SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, DC 20549
                            FORM 10-K
(Mark One)
  [ X ]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended January 31, 1998
                             OR
  [    ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from _________ to _________

                      Commission file Number 0-14681

                          J. BAKER, INC.
            (Exact name of registrant as specified in its charter)

      Massachusetts                                   04-2866591
(State of Incorporation)                  (IRS Employer Identification Number)

               555 Turnpike Street, Canton, Massachusetts 02021
                   (Address of principal executive offices)

                        (781) 828-9300
         (Registrant's telephone number, including area code)

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

       Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $.50 per share
                 7% Convertible Subordinated Notes Due 2002
                     Preferred Stock Purchase Rights
                             (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 [ 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. [ ]

         As of April 1, 1998, the aggregate market value of voting stock held by
non-affiliates  of the  Registrant was  $107,772,488  based on the last reported
sales price of Registrant's stock on the NASDAQ Stock Market System.

         13,919,190 shares of common stock were outstanding on April 1, 1998.

                        DOCUMENTS INCORPORATED BY REFERENCE
         Portions of the  Registrant's  definitive  proxy  statement to be filed
pursuant  to  Regulation  14A within 120 days after the end of the  Registrant's
fiscal year are incorporated by reference in Part III.


<PAGE>


                           J. Baker, Inc.
                           Form 10-K Report
                        Year Ended January 31, 1998
                               Part I

STATEMENTS  MADE OR  INCORPORATED  INTO THIS ANNUAL  REPORT  INCLUDE A NUMBER OF
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.
FORWARD-LOOKING  STATEMENTS INCLUDE,  WITHOUT LIMITATION,  STATEMENTS CONTAINING
THE WORDS "ANTICIPATES", "BELIEVES", "EXPECTS", "INTENDS", "FUTURE" AND WORDS OF
SIMILAR  IMPORT,  WHICH  EXPRESS  MANAGEMENT'S  BELIEF,  EXPECTATIONS  OR INTENT
REGARDING THE COMPANY'S FUTURE  PERFORMANCE.  THE COMPANY'S ACTUAL RESULTS COULD
DIFFER  MATERIALLY  FROM  THOSE  SET  FORTH IN THE  FORWARD-LOOKING  STATEMENTS.
FACTORS THAT MAY CAUSE SUCH  DIFFERENCES  ARE DESCRIBED IN THE SECTION  ENTITLED
"CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS" FOUND ON PAGE 19 OF THIS ANNUAL
REPORT.

Item 1.  BUSINESS

General
         J. Baker,  Inc. ("J. Baker" or the "Company",  which term shall include
all  subsidiaries  of the  Company) is engaged in the retail sale of apparel and
footwear  in three niche  markets.  The Company is engaged in the retail sale of
apparel  through  its chain of Casual Male Big & Tall men's  stores,  which sell
fashion, casual and dress clothing and footwear to the big and tall man; through
its chain of Work 'n Gear work clothing  stores,  which sell a wide selection of
workwear as well as  health-care  apparel and  uniforms for industry and service
businesses;   and  through  its  RX  Uniforms  stores,  which  exclusively  sell
healthcare  apparel.  The Company sells footwear through  self-service  licensed
footwear departments in discount department stores.

         On  January  13,  1997,  the  Company  announced  that it had  signed a
definitive  agreement  for the sale of its Parade of Shoes  division  to Payless
ShoeSource, Inc. ("Payless") of Topeka, Kansas. The transaction was completed on
March 10, 1997.  For  additional  information on the sale of the Parade of Shoes
division, see Industry Segments,  Footwear,  Parade of Shoes Division and Note 2
to the Consolidated Financial Statements.

         On March  5,  1997,  the  Company  announced  that it had sold its Shoe
Corporation  of America  ("SCOA")  division  to an entity  formed by CHB Capital
Partners of Denver,  Colorado along with Dennis B. Tishkoff,  President of SCOA,
and certain members of SCOA management.  For additional  information on the sale
of SCOA, see Industry Segments,  Footwear, Shoe Corporation of America Division,
and Note 2 to the Consolidated Financial Statements.

         During  fiscal  1996,  the  Company  disposed  of  its  Fayva  footwear
division.  For  additional  information  on the  disposal of the Fayva  footwear
business, see Industry Segments, Footwear, Fayva Footwear Division and Note 2 to
the Consolidated Financial Statements.

         The  Company's  businesses  are  seasonal.  The Casual  Male Big & Tall
division  generates  its largest sales  volumes in June  (Father's  Day) and the
Christmas  season,  and the Work 'n Gear stores  generate  their  largest  sales
volume during the second half of the fiscal year. The Company's largest footwear
volume is generated in the Easter,  back to school and Christmas  seasons.  On a
combined  basis,  the Company's sales during the second half of each fiscal year
have consistently exceeded those during the first half of the year. Unseasonable
weather  may  affect  sales of  shoes  and  boots  as well as of work  clothing,
especially during the traditional high-volume periods.

         The Company is required to carry a  substantial  inventory  in order to
provide prompt  deliveries to its Casual Male Big & Tall and Work 'n Gear stores
and its licensed footwear departments. Order backlogs, however, are not material
to the  Company's  business.  The  inventories  needed in the  operation  of the
Company's apparel and footwear  businesses are currently available from a number
of domestic and overseas sources, with no single source accounting for more than
eight percent of the Company's merchandise.

         The  Company  benefits by "most  favored  nation"  provisions  in trade
agreements  between  the  United  States  and  certain  countries  in which  the
Company's  suppliers are located.  From time to time, the United States Congress
has proposed legislation which could result in such provisions being struck from
particular trade agreements, which could, in turn, result in 
<PAGE>

higher costs to the Company. There has been extensive  Congressional debate with
respect to the "most favored nation"  provision of the trade  agreement  between
the United  States and China,  which was renewed for one year in July,  1992 and
has since been extended  through June, 1998. The failure of this provision to be
renewed would likely result in  substantially  increased costs to the Company in
the purchase of footwear from China.  However,  the Company believes that all of
its competitors in the footwear industry would be similarly affected.
Industry Segments

         The Company is engaged in the sale of apparel and footwear manufactured
by others. Financial information with respect to the Company's industry segments
can be found in Note 12 to the Consolidated Financial Statements.

Apparel

Casual Male Big & Tall Division
         Casual Male Big & Tall is the  Company's  chain of big and tall apparel
stores providing fashion, casual and dress clothing and footwear for the big and
tall man.  The chain  specializes  in a wide range of high  quality  apparel and
accessories  for big (waist sizes from 40" to 66") and tall (6'2" or taller) men
at moderate  prices.  The Company  believes  that the clothing  demands of these
customers  have  historically  not been met through  traditional  men's  apparel
stores. The big and tall customer  frequently has difficulty finding an adequate
selection  of  apparel in his size in  department  and men's  specialty  stores.
Furthermore,  only a limited number of big and tall specialty  stores exist, and
these typically have a narrow selection of current sportswear fashions.

         Casual Male Big & Tall stores offer private label as well as some brand
name casual  sportswear  and dress wear in a wide variety of styles,  colors and
fabrics with a focus on basic merchandise such as sports coats,  dress pants and
shirts and a wide  variety of casual  clothes,  including  footwear.  The stores
target the middle income customer  seeking good value at moderate prices and, as
a result,  the  Casual  Male  limits  the  amount of  high-fashion-oriented  and
low-turnover  tailored clothing offered and focuses primarily on basic items and
classic  fashion  sportswear,  thereby  minimizing  fashion risk and  markdowns.
Management  believes that the type and selection of its  merchandise,  favorable
prices and  ability  to obtain  desirable  store  locations  are key  factors in
enabling it to compete  effectively.  Casual Male Big & Tall started fiscal 1998
with 440 stores and ended the year with 459 stores in 47 states,  having  opened
32 stores  and  closed 13 stores.  Sales in the  Casual  Male Big & Tall  stores
accounted  for 43.4%,  26.9% and 21.0% of the Company's  total  revenues for the
years  ended  January  31,  1998,   February  1,  1997  and  February  3,  1996,
respectively.  On a pro forma basis,  excluding sales generated by the Company's
SCOA and Parade of Shoes  divisions,  sales in the Casual Male Big & Tall stores
accounted for 44.7% of the Company's sales for the year ended January 31,1998.

         The Company's Casual Male Big & Tall division faces  competition from a
variety of sources  including  department  stores,  specialty  stores,  discount
stores and off-price and other retailers who sell big and tall  merchandise.  In
addition, sales of clothing through catalogs and home shopping networks or other
electronic  media provide  additional  sources of  competition.  The Casual Male
faces  competition  on a local  level  from  independent  retailers  and  small,
regional  retail  chains,  as well as on a national  scale from  chains  such as
Rochester Big & Tall and Repp, Ltd., a division of Edison  Brothers,  Inc. Repp,
Ltd.,   one  of  Casual  Male's  largest   competitors,   operates  a  chain  of
approximately  180 big and tall  stores.  While  Casual  Male  has  successfully
competed   on  the  basis  of   merchandise   selection,   including   inventory
replenishment  on an  ongoing  basis by color and size,  favorable  pricing  and
desirable store  locations,  there can be no assurance that other retailers will
not adopt purchasing and marketing  concepts similar to those of the Casual Male
Big & Tall chain. In addition, discount retailers with significant buying power,
such as Wal-Mart,  K-Mart and Target stores,  represent an increasing  source of
competition  for  Casual  Male.  The bulk of the  merchandise  carried  by these
department  stores is classified as commodity or "basic" items, but their buying
power provides them with a competitive  edge and an ability to charge low prices
for such items.

         In  deciding to open Casual Male  stores,  the Company  reviews  market
demographics, drive-by visibility for customers, store occupancy costs and costs
to build  and  stock  each  location.  Considering  these  factors  and  others,
management of the Company  projects sales volumes and estimates  operating costs
for each  location and decides to open a store if such  projections  demonstrate
that an acceptable return on the Company's  inventory and fixed asset investment
can be realized.  New Casual Male stores require an average  inventory and fixed
asset   investment   of   approximately   $185,000  to  $220,000,   composed  of
approximately  $100,000 to $120,000 for fixed assets and $85,000 to $100,000 for
inventory.
<PAGE>

         The  Company  makes  decisions  to close  Casual  Male  locations  when
management  believes that these locations are not generating  acceptable  profit
levels. Most store closings occur at lease expiration,  unless lease buyout is a
more economical  option for the Company.  The costs to close stores are expensed
at the time the decision is reached to close the store.

Work 'n Gear Division
         The Work 'n Gear  division  is the  Company's  specialty  retail  chain
focused entirely on utility workwear, uniforms, healthcare apparel and footwear.
Work 'n Gear carries a wide  selection of workwear  products,  including  rugged
specialty outerwear, work shirts and pants, cold weather accessories, as well as
a complete  line of  healthcare  apparel and  uniforms  for industry and service
businesses.  The Company  started  fiscal 1998 with 66 stores and ended the year
with 66  stores,  having  opened 2 stores  (under  the name RX  Uniforms,  which
exclusively  sell  healthcare  apparel)  and closed 2 stores.  The 66 stores are
located  in 13 states in the  Northeastern  and  Midwestern  United  States.  In
addition,  the division  sells its  products  through a direct  corporate  sales
force, which markets workwear and uniforms to large corporate  accounts.  During
the past fiscal  year,  the Work 'n Gear  division  entered into  agreements  to
provide  uniforms to, among others, a national private security firm, a regional
transit authority and a large supermarket chain.

         The National  Association  of Uniform  Manufacturers  and  Distributors
estimates that  approximately  26 million people in the United States work force
wear workwear. Although manufacturing industries are generally on the decline in
the  United  States,  service  industries  are among  the  fastest  growing  and
traditionally  have  accounted  for a large  portion of  uniform  wearers in the
United States.  For example,  the U. S.  Government  Bureau of Labor  Statistics
cites security and healthcare as two of the service  industries where there will
be significant  growth over the next five years. The Work 'n Gear stores seek to
address  the  needs of three  major  groups:  (i) those  customers  who buy work
clothing to be worn on the job,  including  industrial tops and bottoms,  jeans,
work  boots,  rugged  outerwear  and other  accessories,  (ii)  those  corporate
customers  who either supply  uniforms or provide a clothing  allowance to their
employees  to  purchase  uniforms,  and (iii)  those  customers  who work in the
healthcare industry and related fields.

         Traditional  competition  for  the  sale  of  workwear  is  fragmented.
Traditional Army and Navy stores offer a large assortment of workwear items, but
supplement  with fishing,  hunting and other product  lines.  Other  competitors
include large specialty chains such as Bob's Stores and full service  department
stores which  typically  have more narrow  product  offerings.  To the Company's
knowledge,  no  specific  specialty  store  similar to Work 'n Gear  exists on a
national  basis.  Competition  for corporate  workwear  (purchased by employers)
comes from large manufacturers such as WearGuard/ARAMARK, Uniforms to You, Crest
Uniform and Fashion Seal, as well as small,  independent uniform dealers. In the
healthcare  apparel  business,  competition is dominated by three entities:  (i)
Life Uniform,  the largest retailer with approximately 300 stores,  (ii) catalog
operations  led by J. C. Penney and  including  Tafford,  Uniform  World,  Sears
Roebuck & Company  and  Jasco,  and (iii) over 2,000  independent  operators  of
healthcare  apparel  businesses.   Management  believes  that  its  strategy  of
servicing  all three  segments of the workwear  market--consumer,  corporate and
healthcare--combined  with  its  retail  expertise,   affords  Work  'n  Gear  a
significant competitive advantage in the marketplace.

         Work 'n Gear stores are generally  located in strip shopping centers or
are free standing.  Locations in active strip centers are a preferable criterion
for site  selection,  as the close proximity to other stores  increases  traffic
into  the  Work  'n  Gear  stores,   particularly  for  healthcare  apparel  and
accessories.  Site  locations  must take into  consideration  proximity of major
medical facilities,  active retail  environments,  population density,  business
presence in the market and competition.

         Sales in the Work 'n Gear stores  accounted for 8.9%,  5.9% and 4.8% of
the Company's  total revenues for the years ended January 31, 1998,  February 1,
1997 and February 3, 1996,  respectively.  On a pro forma basis, excluding sales
generated by the Company's SCOA and Parade of Shoes divisions, sales in the Work
'n Gear  stores  accounted  for 9.2% of the  Company's  sales for the year ended
January 31, 1998.

Footwear

Restructuring
         The Company has  restructured  its footwear  operations  (the "Footwear
Restructuring") in order to focus its efforts on the management, development and
growth of its Casual  Male Big & Tall and Work 'n Gear  apparel  businesses.  In
connection with the Footwear Restructuring, in March, 1997 the Company completed
the sales of its SCOA and Parade of Shoes businesses.  In addition,  the Company
reduced its investment in its Licensed Discount footwear  business.  The Company
decided to concentrate its efforts in the Licensed Discount  division  primarily
on its five largest licensors, while exploring future strategic options for this
business and continuing to close  departments  upon the  termination of licenses
where the Company believes it is appropriate to do so. As a result,  the Company
undertook  an  evaluation  of the value of the assets in
<PAGE>

the Licensed Discount footwear  business,  and wrote off certain assets which
did not benefit future  operations and wrote down other assets to estimated fair
value.  In fiscal 1997, the Company  recorded a pre-tax charge of $166.6 million
($117.1  million,  or $8.42 basic loss per share, on an after-tax basis) related
to the  sales of the SCOA and  Parade of Shoes  businesses,  the  write-down  to
estimated fair value of certain assets related to its Licensed Discount footwear
business, and severance and consolidation costs related to the downsizing of the
Company's  administrative  areas and its  corporate  facilities.  Of the pre-tax
charge,  $122.3  million  was  included  as a separate  component  of results of
operations  in the  Company's  Consolidated  Statement  of Earnings for the year
ended February 1, 1997, and the majority of the remaining charge,  which related
to the reduction of the Licensed Discount division's  inventory  valuation,  was
included  in cost of sales.  Also,  in  fiscal  1996,  the  Company  recorded  a
restructuring  charge of $69.3 million ($41.6  million,  or $3.00 basic loss per
share,  on an after-tax  basis) related to the liquidation of its Fayva footwear
business. For additional  information,  See Note 2 to the Consolidated Financial
Statements.

Licensed Discount Footwear Division
         In a licensed  footwear  department  operation,  a discount  department
store  chain and the  Company  enter into a license  agreement  under  which the
Company has the  exclusive  right to operate a footwear  department  in the host
stores for a specified  period of years.  The  department is operated  under the
store name in space supplied by the store, and the store collects  payments from
customers  and credits the Company.  The Company  pays the  discount  department
store chain a license fee, generally a percentage of net sales, for the right to
operate the department and for the use of the space.  The license fee ordinarily
covers utilities,  janitorial service,  cash collection and handling,  packaging
and  advertising.  In some  circumstances,  the license fee also covers staffing
costs.

         In its licensed  footwear  department  operations,  the Company sells a
wide variety of family footwear,  including men's, women's and children's dress,
casual and athletic footwear as well as work shoes, boots and slippers.  Most of
the footwear  offered by the Company in its licensed  departments  is sold under
the Company's private labels or on an unbranded basis, although the Company also
sells name brand merchandise at discounted prices in its licensed accounts.

         The  Company's   licensed  footwear   departments  are  operated  on  a
self-serve basis. The Company's personnel employed in particular departments are
responsible for stocking and layout of shelves, responding to customer inquiries
and related  administrative  tasks. In certain accounts,  the Company's licensed
footwear  departments  are  serviced  in a similar  manner by  employees  of the
licensor.

         The  Company  and its  predecessors  have  operated  licensed  footwear
departments in mass  merchandising  department stores for more than forty years.
Sales in the Licensed Discount division  accounted for 44.7%, 33.8% and 34.5% of
the Company's  total  revenues in the years ended January 31, 1998,  February 1,
1997 and February 3, 1996,  respectively.  On a pro forma basis, excluding sales
generated  by the  Company's  SCOA and Parade of Shoes  divisions,  sales in the
Licensed  Discount  division  accounted for 46.1% of the Company's sales for the
year ended January 31, 1998. At January 31, 1998,  the Company  operated a total
of 859 licensed footwear  departments under license agreements with 16 different
discount  department store operators.  During fiscal 1998, the Company opened 11
departments and closed 89, representing a net decrease of 78 units for the year.
As previously  indicated,  the Company  intends to concentrate  its resources in
this  division  on the  major  chains  in which it  operates  licensed  footwear
departments. As a result, the Company may continue to experience declines in the
number of licensed  departments  it operates.  The Company's  licensed  discount
departments are located in 38 states and in the District of Columbia.

         The Company conducts its licensed footwear department  operations under
written  agreements for fixed terms.  Of the 859 licensed  footwear  departments
which the  Company  operated at January 31,  1998,  561, or 65%,  are covered by
agreements  with terms  expiring  in less than five years and 298,  or 35%,  are
covered by an  agreement,  which  expires in July,  2009,  with Ames  Department
Stores, Inc. ("Ames"), a major mass merchandising retailer in the eastern United
States.  For the fiscal year ended January 31, 1998, Ames accounted for 15.4% of
the Company's total revenues. On a pro forma basis, excluding sales generated by
the Company's  SCOA and Parade of Shoes  divisions,  sales in Ames accounted for
15.9% of the Company's sales for the year ended January 31, 1998.

         On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a licensor of the
Company,  filed for protection under Chapter 11 of the United States  Bankruptcy
Code. At the time of the bankruptcy filing, the Company had outstanding accounts
receivable of  approximately  $1.8 million due from Bradlees.  Under  bankruptcy
law,  Bradlees has the option of  continuing  (assuming)  the  existing  license
agreement with the Company or terminating  (rejecting) that agreement.  On April
13,  1998,  Bradlees  filed  its Joint  Plan of  Reorganization  and  Disclosure
Statement with the United States  Bankruptcy Court for the Southern  District of
New York. If the license  agreement is assumed,  Bradlees must cure all defaults
under the  agreement and 
<PAGE>
the Company will collect in full the outstanding  past due receivable.  Although
the Company believes that rejection of the license agreement or the cessation of
Bradlees' business is not probable,  in the event that the agreement is rejected
or Bradlees does not continue in business,  the Company  believes it will have a
substantial claim for damages. If such a claim is necessary, the amount realized
by the Company relative to the carrying values of  Bradlees-related  assets will
be based on the relevant  facts and  circumstances.  The Company does not expect
this  filing  under the  Bankruptcy  Code to have a material  adverse  effect on
future  earnings.  The Company's sales in the Bradlees chain for the fiscal year
ended  January  31,  1998 were  $47.7  million.  See Note 3 to the  Consolidated
Financial Statements.

         On October 18, 1995, Jamesway Corporation ("Jamesway"), then a licensor
of the  Company,  filed for  protection  under  Chapter 11 of the United  States
Bankruptcy Code. Subsequently,  Jamesway ceased operation of its business in all
of its 90  stores.  At the  time  of the  bankruptcy  filing,  the  Company  had
outstanding accounts receivable of approximately $1.4 million due from Jamesway.
Because Jamesway ceased operation of its business, the Company filed a claim for
damages as its contract  with Jamesway was  rejected.  The Company  negotiated a
settlement of the amount of its claim with  Jamesway,  which was approved by the
Bankruptcy  Court.  The Jamesway  plan of  liquidation  was confirmed on June 6,
1997, and the Company  received a partial  distribution of the amount owed to it
under the settlement during the second quarter of fiscal 1998. In August,  1997,
the Company assigned its right to any further  distributions  from Jamesway to a
third party and received, in consideration therefor, an additional percentage of
the amount owed to the Company under its  settlement of its claim with Jamesway.
See Note 3 to the Consolidated Financial Statements.

         The Company's licensed footwear  department  business faces competition
at two levels: (1) for sales to retail customers and (2) for the business of the
department store chains which are its footwear licensor customers. The Company's
success  in  its  licensed  footwear  department   operations  is  substantially
dependent upon the success of the  department  store chains in which the Company
operates  licensed  footwear  departments.  Within the particular market that is
served by the  department  store chains,  the Company  believes that the primary
competitive  factors are the quality,  price and the breadth and  suitability of
the selection of footwear that is offered,  as well as store location,  customer
service and promotional activities.

         The  Company  also  faces  potential   competition  from  the  in-house
operational  capabilities  of its licensors.  Because of the large scale of many
licensing  arrangements  and years of commitment that are involved,  the Company
has observed that changes in these  arrangements do not frequently occur and are
more often  initiated  by  external  factors  such as  mergers  or  acquisitions
involving the licensors or business terminations by other licensees, rather than
by  competition  among  licensees for the business of a licensor.  To the extent
that there is active  competition  for new  business  in this area,  the Company
believes  that the  principal  factors  weighed by a potential  licensor are the
quality of the licensee's  operations,  as reflected by sales  results,  and the
price paid to the licensor in the form of the license fee.

Shoe Corporation of America Division
         The Company's SCOA division  operated  full-service,  semi-service  and
self-service  licensed footwear  departments in department and specialty stores.
SCOA was acquired by the Company in the fourth quarter of fiscal 1994.  Sales in
the SCOA  licensed  departments  accounted  for  1.6%,  19.8%  and  18.0% of the
Company's revenues in the fiscal years ended January 31, 1998,  February 1, 1997
and February 3, 1996, respectively.

         On March  5,  1997,  the  Company  announced  that it had sold its SCOA
business to an entity formed by CHB Capital  Partners of Denver,  Colorado along
with  Dennis  B.  Tishkoff,  President  of SCOA,  and  certain  members  of SCOA
management.  The  decision  to  divest  the SCOA  business  was a result  of the
refocusing  of  the  Company's  management  efforts  primarily  on  its  apparel
businesses   and  the  desire  of  SCOA   management  to  operate  the  division
independently.  The  transaction  involved  the  transfer  to the  buyer  of the
division's inventory, fixed assets, intellectual property and license agreements
for the various  department and specialty  store chains serviced by SCOA as well
as the assumption by the buyer of certain liabilities of the SCOA division.  Net
cash proceeds from the transaction of  approximately  $40.0 million were used to
pay down the Company's bank debt. For additional information,  see Note 2 to the
Consolidated Financial Statements.

Parade of Shoes Division
         The Parade of Shoes division, which the Company began in 1985, provided
primarily leather dress and casual shoes and athletic footwear at everyday value
prices available for selection in a casual,  self-service  atmosphere.  Sales in
the Parade of Shoes stores  accounted for 1.4%, 13.7% and 11.3% of the Company's
revenues  in the fiscal  years  ended  January  31,  1998,  February 1, 1997 and
February 3, 1996, respectively.

         On  January  13,  1997,  the  Company  announced  that it had  signed a
definitive  agreement  for the sale of its Parade of Shoes  business to Payless.
The Company  decided to divest the Parade of Shoes  business in order to refocus
management   
<PAGE>

efforts primarily on the Company's apparel  businesses.  The transaction,  which
was  completed  on March 10,  1997,  involved  the  transfer  to  Payless of the
division's inventory, fixed assets,  intellectual property and leases on the 186
then remaining Parade of Shoes stores. Net cash proceeds from the transaction of
approximately  $20.0 million were used to pay down the Company's  bank debt. For
additional information, see Note 2 to the Consolidated Financial Statements.

Fayva Footwear Division
         On September 5, 1995,  the Company  announced  its intent to dispose of
its Fayva footwear business,  which was completed by the end of fiscal 1996. The
Company  decided  to  dispose  of Fayva due to the  continued  operating  losses
generated  by the  division  along with  Fayva's  declining  market  share in an
already crowded discount retail footwear industry.  For additional  information,
see Note 2 to the Consolidated Financial Statements.

Trademarks

         The Company has no  franchises  or  concessions  except for  agreements
granting it the right to operate licensed footwear departments. The Company owns
certain  trademarks,  which it uses in its  business,  and owns one patent.  The
Company does not consider these trademarks and patent to be materially important
to its business.

Research and Development

         The  Company  does not  engage  in any  Company-sponsored  research  or
customer-sponsored research.

Environment

         The  Company  has not  been  required  to  make  any  material  capital
equipment  expenditures,  or suffered  any  material  effect on its  earnings or
competitive  position,  as a result of compliance  with federal,  state or local
environmental laws.

Employees

         As of January  31,  1998,  the  Company  employed  approximately  3,169
persons  full-time  and 3,461 persons  part-time,  of whom  approximately  2,284
full-time and 3,312 part-time employees were engaged in retail operations at the
store  level.  Approximately  360  of  the  Company's  full-time  and  part-time
employees are covered by collective bargaining agreements.  The Company believes
that  its  employee  relations  are  generally  good.  In  connection  with  the
divestitures  of the SCOA and Parade of Shoes  divisions  and certain  corporate
downsizing,  the  Company  reduced  its work force  during the first  quarter of
fiscal 1998 by approximately  3,481 employees,  of whom approximately 1,693 were
full-time and 1,788 were part-time.

Executive Officers of the Company
<TABLE>
         <S>                            <C>          <C>          
         Name                           Age          Office
         ----                           ---          ------
         Sherman N. Baker                78          Chairman of the Board
         Alan I. Weinstein               55          President and Chief Executive Officer
         Stuart M. Glasser               50          Executive Vice President and President and Chief 
                                                     Executive  Officer of The Casual Male, Inc.
         James Lee                       51          Executive  Vice  President and  President  of the  Licensed  Discount
                                                     Division
         Roger  J. Osborne               45          Executive Vice President and President of Work 'n Gear
         Philip G. Rosenberg             48          Executive Vice President, Chief Financial Officer and Treasurer
</TABLE>

         Mr. Baker has been the Chairman of the Board of the Company since 
March,  1990.  From 1970 until March, 1990, Mr. Baker served as Chief Executive 
Officer of the Company and its predecessor.

         Mr.  Weinstein has held the positions of President and Chief Executive
Officer since  November,  1996 and March, 1997,  respectively.  From September,
1996 through March, 1997, Mr. Weinstein served as Acting Chief Executive Officer
of the  Company.  From July,  1985 through  September,  1996,  Mr.  Weinstein  
held the positions of Senior Executive Vice President, Chief Financial Officer
and Secretary of the Company.  He was also appointed Chief Administrative  
Officer in 1988. Mr.  Weinstein joined the Company's  predecessor in 1968 as 
Assistant  Controller and has held a variety of positions of increasing 
responsibility in finance and administration since that time.
<PAGE>

         Mr.  Glasser has held the positions of Executive  Vice President of the
Company and President and Chief Executive Officer of The Casual Male, Inc. since
September,  1997.  Prior to  joining  the  Company,  from  January,  1991  until
September,  1997,  Mr.  Glasser  was an  Executive  Vice  President  and General
Merchandise Manager of men's, boy's, children's and cosmetics for Bloomingdales,
a division of Federated  Department  Stores,  Inc.  Prior to 1991,  Mr.  Glasser
served as President  and Chief  Executive of the  department  store  division of
Elder-Beerman  Stores  Corp.  and prior to that he served as an  Executive  Vice
President of Lord & Taylor.

         Mr. Lee has held the positions of Executive Vice President of the 
Company and President of the Company's  Licensed Discount  Division since 
January,  1995. From August,  1994 through  December,  1994, Mr. Lee was Senior
Vice President and Director  of  Distribution  for the  Company's  Fayva  
division.  Prior to joining  the  Company,  Mr. Lee was Senior  Vice
President and General Merchandise Manager of Caldor Stores.

         Mr.  Osborne has held the positions of Executive  Vice President of the
Company and President of the Company's Work 'n Gear division  since June,  1997.
From  November,  1996  until  June,  1997,  Mr.  Osborne  served as Senior  Vice
President  and Zone  Director for Mid-West and East coast  markets for Hollywood
Entertainment Corp. From January,  1995 to November,  1996, Mr. Osborne held the
position of Senior Vice  President  and Director of  Operations of the Company's
Licensed  Discount  footwear  department  business.  Mr. Osborne was employed as
Senior Vice  President and Director of Store  Operations  for Pic 'n Pay Stores,
Inc., a chain of discount footwear stores, from 1988 to January, 1995.

         Mr.  Rosenberg has held the position of Executive Vice President since
September,  1996 and was appointed  Chief Financial  Officer in March,  1997.  
From  September,  1996  through  March,  1997,  Mr. Rosenberg  served as Acting 
Chief Financial  Officer of the Company.  In addition, Mr.  Rosenberg has held 
the  positions of Treasurer and Chief  Accounting Officer  since  June,  1992. 
Mr.  Rosenberg  joined  the  Company's  predecessor  in May,  1970 and has held
a variety  of positions of increasing responsibility in finance and 
administration since that time.

Item 2.  PROPERTIES

         The executive and administrative  offices of the Company,  the licensed
footwear  department  business and the Work 'n Gear division,  and the warehouse
and distribution  centers of the licensed footwear  department  business and the
Work 'n Gear  division are located in Canton,  Massachusetts.  This  facility is
located  on 37 acres of land and is owned by JBAK  Canton  Realty,  Inc.  ("JBAK
Realty"), a wholly-owned  subsidiary of JBAK Holding,  Inc. ("JBAK Holding") and
an indirect,  wholly-owned subsidiary of J. Baker, Inc. In December,  1996, JBAK
Realty obtained a $15.5 million mortgage loan from The Chase Manhattan Bank (the
"Mortgage  Loan") secured by the real estate,  buildings and other  improvements
owned by JBAK Realty located at 555 Turnpike Street, Canton,  Massachusetts (the
"Canton  Property").  JBAK Realty  leases the Canton  Property to JBI,  Inc.,  a
wholly-owned  subsidiary of J. Baker, Inc. This facility contains  approximately
750,000  square feet of space,  including  approximately  150,000 square feet of
office space.

         The  Company  leases  a  building  at  437  Turnpike  Street,   Canton,
Massachusetts  that serves as the  administrative  offices for Casual Male Big &
Tall. The building  contains  approximately  53,000 square feet of office space.
The lease on this facility expires on January 31, 2008.

         The Company leases a building in Readville,  Massachusetts  that serves
primarily as the  distribution  center for Casual Male Big & Tall.  The building
contains  approximately  75,000  square feet of office  space and  approximately
375,000 square feet of warehouse/distribution  space. The lease on the Readville
facility  expires on May 31,  1999.  The Company has two  consecutive  five-year
options to renew the lease.

         As of January 31, 1998, the Company operated 459 Casual Male Big & Tall
stores,  all in leased  premises  ranging from 1,710 to 5,987 square feet,  with
average   space  of   approximately   3,260  square  feet  and  total  space  of
approximately  1,495,000  square  feet. A majority of the leases run for initial
terms of five years.  Most are renewable at the option of the Company for one or
more five-year terms.

         As of January 31,  1998,  the  Company  operated 66 Work 'n Gear stores
(including  2  stores  under  the  name  RX  Uniforms,  which  exclusively  sell
healthcare  apparel),  all in leased premises  ranging from 2,430 square feet to
6,200 square feet,  with average  space of  approximately  4,305 square feet and
total space of  approximately  284,000 square feet. A majority of the leases run
for initial terms of five years. Most are renewable at the option of the Company
for one or more five-year terms.
<PAGE>

         See "Item 1. BUSINESS--Industry  Segments,  Footwear, Licensed Discount
Footwear Division",  for information regarding the Company's licenses to operate
footwear departments in retail stores of its licensors.

Item 3.  LEGAL PROCEEDINGS

         On  September  17,  1997,  the  Company  settled a patent  infringement
lawsuit  brought  against the Company and Morse Shoe,  Inc., a subsidiary of the
Company, by Susan Maxwell. Pursuant to the settlement agreement, both cases were
dismissed  with  prejudice  with no  admissions  of  liability  and the  parties
executed a mutual release of all claims. Under the terms of the settlement,  the
Company agreed to make payments to Ms. Maxwell of $4,137,000,  in the aggregate,
over a three-year  period and in connection with the settlement,  has recorded a
one-time charge to earnings of $3.4 million ($2.1 million on an after-tax basis)
during the third quarter of fiscal 1998  reflecting  costs of the settlement not
previously accrued for.

         The  Company  is  not  currently  a  defendant  in any  material  legal
proceedings.

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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year covered by this report.





<PAGE>


                            PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

Market Information

         The Company's Common Stock is traded on The Nasdaq Stock Market(SM) 
under the symbol "JBAK".

         The  following  table sets forth the high and low last  reported  sales
prices, as reported by NASDAQ, for the Company's Common Stock for each quarterly
period during the years ended January 31, 1998 and February 1, 1997.  The prices
set forth below do not include retail mark-ups, mark-downs or commissions.
<TABLE>
         <S>                                                           <C>             <C>
         Year Ended January 31, 1998                                    High            Low
                                                                        ----            ---
         First Quarter                                                 $ 9 13/16       $  6 3/8
         Second Quarter                                                   9               7 5/8
         Third Quarter                                                    9 9/16          7 1/8
         Fourth Quarter                                                   7 3/4           4 1/2

         Year Ended February 1, 1997                                    High            Low
                                                                        ----            ---
         First Quarter                                                 $ 9 7/8         $  4 1/8
         Second Quarter                                                 10 1/2            6 3/8
         Third Quarter                                                    7               5 3/8
         Fourth Quarter                                                   7               5 5/16
</TABLE>

Holders

         The  approximate  number of holders of record of the  Company's  Common
Stock as of April 1, 1998 was 809. The Company  believes  that the actual number
of beneficial owners of the Company's Common Stock is substantially greater than
the stated  number of holders of record,  because a portion of the Common  Stock
outstanding is held in "street name".

Dividends

         On March 2,  1987,  the Board of  Directors  of the  Company  adopted a
policy of paying quarterly dividends.  For each quarter thereafter,  the Company
has paid a 1 1/2 cents per share dividend.

         The Company's  secured credit  agreements  and its senior  subordinated
notes  agreement  limit  the  amount  of  cash  dividends  that  may be  paid to
stockholders.  For  additional  information,  see  Note  5 to  the  Consolidated
Financial Statements.

Other

         On December 15, 1994,  the Board of Directors of the Company  adopted a
Shareholder  Rights Agreement (the "Rights  Agreement")  designed to enhance the
Company's  ability  to  protect   shareholder   interests  and  to  ensure  that
shareholders  receive fair treatment in the event any coercive  takeover attempt
of the Company is made in the  future.  Pursuant  to the Rights  Agreement,  the
Board of  Directors  declared a dividend  distribution  of one  preferred  stock
purchase right (the "Right") for each  outstanding  share of common stock of the
Company  to  shareholders  of record as of the close of  business  on January 6,
1995.  Each  right  entitles  the  holder to  purchase  from the  Company a unit
consisting  of one ten  thousandth  (1/10,000)  of a share  of  Series  A Junior
Participating  Cumulative  Preferred Stock, par value $1.00 per share, at a cash
exercise price of $70 per unit,  subject to  adjustment,  upon the occurrence of
certain  events as set forth in the Rights  Agreement.  These events include the
earliest  to  occur  of (i) the  acquisition  of 15% or more of the  outstanding
shares  of  common  stock  of the  Company  by any  person  or  group,  (ii) the
commencement  of  a  tender  or  exchange  offer  that  would  result  upon  its
consummation in a person or a group becoming the beneficial owner of 15% or more
of the outstanding  common stock of the Company,  or (iii) the  determination by
the Board of Directors that any person is an "Adverse Person", as defined in the
Rights  Agreement.  The  Rights  are not  exercisable  until  or  following  the
occurrence  of one of the above  events and will  expire on December  14,  2004,
unless previously redeemed or exchanged by the Company as provided in the Rights
Agreement.



<PAGE>


Item 6.  SELECTED CONSOLIDATED FINANCIAL DATA

         The following selected consolidated  financial data for the Company are
derived from the  consolidated  financial  statements that have been audited and
reported on by KPMG Peat Marwick LLP, independent  certified public accountants,
and  are  qualified  in  their  entirety  by  reference  to  the  more  detailed
consolidated  financial statements and the independent  auditors' report thereon
appearing  elsewhere  in this  Form  10-K.  J.  Baker has  acquired  a number of
specialty retail  businesses in recent years,  sold its SCOA and Parade of Shoes
businesses  in fiscal 1998 and disposed of its Fayva  footwear  business  during
fiscal 1996.  The Company has also  experienced a number of licensor  bankruptcy
filings in recent  years.  These  acquisitions,  the sales of SCOA and Parade of
Shoes,  the  liquidation  of Fayva and licensor  bankruptcy  filings  affect the
comparability of the financial information herein. For further discussions,  see
"Item 1. BUSINESS" and Notes 2 and 3 to the Consolidated Financial Statements.

                           J. BAKER, INC.
                  SELECTED CONSOLIDATED FINANCIAL DATA
            (Dollars in thousands, except per share amounts)
<TABLE>
<S>                                                     <C>             <C>         <C>         <C>             <C>
                                                                         Year Ended
                                                         --------------------------------------------------------------
                                                         1/31/98           2/01/97      2/03/96    1/28/95      1/29/94
                                                         -------           -------      -------    -------      -------
Income Statement Data:                                                               (53 weeks)
----------------------
Net sales                                               $ 592,151        $897,492   $1,020,413  $1,042,979      $918,878
Cost of sales                                             327,827         542,247      580,067     579,735       516,855
                                                          -------         -------      -------     -------       -------
      Gross profit                                        264,324         355,245      440,346     463,244       402,023
Selling, administrative and
  general expenses                                        226,151         347,977      392,586     389,362       336,283
Depreciation and amortization                              15,102          29,431       32,428      27,883        21,874
Restructuring and other non-recurring charges                   -         122,309       69,300           -             -
Litigation settlement charges                               3,432               -            -           -             -
                                                        ---------        --------   ----------    --------      --------
      Operating income (loss)                              19,639        (144,472)     (53,968)     45,999        43,866
Interest income                                              (109)           (254)        (526)       (635)         (704)
Interest expense                                           13,497          13,056       10,983       9,735         8,146
                                                        ---------        --------     --------    --------      --------
      Earnings (loss) before income taxes                   6,251        (157,274)     (64,425)     36,899        36,424
Income tax expense (benefit)                                2,438         (45,846)     (25,823)     13,283        13,113
                                                        ---------         -------     --------     -------      --------
      Net earnings (loss)                               $   3,813       $(111,428)  $ (38,602)   $  23,616      $ 23,311
                                                        =========        ========    =========    ========       =======

Earnings (loss) per common share:

      Basic                                             $    0.27       $   (8.02)  $    (2.79)   $   1.71      $   1.70
                                                         ========        ========     ========     =======      ========

      Diluted                                           $    0.27       $   (8.02)  $    (2.79)   $   1.46      $   1.45
                                                        =========        ========     ========     =======       ========
</TABLE>

<TABLE>
      <S>                                        <C>           <C>             <C>             <C>              <C>
                                                                                 As At
                                                  ---------------------------------------------------------------------
                                                  1/31/98       2/01/97         2/03/96         1/28/95         1/29/94
                                                  -------       -------         -------         -------         -------
       Balance Sheet Data:
       ------------------
       Working capital                           $122,789      $182,122        $205,080        $235,948         $187,095
       Total assets                               335,067       388,541         526,082         578,618          502,496
       Long-term debt                             186,251       214,092         207,766         204,518          154,665
       Stockholders' equity                        75,263        71,989         184,037         223,317          200,086
                                                  =======       =======         =======         =======          =======
       Cash dividends declared
            per common share                      $   .06      $    .06        $    .06        $    .06         $    .06
                                                   ======       =======         =======         =======          =======
</TABLE>

<PAGE>

                                 J. BAKER, INC.
                      SELECTED CONSOLIDATED FINANCIAL DATA


<TABLE>
<S>                       <C>       <C>       <C>             <C>         <C>    <C>          <C>        <C>    <C>
Store Openings and Closings:
----------------------------

                                    Apparel                                           Footwear
                          ----------------------------        ----------------------------------------------------------
                                                                                    Total     Parade
                          Casual     Work     Total           Licensed            Licensed    of                Total
                          Male      'n Gear   Apparel         Discount    SCOA   Shoe Dept.   Shoes      Fayva  Footwear   Total
                          ------    ------    -------         --------    ----   ----------   -----      -----  --------   -----

Stores open at
   January 28, 1995         319         61        380           1,242       448      1,690      191        368    2,249    2,629

Openings                     81          9         90              27        99        126        8          6      140      230

Closings                      -         (1)        (1)           (182)      (42)      (224)     (31)      (374)    (629)    (630)
                         ------      -----       -----          -----     -----      -----     -----     -----    -----    -----


Stores open at
   February 3, 1996         400         69        469           1,087       505      1,592      168          -    1,760    2,229

Openings                     49          -         49              38        56         94       42          -      136      185

Closings                     (9)        (3)       (12)           (188)     (107)      (295)     (22)         -     (317)    (329)
                         ------      -----      -----           -----     -----      -----     ----      -----    -----    -----


Stores open at
   February 1, 1997         440         66        506             937       454      1,391      188          -    1,579    2,085

Openings                     32          2         34              11         -         11        -          -       11       45

Closings                    (13)        (2)       (15)            (89)     (454)      (543)    (188)         -     (731)    (746)
                         ------      -----      -----            ----     -----      -----    -----      -----    -----     ----

Stores open at
  January 31, 1998          459         66        525             859         -        859        -          -      859    1,384
                          =====      =====      =====           =====   =======      =====    =====     ======    =====    =====
</TABLE>




<PAGE>


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

         All  references  herein to fiscal  1998,  fiscal  1997 and fiscal  1996
relate to the years ended  January 31,  1998,  February 1, 1997 and  February 3,
1996,  respectively.  To the extent that the Company may have incurred increased
costs  resulting from inflation,  the Company  believes that it has been able to
offset these costs through higher  revenues.  Accordingly,  the Company believes
that inflation has had no significant impact on the operations of the Company.

Results of Operations

         The Company completed the Footwear  Restructuring in order to focus its
efforts on the management,  development and growth of its Casual Male Big & Tall
and  Work  'n  Gear  apparel   businesses.   In  connection  with  the  Footwear
Restructuring,  in March,  1997 the Company  completed the sales of its SCOA and
Parade of Shoes businesses.  In addition,  the Company reduced its investment in
its Licensed Discount footwear business.  The Company decided to concentrate its
efforts  in  the  Licensed  Discount  division  primarily  on its  five  largest
licensors,  while  exploring  future  strategic  options for this  business  and
continuing  to close  departments  upon the  termination  of licenses  where the
Company  believes  it is  appropriate  to do so. In  fiscal  1997,  the  Company
recorded a pre-tax charge of $166.6 million ($117.1 million, or $8.42 basic loss
per share, on an after-tax basis) related to the sales of the SCOA and Parade of
Shoes  businesses,  the  write-down  to estimated  fair value of certain  assets
related  to  its  Licensed  Discount  footwear   division,   and  severance  and
consolidation  costs related to the  downsizing of the Company's  administrative
areas and its corporate  facilities.  Of the pre-tax charge,  $122.3 million was
included as a separate  component of results of operations as "Restructuring and
other non-recurring charges" in the Company's Consolidated Statement of Earnings
for the year ended  February 1, 1997. The Company also recorded a charge to cost
of sales of $37.3  million  related  to a  reduction  in the  Licensed  Discount
division's  inventory to estimated fair value. The remaining $7.0 million of the
charge  includes an increase in the  allowance  for  doubtful  accounts  for the
Licensed  Discount  division's  accounts  receivable,  and losses  incurred from
actions  taken in order to maximize  the cash  proceeds  received for the assets
sold in the SCOA and  Parade of Shoes  businesses  subsequent  to the  Company's
decision to dispose of such  businesses.  In fiscal 1996, the Company recorded a
restructuring  charge of $69.3 million ($41.6  million,  or $3.00 basic loss per
share,  on an after-tax  basis)  related to the  disposal of its Fayva  footwear
business.  While the Company  believes  that the  restructuring  of its footwear
business will serve to improve  operations in the future, the Company recognizes
it is operating in a competitive retail environment and has taken steps intended
to manage its  remaining  businesses in a manner  consistent  with such economic
environment.  These steps include  increasing the Company's focus on merchandise
planning and  distribution,  cutting  expenditures and prudently  managing store
openings. The Company also has attempted to generate additional sales and manage
inventory levels by increasing promotional activities.

                           Fiscal 1998 versus Fiscal 1997

         The Company's net sales  decreased by $305.3  million to $592.2 million
in  fiscal  1998  from  $897.5  million  in fiscal  1997,  primarily  due to the
disposition of the Company's SCOA and Parade of Shoes businesses in March, 1997.
Sales in the Company's apparel operations increased by $15.7 million,  primarily
due to an increase  in the number of Casual Male Big & Tall stores in  operation
at the end of fiscal  1998 as  compared  to fiscal  1997 and a 0.7%  increase in
comparable    apparel   store   sales.    (Comparable    apparel   store   sales
increases/decreases  are based upon comparisons of weekly sales volume in Casual
Male Big & Tall stores and Work 'n Gear stores which were open in  corresponding
weeks of the two comparison  periods.) Excluding net sales in the Company's SCOA
and  Parade of Shoes  businesses  of $17.7  million  in fiscal  1998 and  $300.7
million in fiscal 1997, sales in the Company's footwear operations  decreased by
$38.1  million to $264.9  million in fiscal 1998 from  $303.0  million in fiscal
1997.  This  decrease was primarily due to a reduction in the number of Licensed
Discount  footwear  departments  in operation  during fiscal 1998 as compared to
fiscal 1997 and a 5.1%  decrease in  comparable  retail  footwear  store  sales.
(Comparable  retail  footwear  store  sales  increases/decreases  are based upon
comparisons of weekly sales volume in licensed  footwear  departments which were
open in corresponding weeks of the two comparison periods.)

         The Company's cost of sales  constituted  55.4% of sales in fiscal 1998
as  compared to 60.4% in fiscal  1997.  Cost of sales in the  Company's  apparel
operations  was 52.8% of sales in fiscal  1998 as  compared to 52.1% of sales in
fiscal 1997.  The increase in such  percentage  was  primarily  attributable  to
higher  markdowns  as a  percentage  of  sales  and  lower  initial  markups  on
merchandise  purchases.  Cost of sales in the Company's footwear  operations was
58.2% of sales in fiscal  1998,  as  compared  to 64.4% of sales in fiscal  1997
(which,  exclusive of the $37.3  million  write-down  of the  Licensed  Discount
division's  inventory,  was 58.3% of sales in fiscal 1997). Cost of sales in the
Company's  Licensed  Discount  division  was 58.5% of sales in fiscal  1998,  as
compared  to 70.7%  in  fiscal  1997  (which,  exclusive  of the  $37.3  million
write-down of the Licensed Discount division's inventory,  was 58.4% of sales in
fiscal 1997).

<PAGE>

         Selling,  administrative and general expenses decreased $121.8 million,
or 35.0%,  to $226.2  million in fiscal 1998 from $348.0 million in fiscal 1997,
primarily  due to the  disposition  of the  Company's  SCOA and  Parade of Shoes
businesses in March, 1997 and the downsizing of the Company's  Licensed Discount
shoe  division  and  the  Company's   administrative  areas  and  its  corporate
facilities,  coupled  with the  benefit  realized  from the  curtailment  of the
Company's defined benefit pension plan in fiscal 1998. As a percentage of sales,
selling, administrative and general expenses were 38.2% of sales in fiscal 1998,
as  compared  to 38.8% of sales in  fiscal  1997.  Selling,  administrative  and
general  expenses in the  Company's  apparel  operations  were 39.4% of sales in
fiscal 1998,  which was  comparable  to 39.4% of sales in fiscal 1997.  Selling,
administrative  and general expenses in the Company's  footwear  operations were
36.9% of sales in fiscal  1998,  as compared  to 38.5% of sales in fiscal  1997.
This decrease was primarily due to the increased proportion of Licensed Discount
shoe department sales to total footwear sales in fiscal 1998 versus fiscal 1997.
The Company's Licensed Discount shoe division has lower selling,  administrative
and  general  expenses  as a  percentage  of sales than the  aggregate  selling,
administrative  and general  expenses as a  percentage  of sales in the divested
SCOA and Parade of Shoes divisions. Also included in selling, administrative and
general expenses in fiscal 1998 is a non-recurring charge of $700,000 ($427,000,
or $0.03 basic loss per share on an after-tax basis) recorded to write off costs
associated with an abandoned high-yield debt offering.

         Depreciation  and  amortization  expense  decreased by $14.3 million to
$15.1 million in fiscal 1998 from $29.4 million in fiscal 1997, primarily due to
lower  depreciable  assets  attributable  to the  write-off of certain fixed and
intangible  assets in the fourth  quarter of fiscal 1997  related to the overall
restructuring of the Company's footwear businesses.  This decrease was partially
offset by depreciation recorded on fiscal 1998 capital expenditures.

         During  fiscal 1997,  the Company  recorded a pre-tax  charge of $166.6
million  related to the  divestitures  of its SCOA and Parade of Shoes divisions
and the downsizing of the Company's Licensed Discount division and the Company's
administrative areas and its corporate facilities. Of the pre-tax charge, $122.3
million was classified as restructuring and other  non-recurring  charges.  Such
charges  included  the  losses  on the  sales of the SCOA  and  Parade  of Shoes
divisions,  the write-off of assets and obligations  related to the reduction of
the  Company's  investment  in its Licensed  Discount  division,  severance  and
related  costs,  and lease  obligations  and  write-offs  of assets  for  excess
corporate facilities. For additional information, see Note 2 to the Consolidated
Financial Statements.

         During  the  third  quarter  of  fiscal  1998,  the  Company   recorded
litigation  settlement  charges of $3.4  million  ($2.1  million on an after-tax
basis),  related to the  settlement  of a patent  infringement  lawsuit  brought
against the Company,  reflecting costs of the settlement not previously  accrued
for.  For  additional  information,  see  Note 9 to the  Consolidated  Financial
Statements.

         As a result of the above,  the Company's  operating income increased to
$19.6  million  (operating  income of $23.1  million  excluding  the  litigation
settlement  charges) in fiscal  1998 from an  operating  loss of $144.5  million
(operating  income of $22.1 million excluding the $166.6 million pre-tax charge)
in fiscal 1997.  As a percentage  of sales,  operating  income was 3.3% of sales
(operating income of 3.9% of sales excluding the litigation  settlement charges)
in fiscal 1998,  as compared to an operating  loss of 16.1% of sales  (operating
income of 2.5% of sales  excluding the $166.6 million  pre-tax charge) in fiscal
1997.

         Net interest expense increased $586,000 to $13.4 million in fiscal 1998
from $12.8  million in fiscal 1997,  primarily  due to a change in the Company's
method of financing foreign merchandise purchases with bank borrowings in fiscal
1998 versus the use of bankers'  acceptances in fiscal 1997, partially offset by
lower interest rates on bank  borrowings and lower levels of bank  borrowings in
fiscal 1998 versus fiscal 1997.

         Taxes on  earnings  for  fiscal  1998 were $2.4  million,  yielding  an
effective  tax rate of 39.0%,  as  compared  to an income  tax  benefit of $45.8
million in fiscal 1997,  yielding an effective tax rate of 29.2%. The difference
in the  effective  tax rate  primarily  reflects  the  impact of the  additional
valuation  reserve applied against deferred tax accounts as of February 1, 1997.
See Note 6 to the Consolidated  Financial  Statements for further  discussion of
taxes on earnings.

         Net  earnings for fiscal 1998 were $3.8  million,  as compared to a net
loss of $111.4 million in fiscal 1997.


<PAGE>
                             Fiscal 1997 versus Fiscal 1996

         The Company's net sales  decreased by $122.9 million or 12.0% to $897.5
million in fiscal 1997 from $1.02 billion in fiscal 1996. Sales in the Company's
apparel operations  increased by $30.5 million,  primarily due to an increase in
the number of Casual Male Big & Tall stores and Work 'n Gear stores in operation
at the end of fiscal  1997 over fiscal  1996 and a 2.7%  increase in  comparable
apparel store sales.  Sales in the Company's  footwear  operations  decreased by
$153.4  million due to a $106.0  million sales  decrease in the Company's  Fayva
footwear  business  (which was  primarily  the result of the  closing of all 357
Fayva stores in the third quarter of fiscal 1996), a 1.1% decrease in comparable
retail footwear store sales,  and a decrease in the number of Licensed  Discount
shoe  departments and SCOA licensed shoe  departments in operation during fiscal
1997   versus   fiscal   1996.   (Comparable   retail   footwear   store   sales
increases/decreases  are  based  upon  comparisons  of  weekly  sales  volume in
Licensed Discount shoe  departments,  SCOA and Parade of Shoes stores which were
open in corresponding weeks of the relevant comparison periods.) The decrease in
the  number of  Licensed  Discount  shoe  departments  was due in large  part to
Jamesway  Corporation  ("Jamesway"),  a former licensor of the Company,  ceasing
operations in the fourth quarter of fiscal 1996.

         The Company's cost of sales  constituted 60.4% of sales in fiscal 1997,
as  compared to 56.8% in fiscal  1996.  Cost of sales in the  Company's  apparel
operations  was 52.1% of sales in fiscal 1997,  as compared to 51.2% of sales in
fiscal 1996. The increase in such  percentage was primarily due to lower initial
markups on  merchandise  purchases,  partially  offset by lower  markdowns  as a
percentage of sales.  Cost of sales in the  Company's  footwear  operations  was
64.4% of sales in fiscal 1997,  which  includes the $37.3 million  write-down of
the Licensed Discount shoe department business' inventory in connection with the
Footwear Restructuring,  as compared to 58.8% of sales in fiscal 1996. Excluding
the effect of this $37.3 million charge, cost of sales in the Company's footwear
operations was 58.3% of sales in fiscal 1997.  The decrease in such  percentage,
from 58.8% of sales in fiscal  1996,  is  attributable  to lower  markdowns as a
percentage of sales,  partially  offset by lower initial  markups on merchandise
purchases.

         Selling,  administrative  and general expenses decreased $44.6 million,
or 11.4%,  to $348.0  million in fiscal 1997 from $392.6 million in fiscal 1996,
primarily due to the closing of the  Company's  Fayva  footwear  business in the
third quarter of fiscal 1996. As a percentage of sales, selling,  administrative
and general  expenses were 38.8% of sales in fiscal 1997 as compared to 38.5% of
sales in fiscal  1996.  Selling,  administrative  and  general  expenses  in the
Company's apparel  operations were 39.4% of sales in fiscal 1997, as compared to
38.5% of sales in fiscal  1996.  This  increase  was  primarily  the result of a
higher  allocation of  predominantly  fixed  overhead to the  Company's  apparel
operations as a result of the  proportionate  increase in apparel sales to total
Company sales.  Selling,  administrative  and general  expenses in the Company's
footwear  operations were 38.5% of sales in fiscal 1997, which was comparable to
38.5% of sales in fiscal 1996.

         Depreciation  and  amortization  expense  decreased  by $3.0 million to
$29.4 million in fiscal 1997 from $32.4 million in fiscal 1996, primarily due to
the write-off of certain fixed and  intangible  assets in the fourth  quarter of
fiscal  1997  related to the overall  restructuring  of the  Company's  footwear
businesses and the write-off of furniture,  fixtures and leasehold  improvements
as a result of the closing of the Company's Fayva footwear business in the third
quarter  of  fiscal  1996.  This  decrease  was  partially   offset  by  capital
expenditures for depreciable and amortizable assets.

         Of the $166.6 million  pre-tax  charge  recorded in fiscal 1997 for the
divestitures  of the SCOA and Parade of Shoes  businesses  and the downsizing of
the  Company's  Licensed  Discount  shoe  department  business,   the  Company's
administrative  areas and its  corporate  facilities,  $122.3  million  has been
classified as restructuring  and other  non-recurring  charges,  including $63.7
million  for the loss on the sales of the SCOA and  Parade of Shoes  businesses,
$36.7  million for asset  write-offs  related to the  reduction of the Company's
investment  in  its  Licensed  Discount  footwear  business,  $9.3  million  for
severance and employee  benefit costs,  $9.7 million for lease  obligations  and
asset  write-offs for excess  corporate  facilities,  and $2.8 million for other
costs and expenses.

         Of the $63.7 million loss  recorded on the sales of the Company's  SCOA
and Parade of Shoes  businesses,  inventory,  fixed asset and  intangible  asset
write-offs totaled $31.7 million, $14.2 million and $14.8 million, respectively,
while $3.0 million was recorded for transaction related costs and expenses.

         Included  in the $36.7  million  of asset  write-offs  and  obligations
related to the  reduction of the Company's  investment in its Licensed  Discount
shoe department  business are write-offs of intangible  assets of $33.9 million,
which the Company  deems to have no future  value,  and $2.8  million in accrued
costs relating to the repositioning and downsizing of this business.

<PAGE>

        Total asset write-offs and write-downs  included in  restructuring  and
other non-recurring charges amounted to $99.6 million,  while the balance of the
charge required cash outlays, primarily in fiscal 1998.

         For additional  information,  see Note 2 to the Consolidated  Financial
Statements.

         During fiscal 1996, the Company recorded restructuring charges of $69.3
million related to the liquidation of its Fayva footwear business.  Such charges
included  the actual  costs for employee  severance  and other  benefits of $3.5
million,  fixed asset  write-offs of $18.5 million and a loss on the disposal of
inventory of $20.5 million.  Also included in restructuring charges was a charge
of $26.8 million for costs related to the disposition of the Fayva store leases.
For additional information, see Note 2 to the Consolidated Financial Statements.

         As a result of the above  described  effects,  the Company's  operating
loss increased to $144.5 million  (operating  income of $22.1 million  excluding
the $166.6  million  pre-tax  charge) in fiscal 1997 from an  operating  loss of
$54.0 million  (operating income of $15.3 million excluding the $69.3 million of
restructuring  charges) in fiscal 1996. As a percentage of sales,  the operating
loss was 16.1% of sales (operating  income of 2.5% of sales excluding the $166.6
million  pre-tax charge) in fiscal 1997 as compared to an operating loss of 5.3%
of sales  (operating  income of 1.5% of sales  excluding  the $69.3  million  of
restructuring charges) in fiscal 1996.

         Net interest expense  increased $2.3 million to $12.8 million in fiscal
1997, as compared to $10.5 million in fiscal 1996 due to higher  average  levels
of borrowings and higher interest rates.

         In fiscal  1997,  the  Company  reported an income tax benefit of $45.8
million,  yielding an effective tax rate of 29.2%,  as compared to an income tax
benefit of $25.8  million in fiscal  1996,  yielding  an  effective  tax rate of
40.1%. The difference in the effective tax rate primarily reflects the impact of
the additional  valuation  reserve applied  against  deferred tax accounts as of
February  1,  1997.  See Note 6 to the  Consolidated  Financial  Statements  for
further discussion of taxes on earnings.

         The net loss for fiscal  1997 was $111.4  million as  compared to a net
loss of $38.6 million in fiscal 1996.

Financial Condition

                         January 31, 1998 versus February 1, 1997

         The increase in accounts  receivable  at January 31, 1998 from February
1,  1997  was  primarily  due to the  reclassification  of  expected  litigation
settlement  proceeds  from  non-current  assets at  February 1, 1997 to accounts
receivable at January 31, 1998. This increase was partially offset by settlement
of the  Company's  Chapter  11  claim  against  Jamesway  Corporation,  a former
licensor of the Company, and the payoff of the Ames promissory note.

         The  increase  in  merchandise  inventories  at January  31,  1998 from
February 1, 1997 is  primarily  due to  additional  inventory  required  for new
Casual Male  locations  and the Work 'n Gear  corporate  sales  division  and an
increase in in-transit  inventory,  partially  offset by a reduction in footwear
inventory,  primarily due to the closing of licensed footwear departments during
the year.

         The decrease in current  deferred  income  taxes and the  corresponding
increase in non-current  deferred income taxes at January 31, 1998 from February
1, 1997 was primarily the result of timing differences  between the recording of
restructuring and other  non-recurring  charges in fiscal 1997 and the deduction
of those charges on the Company's fiscal 1998 tax returns.  At January 31, 1998,
the deferred income taxes  associated with the net operating loss  carryforwards
generated by such charges are classified as non-current.

         The decrease in assets held for sale at January 31, 1998 from  February
1, 1997 was due to the receipt of the cash proceeds from the divestitures of the
Company's SCOA and Parade of Shoes businesses in March, 1997.

         The decrease in net  property,  plant and equipment at January 31, 1998
from  February  1,  1997 is the  result of the  recording  of $13.3  million  in
depreciation  expense  during  fiscal  1998,  partially  offset  by the  Company
incurring capital expenditures of $8.8 million in fiscal 1998, primarily for the
opening of new stores and the renovation of existing units.

         The decrease in accounts  payable at January 31, 1998 from  February 1,
1997 is primarily  due to an increase in direct  import  merchandise  purchases,
which are paid for sooner than domestic merchandise purchases,  coupled with the
Company's
<PAGE>

decision to  eliminate  bankers'  acceptance  financing  of foreign  merchandise
purchases  in  its  footwear  operations.  The  ratio  of  accounts  payable  to
merchandise  inventory  was 32.7% at January 31,  1998,  as compared to 39.0% at
February 1, 1997.

         The decrease in accrued  expenses at January 31, 1998 from  February 1,
1997 was primarily due to payments of costs related to the  restructuring of the
Company's footwear operations,  including severance and employee benefits, lease
obligations and other various restructuring costs.

         The decrease in other  liabilities at January 31, 1998 from February 1,
1997 was primarily due to payment of $3.0 million to former stockholders of SCOA
to satisfy a contractual  contingent payment obligation,  based on earnings,  to
such former SCOA  stockholders,  coupled with reductions in amounts reserved for
insurance, equipment leases and payments for former officers.

         The decrease in long-term debt, net of current portion,  at January 31,
1998 from February 1, 1997 was primarily due to repayment of the Company's  bank
debt with the net cash proceeds from the sales of the Company's  SCOA and Parade
of Shoes divisions.

Liquidity and Capital Resources

         The Company's  primary cash needs have  historically been for operating
expenses,  working capital, interest payments,  capital expenditures for ongoing
operations and  acquisitions.  In fiscal 1998, the Company's  primary sources of
capital to finance its cash needs were the proceeds received on the sales of the
Company's SCOA and Parade of Shoes businesses,  and borrowings under bank credit
facilities.

         On May 30, 1997, the Company  replaced its $145 million credit facility
by  obtaining  two  separate  revolving  credit  facilities,  both of which  are
guaranteed by J. Baker, Inc. One facility,  which finances the Company's apparel
businesses,  was a $100 million  revolving  credit  facility with Fleet National
Bank,  BankBoston,  N.A., The Chase  Manhattan  Bank,  Imperial  Bank,  USTrust,
Wainwright  Bank & Trust  Company and Bank Polska Kasa Opieki S.A. (the "Apparel
Credit Facility").  The Apparel Credit Facility is secured by all of the capital
stock of The Casual Male, Inc. and three other subsidiaries of the Company.  The
aggregate  commitment  under the Apparel  Credit  Facility was reduced from $100
million to $90 million on December 31, 1997,  by amendment  was increased to $95
million on April 3, 1998 and will  automatically  be  reduced by $10  million on
each of December 31, 1998 and December  31, 1999.  Borrowings  under the Apparel
Credit Facility bear interest at variable rates and can be in the form of loans,
bankers'  acceptances  and letters of credit.  This facility  expires on May 31,
2000.

         To  finance  its  Licensed  Discount  footwear  business,  the  Company
obtained a $55 million  revolving credit facility,  secured by substantially all
of the assets of JBI, Inc. and Morse Shoe, Inc., with BankBoston  Retail Finance
Inc.  (formerly  known as GBFC,  Inc.) and Fleet  National  Bank (the  "Footwear
Credit Facility").  The aggregate  commitment under the Footwear Credit Facility
was  reduced by $5  million on June 30,  1997.  Aggregate  borrowings  under the
Footwear Credit Facility are limited to an amount  determined by a formula based
on various percentages of eligible inventory and accounts receivable. Borrowings
under the Footwear Credit Facility bear interest at variable rates and can be in
the form of loans or letters of credit. This facility expires on May 31, 2000.

         As  of  January  31,  1998,   the  Company  had  aggregate   borrowings
outstanding  under its Apparel Credit  Facility and its Footwear Credit Facility
totaling $74.6 million and $34.2 million, respectively,  consisting of loans and
obligations under letters of credit.

         Net cash  used in  operating  activities  for  fiscal  1998  was  $23.4
million,  as  compared  to net cash  provided by  operating  activities  of $9.6
million  in fiscal  1997.  The  $33.0  million  decrease  was  primarily  due to
expenditures  related to the Footwear  Restructuring  and the receipt of an $8.3
million  federal  income tax refund in the first six months of fiscal 1997.  Net
cash  provided by  operating  activities  was $9.6  million in fiscal  1997,  as
compared to $22.4 million in fiscal 1996.  The decrease of $12.8 million was due
in part to payment of costs associated with the liquidation of Fayva.

         Net cash  provided by  investing  activities  for fiscal 1998 was $51.9
million,  as compared to net cash used in investing  activities of $14.5 million
in fiscal 1997.  The $66.4 million  increase was primarily due to the receipt of
$60.1  million  in  proceeds  from the  sales of the  SCOA and  Parade  of Shoes
businesses  in fiscal  1998.  Net cash used in  investing  activities  was $14.5
million in fiscal 1997,  as compared to net cash used of $26.5 million in fiscal
1996. The $12.0 million decrease was primarily due to an $11.7 million reduction
in capital expenditures in fiscal 1997 as compared to fiscal 1996.


<PAGE>

         Net cash  used in  financing  activities  for  fiscal  1998  was  $28.5
million,  as  compared  to net cash  provided by  financing  activities  of $5.6
million in fiscal 1997.  The $34.1  million  decrease was primarily due to a net
repayment  of  indebtedness  of $26.8  million in fiscal  1998,  as  compared to
repayment  of  indebtedness  of $8.7  million in fiscal  1997 and the receipt of
$14.9  million in net proceeds  from the Mortgage  Loan,  referred to below,  in
fiscal 1997.  Net cash provided by financing  activities in fiscal 1997 was $5.6
million,  as compared to $2.5 million in fiscal 1996. The $3.1 million  increase
was  primarily  due to the  receipt of $14.9  million in net  proceeds  from the
Mortgage Loan in fiscal 1997, offset in part by the repayment of indebtedness of
$8.7  million as  compared  to the  receipt of $3.2  million in net  proceeds of
indebtedness in fiscal 1996.

         The Company  invested $8.8 million,  $16.4 million and $28.1 million in
capital   expenditures   during  fiscal  1998,  fiscal  1997  and  fiscal  1996,
respectively.  The Company's capital expenditures  generally relate to new store
and licensed shoe  department  openings and  remodeling  of existing  stores and
departments, coupled with expenditures for general corporate purposes.

         On December 30, 1996,  JBAK Canton  Realty,  Inc.  ("JBAK  Realty"),  a
wholly-owned  subsidiary of JBAK Holding, Inc. ("JBAK Holding") and an indirect,
wholly-owned  subsidiary of J. Baker,  Inc.,  obtained a $15.5 million  mortgage
loan from The Chase  Manhattan  Bank (the  "Mortgage  Loan") secured by the real
estate,  buildings and other  improvements  owned by JBAK Realty at 555 Turnpike
Street,  Canton,  Massachusetts (the "Canton Property").  JBAK Realty leases the
Canton  Property to JBI, Inc. a  wholly-owned  subsidiary of J. Baker,  Inc. The
Canton Property is used as the Company's corporate headquarters. Proceeds of the
Mortgage Loan were used to pay down loans under the Company's  revolving  credit
facility.

         In  June,  1992  the  Company  issued  $70  million  of 7%  convertible
subordinated  notes due 2002. The notes are convertible at a conversion price of
$16.125 per share, subject to adjustment in certain events.

         The  Company  expects to open  approximately  14 Casual Male Big & Tall
stores,  20  Licensed  Discount  footwear  departments  and 1 Work 'n Gear store
(under the name RX Uniforms,  which exclusively sells healthcare apparel) and to
close  approximately  6 Casual  Male Big & Tall  stores and 9 Licensed  Discount
footwear departments in fiscal 1999.

         The Company believes that amounts  available under its revolving credit
facilities,  along  with  other  potential  sources of funds and cash flows from
operations,  will be sufficient  to meet its operating and capital  requirements
for the foreseeable  future.  From time to time, the Company evaluates potential
acquisition  candidates in pursuit of strategic  initiatives and growth goals in
its  niche  apparel  markets.   Financing  of  potential  acquisitions  will  be
determined  based on the financial  condition of the Company at the time of such
acquisitions,  and may include borrowings under current or new commercial credit
facilities or the issuance of publicly issued or privately placed debt or equity
securities.

Year 2000 Compliance

         The Company is faced with "Year 2000" remediation issues. Many computer
programs were written with a two-digit  date field and if these programs are not
made  Year  2000  compliant,  they will be  unable  to  correctly  process  date
information  on or  after  Year  2000.  While  these  issues  impact  all of the
Company's data processing  systems to some extent,  they are most significant in
connection with various mainframe "legacy" computer programs.

         In fiscal 1997,  the Company  developed a plan to address the Year 2000
issues as they  relate  to the  mainframe  legacy  computer  programs  and began
converting such computer  systems to be Year 2000  compliant.  The plan for such
mainframe  programs  provides for the conversion  efforts to be completed by the
end of fiscal 1999. The Company  intends to determine the extent to which it may
be vulnerable to any failures by its key business partners,  major suppliers and
service providers to remedy their own Year 2000 issues, and is in the process of
initiating formal  communications  with these parties. At this time, the Company
is unable to  estimate  the  nature or extent of any  potential  adverse  impact
resulting from the failure of key business partners, major suppliers and service
providers  to  achieve  Year 2000  compliance,  although  the  Company  does not
currently  anticipate that it will experience any material  shipment delays from
its major suppliers due to Year 2000 issues.  However, there can be no assurance
that these third parties will not experience Year 2000 problems or that any such
problems  would  have a material  effect on the  Company.  Because  the cost and
timing of Year 2000  compliance by third parties such as key business  partners,
major suppliers and service  providers is not within the Company's  control,  no
assurance can be given with respect to the cost or timing of such efforts or any
potential  adverse  effects on the Company of any failure by these third parties
to  achieve  Year 2000  compliance.  The total cost of the  Company's  Year 2000
project is estimated to be $2.0  million and is being funded  through  operating
cash flows.  The Company is expensing all costs  associated  with these computer
systems changes as the costs are incurred.  As of January 31, 1998, $488,000 has
been expensed.


<PAGE>

Certain Factors That May Affect Future Results

         The Company cautions that any forward-looking  statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) contained in
this  Form  10-K  or  made  by  management  of the  Company  involve  risks  and
uncertainties, and are subject to change based on various important factors. The
following  factors,  among others, in some cases have affected and in the future
could affect the Company's financial  performance and actual results,  and could
cause actual results for fiscal 1999 and beyond to differ  materially from those
expressed or implied in any such forward-looking statements: changes in consumer
spending  patterns,   consumer  preferences  and  overall  economic  conditions,
availability of credit,  interest rates,  the impact of competition and pricing,
the  weather,  the  financial  condition  of the  retailers  in whose stores the
Company  operates  licensed shoe  departments,  changes in existing or potential
duties,  tariffs  or  quotas,   availability  of  suitable  store  locations  at
appropriate  terms,   ability  to  hire  and  train  associates  and  Year  2000
conversion.

Item 7(a).  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         None.




<PAGE>


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




                         J. BAKER, INC. AND SUBSIDIARIES
                     Index to Consolidated Financial Statements

<TABLE>
<S>                                                                                                      <C>
Consolidated Financial Statements:                                                                       PAGE

         Independent Auditors' Report                                                                      21

         Consolidated balance sheets as of January 31, 1998 and February 1, 1997                           22

         Consolidated statements of earnings for the years ended January 31, 1998,                         23
February 1, 1997 and February 3, 1996

         Consolidated statements of stockholders' equity for the years ended                               24
January 31, 1998, February 1, 1997 and February 3, 1996

         Consolidated statements of cash flows for the years ended January 31, 1998,                       25
February 1, 1997 and February 3, 1996

         Notes to consolidated financial statements                                                        26
</TABLE>


All schedules have been omitted as they are inapplicable or not required, or the
information has been included in the consolidated financial statements or in the
notes thereto.











<PAGE>










                           Independent Auditors' Report



The Board of Directors and Stockholders
J. Baker, Inc.:


We have audited the accompanying  consolidated  balance sheets of J. Baker, Inc.
and  subsidiaries  as of January 31, 1998 and February 1, 1997,  and the related
consolidated  statements  of earnings,  stockholders'  equity and cash flows for
each of the  years in the  three-year  period  ended  January  31,  1998.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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 financial position of J. Baker, Inc. and
subsidiaries  as of January  31, 1998 and  February 1, 1997,  and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended January 31, 1998 in conformity with generally  accepted  accounting
principles.




                                      /s/KPMG Peat Marwick LLP
                                      ------------------------
                                      KPMG Peat Marwick LLP


Boston, Massachusetts
March 23, 1998



<PAGE>


                         J. BAKER, INC. AND SUBSIDIARIES
                            Consolidated Balance Sheets
                         January 31, 1998 and February 1, 1997
<TABLE>
<S>                                                                               <C>                   <C>
        Assets                                                                        1998                   1997
        ------                                                                        ----                   ----
Current assets:
    Cash and cash equivalents                                                     $   3,995,995         $   3,969,116
    Accounts receivable:
        Trade, net                                                                    9,576,156            14,771,734
        Other                                                                         9,485,578             1,737,786
                                                                                    -----------           -----------
                                                                                     19,061,734            16,509,520
                                                                                    -----------           -----------

    Merchandise inventories                                                         159,407,002           146,045,496
    Prepaid expenses                                                                  4,418,171             6,031,033
    Deferred income taxes, net                                                        5,230,000            37,548,000
    Assets held for sale                                                                      -            62,255,582
                                                                                    -----------           -----------
             Total current assets                                                   192,112,902           272,358,747
                                                                                    -----------           -----------

Property, plant and equipment, at cost:
    Land and buildings                                                               19,532,487            19,340,925
    Furniture, fixtures and equipment                                                72,359,381            74,244,548
    Leasehold improvements                                                           24,832,306            23,100,973
                                                                                    -----------           -----------
                                                                                    116,724,174           116,686,446
    Less accumulated depreciation and amortization                                   44,595,098            40,032,801
                                                                                    -----------           -----------
             Net property, plant and equipment                                       72,129,076            76,653,645
                                                                                    -----------           -----------

Deferred income taxes, net                                                           55,950,000            26,199,000
Other assets, at cost, less accumulated amortization                                 14,875,434            13,329,628
                                                                                   ------------           -----------
                                                                                   $335,067,412          $388,541,020
                                                                                    ===========           ===========
        Liabilities and Stockholders' Equity
        ------------------------------------
Current liabilities:
    Current portion of long-term debt                                              $  2,060,387         $   2,012,327
    Accounts payable                                                                 52,108,352            57,006,085
    Accrued expenses                                                                 14,176,048            29,837,310
    Income taxes payable                                                                979,560             1,380,664
                                                                                   ------------           -----------
             Total current liabilities                                               69,324,347            90,236,386
                                                                                    -----------           -----------

Other liabilities                                                                     4,229,800            12,223,290
Long-term debt, net of current portion                                              114,407,640           140,787,673
Senior subordinated debt                                                              1,490,111             2,951,411
Convertible subordinated debt                                                        70,353,000            70,353,000

Stockholders' equity:
    Common stock, par value $.50 per share, authorized 40,000,000 shares,
      13,919,577 shares issued and outstanding in 1998 (13,892,397 in 1997)           6,959,789             6,946,199
    Preferred stock, par value $1.00 per share, authorized 2,000,000 shares
      (none issued and outstanding)                                                           -                     -
    Series A junior participating cumulative preferred stock, par value $1.00
      per share, authorized 100,000 shares (none issued and outstanding)                      -                     -
    Additional paid-in capital                                                      115,697,467           115,416,223
    Accumulated deficit                                                             (47,394,742)          (50,373,162)
                                                                                    -----------          ------------
             Total stockholders' equity                                              75,262,514            71,989,260
                                                                                    -----------          ------------
                                                                                   $335,067,412          $388,541,020
                                                                                    ===========           ===========
</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>


                         J. BAKER, INC. AND SUBSIDIARIES
                        Consolidated  Statements of Earnings
   For the years ended January 31, 1998, February 1, 1997 and February 3, 1996


<TABLE>
<S>                                                            <C>                  <C>                    <C>
                                                                 1998                   1997                   1996
                                                                 ----                   ----                   ----

Net sales                                                      $592,151,411         $  897,491,941         $1,020,412,703

Cost of sales                                                   327,826,816            542,246,938            580,067,086
                                                                -----------            -----------            -----------

      Gross profit                                              264,324,595            355,245,003            440,345,617

Selling, administrative and general expenses                    226,151,041            347,977,056            392,585,851

Depreciation and amortization                                    15,102,619             29,430,473             32,428,001

Restructuring and other non-recurring charges                             -            122,309,000             69,300,000

Litigation settlement charges                                     3,432,000                      -                      -
                                                               ------------           ------------            -----------

      Operating income (loss)                                    19,638,935           (144,471,526)           (53,968,235)

Interest income                                                    (108,750)              (253,750)              (526,188)

Interest expense                                                 13,496,578             13,056,127             10,983,067
                                                                 ----------             ----------            -----------

      Earnings (loss) before income taxes                         6,251,107           (157,273,903)           (64,425,114)

Income tax expense (benefit)                                      2,438,000            (45,846,000)           (25,823,000)
                                                                -----------            -----------           ------------

      Net earnings (loss)                                      $  3,813,107          $(111,427,903)          $(38,602,114)
                                                               ============           ============            ===========

Earnings (loss) per common share:
      Basic                                                    $       0.27          $       (8.02)          $      (2.79)
                                                                ===========           ============            ===========

      Diluted                                                  $       0.27          $       (8.02)          $      (2.79)
                                                                ===========           ============           ============

Number of shares used to compute earnings (loss) per 
      common share:
      Basic                                                      13,911,080             13,887,544             13,858,273
                                                                ===========            ===========            ===========

      Diluted                                                    13,970,299             13,887,544             13,858,273
                                                                ===========            ===========            ===========
</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>
                         J. BAKER, INC. AND SUBSIDIARIES
                    Consolidated  Statements of  Stockholders'
         Equity For the years ended January 31, 1998, February 1, 1997
                              and February 3, 1996

<TABLE>
<S>                                   <C>                <C>              <C>            <C>             <C>
                                                                                          Retained
                                                                          Additional      Earnings/         Total
                                                 Common Stock              Paid-in       (Accumulated    Stockholders'
                                          Shares            Amount         Capital        Deficit)          Equity
                                         -------           -------        -----------     -----------    ------------


Balance, January 28, 1995              13,840,647        $6,920,324       $115,074,822    $101,321,759    $223,316,905


Net loss for the year ended
    February 3, 1996                            -                 -                  -    (38,602,114)     (38,602,114)
Exercise of stock options                  32,000            16,000            138,195              -          154,195
Dividends paid ($.06 per share)                 -                 -                  -       (831,576)        (831,576)
                                      -----------        ----------       ------------    ------------     ------------

Balance, February 3, 1996              13,872,647         6,936,324        115,213,017     61,888,069      184,037,410


Net loss for the year ended
    February 1, 1997                            -                 -                  -   (111,427,903)    (111,427,903)
Shares issued in connection with the
  acquisition of Shoe Corporation
  of America                                6,001             3,001            104,942              -          107,943
Exercise of stock options                  13,749             6,874             98,264              -          105,138
Dividends paid ($.06 per share)                 -                 -                  -       (833,328)        (833,328)
                                      -----------        ----------       ------------    ------------      -----------

Balance, February 1, 1997              13,892,397         6,946,199        115,416,223     (50,373,162)     71,989,260


Net earnings for the year ended
    January 31, 1998                            -                 -                  -       3,813,107       3,813,107
Exercise of stock options                   8,500             4,250             43,550              -           47,800
Shares issued to certain employees         18,680             9,340            237,694              -          247,034
Dividends paid ($.06 per share)                 -                 -                  -       (834,687)        (834,687)
                                      -----------        ----------       ------------    ------------     ------------

Balance, January 31, 1998              13,919,577        $6,959,789       $115,697,467   $(47,394,742)     $75,262,514
                                      ===========        ==========       ============   ============      ===========

</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>


                         J. BAKER, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
             For the years ended January 31, 1998, February 1, 1997
                              and February 3, 1996

<TABLE>
<S>                                                                <C>                 <C>                 <C>
                                                                        1998               1997                 1996
                                                                        ----               ----                 ----
Cash flows from operating activities:
      Net earnings (loss)                                          $  3,813,107        $ (111,427,903)      $  (38,602,114)
      Adjustments to reconcile net earnings (loss) to net cash
        provided by (used in) operating activities:
         Depreciation and amortization:
             Fixed assets                                            13,334,762            21,151,307           21,985,599
             Deferred charges, intangible assets and
                deferred financing costs                              1,806,557             8,317,866           10,490,278
         Deferred income taxes, net                                   2,567,000           (47,610,000)         (20,153,000)
         Loss on disposals and revaluation of assets                          -            99,600,000           29,900,000
         Change in:
             Accounts receivable                                        568,003             1,544,648            3,088,464
             Merchandise inventories                                (15,442,592)           50,782,034           36,583,661
             Prepaid expenses                                         1,612,862            (1,758,077)          (3,030,223)
             Accounts payable                                        (4,897,733)          (29,177,966)         (15,678,736)
             Accrued expenses                                       (18,514,062)            5,340,437            9,561,924
             Income taxes payable/receivable                           (401,104)            8,617,396           (7,709,089)
             Other liabilities                                       (7,873,826)            4,182,155           (4,045,342)
                                                                   ------------           -----------           -----------
                Net cash provided by (used in)
                 operating activities                               (23,427,026)            9,561,897           22,391,422
                                                                   ------------           -----------          -----------

Cash  flows from investing activities: Capital expenditures for:
         Property, plant and equipment                               (8,810,193)          (16,420,644)         (28,062,433)
         Other assets                                                (2,304,132)           (1,921,816)          (1,379,958)
      Payments received on note receivable                            2,900,000             3,888,000            2,900,000
      Net proceeds from sales of footwear businesses                 60,134,835                     -                    -
                                                                     ----------        --------------      ---------------
                Net cash provided by (used in)
                  investing activities                               51,920,510           (14,454,460)         (26,542,391)
                                                                     ----------           -----------          -----------

Cash flows from financing activities:
      Repayment of senior debt                                       (1,500,000)           (1,500,000)          (1,500,000)
      Proceeds from (repayment of) revolving credit facility       (125,800,000)           (7,200,000)           4,700,000
      Proceeds from apparel and footwear credit
          facilities                                                                       99,980,354                    -
-
      Proceeds from (repayment of) mortgage payable                    (512,327)           15,500,000                    -
      Payment of mortgage escrow, net                                   (94,779)             (605,215)                   -
      Proceeds from issuance of common stock, net of retirements        294,834               213,081              154,195
      Payment of dividends                                             (834,687)             (833,328)            (831,576)
                                                                     -----------           ----------          -----------
                Net cash provided by (used in)
                  financing activities                              (28,466,605)            5,574,538            2,522,619
                                                                   -------------            ---------          -----------

Net increase (decrease) in cash and cash equivalents                     26,879               681,975           (1,628,350)

Cash and cash equivalents at beginning of year                        3,969,116             3,287,141            4,915,491
                                                                    -----------           -----------          -----------

Cash and cash equivalents at end of year                           $  3,995,995          $  3,969,116         $  3,287,141
                                                                    ===========           ===========          ===========
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>

                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
             January 31, 1998, February 1, 1997 and February 3, 1996

(1)      Summary of Significant Accounting Policies

         Nature of Operations
            J. Baker,  Inc. and  subsidiaries  (the "Company") is engaged in the
            retail sale of apparel and  footwear.  As of January 31,  1998,  the
            Company's Casual Male Big & Tall, Work 'n Gear and Licensed Discount
            footwear  businesses  operated 1,384  locations in 47 states and the
            District of  Columbia.  The Company  operates the 459 store chain of
            Casual Male Big & Tall men's stores which sell  fashion,  casual and
            dress  clothing  and  footwear to the big and tall man; the 64 store
            chain  of Work 'n  Gear  work  clothing  stores,  which  sell a wide
            selection of workwear as well as healthcare apparel and uniforms for
            industry and service  businesses,  and 2 RX Uniforms  stores,  which
            exclusively sell healthcare apparel;  and sells footwear through 859
            self-service  licensed footwear  departments in discount  department
            stores. See Note 2 for information regarding the divestitures of the
            Company's Shoe  Corporation of America  ("SCOA") and Parade of Shoes
            divisions  and  the  liquidation  of the  Company's  Fayva  footwear
            division.

         Basis of Presentation and Principles of Consolidation
            The consolidated  financial  statements  include the accounts of the
            Company  and  its   wholly-owned   subsidiaries.   All   significant
            intercompany  accounts  and  transactions  have been  eliminated  in
            consolidation.

            The preparation of consolidated  financial  statements in conformity
            with generally accepted accounting principles requires management to
            make estimates and assumptions  that affect the reported  amounts of
            assets and  liabilities  and  disclosure  of  contingent  assets and
            liabilities at the date of the financial statements and the reported
            amounts of revenues and expenses.  Actual  results could differ from
            these estimates.

         Fiscal Year
            The  Company  follows  a 52 to 53 week  fiscal  year  ending  on the
            Saturday  nearest January 31. The fiscal year ended February 3, 1996
            contained 53 weeks.

         Fair Value of Financial Instruments
            The carrying amount of cash, cash equivalents, trade receivables and
            trade payables  approximate fair value because of the short maturity
            of these  financial  instruments.  The fair  value of the  Company's
            long-term  instruments  is  estimated  based on  market  values  for
            similar instruments. At January 31, 1998, the difference between the
            carrying  value of long-term  instruments  and their  estimated fair
            value is not material.

         Cash and Cash Equivalents
            Cash   equivalents   consist  of  highly  liquid   instruments  with
            maturities  of three  months or less and are  stated at cost,  which
            approximates market.

         Merchandise Inventories
            Merchandise  inventories,  which consist entirely of finished goods,
            are valued at the lower of cost or market, principally by the retail
            inventory method.

         Depreciation and Amortization of Property, Plant and Equipment and 
         Other Assets
            Depreciation and amortization of the Company's  property,  plant and
            equipment and other assets are provided on the straight-line  method
            over the following periods:
<TABLE>
                           <S>                                                  <C>
                           Furniture and fixtures                                7 years
                           Machinery and equipment                               7 years
                           Leasehold improvements                               10 years
                           Building, building improvements and
                              land improvements                                 40 years
                           Systems development costs and
                              other intangible assets                           3 to 10 years
</TABLE>

<PAGE>

                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            Maintenance  and repairs are charged to expense as  incurred.  Major
            renewals  or  replacements  are  capitalized.  When  properties  are
            retired or  otherwise  disposed  of, the asset and  related  reserve
            account are  relieved  and the  resulting  gain or loss,  if any, is
            credited or charged to earnings.

         Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
            The Company adopted the provisions of SFAS No. 121,  "Accounting for
            the Impairment of Long-Lived  Assets and for Long-Lived Assets to Be
            Disposed  Of", on February 4, 1996.  This  Statement  requires  that
            long-lived assets and certain  identifiable  intangibles be reviewed
            for impairment whenever events or changes in circumstances  indicate
            that  the  carrying  amount  of an  asset  may  not be  recoverable.
            Recoverability  of  assets  to be held  and  used is  measured  by a
            comparison  of the  carrying  amount of an asset to future  net cash
            flows  expected  to be  generated  by the asset.  If such assets are
            considered  to be  impaired,  the  impairment  to be  recognized  is
            measured  by the amount by which the  carrying  amount of the assets
            exceed the fair value of the  assets.  Assets to be  disposed of are
            reported  at the lower of the  carrying  amount or fair  value  less
            costs to sell.  Adoption of this  Statement  did not have a material
            impact on the Company's financial position, results of operations or
            liquidity.  See Note 2 regarding asset write-offs as a result of the
            Company's decision to downsize its footwear operations.

         Earnings (Loss) Per Common Share
            In February, 1997, the Financial Accounting Standards Board ("FASB")
            issued  Statement of Accounting  Standards No. 128 ("SFAS No. 128"),
            "Earnings Per Share"  ("EPS"),  which the Company  adopted in fiscal
            1998.  Basic EPS is computed by dividing income  available to common
            shareholders  by  the  weighted  average  number  of  common  shares
            outstanding  during the period.  Diluted EPS is computed by dividing
            income  available to common  shareholders  by the  weighted  average
            number of common  shares  outstanding,  after  giving  effect to all
            dilutive  potential common shares,  that were outstanding during the
            period.

            The calculation of diluted earnings (loss) per common share includes
            the dilutive  effect of  outstanding  stock options and warrants for
            fiscal 1998.  Stock  options and  warrants  are  excluded  from this
            calculation  for fiscal 1997 and fiscal 1996  because  their  effect
            would be  anti-dilutive.  The  common  stock  issuable  under the 7%
            convertible   subordinated   notes  due  2002  and  the  convertible
            debentures  was not  included in the  calculation  for fiscal  1998,
            fiscal   1997  and  fiscal  1996   because   its  effect   would  be
            antidilutive.  All net earnings  (loss) per common share amounts for
            all periods  presented have been restated to conform to SFAS No. 128
            requirements.

            Net earnings  (loss) and shares used to compute net earnings  (loss)
            per share, basic and diluted, are reconciled below:
<TABLE>
                  <S>                                           <C>                 <C>                   <C>
                                                                  1998                 1997                 1996
                                                                  ----                 ----                 ----

                  Net earnings (loss), basic and diluted        $ 3,813,107         $(111,427,903)        $(38,602,114)
                                                                 ==========          ============          ===========
                  Weighted average common shares:

                      Basic                                      13,911,080           13,887,544           13,858,273

                           Effect of dilutive securities:
                               Stock options                         59,219                    -                    -
                                                                -----------          -----------          -----------

                      Diluted                                    13,970,299           13,887,544           13,858,273
                                                                 ==========           ==========           ==========
</TABLE>

         Revenue Recognition
            The  Company  recognizes  revenue  at the time of sale in its retail
            stores and licensed departments.

         Store Opening and Closing Costs
            Direct incremental store opening costs are amortized to expense over
            a  twelve-month  period.  All costs  related to store  closings  are
            expensed at the time the decision is reached to close the store.

<PAGE>

                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

         Deferred Lease Acquisition Costs
            Costs  incurred  in  connection  with  the  acquisition  of  license
            agreements were classified as deferred lease  acquisition  costs and
            were being amortized over the terms of the respective leases,  which
            ranged  from  three to  twenty  years.  See Note 2  regarding  asset
            write-offs  as a result of the  Company's  decision to downsize  its
            footwear operations.

         Stock Options
            Prior to  February  4, 1996,  the  Company  accounted  for its stock
            options in accordance  with the provisions of Accounting  Principles
            Board  ("APB")  Opinion  No.  25,  "Accounting  for Stock  Issued to
            Employees",  and  related  interpretations.  As  such,  compensation
            expense  would be  recorded on the date of grant only if the current
            market price of the underlying stock exceeded the exercise price. On
            February 4, 1996, the Company adopted SFAS No. 123,  "Accounting for
            Stock-Based  Compensation",  which permits  entities to recognize as
            expense  over the vesting  period the fair value of all  stock-based
            awards on the date of grant. Alternatively, SFAS No. 123 also allows
            entities to continue to apply the  provisions  of APB Opinion No. 25
            and  provide pro forma net income and pro forma  earnings  per share
            disclosures for employee stock option grants made in fiscal 1996 and
            future years as if the  fair-value-based  method defined in SFAS No.
            123 had been  applied.  The Company has elected to continue to apply
            the  provisions  of APB  Opinion  No. 25 and  provide  the pro forma
            disclosure provisions of SFAS No. 123.

         Income Taxes
            Deferred taxes are provided for using the asset and liability method
            for temporary differences between financial and tax reporting.

         Effect of Accounting Changes
            In 1997, the Financial  Accounting Standards Board issued SFAS No. 
            130, "Reporting  Comprehensive  Income", and SFAS No. 131,  
            "Disclosures About Segments of an Enterprise and Related  
            Information".  Both statements will be adopted by the Company in 
            fiscal 1999. Current financial  statements are presented  
            substantially in accordance with SFAS No. 131.

         Reclassifications
            Certain   reclassifications  have  been  made  to  the  consolidated
            financial   statements  of  prior  years  to  conform  to  the  1998
            presentation.

(2)   Restructuring and Other Non-Recurring Charges

            The Company has restructured its footwear  operations (the "Footwear
            Restructuring")  in order to focus its  efforts  on the  management,
            development  and  growth of its  Casual  Male Big & Tall and Work 'n
            Gear   apparel   businesses.   In   connection   with  the  Footwear
            Restructuring, in March, 1997 the Company completed the sales of its
            SCOA and  Parade  of Shoes  businesses.  In  addition,  the  Company
            reduced its investment in its Licensed Discount  footwear  business.
            The  Company  decided to  concentrate  its  efforts in the  Licensed
            Discount  division on its five largest  licensors,  while  exploring
            future  strategic  options for this business and continuing to close
            departments  upon  termination  of the  licenses  where the  Company
            believes it is  appropriate  to do so. In fiscal  1997,  the Company
            recorded a pre-tax  charge of $166.6  million  ($117.1  million,  or
            $8.42 basic loss per share,  on an after-tax  basis)  related to the
            sales of the SCOA and Parade of Shoes businesses,  the write-down to
            estimated  fair value of  certain  assets  related  to its  Licensed
            Discount footwear  division,  and severance and consolidation  costs
            related to the downsizing of the Company's  administrative areas and
            its corporate facilities.  Of the pre-tax charge, $122.3 million was
            included as a separate  component  of results of  operations  in the
            Company's  Consolidated  Statement  of  Earnings  for the year ended
            February  1, 1997.  The  Company  also  recorded a charge to cost of
            sales  of $37.3  million  related  to a  reduction  in the  Licensed
            Discount division's inventory to estimated fair value. The remaining
            $7.0 million of the charge included an increase in the allowance for
            doubtful  accounts for the  Licensed  Discount  division's  accounts
            receivable,  and  losses  incurred  from  actions  taken in order to
            maximize the cash proceeds  received for the assets sold in the SCOA
            and Parade of Shoes businesses  subsequent to the Company's decision
            to dispose of such businesses.  In connection with the above events,
            the  Company  reduced  its work force  during  the first  quarter of
            fiscal 1998 by approximately 3,481 employees,  of whom approximately
            1,693 were full-time and 1,788 were part-time.


<PAGE>


                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            Asset   write-offs   included   in  the   restructuring   and  other
            non-recurring  charges  totaled $99.6 million,  while the balance of
            the  charge  required  cash  outlays,   primarily  in  fiscal  1998.
            Restructuring and other non-recurring charges included $63.7 million
            for  the  loss  on the  sales  of  the  SCOA  and  Parade  of  Shoes
            businesses,  $36.8  million  for  asset  write-offs  related  to the
            reduction  of the  Company's  investment  in its  Licensed  Discount
            footwear  division,  $9.3 million for severance and employee benefit
            costs,  $9.7 million for lease  obligations and asset write-offs for
            excess  corporate  facilities,  and $2.8 million for other costs and
            expenses.

         Sale of Shoe Corporation of America Division
            On  March  5,  1997,  the  Company  announced  it had  sold its SCOA
            division  to an entity  formed  by CHB  Capital  Partners  of Denver
            Colorado,  along with Dennis B.  Tishkoff,  President  of SCOA,  and
            certain members of SCOA  management.  The  transaction  involved the
            transfer to the buyer of the  division's  inventory,  fixed  assets,
            intellectual   property  and  license  agreements  for  the  various
            department  and specialty  store chains  serviced by SCOA as well as
            the  assumption  by the  buyer of  certain  liabilities  of the SCOA
            division.  In connection  with the sale of SCOA,  the Company paid a
            total of $3.0  million  to former  stockholders  of SCOA in order to
            satisfy  a  contractual  contingent  payment  obligation,  based  on
            earnings,  owed to such former SCOA stockholders.  Net cash proceeds
            received  from the sale,  reduced  by the  amount of the  contingent
            payment,   a  $1.4  million  one-year  escrow  account  balance  and
            transaction  expenses of $1.3 million,  totaled  approximately $40.0
            million.  The Company also remains as guarantor on certain of SCOA's
            license agreements for a period not to exceed one year.

         Sale of Parade of Shoes Division
            On March 10, 1997,  the Company  completed the sale of its Parade of
            Shoes division to Payless.  The transaction involved the transfer to
            Payless of the  division's  inventory,  fixed  assets,  intellectual
            property  and  leases  on the 186  then  remaining  Parade  of Shoes
            stores.  Net cash proceeds from the  transaction,  reduced by a $2.7
            million  two-year escrow account  balance and the retained  accounts
            payable of the  division,  were  approximately  $20.0  million.  The
            Company remains  contingently  liable under certain of the Parade of
            Shoes store leases assigned to Payless.

         Revaluation and Downsizing of Licensed Discount Footwear Division
            As part of the  restructuring  of its  footwear  business  in fiscal
            1997,  the Company  made a  determination  that it would  reduce its
            investment in its Licensed Discount footwear  business.  The Company
            currently  intends to concentrate the Licensed  Discount  division's
            efforts on its major  licensors  while  exploring  future  strategic
            options for this  business.  As a result,  the Company  undertook an
            evaluation  of the  value of the  assets  in the  Licensed  Discount
            business,  and wrote off certain assets which did not benefit future
            operations  and wrote down other  assets to  estimated  fair  value,
            including  deferred lease  acquisition  costs,  systems  development
            costs and excess of costs over net assets acquired.  Included in the
            restructuring  and other  non-recurring  charges  for the year ended
            February  1, 1997,  are  write-offs  of  intangible  assets of $33.9
            million,  which the Company deemed to have no future value, and $2.8
            million  in  accrued  costs  relating  to  the   repositioning   and
            downsizing  of the Licensed  Discount  business.  In  addition,  the
            Company  recorded  a  charge  of  $37.3  million  to cost of  sales,
            representing  the  write-down  of the Licensed  Discount  division's
            inventory to estimated  fair value,  and a charge of $2.2 million to
            selling,   administrative  and  general  expenses,  representing  an
            increase to the Company's allowance for doubtful accounts related to
            amounts  expected to be realized  from the  settlement of Chapter 11
            claims with various licensors.

         Disposal of Fayva Footwear Division
            In  the  year  ended   February  3,  1996,   the  Company   recorded
            restructuring  charges  of $69.3  million  (which  had an  after-tax
            effect of $41.6  million or $3.00  basic loss per share) as a result
            of  the  liquidation  of  the  Company's  Fayva  footwear  business.
            Restructuring  charges included actual costs for employee  severance
            and  other  benefits  of $3.5  million  (a total  of 2,545  full and
            part-time  employees  were  terminated),  fixed asset  write-offs of
            $18.5  million  and a loss on the  disposal  of  inventory  of $20.5
            million. Also included in restructuring charges is a charge of $26.8
            million  for costs  related to the  disposition  of the Fayva  store
            leases.


<PAGE>
                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            A summary of the restructuring activity is presented below:
<TABLE>
            <S>                                                   <C>                <C>              <C>

                                                                     1998                 1997                 1996
                                                                     ----                 ----                 ----

            Balance, beginning of year                            $22,372,000        $  13,300,000    $               -

            Restructuring and other non-recurring charges                   -          122,309,000           69,300,000

            Non-cash asset write-downs                                      -          (99,600,000)         (29,900,000)

            Inventory liquidation, lease termination,
              severance and other costs                           (16,794,000)         (13,637,000)         (26,100,000)
                                                                  ------------        -------------        -------------

            Balance, end of year                                 $  5,578,000          $22,372,000          $13,300,000
                                                                 ============          ===========          ===========
</TABLE>

(3)      Bankruptcy Filings of Licensors

            On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"),  a licensor of
            the Company,  filed for  protection  under  Chapter 11 of the United
            States  Bankruptcy Code. At the time of the bankruptcy  filing,  the
            Company had outstanding  accounts  receivable of approximately  $1.8
            million due from Bradlees.  Under  bankruptcy law,  Bradlees has the
            option of continuing  (assuming) the existing license agreement with
            the Company or terminating  (rejecting) that agreement. On April 13,
            1998, Bradlees filed its Joint Plan of Reorganization and Disclosure
            Statement with the United States  Bankruptcy  Court for the Southern
            District of New York. If the license agreement is assumed,  Bradlees
            must cure all  defaults  under the  agreement  and the Company  will
            collect in full the outstanding  past due  receivable.  Although the
            Company believes that the rejection of the license  agreement or the
            cessation of Bradlees'  business is not probable,  in the event that
            the agreement is rejected or Bradlees does not continue in business,
            the Company  believes it will have a substantial  claim for damages.
            If such a claim is  necessary,  the amount  realized  by the Company
            relative to the carrying values of  Bradlees-related  assets will be
            based on the relevant facts and circumstances.  The Company does not
            expect  this  filing  under the  Bankruptcy  Code to have a material
            adverse  effect  on  future  earnings.  The  Company's  sales in the
            Bradlees chain for the fiscal year ended January 31, 1998 were $47.7
            million.

            On October  18,  1995,  Jamesway  Corporation  ("Jamesway"),  then a
            licensor of the Company,  filed for  protection  under Chapter 11 of
            the United States  Bankruptcy  Code.  Subsequently,  Jamesway ceased
            operation  of its  business in all of its 90 stores.  At the time of
            the  bankruptcy  filing,   the  Company  had  outstanding   accounts
            receivable of approximately $1.4 million due from Jamesway.  Because
            Jamesway ceased operation of its business, the Company filed a claim
            for damages as its contract with Jamesway was rejected.  The Company
            negotiated  a settlement  of the amount of its claim with  Jamesway,
            which was approved by the  Bankruptcy  Court.  The Jamesway  plan of
            liquidation was confirmed on June 6, 1997, and the Company  received
            a partial distribution of the amount owed to it under the settlement
            during  the second  quarter of fiscal  1998.  In August,  1997,  the
            Company  assigned  its  rights  to any  further  distributions  from
            Jamesway to a third party and received,  in consideration  therefor,
            an additional percentage of the amount owed to the Company under its
            settlement of its claim with Jamesway.

            On April  26,  1990,  Ames  Department  Stores,  Inc.,  and  related
            entities ("Ames"),  a significant  licensor of the Company (see Note
            11),  filed for  protection  under  Chapter 11 of the United  States
            Bankruptcy  Code.  Pursuant  to Ames'  Plan of  Reorganization,  the
            Company settled its $13.7 million  pre-petition claim with Ames and,
            in return,  the Company received $5 million in cash and a promissory
            note issued by Ames in the amount of $8.7 million  bearing  interest
            at the  rate of 6.0%  per  annum  and  having  a final  maturity  on
            December 1, 1997.  During fiscal 1998, the Company received payments
            totaling $2.9 million from Ames representing the outstanding balance
            of the Ames  promissory  note and  discharged  its mortgage lien and
            security  interest in Ames' real  property  and  buildings  in Rocky
            Hill, Connecticut.


<PAGE>
                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

(4)      Accounts Receivable

            Trade accounts  receivable are principally  comprised of amounts due
            from  landlords of the  Company's  licensed  shoe  departments.  The
            Company  performs regular credit  evaluations of its licensors,  and
            generally does not require collateral from its licensors.

            The  following is a summary of the activity  affecting the allowance
            for doubtful  accounts  receivable  for the years ended  January 31,
            1998, February 1, 1997 and February 3, 1996:
<TABLE>
                  <S>                                                 <C>                <C>                <C>
                                                                          1998             1997               1996
                                                                          ----             ----               ----

                  Balance, beginning of year                          $5,286,617         $3,217,429         $1,972,903

                  Additions charged to expense                            15,000          2,200,000          1,413,580

                  Write-offs, net of recoveries                       (4,724,159)          (130,812)          (169,054)
                                                                      ----------         ----------         ----------

                  Balance, end of year                              $    577,458         $5,286,617         $3,217,429
                                                                    ============         ==========         ==========
</TABLE>

 (5)     Debt

         Long-Term Debt
            Long-term debt at January 31, 1998 and  February 1, 1997 was
            comprised of:
<TABLE>
                  <S>                                                         <C>                      <C>    
                                                                                 1998                        1997
                                                                                 ----                        ----

                  Credit facility (weighted average                           $            -           $125,800,000
                    interest rate of 8.2% in fiscal 1997)

                  Apparel credit facility (weighted average                       66,300,000                      -
                    interest rate of 7.4% in fiscal 1998)

                  Footwear credit facility (weighted average                      33,680,354                      -
                    interest rate of 8.0% in fiscal 1998)

                  Mortgage note, net of current portion                           14,427,286             14,987,673
                                                                                 -----------            -----------
                    (interest rate of 9.0%)
                                                                                $114,407,640           $140,787,673
                                                                                 ===========            ===========
</TABLE>

            On May 30,  1997,  the  Company  replaced  its $145  million  credit
            facility by obtaining two separate revolving credit facilities, both
            of which are  guaranteed  by J.  Baker,  Inc.  One  facility,  which
            finances  the  Company's  apparel  businesses,  was a  $100  million
            revolving  credit  facility with Fleet  National  Bank,  BankBoston,
            N.A., The Chase Manhattan Bank, Imperial Bank,  USTrust,  Wainwright
            Bank & Trust  Company and Bank Polska Kasa Opieki S.A. (the "Apparel
            Credit Facility").  The Apparel Credit Facility is secured by all of
            the  capital  stock  of  The  Casual  Male,  Inc.  and  three  other
            subsidiaries  of the Company.  The  aggregate  commitment  under the
            Apparel Credit Facility was reduced from $100 million to $90 million
            on December 31, 1997,  by amendment  was increased to $95 million on
            April 3, 1998 and will  automatically  be reduced by $10  million on
            each of December 31, 1998 and December  31, 1999.  Borrowings  under
            the Apparel Credit  Facility bear interest at variable rates and can
            be in the form of loans, bankers' acceptances and letters of credit.
            This facility expires on May 31, 2000.



<PAGE>
                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            To finance its  Licensed  Discount  footwear  business,  the Company
            obtained  a  $55  million  revolving  credit  facility,  secured  by
            substantially  all of the assets of JBI, Inc. and Morse Shoe,  Inc.,
            with BankBoston  Retail Finance Inc.  (formerly known as GBFC, Inc.)
            and  Fleet  National  Bank (the  "Footwear  Credit  Facility").  The
            aggregate  commitment under the Footwear Credit Facility was reduced
            by $5  million  on June 30,  1997.  Aggregate  borrowings  under the
            Footwear  Credit  Facility are limited to an amount  determined by a
            formula  based on various  percentages  of  eligible  inventory  and
            accounts  receivable.  Borrowings under the Footwear Credit Facility
            bear  interest at variable  rates and can be in the form of loans or
            letters of credit. This facility expires on May 31, 2000.

            As of  January  31,  1998,  the  Company  had  aggregate  borrowings
            outstanding  under its  Apparel  Credit  Facility  and its  Footwear
            Credit   Facility   totaling   $74.6  million  and  $34.2   million,
            respectively,  consisting of loans and obligations  under letters of
            credit.

            On December 30, 1996, JBAK Canton Realty,  Inc. ("JBAK  Realty"),  a
            wholly-owned  subsidiary of JBAK Holding,  Inc. ("JBAK Holding") and
            an indirect,  wholly-owned  subsidiary of J. Baker, Inc., obtained a
            $15.5  million  mortgage  loan  from The Chase  Manhattan  Bank (the
            "Mortgage  Loan")  secured by the real estate,  buildings  and other
            improvements  owned by JBAK Realty  located at 555 Turnpike  Street,
            Canton,  Massachusetts (the "Canton  Property").  JBAK Realty leases
            the property to JBI, Inc. ("JBI"),  a wholly-owned  subsidiary of J.
            Baker,  Inc. The Canton Property is used as the Company's  corporate
            headquarters. Neither JBAK Holding nor JBAK Realty has agreed to pay
            or make its assets available to pay creditors of the Company or JBI.
            Neither  the  Company  nor  JBI has  agreed  to  make  their  assets
            available to pay creditors of JBAK Holding or JBAK Realty.  Proceeds
            of the Mortgage Loan were used to pay down loans under the Company's
            revolving credit facility.

         Senior Subordinated Debt
            In June 1989, the Company issued $35 million of senior  subordinated
            notes with detachable warrants, which enable the holders to purchase
            600,000  shares of the Company's  common stock at a price of $20 per
            share,  subject to adjustments.  At January 31, 1998, the detachable
            warrants enable holders to purchase  approximately 640,000 shares at
            $18.80 per share.  Subject to certain  conditions,  the  Company may
            repurchase all, but not less than all, of the  outstanding  warrants
            at a price equal to the product of (a) the aggregate  number,  as of
            such time,  of shares of common stock  issuable upon exercise of the
            warrant by (b) $18.80 and  multiplying  the product  thereof by 50%.
            The senior  subordinated  notes of  $2,990,111  at January  31, 1998
            ($4,451,411  at  February  1,  1997)  are  presented  net of  $9,889
            ($48,589 at February 1, 1997), which reflects the unaccreted portion
            of the  $1,710,000  value  originally  assigned  to  the  detachable
            warrants.  The value of the  warrants  was  recorded  as  additional
            paid-in  capital and is being accreted using the  effective-interest
            method.

            The senior  subordinated  debt was reduced by $27.5 million in June,
            1992 with proceeds from the $70 million 7% convertible  subordinated
            notes referred to below.  The senior  subordinated  notes are due in
            installments  of $1.5 million per year beginning in May, 1995 with a
            final  payment in May,  1999.  Interest,  currently  at  12.21%,  is
            payable quarterly.

         Convertible Subordinated Debt
            Convertible  subordinated  debt at January 31, 1998 and  February 1,
            1997 was comprised of:
<TABLE>
                  <S>                                                            <C>                   <C>
                                                                                   1998                  1997
                                                                                   ----                  ----
                  7% convertible subordinated notes                              $70,000,000           $70,000,000
                  Convertible debentures                                             353,000               353,000
                                                                                 -----------            ----------
                                                                                 $70,353,000           $70,353,000
                                                                                  ==========            ==========
</TABLE>

            In June  1992,  the  Company  issued $70  million of 7%  convertible
            subordinated  notes due 2002. The notes are convertible  into common
            stock at a  conversion  price  of  $16.125  per  share,  subject  to
            adjustment in certain events.

<PAGE>
                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            The convertible  debentures  began accruing  interest on January 15,
            1997 at a rate of 8%, and no principal will be payable until January
            15,  2002.  The debt is subject,  under  certain  circumstances,  to
            mandatory conversion.  Approximately 6,500 shares of J. Baker common
            stock are reserved  for any future  conversions  of the  convertible
            debentures.

            The Company's  revolving credit  facilities and senior  subordinated
            notes  contain  various   covenants  and   restrictive   provisions,
            including restrictions on the incurrence of additional  indebtedness
            and liens, the payment of dividends and the maintenance of specified
            financial  ratios,  minimum  levels  of  working  capital  and other
            financial  criteria.  As of January  31,  1998,  the  Company was in
            compliance with such covenants.

            The Company is  restricted,  under  various  debt  agreements,  from
            paying cash  dividends  unless  tangible net worth  exceeds  certain
            required  levels.  As  defined  by the  most  restrictive  of  those
            agreements,  minimum  tangible net worth,  as so defined,  was $68.0
            million at January 31,  1998.  At January 31,  1998,  the  Company's
            tangible net worth, as so defined, was approximately $71.9 million.

            Scheduled   principal   repayments   of   long-term   debt,   senior
            subordinated  notes and convertible  subordinated  debt for the next
            five fiscal years and thereafter are as follows:

                             Fiscal year
                           ending January
                           --------------
                                1999                     $   2,060,387
                                2000                         2,112,955
                                2001                       100,650,809
                                2002                         1,086,348
                                2003                        70,802,141
                                Thereafter                  11,608,387

(6)      Taxes on Earnings

            Income tax  expense  (benefit)  attributable  to income  (loss) from
            operations consists of:
<TABLE>
                <S>                                              <C>                  <C>                   <C>
                                                                     Current             Deferred                Total
                                                                     -------             --------                -----
                Year ended January 31, 1998:
                  Federal                                        $   (604,000)        $   2,130,712         $   1,526,712
                  State and city                                      475,000               436,288               911,288
                                                                -------------         -------------         -------------
                                                                 $   (129,000)        $   2,567,000         $   2,438,000
                                                                 ============          ============          ============
                Year ended February 1, 1997:
                  Federal                                        $          -         $ (32,688,000)         $(32,688,000)
                  State and city                                    1,764,000           (14,922,000)          (13,158,000)
                                                                 ------------            ----------           -----------
                                                                 $  1,764,000         $ (47,610,000)         $(45,846,000)
                                                                  ===========           ===========           ===========
                Year ended February 3, 1996:
                  Federal                                         $(7,311,000)         $(13,271,000)         $(20,582,000)
                  State and city                                    1,641,000            (6,882,000)           (5,241,000)
                                                                  -----------            ----------            ----------
                                                                  $(5,670,000)         $(20,153,000)         $(25,823,000)
                                                                   ==========           ===========           ===========
</TABLE>

             The following is a  reconciliation  between the  statutory  federal
             income  tax rate and the  Company's  effective  rate for the  years
             ended January 31, 1998, February 1, 1997 and February 3, 1996:
<TABLE>
                  <S>                                                   <C>                  <C>                   <C>
                                                                        1998                  1997                  1996
                                                                        ----                  ----                  ----
                  Statutory federal income tax rate                     35.0%                (35.0%)               (35.0%)
                  State income taxes, net of federal
                     income tax benefit                                  9.5%                 (5.4%)                (5.3%)
                  Change in beginning of year balance of the valuation
                     allowance for deferred tax assets                     -                   7.4%                    -
                  Other                                                 (5.5%)                 3.8%                  0.2%
                                                                        -----                ------                ------
                                                                         39.0%               (29.2%)               (40.1%)
                                                                       ======               =======                ======
</TABLE>
<PAGE>

                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

             The  tax  effects  of  temporary  differences  that  give  rise  to
             significant  portions of the  deferred  tax assets and deferred tax
             liabilities  at January 31, 1998 and February 1, 1997 are presented
             below:
<TABLE>
              <S>                                                           <C>                        <C>
                                                                                 1998                       1997
                                                                                 ----                       ----
              Deferred tax assets:
                 Accounts receivable                                        $    177,000               $    550,000
                 Inventory                                                     6,006,000                 32,692,000
                 Intangible assets                                             3,114,000                 11,506,000
                 Other assets                                                     23,000                  1,227,000
                 Nondeductible accruals and reserves                             876,000                 12,476,000
                 Operating loss and credit carryforwards                      88,763,000                 46,759,000
                                                                             -----------                 ----------
                     Total gross deferred tax assets                          98,959,000                105,210,000
                     Less valuation allowance                                (26,636,000)               (26,636,000)
                                                                              ----------                -----------
                     Net deferred tax assets                                  72,323,000                 78,574,000
                                                                             -----------                -----------
              Deferred tax liabilities:
                 Property, plant and equipment                                (7,817,000)                (5,811,000)
                 Intangible assets                                              (736,000)                (6,426,000)
                 Other liabilities                                            (2,590,000)                (2,590,000)
                                                                              -----------                ----------
                     Total gross deferred tax liabilities                    (11,143,000)               (14,827,000)
                                                                              -----------               -----------
                     Net deferred tax asset                                 $ 61,180,000               $ 63,747,000
                                                                             ===========                ===========
</TABLE>

            At January 31, 1998 and February 1, 1997, the net deferred tax asset
            consisted of the following:
<TABLE>
                 <S>                                                         <C>                        <C>
                                                                                  1998                      1997
                                                                                  ----                      ----
                 Deferred tax asset, net - current                           $  5,230,000               $ 37,548,000
                 Deferred tax asset, net - non-current                         55,950,000                 26,199,000
                                                                              -----------                -----------
                                                                             $ 61,180,000               $ 63,747,000
                                                                              ===========                ===========
</TABLE>

            At  January  31,   1998,   the  Company  has  net   operating   loss
            carryforwards ("NOLS") and general business credit carryforwards for
            federal income tax purposes of approximately $194.0 million and $1.3
            million,  respectively,  which expire in years ended  January,  2002
            through  January,  2013.  Financial  Accounting  Standards  No. 109,
            "Accounting  for Income  Taxes" ("FAS 109"),  requires  that the tax
            benefit of such NOLS be  recorded as an asset to the extent that the
            Company  assesses  the  utilization  of such NOLS to be "more likely
            than not". The NOLS available for future  utilization were generated
            principally by restructuring and other  non-recurring  charges which
            are not expected to continue. The Company has determined, based upon
            the history of prior  operating  earnings in its ongoing  businesses
            and its  expectations  for the future,  that operating income of the
            Company will more likely than not be sufficient to utilize fully the
            $194.0 million of NOLS prior to their expiration in the year 2013.

            The Company has minimum tax credit  carryforwards  of  approximately
            $4.0  million  available to reduce  future  regular  federal  income
            taxes, if any, over an indefinite period.

(7)       Pension and Profit Sharing Plans

            The Company has a noncontributory  pension plan (the "Pension Plan")
            which  covers   substantially   all   non-union   employees  and  is
            administered  by Trustees who are officers of the Company.  In March
            1997, the Board of Directors of the Company approved an amendment to
            the  Pension  Plan,  which  resulted  in the  freezing of all future
            benefits under the plan as of May 3, 1997. As a result,  the Company
            recognized  a gain in  fiscal  1998 of $3.7  million  (which  had an
            after-tax effect of $2.2 million).  The curtailment gain is included
            in selling, administrative and general expenses.


<PAGE>
                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            The following table sets forth the Pension Plan's funded status at 
            January 31, 1998 and February 1, 1997:
<TABLE>
                  <S>                                                           <C>                     <C>
                                                                                   1998                    1997
                                                                                   ----                    ----
                  Actuarial present value of benefit obligations:
                      Vested                                                    $13,519,000             $12,696,000
                      Non-vested                                                  1,849,000               1,170,000
                                                                                 ----------              ----------
                           Total accumulated benefit obligations                $15,368,000             $13,866,000
                                                                                 ==========              ==========

                  Plan assets at fair value                                     $19,146,000             $15,737,000
                  Actuarial present value of projected benefit obligations      (15,368,000)            (18,832,000)
                                                                                 ----------              ----------
                  Excess (deficiency) of plan assets over projected
                        benefit obligations                                       3,778,000              (3,095,000)

                  Unrecognized prior service benefit                                      -                (449,000)
                  Unrecognized net transitional liability                                 -                 979,000
                  Unrecognized net actuarial loss (gain)                           (925,000)                520,000
                                                                                 ----------              ----------

                  Prepaid (accrued) pension cost                                $ 2,853,000             $(2,045,000)
                                                                                 ==========              ==========
</TABLE>

            In December 1993, the Board of Directors of the Company  established
            a Supplemental  Retirement plan (the "Supplemental Plan") to provide
            benefits  attributable to  compensation  in excess of $160,000,  but
            less than $267,326.  The following table sets forth the Supplemental
            Plan's funded status at January 31, 1998 and February 1, 1997:
<TABLE>

                  <S>                                                             <C>                    <C> 
                                                                                      1998                  1997
                                                                                      ----                  ----
                  Actuarial present value of benefit obligation:
                       Vested                                                     $  248,000             $  251,000
                       Non-vested                                                     20,000                110,000
                                                                                   ---------              ---------
                           Total accumulated benefit obligations                   $ 268,000              $ 361,000
                                                                                    ========              =========

                  Plan assets at fair value                                       $        -             $        -
                  Actuarial present value of projected benefit obligations          (691,000)              (700,000)
                                                                                    --------               --------
                  Deficiency of plan assets over projected benefit obligations      (691,000)              (700,000)

                  Unrecognized prior service cost                                    248,000                400,000
                  Unrecognized net actuarial loss (gain)                            (130,000)              (149,000)
                                                                                    --------              ---------
                  Accrued pension cost                                             $(573,000)             $(449,000)
                                                                                    ========               ========
</TABLE>

            Assumptions  used to develop the plans'  funded  status  were  
            discount  rate (7.0% in 1998,  7.5% in 1997) and
            increase in compensation levels (4.5%).

            Plan assets of the Pension Plan consist  primarily of common  stock,
            U.S. government obligations, mutual funds and insurance contracts.

            Net  pension  cost  (benefit)  for the years  ended  January 31,  
            1998,  February 1, 1997 and February 3, 1996 included the following
            components:
<TABLE>

                  <S>                                             <C>                 <C>                 <C> 
                                                                       1998                1997                1996
                                                                       ----                ----                ----
                  Service cost - benefits earned
                      during the year                             $   315,000          $1,828,000          $1,260,000
                  Interest cost on projected
                      benefit obligation                            1,180,000           1,420,000           1,199,000
                  Actual return on plan assets                     (3,432,000)         (2,657,000)         (1,528,000)
                  Net amortization and deferral                     2,146,000           1,734,000             655,000
                  Effect of curtailment                            (3,669,000)                  -                   -
                                                                   ----------          ----------          ----------
                      Net pension cost (benefit)                  $(3,460,000)         $2,325,000          $1,586,000
                                                                   ==========           =========           =========
</TABLE>
<PAGE>

                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            Assumptions used to develop the net periodic pension cost for fiscal
            1998 were discount rate (7.5%),  expected long-term return on assets
            (9.0%) and increase in compensation levels (4.5%).

            In January,  1992, the Company implemented a qualified 401(k) profit
            sharing plan  available to full-time  employees  who meet the plan's
            eligibility requirements. Under the 401(k) plan, the Company matches
            50% (25% for the years ended  February 1, 1997 and February 3, 1996)
            of the qualified employee's  contribution up to 6% (3% for the years
            ended  February  1, 1997 and  February  3,  1996) of the  employee's
            salary.  The total cost of the matching  contribution  was $897,000,
            $379,000 and $441,000 for the years ended January 31, 1998, February
            1, 1997 and February 3, 1996, respectively.

            The  Company  has  established  incentive  bonus  plans for  certain
            executives and employees. The bonus calculations are generally based
            on the  achievement  of  certain  profit  levels,  as defined in the
            plans.  For the years ended  January 31, 1998,  February 1, 1997 and
            February 3, 1996, $70,000, $145,500 and $50,000,  respectively,  was
            provided for bonuses under the plans.

            The Company  does not provide  post-retirement  benefits  other than
            pensions as defined under SFAS #106.

(8)      Stock Options and Performance Share Awards

            The Company has options  outstanding  under the Amended and Restated
            1985 Stock Option Plan,  the 1992  Directors'  Stock Option Plan and
            the 1994  Equity  Incentive  Plan (the  "Stock  Option  Plans").  In
            addition,  the Company has granted options which are not part of any
            Stock Option Plan.

            The Amended and  Restated  1985 Stock  Option Plan  provided for the
            issuance  of  incentive  and  non-qualified  stock  options  to  key
            employees  at an  option  price  of not less  than  100% of the fair
            market  value of a share on the date of grant of the  option.  Under
            this plan,  there are no shares of common stock  available for grant
            at January 31, 1998 as no options could be granted  thereunder after
            June, 1995.

            In fiscal 1995, the Company  established  the 1994 Equity  Incentive
            Plan,  which  provides  for the  issuance of one  million  shares of
            common stock to officers and  employees in the form of stock options
            (both  incentive  options  and  non-qualified  options),  grants  of
            restricted  stock,  grants of  performance  shares and  unrestricted
            grants of stock.  Under this plan, at January 31, 1998, there are no
            shares of common stock  available for grants of performance  shares,
            and 194,810  shares of common stock remain  available  for all other
            types of grants.

            Options  granted  under the Amended and  Restated  1985 Stock Option
            Plan and the 1994 Equity  Incentive Plan become  exercisable  either
            ratably over four or more years, or upon grant, at the discretion of
            the Board of Directors, and expire ten years from the date of grant.

            The 1992  Directors'  Stock Option Plan  provides for the  automatic
            grant of an option to purchase 2,500 shares of the Company's  common
            stock upon a director's  initial  election to the Board of Directors
            and in addition,  at the close of business on the fifth business day
            following  the Company's  annual  meeting of  stockholders.  Options
            under  the  Directors'  Plan  are  granted  at a price  equal to the
            closing  price of the  Company's  common stock on the date of grant.
            They are  exercisable in full as of the date of grant and expire ten
            years from the date of grant.  Under this plan,  there are no shares
            of common stock available for grant at January 31, 1998.

            The Company applied  Accounting  Principles Board Opinion No. 25 and
            related   interpretations  in  accounting  for  its  stock  options.
            Accordingly,  $98,000 of  compensation  cost has been recognized for
            stock  options in the  Company's  results of  operations  for fiscal
            1998.  Had the  Company  recorded  a charge  for the  fair  value of
            options  granted  consistent  with SFAS No. 123,  net income and net
            earnings per common share would have  decreased  by  $1,458,000  and
            $0.10 in  fiscal  1998 and net  loss and net loss per  common  share
            would have been  increased  by $940,000 and $0.07 in fiscal 1997 and
            $300,000 and $0.02 in fiscal 1996, respectively.


<PAGE>

                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            The fair value of each option  grant is estimated on the date of the
            grant  using  the  Black-Scholes  options  pricing  model,  with the
            following  weighted  average  assumptions  used for grants in fiscal
            years 1998, 1997 and 1996:
<TABLE>

                  <S>                                                 <C>              <C>               <C> 
                                                                         1998             1997              1996
                                                                         ----             ----              ----
                  Risk-free interest rate                                 5.8%             5.9%              6.2%
                  Expected option lives                                6.8 years        6.8 years         7.1 years
                  Expected volatility                                    51.5%            59.0%             59.2%
                  Expected dividend yield                                 0.8%             0.8%              0.5%
</TABLE>

            The effect of applying SFAS No. 123 is not representative of the pro
            forma  effect on net  earnings in future  years  because it does not
            take into  consideration pro forma  compensation  expense related to
            grants made prior to fiscal 1996.

            Data with respect to stock  options for fiscal years 1998,  1997 and
            1996 is as follows:
<TABLE>
                <S>                                <C>           <C>       <C>             <C>       <C>           <C>
                                                          1998                        1997                     1996
                                               --------------------------- -------------------------  ---------------------
                                                                  Weighted                 Weighted                Weighted
                                                                   Average                  Average                 Average
                                                                  Exercise                 Exercise                Exercise
                                                     Shares         Price      Shares        Price      Shares       Price
                                                     ------      ---------     ------      --------     ------     --------
                Outstanding at beginning of year   1,072,430       $  9.58  1,176,170        $15.30  1,091,395       $16.58
                Granted                              637,500          7.16    731,262          8.70    338,000        12.88
                Exercised                             (8,500)         5.62    (13,749)         7.65    (32,000)        4.82
                Canceled                            (516,507)        11.13   (821,253)        16.55   (221,225)       19.43
                                                   ---------                ---------                ---------
                Options outstanding at end of year 1,184,923          8.37  1,072,430          9.58  1,176,170        15.30
                                                   =========                =========                =========

                Options exercisable at end of year   439,801                  516,027                  589,102
                Weighted average fair-value of
                  options granted during the year      $3.78                    $4.94                    $8.08
</TABLE>

            Effective as of February 5, 1996, the Board of Directors offered all
            employee  participants  in the Stock Option Plans the opportunity to
            reprice to $9.00 per share any currently  outstanding  stock options
            with  exercise  prices in excess of $9.00 per share.  On February 5,
            1996, the fair market value of the Company's  common stock was $5.25
            per share.  Pursuant to the repricing program, any employee electing
            to reprice  outstanding  stock options was also required to accept a
            reduced number of options shares  commensurate with the reduction in
            price to $9.00 from the price of the original  grant.  Each repriced
            option  retained the vesting  schedule  associated with the original
            grant.  Holders of original  option grants  totaling  646,376 shares
            elected to reprice  such  options at $9.00 per share  resulting in a
            reduction of such options held to 342,962 shares, which is contained
            in the number of options granted in fiscal 1997.

            The  following  table  sets  forth a summary  of the  stock  options
            outstanding at January 31, 1998:
<TABLE>
                <S>                <C>           <C>                 <C>                 <C>             <C>
                                      Options Outstanding                                         Options Exercisable
                                   --------------------------------------------------    --------------------------------
                                                 Weighted Average
                                                 Remaining
                   Range of          Number      Years of            Weighted Average      Number        Weighted Average
                Exercise price     Outstanding   Contractual Life     Exercise Price     Exercisable     Exercise Price
                --------------     -----------   ----------------     --------------     -----------     --------------
                $ 1.00 - $ 8.63      552,545         8.1                  $ 5.96           158,201           $ 6.84
                $ 8.94 - $ 9.88      522,053         7.7                  $ 9.15           177,850           $ 9.07
                $12.00 - $17.00       62,025         5.5                  $13.55            56,975           $13.58
                $19.25 - $22.38       48,300         5.8                  $20.93            46,775           $20.97
                                   ---------                                               -------

                $ 1.00 - $22.38    1,184,923         7.7                  $ 8.37           439,801           $10.12
                                   =========                                               =======
</TABLE>
<PAGE>


                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            During fiscal 1997 and fiscal 1998, the Company granted  Performance
            Share  Awards  that  entitle  certain  officers  to  shares  of  the
            Company's  common  stock in fiscal 1999 and fiscal 2000 if the price
            of the common stock  attains a "Target  Price" (the average  closing
            price of the  Company's  common stock for certain  defined  periods)
            between  $10.00 and $15.00.  If such Target Price is  attained,  the
            Company  will  grant  between  82,750  and  165,500  shares  of  the
            Company's common stock, respectively, to the eligible officers.

(9)      Commitments and Contingent Liabilities
         Leases
            The  Company  leases  its retail  stores,  computers,  vehicles  and
            certain of its offices and  warehouse  facilities.  The Company also
            operates from leased  premises  under license  agreements  generally
            requiring payment of annual rentals contingent upon sales.

            The Company remains liable under certain leases and lease guaranties
            for premises  previously  leased by the Company for the operation of
            Parade of Shoes and Fayva  footwear  stores  (the  "Excess  Property
            Leases").  The total  liability  under the Excess Property Leases is
            approximately  $47.6 million as of January 31, 1998. The Company has
            reduced   its  actual   liability   by   assigning   or   subleasing
            substantially  all of the  Excess  Property  Leases to  unaffiliated
            third parties.

            At January 31, 1998,  minimum  rental  commitments  under  operating
            leases are as follows:
<TABLE>
                  <S>                                   <C>                               <C>                  
                    Fiscal Year
                  ending January                        Net minimum rentals               Minimum sub-rentals
                  --------------                        -------------------               -------------------
                                                                           (in thousands)
                      1999                                $ 33,937                            $   511
                      2000                                  28,212                                472
                      2001                                  21,727                                180
                      2002                                  17,762                                 72
                      2003                                  12,868                                 42
                      Thereafter                            21,565                                  -
                                                           -------                             ------
                                                          $136,071                             $1,277
                                                           =======                              =====
</TABLE>

            Rent expense for the years ended January 31, 1998,  February 1, 1997
            and February 3, 1996 was as follows:
<TABLE>
                      <S>                                          <C>                   <C>                   <C>
                                                                     1998                  1997                  1996
                                                                     ----                  ----                  ----
                                                                                         (in thousands)
                      Minimum rentals                              $ 32,882              $ 49,167              $ 52,284
                      Contingent rentals                             51,611                83,084                93,289
                                                                    -------               -------               -------
                                                                     84,493               132,251               145,573
                      Less sublease rentals                             556                   317                   336
                                                                    -------               -------               -------
                         Net rentals                               $ 83,937              $131,934              $145,237
                                                                    =======               =======               =======
</TABLE>

         Other Commitments and Contingencies
            The Company has employment  agreements  with certain of its officers
            under which it is committed  to pay an  aggregate  of  approximately
            $5.3 million through April, 2000.

            During  fiscal  1996,  the  Company's  Board  of  Directors  adopted
            executive severance agreements,  which create certain liabilities in
            the event of the termination of the covered  executives within three
            years  following  either a change of control  of the  Company or the
            termination of certain key executives of the Company.  The aggregate
            commitment amount under these executive severance agreements, should
            all thirteen covered employees be terminated,  is approximately $2.7
            million.



<PAGE>

                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

            At  January  31,  1998  and  February  1,  1997,   the  Company  was
            contingently  liable under  letters of credit  totaling $8.8 million
            and $11.2 million, respectively. These letters of credit, which have
            terms of one month to one year, are used primarily to  collateralize
            the  Company's  obligations  to third  parties  for the  purchase of
            inventory. The fair value of these letters of credit is estimated to
            be the same as the  contract  values  based on the nature of the fee
            arrangements with the issuing banks. No material loss is anticipated
            due to the non-performance by counterparties to these arrangements.

            On September  17, 1997,  the Company  settled a patent  infringement
            lawsuit  brought  against the Company and Morse Shoe,  Inc. by Susan
            Maxwell.  Pursuant  to the  settlement  agreement,  both  cases were
            dismissed  with  prejudice  with no  admissions of liability and the
            parties executed a mutual release of all claims.  Under the terms of
            the  settlement,  the Company agreed to make payments to Ms. Maxwell
            of  $4,137,000,  in the aggregate,  over a three-year  period and in
            connection  with the  settlement,  has recorded a one-time charge to
            earnings of $3.4 million ($2.1 million on an after-tax basis) during
            the third quarter of fiscal 1998 reflecting  costs of the settlement
            not previously accrued for.

(10)     Stockholders' Equity
            The Board of  Directors  of the  Company  is  authorized  by vote or
            votes,  from time to time  adopted,  to provide for the  issuance of
            Preferred  Stock  in one or more  series  and to fix and  state  the
            voting powers, designations, preferences and relative participating,
            optional  or other  special  rights of the shares of each series and
            the qualifications, limitations and restrictions thereof.

            On December 15, 1994, the Board of Directors of the Company  adopted
            a Shareholder Rights Agreement (the "Rights Agreement")  designed to
            enhance the Company's ability to protect  shareholder  interests and
            to ensure that shareholders  receive fair treatment in the event any
            coercive  takeover  attempt of the  Company  is made in the  future.
            Pursuant to the Rights Agreement,  the Board of Directors declared a
            dividend  distribution  of one preferred  stock  purchase right (the
            "Right") for each  outstanding  share of common stock of the Company
            to  shareholders of record as of the close of business on January 6,
            1995.  Each right entitles the holder to purchase from the Company a
            unit  consisting  of one ten  thousandth  (1/10,000)  of a share  of
            Series A Junior Participating  Cumulative Preferred Stock, par value
            $1.00 per share,  at a cash exercise price of $70 per unit,  subject
            to adjustment, upon the occurrence of certain events as set forth in
            the Rights Agreement.  These events include the earliest to occur of
            (i) the  acquisition  of 15% or more of the  outstanding  shares  of
            common  stock  of the  Company  by any  person  or  group,  (ii) the
            commencement  of a tender or exchange  offer that would  result upon
            its  consummation  in a person or a group  becoming  the  beneficial
            owner of 15% or more of the outstanding  common stock of the Company
            or (iii) the determination by the Board of Directors that any person
            is an  "Adverse  Person",  as defined in the Rights  Agreement.  The
            Rights are not exercisable  until or following the occurrence of one
            of the above  events and will expire on December  14,  2004,  unless
            previously  redeemed or  exchanged by the Company as provided in the
            Rights Agreement.

(11)     Principal Licensor
            Sales in  licensed  footwear  departments  operated  under  the Ames
            license  agreement  accounted  for  15.4%,  10.5%  and  9.4%  of the
            Company's net sales in the years ended January 31, 1998, February 1,
            1997 and  February  3,  1996,  respectively.  On a pro forma  basis,
            excluding  sales generated by the Company's SCOA and Parade of Shoes
            divisions,  sales in Ames accounted for 15.9% of the Company's sales
            for the year ended January 31, 1998.



<PAGE>
                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

(12)     Segment Information
            The  Company is a specialty  retailer  conducting  business  through
            retail  stores  in two  business  segments:  apparel  and  footwear.
            Information   about   operations  for  each  of  these  segments  is
            summarized as follows:
<TABLE>
            <S>                                          <C>                   <C>                     <C>
                                                                                Year Ended
                                                         --------------------------------------------------------------
                                                         January 31, 1998       February 1, 1997       February 3, 1996
                                                         ----------------       ----------------       ----------------
                                                                               ($ in thousands)           (53 weeks)
            Apparel
                  Net sales                                    $309,500               $293,775                $263,322
                  Operating profit                               24,185                 24,123                  24,814
                  Identifiable assets                           132,335                116,859                 110,461
                  Depreciation and amortization                   6,747                  7,501                   6,973
                  Additions to property, equipment and
                      leasehold improvements                      6,660                  6,665                  10,461
            Footwear
                  Net sales                                    $282,651               $603,717                $757,091
                  Restructuring and other
                    non-recurring charges                             -               (122,309)                (69,300)
                  Litigation settlement charges                  (3,432)                     -                       -
                  Operating profit (loss)                        14,367               (144,744)                (51,768)
                  Identifiable assets                           112,935                178,126                 372,657
                  Depreciation and amortization                   4,715                 18,094                  20,524
                  Additions to property, equipment and
                      leasehold improvements                        718                  8,043                  13,271
            Consolidated
                  Net sales                                    $592,151               $897,492              $1,020,413
                  Restructuring and other
                    non-recurring charges                             -               (122,309)                (69,300)
                  Litigation settlement charges                  (3,432)                     -                       -
                  Operating profit (loss) before general
                      corporate expense                          38,552               (120,621)                (26,954)
                  General corporate expense                     (18,913)               (23,851)                (27,014)
                  Interest expense, net                         (13,388)               (12,802)                (10,457)

            Earnings (loss) before income taxes              $    6,251              $(157,274)               $(64,425)

            Identifiable assets                                $245,270               $294,985                $483,118
            Corporate assets                                     89,797                 93,556                  42,964

                  Total assets                                 $335,067               $388,541                $526,082

            Depreciation and amortization                     $  15,103               $ 29,430                $ 32,428

            Additions to property, equipment and
                leasehold improvements                        $   8,810               $ 16,421                $ 28,062

</TABLE>

<PAGE>
                         J. BAKER, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

(13)     Selected Quarterly Financial Data (Unaudited)
<TABLE>
        <S>                                              <C>          <C>          <C>         <C>             <C>
                                                           First        Second       Third        Fourth
                                                           Quarter      Quarter      Quarter      Quarter         Total
                                                           -------      -------      -------      -------         ------
                                                                  (In thousands, except per share data)
         Year ended January 31, 1998
              Net sales                                   $137,350     $143,929    $139,148     $171,724        $592,151
              Gross profit                                  61,998       63,790      62,586       75,950         264,324
              Net earnings (loss)                         $    269     $  1,904    $ (1,383)    $  3,023        $  3,813
                                                          ========     ========     ========    ========       =========
              Earnings (loss) per common share:
                  Basic                                   $    .02     $    .14    $   (.10)    $    .22        $   0.27
                                                           =======      =======      =======     =======         =======
                  Diluted                                 $    .02     $    .14    $   (.10)    $    .22        $   0.27
                                                           =======      =======     =======      =======         =======

         Year ended February 1, 1997
              Net sales                                   $195,530     $231,805     $222,764    $247,393        $897,492
              Gross profit                                  90,621      101,427       96,184      67,013         355,245
              Net earnings (loss)                         $    826     $  1,486     $  1,418   $(115,158)      $(111,428)
                                                          ========     ========     ========    ========        ========
              Earnings (loss) per common share:
                  Basic                                  $     .06    $     .11    $     .10   $   (8.29)      $   (8.02)
                                                          ========     ========     ========    =========       ========
                  Diluted                                $     .06    $    .11     $     .10   $   (8.29)      $   (8.02)
                                                          ========     ========     ========    ========        ========
</TABLE>

(14)     Advertising Costs

            Advertising  costs are charged to expense as  incurred.  The Company
            incurred advertising costs of $11.7 million, $14.8 million and $20.5
            million in the years ended  January 31,  1998,  February 1, 1997 and
            February 3, 1996, respectively.

(15)     Supplemental Schedules to Consolidated Statements of Cash Flows

<TABLE>
            <S>                                                      <C>                <C>                    <C>
                                                                       1998                1997                   1996
                                                                       -----               ----                   ----

            Cash paid for interest                                   $13,545,337        $12,670,073            $11,069,341
            Cash paid for income taxes                                   272,104          1,168,901              2,039,089
            Income taxes refunded                                              -         (8,315,483)                     -
                                                                    ============         ==========             ==========
</TABLE>


<PAGE>


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

   None.

                                    PART III

Item 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The  information  appearing  in  the  Proxy  Statement  under  the  captions
"ELECTION OF DIRECTORS",  "Information About Board of Directors and Committees",
"REPORT OF THE  COMPENSATION  COMMITTEE  OF THE BOARD OF  DIRECTORS ON EXECUTIVE
COMPENSATION",   "Executive   Compensation"   and   "Employment   and  Severance
Arrangements" is incorporated herein by this reference.

Item 11.  EXECUTIVE COMPENSATION

    The  information   appearing  in  the  Proxy  Statement  under  the  caption
"Executive Compensation", "Employment and Severance Arrangements",  "Information
About  Board of  Directors  and  Committees"  and  "REPORT  OF THE  COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE  COMPENSATION"  is incorporated
herein by this reference.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information appearing in the Proxy Statement under the caption "SECURITY
OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT"  and  SECTION  16(a)
"BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE"  is  incorporated  herein by this
reference.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information  appearing in the Proxy Statement under the caption "Certain
Relationships  and  Related   Transactions"  is  incorporated   herein  by  this
reference.

                                     PART IV

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

   (a)   Financial Statements.  The following documents are filed as part of 
         this report:

         1,2. The financial statements, notes thereto, and independent auditors'
              report listed in the Index to  Consolidated  Financial  Statements
              set forth in Item 8.

         3.    Exhibits.  The Exhibits listed in the Exhibit Index.  Exhibits 
               10.15 through 10.36 constitute all of the management  contracts 
               and  compensation  plans and  arrangements  of the  Company  
               required  to be filed as exhibits to this Annual Report.

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



<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.

                                         J. Baker, Inc.
                                         (Registrant)



By/s/Sherman N. Baker                    By/s/Alan I. Weinstein
     Sherman N. Baker                    Alan I. Weinstein
     Chairman of the Board               President and
                                         Chief Executive Officer


By/s/Philip G. Rosenberg
     Philip G. Rosenberg
     Executive Vice President
     and Principal Financial Officer



April 22, 1998


    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report has been signed by the following  persons on behalf of the registrant and
in the capacities and on the dates indicated:


/s/Sherman N. Baker                      /s/J. Christopher Clifford
Sherman N. Baker, Director               J. Christopher Clifford, Director



/s/Ervin Cruce                           /s/Douglas Kahn
Ervin Cruce, Director                    Douglas Kahn, Director



/s/Harold Leppo                          /s/David Pulver
Harold Leppo, Director                   David Pulver, Director



/s/Melvin M. Rosenblatt                  /s/Nancy Ryan
Melvin M. Rosenblatt, Director           Nancy Ryan, Director



/s/Alan I. Weinstein
Alan I. Weinstein, Director


All as of April 22, 1998





<PAGE>







                                    EXHIBITS

                                   Filed with

                           Annual Report on Form 10-K

                                       of

                                 J. BAKER, INC.

                               555 Turnpike Street
                                Canton, MA 02021

                       For the Year Ended January 31, 1998







<PAGE>


                                 EXHIBIT INDEX

<TABLE>
<S>                                                                                                            <C>
Exhibit                                                                                                        Page No.

3.   Articles of Organization and By-Laws

     (.01)  Amended and Restated Articles of Organization of the Company,                                         *
            as filed with the Secretary of the Commonwealth of Massachusetts
            on September 26, 1990 (filed as Exhibit 3.01 to the Company's
            Form 10-K Report for the year ended February 2, 1991).

     (.02)  By-Laws of the Company, as amended by the Board of Directors                                          *
            on September 11, 1990 (filed as Exhibit 19.01 to the Company's
            Form 10-Q Report for the quarter ended November 3, 1990).


4.   Instruments Defining the Rights of Security Holders, Including Indentures

     (.01)  Senior Notes and Senior Subordinated Notes with Stock Purchase                                        *
            Warrants dated as of May 1, 1989 (filed as Exhibit 4.01 to the
            Company's Form 10-Q Report for the quarter ended July 29, 1989).

     (.02)  Amendment dated as of November 13, 1995 to Senior Subordinated                                        *
            Note Agreement dated May 1, 1989 (filed as Exhibit 4.02 to the
            Company's Form 10-Q Report for the quarter ended October 28, 1995).

     (.03)  Indenture dated as of January 15, 1992 by and between Morse Shoe,                                     *
            Inc. and State Street Bank and Trust Company as Trustee with
            respect to  Convertible  Subordinated  Debentures due 2002 (filed as
            Exhibit  4.12 to the  Company's  Form 10-K Report for the year ended
            January 30, 1993).

     (.04)  First Supplemental Indenture dated as of January 30, 1993 to                                          *
            the Indenture dated January 15, 1992 under which Convertible
            Subordinated Debentures Due 2002 were issued by Morse Shoe, Inc.
            (filed as Exhibit 4.01 to the Company's Form 10-Q Report for the
            quarter ended May 1, 1993).

     (.05)  Indenture dated as of June 12, 1992 by and between J. Baker, Inc.                                     *
            and State Street Bank and Trust Company as Trustee with respect to
            7% Convertible Subordinated Notes due 2002 (filed as Exhibit 4.08 to
            the  Company's  Form 10-Q  Report for the  quarter  ended  August 1,
            1992).

     (.06)  Shareholder Rights Agreement between J. Baker, Inc. and Fleet                                         *
            National Bank of Massachusetts, dated as of December 15, 1994
            (filed  as  Exhibit  4.01 to the  Company's  Form 8-K  Report  dated
            December 15, 1994).





*    Incorporated herein by reference
**   Included herein
<PAGE>

Exhibit                                                                                                    Page No.

     (.07)  Waiver Agreement and Amendment to Senior Subordinated Note Agreement                                  *
            between JBI, Inc. and Massachusetts Mutual Life Insurance Company and
            MassMutual Participation Investors ("MassMutual") dated February 24,
            1997 (filed as Exhibit  10.26 to the  Company's  Report on Form 10-K
            for the year ended February 1, 1997).

     (.08)  Guaranty Agreement of certain subsidiaries of the Company in favor of                                 *
            MassMutual dated as of March 13, 1997 (filed as Exhibit 10.27 to the
            Company's Report on Form 10-K for the year ended February 1, 1997).


10.  Material Contracts

     (.01)  Asset Purchase Agreement dated as of March 5, 1997 by and between                                     *
            Shoe Corporation of America and JBI, Inc. (filed as Exhibit 2.1 to
            the Company's Form 8-K Report dated March 20, 1997).

     (.02)  Asset Purchase Agreement dated as of January 13, 1997 by and between                                  *
            Payless ShoeSource, Inc., JBI, Inc. and J. Baker, Inc. (filed as
            Exhibit 2.2 to the Company's Form 8-K Report dated March 20, 1997).

     (.03)  License Agreement between Ames Department Stores, Inc., et al and                                     *
            JBI Holding Company, Inc. (filed as Exhibit 10.01 to the Company's
            Form 10-K Report for the year ended January 30, 1988).

     (.04)  Agreement between JBI Holding Company, Inc. and JBI, Inc. re:                                         *
            Assignment of Ames License Agreement (filed as Exhibit 10.02 to
            the Company's Form 10-K Report for the year ended January 30,
            1988).

     (.05)  Amendment No. 1 dated April 29, 1989 to Agreement between Ames                                        *
            Department Stores, Inc. and JBI Holding Company, Inc. (filed as
            Exhibit  10.04 to the  Company's  Form 10-Q  Report for the  quarter
            ended April 29, 1989).

     (.06)  Amendment No. 2 dated December 18, 1992, to Agreement between                                         *
            Ames Department Stores, Inc. and JBI Holding Company, Inc. (filed
            as  Exhibit  10.04 to the  Company's  Form 10-K  Report for the year
            ended January 30, 1993).

     (.07)  Guaranty and Indemnity Agreement dated April 28, 1989 between J.                                      *
            Baker, Inc. and Ames Department Stores, Inc. (filed as Exhibit
            10.05 to the Company's  Form 10-Q Report for the quarter ended April
            29, 1989).

     (.08)  Plan of Reorganization of The Casual Male Corporation dated                                           *
            November 1, 1990 as revised November 20, 1990 (filed as Exhibit
            2.01 to the Company's Form 10-Q Report for the quarter ended
            November 3, 1990).




*    Incorporated herein by reference
**   Included herein

<PAGE>

Exhibit                                                                                                    Page No.

     (.09)  Credit Agreement by and among The Casual Male, Inc., TCM Holding                                     *
            Co., Inc., WGS Corp., TCMB&T, Inc. and J. Baker, Inc., and Fleet
            National Bank and BankBoston, N.A., et al, dated May 30, 1997 (filed
            as  Exhibit  10.01  to the  Company's  Report  on Form  10-Q for the
            quarter ended May 3, 1997).

     (.10)  First Amendment to Credit Agreement by and among The Casual Male,                                    **
            Inc., TCM Holding Co., Inc., WGS Corp., TCMB&T, Inc. and J. Baker,
            Inc.,  and Fleet  National Bank and  BankBoston,  N.A., et al, dated
            February 24, 1998, attached.

     (.11)  Second Amendment to Credit Agreement by and among The Casual Male,                                   **
            TCM Holding Co., Inc., WGS Corp., TCMB&T, Inc. and J. Baker, Inc.
            and Fleet National Bank and BankBoston, N.A., et al., dated April 2, 1998,
            attached.

     (.12)  Loan and Security Agreement between JBI, Inc., Morse Shoe, Inc.                                      *
            and JBI Holding Company, Inc., and BankBoston Retail Finance Inc.
            (formerly known as GBFC, Inc.) and Fleet National Bank, dated May 30,
            1997 (filed as Exhibit  10.02 to the  Company's  Report on Form 10-Q
            for the quarter ended May 3, 1997).

     (.13)  First Amendment to Loan and Security Agreement between JBI, Inc.,                                    **
            Morse Shoe, Inc. and JBI Holding Company, Inc., and BankBoston
            Retail Finance Inc. (formerly GBFC, Inc.) and Fleet National
            Bank, dated July 15, 1997, attached.

     (.14)  Second Amendment to Loan and Security Agreement between JBI, Inc., Morse                             **
            Shoe, Inc. and JBI Holding Company, Inc., and BankBoston Retail Finance Inc.
            (formerly known as GBFC, Inc.) and Fleet  National Bank, dated
            February 18, 1998, attached.

     (.15)  Executive Employment Agreement dated March 25, 1993 between                                           *
            Sherman N. Baker and J. Baker, Inc. (filed as Exhibit 10.01
            to the Company's Form 10-Q Report for the quarter ended
            July 31, 1993).

     (.16)  Amendment to Employment Agreement between J. Baker, Inc. and                                          *
            Sherman N. Baker, dated March 31, 1995 (filed as Exhibit 4.10
            to the Company's Form 10-K Report for the year ended January
            28, 1995).

     (.17)  Amendment to Employment Agreement between J. Baker, Inc. and                                          *
            Sherman N. Baker, dated March 31, 1996 (filed as Exhibit 10.09 to
            the Company's Form 10-K Report for the year ended February 3, 1996).

     (.18)  Third Amendment to Employment Agreement between J. Baker, Inc. and                                    *
            Sherman N. Baker dated as of March 31, 1997 (filed as Exhibit 10.10 to
            the Company's report on Form 10-K for the year ended February 1, 1997).




*    Incorporated herein by reference
**   Included herein

<PAGE>

Exhibit                                                                                                    Page No.

     (.19)  Performance Share Award granted to Alan I. Weinstein dated March 26,                                  *
            1996 (filed as Exhibit 10.04 to the Company's Form 10-Q Report for
            the quarter ended August 3, 1996).

     (.20)  Executive Employment Agreement between J. Baker, Inc. and Alan I.                                     *
            Weinstein dated April 1, 1997 (filed as Exhibit 10.17 to the Company's
            Report on Form 10-K for the year ended February 1, 1997).

     (.21)  Amendment to Executive Employment Agreement between J. Baker, Inc.                                    *
            and Alan I. Weinstein, dated September 1,1997 (filed as Exhibit 10.06 to
            the Company's Form 10-Q Report for the quarter ended November 1, 1997).

     (.22)  Performance Share Award granted to James D. Lee dated October 18, 1996                                *
            (filed as Exhibit 10.01 to the Company's Form 10-Q Report for the
            quarter ended November 2, 1996).

     (.23)  Executive Employment Agreement dated as of April 1, 1997                                             *
            between James D. Lee and J. Baker, Inc.

     (.24)  Performance Share Award granted to James D. Lee, dated June 5, 1997                                   *
            (filed as Exhibit 10.02 to the Company's Report on Form 10-K for the
            quarter ended November 1, 1997).

     (.25)  Forgivable Promissory Note made by James D. Lee in favor of J. Baker,                                 *
            Inc., dated November 24, 1997 (filed as Exhibit 10.03 to the Company's
            Report on Form 10-Q for the quarter ended November 1, 1997).

     (.26)  First Amendment to Executive Employment Agreement between                                            **
            J. Baker, Inc. and James D. Lee, dated April 10, 1998, attached.

     (.27)  Performance Share Award granted to Philip G. Rosenberg dated October                                  *
            18, 1996 (filed as Exhibit 10.03 to the Company's Form 10-Q Report
            for the quarter ended November 2, 1996).

     (.28)  Executive Employment Agreement between J. Baker, Inc. and Philip G.                                   *
            Rosenberg, dated April 1, 1997 (filed as Exhibit 10.55 to the Company's
            Report on Form 10-K for the year ended February 1, 1997).

     (.29)  First Amendment to Executive Employment Agreement between J. Baker,                                  **
            Inc. and Philip G. Rosenberg, dated April 10, 1998, attached.

     (.30)  Executive Employment Agreement between J. Baker, Inc. and Stuart M.                                   *
            Glasser, dated September 15, 1997 (filed as Exhibit 10.04 to the Company's
             Report on Form 10-Q for the quarter ended November 1, 1997).

     (.31)  Performance Share Award granted to Stuart M. Glasser, dated                                           *
            September 15, 1997 (filed as Exhibit 10.05 to the Company's Report on Form
            10-Q for the quarter ended November 1, 1997).





*    Incorporated herein by reference
**   Included herein

<PAGE>

Exhibit                                                                                                    Page No.

     (.32)  Executive Employment Agreement dated as of June 5, 1997 between Roger                                *
            Osborne and J. Baker, Inc. (filed as Exhibit 10.02 to the Company's Report
            on Form 10-Q for the quarter ended August 2, 1997).

     (.33)  First Amendment to Executive Employment Agreement between J. Baker,                                  **
            Inc. and Roger J. Osborne dated April 10, 1998, attached.

     (.34)  J. Baker, Inc. Amended and Restated 1985 Stock Option Plan (filed                                     *
            as Exhibit 19.02 to the Company's Form 10-Q Report for the quarter
            ended August 1, 1992).

     (.35)  J. Baker, Inc. 1994 Equity Incentive Plan dated as of March 29,                                       *
            1994 (filed as Exhibit 10.23 to the Company's Form 10-K Report
            for the year ended January 29, 1994).

     (.36)  J. Baker, Inc. 1992 Directors Stock Option Plan dated as of                                           *
            April 13, 1992 (filed as Exhibit 19.03 to the Company's Form
            10-Q Report for the quarter ended August 1, 1992).

     (.37)  Stock Purchase Agreement by and among J. Baker, Inc. and Tishkoff                                     *
            Enterprises, Inc. and certain stockholders of Tishkoff Enterprises, Inc.
            dated November 19, 1993 (filed as Exhibit 2.01 to the Company's Form
            10-Q Report for the quarter ended October 30, 1993).

     (.38)  Mortgage and Security Agreement dated as of December 30, 1992 by                                      *
            and between JBI Holding Company, Inc. and Ames Department Stores,
            Inc. (filed as Exhibit 10.22 to the Company's Form 10-K Report
            for the year ended January 30, 1993).

     (.39)  Promissory Note dated as of December 30, 1992 made by Ames                                            *
            Department Stores, Inc. in favor of JBI Holding Company, Inc.
            (filed as Exhibit  4.14 to the  Company's  Form 10-K  Report for the
            year ended January 30, 1993).

     (.40)  Agreement and Plan of Reorganization by and among J. Baker, Inc.,                                     *
            Morse Acquisition, Inc. and Morse Shoe, Inc. dated October 22,
            1992,  as amended by Letter  Amendments  dated  December 7, 1992 and
            December 10, 1992 (filed as Exhibits 2.01-2.03 to the Company's Form
            10-Q Report for the quarter ended October 31, 1992).

     (.41)  Agreement of Merger among J. Baker, Inc., JBAK Acquisition Corp.                                      *
            and Tishkoff Enterprises, Inc. dated December 3, 1993 (filed as
            Exhibit 10.30 to the  Company's  Form 10-K Report for the year ended
            January 29, 1994).

     (.42)  Agency Agreement by and between Gordon Brothers Partners, Inc.                                        *
            and Morse Shoe, Inc., dated September 22, 1995 (filed as Exhibit
            10.01 to the  Company's  Form  10-Q  Report  for the  quarter  ended
            October 28, 1995).




*    Incorporated herein by reference
**   Included herein

<PAGE>

Exhibit                                                                                                    Page No.

     (.43)  Mortgage, Assignment of Leases and Rents and Security Agreement from                                  *
            Morse Shoe, Inc. to Fleet National Bank dated as of June 21, 1996
            (filed as Exhibit  10.06 to the  Company's  Form 10-Q Report for the
            quarter ended August 3, 1996).

     (.44)  Mortgage, Assignment of Leases and Rents and Security Agreement from                                  *
            JBI, Inc. to Fleet National Bank dated as of June 21, 1996 (filed as
            Exhibit 10.07 to the Company's Form 10-Q Report for the quarter ended
            August 3, 1996).

     (.45)  Release and Discharge of Mortgage from Fleet National Bank as Agent                                   *
            with respect to the Canton, Massachusetts property dated December 27,
            1996 (filed as Exhibit 10.67 to the Company's Report on Form 10-K for
            the year ended February 1, 1997).

     (.46)  Release of Mortgage from Fleet National Bank as Agent with                                            *
            respect to the Columbus, Ohio property dated February 27, 1997,
            attached.

     (.47)  Mortgage and Security Agreement by JBAK Canton Realty, Inc. to                                        *
            The Chase Manhattan Bank dated as of December 30, 1996, attached.

11.         Statement re:  Computation of Net Earnings (Loss) Per Common                                         **
            Share, attached.

12.         Statement re:  Computation of Ratio of Earnings to Fixed Charges,                                    **
            attached.

21.         Subsidiaries of the Registrant, attached.                                                            **

23.         Consent of KPMG Peat Marwick LLP, attached.                                                          **

27.         Financial Data Schedule, attached.                                                                   **

</TABLE>
















*     Incorporated herein by reference
**    Included herein