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 1, 1999
                               -------------------------------------------------


[   ]      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
                                       ---   ---



       24,063,349 shares of Common Stock were outstanding on May 14, 1999.


                            Exhibit Index on page 15

                        Page 1 of 18 (including exhibits)

                                      -1-
<PAGE>

                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                        FOR THE QUARTER ENDED MAY 1, 1999




                                    I N D E X




                                                                          Page

Part I:  Financial Information

           Consolidated Condensed Statements of Operations                  3
              for the Thirteen Weeks ended May 1, 1999 and
              May 2, 1998

           Consolidated Condensed Balance Sheets as of                      4
              May 1, 1999, January 30, 1999, and May 2,
              1998

           Consolidated Condensed Statements of Cash Flows                  5
              for the Thirteen Weeks ended May 1, 1999 and May 2, 1998

           Notes to Consolidated Condensed Financial Statements             6

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


Part II: Other Information

           Submission of Matters to a Vote of Security Holders             15

           Exhibits and Reports on Form 8-K                                15



                                      -2-
<PAGE>
<TABLE>





                                     PART I
                              FINANCIAL INFORMATION


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



                                                                                                       For the Thirteen
                                                                                                          Weeks Ended
                                                                                                --------------------------------
<CAPTION>
                                                                                                   May 1,            May 2,
                                                                                                    1999              1998
                                                                                                --------------    --------------
<S>                                                                                             <C>               <C>

Ames net sales                                                                                       $581,602          $497,045
Hills net sales                                                                                       247,467                 -
                                                                                                --------------    --------------
     Total net sales                                                                                  829,069           497,045

Costs, expenses and (income):
     Ames cost of merchandise sold                                                                    419,505           358,611
     Hills cost of merchandise sold                                                                   167,450                 -
     Ames selling, general and administrative expenses                                                176,204           145,272
     Hills operating expenses and agency fees                                                          89,257                 -
     Leased department and other income                                                                (8,422)           (6,186)
     Depreciation and amortization expense, net                                                        14,383             1,921
     Interest and debt expense, net                                                                    11,922             2,054
                                                                                                --------------    --------------

Loss before income taxes                                                                              (41,230)           (4,627)
Income tax benefit                                                                                     14,842             1,684
                                                                                                --------------    --------------
Net loss                                                                                             ($26,388)          ($2,943)
                                                                                                ==============    ==============




Weighted average number of common shares outstanding                                                   23,990            22,640
                                                                                                ==============    ==============

Basic net loss per share                                                                              $ (1.10)          $ (0.13)
                                                                                                ==============    ==============







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





</TABLE>

                                      -3-
<PAGE>
<TABLE>



                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In Thousands)
                                   (Unaudited)
<CAPTION>

                                                                                    May 1,            January 30,          May 2,
                                                                                     1999                1999               1998
                                                                                ---------------     --------------     -------------
<S>                                                                             <C>                 <C>                <C>
                                     ASSETS

Current Assets:
      Cash and short-term investments                                                  $46,315            $35,744           $22,348
      Receivables                                                                       50,639             30,244            26,713
      Merchandise inventories                                                          687,693            621,509           499,911
      Prepaid expenses and other current assets                                         39,488             16,075            14,244
                                                                                ---------------     --------------     -------------
             Total current assets                                                      824,135            703,572           563,216

Fixed Assets                                                                           471,916            437,834           141,887
      Less - Accumulated depreciation and amortization                                 (80,016)           (66,205)          (49,065)
                                                                                ---------------     --------------     -------------
             Net fixed assets                                                          391,900            371,629            92,822

Other assets and deferred charges                                                       48,973             16,447             6,269
Deferred taxes, net                                                                    102,406            102,406             7,406
Beneficial lease rights, net                                                            58,195             58,885                 -
Goodwill, net                                                                          228,142            230,454                 -
                                                                                ---------------     --------------     -------------
                                                                                    $1,653,751         $1,483,393          $669,713
                                                                                ===============     ==============     =============




                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
      Accounts payable:
          Trade                                                                       $275,552           $313,280          $182,258
          Other                                                                         71,410             83,485            50,782
                                                                                ---------------     --------------     -------------
             Total accounts payable                                                    346,962            396,765           233,040

      Short-term debt                                                                        -                  -            54,256
      Current portion of long-term debt, capital lease and financing obligations        17,799             17,799            12,306
      Self-insurance reserves                                                           29,176             29,115            14,983
      Accrued expenses and other current liabilities                                   237,783            211,827            69,870
      Store closing reserves                                                            58,789             59,768            10,946
                                                                                ---------------     --------------     -------------
          Total current liabilities                                                    690,509            715,274           395,401

Long-term debt                                                                         333,486             95,810                 -
Capital lease and financing obligations                                                184,901            191,904            29,823
Other long-term liabilities                                                            124,175            132,376            44,303
Excess of revalued net assets over equity under fresh-start reporting                   22,483             24,021            28,636
Commitments and contingencies

Stockholders' Equity:
      Preferred stock                                                                        -                  -                 -
      Common stock                                                                         240                239               227
      Additional paid-in capital                                                       237,243            236,667           120,080
      Retained earnings                                                                 61,628             88,016            51,243
      Treasury stock, at cost                                                             (914)              (914)                -
                                                                                ---------------     --------------     -------------
          Total stockholders' equity                                                   298,197            324,008           171,550
                                                                                ---------------     --------------     -------------
                                                                                    $1,653,751         $1,483,393          $669,713
                                                                                ===============     ==============     =============


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



                                       -4-

</TABLE>



<PAGE>
<TABLE>


                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                   (Unaudited)


                                                                                                  For the Thirteen
                                                                                                     Weeks Ended
                                                                                     ----------------------------------------
                                                                                          May 1,                  May 2,
                                                                                           1999                    1998
                                                                                     ----------------        ----------------
<CAPTION>
                                                                                     <S>                     <C>
Cash flows from operating activities:
        Net loss                                                                            ($26,388)                ($2,943)
        Adjustments to reconcile net loss to net cash
            used for operating activities:
        Income tax benefit                                                                   (14,842)                 (1,684)
        Depreciation and amortization of fixed and other assets                               16,183                   2,104
        Increase in accounts receivable                                                      (20,395)                 (7,791)
        Increase in merchandise inventories                                                  (66,184)                (76,075)
        Increase (decrease) in accounts payable                                              (49,803)                  9,884
        Increase (decrease) in accrued expenses and other current liabilities                 24,899                  (3,327)
        Increase (decrease) in other working capital and other, net                          (15,098)                  1,912
                                                                                     ----------------        ----------------
Cash used for operations before store closing items                                         (151,628)                (77,920)
Payments of store closing costs                                                                 (979)                   (710)
                                                                                     ----------------        ----------------
Net cash used for operating activities                                                      (152,607)                (78,630)
                                                                                     ----------------        ----------------
Cash flows from investing activities:
        Purchases of fixed assets                                                            (34,205)                 (8,957)
        Purchase of leases                                                                   (27,822)                      -
                                                                                     ----------------        ----------------

Net cash used for investing activities                                                       (62,027)                 (8,957)
                                                                                     ----------------        ----------------
Cash flows from financing activities:
        Payments of debt, capital lease and financing obligations                             (7,003)                 (2,606)
        Borrowings under the revolver, net                                                    37,676                  54,256
        Proceeds from the issuance of senior notes                                           200,000                       -
        Payments of deferred financing costs                                                  (6,044)                      -
        Proceeds from the exercise of options and warrants                                       576                     457
                                                                                     ----------------        ----------------
Net cash provided by financing activities                                                    225,205                  52,107
                                                                                     ----------------        ----------------

Increase (decrease) in cash and short-term investments                                        10,571                 (35,480)
Cash and short-term investments, beginning of period                                          35,744                  57,828
                                                                                     ----------------        ----------------
Cash and short-term investments, end of period                                               $46,315                 $22,348
                                                                                     ================        ================




Supplemental  disclosures of cash flow information:
  Cash paid during the period for:
        Interest and debt fees not capitalized                                                $8,271                  $1,661
        Income taxes                                                                             355                      10



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


                                      - 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 May 1, 1999 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 (the "SEC").  Certain  prior year  amounts have been
       reclassified to  conform  to  the  presentation   used  for  the  current
       year. The consolidated  condensed  balance  sheet at January 30, 1999 was
       obtained  from  audited  financial  statements  previously filed with the
       SEC in the Company's Annual Report on Form 10-K for the fiscal year ended
       January 30, 1999  (the "1998  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 1998 Form
       10-K.

              In the fourth  quarter of the year ended January 30, 1999 ("Fiscal
       1998"),  the Company adopted SOP 98-5 "Reporting on the Costs of Start-Up
       Activities"  retroactively effective to the first quarter of Fiscal 1998.
       Therefore,  the  consolidated  condensed  financial  statements  for  the
       quarter ended May 2, 1998 have been adjusted  accordingly.  Reference can
       be made to the 1998 Form 10-K for  additional  discussion of the adoption
       of SOP 98-5 by the Company.

2.     Acquisition and Agency Agreement:
      ----------------------------------

       Acquisition of Hills Stores Company

              On December 31, 1998,  HSC  Acquisition  Corp.  ("HSC"),  a wholly
       owned  subsidiary  of  the  Company,  acquired  in  excess  of 80% of the
       outstanding   voting  stock  of  Hills  Stores   Company   ("Hills")  and
       approximately  74%  of  the  outstanding  Hills  12  1/2%  senior  notes.
       Subsequently,  Hills  was  merged  with  HSC and  became  a  wholly-owned
       subsidiary  of Ames  Department  Stores,  Inc. In April  1999,  Hills was
       merged with and into Ames Department Stores Inc.

              Total  cash  consideration for  the acquisition of  Hills was $130
       million.   Reference  can  be  made  to  the  1998  Form 10-K for further
       discussion of the Hills acquisition.

              The  acquisition  has been recorded  under the purchase  method of
       accounting and,  accordingly,  the results of operations of Hills for the
       quarter ended May 1, 1999 are included in the  accompanying  consolidated
       condensed  financial  statements.  The aggregate  purchase  price of $130
       million has been  allocated to assets  acquired and  liabilities  assumed
       based on a preliminary  determination of respective fair market values at
       the date of acquisition  and is subject to adjustment.  The fair value of
       tangible  assets  acquired and  liabilities  assumed was $477 million and
       $637  million,  respectively.  The balance of the  purchase  price,  $290
       million,  was  recorded  as two  components:  an  excess of cost over net
       assets acquired (goodwill) of $231 million, which is being amortized over
       25 years on a  straight-line  basis,  and beneficial  lease rights of $59
       million,  which is being amortized over the life of the respective leases
       (which average approximately 25 years).

              At the  time  of the  acquisition,  Hills  operated  155  discount
       department  stores.  In 1999, the Company will remodel and convert 150 of
       the Hills stores to Ames stores.  The five  remaining  Hills stores along
       with seven other Ames stores will be closed because they are in locations
       that are either competitive with, or are underperforming,  other Hills or
       Ames stores.  The remodeling and conversion  process will be conducted in
       three stages,  each stage involving  approximately one third of the Hills
       stores.  The first stage was completed in late April 1999; the second and
       third stages are  scheduled to be completed in July 1999,  and  September
       1999, respectively.

                                      -6-
<PAGE>
       Agency Agreement Overview

              Concurrent with the Hills acquisition,  the Company entered into a
       transition  and agency  agreement  (the "Agency  Agreement")  with Gordon
       Brothers Retail Partners,  LLC and The Nassi Group, LLC (collectively the
       "Agent"),  which provides that the Agent shall serve for a period of time
       to operate  all of the  acquired  Hills  stores and to conduct  inventory
       liquidation  sales  at  each  of  those  stores  prior  to its  scheduled
       remodeling or final closure.  Accordingly, the Agent is managing the sale
       of the  inventory  acquired in the Hills  acquisition  as well as certain
       other inventory identified in the Agency Agreement.

              The Agency  Agreement  entitles  the Company to receive out of the
       sale proceeds a minimum  amount equal to 40% of the initial  retail value
       or initial  ticketed  selling price of the merchandise  (the  "Guaranteed
       Return"). Accordingly, the Company valued the acquired Hills inventory at
       an amount equal to the Guaranteed  Return.  An additional  payment may be
       made to the Company if proceeds of sale exceed a target percentage of the
       initial retail value. The Agency  Agreement  further entitles the Company
       to  reimbursement  of certain store operating  expenses  (e.g.,  payroll,
       rent,  advertising,  etc.) out of the sale  proceeds  during  the  agency
       period.

              The Agent will be paid a fee (the  "Agency  Fee") for its services
       pursuant to the Agency Agreement.  The Agency Fee will be an amount equal
       to the proceeds from the sales of Hills  merchandise less a deduction for
       the reimbursement of store operating expenses and the Guaranteed Return.

       Agency Agreement Accounting

              As discussed  earlier,  the results of operations of Hills for the
       quarter  ended  May 1,  1999  have  been  included  in  the  accompanying
       consolidated  condensed  financial  statements.  During the first quarter
       ended May 1, 1999,  and for the  duration  of the Agency  Agreement,  the
       following  accounting  treatment  has  been,  and  will  be,  applied  to
       recognize  the results of the Hills stores prior to their  conversion  to
       Ames  stores  during  fiscal  1999.  Hills net sales will be  recorded as
       "Hills Net Sales" and  represent  net sales  achieved by the Hills stores
       prior to their  conversion  to Ames  stores.  "Hills Cost of  Merchandise
       Sold"  represents  the cost of  merchandise  sold in connection  with the
       above  referenced  sales as adjusted  for the  Guaranteed  Return  amount
       mentioned above.  "Hills Operating  Expenses and Agency Fees" include the
       following:  the associated  store expenses  incurred while  operating the
       Hills  stores  prior  to  their  conversion  to Ames  stores,  which  are
       reimbursable  to the  Company out of the  proceeds  of Hills  merchandise
       sales per the Agency  Agreement;  the Agency Fee due to the Agent for the
       period presented; and other expenses (e.g., non-store payroll,  non-store
       rent,  etc.)  associated  with supporting the Hills stores prior to their
       conversion to Ames stores,  which are not  reimbursable  under the Agency
       Agreement.

              The Agency Fee of $26.2 million recorded for the first quarter was
       determined  based upon the Hills sales  results for the period,  less the
       Guaranteed Return, reimbursable Hills store expenses and an allocation to
       Ames based on sale  proceeds in excess of specified  levels.  Because the
       Company is entitled to a  Guaranteed  Return and  reimbursement  of Hills
       store expenses during the term of the Agency  Agreement,  the Company may
       realize the  benefit of a  reduction  in the Agency Fee during the latter
       stages of the Agency Agreement. As a result, any Agency Fee calculated on
       an interim basis may not be indicative of the total fee to be remitted to
       the  Agent.  The  Agency  Fee  will  only  be  determined  after  a final
       accounting  for all  revenues  and  expenses  earned/incurred  during the
       entire agency period.  The final  accounting will be completed during the
       third quarter of fiscal 1999.

       Acquisition of Caldor Sites

              During March 1999, the Company  entered into two  agreements  with
       Caldor  Corporation to purchase seven of its stores in  Connecticut,  two
       stores in Massachusetts and a 649,000 square foot distribution  center in
       Westfield,  MA, for a total cash purchase price of $42.7  million.  Under
       the terms of the agreements,  the Company assumed Caldor's leases for the
       nine stores and the  distribution  center and  acquired  all of the store
       fixtures  in eight of the stores and all  racking,  sorting  systems  and
       materials handling equipment in the distribution center. During March and
       April 1999, the United States  Bankruptcy Court for the Southern District
       of New York approved the  Company's  right to purchase the leases for the
       stores and the distribution center.  All of the transactions subsequently
       closed.
                                      -7-
<PAGE>
3.     Basic Net Loss Per Common Share:
      ---------------------------------

              Basic 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  quarter  ended May 1, 1999,
       103,981 options were exercised and no warrants were converted. During the
       quarter  ended May 2, 1998,  61,760  options were  exercised  and 188,135
       warrants were converted.


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.


5.     Debt:
      ------

       Credit Agreement

              On December 31, 1998,  in connection  with the Hills  Acquisition,
       certain of the  Company's  subsidiaries  entered into an  agreement  (the
       "Credit  Agreement")  with a  syndicate  of  other  banks  and  financial
       institutions  for whom Bank of America  NT&SA is  serving  as agent.  The
       Credit Agreement  provides for a secured  revolving credit facility of up
       to $650  million,  with a sublimit of $150 million for letters of credit.
       The Credit  Agreement  replaced a $320 million secured  revolving  credit
       facility.

              The  Credit  Agreement  is in effect  until  June 30,  2002 and is
       secured by substantially all of the assets of the Company.  Reference can
       be made to the 1998 Form 10-K for  additional  discussion  of the  Credit
       Agreement and for  descriptions  of the Company's  other  obligations not
       discussed herein.

              As of May 1, 1999,  borrowings of $82.6  million were  outstanding
       under the Credit Agreement.   These borrowings are included in  long-term
       debt in the accompanying  consolidated  condensed balance sheet as of May
       1, 1999. In addition, $28.2 and $9.0 million of standby and trade letters
       of credit,  respectively,   were outstanding under  the Credit Agreement.
       The weighted  average  interest rate on  the borrowings for the  thirteen
       weeks ended May 1, 1999 was 7.7%. The peak borrowing level through May 1,
       1999 was $281.8 million.

       Ames Senior Notes

              On  April  27,  1999,  the  Company  completed  the  sale  of $200
       million of its 10% seven-year senior notes (the "Ames Senior Notes"). The
       net proceeds from the sale of the Ames Senior Notes, approximately $193.4
       million,  were used to reduce  outstanding  borrowings  under the  Credit
       Agreement.

            The Ames  Senior  Notes  pay  interest  semi-annually  in April  and
       October and mature April 2006.  Prior to April 15, 2002,  the Company may
       redeem up to 35% of the Ames  Senior  Notes with the  proceeds  of one or
       more  public  equity  offerings  at a  redemption  price  of  110% of the
       principal  amount  thereof.  On or after April 15, 2003,  the Company may
       redeem some or all of the Ames Senior Notes  outstanding  at a redemption
       price equal,  initially, to 105% of the principal amount thereof. In both
       cases,  the accrued and unpaid  interest will be added to the  redemption
       price on the applicable redemption date.

           The Ames Senior Notes were issued under an indenture  among Ames, its
       existing  subsidiaries  and  The  Chase  Manhattan  Bank.  The  financial
       covenants in the indenture  restrict Ames' ability to: borrow money;  pay
       dividends on or purchase  Ames' stock;  make  investments;  use assets as
       security in other  transactions;  sell certain assets or merge with other
       companies;  and enter into transactions  with affiliates.  If a Change of
       Control  occurs,  each holder of the Ames  Senior  Notes has the right to
       require  the Company to purchase  all or any part of that  holder's  Ames
       Senior  Notes  for a  payment  in cash  equal  to  101% of the  aggregate
       principal  amount of Ames Senior Notes  purchased plus accrued and unpaid
       interest.
                                      -8-
<PAGE>
6.     Stock Options:
      ---------------

              The  Company  has three stock  option plans (the "Option  Plans"):
       the 1994 Management  Stock Option Plan, the 1998 Stock Incentive Plan and
       the 1994 Non-Employee Directors Stock Option Plan.

              In October 1995,  the Financial Accounting Standards Board  issued
       SFAS  No. 123  "Accounting for  Stock-Based Compensation."  SFAS  No. 123
       established a  fair-value  based  method of  accounting  for  stock-based
       compensation;  however,   it  allowed  entities  to  continue  accounting
       for  employee stock-based  compensation  under the intrinsic value method
       prescribed by  Accounting  Principles Board Opinion  No. 25,  "Accounting
       for Stock Issued to Employees."   The Company elected to account for  the
       Option Plans under APB Opinion No. 25,  under which  no compensation cost
       has been recognized, and adopt SFAS No. 123 through disclosure.

              If the Company had elected to recognize  compensation cost for the
       Option Plans based on the fair value at the grant dates for awards  under
       those plans,  consistent with the method  prescribed by SFAS No. 123, net
       loss  and basic net loss per common share would have approximated the pro
       forma amounts indicated below:

                                                     For the Thirteen
                                                        Weeks Ended
                                                   May 1,          May 2,
                                                    1999            1998
                                                  -------         -------
       Net Loss (in thousands)
         As reported                             ($26,388)        ($2,943)
         Pro forma                               ($27,971)        ($3,080)

       Basic Net Loss Per Common Share
         As reported                              ($1.10)         ($0.13)
         Pro forma                                ($1.17)         ($0.14)

              The  fair  value of stock  options used  to compute  pro forma net
       income and net income per diluted common share is the  estimated  present
       value  at  grant  date  using  the  Black-Scholes   option-pricing  model
       with  the following  weighted  average  assumptions:  no dividend  yield,
       expected  option  volatilities,  a risk-free  interest rate equal to U.S.
       Treasury  securities  with  a maturity  equal to the expected life of the
       option and  an expected life from  date of grant until option  expiration
       date.

 7.    Income Taxes:
      --------------

              The Company's  estimated annual effective income tax rate for each
       year was applied to the loss before  income taxes for the thirteen  weeks
       ended May 1,  1999 and May 2,  1998 to  compute  a  non-cash  income  tax
       benefit.  The income tax benefit is included in other  current  assets in
       the accompanying  consolidated  condensed balance sheet as of May 1, 1999
       and May 2, 1998.


 8.    Commitments and Contingencies:
      -------------------------------

              Reference  can be  made  to the  1998  Form  10-K  (Item 3 - Legal
       Proceedings)  for various  litigation  involving  the Company,  for which
       there were no  material  changes  since the filing  date of the 1998 Form
       10-K except as follows:

              With  regard  to the  Gould  matter,  on May 25,  1999,  the Court
       preliminarily approved a class action settlement that had been reached by
       the parties.  The terms and conditions of the Gould settlement mirror the
       Abrams  settlement.  Notice of the proposed  class action  settlement was
       sent to class members on June 4, 1999 and a hearing on the Final Approval
       of the  Settlement is scheduled for September 15, 1999. If approved,  the
       settlement  provides  that each class  member will  receive a  calculated
       amount of cash and scrip  usable in Ames  stores  based on the  number of
       weeks  worked and  individual  weekly  salary  levels in  exchange  for a
       release  of all  claims  against  the  Company.  The total  amount of the
       settlement  is not  expected  to exceed  $265,000  in cash and $90,000 in
       scrip usable in Ames stores.
                                      -9-
<PAGE>

9.       Subsequent Events:
        -------------------

              On May 24, 1999, the Company  completed the public offering of 5.1
       million  shares  of  Common  Stock at a price of  $38.75  per  share by a
       syndicate  of  underwriters  managed  by Lehman  Brothers  with a co-lead
       manager and three other  co-managers.  The proceeds,  net of underwriting
       discounts, of approximately $187.9 million were used to reduce borrowings
       under the Credit Agreement and for general corporate purposes.
                                      -10-
<PAGE>




                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                        FISCAL QUARTER ENDED MAY 1, 1999
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



       Results of Operations
      -----------------------

              On December 31, 1998,  we  acquired  approximately  80.8%  of  the
       outstanding  voting stock of Hills  Stores  Company.   Accordingly,   the
       operations  of  Hills  and  its  subsidiaries  during  the   quarter  are
       included   in our consolidated  results  of  operations  for  the quarter
       ended May 1, 1999.  Immediately  following our acquisition of  Hills,  we
       began implementing a series of initiatives  to prepare for the conversion
       of 150 of the Hills stores into Ames stores and the permanent  closure of
       the  five  remaining    Hills  stores.  These  initiatives  included  the
       termination  of most of Hills' corporate  and  administrative  operations
       and  personnel,   the  announced  closure of  seven  Ames  stores that we
       considered to be directly competitive  with  acquired  Hills  stores  and
       the  engagement of  two experienced  liquidation  firms,  Gordon Brothers
       Retail Partners and The Nassi  Group, to operate the Hills  stores  until
       their  closure and to liquidate Hills' merchandise inventories.

              During  the  quarter  ended May 1, 1999,  Gordon Brothers and  The
       Nassi  Group  completed  the merchandise  liquidation sales  in 50 of the
       Hills stores.  Subsequent to the liquidation  sales,  we remodeled  these
       stores during an eight-week period and, on April 19,  1999,  we re-opened
       them as Ames  stores.  In addition,  Gordon  Brothers and The Nassi Group
       initiated the liquidation sales in 54 Hills stores in late March and  the
       final liquidation sales in 46 Hills stores in early May.

              Under  our  agreement  with Gordon  Brothers and The Nassi  Group,
       we are entitled to retain from the proceeds of the merchandise  inventory
       sales, as a minimum guaranteed amount, 40% of the initial ticketed retail
       price of the inventory being sold,  irrespective of the  actual  price at
       which it is sold.  The remaining  sale  proceeds,  net of the expenses of
       operating the stores,  are  payable to the  liquidators  as  compensation
       for their  services,  subject to  additional  allocations  to Ames to the
       extent the proceeds  exceed  specified  levels.  For financial  reporting
       purposes, Hills'  net  sales   represent  the actual sale  proceeds  from
       merchandise liquidation  sales,  its cost of merchandise  sold represents
       the  minimum  guaranteed  amount  adjusted  for  proceeds  in  excess  of
       specified  targets, and its selling,  general and administrative expenses
       include the  portion of those  proceeds that  are to  be paid over to the
       liquidators.

                                      -11-
<PAGE>

                The following  table  illustrates  the separate  contribution of
       Ames' and Hills'  operations to various  components  of the  consolidated
       results of operations,  as described  below, for the quarter ended May 1,
       1999,  as well as the impact on these  consolidated  results of the other
       costs described below:
<TABLE>
                                                         For the
                                                      Thirteen Weeks
                                                          Ended            For the Thirteen Weeks Ended May 1, 1999
                                                        May 2, 1998       ------------------------------------------
                                                      ---------------     Ames        Hills        Other        Total
                                                                         ------      -------      -------      -------
    <S>                                                   <C>           <C>          <C>         <C>           <C>
    NET SALES                                             $497,045      $581,602     $247,467    $    -        $829,069



    COSTS, EXPENSES AND (INCOME):

      Cost of merchandise sold                             358,611       419,505      167,450          -        586,955

      Selling, general and administrative expenses         145,272       159,632       89,257       16,572      265,461

      Leased department and other income                    (6,186)       (6,396)      (2,026)         -         (8,422)

      Depreciation and amortization expense, net             1,921         5,917        6,580        1,886       14,383

      Interest and debt expense, net                         2,054         7,978        2,774        1,170       11,922
                                                     --------------   -----------  -----------  -----------  -----------

    LOSS BEFORE INCOME TAXES                                (4,627)       (5,034)     (16,568)     (19,628)     (41,230)

    Income tax  benefit                                      1,684         1,812        5,964        7,066       14,842
                                                     --------------   -----------  -----------  -----------  -----------

    NET LOSS                                               ($2,943)      ($3,222)    ($10,604)    ($12,562)    ($26,388)
                                                           ========      ========    =========    =========    =========

</TABLE>

                For the quarter ended May 1, 1999, the Ames results  reflect (a)
       the  results  of the  pre-Hills  acquisition  Ames  base,  (b)  the  post
       re-opening  results of the 50  converted  Hills  stores  and (c)  certain
       expenses associated with the acquisition of Hills, including the interest
       expense on the  acquired  Hills  senior notes and a pro rata share of the
       amortization of the goodwill recorded in connection with the acquisition.
       The Hills results  represent (a) the results of operations  for the Hills
       stores during the period that these stores were operated  pursuant to the
       agreement with Gordon Brothers and The Nassi Group, including the fee due
       Gordon  and Nassi and the  depreciation  and  interest  expense  directly
       associated  with such stores and (b) Hills corporate  overhead  expenses,
       principally the Canton, MA corporate facility.  The other costs represent
       the expenses incurred during the period of remodeling the 50 Hills stores
       that re-opened as Ames stores on April 19, 1999.

                The unique  circumstances under which   Hills'  operations  have
       been  conducted  through  the  first quarter  ended  May 1, 1999  and the
       accounting treatment accorded  those  operations as a consequence  of our
       agreement  with  Gordon Brothers and  The Nassi Group  distort any direct
       comparison of the principal components of Ames' consolidated  results for
       the quarters  ended May 1, 1999 and May 2, 1998.  In  the discussion that
       follows,   Ames'  net  sales,  gross  margin,  and  selling,  general and
       administrative expenses for the quarter ended  May 1, 1999  are presented
       and  compared exclusive of the  Hills results.  The impact  of the  Hills
       acquisition   is   included  in   the   comparison  of  depreciation  and
       amortization expense and interest and debt expense.

                Ames'  net  sales  for  the  thirteen  weeks  ended  May 1, 1999
       increased  $84.6 million or 17.0% from the prior-year's first quarter and
       comparable-store  sales  increased  9.1%.  These  sales  increases   were
       attributable,  in part,  to  the  Grand  Openings of 50  converted  Hills
       stores and 1 other new Ames  store in  April 1999 and a successful  month
       long promotion in March 1999.  Net sales for last year have been restated
       to  reflect the effect of recording promotional coupons issued by Ames as
       markdowns, which conforms with the current  year  treatment.
                                      -12-
<PAGE>
                Ames' gross  margin increased $23.7 million in the first quarter
       of 1999 compared to the first quarter of 1998, but remained  unchanged as
       a percentage of net sales at 27.9%.  The  gross margin rate for the first
       quarter benefited from a higher average markup on sales, which was offset
       by higher markdowns.

                Ames' selling,  general  and  administrative  expenses increased
       $14.4  million  in  the  first  quarter of  1999  compared  to  the first
       quarter of 1998,  but  decreased as a percentage  of net sales from 29.2%
       in  1998  to  27.4%  in  1999.  The  percentage  decrease  was  primarily
       attributable  to a reduction in store related expenses as a percentage of
       sales.

                Depreciation  and  amortization  expense  increased   by   $12.5
       million.  The Hills  acquisition  added $6.6 million of depreciation  and
       amortization  expense  associated  with  the additional  depreciation and
       amortization of the Hills fixed assets and  beneficial  lease  rights and
       the  amortization  of  goodwill  relating  to  the  excess  of  the Hills
       acquisition  cost  over  the  value   of   the  acquired   assets.    The
       increase  in  depreciation  and  amortization expense also related to new
       point-of-sale  systems installed in the Ames stores in 1998  and fixtures
       purchased for the six new Ames stores opened during fiscal 1998.

                Interest  expense  increased by $9.9 million.   The increase was
       primarily attributable  to increased interest on bank  borrowings and the
       interest  expense  incurred for  the  Hills  senior  notes  that were not
       tendered during the Hills acquisition.

                Our estimated annual effective income tax rate for each year was
       applied  to the loss  before  income  taxes for each  period to compute a
       non-cash income  tax benefit.  The income  tax benefits  are  included in
       other  current  assets  in  the  balance  sheet  as of  May 1,  1999  and
       May 2, 1998.

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

              Our principal  sources of liquidity are our bank credit  facility,
       cash from  operations and cash on hand. Our current bank credit  facility
       consists of a revolving  credit facility of up to $650.0 million,  with a
       sublimit of $150.0 million for letters of credit,  which expires June 30,
       2002.   Borrowings   under  the  bank  credit  facility  are  secured  by
       substantially  all of our assets and after  February 2000 we are required
       to meet certain  financial  covenants.  In  addition,  we are required to
       maintain a minimum  availability  of at least  $100.0  million.  Our peak
       borrowing  level  during  the  quarter  ended May 1, 1999 under this bank
       credit  facility was $281.8  million.  We believe we will have sufficient
       liquidity to meet our financial obligations for the foreseeable future.

              On April 27,  1999,  we  completed  the sale  of $200  million  of
       Ames  senior  notes.   The net proceeds  from the sale of the Ames senior
       notes,   approximately $193.4 million,  were used  to  reduce outstanding
       borrowings  under our bank credit facility.  The Ames  senior  notes  pay
       interest semi-annually in April and October and mature April 2006.

              On May 24, 1999,  we completed the public  offering of 5.1 million
       shares  of Common  Stock at a price of $38.75 per  share.  The  proceeds,
       net of  underwriting  discounts,  of  approximately  $187.9  million were
       used to reduce our  borrowings  under the bank  credit  facility  and for
       general corporate purposes.

              Merchandise  inventories increased $187.8 million from May 2, 1998
       to May 1, 1999 due to planned  increases for the opening of the converted
       Hills  stores  as   well  as   the   inclusion  of   $82.9   million   of
       merchandise inventories from the Hills locations in liquidation as of the
       end of the quarter.  The  inventories in the Hills stores in  liquidation
       have  been  valued  at  approximately  40% of the initial ticketed retail
       price of the merchandise,  which  represents  the  minimum  amount we are
       entitled to  retain  out  of  the  proceeds  from  the  liquidation.  Our
       merchandise inventories  increased  $66.2 from  January  30,  1999 to May
       1, 1999 due primarily to the normal seasonal build-up of inventories.

              Trade accounts payable increased $93.3 million from May 2, 1998 to
       May 1,   1999  primarily  due  to  the  merchandise  inventory  increases
       referenced  above  and  the  inclusion of  $20.8 million of  Hills' trade
       payables.   The  decrease  of $37.7  million  from  January  30,  1999 to
       May 1,  1999 was principally  the result of  seasonal dating in effect as
       of  January  30, 1999, partially  offset  by  the  seasonal  build-up  of
       inventories referenced above.
                                      -13-
<PAGE>
              Capital  expenditures  for  the  thirteen  weeks ended May 1, 1999
       totaled $34.2  million  and for the  balance of the  year  are  estimated
       to be approximately  $185.0  million.  We  adjust  our plans  for  making
       such expenditures depending on the amount of internally generated funds.

              Net fixed assets  increased by $299.1  million from May 2, 1998 to
       May 1, 1999 due primarily to the inclusion of $226.4 million in net fixed
       assets  of Hills.   Our  net  fixed assets  increased  $20.3 million from
       January 30, 1999 to May 1, 1999 due primarily to the capital expenditures
       associated with the newly converted Hills stores.

              Beneficial  lease  rights  represent the excess of the fair market
       value of the acquired  Hills leases over contract value of those  leases.
       We are amortizing  this  amount  over the  terms of  the  related  leases
       (which  average  approximately  25 years) using the straight-line method.
       Goodwill is being amortized over 25 years using the straight-line method.

              Long-term debt as of May 1,  1999  consisted of  borrowings  under
       our bank  credit facility of  $82.6  million,  $200.0 million of the Ames
       senior  notes  issued  in  April 1999,  and  $50.9  million  of the Hills
       senior notes that remained outstanding after the acquisition.   The Hills
       senior notes became direct obligations of Ames as a result  of the merger
       of Hills into Ames.

              Capital lease and financing obligations increased  $155.1  million
       from May 2, 1998 to May 1, 1999 due primarily to the  inclusion of $144.5
       million   of capital lease and financing  obligations  of Hills.  Capital
       lease and  financing obligations decreased  by  $7.0 million from January
       30,  1999  to  May 1,  1999  due  to  payments  made  on  capital   lease
       obligations.

              The net  operating  loss carryovers  remaining  after  fiscal year
       1998, subject to any  limitations pursuant to Internal  Revenue Code Sec.
       382, should  offset income on which taxes would  otherwise  be payable in
       the next several years.

       Year 2000 Readiness
      ---------------------

              In  operating  our  business,  we  are  dependent  on  information
       technology and process control  systems  that  employ  computers  as well
       as  embedded microprocessors. We also depend on the proper functioning of
       the business systems of third parties,  particularly  the more than 3,200
       vendors  from   whom we  purchase  the  merchandise  sold in our  stores.
       Many  computer  systems and  microprocessors  can only  process  dates in
       which  the  year  is represented  by two  digits.  As a  result,  some of
       these  systems  and processors may interpret "00" incorrectly as the year
       1900 instead of the year 2000, in which event they could  malfunction  or
       become  inoperable after  December  31,  1999.   Systems  and  processors
       that can  properly  recognize the year 2000 are referred to as "year 2000
       compliant."

              As previously reported,   we initiated a comprehensive  program to
       prepare  our computer  systems and  applications  for the  year 2000.  We
       have spent approximately  $4.6 million on this program through the end of
       the  first quarter of  fiscal 1999 and expect that full implementation of
       the program will  involve an  additional  $2.0  million to $2.5  million,
       including    expenditures   for   software   and   consulting   services.
       Additionally,   we  estimate the  allocated costs of  our internal system
       development staff who  are  implementing  our  year 2000  initiatives  to
       be $3.5 million to $4.0 million over the life of the project.

                                      -14-
<PAGE>




                                     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 Note 8.


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

                      On May 14,  1999,  the Company sent a notice of the annual
               meeting and a proxy statement to its stockholders.  The notice of
               meeting  announced that the Annual Meeting of Stockholders  would
               be held  Wednesday,  June 16, 1999,  to consider and act upon the
               following  matters:  (a) the election of six (6)  directors for a
               term of one year or until their  successor(s)  have been  elected
               and  qualified;   (b)  the   ratification  and  approval  of  the
               appointment  of  Arthur  Andersen  LLP as  independent  certified
               public  accountants  and  auditors for the Company for the fiscal
               year ending  January 29, 2000;  and (c) the  transaction  of such
               other  business  as may  properly  come before the meeting or any
               adjournment(s) thereof.

                      The  results  of  the  meeting  will  be  reported  in the
               Quarterly Report for the Company's fiscal quarter ending July 31,
               1999.

<TABLE>

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

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

               Exhibit No.                         Exhibit                           Page No.
              -------------                       ---------                         ----------
<S>            <C>                      <C>                                         <C>
                   11                   Schedule of computation of basic                18
                                        and diluted net income (loss) per
                                        share


                                      -15-
<PAGE>

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

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


<S>     <C>                             <C>                            <C>             <C>
        Date of Report                  Date of Filing                  Item #              Description
       ----------------                ----------------                --------            -------------

        March 16, 1999                  March 16, 1999                     7          Disclosure of Hills Stores Company historical
                                                                                      financial statements and combined pro forma
                                                                                      historical statements to fulfill reporting
                                                                                      requirements.

        April 2, 1999                   April 2, 1999                      5          Disclosure of the Employment Agreement dated
                                                                                      March 23, 1999 between Ames Department Stores,
                                                                                      Inc. and Rolando de Aguiar.

        April 2, 1999                   April 2, 1999                      5          Disclosure of the Employment Agreement dated
                                                                                      March 23, 1999 between Ames Department Stores,
                                                                                      Inc. and Denis T. Lemire.



</TABLE>
                                      -16-
<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:     June 11, 1999            /s/ Joseph R. Ettore
                                         ---------------------------------------
                                          Joseph R. Ettore, President, Director,
                                          and Chief Executive Officer






     Dated:     June 11, 1999            /s/ Rolando de Aguiar
                                         ---------------------------------------
                                          Rolando de Aguiar, Executive Vice
                                          President and Chief Financial and
                                          Administrative Officer




                                      -17-
<PAGE>
<TABLE>
                                                                                                             Exhibit 11






                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
         SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
                 (Amounts in thousands except per share amounts)



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

                                                                                     May 1,          May 2,
                                                                                      1999            1998
                                                                                  -------------   -------------
<S>                                                                               <C>             <C>


Net loss                                                                              ($26,338)        ($2,943)
                                                                                  =============   =============






For Basic Net Loss Per Share
-----------------------------
   Weighted average number of common shares
          outstanding during the period                                                 23,990          22,640
                                                                                  =============   =============


        Basic net loss per share                                                        ($1.10)         ($0.13)
                                                                                  =============   =============



For Diluted Net Loss Per Share
-------------------------------
   Weighted average number of common shares
          outstanding during the period                                                 23,990          22,640

   Add:   Common stock equivalent shares represented by
        - Series B Warrants                                                                 (a)             (a)
        - Options under 1994 Management Stock Option Plan &
                1998 Stock Incentive Plan                                                   (a)             (a)
        - Options under 1994 Non-Employee Directors
                Stock Option Plan                                                           (a)             (a)

                                                                                  -------------   -------------
   Weighted average number of common and common equivalent
          shares used in the calculation of diluted net loss per share                  23,990          22,640
                                                                                  =============   =============


        Diluted net loss per share                                                      ($1.10)         ($0.13)
                                                                                  =============   =============


          (a) Common stock equivalents have not been included because the effect would be anti-dilutive.
                                      -18-
<PAGE>
</TABLE>