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                                             SECURITIES AND EXCHANGE COMMISSION
                                                   WASHINGTON, D.C. 20549
                                                          FORM 10-Q



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


For the quarterly period ended            May 4, 2002
                               -----------------------------------



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

For the transition period from                                            to
                               ------------------------------------------    --------------------------------------------


                                                   Commission File Number 1-05380


                                                     AMES DEPARTMENT STORES, INC.
                                                  ----------------------------------
                                          (Exact name of registrant as specified in its charter)



          Delaware                                                                                   04-2269444
--------------------------------                                                       ----------------------------------------
State or other jurisdiction of                                                         (I.R.S. Employer Identification Number)
 incorporation or organization)



2418 Main Street, Rocky Hill, Connecticut                                                              06067
-----------------------------------------                                                       -------------------
(Address of principal executive offices)                                                             (Zip Code)


Registrant's telephone number including area code:                                                 (860) 257-2000
                                                                                            -----------------------------




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


                                                 YES   X     NO
                                                     -----       -----




                           29,408,057 shares of Common Stock were outstanding on June 1, 2002.


                                                Exhibit Index on page 19

                                                      Page 1 of 22

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                                       AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES

                                                        FORM 10-Q

                                            FOR THE QUARTER ENDED May 4, 2002




                                                        I N D E X




                                                                                                       Page
Part I:         FINANCIAL INFORMATION

     Item 1.        Consolidated Condensed Statements of Operations                                     3
                       for the Thirteen Weeks ended May 4, 2002
                       and May 5, 2001

                    Consolidated Condensed Balance Sheets as of                                         4
                       May 4, 2002,  February 2, 2002, and May 5, 2001

                    Consolidated Condensed Statements of Cash Flows                                     5
                       for the Thirteen Weeks ended May 4, 2002 and May 5, 2001

                    Notes to Consolidated Financial Statements                                          6

     Item 2.        Management's Discussion and Analysis of Financial                                   11
                       Condition and Results of Operations

     Item 3.        Quantitative and Qualitative Disclosures about Market Risk                          18


Part II:        OTHER INFORMATION

     Item 1.        Legal Proceedings                                                                   19

     Item 4.        Submission of Matters to a Vote of Security Holders                                 19

     Item 6.        Exhibits and Reports on Form 8-K                                                    19


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                                                  PART I
Item 1.
                                           FINANCIAL INFORMATION

                                 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                           (DEBTORS-IN-POSSESSION)
                                   (In Thousands, Except Per Share Amounts)
                                                (Unaudited)

                                                                          For the Thirteen
                                                                             Weeks Ended
                                                                  ----------------------------------
                                                                      May 4,             May 5,
                                                                       2002               2001
                                                                  ----------------    --------------
     Total net sales                                                     $567,882          $793,687
     Leased department and other income                                     6,718             9,149
                                                                  ----------------    --------------

TOTAL REVENUE                                                             574,600           802,836

COSTS AND EXPENSES
     Cost of merchandise sold                                             412,095           565,956
     Selling, general and administrative expenses                         182,069           238,715
     Depreciation and amortization expense, net                            14,661            19,636
     Interest and debt expense, net                                        11,906            23,258
     Reorganization expenses                                                3,000                 -
                                                                  ----------------    --------------

LOSS BEFORE INCOME TAXES                                                 (49,131)          (44,729)

Income tax benefit                                                              -            16,997
                                                                  ----------------    --------------

NET LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE                  ($49,131)         ($27,732)
                                                                  ----------------    --------------


Cumulative effect of accounting change, net of tax of $0                    5,562                 -
                                                                  ----------------    --------------

NET LOSS                                                                ($43,569)         $(27,732)
                                                                  ================    ==============

Basic net loss per common share:
     Before cumulative effect of accounting change                        ($1.67)            ($.94)
     Cumulative effect of accounting change, net of tax of $0                0.19                 -
                                                                  ----------------    --------------
     Basic net loss per share                                             ($1.48)            ($.94)
                                                                  ================    ==============

Weighted average number of common shares outstanding                       29,408            29,397
                                                                  ================    ==============

Diluted net loss per common share:
     Before cumulative effect of accounting change                        ($1.67)            ($.94)
     Cumulative effect of accounting change, net of tax of $0                0.19                 -
                                                                  ----------------    --------------
     Diluted net loss per share                                           ($1.48)            ($.94)
                                                                  ================    ==============

Weighted average number of equivalent shares                               29,408            29,397
                                                                  ================    ==============


        (The accompanying notes are an integral part of these consolidated condensed financial statements.)

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                                        AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                                            CONSOLIDATED CONDENSED BALANCE SHEETS
                                                  (DEBTORS-IN-POSSESSION)
                                    (In Thousands, Except Shares and Per Share Amounts)

                                                                               (Unaudited)                          (Unaudited)
                                                                           ----------------   -----------------   -----------------
                                                                               May 4,              February 2,         May 5,
                                                                                2002                  2002              2001
                                                                           ----------------   -----------------   -----------------
                                            ASSETS
Current Assets:
     Cash and cash equivalents                                                       $22,039            $29,105          $44,440
     Receivables                                                                      20,032             12,631           34,877
     Merchandise inventories                                                         594,901            532,407          837,476
     Deferred taxes, net                                                                   -                  -           34,768
     Prepaid expenses and other current assets                                        22,854             26,511           31,053
                                                                             ----------------    ---------------    -------------

          Total current assets                                                       659,826            600,654          982,614
                                                                             ----------------    ---------------    -------------


Fixed Assets                                                                         494,588            591,623          715,386
     Less - Accumulated depreciation and amortization                              (231,981)          (248,076)        (221,366)
                                                                             ----------------    ---------------    -------------

          Net fixed assets                                                           262,607            343,547          494,020
                                                                             ----------------    ---------------    -------------
Other assets and deferred charges                                                     50,954             52,283           70,685
Deferred taxes, net                                                                        -                  -          411,891
Beneficial lease rights, net                                                          13,900             31,324           40,469
Goodwill, net                                                                         55,923             55,923           57,837
                                                                             ----------------    ---------------    -------------

                                                                                  $1,043,210         $1,083,731       $2,057,516
                                                                             ================    ===============    =============

                             LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable:
          Trade                                                                      $73,520            $67,458         $321,931
          Other                                                                       45,574             51,982           70,934
                                                                               --------------    ---------------    -------------

     Total accounts payable                                                          119,094            119,440          392,865
                                                                               --------------    ---------------    -------------
Current portion of long term debt                                                    442,372            342,128                -
Current portion of capital lease and financing obligations                             7,782              7,962           19,018
Self-insurance reserves                                                               28,140             29,205           29,225
Accrued expenses and other current liabilities                                        67,767             70,172          112,046
Store closing reserves                                                                 1,061             62,928          142,797
                                                                               --------------    ---------------    -------------
     Total current liabilities                                                       666,216            631,835          695,951
                                                                               --------------    ---------------    -------------


Long-term debt                                                                             -                  -          804,552
Capital lease and financing obligations                                               56,706             80,816          133,963
Other long-term liabilities                                                           31,592             32,543           43,284
Excess of revalued net assets over equity under fresh-start reporting                      -              5,562           10,176
Liabilities subject to compromise                                                    748,021            748,731                -

Commitments and contingencies

Stockholders' (Deficit) Equity:
    Preferred stock                                                                        -                  -                -
    Common stock                                                                         295                295              295
    Additional paid-in-capital                                                       533,394            533,394          533,394
    Accumulated deficit                                                            (992,092)          (948,523)        (163,177)
    Treasury stock                                                                     (922)              (922)            (922)
                                                                               --------------    ---------------    -------------
    Total stockholders' equity / (deficit)                                         (459,325)          (415,756)          369,590
                                                                               --------------    ---------------    -------------
                                                                                  $1,043,210         $1,083,731       $2,057,516
                                                                               ==============    ===============    =============

           (The accompanying notes are an integral part of these consolidated condensed financial statements.)
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                                             AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                                            CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                                       (DEBTORS-IN-POSSESSION)
                                                            (In Thousands)

                                                               (Unaudited)

                                                                                    For the Thirteen
                                                                                       Weeks Ended
                                                                         ----------------------------------------

                                                                              May 4,               May 5,
                                                                               2002                 2001
                                                                         ------------------  --------------------

Cash flows from operating activities:
      Net loss                                                                   ($43,569)             ($27,732)
      Cumulative effect of Accounting change                                       (5,562)                     -
                                                                         ------------------  --------------------
      Net loss before cumulative effect adjustment                                (49,131)              (27,732)
      Expenses (income) not requiring the outlay of cash:
           Income tax benefit                                                            -              (16,997)
           Depreciation and amortization of fixed and other assets                  16,140                21,524
           Inventory impairment utilization                                       (10,107)                     -
           Amortization of debt discounts and deferred financing costs               2,258                 1,437
                                                                         ------------------  --------------------
Cash used by operations before changes in working capital and
store closing activities                                                          (40,840)              (21,768)
Changes in working capital:
      Increase in receivables                                                      (7,401)              (17,838)
      Increase in merchandise inventories                                         (50,951)              (93,344)
      Decrease in accounts payable                                                   (346)              (31,421)
      Decrease in accrued expenses and other liabilities                           (2,948)               (7,721)
       Decrease in other working capital and other, net                              7,230                10,417
Changes due to store closing activities:
      Payments of store closing costs                                              (7,437)               (7,101)
                                                                         ------------------  --------------------

Net cash used for operating activities                                           (102,693)             (168,776)
                                                                         ------------------  --------------------
Cash flows from investing activities:
      Purchases of fixed assets                                                      (842)              (14,651)
                                                                         ------------------  --------------------
Net cash used for investing activities                                               (842)              (14,651)
                                                                         ------------------  --------------------
Cash flows from financing activities:
      Borrowings under the revolving credit facilities, net                        100,244               198,495
      Payments on debt and capital lease obligations                               (1,065)               (4,076)
      Change in liabilities subject to compromise                                    (710)                     -
      Payments of deferred financing costs                                         (2,000)              (16,313)
                                                                         ------------------  --------------------
Net cash provided by financing activities                                           96,469               178,106
                                                                         ------------------  --------------------

Decrease in cash and cash equivalents                                              (7,066)               (5,321)
Cash and cash equivalents, beginning of period                                      29,105                49,761
                                                                         ------------------  --------------------

Cash and cash equivalents, end of period                                           $22,039               $44,440
                                                                         ==================  ====================

Supplemental disclosure of cash flow information:
Cash paid during the period for:
   Interest and debt fees not capitalized                                          $10,052               $28,490
   Income taxes                                                                          -                    60


                 (The accompanying Notes are an integral part of these consolidated condensed financial statements.)

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<PAGE>



                          AMES DEPARTMENT STORES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                             (DEBTORS-IN-POSSESSION)

                                   (Unaudited)


1.       Basis of Presentation :


         The accompanying consolidated condensed financial statements have been
prepared on a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities and commitments in the
normal course of business and do not reflect any adjustments that might result
if the Company is unable to continue as a going concern. The filing of the
voluntary Chapter 11 petitions referred to below (the "Chapter 11 cases"),
losses from operations and negative cash flow from operations raise doubt about
the Company's ability to continue as a going concern. The appropriateness of
using a going concern basis is dependent upon, among other things, confirmation
of a plan or plans of reorganization, future profitable operations and the
ability to generate cash from operations and financing sources sufficient to
meet obligations. As a result of the filing of the Chapter 11 cases and related
circumstances, realization of assets and liquidation of liabilities is subject
to significant uncertainty. While under the protection of Chapter 11, we may
sell or otherwise dispose of assets, and liquidate or settle liabilities for
amounts other than those reflected in the consolidated financial statements.
Further, a plan or plans of reorganization could materially change the amounts
reported in the accompanying consolidated financial statements. The consolidated
financial statements do not include any adjustments relating to recoverability
of the value of recorded asset amounts or the amount and classification of
liabilities that might be necessary as a consequence of a plan of
reorganization. The Company anticipates significant adjustments to the
consolidated financial statements as a result of applying the provisions of
Statement of Position 90-7 "Financial Reporting by entities in Reorganization
Under the Bankruptcy Code" during the proceedings. At this time, it is not
possible to predict the outcome of the Chapter 11 cases or their effect on the
Company's business, its financial position, results of operations or cash flows.


2.      Chapter 11 Filing

       On August 20, 2001, the Company and each of its four subsidiaries
(collectively, the "Debtors") filed voluntary petitions under Chapter 11 of the
U.S. Bankruptcy Code (the "Bankruptcy Code") with the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court"). The
Chapter 11 cases Nos. 01-42217 (REG) through 01-42221 (REG) (the "Chapter 11
Cases") have been consolidated for the purpose of joint administration. As of
August 20, 2001, the Debtors began operating their business as
debtors-in-possession under Chapter 11 of the Bankruptcy Code and are subject to
the jurisdiction of the Bankruptcy Court.

       As a result of these filings, actions to collect pre-petition
indebtedness are stayed and other contractual obligations against the Debtors
may not be enforceable. In addition, under the Bankruptcy Code, the Debtors may
assume or reject executory contracts, including real estate leases, employment
contracts, personal property leases, service contracts and other unexpired
executory pre-petition contracts, subject to Bankruptcy Court approval. Parties
affected by these rejections may file claims with the Bankruptcy Court in
accordance with the Bankruptcy Code. The Debtors cannot presently determine the
ultimate liability that may result from the filing of claims for all contracts
that may be rejected. Estimates have been made, however, for certain contracts
to be rejected and are included in the liabilities subject to compromise.
Substantially all pre-petition liabilities are subject to settlement under a
plan of reorganization to be voted on by the creditors and equity holders and
approved by the Bankruptcy Court. Although the Debtors expect to file a
reorganization plan or plans that provide for emergence from bankruptcy, there
can be no assurance that a reorganization plan or plans will be proposed by the
Debtors or confirmed by the Bankruptcy Court or that any such plan will be
consummated.

      As provided by the Bankruptcy Code, the Debtors have the exclusive right
to submit a plan of reorganization for 120 days from the date of the filing of
the voluntary petitions. On December 5, 2001, the Company filed a motion with
the Bankruptcy Court to extend the period of exclusivity and on December 18,
2001, the court granted an extension of the exclusivity period to May 31, 2002.
On May 23, 2002, the Court granted a further extension of the exclusivity period
until February 28, 2003. If the Debtors fail to file a plan of reorganization
during the period of exclusivity or if such a plan is not accepted by the
required number of creditors and equity holders within the required period, any
party in interest may subsequently file its own plan of reorganization for the
Debtors. A plan of reorganization must be confirmed by the Bankruptcy Court,
upon certain findings being made by the Bankruptcy Court which are required by
the Bankruptcy Code. The Bankruptcy Court may confirm a plan of reorganization
notwithstanding the non-acceptance of the plan by an impaired class of creditors
or equity holders if certain requirements of the Bankruptcy Code are met. As
part of its restructuring, the Company also anticipates that all existing equity
will be cancelled. The Chapter 11 filing, the uncertainty regarding the eventual
outcome of the reorganization case and the effect of other unknown adverse
factors could threaten the Company's existence as a going concern.

      At the first day hearing held on August 20, 2001 before Judge Robert E.
Gerber, the Bankruptcy Court entered its first day orders granting authority to
the Debtors to, among other things, pay pre-petition and post-petition employee
wages, salaries, benefits and other employee obligations, pay certain
administrative fees and insurance related obligations and honor customer service
programs, including warranties, returns, layaways and gift certificates.

      Schedules have been filed with the Bankruptcy Court setting forth the
assets and liabilities of the Debtors as of the filing date as shown by the
Company's accounting records. The Bankruptcy Court established a March 25, 2002
bar date for claims in the Company's Chapter 11 Cases. Differences between
amounts shown by the Company and claims filed by creditors will be investigated
and, if necessary, unresolved disputes will be determined by the Bankruptcy
Court. The ultimate settlement terms for such liabilities are subject to a plan
of reorganization, and accordingly, are not presently determinable.
..

3.       Net Loss Per Common Share:

       Net loss per share was determined using the weighted average number of
common shares outstanding. Diluted net loss per share was equal to basic net
loss per share because inclusion of common stock equivalents would have been
anti-dilutive. During the quarters ended May 4, 2002 and May 5, 2001, no options
were exercised.


4.       Inventories:

      Inventories are valued at the lower of cost, using the first-in, first-out
(FIFO) method, or market and include the capitalization of transportation and
distribution center costs.  The Company records reserves for inventory shrinkage
and markdowns on a regular basis, such reserves are reflected as a reduction in
inventory value in the Consolidated Balance Sheet.

5.       Debt:

      As a result of the Chapter 11 filing (see Note 2), the Ames Senior Notes
and the Hills Senior Notes (see below) will be classified as "liabilities
subject to settlement under the reorganization case." No principal or interest
payments will be made without Bankruptcy Court approval or until a
reorganization plan defining the repayment terms has been approved by the
Bankruptcy Court.

         Debtor-In-Possession Credit Facilities

       On August 20, 2001, the Company entered into a $700 million
Debtor-In-Possession Credit Agreement, dated as of August 20, 2001 (the "GECC
DIP Facility", "DIP Facility" or "DIP"), with General Electric Capital
Corporation ("GE Capital" or "GECC"). The Company also entered into a $55
Million Credit Agreement, dated as of August 20, 2001 (the "Kimco DIP Facility"
and together with the "GECC DIP Facility", the "DIP Facilities"), with Kimco
Funding, LLC ("Kimco"). The GECC DIP Facility consists of a $575 million Tranche
A Revolver (including a Swing Line Commitment of $30 million as a subfacility
thereof), a $50 million fully drawn Tranche B Revolver and a $75 million Term
Loan. The GECC DIP Facility, as amended, has a sublimit of $75 million for the
issuance of letters of credit. Amounts borrowed under the Tranche A and Tranche
B Revolvers bear interest at the Index Rate plus 1.50% per annum or, at the
election of the Company, the applicable LIBOR Rate plus 2.75% per annum. Amounts
borrowed under the Term Loan bear interest at the Index Rate plus 5.25% per
annum. The Company must also pay an unused commitment fee equal to 0.35% per
annum multiplied by the average unused daily balance of the Revolving Loan and
the Swing Line Loan. The GECC DIP Facility terminates on the earliest of, among
other dates, August 20, 2003 and the effective date of a plan of reorganization
in the Chapter 11 Cases. Proceeds from the GECC DIP Facility were used to repay
in full the Prior Credit Facility (as defined below), and will be used to pay
transaction costs and expenses related to the Chapter 11 Cases, to provide
working capital and for other general corporate purposes.

     The GECC DIP Facility  replaced the Company's  former credit facility under
the credit  agreement  dated as of March 2, 2001 (the "Prior  Credit  Facility")
with GE  Capital,  as  agent,  and a  syndicate  of other  banks  and  financial
institutions.  The Prior Credit Facility provided for a secured revolving credit
facility of up to $750  million,  with a sub-limit of $50 million for letters of
credit, and a secured term facility for $50 million. On August 20, 2001, as part
of its Interim  Order,  the Bankruptcy  Court  authorized the Company to use the
proceeds  of  the  GECC  DIP  Facility  to  repay  the   Company's   outstanding
indebtedness  under the Prior  Credit  Facility.  On  September  25,  2001,  the
Bankruptcy  Court  issued  a final  order  authorizing  the  Company  to use the
proceeds  of  the  GECC  DIP  Facility  to  repay  the   Company's   outstanding
indebtedness under the Prior Credit Facility.

       The lenders under the GECC DIP Facility have a super-priority claim
against the estates of the Debtors (except with respect to the Company's right,
title and interest in all real property leases in which the lenders under the
Kimco DIP Facility, as defined below, have a first priority lien).

       The Kimco DIP Facility consists of a $55 million term loan which has been
reduced by payments to $54.4 million as of May 4, 2002. Amounts borrowed under
the Kimco DIP Facility bear interest at the Index Rate plus 6.00% per annum. The
Company must also pay an additional fee on or prior to July 31, 2002 and each
anniversary date thereof occurring on or prior to the maturity date equal to
0.33% multiplied by the aggregate principal amount of loans outstanding on such
date. The Kimco DIP Facility terminates on the earliest of, among other dates,
August 20, 2003 and the effective date of a plan of reorganization in the
Chapter 11 Cases.

       The lenders under the Kimco DIP Facility have a priority claim against
the estates of the Debtors, which ranks junior to the super-priority claims of
the lenders under the GECC DIP Facility (except with respect to the Company's
right, title and interest in all real property leases in which the lenders under
the Kimco DIP Facility have a first priority lien).

       On April 4, 2002, the Company and its GECC DIP Facility lenders agreed to
certain modifications of the covenants required by the terms of the GECC DIP
Facility. The Company was in compliance with all financial covenants of the DIP
Facilities as of May 4, 2002.

       As of May 4, 2002, borrowings of $388.0 million were outstanding under
the GECC DIP Facility. These borrowings are included in the current portion of
long-term debt in the accompanying consolidated condensed balance sheet as of
May 4, 2002. In addition, $33.0 and $11.3 million of standby and trade letters
of credit, respectively, were outstanding under the GECC DIP Facility. The
weighted average interest rate on the borrowings under the GECC DIP Facility
for the 13 weeks ended May 4, 2002 was 7.53%. The peak borrowing level under the
GECC DIP Facility through May 4, 2002 was $388.0 million and occurred in the
fiscal month of April, 2002.


Senior Notes due 2003

      The 12.5% Senior Notes due 2003 (the "Hills Senior Notes") were, at the
time of the acquisition of Hills, an unsecured obligation of Hills Stores
Company ("Hills"). The Company had Hills Senior Notes with a recorded value of
$44.1 million outstanding as of August 20, 2001. The Hills Senior Notes pay
interest in January and June and mature July 2003. No principal or interest
payments will be made without Bankruptcy Court approval or until a
reorganization plan defining the repayment terms has been approved by the
Bankruptcy Court.


Senior Notes due 2006

     The Company had $200.0 million of its 10% seven-year senior notes (the
"Ames Senior Notes") outstanding as of August 20, 2001. The Ames Senior Notes
pay interest semi-annually in April and October and mature April 2006. The
Company did not pay interest on the Ames Senior Notes in October, 2001, and no
principal or interest payments will be made without Bankruptcy Court approval or
until a reorganization plan defining the repayment terms has been approved by
the Bankruptcy Court..


6.       Stock Options:

      The Company has four stock option plans (the "Option Plans"): the 1994
Management Stock Option Plan, the 1994 Non-Employee Directors Stock Option Plan
(as amended), the 1998 Management Stock Incentive Plan, as amended and restated,
and the 2000 Store Manager Stock Option Plan.

      The Company accounts for its stock option plans under Accounting
Principles Board ("APB") Opinion No. 25.


7.       Income Taxes:
       The Company's estimated annual effective income tax rate was applied to
the loss before income taxes for the thirteen weeks ended May 5, 2001, to
compute a non-cash income tax benefit. The income tax benefit was included in
current deferred taxes in the accompanying consolidated condensed balance sheet
as of May 5, 2001.

      In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some or all of the deferred
taxes will not be realized. In Fiscal 2001, the Company increased its valuation
allowance on its deferred tax assets by $591 million. The Company has recorded a
full valuation allowance on net deferred tax assets as realization of such
assets in future years is uncertain.

8.       Commitments and Contingencies:

      Reference can be made to the 2001 Form 10-K (Item 3 - Legal) for various
litigation involving the Company, for which there were no material changes since
the filing date of the 2001 Form 10-K.

      On August 20, 2001, the Debtors filed their voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code with the United States
Bankruptcy Court for the Southern District of New York, Case Nos. 01-42217
through 01-42221 (REG). All civil litigation commenced against the Debtors prior
to that date has been stayed by operation of law. The Company may agree from
time to time to proceed with the resolution of certain litigation or the Court
may allow certain litigation to proceed. Any judgments against the Company,
however, ultimately may be paid only pursuant to a confirmed plan of
reorganization.


9.       Closed Store Reserves and Inventory Charges:

      The Company has established reserves against the costs associated with the
closure of a number of stores. The following items represent the major
components of the change in the closed store reserves during the quarter ended
May 4, 2002.

                                                                (in thousands)
                                                              -----------------
                  Balance at 2/2/02                                    $62,928
                           Fixed asset write-downs                    (66,622)
                           Beneficial lease write off                 (15,976)
                           Capital  lease  obligation  write
                             off                                        23,234
                           Occupancy costs                             (3,062)
                           Severance                                   (4,181)
                           Transferred from liabilities
                             subject to compromise                       4,740
                                                              -----------------
                  Balance at 5/4/02                                     $1,061
                                                              =================

 10.     Liabilities Subject to Compromise

      Liabilities subject to compromise consist of various obligations of the
Company as of the August 20, 2001 Chapter 11 filing date. As of May 4, 2002
liabilities subject to compromise was comprised of :

       (in thousands)                                           Balance at
                                                               May 4, 2002
                                                         -----------------
       Accounts payable trade                                     $259,570
       Accounts payable other                                       78,327
       Lease rejection and other store closing costs               103,329
       Equipment lease obligations                                  21,870
       Senior notes                                                244,147
       Accrued  taxes,   general  liability  and  other
         prepetition obligations                                    40,778
                                                         -----------------
       Total                                                      $748,021
                                                         =================


11.      Recently Issued Accounting Pronouncements:

      During June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 141 "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." In
addition to requiring the use of the purchase method for all business
combinations, SFAS No. 141 requires intangible assets that meet certain criteria
to be recognized as assets apart from goodwill. SFAS No 142 addresses accounting
and reporting standards for acquired goodwill and other intangible assets, and
generally, requires that goodwill and indefinite life intangible assets no
longer be amortized but be tested for impairment annually. Finite life
intangible assets will continue to be amortized over their useful lives. The
Company adopted SFAS No. 142 at the start of fiscal year 2002. As a result of
this standard, the Company recorded a cumulative effect adjustment, during the
quarter ended May 4, 2002, of $5.6 million reflecting the elimination of "excess
of revalued net assets over equity under fresh-start reporting," also referred
to as Negative Goodwill. In addition, the Company estimates that $2.6 million of
goodwill amortization will be eliminated during this Fiscal year as a result of
the adoption of this standard. Further determination as to any potential
impairment of goodwill and other intangible assets as calculated under the
provisions of these new standards has not yet been determined by the Company.

      In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs and is effective for fiscal
years beginning after June 15, 2002. Management does not expect the impact of
SFAS No. 143 to be material to the Company's consolidated financial statements.

      During August 2001 the Financial Accounting Standard Board issued SFAS No.
144 "Accounting for the impairment or disposal of long-lived assets." The
statement addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121 "Accounting for the
impairment of long-lived assets and for long-lived assets to be disposed of" and
the accounting and reporting provisions of Accounting Principles Board No. 30
"Reporting the results of operations-Reporting the effects of disposal of a
segment of business, and extraordinary, unusual and infrequently occurring
events and transactions for the disposal of a segment of a business". SFAS No.
144 excludes goodwill and other intangibles that are not amortized. The
statement is effective for fiscal years beginning after December 15, 2001. The
impact of this statement on the Company's consolidated financial statements is
currently being evaluated.


12.      Subsequent Events:

      On June 6, 2002, the Company announced the closing of six stores. The
liquidation of the inventories in the six stores immediately began on June 7,
2002. The Company will record a charge in the second quarter of Fiscal 2002 for
employee severance, the write-off of fixed assets and the estimated cost of the
leases to be rejected in the Chapter 11 proceedings related to these closing
stores.

      On June 17, 2002, the Company announced that it had entered into
agreements with the current lenders to its DIP Facility led by GE Capital as
agent, to amend its current DIP Facility agreement and with KRC Acquisition
Corporation, an affiliate of Kimco Realty Corporation for the sale and leaseback
of certain of its properties.  Both of these agreements are subject to Bankrupty
Court approval.  The Company expects that the new agreements will
result in approximately $25 million in additional availability for the Company.


<PAGE>

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



The following discussion and analysis should be read in conjunction with the
consolidated condensed financial statements and footnotes presented in this
report.

Chapter 11 Filing

      On August 20, 2001, the Company and each of its four subsidiaries
(collectively, the "Debtors") filed voluntary petitions under Chapter 11 of the
U.S. Bankruptcy Code (the "Bankruptcy Code") with the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court"). The
Chapter 11 cases Nos. 01-42217 (REG) through 01-42221 (REG) (the "Chapter 11
Cases") have been consolidated for the purpose of joint administration. As of
August 20, 2001, the Debtors began operating their business as
debtors-in-possession under Chapter 11 of the Bankruptcy Code and are subject to
the jurisdiction of the Bankruptcy Court.

      As a result of these filings, actions to collect pre-petition indebtedness
are stayed and other contractual obligations against the Debtors may not be
enforceable. In addition, under the Bankruptcy Code, the Debtors may assume or
reject executory contracts, including real estate leases, employment contracts,
personal property leases, service contracts and other unexpired executory
pre-petition contracts, subject to Bankruptcy Court approval. Parties affected
by these rejections may file claims with the Bankruptcy Court in accordance with
the Bankruptcy Code. The Debtors cannot presently determine the ultimate
liability that may result from the filing of claims for all contracts that may
be rejected. Estimates have been made however, for certain contracts to be
rejected and are included in the liabilities subject to compromise category.
Substantially all pre-petition liabilities are subject to settlement under a
plan of reorganization to be voted on by the creditors and equity holders and
approved by the Bankruptcy Court. Although the Debtors expect to file a
reorganization plan or plans that provide for emergence from bankruptcy, there
can be no assurance that a reorganization plan or plans will be proposed by the
Debtors or confirmed by the Bankruptcy Court or that any such plan will be
consummated.

      As provided by the Bankruptcy Code, the Debtors have the exclusive right
to submit a plan of reorganization for 120 days from the date of the filing of
the voluntary petitions. On December 5, 2001, the Company filed a motion with
the Bankruptcy Court to extend the period of exclusivity and on December 18,
2001, the court granted an extension of the exclusivity period to May 31, 2002.
On May 23, 2002, the Court granted a further extension of the exclusivity period
until February 28, 2003. If the Debtors fail to file a plan of reorganization
during the period of exclusivity or if such a plan is not accepted by the
required number of creditors and equity holders within the required period, any
party in interest may subsequently file its own plan of reorganization for the
Debtors. A plan of reorganization must be confirmed by the Bankruptcy Court,
upon certain findings being made by the Bankruptcy Court which are required by
the Bankruptcy Code. The Bankruptcy Court may confirm a plan of reorganization
notwithstanding the non-acceptance of the plan by an impaired class of creditors
or equity holders if certain requirements of the Bankruptcy Code are met. As
part of its restructuring, the Company also anticipates that all existing equity
will be cancelled. The Chapter 11 filing, the uncertainty regarding the eventual
outcome of the reorganization case and the effect of other unknown adverse
factors could threaten the Company's existence as a going concern.

      At the first day hearing held on August 20, 2001 before Judge Robert E.
Gerber, the Bankruptcy Court entered its first day orders granting authority to
the Debtors to, among other things, pay pre-petition and post-petition employee
wages, salaries, benefits and other employee obligations, pay certain
administrative fees and insurance related obligations and honor customer service
programs, including warranties, returns, layaways and gift certificates.

      Schedules have been filed with the Bankruptcy Court setting forth the
assets and liabilities of the Debtors as of the filing date as shown by the
Company's accounting records. The Bankruptcy Court established a March 25, 2002,
bar date for claims in the Company's Chapter 11 Cases. Differences between
amounts shown by the Company and claims filed by creditors will be investigated
and, if necessary, unresolved disputes will be determined by the Bankruptcy
Court. The ultimate settlement terms for such liabilities are subject to a plan
of reorganization, and accordingly, are not presently determinable.


Forward-looking Statements

      The statements contained or incorporated by reference under the captions
"Business," "Legal Proceedings," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Quantitative and Qualitative
Disclosures about Market Risk" and elsewhere in this Form 10-Q that are not
historical facts are "forward-looking statements," as that term is defined in
the Private Securities Litigation Reform Act of 1995. Those statements include
all discussions of strategy as well as statements that contain such
forward-looking expressions as "believes," "estimates," "intends," "may,"
"will," "should," or "anticipates" or the negative thereof. In addition, from
time to time, our representatives or we have made or may make forward-looking
statements orally or in writing. Furthermore, forward-looking statements may be
included in our filings with the Securities and Exchange Commission as well as
in the press releases or oral presentations made by or with the approval of one
of our authorized executive officers.

      We caution you to bear in mind that forward-looking statements, by their
very nature, involve assumptions and expectations and are subject to risks and
uncertainties. Although we believe that the assumptions and expectations
reflected in the forward-looking statements contained herein are reasonable, no
assurance can be given that those assumptions or expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from our expectations include, but are not limited to, the ones
discussed below.

      The filing of the voluntary Chapter 11 petitions referred to above, losses
from operations and negative cash flow from operations raise doubt about our
ability to continue as a going concern. In addition, we are subject to
risks associated with (i) our ability to operate pursuant to the terms of the
Debtor-In-Possession credit facilities ("DIP Facilities" or "DIP"), (ii) our
ability to operate successfully under the Chapter 11 proceedings, (iii) the
approval of plans and activities by the Bankruptcy Court and (iv) our ability to
create and have approved a reorganization plan in the Chapter 11 Cases.

      Our financial performance is sensitive to changes in overall economic
conditions that impact consumer spending, particularly discretionary spending.
Future economic conditions affecting disposable consumer income such as
employment levels, business conditions, fuel and energy costs, interest rates,
and tax rates could reduce consumer spending or cause consumers to shift their
spending to other products. A general slowdown in the United States' economy or
an uncertain economic outlook would adversely affect consumer spending habits,
which would likely result in lower net sales than expected on a quarterly or
annual basis. A general reduction in the level of discretionary spending or
shifts in consumer discretionary spending to other products could adversely
affect our growth, net sales, and profitability. Our operating results may be
adversely affected by unfavorable local, regional or national economic
conditions, especially those affecting the Northeast, Midwest or Mid-Atlantic
Regions where our stores are currently located.

      Our business is affected by the pattern of seasonality common to most
retailers. Our net sales and net income are generally weakest during the first
two fiscal quarters and strongest during the third and fourth quarters.
Historically, we have generated a significant portion of our net sales and
profits during our fourth fiscal quarter, which includes the Christmas selling
season, and have experienced losses or minimal earnings in the first, second,
and third fiscal quarters.

      We realize a disproportionately large amount of our net sales and net
income during the Christmas selling season. In anticipation of the holidays, we
purchase substantial amounts of seasonal inventory and hire many temporary
employees. If for any reason our net sales during the Christmas selling season
were below seasonal norms, we could have excess inventory, necessitating
mark-downs to minimize this excess, which would reduce our profitability and
adversely affect our operating results.

      We continually change our mix of seasonal merchandise, non-seasonal
merchandise, and consumable products. Our gross profit margins may fluctuate
from quarter to quarter. Our quarterly and annual results of operations,
including comparable store net sales and income, also fluctuate for a variety of
other reasons, including adverse weather conditions, particularly during the
peak Christmas season, and difficulties in obtaining sufficient quantities of
merchandise from our suppliers.

      The retail industry is highly competitive and we expect competition to
increase in the future. We compete with many smaller stores offering a similar
range of products. Although Ames is one of the largest regional discount
retailers, we are still considerably smaller in terms of our total number of
stores, sales and earnings than the three leading national chains: Wal-Mart,
Kmart, and Target Stores. Each of these chains, as well as other regional
operators, currently operates stores within our regional market and competes
with us for customers and potential store locations. We anticipate a further
increase in competition from these national discount store chains.

      Our merchandising focus is primarily directed to consumers who, we
believe, are underserved by the major national chains. Although this approach,
combined with our smaller store size, has enabled us to compete effectively with
these chains and operate profitably in proximity to their stores, we remain
vulnerable to the marketing power and high level of consumer recognition of the
major national discount chains. We expect to face increased competition in the
future which could adversely affect our business, results of operations, and
financial condition.

      The efficient operation of our business is heavily dependent on our
information systems. We depend on others to maintain and periodically upgrade
many of these systems so that they can continue to support our business. The
software programs supporting many of our systems were licensed to us by
independent software developers. The inability of these developers to continue
to maintain and upgrade these information systems and software programs would
disrupt our operations if we were unable to convert to alternate systems in an
efficient and timely manner.

      Our business is dependent on continued good relations with our vendors. In
particular, we believe that we generally are able to obtain attractive pricing
and other terms from vendors because we are perceived as a desirable customer.
Our failure to maintain good relations with our vendors could increase our
exposure to shifts in market demand, which may in turn lead to improper
inventory levels and increased inventory markdown rates.

      Substantially all of our assets are encumbered by the terms of the DIP
Facilities. At May 4, 2002, the amount of our General Electric Capital
Corporation Debtor-In-Possession ("GECC DIP") revolving credit agreement debt
outstanding was $388.0 million. Our leveraged position impairs our ability to
obtain additional financing to fund working capital requirements, capital
expenditures or other purposes.

      The amount of our GECC DIP available for cash borrowings and
letters of credit is based on specified percentages of our inventory on hand as
well as in-transit inventory from overseas, certain receivables and certain of
our owned real estate. Our borrowing availability under the GECC DIP
fluctuates relative to this borrowing base. This borrowing base varies in value
as a result of sales, merchandise purchases, and profitability. Lack of
short-term liquidity due to reaching the limits of our borrowing availability
would adversely affect our business, results of operations, and financial
condition.

      We incurred a net pre-tax loss of $49.1 million in our fiscal quarter
ended May 4, 2002. There can be no assurance that losses will not continue in
the future. If losses do continue to occur, we would likely need to obtain
additional capital to continue our operations.

      All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
these factors and the cautionary statements contained herein.

Basis of Presentation

     The  accompanying  consolidated  condensed  financial  statements have been
prepared on a going concern basis, which contemplates  continuity of operations,
realization  of assets and  liquidation of  liabilities  and  commitments in the
normal course of business and do not reflect any  adjustments  that might result
if the  Company  is unable to  continue  as a going  concern.  The filing of the
voluntary  Chapter 11 petitions  referred to above,  losses from  operations and
negative cash flow from  operations  raise doubt about the Company's  ability to
continue as a going concern.  The appropriateness of using a going concern basis
is  dependent  upon,  among  other  things,  confirmation  of a plan or plans of
reorganization,  future  profitable  operations and the ability to generate cash
from  operations  and financing  sources  sufficient to meet  obligations.  As a
result  of the  filing  of the  Chapter  11  cases  and  related  circumstances,
realization  of assets and  liquidation of liabilities is subject to significant
uncertainty.  While under the  protection of Chapter 11, the Debtors may sell or
otherwise  dispose of assets,  and liquidate or settle  liabilities  for amounts
other than those reflected in the consolidated financial statements.  Further, a
plan or plans of reorganization  could materially change the amounts reported in
the accompanying  consolidated financial statements.  The consolidated financial
statements  do not include any  adjustments  relating to  recoverability  of the
value of recorded asset amounts or the amount and  classification of liabilities
that  might be  necessary  as a  consequence  of a plan of  reorganization.  The
Company  anticipates  significant  adjustments  to  the  consolidated  financial
statements as a result of applying the  provisions of Statement of Position 90-7
"Financial  Reporting by entities in  Reorganization  Under the Bankruptcy Code"
during the proceedings.  At this time, it is not possible to predict the outcome
of the Chapter 11 cases or their effect on the Company's business, its financial
position,  results of  operations or cash flows.  If it is  determined  that the
liabilities  subject to compromise in the Chapter 11 cases exceed the fair value
of the assets, unsecured claims may be satisfied at less than 100% of their face
value. The Company has previously  indicated its belief that all existing equity
will be cancelled as part of the  reorganization.  The Company  believes the DIP
Facilities , should  provide the Company with adequate  liquidity to conduct its
business  while it  prepares  a  reorganization  plan.  However,  the  Company's
liquidity, capital resources, results of operations and ability to continue as a
going  concern  are  subject  to known  and  unknown  risks  and  uncertainties,
including those set forth under "Forward-looking Statements."

<PAGE>

Results of Operations

      The following tables illustrate the consolidated results of operations for
the thirteen weeks ended May 4, 2002 compared to the consolidated results of
operation for the thirteen weeks ended May 5, 2001.

<TABLE>
<S>                                                                                                     <C>
               For the thirteen weeks ended               May 4,             May 5,             Percentage
                                                           2002               2001                Change
                                                      ----------------    --------------      ----------------
                                                                          (In thousands)

Net sales                                                  $567,882            $793,687           (28.5)%
Leased department and other income                            6,718               9,149           (26.6)%
                                                      --------------      --------------

Total revenue                                               574,600             802,836           (28.4)%
Costs and expenses:
      Cost of merchandise sold                              412,095             565,956           (27.2)%
      Selling, general, and administrative expense          182,069             238,715           (23.7)%
      Depreciation and amortization expense, net             14,661              19,636           (25.3)%
      Interest and debt expense, net                         11,906              23,258           (48.8)%
      Reorganization expenses                                 3,000                   -
                                                      --------------      --------------
Loss before income taxes                                   (49,131)            (44,729)
Income tax benefit                                                -              16,997
                                                      --------------      --------------
Net Loss before cumulative effect of accounting
  change                                                  (49,131)            (27,732)
Cumulative effect of accounting changes, net of tax
  of $0                                                      5,562                   -
                                                      --------------      --------------

Net loss                                                  ($43,569)           ($27,732)
                                                      ==============      ==============


</TABLE>

      The decrease in net sales of 28.5% is primarily attributable to the
closing of 119 stores and a 8.7% decrease in comparable store sales.

      Gross margin as a percentage of sales decreased to 27.4% from 28.7% during
the first quarter of fiscal 2002 compared to the same period in Fiscal 2001. For
the quarter, the gross margin rate was negatively impacted by a reduction in
vendor funds received, partially offset by a lower markdown rate from last year.

      The decrease in selling, general and administrative expenses primarily
resulted from cost reduction programs and the closure of 119 stores. Selling,
general and administrative expenses as a percentage of sales increased from
30.1% to 32.1% for the quarter; the increase was primarily a result of lower
than expected sales.

      The decrease in depreciation and amortization expense is primarily a
result of a lower fixed asset base as a result of write-offs of the assets in
the closed stores.

      The decrease in interest expense is mainly attributable to a lower level
of borrowings under our credit facilities and the reclassification of the Ames
Senior Notes and the Hills Senior Notes to liabilities subject to compromise.

      The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 142, "Goodwill and Other Intangible Assets" at the start of Fiscal 2002.
Adoption of SFAS No. 142 resulted in a cumulative effect of accounting change
item in the Company's statement of operations. The Company recorded a $5.6
million gain from the write-off of "excess of revalued net assets over equity
under fresh-start reporting" also referred to as negative goodwill.


Liquidity and Capital Resources

Current Year

      The following table reflects certain balance sheet account balances as of
the end of the current year fiscal quarter compared to the same account balances
as of the beginning of the current fiscal quarter.

<TABLE>
<S>                                                                                                          <C>
                                                May 4,            February 2,                        Percentage
                                                 2002                2002             Change           Change
                                            ----------------    ----------------    ------------    -------------
                                                                         (In thousands)
                                            ---------------------------------------------------------------------

Cash and cash equivalents                         $22,039               $29,105        ($7,066)          (24.3)%
Merchandise inventories                           594,901               532,407          62,494            11.7%
Net fixed assets                                  262,607               343,547        (80,940)          (23.6)%
Trade accounts payable                             73,520                67,458           6,062             9.0%
Store closing reserves                              1,061                62,928        (61,867)          (98.3)%
Accrued expenses                                   67,767                70,172         (2,405)           (3.4)%
Capital lease and financing obligations            56,706                80,816        (24,110)          (29.8)%

</TABLE>

      The decrease in our cash position was primarily caused by the closing of
54 stores.

     The increase in inventory was due to seasonable buildup partially offset by
the liquidation of inventory in the 54 closing stores.

      The decrease in net fixed assets was due to net fixed asset retirements
(including capital lease asset retirements) totaling $66.6 million, associated
with the 54 stores that have closed since the beginning of the year, and $15.1
million in depreciation expense partially offset by $.8 million in capital
expenditures.

      The increase in trade accounts payable was principally the result of
increased inventory purchases.

      Store closing reserves decreased primarily as a result of costs related to
the store closings, including $66.6 million in fixed asset write-downs partially
offset by $23.2 million in capital lease obligation write offs, $16.0 million in
beneficial lease write offs, $4.2 million in severance costs and $3.1 million in
occupancy costs. An additional $4.7 million was transferred from the liabilities
subject to compromise account for lease rejection costs.

      The decrease in capital lease and financing obligations was primarily due
to $23.2 million in write-offs associated with the closing of the 54 stores.


Comparable Quarters

      The following table reflects certain balance sheet account balances as of
the end of the current fiscal quarter compared to the same account balances at
the end of the Fiscal 2001 first quarter.

<TABLE>
<S>                                                                                                             <C>

                                                May 4,              May 5,                           Percentage
                                                 2002                2001             Change           Change
                                            ----------------    ----------------    ------------    -------------

                                                                         (In thousands)
                                            --------------------------------------------------------------------

Cash and cash equivalents                         $22,039               $44,440       ($22,401)          (50.4)%
Merchandise inventories                           594,901               837,476       (242,575)          (29.0)%
Net fixed assets                                  262,607               494,020       (231,413)          (46.8)%
Trade accounts payable                             73,520               321,931       (248,411)          (77.2)%
Store closing reserves                              1,061               142,797       (141,736)          (99.3)%
Accrued expenses                                   67,767               112,046        (44,279)          (39.5)%
Capital lease and financing obligations            56,706               133,963        (77,257)          (57.7)%

</TABLE>

      The decrease in merchandise inventories was due to a smaller store base as
a result of the closing of 119 stores since the end of last year quarter ended
May 5, 2001.

      The reduction in net fixed assets resulted from write-offs of $169.6
million primarily associated with the 119 stores, as referenced above, and $74.1
million in depreciation expense offset by $11.4 million in capital expenditures
and $0.6 million in capital lease additions incurred during the twelve months
ended May 4, 2002.

      The decrease in trade accounts payable from May 5, 2001 resulted primarily
from the transfer of vendor payables as of Auguest 19, 2002 to liabilities
subject to compromise.

     Store closing  reserves  decreased as a result $166.9 million in fixed
asset write-offs, $103.7 million of transfers to liabilities subject to
compromise in recognition of potential lease rejection costs, $23.4 million
of beneficial lease write-offs, $11.2 million of occupancy costs and $7.8
million of severance costs offset by $114.7 million in store closing charges
and $57.1 million of capital lease obligation write-offs.

      The decrease in capital lease and financing obligations was due to $57.1
million in write-offs associated with the closing stores as previously
referenced, $7.8 million in payments on capital lease obligations and $2.0
million of principal payments on financing obligations partially offset by $0.6
million in capital lease additions.


Liquidity Sources

      Our principal sources of liquidity are our Debtor in Possession credit
agreements (see below), cash from operations, and cash on hand.

      On August 20, 2001, the Company entered into a $700 million
Debtor-In-Possession Credit Agreement, dated as of August 20, 2001 ( the "GECC
DIP Facility"), with General Electric Capital Corporation ("GE Capital"). The
Company also entered into a $55 million Credit Agreement, dated as of August 20,
2001 (the "Kimco DIP Facility" and, together with the GECC DIP Facility, the
"DIP Facilities"), with Kimco Funding, LLC ("Kimco"). The GECC DIP Facility
consists of a $575 million Tranche A Revolver (including a Swing Line Commitment
of $30 million as a subfacility thereof), a $50 million fully drawn Tranche B
Revolver and a $75 million Term Loan. The GECC DIP Facility has a sublimit of
$75 million for the issuance of letters of credit. Amounts borrowed under the
Tranche A and Tranche B Revolvers bear interest at the Index Rate plus 1.50% per
annum or, at the election of the Company, the applicable LIBOR Rate plus 2.75%
per annum. Amounts borrowed under the Term Loan bear interest at the Index Rate
plus 5.25% per annum. The Company must also pay an unused commitment fee equal
to 0.35% per annum multiplied by the average unused daily balance of the
Revolving Loan and the Swing Line Loan. The GECC DIP Facility terminates on the
earliest of, among other dates, August 20, 2003 and the effective date of a plan
of reorganization in the Chapter 11 Cases. Proceeds from the GECC DIP Facility
were used to repay in full the Prior Credit Facility (as defined below), and
will be used to pay such transaction costs and expenses related to the Chapter
11 Cases, to provide working capital and for other general corporate purposes.

      The GECC DIP Facility replaced the Company's former credit facility under
the Credit Agreement, dated as of March 2, 2001 (the "Prior Credit Facility"),
with GE Capital, as agent, and a syndicate of other banks and financial
institutions. The Prior Credit Facility provided for a secured revolving credit
facility of up to $750 million, with a sub-limit of $50 million for letters of
credit, and a secured term facility for $50 million. On September 25, 2001, the
Bankruptcy Court issued a final order authorizing the Company to use the GECC
DIP Facility.

      The lenders under the GECC DIP Facility have a super-priority claim
against the estates of the Debtors (except with respect to the Company's right,
title and interest in all real property leases in which the lenders under the
Kimco DIP Facility have a first priority lien).

      The Kimco DIP Facility consists of a $55 million term loan. Amounts
borrowed under the Kimco DIP Facility bear interest at the Index Rate plus 6.00%
per annum. The Company must also pay an additional fee on or prior to July 31,
2002 and each anniversary date thereof occurring on or prior to the maturity
date equal to 0.33% multiplied by the aggregate principal amount of loans
outstanding on such date. The Kimco DIP Facility terminates on the earliest of,
among other dates, August 20, 2003 and the effective date of a plan of
reorganization in the Chapter 11 Cases. Proceeds from the Kimco DIP Facility
will be used for the financing of (i) capital expenditures relating to the
Company's real property assets, (ii) its operating expenses and (iii)
intercompany loans to Ames Merchandising Corporation.

        The lenders under the Kimco DIP Facility have a priority claim against
the estates of the Debtors, which ranks junior to the super-priority claims of
the lenders under the GECC DIP Facility (except with respect to the Company's
right, title and interest in all real property leases in which the lenders under
the Kimco DIP Facility have a first priority lien).

     As of May 4, 2002, borrowings of $388.0 million were outstanding under the
GECC DIP Facility. These borrowings are included in the current portion of
long-term debt in the accompanying consolidated condensed balance sheet as of
May 4. 2002. In addition, $33.0 and $11.3 million of standby and trade letters
of credit, respectively, were outstanding under the GECC DIP Facility. The
weighted average interest rate on the borrowings for the thirteen weeks ended
May 4, 2002 was 7.53%. The peak borrowing level under the GECC DIP Facility
through May 4, 2002 was $388.0 million and occurred in the fiscal month of
April, 2002.

      Achievement of expected cash flows from operations and compliance with our
credit agreement covenants (see Note 5 to the consolidated financial statements)
are dependent upon the attainment of sales, gross profit, expense levels, vendor
relations, and flow of merchandise that are consistent with our financial
projections

     Closed Store Reserves

     The Company has established reserves against the costs associated with the
closure of a number of stores. The following items represent the major
components of the change in the closed store reserves during the quarter ended
May 4, 2002.


                                                             (in thousands)
                                                           ----------------
     Balance at 2/2/02                                              $62,928
              Fixed asset write-downs                              (66,622)
              Beneficial lease write off                           (15,976)
              Capital lease obligation write off                     23,234
              Occupancy costs                                       (3,062)
              Severance                                             (4,181)
              Transferred from liabilities subject to
                compromise                                            4,740
                                                           ----------------
     Balance at 5/4/02                                               $1,061
                                                           ================

     On June 6, 2002, the Company announced the closing of six stores.
Liquidation of the inventories of the six stores began on June 7, 2002. The
Company will record a charge in the second quarter of Fiscal 2002 for employee
severance, the write-off of fixed assets and the estimated cost of the leases to
be rejected in the Chapter 11 proceedings related to these closing stores.

<PAGE>

Item 3.
           Quantitative and Qualitative Disclosures About Market Risk

      We have exposure to interest rate volatility primarily relating to
interest rate changes applicable to revolving loans under our credit facilities.
These loans bear interest at rates which vary with changes in (i) the London
Interbank Offered Rate (LIBOR) or (ii) the Index Rate (as defined in our credit
agreement).

      We do not speculate on the future direction of interest rates. As May 4,
2002, approximately $442.4 million of our debt bore interest at variable rates.
We believe that the effect, if any, of possible near term changes in interest
rates on our consolidated financial position, results of operations or cash
flows would not be significant.



<PAGE>

<TABLE>
<S>                                                                                     <C>


                                     PART II
                                OTHER INFORMATION


Item 1.           Legal Proceedings.

                  Reference can be made to Item 3 - Legal Proceedings included
                  in the Company's most recent Form 10-K for various litigation
                  involving the Company, for which there were no material
                  changes since the filing date of the Form 10-K, except as set
                  forth in Part I, Item 2 - Management's Discussion and Analysis
                  of Financial Condition and Results of Operations.

                  On August 20, 2001, the Debtors filed their voluntary
                  petitions for reorganization under Chapter 11 of the
                  Bankruptcy Code with the United States Bankruptcy Court for
                  the Southern District of New York, Case Nos. 01-42217 through
                  01-42221 (REG). All civil litigation commenced against the
                  Debtors prior to that date has been stayed by operation of
                  law.

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

                  None

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

(a)      Index to Exhibits

                 Exhibit No.          Exhibit

                 11                   Schedule of computation of basic and diluted net income (loss)
                                      per share

                 12                   Ratio of Earnings to Fixed Charges


(b)      Reports on Form 8-K

                  None




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<PAGE>




                                   SIGNATURES



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

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<S>                                                                                                             <C>

                                                                            AMES DEPARTMENT STORES, INC.
                                                                                    (Registrant)


Dated:               June 17, 2002
                                                                 /s/ JOSEPH R. ETTORE
                                                                 ----------------------------------------------------
                                                                 Joseph R. Ettore, Chairman, Chief Executive
                                                                 Officer, and Director

Dated:               June 17, 2002                               /s/ ROLANDO DE AGUIAR
                                                                 ----------------------------------------------------
                                                                 Rolando de Aguiar, Senior Executive Vice
                                                                 President, Chief Financial and Administrative Officer



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<S>                                                                                                     <C>

                                                                                                                Exhibit 11
                                      AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                             SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
                                        (In Thousands, Except Per Share Amounts)


                                                                                For the Thirteen
                                                                                   Weeks Ended
                                                                       ------------------------------------
                                                                           May 4,               May 5,
                                                                            2002                 2001
                                                                       ----------------     ---------------


       Net loss before cumulative effect of accounting change                ($49,131)           ($27,732)
       Cumulative effect of accounting change                                    5,562                   -
                                                                       ----------------     ---------------
       Basic and diluted net loss......................                       (43,569)            (27,732)
                                                                       ================     ===============

       For Basic Earnings Per Share:
       Weighted average number of common shares outstanding
            during the period (b).............................                  29,408              29,397
       Basic earnings per share:
       Basic income per share before cumulative effect of
            accounting change                                                  ($1.67)              ($.94)
       Cumulative effect adjustment, net of tax of $0                             0.19                   -
                                                                       ----------------     ---------------
       Basic net loss per Share....................................            ($1.48)              ($.94)
                                                                       ================     ===============

       For Diluted Earnings Per Share:
       Weighted average number of common shares outstanding
            during the period (b)......................................         29,408              29,397
       Add common stock equivalent shares represented by:
       Options under the 2000 Store Manager Stock Option
            Plan                                                                     -                  95
                                                                       ----------------     ---------------
       Weighted average number of common and common
            Equivalent shares.....................................              29,408              29,397
                                                                       ================     ===============
       Diluted earnings per share:
       Diluted income per share before cumulative effect of
            accounting change                                                  ($1.67)              ($.94)
       Cumulative effect adjustment, net of tax of $0                             0.19                   -
                                                                       ----------------     ---------------
       Diluted net loss per share (a).............................             ($1.48)              ($.94)
                                                                       ================     ===============


(a)  Common stock equivalents have not been included, because the effect would be anti-dilutive.
(b)  The weighted average number of common shares outstanding is net of treasury stock.

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<PAGE>

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<S>                                                                                                                         <C>
                                                                                                           Exhibit 12
                                             AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                                                  RATIO OF EARNINGS TO FIXED CHARGES
                                                  (In Thousands, Except Ratio Data)


                                    Thirteen
                                   Weeks Ended
                                                                                 Fiscal Year Ended
                                   ------------    ------------------------------------------------------------------------------

                                       May 4,        February 2,      February 3,    January 29,     January 29,    January 31,
                                        2002            2002             2001           2000            1999           1998

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

Income (loss) before income
   taxes. Extraordinary item and
   cumulative effect adjustment       (49,131)         (383,154)      (288,377)       (31,355)          52,605         53,633

Add:
  Interest expense                      11,906            76,151         87,961         60,843          15,253         11,600

  Interest component of rental
  expense                                5,908            26,068         28,876         29,253          21,121         18,409
                                   ------------    --------------   ------------   ------------    ------------   ------------

Earnings available for fixed
   charges                            (31,317)         (280,935)      (171,540)         58,741          88,979         83,642

Fixed Charges:
  Interest expense                      11,906            76,151         87,961         60,843          15,253         11,600

  Interest component of rental
  expense                                5,908            26,068         28,876         29,253          21,121         18,409
                                   ------------    --------------   ------------   ------------    ------------   ------------

Total  fixed charges                    17,814           102,219        116,837         90,096          36,374         30,009

Ratio of earnings to fixed charges      (1.8)x            (2.7)x         (1.5)x            .7x            2.4x           2.8x


       For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income before income taxes,
extraordinary item, and cumulative effect adjustment plus fixed charges (net of capitalized interest).  Fixed charges consist
of interest expense on all indebtedness and capitalized interest, amortized premiums, discounts and capitalized expenses related to
indebtedness, and one third of rent expense on operating leases representing that portion of rent expense deemed by us to be
attributable to interest. For the fiscal year quarter ended May 4, 2002, the amount of additional earnings that would have been
required to cover fixed charges for this period was $49.1 million.

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