UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Commission File Number: 0-19526

GOODY’S FAMILY CLOTHING, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (865) 966-2000

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

None

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

Common Stock, No Par Value

(Title of Class)

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

    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 the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

    Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes þ    No o

    The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price of the Common Stock on The NASDAQ National Market on July 31, 2004, the last business day of the registrant’s most recently completed second fiscal quarter, was $172,730,499. For purposes of this response, the registrant has assumed that its directors, executive officers, and beneficial owners of 5% or more of its Common Stock are the affiliates of the registrant.

    Number of shares of Common Stock outstanding as of March 31, 2005: 32,936,519

DOCUMENTS INCORPORATED BY REFERENCE

    The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K: Certain information required in Part III of this Form 10-K shall be incorporated from the Company’s Proxy Statement for its 2005 Annual Meeting of Shareholders currently scheduled to be held on June 15, 2005.

     Unless the context otherwise indicates, all references in this Form 10-K to the “Company” or “Goody’s” refer to Goody’s Family Clothing, Inc., a Tennessee corporation, and its subsidiaries. The Company’s fiscal year ends on the Saturday nearest the last day of January. The terms “fiscal 2010,” “fiscal 2009,” “fiscal 2008,” “fiscal 2007,” “fiscal 2006,” “fiscal 2005,” “fiscal 2004,” “fiscal 2003,” “fiscal 2002,” “fiscal 2001,” and “fiscal 2000,” refer to the Company’s fiscal years ending or ended on January 29, 2011 (52 weeks), January 30, 2010 (52 weeks), January 31, 2009 (52 weeks), February 2, 2008 (52 weeks), February 3, 2007 (53 weeks), January 28, 2006 (52 weeks), January 29, 2005 (52 weeks), January 31, 2004 (52 weeks), February 1, 2003 (52 weeks), February 2, 2002 (52 weeks), and February 3, 2001 (53 weeks), respectively.

FORWARD-LOOKING STATEMENTS

      The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. Management has endeavored in its communications and in this Form 10-K to highlight the trends and factors that might have an impact on the Company and the industry in which it competes. Any “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “estimate,” “anticipate,” “believe,” “target,” “plan,” “project,” or “continue,” or the negatives thereof or other variations thereon or similar terminology, are made on the basis of management’s plans and current analysis of the Company, its business and the industry as a whole. These statements appear in a number of places in this Form 10-K and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things:

      Readers are cautioned that any such forward-looking statement is not a guarantee of future performance and involves risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statement as a result of various factors. Also see “Certain Factors That May Affect Future Results.” The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

PART I

General

      Goody’s is a retailer of moderately priced family apparel with 357 stores in 20 states as of January 29, 2005. The Company primarily locates its stores in small to midsized markets in the Southeast, Midwest and Southwest regions of the United States that have demographic characteristics consistent with its targeted customer. All of Goody’s stores are leased, average approximately 27,700 gross square feet, and are generally located in strip shopping centers. The Company manages its core functions, such as purchasing, pricing, marketing and advertising, distribution, planning and allocation, real estate, finance, and information systems, from its centrally located corporate office in Knoxville, Tennessee. The Company has two distribution centers, one each in Knoxville, Tennessee, and Russellville, Arkansas.

      The Company’s objective is to be a leading retailer of apparel for the entire family in each of the markets it serves. In keeping with this objective, Goody’s offers a broad selection of current-season, nationally recognized brands for brand-conscious shoppers, as well as exclusive brands for those shoppers who seek quality apparel at value prices.

      The address of the Company’s web site is www.goodysonline.com. The Company makes available, free of charge, through its web site, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the United States Securities and Exchange Commission (the “SEC”). Such filings may be accessed through the Company’s web site, www.goodysonline.com, then choose “SEC Filings.”

Competitive Strategy

      The Company’s operating strategies continually evolve to keep pace with the competitive demands of an ever-changing retail environment. However, the central elements of the Company’s core business strategy remain essentially the same and include the following:

Expansion Strategy

      The Company opened 24 stores, relocated or remodeled 13 existing stores and closed 2 stores during fiscal 2004. During fiscal 2005, the Company expects to increase its new store openings to approximately 35 stores and relocate or remodel approximately 15 existing stores. The majority of the fiscal 2005 planned new stores are expected to be located in small to midsized markets ranging from 20,000 to 50,000 square feet, with an average square footage of approximately 26,100 square feet. The Company expects to resume its historical strategy of increasing its store base by approximately 10% each year primarily in small to midsized markets.

      In making its decision to open a new store, the Company typically evaluates, among other factors, market demographics, competition, location, customer traffic, rent and occupancy costs, advertising, and other expenses associated with the opening and operating of a new store. Goody’s has historically supported new store growth from internally generated funds.

      The Company would consider a complementary acquisition opportunity should it arise, although the Company has no understandings, arrangements or agreements with respect to any such opportunity.

      The following table provides information regarding the number of stores in operation, new stores opened, stores closed, and stores relocated or remodeled during the years indicated:

      The Company’s 328 stores open at the end of fiscal 2002 included 1 store in Charlottesville, Virginia, that temporarily closed due to smoke damage on January 15, 2003, and reopened on March 6, 2003.

Merchandising Strategy

      The Company’s merchandising strategy has been developed to appeal to its value-conscious customers by offering a broad selection of current-season, trend-right, nationally recognized, and exclusive-brand merchandise at value prices. The Company continually develops and refines its merchandising strategy in an attempt to satisfy the preferences of its target customers. The Company competes with: (i) department stores by offering nationally recognized, brand-name quality apparel at value prices; (ii) specialty stores by offering apparel for the entire family; (iii) off-price apparel stores by offering a wide selection of current-season merchandise at competitive prices; and (iv) discount stores by offering nationally recognized, brand-name merchandise generally unavailable to discount retailers. While nationally recognized, brand-name merchandise remains the cornerstone of its merchandising strategy, the Company continues to invest in the development of its exclusive brands and private-label merchandise that offers customers quality merchandise at value prices. The Company’s private-label sales accounted for approximately 32%, 27% and 28% of total sales in fiscal 2004, 2003 and 2002, respectively. In addition, the Company introduced two new exclusive brands in early fiscal 2005 — Pierre Cardin for women and Hawaiian Tropic apparel for men and women.

      The Company opened its e-commerce store through its website on February 25, 2005, on a limited basis and grand opened its e-commerce site on March 8, 2005. The Company is offering selected, popular merchandise on this site as an alternative to customers who want to shop in the comfort of their home. The Company accepts credit cards, checks and gift cards as forms of tender for on-line purchases. Order fulfillment is accomplished through six of its store locations strategically placed in certain geographic areas within its current store base.

      The Company purchased the Duck Head trademarks and four related licenses from TSI Brands Inc., and its parent corporation, Tropical Sportswear Int’l Corporation, during fiscal 2003 for $4,000,000 plus related costs. The Company believes this is an important trademark, given its rich history and recognition in the Southeast region of the United States. The Company introduced exclusive sportswear merchandise bearing the Duck Head trademarks in the men’s, misses and children’s divisions in March 2004. In the summer of 2004, the junior’s division was added to the Duck Head sportswear line and the Duck Head Jeans Company denim line was introduced for the whole family. Duck Head merchandise sales exceeded $97 million in fiscal 2004 and are targeted to reach $135 million in fiscal 2005 with the growth of the sportswear merchandise, as well as additions of accessories and gift items and having a full year of selling sportswear and denim lines. Brand marketing in 2005 for Duck Head will continue to include separate television advertisements, highlights in newspaper inserts and a dedicated informational website describing the extensive selection in the Duck Head line. The Company will also support the Duck Head brand with in-store signage and promotional activities.

      A typical Goody’s store has five divisions that include women’s (junior’s, misses, petite, plus size, intimate apparel, swimwear, outerwear, and accessories), men’s (sportswear, activewear, young men’s, and men’s furnishings), children’s (infants and toddlers, boys and girls), shoes (women’s, men’s, children, and athletic), and other (tuxedo rentals and service fees). The Company’s stores carry an average of approximately 15,600 different styles of merchandise that are electronically tracked (including by color and size, where appropriate) in order to provide timely and accurate selling data to management.

Merchandising Divisions

      Women’s. The most comprehensive merchandise selection offered by the Company is in the women’s division, which contributed 62.0% of total sales in fiscal 2004. The women’s division emphasizes casual and career fashions, denim, dresses, and accessories and includes misses, junior’s, petite and plus sizes, intimate apparel, swimwear, outerwear and accessories. Misses’ merchandise lines include popular brand names such as Adidas, Alfred Dunner, Briggs, Cathy Daniels, Dockers, Erika, Lee, Levi’s, Nike, Norton McNaughton, On Que, Requirements, and Sag Harbor, as well as the Company’s current exclusive brands, Duck Head, Duck Head Jeans Company (DHJC), Goodclothes, and Mountain Lake. Juniors’ merchandise lines include nationally recognized brand names such as Anxiety, L.E.I., Levi’s, Mudd, My Michelle, Self Esteem, and Union Bay. Fashion dresses are also an important part of Goody’s overall women’s product lines and feature popular brand names such as Connected, Dorby, My Michelle, and Sag Harbor. Nationally recognized, brand-name intimate apparel offered by the women’s division includes products from Hanes and Playtex. Swimwear features labels such as Beach Native, Baltex, L.E.I., Manhattan Beachwear, and Mudd. Nationally recognized brands featured in accessories include Arden Fragrances (that include Calvin Klein, Nautica, Obsession, Paul Sebastian, and White Diamonds), Burnes of Boston, L.E.I., Mudd, Playtex, Riveria, and Rosetti.

      Men’s. The men’s division contributed 21.2% of total sales in fiscal 2004 and consists of sportswear, activewear, denim, young men’s, and men’s furnishings departments. The men’s division features nationally recognized, brand-name merchandise and includes Adidas, Dockers, JNCO, Lee, Levi’s, Munsingwear, Nike, U.S. Polo, and Union Bay. The Company’s current exclusive brands for men are Duck Head, DHJC, Ivy Crew, OCI and RMG Chairman’s Collection.

      Children’s. The children’s division contributed 10.3% of total sales in fiscal 2004 and offers durable apparel for children of all ages including infants and toddlers, and boys and girls. Nationally recognized brands for children offered by the children’s division include Adidas, Baby Togs, Carter’s, Lee, L.E.I., Levi’s, Mudd, My Michelle, Nike, U.S. Polo, Union Bay, and Zana-DI. The Company’s current exclusive brands for children are Baby Crew, Duck Head, DHJC, Good Kidz, and OCI.

      Shoes. The Company operates its own shoe departments, which contributed 5.8% of total sales in fiscal 2004. At the end of fiscal 2004, 355 stores had shoe departments; and the Company expects that all new and relocated stores in fiscal 2005 will have shoe departments. The shoe departments offer nationally recognized brands such as Adidas, Avia, Calico Sport, Connie, Deer Stags, Diba East, Dockers, GBX, Giorgio Brutini, Grasshoppers, Keds, L.E.I., Life Stride, Mootsies Tootsies, Mudd, New Balance, Nike, Reebok, Self Esteem, Skechers, and U.S. Polo.

      Other. Includes revenue from tuxedo rentals and service fees, royalties from license fees and gift certificate, gift card and in-store credit forfeitures that, in the aggregate, contributed 0.7% of total sales in fiscal 2004.

      The following table shows a breakdown of the Company’s total sales for the periods indicated (dollars in thousands):

Store Visual Presentation

      Generally within each Goody’s store, specific departments have prominent signage with aisles leading directly to major departments. Visual merchandising and store presentation are enhanced by fixtures that showcase merchandise in an accessible and customer-friendly shopping environment. Sale items featured in the Company’s advertising campaigns are highlighted in the stores with signs that allow customers to quickly locate items of interest. The overall merchandise presentation is organized to highlight selected fashion products as the seasons progress. The visual merchandising department, in collaboration with the merchandising staff, communicates with the stores frequently through its “Front & Forward” program, a series of guidebooks designed to help store Associates coordinate visual presentation efforts with featured items contained in advertisements or items being promoted in-store. The Company continually endeavors to update its stores and improve their “shopability.”

Purchasing

      The Company buys merchandise from approximately 650 vendors worldwide. During fiscal 2004, the Company’s receipts from Levi Strauss & Co., its largest vendor, represented approximately 9.0% of total receipts. No more than 3.5% of total receipts were attributable to any one of the Company’s other vendors during fiscal 2004. However, the Kellwood Company and Jones Apparel Group, Inc. own 13 and 12 of the Company’s vendors, respectively, which represented approximately 8.5% and 4.5% of total receipts for fiscal 2004, respectively. The Company believes it maintains strong relationships with its vendors. A large portion of the Company’s merchandise is prepackaged and preticketed by the vendors for each store, allowing the merchandise to be cross-docked, thereby reducing the cost and processing time at its distribution centers.

      Merchandise associated with the Company’s private-label merchandise is largely imported. The Company employs its own designers and product development teams that work closely with the merchandising staff to track seasonal fashion trends, analyze customer feedback and determine appropriate order quantities. The Company controls its private-label merchandise from initial concept to its introduction in its stores and monitors product quality, freight costs and other expenses in an effort to maximize gross margins on such merchandise.

Planning and Allocation

      The Company’s planning and allocation department works closely with merchandising, distribution and store operations personnel to establish an appropriate flow of merchandise for each of the Company’s stores. This flow of merchandise is intended to reflect customer preferences in each market. The Company utilizes electronic data interchange (“EDI”) with 312 vendors, wherein the Company and vendors exchange documents electronically; additionally the vendor will pack orders by store and ticket the merchandise at the color and size levels. Sales from EDI vendors accounted for approximately 69% of total sales in fiscal 2004. The Company also utilizes automatic replenishment programs or internally referred to as “quick response” (“QR”), with 122 of the 312 EDI vendors, which allow for more efficient replenishment of specific items of merchandise in particular styles, sizes and colors to optimize in-stock positions of basic merchandise. Goody’s provides QR vendors with selling data for their products and reorders are automatically produced when compared to predetermined models. Sales from QR vendors represented approximately 36% of total sales in fiscal 2004. The Company continues to support and encourage the use of QR and EDI for its vendors.

Centralized Distribution

      The Company has two distribution centers: a 344,000-square-foot distribution center, located in Knoxville, Tennessee, and a 235,000-square-foot distribution center, located in Russellville, Arkansas. The two distribution centers have the combined capacity to serve approximately 525 stores. Both distribution centers are equipped with automated merchandise handling equipment that facilitates efficient distribution of merchandise to the Company’s stores and provides for efficient cross docking of prepackaged and preticketed merchandise by store. Incoming merchandise is received at the distribution centers where it is randomly inspected for quality control at the Company’s discretion.

      Merchandise for individual stores is typically processed through the distribution centers within 48 hours of its receipt from vendors. Furthermore, because the distribution centers are located adjacent to main interstate highways, the Company believes it has been able to negotiate favorable shipping terms with common carriers.

      The Company also has developed an effective computerized system for tracking merchandise from the time it arrives at its distribution centers until it is delivered to the stores to ensure that shipments are delivered in an accurate and timely manner. The Company utilizes a third-party contract carrier to deliver merchandise to its stores.

Marketing and Advertising

      The Company’s marketing and advertising strategies are designed to reinforce its image as a destination store for trend-right casual and career apparel at value prices for the entire family. The Company believes that its advertisements, which emphasize a wide selection of nationally recognized, brand-name apparel at value prices for the entire family, have enabled it to communicate a distinct identity that reinforces its brand in the marketplace.

      Using a multi-media approach in fiscal 2004, Goody’s utilized outside agencies for print and broadcast media buying. In addition, outside resources were used in conjunction with the internal marketing/advertising staff for creative input in both print and broadcast media. In 2005, the Company intends to schedule television and radio advertisements to air consistently in support of promotional events and to maintain top-of-mind awareness. The Company uses print and television advertising to communicate the depth and selection of its merchandise as well as its value proposition. The www.goodysonline.com website provides an additional communication vehicle to demonstrate selection and value. In-store merchandise presentation is coordinated with such advertising to maximize promotional opportunities. While the exact allocation of advertising expenditures differs from market to market, the Company allocated approximately 54% of its fiscal 2004 advertising expenditures to print media, 36% to television and radio with the remainder for other promotional activities. Several of the Company’s key vendors share in the costs of mutually beneficial advertising campaigns through cooperative advertising programs.

      The Company offers the GOODY’s private-label credit card through an arrangement with Alliance Data Systems and World Financial Network National Bank. Under this arrangement, the Company pays sales transaction fees, but is not responsible for assessing customer credit-worthiness and does not assume the risk associated with extending credit. During fiscal 2004, average net sales per transaction on the GOODY’s private-label credit card were higher than the average of all other credit cards accepted. The GOODY’s private-label credit card includes a loyalty program that is intended to increase the frequency and volume of customer purchases. The Company advertises and markets directly to its credit card customers.

      The Company also offers its customers a GOODY’s gift card. The GOODY’s gift card is designed to simplify the gift transaction for the customer and enhance the “Goody’s” brand image. This card is always available at the point-of-sale and through its website. At certain times of the year such as the Christmas selling season, it is aggressively marketed to increase gift card sales.

Pricing

      The Company’s pricing strategy is designed to provide value to its customers by offering merchandise at value prices generally below the prices of traditional department and specialty stores. In order to remain competitive and enhance sales promotion efforts, Goody’s frequently monitors its competitors’ prices. In addition, the Company’s management information systems provide daily and weekly sales and gross margin reports that, among other things, track sales and gross margins by stock-keeping unit and provide management with the flexibility to adjust prices, as appropriate.

Customer Service

      Goody’s goal is to provide shoppers with a positive shopping experience every time they visit its stores. The Company reviews and analyzes customer calls, e-mails and letters, receives feedback from store management, and conducts quantitative and qualitative studies to monitor customer expectations. To support its efforts, the Company utilizes a customer service program called “GREAT,” an acronym that stands for “Greet every customer, Room to shop, Exciting store presentation, Attention to detail, and Thank every customer.” Goody’s store Associates play the most important role in the success of the GREAT program.

Store Operations

      Management of store operations is the responsibility of the Executive Vice President — Stores, who is assisted by a Vice President — Store Operations, a Vice President — Loss Prevention, 3 Vice Presidents — Sales, and currently 31 District Managers.

      Each store is managed by a team consisting of a Manager and up to two Assistant Managers, depending on the size of the store. Stores are typically staffed by Sales Associates, Department Heads, Cashiers, and Stockroom Associates. All Associates are responsible for interacting with customers, developing and maintaining creative visual merchandise presentation and ensuring a positive shopping experience for each customer. The store staff consists of a combination of full- and part-time Associates; temporary Associates are hired for peak selling seasons. The Company’s stores are generally open from 9:00 a.m. to 9:00 p.m. Monday through Thursday; from 9:00 a.m. to 10:00 p.m. on Friday and Saturday; and from 11:00 a.m. to 7:00 p.m. on Sunday. These hours are extended during various holidays and peak selling seasons.

Store Locations

      The Company typically locates its stores in small to midsized markets in the Southeast, Midwest and Southwest regions of the United States that have populations of fewer than 100,000 and demographic characteristics consistent with its targeted value-conscious customer. However, the Company does have approximately 6% of its stores located in metropolitan markets with sales accounting for approximately 6% of the Company’s total sales in fiscal 2004. Goody’s leases store space, primarily in strip centers, where costs are generally lower than mall locations. The smallest of the Company’s stores has 7,600 gross square feet and the largest store has 52,600 gross square feet; the average store size is approximately 27,700 gross square feet. The Company’s store locations may be found by visiting its web site at www.goodysonline.com.

      All of the Company’s store locations are leased. The Company believes the flexibility of leasing its stores provides substantial benefits and avoids the inherent risks of owning real estate. The Company believes it has established itself as an anchor tenant due to its sales volume, the size of its stores, its advertising contributions in local markets, its financial position, and its history of meeting lease commitments on a timely basis.

Information Systems

      The Company frequently upgrades its core business systems with current technology, when and where possible, in an effort to enhance financial and other business controls. The Company maintains fully integrated point-of-sale (“POS”), inventory and merchandise systems. The Company’s information systems provide management, buyers, planners, and distributors with comprehensive data that allow them to identify emerging sales trends and, accordingly, manage inventories. The data provided by information systems include: merchandise planning, purchase order management, open order reporting, open-to-buy, receiving, distribution, EDI, basic stock replenishment, inventory, and price management. Daily and weekly sales reports are used by management to enhance the timeliness and effectiveness of purchasing and markdown decisions. Merchandise purchases are based on planned sales and inventories, and are frequently revised to reflect changing sales trends. The Company’s POS systems are supported by an in-store computer system. The in-store systems feature bar-coded ticket scanning, automatic price look-up, credit and check authorization utilizing a satellite network, and daily transmittal of detailed sales data from stores to the corporate office. The Company completed installation of new POS terminals and back-office systems in all stores during fiscal 2004 that began in fiscal 2003.

Trademarks and Licenses

      The United States Patent and Trademark Office (the “USPTO”) has issued federal registrations to the Company for the following trademarks: Accessory Crossing, Baby Duck Head, Bobby G by Ivy Crew, Chandler Hill Sport, DHX, DHX Sport, Duck Head (word mark), Duck Head (various design marks), Duck Head Expedition 1865, Duck Head Tailored Classics, Duck Head Tour, Expedition 1865, Feels Like You, “G” (stylized G with arch design), Goodclothes (word and design), Good Kidz, Goody’s (store services), Goody’s (credit card services), Goody’s Family Clothing, Goody’s Family Clothing (word and design), Goody’s Low Price!! Department Store Styles Department Store Brands (word and design), International Trading Company (word and design), Intimate Classics, Ivy Crew, Low Prices Never Looked So Good, MBJC, Montana Blues Jean Company, Mountain Lake, Mountain Lake Casuals, Mountain Lake High Quality Apparel With A Feel Good Fit, Mountain Lake Jean Company, OCI, OCI (stylized), Old College Inn, Old College Inn Jean Company, Old College Inn Loungewear, Old College Inn Sport, RGM, Sterling Reflections, Take A Good Look (word and design), Y.E.S. Your Everyday Savings, and Your Everyday Y.E.S. Savings Brands Value Quality. The Company has also filed applications with the USPTO seeking federal registrations for the following trademarks: Comfort Stretch, “D” (design), DHJC, DHJCO, DH Jeans Co., DHX Dry, Dressing You For Life, Duck Head (word and design for toiletries and fragrances), Duck Head Baby, Duck Head Jeans Co., Duck Head Sport, Duck Tail, Ducktek, Duck Tucks, GoodGirls, Goodsport, Good Sports, Goody’s — It’s All About You, Little Duck Head, Montana Blues, Now That Looks Great On You, RMG, Take A Good Look (block letters), The Best Towel On The Beach, We Know Denim, and www.goodysonline.com.

      In May 2003, the Company purchased from TSI Brands, Inc. and Tropical Sportswear Int’l Corporation (jointly “TSI”) all of TSI’s rights, title and interest in and to (i) the trademark Duck Head and related trademarks (jointly, “Duck Head”) and (ii) four (4) license agreements (collectively, the “License(s)”) granting limited use of the Duck Head trademark to four (4) licensees. The Company holds the USPTO registrations to the Duck Head trademarks. The Company holds or has applied for the Duck Head trademark registration in certain foreign countries. The Licenses generally grant exclusive use of the Duck Head name on certain merchandise and accessories, including shoes, optical eyewear and sunglasses, belts, and neckwear in the United States of America and certain men’s merchandise outside the United States of America. One of the Licenses grants a third-party licensee the exclusive use of the Duck Head name in Japan for certain categories of merchandise. The License for belts and neckwear expired in June 2004. In exchange for each License, the Company receives certain royalty payments and advertising commitments from each licensee.

      The following trademarks and trade names used in this Form 10-K are owned by (and in certain cases registered to) third-parties: Adidas, Alfred Dunner, Anxiety, Arden Fragrances (that include Calvin Klein, Nautica, Obsession, Paul Sebastian, and White Diamonds), Avia, Baby Togs, Baltex, Beach Native, Briggs, Burnes of Boston, Calico Sport, Carter’s, Cathy Daniels, Connected, Connie, Deer Stags, Diba East, Dockers, Dorby, Erika, GBX, Giorgio Brutini, Grasshoppers, Hanes, JNCO, Keds, Lee, L.E.I., Levi’s, Life Stride, Manhattan Beachwear, Mootsies Tootsies, Mudd, Munsingwear, My Michelle, New Balance, Nike, Norton McNaughton, On Que, Playtex, Reebok, Requirements, Riveria, Rosetti, Sag Harbor, Self Esteem, Skechers, U.S. Polo, Union Bay, and Zana-DI.

Associates

      As of April 2, 2005, the Company employed approximately 10,000 active full- and part-time Associates. The majority of the Company’s Associates work in stores serving customers. The stores are managed by a professional group of Store Managers and Assistant Store Managers, who are compensated on a salaried basis. Additionally, Store Managers are eligible to receive incentive compensation based on the Company’s profitability as well as attainment of other objective performance goals relative to their respective stores. All other store Associates are compensated on an hourly basis. Periodically, store Associates may win a cash or gift award as a result of participation in a store-level promotional contest or event.

      The Company has an incentive bonus program for key Corporate Associates (the Short-Term Incentive Plan), which requires the attainment of certain profitability goals and could potentially provide a significant portion of the Associates’ total annual compensation. All of the Company’s Associates are non-union employees, with the exception of those at its distribution center in Knoxville, Tennessee, who are represented by the Union of Needletrades, Industrial and Textile Employees.

      From time to time, the Company grants stock options to certain key Associates. These options are designed to align these key Associates’ interests with those of the Company’s shareholders while allowing the Company to improve retention through long-term incentives.

      The Company maintains the Goody’s Family Clothing, Inc. 401(k) Retirement Plan (the “401(k) Plan”) with a salary deferral feature for all eligible Associates. Under the terms of the 401(k) Plan, eligible Associates may contribute between 3% and 15% of their annual compensation on a pretax basis (with certain limitations imposed by the Internal Revenue Service) to the 401(k) Plan. The Company provides matching contributions to the 401(k) Plan that are determined by the Company on a discretionary basis at the start of each 401(k) Plan year and committed to for the plan year, vest over an Associate’s service period and are based upon a percent of an Associate’s elected contributions. These matching contributions, net of plan forfeitures, amounted to $794,000, $699,000 and $813,000 for fiscal 2004, 2003 and 2002, respectively.

      In 2004, the Company evaluated its healthcare program. On March 1, 2005, as a result of this extensive review, the Company implemented a revised program to encourage and support a focus on health as well as support a cost containment strategy. In addition to healthcare, the Company presents to eligible Associates the opportunity to participate in dental, life and disability programs and contributes to the cost of these programs.

      The Company also has an Employee Payroll Investment Plan that allows eligible Associates to purchase the Company’s common stock (the “Common Stock”) at fair market value through regular payroll deductions.

Seasonality and Inflation

      The Company’s business is seasonal by nature. The Christmas season (beginning the Sunday before Thanksgiving and ending on the first Saturday after Christmas), the back-to-school season (beginning the third week of July and continuing through the first week of September) and the Easter season (beginning two weeks before Easter Sunday and ending on the Saturday preceding Easter) collectively accounted for approximately 36.3% of the Company’s annual sales based on the Company’s last three fiscal years ended January 29, 2005. In general, sales volume varies directly with customer traffic, which is heaviest during the fourth quarter of a fiscal year. Because of the seasonality of the Company’s business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

      Inflation can affect the costs incurred by the Company in the purchase of its merchandise, the leasing of its stores and certain components of its selling, general and administrative expenses. The Company believes that during the last three fiscal years ended January 29, 2005, inflation has not had a material adverse effect on the Company’s business, although there can be no assurance that inflation will not have a material adverse effect on the Company in the future.

Competition

      The retail apparel business is highly competitive with price, selection, fashion, quality, store location, store environment, and customer service being the principal competitive factors. The Company believes that it is positioned to compete on the basis of each of these factors. The Company competes primarily with department stores, specialty stores, off-price apparel stores, and discount stores. Many competitors are large national chains, with substantially greater financial and other resources than those available to the Company; there is no assurance that the Company will be able to compete successfully with any of them in the future.

Certain Factors That May Affect Future Results

      The following important factors, among others, could cause the Company’s future operating results to differ materially from those indicated by forward-looking statements made in this Form 10-K and presented elsewhere by management from time to time.

      The Company has had declines in comparable store sales for the last three fiscal quarters ended January 29, 2005. The Company is evaluating and addressing the reasons for the decreases and there can be no assurance that this trend will reverse or that the Company can successfully execute its business plans and strategies.

      Despite these decreases in comparable store sales, the Company does not have a plan to exit a significant number of stores. However, should the negative trend continue, circumstances could require the Company to close a significant number of stores at material costs. Such store closures, as well as other effects from a continuation in the negative trend, could have a material adverse effect on the Company.

      Goody’s faces intense competition not only for customers, but also for access to quality merchandise and suitable store locations, from traditional department stores, specialty retailers, off-price retail chains, and discount stores. Many of these competitors are larger and have significantly greater financial, marketing and other resources when compared to the Company. In addition, many department stores have become more promotional and have reduced their selling price points, and certain finer department stores have opened outlet stores that offer off-price merchandise in competition with the Company. Further, in view of the Company’s strategy of offering current-season, trend-right, nationally recognized, and exclusive-brand merchandise at value prices, aggressive department store pricing could adversely affect the Company’s margins. The effect of intense competition could require the Company to reduce prices on merchandise for sale or increase spending on marketing and advertising, any of which could have a material adverse effect on the Company.

      The Company believes that communicating frequently with its customers is the key to maintaining traffic flow in its stores and creating loyalty within its customer base. The Company continues to evaluate new merchandising, advertising and pricing strategies that continually evolve in an effort to increase customer traffic and stimulate sales. There can be no assurance that the Company’s strategies will be effective.

      The Company’s revenue growth historically has been dependent, in part, upon an expansion policy of growing its store base by approximately 10% each year. During fiscal 2004, the Company opened 24 stores, for a 7% store base growth rate. During fiscal 2005, the Company expects to increase its new store openings to approximately 35 stores, for an approximate 10% store base growth rate.

      The inability of the Company to resume its historical levels of new store growth may have a material adverse effect on its long-term growth. There can be no assurance that the Company will meet its business plan for fiscal 2005, thereby allowing it to resume its historical level of new store openings.

      The Company’s sales are extremely vulnerable to weather conditions. For example, unusually warm weather in the fall or snow and ice during the winter can adversely affect its sales of fall/winter merchandise and unusually cold weather during the spring can adversely affect its sales of spring/summer merchandise.

      The Company’s success is largely dependent upon its ability to gauge the fashion tastes of its customers and to provide merchandise in sufficient quantities to satisfy customer demand in a timely manner. The Company’s failure to anticipate, identify or react appropriately to changes in fashion trends or plan receipts to match customer demand could have a material adverse effect on its financial results. Misjudgments or unanticipated changes in fashion trends as well as economic conditions could lead to excess inventories and higher markdowns, and repeated fashion misjudgments could have a material adverse effect on the Company’s image with customers.

      Sales from the Company’s private-label merchandise represented approximately 32% of the Company’s total sales in fiscal 2004. Because of the longer lead times required to manufacture private-label merchandise, and the lack of recourse the Company might otherwise have with branded merchandise vendors, failure to anticipate, identify and react appropriately to changes in fashion trends with its private-label merchandise could have an adverse effect on the Company. In addition, the Company has devoted substantial resources to the development and marketing of the exclusive Duck Head private label (with sales exceeding $97 million in fiscal 2004), as well as other private-label and exclusive brands, and there can be no assurance that these initiatives will continue to be successful.

      The Company does not own or operate any manufacturing facilities. The success of the Company’s business is largely dependent upon its ability to purchase current-season, brand-name and private-label apparel at competitive prices in adequate quantities and with timely deliveries. The inability or unwillingness of key vendors to increase their sales to the Company to keep pace with the Company’s growth, or the loss of one or more key vendors for any reason, could have a material adverse effect on the Company. During fiscal 2004, the Company’s largest vendor, Levi Strauss & Co., accounted for approximately 9.0% of total receipts. In addition, the Kellwood Company and Jones Apparel Group, Inc. own 13 and 12 of the Company’s vendors, respectively, which represented approximately 8.5% and 4.5% of total receipts for fiscal 2004, respectively. There can be no assurance that the Company will be able to acquire brand-name merchandise in sufficient quantities and on favorable terms in the future, if at all.

      The Company’s private-label programs are largely supported by products directly purchased from vendors located abroad. In addition, the Company believes that a substantial portion of its merchandise purchased from domestic vendors are manufactured abroad. These arrangements are subject to the risks of relying on products manufactured abroad, including import duties and quotas imposed by bilateral textile agreements, certain of which were phased out as of December 2004, loss of “most favored nation” trading status, currency fluctuations, work stoppages, economic uncertainties including inflation, the imposition of additional regulations relating to imports, the imposition of additional duties, taxes and other charges on imports, foreign government regulations, lack of compliance by foreign manufacturers with U.S. consumer protection laws (for which, in respect of its private-label merchandise, the Company may be responsible as the importer of record) and intellectual property laws, political unrest including terrorism and war, and trade restrictions, including U.S. retaliation against unfair foreign practices. While the Company believes it could find alternative sources of supply for its private-label programs, an interruption or delay in supply from these foreign sources or the imposition of additional duties, taxes or other charges on these imports could have a material adverse effect on the Company, unless and until alternative supply arrangements are secured. Moreover, products from alternative sources may be of lesser quality or more expensive than those currently purchased by the Company.

      The Company maintains systems, programs and controls over its merchandise inventories to mitigate possible risks associated with shrinkage. These risks include losses primarily from: (i) customer and employee theft; (ii) merchandise transferred between the distribution centers and stores; (iii) store to store transfers; (iv) concealed shortages from vendors; and (v) merchandise returned to vendors. The Company conducts a complete physical inventory count near the end of each fiscal year in order to determine the Company’s actual shrinkage results. For interim financial reporting purposes, the Company provides a reserve for shrinkage based principally upon its historical shrinkage experience. The amount of actual shrinkage could vary significantly from shrinkage reserves recorded in its interim financial statements throughout the year and, accordingly, could have a material effect (either positive or negative) on the Company’s financial position, results of operations or cash flows for that year and the fourth quarter of such year.

      Since the Company’s information systems are important to its success, it frequently upgrades its core information and in-store systems with current technology, when and where possible, in an effort to enhance financial and other operational controls. The Company also has implemented certain information systems disaster recovery plans to mitigate the risk of business interruptions related to information technology disasters. There can be no assurance that information technology systems will not become obsolete or fail, or that the execution of the Company’s information systems disaster recovery plans will be successful.

      The Company’s borrowings under its credit facility are limited by collateral formulas, based principally upon the Company’s eligible inventories. If availability (as calculated pursuant to the credit facility) falls below $25,000,000, the Company would be required, for a period of time, to comply with a financial covenant requiring it to maintain minimum levels of tangible net worth based on formulas. The credit facility also contains certain discretionary provisions that enable the lender to reduce availability. There can be no assurance as to the continued sufficiency of eligible collateral to enable borrowings by the Company under its credit facility, or that the Company will be able to comply with covenants under its credit facility, or that the lender will not otherwise limit borrowings by the Company under the credit facility.

      The Company depends in part on credit (including acceptable credit terms) provided by its vendors and factors, and there can be no assurance as to their continued support. The Company believes that credit decisions made by vendors and factors are influenced by their perception of the Company’s credit rating. This perception is shaped by information reported in the industry and financial press and elsewhere as to the Company’s financial strength and operating performance. Accordingly, negative perceptions as to the Company’s financial strength or operating performance could have a negative impact on the Company’s liquidity.

      The Company’s business is seasonal by nature. The Christmas season (beginning the Sunday before Thanksgiving and ending on the first Saturday after Christmas), the back-to-school season (beginning the third week of July and continuing through the first week of September) and the Easter season (beginning two weeks before Easter Sunday and ending on the Saturday preceding Easter) collectively accounted for approximately 36.3% of the Company’s annual sales based on the Company’s last three fiscal years ended January 29, 2005. In general, sales volume varies directly with customer traffic, which is heaviest during the fourth quarter of a fiscal year. Because of the seasonality of the Company’s business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

      The Company’s results of operations have fluctuated in the past, and are expected to fluctuate in the future, as a result of a variety of factors, including weather conditions, the timing of store openings and related advertising and preopening expenses, store closings and related write-offs, price increases by suppliers (such as fuel costs, health benefit costs, utilities, and taxes), actions by competitors, the competitiveness of the retail apparel environment, general economic conditions, and global political unrest.

      The Company believes that its future success will depend significantly on the efforts and abilities of its senior executives, in particular, Robert M. Goodfriend, Chairman of the Board of Directors and Chief Executive Officer. The loss of the services of Mr. Goodfriend, or other members of the Company’s senior management, could have a material adverse effect on the Company. The Company has employment agreements with its senior executives, other than Mr. Goodfriend. The employment agreements provide, among other things, for severance payments and for the payments of between 12 and 18 months salary upon the occurrence of a change in control of the Company (as defined in the agreements).

      The Company believes that its future success will also largely depend upon its ability to attract and retain qualified employees. Competition for such personnel is intense and there can be no assurance that the Company will continue to be successful in attracting and retaining such personnel.

      The Company’s future operating results could be affected by its ability to identify suitable markets and sites for new stores, negotiate leases with acceptable terms and maintain adequate working capital. To serve its store growth, the Company must be able to achieve and maintain efficiency through the operation of its 2 distribution centers, one each in Knoxville, Tennessee, and Russellville, Arkansas, that currently service 233 and 126 of the Company’s stores, respectively. In addition, the Company must be able to continue to hire, train and retain competent managers and store personnel. There can be no assurance that the Company will be able to expand its market presence in its existing markets or successfully enter new or contiguous markets by opening new stores or that any such expansion will not adversely affect the Company. Further, if the Company’s management is unable to manage its growth effectively or closes a material number of stores, the Company could be materially and adversely affected.

      The Company finalized the opening of its e-commerce initiative through a website on March 8, 2005. There can be no assurance that this initiative will be financially successful or that it will be an effective channel of sales and distribution of the Company’s selected merchandise offerings.

      Critical accounting policies are those that management believes are both most important to the portrayal of the Company’s financial condition, operations and cash flows, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions.

      The Company considers inventory valuation, insurance reserves, contingencies, impairment of long-lived assets, and taxes to be most critical in understanding the judgments that are involved in preparing its consolidated financial statements. See discussion in “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

      The Company is involved in certain legal proceedings. The ultimate outcome of such pending legal proceedings may have a material adverse effect on the Company’s financial position, results of operations or cash flows. See “Item 3. — Legal Proceedings.”

      The Company owns the following properties:

      The Company currently leases all of its stores. Lease terms gen