<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10 - Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE QUARTERLY PERIOD ENDED MAY 5, 2001

                           COMMISSION FILE NO. 1-6695

                            ------------------------

                               JO-ANN STORES, INC.
             (Exact name of Registrant as specified in its charter)


                   OHIO                                  34-0720629
      (State or other jurisdiction of       (I.R.S. Employer Identification No.)
      incorporation or organization)

      5555 DARROW ROAD, HUDSON, OHIO                       44236
 (Address of principal executive offices)                (Zip Code)

       Registrant's telephone number, including area code: (330) 656-2600

         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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

         Shares of Class A Common Stock outstanding at June 15, 2001:  9,557,598

         Shares of Class B Common Stock outstanding at June 15, 2001:  8,806,211


================================================================================







<PAGE>   2



JO-ANN STORES, INC.
FORM 10-Q INDEX
FOR THE QUARTER ENDED MAY 5, 2001
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                            Page Numbers

<S>                                                                                                         <C>
PART I.     FINANCIAL INFORMATION:

            Item 1.    Financial Statements (Unaudited)

                       Consolidated Balance Sheets as of May 5, 2001 and February 3, 2001                       3

                       Consolidated Statements of Operations for the Thirteen Weeks
                       Ended May 5, 2001 and April 29, 2000                                                     4

                       Consolidated Statements of Cash Flows for the Thirteen Weeks
                       Ended May 5, 2001 and April 29, 2000                                                     5

                       Notes to Consolidated Financial Statements                                               6

            Item 2.   Management's Discussion and Analysis of Financial Condition
                       and Results of Operations                                                                10

            Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                13

PART II.    OTHER INFORMATION

            Item 1.    Legal Proceedings                                                                        14

            Item 2.    Changes in Securities and Use of Proceeds                                                14

            Item 3.    Defaults Upon Senior Securities                                                          14

            Item 4.    Submission of Matters to a Vote of Security Holders                                      14

            Item 5.    Other Information                                                                        14

            Item 6.    Exhibits and Reports on Form 8-K                                                         14

            Signatures                                                                                          15
</TABLE>


                                     Page 2
<PAGE>   3


PART I  FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                               JO-ANN STORES, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             (UNAUDITED)
                                                                                MAY 5,            FEBRUARY 3,
                                                                                2001                 2001
-------------------------------------------------------------------------------------------------------------------
                                                                                   (MILLIONS OF DOLLARS,
                                                                             EXCEPT SHARE AND PER SHARE DATA)
<S>                                                                             <C>                <C>
ASSETS
Current assets:
    Cash and temporary cash investments                                         $ 23.1             $ 17.5
    Inventories                                                                  476.7              451.0
    Prepaid expenses and other current assets                                     38.0               37.3
                                                                                ------             ------
Total current assets                                                             537.8              505.8

Property, equipment and leasehold improvements, net                              226.2              190.2
Goodwill, net                                                                     27.1               27.2
Other assets                                                                      21.1               19.0
                                                                                ------             ------
Total assets                                                                    $812.2             $742.2
                                                                                ======             ======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                            $147.9             $164.0
    Accrued expenses                                                              48.0               59.5
                                                                                ------             ------
Total current liabilities                                                        195.9              223.5

Long-term debt                                                                   345.9              240.0
Deferred income taxes                                                             22.5               22.5
Other long-term liabilities                                                        7.6                7.4

Shareholders' equity:
    Common stock:
       Class A, stated value $0.05 per share; issued and outstanding
          9,529,911 and 9,364,896, respectively                                    0.6                0.6
       Class B, stated value $0.05 per share; issued and outstanding
          8,806,211 and 8,842,123, respectively                                    0.5                0.5
    Additional paid-in capital                                                    99.6               99.2
    Unamortized restricted stock awards                                           (1.1)              (1.2)
    Retained earnings                                                            181.4              187.8
    Accumulated other comprehensive income (loss)                                 (2.5)              --
                                                                                ------             ------
                                                                                 278.5              286.9
    Treasury stock, at cost                                                      (38.2)             (38.1)
                                                                                ------             ------
Total shareholders' equity                                                       240.3              248.8
                                                                                ------             ------
Total liabilities and shareholders' equity                                      $812.2             $742.2
                                                                                ======             ======
</TABLE>

See notes to consolidated financial statements


                                     Page 3

<PAGE>   4


                               JO-ANN STORES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              THIRTEEN WEEKS ENDED
                                                                        -----------------------------
                                                                           MAY 5,           APRIL 29,
                                                                           2001               2000
-----------------------------------------------------------------------------------------------------
                                                                        (MILLIONS OF DOLLARS, EXCEPT
                                                                          SHARE AND PER SHARE DATA)

<S>                                                                      <C>                 <C>
Net sales                                                                $ 328.9             $ 325.4
Cost of sales                                                              177.8               173.1
                                                                         -------             -------
    Gross margin                                                           151.1               152.3
Selling, general and administrative expenses                               143.5               131.6
Depreciation and amortization                                                9.7                 8.9
                                                                         -------             -------
    Operating profit (loss)                                                 (2.1)               11.8
Interest expense                                                             7.2                 6.9
                                                                         -------             -------
    Income (loss) before income taxes                                       (9.3)                4.9
Income tax provision (benefit)                                              (3.5)                1.9
                                                                         -------             -------
    Net income (loss) before extraordinary item                             (5.8)                3.0
Extraordinary item, loss related to early retirement of debt,
    net of tax benefit of $0.4 million                                      (0.6)               --
                                                                         -------             -------
Net income (loss)                                                        $  (6.4)            $   3.0
                                                                         =======             =======

Net income (loss) per common share - basic and diluted:

     Net income (loss) before extraordinary item                         $ (0.32)            $  0.17
     Extraordinary item, net of tax benefit                                (0.03)               --
                                                                         -------             -------
     Net income (loss)                                                   $ (0.35)            $  0.17
                                                                         =======             =======

Weighted average shares outstanding (millions):

     Basic                                                                  18.3                17.9
                                                                         =======             =======
     Diluted                                                                18.3                18.0
                                                                         =======             =======
</TABLE>

See notes to consolidated financial statements

                                     Page 4



<PAGE>   5


                               JO-ANN STORES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          THIRTEEN WEEKS ENDED
                                                                                  -------------------------------------
                                                                                        MAY 5,             APRIL 29,
                                                                                         2001                 2000
----------------------------------------------------------------------------------------------------------------------
                                                                                           (MILLIONS OF DOLLARS)

<S>                                                                                       <C>                <C>
Net cash flows from operating activities:
    Net income (loss)                                                                     $ (6.4)            $  3.0
    Adjustments to reconcile net income (loss) to net cash provided by
       (used for) operating activities:
       Depreciation and amortization                                                         9.7                8.9
       Extraordinary item, net of tax                                                        0.6               --
    Changes in operating assets and liabilities:
       Increase in inventories                                                             (25.7)              (3.2)
       (Increase) decrease in prepaid expenses and other current assets                      0.7               (0.8)
       Decrease in accounts payable                                                        (16.1)              (0.9)
       Decrease in accrued expenses                                                        (14.6)              (4.0)
       Other, net                                                                            1.2                1.1
                                                                                          ------             ------
Net cash provided by (used for) operating activities                                       (50.6)               4.1

Net cash flows used for investing activities:
    Capital expenditures                                                                   (45.0)              (8.9)
    Other, net                                                                              (0.9)               1.3
                                                                                          ------             ------
Net cash used for investing activities                                                     (45.9)              (7.6)

Net cash flows provided by financing activities:
    Net increase in credit facilities                                                      105.9                1.8
    Other, net                                                                              (3.8)               1.0
                                                                                          ------             ------
Net cash provided by financing activities                                                  102.1                2.8
                                                                                          ------             ------

Net increase (decrease) in cash                                                              5.6               (0.7)
Cash and temporary cash investments at beginning of period                                  17.5               21.4
                                                                                          ------             ------
Cash and temporary cash investments at end of period                                      $ 23.1             $ 20.7
                                                                                          ======             ======

Supplemental disclosures of cash flow information: Cash paid during the period
    for:
       Interest                                                                           $ 10.6             $  2.8
       Income taxes, net of refunds                                                          0.2                4.4
</TABLE>

See notes to consolidated financial statements

                                     Page 5
<PAGE>   6


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               JO-ANN STORES, INC.

NOTE 1  -  BASIS OF PRESENTATION

        Jo-Ann Stores, Inc. (the "Company"), an Ohio corporation, is a fabric
and craft retailer operating 991 retail stores in 49 states at May 5, 2001. The
930 traditional and 61 superstores feature a large variety of competitively
priced, high quality apparel, craft and home decorating fabrics, notions,
crafts, seasonal and home accessories, and floral and framing products.

        The consolidated financial statements include the accounts of the
Company and its subsidiaries and have been prepared without audit, pursuant to
the rules of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures herein are adequate to make the
information not misleading. Certain amounts in the fiscal 2001 interim financial
statements have been reclassified in order to conform to the current year
presentation. The statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended February 3, 2001.

        Typical of most retail companies, the Company's business is highly
seasonal with the majority of revenues and operating profits generated in the
second half of the fiscal year; therefore, earnings or losses for a particular
interim period are not indicative of full year results. In the opinion of
management, the consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary for a fair statement of
results for the interim periods presented.

NOTE 2  -  EARNINGS PER SHARE

         Basic earnings per common share are computed by dividing net income by
the weighted average number of shares outstanding during the period. If
applicable, diluted earnings per share include the effect of the assumed
exercise of dilutive stock options under the treasury stock method. The impact
of stock options is not included in the earnings per common share calculation
for the thirteen weeks ended May 5, 2001, as it is anti-dilutive.

NOTE 3  -  FINANCING

         In April 2001, the Company entered into a new $365 million senior
secured credit facility (the "Credit Facility") which replaced the Company's
prior senior credit and synthetic lease facilities and expires on April 30,
2005. The Credit Facility consists of $325 million in revolving loans and a $40
million term loan.

         Deferred finance charges written-off under the prior senior credit
facility totaled $1.0 million, or $0.6 million after tax, and were recorded as
an extraordinary item in the first quarter of fiscal 2002. The deferred costs
written-off under the synthetic lease facility totaled $0.6 million, or $0.4
million after tax, and were included in selling, general and administrative
expenses in the first quarter of fiscal 2002.

NOTE 4  -  FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

            The Company is subject to risk resulting from interest rate
fluctuations, as interest on the Company's Credit Facility is based on variable
rates. The Company's objective in managing its interest rate exposure is to
limit the impact of interest rate changes on earnings and cash flows and to
lower its

                                     Page 6
<PAGE>   7

overall borrowing costs. The Company primarily utilizes interest rate swaps to
achieve this objective, effectively converting a portion of its variable-rate
exposures to fixed interest rates.

         Effective February 4, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities", as amended. In accordance with SFAS No. 133, the
Company has reviewed and designated all of its interest rate swap agreements as
cash flow hedges and now recognizes the fair value of its interest rate swap
agreements on the balance sheet. Changes in the fair value of these agreements
are recorded in other comprehensive income (loss) and reclassified into earnings
as the underlying hedged item affects earnings. During the first quarter of
fiscal 2002, unrealized after tax net losses of $2.5 million were recorded in
other comprehensive income (loss), including a $1.7 million cumulative
transition adjustment, as of the date of adoption of SFAS No. 133. The hedge
ineffectiveness for the first quarter of fiscal 2002 was $0.2 million and is
reflected in interest expense.

                                     Page 7
<PAGE>   8


NOTE 5  -  CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)

         The Company's 10 3/8% senior subordinated notes and Credit Facility are
fully and unconditionally guaranteed, on a joint and several basis, by the
wholly-owned subsidiaries of the Company. The senior subordinated notes are
subordinated to the Company's Credit Facility. Summarized consolidating
financial information of the Company (excluding its subsidiaries) and the
guarantor subsidiaries as of and for the thirteen weeks ended May 5, 2001 is as
follows:

<TABLE>
<CAPTION>
                                                                MAY 5, 2001                       FEBRUARY 3, 2001
                                                  ---------------------------------------   -------------------------------------
                                                                 GUARANTOR                              GUARANTOR
CONSOLIDATING BALANCE SHEETS                        PARENT     SUBSIDIARIES  CONSOLIDATED    PARENT    SUBSIDIARIES  CONSOLIDATED
-----------------------------------------------------------    ------------  ------------   --------   ------------  ------------
                                                                              (Millions of dollars)
<S>                                                 <C>           <C>           <C>           <C>           <C>           <C>
ASSETS
Current assets:
    Cash and temporary cash investments             $ 19.5        $  3.6        $ 23.1        $ 13.8        $  3.7        $ 17.5
    Inventories                                      192.6         284.1         476.7         181.9         269.1         451.0
    Prepaid expenses and other current assets         29.8           8.2          38.0          25.0          12.3          37.3
                                                    ------        ------        ------        ------        ------        ------
Total current assets                                 241.9         295.9         537.8         220.7         285.1         505.8
Property, equipment and leasehold
improvements, net                                     73.7         152.5         226.2          74.6         115.6         190.2
Goodwill, net                                         --            27.1          27.1          --            27.2          27.2
Other assets                                          19.4           1.7          21.1          17.9           1.1          19.0
Intercompany                                         445.1        (445.1)         --           387.1        (387.1)         --
                                                    ------        ------        ------        ------        ------        ------
Total assets                                        $780.1        $ 32.1        $812.2        $700.3        $ 41.9        $742.2
                                                    ======        ======        ======        ======        ======        ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                $124.6        $ 23.3        $147.9        $127.3        $ 36.7        $164.0
    Accrued expenses                                  75.3         (27.3)         48.0          85.3         (25.8)         59.5
                                                    ------        ------        ------        ------        ------        ------
Total current liabilities                            199.9          (4.0)        195.9         212.6          10.9         223.5
Long-term debt                                       345.9          --           345.9         240.0          --           240.0
Deferred income taxes                                 14.2           8.3          22.5          14.2           8.3          22.5
Other long-term liabilities                            4.7           2.9           7.6           4.6           2.8           7.4
Shareholders' equity:
    Common stock                                       1.1          --             1.1           1.1          --             1.1
    Additional paid-in capital                        99.6          --            99.6          99.2          --            99.2
    Unamortized restricted stock awards               (1.1)         --            (1.1)         (1.2)         --            (1.2)
    Retained earnings                                156.5          24.9         181.4         167.9          19.9         187.8
    Accumulated other comprehensive income
       (loss)                                         (2.5)         --            (2.5)         --            --            --
                                                    ------        ------        ------        ------        ------        ------
                                                     253.6          24.9         278.5         267.0          19.9         286.9
    Treasury stock, at cost                          (38.2)         --           (38.2)        (38.1)         --           (38.1)
                                                    ------        ------        ------        ------        ------        ------
Total shareholders' equity                           215.4          24.9         240.3         228.9          19.9         248.8
                                                    ------        ------        ------        ------        ------        ------
Total liabilities and shareholders' equity          $780.1        $ 32.1        $812.2        $700.3        $ 41.9        $742.2
                                                    ======        ======        ======        ======        ======        ======
</TABLE>
<TABLE>
<CAPTION>
                                                                              THIRTEEN WEEKS ENDED
                                                   --------------------------------------------------------------------------------
                                                                  MAY 5, 2001                                APRIL 29, 2000
                                                   ---------------------------------------     ------------------------------------
                                                                  GUARANTOR                                GUARANTOR
 CONSOLIDATING STATEMENTS OF OPERATIONS              PARENT     SUBSIDIARIES  CONSOLIDATED      PARENT    SUBSIDIARIES CONSOLIDATED
------------------------------------------------------------    ------------  ------------     --------   ------------ ------------
                                                                              (Millions of dollars)

<S>                                                 <C>            <C>            <C>            <C>          <C>         <C>
Net sales                                           $179.0         $149.9         $328.9         $178.7       $146.7      $325.4
Cost of sales                                        103.2           74.6          177.8           97.3         75.8       173.1
                                                    ------         ------         ------         ------       ------      ------
Gross margin                                          75.8           75.3          151.1           81.4         70.9       152.3
Selling, general and administrative expenses          78.7           64.8          143.5           68.5         63.1       131.6
Depreciation and amortization                          4.1            5.6            9.7            4.3          4.6         8.9
                                                    ------         ------         ------         ------       ------      ------
Operating profit (loss)                               (7.0)           4.9           (2.1)           8.6          3.2        11.8
Interest expense                                       7.2           --              7.2            6.9         --           6.9
                                                    ------         ------         ------         ------       ------      ------
Income (loss) before income taxes                    (14.2)           4.9           (9.3)           1.7          3.2         4.9
Income tax provision (benefit)                        (3.4)          (0.1)          (3.5)           1.8          0.1         1.9
                                                    ------         ------         ------         ------       ------      ------
Net income (loss) before extraordinary item          (10.8)           5.0           (5.8)          (0.1)         3.1         3.0
Extraordinary item, net of tax benefit                (0.6)          --             (0.6)          --           --          --
                                                    ------         ------         ------         ------       ------      ------
Net income (loss)                                   $(11.4)        $  5.0         $ (6.4)        $ (0.1)      $  3.1      $  3.0
                                                    ======         ======         ======         ======       ======      ======
</TABLE>

                                     Page 8

<PAGE>   9

<TABLE>
<CAPTION>
                                                                                THIRTEEN WEEKS ENDED
                                                   -------------------------------------------------------------------------------
                                                                  MAY 5, 2001                           APRIL 29, 2000
                                                   ---------------------------------------  --------------------------------------
                                                                 GUARANTOR                              GUARANTOR
CONSOLIDATING STATEMENTS OF CASH FLOWS                PARENT    SUBSIDIARIES  CONSOLIDATED    PARENT   SUBSIDIARIES   CONSOLIDATED
--------------------------------------------------------------  ------------  ------------   --------  ------------   ------------
                                                                          (Millions of dollars)

<S>                                                 <C>           <C>           <C>           <C>           <C>           <C>
 Net cash flows from operating activities:
     Net income (loss)                              $(11.4)       $  5.0        $ (6.4)       $ (0.1)       $  3.1        $  3.0
     Adjustments to reconcile net income (loss)
     to net cash provided by (used for)
     operating activities:
         Depreciation and amortization                 4.1           5.6           9.7           4.3           4.6           8.9
         Extraordinary item, net of tax                0.6          --             0.6          --            --            --
     Changes in operating assets and liabilities:
         (Increase) decrease in inventories          (10.7)        (15.0)        (25.7)          4.7          (7.9)         (3.2)
         (Increase) decrease in prepaid expenses
            and other current assets                  (3.6)          4.3           0.7          (1.2)          0.4          (0.8)
         Increase (decrease) in accounts payable     (60.7)         44.6         (16.1)         (6.7)          5.8          (0.9)
         Decrease in accrued expenses                (13.1)         (1.5)        (14.6)         (1.9)         (2.1)         (4.0)
         Other, net                                    2.1          (0.9)          1.2           0.4           0.7           1.1
                                                    ------        ------        ------        ------        ------        ------
 Net cash provided by (used for) operating
     activities                                      (92.7)         42.1         (50.6)         (0.5)          4.6           4.1
 Net cash flows used for investing activities:
     Capital expenditures                             (3.5)        (41.5)        (45.0)         (1.8)         (7.1)         (8.9)
     Other, net                                       (0.2)         (0.7)         (0.9)          0.1           1.2           1.3
                                                    ------        ------        ------        ------        ------        ------
 Net cash used for investing activities               (3.7)        (42.2)        (45.9)         (1.7)         (5.9)         (7.6)

 Net cash flows provided by financing activities:
     Net increase in credit facilities               105.9          --           105.9           1.8          --             1.8
     Other, net                                       (3.8)         --            (3.8)          1.0          --             1.0
                                                    ------        ------        ------        ------        ------        ------
 Net cash provided by financing activities           102.1          --           102.1           2.8          --             2.8
                                                    ------        ------        ------        ------        ------        ------

 Net increase (decrease) in cash                       5.7          (0.1)          5.6           0.6          (1.3)         (0.7)
 Cash and temporary cash investments at beginning
     of period                                        13.8           3.7          17.5          16.9           4.5          21.4
                                                    ------        ------        ------        ------        ------        ------
 Cash and temporary cash investments at end of
 period                                             $ 19.5        $  3.6        $ 23.1        $ 17.5        $  3.2        $ 20.7
                                                    ======        ======        ======        ======        ======        ======
</TABLE>

                                     Page 9

<PAGE>   10


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

RESULTS OF OPERATIONS
COMPARISON OF THE THIRTEEN WEEKS ENDED MAY 5, 2001 AND APRIL 29, 2000

        Net sales for the first quarter of fiscal 2002 increased 1.1%, or $3.5
million, to $328.9 million from $325.4 million in the prior year. The sales
increase was attributable to a greater number of superstores in operation.
During the first quarter of fiscal 2002, we operated 61 superstores versus 46
superstores in the year ago period. Sales from stores open one year or more
("same-store sales") decreased 2.0%, or $6.3 million, for the first quarter of
fiscal 2002 compared to a same-store sales increase of 5.6% for the prior year
first quarter. The reduction in same-store sales increases from the prior year
was attributable to sales softness experienced due to inventory imbalances at
the beginning of the quarter, a lingering effect of our systems conversion in
fiscal 2001, and general economic conditions.

         Gross margin decreased $1.2 million compared to the year earlier
period. As a percent of net sales, gross margin was 45.9% for the first quarter
of fiscal 2002, a decrease of 90 basis points from 46.8% for the same quarter a
year earlier. Excluding the impact of the increase in shrink expense, as
discussed below, gross margin as a percent of sales increased 110 basis points,
due to promotional efforts that were focused on offering value to our customers
but at less aggressive discounting than in the prior year.

         Higher shrink expense resulted from a deterioration in our shrink rates
of approximately 50 basis points. We adjust our store shrink rates through the
performance of annual physical inventories throughout the year. Physical
inventories are typically concentrated in the nine months between January and
September. During the months of January through April, we inventoried,
reconciled and recorded the inventory results of approximately 36% of our
stores. The impact on first quarter results related both to stores actually
inventoried during the quarter and to an increased shrink accrual required on
uninventoried stores based on the results of the inventoried stores.
Consequently, shrink expense was $6.9 million, or 200 basis points, worse than
our historical shrink rates.

         Selling, general and administrative expenses were 43.6% of net sales
for the first quarter of fiscal 2002, versus 40.4% for the same quarter of
fiscal 2001. Selling, general and administrative expense leverage was adversely
impacted by a negative same-store sales performance for the quarter, coupled
with higher store utility costs and higher distribution expenses due to the
opening of our second permanent distribution center in Visalia, California.
Selling general and administrative expenses for the first quarter of fiscal 2002
also included non-operational charges of $0.6 million for the write-off of
deferred costs related to our synthetic lease facility.

        Depreciation and amortization expense increased $0.8 million to $9.7
million from $8.9 million. We began depreciating the cost of our SAP Retail
project in April 2000, adding approximately $0.8 million in incremental
depreciation expense for the first quarter of fiscal 2002.

        The operating loss for the first quarter of fiscal 2002 was $2.1
million, compared to operating profit of $11.8 million for the first quarter of
fiscal 2001.

        Interest expense increased $0.3 million to $7.2 million from $6.9
million in the first quarter of fiscal 2001. Average borrowings for the first
quarter of fiscal 2002 were $270.2 million, compared with $245.9 million in the
prior year first quarter. The impact of higher average borrowings on interest
expense was partially offset by a lower effective interest rate.

        Our effective income tax rate of 38.0% for the first quarter of fiscal
2002 was consistent with the rate for the first quarter of fiscal 2001.

                                    Page 10
<PAGE>   11

        Net loss before extraordinary item for the quarter was $5.8 million, or
$0.32 per diluted share, compared with net income of $3.0 million, or $0.17 per
diluted share, for the prior year first quarter.

         In April 2001, we entered into a new four-year $365 million senior
secured credit facility (the "Credit Facility"), consisting of a $325 million
revolving credit facility and a $40 million term loan facility (the "Term
Loan"). The Credit Facility replaced our prior senior credit and synthetic lease
facilities. Deferred finance charges written-off under the prior senior credit
facility totaled $0.6 million after tax, or $0.03 per diluted share, and were
recorded as an extraordinary item.

        Net loss for the first quarter of fiscal 2002 was $6.4 million, or $0.35
per diluted share, compared with net income of $3.0 million, or $0.17 per
diluted share, for the prior year first quarter.

LIQUIDITY AND CAPITAL RESOURCES

         Cash, including temporary cash investments, increased $5.6 million
during the first quarter of fiscal 2002 to $23.1 million as of May 5, 2001.

         Net cash used for operating activities was $50.6 million in the first
quarter of fiscal 2002, compared with net cash provided by operating activities
of $4.1 million in the first quarter of fiscal 2001. Inventories, net of
payables support, increased $41.8 million, compared with an increase of $4.1
million in the first quarter of the prior year, primarily due to additional
inventory needed for the start-up of the Visalia distribution center and for the
improvement of in-stock levels in our traditional store base.

        Net cash used for investing activities for the first quarter of fiscal
2002 totaled $45.9 million compared with $7.6 million in the first quarter of
fiscal 2001. Capital expenditures for the first quarter of fiscal 2002 of $45.0
million include approximately $40.0 million related to the unwind of the
synthetic lease facility which was replaced by our new Credit Facility
(discussed further under "Financing" below). Excluding the unwind of the
synthetic lease, capital expenditures during the first quarter of fiscal 2002
were primarily related to the opening of new superstores and other store related
projects.

        During the first quarter of fiscal 2002, we opened three superstores,
relocated six traditional stores and closed 19 smaller or under-performing
traditional stores. For the balance of fiscal 2002, we expect to open nine
superstores and to relocate four traditional stores. We have no material
commitments in connection with these planned capital expenditures.

Financing

         We believe that our Credit Facility, coupled with cash on hand and cash
from operations, will be sufficient to cover our working capital, capital
expenditure and debt service requirement needs for the foreseeable future. In
April 2001, we entered into a new senior secured credit facility which expires
on April 30, 2005 and which, as explained below, replaced our prior senior
credit and synthetic lease facilities. The Credit Facility consists of a $365
million credit facility providing for $325 million in revolving loans and a $40
million term loan, both secured by a first priority perfected security interest
in our inventory, accounts receivable, property and other assets. The Credit
Facility is fully and unconditionally guaranteed by each of our subsidiaries. As
of May 5, 2001, excess availability exceeded $70.0 million. Interest on
borrowings under the Credit Facility is calculated at the bank's base rate or
London Interbank Offered Rate ("LIBOR") plus 1.75% to 2.25%, depending on the
level of excess availability (as defined in the Credit Agreement) that is
maintained. Proceeds from the Credit Facility were used to repay all outstanding
borrowings under our prior senior credit facility and synthetic lease facility.

         The Term Loan replaces a $40 million synthetic lease facility that we
used to finance the construction of our West Coast distribution center located
in Visalia, California. The synthetic lease facility

                                    Page 11
<PAGE>   12

was accounted for as an operating lease, with interest payments capitalized
until the facility began operations. As a result of the unwind of the synthetic
lease facility, we have recorded the appropriate assets and debt obligation of
$40 million in the first quarter of fiscal 2002. The Term Loan, while
outstanding, reduces availability under the Credit Facility.

         Effective May 15, 2001, the agent for the Credit Facility assumed
assignment of our two interest rate swap agreements existing as of February 3,
2001, and on May 16, 2001, terminated those interest rate swap agreements and
established a new interest rate swap with a fixed LIBOR rate of 6.72% and
notional amount of $90.0 million, reducing to $40.0 million on May 1, 2003,
until its expiration on April 30, 2005.

Business Outlook

         We estimate net losses for fiscal 2002 will be in the range of $0.60 to
$0.70 per share. This is a result of the recent shrink trends, the SKU Reduction
Initiative, the opening of the Visalia distribution center, the operation of a
three distribution center network until late in the third quarter, as well as
the inventory imbalances and out-of-stock issues with which we began the year.
The fiscal 2002 estimate includes the first quarter actual loss of $0.35 per
share and a projected second quarter loss of $1.10 to $1.20 per share. We
continue to expect to report an earnings improvement over last year beginning in
the fourth quarter of fiscal 2002.

         In addition, we estimate that non-recurring charges associated with
additional store closings and other turnaround initiatives, the evaluation of
which is currently being completed, could increase the fiscal 2002 expected loss
by $0.30 to $0.50 per share.

SEASONALITY AND INFLATION

        Our business exhibits seasonality, which is typical for most retail
companies. Our sales are much stronger in the second half of the year than the
first half of the year. Net earnings are highest during the months of September
through December when sales volumes provide significant operating leverage.
Capital requirements needed to finance our operations fluctuate during the year
and reach their highest levels during the second and third fiscal quarters as we
increase our inventory in preparation for our peak selling season.

        We believe that inflation has not had a significant effect on net sales
or on net income. There can be no assurance, however, that our operating results
will not be affected by inflation in the future.

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<PAGE>   13



FORWARD-LOOKING STATEMENTS

        Certain statements contained in this report that are not historical
facts are forward-looking statements that are subject to certain risks and
uncertainties. When used herein, the terms "anticipates," "plans," "estimates,"
"expects," "believes," and similar expressions as they relate to us are intended
to identify such forward-looking statements. Our actual results, performance or
achievements may materially differ from those expressed or implied in the
forward-looking statements. Risks and uncertainties that could cause or
contribute to such material differences include, but are not limited to, general
economic conditions, changes in customer demand, changes in trends in the fabric
and craft industry, seasonality, our failure to manage our growth or transition
to our new Visalia distribution center, our failure to execute our productivity
initiatives, including the SKU Reduction Initiative and the store base
productivity review, loss of key management, the availability of merchandise,
changes in the competitive pricing for products, and the impact of competitor
store openings and closings.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We use derivative financial instruments at various times to manage the
risk associated with interest rate fluctuations. These agreements are
insignificant to our operations and financial position.

                                    Page 13
<PAGE>   14


                            PART II OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          On August 16, 2000, Sandy Lortz, a former employee of the Company,
filed a purported class action complaint (the "Lortz Complaint") against the
Company, on behalf of the Company's former and current California store
management employees. The Lortz Complaint was filed in the Superior Court of
California and alleges the Company violated certain California laws by
erroneously treating its store management employees as "exempt" employees who
are not entitled to overtime compensation. The Lortz Complaint seeks
compensatory damages, penalties, attorneys' fees and injunctive relief. This
case has been consolidated with a similar class action complaint filed on behalf
of Regina Salas, filed on October 24, 2000 in the Superior Court of California.
The case is in the early phase of discovery. No trial date has been set. The
Company intends to defend this lawsuit vigorously.

         The Company is a defendant from time to time in lawsuits incidental to
its business. Based on currently available information, the Company believes
that resolution of all known contingencies, including the litigation described
above, is uncertain, and there can be no assurance that future costs of such
litigation would not be material to the Company's financial position or results
of operations.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not Applicable.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

         Not Applicable.

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

         Not Applicable.

ITEM 5.   OTHER INFORMATION

         Debra Walker, former Executive Vice President, Marketing and E-Commerce
for the Company, resigned from the Company on June 15, 2001.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          a)    Exhibits
                --------

                See the Exhibit Index on page 16 of this report.

          b)    Reports on Form 8-K
                -------------------

                Not Applicable.


                                    Page 14

<PAGE>   15



                                   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.

                                JO-ANN STORES, INC.

DATE:  June 19, 2001            /s/ Alan Rosskamm
                                ---------------------------
                                By: Alan Rosskamm
                                    President and Chief Executive Officer

                                /s/ Brian P. Carney
                                ---------------------------
                                By: Brian P. Carney
                                    Executive Vice President and Chief Financial
                                    Officer

                                    Page 15
<PAGE>   16


                               JO-ANN STORES, INC.
            FORM 10-Q FOR THE THIRTEEN WEEK PERIOD ENDED MAY 5, 2001

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                                                       SEQUENTIAL
    EXHIBIT NO.                                       DESCRIPTION                                       PAGE NO.
--------------------     -----------------------------------------------------------------------    -----------------
<S>                      <C>                                                                        <C>
       10.1              Credit Agreement dated as of April 24, 2001 among the Registrant, as
                         borrower, Fleet National Bank, as Issuing Bank, Fleet Retail Finance
                         Inc., as Administrative Agent and Collateral Agent, Congress
                         Financial Corporation, as Documentation Agent, GMAC Commercial
                         Credit, LLC, National City Commercial Finance, Inc. and The CIT Group
                         / Business Credit, Inc. as Co-Agents and Fleet Securities Inc. as
                         Arranger and Syndication Agent.                                                   17

       10.2              Amendment No. 1 to Credit Agreement dated as of April 24, 2001                   114
</TABLE>


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