive Officer, President and a Director of PHC
Retail since June 9, 1995.  Mr. Moorman has also been
Chairman of the Board and a Director of the Company since
September 1989, Chief Executive Officer of the Company since
May 1989 and President of the Company since June 1988.
Concurrently, Mr. Moorman served as Chief Financial Officer
and Treasurer of the Company from August 1989 to June 1992
and Secretary of the Company from August 1989 to June 1990.
Mr. Moorman has been employed by the Company in various
positions since 1964 including store manager and buyer.  Mr.
Moorman has been a Director of the Company since 1977.

     Ronnie W. Palmore has been Senior Vice President,
Merchandising of  PHC Retail since June 9, 1995 and of the
Company since September 1989 and Assistant Secretary of the
Company since 1988.  Mr. Palmore served as Senior Vice
President, Stores of the Company from June 1988 to August
1989 and has been employed by the Company in various
positions since 1973 including store manager.

     E. Randolph Lail has been Senior Vice President,
Finance, Chief Financial Officer, Secretary and Treasurer of
PHC Retail since June 9, 1995.  Mr. Lail has also been
Senior Vice President, Finance of the Company since June
1993, Chief Financial Officer and Treasurer of the Company
since June 1992 and Secretary of the Company since June
1990.   Mr. Lail served as Vice President, Finance of the
Company from June 1990 to June 1993 and as Controller of the
Company from January 1988 to June 1990.  Mr. Lail is a
Certified Public Accountant and has been employed by the
Company since January 1988.

     Russell A. Lundy II has been Senior Vice President,
Stores of PHC Retail and the Company since June 1999.  Mr.
Lundy served as Vice President, Human Resources of PHC
Retail since June 9, 1995 and of the Company since June
1990.  Mr. Lundy has been employed by the Company in
variance positions since 1983 including store manager.

     Marvin H. Thomas, Jr. has been Senior Vice President,
Operations of PHC Retail since June 9, 1995 and of the
Company since June 1993. Mr. Thomas served as Vice
President, Operations of the Company from June 1990 to June
1993 and Vice President, Merchandise Manager of the Company
from May 1988 to June 1990.  Mr. Thomas has been employed by
the Company in various positions since 1979 including store
manager and buyer.

<PAGE>

     William C. DeRusha has been a Director of PHC Retail
since June 9, 1995 and of the Company since March 1992. Mr.
DeRusha is the former Chairman of the Board and Chief
Executive Officer of Heilig-Meyers Company.

     Malcolm S. McDonald has been a Director of PHC Retail
since June 9, 1995 and of the Company since April 1992. Mr.
McDonald has retired from First Union National Bank
VA/MD/DC.  Mr. McDonald is the former Chairman of the Board
and Chief Executive Officer of Signet Banking Corporation

     Wellford L. Sanders, Jr. has been a Director of PHC
Retail since June 9, 1995 and of the Company since February
1992.  Mr. Sanders is a Managing Director of First Union
Securities, Inc.  Mr. Sanders is a former partner in the law
firm of McGuireWoods, LLP.

     Thomas R. Wall, IV has been a Director of PHC Retail
and the Company since June 9, 1995.  Mr. Wall has been
Managing Director of Kelso & Company since 1990 and prior
thereto a General Partner of Kelso since 1989. Mr. Wall is
also a director of AMF Bowling Inc., Citation Corporation,
Consolidated Vision Group, Inc., iXL Enterprises, Inc., Key
Components, Inc.; Mitchell Supreme Fuel Company, Mosler
Inc., TransDigm, Inc. and 21st Century Newspapers, Inc.

     Frank T. Nickell has been a Director of PHC Retail and
the Company since June 9, 1995.  Mr. Nickell has been
President and a director of Kelso & Company since March 1989
and Chief Executive Officer since September 1997.  March
1989. He is also a director of Blackrock, Inc., Earle M.
Jorgensen Company and The Bear Stearns Companies, Inc.

     Executive officers of Peebles are elected annually and
serve at the discretion of the Board of Directors.

DIRECTORS COMPENSATION

     Mr. DeRusha, Mr. McDonald and Mr. Sanders are paid an
annual retainer of $20,000, payable quarterly in arrears. No
other Director is paid a fee for serving as a Director.  All
Directors are reimbursed for expenses incurred in attending
meetings of the Board of Directors.

AGREEMENTS TO INDEMNIFY

     Peebles has entered into agreements with each of its
Directors and officers of Peebles pursuant to which Peebles
has agreed to indemnify such Director or officer from
claims, liabilities, damages, expenses, losses, costs,
penalties or amounts paid in settlement incurred by such
Director or officer and arising out of his capacity as a
Director, officer, employee and/or agent of the corporation
of which he is a director or officer to the maximum extent
provided by applicable law.  In addition, such Director or
officer shall be entitled to an advance of expenses to the
maximum extent authorized or permitted by law to meet the
obligations indemnified against.  Such agreements also
obligate the Company to purchase and maintain insurance for
the benefit and on behalf of its Directors and officers
insuring against all liabilities that may be incurred by
such director or officer, in or arising out of his capacity
as a director, officer, employee and/or agent of the
Company.

ITEM 11.   EXECUTIVE COMPENSATION

     The following tables set forth a summary of
compensation paid by the Company to its five highest paid
executive officers (the "Named Executives") and during 1998,
1999 and 2000.

<PAGE>
<TABLE>
<CAPTION>
                   SUMMARY COMPENSATION TABLE

                                                          LONG-TERM COMPENSATION
                                                          ----------------------
                                                             AWARDS    PAYOUT
                                                             ------    ------
                                 ANNUAL COMPENSATION         NUMBER OF LONG-TERM
                           --------------------------------   OPTIONS/ INCENTIVE
NAME AND PRINCIPAL                                 OTHER      WARRANTS   PLAN
     POSITION          YEAR    SALARY    BONUS   COMPENSATION  GRANTED   PAYOUT
------------------     ----    ------    -----   ------------ -------- ---------
                                ($)    ($)(1),(2)  ($)  (3)               ($)
<S>                    <C>    <C>       <C>         <C>         <C>      <C>
MICHAEL F. MOORMAN
Chairman of the Board,  2000  $419,247  $287,031    $ ---        ---     $---
President and Chief     1999   382,689   422,428      ---        ---      ---
Executive Officer       1998   327,643   336,119      ---        ---      ---

RONNIE W. PALMORE
Senior Vice President,  2000  $245,124  $ 65,858    $ ---        ---     $---
Merchandising and       1999   212,478    94,734      ---        ---      ---
Assistant Secretary     1998   185,243    65,411      ---        ---      ---

E. RANDOLPH LAIL        2000  $201,151  $ 55,987    $58,988      ---     $---
Senior Vice President,  1999   175,182    87,791      1,244      ---      ---
Finance, CFO, Secretary 1998   153,442    75,041      1,079      ---      ---
and Treasurer

RUSSELL A. LUNDY, II    2000  $154,691  $ 42,398    $26,905      ---     $---
Senior Vice President,  1999   121,666    51,570      6,929      ---      ---
Stores                  1998    91,819    31,020      6,958      ---      ---

MARVIN H. THOMAS, JR.   2000  $155,903  $ 56,467    $37,718      ---     $---
Senior Vice President,  1999   129,847    63,291      1,009      ---      ---
Operations              1998   115,094    39,287        877      ---      ---


(1)  Salary and bonus amounts for 1998, 1999 and 2000 include tax-
     deferred contributions of compensation to the Peebles Inc. 401-K
     Profit Sharing Plan.  Also included in salary amounts for 1998,
     1999 and 2000, and the bonus amounts for 1998, 1999 and  2000,
     are the matching contributions made by the Company on behalf of
     the Named Executives to the Peebles Inc. 401-K Profit Sharing
     Plan.

(2)  Bonus amounts for each of the Named Executives include the
     accrued bonus earned under the Company's annual incentive plans
     for the years shown.

(3)  The amounts shown reflect the current value of the benefit
     to Mr. Lail, Mr. Lundy and Mr. Thomas, respectively, of the
     portion of the premiums paid by the Company with respect to a
     split dollar insurance arrangement.  The benefit was determined
     for each year by calculating the time value of money (including
     the applicable long term federal funds rate) of the premium paid
     by the Company in the years shown ($38,246 for Mr. Lail; $15,809
     for Mr. Lundy and $26,628 for Mr. Thomas per year)
</TABLE>
      OPTION GRANT TABLE.  There were no options granted  by
the Company to the Named Executives during 2000.

<PAGE>

      OPTION EXERCISE TABLE.  The following table sets forth
information concerning the exercise of stock options  during
2000  by each of the Named Executives and the year end value
of unexercised options.

                      OPTIONS EXERCISED IN 2000
                      -------------------------
                                                                  VALUE OF
                                                 NUMBER OF     UNEXERCISED IN
                         SHARES                 UNEXERCISED     MONEY OPTIONS
                        ACQUIRED              OPTIONS AT YEAR    AT YEAR END
NAME AND PRINCIPAL         ON       VALUE     END EXECISABLE/    EXERCISABLE/
   POSITION             EXERCISE   REALIZED   UNEXERCISABLE(2)   UNEXERCISABLE
------------------      --------   --------   ----------------   -------------

 MICHAEL F. MOORMAN        0          $0             0                $0
 Chairman of the Board,
 President and Chief
 Executive Officer

 RONNIE W. PALMORE         0          $0             0                $0
 Senior Vice President,
 Merchandising, Assistant
 Secretary

 E. RANDOLPH LAIL          0          $0             0                $0
 Senior Vice President,
 Finance, Chief Financial
 Officer, Secretary and
 Treasurer

 RUSSELL A. LUNDY, II      0          $0             0                $0
 Senior Vice President,
 Stores

 MARVIN H. THOMAS, JR.     0          $0             0                $0
 Senior Vice President,
 Operations

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

 (1)  There were no stock options exercised by the Named Executives in 2000.
 (2)  There were no unexercised options at year end.

     As of the fiscal year ended February 3, 2001, there were no projected
     long-term incentive payouts.

PENSION PLAN

     The following table shows the annual benefit payable
upon normal retirement at age 65 to persons in specified
earnings and years of service classifications under the
Employee's Retirement Plan of Peebles Inc. ("Plan I").
Effective for the 2000 Plan I year, the Internal Revenue
Code limited the amount of earnings that could be taken into
account for purposes of calculating benefits to $160,000,
and limited the maximum annual benefit which could be paid
from the Plan to any participant to $130,000.  The benefits
shown below do not reflect these limits.

<PAGE>

                                   Years of Service
      Final            ------------------------------------------
   Average Salary        15       20       25       30       35
   --------------        --       --       --       --       --
     $ 75,000........ $11,115  $14,820  $18,525  $22,230  $22,230
      100,000........  15,990   21,320   26,650   31,980   31,980
      125,000........  20,865   27,820   34,775   41,730   41,730
      150,000........  25,740   34,320   42,900   51,480   51,480
      175,000........  30,615   40,820   51,025   61,230   61,230
      200,000........  35,490   47,320   59,150   70,980   70,980
      225,000........  40,365   53,820   67,275   80,730   80,730
      250,000........  45,240   60,320   75,400   90,480   90,480
      300,000........  54,990   73,320   91,650  109,980  109,980
      350,000........  64,740   86,320  107,900  129,480  129,480
      400,000........  74,490   99,320  124,150  148,980  148,980
      450,000........  84,240  112,320  140,400  168,480  168,480

     Benefits under Plan I are based on a designated
percentage of the participant's average earnings for the
participant's five highest years of earnings, weighted
according to years of credited service, and integrated with
Social Security covered compensation.  Earnings are based on
the participant's total taxable wages for the year,
including certain pre-tax contributions to employee benefit
plans, but excluding reimbursements, certain expense
allowances, deferred compensation, welfare and fringe
benefits.  For Plan I purposes, earnings for the Named
Executives are substantially the same as the amounts listed
in the Summary Compensation Table.  Benefits are computed on
a straight life annuity basis.

     Prior to 1998, Plan I covered substantially all
employees.  In 1997, the Board of Directors approved the
adoption of The Employees Retirement Plan II of Peebles Inc.
("Plan II") effective February 1, 1998.  The Plan I benefits
of certain participants were frozen and spun-off to Plan II
and no further benefits would accrue under Plan II.
Further, Plan I and Plan II were closed to new participants
at February 1, 1998.  Plan II was terminated and all Plan II
participant benefits were disbursed by January 30, 1999.

     Mr. Moorman, Mr. Palmore, Mr. Lail, Mr. Lundy II and
Mr. Thomas have no accrued benefits under Plan I.

     The Company maintains a supplemental benefits program
designed to provide certain key executives retirement
benefits.  The Executive Employee Supplemental Retirement
Plan (the "SERP"), maintained for certain designated
executives, includes Mr. Moorman and Mr. Palmore.  The SERP
is a non-qualified retirement plan that provides each
participant with a lump sum benefit based on 60% of the
participant's earnings during the five consecutive calendar
years which produce the highest average reduced by the sum
of the benefits payable to the participant under the Pension
Plan, Executive Employee Benefit Restoration Plan (the
"Restoration Plan") and Social Security.  Benefits under the
SERP are fully vested upon the earliest of the participant's
completion of five years of service with the Company, the
participant's permanent disability or the date on which
there is a change of control of the Company.  The
Restoration Plan is a non-qualified plan designed to provide
supplemental benefits to certain employees, including Mr.
Moorman, whose accrued benefits under the Pension Plan were
transferred to and distributed from the Pension Plan II.
The benefit under the Restoration Plan is payable in a
single lump sum.  A participant's benefits are forfeited
under the SERP and Restoration Plan if his employment is
terminated for cause.

<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Company has a Compensation Committee of the Board
of Directors.  For 2000, the Board of Directors established
compensation for the Company's officers for such year.
Michael F. Moorman, the sole officer or employee of the
Company who is also a member of the Board of Directors, made
recommendations to the Board of Directors concerning
executive compensation but did not otherwise participate in
or vote upon the executive compensation decisions made by
the Board of Directors for such year. Mr. Moorman is not a
member of the Compensation Committee.  No interlocking
relationship currently exists between any member of the
Compensation Committee and any member of any other company's
board of directors or compensation committee, nor did any
such interlocking relationship exist during 2000.

CERTAIN RELATIONSHIPS

     Frank T. Nickell and Thomas R. Wall, IV, members of the
Board of Directors of the Company, are affiliated with Kelso
& Company, which rendered management services to the Company
during 2000 and affiliates of which own substantially all
the common stock of PHC Retail.  From time to time Kelso &
Company has provided financial advice to the Company for
which the Company has reimbursed certain of Kelso &
Company's expenses.

EMPLOYMENT AGREEMENTS

    Mr. Lail, Mr. Lundy and Mr. Thomas participate in split
dollar insurance arrangements with the Company.  The
executive owns, and therefore has a vested interest in, the
cash surrender value of the policy in excess of the
Company's premium investment.  At retirement, the executive
can either use the cash value for retirement income or keep
the death benefit or a combination of the two.  The Company
would recover its cost at retirement.  In the event of a
change in control, the executive would have a
nonforfeitable right to the Company's share of the cash
surrender value of the policy.

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

     All of the outstanding common stock of the Company is
owned by PHC Retail. The following table sets forth certain
information regarding the beneficial ownership of Common
Stock of PHC Retail, as of April 2, 2001, by (a) each person
known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock, (b) each of
the Company's Directors and Named Executives who owns shares
of Common Stock and (c) all Directors and Named Executives
of the Company as a group.  Unless otherwise noted in the
footnotes to the table, the persons named in the table have
sole voting and investing power with respect to all shares
of Common Stock indicated as being beneficially owned by
them.

<PAGE>

<TABLE>
CAPITAL STOCK OF PHC RETAIL

                                                          SHARES OF
                               SHARES OF       PERCENT    NONVOTING PERCENT
                              VOTING COMMON      OF        COMMON     OF
 NAME OF BENEFICIAL OWNER(1)     STOCK          CLASS      STOCK     CLASS
----------------------------     -----          -----      -----     -----
<S>                             <C>             <C>        <C>       <C>
Kelso Investment
  Associates V, L.P. (2)(3)     1,803,693(3)    90.09          0       0
Kelso  Equity
  Partners  V, L.P. (2)(3)         67,973        3.40          0       0
Michael F. Moorman (6)             52,500        2.62          0       0
Ronnie W. Palmore (6)              14,968           *          0       0
E. Randolph Lail (6)                7,800           *          0       0
Marvin H. Thomas, Jr. (6)           6,015           *          0       0
Russell A. Lundy II (6)             3,106           *          0       0
William C. DeRusha                      0           0      2,000    8.17
Malcolm S. McDonald                     0           0      2,000    8.17
Wellford L. Sanders, Jr.                0           0      2,500   10.22
Joseph S. Schuchert (2)(3)      1,871,666(3)    93.49          0       0
Frank T. Nickell   (2)(3)       1,873,848(4)(5) 93.59          0       0
George E. Matelich (2)(3)       1,871,666(3)    93.49          0       0
Thomas R. Wall, IV (2)(3)       1,873,848(4)(5) 93.59          0       0
Michael B. Goldberg (2)(3)      1,871,666(3)    93.49          0       0
David I. Wahrhaftig (2)(3)      1,871,666(3)    93.49          0       0
Frank K. Bynum, Jr. (2)(3)      1,871,666(3)    93.49          0       0
Philip E. Berney  (2)(3)        1,871,666(3)    93.49          0       0

All Directors and Named Executives
  as a group (10 persons)(6)(7) 1,958,237       97.81      6,500   26.56

  * Less than 1 Percent
</TABLE>
 (1) The information as to beneficial ownership is based on
     statements furnished to the Company by the beneficial
     owners.  As used in this table, "beneficial ownership"
     means the sole or shared power to vote, or direct the
     voting of a security, or the sole or shared investment
     power with respect to a security (i.e., the power to
     dispose of , or direct the disposition of).  A person
     is deemed as of any date to have "beneficial
     ownership" of any security that such person has the
     right to acquire within 60 days after such date.  For
     purposes of computing the percentage of outstanding
     shares held by each person named above, any security
     that such person has the right to acquire within 60
     days of the date of calculation is deemed to be
     outstanding but is not deemed to be outstanding for
     purposes  of computing the percentage of any other
     person.
(2)  The business address for such person(s) is C/O Kelso &
     Company, 320 Park Avenue, 24th Floor, New York, New
     York 10022.
(3)  Messrs. Schuchert, Nickell, Matelich, Wall, Goldberg,
     Wahrhaftig, Bynum and Berney may be deemed to share beneficial
     ownership of shares of PHC Common Stock owned of record by Kelso
     Investment Associates V, L.P. ("KIA V") and Kelso Equity Partners
     V, L.P. ("KEP V"), by virtue of their status as general partners
     of such partnerships.  Messrs. Schuchert, Nickell, Matelich,
     Wall, Goldberg, Wahrhaftig, Bynum and Berney share investment and
     voting power with respect to securities owned by other Kelso
     affiliates.  Messrs. Schuchert, Nickell, Matelich, Wall,
     Goldberg, Wahrhaftig, Bynum and Berney disclaim beneficial
     ownership of the shares of PHC Common Stock owned of record by
     KIA V and KEP V and the securities owned by other Kelso
     affiliates.
(4)  Includes 1,848 shares of PHC Common Stock held by trusts of
     which Mr. Nickell is trustee, as to which shares Mr. Nickell
     disclaims beneficial ownership.
(5)  Includes 334 shares of PHC Common Stock held by trusts of
     which Mr. Wall is trustee, as to which shares Mr. Wall disclaims
     beneficial ownership.
(6)  Includes unexercised vested stock options for the purchase
     of PHC Common Stock in the amount of 17,500, 5,500, 4,500, 1,500,
     and 2,874 for Messrs. Moorman, Palmore, Lail, Thomas and Lundy
     II, respectively.

<PAGE>

     ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     See "Item 10. Directors and Executive Officers of the
Registrant" and "Item 11. Executive Compensation" for a
description of certain arrangements with respect to present
and former executive officers and directors of Peebles.

<PAGE>

                             PART IV

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

          (a)  1.   Financial statements.
                    ---------------------

                      Information with respect to this Item is
                    contained in the consolidated financial
                    statements indicated on the indices on page
                    F-0 of this annual report on Form 10-K.

               2.   Financial statement schedules.
                    -----------------------------
                      Schedule II  Valuation and Qualifying
                    Accounts appears in Note J on page F-12 of
                    this annual report on Form 10-K;

                      All other schedules for which provision
                    is made in the applicable accounting
                    regulation of the Securities and Exchange
                    Commission are not required under the
                    related instructions or are inapplicable
                    and therefore have been omitted.

               3.   Exhibits.
                    --------
                      The exhibits listed on the accompanying
                    index to exhibits are filed as part of this
                    annual report on Form 10-K.

          (b)  Reports on Form 8-K.
               -------------------
                      NONE

          (c)  Exhibits.
               --------
    2.1***     Form of Agreement and Plan of Merger dated
               April 3, 1995 among PHC Retail Holding Company, Peebles
               Acquisition Corp. and Peebles Inc., exclusive of
               exhibits and schedules.  The Registrant hereby
               undertakes to furnish to the Commission supplementally
               upon request a copy of any omitted exhibit or schedule.
    3.1+       Form of Amended and Restated Articles of
               Incorporation of Peebles Inc.
    3.2+       Form of Amended and Restated Bylaws of Peebles Inc.
    3.3***     Amendment to Amended and Restated Articles of
               Incorporation dated May 3, 1993
    3.4*+      Amendment to Amended and Restated Bylaws of
               Peebles Inc. dated June 9, 1995.
    3.5*+      Amendment to Amended and Restated
               Articles of Incorporation dated June 9, 1995
   10.1**+     Amended and Restated Credit Agreement,
               dated as of June 29, 1998 by and among Peebles
               Inc., Fleet Bank, N.A., as agent, and the
               financial institutions as parties thereto,
               exclusive of exhibits and schedules.  The
               Registrant hereby undertakes to furnish the
               Commission supplementally upon request a copy of
               any omitted exhibit or schedule.
   10.11*+     Form of Indemnification, Guarantee and
               Contribution Agreement dated as of August 23, 1995 among
               PHC Retail Holding Company, Peebles Inc. and each of the
               directors and officers of Peebles Inc.
     21        Subsidiaries of the Registrant.
     27        Financial Data Schedule

<PAGE>
     ----------------------------
     *           Incorporated by reference from the
                 Registration Statement of PBL and Peebles on Form
                 S-1 (Registration No. 33-27126), which was
                 declared effective by the Commission on July 14,
                 1989.
     +           Incorporated by reference from the Form
                 10-K of the Company for the fiscal year ended
                 February 1, 1992.
    ***          Incorporated by reference from the Form
                 10-K of the Company for the fiscal year ended
                 January 28, 1995.
     *+          Incorporated by reference from the Form 10-K
                 of the Company for the fiscal year ended
                 February 3, 1996.
    **+          Incorporated by reference from Exhibit
                 10.68 to the Company's Quarterly Report on Form
                 10-Q for the quarter ended August 1, 1998.

          (d)  Financial Statement Schedules
               -----------------------------
              Schedule II  Valuation and Qualifying
          Accounts appears in Note J on page F-12 of this
          annual report on Form 10-K.

              All other schedules for which
          provision is made in the applicable accounting
          regulation of the Securities and Exchange Commission
          are not required under the related instructions or
          are inapplicable and therefore have been omitted.

<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.

                 PEEBLES INC.
              ------------------
                 (Registrant)

     By    /s/  Michael F. Moorman          Date:     April 6, 2001
           -----------------------
           Michael F. Moorman, President
           and Chief Executive Officer
           (Principal Executive Officer)

     By   /s/  E. Randolph Lail             Date:     April 6, 2001
          ---------------------
           E. Randolph Lail, Senior Vice President
           Finance, CFO, (Principal Financial
           and Accounting 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.

     By  /s/ Wellford L. Sanders, Jr.       Date:     April 6, 2001
         ----------------------------
           Wellford L. Sanders, Jr., Director

     By  /s/ William C. DeRusha             Date:     April 6, 2001
         ----------------------
           William C. DeRusha, Director

     By  /s/ Malcolm S. McDonald            Date:     April 6, 2001
         -----------------------
           Malcolm S. McDonald, Director

     By  /s/ Frank T. Nickell               Date:     April 6, 2001
         --------------------
           Frank T. Nickell, Director

     By  /s/ Thomas R. Wall                 Date:     April 6, 2001
         ------------------
           Thomas R. Wall, IV, Director

     SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
     PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH
     HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE
     ACT.

<PAGE>

                                                    Exhibit 21
                   Subsidiaries of Registrant

    Name of Subsidiary               Jurisdiction in which organized
------------------------             -------------------------------
 Carlisle Retailers, Inc.                           Ohio
 Ira A. Watson, Co.                               Delaware


<PAGE>


AUDITED CONSOLIDATED FINANCIAL STATEMENTS

PEEBLES INC. AND SUBSIDIARIES

FEBRUARY 3, 2001



Report of Independent Auditors.......................    F-1

Consolidated Balance Sheets..........................    F-2

Consolidated Statements of Income....................    F-3

Consolidated Statements of Cash Flows................    F-4

Notes to Consolidated Financial Statements...........    F-5

Management's Discussion and Analysis of Financial
Condition and Results of Operations..... ............    F-13


<PAGE>



REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


Board of Directors
Peebles Inc.


We have audited the accompanying consolidated balance sheets of
Peebles Inc. and subsidiaries as of February 3, 2001 and January 29,
2000, and the related consolidated statements of income and cash flows
for each of the three fiscal years in the period ended February 3,
2001.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Peebles Inc. and subsidiaries at February 3,
2001 and January 29, 2000, and the consolidated results of their
operations and their cash flows for each of the three fiscal years in
the period ended February 3, 2001 in conformity with accounting
principles generally accepted in the United States.



                                      /s/  Ernst & Young LLP
                                           -----------------

Richmond, Virginia
March 9, 2001


                               F-1

<PAGE>

CONSOLIDATED BALANCE SHEETS
PEEBLES INC. AND SUBSIDIARIES
(in thousands, except shares and per share amounts)

                                            FEBRUARY 3,   JANUARY 29,
                                               2001          2000
                                               ----          ----
ASSETS
CURRENT ASSETS
 Cash                                       $  1,686      $   1,008

 Accounts receivable, net                     37,340         37,949
 Merchandise inventories                      70,580         70,181
 Prepaid expenses                              1,746          1,552
 Income taxes receivable                          --          1,201
 Other                                           147          2,670
                                             -------        -------
           TOTAL CURRENT ASSETS              111,499        114,561


PROPERTY AND EQUIPMENT
Fixtures and equipment                        78,245         73,250
Land and building                             14,453         14,593
Leasehold improvements                         1,669          1,727
                                             -------        -------
                                              94,367         89,570
Accumulated depreciation and amortization     44,235         36,507
                                             -------        -------
                                              50,132         53,063

OTHER ASSETS
 Excess of cost over net assets acquired,
  net                                         37,140         39,100
 Deferred financing costs, net                 1,018          1,895
 Sundry                                        3,060          2,441
                                             -------        -------
                                              41,218         43,436
                                             -------        -------
                                            $202,849       $211,060
                                             =======        =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 Accounts payable                           $ 15,162        $13,638
 Accrued compensation and other expenses       7,226          7,268
 Deferred income taxes                         1,711          2,139
 Current maturities of long-term debt         13,471          9,439
 Other                                         3,913          3,582
                                             -------        -------
        TOTAL CURRENT LIABILITIES             41,483         36,066
LONG-TERM DEBT                                72,334         96,938
LONG-TERM CAPITAL LEASE OBLIGATIONS              499            614
DEFERRED INCOME TAXES                          9,863          8,883
STOCKHOLDERS' EQUITY
Preferred stock--no par value, authorized         --             --
   1,000,000 shares, none issued or
   outstanding
Common stock--par value $.10 per share,
   authorized 5,000,000 shares, 1,000
   issued and outstanding                          1              1
Additional capital                            59,307         59,307
Retained earnings:  accumulated
   from May 27,1995                           19,362          9,251
                                             -------        -------
                                              78,670         68,559
                                             -------        -------
                                            $202,849       $211,060
                                             =======        =======
See notes to consolidated financial
statements.

                               F-2

<PAGE>

CONSOLIDATED STATEMENTS OF INCOME
PEEBLES INC. AND SUBSIDIARIES
(in thousands, except shares and per share amounts)


                                       FISCAL YEARS ENDED
                                       ------------------
                                  FEBRUARY    JANUARY    JANUARY
                                     3,          29,        30,
                                    2001        2000       1999
                                    ----        ----       ----
NET SALES                        $306,608     $300,839   $265,215

COSTS AND EXPENSES
Cost of sales                     181,681      178,657    159,067
Selling, general and
Administrative expenses            85,615       86,139     76,402
Depreciation and amortization      10,534        9,926      8,057
Asset impairment                       --        2,182         --
                                  -------      -------    -------
OPERATING INCOME                   28,777       23,935     21,689

OTHER INCOME                           94           --          9

INTEREST EXPENSE                   11,133       11,521     10,804
                                  -------      -------    -------


INCOME BEFORE INCOME TAXES         17,738       12,414     10,894

INCOME TAXES (BENEFIT)
Current                             7,075        3,786      5,031
Deferred                              552        1,599      (194)
                                  -------      -------    -------
                                    7,627        5,385      4,837

NET INCOME                       $ 10,111    $  7,029    $  6,057
                                  =======     =======     =======

RETAINED EARNINGS (DEFICIT)
BEGINNING OF PERIOD                 9,251        2,222    (3,835)
                                  -------      -------   -------

RETAINED EARNINGS
END OF PERIOD                    $ 19,362     $  9,251   $  2,222

NET INCOME PER SHARE             $ 10,111     $  7,029   $  6,050
                                  =======      =======    =======

Weighted average common stock
   outstanding                      1,000        1,000      1,000
                                  =======      =======    =======

See notes to consolidated financial statements.
                               F-3

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
PEEBLES INC. AND SUBSIDIARIES
(in thousands)
                                        FISCAL YEARS ENDED
                                   -----------------------------
                                   FEBRUARY    JANUARY   JANUARY
                                       3,         29,       30,
                                     2001        2000      1999
                                     ----        ----      ----
OPERATING ACTIVITIES
Net income                        $  10,111   $  7,029  $  6,057
Adjustments to reconcile net
  income to net cash provided
  by operating activities:
Depreciation                          7,758      7,305     5,953
Amortization                          3,747      4,015     3,415
Deferred income taxes                   552      1,599     (194)
Provision for doubtful accounts       3,320      1,663     1,330
LIFO/market reserve adjustment        (769)      (371)        51
Asset impairment                         --      2,182        --
Changes in operating assets and
  liabilities net of effects from
   acquisition adjustments:
Accounts receivable                 (2,711)    (6,217)   (1,759)
Merchandise inventories                 370      1,923   (3,498)
Accounts payable                      1,524    (4,721)     3,452
Other assets and liabilities          2,180      (546)     (984)
                                    -------    -------   -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES                 26,082     13,861    13,823
               ---
INVESTING ACTIVITIES
Acquisition of Ira A. Watson Co.         --         --   (4,451)
Purchase of property and            (4,797)    (9,151)  (13,394)
equipment
Other                                  (35)      (217)     (204)
                                   -------     -------  -------

NET CASH USED IN INVESTING          (4,832)    (9,368)  (18,049)
ACTIVITIES

FINANCING ACTIVITIES
Proceeds from revolving line of
Credit and long-term debt           429,643    420,528   414,155
Reduction in revolving line of
Credit and long-term debt         (450,215)  (424,077) (414,789)
Proceeds from 1998 Credit Agreement-
acquisition of Ira A. Watson Co.         --         --    24,000
Retirement of Ira A. Watson Co.
pre-acquisition bank debt and
trade liabilities                        --         --  (17,895)
Financing fees -  1998 Credit
Agreement                                --         --   (1,613)
                                    -------    -------   -------

NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES               (20,572)    (3,549)     3,858
                                   -------    -------    -------

INCREASE (DECREASE) IN CASH AND
CASH
EQUIVALENTS                             678        944     (368)

Cash beginning of period              1,008         64       432
                                    -------    -------   -------

CASH END OF PERIOD                 $  1,686   $  1,008  $     64
                                    =======    =======   =======

See notes to consolidated
Financial statements.

                               F-4

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PEEBLES INC. AND SUBSIDIARIES
February 3, 2001

(in thousands, except shares and per share amounts)

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS:  Peebles Inc. and subsidiaries ("Peebles"
or the "Company") operate retail department stores offering
predominately fashion merchandise for the entire family and
selected home accessories.  At February 3, 2001, the Company was
operating 124 stores located primarily in small and medium sized
communities which typically do not have a mall-based department
store.  The stores serve communities in 15 states, located
primarily in the Southeast and Mid-Atlantic.

ORGANIZATION AND BASIS OF FINANCIAL STATEMENT PRESENTATION:
Consolidation:  Peebles Inc. is a wholly owned subsidiary of PHC
Retail Holding Company ("PHC Retail"). PHC Retail, a closely held
company, has no significant assets other than the entire equity
interest of Peebles Inc. common stock, $.10 par value (the
"Common Stock").  The consolidated financial statements include
the accounts of Peebles Inc. and its wholly owned subsidiaries,
Carlisle Retailers, Inc. ("Carlisle's") and Ira A. Watson Co.
("Watson's").  All significant intercompany balances and
transactions have been eliminated.

FISCAL YEAR:  The Company's fiscal year ends on the Saturday
nearest January 31.  Fiscal years 2000, 1999 and 1998 ended on
February 3, 2001, January 29, 2000 and January 30, 1999,
respectively.  Results of operations consisted of fifty-three
weeks in 2000, and fifty-two weeks in 1999 and 1998.  References
to years relate to fiscal years rather than calendar years.
Certain amounts in the 1999 and 1998 consolidated financial
statements have been reclassified to conform to the 2000
presentation.

USE OF ESTIMATIES:  The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes.  Actual results could differ from those estimates.

REVENUE:  Retail sales are of merchandise.  "Net Sales" as shown
are net of actual returns for the period and exclude all taxes.
Revenue from in-store services and finance charges on credit
balances are recorded as a reduction to selling, general and
administrative expenses.

INCOME TAXES:  Deferred income taxes are provided for temporary
differences between income and expense for financial reporting
purposes and for income tax purposes.

NET INCOME PER SHARE:  Net income per share is based on the
weighted-average number of shares outstanding.

CASH AND CASH EQUIVALENTS:  Peebles considers all highly liquid
investments maturing within three months of purchase to be cash
equivalents.  There were no cash equivalents at February 3, 2001
or January 29, 2000.

MERCHANDISE INVENTORIES: Merchandise inventories are accounted
for by the retail inventory method applied on a last in, first
out ("LIFO") basis.

PROPERTY AND EQUIPMENT:  Property and equipment is stated on the
basis of cost.  Depreciation of property and equipment is
provided primarily by the straight-line method over the estimated
useful lives of the related assets, generally 7 to 10 years for
fixtures and equipment and 20 years for buildings.  The cost of
leasehold improvements is amortized over the shorter of the
economic lives or the terms of the leases by the straight-line
method. Amortization of buildings under capital leases is
computed by the straight-line method over the lease term and is
included in depreciation and amortization expense.

F-5

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC. AND SUBSIDIARIES

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

STORE OPENING COSTS:  Store opening costs are charged to selling,
general and administrative expenses as incurred.

ADVERTISING COSTS:  Advertising costs, charged to selling,
general and administrative expenses as incurred, were $6,707,
$8,015 and $6,462 for 2000, 1999 and 1998, respectively.

LONG-LIVED ASSETS:  The Company periodically reviews the carrying
value of long-lived assets to determine if an impairment has
occurred.  The primary indicators of impairment are, but not
limited to, significant changes in competition or demographics,
recent historical operating profitability, projected
profitability and the related cash flows of each.  Projections
are based on management's best estimates of future performance.

EXCESS OF COST OVER NET ASSETS ACQUIRED:  The excess of cost over
net assets acquired ("Goodwill") is being amortized on a straight-
line basis over a twenty-five year period.  Goodwill amortization
expense for 2000, 1999 and 1998 was $1,960, $1,917 and $1,796,
respectively.  Accumulated amortization was $10,817 and $8,857 at
February 3, 2001 and January 29, 2000, respectively.

DEFERRED FINANCING COSTS:  Deferred financing costs are amortized
by the interest method over a period consistent with the related
financing.  Amortization expense of $877, $1,394 and $1,294, is
included in interest expense for 2000, 1999 and 1998,
respectively.  Accumulated amortization at February 3, 2001 and
January 29, 2000 was $5,842 and $4,965, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS:  The carrying value of the
Company's customer receivables, accounts payable and long-term
debt approximate fair value.

ACCOUNTING PRONOUNCEMENTS:  The Company is subject to the
provisions of Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements".  SAB 101 did not have a
material impact on the Company's consolidated financial
statements.  The Company will be subject to the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Financial Instruments and Hedging
Activities", as amended by SFAS No. 138, effective February 4,
2001.  SFAS No. 133 and SFAS No. 138 are not expected to impact
the Company's consolidated financial statements.

NOTE B-ACQUISITIONS OF WATSON'S

The Watson Merger:  On June 29, 1998, Peebles Inc. acquired the
Ira A. Watson Co. ("Watson's") for a cash purchase price of
$4,451.  The purchase method of accounting was used to allocate
the purchase price.  The excess of cost over net assets acquired,
$6,102, is being amortized over a twenty-five year period
beginning June 29, 1998.

NOTE C-ACCOUNTS RECEIVABLE

Accounts receivable are shown net of $2,400 and $1,800,
representing the allowance for uncollectible accounts at February
3, 2001 and January 29, 2000, respectively.  The provision for
doubtful accounts was $3,320, $1,663 and $1,330, for 2000, 1999
and 1998, respectively.  Finance charges on credit sales,
included as a reduction of selling, general and administrative
expenses, aggregated $6,106, $5,416 and $5,103 for 2000, 1999 and
1998, respectively.

As a service to its customers, the Company offers credit through
the use of its own charge card and certain major credit cards.
The Peebles' customer usually resides in the local community
immediately surrounding the store location.  Peebles stores serve
these local customers in 15 states:  Virginia, Tennessee, North
Carolina, Maryland, Kentucky, West Virginia, Alabama,
Pennsylvania, South Carolina, Ohio, Delaware, New York, Indiana,
New Jersey and Missouri. The Company does not require collateral
from its customers.
                               F-6

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC. AND SUBSIDIARIES


NOTE D-MERCHANDISE INVENTORIES

Merchandise inventories are accounted for by the retail inventory
method applied on a last-in, first-out ("LIFO") basis.  In
connection with an acquisition of the Company in May 1995
accounted for using the purchase method, the then existing LIFO
reserve was eliminated and a new LIFO base year was established
which included an adjustment to fair value (the "Fair Value
Adjustment").  The "LIFO/Market Reserve" adjusts inventory to the
lower of LIFO cost or market.

Merchandise inventories consisted of the following:
                             February 3,    January 29,
                                2001           2000
                                ----           ----

 Merchandise inventories at
  FIFO cost                   $ 63,366       $ 63,736
 Fair Value Adjustment           7,436          7,436
 LIFO/Market Reserve             (222)          (991)
                               -------        -------

 Merchandise inventories at
  lower of cost or market     $ 70,580       $ 70,181
                               =======        =======


NOTE E-ASSET IMPAIRMENT

In 1999, the Company determined that an investment in a co-
operative buying office, included in "Sundry" on the consolidated
balance sheets in prior years, no longer had any economic fair
value.  The resulting impairment, representing the Company's
entire investment in the buying office, reduced both 1999
operating income and income before income taxes by $2,182, and
reduced current income taxes by $866.

NOTE F-LONG-TERM DEBT

Long-term debt consisted of the following:

                                 February 3,   January 29,
                                    2001           2000
                                    ----           ----

   Senior Revolving Facility    $  26,145      $  34,000
   Senior Term Note A               5,988          9,750
   Senior Term Note B              53,372         58,950
   Swingline Facility                  --          3,277
   Other                              300            400
                                  -------        -------
                                   85,805        106,377
   Less current maturities:
      Scheduled principal
       payments                     3,700          3,700
      Excess Cash Flow Prepayment
       Amount                       9,771          5,739
                                  -------        -------
   Total current maturities        13,471          9,439
                                  -------        -------

   Long-term debt               $  72,334      $  96,938
                                 ========       ========

The Company has a credit facility (the "Credit Agreement"), which
provides a Senior Term Facility, a Senior Revolving Facility, and
a Swingline Facility.  The Credit Agreement is secured by a first
priority security interest in substantially all the personal and
real property of Peebles.  Restrictive covenants limit the
payment of cash dividends in any fiscal year.
                               F-7

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC. AND SUBSIDIARIES


NOTE F-LONG-TERM DEBT-Continued

The Senior Term Facility includes two notes, Senior Term Note A
and Senior Term Note B.  Senior Term Note A and Senior Term Note
B accrue interest quarterly in arrears at a LIBOR based rate
which is expected to vary 25 to 50 basis points, dependent
primarily on the Company's operating performance in relation to
outstanding debt at the end of each fiscal quarter.  Senior Term
Note A and Senior Term Note B currently bear interest at LIBOR
plus 2.25% and LIBOR plus 2.75%, respectively.  Scheduled
principal payments are payable quarterly in arrears.  Senior Term
Note A and Senior Term Note B mature April 30, 2003 and 2004,
respectively.

The total amount available under the Senior Revolving Facility
(the "Revolver") and the Swingline Facility is determined by a
defined asset based formula with maximum borrowings limited to
$75,000, less outstanding amounts under letters of credit.  At
February 3, 2001, the total amount available to borrow was
$68,414, of which $26,145 was in use.  The Revolver matures on
April 30, 2003 and has no specific paydown provisions. The
Company pays a fee of 1/2 of 1% per annum on any unused portion
of the Revolver.  The Revolver currently bears interest at LIBOR
plus 2.25%.

Loans under the Swingline Facility are drawn and repaid daily
based on the operating activity of the Company.  Aggregate
amounts outstanding under the Swingline Facility cannot exceed $5
million.  Excess borrowings or funding outside these amounts
revert to the Revolver.  The Swingline Facility currently bears
interest at prime plus 1.00% and has no LIBOR conversion option.

The Credit Agreement requires that 75% of annual excess cash
flow, as defined by the Credit Agreement, is used to reduce
borrowings under the Senior Term Facility as an excess cash flow
("ECF") prepayment amount.  The ECF prepayment amount for 2000,
$9,771, is payable at the end of the first fiscal quarter of 2001
and therefore has been classified as a current maturity at
February 3, 2001.  The 1999 ECF prepayment amount, $5,739, was
paid in 2000.  The ECF prepayments are funded through the
Revolver and reduce Senior Term Note A and Senior Term Note B
ratably.

The Company had commitments under letters of credit of $1,719 and
$5,021 at February 3, 2001 and January 29, 2000, respectively.
The letters of credit, issued by a bank, are primarily to secure
international shipments of merchandise.

The Company made cash interest payments of $10,266, $9,952, and
$8,562 for 2000, 1999 and 1998, respectively.

Aggregate scheduled principal payments, exclusive of any ECF
prepayments, on the long-term debt are as follows:  2001 --
$3,700; 2002 -- $2,702; 2003 -- $26,845; 2004 -- $42,787;
thereafter -- $0.

NOTE G-LEASES

The Company leases substantially all of its store locations under
capital and operating leases with initial terms ranging from 1 to
25 years and renewal options of 1 to 10 years expiring at various
dates  through 2052.  Total rental expense under operating leases
was as follows:
                     2000       1999      1998
                     ----       ----      ----

   Minimum         $15,088    $14,924    $12,141
   Contingent          273        392        363
                   -------    -------    -------
                   $15,361    $15,316    $12,504

Contingent rentals are based upon a percentage of annual sales in
excess of specified amounts.
                               F-8

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC. AND SUBSIDIARIES


NOTE G-LEASES-Continued

Future minimum lease payments under capital leases and
noncancellable operating leases at February 1, 2001 were as
follows:

                                  Capital   Operating
   Fiscal Year                    Leases     Leases
   -----------                    -------   ---------

   2001                           $  180    $ 13,146
   2002                              180      12,005
   2003                              181      10,521
   2004                              181       9,183
   2005                               60       7,974
   Thereafter                          0      43,392
                                 -------     -------
   Total minimum lease payments      782    $ 96,221
   Less:  amounts representing
     interest                      (168)
                                 -------
   Present value of net minimum
   Lease payments, including
     current maturities of $283,
     with interest rates ranging
      from 12.0% to 17.8%        $   614
                                 =======


NOTE H-EMPLOYEE BENEFIT PLANS

The Company sponsors one defined benefit pension plan, The
Employees Retirement Plan of Peebles Inc. (the "Plan"), and
several Supplemental Benefits Programs.  The Plan covers certain
participants who in 1997 had reached certain age and years of
service requirements.  The Plan was closed to new participants at
February 1, 1998.  The Supplemental Benefits Programs provide
certain key executives supplemental retirement income equal to
60% of final average compensation.  The Company's funding policy
for all plans is to make minimum annual contributions required by
applicable regulations.

The following information relative to the above plans is
disclosed in accordance with the requirements of SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement
Benefits".
                               2000         1999
                               ----         ----
   CHANGE IN BENEFIT
   OBLIGATION:
   Benefit obligation at
      beginning of year      $ 6,336     $  5,686
   Service cost                  204          157
   Interest cost                 484          379
   Plan Amendments                --           91
   Actuarial loss              1,066          583
   Benefit payments             (522)       (560)
                             -------      -------
   Benefit obligation at
   end of year               $ 7,568     $  6,336
                              ======      =======

   CHANGE IN PLAN ASSETS:
   Fair value of plan
      assets at beginning
      of year                $ 5,083     $  4,986
   Actual return on plan
      assets                     146          629
   Employer contribution          --           28
   Benefit payments             (522)       (560)
                             -------      -------
   Fair value of plan
      assets at end of year  $ 4,707     $  5,083
                              ======      =======

                               F-9

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC. AND SUBSIDIARIES


NOTE H-EMPLOYEE BENEFIT PLANS-Continued

                               2000        1999
                               ----        ----
   FUNDED STATUS:
   Funded status             $(2,861)    $(1,254)
   Unrecognized actuarial
      loss                     1,494         148
   Unrecognized prior
      service cost               492         562
                              ------      ------
   Accrued pension
      liability               $ (875)    $  (544)
                              ======     =======


   COMPONENTS OF NET
   PERIODIC PENSION COST:
   Service cost               $   204     $   157
   Interest cost                  484         379
   Expected return on plan
      assets                     (427)       (422)
   Prior service cost
      recognized                   70          70
   Net periodic pension
      cost                    $   331     $   184
                              =======     =======

   WEIGHTED AVERAGE
   ASSUMPTIONS
   AS OF MEASUREMENT DATE:
   Discount rate               7.50%        8.00%
   Expected return on plan
      assets                   9.00%        9.00%
   Rate of compensation
      increase                 5.00%        5.00%

The projected benefit obligation, accumulated benefit obligation,
and fair value of plan assets for the Supplemental Benefits
Program with accumulated benefit obligations in excess of plan
assets were $3,511, $1,499 and $0, respectively, as of February
3, 2001 and $2,432, $970 and $0, respectively, as of January 29,
2000.

The Peebles Inc. 401 (k) Profit Sharing Plan: The Company
maintains a qualified profit sharing and retirement savings plan,
which under Section 401 (k) of the Internal Revenue Code, allows
tax deferred contributions from eligible employees of up to 12%
of their annual compensation.  The Company matches employee
contributions up to 50% of an employee's first 6% of eligible
compensation.  The Company's matching contributions totaled $363,
$325 and $260 in 2000, 1999 and 1998, respectively.

NOTE I - INCOME TAXES

The provisions for income taxes consisted of the following:
                      2000          1999       1998
                      ----          ----       ----

 Current:  Federal  $ 5,926       $ 3,161    $ 4,201
           State      1,149           625        830

 Deferred: Federal      460         1,335      (162)
           State         92           264       (32)
                     ------        ------     ------
                    $ 7,627       $ 5,385    $ 4,837
                     ======        ======     ======

Income taxes differ from the amounts computed by applying the
applicable federal statutory rates due to the following:
                              F-10

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC. AND SUBSIDIARIES

NOTE I - INCOME TAXES--Continued
                                 2000       1999     1998
                                 ----       ----     ----

 Taxes at the federal
    Statutory rate              $6,208     $4,345   $3,813
 Increases (decreases):
 State income taxes, net of
    federal tax                    806        581      526
 Amortization of Goodwill          544        531      531
 Other                              69       (72)     (33)
                                 -----      -----    -----

                                $7,627     $5,385   $4,837
                                 =====      =====    =====

At February 3, 2001, the Company has net operating loss
carryforwards of approximately $2,900 for income tax purposes,
which expire in 2010.

Significant components of deferred tax liabilities and assets are
as follows:


                                February 3,     January 29,
                                   2001            2000
                                   ----            ----

  Deferred tax liabilities:
  Inventory valuation           $  1,883        $  1,707
  Depreciation and amortization   11,447          10,658
  Accounts receivable valuation      389             779
  Other                              359             313
                                 -------         -------
                                  14,078          13,457
  Deferred tax assets:
  Doubtful accounts                 (945)          (709)
  Net operating loss
     carryforwards                (1,150)        (1,393)
  Other                             (409)          (333)
                                 -------         -------
                                  (2,504)        (2,435)
                                 --------        -------
  Net deferred tax liabilities   $ 11,574       $ 11,022
                                 ========        =======

Peebles made cash income tax payments of $5,650, $5,316 and
$5,369 for 2000, 1999 and 1998, respectively.

NOTE J - VALUATION AND QUALIFYING ACCOUNTS

Activity related to valuation and qualifying accounts is as
follows:
                                  Allowance for     Net LIFO/
                                     Doubtful         Market
                                     Accounts        Reserve
                                   -----------      ---------

BALANCE JANUARY 31, 1998            $ 1,400          $  703
Charges to expense                    1,330              51
Increase due to acquisition
   of Watson's                          300             608
Deductions - net write-off of
   uncollectible accounts           (1,330)              --
                                    -------          ------
BALANCE JANUARY 30, 1999              1,700           1,362
Charges (credits) to expense          1,663           (371)
Deductions - net write-off of
   uncollectible accounts           (1,563)              --
BALANCE JANUARY 29, 2000              1,800             991
                                     ------          ------
Charges (credits) to expense          3,320           (769)
Deductions - net write-off of
   uncollectible accounts           (2,720)              --
                                     ------          ------
BALANCE FEBRUARY 3, 2001            $ 2,400          $  222
                                     ======          ======

                              F-11
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC. AND SUBSIDIARIES


NOTE K - QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
 (dollars in thousands)
                                FISCAL QUARTER
              --------------------------------------------------------------
                    FIRST          SECOND          THIRD           FOURTH
                2000    1999    2000    1999    2000    1999    2000    1999
                ----    ----    ----    ----    ----    ----    ----    ----
<S>           <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Net Sales     $63,363 $64,422 $71,422 $70,537 $71,992 $69,723 $99,716 $96,147

Cost of Sales  38,171  39,063  42,906  41,228  41,626  41,915  58,978  56,451

Gross Margin   25,192  25,359  28,631  29,319  30,366  27,808  40,738  39,696

Operating
   Income       3,663   3,517   5,340   5,876   5,650   3,520  14,124  11,022

Net Income        482     427   1,357   1,711   1,565     360   6,707   4,531
                =====   =====   =====   =====   =====   =====  ======  ======
Net Income
   Per Share   $  482  $  427 $ 1,357 $ 1,711 $ 1,565  $  360 $ 6,707 $ 4,531
                =====   =====   =====   =====   =====   =====  ======  ======

</TABLE>
                              F-12

<PAGE>

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

RESULTS OF OPERATIONS

Peebles operates specialty department stores offering
predominately fashion merchandise for the entire family and other
selected home accessories to small and medium sized communities
that do not typically have a mall-based department store.  At
February 3, 2001, the Company operated 124 stores in 15 states,
located primarily in the Southeast and Mid-Atlantic regions.  The
Company defines a comparable store as having operations for the
entire twelve-month period in both the current and previous
fiscal year.  For fiscal 2000, 1999 and 1998, the Company had
117, 84 and 77 comparable stores, respectively.

Consolidated net sales and results of consolidated operations of
the Company, expressed as percentages of net sales, are presented
below for the 2000, 1999 and 1998 fiscal years.

    (dollars in thousands)       2000      1999      1998
                                 ----      ----      ----
Net sales                      $306,608  $300,839  $265,215
   increase                        1.9%     13.4%     21.8%

Comparable stores % increase
In sales:                           .3%      1.3%      0.9%
Total stores in operation at
   period end                      124       121       117

Operations as a Percentage of
          Net Sales:
-----------------------------
Cost of sales                     59.3%     59.4%     60.0%
Selling, general &
Administrative expenses           27.9       28.6      28.8
Depreciation and amortization      3.4        3.3       3.0
Asset impairment                    --         .7        --
                                 -----      -----     -----
   OPERATING INCOME                9.4        8.0       8.2

Interest expense                   3.6        3.8       4.1
Provision for income taxes         2.5        1.9       1.8
                                 -----      -----     -----
Net Income                         3.3%      2.3%      2.3%
                                 =====      =====     =====

Net sales increased $5,769, or 1.9%, comparing the 53-week
current year to the 52-week prior year.  Comparing the 52-
week period ended January 27, 2001 to the 52-week period
ended January 29, 2000, net sales increased $1,975, or .7%.
New store growth accounted for the increase in both
comparisons.  The Company opened four new stores in 2000 and
closed one marginally profitable store in January 2001.
Three of the new stores were opened in the third quarter and
one in the fourth.  In addition, net sales benefited from a
full year of operations at five new store locations opened
in 1999.

Net sales at comparable stores increased .3% in the 53-week
versus 52-week comparison and declined .9% in comparing the
52-week periods.  Comparable store net sales increases
(decreases) by fiscal quarter as a percentage of the prior
year comparable quarter, were as follows for the last two
fiscal years:

                       Fiscal Quarter
           ------------------------------------
                                                 Total
           First    Second    Third    Fourth     Year
           -----    ------    -----    ------    -----
2000 vs.
  1999    (3.6%)      1.0%     1.5%     2.7%       .3%
1999 vs.
  1998    (2.6%)      3.6%     0.4%     3.2%      1.3%


Comparable store net sales continued to benefit from the
overall strength of consumer demand for soft apparel.  In
comparing fiscal quarters from one year to the next,
unseasonable weather variations have influenced "buy now,
wear now" consumer demand.  Weather related variations,
however, have not been considered significant to net sales
in total for any fiscal year.

<PAGE>

In comparing 2000 to 1999, the decline noted in the first
quarter was primarily a result of Mother's Day falling two
weeks later in 2000 than 1999, coupled with unseasonably
cold weather in the spring.  After sixteen fiscal weeks, the
weather had warmed and comparable store sales were down only
 .9%.  During June and July comparable store sales benefited
from strong weeks around Father's Day and early summer
clearance.  For the third consecutive year, severely hot
weather through August pushed Back-to-School demand into
September and early October.  The Holiday season featured
five weekends between Thanksgiving and Christmas, which made
meaningful comparisons difficult, but net sales strength was
noted immediately after Thanksgiving, and again as Christmas
drew near.

Cost of sales as a percentage of net sales were 59.3%, 59.4% and
60.0%, in 2000, 1999 and 1998, respectively.  The improvement
results from consistent gross margin percentages at comparable
stores, and continued improvement in the gross margins at new and
acquired stores.  New and acquired stores typically run a higher
cost of sales percentage relative to mature stores, especially
those in markets new to the Company, due to a stronger
promotional effort and lack of comparable sales history.  After
approximately 24 to 36 months of operation, a new location
generally attains the Company's mature store average cost of
sales.  A net 33 new and acquired store locations were opened
during 1998, versus only 5 in 1999 and a net 3 in 2000.  Overall,
the Company's commitment to a less promotional, value priced,
merchandise strategy has favorably influenced cost of sales
during periods of inconsistent consumer demand and significant
store growth.

Selling, general and administrative ("SG&A") expenses, exclusive
of depreciation and amortization, were 27.9%, 28.6% and 28.8% of
net sales in 2000, 1999 and 1998, respectively.  Similar to the
impact on cost of sales described above, new and acquired stores
typically have a higher expense structure than mature stores for
the first 12 to 18 months after opening as advertising and
payroll expenses are planned at a higher percentage of sales to
achieve a market presence.  In addition, new stores frequently
have higher occupancy costs than mature stores.  In 1997, when
the Company was operating 84 stores instead of 124 and had one
distribution center instead of two, SG&A expenses were 27.7% of
net sales.  The allowance for uncollectible accounts was
increased $600, $100 and $300 in 2000, 1999 and 1998,
respectively.

Depreciation and amortization expense as a percentage of net
sales were 3.4%, 3.3% and 3.0% in 2000, 1999 and 1998,
respectively.   Significant capital expenditures required during
the 12 to 18 month of significant store growth, beginning June
1998, were the primary reason depreciation expense has increased
relative to net sales.

The asset impairment as a percentage of 1999 net sales was .7%,
or $2,182.  The asset impairment represented the Company's entire
investment in a co-operative buying office (the "Co-Operative").
The Company had been a member of the Co-Operative, and therefore
had an investment in it, for well over a decade.  Purchases
through the Co-Operative, primarily imported merchandise in
support of the Company's private label program, totaled
approximately 7% of 1999 purchases.  The Company had no
disruption in the merchandise flow as the Co-Operative was
dissolved in the third fiscal quarter of 2000.

As a result of the factors discussed above, operating income in
2000, 1999 and 1998 as a percentage of total net sales was 9.4%,
8.0% and 8.2%, respectively.

Interest expense as a percentage of net sales was 3.6%, 3.8% and
4.1%, for 2000, 1999 and 1998, respectively.  In June 1998,
$24,000 was added to Senior Term Notes A and B to consummate the
Watson Merger.  As a result, interest expense increased relative
to net sales in 1998.  In both 1999 and 2000, profitable
operations resulted in lower average borrowings, and interest
expense declined relative to net sales.  In 2000 moderating
interest rates also resulted in a decrease in interest expense
dollars.

Total income taxes as a percentage of net sales were 2.5%, 1.9%
and 1.8% in 2000, 1999 and 1998, respectively.  The effective tax
rate for 2000, 1999 and 1998 was 43.0%, 43.4% and 44.4%,
respectively.  The effective tax rate in all three fiscal years
is higher than statutory rates because of non-deductible
amortization of intangible assets.

<PAGE>

As a result of the above factors, the Company had net income as a
percentage of net sales of 3.3%, 2.3% and 2.3% in 2000, 1999 and
1998 respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash requirements are for working capital
needs and for capital expenditures associated with new stores and
the remodeling of existing stores.  The Company's primary sources
of funds are cash flow from continuing operations, borrowings
under the Credit Agreement and trade accounts payable.  The
Company's inventory levels typically build throughout the fall,
peaking during the Christmas selling season, while accounts
receivable peak during December and decrease during the first
quarter.  Capital expenditures typically occur evenly throughout
the first three quarters of each year.

The Company's operating activities provided net cash of $26,082,
$13,861 and $13,823 in 2000, 1999 and 1998.  Profitable
operations and greater use of vendor financing accounted for the
majority of the increase in 2000.  In 1999, as the Company
transitioned from the use of the co-operative buying service for
spring 2000 merchandise purchases, cash flow was temporarily
affected by certain deposits and other current assets which were
realized in 2000.  Working capital decreased from $78,495 at
January 29, 2000, to $70,016 at February 3, 2001, primarily as a
result of this reduction in other current assets and as well as
the inclusion of the ECF Prepayment in current maturities of long-
term debt.  The ECF prepayment classified as current at February
3, 2001 is $9,771, versus $5,739 at January 29, 2000.  In 1999,
accounts receivable used cash as the outstanding balance grew
from 1998, primarily as a result of significant increases in
charge sales at the former Watson stores.  In 2000, the growth in
accounts receivable balance moderated with the continued maturity
of the stores opened in 1998.

Net cash used in investing activities was $4,832, $9,368 and
$18,049 in 2000, 1999 and 1998, respectively.  Investing
activities included capital expenditures, primarily for fixturing
and point of sale equipment in new and acquired store locations,
of $4,797, $9,151 and $13,394 in 2000, 1999 and 1998,
respectively.  Capital expenditures for 2000 were significantly
lower than 1999 and 1998 as only 4 new locations were opened
during the fiscal year, and the majority of the capital
improvements required by stores opened in 1998 and 1999 was
completed in 1999.  In 2000, capital expenditures included $1,500
at the four new store locations, and $1,300 for major remodelings
and relocations.  The remaining expenditures were primarily for
space re-allocations and routine fixture upgrades at existing
stores.

Financing activities reduced outstanding borrowings by $20,572 in
2000 and $3,549 in 1999.  Scheduled debt service, primarily
principal payments on the Senior Term Facility, used $3,700 in
both 2000 and 1999.  The 1999 ECF Prepayment, $5,739, which
decreased amounts outstanding under the Senior Term Facility, was
funded through the Revolver.  The total balance of the Revolver
and Swingline Facility was reduced from $37,277 at January 29,
2000 to $26,145 at February 3, 2001.

In June 1998, the Company amended and restated the Credit
Agreement, at a cost of $1,613, to facilitate the Watson Merger.
As a result, borrowings under Senior Term Notes A and B were
increased by $24,000, retiring $17,895 of Watson's pre-
acquisition debt and trade liabilities, and funding the $4,451
cash purchase price.  The cash purchase price included $1,848 for
the entire equity interest, $1,352 to a third party for the
proprietary charge card receivables, and $1,251 in acquisition
fees.

In 2001, the Company's capital expenditures are expected to total
approximately $11,900.  The Company plans to open eleven new
store locations, adding approximately 170,000 square feet, with
total fixtures and equipment of $5,100.  Major remodelings and/or
space reallocations are planned at 10 existing stores and related
capital expenditures are expected to total $3,800.  The remaining
capital expenditures are primarily for routine fixture/equipment
upgrades at existing stores, except for approximately $1,200,
which is planned for a significant upgrade in the satellite
communications network.

<PAGE>

As of March 2001, the Company had signed leases for two new store
locations due to open in the third fiscal quarter of 2001.  The
Company expects to continue to lease its stores, and the typical
new store is anticipated to average approximately 21,600 square
feet but may vary depending on the individual market and real
estate opportunity.  Based on historical experience, the Company
estimates that the cost of opening a new store will include
capital expenditures of approximately $425 for leasehold
improvements and fixtures and approximately $425 for initial
inventory, approximately one-third of which is normally financed
through vendor credit.  Accounts receivable for new stores
typically build to 11% of net sales or approximately $275 within
24 months of the store opening.  The Company may also incur
capital expenditures to acquire existing stores.

The Company finances its operations, capital expenditures, and
debt service payments in part with funds available under its
Revolver.  The maximum amount available under the Revolver is $75
million less amounts outstanding under letters of credit.  The
actual amount available is determined by an asset-based formula.
The Company believes the cash flow generated from operating
activities together with funds available under the Revolver will
be sufficient to fund its investing activities and the debt
service of the Credit Agreement.

SEASONALITY AND INFLATION

As a retailer offering predominately soft-apparel and selected
home accessories, the Company's business is seasonal, although
less heavily weighted in the fourth quarter than retailers with
comparable offerings of merchandise.  Over the past five fiscal
years, quarterly sales as a percentage of total sales have been
consistent at approximately 20%, 23%, 24% and 33% for the first
through fourth quarters, respectively.  Peebles' positioning of
its stores in small to medium sized communities with limited
competition, along with the Company's less promotional, every day
fair value, pricing strategy, produces operations less dependent
on the fourth quarter.  However, the third and fourth quarters
are generally bolstered by the back-to-school and Christmas
holiday selling seasons.

The Company does not believe that inflation has had a material
effect on its results of operations during the past three fiscal
years.  Peebles uses the retail inventory method applied on a
LIFO basis in accounting for its inventories.  Under this method,
the cost of products sold reported in the financial statements
approximates current costs and thus reduces the likelihood of a
material impact that increases costs.  However, there can be no
assurance that the Company's business will not be impacted by
inflation in the future.

MARKET RISK
The Company's interest expense is affected by changes in short-
term interest on the debt outstanding under the Credit Agreement.
The Credit Agreement bears interest at rates based on both the
LIBOR and prime lending rates (the "Borrowing Rates").  Assuming:
i) the Borrowing Rates vary by 100 basis points from their
current levels in any given fiscal month, and ii) the Company
maintains an aggregate outstanding debt balance subject to these
rates of $85,805 during the fiscal month of variance, interest
expense would vary by approximately $72 for that fiscal month.

FORWARD-LOOKING STATEMENTS
Certain statements in this annual report are forward-
looking, based on the Company's evaluation of historical
information and judgments on future events, based on the
best information available at the time.  Underlying these
statements are risks and uncertainties which could cause
actual results to differ materially from those forward-
looking statements.  These risks and uncertainties include,
but are not limited to: i) consumer demand for the Company's
soft-apparel merchandise; ii) competitive and consumer
demographic shifts within the Company's markets; iii) the
Company's access to, and cost of, capital; iv) the Company's
ability to locate and open new store locations on a timely
and profitable basis; v) the Company's ability to integrate
acquired stores into Peebles' overall operations on a timely
basis; and vi) the successful management of inventory
levels, related costs and selling, general and
administrative costs.