UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
   
                                FORM 10-K/A-2 [^]
    
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended January 31, 1998

                                 Commission File
                                 Number 0-28410

                                LOEHMANN'S, INC.
                                ----------------
            (Exact name of registration as specified in its charter)

            Delaware                                             22-2341356
            --------                                             ----------
 (State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

2500 Halsey Street, Bronx, New York                                10461
-----------------------------------                                -----
  (Address of principal offices)                                 (Zip Code)

       Registrant's telephone number, including Area Code: (718) 409-2000

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

    Securities registered pursuant to Section 12(g) of the Act: Common Stock

         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, and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         The aggregate market value of voting stock held by nonaffiliates of
registrant as of April 28, 1998 was $34,245,074.

         The Company had 8,976,932 shares of Common Stock and 48,431 shares of
Class B Common Stock outstanding as of April 28, 1998.
   
EXPLANATORY NOTE
    
   
THIS AMENDMENT IS BEING FILED TO AMEND AND RESTATE THE REGISTRANT'S ANNUAL 
REPORT ON FORM 10-K IN ITS ENTIRETY.
    
<PAGE>
   
[^]
PART I.
    

ITEM 1.  BUSINESS

         Loehmann's, Inc.[^] ("Loehmann's" or the "Company"), founded in 1921 as
the "Original Designer Outlet," is a leading national specialty retailer of well
known designer and brand name women's fashion apparel, men's furnishings,
accessories, and shoes offered at prices that are typically 30% to 65% below
department store prices. The Company believes it has developed a unique
franchise as the largest national upscale off-price specialty retailer in the
industry. The Company's strong brand name, loyal customer base and long-standing
relationships with leading designers and vendors of quality merchandise has
enabled it to maintain its franchise. The Company's target customers are
relatively affluent women between the ages of 30 and 55 who are attracted to
designer and other high quality merchandise offered at exceptional values. As of
April 28, 1998 the Company operated 69 stores in major metropolitan markets
located in 22 states.
   
Corporate Structure
    
   
         Loehmann's is a Delaware corporation with no subsidiaries. As of
January 31, 1998, the Company had 25,000,000 shares of common stock, par value
$0.01 per share (the "Common Stock"), 469,237 shares of Class B common stock,
par value $0.01 per share (the "Class B Common Stock"), and 1,000,000 shares of
preferred stock, par value $0.01 per share (the "Preferred Stock") authorized,
of which 8,976,932 shares of Common Stock and 48,431 shares of Class B Common
Stock were issued and outstanding. In addition, as of January 31, 1998, the
Company had $131,360,000 of long-term indebtedness outstanding, consisting of
$33,771,000 under a revolving credit facility, $95,000,000 aggregate principal
amount of 11 7/8% Senior Notes due 2003 (the "Notes"), and $2,589,000 of revenue
bonds and notes.
    
   
         In anticipation of the Company's initial public offering on May 7,
1996, in order to effect a reincorporation from Maryland to Delaware, Loehmann's
Holdings, Inc. ("Holdings"), the Company's predecessor, was merged into the
Company (the "Merger"). As a result of the Merger, each share of Holdings common
stock and Class B common stock was converted into approximately 0.22 shares of
the Company's Common Stock and Class B Common Stock, respectively, and the
authorized number of shares of Common Stock was increased to 25,000,000.
    
   
         On May 10, 1996, the Company issued and sold 3,572,000 shares of Common
Stock in its initial public offering and issued and sold $100 million principal
amount of the Notes in a concurrent debt offering, resulting in net proceeds of
approximately $155 million to the Company. The proceeds received from these
offerings were used to redeem indebtedness and all issued and outstanding shares
of the Company's Series A Preferred Stock.
    

                                        2
<PAGE>

Industry Overview
   
         WOMEN'S APPAREL
    
         According to published reports, total retail sales of women's apparel
and accessories in the United States were in excess of $89.0 billion in 1997.
The womenswear industry is served by a variety of distribution channels
including department stores, specialty stores and off-price retailers.

         The women's apparel industry is categorized into five product
classifications: designer, bridge, better, moderate and budget. Designer
merchandise is the most expensive product classification and is characterized by
high fashion styling. Designer brands include Donna Karan, Calvin Klein, Ralph
Lauren and Anne Klein. Bridge products are typically brand name merchandise
which may carry designer labels but are less expensive than the designer
classification and allow customers to purchase designer-like merchandise at
below designer prices. Bridge brands include DKNY, Anne Klein II, Adrienne
Vittadini, CK/Calvin Klein, Emanuel Ungaro and Tahari. Apparel in the better
classification carries brand name labels but is less expensive than bridge
apparel. Better brands include Jones New York, Harve Benard and Kenar.
Merchandise in the moderate classification is also generally brand name but is a
less expensive product category. Moderate brands include Oleg Cassini and Leslie
Fay. Budget merchandise is the least expensive product classification.

         Designer and bridge merchandise is generally sold in finer department
stores such as Bloomingdale's, Lord & Taylor, Nordstrom and Saks Fifth Avenue.
Because manufacturers of designer and bridge merchandise are very concerned
about maintaining the upscale image of their trademarks, they are typically very
selective about which retailers carry their products. As a result, the Company
believes that most other off-price retailers have limited access to designer and
bridge merchandise.
   
         OTHER PRODUCTS
    
   
         The men's apparel industry includes tailored apparel (suits,
formalwear, slacks, sportcoats and outer wear), sportswear (casual pants,
sportshirts, sweaters and jackets) and furnishings (dress shirts, ties, belts,
suspenders, underwear, socks, scarves and gloves). Loehmann's offers primarily 
men's furnishings to its customers.
    
   
         The men's furnishings industry is served by a variety of distribution
channels including department stores, specialty menswear stores, off-price
retailers and catalog retailers. The Company offers primarily designer and brand
name men's furnishings, which are generally sold in finer department stores and
specialty stores such as Bloomingdale's, Lord & Taylor, Nordstrom, Saks Fifth
Avenue and Brooks Brothers.
    

Business Strategy

         The Company's strategy is to deliver value to its customers by offering
at substantial discounts a wide selection of high quality in-season merchandise,
including designer and bridge apparel, accessories and shoes. The Company
believes that it differentiates itself from finer department stores by offering
similar merchandise at significantly lower prices and from other

                                        3
<PAGE>

off-price apparel retailers by offering a broad range of designer and bridge
merchandise. The principal elements of the Company's business strategy are as
follows:

         EMPHASIS ON IN-SEASON DESIGNER AND HIGH QUALITY MERCHANDISE

         The Company offers a wide selection of in-season apparel, accessories
and shoes, approximately one-third of which is designer and bridge merchandise.
The Company, like finer department stores, is known for carrying designer and
bridge labels, including Donna Karan, Calvin Klein, Ralph Lauren, Adrienne
Vittadini, Tahari, Dana Buchman, Andrea Jovine and Emanuel Ungaro.

         VALUE PRICING

         The Company provides its customers with exceptional value by offering
its merchandise at prices that are typically 30% to 65% below prices charged by
department stores for the same items and that are comparable to or lower than
prices charged by other off-price retailers.

         CAPITALIZE ON LONG-STANDING VENDOR RELATIONSHIPS
   
         Loehmann's believes that it is uniquely positioned among off-price
retailers as a principal choice for well known designers who believe that their
prestige will be preserved by having their merchandise offered by Loehmann's
because of its high quality image and affluent customer base. Loehmann's
long-standing vendor relationships and its ability to sell large quantities of
goods have provided the Company with ready access to a wide selection of
merchandise, often on a preferential basis. The failure of the Company to
maintain its status as a principal choice for well known designers may erode one
of Loehmann's key competitive advantages over its competitors, such as off-price
retailers. Such an increase in competition could materially and adversely affect
the Company's business and results of operations.
    
         BROADEN MERCHANDISE CATEGORIES

         The Company continually seeks to broaden its appeal and has over the
past several years expanded its merchandise mix to include gifts, shoes and a
broader range of accessories and intimate apparel. These items, which typically
generate higher gross margins than the Company's traditional apparel categories,
accounted for approximately 20% of the Company's net sales in fiscal 1997, an
increase from 13% in fiscal 1993. In addition, the Company has introduced men's
wear at 19 of its locations with plans to expand to 50 locations in 1998.

         FLEXIBLE PURCHASING STRATEGY

         The Company relies on a flexible purchasing strategy under which it
enters any given month with a substantial portion of its purchasing requirements
unfulfilled. This strategy enables the Company to react to sales trends, fashion
trends and changing customer preferences while enhancing the Company's ability
to negotiate with its vendors and take advantage of market inefficiencies and
opportunities as they may arise.

                                        4
<PAGE>

         EFFICIENT INVENTORY MANAGEMENT

         The Company ships new high quality merchandise to its stores on a daily
basis. The Company believes it is able to constantly replenish its stores
because of its allocation and distribution system, which enables the Company to
distribute merchandise to its stores typically within 48 to 72 hours after
delivery to its distribution center. In addition, the Company utilizes a
cyclical markdown strategy which automatically reduces prices as goods age. As a
result of this inventory management, the Company is able to enhance its gross
margin, maintain a comparatively low investment in inventory, increase its
inventory turn and react more effectively to changing fashion trends and
customer preferences.

         LOW-COST STRUCTURE

         In order to provide its customers with exceptional value while
maximizing profitability and cash flow, the Company is focused on maintaining an
efficient, low-cost operating structure. Key elements of this focus include the
Company's no-frills store format, lean corporate overhead and disciplined real
estate strategy.

         EXPANSION STRATEGY

         In fiscal 1997 the Company continued its store expansion program,
opening new stores in existing suburban markets where the Loehmann's franchise
is well established and in other locations which have appealing demographics.
The Company opened seven stores in fiscal 1997, in addition to the seven stores
opened in fiscal 1996. The Company plans to open three stores in fiscal 1998,
two of these stores have already been opened in Long Beach, California, and
Cincinnati, Ohio. The Company closed four stores in fiscal 1997 and converted
one store into a clearance center. As part of the Company's ongoing strategy to
focus on larger, more profitable stores, and to continue to reposition its
merchandise offerings, the Company closed nine stores in March 1998, and expects
to close one additional store during the year.

         The Company has retained the services of a retail consulting firm that
has conducted an extensive analysis of the relevant demographics to advise the
Company with respect to its expansion strategy. All decisions as to store
openings are decided on a case by case basis by the Company's Board of Directors
based on the recommendations of management.

Merchandising

         SELECTION

         The Company offers a wide selection of women's sportswear, dresses,
suits, outerwear, coats, accessories, intimate apparel and shoes, as well as a
selection of gifts, infantwear, kid's wear and men's furnishings. The Company
does not offer budget merchandise in its stores. Most of the Company's
merchandise is in-season and is therefore generally available at Loehmann's
during the same selling season as it is available in department stores. The
following is a list of many of the key brands offered at the Company's stores:

                                        5
<PAGE>

Adrienne Vittadini           Dana Buchman                 Kenar
Andrea Jovine                DKNY                         Oleg Cassini
A Line by Anne Klein         Donna Karan                  Ralph Lauren
Anne Klein II                Emmanuel Ungaro              Tahari
Calvin Klein                 Harve Benard
CK/Calvin Klein              Jones NY

         The Company continually seeks to broaden its appeal and has over the
past several years expanded its merchandise mix to include shoes and a broader
range of accessories and intimate apparel. These items, which typically generate
higher gross margins than the Company's traditional apparel categories,
accounted for over 20% of the Company's net sales in fiscal 1997, an increase
from 13% in fiscal 1993. The following table shows the percentages of the
Company's net sales attributable to its various product categories for fiscal
1993 through fiscal 1997:

<TABLE>
<CAPTION>
                                               1993        1994         1995         1996        1997
                                               ----        ----         ----         ----        ----
<S>                                           <C>         <C>          <C>          <C>         <C>  
Sportswear .........................           49.6%       48.8%        47.6%        48.1%       47.8%
Dresses and suits ..................           28.6        26.5         26.0         24.6        22.9
Coats and outerwear ................            5.9         5.2          5.1          5.0         4.7
Accessories/intimate apparel .......           11.3        13.0         14.5         14.6        13.6
Shoes ..............................            2.1         3.4          5.5          5.8         6.5
Men's ..............................             --          --           --           --         2.5
Other ..............................            2.5         3.1          1.3          1.9         2.0
Total ..............................          100.0%      100.0%       100.0%       100.0%      100.0%
</TABLE>

         All Loehmann's stores carry items from each of its merchandise
categories. However, the allocation of merchandise among the stores varies based
upon factors relating to the demographics and geographic location of each store
as well as the size of the store and its ability to adequately display the
merchandise. In a continuing effort to broaden its appeal, both infantwear and
women's large sizes and petite apparel were offered in approximately 40 of the
Company's stores during fiscal 1997 and men's furnishings was introduced in 19
locations.

         PRICING

         The Company seeks to provide its customers with exceptional value by
offering its merchandise at prices that are typically 30% to 65% below prices
charged by department stores for the same items and that are comparable to or
lower than prices charged by other off-price retailers. The Company's central
buying staff adheres to a disciplined approach to acquiring merchandise that
enables the Company to consistently offer its merchandise at favorable prices.
The Company's buyers will only acquire merchandise at prices which permit the
Company to offer its merchandise for sale initially at a significant discount to
the first marked down price that a department store would charge for the same
item. Each item of merchandise offered by the Company carries a price tag
displaying the Company's price as well as the typical department store's initial
price for the same item.
   
         The Company has historically used a cyclical markdown policy to reduce
prices automatically as goods age. Since the beginning of the current fiscal
year, however, this
    

                                        6
<PAGE>
   
policy has been modified slightly, as the prices of goods that are selling well
are no longer automatically reduced at pre-determined time intervals. The
purpose of this policy is to improve inventory turnover and minimize the amount
of unsold merchandise at the end of the season, while reinforcing the customer's
perception of value and enabling the Company to provide the stores with fresh
merchandise on a regular basis. In addition, the Company closely monitors prices
charged by competitors in each of its markets and adjusts its prices to preserve
its pricing advantage.
    

Vendor Relationships and Purchasing

         The Company believes it is well positioned among off-price retailers as
a principal choice for well known designers who believe that their prestige will
be preserved by having their merchandise offered by Loehmann's because of its
high quality image and affluent customer base. Many of the Company's most active
suppliers have been selling merchandise to the Company for at least 10 years.
Because of these long-standing vendor relationships and its ability to sell
large quantities of goods, the Company has ready access to a wide selection of
merchandise, often on a preferential basis.
   
         The Company does not engage in significant forward purchasing and a
large portion of its purchasing requirements in any given month intentionally
remains unfulfilled at the beginning of the month. This strategy enables the
Company to react to fashion trends and changing customer preferences while
enhancing the Company's ability to negotiate with its vendors and take advantage
of market inefficiencies and opportunities as they may arise. Although the
Company has always been able to fulfill its inventory needs, its opportunistic
purchasing strategy does not always permit Loehmann's to purchase specific types
of goods. For example, certain types of popular merchandise may be unavailable
in certain sizes or colors depending on market conditions.
    
         The Company purchases a majority of its inventory during the
manufacturer's selling season enabling the Company to offer merchandise during
the same selling season as it is available in department stores. The Company
also purchases a portion of its inventory at the end of the season, when the
Company is prepared to purchase a manufacturer's remaining items at an even
steeper discount. Vendors who sell to the Company do not need to build into
their price structure any anticipation of returns, markdown allowances or
advertising allowances, all of which are typical in the department store
industry. In addition, the Company pays for goods within an average of
approximately 25 to 30 days and often picks up the merchandise directly from the
vendors.

         The Company purchases its inventory from over 400 suppliers, which in
many cases include separate divisions of a single manufacturer or designer.
These suppliers include a substantial majority of the designer and brand name
apparel manufacturers in the United States. Some purchases are also made in the
European market, primarily Italy. The Company does not have any long-term supply
contracts with its suppliers.

         The Company maintains its own central buying staff, comprised of 17
experienced off-priced buyers, many of who also have extensive experience with
traditional department stores. Historically, the Company has had very low
turnover within its buying group, enabling

                                        7
<PAGE>

Loehmann's to capitalize on an experienced, respected group of buyers capable of
enhancing the Company's already strong vendor relationships.

Store Layout

         Loehmann's store format and merchandise presentation are designed to
project the image of deep discount and exceptional value, as well as to
emphasize Loehmann's niche as the off-price equivalent of an upscale specialty
store. Loehmann's stores are divided into two shopping areas: a large, open
selling area with wall-to-wall merchandise and a smaller, separate, and more
intimate area called "The Back Room." The Company presents moderate and better
sportswear, dresses and suits, as well as all outerwear, men's apparel,
accessories, intimate apparel and shoes on the main selling floor. Designer and
bridge merchandise, including gowns, dresses, suits and sportswear, are
displayed in The Back Room.

         The Back Room provides a key point of differentiation to the consumer,
as it projects the image of designer goods sold in a no-frills environment and,
therefore, at exceptional values. Although the Company estimates that The Back
Room generally accounts for only approximately 10% to 15% of a typical
Loehmann's store's selling space, The Back Room has generated approximately
one-third of the Company's net sales over the last several years.

         All stores are low maintenance, simple, and functional facilities
designed to maximize selling space and contain overhead costs. Store layouts are
flexible in that product groupings can be easily moved or expanded. All stores
have two or more communal fitting rooms. However, in response to customer
preferences, private fitting rooms have been added in most stores. Because the
Company is committed to maintaining virtually all of its in-store inventory on
the selling floor, its stores do not require significant space devoted to
inventory storage.

Distribution

         The Company operates a 126,000 square foot centralized distribution
center located at the Company's headquarters and a 32,000 square foot satellite
warehouse for processing shoes located near the main distribution center. In
addition, the Company leases a 150,000 square foot facility in Secaucus, New
Jersey. As merchandise arrives at the distribution center, it is priced,
ticketed, assigned to individual stores by the Company's merchandising systems,
packaged for delivery and transported to the stores. The time from receipt of
goods at the distribution center to placement of merchandise in the stores
typically ranges from 48 to 72 hours.

Advertising and Promotion

         Over the years, Loehmann's has built its reputation through
"word-of-mouth" advertising. In the last three fiscal years, the Company has
significantly increased its advertising expenditures. The Company advertises
predominantly through direct mail and to a lesser extent through newspaper
advertising.

         A significant portion of the Company's advertising efforts involve
direct mail announcements to members of "The Insider Club," a free membership
program. Members receive notification of special events throughout the year and
a 15% discount on their birthdays. The list of members now includes
approximately 1.6 million active customers. In addition, the

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<PAGE>

Company entered into an agreement with First USA Bank and launched a co-branded
Platinum Visa Card in November 1997.

Store Operations

         The Company operates its stores to enhance the customer's shopping
experience by creating a friendly shopping environment within a self-service
operation. The Company's stores are organized into eight separate geographic
districts each with a regional manager. Regional managers monitor the financial
performance of the stores in their respective geographic districts and
frequently visit stores to ensure adherence to the Company's merchandising,
operations and personnel standards. The typical staff for a Loehmann's store
consists of a store manager, and a number of associate store and department
managers, sales specialists and additional full and part-time hourly associates
depending upon the store's needs.

         Senior management meets with the regional managers on a periodic basis
to maintain a clear line of communication. In addition, "mystery shoppers" shop
the stores to help ensure that sales associates are friendly and helpful and
maintain all of the Company's merchandising, customer service and loss
prevention standards.

         Store management personnel currently complete a training program at a
designated training store before assuming management responsibility. Sales
specialists receive product and customer service training at the store level.

         All store and regional managers participate in a bonus plan that ties
compensation awards to the achievement of specified store profit goals and
overall Company profits and also are eligible in the Company's stock option
plan.

Management Information Systems

         Each Loehmann's store is linked to the Company's headquarters through a
point-of-sale system that interfaces with an IBM RS6000 computer equipped with
integrated merchandising, distribution and accounting software packages. The
Company's point-of-sale computer system has features that include merchandise
scanning, the capture of customer sales information and on-line credit card
approval. These features improve transaction accuracy, speed and checkout time
as well as increase overall store efficiency.

         The Company's management information and control systems enable the
Company's corporate headquarters to promptly identify sales trends, identify
merchandise to be marked down and monitor merchandise mix and inventory levels
at individual stores. The Company believes that the current management
information and control systems are capable of supporting the Company's planned
expansion for the foreseeable future.

         The Company has outside service contracts to maintain its computer
software programs and expects that all modifications and conversions will be
completed on a timely basis. The total dollar amount that the Company estimates
will be spent to address the year 2000 issue is not expected to have a material
financial impact.

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<PAGE>

Employees

         At January 31, 1998, the Company had 2,827 employees, of whom 1,900
were store sales and clerical employees, 202 performed store managerial
functions, and 725 were corporate and warehouse personnel. Except for managerial
employees, professional support staff and the Company's buyers, all employees
are paid on an hourly basis. None of the Company's employees are represented by
a labor union. The Company believes that its employee relations are good.

Trademark and Service Mark

         "Loehmann's" has been registered as a trademark and a service mark with
the United States Patent and Trademark Office. The registration of the trademark
and the service mark may be renewed to extend the original 20-year registration
period indefinitely, provided the marks are still in use. The Company intends to
continue to use its trademark and service mark and to maintain their
registrations. The Company believes its trademark and service mark have received
broad recognition and their continued existence is important to the Company's
business.

Competition

         All aspects of the off-price fashion apparel business are highly
competitive, and the Company expects competitive pressures to increase in the
future as more factory outlet centers open and department stores continue price
discounting. The Company believes that the principal elements of competition are
the price, quality, selection and presentation of merchandise, store location
and customer service. Management believes that the Company is well positioned to
compete on the basis of each of these factors. The competitive environment may
also be affected by factors beyond a particular retailer's control, such as
shifts in consumer preferences, change in population demographics and traffic
patterns, and fluctuating economic conditions.
   
         Competitive conditions in the men's furnishings industry are comparable
to those in the women's apparel industry. However, as the Company's primary
focus is on women's apparel, the Company's men's offerings are limited to such
items as shirts, belts and ties. These items are intended to complement women's
apparel and are often "impulse" purchases.
    
         The Company competes primarily with finer department stores. The
Company believes it competes successfully with such department stores by
offering a wide selection of comparable quality merchandise at significantly
lower prices. Many department stores have increased their promotional efforts,
although such promotions are typically focused on moderate merchandise. Should
finer department stores continue to price more aggressively, the Company's
margins may be adversely affected. Most of the department stores and some of the
off-price and discount retailers with which the Company competes have access to
substantially greater financial and marketing resources than those available to
the Company.

         The Company also faces competition from factory outlet malls and a
variety of off-price and discount retailers, some of which are relatively new
companies, but many of which are established retail chains or divisions thereof.
Such competitors include Burlington Coat Factory, Filene's Basement, Marshall's,
Saks Off 5th, Syms, and T.J. Maxx. The Company believes it

                                       10
<PAGE>

competes successfully with other off-price and discount retailers by reason of
the quality, selection and price of the designer and other better quality
merchandise available in the Company's stores.

         In recent years, some designer and other better quality women's apparel
has been offered through mail order catalogs. While not significant at the
present time, the Company cannot predict the impact of this and other in-home
shopping competition.

Special Note Regarding Forward-looking Statements

         Certain statements under the captions "Business," "Management's
Discussions and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-K or incorporated by reference herein, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions;
competition; success of operating initiatives; development and operating costs;
advertising and promotional efforts; brand awareness; the existence or adherence
to development schedules; the existence or absence of adverse publicity;
availability, locations and terms of sites for store development; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs; changes
in, or the failure to comply with, government regulations; construction costs
and other factors referenced in this report.

ITEM 2.  PROPERTIES

         As of April 28, 1998, the Company operated 69 stores in 22 states
including seven stores opened in fiscal 1997 and two stores opened in fiscal
1998. The Company does not own any of its stores and has no manufacturing
facilities.

         Indicated below is a listing of the regions in which the Company
operates its stores:

                                                     Percent of
                                 Number of           Fiscal Year
Region                            Stores            1997 Sales (1)
------                            ------            --------------
California .............             17                 26.1%
New York  ..............              9                 23.4
Other Mid-Atlantic .....              7                  9.1
New Jersey .............              6                  9.0
Florida ................              5                  8.5
Midwest ................              7                  5.6
New England ............              5                  5.4
Texas ..................              4                  4.7

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<PAGE>

Other Southeast ........              5                  4.3
Other West ..........                 4                  3.9
                                  -----                -----
                                     69                100.0%
                                  =====                =====
--------------

         (1)      These percentages exclude sales from the Company's 4 stores
                  closed in fiscal 1997, and the Company's two stores opened and
                  nine stores closed in fiscal 1998.

Leases

         The leases for the Company's stores typically provide for a 15 to
20-year term with three five-year renewals that are automatic unless the Company
elects to terminate the lease. The rental rate is a fixed amount rather than a
contingent payment based on a store's gross sales. The leases typically contain
tax escalation clauses and require the Company to pay insurance, utilities,
repair and maintenance expenses. Increases in the fixed rent payable during the
renewal terms are generally less than 10% to 15% of the base rent (although this
percentage may increase for new stores). The leases have initial or renewal
terms expiring as follows: 1998-1999 (13 stores); 2000-2002 (26 stores);
2003-2005 (9 stores); and 2006 and later (33 stores).

         Two of three leases that expire by year-end fiscal 1998 have renewal
options. The Company has generally been successful in renewing its store leases
as they expire.

         The Company leases the land for a 153,000 square foot facility located
in an industrial park in the Bronx, New York, which serves as its corporate
headquarters and as the site of its central warehousing and distribution
operations. This facility contains 27,000 square feet of office space and
126,000 square feet of warehouse space. The ground lease with respect to the
land on which the facility is situated provides for aggregate annual base rental
payments of $37,500. The lease expires in 2010, but is renewable at certain
increased rates until 2050. The facility is subject to two mortgages which
relate to New York City Industrial Development Agency Revenue Bonds. In
addition, the Company leases a 32,000 square foot warehouse in the Bronx, New
York, which serves as additional warehouse space. The lease expires on December
31, 1998 and provides for annual rental payments of $198,000. The Company also
leases a 150,000 square foot warehouse in Secaucus, New Jersey, which serves as
additional warehouse space. The lease expires on January 31, 1999, and provides
for annual rental payments of $675,000.

ITEM 3.  LEGAL PROCEEDINGS

         Management is not aware of any litigation or regulatory proceedings
against the Company which would materially impact its business or financial
position.

                                       12
<PAGE>

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

         None, during the fourth quarter of fiscal 1997.

                                       13
<PAGE>

PART II.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   
         The Company's common stock has been traded on the NASDAQ National
Market System since May 7, 1996 under the symbol LOEH. As of April 1, 1998,
there were approximately 100 shareholders of record of the Company's common
stock. The following table shows the high and low sales price for the Company's
common stock for each quarterly period from May 7, 1996, the date of the
Company's initial public offering, through January 30, 1998.
    
   
Fiscal Quarter Ended                                    High             Low
--------------------                                    ----             ---
August 3, 1996 ................................      $28.125         $18.000
November 2, 1996 ..............................      $30.000         $20.375
February 1, 1997 ..............................      $31.000         $14.625
May 3, 1997 ...................................      $19.500         $ 6.250
August 2, 1997 ................................      $ 8.250         $ 6.000
November 1, 1997 ..............................      $10.125         $ 5.688
January 31, 1998 ..............................      $ 7.875         $ 3.500
    
   
         On January 30, 1998, the closing market price of the Company's Common
Stock was $3.81. The Company has not paid dividends on its common stock or its
Class B Common Stock since inception and does not anticipate paying a cash
dividend in the foreseeable future. The Indenture for the Notes and the
Company's revolving credit facility contain various covenants which may restrict
the payment of cash dividends. On April 1, 1998, the closing market price of the
Company's Common Stock was $43/8.
    
   
         During fiscal year 1997, 93,846 shares of Common Stock were issued upon
conversion of the Company's Class B Common Stock in reliance on Section 3(a)(9)
under the United States Securities Act of 1933 (the "Securities Act"). The
exemption provided under Section 3(a)(9) was available because the shares of
Common Stock were issued by the Company to its existing security holders
exclusively, and no commission or other remuneration was paid for soliciting the
conversions.
    
   
         During fiscal year 1997, the Company issued to its employees 44,500
options to purchase shares of Common Stock in reliance on Section 4(2) under the
Securities Act ("Section 4(2)"). These options are exercisable at prices ranging
from $6.88 to $15.88. Such options were issued pursuant to the Company's New
Stock Incentive Plan and vest over a range of one to five years from the date of
grant, provided that the individuals remain in the employ of the Company. Such
options expire on the tenth anniversary of the date of grant. The exemption
provided under Section 4(2) was available because all of the options were issued
to four members of the Company's senior management, each of whom is financially
sophisticated and highly experienced in business.
    

                                       14
<PAGE>
   
         During fiscal year 1997, the Company issued to its non-employee
directors 101,000 options to purchase shares of Common Stock in reliance on
Section 4(2) under the Securities Act. The options are exercisable at prices
ranging from $5.75 to $7.0625. Such options were issued pursuant to the
Company's Stock Option Plan For Non-Employee Directors and vest over a range of
one to three years from the date of grant, provided the optionee remains in
service of the Company as a director on such date. Such options expire either on
the tenth anniversary of the date of grant, or the expiration of one year from
the date the optionee's service with the Company terminates. The exemption
provided under Section 4(2) was available because such options were granted to
seven of the Company's directors, each of whom is financially sophisticated and
highly experienced in business. Consequently, the grantees of the options are
"sophisticated investors," and the granting of the options did not involve a
public offering within the meaning of Section 4(2).
    

                                       15
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
   
[^] Selected Financial Data                        [^] 1997         1996         1995         1994         1993
                                                   --------         ----         ----         ----         ----
                                                              (In thousands, except per share amounts)
<S>                                              <C>          <C>          <C>          <C>          <C>         
Net Sales .......................................$    443,310 $    417,758 $    386,090 $    392,606 $    373,443
Net loss applicable to common stock .............$     15,672 $      1,216 $     17,019 $      3,308 $     13,727
Basic net loss per share applicable to                                           
  common stock ..................................$       1.75 $       0.15 $       3.12 $       0.63 $       2.18
Diluted net loss per share applicable to                                           
  common stock ..................................$       1.75 $       0.14 $       3.12 $       0.63 $       2.18
Total Assets ....................................$    189,226 $    176,200 $    163,611 $    178,612 $    177,666
Long-term obligations ...........................$    131,360 $    107,850 $    131,733 $    131,967 $    130,827
Redeemable Series A preferred stock .............          --           -- $     15,279 $     13,223 $     11,421
    
</TABLE>
   
[^]
[^][^]
Financial Highlights
[^]
    
<TABLE>
<CAPTION>
   
                                                                                                       Percent
                                                                     1997               1996             Change
                                                             ------------------  -----------------  -------------
<S>                                                          <C>                 <C>                <C> 
Operating Results
Net Sales ................................................       $443,310,000       $417,758,000          6.1%
Adjusted EBITDA (1).......................................        $18,032,000        $36,828,000        -51.0%
Non-recurring Charge......................................          9,300,000                  0          N/A
Operating (Loss) Income...................................         (2,701,000)        24,980,000          N/A
[^] Net (Loss) Applicable
       to Common Stock....................................        (15,672,000)        (1,216,000)         N/A
Basic Net Loss per Share
      Applicable to Common Stock..........................             ($1.75)            ($0.15)         N/A
Diluted Net Loss per Share
      Applicable to Common Stock..........................             ($1.75)            ($0.14)         N/A
    

Financial Position
Shareholders Equity.......................................          9,706,000         25,243,000         61.5%
Total Assets .............................................        189,226,000        176,200,000          7.4%
Working Capital ..........................................         27,092,000         22,278,000         21.6%
Number of Stores at End of Period ........................                 76                 73          4.1%
Total Square Footage .....................................          1,492,000          1,279,000         16.7%
</TABLE>
   
[^]--------------------
    
                                       16

<PAGE>
   
[^](1)   Adjusted EBITDA represents earnings before interest expense, income tax
         expense, depreciation and a charge for store closings and impairment of
         assets. Adjusted EBITDA is presented because management believes it is
         a useful financial indicator used by certain investors and securities
         analysts to analyze companies on the basis of operating performance.
         Adjusted EBITDA is not a term defined in generally accepted accounting
         principles, should not be considered as an alternative to net income,
         an indicator of the Company's operating performance, or an alternative
         to the Company's cash flow from operating activities as a measure of
         liquidity, and should not be considered in isolation or as a substitute
         for measures of performance prepared in accordance with generally
         accepted accounting principles. The Company understands that while
         EBITDA is frequently used by securities analysts in the evaluation of
         companies, Adjusted EBITDA, as used herein, is not necessarily
         comparable to other similarly titled captions of other companies due to
         potential inconsistencies in the method of calculation.
    
   
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
    

[^]

[^]

Results of Operations

         The table below sets forth certain financial data of the Company
expressed as a percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
   
                                                                       Fiscal Year (1)
                                                        --------------------------------------------
                                                            1997           1996           1995
<S>                                                        <C>            <C>            <C>   
Net sales ............................................     100.0%         100.0%         100.0%
Gross margin .........................................      28.4           31.9       [^] 30.2
Selling, general and administrative expenses .........      25.1           23.0           23.2
Depreciation and amortization ........................       2.6            2.8            3.1
Charge for store closings and impairment of assets ...       1.3             --        [^] 3.0
Operating income .....................................      (0.6)           6.0            0.9
Interest expense, net ................................       2.9            3.2            4.7
Income (loss) before income taxes ....................      (3.5)%          2.8%          (3.8)%
-------------
(1)      Fiscal 1997 and 1996 had 52 weeks, and fiscal 1995 had 53 weeks. Numbers may not
         total due to rounding.
    
</TABLE>

Fiscal 1997 Compared to Fiscal 1996

         Net sales increased by approximately $25.6 million, or 6.1%, to $443.3
million during fiscal 1997 as compared to $417.8 million during fiscal 1996.
Comparable store sales (sales at stores that were in operation for both periods)
decreased by 6.8% during fiscal 1997 as compared

                                       17
<PAGE>

to fiscal 1996. The increase in reported net sales for fiscal 1997 is the result
of sales from new stores, offset by the effect of closed stores and the
comparable store sales decrease of 6.8%. The Company opened 7 new stores if
fiscal 1997 and 7 new stores in fiscal 1996, and closed 4 stores in fiscal 1997
and 3 stores in fiscal 1996.
   
         Gross profit decreased by approximately $7.4 million to $125.8 million
during fiscal 1997 as compared to $133.1 million for fiscal 1996. Gross margin
decreased to 28.4% for fiscal 1997 from 31.9% in the prior fiscal year. The
decrease in gross margin is primarily the result of: (i) an increase in
markdowns which represents 2.7% of sales (which resulted from inflated inventory
levels caused by slow selling women's apparel, primarily designer and bridge
lines), and (ii) a one time charge which represents 0.8% of sales, for the
planned liquidation of inventory in ten stores to be closed in 1998, and for the
planned liquidation of inventory as part of the Company's strategy to reposition
its merchandise offerings.
    
         Selling, general and administrative expenses increased by approximately
$15.1 million to $111.4 million during fiscal 1997 as compared to $96.3 million
for fiscal 1996. As a percentage of net sales, selling, general and
administrative expense increased to 25.1% in fiscal 1997 from 23.0% in the prior
year. The dollar increase in selling, general and administrative expenses was
primarily related to: (i) $17.4 million in store operating expenses related to
1996 and 1997 new stores including store payroll, occupancy and advertising
costs partially offset by (ii) $3.4 million primarily related to store closings.
The increase in selling, general and administrative expense as a percentage of
sales is primarily the result of higher relative occupancy costs as a percentage
of sales for new stores and the comparable store expansions.
   
         Included in selling, general and administrative expense are bonus
payments made to the Company's executive officers. The Company's executives
received no bonus payments in fiscal 1997, and were paid an aggregate $942,565
in bonuses in fiscal 1996. Annual bonuses are paid to the Company's executives
in accordance with the Company's Performance Incentive Plan, which is described
more fully under "Report of Compensation Committee - Annual Bonus Incentives" on
page 11 of the Company's Definitive Proxy Statement for its Annual Meeting of
Stockholders held on July 30, 1998 (the "Proxy Statement").
    
         Depreciation and amortization for fiscal 1997 described by
approximately $0.4 million to $11.4 million as compared to $11.8 million for the
prior fiscal year. The reduction in depreciation and amortization is
attributable to: (i) a decrease in amortization of deferred financing fees
related to the refinancing of debt associated with the debt offering in fiscal
1996, (ii) an increase in depreciation related to the opening of the seven new
stores and the expansion and renovation of eight stores in fiscal 1997, (iii) a
lengthening of the estimated depreciable lives of assets for certain stores
whose primary lease terms were extended, and (iv) a decrease in depreciation
associated with the natural retirement of certain assets.

         In connection with the Company's ongoing strategy to focus on larger,
more profitable stores, the Company provided for a charge in the amount of $5.7
million for the closing of ten stores during 1998. This charge consists of the
write off of property, plant, and equipment, closing expenses, and costs
associated with net lease obligations of $2.1 million, $0.6 million, and $3.0
million, respectively. See Note 9 to the Consolidated Financial Statements.

                                       18
<PAGE>

         Operating (loss) income decreased by $27.7 million to $(2.7) million,
or (0.6)% of sales, in fiscal 1997 as compared to $25.0 million, or 6.0% of
sales, in fiscal 1996. The decrease in operating income as a percentage of sales
from 6.0% to (0.6)% in fiscal 1997 primarily consists of the following: (i) 1.3%
related to the charge for store closings, (ii) 2.1% related to selling, general,
and administrative expenses primarily resulting from higher occupancy costs as a
percentage of sales associated with new and expanded stores, and (iii) 3.5%
related to a decrease in gross profit resulting from higher markdowns and the
planned liquidation of inventory to reposition its merchandise offerings and for
the closing of stores.

         Interest expense decreased by $0.5 million to $12.8 million for fiscal
1997 as compared to $13.4 million for fiscal 1996. The reduction in net interest
expense primarily resulted from the effect of the Company's reduction of
approximately $30.0 million of senior notes and a reduction of the average
interest rate paid on the long term debt by approximately 60 basis points on May
7, 1996, partially offset by interest expense incurred on borrowings under the
revolving line of credit. See Note 4 of the Consolidated Financial Statements.

Fiscal 1996 Compared to Fiscal 1995

         Net sales increased by approximately $31.7 million, or 8.2%, to $417.8
million during fiscal 1996 as compared to $386.1 million during fiscal 1995. The
reporting period for fiscal 1996 was comprised of 52 weeks while fiscal 1995 had
53 weeks. For the comparable 52 week period, sales increased 9.3%. Comparable
store sales (sales at stores that were in operation for both periods) increased
by 1.6% during fiscal 1996 as compared to fiscal 1995 on a 52 week basis. The
increase in reported net sales for fiscal 1996 was a result of the comparable
store increase of 1.6%, plus sales from new stores offset by the effect of
closed stores and the effect of the fifty third week of fiscal 1995. The Company
closed 11 stores in fiscal 1995 and 3 stores in fiscal 1996, two of which were
replaced by new stores.
   
         Gross profit increased by approximately [^] $16.5 million to $133.1
million during fiscal 1996 as compared to [^] $116.6 million for fiscal 1995.
Gross margin increased to 31.9% for fiscal 1996 from [^] 30.2% in the prior
fiscal year. The increase in margin was primarily a result of (i) a charge of
$3.6 million taken in fiscal 1995 related to store closings, (ii) a continuing
shift in the Company's sales mix towards merchandise with a higher average gross
margin [^], and (iii) a reduction of markdowns as a percentage of sales.
    
         Selling, general and administrative expenses increased by approximately
$6.8 million to $96.3 million during fiscal 1996 as compared to $89.5 million
for fiscal 1995. As a percentage of net sales, selling, general and
administrative expenses decreased to 23.0% in fiscal 1996 from 23.2% in the
prior year. The dollar increase in selling, general and administrative expenses
was related to: (i) $1.7 million of pre-opening expenses associated with the
seven new stores opened in fiscal 1996; (ii) $3.7 million in store operating
expenses primarily related to new stores including occupancy and advertising
costs and (iii) $2.3 million primarily due to the Company's continued investment
in corporate infrastructure to support the new store program partially offset by
$0.9 million primarily related to cost recoveries associated with occupancy
expense.
   
         Included in selling, general and administrative expense are bonus
payments made to the Company's executive officers under the Company's
Performance Incentive Plan. The Company's executives received an aggregate
$942,565 in bonuses in fiscal 1996, and an
    
                                       19
<PAGE>
   
aggregate $287,500 in bonus payments in fiscal 1995. Bonuses were paid to the
Company's executives in fiscal 1995 despite the Company's posting of a net loss
before taxes in such year, because the net loss was largely caused by a special
charge for closing stores, and the Company's Adjusted EBITDA (which is defined
under "Financial Highlights" in Item 6 above) in such year was $30,716,000.
    
         Depreciation and amortization for fiscal 1996 decreased by
approximately $0.3 million to $11.8 million as compared to $12.1 million for the
prior fiscal year. The reduction in depreciation and amortization is
attributable to the closing of 11 stores in fiscal 1995, the effect of a $4.95
million asset impairment charge recorded in fiscal 1995, along with a reduction
in amortization expense resulting from the refinancing of debt associated with
the debt offering. See Note 3 to the Consolidated Financial Statements. This was
partially offset by additional depreciation associated with capital expenditures
in fiscal 1996 related to the opening of the seven new stores and renovations of
the Company's existing store base.

         Operating income increased by $21.7 million to $25.0 million for fiscal
1996 as compared to $3.3 million for fiscal 1995. Before the charges for store
closings and impairment of assets in fiscal 1995, operating income increased by
approximately $6.4 million to $25.0 million for fiscal 1996 from $18.6 million
for fiscal 1995. As a percentage of net sales, operating income before the
charges for store closings and impairment of assets increased to 6.0% from 4.8%.
The increase in operating income, before the charge for store closings and
impairment of assets, is primarily a result of new store contribution.

         Interest expense decreased by $4.8 million to $13.4 million for fiscal
1996 as compared to $18.2 million for fiscal 1995. The reduction in net interest
expense primarily resulted from the Company's reduction of approximately $30.0
million of senior notes and a reduction of the average interest rate paid on the
senior notes by approximately 60 basis points, partially offset by interest
expense incurred on borrowings under the revolving line of credit. In May 1996,
the Company redeemed its 10-1/2% Senior Secured Notes and 13-3/4% Senior
Subordinated Notes totaling $130.0 million face value and issued $100.0 million
face value of 11-7/8% Senior Notes (the "Redemption"). Additionally, the
reduction in net interest expense resulted from an increase in interest income
earned on invested cash and $0.6 million interest capitalized on fixed asset
additions. As a result of the Redemption, the Company incurred approximately
$4.7 million in extraordinary losses on the early extinguishment of debt and
$2.0 million in losses from the write-off of related deferred financing costs
associated with such indebtedness.

         In fiscal 1996, the Company utilized approximately $5.0 million of tax
net operating losses. See Note 2 of the Consolidated Financial Statements.

Quarterly Results and Seasonality
   
         While the Company's net sales do not show significant seasonal
variation, the Company's operating income has traditionally been significantly
higher in its first and third fiscal quarters. The Company believes that its
merchandise is purchased primarily by women who are buying for their own
wardrobes rather than as gifts. As a result, the Company does not experience
increases in net sales during the Christmas shopping season. Results of
operations during the second and fourth quarters are traditionally impacted by
end of season clearance events. In addition, fourth quarter results of
operations can be affected by employee performance bonuses, because
    

                                       20
<PAGE>
   
although bonuses are accrued throughout the fiscal year and are estimated on a
quarterly basis, bonus amounts are not definitively known until year-end goals
are achieved.
    
         The following table sets forth certain unaudited operating data for the
Company's eight fiscal quarters ended January 31, 1998. The unaudited quarterly
information includes all normal recurring adjustments which management considers
necessary for a fair presentation of the information shown.

                                       21
<PAGE>
<TABLE>
<CAPTION>
                                                 Fiscal 1996                                        Fiscal 1997
                               -----------------------------------------------------------------------------------------------------
                                 First       Second       Third        Fourth       First       Second       Third        Fourth
                                Quarter     Quarter      Quarter      Quarter      Quarter      Quarter     Quarter      Quarter
                                                             (In thousands, except per share data)
                                                                                    Unaudited
Statement of operations data
<S>                            <C>         <C>         <C>          <C>          <C>          <C>          <C>         <C>         
Net sales .....................$   104,120 $    90,652 $    114,393 $    108,593 $    112,595 $     95,292 $   126,495 $    108,928
Gross profit ..................     33,734      28,100       37,349       33,938       35,106       25,621      40,465       24,570
Selling, general and 
   administrative expenses (1).     23,885      20,802       25,528       26,078       28,868       24,393      30,053       28,056
Depreciation and amortization..      3,148       2,899        2,845        2,956        2,864        2,668       2,946        2,955
Non-recurring charge...........          -           -            -            -            -            -           -        5,660
Operating income (loss) .......      6,702       4,399        8,976        4,903        3,374       (1,440)      7,466      (12,101)
Interest expense ..............      4,231       3,759        2,698        2,673        2,972        3,140       3,278        3,455
Income (loss) before                                                                                           
   extraordinary item .........      2,421         630        6,274        2,228          380       (4,587)      4,122      (15,587)
Extraordinary loss for early
   retirement of debt .........          -       7,101            -            -            -            -           -            -
Net income (loss) .............$     1,835 $   (11,553)$      6,274 $      2,228 $        380 $     (4,587)$     4,122 $    (15,587)
Basic earnings (loss) per share   
   before extraordinary item...$      0.35 $     (0.51)$       0.71 $       0.25 $       0.04 $      (0.51)$      0.46 $      (1.73)
Basic earnings (loss) per share   
   after extraordinary item....$      0.35 $     (1.33)$       0.71 $       0.25 $       0.04 $      (0.51)$      0.46 $      (1.73)
Diluted earnings (loss) per 
   share before extraordinary 
   item........................$      0.31 $     (0.51)$       0.66 $       0.23 $       0.04 $      (0.51)$      0.45 $      (1.73)
Diluted earnings (loss) per 
   share after extraordinary 
   item........................$      0.31 $     (1.33)$       0.66 $       0.23 $       0.04 $      (0.51)$      0.45 $      (1.73)

-----------------
(1)      Reflects income of $0.5 million of occupancy-related cost recovery 
         items in the fourth quarter of fiscal 1996.
</TABLE>

Liquidity and Capital Resources
   
         Historically, the Company has used cash to service its indebtedness and
to fund capital expenditures. The Company's primary sources of liquidity are
cash generated from operations and borrowings under its revolving credit
facility (the "Credit Facility").
    
   
         Net cash used in operating activities totaled $7.5 million for fiscal
1997 of which $9.2 million was for an increase in inventory related primarily to
the opening of seven new stores and the expansion of eight comparable stores
during the year. These new and expanded stores carry a larger selection of
women's apparel. Such stores carry approximately double the store inventory
carried by the average Loehmann's store, and also require increased reserve
inventory levels. In addition, the merchandise inventory at January 31, 1998
included inventory at 10 stores which were planned to be closed by March 1998.
Net cash used in investing activities was $16.7 million in fiscal 1997,
principally related to the new store and expansion store activity during the
year. Net cash used for operating and investing activities was financed
primarily by the increase in borrowings of $23.6 million under the [^] Credit
Facility.
    
   
         The Company's outstanding long-term indebtedness as at January 31,
1998, February 1, 1997, and February 3, 1996, was $131.36 million, $107.85
million, and $131.733 million, respectively. Interest expense decreased by $0.5
million, to $12.8 million, for fiscal
    

                                       22
<PAGE>
   
1997, as compared to $13.4 million for fiscal 1996. The reduction in net
interest expense primarily resulted from the effect of the Company's reduction
of approximately $30.0 million of indebtedness following the Company's initial
public offering in May 1996 and an approximate 60 basis point reduction, on May
7, 1996, of the average interest rate paid on the long term debt, partially
offset by interest expense incurred on borrowings under the Credit Facility.
    
   
         On May 10, 1996 the Company sold 3,572,000 shares of Common Stock and
$100.0 million principal amount of the Notes in public offerings. The net
proceeds received from such offerings were used to (i) redeem in full $54.1
million of the Company's 10-1/2% Senior Secured Notes, at a redemption price of
103.5%, (ii) redeem in full $77.55 million of the Company's 13-3/4% Senior
Subordinated Notes at a redemption price of 101.0%, and (iii) redeem all issued
and outstanding shares of the Company's Series A Preferred Stock at its
liquidation price of $0.56 per share. In addition, in fiscal 1997, the Company
made principal payments of $70,000 on its long-term indebtedness.
    
   
         In February 1998, the Company amended [^] the Credit Facility to
provide for: (i) the elimination of all financial covenants [^], (ii) an
increase in the Credit Facility to $50.0 million, and (iii) an extension of the
term of the Credit Facility to June 2001. [^] At January 31, 1998, outstanding
borrowings under the Credit Facility were approximately $33.8 million. See Note
4 of the Consolidated Financial Statements.
    
   
         In fiscal 1998, the Company's material commitments will include
servicing its indebtedness (primarily interest on the Credit Facility and the
Notes) and capital expenditures. Because indebtedness under the Credit Facility
bears interest at floating rates based on LIBOR, the Company's debt service
costs in fiscal 1998 will fluctuate. However, assuming that interest rates
remain constant, the Company expects that: (i) its total debt service costs in
fiscal 1998 will be somewhat greater than the $12.8 million in fiscal 1997 due
to the Company's increased debt levels, and (ii) the amount of principal
reduction in fiscal 1998 will remain approximately $70,000. The Company has
reduced its capital expenditure requirements for fiscal 1998 to $9.0 million by
decreasing its new store and comparable store expansion program, and has put
special emphasis toward inventory management in order to maintain control over
markdown requirements during fiscal 1998. Although no assurances can be given,
the Company anticipates that these programs will improve the Company's cash
flow. The Company believes that cash generated from operations together with
funds available under the Credit Facility will be sufficient to satisfy its cash
requirements in fiscal 1998. [^] Although the Company fully anticipates that it
will be able to continue meeting its obligations as they come due beyond fiscal
1998, the Company's ability to do so will depend on its ability to successfully
implement its business plans, general economic and business conditions, and the
other factors noted in "Special Note Regarding Forward Looking Statements."
    

Year 2000

         The Company presently believes that the year 2000 issue will not pose
significant operational problems for its computer systems. The Company has
outside service contracts to maintain its computer software programs and expects
that all modifications and conversions will be completed on a timely basis. The
total dollar amount that the company estimates will be spent

                                       23
<PAGE>

to address its year 2000 issues is not expected to have a material financial
impact. However, if such modifications and conversions are not made, or are not
completed in a timely manner, the year 2000 issue could have a material adverse
impact upon Company operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.

                                       24
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Auditors

The Board of Directors and Stockholders
Loehmann's, Inc.
   
         We have audited the accompanying consolidated balance sheets of
Loehmann's Inc. as of January 31, 1998[^] and February 1, 1997, and the related
consolidated statements of operations, changes in common stockholders' equity
(deficit) and cash flows for the fiscal years ended January 31, 1998, February
1, 1997[^] and February 3, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
    
         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
   
         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Loehmann's Inc. at January 31, 1998 and February 1, 1997, and the consolidated
results of its operations and cash flows for the fiscal years ended January 31,
1998, February 1, 1997[^] and February 3, 1996 in conformity with generally
accepted accounting principles.
    

ERNST & YOUNG LLP

New York, New York
March 6, 1998
--------------------------------------------------------------------------------

                                       25
<PAGE>

Consolidated Balance Sheets
Loehmann's, Inc.
<TABLE>
<CAPTION>
                                                                           January 31,         February 1,
                                                                              1998                1997
                                                                      -------------------- -------------------
                                                                           (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                                   <C>                  <C>       
Assets
Current Assets:
         Cash and cash equivalents...................................          $    1,767          $    2,292
         Accounts receivable and other assets........................               5,575               4,400
         Merchandise inventory.......................................              67,521              58,304

Total current assets.................................................              74,863              64,996

Property, equipment and leaseholds, net..............................              71,612              66,515
Deferred debt issuance costs and other assets, net...................               3,228               3,870
Purchase price in excess of net assets acquired, net.................              39,523              40,819
                                                                      -------------------- -------------------
Total assets.........................................................          $  189,226          $  176,200
                                                                      -------------------- -------------------
Liabilities and common stockholders' equity
   
Current liabilities:
         Accounts payable............................................          $   21,570          $   19,634
         Accrued expenses............................................          [^] 11,732              13,262
         Accrued interest............................................               2,496               2,530
         Customer merchandise credits................................               4,710               7,212
         Reserve for store closings..................................               7,190                  10
         Current portion of long-term debt...........................                  73                  70
    
Total current liabilities............................................              47,771              42,718

Long-term debt:
         Revolving line of credit....................................              33,771              10,188
         117/8% senior notes.........................................              95,000              95,000
         Revenue bonds and notes.....................................               2,589               2,662

Total long-term debt.................................................             131,360             107,850
Other noncurrent liabilities.........................................                 389                 389
Common stockholders' equity:
         Common stock, 25,000,000 shares authorized; 8,976,932
           and 8,756,739 shares issued and outstanding at
           January 31, 1998, and February 1, 1997, respectively......                  89                  87

         Class B convertible common stock, 469,237 shares
           authorized, 48,431 and 142,277 at January 31, 1998,
           and February 1, 1997, respectively........................                 244                 713
         Additional paid-in capital..................................              81,597              80,995
         Accumulated deficit.........................................             (72,224)            (56,552)


                                                                     
Total common stockholders' equity....................................               9,706              25,243
                                                                      -------------------- -------------------
Total liabilities and common stockholders' equity....................          $  189,226          $  176,200
                                                                      ==================== ===================
-------------
The accompanying notes are an integral part of these consolidated financial 
statements.  
</TABLE>

                                       26
<PAGE>

Consolidated Statements of Operations
Loehmann's, Inc.
<TABLE>
<CAPTION>
   
                                                                                       Fiscal year ended
                                                                      --------------------------------------------------
                                                                        January 31,      February 1,      February 3,
                                                                           1998             1997             1996    
                                                                      ---------------- ---------------- ----------------
                                                                            (in thousands, except per share data)
<S>                                                                   <C>              <C>              <C>            
Net Sales............................................................ $       443,310  $       417,758  $       386,090
Cost of sales........................................................         317,548          284,637      [^] 269,489

Gross profit.........................................................         125,762          133,121      [^] 116,601
Selling, general and administrative expenses.........................         111,370           96,293           89,485
Depreciation and amortization........................................          11,433           11,848           12,120
Charge for store closings and impairment assets......................           5,660               --           15,300

Operating income.....................................................          (2,701)          24,980            3,296
Interest expense, net................................................          12,845           13,361           18,153

Income (loss) before income taxes....................................         (15,546)          11,619          (14,857)
Provision for income taxes...........................................             126               66              106

Income (loss) before extraordinary item..............................         (15,672)          11,553          (14,963)
Extraordinary loss on early extinguishment of debt (net of tax)......              --            7,101               --

Net income (loss)....................................................         (15,672)           4,452          (14,963)
Stock dividends on and normal and accelerated accretion of
preferred stock......................................................              --            5,668            2,056

Net loss applicable to common stock.................................. $       (15,672) $        (1,216) $       (17,019)

Earnings per share:
Basic (loss) earnings per share before extraordinary item............ $         (1.75) $          0.74  $         (3.12)
Extraordinary Item................................................... $            --  $         (0.89) $            --
                                                                      ---------------- ---------------- ----------------
Basic (loss) per share after extraordinary item...................... $         (1.75) $         (0.15) $         (3.12)
                                                                      ================ ================ ================
Diluted (loss) earnings per share before extraordinary item.......... $         (1.75) $          0.69  $         (3.12)
Extraordinary Item................................................... $            --  $         (0.83) $            --
                                                                      ---------------  ---------------  ---------------
Diluted (loss) per share after extraordinary item.................... $         (1.75) $         (0.14) $         (3.12)
                                                                      ===============  ===============  ===============

Weighted average number of common shares outstanding.................           8,961            7,901            5,463

Weighted average number of common shares and common share             
equivalents outstanding..............................................           8,961            8,529            5,463
                                                                      ---------------  ---------------  ---------------
-------------
The accompanying notes are an integral part of these consolidated financial 
statements.  
    
</TABLE>

                                       27
<PAGE>

Consolidated Statements of Changes in Common Stockholders' Equity (Deficit)
Loehmann's, Inc.
<TABLE>
<CAPTION>
   
                                                                         Class B              
                                            Common Stock               Common Stock           
                                     ------------------------------------------------------  Additional
                                         Number                     Number                    Paid-in     Accumulated
(In thousands, except share amounts)   of Shares      Amount      of Shares       Amount      Capital       Deficit       Totals 
                                     -------------- ----------- -------------- ----------- ------------- ------------- -------------
<S>                                  <C>            <C>         <C>            <C>         <C>           <C>           <C>         
Balances as of January 28, 1995......    4,704,089  $       47       469,237   $    2,352  $     23,636  $   (38,317)  $   (12,282)
Stock options earned.................           --          --            --           --           199           --           199
Exercise of stock options............       21,331          --            --           --            22           --            22
Net loss for the fiscal year 
   ended February 3, 1996............           --          --            --           --            --      (14,963)      (14,963)
Dividend on and accretion of 
   preferred stock...................           --          --            --           --            --       (2,056)       (2,056)

Balances as of February 3, 1996......    4,725,420          47       469,237        2,352        23,857      (55,336)      (29,080)
Issuance of common stock.............    3,572,000          36            --           --        55,343           --        55,379
Exercise of stock options............      132,359           1            --           --           159           --           160
Conversion of Class B common stock...      326,960           3      (326,960)      (1,639)        1,636           --            --
Net income for the fiscal year 
   ended February 1, 1997............           --          --            --           --            --        4,452         4,452
Dividend on and accretion of 
   preferred stock...................           --          --            --           --            --       (5,668)       (5,668)
Balances as of February 1, 1997......    8,756,739          87       142,277          713        80,995      (56,552)       25,243
Exercise of stock options............      126,347           1            --           --           134           --           135
Conversion of Class B common stock...       93,846           1       (93,846)        (469)          468           --            --

Net loss for the fiscal year ended 
   January 31, 1998..................           --          --            --           --            --      (15,672)      (15,672)
                                     -------------- ----------- -------------- ----------- ------------- ------------- -------------

Balances as of January 31, 1998          8,976,932  $       89        48,431   $      244  $     81,597  $   (72,224)  $     9,706

-------------
The accompanying notes are an integral part of these consolidated financial 
statements.  
    
</TABLE>

                                       28
<PAGE>

Consolidated Statements of Cash Flows
Loehmann's, Inc.
<TABLE>
<CAPTION>
   
                                                                                           Fiscal year ended
                                                                          --------------------------------------------------
                                                                            January 31,      February 1,      February 3,
                                                                               1998             1997             1996    
                                                                          ---------------  ---------------- ----------------
                                                                                             (in thousands)
<S>                                                                       <C>              <C>              <C>              
Cash flows from operating activities
Net income (loss)........................................................ $       (15,672) $          4,452 $        (14,963)
Adjustments to reconcile net income (loss) to net cash provided by 
  operating activities:
                  Depreciation and amortization..........................          11,433            11,848           12,120
                  Accretion of 10 1/2% senior secured notes..............              --               510            1,328
                  Charges for [^] impairment of assets [^] related to
                  store closings.........................................           2,110                --           10,538
                  Loss on early retirement of 10 1/2% senior secured
                  notes and
                           13 3/4% senior subordinated notes.............              --             7,101               --
                  Changes in assets and liabilities:
                           Accounts receivable and other assets..........          (1,175)           (2,678)             678
                           Merchandise inventory.........................          (9,217)          (14,583)             417
                           Accounts payable..............................           1,936            (1,840)            (276)
                           Accrued expenses..............................       [^](1,530)            3,060             (985)
                           Customer merchandise credits..................          (2,502)            1,150              537
                           Reserve for store closings....................           7,180              (435)             445
                           Accrued interest..............................             (34)           (4,507)             250
                                                                          ---------------  ---------------- ----------------
Net change in current assets and liabilities.............................       [^](5,342)          (19,833)           1,066
Net change in other noncurrent assets and liabilities....................             (15)              549             (627)

Total adjustments........................................................           8,186               175           24,425
                                                                          ---------------  ---------------- ----------------
Net cash (used in) provided by operations                                          (7,486)            4,627            9,462

Cash flows from investing activities
Capital expenditures.....................................................         (16,687)          (16,037)          (8,130)
Net cash used in investing activities....................................         (16,687)          (16,037)          (8,130)

Cash flows from financing activities
Borrowings on revolving credit facilities................................          23,583            10,188               --
Redemption of 10 1/2% senior secured notes...............................                           (55,905)          (1,584)
Redemption of 13 3/4% senior subordinated notes..........................                           (78,325)              --
Redemption of 117/8% senior notes........................................                            (5,165)              --
Sale of 117/8% senior notes, net of issuance costs.......................                            95,863               --
Redemption of Series A Preferred Stock...................................                           (20,947)              --
Sale of common stock.....................................................             135            55,379               --
Other financing activities, net..........................................             (70)              102              (58)
                                                                          ---------------  ---------------- ----------------
Net cash provided by (used in) financing activities......................          23,648             1,190           (1,642)
                                                                          ---------------  ---------------- ----------------
Net (decrease) increase in cash and cash equivalents.....................            (525)          (10,220)            (310)
Cash and cash equivalents at beginning of period......................... $         2,292  $         12,512 $         12,822

Cash and cash equivalents at end of period............................... $         1,767  $          2,292 $         12,512
                                                                          ---------------  ---------------- ----------------
    
</TABLE>

                                       29
<PAGE>
<TABLE>
<CAPTION>
   
Supplemental disclosure of cash flow information
<S>                                                                       <C>              <C>              <C>             
Cash paid during the fiscal year for interest............................ $        13,212  $         18,807 $         16,845
Cash paid during the fiscal year for income taxes........................ $           233  $            218 $            103
                                                                          ---------------  ---------------- ----------------
-------------
The accompanying notes are an integral part of these consolidated financial 
statements.  
    
</TABLE>

                                       30
<PAGE>

Notes to Consolidated Financial Statements
Loehmann's, Inc.

1.  Summary of Significant Accounting Policies

Organization

         Effective May 7, 1996, the Company effected a reincorporation from
Maryland, to Delaware by Loehmann's Holdings, Inc. ("Holdings"), the Company's
predecessor, merging into the Company (the "Merger"). As a result of the Merger,
each share of Holdings common stock and Class B common stock was converted into
approximately 0.22 shares of the Company's common and Class B common and the
authorized number of common was changed to 25,000,000. Accordingly, the
financial information appearing herein (including all share and per share data)
reflects the retroactive application of the Merger.

Basis of Presentation

         The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany items
have been eliminated.

Fiscal Year

         The Company follows the standard fiscal year of the retail industry
which is a 52 or 53 week period ending on Saturday closest to January 31. Fiscal
years ended January 31, 1998, February 1, 1997 and February 3, 1996 had 52
weeks, 52 weeks and 53 weeks, respectively.

Use of Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

Cash and Cash Equivalents

         The Company considers all highly liquid marketable securities purchased
with an original maturity of three months or less to be cash and cash
equivalents.

Merchandise Inventory

         Merchandise inventory is valued at the lower of cost or market as
determined by the retail inventory method. However, certain warehoused inventory
that is not available for sale is valued on a specific cost basis. The
merchandise inventory valued on a specific cost basis at January 31, 1998 and
February 1, 1997 was $20.1 million and $11.9 million, respectively.

                                       31
<PAGE>
   
Revenue Recognition
    
   
         The Company records revenue at the point of sale to its customers at
its retail stores.
    

Advertising Expense

         The cost of advertising is expensed as incurred. Advertising costs were
$15.4 million, $14.8 million and $13.0 million during fiscal years 1997, 1996
and 1995, respectively.

Depreciation and Amortization

         Building and furniture, fixtures and equipment are depreciated on a
straight-line basis over their estimated useful lives. Leasehold interests
represent the beneficial value of operating leases as determined by an
independent appraisal of the individual leases at the date such leases were
acquired by the Company and such amounts are amortized on a straight-line basis
over the related lease term.

         Leasehold improvements are amortized on a straight-line basis over the
shorter of the related lease terms or their useful life.

Pre-opening Costs
   
         [^] The Company's costs incurred in connection with the opening of new
stores are expensed in the fiscal quarter in which the store opens. Due to the
nature of the Company's store openings, the majority of such expenditures are
made within the quarter the store opens. As a result, the Company believes that
Statement of Position ("SOP") 98-5 will have no material impact on the timing of
expense recognition. In fiscal 1997 and 1996 the Company incurred $1.3 million
and $1.7 million respectively in pre-opening costs. No pre-opening costs were
incurred in fiscal 1995.
    

Purchase Price in Excess of Net Assets Acquired, Net

         The purchase price in excess of identifiable net assets acquired is
being amortized on a straight-line basis over 40 years. Amortization for fiscal
years 1997, 1996 and 1995 amounted to $1.3 million annually. Accumulated
amortization at January 31, 1998 and February 1, 1997 was $12.2 million and
$10.9 million, respectively.

Class B Common Stock

         Each share of Class B Common Stock is convertible into one share of
Common Stock, subject to adjustment at any time. During fiscal 1997,
approximately 93,846 shares of Class B Common Stock were converted. The
Company's various credit agreements prohibit or restrict any such repurchase.

                                       32
<PAGE>

Capitalized Interest

         Interest on borrowed funds is capitalized during construction of
property and is amortized on a straightline basis over the depreciable lives of
the related assets. Interest of $397,000 and $640,000 was capitalized during
fiscal 1997 and fiscal 1996, respectively. Interest capitalized during fiscal
1995 was not material.

Deferred Debt Issuance Costs

         Deferred debt issuance costs are amortized over the terms of the
related debt agreements. Deferred debt issuance costs were $4.2 million at
January 31, 1998 and $4.1 million at February 1, 1997. Amortization expenses for
fiscal years 1997, 1996, and 1995 amounted to $0.6 million, $0.8 million and
$1.2 million, respectively. Total accumulated amortization at January 31, 1998
and February 1, 1997 amounted to $1.1 million and $0.5 million respectively.

Income Taxes

         Income taxes are provided using the liability method.

Net Loss Per Share of Common Stock

         Basic EPS is determined by dividing net income/loss (after deducting
dividends on and accretion of preferred stock) by the weighted average number of
Common and Class B Common shares outstanding during the period. Diluted EPS is
determined by dividing net income/loss (after deducting dividends on and
accretion of preferred stock) by the weighted average number of Common and Class
B Common shares and common stock equivalents outstanding during the period.
Outstanding options to purchase Common Stock were not considered in the
calculation of Diluted EPS for fiscal 1997 and fiscal 1995, as their effects
were antidilutive.

         In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements (see Note 6). The adoption of Financial Accounting Standards Board
Statement No. 128 did not have a material adverse effect upon the Company's
financial statements.
   
Other Comments
    
   
         Certain items in fiscal 1995 have been reclassified to present them on
a basis consistent with fiscal 1997.
    

2.  Income Taxes

                                       33
<PAGE>

         The Company's provision for income taxes primarily represents state and
local minimum and alternative minimum taxes.

         Significant components of deferred tax liabilities and assets are as
follows:

<TABLE>
<CAPTION>
                                                                    January 31,        February 1,
                                                                       1998               1997
                                                                 -----------------  -----------------
                                                                            (In thousands)
<S>                                                              <C>                <C>              
Deferred tax assets:
         Net operating loss carryforwards .....................  $          12,251  $           8,146
         Excess book depreciation and amortization ............              4,365              6,037
         Store closing reserve.................................              3,643                  4
         Compensation .........................................                 --                925
         Capitalization of inventory expenses .................                711                617
         Other, net ...........................................                996                429
Total deferred tax assets .....................................             21,966             16,158
Deferred tax liabilities ......................................               (269)              (205)
Net deferred tax assets .......................................             21,696             15,953
Less valuation allowance ......................................            (21,696)           (15,953)
                                                                 $              --  $              --
                                                                 -----------------  -----------------
</TABLE>

Following is a reconciliation of the statutory Federal income tax rate and the
effective income tax rate application to earnings before income taxes:

<TABLE>
<CAPTION>

                                                               January 31,         February 1,         February 3,
                                                                  1998                1997                1996
                                                           -------------------  ------------------  ------------------
<S>                                                        <C>                  <C>                 <C>  
Statutory tax rate ......................................                35.0%               35.0%               35.0%
Tax effect of extraordinary item ........................                  --               (21.4)                 --
Utilization of net operating loss carry forward .........                  --               (17.8)%                --
Valuation allowance adjustment ..........................               (32.4)                --                (31.9)
Goodwill ................................................                (3.0)                3.9                (3.2)
Other, net...............................................                (0.4)                0.9                (0.6)
Effective tax rate ......................................                (0.8)%               0.6%               (0.7)%
</TABLE>
   
         At January 31, 1998, the Company had net operating loss carryforwards
of approximately $31.3 million and $24.5 million for regular and alternative
minimum tax purposes, respectively. Net operating losses [^] expire in [^] the
years 2003 through 2012.
    

3.  Equity and Debt Offering

         On May 10, 1996, the Company sold 3,572,000 shares of Common Stock and
$100.0 million principal amount of 11-7/8% Senior Notes due 2003 (the "Senior
Notes"). The net proceeds received from such offerings (the "Offerings") were
used (i) to redeem in full the Company's 10-1/2% Senior Secured Notes, at a
redemption price of 103.5%, (ii) to redeem

                                       34
<PAGE>

in full the Company's 13-3/4% Senior Subordinated Notes at a redemption price of
101.0%, and (iii) to redeem all issued and outstanding shares of the Company's
Series A Preferred Stock at its liquidation price of $0.56 per share
(collectively, the "Existing Obligations").

         As a result of these transactions, the Company incurred approximately
$4.7 million in extraordinary losses on the early extinguishment of debt and
$2.0 million in losses from the write-off of related deferred financing costs
associated with such indebtedness, and a $5.1 million charge to accumulated
deficit from the accelerated accretion of the Series A Preferred Stock to its
liquidation price of $0.56 per share.

4.  Long-term Debt

         The Company's long-term debt consists of:

<TABLE>
<CAPTION>
                                                                    January 31,        February 1,
                                                                       1998               1997
                                                                 -----------------  -----------------
                                                                            (In thousands)
<S>                                                              <C>                <C>              
Revolving line of Credit(a) ...................................          $  33,771          $  10,188
117/8 senior notes, due 2003(b)................................             95,000             95,000
9 1/2% New York City Industrial Development
  Agency revenue bonds, due 2004...............................              2,250              2,250
5 1/2% City of New York note due in varying
  installments to 2004.........................................                412                482
                                                                 -----------------  -----------------
                                                                           131,433            107,920
Less current maturities........................................                 73                 70
                                                                 -----------------  -----------------
Long-term debt.................................................           $131,360           $107,850
                                                                 -----------------  -----------------
</TABLE>

---------------
(a)      In February 1998, the Company amended its credit agreement with its
         bank (the "Credit Facility") to provide for: (i) the elimination of all
         financial covenants under the Credit Facility, (ii) an extension of the
         term of the Credit Facility to June 2001, and (iii) an increase in the
         Credit Facility to $50.0 million with interest at either the Bank's
         prime rate plus 0.75%, or LIBOR plus 2.2% at the Company's option. The
         Credit Facility is subject to certain borrowing base limitations, and
         imposes certain other limitations on the Company. The Credit Facility
         is secured by substantially all of the Company's assets and is not
         subject to scheduled repayments, except upon maturity. At January 31,
         1998, the Company's outstanding amounts under letters of credit were
         $1,719,563.

(b)      Interest is payable semiannually on May 15 and November 15 in each
         year. The Company is entitled to redeem the Notes commencing May 15,
         2000 at redemption prices of 105.938%, 102.969% and 100% of the
         principal amount during 2000, 2001 and 2002, respectively.

                  The Senior Notes Indenture contains certain covenants that,
                  among other things, limit the ability of the Company to incur
                  additional indebtedness,

                                       35
<PAGE>

                  transfer or sell assets, pay dividends or make certain other
                  restricted payments, incur liens, enter into certain
                  transactions with affiliates or consummate certain mergers,
                  consolidations or sales of all or substantially all of its
                  assets. In addition, subject to certain conditions, the
                  Company is obligated to make offers to repurchase the Senior
                  Notes with the net proceeds of certain asset sales. These
                  covenants are subject to certain exceptions and
                  qualifications.

                  Based on a quoted market price of 104.4%, the fair value of
                  the 11 7/8 senior notes outstanding at January 31, 1998
                  approximated $99.1 million.

                  During the second quarter of 1996, the Company purchased and
                  retired $5.0 million face amount of the 117/8% senior notes on
                  the open market incurring an extraordinary loss of
                  approximately $365,000 in connection with this purchase.

5.  Property, Equipment and Leaseholds, Net

         Property, equipment and leaseholds are recorded at cost less
accumulated depreciation and amortization. The components of property, equipment
and leaseholds are as follows:
<TABLE>
<CAPTION>
   
                                                             Useful         January 31,        February 1,
                                                              Lives             1998              1997
                                                         --------------  ------------------  ----------------
                                                           (In years)           (In thousands)
<S>                                                      <C>             <C>                 <C>     
Building ...............................................        20                 $  7,879          $  7,879
Furniture, fixtures and equipment ......................       3-8                   44,246            35,835
Leasehold interests(a)..................................      5-29                   45,853            51,781
Leasehold improvements .................................      5-29                   33,332            28,675
Total property, equipment and leaseholds................                            131,010           124,170
Accumulated depreciation and amortization...............                            (59,698)          (57,655)
Property, equipment and leaseholds, net.................                           $ 71,612          $ 66,515
    
</TABLE>
   
(a)      "Leasehold interests" represent the allocation to the Company's leases
         of the excess of the purchase price of the assets acquired in the
         leveraged buy-out that took place in 1988 over the net book value of
         such assets.
    

                                       36
<PAGE>

6.  Earnings Per Share

         The following table sets forth the computation of basic and diluted
(loss) earnings per share:

<TABLE>
<CAPTION>
   
                                                               Fiscal 1997      Fiscal 1996      Fiscal 1995
                                                             ---------------- ---------------- ----------------
<S>                                                          <C>              <C>              <C>            
Numerator
Net operating (loss) income................................. $       (15,672) $         11,553 $      (14,963)
Preferred stock dividends on and normal and
         accelerated accretion..............................               --            5,668           2,056
Numerator for basic and diluted (loss) earnings
         per share before extraordinary item................         (15,672)            5,885        (17,019)
Extraordinary item..........................................               --            7,101              --
Numerator for basic and diluted (loss) per share
         after extraordinary item...........................         (15,672)          (1,216)        (17,019)

Denominator
Denominator for basic (loss) earnings per share
         -- weighted average shares.........................            8,961            7,901           5,463
Effect of dilutive securities:
         Employee stock options.............................               --              628              --
         Dilutive potential common shares...................               --              628              --
Denominator for diluted (loss) earnings per
         share -- adjusted weighted average shares
         and assumed conversions............................ $          8,961 $          8,529 $         5,463
Basic (loss) earnings per share before
         extraordinary item................................. $         (1.75) $           0.74 $        (3.12)
Extraordinary Item.......................................... $             -- $         (0.89) $            --

Basic (loss) per share after extraordinary item............. $         (1.75) $         (0.15) $        (3.12)
Diluted (loss) earnings per share before
         extraordinary item................................. $         (1.75) $           0.69 $        (3.12)
Extraordinary Item.......................................... $             -- $         (0.83) $            --

Diluted (loss) per share after extraordinary item........... $         (1.75) $         (0.14) $        (3.12)
    
</TABLE>

7.  Stock Option Plans

         On September 30, 1988, the Company adopted the Loehmann's Holdings,
Inc. 1988 Stock Option Plan, as amended on April 2, 1992, pursuant to which a
committee appointed by the Board of Directors is authorized to grant options to
purchase up to 1,077,010 shares of Common Stock to key employees and directors.
On May 7, 1996, the Company adopted the Loehmann's, Inc. New Stock Incentive
Plan (the "New Stock Option Plan") as amended on June 19, 1997. A maximum of
646,892 shares of Common Stock may be delivered by the Company pursuant to
options or other awards authorized by a committee appointed by the Board of
Directors. On June 19, 1997, the Company adopted the Loehmann's, Inc. Director's
Stock Option Plan. A maximum of 250,000 shares of Common Stock may be delivered
by the Company pursuant to options or other awards authorized by a committee
appointed by the Board of Directors.

                                       37
<PAGE>

         The following information pertains to the Company's stock option plans:

<TABLE>
<CAPTION>
   
                                           January 31,                 February 1,                  February 3,
                                              1998                        1997                         1996
                                   --------------------------- ---------------------------- ---------------------------
                                                   Weighted                    Weighted                     Weighted
                                                    Average                     Average                      Average
                                                   Exercise                    Exercise                     Exercise
                                      Shares         Price        Shares         Price         Shares         Price 
                                   ------------ -------------- ------------ --------------- ------------ --------------
                                          (in thousands)              (in thousands)               (in thousands)
<S>                                <C>          <C>            <C>          <C>             <C>          <C>   
Outstanding options,                                                                     
  beginning of year ..............         875         $ 7.00          729          $ 2.77          604         $ 1.37
Granted ..........................         147           8.58          324           17.74          264           4.76
Canceled .........................         (38)         14.86          (46)          17.96         (120)          1.07
Exercised.........................        (126)          1.18         (132)           1.20          (19)          1.36
Outstanding options,                                                                     
  end of year ....................         858         $ 7.63          875          $ 7.00          729         $ 2.77
Options exercisable,                                                                     
  end [^] of year ................         474         $ 4.59          450          $ 3.02          432         $ 2.30
Options available for                      
  future grant  ..................         423            N/A           77             N/A           42            N/A
    
</TABLE>

         Stock options are granted to officers and key employees based upon a
price determined by the Board of Directors of the Company. Compensation expense
is recorded in the period that options are earned.

         The 858,179 options outstanding at January 31, 1998, vest over a range
of two to five years from the date of grant provided the individuals remain in
the employ of the Company. Options are exercisable at a price ranging from $1.07
to $23.13. Options issued under the 1988 Stock Option Plan generally must be
exercised within five years from the date they are earned. Options issued under
the New Stock Option Plan must be exercised prior to the tenth anniversary of
the grant date.
   
         The Company has elected to follow APB 25 and related interpretations in
accounting for stock options and accordingly has recognized no compensation
expense. Had compensation cost been determined based upon the fair value at
grant date for awards consistent with the methodology prescribed by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Company would have incurred an additional compensation cost
of $1.0 million or $0.11 per share for fiscal 1997, $0.6 million or $0.07 per
share for fiscal 1996, and $0.1 million or $0.01 per share for fiscal 199[^] 5.
    
   
         The fair value of these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following assumptions for
fiscal 1997, 1996 and 1995: risk-free interest rate of 6.3%, an expected life of
3 to 7 years and a dividend yield of zero. For fiscal 1997, 1996 and 1995,
volatility was 85.8%, 58.0% and 38.7%, respectivel[^] y.
    

                                       38
<PAGE>
   
8.  Commitments and Contingenci[^] es
    
   
         The Company is the lessee under various long-term operating leases for
store locations and equipment rentals for up to 29 years, including renewal
options. The leases typically provide for three five-year renewals that are
automatic unless the Company elects to terminate the lease. Rent expense related
to these leases amounted to $15.4 million, $10.1 million and $8.1 million for
the fiscal years ended January 31, 1998, February 1, 1997 and February 3, 1996,
respectively. Future minimum payments under noncancelable operating leases
consisted of the following at January 31, 1998:
    

                                                  (in thousands)
          1998                                     $     15,993
          1999                                           15,644
          2000                                           14,818
          2001                                           13,969
          2002                                           13,876
          Thereafter                                    154,026
                                                   ------------
          Total                                    $    228,326

9.  Charge for Store Closings

         During the fourth quarter of fiscal 1997, the Company implemented a
plan to close ten underperforming stores and, as a result, recorded a $5.7
million charge to continuing operations. These closures are intended to improve
the Company's liquidity and future operating profitability.
   
         The store closures will be materially completed by the end of March
1998. Net sales and store operating income (loss), including certain
specifically allocated charges, for these stores were $21.3 million and $(0.8)
million, respectively, in fiscal 1997, $24.9 million and $1.5 million,
respectively, in fiscal 1996 and, $26.2 million and $1.2 million, respectively,
in fiscal 1995.
    
   
         The charge for store closings consisted of write-offs of property,
plant and equipment, costs associated with net lease obligations and other
expenses of $2.1 million, $3.0 million and $0.6 million, respectively.
    
   
         During the second quarter of fiscal 1995, the Company implemented a
plan to close 11 underperforming stores and, as a result, recorded a $10.35
million charge to continuing operations. These closures were intended to improve
overall chain profitability and achieve a more competitive cost structure.
    
   
         The store closures were completed by the end of August 1995. Reserved
amounts remaining at February 3, 1996 relating to long-term lease commitments
were not material. Net sales and store operating income (loss), including
certain specifically allocated charges, for these stores were $8.2 million and
$0.1 million, respectively, in fiscal 1995.
    
   
         The charge for store closings consisted of write-offs of property,
plant and equipment, markdowns associated with store closings, costs associated
with net lease
    

                                       39
<PAGE>

obligations and other expenses of $5.5 million, $3.6 million, $0.95 million and
$0.3 million, respectively.

10.  Charge for Impairment of Assets

   
         During the second quarter of fiscal 1995, the Company completed certain
market analyses as part of its overall strategic plan. As an outcome of these
analyses, the Company shortened the period of time in which it intended to
occupy certain stores and as a consequence the undiscounted cash flows estimated
to be generated from the revised intended use was not sufficient to recover the
assets' carrying amount. Based on these indicators, the primary intangible
assets associated with these locations were determined to be impaired as defined
by Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS No. 121").
    
   
         Accordingly, the Company recorded an impairment loss of approximately
$4.95 million to continuing operations, representing the excess net book value
of these assets over their fair value. Fair value was based on appraisal value.
    
   
         The impairment charge consisted of leasehold interests, furniture,
fixtures and equipment and leasehold improvements of $4.45 million, $0.25
million and $0.25 million, respectively.
    

11.  Employee Benefit Plans

   
         In October 1996, the Company established a defined contribution
retirement savings plan (401(k)) covering all eligible employees. This plan
succeeds the previously discretionary profit sharing plan with all prior
individual account balances and vesting terms transferred to the new plan. The
plan allows participants to defer a portion of their annual compensation and
receive a matching employer contribution on a portion of that deferral. During
fiscal 1997 and fiscal 1996, the Company recorded contributions of $209,000 and
$71,000, respectively, to the 401(k) plan. The Company recorded a contribution
of $500,000 to the profit sharing plan in fiscal 1995.
    

                                       40
<PAGE>
<TABLE>
<CAPTION>
   
                                                                                              [^] [^] SCHEDULE II


                                           [^] LOEHMANN'S, INC.
                                   [^] VALUATION AND QUALIFYING ACCOUNTS
                                             [^](in thousands)

            Column A                  Column B              Column C                Column D        Column E
-----------------------------------------------------------------------------------------------------------------
                                                            Additions

                                     Balance at       Charged        Charged                        Balance at
                                     Beginning        to Cost        to Other                         end of
           Description               of Period          and          Accounts      Deductions         Period
                                                      Expense                            
-----------------------------------------------------------------------------------------------------------------
<S>                                  <C>              <C>            <C>           <C>              <C>    
     Year ended January 31,
              1998                      $10            $7,190                         $70 (a)         $7,130
   Reserve for Store Closings

     Year ended February 1,
              1997                     $445                                          $435 (a)            $10
   Reserve for Store Closings

     Year ended February 3,
              1996                       $0            $4,850                      $4,405 (a)           $445
   Reserve for Store Closings

(a) Payments for leasehold obligation expenses and other store closing expenses.
    
</TABLE>

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

         None.

                                       41
<PAGE>

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The following persons are the executive officers and directors of the
Company.


Name                           Age                Position
----                           ---                --------

Norman S. Matthews .........   65    Chairman of the Board and Director
Robert N. Friedman .........   57    Chairman, Chief Executive Officer
                                     and Director
Robert Glass................   51    President, Secretary, Chief Operating
                                     Officer and Director
Anthony D'Annibale..........   37    Senior Vice President Merchandising
Jan Heppe...................   46    Senior Vice President and Director of
                                     Stores
Dennis R. Hernreich.........   42    Vice President Finance, Chief Financial
                                     Officer, Treasurer and Assistant
                                     Secretary
Philip Kaplan (1) ..........   67    Director
Janet A. Hickey ............   53    Director
Richard E. Kroon ...........   55    Director
Christina A. Mohr ..........   42    Director
Arthur E. Reiner............   57    Director
Cynthia R. Cohen ...........   45    Director
Lorrence T. Kellar..........   60    Director

-----------
(1)      Until April 1, 1998, Mr. Kaplan was President, Secretary and Chief 
         Operating Officer of the Company.


         Set forth below are the biographies of the directors of the Company.
The term of the Class A Directors expires at the first annual meeting of the
Company's stockholders following the end of the Company's fiscal year ending
January 30, 1999. The term of the Class B Directors expires at the first annual
meeting of the Company's stockholders following the end of the Company's fiscal
year ending January 29, 2000. The term of the Class C Directors expires at the
first annual meeting of the Company's stockholders following the end of the
Company's fiscal year ending January 31, 1998.

Class A Directors

         Robert N. Friedman has been Chairman, Chief Executive Officer and a
Director of the Company since November 1995 and was President, Chief Executive
Officer and a Director of the Company from September to November 1995. Mr.
Friedman was President and Chief Executive Officer of Loehmann's Holdings, Inc.,
a predecessor of the Company

                                       42
<PAGE>

("Holdings") from April 1992 until May 1996. Prior to joining the Company, Mr.
Friedman was employed by R.H. Macy Co., Inc. for 28 years in various capacities,
including President and Vice Chairman, Merchandising, at Macy's East from
1990-1992, Chairman and C.E.O. of Macy's Bamberger Division and Chairman and
C.E.O. of Macy's South/Bullocks. He serves on the Board of Trustees of The
Fashion Institute of Technology.

         Robert Glass has been a Director of the Company since February 1998 and
has served as President, Chief Operating Officer and Secretary since April 1998.
From September 1994 to March 1998, Mr. Glass served as Senior Vice President,
Chief Financial Officer, Treasurer and Assistant Secretary of the Company. From
1992 to 1994, Mr. Glass served as a retail consultant. Prior to that time, he
held a number of senior retail management positions, including Chief Financial
Officer and later President of Gold Circle Stores, a division of Federated
Department Stores, Inc., and Executive Vice President of Thrifty Drug from 1990
to 1992.

         Philip Kaplan has been a Director of the Company since September 1988
and served as President, Chief Operating Officer and Secretary of the Company
from November 1995 to March 1998. He was Chairman and Chief Operating Officer of
the Company from September to November 1995 and served as Chairman, Chief
Operating Officer, Secretary and Treasurer from September 1988 to September
1995. Mr. Kaplan was Vice Chairman, Treasurer and a Director of Holdings from
February 1987 until May 1996. Mr. Kaplan was president of Verdi International, a
manufacturer of luggage, from 1983 to 1987, Senior Vice President of Abraham and
Strauss, a division of Federated Department Stores, Inc., from 1979 until 1983
and Executive Vice President-Chief Financial Officer of E.J. Korvette's from
1971 until 1979.

         Norman S. Matthews has been Chairman of the Board and a Director of the
Company since September 1995. Mr. Matthews served as Chairman of the Board of
Holdings from December 1993 until May 1996 and as a Director of Holdings from
October 1988 until May 1996. Mr. Matthews currently serves as a consultant to
various retailers. He was President of Federated Department Stores from March
1987 until April 1988 and served in other executive capacities with Federated
Department Stores prior to that date. He is a Director of Progressive Corp., an
insurance holding company, Lechters, Inc., a housewares chain, Finlay
Enterprises, Inc. and its subsidiary, Finlay Fine Jewelry Corporation, a jewelry
lessee in major department stores, Toys "R" Us, a children's specialty retailer,
and Eye Care Centers of America, Inc.

Class B Directors

         Lorrence T. Kellar has been a Director of the Company since September
1997. Mr. Kellar has been Vice President of Real Estate for the Kmart
Corporation since April 1996. Prior to that, Mr. Kellar had been Vice President
of Real Estate and Finance of The Kroger Co., a supermarket retailer, from 1988
to April 1996.

         Richard E. Kroon has been a Director of the Company since September
1995 and was a Director of Holdings from 1988 until May 1996. Mr. Kroon has been
Managing Partner of the Sprout Group, the venture capital affiliate of Donaldson
Lufkin & Jenrette, Inc. ("DLJ"), since 1981. Mr. Kroon is President, Director
and Chief Executive Officer of

                                       43
<PAGE>

DLJ Capital Corporation, a subsidiary of DLJ. He is a Director of Educational
Medical, Inc., the National Venture Capital Association, and several private
companies.

         Christina A. Mohr has been a Director of the Company since September
1995 and was a director of Holdings from January 1994 until May 1996. Ms. Mohr
has been Managing Director at Salomon Smith Barney (formerly Salomon Brothers,
Inc.), an investment banking firm, since February 1997. Prior to that, Ms. Mohr
had been Managing Director, Banking Group of Lazard Freres & Co. LLC, an
investment banking firm, from 1990 to February 1997. She was a Vice President,
Banking Group, from 1984 to 1990. She is a Director of United Retail Group,
Inc., a retail chain.

Class C Directors

         Cynthia R. Cohen has been a Director of the Company since September
1995 and was a Director of Holdings from January 1994 until May 1996. Since
1990, Ms. Cohen has been President of Strategic Mindshare, a retail marketing
and strategy consulting firm. Prior to that, Ms. Cohen was a partner of Touche
Ross (a predecessor of Deloitte & Touche LLP). Ms. Cohen is a Director of One
Price Clothing, Inc., an apparel retail chain, Office Depot, an office products
retailer, the Mark Group and Capital Factors, Inc., a factoring company.

         Janet A. Hickey has been a Director of the Company since September 1995
and was a Director of Holdings from 1988 until May 1996. Ms. Hickey has been
Senior Vice President and General Partner of the Sprout Group, a shareholder of
the Company and the venture capital affiliate of DLJ, and a Divisional Senior
Vice President of DLJ Capital Corporation, a subsidiary of DLJ, since June 1985.
Ms. Hickey is a director of Corporate Express, Inc. and several private
companies.

         Arthur E. Reiner has been a Director of the Company since August 1996.
Mr. Reiner has been President and Chief Executive Officer of Finlay Enterprises,
Inc. the parent of Finlay Fine Jewelry Corporation, since January 1996, Vice
Chairman of Finlay Enterprises, Inc. since January 1995 and Chairman and Chief
Executive Officer of Finlay Fine Jewelry Corporation since January 1995. Prior
to that, he was employed by R.H. Macy Co., Inc., serving as Chairman and Chief
Executive Officer of Macy's East from January 1992 to October 1994 and Chairman
and Chief Executive Officer of Macy's Northeast from April 1988 to January 1992.

         Set forth below are biographies of the executive officers of the
Company who are not also directors.

         Anthony D'Annibale has been Senior Vice President Merchandising of the
Company since 1996. From 1994 to 1996 he was Vice President of Merchandising and
from 1989 to 1994 he served in various merchandising capacities of the Company.
Prior to 1989, Mr. D'Annibale held various buying positions at Steinbach
Department Stores - a division of the Amcena Corporation.

         Jan Heppe has been Senior Vice President and Director of Stores of the
Company since September 1995. Prior to that time, she held a number of senior
retail management

                                       44
<PAGE>

positions including Senior Vice President/General Manager of the John Wanamaker
Department Store in Philadelphia, Pennsylvania from 1992 through 1995,
Divisional Vice President/ General Manager of the John Wanamaker Department
Store in Moorestown, New Jersey from 1991 to 1992 and a senior management retail
position at Henri Bendel in 1991. Prior to 1991, Ms. Heppe was General Manager
of On Course, a catalog and wholesale operation and also held various executive
positions at Gimbels, New York.

         Dennis R. Hernreich has been Vice President Finance, Chief Financial
Officer, Treasurer and Assistant Secretary of the Company since April 1998. From
June 1996 to March 1998, Mr. Hernreich served as Vice President Finance and
Controller of the Company. From 1991 to 1996 he served as Director, Executive
Vice President and Chief Financial Officer of Gibson's Discount Centers. Mr.
Hernreich's other positions have included Senior Vice President for Finance and
Administration for Associated Agencies and Chief Financial Officer for Nucorp,
Inc./Equity Group.

Section 16(a) Beneficial Ownership Reporting Compliance

         Based upon a review of Forms 3 and 4 and amendments thereto furnished
to the Company during and with respect to its most recent fiscal year and upon
written representations from persons known to the Company to be subject to
Section 16 of the Exchange Act (a "reporting person"), no one, except Lorrence
T. Kellar, Christina A. Mohr and Philip Kaplan did not file when due reports
required by Section 16(a) of the Exchange Act during the fiscal year ended
January 31, 1998. Lorrence T. Kellar filed his Form 3 late, Christina Mohr will
file her Form 5 late, and Philip Kaplan will file his Form 5 late.

                                       45
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

         The following table sets forth the compensation awarded to, earned by
or paid to the named executive officers for services rendered to the Company
during the fiscal years ended January 31, 1998, February 1, 1997 and February 3,
1996.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                          Long Term
                                                                                         Compensation
                                                                                            Awards
                                                                        Other Annual      Securities         All Other
                                   Fiscal                               Compensation      Underlying     Compensation ($)
   Name and Principal Position      Year     Salary($)     Bonus($)          ($)         Options (#)            (1)
   ---------------------------      ----     ---------     --------          ---         -----------            ---
                                               Annual Compensation
<S>                                 <C>      <C>           <C>               <C>         <C>                   <C>  
Robert N. Friedman...............   1997      575,000         --             (2)                 --            2,406
Chairman and Chief                  1996      550,000       550,000          (2)             63,614            2,750
Executive Officer                   1995      475,000       135,000          (2)            187,639            3,471

Philip Kaplan....................   1997      375,000         --             (2)                 --            2,375
President and Chief                 1996      374,400       240,000          (2)             25,170            1,875
Operating Officer                   1995      356,250       105,000          (2)             14,657            3,471

Robert Glass.....................   1997      257,500         --             (2)                 --            2,388
Senior Vice President and           1996      232,500        56,870          (2)             31,172            1,213
Chief Financial Officer             1995      211,250        17,500          (2)                 --              574

Jan Heppe(3).....................   1997      240,000         --             (2)                 --            2,400
Senior Vice President and           1996      198,875        50,000          (2)             31,172            1,125
Director of Stores                  1995       62,327        10,000          (2)                 --               --

Bonnie Dexter-Wolterstorff(4) ...   1997      186,500         --             (2)                 --            2,375
Senior Vice President,              1996      180,000        45,695          (2)             31,172              925
Merchandising                       1995      165,000        20,000          (2)                 --            3,471
</TABLE>

-----------
(1)      Consists of (i) Company contributions in fiscal 1997 under the
         Loehmann's Inc. 401(k) Savings and Investment Plan of $2,406 for Mr.
         Friedman, $2,375 for Mr. Kaplan, $2,388 for Mr. Glass, $2,400 for Ms.
         Heppe and $2,375 for Ms. Dexter; (ii) Company contributions in fiscal
         1996 under the Loehmann's 401(k) Savings and Investment Plan of $2,750
         for Mr. Friedman, $1,875 for Mr. Kaplan, $1,213 for Mr. Glass, $1,125
         for Ms. Heppe and $925 for Ms. Dexter-Wolterstorff; and (iii) Company
         contributions in fiscal 1995 under the Loehmann's, Inc. Deferred Profit
         Sharing Plan of $3,471 for each

                                       46
<PAGE>

         of Mr. Friedman, Mr. Kaplan and Ms. Dexter-Wolterstorff and 
         reimbursement of moving expenses in fiscal 1995 of $574 for Mr. Glass.

(2)      For each named executive officer, the aggregate amount of other annual
         compensation is less than the lesser of 10% of such officer's total
         salary and bonus for such year or $50,000.

(3)      Ms. Heppe became an executive officer of the Company in October 1995.

(4)      Ms. Dexter-Wolterstorff resigned from her position with the Company in
         February 1998.

         The following table sets forth information concerning the value of
unexercised options as of January 31, 1998 held by the executives named in the
Summary Compensation Table above.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
                                                            Number of Securities
                             Shares                              Underlying               Value of Unexercised
                            Acquired         Value          Unexercised Options           In-the-Money Options
                          On Exercise      Realized        at Fiscal Year End(#)         at Fiscal Year End ($)
Name                          (#)             ($)        Exercisable/Unexercisable    Exercisable/Unexercisable(1)
----                          ---             ---        -------------------------    ----------------------------
<S>                         <C>          <C>             <C>         <C>              <C>         <C>             
Robert N. Friedman                                           252,235        53,992    $   151,076            --
Philip Kaplan               118,458      $   719,514         102,716             0    $   213,096            --
Robert Glass                                                  11,170        31,174    $    18,417  $     12,284
Jan Heppe                                                      4,468        26,704             --            --
Bonnie Dexter-
Wolterstorff                                                   3,796         2,234             --            --
</TABLE>

-------------------------------------------------------
(1)      Based on a stock price at January 30, 1998 of $3 13/16.


Employment and Severance Agreements

MR. FRIEDMAN

         Mr. Friedman's employment agreement, as amended (the "Friedman
Agreement"), provides that he will serve as Chairman and Chief Executive Officer
of the Company from November 1, 1995 through January 31, 1999, for an annual
base salary of not less than $550,000 for fiscal 1996, $575,000 for fiscal 1997
and $600,000 for fiscal 1998. Mr. Friedman also is eligible to receive an annual
bonus equal to 100% of his base salary in effect for each of fiscal 1996 and
fiscal 1997 and 60% of his base salary in effect for fiscal 1998 if, for each
such fiscal year, the Company attains its targeted financial goals (as defined
by the Compensation Committee). The Friedman Agreement also provides for certain
insurance and other benefits to be maintained and paid by the Company.

                                       47
<PAGE>

         The Friedman Agreement provided for a grant to Mr. Friedman on November
1, 1995, of options to purchase up to 187,638 shares of Common Stock at an
exercise price of $5.01 per share. Of such options, 71,474 vested in fiscal
1996, 71,474 vested in fiscal 1997 and 44,690 vest automatically at the end of
fiscal 1998. In addition, on February 23, 1996, the Company granted Mr. Friedman
options to purchase up to 35,707 shares of Common Stock at an exercise price of
$8.06. One-half of such options vested automatically at the end of fiscal 1996
and the remainder vested at the end of fiscal 1997. In addition, on April 5,
1996 the Company granted Mr. Friedman options to purchase 27,907 shares of
Common Stock at an exercise price of $8.06. Of such options, 9,302 vested in
fiscal 1996, 9,303 vested in fiscal 1997 and 9,302 will vest in fiscal 1998. As
of April 1, 1998, 383,484 of Mr. Friedman's options had vested and, of these
vested options, 131,245 had been exercised.

         The Friedman Agreement provides that if Mr. Friedman's employment is
terminated by the Company without Cause or by Mr. Friedman with Good Reason (as
such terms are defined in the Friedman Agreement), the Company will be required
to pay his base salary then in effect for the greater of 12 months following his
termination or the remainder of his term of employment. Mr. Friedman also will
be entitled to receive any bonus earned with respect to any previously completed
fiscal year which remains unpaid as of the date of termination. If Mr.
Friedman's employment is terminated, either by the Company or by Mr. Friedman
for Good Reason, coincident with or within one-year after a Change of Control
(as defined in the Friedman Agreement), the Company will be required to pay Mr.
Friedman a lump sum, in cash, equal to two times his base salary then in effect
and all unvested options will vest in full. If Mr. Friedman's employment is
terminated by the Company without Cause, Mr. Friedman for Good Reason or as a
result of a Change of Control, the Company also, with certain exceptions, will
be required to continue to maintain life insurance for Mr. Friedman for the
remainder of his life or until he attains the age of 70 with a death benefit
equal to his base salary at the date of termination and medical insurance for
Mr. Friedman and his spouse until their respective deaths. The Company also will
be required to maintain life insurance for Mr. Friedman and medical insurance
for Mr. Friedman and his spouse, as described in the foregoing sentence, upon
Mr. Friedman's retirement or voluntary termination from the Company after the
period of employment provided for in the Friedman Agreement.

         The Friedman Agreement provides that the Company has certain rights to
purchase shares of the Common Stock and/or vested options held by Mr. Friedman
upon termination of his employment. Finally, the Friedman Agreement provides
that Mr. Friedman will not, with certain exceptions, "engage or be engaged in a
competing business" (as defined in the Friedman Agreement) for a period of two
years following termination of his employment (unless he is terminated without
Cause or he resigns with Good Reason).

MR. GLASS

         Mr. Glass's employment agreement (the "Glass Agreement"), provides that
he will serve as President and Chief Operating Officer of the Company from April
1, 1998 through March 31, 2000 for an annual base salary of $300,000. The annual
base salary shall be reviewed each April 1 except that no such review shall
result in any reduction of the annual base salary then in effect. Mr. Glass also
is eligible to receive an annual bonus equal to 60% of his annual base salary in
effect, if, for each such fiscal year, the Company attains its

                                       48
<PAGE>

targeted financial goals (as defined by the Compensation Committee). The Glass
Agreement also provides for certain insurance and other benefits to be
maintained and paid by the Company.

         The Glass Agreement provided for a grant to Mr. Glass on March 4, 1998
of options to purchase 100,000 shares of Common Stock at an exercise price of
$3.50 per share. The options vest and become exercisable on the fifth
anniversary of the date of the grant and expire on the tenth anniversary of the
date of the grant.

         The Glass Agreement provides that if Mr. Glass's employment is
terminated by the Company without Cause or by Mr. Glass with Good Reason (as
such terms are defined in the Glass Agreement), the Company will be required to
pay his base salary then in effect for the greater of 12 months following his
termination or the remainder of his term of employment. Mr. Glass also will be
entitled to receive any bonus earned with respect to any previously completed
fiscal year which remains unpaid as of the date of termination. If Mr. Glass's
employment is terminated, either by the Company or by Mr. Glass for Good Reason,
coincident with or within one-year after a Change of Control (as defined in the
Glass Agreement), the Company will be required to pay Mr. Glass a lump sum, in
cash, equal to two times his base salary then in effect and all unvested options
will vest in full. If Mr. Glass's employment is terminated by the Company
without Cause, Mr. Glass for Good Reason or as a result of a Change of Control,
the Company also, with certain exceptions, will be required to continue to
maintain life insurance for Mr. Glass for the remainder of his life or until he
attains the age of 70 with a death benefit equal to his base salary at the date
of termination and medical insurance for Mr. Glass and his spouse until their
respective deaths. The Company also will be required to maintain life insurance
for Mr. Glass and medical insurance for Mr. Glass and his spouse, as described
in the foregoing sentence, upon Mr. Glass's retirement or voluntary termination
from the Company after the period of employment provided for in the Glass
Agreement.

         The Glass Agreement provides that if Mr. Glass's employment is
terminated for any reason, Mr. Glass will not for a period of two years
following termination of his employment directly or indirectly (i) solicit or
encourage any member of senior management to leave the employment of the Company
or (ii) hire any member of senior management who was an employee of the Company
during Mr. Glass's employment under the Glass Agreement or the two year period
after Mr. Glass's employment is terminated.

MS. DEXTER-WOLTERSTORFF

         The Company is a party to a severance agreement with Ms.
Dexter-Wolterstorff. The severance agreement provides for contingent payment of
base salary from date of separation through August 7, 1998.

Compensation of Members of the Board of Directors

         For serving as a director of the Company, each non-employee director
receives, $15,000 per year, $1,000 per Board of Directors meeting attended in
person, $500 per Board

                                       49
<PAGE>

of Directors meeting attended by telephone, and $500 per Board of Directors
committee meeting attended. Certain directors who are not employees of the
Company will be entitled to receive benefits under the Directors Stock Option
Plan and all directors of the Company will be entitled to receive benefits under
the Directors Deferred Compensation Plan. Under the terms of the Directors Stock
Option Plan, each person, who is not an employee of the Company, and who is
first elected, appointed or otherwise first becomes a Director (an "Eligible
Director") will be granted an option to purchase 6,000 shares of Common Stock as
of the date on which such person first becomes an Eligible Director (an "Initial
Option"). Each person who is an Eligible Director on February 1st of each year
will receive an option to purchase 3,000 shares of Common Stock (an "Annual
Option"). The Directors Stock Option Plan also provides that the Board of
Directors shall have discretionary authority to award options to acquire up to
an aggregate of 100,000 shares of Common Stock to one or more Eligible Directors
("Discretionary Options"). All options granted under the Directors Stock Option
Plan are "nonqualified" stock options subject to the provisions of Section 83 of
the Internal Revenue Code of 1986, as amended.

         Each Initial Option and Special Option vests and becomes exercisable in
1/3 increments on each of the first, second and third anniversaries of the date
of grant; provided that the Eligible Director is in the service of the Company
as a director on such date. Each Annual Option vests and becomes exercisable in
full on the one year anniversary of the date of grant, provided that the
Eligible Director is in the service of the Company as a director on such date.
In the event of the termination of the Eligible Director's service as a director
prior to the time all or any portion or an Initial Option, a Special Option, or
an Annual Option vests, such option, to the extent not yet vested, terminates.
Discretionary Options are subject to vesting conditions established by the Board
of Directors and provided in a separate award agreement evidencing the award of
such Discretionary Option. Any unexercised portion of an option automatically
becomes null and void at the time of the earliest to occur of (i) the expiration
of 10 years from the grant date, and (ii) the expiration of one year from the
date the Eligible Director's service terminates. The Directors Stock Option Plan
provides that the option exercise price for the options shall be the "fair
market value" (as defined in the Directors Stock Option Plan) of the Common
Stock on the date of grant.

         In addition, the Company has a consulting agreement with Mr. Kaplan.
Mr. Kaplan will act as a director and consultant to the Company. Under the
agreement, he is paid a retainer of $75,000 per year and is entitled to a
$15,000 per year auto allowance. This consulting agreement became effective in
April 1998 and extends for a five-year period.

Compensation of Chairman of the Board

         The Company has a consulting agreement with Mr. Matthews, pursuant to
which he is currently paid $75,000 per annum. In addition, in connection with
Mr. Matthews' agreement to serve as Chairman of the Board, Mr. Matthews was
granted options pursuant to the 1988 Stock Option Plan (the "1988 Stock Plan")
to purchase up to 91,232 shares of the Common Stock, 24,197 exercisable at $1.07
per share, 22,345 exercisable at $4.48 per share, 22,345 exercisable at $2.24
per share and 22,345 exercisable at $8.95 per share. In addition, on July 1,
1995 Mr. Matthews was granted options pursuant to the 1988 Stock Plan to
purchase 44,689 shares of the Common Stock at $5.01 per share. Within 180 days
upon termination, depending on the cause of termination, the Company has the
right to purchase

                                       50
<PAGE>

Mr. Matthews' shares and unexercised vested options. The Company also has a 
right of first refusal upon notice of proposed sale of shares by Mr. Matthews.

         In addition, on June 19, 1997, Mr. Matthews was granted options
pursuant to the Directors Stock Option Plan to purchase 65,000 shares at $7.0625
per share. Such options shall vest in full on the earlier of (i) June 19, 2001
or (ii) a Change of Control (as defined in the Directors Stock Option Plan) of
the Company, and expire at the earlier of (i) 10 years from the grant date and
(ii) one year from the date Mr. Matthews' service terminates.

Compensation Committee Interlocks and Insider Participation

         During fiscal 1997, Mr. Kroon, Mr. Matthews and Ms. Cohen served as
members of the Compensation Committee of the Board of Directors.

                                       51
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of April 28, 1998
with respect to beneficial ownership of shares of the Common Stock by (i) all
stockholders known by the Company to be beneficial owners of more than 5% of
such class, (ii) each director, (iii) each executive officer named in the
Summary Compensation Table and (iv) all directors and executive officers as a
group. Unless otherwise indicated in the notes below, the address of each
beneficial owner is in care of Loehmann's, Inc., 2500 Halsey Street, Bronx, New
York 10461.


Name and Address of Beneficial Owner        Shares of Common Stock    Percentage
------------------------------------        ----------------------    ----------

Sprout Capital V(1)............................    200,779               2.2%
Sprout Growth, L.P.(1).........................    242,769               2.7%
Sprout Growth, Ltd.(1).........................     27,025                 *
DLJ Venture Capital Fund II, L.P.(1)...........     12,065                 *
Donaldson, Lufkin & Jenrette Securities
         Corporation(1)........................    126,161               1.4%
Alliance Capital Management L.P.(1)............      1,000                 *
J&W Seligman & Co. Incorporated(2).............  1,072,000              11.9%
Putnam Investments, Inc.(3)....................  1,006,430              11.2%
Goldman, Sachs & Co.(4)........................  1,004,400              11.2%
AIM Management Group Inc.(5)...................    663,400               7.4%
Wellington Management Company, LLP(6)..........    571,000               6.4%
Norman S. Matthews(7)..........................    129,562               1.4%
Robert Friedman(8).............................    252,235               2.7%
Philip Kaplan(9)...............................    147,174               1.7%
Robert Glass(10)...............................     11,170                 *
Jan Heppe(11)..................................      4,468                 *
Bonnie Dexter-Wolterstorff (12)................      9,264                 *
Janet A. Hickey(1)(13).........................      2,000                 *
Lorrence T. Kellar (14)........................      3,000                 *
Richard E. Kroon(1)(13)........................      2,000                 *
Christina A. Mohr(13)..........................      2,000                 *
Arthur E. Reiner(13)...........................      2,000                 *
Cynthia R. Cohen(13)...........................      2,000                 *
All directors and executive officers 
         as a group (12 persons)(15)...........    566,873               6.0%

-----------

*        Less than 1%

(1)      Based in part upon information provided in a Schedule 13G filed with
         the Commission. Sprout Capital V, Sprout Growth, L.P., Sprout Growth,
         Ltd., DLJ Venture Capital II, L.P., Donaldson, Lufkin & Jenrette
         Securities Corporation ("DLJ" and, collectively with the other entities
         named above, the "Sprout Group") are all affiliates. Ms. Hickey and Mr.
         Kroon are general partners of, or executive officers in (1) certain of
         the affiliates of DLJ that own shares of Common Stock or (2) entities
         that control such

                                       52
<PAGE>

         affiliates. The business address of all such Sprout Group entities is
         277 Park Avenue, New York, New York 10172. Ms. Hickey and Mr. Kroon
         disclaim beneficial ownership of such shares. Because of their direct
         and indirect ownership of a majority of the capital stock of DLJ, AXA
         Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Alpha
         Assurances I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA
         Courtage Assurance Mutuelle, AXA, Alliance Capital Management L.P. and
         The Equitable Companies Incorporated may be deemed to beneficially own
         all of the shares of Common Stock beneficially owned by the Sprout
         Group. The business address of Alpha Assurances I.A.R.D. Mutuelle and
         Alpha Assurances Vie Mutuelle is 100-101 Terrasse Boieldien, 92042
         Paris La Defense France. The business address of AXA Assurances
         I.A.R.D. Mutuelle and AXA Assurances Vie Mutuelle is 21, rue de
         Chateaudun, 75009 Paris France. The business address of AXA Courtage
         Assurance Mutuelle is 26, rue Louis le Grand, 75002 Paris France. The
         business address of AXA is 23, avenue Matignon, 75008 Paris France. The
         business address of The Equitable Companies Incorporated is 787 Seventh
         Avenue, New York, New York 10019. The business address of Alliance
         Capital Management L.P. is 1345 Avenue of the Americas, New York, New
         York 10105.

(2)      Based upon information provided in a Schedule 13G filed with the
         Commission. The holdings of J.&W. Seligman & Co. Incorporated ("JWS")
         include all shares of Common Stock beneficially owned by Seligman Value
         Fund Series, Inc. - Seligman Small-Cap Value Fund (the "Fund"). JWS, as
         investment adviser for the Fund, may be deemed to beneficially own the
         shares of the Fund. Accordingly, the shares owned by JWS include those
         shares owned by the Fund. In addition, William C. Morris, as the owner
         of a majority of the outstanding voting securities of JWS, may be
         deemed to beneficially own the shares reported herein by JWS. The
         business address of JWS, the Fund and William C. Morris is 100 Park
         Avenue, New York, NY 10017.

(3)      Based upon information provided in a Schedule 13G filed with the
         Commission. The holdings of Putnam Investments, Inc. include all shares
         of Common Stock beneficially owned by Putnam Investment Management,
         Inc. and The Putnam Advisory Company, Inc., investment advisors which
         are subsidiaries of Putnam Investments, Inc. Because of its ownership
         of all of the capital stock of Putnam Investments, Inc., Marsh &
         McLennan Companies, Inc. may be deemed to beneficially own all of the
         shares of Common Stock beneficially owned by Putnam Investments, Inc.
         The business address of Putnam Investments, Inc., Putnam Investment
         Management, Inc. and the Putnam Advisory Company, Inc. is One Post
         Office Square, Boston, Massachusetts 02109. The business address of
         Marsh & McLennan Companies, Inc. is 1166 Avenue of the Americas, New
         York, New York 10036.

(4)      Based upon information provided in a Schedule 13G filed with the
         Commission. The holdings of The Goldman Sachs Group, L.P. include all
         shares of Common Stock beneficially owned by Goldman, Sachs & Co. and
         Goldman Sachs Trust on behalf of GS Small Cap Value Fund, both of which
         are subsidiaries of Goldman, Sachs & Co. The business address for the
         Goldman Sachs Group, L.P. and Goldman, Sachs & Co. is 85 Broad Street,
         New York, NY 10004 and the business address of Goldman Sachs Trust is 1
         New York Plaza, New York, NY 10004.

(5)      Based upon information provided in a Schedule 13G filed with the
         Commission. The holdings of AIM Management Group Inc. include all
         shares of Common Stock beneficially owned by AIM Advisors, Inc. and AIM
         Capital Management, Inc., investment advisors which are subsidiaries of
         AIM Management Group Inc. The business address of all such entities is
         11 Greenway Plaza, Suite 1919, Houston, Texas 77046.

                                       53
<PAGE>

(6)      Based upon information provided in a Schedule 13G filed with the
         Commission. The holdings of Wellington Management & Company, LLP
         include all shares of Common Stock beneficially owned by Wellington
         Trust Company, NA, a wholly-owned subsidiary of Wellington Management
         Company. The business address of all such entities is 75 State Street,
         Boston, Massachusetts 02109.

(7)      Includes 22,345 shares of Class B Common Stock which are convertible
         into Common Stock and options to purchase 89,378 shares of Common Stock
         which are exercisable within sixty (60) days of the date hereof. Does
         not include options to purchase 65,000 shares of Common Stock which are
         not exercisable within sixty (60) days of the date hereof. Includes
         17,839 shares owned.

(8)      Includes options to purchase 252,235 rounded shares of Common Stock
         which are exercisable within sixty (60) days of the date hereof. Does
         not include options to purchase 53,992 shares of Common Stock which are
         not exercisable within sixty (60) days of the date hereof.

(9)      Includes options to purchase 102,716 shares of Common Stock which are
         exercisable within sixty (60) days of the date hereof. Includes 44,458
         shares owned.

(10)     Includes options to purchase 11,170 shares of Common Stock which are
         exercisable within sixty (60) days of the date hereof. Does not include
         options to purchase 31,174 shares of Common Stock which are not
         exercisable within sixty (60) days of the date hereof.

(11)     Includes options to purchase 4,468 shares of Common Stock which are
         exercisable within sixty (60) days of the date hereof. Does not include
         options to purchase 26,704 shares of Common Stock which are not
         exercisable within sixty (60) days of the date hereof.

(12)     Includes options to purchase 6,030 shares of Common Stock which are
         exercisable within sixty (60) days of the date hereof, and 3,234 shares
         owned. Does not include options to purchase 28,266 shares of Common
         Stock which are not exercisable within sixty (60) days of the date
         hereof.

(13)     Includes options to purchase 2,000 shares of Common Stock which are
         exercisable within sixty (60) days of the date hereof. Does not include
         options to purchase 7,000 shares of Common Stock which are not
         exercisable within sixty (60) days of the date hereof.

(14)     Includes 3,000 shares owned. Does not include options to purchase 9,000
         shares of Common Stock which are not exercisable within sixty (60) days
         of the date hereof.

(15)     Includes 22,345 shares of Class B Common Stock which are convertible
         into Common Stock and options to purchase 475,997 shares of Common
         Stock which are exercisable within sixty (60) days of the date hereof.
         Does not include options to purchase 249,136 shares of Common Stock
         which are not exercisable within sixty (60) days of the date hereof.
         Includes 68,531 shares owned.

                                       54
<PAGE>
   
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
   
         According to filings made with the Commission, during fiscal 1997,
Putnam Investors, Inc. and its affiliates beneficially owned more than 5% of the
Company's Common Stock. The Company believes that Putnam Investors, Inc. and its
affiliates own Notes.
    

                                       56
<PAGE>

PART IV.

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

(a)      Documents filed as part of the report.

         (1)      List of Financial Statements

                  Report of Independent Auditors
                  Consolidated Balance Sheets
                  Consolidated Statements of Operations
                  Consolidated Statements of Changes in Stockholders' Equity
                  Consolidated Statements of Cash Flows
                  Notes to Consolidated Financial Statements

         (2)      List of Financial Statement Schedules
   
                  Schedule II, Valuation and Qualifying Accounts
                  Other schedules are omitted because they are either not
                  applicable or the required information is shown in the
                  financial statements or notes thereto.
    

         (3)      List of Exhibits

                  3.1      Amended and Restated Certificate of Incorporation of
                           Loehmann's, Inc., filed as Exhibit 3.1 to Loehmann's,
                           Inc.'s Registration Statement on Form S-1
                           (Registration No. 33-97100) and incorporated hereby
                           by reference.

                  3.2      By-Laws of Loehmann's, Inc., filed as Exhibit 3.2 to
                           Loehmann's, Inc.'s Registration Statement on Form S-1
                           (Registration No. 33-97100) and incorporated herein
                           by reference.

                  4.1      11 7/8% Senior Note Indenture, dated as of May 10,
                           1996, between Loehmann's, Inc. and United States
                           Trust Company of New York, as Trustee, filed as
                           Exhibit 4.1 to Loehmann's, Inc.'s Quarterly Report on
                           Form 10-Q for the quarterly period ended May 4, 1996
                           (Comm. File No. 0-28410), and incorporated herein by
                           reference.

                  4.2      Second Amended and Restated Credit Agreement, dated
                           as of May 6, 1996, between Loehmann's, Inc.,
                           BankAmerica Business Credit, Inc., as Agent, and
                           certain Banks party thereto, filed as Exhibit 4.2 to
                           Loehmann's, Inc.'s Registration Statement on Form S-1
                           (Registration No. 333-12881) and incorporated herein
                           by reference.
   
                  4.3      A letter from Loehmann's, Inc. to the Securities and
                           Exchange Commission agreeing to furnish copies of
                           certain debt instruments.+
    

                                       57
<PAGE>

                  4.4      First Amendment to Credit Agreement, dated as of July
                           23, 1997, between Loehmann's, Inc., and BankAmerica
                           Business Credit, Inc., as Agent and sole lender,
                           filed as Exhibit 4.1 to Loehmann's, Inc.'s Quarterly
                           Report on Form 10-Q for the quarterly period ended
                           August 2, 1997 (Comm. File No. 0-28410), and
                           incorporated herein by reference.

                  4.5      Second Amendment to Credit Agreement, dated as of
                           August 15, 1997, between Loehmann's, Inc., and
                           BankAmerica Business Credit, Inc., as Agent and sole
                           lender, filed as Exhibit 4.2 to Loehmann's, Inc.'s
                           Quarterly Report on Form 10-Q for the quarterly
                           period ended August 2, 1997 (Comm. File No. 0-28410),
                           and incorporated herein by reference.
   
                  4.6      Third Amendment to Credit Agreement, dated as of
                           December 30, 1997, between Loehmann's, Inc., and
                           BankAmerica Business Credit, Inc., as Agent and sole
                           lender.+
    
                  10.1     Lease Agreement between the New York City Industrial
                           Development Agency and Loehmann's, Inc. dated as of
                           December 1, 1983, filed as Exhibit 10.3 to Loehmann's
                           Holdings, Inc.'s Registration Statement on Form S-1
                           (Registration No. 33-25718) and incorporated herein
                           by reference.

                  10.2     Amended and Restated Agreement among Loehmann's
                           Holdings, Inc., Loehmann's, Inc. and Philip Kaplan
                           dated as of September 19, 1988 and Memorandum dated
                           March 1, 1993 amending such Agreement, filed as
                           Exhibit to Loehmann's Holdings, Inc.'s Registration
                           Statement on Form S-4 (Registration No. 33-71922) and
                           incorporated herein by reference.

                  10.3     Amendment No. 1 to Employment Agreement among
                           Loehmann's Holdings, Inc., Loehmann's, Inc. and
                           Philip Kaplan dated as of November 1, 1995, filed as
                           Exhibit 10.9 to Loehmann's Holdings, Inc.'s
                           Registration Statement on Form S-1 (Registration No.
                           33-97100) and incorporated herein by reference.

                  10.4     Amendment No. 2 to Employment Agreement among
                           Loehmann's Holdings, Inc., Loehmann's, Inc. and
                           Philip Kaplan dated as of April 5, 1996, filed as
                           Exhibit 10.10 to Loehmann's Holdings, Inc.'s
                           Registration Statement on Form S-1 (Registration No.
                           33-97100) and incorporated herein by reference.

                  10.5     Agreement among Loehmann's Holdings, Inc.,
                           Loehmann's, Inc. and Robert N. Friedman dated as of
                           November 1, 1995, filed as Exhibit 10.11 to
                           Loehmann's Holdings, Inc.'s Registration Statement on
                           Form S-1 (Registration No. 33-97100) and incorporated
                           herein by reference.

                                       57
<PAGE>

                  10.6     Amendment No. 1 to Employment Agreement among
                           Loehmann's Holdings, Inc., Loehmann's, Inc. and
                           Robert N. Friedman dated as of April 5, 1996, filed
                           as Exhibit 10.12 to Loehmann's Holdings, Inc.'s
                           Registration Statement on Form S-1 (Registration No.
                           33-97100) and incorporated herein by reference.

                  10.7     Compensation/Consultation Agreement between
                           Loehmann's Holdings, Inc. and Norman Matthews, filed
                           as Exhibit 10.8 to Loehmann's Holdings, Inc.'s
                           Registration Statement on Form S-1 (Registration No.
                           33-25718) and incorporated herein by reference.

                  10.8     Loehmann's, Inc. Amended and Restated Deferred Profit
                           Sharing Plan, effective January 31, 1993, filed as
                           Exhibit 10.15 to Loehmann's Holdings, Inc.'s
                           Registration Statement on Form S-1 (Registration No.
                           33-97100) and incorporated herein by reference.

                  10.9     Loehmann's Holdings, Inc. 1988 Stock Option Plan,
                           filed as Exhibit 10.10 to Loehmann's Holdings, Inc.'s
                           Registration Statement on Form S-1 (Registration No.
                           33-25718) and incorporated herein by reference.

                  10.10    Non-Qualified Stock Option Agreement dated September
                           30, 1988 between Loehmann's Holdings, Inc. and Philip
                           Kaplan, filed as Exhibit 10.11 to Loehmann's
                           Holdings, Inc.'s Registration Statement on Form S-1
                           (Registration No. 33-25718) and incorporated herein
                           by reference.

                  10.11    Loehmann's, Inc. New Stock Incentive Plan, filed as
                           Exhibit 10.18 to Loehmann's, Inc.'s Registration
                           Statement on Form S-1 (Registration No. 33-97100) and
                           incorporated herein by reference.

                  10.12    Executive Incentive Compensation Plan, filed as
                           Exhibit 10.13 to Loehmann's Holdings, Inc.'s
                           Registration Statement on Form S-1 (Registration No.
                           33-25718) and incorporated herein by reference.

                  10.13    Non-Qualified Stock Option Agreement dated as of
                           December 10, 1993 between Loehmann's Holdings, Inc.
                           and Norman S. Matthews, filed as Exhibit 10.15 to
                           Loehmann's Holdings, Inc.'s Registration Statement on
                           Form S-4 (Registration No. 33-71922) and incorporated
                           herein by reference.
   
                  10.14    Employment Agreement between Loehmann's, Inc. and
                           Robert Glass, dated as of February 27, 1998.+
    
   
                  10.15    Consulting Agreement between Loehmann's, Inc. and
                           Philip Kaplan, dated as of April 3, 1998.+
    

                                       58
<PAGE>
   
                  10.16    Severance Agreement between Loehmann's, Inc. and
                           Bonnie Dexter-Wolterstorff, dated January 9, 1998.*
    
   
                  10.17    Form of Agency Agreement between Loehmann's, Inc. and
                           a joint venture of Gordon Brothers Retail Partners,
                           LLC and The Ozer Group, LLC, dated February 27,
                           1998.*
    
   
[^]
                  23       Consent of Independent Auditors.+

                  24       Powers of Attorney.+

                  27       Financial Data Schedule.+
    

(b)      Reports on Form 8-K

No report on Form 8-K was filed during the quarter ended January 31, 1998.

--------------
*        Filed herewith
   
+        Previously filed
    

                                       59

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to its
Annual Report on Form 10-K to be signed on its behalf by the undersigned
thereunto duly authorized.

                                             LOEHMANN'S, INC.


Dated:   February 11, 1999                   By: /s/ Robert Glass
                                             --------------------
                                             Robert Glass, President, Chief
                                             Operating Officer, Secretary and
                                             Director

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


Signature                 Title                                   Date
---------                 -----                                   ----

          *               Chairman of the Board and Director
----------------------
Norman S. Matthews

          *               Chairman, Chief Executive Officer and
----------------------    Director
Robert N. Friedman

/s/ Robert Glass          Director
----------------------
Robert Glass

          *               Senior Vice President, Finance, Chief
----------------------    Financial Officer, and Chief Accounting
Dennis R. Hernreich       Officer

          *               Director
----------------------    
Philip Kaplan

          *               Director
----------------------    
Janet A. Hickey

          *               Director
----------------------    
Richard E. Kroon

                          Director
----------------------    
Christina A. Mohr

          *               Director
----------------------    
Arthur E. Reiner

          *               Director
----------------------    
Cynthia R. Cohen

                                       60
<PAGE>

          *               Director
----------------------    
Lorrence T. Kellar


* By: /s/ Robert Glass
  --------------------
  Robert Glass
  Attorney-in-fact

  Dated: February 11, 1999