<PAGE>

                       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 EXCHANGE ACT OF 1934

                 For the quarterly period ended: June 27, 1998

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

      For the transition period from__________________ to _______________

                         Commission file number 0-14756

                           THE COSMETIC CENTER, INC.
             (Exact name of registrant as specified in its charter)

          DELAWARE                                      52-1266697
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                     Identification No.)

      8700 ROBERT FULTON DRIVE,
        COLUMBIA, MARYLAND                               21046
(Address of principal executive offices)               (Zip Code)

        Registrant's telephone number, including area code: 410-309-4600


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 __

As of June 27, 1998, 10,025,601 shares of Class C Common Stock, par value $.01
per share, and no shares of Class A Common Stock, par value $.01 per share, or
Class B Common Stock, par value $.01 per share, were outstanding.

                             Total Pages 14

<PAGE>


                           THE COSMETIC CENTER, INC.
                       UNAUDITED CONDENSED BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                    JUNE 27,   DECEMBER 27,
                    ASSETS                                            1998         1997
                                                                  -----------  -----------
                                                                   (Unaudited)
<S>                                                                <C>          <C>    
 Current assets:
    Cash                                                           $  2,518     $  5,359
    Accounts receivable, net.................................           787        1,320
    Inventories..............................................        73,871       88,976
    Deferred tax assets......................................         2,794        2,879
    Prepaid expenses and other...............................           284          179
                                                                   ------------ -----------
       Total current assets..................................        80,254       98,713
 Property and equipment, net.................................        13,086       14,172
 Other assets................................................           913        1,031
 Intangible assets related to businesses acquired, net.......         4,434        4,494
                                                                   ------------ -----------
       Total assets..........................................      $ 98,687     $118,410
                                                                   ============ ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable.........................................      $ 13,397     $ 17,234
    Accrued expenses and other...............................         9,681        9,715
    Accounts payable to Products Corporation.................         5,812        2,500
    Note payable - Bank......................................        41,779            -
                                                                   ------------ -----------
        Total current liabilities............................        70,669       29,449
Note payable - Products Corporation..........................        13,255       13,255
Long-term debt...............................................             -       38,954
Other long-term liabilities..................................         1,867        2,065

Stockholders' equity:
   Class A common stock, $.01 par value; 5,000,000 shares
     authorized; no shares issued and outstanding............             -            -
   Class B common stock, $.01 par value; 5,000,000 shares
     authorized; no shares issued and outstanding............             -            -
   Class C common stock, $.01 par value; 40,000,000 shares
     authorized; 10,025,601 and 10,015,101, respectively,
     issued and outstanding .................................           100          100
    Additional paid in capital...............................        39,334       39,291
    Accumulated deficit......................................       (26,538)      (4,704)
                                                                   ------------ ------------
         Total stockholders' equity..........................        12,896       34,687
                                                                   ------------ ------------
         Total liabilities and stockholders' equity..........      $ 98,687     $118,410
                                                                   ============ ============

</TABLE>


             See Notes to Unaudited Condensed Financial Statements.

                                       2
<PAGE>



                                THE COSMETIC CENTER, INC.
                         UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
                 (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                          -----------------------          ----------------------
                                                                           JUNE 27,      JUNE 27,           JUNE 27,     JUNE 27,
                                                                            1998          1997               1998        1997
                                                                          ---------    ----------          ----------   ---------
<S>                                                                     <C>           <C>                  <C>          <C>      
Net sales...........................................................    $    39,478   $   36,473           $   77,394   $  49,332
                                                                        -----------   ----------           ----------   ---------
Cost of sales, including buying, occupancy and distribution.........         37,564       24,955               66,360      33,658

Selling, general and administrative expenses........................         16,687       11,704               30,305      18,402

Business consolidation costs........................................             --        4,000                   --       4,000
                                                                        -----------   ----------           ----------   ---------
Operating expenses..................................................         54,251       40,659               96,665      56,060
                                                                        -----------   ----------           ----------   ---------
Loss from operations................................................        (14,773)      (4,186)             (19,271)     (6,728)

Interest expense....................................................         (1,303)        (898)              (2,614)     (1,172)
                                                                                           
Other income, net...................................................             19          (64)                  51         (64)
                                                                        -----------   ----------           ----------   ---------
Loss from operations before income taxes............................        (16,057)      (5,148)             (21,834)     (7,964)

Provision for income taxes..........................................             --            5                   --          20
                                                                        -----------   ----------           ----------   ---------
Net loss............................................................    $   (16,057)  $   (5,153)          $  (21,834)  $  (7,984)
                                                                        ============  ==========           ==========   =========
Basic and diluted loss per common share:                                                   
     Loss from operations...........................................    $     (1.47)  $    (0.44)          $    (1.92)  $   (0.75)
                                                                        ============  ==========           ==========   =========
     Net loss.......................................................    $     (1.60)  $    (0.54)          $    (2.18)  $   (0.89)
                                                                        ===========   ==========           ==========   =========

Basic and diluted weighted average                                                         
     common shares outstanding......................................     10,025,601    9,542,558           10,021,505   9,010,946
                                                                        ===========   ==========           ==========   =========

</TABLE>


             See Notes to Unaudited Condensed Financial Statements.

                                       3



<PAGE>


                           THE COSMETIC CENTER, INC.
                  UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>


                                                                                       SIX MONTHS ENDED
                                                                                ------------------------------
                                                                                   JUNE 27,         JUNE 27,
 CASH FLOWS FROM OPERATING ACTIVITIES:                                               1998             1997
                                                                                --------------    ------------
<S>                                                                             <C>               <C>        
 Net loss...................................................................... $   (21,834)      $    (7,984)
 Adjustments to reconcile net loss to                                                                        
    net cash (used for) provided by operating activities: 
  Depreciation and amortization................................................       2,303             1,706
  Non-Cash restructuring charges...............................................      10,538                --
  Change in assets and liabilities, net of aquired assets and liabilities:                                   
       Decrease (increase) in accounts receivable, net.........................         533             (204)
       Decrease in inventories.................................................       8,507                69
       (Increase) decrease in prepaid expenses and other current assets........         (20)              754
       (Decrease) increase in accounts payable.................................      (3,837)            2,843
       (Decrease) increase in accrued expenses and other.......................      (3,974)            2,249
       Increase in accounts payable to Products Corporation - current .........       3,312               647
       Other, net..............................................................         (80)              404
                                                                                -----------       -----------
 Net cash (used for) provided by operating activities..........................      (4,552)              484
                                                                                -----------       -----------
 CASH FLOWS FROM INVESTING ACTIVITIES:                                                                       
 Capital expenditures..........................................................      (1,157)           (1,162)
 Acquisition of business, net of cash acquired.................................          --           (19,883)
                                                                                -----------       -----------
 Net cash used for investing activities........................................      (1,157)          (21,045)
                                                                                -----------       -----------
                                                                                                              
 CASH FLOWS FROM FINANCING ACTIVITIES:                                                                        
 Net borrowings from bank......................................................       2,825            18,848
 Increase in accounts payable to Products Corporation - non-current, net.......          --               940
 Exercise of  stock option.....................................................          43                --
                                                                                -----------       -----------
 Net cash provided by financing  activities....................................       2,868            19,788
                                                                                -----------       -----------

 Net decrease in cash..........................................................      (2,841)             (773)
 Cash at beginning of period...................................................       5,359             3,479
                                                                                -----------       -----------
                                                                                                              
 Cash at end of period......................................................... $     2,518       $     2,706
                                                                                ===========       ===========

 Supplemental schedule of cash flow information:
    Cash paid during the period for:
        Interest............................................................... $     2,495               315
        Income taxes, net of refunds...........................................          16                12
</TABLE>


             See Notes to Unaudited Condensed Financial Statements.




                                       4


<PAGE>


                           THE COSMETIC CENTER, INC.
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                (dollars in thousands, except per share data)


(1) BASIS OF PRESENTATION

         The Cosmetic Center, Inc. (the "Company") operates in one segment as a
specialty retailer primarily engaged in the sale of a wide range of prestige
and mass-merchandised brand name cosmetics, fragrances, skincare and treatment,
haircare, bath and body, personal care appliances, hosiery, beauty care and
related items (sometimes referred to herein as "Beauty Products") at discounted
prices. As of June 27, 1998, the Company operated 60 retail stores and 192
outlet stores in 42 states. Retail stores operate in strip shopping centers and
sell, primarily at discount prices, an extensive selection of first quality
Beauty Products that are usually found in mass market retailers and department
stores. Outlet stores operate in outlet centers and sell, at deep discount
prices, a wide range of first quality, first quality excess, returned,
refurbished and discontinued brand name Beauty Products.

         The Company is an approximately 85% owned subsidiary of Revlon
Consumer Products Corporation (together with its subsidiaries other than the
Company, "Products Corporation"), which is a direct wholly owned subsidiary of
Revlon, Inc.

         On April 25, 1997, Prestige Fragrance & Cosmetics, Inc. ("PFC"), then
a wholly owned subsidiary of Products Corporation, merged (the "Merger") with
and into The Cosmetic Center, Inc. (prior to the Merger, "CCI"), with the
Company being the surviving corporation. The Merger was accounted for as a
reverse acquisition using the purchase method of accounting, and PFC is
considered to be the acquiring entity and CCI the acquired entity for
accounting purposes, even though CCI was the surviving legal entity. The
historical financial statements of the Company for the period prior to the
Merger include the results of operations of PFC only, and for the period
subsequent to the Merger include the results of operations of both entities. As
a result of the Merger, the Company changed its fiscal year to a 52- or 53-week
year ending on the last Saturday in December. See Note 3.

         The accompanying Condensed Financial Statements are unaudited. In
management's opinion, all adjustments (consisting only of normal recurring
adjustments other than the one-time charges described in Note 6) necessary for
a fair presentation have been made. In the Unaudited Condensed Financial
Statements, the Company has made a number of estimates and assumptions relating
to the assets and liabilities, the disclosure of contingent assets and
liabilities and the reporting of revenues and expenses to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates. The results of
operations and financial position, including working capital, for interim
periods are not necessarily indicative of results to be expected for a full
year, due, in part, to seasonal fluctuations, which are normal for the
Company's business. These unaudited condensed financial statements should be
read in conjunction with the financial statements and related notes contained
in the Company's 1997 Annual Report on Form 10-K.

         In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income," which establishes standards for
reporting and displaying comprehensive income (loss) and its components in a
full set of general-purpose financial statements. The only component of
comprehensive income for the Company is net income (loss).

         Also in June 1997, the FASB issued SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. Due to the similarity in type of product and 
method of distribution of products for CCI and PFC stores, and the similarity 
of customers for the products, the Company's financial reports are presented as
a single operating segment.


         The aforementioned recently issued accounting pronouncements establish
standards for disclosures only and therefore there will be no effect on the
Company's financial position or results of operation.


                                       5

<PAGE>

                           THE COSMETIC CENTER, INC.
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                (dollars in thousands, except per share data) 


(2) BASIC AND DILUTED LOSS PER SHARE

         Basic and diluted loss per common share has been computed based upon
the weighted average number of shares of common stock outstanding during the
period. The Company's outstanding stock options represent the only dilutive
potential common stock outstanding. The amounts of loss and number of shares
used in the calculations of basic and diluted loss per common share were the
same for the periods presented, and diluted loss per share does not include any
incremental shares that would have been outstanding assuming the exercise of
any stock options because the effect of those incremental shares would have
been antidilutive. Weighted average shares outstanding is computed assuming
that the 8,479,335 shares of the Company's Class C Common Stock, par value
$0.01 per share (the "Class C Common Stock"), that Products Corporation
received in the Merger were outstanding and owned by Products Corporation for
all periods prior to the Merger.



(3)  THE MERGER

         Pursuant to the Merger, Products Corporation received 8,479,335 shares
of Class C Common Stock. As a result of the Merger, CCI's stockholders
received, for each share of Class A Common Stock or Class B Common Stock held,
one share of newly issued Class C Common Stock or, at each stockholder's
election subject to a limitation, $7.63 in cash (the "Cash Election"). Holders
of options to purchase CCI's Class A Common Stock or Class B Common Stock with
an exercise price of less than $7.63 received for each such option they held,
an equivalent option to purchase Class C Common Stock or, at each such
optionholder's election and subject to a limitation, cash equal to the
difference between $7.63 and the exercise price per share of such option. The
number of shares of Class C Common Stock owned by Products Corporation after
the Merger constitutes approximately 85% of the outstanding Class C Common
Stock after giving effect to the Cash Election.

         The Merger was accounted for as a reverse acquisition, using the
purchase method of accounting, for a purchase price of approximately $27,905.
This amount was allocated to the assets of CCI acquired and liabilities of CCI
assumed to the extent of Products Corporation's ownership interest based upon
their estimated fair values. The excess of acquisition cost over estimated fair
value of CCI's net tangible assets of $3,280 has been allocated to goodwill and
is being amortized over 40 years. As a result of the Merger, the Company
incurred costs of approximately $6,800, which costs were included in the
purchase price of CCI and primarily related to direct costs of the acquisition,
closing certain CCI stores and severance benefits for certain CCI employees. As
of June 27, 1998, approximately $2,183 of these direct costs remained in
accrued liabilities and other long-term liabilities.


(4)  LONG TERM DEBT

         The Company's current credit facility was amended as of March 28, 1998
to, among other things, adjust the interest rate to LIBOR plus 2.50% per annum 
or the bank's prime rate plus 0.75% per annum and amend certain financial 
covenants.

          The outstanding balance of the Company's credit facility is reflected
as current debt since it expires in less than one year on April 30, 1999. The 
Company intends to refinance its credit facility, although no assurance can be 
given that such refinancing will be consummated or if consummated, will be 
consummated on favorable terms.


                                       6
<PAGE>

                           THE COSMETIC CENTER, INC.
              NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                (dollars in thousands, except per share data)

         The credit facility, which expires on April 30, 1999, provides up to
$70 million of revolving credit tied to a borrowing base of 65% of eligible
inventory, as defined in the credit facility. Availability under the credit
facility varies with the borrowing base. As of June 27, 1998, $41.8 million was
outstanding and an additional $3.5 million was available for borrowing under
the credit facility.

         As a result of the Company's operating losses, the Company obtained a
waiver of compliance with the financial covenants contained in its credit
facility as of June 27,1998. The Company is in discussions with its lenders for
an amendment to the financial covenants contained in its credit facility. There
can be no assurances that the Company will obtain such amendment or if
obtained, that such amendment will be on favorable terms.


(5) SUBSEQUENT EVENTS

         In order to provide for its liquidity needs and to fund its new
business strategy, following the end of the second quarter, the Company
borrowed $5 million from Products Corporation. Such borrowings bear interest at
9.25% and may be repaid following demand by Products Corporation in whole or in
part only if after such repayment the Company has a certain minimum 
availability under its credit facility. Such amount is in addition to the
"Notes payable - Products Corporation" and "Accounts payable to Products
Corporation".

(6) RESTRUCTURING CHARGES

         The Company incurred one-time charges, resulting in an accrual of
$10.5 million for the three months ended June 27, 1998. These charges include
write-offs of $6.6 million for inventory, primarily resulting from 
remerchandising plans related to the Company's new strategic plan, and 
$3.9 million of SG&A (as defined below) related write-offs of which 
$2.3 million related to severance and other employment costs and $1.6 million 
related to other charges in connection with the implementation of the Company's
new strategic plan.

                                       7
<PAGE>

                           THE COSMETIC CENTER, INC.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS


OVERVIEW

         On April 25, 1997, PFC, then a wholly owned subsidiary of Products
Corporation, merged with and into CCI, with the Company being the surviving
corporation. The Merger has been accounted for as a reverse acquisition using
the purchase method of accounting, and PFC is considered to be the acquiring
entity and CCI the acquired entity for accounting purposes, even though CCI was
the surviving legal entity. The historical financial statements and all other
financial data included herein of the Company for the period prior to the
Merger include the results of operations of PFC only, and for the period
subsequent to the Merger include the results of operations and other financial
data of both entities. This Quarterly Report on Form 10-Q should be read in
conjunction with the Company's 1997 Annual Report on Form 10-K.

         The Company operates in a single business segment as a specialty
retailer primarily engaged in the sale of a wide range of prestige and
mass-merchandised brand name Beauty Products at discounted prices. As of June
27, 1998, the Company operated 60 retail stores and 192 outlet stores in 42
states. Retail stores operate in strip shopping centers and sell, primarily at
discount prices, an extensive selection of first quality Beauty Products that
are usually found in mass market retailers and department stores. Outlet stores
operate in outlet centers and sell, at deep discount prices, a wide range of
first quality, first quality excess, returned, refurbished and discontinued
brand name Beauty Products.

         The Company has been experiencing declining comparable store sales
resulting in losses due primarily to difficulties in the integration of the
operations of CCI and PFC. In the second quarter of 1998, the Company initiated
the implementation of a new strategic plan intended to focus on improving
financial and operating performance. The Company's strategic plan is intended
to increase sales, enhance profitability and improve operational performance
through, among other things, (i) strengthening the organization, including 
hiring a new President and Chief Executive Officer with significant experience 
in the retail industry, (ii) remerchandising stores to improve sales and 
productivity by implementing newly developed, rationalized planograms which are
expected to have an updated appeal with a focus on differentiation from the
competition, (iii) opening new stores in high growth, densely populated, 
middle-to-higher income regions, (iv) closing stores which do not meet 
financial return expectations, (v) developing a new store prototype to provide 
the Company's customers with a more pleasant shopping experience, (vi) focusing
on operational disciplines intended to improve inventory controls and increase 
warehouse and distribution efficiencies and (vii) improving information systems
by, among other things, upgrading the Company's merchandise management and 
financial systems and introducing scanning into stores.

         The Company incurred one-time charges, resulting in an accrual of
$10.5 million for the three months ended June 27, 1998. These charges include
write-offs of $6.6 million for inventory, primarily resulting from
remerchandising plans related to the Company's new strategic plan and $3.9
million of SG&A (as defined below) related write-offs of which, $2.3 million
related to severance and other employment costs and $1.6 million related to
other charges in connection with the implementation of the Company's new
strategic plan.


RESULTS OF OPERATIONS

         Net sales for the three months ended June 27, 1998 were $39.5 million,
an increase of $3.0 million, or 8.2%, from the $36.5 million in net sales for
the three months ended June 27, 1997. Net sales for the six months ended June
27, 1998 were $77.4 million, an increase of $28.1 million, or 57.0%, from the
$49.3 million in net sales for the six months ended June 27, 1997. The increase
in net sales for both periods was attributable primarily to incremental sales
resulting from the Merger with CCI, which contributed approximately $25.1
million for the three months ended June 27, 1998 and $50.8 million for the six
months ended June 27, 1998 compared with $21.4 million from the date of the
Merger to June 27, 1997. The increase in net sales from the Merger was offset,
primarily, by a decline in comparable store sales. On a proforma basis for the
Merger, comparable store sales for the three months ended June 27, 1998
declined to $38.1 million from $41.2 million for the three months ended June
27, 1997 and on a proforma basis, comparable store sales for the six months
ended June 27, 1998 declined to $74.1 million from $78.4 million for the six
months ended June 27, 1997. The decline in comparable store sales resulted
primarily from disruptions resulting from the Merger and the integration of the
operations of CCI and PFC, sales declines in older stores and stores in malls
and shopping centers experiencing sales declines and increased competitive
activity.

         Cost of sales, including buying, occupancy and distribution expenses
("COS"), excluding the impact of one-time charges of $6.6 million which are
more fully described above, were $31.0 million (78.5% of net sales) for the
three months ended June 27, 1998 compared to $25.0 million (68.4% of net sales)
for the three months ended June 27, 1997. COS, excluding the impact of such
one-time charges, were $59.8 million (77.3% of net sales) for the six months
ended June 27, 1998 compared to $33.7 million (68.2% of net sales) for the six
months ended June 27, 1997. COS as a percentage of net sales, excluding one 
time charges for the three and six months ended June 27, 1998 increased 
primarily as a result of higher COS in the CCI stores included from the date of
the Merger associated with the product mix in such stores. Including the effect
of inventory write-offs, COS was $37.6 million for the three months ended 
June 27, 1998 and $66.4 million for the six months ended June 27, 1998.

         Selling, general and administrative ("SG&A") expenses, excluding the
impact of one-time charges of $3.9 million which are more fully described
above, were $12.8 million (32.4% of net sales) for the three months ended June
27, 1998 compared to $11.7 million (32.1% of net sales) for the three months
ended June 27, 1997. SG&A expenses, excluding the impact of such one-time
charges, were $26.4 million (34.1% of net sales) for the six months ended June
27, 1998 compared to $18.4 million (37.3% of net sales) for the six months
ended June 27, 1997. SG&A expenses as a percentage of net sales decreased for
the six months ended June 27, 1998 compared with the prior year period primarily
due to the inclusion of the CCI operations and the benefit of certain synergies
achieved as a result of the consolidation 


                                       8
<PAGE>

                           THE COSMETIC CENTER, INC.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS


of CCI and PFC. Including the effect of one-time charges, SG&A expenses would 
have been $16.7 million for the three months ended June 27, 1998 and 
$30.3 million for the six months ended June 27, 1998.

         Interest expense was $1.3 million for the three months ended June 27,
1998 compared to $0.9 million for the three months ended June 27, 1997 and $2.6
million for the six months ended June 27, 1998 compared to $1.2 million for the
six months ended June 27, 1997. The increase in interest expense for the 1998
periods is primarily attributable to higher borrowings under the Company's
credit facility.


LIQUIDITY AND CAPITAL RESOURCES

         Net cash (used for) provided by operating activities was ($4.6)
million for the six months ended June 27, 1998 and $0.5 million for the six
months ended June 27, 1997. The increase in cash used for operating activities
in the 1998 period compared with the 1997 period resulted primarily from the
increase in the net loss of the Company in the 1998 period, partially offset by
a decrease in inventories.

         Net cash used for investing activities was $1.2 million and $21.0
million for the six months ended June 27, 1998 and June 27, 1997, respectively.
The decrease in cash used for investing activities during the 1998 period
compared with the 1997 period is due to the cash used in the Merger during the
1997 period.

         Net cash provided by financing activities was $2.9 million for the six
months ended June 27, 1998 compared with $19.8 million for the six months ended
June 27, 1997. The decrease in the 1998 period compared with the 1997 period
resulted primarily from reduced borrowings under the credit facility as
borrowings under the Company's credit facility were used to fund the Merger
during the six months ended June 27, 1997. The credit facility, which expires
on April 30, 1999, provides up to $70 million of revolving credit tied to a
borrowing base of 65% of eligible inventory, as defined in the credit facility.
Availability under the credit facility varies with the borrowing base. As of
June 27, 1998, $41.8 million was outstanding and an additional $3.5 million was
available for borrowing under the credit facility.

         The Company's principal sources of funds are expected to be cash flow
generated from operations and borrowings under the credit facility. The
Company's principal uses of funds are expected to be the payment of operating
expenses, working capital, costs to implement the Company's strategic plan,
capital expenditures and debt service on the Company's credit facility.

         As a result of the Company's operating losses, the Company obtained a
waiver of compliance with the financial covenants contained in its credit
facility as of June 27, 1998. The Company is in discussions with its lenders
for an amendment to the financial covenants contained in its credit facility.
There can be no assurances that the Company will obtain such amendment or, if
obtained, that such amendment will be on favorable terms. In addition, to
provide for its liquidity needs and to fund its new business strategy,
following the end of the second quarter, the Company borrowed $5 million from
Products Corporation. Such borrowings bear interest at 9.25% and may be repaid
following demand by Products Corporation in whole or in part only if after such
repayment the Company has certain minimum availability under its credit
facility.

         The outstanding balance of the Company's credit facility is reflected
as current debt since it expires in less than one year on April 30, 1999. The 
Company intends to refinance its credit facility, although no assurance can be 
given that such refinancing will be consummated or if consummated, will be 
consummated on favorable terms.

         Based upon the Company's current level of operations and anticipated
growth as a result of its strategic plan, the Company is unable to predict
whether cash flows from operations and funds from the credit facility will be
sufficient to enable the Company to meet its anticipated cash requirements for
the foreseeable future. If the Company is unable to satisfy such cash
requirements, the Company could be required to adopt one or more alternatives,
such as 


                                       9
<PAGE>

                           THE COSMETIC CENTER, INC.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS


reducing or delaying capital or other expenditures, store openings and closings
or other aspects of the Company's strategic plan, borrowing additional funds,
or restructuring indebtedness, selling assets or operations, issuing additional
shares of capital stock of the Company or seeking capital contributions from
third parties or affiliates. There can be no assurance that any of such actions
could be effected or effected on favorable terms, that if effected they would
enable the Company to continue to satisfy its cash requirements or that they
would be permitted under the terms of the credit facility or the Products
Corporation or REV Holdings Inc. debt instruments then in effect.

         The Company estimates that capital expenditures for the remainder of
1998 will be approximately $3.1 million, including upgrades to the Company's
management information systems. Pursuant to a tax sharing agreement, the
Company may be required to pay Products Corporation amounts equal to the taxes
that the Company would otherwise have to pay if it were to file separate
federal, state and local tax returns. The Company currently anticipates that no
significant federal tax payments or payments in lieu of federal taxes pursuant
to the tax sharing agreement will be made by the Company for 1998.

         In addition, Products Corporation has announced that it is
implementing its previously announced strategy of withdrawing from operating
retail stores and has determined to dispose of its 85% interest in the Company.
As a result of Products Corporation's determination, the Company has determined
to explore its strategic alternatives. There can be no assurance that any
strategic alternative will be consummated or, if consummated, as to the terms
of any such strategic alternative.


FORWARD LOOKING STATEMENTS

         This quarterly report on Form 10-Q for the quarter ended June 27, 1998
as well as other public documents of the Company contain forward-looking
statements which involve risks and uncertainties. Any statment in this 
Form 10-Q that is not historical should be considered forward-looking. The 
Company's actual results may differ materially from those discussed in such 
forward-looking statements. Such statements include, without limitation, 
statements regarding anticipated growth in sales, profit enhancement and 
improved operational performance, costs to integrate further the operations of 
CCI and PFC, costs associated with anticipated store openings, closings and 
relocations and otherwise, implementing the Company's strategic plan, costs to 
expand the operations of the Company, capital expenditures including 
information system upgrades, the Company's intent to refinance the credit 
facility and amend financial covenants in the credit facility, the Company's 
intent to explore strategic alternatives, expectations as to the Company's cash
flows from operations and the availability of funds from the credit facility, 
and borrowing additional funds and restructuring indebtedness, capital 
contributions or loans from affiliates or third parties, and the sale of assets
or additional shares of the Company. Readers are urged to consider that 
statements which use the terms "believes," "does not believe," "no reason to 
believe," "expects," "plans," "intends," "estimates," "anticipated," 
"anticipates" or similar expressions, as they relate to the Company or the 
Company's management, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future 
events and are subject to certain risks, uncertainties and assumptions. In 
addition to factors that may be described in the Company's filings with the 
Securities and Exchange Commission (the "Commission"), including this filing, 
the following factors, among others, could cause the Company's actual results 
to differ materially from those expressed in any forward-looking statements 
made by the Company: (i) the unavailability of funds from the credit facility 
or sufficient cash flows from operations, or the inability to secure capital 
contributions or loans from affiliates or the inability to sell assets or 
additional shares of the Company to affiliates or third parties to fund the 
Company's cash requirements, (ii) lack of success of the Company's new 
marketing and advertising initiatives in maintaining or increasing the 
Company's customer base, (iii) unanticipated costs or difficulties or delays in
increasing net sales, or negative effects on net sales as a result of new store
prototypes and remerchandising efforts, (iv) unanticipated costs or 
difficulties or delays in integrating further the operations of CCI and PFC, 
(v) unanticipated costs or difficulties or delays in connection with store 
openings, closings, remodelings or relocations, (vi) unanticipated capital 
expenditures arising from implementation of the Company's strategic plan, 
(vii) unanticipated costs or difficulties or delays in implementing the new 
management information systems, including scanning, (viii) lack of success in 
reducing costs 


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<PAGE>
                           THE COSMETIC CENTER, INC.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS


through improved inventory and warehouse efficiencies, (ix) actions by
competitors, including combinations within the retail industry, pricing
pressure, marketing initiatives or successful new retail store concepts, (x)
the lack of commercial success of the Company's salon arrangement, (xi) the
unavailability of product or the loss of suppliers, including secondary source
suppliers, (xii) unanticipated costs or difficulties or delays in implementing
the Company's strategic plan or lack of success of the Company's strategic
plan, (xiii) general business and economic conditions, as well as other factors
described from time to time in the Company's reports filed with Commission,
(xiv) inability to obtain an amendment to the Company's credit facility or the
terms of any such amendment or the inability to refinance such credit facility
when due and (xv) the results of the Company's efforts to pursue strategic
alternatives, including disruption to the Company's business as a result of
such efforts, whether any strategic alternatives will ultimately be pursued or
entered into or the terms of any such strategic alternatives. The Company
assumes no responsibility to update forward looking information contained
herein.

 EFFECT OF NEW ACCOUNTING STANDARD

     In March 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which requires capitalization of
certain development costs of software to be used internally. The effect of
adopting the statement has not yet been determined.



                                      11
<PAGE>




   PART II - OTHER INFORMATION


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

         The 1998 Annual Meeting of Stockholders was held on May 5, 1998. Three
Class III Directors were elected at the meeting: I. Howard Diener, David N.
Dinkins and Harvey S. Rosenthal. All of the Class III Directors were elected
without opposition. There were no broker non-votes. The only other matter voted
on was the ratification of the appointment by the Board of Directors of KPMG
Peat Marwick LLP as the Company's independent certified public accountants for
1998. 

    The tabulation of votes for each matter is as follows:

1.  Election of Directors:


    Nominees for Director       For                 Withheld
    ---------------------       ---                 --------

      I. Howard Diener       9,204,609                 404
      David N. Dinkins       9,204,584                 429
      Harvey S. Rosenthal    9,204,609                 404



2.  Ratification of Independent Certified Public Accountants:
                              For               Against                Abstain
                              ---               -------               --------

                           9,204,753                0                     260



         In June 1998, Mr. Diener resigned from the Board and as President and
Chief Executive Officer and Ms. Mary Elizabeth Burton was elected a Class III
Director by the Board to fill such vacancy. Ms. Burton was also elected by the
Board as President and Chief Executive Officer.





ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a) EXHIBITS

         4.1 - Waiver and Amendment No. 2 dated as of June 27, 1998 to the Loan
         and Security Agreement dated as of April 25, 1997, as amended, by and
         among the Company, BankAmerica Business Credit, Inc., as agent, and
         the lenders that are party thereto.

         10.1 - Employment agreement dated as of June 8, 1998 between the
         Company and Mary Elizabeth Burton.

     (b) REPORTS ON FORM 8-K - None



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<PAGE>



                                   SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.


                           THE COSMETIC CENTER, INC.
                           -------------------------
                                  (Registrant)


By :                                         By:
    -------------------------------------       -------------------------------
    MARY ELIZABETH BURTON                       DWIGHT W. CRAWLEY
    President and Chief Executive Officer       Senior Vice President - Finance,
                                                Chief Financial Officer and
                                                Chief Accounting Officer

Dated:   August __, 1998



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