ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

BLAIR CORPORATION AND SUBSIDIARY

September 30, 1999


Results of Operations
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Comparison of Third Quarter 1999 and Third Quarter 1998

The third  quarter of 1999 resulted in a net loss of $732,400 as compared to net
income of $2,588,455 for the third quarter of 1998.  However,  the third quarter
of 1998 included income from  non-recurring  insurance proceeds of $2.8 million.
Net of the  insurance  proceeds,  the third  quarter of 1998  resulted  in a net
operating loss of $211,545. The third quarter of 1999 was negatively impacted by
the  disposition  of  excess  inventory   (approximately  $1.6  million  pre-tax
inventory  writedown  and  increased  volume of  sale-priced  offerings)  and by
increased postage costs  (approximately  $.9 million  pre-tax).  These increased
costs were primarily reflected in cost of goods sold and advertising expense.

Net sales for the third quarter of 1999 were  approximately  the same (down .2%)
as net sales for the third quarter of 1998. Overall, response rates in the third
quarter of 1999 were slightly  higher than in the third quarter of 1998 and were
at expected  levels for 1999.  Gross sales  revenue  generated  per  advertising
dollar increased  approximately  4.3% in third quarter 1999 as compared to third
quarter  1998.  The total number of orders  shipped  increased  slightly and the
average  order size  decreased  slightly  in the third  quarter of 1999 from the
third quarter of 1998. The provision for returned merchandise as a percentage of
gross sales decreased  approximately 6% in the third quarter of 1999 as compared
to the third quarter of 1998  primarily due to the Company's  efforts to improve
product quality.

Other  income  increased  2.6% in the third  quarter of 1999 as  compared to the
third quarter of 1998.  Commissions earned on continuity programs were primarily
responsible for the increased other income.

There  were no  insurance  proceeds  in 1999.  Insurance  proceeds  in the third
quarter of 1998 were the result of the Company owned term life policy on John L.
Blair,  former  President  and Chairman of the Company.  John died on August 29,
1998.

Cost of goods sold as a percentage of net sales  increased to 53.7% in the third
quarter of 1999 from 51.6% in the third quarter of 1998.  Cost of goods sold has
been negatively  impacted by the disposition of excess inventory  (approximately
$1.6 million pre-tax inventory  writedown) and by increased  shipping  (postage)
costs.  Excess inventory had resulted from the Company's  transition to a larger
catalog operation and lower than expected response in the fourth quarter of 1998
and the first quarter of 1999.

Advertising  expense in the third quarter of 1999  decreased 4.9% from the third
quarter of 1998.  Increased  catalog  mailings  and postal  rates were more than
offset by decreased letter mailings and co-op and media volume.

The total number of catalog  mailings  released in the third quarter of 1999 was
3% higher than in the third  quarter of 1998 (35.4  million  vs. 34.2  million).
Catalog mailings from all three product lines,  including  combined product line
offerings,  are  continually  reviewed as to mailing  frequency,  page  density,
product   content,   number  of  pages  and  trim  size.