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             October 26, 1996              
                               -----------------------------------------

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

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


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

                                     None                              
-------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report


  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by 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       
                               -----      -----

      APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING 
THE PRECEDING FIVE YEARS:  Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by Sections 12, 13 or 
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution 
of securities under a plan confirmed by a court.

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

  20,472,469 shares of Common Stock were outstanding on November 8, 1996.


                         Exhibit Index on page 13
                     Page 1 of 15 (including exhibits)<PAGE>


               AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES

                                 FORM 10-Q

                  FOR THE QUARTER ENDED OCTOBER 26, 1996




                                 I N D E X
                                 ----------



                                                                   Page
                                                                   ----
Part I: Financial Information

        Consolidated Condensed Statements of Operations              3
           for the Thirteen and Thirty-nine Weeks Ended 
           October 26, 1996 and October 28, 1995

        Consolidated Condensed Balance Sheets at                     4
           October 26, 1996, January 27, 1996, and 
           October 28, 1995

        Consolidated Condensed Statements of Cash Flows              5
           for the Thirty-nine Weeks Ended October 26, 1996
           and October 28, 1995

        Notes to Consolidated Condensed Financial Statements         6

        Management's Discussion and Analysis of Financial            9
           Condition and Results of Operations


Part II:   Other Information

        Submission of Matters to a Vote of Security Holders         13
           and Exhibits and Reports on Form 8-K














<PAGE>


<PAGE>
<TABLE>
                                             PART I
                                      FINANCIAL INFORMATION

                          AMES DEPARTMENT STORES, INC. AND SUSIDIARIES
                        CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                            (In Thousands, Except Per Share Amounts)
                                          (Unaudited)

<CAPTION>

                                                             For the Thirteen          For the Thirty-nine
                                                                Weeks Ended               Weeks Ended
                                                          -----------------------   -------------------------
                                                           Oct. 26,    Oct. 28,       Oct. 26,     Oct. 28,
                                                             1996        1995           1996         1995
                                                          ----------- -----------   ------------ ------------
<S>                                                       <C>         <C>           <C>          <C>
TOTAL SALES                                                 $540,607    $524,421     $1,521,501   $1,508,114
 Less: Leased department sales                                23,731      22,871         66,851       68,064
                                                          ----------- -----------   ------------ ------------
NET SALES                                                    516,876     501,550      1,454,650    1,440,050
COSTS, EXPENSES AND (INCOME):
 Cost of merchandise sold                                    375,652     367,413      1,056,299    1,054,568
 Selling, general and administrative expenses                141,163     140,504        403,574      410,762
 Leased department and other operating income                 (7,466)     (7,182)       (20,461)     (21,144)
 Depreciation and amortization expense                         2,646       2,343          7,915        6,427
 Amortization of the excess of revalued net assets 
  over equity under fresh-start reporting                     (1,538)     (1,538)        (4,615)      (4,615)
 Interest and debt expense, net                                5,821       7,014         15,266       18,550
 Gain on disposition of properties                                 -           -           (395)      (6,090)
                                                          ----------- -----------   ------------ ------------

INCOME (LOSS) BEFORE INCOME TAXES                                598      (7,004)        (2,933)     (18,408)

 Income tax benefit (provision)                                 (177)      2,120            870        5,571
                                                          ----------- -----------   ------------ ------------
NET INCOME (LOSS)                                               $421     ($4,884)       ($2,063)    ($12,837)
                                                          =========== ===========   ============ ============

WEIGHTED AVERAGE NUMBER OF COMMON AND
  COMMON EQUIVALENT SHARES OUTSTANDING                        21,974      20,127         20,465       20,127
                                                          =========== ===========   ============ ============

NET INCOME (LOSS) PER SHARE                                    $0.02      ($0.24)        ($0.10)      ($0.64)
                                                          =========== ===========   ============ ============

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

                                       -3-
</TABLE>





<PAGE>


<PAGE>
<TABLE>
                            AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                                CONSOLIDATED CONDENSED BALANCE SHEETS
                                            (In Thousands)           
                                              (Unaudited)
<CAPTION>
                                                                        October 26, January 27, October 28,
                                                                            1996        1996        1995
                              ASSETS                                    ------------------------------------
<S>                                                                     <C>         <C>         <C>
Current Assets:
 Cash and short-term investments                                             20,577      14,185      19,998
 Receivables                                                                 45,055      14,478      39,293
 Merchandise inventories                                                    558,727     402,177     600,230
 Prepaid expenses and other current assets                                   15,620      12,793      19,017
                                                                        ------------------------------------
       Total current assets                                                 639,979     443,633     678,538
                                                                        ------------------------------------

Fixed Assets                                                                 91,597      78,487      69,316
 Less - Accumulated depreciation and amortization                           (27,919)    (20,259)    (14,239)
                                                                        ------------------------------------
       Net fixed assets                                                      63,678      58,228      55,077
                                                                        ------------------------------------

Other assets and deferred charges                                             4,792       3,965       4,176
                                                                        ------------------------------------
                                                                           $708,449    $505,826    $737,791
                                                                        ====================================
               LIABILITIES AND STOCKHOLDERS' EQUITY 

Current Liabilities:
 Accounts payable:
    Trade                                                                  $218,439    $112,682    $203,134
    Other                                                                    40,919      43,636      38,119
                                                                        ------------------------------------
       Total accounts payable                                               259,358     156,318     241,253
 Note payable - revolver                                                    141,507       4,284     175,747
 Current portion of long-term debt and capital lease obligations             16,260      17,347      19,049
 Self-insurance reserves                                                     35,395      39,003      43,808
 Accrued expenses and other current liabilities                              55,509      54,943      51,868
 Restructuring reserves                                                      18,515      30,623       1,144
                                                                        ------------------------------------
       Total current liabilities                                            526,544     302,518     532,869

Long-term debt                                                               12,599      23,159      25,445
Capital lease obligations                                                    26,966      29,372      33,967
Other long-term liabilities                                                   5,793       6,322       7,922

Unfavorable lease liability                                                  17,442      18,672      21,491
Excess of revalued net assets over equity under fresh-start reporting        37,865      42,480      44,018

Stockholders' Equity:
 Common stock                                                                   205         205         201
 Additional paid-in capital                                                  80,759      80,759      80,759
 Retained earnings (accumulated deficit)                                        276       2,339      (8,881)
                                                                        ------------------------------------
       Total stockholders' equity                                            81,240      83,303      72,079
                                                                        ------------------------------------
                                                                           $708,449    $505,826    $737,791
                                                                        ====================================
<FN>
    (The accompanying notes are an integral part of these consolidated condensed financial statements.)

                                                                   -4-
</TABLE>



<PAGE>


<PAGE>
<TABLE>
                    AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                    (In Thousands)
                                      (Unaudited)
<CAPTION>
                                                             For the Thirty-nine
                                                                 Weeks Ended
                                                           ---------------------
                                                            Oct. 26,   Oct. 28,
                                                              1996       1995
                                                           ---------- ----------
<S>                                                        <C>        <C>
Cash flows from operating activities:
 Net income (loss)                                           ($2,063)  ($12,837)
 Adjustments to reconcile net loss to net cash
     used for operating activities:
 Income tax benefit                                             (870)    (5,571)
 Gain on disposition of properties                              (395)    (6,090)
 Depreciation and amortization of fixed assets                 8,096      6,655
 Amort. of the excess of revalued net assets over equity      (4,615)    (4,615)
 Increase in accounts receivable                             (30,577)   (22,486)
 Increase in merchandise inventories                        (156,550)  (170,078)
 Increase in accounts payable                                103,040     76,722
 Decrease in accrued expenses and other current liabs.        (3,950)   (11,496)
 Decrease (increase) in other working capital & other, net     1,640     (2,091)
                                                           ---------- ----------
Cash used for operations before restructuring items          (86,244)  (151,887)

Payments of restructuring costs                              (11,714)    (1,316)
                                                           ---------- ----------
Net cash used for operating activities                       (97,958)  (153,203)
                                                           ---------- ----------
Cash flows from investing activities:
 Proceeds from sales of properties and leases                    690      5,493
 Purchases of fixed assets                                   (15,288)   (20,103)
 Purchase of leases                                           (3,165)         -
 Decrease in restricted cash                                       -      2,047
                                                           ---------- ----------
Net cash used for investing activities                       (17,763)   (12,563)
                                                           ---------- ----------
Cash flows from financing activities:
 Payments of debt and capital lease obligations              (15,110)   (18,385)
 Short-term borrowings under the revolver, net               137,223    175,747
                                                           ---------- ----------
Net cash provided by financing activities                    122,113    157,362
                                                           ---------- ----------
Increase (decr.) in unrest. cash and short-term invest.        6,392     (8,404)
Unrestricted cash and short-term invest., beg. of period      14,185     28,402
                                                           ---------- ----------
Unrestricted cash and short-term invest., end of period      $20,577    $19,998
                                                           ========== ==========
Supplemental disclosures of cash flow information:
    Cash paid during the period for:
 Interest and debt fees not capitalized                      $10,973    $12,775
 Income taxes                                                      2          1


<FN>
(The accompanying notes are an integral part of these consolidated condensed 
 financial statements.)
                                   - 5 -
</TABLE>

<PAGE>

           AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                            (Unaudited)



 1.    Basis of Presentation:
       ---------------------

       In the opinion of management, the accompanying unaudited
   consolidated condensed financial statements of Ames Department
   Stores, Inc. (a Delaware Corporation) and subsidiaries
   (collectively "Ames" or the "Company") contain all adjustments
   (consisting of normal recurring adjustments) necessary for a fair
   presentation of such financial statements for the interim periods. 
   Due to the seasonality of the Company's operations, the results of
   its operations for the interim period ended October 26, 1996 may
   not be indicative of total results for the full year.  Certain
   information and footnote disclosures normally included in financial
   statements prepared in accordance with generally accepted
   accounting principles have been condensed or omitted pursuant to
   the rules and regulations promulgated by the Securities and
   Exchange Commission.  Certain prior year amounts have been
   reclassified to conform to the presentation used for the current
   year.  The consolidated condensed balance sheet at January 27, 1996
   was taken from audited financial statements previously filed with
   the Commission in the Company's latest Form 10-K.  The accompanying
   unaudited consolidated condensed financial statements should be
   read in conjunction with the financial statements and notes thereto
   included in the Company's latest Form 10-K.  


 2.    Earnings Per Common Share:
       -------------------------

       Earnings per share was determined using the weighted average
   number of common shares outstanding.  There were no exercises of
   warrants during the quarter ended October 26, 1996.  Common stock
   equivalents and fully diluted earnings per share were excluded for
   the periods with net losses as their inclusion would have reduced
   the reported loss per share.  Fully diluted earnings per share was
   equal to primary earnings per share for the quarter ended October
   26, 1996.


 3.    Inventories:
       -----------

       Inventories are valued at the lower of cost or market.  Cost is
   determined by the retail last-in, first-out (LIFO) cost method for
   all inventories.  No LIFO reserve was necessary at October 26,
   1996, January 27, 1996 and October 28, 1995. 

<PAGE>

 4.    Debt:
       ----

       On April 28, 1994, the Company entered into an agreement with
   BankAmerica Business Credit, Inc., as agent, two financial
   institutions as co-agents (together with the agent, the "Agents"),
   and a syndicate consisting of five other banks and financial
   institutions, for a secured revolving credit facility of up to $300
   million, with a sublimit of $100 million for letters of credit (the
   "Credit Agreement").  The Credit Agreement is in effect until June
   22, 1997, is secured by substantially all of the assets of the
   Company and requires the Company to meet certain quarterly
   financial covenants which were amended in January, 1996.  In
   addition, the Company must have no outstanding borrowings (other
   than borrowings, not to exceed $20 million, related to certain
   expenditures) under the Credit Agreement for a consecutive 30-day
   period between November 15th and February 15th of the following
   year.  The Company is in compliance with the financial covenants
   through the quarter ended October 26, 1996.  

       The Company is currently engaged in negotiations regarding the
   extension or replacement of the Credit Agreement.

       As of October 26, 1996, borrowings of $141.5 million were
   outstanding under the Credit Agreement.  In addition, $26.9 and
   $2.4 million of standby and trade letters of credit, respectively,
   were outstanding under the Credit Agreement.  The weighted average
   interest rate on the borrowings was 8.7% and 9.2% for the thirteen
   and thirty-nine weeks ended October 26, 1996, respectively.  The
   peak borrowing level through October 26, 1996 was $157.6 million.

       The amount of borrowing under the Credit Agreement generally
   shall not exceed the sum of (i) an amount equal to 55% of inventory
   not covered by any outstanding letter of credit plus (ii) an amount
   equal to 50% of inventory covered by any outstanding letter of
   credit less (iii) a reserve for reinstated debt ($1.5 million as of
   October 26, 1996).  In addition, the Credit Agreement provides for
   potential establishment of other reserves contingent upon the
   Company's financial performance.  In addition, each Agent reserves
   the right to adjust the total available to be borrowed by
   establishing reserves, making determinations of eligible inventory,
   revising standards of eligibility or decreasing from time to time
   the percentages set forth above.  Reference can be made to the
   latest Form 10-K for further descriptions of the Credit Agreement
   and the obligations summarized below, and for descriptions of the
   Company's other obligations not discussed herein.


       Deferred Cash Distributions

       The Company's plan of reorganization, which was consummated on
   December 30, 1992, provided that $46.5 million of cash
   distributions in respect to several classes of claims would be paid
   subsequent to the consummation date.  On January 31, 1993, January
   31, 1994, January 31, 1995, and January 31, 1996, $15.0, $8.0, $8.0
   and $8.0 million, respectively, of these deferred cash
   distributions were paid as scheduled.  The remaining unsecured
   amount of $7.5 million is due, with interest that began on February
   1, 1994 at 5% per annum, on January 31, 1997.  


<PAGE>
 5.    Stock Options:
       -------------

       The Company has two stock option plans, the 1994 Management
   Stock Plan and the 1994 Non-Employee Directors Stock Option Plan. 
   The Company accounts for these plans under APB Opinion No. 25,
   under which no compensation cost has been recognized.  The impact
   on the Company's net income and earnings per share of compensation
   cost determined consistent with FASB Statement No. 123 would have
   been immaterial for the periods presented.


 6.    Income Taxes:
       ------------

       The Company's estimated annual effective income tax rate for
   each year was applied to the loss incurred before income taxes for
   the thirty-nine weeks ended October 26, 1996 and October 28, 1995
   to compute non-cash income tax benefits of $0.9 and $5.6 million,
   respectively.  The same method was used to compute the income tax
   provision of $0.2 million for the third quarter of 1996 and the
   non-cash income tax benefit of $2.1 million for the third quarter
   of 1995.  The Company currently expects that, as a result of the
   seasonality of the Company's business, this year's income tax
   benefit will be offset by non-cash income tax expense in the
   remaining interim periods.  The income tax benefits are included in
   other current assets in the accompanying balance sheet as of
   October 26, 1996 and October 28, 1995.  


 7.    Litigation:
       ----------

       Reference can be made to the latest Form 10-K (Note 12 to the
   Consolidated Financial Statements) for various litigation involving
   the Company, for which there were no material changes since the
   filing date of the Form 10-K, except as follows. 

       As reported in the Form 10-K, Class Action Complaints were
   filed against the Company on March 21, 1995 and December 15, 1995. 
   Both actions concern certain wage and hour laws claims pertaining
   to Assistant Managers.  On June 25, 1996, a Complaint was filed
   (the "Third Complaint") against the Company in the United States
   District Court for the District of Massachusetts entitled David
   Root, Individually and on Behalf of All other Similarly Situated v.
   Ames Department Stores, Inc.  The Third Complaint alleges that Ames
   violated the Fair Labor Standards Act by failing to pay overtime to
   Replenishment Assistant Managers and seeks to recover overtime for
   Replenishment Assistant Managers employed anywhere in the United
   States at any time since June 25, 1993.  The Company has denied any
   liability on the basis that Root and other similarly situated
   Replenishment Assistant Managers were exempt employees not entitled
   to overtime pay.  The Company has further denied that plaintiff is
   a proper representative of the purported class.  No discovery has
   commenced.

       As reported in the Form 10-K, the Company had commenced an
   adversary proceeding in the Bankruptcy Court seeking, among other
   things, to enjoin Argonaut Insurance Company ("Argonaut") from
   drawing down on a $5 million letter of credit issued to the benefit
   of Argonaut at the request of Ames in May, 1990.  On October 31,
   1996, Argonaut and the Company entered into an agreement 
   resolving all disputes. On November 19, 1996, the agreement was approved
   by the Bankruptcy Court.  If no appeal is filed, it will become final 10
   days after it is filed with the Court.  The agreeement calls for
   payment to Argonaut in February, 1997 of $1 million, which amount
   is included in the self-insurance reserves in the Company's balance
   sheet.
<PAGE>


<PAGE>
<TABLE>
                           AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                                 FISCAL QUARTER ENDED OCTOBER 26, 1996
                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                      AND RESULTS OF OPERATIONS

<CAPTION>


Results of Operations
----------------------
  The following table sets forth the number of stores in operation as of the dates indicated:

                                                     Number of Stores in Operation
                                            ---------------------------------------------
                                            October 26,     January 27,       October 28,
                                               1996            1996              1995
                                            ---------       -----------       -----------
                                                303              307              307


  The following discussion and analysis is based on the historical results of operations for the
thirteen and thirty-nine weeks ended October 26, 1996 and October 28, 1995.  Seventeen (17)
stores were closed during fiscal 1996; thirteen (13) stores were opened during the same period.
One store was closed during the first three quarters of fiscal 1995. 

  The following table sets forth the historical operating results expressed as a percentage of net 
sales for the periods indicated:


                                                         Thirteen                 Thirty-nine
                                                        Weeks Ended              Weeks Ended
                                                     ------------------       -------------------
                                                     Oct. 26,  Oct. 28,       Oct. 26,  Oct. 28,
                                                      1996       1995          1996        1995
                                                     -------    -------       -------   ---------
<S>                                                  <C>        <C>           <C>        <C>
  Net sales                                           100.0 %    100.0 %       100.0 %     100.0 %
  Cost of merchandise sold                             72.7       73.3          72.6        73.2
                                                     -------    -------       -------    --------
     Gross margin                                      27.3       26.7          27.4        26.8
  Expenses and (income):
  Selling, general and administrative expenses         27.3       28.0          27.7        28.5
  Leased department and other operating income         (1.4)      (1.4)         (1.4)       (1.5)
  Depreciation and amortization expense                 0.5        0.5           0.5         0.4
  Amortization of the excess of revalued net 
       assets over equity                              (0.3)      (0.3)         (0.3)       (0.3)
  Interest and debt expense, net                        1.1        1.4           1.0         1.3
  Gain on disposition of properties                       -          -             -        (0.4)
                                                     -------    -------       -------    --------

  Income (loss) before income taxes                     0.1       (1.4)         (0.2)       (1.3)

  Income tax benefit (provision)                          -        0.4           0.1         0.4
                                                     -------    -------       -------    --------
  Net income (loss)                                     0.1 %     (1.0)%        (0.1)%      (0.9)%
                                                     =======    =======       =======    ========


                                                      - 9 -
</TABLE>


<PAGE>

       Total sales (which include leased department sales) for the
   third quarter increased $16.2 million or 3.1% over the prior-year's
   third quarter.  Net sales for the same period increased $15.3
   million or 3.1% over the prior year.  These increases were due to
   an increase of 1.2% in comparable store sales on a 286-store base
   and the opening of 13 new stores since the end of  last year's
   third quarter, partially offset by the closing of 17
   underperforming stores in the first quarter of 1996.  
       
       Total sales for the thirty-nine weeks ended October 26, 1996
   increased $13.4 million or 0.9% over the same prior year period. 
   Net sales for the same period increased $14.6 million or 1.0% over
   the prior year.  These increases were due to the opening of the new
   stores cited above, partially offset by a 0.5% decrease in
   comparable store sales and the closing of the stores cited above. 
   Net sales for all periods for last year have been restated to
   reflect the effect of recording "55 Gold" senior citizen discounts
   as markdowns, which conforms with the current year treatment.

       Gross margin for the third quarter increased $7.1 million, or
   0.6% as a percentage of net sales.  Gross margin for the
   thirty-nine weeks increased $12.9 million, or .6% as a percentage
   of net sales. The third quarter and year-to-date gross margin rate
   was positively impacted by a higher markup on sales and lower
   markdowns.

       Selling, general and administrative expenses increased $0.7
   million in the third quarter compared to the same prior year
   period, but decreased 0.7% as a percentage of  net sales for the
   same period.  Selling, general and administrative expenses for the
   thirty-nine week period declined $7.2 million, or 0.8% as a
   percentage of net sales.  In the quarter, increases in home office
   and field support expenses were partially offset by decreases in
   advertising and store expenses. All major expense categories,
   except home office expenses, were lower for the thirty-nine weeks.

       Depreciation and amortization expense increased by $0.3 and
   $1.5 million in the quarter and year-to-date, respectively,
   compared to the same prior-year period. The adoption of fresh-start
   reporting as of December 26, 1992 resulted in the write-off of all
   of the Company's non-current assets at that date, and therefore
   depreciation and amortization expense reflects capital additions
   after that date.

       The amortization of the "excess of revalued net assets over
   equity under fresh-start reporting" remained the same in the
   current periods presented as compared to the prior year. The
   Company is amortizing this amount over a ten-year period.

       Interest and debt expense, net of interest income, declined by
   $1.2 and $3.3 million, or 0.3% of net sales, in the quarter and
   year-to-date, respectively.  These decreases were due primarily to
   lower outstanding long-term debt balances as well as a reduction in
   interest expense related to the Credit Agreement (as defined
   below). The Company's average outstanding debt under the Credit
   Agreement decreased in both periods presented: from $145.4 to
   $131.0 million during the quarter and from $106.3 to $93.8 million
   during the year-to-date period.  Interest rates on the borrowings
   under the Credit Agreement were also lower in both periods
   presented.  


<PAGE>

       The Company recognized $0.4 and $6.1 million of net property
   gains during the thirty-nine weeks ended October 26, 1996 and
   October 28, 1995, respectively.   During last year's second
   quarter, the Company in separate transactions sold two distribution
   centers - one of which was an operating property through June,
   1995; the other of which had been closed since March, 1993 - and
   recognized gains totaling $5.1 million.  In last year's first
   quarter, the Company completed the assignment of a lease for a
   warehouse which was not part of Ames' operations and recognized a
   gain of $1.0 million.

       The Company's estimated annual effective income tax rate for
   each year was  applied to the loss before income taxes for the
   thirty-nine weeks ended October 26, 1996 and October 28, 1995 to
   compute non-cash income tax benefits of $0.9 and $5.6 million,
   respectively.  The same method was used to compute the income tax
   provision of $0.2 million for the third quarter of 1996 and the
   non-cash income tax benefit of $2.1 million for the third quarter
   of 1995.  The Company currently expects that, as a result of the
   seasonality of the Company's business, this year's income tax
   benefit will be offset by non-cash income tax expense in the
   remaining interim periods.

       Compared with the projections for the third quarter of 1996
   contained in the Form 8-K filed on June 11, 1996 (referred to
   herein as the "Plan"), sales and EBITDA were $10.8 and $4.6 million
   higher than Plan, respectively.  EBITDA is defined as earnings
   (loss) before net interest expense, income taxes, LIFO expense,
   extraordinary or non-recurring items (including certain pre-opening
   expenses), depreciation, amortization and other non-cash charges
   and gain or loss on the sale of properties after January 28, 1996.
   Year-to-date sales were $8.2 million less than Plan and year-to-
   date EBITDA was $8.9 million better than Plan.  The year-to-date
   EBITDA results reflected lower-than-planned expenses and
   higher-than-planned gross margin rate, partially offset by the
   lower-than-planned sales.


   Liquidity and Capital Resources
   -------------------------------

       On April 28, 1994, the Company entered into an agreement with
   BankAmerica Business Credit, Inc., as agent, two financial
   institutions as co-agents (together with the agent, the "Agents"),
   and a syndicate consisting of five other banks and financial
   institutions, for a secured revolving credit facility of up to $300
   million, with a sublimit of $100 million for letters of credit (the
   "Credit Agreement").  The Company was in compliance with the
   financial covenants of the Credit Agreement through the quarter
   ended October 26, 1996.
       
       The Credit Agreement is in effect until June 22, 1997. The
   Company is currently engaged in negotiations regarding the
   extension or replacement of the Credit Agreement. 
 
       Reference can be made to Note 4 of this Quarterly Report and
   the latest Form 10-K for further descriptions of the Credit
   Agreement and the Company's other obligations.

       Merchandise inventories, valued on a LIFO basis, decreased
   $41.5 million from October 28, 1995 to October 26, 1996 due to a
   planned reduction in apparel  inventories and the effect of closing
   17 stores during this year's first quarter, partially offset by the
   addition of thirteen (13) new stores since last year's third
   quarter.  The increase in inventories of $156.6 million from
   January 27, 1996 to October 26, 1996 was the result of a normal
   seasonal build-up of inventories.<PAGE>

       Trade accounts payable increased $15.3 million from October 28,
   1995 to October 26, 1996 due primarily to the timing of merchandise
   receipts and improved trade payment terms.  The increase in trade
   accounts payable of $105.8 million from January 27, 1996 to October
   26, 1996 was the result of the seasonal build-up of merchandise
   inventories referenced earlier.

       Long-term debt decreased $12.8 million and $10.6 million from
   October 28, 1995 and January 27, 1996, respectively, to October 26,
   1996 due primarily to the payment of the deferred cash distribution
   referenced in Note 4 of this Quarterly Report.

       Capital expenditures for the thirty-nine weeks ended October
   26, 1996 totaled $15.3 million and for the balance of the year are
   estimated to be approximately $6.5 million.   The Company adjusts
   its plans for making such expenditures depending on the amount of
   internally generated funds.

       The net operating loss carryovers remaining after fiscal year
   1996, subject to any limitations pursuant to Internal Revenue Code
   Sec. 382, should offset income on which taxes would otherwise be
   payable in future years.

       The Company believes that available cash and expected cash
   flows from the current fiscal year's operations and beyond, and the
   availability of its financing facilities, will enable the Company
   to fund its expected needs for working capital, capital
   expenditures and debt service requirements.  Achievement of
   expected cash flows from operations and compliance with the EBITDA
   (as defined above) covenant in the Credit Agreement is dependent
   upon the Company's attainment of sales, gross profit, and expense
   levels that are reasonably consistent with its financial
   projections.


<PAGE>
                              Part II

                         OTHER INFORMATION




Item 1. Legal Proceedings
        -----------------

            Reference can be made to Note 12 to the Consolidated
        Financial Statements 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 
        Note 7 of this Quarterly Report.



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

            There were no matters submitted to a vote of security
        holders during the third quarter ended October 26, 1996,
        through the solicitation of proxies or otherwise.


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


    (a) Index to Exhibits
        -----------------


        Exhibit No.                 Exhibit                          Page No.
        -----------                 -------                          --------

            11          Schedule of computation of primary              15
                        and fully diluted earnings per share



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

        The following reports on Form 8-K were filed
            with the Securities and Exchange Commission
            during the third quarter:


    Date of Report    Date of Filing      Item #      Description
    --------------    --------------      ------      -----------

    August 14, 1996    August 14, 1996      5         Disclosure
                                                      of fiscal
                                                      July 1996
                                                      results.

    September 6, 1996  September 6, 1996    5         Disclosure
                                                      of fiscal 
                                                      August 1996
                                                      results.

    October 11, 1996   October 11, 1996     5         Disclosure of 
						                                                fiscal September
						                                                1996 results.

<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.  




                                 AMES DEPARTMENT STORES, INC.
                                         (Registrant)




  Dated:  November 22, 1996   /s/ Joseph R. Ettore                 
                              --------------------------------------
                              Joseph R. Ettore, President, Director,
                              and Chief Executive Officer






  Dated:  November 22, 1996   /s/ John F. Burtelow                  
                              --------------------------------------
                              John F. Burtelow, Executive Vice 
                              President and Chief Financial Officer






  Dated:  November 22, 1996   /s/ Gregory D. Lambert                
                              --------------------------------------
                              Gregory D. Lambert
                              Senior Vice President - Finance
  








<PAGE>


<PAGE>
<TABLE>
                                                                                Exhibit 11
                         AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                         SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS
                           PER SHARE
                         (Amounts in thousands except per share amounts)
<CAPTION>
                                                  For the Thirteen      For the Thirty-nine
                                                    Weeks Ended            Weeks Ended 
                                                --------------------   --------------------
                                                Oct. 26,   Oct. 28,    Oct. 26,   Oct. 28,
                                                  1996       1995        1996       1995
                                                ---------  ---------   ---------  ---------
<S>                                             <C>        <C>         <C>        <C>
Net income (loss)                                   $421    ($4,884)    ($2,063)  ($12,837)
                                                =========  =========   =========  =========

For Primary Earnings Per Share
------------------------------
Weighted average number of common shares
     outstanding during the period                20,460     20,127      20,465     20,127

Add: Common stock equivalent shares represented by
      -  Series B Warrants                           (a)        (b)         (b)        (b)
      -  Series C Warrants                         1,340        (b)         (b)        (b)
      -  Options under 1994 Management Stock
              Option Plan                            168        (b)         (b)        (b)
      -  Options under 1994 Non-Employee Directors
              Stock Option Plan                        6        (b)         (b)        (b)
                                                ---------  ---------   ---------  ---------
Weighted average number of common and common
     equivalent shares used in the calculation
     of primary earnings per share                21,974     20,127      20,465     20,127
                                                =========  =========   =========  =========

Primary net income (loss) per share                $0.02     ($0.24)     ($0.10)    ($0.64)
                                                =========  =========   =========  =========


For Fully Diluted Earnings Per Share
---------------------------------------
Weighted average number of common shares
     outstanding during the period                20,460     20,127      20,465     20,127

Add: Common stock equivalent shares represented by
      -  Series B Warrants                           (a)        (b)         (b)        (b)
      -  Series C Warrants                         1,480        (b)         (b)        (b)
      -  Options under 1994 Management Stock
              Option Plan                            314        (b)         (b)        (b)
      -  Options under 1994 Non-Employee Directors
              Stock Option Plan                       17        (b)         (b)        (b)
                                                ---------  ---------   ---------  ---------
Weighted average number of common and common
     equivalent shares used in the calculation
     of fully diluted earnings per share          22,271     20,127      20,465     20,127
                                                =========  =========   =========  =========

Fully diluted net income (loss) per share          $0.02     ($0.24)     ($0.10)    ($0.64)
                                                =========  =========   =========  =========

<FN>
 (a) These options/warrants were not considered common stock equivalents because the 
     exercise price exceeded the market price of the common stock for all or substantially
     all of the period.
 (b) Common stock equivalents have not been included because the effect would be
     anti-dilutive.



                                                            - 15 -
</TABLE>






<PAGE>