<PAGE>  1

                                CONFORMED
 
                              UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C.  20549
 
                                FORM 10-Q
 
 (Mark One)
 
 [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
                        AND EXCHANGE ACT OF 1934
 
 For the quarterly period ended March 31, 1997
 
                                   or
 
 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                        AND EXCHANGE ACT OF 1934
 
 For the transition period from __________________ to _____________________ 
 Commission file number 1-542
 
                                GROSSMAN'S INC.                            
 --------------------------------------------------------------------------
         (Exact name of registrant as specified in its charter)
 
                 Delaware                                 38-0524830        
 -----------------------------------------          -----------------------
      (State or other jurisdiction of                  (I.R.S. Employer
      in corporation or organization)                 Identification No.)
 
              45 Dan Road                                        
           Canton, Massachusetts                             02021          
 -----------------------------------------          -----------------------
 (Address of principal executive offices)                 (Zip Code)
 
                                 (617) 830-4000                             
 --------------------------------------------------------------------------
              (Registrant's telephone number, including area code)
 
                                 Not applicable                             
 --------------------------------------------------------------------------
              (Former name, former address and former fiscal year, 
                          if changed since last report)
 
      Indicate by check mark whether the registrant (1) has filed all
 reports required to be filed by Sections 13 or 15(d) of the Securities
 Exchange Act of 1934 during the preceding 12 months (or for such shorter
 periods 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 whether the registrant has filed all documents
 and reports required to be filed by Sections 12, 13 or 15(d) of the
 Securities Exchange Act of 1934 subsequent to the distribution of
 securities under a plan confirmed by a court.  Yes     No
 
      The Company filed a Voluntary Petition pursuant to the provisions of
 Chapter 11 of the U.S. Bankruptcy Court on April 7, 1997.  No plan has
 been submitted to the Court.
 
      Indicate the number of shares outstanding of the issuer's classes of
 common stock, as of the latest practicable date. 
 
  Common Stock - $.01 Par Value - 27,978,074 shares as of May 15, 1997.


<PAGE>  2

                             GROSSMAN'S INC.
                                FORM 10-Q
                      QUARTER ENDED MARCH 31, 1997
 
                                  INDEX
 
     
                                                                Page Number
                                                                -----------
 
 PART I. FINANCIAL INFORMATION
 -----------------------------
 
 ITEM 1. FINANCIAL STATEMENTS  
   
   GROSSMAN'S INC. AND SUBSIDIARIES
    Consolidated Balance Sheets
      March 31, 1997, December 31, 1996 and March 31, 1996..........    3
 
    Consolidated Statements of Operations
      Three Months Ended March 31, 1997 and 1996....................    5
 
    Consolidated Statements of Cash Flows
      Three Months Ended March 31, 1997 and 1996....................    6
 
    Notes to Unaudited Interim Consolidated Financial Statements....    7
 
 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS..................................   12
 
 
 PART II. OTHER INFORMATION
 --------------------------
 
 ITEM 1. LEGAL PROCEEDINGS..........................................   18
 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...........................   18
 
 SIGNATURES.........................................................   19
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                     2


<PAGE>  3

 PART I. FINANCIAL INFORMATION
 -----------------------------
 
 
 ITEM 1. FINANCIAL STATEMENTS
                      
<TABLE>
<CAPTION>
                      
 
                    GROSSMAN'S INC. AND SUBSIDIARIES
                         (DEBTOR-IN-POSSESSION)
                       CONSOLIDATED BALANCE SHEETS
                  (in thousands, except per share data)
                               (Unaudited)
 
 
                                    March 31,    December 31,    March 31,
                                      1997          1996           1996    
                                    ---------    ------------    ---------
 <S>                                 <C>           <C>           <C>
 ASSETS                                 
 ------
 CURRENT ASSETS
  Cash and cash equivalents          $  4,702      $  1,058      $  1,745
  Receivables, less allowance of 
    $3,602 at March 31, 1997, 
    $2,810 at December 31, 1996 
    and $3,041 at March 31, 1996 
    for doubtful accounts               4,625        10,710        20,604
  Inventories                          39,360        56,662        53,106 
  Property held for sale               11,139        15,199         4,500
  Other current assets                  3,265         1,559         2,852
                                     --------      --------      --------
    Total current assets               63,091        85,188        82,807
 
 PROPERTY, PLANT AND EQUIPMENT, 
  net of accumulated depreciation 
  of $16,696 at March 31, 1997, 
  $16,114 at December 31, 1996 and 
  $14,608 at March 31, 1996            25,150        25,549        50,955
 PROPERTY HELD FOR SALE                    -             -         31,294
 PREPAID PENSION ASSET                  9,466         9,536            -
 OTHER ASSETS                           2,874         3,168         1,188
                                     --------      --------      --------
    TOTAL ASSETS                     $100,581      $123,441      $166,244
                                     ========      ========      ========
 
 
 The accompanying notes are an integral part of these unaudited interim 
 consolidated financial statements.
 
</TABLE>
 
 
 
 
 
 
 
 
 
                                     3


<PAGE>  4

<TABLE>
<CAPTION>

                    GROSSMAN'S INC. AND SUBSIDIARIES
                         (DEBTOR-IN-POSSESSION)
                       CONSOLIDATED BALANCE SHEETS
                  (in thousands, except per share data)
                               (Unaudited)
 
 
 
                                     March 31,    December 31,   March 31,
                                       1997          1996          1996    
                                     ---------    ------------   ---------
 <S>                                  <C>           <C>           <C>
 LIABILITIES AND
 STOCKHOLDERS' INVESTMENT
 
 CURRENT LIABILITIES
  Accounts payable and accrued
   liabilities                        $ 59,061      $ 60,229      $ 97,040
  Accrued interest                         459           397         1,829
  Revolving term note payable           21,359        30,024            -
  Current portion of long-term debt                                        
    and capital lease obligations       11,331        12,228        22,986
                                      --------      --------      ---------
     Total current liabilities          92,210       102,878       121,855
 
 REVOLVING TERM NOTE PAYABLE                -             -             68
 LONG-TERM DEBT AND CAPITAL LEASE
  OBLIGATIONS                              358           634         2,002
 PENSION LIABILITY                          -             -          8,206
 OTHER LIABILITIES                       7,238         7,241        15,005 
                                      ---------     ---------     ---------
    Total liabilities                   99,806       110,753       147,136
 
 COMMITMENTS AND CONTINGENCIES
 
 STOCKHOLDERS' INVESTMENT
  Common stock, $.01 par value:
   Shares authorized - 50,000
   Shares issued - 27,930 in 1997,
   27,676 at December 31, 1996
   and 26,137 at March 31, 1996            279           277           261
  Additional paid-in-capital           157,931       157,825       155,762
  Retained earnings (deficit)         (157,435)     (145,414)     (118,893)
  Minimum pension liability                 -             -        (16,476)
  Cumulative foreign currency
   translation adjustment                   -             -         (1,442)
  Less 43 shares in treasury at 
   March 31, 1996, at cost                  -             -           (104)
                                      ---------     ---------     ---------
     Total stockholders' investment        775        12,688        19,108 
                                      ---------     ---------     ---------
    TOTAL LIABILITIES AND 
     STOCKHOLDERS' INVESTMENT         $100,581      $123,441      $166,244
                                      =========     =========     =========
 
 The accompanying notes are an integral part of these unaudited interim 
 consolidated financial statements.   
 
</TABLE>
 
 
 
 
 
                                    4 


<PAGE>  5

<TABLE>
<CAPTION>

                    GROSSMAN'S INC. AND SUBSIDIARIES
                         (DEBTOR-IN-POSSESSION)
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)
                               (Unaudited)
 
                                                    Three Months Ended 
                                                        March 31,   
                                                  -----------------------
                                                    1997           1996
                                                    ----           ----
 <S>                                              <C>           <C> 
 SALES                                            $ 49,375      $112,981
 COST OF SALES                                      39,358        86,481
                                                  ---------     ---------
   Gross Profit                                     10,017        26,500    
 
 OPERATING EXPENSES                   
   Selling and administrative                       20,864        38,034
   Depreciation and amortization                     1,022         1,849
   Store closing expense                                -         40,150
   Preopening expense                                  134           361
                                                  ---------     ---------
                                                    22,020        80,394 
                                                  ---------     ---------
 OPERATING LOSS                                    (12,003)      (53,894)
 
 OTHER EXPENSES (INCOME)                                   
   Interest expense                                    687         1,620   
   Net gain on disposals of property                    -            (27)
   Other                                              (669)       (1,008)
                                                  ---------     ---------
                                                        18           585 
 EQUITY IN NET LOSS OF UNCONSOLIDATED AFFILIATE         -            208
                                                  ---------     ---------
 LOSS BEFORE INCOME TAXES                          (12,021)      (54,687)   
 PROVISION FOR INCOME TAXES                             -             -     
                                                  ---------     ---------
 NET LOSS                                         $(12,021)     $(54,687)
                                                  =========     =========
 
 NET LOSS PER COMMON SHARE 
   (PRIMARY AND FULLY DILUTED)                    $  (0.43)     $  (2.10)
                                                  =========     =========
 WEIGHTED AVERAGE SHARES AND EQUIVALENT
   SHARES OUTSTANDING (PRIMARY AND FULLY DILUTED)   27,818        26,089
                                                  =========     =========   
 
 
 The accompanying notes are an integral part of these unaudited interim 
 consolidated financial statements.
 
</TABLE>
 
 
 
 
 
 
 
                                     5


<PAGE>  6

<TABLE>
<CAPTION>

                    GROSSMAN'S INC. AND SUBSIDIARIES
                         (DEBTOR-IN-POSSESSION)
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                  (in thousands, except per share data)
                               (Unaudited)
 
                                                     Three Months Ended
                                                          March 31,   
                                                   -----------------------
                                                      1997          1996 
                                                      ----          ----
 <S>                                               <C>           <C>
 OPERATING ACTIVITIES:
 Net loss                                          $(12,021)     $(54,687) 
 Adjustments to reconcile net loss to net cash
  provided by operating activities:
   Depreciation and amortization                      1,022         1,849
   Net gain on disposals of property                     -            (27)
   Provision for losses on accounts receivable        1,676           465
   Provision for store closings                          -         40,150
   Undistributed loss of unconsolidated affiliate        -            208
   (Increase) decrease in assets:
    Receivables                                       4,409         3,071
    Inventories                                      17,302        35,572
    Note receivable and other assets                 (1,339)       13,507
   (Decrease) in accounts payable and 
    accrued and other liabilities                    (1,109)       (7,603)
                                                   ---------     ---------
    Total adjustments                                21,961        87,192
                                                   ---------     ---------
  NET CASH PROVIDED BY OPERATING ACTIVITIES           9,940        32,505
 
 INVESTING ACTIVITIES:
  Capital expenditures                                 (204)       (1,550)
  Proceeds from sales of property, net                3,641         2,474
  Investment in unconsolidated affiliate                 -           (200)
                                                   ---------     ---------
  NET CASH PROVIDED BY INVESTING ACTIVITIES           3,437           724 
 
 FINANCING ACTIVITIES:
  Payments on long-term debt and capital lease 
   obligations                                       (1,173)       (1,244)
  Net repayments of revolving term note payable      (8,665)      (32,776)
  Issuance of common stock                              105            -  
                                                   ---------     ---------
  NET CASH (USED FOR) FINANCING ACTIVITIES           (9,733)      (34,020)
 
 Net increase (decrease) in cash and cash 
  equivalents                                         3,644          (791)
 
 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     1,058         2,536 
                                                   ---------     ---------
 CASH AND CASH EQUIVALENTS AT END OF PERIOD        $  4,702      $  1,745
                                                   =========     =========
 
 The accompanying notes are an integral part of these unaudited interim 
 consolidated financial statements.
 
</TABLE>
 
 
                                     6


<PAGE>  7

                      GROSSMAN'S INC. AND SUBSIDIARIES
                         (DEBTOR-IN-POSSESSION)
        NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1997
 
 NOTE 1 - BASIS OF PRESENTATION
 ------------------------------
 
 On April 7, 1997, the Company and two of its wholly owned affiliates, GRS
 Holding Company, Inc. and GRS Realty Company, filed Chapter 11 bankruptcy
 petitions under Title 11 of the United States Code ("Chapter 11").  The
 Company is presently operating its business as a debtor-in-possession
 subject to the jurisdiction of the United States Bankruptcy Court for the
 District of Delaware (the "Court").  The Company will continue to operate
 as a debtor-in-possession while pursuing a reorganization plan to
 restructure operations and the Company's capitalization.  As a debtor-in-
 possession in Chapter 11, the Company may not engage in transactions
 outside of the ordinary course of business, without approval, after notice
 and hearing, of the Court.  The accompanying consolidated financial
 statements do not include any adjustments to reflect the possible future
 effects of the recoverability and classification of assets, the amounts
 and classification of liabilities which may be allowed in the Chapter 11
 plan, or the ultimate capitalization of the Company.
 
 The accompanying Unaudited Interim Consolidated Financial Statements have 
 been prepared on a going concern basis in conformity with generally
 accepted accounting principles applied on a consistent basis and, in the
 opinion of management, include all adjustments, consisting of normal
 recurring accruals, necessary for a fair presentation of the results for
 the interim periods.  The results of operations for the interim periods
 are not necessarily indicative of results to be expected for the year.
 
 These interim consolidated financial statements should be read in
 conjunction with the consolidated financial statements and related notes
 contained in the Annual Report on Form 10-K of Grossman's Inc. for the
 year ended December 31, 1996.  The balance sheet as of December 31, 1996
 has been derived from the audited financial statements as of that date.
 
 The Unaudited Interim Consolidated Financial Statements include the
 accounts of Grossman's Inc. and its wholly-owned subsidiaries (the
 "Company") after elimination of intercompany balances and transactions. 
 
 The Company's fiscal year end is December 31.  The Company records
 activity in quarterly accounting periods of equal length, ending on the
 last Saturday of each quarter.  The differences in amounts presented and
 those which would have been presented using actual quarter end dates are
 not material.
 
 Certain amounts in the consolidated financial statements for prior years
 have been reclassified to conform to the current year presentation.  Such 
 reclassifications had no effect on previously reported results of
 operations.
 
 
 
 
 
 
 
                                     7

<PAGE>  8

 NOTE 2 - REFINANCING AND PROJECTED REORGANIZATION
 -------------------------------------------------
 
 In each of the past four years, the Company has downsized its operations
 and closed stores.  Net losses were reported in each of these years and
 significant operating losses were reported in the past two years.  The 
 largest group of store closings occurred in March 1996 when the Company
 closed its 60 store Grossman's Division.  Inventory shortages were
 experienced in all divisions prior to and shortly after these store
 closings, and sales results following the closure of the Grossman's
 Division were harmed through the remainder of 1996.  During early January
 1997, limited availability under the Company's revolving credit agreement,
 combined with operating deficits, resulted in an inability to meet current
 obligations.
 
 On January 22, 1997, the Company announced that it was experiencing a
 severe liquidity shortage.  The Company also announced that it was
 exploring all available options, including seeking protection from
 creditors under Chapter 11 of the U.S. Bankruptcy Code.
 
 On February 7, 1997, the Company and JELD-WEN, inc. ("JELD-WEN"), a major
 supplier to the Company and an affiliate of its largest shareholder,
 entered into a letter of intent which stipulated terms under which the
 Company would be provided financing involving JELD-WEN.
 
 On March 4, 1997, the Company announced an agreement with GDI Company,
 Inc. ("GDI"), a subsidiary of JELD-WEN, pursuant to which GDI purchased
 the $4 million convertible note payable by GRS to Combined Investors LLP,
 an affiliate of Gordon Brothers Partners, Inc.  Following the purchase,
 $1.1 million of segregated cash collateral from the sale of real estate
 was released to the Company.  The funds received by the Company also
 included $1.99 million pursuant to a note secured by three parcels of real
 estate of GRS Realty, Inc. ("GRS"), previously pledged to secure the $4
 million note.  
 
 Following the loan from GDI Company, Inc., Congress Financial Corporation
 ("Congress") amended its credit agreement with the Company and provided
 the Company an additional $10 million, guaranteed and supported by a
 stand-by letter of credit obtained by an affiliate of JELD-WEN, in favor
 of Congress, and $5 million of real estate previously pledged to secure
 the $4 million note.  The total $13.1 million of proceeds received were
 used for essential expenses and the restocking of inventories.  This loan
 was refinanced, as discussed below.
 
 On April 8, 1997, first day orders granting the Company authority to pay
 employees, honor customer practices and take certain other actions which
 assist business operations in Chapter 11 were entered by the Court. 
 Pursuant to interim financing orders entered by the Court on April 9 and
 10, 1997, Congress, Grossman's principal pre-bankruptcy revolving credit
 lender, continued to extend credit on essentially pre-bankruptcy terms
 under a revolving loan facility, and GDI made available up to $11 million
 in advances of which the Company drew approximately $6 million as of April
 30, 1997.
 
 
 
 
 
 
 
                                     8

<PAGE>  9

 NOTE 2 - REFINANCING AND PROJECTED REORGANIZATION (CONTINUED)
 -------------------------------------------------------------
 
 On April 30, 1997, GDI purchased the Congress loan and collateral
 position, with the exception of a $1 million senior lien on inventory and
 receivables retained by Congress, related to a termination fee in dispute. 
 Congress also received a release from the Company as part of the
 assignment of its loans.  The loan and security agreement was amended and
 restated, and under the terms of the final amended DIP financing facility
 from GDI, availability is calculated on a borrowing base of 60% of
 eligible inventory plus 80% of eligible accounts receivable.  There is
 also an available overadvance above this borrowing base of $11 million,
 which is currently subject to a $1 million reserve pending resolution of
 the disputed Congress termination fee.  The interest rate for the DIP
 facility is prime plus 1.00% and the maximum amount which can be borrowed
 is $50 million (or if less, the sum of the borrowing base and the
 overadvance).  This GDI DIP facility is in addition to the $5.99 million
 of pre-petition real estate loans held by GDI.
 
 Both the final DIP facility and the assignment of the loan from Congress
 to GDI were approved by the Court on April 30, 1997.
 
 
 NOTE 3 - 1996 STORE CLOSINGS
 ----------------------------
 
 In March 1996, the Company announced a restructuring and refinancing plan 
 under which its 60 Grossman's stores, located in eight Northeastern
 states, were closed and a $40.2 million restructuring charge was recorded. 
 
 
 NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 -------------------------------------------------
 
<TABLE>

 Accounts payable and accrued liabilities consist of the following (in 
 thousands):

<CAPTION>
 
                                       March 31,   December 31,   March 31,
                                        1997          1996         1996    
                                      ---------   ------------   ---------
 <S>                                   <C>           <C>          <C>
 Accounts payable                      $39,243       $37,856      $55,448
 Accrued salaries, wages, 
  commissions and related taxes          2,403         2,857        4,853 
 Accrued income and franchise taxes        264           245          318
 Accrued taxes other than income 
  and franchise                          1,732         3,218        2,921  
 Accrued store closing costs             6,177         4,322       15,813 
 Accrued insurance                       6,769         7,403       11,136 
 Other accrued liabilities               2,473         4,328        6,551
                                       -------       --------     -------
                                       $59,061       $60,229      $97,040 
                                       =======       =======      =======
</TABLE>
 
 
 
 
 
                                     9
<PAGE>  10


 NOTE 5 - LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT
 ------------------------------------------------------

<TABLE>
 
 Long-term debt consists of the following (in thousands):

<CAPTION>
 
                                      March 31,  December 31,   March 31, 
                                        1997         1996         1996    
                                      ---------  ------------  ----------
 <S>                                   <C>          <C>          <C>
 14% Debentures, paid April 1996       $    -       $    -       $16,201
 Convertible notes payable, due
  April 1999                             1,500        1,500           -
 Non-convertible notes payable,
  due April 1999                         3,011        2,971           -
 Mortgage notes                          5,811        6,552        3,419 
 Other notes payable                       185          224          386
 Capital lease obligations               1,142        1,615        4,982
                                       -------      -------      -------
                                        11,689       12,862       24,988
 
 Less current portion                   11,331       12,228       22,986
                                       -------      -------      -------
                                       $   358      $   634      $ 2,002 
                                       =======      =======      =======

</TABLE>
 
 
 At March 31, 1997, cash borrowings under the Company's loan and security
 agreement totalled $21.4 million and outstanding standby letters of credit
 totalled $5.2 million.  The maximum borrowings under this agreement during
 the three months ended March 1997 were $35.4 million, including letters of
 credit of $5.4 million.  The maximum borrowings under the loan and
 security agreement in effect for the three months ended March 31, 1996
 were $52.3 million, including letters of credit of $9.2 million.  The
 weighted average annual interest rates on such borrowings in the first
 quarters of 1997 and 1996 were 8.8% and 11.6%, respectively.  At March 31,
 1997, the loan and security agreement provided for borrowings of $21.7
 million.
 
 See Note 2 for discussion of restructuring of the loan and security
 agreement, and subsequent termination and replacement of the agreement
 with debtor-in-possession financing.  
 
 
 NOTE 6 - OTHER LIABILITIES
 --------------------------

<TABLE>
 
 Other long-term liabilities consist of the following (in thousands):

<CAPTION>
 
                                      March 31,   December 31,   March 31,
                                        1997         1996          1996
                                      ---------   ------------   ---------
 <S>                                   <C>           <C>          <C>
 Accrued insurance claims              $6,129        $6,129       $ 6,281
 Accrued store closing costs              768           768         8,332
 Other accrued liabilities                341           344           392
                                       ------        ------       -------
                                       $7,238        $7,241       $15,005
                                       =======       ======       =======
</TABLE>
 
 
                                   10
 

<PAGE>  11


 NOTE 7 - EARNINGS PER SHARE
 ---------------------------
 
 In February 1997, the Financial Accounting Standards Board issued
 Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
 ("FAS 128"), which is required to be adopted in the fourth quarter of
 1997.  At that time, the Company will be required to change the method
 currently used to compute earnings per share ("EPS") and to restate all
 prior periods.  FAS 128 simplifies the previous standard for computing EPS
 and replaces the presentation of primary and fully diluted EPS with the
 presentation of basic and diluted EPS.  The basic EPS calculation will not
 include the dilutive effects of stock options, previously included in the
 determination of primary EPS.  As a result, in profitable periods the
 Company's basic EPS calculation will exceed primary EPS.  The calculation
 of diluted EPS will not differ materially from fully diluted EPS.  The
 differences between the FAS 128 calculations, as compared to primary and
 fully diluted EPS, for the first quarters of 1996 and 1997 are not
 material.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                    11


<PAGE>  12

ITEM 2.      
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 FINANCIAL CONDITION
 
 MARCH 31, 1997 COMPARED WITH DECEMBER 31, 1996
 ----------------------------------------------
 
 INTRODUCTION
 
 This discussion should be read in conjunction with the financial
 statements contained in Item 1 hereof, and the consolidated financial
 statements, related notes and Management's Discussion and Analysis of
 Financial Condition and Results of Operations contained in
 the Annual Report on Form 10-K for the year ended December 31, 1996.
 
 PETITION FOR RELIEF UNDER CHAPTER 11
 
 On April 7, 1997 (the "Petition Date"), the Company and two of its wholly
 owned affiliates, GRS Holding Company, Inc. and GRS Realty Company, Inc.,
 filed Chapter 11 petitions for reorganization under Title 11 of the United
 States Code ("Chapter 11").  The Company is presently operating its
 business as a debtor-in-possession, subject to the jurisdiction of the
 United States Bankruptcy Court for the District of Delaware (the "Court"). 
 The Company will continue to operate its business as a
 debtor-in-possession while pursuing a reorganization plan to restructure
 operations and the Company's capitalization.  As a debtor-in-possession in
 Chapter 11, the Company may not engage in transactions outside of the
 ordinary course of business, without the approval, after notice and
 hearing, of the Court.
 
 The Chapter 11 filing results in an automatic stay of the commencement or
 prosecution of claims against the Company that arose before the Petition
 Date.  Until a reorganization plan is confirmed by the Court, payments of
 pre-petition liabilities will be limited to those payments approved by the
 Court.  As a result of the filing, the Company may sell or otherwise
 realize assets and liabilities for amounts other than those reflected in
 the financial statements.  In addition, a plan of reorganization could
 materially change the amounts currently recorded in the financial
 statements.  The financial statements do not include any adjustments to
 reflect the possible future effects of the recoverability and
 classification of assets, the amounts and classification of liabilities
 which may be allowed in the reorganization plan, or the ultimate
 capitalization of the Company.
 
 In each of the past four years, the Company has downsized its operations
 and closed stores.  Net losses were reported in each of these years and
 significant operating losses were reported in both 1995 and 1996.  The
 largest group of store closings occurred in March 1996 when the Company
 closed its 60 store Grossman's Division.  Inventory shortages were
 experienced in all divisions prior to and shortly after these store
 closings, and sales results following the closure of the Grossman's
 Division were harmed through the remainder of 1996.  During early January
 1997, limited availability under the Company's revolving credit agreement,
 combined with operating deficits, resulted in an inability to meet
 obligations.
 
 
                                    12

<PAGE>  13

 MARCH 31, 1997 COMPARED WITH DECEMBER 31, 1996 (CONTINUED)
 ----------------------------------------------------------
 
 On January 22, 1997, the Company announced that it was experiencing a
 severe liquidity shortage.  The Company also announced that it was
 exploring all available options, including seeking protection from
 creditors under Chapter 11 of the U.S. Bankruptcy Code.  For a period of
 approximately six weeks, during which the Company sought, negotiated and
 obtained interim financing, almost no inventory was received from
 suppliers.  
 
 On March 4, 1997, the Company announced an agreement with GDI Company,
 Inc. ("GDI"), a subsidiary of JELD-WEN, pursuant to which GDI purchased
 the $4 million convertible note payable by GRS to Combined Investors LLP,
 an affiliate of Gordon Brothers Partners, Inc.  Following the purchase,
 $1.1 million of segregated cash collateral from the sale of real estate
 was released to the Company.  The funds received by the Company also
 included $1.99 million pursuant to a note secured by three parcels of real
 estate of GRS Realty, Inc. ("GRS"), previously pledged to secure the $4
 million note.  
 
 Following the loan from GDI Company, Inc., Congress Financial Corporation
 ("Congress") amended its credit agreement with the Company and provided
 the Company an additional $10 million, guaranteed and supported by a
 stand-by letter of credit obtained by an affiliate of JELD-WEN, in favor
 of Congress, and $5 million of real estate previously pledged to secure
 the $4 million note.  The total $13.1 million of proceeds received were
 used for essential expenses and the restocking of inventories.  This loan
 was refinanced, as discussed below.
 
 Funding levels under the interim financing provided by GDI and Congress
 did not allow for the purchase of inventory sufficient to restock the
 Company's stores.
 
 Pursuant to interim financing orders entered by the Court on April 9 and
 10, 1997, Congress Financial Corporation, Grossman's principal pre-
 bankruptcy revolving credit lender, continued to extend credit on
 essentially pre-bankruptcy terms under a revolving loan facility, and GDI
 made available up to $11 million in advances of which the Company drew
 approximately $6 million as of April 30, 1997.
 
 On April 30, 1997, GDI purchased the Congress loan and collateral
 position, with the exception of a $1 million senior lien on inventory and
 receivables retained by Congress, related to a termination fee in dispute. 
 Congress also received a release from the Company as part of the
 assignment of its loans.  The loan and security agreement was amended and
 restated, and under the terms of the final amended DIP financing facility
 (the "DIP facility") from GDI, availability is calculated on a borrowing
 base of 60% of eligible inventory plus 80% of eligible accounts
 receivable.  There is also an available overadvance above this borrowing
 base of $11 million, which is currently subject to a $1 million reserve
 pending resolution of the disputed Congress termination fee.  The interest
 rate for the DIP facility is prime plus 1.00% and the maximum amount which
 can be borrowed is $50 million (or if less, the sum of the borrowing base
 and the overadvance).  This GDI DIP facility is in addition to the $5.99
 million of pre-petition real estate loans held by GDI.
 
 
 
                                    13

<PAGE>  14

 Both the final DIP facility and the assignment of the loan from Congress
 to GDI were approved by the Court on April 30, 1997.  The Company
 anticipates that the DIP financing will allow for the stores to be fully
 restocked during the second quarter.  The Company is in the process of
 formulating its business plan.  That process will include a determination
 of the adequacy of the DIP facility to fund the restructuring of stores
 and normal operations.
 
 The Company and the Subsidiaries filed a motion on May 6, 1997 which asks
 the Court to establish procedures requiring prior written notice to the
 Company by any party or group proposing (i) acquire shares of Company's
 stock resulting in a more than 1,350,000 share block, or (ii) acquire
 prepetition unsecured claims against the Company or those subsidiaries
 resulting in a more than $6 million block of such claims.  The procedures
 would also require such notice by any party or group proposing to acquire
 such stock or claims if such party or group hold or are acquiring both
 stock and claims.  If the Company objects during a 30 day period after
 such notice, the transaction would become effective only upon Court
 approval.  The Company believes that this relief is necessary to protect
 the Net Operating Loss Carryforwards (approximately $300 million at
 December 31, 1996), which it believes will be critical to its ability to
 reorganize.  An order granting interim approval was signed on May 14, 1997
 by the Court, with a final hearing date set for June 17, 1997.
 
 
 OTHER FINANCIAL CONDITION CHANGES
 
 During the first quarter, inventory levels would normally increase due to
 a seasonal build up of inventory in advance of the spring and summer
 months.  Due to the lack of inventory received, inventory levels decreased
 by over 30%, from $56.7 million at December 31, 1996 to $39.4 million at
 quarter end.  Accounts payable, which would normally trend with inventory,
 rose slightly during this period, due to payments being made only for
 critical expenses during most of the quarter.
 
 Real property held for sale declined by $4.0 million during the quarter,
 reflecting the continued sale of surplus properties.  
 
 Two Mr. Second Bargain Outlet stores were opened during the quarter, with
 limited capital investment, as the stores were opened in former leased
 Grossman's store locations closed in 1996.  Due to the lack of inventory
 received during the quarter, inventory for these stores was allocated from
 inventory which otherwise would have been stocked in existing stores.
 
 Included in accrued liabilities is accrued store closing costs, which
 increased by $1.8 million during the quarter, principally due to the
 refund of fees paid in 1996.
 
 Total long-term debt declined by $1.1 million, reflecting payments related
 to the property sales, offset in part by interim GDI financing.
 
 Statements contained in this Management's Discussion and Analysis of
 Financial Condition and Results of Operations that are not based on
 historical fact are "forward-looking statements" within the meaning of the
 Private Securities Litigation Reform Act of 1995.  Important factors,
 beyond the Company's control, that could cause actual results to differ 
 materially from those in the forward-looking statements include, but are 
 
 
                                    14 


<PAGE>  15

 MARCH 31, 1997 COMPARED WITH DECEMBER 31, 1996 (CONTINUED)
 ----------------------------------------------------------
 
 not limited to, the need for Bankruptcy Court approvals, adequacy and
 absence of default under the DIP facility, competition, stability of
 customer demand, and the sufficiency of capital resources.  The Company
 undertakes no obligation to publicly release revisions to these
 forward-looking statements to reflect events or circumstances which occur
 between financial statement filing dates.
 
 
 RESULTS OF OPERATIONS
 
 THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED 
 MARCH 31, 1996
 ------------------------------------------------------------------
 
 Results of operations during the three months ended March 31, 1996 include
 the results of the Grossman's Division, whose operations terminated on
 March 31, 1996.
 
 The Company's first quarter historically has been a period of low sales
 activity with resultant losses, as fewer home improvement projects and
 construction activities in the Company's markets are undertaken during the
 winter months.  Sales from ongoing operations during 1997 were
 significantly below both planned and historical levels due to out-of-stock
 situations which resulted from limited inventory receipts.  Sales results
 in 1996 were also affected by inventory supply problems encountered in
 advance of the closing of the Grossman's stores, but not to the extent
 that 1997 sales were affected.

<TABLE>
 
 The following table shows comparative sales results by store type and
 the significant sales decline from 1996 to 1997 (dollars in millions):

<CAPTION>
 
                                                Three Months
                                                Ended March   
                                             ------------------
                                               1997      1996 
                                               ----      ----
 <S>                                          <C>       <C>
 SALES (in millions)
 Ongoing Operations
  Contractors' Warehouse                      $ 38.0    $ 54.5
  Mr. 2nd's Bargain Outlet                      11.4      10.5 
                                              ------    ------
    Total Ongoing Operations                    49.4      65.0
 Closed Stores
  Grossman's                                      -       48.0
                                              ------    ------
 Total Grossman's Inc.                        $ 49.4    $113.0
                                              ======    ====== 
 
</TABLE>
 
 
 
 
 
 
 
 
                                    15


<PAGE>  16


 THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED 
 MARCH 31, 1996 (CONTINUED)
 ------------------------------------------------------------------

<TABLE>
<CAPTION>
 
                                                Three Months
                                                Ended March   
                                             ------------------
                                               1997      1996 
                                               ----      ----
 <S>                                           <C>       <C>
 % OF TOTAL SALES
 Ongoing Operations
  Contractors' Warehouse                        76.9 %    48.2 %
  Mr. 2nd's Bargain Outlet                      23.1       9.3  
                                               ------    ------  
   Total Ongoing Operations                    100.0      57.5  
 Closed Stores
  Grossman's                                      -       42.5  
                                               ------    ------  
 Total Grossman's Inc.                         100.0 %   100.0 %
                                               ======    ======  
 
 SALES % INCREASE (DECREASE)
  VERSUS PRIOR YEAR
 Ongoing Operations
  Contractors' Warehouse                       (30.3)%     6.7 %
  Mr. 2nd's Bargain Outlet                       8.6       1.9  
                                              -------   ------- 
   Total Ongoing Operations                    (24.0)      5.9  
 Closed Stores
  Grossman's                                  (100.0)    (26.6) 
                                              -------   ------- 
 Total Grossman's Inc.                         (56.3)%   (10.9)%
                                              =======   ======= 
 
 COMPARABLE STORE SALES % INCREASE 
  (DECREASE) VERSUS PRIOR YEAR     
 Ongoing Operations
  Contractors' Warehouse                       (32.8)%    (3.7)%
  Mr. 2nd's Bargain Outlet                      (9.8)    (12.7) 
                                              -------   ------- 
   Total Ongoing Operations                    (29.0)     (5.2) 
 Closed Stores
  Grossman's                                      NA        NA  
                                              -------   ------- 
 Total Grossman's Inc.                         (29.0)%    (5.2)%
                                              =======   ======= 
 
 NUMBER OF STORES AT MONTH END
 Ongoing Operations
  Contractors' Warehouse                          15        15
  Mr. 2nd's Bargain Outlet                        28        24
 Closed Stores
  Grossman's                                       -         -
                                               ------    ------
 Total Number of Stores                           43        39
                                               ======    ======
</TABLE>
                    
 
                                   16
 

<PAGE>  17

 THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED 
 MARCH 31, 1996 (CONTINUED)
 ------------------------------------------------------------------
 
 Sales results were also affected by store openings and closings.  The 1997
 results include the results of four Mr. 2nd's Bargain Outlet stores opened
 subsequent to the first quarter of 1996.  Contractors' Warehouse results
 reflect one Midwest store opened in May 1996 and the December 1996 closing
 of the Reno, Nevada store.
 
 Gross profit declined by $16.5 million, reflecting the sales decline and a
 decrease in gross margin from 23.5% to 20.3%.  The decrease in gross
 margin was due principally both to the closing of the Grossman's stores,
 which operated at higher margin rates, and a decline within Contractors'
 Warehouse stores, due to the sales mix experienced as inventories became
 depleted.  
 
 Selling and administrative expenses declined by $17.2 million, reflecting
 the Grossman's store closings, but experienced a large increase as a
 percent of sales, from 33.7% in 1996 to 41.7% in 1997, due to the
 extremely low sales volume.
 
 Depreciation and amortization declined from $1.8 million in 1996 to $1.0
 million in 1997, reflecting the downsizing.  Depreciation on all
 Grossman's stores ceased after March 1996.
 
 Store closing expense in 1996 totalled $40.2 million, related to the
 Grossman's store closings.
 
 Interest expense declined from $1.6 million in 1996 to $687 thousand in
 1997, reflecting lower revolving credit borrowings, lower levels of
 capital lease financing due to store closings, and savings related to
 long-term debt paid with proceeds from property sales.
 
 Other income declined by $339 thousand, principally due to lower volume of
 tool rentals in Contractors' Warehouse stores.
 
 The Company's Mexican joint venture, for which the Company's share of net
 loss in the first quarter of 1996 was $208 thousand, was terminated in
 December 1996.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                    17


<PAGE>  18

 PART II.  OTHER INFORMATION
 ---------------------------
 
 Item 1.  LEGAL PROCEEDINGS
 
     The Company previously reported on its Form 8-K dated April 22,
 1997, the filing on April 7, 1997 by the Company and two of its
 subsidiaries (the "Subsidiaries") of voluntary Chapter 11 bankruptcy
 petitions in the United States Bankruptcy Court for the District of
 Delaware (the "Court") under Title 11 of the United States Code.  Due to
 its pre-petition liquidity crisis, the Debtors were past due on
 significant amounts of trade and other unsecured obligations.  In the
 Company's Chapter 11 petition, it listed $74,177,000 of unsecured debt. 
 As a general matter, such debt will only be paid when and to the extent
 provided in a confirmed Chapter 11 plan.
 
     The Company files monthly operating reports with the Court, copies
 of such reports are available from the Clerk of the Court.
 
     The Company and the Subsidiaries filed a motion on May 6, 1997 which
 asks the Court to establish procedures requiring prior written notice to
 the Company by any party or group proposing (i) acquire shares of
 Company's stock resulting in a more than 1,350,000 share block, or (ii)
 acquire prepetition unsecured claims against the Company or those
 subsidiaries resulting in a more than $6 million block of such claims. 
 The procedures would also require such notice by any party or group
 proposing to acquire such stock or claims if such party or group hold or
 are acquiring both stock and claims.  If the Company objects during a 30
 day period after such notice, the transaction would become effective only
 upon Court approval.  The Company believes that this relief is necessary
 to protect the Net Operating Loss Carryforwards (approximately $300
 million at December 31, 1996), which it believes will be critical to its
 ability to reorganize.  An order granting interim approval was signed on
 May 14, 1997 by the Court, with a final hearing date set for June 17,
 1997.
 
 
 Item 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
         (a) EXHIBITS
 
  
              11(a) Statement re computation of earnings per share,
                    filed herewith.
 
              99         Press release, dated May 12, 1997, announcing
                    Grossman's Reorganization Team.
 
 
         (b) REPORTS ON FORM 8-K
 
           The Company filed a Form 8-K with the Securities and     
           Exchange Commission, dated and filed April 22, 1997,
           reporting Bankruptcy or Receivership.
 
 
 
 
 
                                    18


<PAGE>  19

 SIGNATURES
 
 
 
      Pursuant to the requirements 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.
 
                                        GROSSMAN'S INC.
                                           Company
 
 
 
                                by  /s/ Steven L. Shapiro           
                                    -------------------------------------
                                             Steven L. Shapiro
                                        Vice President - Controller
                                       (Principal Accounting Officer)
        
 
 
 
 
 DATE:  May 15, 1997
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                   19