Results of Operations

Overview
The Company operates primarily in two business segments through two wholly owned subsidiaries: retail grocery (including related real estate and store development activities) - operated by Harris Teeter, and industrial sewing thread (textile primarily), including embroidery thread and technical textiles - operated by A&E. Harris Teeter is a regional supermarket chain operating primarily in the southeastern United States, including Delaware and the District of Columbia. A&E is a global manufacturer and distributor of sewing thread for the apparel and other markets, embroidery thread and technical textiles. The Company evaluates the performance of its two businesses utilizing various measures which are based on operating profit.

The economic environment has motivated changes in the consumption habits of the retail consumer which has impacted the financial results of both operating subsidiaries. Unprecedented economic uncertainty, tumultuous market conditions, and a decreasing level of consumer confidence has created a more cautious consumer and increased the competitive environment in Harris Teeter's primary markets. Harris Teeter competes with other traditional grocery retailers, as well as other retail outlets including, but not limited to, discount retailers such as "neighborhood or supercenters" and "club and warehouse stores," specialty supermarkets and drug stores. Generally, Harris Teeter markets continue to experience new store opening activity and aggressive feature pricing or everyday low prices by competitors. In response, Harris Teeter utilizes information gathered from various sources, including its Very Important Customer ("VIC") loyalty card program, and works with suppliers to deliver effective retail pricing and targeted promotional spending programs that drive customer traffic and create value for Harris Teeter customers. In addition, Harris Teeter differentiates itself from its competitors with its product selection, assortment and variety, and its focus on customer service. These efforts along with Harris Teeter's new store development program have resulted in overall gains in market share within Harris Teeter's primary markets.

Harris Teeter has continued with its planned new store development program. Since the end of the second quarter of fiscal 2008, Harris Teeter has opened 13 new stores while closing 3 stores for a net addition of 10 stores. Harris Teeter operated 179 stores at March 29, 2009. Much of Harris Teeter's new store growth is focused on its expanding Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. The new store activity, and its associated pre-opening and incremental start-up costs, has required additional borrowings under the Company's revolving credit facility.

Business conditions for A&E's customers have also been negatively impacted by the current economic environment and the cautious consumer. A&E has experienced a significant decline in sales as a result of the serious global economic conditions facing their customers in the apparel and non-apparel markets, including the automotive segment. In addition, apparel production in the Americas has continued to decline due to the continued shift of apparel sourcing from the Americas to other regions of the world, predominately Asia. It has been estimated by the U.S. Department of Commerce Office of Textiles and Apparel that Asia and the Indian sub-continent accounted for approximately 69% of the apparel imports into the U.S. in 2006, approximately 73% in 2007, approximately 74% in 2008 and approximately 77% for the first two months in 2009. This has greatly impacted A&E operations in the Americas. As a result, A&E's strategic plans have included the expansion of its operations in the Asian markets and the expansion of product lines beyond apparel sewing thread.

A&E's growth in China, India and other Asian markets has been accomplished through additional investments in its wholly owned subsidiaries by way of capital expenditures and through strategic joint ventures. During the first quarter of fiscal 2009, A&E exercised its option to purchase an additional 14% ownership interest in Vardhman Yarns and Threads Limited ("Vardhman") under the terms of the original joint venture agreement. This additional investment increased A&E's total ownership interest in Vardhman to 49%. A&E continues to transform its business to be more Asian centric, which is in line with the global shifting of A&E's customer base.

In prior years, A&E has expanded its customer base and product line offerings through strategic acquisitions of businesses that produce technical textiles, embroidery thread and other non-apparel yarns. Technical textiles represent non-apparel yarns A&E supplies to its customers in the automotive, telecommunication, wire and cable, paper production and other industries. The sale of non-apparel threads and yarns resulting from these acquisitions has partially offset sales declines in the U.S. resulting from the shifting of apparel manufacturing. A&E continues to expand the manufacturing and distribution of non-apparel products throughout its global operations.

Quarterly Results

Consolidated
The following table sets forth the operating profit components by each of the
Company's business segments and Corporate for the 13 weeks ended March 29, 2009
and March 30, 2008. The table also sets forth each of the segment's net sales as
a percent to total net sales, the net income components as a percent to total
net sales and the percentage increase or decrease of such components over the
prior year (in thousands):

                                                                           March 29, 2009              March 30, 2008
                                                                               % to Total                  % to Total    % Inc.
                                                                                Net Sales                   Net Sales    (Dec.)
Net Sales
    Harris Teeter                                              $    949,427          94.0    $  893,064          91.5       6.3
    American & Efird                                                 60,577           6.0        82,508           8.5    (26.6)
        Total                                                  $  1,010,004         100.0    $  975,572         100.0       3.5

Gross Profit
    Harris Teeter                                              $    295,006         29.21    $  283,955         29.11       3.9
    American & Efird                                                  9,872          0.98        17,416          1.78    (43.3)
        Total                                                       304,878         30.19       301,371         30.89       1.2

Selling, General and Admin. Expenses
    Harris Teeter                                                   249,962         24.75       237,591         24.35       5.2
    American & Efird                                                 14,442          1.43        18,126          1.86    (20.3)
    Corporate                                                         1,452          0.14         1,578          0.16     (8.0)
        Total                                                       265,856         26.32       257,295         26.37       3.3

Operating Profit (Loss)
    Harris Teeter                                                    45,044          4.46        46,364          4.75     (2.8)
    American & Efird                                                (4,570)        (0.45)         (710)        (0.07)      n.m.
    Corporate                                                       (1,452)        (0.14)       (1,578)        (0.16)     (8.0)
        Total                                                        39,022          3.87        44,076          4.52    (11.5)

    Other Expense (Income), net                                       4,125          0.41         4,995          0.51    (17.4)
    Income Tax Expense                                               11,955          1.19        15,019          1.54    (20.4)
    Net Income                                                 $     22,942          2.27    $   24,062          2.47     (4.7)

n.m. - not meaningful

As depicted in the table above, the increase in consolidated sales was attributable to sales increases at Harris Teeter and was partially offset by a decrease in sales at A&E, when compared to the prior year. A&E's foreign sales for the second quarter of fiscal 2009 represented 3.2% of the consolidated net sales of the Company compared to 4.6% in the same period last year. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Gross profit increased during the second quarter of fiscal 2009 over the prior year period as a result of gross profit increases at Harris Teeter that were offset, in part, by a gross profit decline at A&E. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Selling, general & administrative ("SG&A") expenses increased when compared to the prior year period as a result of the increased operating costs at Harris Teeter driven by store expansion. The increased expenses were partially offset by reduced SG&A expenses at A&E and Corporate. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Other expense, net includes interest expense, interest income, investment gains and losses, and minority interest. Interest expense decreased over the prior year period by $0.8 million as a result of lower average interest rates on outstanding debt balances.

As a result of the items discussed above, consolidated net income for the second quarter of fiscal 2009 decreased by $1.1 million, or 4.7%, over the prior year period and earnings per diluted share decreased by 4.0% to $0.48 per share in fiscal 2009 from $0.50 per share in fiscal 2008.

Harris Teeter, Retail Grocery Segment
The following table sets forth the consolidated operating profit components for
the Company's Harris Teeter supermarket subsidiary for the 13 weeks ended March
29, 2009 and March 30, 2008. The table also sets forth the percent to sales and
the percentage increase or decrease over the prior year (in thousands):

                            March 29, 2009                March 30, 2008
                                      % to                          % to       % Inc.
                                     Sales                         Sales       (Dec.)
  Net Sales        $  949,427       100.00       $  893,064       100.00          6.3
  Cost of Sales       654,421        68.93          609,109        68.20          7.4
  Gross Profit        295,006        31.07          283,955        31.80          3.9
  SG&A Expenses       249,962        26.33          237,591        26.61          5.2
  Operating Profit $   45,044         4.74       $   46,364         5.19        (2.8)

Net sales increased by 6.3% in the second quarter of fiscal 2009, as compared to the prior year period. The increase in net sales was attributable to incremental new stores and comparable store sales increases. The increase in sales from new stores exceeded the loss of sales from closed stores by $58.5 million for the comparable periods. Comparable store sales (see definition below) increased 0.09% ($0.8 million) in the second quarter of fiscal 2009, as compared to 3.28% ($25.8 million) in the second quarter of fiscal 2008. Management believes that Harris Teeter's comparable store sales for the quarter were negatively impacted by the changing consumer buying habits created by the current economic environment and the timing of the Easter holiday which will fall into Harris Teeter's third fiscal quarter of 2009. Management also believes that comparable sales for the quarter were positively impacted by the timing of the New Year's holiday. As previously disclosed, the New Year's holiday is included in the second fiscal quarter of 2009, whereas in fiscal 2008, the New Year's holiday was included in the first quarter. On a comparable 11-week basis which excludes New Year's and Easter from the second quarter of both fiscal 2008 and 2009, comparable store sales increased by 0.11%. In addition, during the second quarter of fiscal 2009, Harris Teeter realized a higher percentage of sales of its lower priced store brand products, which management believes negatively impacted comparable store sales. Store brand product penetration was 24.80% during the second quarter of fiscal 2009, an increase of 62 basis points over the second quarter of fiscal 2008. The number of shopping visits was up, however the average ticket size was down in the second quarter of fiscal 2009, as compared to the prior year. In addition, Harris Teeter experienced an average increase in active households of 1.99% per comparable store (based on VIC data), evidencing a growing customer base in those stores. Comparable store sales were also negatively impacted by the cannibalization created by Harris Teeter's strategy of opening additional stores in its core markets that have a close proximity to existing stores. However, management expects these stores, and any similar new additions in the foreseeable future, to have a strategic benefit of enabling Harris Teeter to capture sales and expand market share as the markets it serves continue to grow.

Harris Teeter considers its reporting of comparable store sales growth to be effective in determining core sales growth during periods of fluctuation in the number of stores in operation, their locations and their sizes. While there is no standard industry definition of "comparable store sales," Harris Teeter has been consistently applying the following definition. Comparable store sales are computed using corresponding calendar weeks to account for the occasional extra week included in a fiscal year. A new store must be in operation for 14 months before it enters into the calculation of comparable store sales. A closed store is removed from the calculation in the month in which its closure is announced. A new store opening within an approximate two-mile radius of an existing store that is to be closed upon the new store opening is included as a replacement store in the comparable store sales measurement as if it were the same store. Sales increases resulting from existing comparable stores that are expanded in size are included in the calculations of comparable store sales, if the store remains open during the construction period.

Gross profit as a percent to sales in the second quarter of fiscal 2009, declined 73 basis points from the prior year as a result of additional promotional activity designed to provide more value to Harris Teeter's customers. Management continues to adjust Harris Teeter's promotional spending programs in response to the changing purchasing habits of Harris Teeter's customers. The decline in the gross profit margin was offset, in part, by management's emphasis on distribution and manufacturing cost controls and decreasing fuel costs.

As a result of the sales and cost elements described above, operating profit declined slightly over the prior year period. Harris Teeter continues to concentrate on expanding within its core markets, which management believes have greater potential for improved returns on investment in the foreseeable future.

American & Efird, Industrial Thread Segment The following table sets forth the consolidated operating profit components for the Company's A&E textile subsidiary for the 13 weeks ended March 29, 2009 and March 30, 2008. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):

                                                                        March 29, 2009               March 30, 2008
                                                                                  % to                         % to       % Inc.
                                                                                 Sales                        Sales       (Dec.)
  Net Sales                                                    $   60,577       100.00       $  82,508       100.00       (26.6)
  Cost of Sales                                                    50,705        83.70          65,092        78.89       (22.1)
  Gross Profit                                                      9,872        16.30          17,416        21.11       (43.3)
  SG&A Expenses                                                    14,442        23.84          18,126        21.97       (20.3)
  Operating Profit (Loss)                                      $  (4,570)       (7.54)       $   (710)       (0.86)         n.m.

Net sales decreased 26.6% in the second quarter of fiscal 2009 as compared to the prior year period. The decrease was driven by sales declines between the second quarters of fiscal 2009 and fiscal 2008 for all regions. Foreign sales accounted for approximately 53% of total A&E sales in the second quarter of fiscal 2009, as compared to approximately 55% in the second quarter of fiscal 2008. Foreign sales, especially in the Asian markets, will continue to be a significant proportion of total A&E sales due to the shifting global production of its customers and A&E's strategy of increasing its presence in such global markets. Management recognizes that a major challenge facing A&E is the geographic shift of its customer base and, as a result, management remains committed to its strategic plans that will transform A&E's business to a more Asian-centric global supplier of sewing thread, embroidery thread and technical textiles.

Gross profit and its percent to sales, in the second quarter of fiscal 2009 decreased from the second quarter of fiscal 2008, as a result of weak sales and poor overhead absorption in A&E's U.S. operations and certain other foreign operations. The shifting of apparel production from the Americas to Asia has continued and management is focused on optimizing costs and manufacturing capacities in its domestic and foreign operations.

SG&A expenses in the second quarter of fiscal 2009 decreased from the second quarter of fiscal 2008; however SG&A expenses as a percent to sales increased primarily due to the decrease in sales that provide the leverage to offset fixed expenses. A&E has realized some SG&A expense reductions through the consolidation and rationalization of A&E's U.S. operations. Net profit from non-consolidated subsidiaries is recorded as a reduction to SG&A expenses and amounted to $0.2 million in the second quarter of fiscal 2009, as compared to $0.5 million in the second quarter of fiscal 2008.

A&E's operating loss for the second quarter of fiscal 2009 resulted from a challenging automotive and retail apparel environment in many parts of the world and its impact on A&E's customers. Although A&E has significantly reduced expenses, it was not enough to offset the decline in sales and reduced operating schedules. Management at A&E intends to continue to reduce expenses at its U.S. operations and certain foreign operations to more closely match sales volumes.

Year-To-Date Results

Consolidated
The following table sets forth the operating profit components by each of the
Company's business segments and Corporate for the 26 weeks ended March 29, 2009
and March 30, 2008. The table also sets forth each of the segment's net sales as
a percent to total net sales, the net income components as a percent to total
net sales and the percentage increase or decrease of such components over the
prior year (in thousands):

                                                  March 29, 2009                 March 30, 2008
                                                      % to Total                     % to Total    % Inc.
                                                       Net Sales                      Net Sales    (Dec.)
Net Sales
    Harris Teeter                    $   1,878,354          93.7    $   1,789,668          91.7       5.0
    American & Efird                       126,635           6.3          162,647           8.3    (22.1)
       Total                         $   2,004,989         100.0    $   1,952,315         100.0       2.7

Gross Profit
    Harris Teeter                    $     583,355         29.09    $     557,382         28.55       4.7
    American & Efird                        22,366          1.12           35,022          1.79    (36.1)
       Total                               605,721         30.21          592,404         30.34       2.2

Selling, General and Admin. Expenses
    Harris Teeter                          494,004         24.64          466,783         23.91       5.8
    American & Efird                        28,037          1.40           35,502          1.82    (21.0)
    Corporate                                2,858          0.14            3,157          0.16     (9.5)
       Total                               524,899         26.18          505,442         25.89       3.8

Operating Profit (Loss)
    Harris Teeter                           89,351          4.45           90,599          4.64     (1.4)
    American & Efird                       (5,671)        (0.28)            (480)        (0.03)      n.m.
    Corporate                              (2,858)        (0.14)          (3,157)        (0.16)     (9.5)
       Total                                80,822          4.03           86,962          4.45     (7.1)

Other Expense, net                           9,045          0.45           10,007          0.51     (9.6)
Income Tax Expense                          25,953          1.29           29,545          1.51    (12.2)
Net Income                           $      45,824          2.29    $      47,410          2.43     (3.3)

As depicted in the table above, the increase in consolidated sales was attributable to sales increases at Harris Teeter which were partially offset by a decrease in sales at A&E when compared to the prior year. A&E's foreign sales for the 26 weeks ended March 29, 2009, represented 3.4% of the consolidated net sales of the Company compared to 4.6% in the same period last year. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Gross profit increased during the first half of fiscal 2009 over the prior year period as a result of gross profit increases at Harris Teeter that were offset, in part, by a gross profit decline at A&E. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Selling, general & administrative ("SG&A") expenses increased during the first half of fiscal 2009, when compared to the prior year period, as a result of the increased operating costs at Harris Teeter driven by store expansion. The increased expenses were partially offset by reduced SG&A expenses at A&E and Corporate. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Other expense, net includes interest expense, interest income, investment gains and losses, and minority interest. Interest expense for the 26 week period decreased over the prior year period by $0.9 million. The decrease in interest expense was driven by lower average interest rates on outstanding debt balances. Average outstanding debt balances actually increased between the comparable periods as a result of increased borrowings under the Company's credit facility and new capital leases entered into in support of Harris Teeter's new store development program.

As a result of the items discussed above, consolidated net income for the 26 weeks ended March 29, 2009 decreased by $1.6 million, or 3.3%, over the prior year period and earnings per diluted share decreased by 3.1% to $0.95 per share in fiscal 2009 from $0.98 per share in fiscal 2008.

Harris Teeter, Retail Grocery Segment
The following table sets forth the consolidated operating profit components for
the Company's Harris Teeter supermarket subsidiary for the 26 weeks ended March
29, 2009 and March 30, 2008. The table also sets forth the percent to sales and
the percentage increase or decrease over the prior year (in thousands):

                           March 29, 2009               March 30, 2008
                                     % to                         % to     % Inc.
                                    Sales                        Sales     (Dec.)
Net Sales        $   1,878,354     100.00     $   1,789,668     100.00        5.0
Cost of Sales        1,294,999      68.94         1,232,286      68.86        5.1
Gross Profit           583,355      31.06           557,382      31.14        4.7
SG&A Expenses          494,004      26.30           466,783      26.08        5.8
Operating Profit $      89,351       4.76     $      90,599       5.06      (1.4)

Net sales increased by 5.0% for the 26 weeks of fiscal 2009, as compared to the . . .