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 2, 2002
           ------------------------------------------
            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 (434) 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 2, 2002.)

     As of April 1, 2002, 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.

<Page>

                              NONE
                             PART I
ITEM 1.  BUSINESS. GENERAL

      Peebles Inc. ("Peebles" or the "Company") operates 137
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  17
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   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.  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
Ira A. Watson Co. ("Watson" or "Watson's").

     References to 1997, 1998, 1999, 2000 and 2001 relate to
the  Company's fiscal years ended January 31, 1998,  January
30, 1999, January 29, 2000, February 3, 2001 and February 2,
2002,  respectively.  Fiscal years include 52 weeks,  except
fiscal year 2000, which 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 28,000 gross square feet, 22,200 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.

     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 generally centralized.

     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  February 1997 to February 2002, the Company  has
expanded  from  77  stores to 137, 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 five new markets in 2002.   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.  In  2001,  the  Company
     opened  11  acquired  store  locations.   Although   no
     acquisitions are currently planned for 2002, management
     believes   the   economic  environment  and   financial
     condition   of  retailers  will  continue  to   present
     acquisition opportunities.  Since February 1, 1997, the
     Company  has  acquired  40 store locations  from  other
     retailers.

     REMODELING AND RELOCATING STORES.  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.
     The   Company  regularly  considers  stores  for  major
     remodeling/space   reallocations,   less    significant
     remodeling  or  fixture upgrades or,  less  frequently,
     relocation, all dependent on the market.  In 2002,  the
     Company currently plans to relocate one existing  store
     within  its the market, and three stores are  scheduled
     for major remodeling/space reallocation.

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  137  stores currently in operation, 106 are located  in
strip  shopping  centers, 21 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  2001,  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,  Studio Direct,
                          Woolrich,  Playtex,  Vanity  Fair,
                          Levi,  Item  Eyes;

Men's                     Ralph    Lauren,  Haggar,   Bombay
                          Industries,  Levi,    Van  Heusen,
                          Foria International,  Nike,  Izod,
                          Swank, Carhartt Inc.;

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

Children's                Tommy    Hilfiger,  H.H.   Cutler,
                          Levi, Kids  Headquarters,   Gerson
                          &   Gerson, Baby    Togs,   Samara
                          Brothers,  Fishman  &  Tobin, Byer
                          California, William Carter;

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

Home                      International Silver, Seymour Mann,
                          PEM-America,  Mikasa,   Westpoint-
                          Stevens, New Creative Enterprises,
                          Pacific  Rim,  Baum  Bothers   The
                          Manual  Woodworker,  Aceco Inc.;

Cosmetics                 Estee   Lauder,  Elizabeth  Arden,
                          Clinique,   Liz  Claiborne, Calvin
                          Klein,  Belae Brands, Ralph Lauren
                          Fragrances, Aramis, Fashion  Fair,
                          Markwins   International;

      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 1999,  2000
and   2001   were  2.7%,  2.2%  and  2.0%  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  1999  due  to   the
significant number of new store locations added in 1998.

PURCHASING AND DISTRIBUTION

      The  Company  employs  29  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 alternate
sources    to  supply  its  private  label  programs.    Any
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.  Working 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,  the  existing distribution  centers  can  support
future  growth  in  existing and contiguous  markets  up  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.

      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 twelve 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 20 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 some of 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  1999,  2000  and  2001, 27.6%,  27.6%  and  28.9%,
respectively,  of  net sales were made using  the  Company's
proprietary  credit  card.   As of  February  2,  2002,  the
Company  had approximately 596,000 credit card accounts,  of
which  201,000 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 1999,
2000  and  2001, income from finance charges and  late  fees
totaled   $5.9  million,  $6.9  million  and  $7.3  million,
respectively.  Uncollectible accounts considered  bad  debts
totaled   $1.6  million,  $2.7  million  and  $3.2  million,
respectively, in 1999, 2000 and 2001.

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 2, 2002, the Company had 1,559  full-time
employees  and  2,081  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  Classic(TM),
Private Expressions(TM), Meherrin River Outfitters(TM) and  Sonoma
Bay(TM).


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.

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 28,000 square feet. In  net
selling  square footage by state at February  2,  2002,  the
Company's stores were as follows:

    State      Stores   Net SQ Ft        State     Stores Net SQ Ft
   ------      ------   ---------        -----     -----------------
Virginia           35     773,177     Alabama          6     107,039
Tennessee          14     369,393     New York         4      95,086
North Carolina     14     270,223     Delaware         3      80,611
Kentucky           11     297,083     New Jersey       3      74,722
Ohio               16     250,668     Illinois         2      32,708
Maryland            7     207,904     Indiana          2      25,963
South Carolina      6     149,557     Missouri         1      24,625
Pennsylvania        6     134,933     Mississippi      1      15,781
West Virginia       6     130,580                    ---   ---------
                                        Totals       137   3,040,053
                                                     ===   =========

      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 1999, 2000 and 2001,  the  Company's
aggregate   rental   payments  on  operating   leases   were
approximately  $15.3  million,  $15.4  million   and   $15.8
million, respectively.

      The  Company's  owns, subject to deeds  of  trust  and
security  interests granted in connection with the Company's
Credit  Agreement:   the  corporate  headquarters  and   the
150,000 square foot distribution center facility located  on
31  acres  in  South Hill, Virginia; and 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

                         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,  not  to  exceed
$750,000  in  any  fiscal year.  In 2001, the  Company  paid
dividends  to PHC Retail of  $696,000 for the repurchase  of
PHC   Retail   common   stock   from   retiring   management
shareholders.  The Company did not pay any dividends in 1999
and  2000 and does not expect to pay any dividends  for  the
foreseeable future except for the repurchase of  PHC  Retail
common stock




              (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 2,  2002  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)

                            Fiscal     Fiscal   Fiscal    Fiscal   Fiscal
                             Year       Year     Year      Year     Year
                             Ended      Ended    Ended     Ended    Ended
                           January    January   January  February  February
                              31,       30,       29,        3,       2,
                             1998      1999      2000      2001     2002
                             ----      ----      ----      ----     ----

INCOME STATEMENT DATA:
Net sales.....             $217,694  $265,215  $300,839  $306,608 $308,317
Cost of sales.              130,820   159,067   178,657   181,681  179,708
                            -------   -------   -------   -------  -------
Gross margin..              86,874    106,148   122,182   124,927  128,609
Selling, general and
  administrative expenses   60,324     76,402    86,139    85,616   85,601
Depreciation and
  amortization..             6,648      8,057     9,926    10,534   11,523
Asset impairment..              --         --     2,182        --       --
Operating income..          19,902     21,689    23,935    28,777   31,485
Other income..                 444          9        --        94       43
Interest expense..           9,609     10,804    11,521    11,133    6,948
                           -------    -------   -------   -------  -------
Income before income taxes  10,737     10,894    12,414    17,738   24,580
Income taxes                 4,687      4,837     5,385     7,627   10,078
                           -------    -------   -------   -------  -------
Net income ...            $  6,050   $  6,057   $ 7,029  $ 10,111 $ 14,502
                           =======    =======   =======   =======  =======
Net income per share      $  6,050   $  6,057   $ 7,029  $ 10,111 $ 14,502
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)..            $ 2,835    $ 2,750   $ 2,705    $2,522   $2,425
Selling sq. ft. per
  store (1)..               24,550     24,305    24,070    23,585   23,339
Net sales per selling
  sq. ft. (1)..               $113       $113      $112      $107     $104
Comparable store net
  sales increase
  (decrease) (1)..             5.3%       0.9%      1.3%       .3%   (3.3%)
Number of stores
  (end of period)..             84        117       121       124     137
Total selling sq. ft.
  (end of period)..      2,022,000  2,803,000 2,880,000 2,913,000 3,040,053

Capital expenditures
  (000's)..                $10,226    $13,394    $9,151    $4,797  $10,260

BALANCE SHEET DATA:         January   January   January  February  February
                              31,        30,       29,       3,       2,
                             1998       1999      2000      2001     2002
                            -----      -----     -----     -----    -----

Working capital..          $63,459    $75,246   $78,495   $70,016  $83,619
Net property and
  Equipment..               38,749     51,949    53,063    50,132   51,003
Total assets..             172,456    208,286   211,060   202,849  216,803
Total debt (2)..            87,299    110,921   106,991    86,304   83,656
Stockholders' equity (3)..  55,473     61,530    68,559    78,670   92,450

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)   Includes the long-term portion of the capital lease
  obligations and the current portion of long-term debt.
3)   Retained earnings, included in stockholders' equity has been
  accumulated since May 27, 1995.

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

<Page>
                              NONE
                            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 1, 2002, are as
follows:
                                                           Years
      Name          Age             Position             with the
                                                         Company
      ----          ---             --------          -------------

Michael F. Moorman   59  Chairman of the Board,               37
                         President and Chief Executive
                         Officer
Ronnie W. Palmore    52  Senior Vice President,               29
                         Merchandising and Assistant
                         Secretary
E. Randolph Lail     46  Senior Vice President,               14
                         Finance, Chief Financial
                         Officer, Secretary and
                         Treasurer
Russell A. Lundy II  39  Senior Vice President, Stores        17
Marvin H. Thomas,Jr. 46  Senior Vice President, Operations    20
William C. DeRusha   52  Director                             10
Malcolm S. McDonald  63  Director                             10
Wellford L.
   Sanders, Jr.      56  Director                              9
Thomas R. Wall, IV   43  Director                              7
Frank T. Nickell     54  Director                              7

      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 of the Company since September  1989,
Chief  Executive Officer of the Company since May  1989  and
President  of the Company since June 1988.  Mr. Moorman  has
been a Director of the Company since 1977.  Mr. Moorman  has
been employed by the Company in various positions since 1964
including store manager and buyer.

      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 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 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  from June 9, 1995 until June 1999 and of the Company
from June 1990 until June 1999.  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 has been  employed  by
the  Company in various positions since 1979 including store
manager and buyer.

      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 Citation Corporation, Consolidated Vision
Group,  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.   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 serve one-year terms.

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 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 1999,
2000 and 2001.
<Page>
<Table>
<Caption>
                       SUMMARY COMPENSATION TABLE

                                                               LONG-TERM COMPENSATION
                                                                ------------------
                                                                 AWARDS     PAYOUT
                                                                --------    ------
                                 ANNUAL COMPENSATION            NUMBER OF  LONG-TERM
                           ------------------------------------  OPTIONS   INCENTIVE
NAME AND                                              OTHER     WARRANTS     PLAN
PRINCIPAL POSITION         YEAR  SALARY    BONUS   COMPENSATION  GRANTED    PAYOUT
---------------------      ----  ------    -----   ------------  -------    ------
                                 ($)(1) ($)(1),(2)   ($) (3)                 ($)
<S>                        <C>   <C>      <C>        <C>          <C>      <C>
 MICHAEL F. MOORMAN
 Chairman of the Board,    2001 $432,478 $357,280   $   ---        ---    $ ---
 President and Chief       2000  419,247  287,031       ---        ---      ---
 Executive Officer         1999  382,689  422,428       ---        ---      ---

 RONNIE W. PALMORE
 Senior Vice President,    2001 $253,990 $ 78,516   $   ---        ---    $ ---
 Merchandising and         2000  245,124   65,858       ---        ---      ---
 Assistant Secretary       1999  212,478   94,734       ---        ---      ---

 E. RANDOLPH LAIL          2001 $209,199 $ 81,456   $53,074        ---    $ ---
 Senior Vice President,    2000  201,151   55,987    58,988        ---      ---
 Finance CFO, Secretary
 and Treasurer             1999  175,182   87,791     1,244        ---      ---

 RUSSELL A. LUNDY, II      2001 $162,260 $ 49,203   $24,870        ---    $ ---
 Senior  Vice President,   2000  154,691   42,398    26,905        ---      ---
 Stores                    1999  121,666   51,570     6,929        ---      ---

 MARVIN H. THOMAS, JR.     2001 $166,823 $ 66,331   $33,936        ---    $ ---
 Senior Vice President,    2000  155,903   56,467    37,718        ---      ---
 Operations                1999  129,847   63,291     1,009        ---      ---


  (1)  Salary and bonus amounts for 1999, 2000 and 2001 include tax-
     deferred contributions of compensation to the Peebles Inc. 401-K
     Profit Sharing Plan.  Also included in salary amounts for 1999,
     2000 and 2001, and the bonus amounts for 1999, 2000 and 2001, 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 ($78,538 for Mr. Lail; $31,286
     for Mr. Lundy and $50,218 for Mr. Thomas per year)
</Table>

      OPTION GRANT TABLE.  There were no options granted  by
the Company to the Named Executives during 2001.

      OPTION  EXERCISE  TABLE.  The following  table  sets  forth
information concerning the exercise of stock options during  2001
by  each  of  the  Named  Executives and the  year-end  value  of
unexercised options.

                    OPTIONS EXERCISED IN 2001
                    -------------------------
                                                                Value of
                                             Number of       Unexercised in
                                             Unexercised    Money Options at
                       Shares               Options at Year    Year End
 Name and             Acquired      Value   End Exercisable/  Exercisable/
 Principal Position on Exercised   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 2001.
(2) There were no unexercised options at year-end.

      As of the fiscal year ended February 2, 2002,
there were no projected long-term incentive payouts.

PENSION PLAN

      Prior  to  1998, the Company sponsored a Pension  Plan
(subsequently  known  as Plan I) that 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  but  each
received  a  distribution from the  terminated  Plan  II  in
January 1998.

      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 retirement income 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 Plan I,
Plan  II,  the  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   Plan   I   were
transferred  to and distributed from 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.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      The  Company has a Compensation Committee of the Board
of  Directors.  For 2001, 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 2001.

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  2001  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.

      The  Company's  officers  are  parties  to  employment
agreements  with PHC Retail that among other things  contain
certain change of control provisions.

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 1, 2002, 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.




CAPITAL STOCK OF PHC RETAIL        SHARES OF              SHARES OF
                                VOTING COMMON  PERCENT    NONVOTING  PERCENT OF
  NAME OF BENEFICIAL OWNER (1)      STOCK     OF CLASS   COMMON STOCK   CLASS
 ----------------------------       -----     --------   ------------   -----

Kelso Investment Associates
  V,L.P.(2)(3)                    1,803,693(3)  90.04         0           0
Kelso  Equity  Partners  V,
  L.P. (2),(3)                       67,973      3.39         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
Russell A. Lundy II (6)               4,456         *         0           0
Marvin H. Thomas, Jr. (6)             6,015         *         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)  93.44         0           0
Frank T. Nickell (2),(3)          1,873,514(4)  93.53         0           0
George E. Matelich (2),(3)        1,871,666(3)  93.44         0           0
Thomas R. Wall, IV (2),(3)        1,872,000(5)  93.45         0           0
Michael B. Goldberg (2),(3)       1,871,666(3)  93.44         0           0
David I. Wahrhaftig (2),(3)       1,871,993(3)  93.45         0           0
Frank K. Bynum, Jr. (2),(3)       1,871,666(3)  93.44         0           0
Philip E. Berney (2),(3)          1,871,666(3)  93.44         0           0
All Directors and Named Executives
  as a group (10 persons) (6)     1,959,587     97.83     6,500       26.56
      * Less than 1 Percent

 (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, 2,850,
     and 2,874 for Messrs. Moorman, Palmore, Lail, Lundy, II and
     Thomas, respectively.

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.

                             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-13 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.
    10.2       First Amendment and Consent to Amended
               and Restated Credit Agreement dated October 31,
               2001 (filed herewith).
    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.

               ----------------------------
    *            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-13 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 5, 2002
           -------------------------------
           Michael F. Moorman, President
           and Chief Executive Officer
          (Principal Executive Officer)

     By    /s/  E. Randolph Lail                 Date:  April 5, 2002
           -------------------------------
           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 5, 2002
           -------------------------------
          Wellford L. Sanders, Jr., Director

     By    /s/ William C. DeRusha                Date:  April 5, 2002
           -------------------------------
           William C. DeRusha, Director

     By    /s/ Malcolm S. McDonald               Date:  April 5, 2002
           -------------------------------
           Malcolm S. McDonald, Director

     By    /s/ Frank T. Nickell                  Date:  April 5, 2002
           -------------------------------
           Frank T. Nickell, Director

     By    /s/ Thomas R. Wall                   Date:   April 5, 2002
           -------------------------------
           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
-------------------         -------------------------------

Ira A. Watson, Co.                    Delaware


<Page>

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

PEEBLES INC.

FEBRUARY 2, 2002



Report of Independent Auditors                                 F-1

Consolidated Balance Sheets                                    F-2

Consolidated Statements of Income                              F-3

Consolidated Statements of Changes in Stockholders' Equity     F-4

Consolidated Statements of Cash Flow                           F-5

Notes to Consolidated Financial Statements                     F-6

Management's Discussion and Analysis of Financial
Condition and Results of Operations                           F-15

				F-0

<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 2, 2002 and February  3,
2001, and the related consolidated statements of income and cash flows
for  each  of  the three fiscal years in the period ended February  2,
2002.   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  2,
2002  and  February  3, 2001, and the consolidated  results  of  their
operations and their cash flows for each of the three fiscal years  in
the  period  ended  February  2, 2002 in  conformity  with  accounting
principles generally accepted in the United States.



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


Richmond, Virginia
March 8, 2002

				F-1

<Page>

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

                                            FEBRUARY 2,  FEBRUARY 3,
                                               2002         2001
                                               ----         ----
ASSETS
CURRENT ASSETS
 Cash                                       $  1,773     $  1,686
 Accounts receivable, net                     41,661       37,340
 Merchandise inventories                      79,061       70,580
 Prepaid expenses                              1,701        1,746
 Other                                           361          147
                                            --------     --------
                   TOTAL CURRENT ASSETS      124,557      111,499

PROPERTY AND EQUIPMENT
Fixtures and equipment                        79,346       78,245
Land and building                             13,863       14,453
Leasehold improvements                         1,548        1,669
                                            --------     --------
                                              94,757       94,367
Accumulated depreciation and amortization     43,754       44,235
                                            --------     --------
                                              51,003       50,132

OTHER ASSETS
 Excess of cost over net assets acquired,
  Net                                         35,223       37,140
 Deferred financing costs, net                   472        1,018
 Beneficial leaseholds, net                    2,521          422
 Sundry                                        3,027        2,638
                                            --------     --------
                                              41,243       41,218
                                            --------     --------
                                            $216,803     $202,849
                                            ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 Accounts payable                           $ 16,915     $ 15,162
 Accrued compensation and other expenses       7,851        7,226
 Deferred income taxes                         1,346        1,711
 Current maturities of long-term debt         10,061       13,471
 Other                                         4,765        3,913
                                            --------     --------
               TOTAL CURRENT LIABILITIES      40,938       41,483
LONG-TERM DEBT                                73,225       72,334
LONG-TERM CAPITAL LEASE OBLIGATIONS              370          499
DEFERRED INCOME TAXES                          9,820        9,863
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                           59,490        59,307
Accumulated other comprehensive income
  (loss)                                       (209)           --
Retained earnings: accumulated from
  May 27, 1995                               33,168        19,362
                                           --------      --------
                                             92,450        78,670
                                           --------      --------

                                           $216,803      $202,849
                                           ========      ========

See notes to consolidated financial statements.

				F-2
<Page>

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


                                       Fiscal Years Ended
                                 -------------------------------
                                 FEBRUARY    FEBRUARY    JANUARY
                                    2,          3,          29,
                                  2002         2001        2000
                                ---------    ---------  ---------

NET SALES                       $ 308,317    $ 306,608  $ 300,839

COSTS AND EXPENSES
  Cost of sales                   179,708      181,681    178,657
  Selling, general and
   administrative expenses         85,601       85,616     86,139
  Depreciation and amortization    11,523       10,534      9,926
  Asset impairment                     --           --      2,182
                                ---------    ---------  ---------
    OPERATING INCOME               31,485       28,777     23,935

OTHER INCOME                           43           94         --

INTEREST EXPENSE                    6,948       11,133     11,521
                                ---------    ---------  ---------

    INCOME BEFORE
      INCOME TAXES (BENEFIT)       24,580       17,738     12,414

INCOME TAXES (BENEFIT)
  Current                          10,359        7,075      3,786
  Deferred                           (281)         552      1,599
                                ---------    ---------  ---------
                                   10,078        7,627      5,385
                                ---------    ---------  ---------

NET INCOME                      $  14,502    $  10,111  $   7,029
                                =========    =========  =========

NET INCOME PER SHARE            $  14,502    $  10,111  $   7,029
                                =========    =========  =========

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

See notes to consolidated financial statements.

				F-3
<Page>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
PEEBLES INC.
(dollars in thousands, except per share amounts)

                                                      ACCUMULATED
                             COMMON STOCK                OTHER
                           ----------------          COMPREHENSIVE
                                     PAR    ADDITIONAL  INCOME   RETAINED
                            SHARES   VALUE    CAPITAL   (LOSS)   EARNINGS
                           -------- -------   -------    ------   --------


BALANCE JANUARY 30, 1999     1,000    $  1  $59,307     $  --    $ 2,222

Net income                      --      --      --         --      7,029
                             -----   -----   ------     -----    -------

BALANCE JANUARY 29, 2000     1,000    $  1  $59,307     $  --    $ 9,251

Net income                      --      --      --         --     10,111
                             -----   -----   ------     -----    -------

BALANCE FEBRUARY 3, 2001     1,000    $  1  $59,307     $  --    $19,362

Dividend to PHC Retail for
  Share Repurchase              --      --       --        --      (696)
Exercise of PHC Retail
  stock options                 --      --      183        --        --
Unrealized loss on Interest
  Rate Swap                     --      --       --      (209)       --
Net income                      --      --       --        --    14,502
                             -----   -----   ------     -----   -------

BALANCE FEBRUARY 2, 2002     1,000   $   1  $59,490   $  (209)  $33,168
                             =====   =====   ======    ======   =======

See notes to condensed consolidated financial statements.

				F-4
<Page>

CONSOLIDATED STATEMENTS OF CASH FLOWS
PEEBLES INC.
(in thousands)
                                                  FISCAL YEARS ENDED
                                           ---------------------------------
                                            FEBRUARY    FEBRUARY    JANUARY
                                                2,          3,        29,
                                              2002         2001      2000
                                             -----        -----      -----
OPERATING ACTIVITIES
Net income                                 $ 14,502    $ 10,111   $  7,029
Adjustments to reconcile net income to
  net cash provided by operating activities:
  Depreciation                                8,592       7,758      7,305
  Amortization                                3,477       3,747      4,015
  Deferred income taxes                        (281)        552      1,599
  Provision for doubtful accounts             3,568       3,320      1,663
  LIFO/market reserve adjustment               (222)       (769)      (371)
  Asset impairment                               --          --      2,182
  Changes in operating assets and liabilities:
   Accounts receivable                       (7,889)     (2,711)    (6,217)
   Merchandise inventories                   (8,259)        370      1,923
   Accounts payable                           1,753       1,524     (4,721)
   Other assets and liabilities                 792       2,180       (546)
                                            -------     -------    -------
NET CASH PROVIDED BY
  OPERATING ACTIVITIES                       16,033      26,082     13,861

INVESTING ACTIVITIES
  Purchase of property and equipment        (10,260)     (4,797)    (9,151)
  Acquisition of New Store Locations         (2,375)         --         --
  Other                                         (96)        (35)      (217)
                                            -------     -------    -------

NET CASH USED IN INVESTING ACTIVITIES       (12,731)     (4,832)    (9,368)

FINANCING ACTIVITIES
  Proceeds from revolving line of credit
   and long-term debt                       494,457     429,643    420,528
  Reduction in revolving line of credit
   and long-term debt                      (496,976)   (450,215)  (424,077)
  Dividend to PHC Retail                       (696)         --         --
                                            -------     -------    -------


NET CASH USED IN FINANCING ACTIVITIES        (3,215)    (20,572)    (3,549)
                                            -------     -------    -------

INCREASE IN CASH AND CASH
EQUIVALENTS                                      87         678        944

Cash beginning of period                   $  1,686       1,008         64
                                            -------     -------    -------

CASH END OF PERIOD                         $  1,773    $  1,686   $  1,008
                                            =======     =======    =======
See notes to consolidated financial
statements.

				F-5

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PEEBLES INC.
February 2, 2002

(in thousands, except shares and per share amounts)

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE  OF OPERATIONS:  Peebles Inc. ("Peebles" or the "Company")
operates retail department stores offering predominately  fashion
merchandise  for the entire family and selected home accessories.
At February 2, 2002, the Company was operating 137 stores located
primarily  in small and medium sized communities which  typically
do  not  have  a mall-based department store.  The  stores  serve
communities in 17 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.
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 2001, 2000 and 1999  ended  on
February  2,  2002,  February  3,  2001  and  January  29,  2000,
respectively.  Results of operations consisted of fifty-two weeks
in  2001 and 1999, and fifty-three weeks in 2000.  References  to
years relate to fiscal years rather than calendar years.  Certain
amounts  in  the 2000 and 1999 consolidated financial  statements
have been reclassified to conform to the 2001 presentation.

USE  OF  ESTIMATES:  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.

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 2,  2002
or February 3, 2001.

FAIR  VALUE  OF FINANCIAL INSTRUMENTS:  The carrying  amounts  of
accounts receivables and accounts payable approximate fair  value
due  to their short maturities.  The carrying amount of long-term
debt  approximates  fair  value  as  the  stated  interest  rates
approximate  market  rates.  The carrying  amount  of  cash  flow
hedges approximate fair value, based upon quoted market prices.

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.

LONG-LIVED ASSETS:  The Company periodically reviews the carrying
value  of  long-lived  assets  to  determine  if  impairment  has
occurred.   The  primary indicators of impairment  are,  but  not
limited  to,  significant changes in competition or demographics,
recent   historical   operating   profitability   and   projected
profitability.   In  general, the carrying  value  of  long-lived
assets  is considered recoverable if it is less than the  related
future projected undiscounted cash flows.  If the carrying  value
were found to be greater, the carrying value would be reduced  to
fair  value.   Projections included in this review are  based  on
management's best estimates of future performance.

				F-6

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC.

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

EXCESS OF COST OVER NET ASSETS ACQUIRED:  Through February 2,2002,
the  excess of cost over net assets acquired  ("Goodwill")
was  being  amortized on a straight-line basis over a twenty-five
year  period.  Goodwill amortization expense for 2001,  2000  and
1999  was  $1,917, $1,960 and $1,917, respectively.   Accumulated
amortization  was  $12,734 and $10,817 at February  2,  2002  and
February 3, 2001 respectively.

DEFERRED FINANCING COSTS:  Deferred financing costs are amortized
by  the interest method over a period consistent with the related
financing.   Amortization expense of $546, $877  and  $1,394,  is
included   in   interest  expense  for  2001,  2000   and   1999,
respectively.  Accumulated amortization at February 2,  2002  and
February 3, 2001 was $6,388 and $5,842, respectively.

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.

ADVERTISING  COSTS:   Advertising  costs,  charged  to   selling,
general  and  administrative expenses as incurred,  were  $6,174,
$6,707 and $8,015 for 2001, 2000 and 1999, respectively.

INCOME  TAXES:   The Company provides for deferred  income  taxes
under the liability method.  Under the liability method, deferred
taxes  are  determined  based  on  the  differences  between  the
financial statement and tax bases of assets and liabilities using
enacted  tax  rates  is effect in the years the  differences  are
expected to reverse.

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

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

DERIVATIVE  FINANCIAL  INSTRUMENTS:   The  Company  adopted   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.  For derivative financial instruments
qualifying as a cash flow hedge, changes in the fair value of the
effective portion of the derivative instrument are recognized  in
Other  Comprehensive  Income ("OCI").  The  Company  enters  into
interest rate swap agreements to manage exposure to interest rate
fluctuations.

ACCOUNTING  PRONOUNCEMENTS:  In  June  2001,  the  Financial
Accounting  Standards  Board  issued  Statement   No.   142,
"Goodwill  and  Other Intangible Assets" ("SFAS  No.  142").
Under  the provisions of SFAS No. 142, goodwill and  certain
other  indefinite-lived intangible assets will cease  to  be
amortized, and instead, will be tested for impairment on  at
least  an annual basis or at any time certain indicators  of
impairment  arise.   The  Company  is  in  the  process   of
performing  the procedures required under SFAS No.  142  for
adoption  in the first fiscal quarter of 2002.  The  Company
currently  expects  the  only  impact  on  the  consolidated
financial  statements  of adopting SFAS  No.  142  to  be  a
decrease  in  fiscal  2002 amortization expense  of  $1,917,
representing the scheduled amortization of Goodwill.

NOTE B-ACCOUNTS RECEIVABLE

Accounts   receivable  are  shown  net  of  $2,800  and   $2,400,
representing the allowance for uncollectible accounts at February
2,  2002  and February 3, 2001, respectively.  The provision  for
doubtful  accounts was $3,568, $3,320 and $1,663 for  2001,  2000
and  1999, respectively.  Finance charges and late fees on credit
sales,   included  as  a  reduction  of  selling,   general   and
administrative expenses, were $7,306, $6,895 and $5,862 for 2001,
2000 and 1999, respectively.

				F-7

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC.


NOTE B-ACCOUNTS RECEIVABLE--Continued

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 17 states.  The Company does not require
collateral from its customers.

NOTE C-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 2,     February 3,
                                         2002            2001
                                     -------------   ------------
 Merchandise inventories at FIFO cost  $ 71,625        $ 63,366
 Fair Value Adjustment                    7,436           7,436
 LIFO/Market Reserve                         --            (222)
                                        -------         -------
 Merchandise inventories at lower
  of cost or market                    $ 79,061        $ 70,580
                                       ========        ========

NOTE D-LONG-TERM DEBT

Long-term debt consisted of the following:

                                  February 2, 2002     February 3, 2001
                                  ----------------     ----------------
   Senior Revolving Facility       $   35,500           $   26,145
   Senior Term Note A                   2,002                5,988
   Senior Term Note B                  43,987               53,372
   Swingline Facility                   1,597                   --
   Other                                  200                  300
                                    ---------            ---------
                                       83,286               85,805
   Less current maturities:
     Scheduled principal payments       2,367                3,700
     Excess Cash Flow Prepayment
      Amount                            7,694                9,771
                                    ---------            ---------
    Total current maturities           10,061               13,471
                                    ---------            ---------

   Long-term debt                   $  73,225            $  72,334
                                    =========            =========

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.

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   2.00%  and  LIBOR  plus  2.50%,  respectively.   Scheduled
principal payments are payable quarterly in arrears.

				F-8

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC.


NOTE D-LONG-TERM DEBT-Continued

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, payable at
the  end  of  the  first fiscal quarter of the subsequent  fiscal
year, was $7,694 and $9,771 for 2001 and 2000, respectively.  The
ECF prepayments are funded through the Revolver and reduce Senior
Term  Note A and Senior Term Note B ratably.  Senior Term Note  A
will  be  retired  October  31, 2002.   Senior  Term  Note  B  is
scheduled to mature April 30, 2004.

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  2,  2002,  the  total amount available  to  borrow  was
$73,150,  of which $37,097 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 2.00%.

In November 2001, the Company entered into two interest rate swap
agreements  (together,  the  "Swap  Agreements")  with   notional
amounts  of  $10,000  and $40,000, respectively,  and  expiration
dates  of  November  20, 2002 and 2003, respectively.   The  Swap
Agreements  meet  the definition of a cash flow hedge  under  the
provisions  of  SFAS  No.  133.  In 2001,  interest  expense  was
increased by $148, representing the difference between  the  Swap
Agreements  fixed rates and the floating rate, the  30-day  LIBOR
rate.   At February 2, 2002, the Company recorded a $336  current
liability  and  a  $209 unrealized loss, net of $127  income  tax
benefit,  in  OCI based on the estimated fair value of  the  Swap
Agreements at that date.

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 .75% and has no LIBOR conversion option.

The Company had commitments under letters of credit of $1,850 and
$1,719  at  February 2, 2002 and February 3, 2001,  respectively.
The  letters of credit, issued by a bank, are primarily to secure
international shipments of merchandise.

Restrictive  debt  covenants of the Credit  Agreement  limit  the
payment of cash dividends.  Cash dividends may only be paid  from
the  Company to PHC Retail to repurchase PHC Retail common  stock
and are limited to $750 in any fiscal year.  In 2001, $696 of PHC
Retail  common  stock  was repurchased from  retiring  management
stockholders.

The  Company  made cash interest payments of $6,653, $10,266  and
$9,952 for 2001, 2000 and 1999, respectively.

Aggregate scheduled principal payments, exclusive of any ECF
prepayments, on the long-term debt are as follows:  2002 --
$2,367; 2003 -- $37,797; 2004 -- $35,428; 2005 and thereafter --
$0.

NOTE E-ACQUISITION OF NEW STORE LOCATIONS

In  2001,  the  Company  acquired eleven store  locations  in  an
auction.  The leases related to these store locations were  below
fair  market value, and the entire purchase price of  $2,375  has
been capitalized as beneficial leaseholds.  Beneficial leaseholds
are  amortized  on  a straight-line basis over  approximately  12
years,  the  estimated  composite useful  lives  of  the  related
leases.

				F-9

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC.


NOTE F-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:
                     2001         2000      1999
                     ----         ----      ----
   Minimum         $15,580      $15,088   $14,924
   Contingent          243          273       392
                   -------      -------   -------
                   $15,823      $15,361   $15,316
                   =======      =======   =======

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

Future minimum lease payments under capital leases and
noncancellable operating leases at February 2, 2002 were as
follows:
                                             Capital       Operating
   Fiscal Year                               Leases         Leases
  ------------                              ----------   ------------
   2002                                       $  180      $ 13,504
   2003                                          180        12,030
   2004                                          181        10,645
   2005                                           60         9,368
   2006                                            0         8,011
   Thereafter                                      0        40,545
                                              ------       -------
   Total minimum lease payments                  601       $94,103
                                                           =======
   Less:  amounts representing interest         (102)
                                              ------
   Present value of net minimum lease
   payments, including current maturities of
   $129, with an interest rate of 12.0%       $  499
                                              ======


NOTE G-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 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.

				F-10

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC.


NOTE H-EMPLOYEE BENEFIT PLANS--Continued

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".
                                        2001        2000
                                      --------    --------

   CHANGE IN BENEFIT OBLIGATION:
     Benefit obligation at beginning
      of year                         $  7,568   $  6,336
     Service cost                          226        204
     Interest cost                         534        484
     Actuarial (gain) loss                (403)     1,066
     Benefit payments                   (1,274)      (522)
                                       -------    -------
   Benefit obligation at end of year  $  6,651   $  7,568
                                       =======    =======

   CHANGE IN PLAN ASSETS:
     Fair value of plan assets at
      beginning of year               $  4,707   $  5,083
     Actual return on plan assets         (366)       146
     Employer contribution                  --         --
     Benefit payments                   (1,274)     (522)
                                       -------    -------
     Fair value of plan assets at end
      of year                          $  3,067  $  4,707
                                        =======   =======
    FUNDED STATUS:
     Funded status                    $  (3,584) $  (2,861)
     Unrecognized actuarial loss          1,816      1,494
     Unrecognized prior service cost        421        492
                                        -------    -------
     Accrued pension liability        $  (1,347)  $   (875)
                                         =======   =======
   COMPONENTS OF NET PERIODIC PENSION COST:
     Service cost                     $     226   $    204
     Interest cost                          534        484
     Expected return on plan assets        (384)      (431)
     Prior service cost recognized           70         70
     Recognized losses                      322          4
                                        =======     ======
     Net periodic pension cost        $     768    $   331
                                        =======     ======

   Weighted Average Assumptions as of
   Measurement Date:
     Discount rate                         7.00%     7.50%
     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 $3,299, $2,144 and $0, respectively, as of  February
2,  2002  and $3,511, $1,499 and $0, respectively, as of February
1, 2003.

				F-11

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC.


NOTE H-EMPLOYEE BENEFIT PLANS-Continued

The  Company  also  maintains  a  qualified  profit  sharing  and
retirement savings plan, The Peebles Inc. 401 (k) Profit  Sharing
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,
included in selling, general and administrative expenses, totaled
$346, $363 and $325 in 2001, 2000 and 1999, respectively.

NOTE I - INCOME TAXES

The provisions for income taxes consisted of the following:

                       2001        2000          1999
                      ------      ------         -----
 Current:Federal    $  8,593    $  5,926      $  3,161
         State         1,766       1,149           625

 Deferred:Federal       (233)        460         1,335
          State          (48)         92           264
                    --------    --------      --------
                    $ 10,078    $  7,627      $  5,385
                    ========    ========      ========

Income taxes differ from the amounts computed by applying the
applicable federal statutory rates due to the following:
                                      2001      2000     1999
                                     ------    ------   ------

 Taxes at the federal
   statutory rate                   $ 8,603   $ 6,208  $ 4,345
 Increases (decreases):
 State income taxes, net of
   federal tax                        1,086       806      581
 Amortization of Goodwill               531       544      531
 Other                                (142)        69      (72)
                                    -------   -------  -------

                                    $10,078   $ 7,627  $ 5,385
                                    =======   =======   =======

At February 2, 2002, the Company has net operating loss
carryforwards of approximately $2,300 for income tax purposes,
which expire in 2010.  Due to Internal Revenue Service
regulations, utilization of the net operating loss carryforwards
may be limited in a particular year.

				F-12

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC.

NOTE I - INCOME TAXES-Continued

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

                                      February 2, 2002  February 3, 2001
                                      ----------------  ----------------
  Deferred tax liabilities:
    Inventory valuation                  $   2,005         $   1,883
    Depreciation and amortization           11,612            11,447
    Accounts receivable valuation               --               389
    Other                                      474               359
                                         ---------         ---------
                                            14,091            14,078
  Deferred tax assets:
    Doubtful accounts                       (1,103)             (945)
    Net operating loss carryforwards          (907)           (1,150)
    Other                                     (915)             (409)
                                         ---------         ---------
                                            (2,925)           (2,504)
                                         ---------         ---------
  Net deferred tax liabilities            $ 11,166          $ 11,574
                                         =========         =========

Peebles made cash income tax payments of $9,336, $5,650 and
$5,316 for 2001, 2000 and 1999, 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 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
  Charges (credits) to expense          3,568            (222)
  Deductions - net write-off of
   uncollectible accounts              (3,168)             --
                                    ---------         -------
BALANCE FEBRUARY 2, 2002            $   2,800         $    --
                                    =========         =======


				F-13

<Page>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
PEEBLES INC.


NOTE K - QUARTERLY FINANCIAL DATA (UNAUDITED)

<Table>
<Caption>
 (dollars in thousands)                        FISCAL QUARTER
                     ------------------------------------------------------
                     FIRST            SECOND          THIRD          FOURTH
                 2001    2000     2001    2000     2001   2000     2001   2000
<S>            <C>      <C>     <C>     <C>     <C>     <C>     <C>      <C>
Net Sales      $63,464  $63,363 $67,688 $71,537 $74,614 $71,992 $102,551 $99,716

Cost of Sales   36,943   38,171  39,569  42,906  44,012  41,626   59,184  58,978

Gross Margin    26,521   25,192  28,119  28,631  30,602  30,366   43,367  40,738

Operating Income 4,251    3,663   5,024   5,340   6,026   5,650   16,184  14,124

Net Income       1,368      482   1,920   1,357   2,617   1,565    8,597   6,707
                ======   ======  ======  ======  ======  ======   ======  ======
Net Income
  Per Share    $ 1,368   $  482 $ 1,920 $ 1,357 $ 2,617 $ 1,565  $ 8,597 $ 6,707
                ======   ======  ======  ======  ======  ======   ======  ======
</TABLE>
				F-14

<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  2, 2002, the Company operated 137 stores in 17  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.

Consolidated net sales and results of consolidated operations  of
the Company, expressed as percentages of net sales, are presented
below  for  the  2001, 2000 and 1999 fiscal years.   Consolidated
operations  included 52 weeks in 2001 and 1999, and 53  weeks  in
2000.

     (dollars in thousands)         2001     2000       1999
                                  -------   -------    -------
Net sales                        $308,317  $306,608   $300,839
  % increase                           .6%      1.9%      13.4%

Comparable stores % (decrease)
  increase in sales:                 (3.3)%      .3%       1.3%
Total stores in operation at
  period end                          137       124        121

Operations as a Percentage of Net
             Sales:
---------------------------------
Cost of sales                        58.3%     59.3%      59.4%
Selling, general & administrative
  expenses                           27.8      27.9       28.6
Depreciation and amortization         3.7       3.4        3.3
Asset impairment                       --        --         .7
                                 --------  --------   --------
OPERATING INCOME                     10.2       9.4        8.0

Interest expense                      2.2       3.6        3.8
Provision for income taxes            3.3       2.5        1.9
                                 --------  --------   --------
Net Income
                                      4.7%      3.3%      2.3%
                                 ========  ========   ========

				F-15

<Page>

Net  sales increased .6%, comparing the 52-week current year
to  the  53-week prior year.  For the 52-week periods  ended
February  2,  2002 and February 3, 2001 net sales  increased
1.9%.   New store growth accounted for the increase in  both
comparisons.  The Company opened 17 new stores in 2001, with
10  openings  in August and 7 openings in November.   During
2001,  the Company closed 4 marginally profitable stores,  1
in  September  2001  and 3 in January 2002.   In  2000,  the
Company opened 4 new stores, and closed 1 store.  All  costs
related  to a store closing are included in selling, general
and administrative expenses.

At  comparable stores, net sales decreased 3.3% in comparing
the 52-week current year to the 53-week prior year.  For the
52-week periods ended February 2, 2002 and February 3, 2001,
net  sales  at comparable stores decreased 2.0%.  Comparable
store net sales increases (decreases) by fiscal quarter as a
percentage  of  the  prior  year  comparable  quarter,   are
presented in the table below.

                                Fiscal Quarter
                ------------------------------------------------
                 First    Second    Third    Fourth   Total Year
                ------    ------    -----    ------   ----------

2001 vs. 2000   (1.1%)    (5.4%)    (1.4%)   (3.8%)     (3.3%)
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%


Throughout  2001,  consumer demand for  the  Company's  soft
apparel was weak.  In comparing the fiscal quarters  of  any
one   year   to  another,  unseasonable  weather  variations
influence  "buy now, wear now" consumer demand, but  weather
related  variations have not been considered significant  to
net sales in total for any fiscal year.

The   timing   of   "Mother's  Day"  sales  influenced   the
comparisons in the first two fiscal quarters.  In both  2001
and  1999,  Mother's Day sales fell primarily in  the  first
fiscal quarter.  In 2000, those sales were primarily in  the
second  fiscal  quarter.  Aggregating the first  two  fiscal
quarters,  comparable  store  net  sales  declined  4.0%  in
comparing  2001  to 2000.  In comparing the  same  six-month
periods  in  2000  to  1999,  comparable  store  net   sales
decreased  1.3%.   In  the  third fiscal  quarter  of  2001,
consumer  demand appeared to be strengthening as  comparable
store  net  sales in August had increased in  comparison  to
2000.   The  tragic events of September 11,  2001  adversely
affected  customer traffic, and for the 3-week period  ended
September  22,  2001, comparable store net sales  were  down
8.9%.  During October 2001, consumer demand stabilized,  and
for  the  entire third fiscal quarter, comparable store  net
sales  were  off only 1.4% in comparison to  2000.   In  the
fourth  fiscal  quarter of 2001, "Holiday"  net  sales  were
strongest in comparison to 2000 immediately before and after
Christmas.  Eliminating the effect of the 5-week January  in
2000,  the comparable store net sales in the fourth  quarter
of 2001 were flat with 2000.

Cost of sales as a percentage of net sales were 58.3%, 59.3%  and
59.4%,  in  2001,  2000  and  1999, respectively.   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.   The  Company  controlled  inventory  levels   in
response  to  the weaker consumer demand, and as a  result,  2001
clearance  markdowns  did  not  increase  over  the  prior  year.
Further,  the continued maturation of new and acquired stores  in
1998  has  had a positive impact on gross margin in each  of  the
past three fiscal years.  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.

Selling,  general and administrative ("SG&A") expenses, exclusive
of  depreciation and amortization, were 27.8%, 27.9% and 28.6% of
net  sales in 2001, 2000 and 1999, respectively.  The benefit  of
strict  cost  controls  and  economies  of  scale  offset  higher
expenses  at the 17 new locations opened in the third and  fourth
fiscal  quarters.  New and acquired stores typically have  higher
occupancy  costs,  and  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.

Depreciation  and  amortization expenses as a percentage  of  net
sales   were  3.7%,  3.4%  and  3.3%  in  2001,  2000  and  1999,
respectively.   Capital  expenditures  related   to   new   store
locations   have  been  the  primary  reason  for  the  increase.
Depreciation expense as a percentage of net sales was 2.8%,  2.5%
and 2.4% in 2001, 2000 and 1999, respectively.

In  1999,  the asset impairment as a percentage of net sales  was
..7%,  or  $2,182.  The asset impairment represented the Company's
entire investment in a co-operative buying office.

As  a result of the factors discussed above, operating income  in
2001, 2000 and 1999 as a percentage of net sales was 10.2%,  9.4%
and 8.0%, respectively.

Interest expense as a percentage of net sales was 2.2%, 3.6%  and
3.8%,  for  2001,  2000 and 1999, respectively.  The  significant
decrease  in  comparing 2001 to 2000 was primarily  a  result  of
lower interest rates, as the Credit Agreement bears interest at a
variable   rate,   based  primarily  on  LIBOR.    In   addition,
increasingly profitable operations in both 2001 and 2000 resulted
in lower average borrowings.

Total  income taxes as a percentage of net sales were 3.3%,  2.5%
and 1.9% in 2001, 2000 and 1999, respectively.  The effective tax
rate  for  2001,  2000  and  1999 was  41.0%,  43.0%  and  43.4%,
respectively.  The effective tax rate in all three  fiscal  years
is   higher   than  statutory  rates  because  of  non-deductible
amortization of intangible assets.

As a result of the above factors, the Company had net income as a
percentage of net sales of 4.7%, 3.3%and 2.3% in 2001,  2000  and
1999, 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 $16,033,
$26,082 and $13,861 in 2001, 2000 and 1999.  In comparing 2001 to
2000,  greater  profitability and use of  vendor  financing  were
offset  by an increase in working capital requirements, primarily
as  a  result  of  the 17 new store locations.   Working  capital
increased  to  $83,619 at February 2, 2002, up  from  $70,016  at
February 3, 2001 and $78,495 at January 29, 2000.  At February 2,
20002, merchandise inventories increased $8,259 in comparison  to
February   3,  2001,  with  2001  new  store  locations  carrying
merchandise inventory of approximately $6,300.  Vendor  financing
through  accounts  payable  provided cash  of  $1,753.   Accounts
receivable,   primarily  related  to  the  Company's  proprietary
Peebles Charge card, used net operating cash of $4,321.  Of  this
net use of cash, the 2001 new store locations represented $1,425.
Peebles Charge sales increased from 27.6% of net sales in 2000 to
28.9% in 2001, primarily due to increases at maturing stores and,
in  general,  due  to the weakness in the general  economy.   The
timing  of realization of certain other net assets provided  less
cash in 2001 than in 2000.

Net  cash  used in investing activities was $12,731,  $4,832  and
$9,368  in  2001,  2000  and 1999, respectively.   In  2001,  the
Company  acquired 11 of the 17 new store locations in an  auction
for  $2,375.   Capital expenditures totaled $10,260,  $4,797  and
$9,151, in 2001, 2000 and 1999, respectively.  In 2001, new store
locations  required $4,550 of capital expenditures.  In addition,
remodeling  and  space  reallocation at existing  stores  totaled
$3,550  and  upgrades to point of sale equipment totaled  $1,255.
The  remaining  2001 capital expenditures were  for  upgrades  to
distribution   center  handling  equipment  and  general   office
equipment.   Capital  expenditures for  2000  were  significantly
lower  than  1999 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  remodeling  and  space
reallocation.  The remaining 2000 expenditures were primarily for
routine fixture upgrades at existing stores.

The Company used cash to reduce outstanding borrowings by $2,519,
$20,572  and  $3,549  in 2001, 2000 and 1999,  respectively.   In
2001,  the  Company  used cash of $696 to repurchase  PHC  Retail
common  stock  from  management  shareholders.   Scheduled   debt
service,   primarily  principal  payments  on  the  Senior   Term
Facility,  used  $3,700  in  2001,  2000  and  1999.    The   ECF
Prepayments,  $9,771  paid  in 2001  and  $5,739  paid  in  2000,
decreased amounts outstanding under the Senior Term Facility  and
were  funded  through the Revolver.  The 2001 ECF  Prepayment  of
$7,694 will be paid in the first fiscal quarter of 2002.

In 2002, the Company's capital expenditures are expected to total
approximately $7,300.  The Company plans to open five new store
locations, adding approximately 86,000 square feet, with total
fixtures and equipment of $2,400.  In addition, current plans for
2002 include the relocation of one existing store and the major
remodeling/space reallocation of three stores, with related
capital expenditures of $2,600.  Of the remaining 2002 capital
expenditures, approximately $1,400 is planned for routine
fixture/POS equipment upgrades at existing stores, and $900 for
capital equipment at the corporate office and distribution
centers.

As  of March 2002, the Company had signed leases for three of the
2002  new  store  locations.   The Company  has  identified  four
existing  store locations which may be closed in 2002.   Each  of
the  stores  is  at  a  lease renewal period  and  is  considered
marginally profitable.  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.  At February  2,  2002,  the
contractual cash obligations of the Company were as follows:

                                   Payments Due by Period
                                ---------------------------
                                  Less
   Contractual                   than 1     1 - 3    4 - 5    After 5
   Obligations          Total     year      years    years     years
---------------------------------------------------------------------
Long-term debt        $ 83,286 $ 10,061  $ 73,225    $   0     $   0
Capital lease
  Obligations              601      180       361       60         0
Operating leases        94,103   13,504    22,675   17,379    40,545
                       -------  -------   -------   ------   -------
Total Contractual
Cash Obligations      $177,990 $ 23,745  $ 96,261 $ 17,439  $ 40,545
                       ======== =======   =======  =======   =======



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  six  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").   At
February  2, 2002, long-term debt totaled $83,286.  Although  the
total  debt  varies throughout the year based  on  the  Company's
operations and seasonal fluctuations, the balance outstanding  is
not  expected to drop below $50,000 in 2002 or below  $40,000  in
2003.   The  Company  has two interest rate swaps  with  notional
amounts  of $10,000 and $40,000, and expiration dates of November
20,  2002  and 2003, respectively, to hedge exposure to  interest
rate fluctuations.  Therefore, with $50,000 of the long-term debt
effectively  bearing a fixed rate of interest, and  assuming  the
Borrowing  Rates  vary  by 100 basis points  from  their  current
levels  in  any given fiscal month, the $33,286 of variable  debt
subject  to the Borrowing Rates, interest expense would  vary  by
approximately $28 for that fiscal month.

CRITICAL ACCOUNTING POLICIES

The Company's significant accounting policies are summarized
in  Note A to these consolidated financial statements, which
have  been prepared in accordance with accounting principles
generally accepted in the Untied States.  The preparation of
these  consolidated financial statements requires management
to  select and apply accounting policies involving estimates
and  judgment.   Listed below are those accounting  policies
requiring a higher degree of judgment and/or where estimates
have  the  greatest  impact  on the  consolidated  financial
statements.

Allowance  for  Uncollectible Accounts:   Peebles  maintains
allowances  for  doubtful  accounts  for  estimated   losses
resulting  from  the  inability of  its  customers  to  make
required  payments.   The  allowance  is  determined   using
historical   experience,  aging  of  receivables,   and   an
evaluation of the current and expected economic environment.
If  the financial condition of individual customers, regions
in  which the Company operates, or the general economy  were
to  vary materially from the assumptions used by management,
the   allowance  would  require  adjustment.   The   Company
evaluates the adequacy of the allowance on a regular  basis,
adjusting   its  assumptions  and  updating  the  historical
experience accordingly.

Merchandise  Inventories:   The  Company  uses  the   retail
inventory  method, applied on a last-in, first-out  ("LIFO")
basis,  to account for merchandise inventories.  The  retail
inventory  value  must  represent  the  best  estimation  of
saleable value in order to state merchandise inventories  at
the lower of cost or market.  The saleable value assigned to
specific  inventory units is determined by management  using
detailed  analysis  of  historical experience  and  expected
consumer  demand.   If  actual  consumer  demand   for   the
Company's  apparel  varies significantly from  expectations,
realization of the merchandise inventories will  affect  the
cost of sales.

Long-Lived Assets:  The Company records these assets,  which
include property and equipment, finite-lived and indefinite-
lived  intangible  assets at cost, or  calculated  cost,  as
applicable, and assigns a useful economic life.  The  assets
are  depreciated or amortized, generally on a  straight-line
basis,  over the assigned useful economic life.  The Company
periodically  reviews the net carrying value  of  long-lived
assets  and the useful economic life remaining to  determine
if impairment has occurred, resulting in a revaluation.  The
economic  useful  life  is assigned  based  on  the  assets,
expected contribution to future operations.  If the  Company
experiences  significant unforeseen changes in  competition,
market  demographics, or technology rendering the  Company's
existing technology obsolete, useful economic lives  may  be
shortened   and/or   carrying  values   reduced,   adversely
affecting operating profitability.

The  Company  will  adopt SFAS No. 142 in the  first  fiscal
quarter  of  2002.  Under the provisions of  SFAS  No.  142,
Goodwill  and  certain  other indefinite-lived  assets  will
cease  to  be  amortized, and instead, will  be  tested  for
impairment  on  at least an annual basis,  or  at  any  time
indicators  of impairment exist.  At February 2,  2002,  net
Goodwill  was  $35,224, or 16.2% of total  assets.   Through
February  2, 2002, Goodwill was amortized on a straight-line
basis,  and a useful economic life of twenty-five years  had
been  assigned.  Annual amortization expense in a  fifty-two
week  fiscal  year  would  have been  $1,917.   The  Company
currently expects the only impact of adopting SFAS  No.  142
to  be  a  reduction  in  amortization  expense  of  $1,917.
However,  if  unforeseen  changes  in  competition,   market
demographics or the economy adversely impact the fair  value
of   the   Company,   Goodwill  and  other  indefinite-lived
intangible assets may require revaluation.


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.