SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    FORM 10-Q

                Quarterly Report Under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


For quarterly period ended March 1, 1997

Commission File No.  0-19369


                            LITTLE SWITZERLAND, INC.

             (Exact name of registrant as specified in its charter)

DELAWARE                            66-0476514
(State of Incorporation)            (I.R.S Employer
                                    Identification No.)

161-B CROWN BAY CRUISE SHIP PORT
ST. THOMAS U.S.V.I.                             00802
(Address of Principal Executive Offices)   (Zip Code)

(809) 776-2010
(Registrant's Telephone Number, Including Area Code)


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 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   |  |



At April  10,  1997,  8,461,488  shares of $.01 par  value  common  stock of the
registrant were outstanding.








<PAGE>








                            LITTLE SWITZERLAND, INC.

                               INDEX TO FORM 10-Q

            FOR THE QUARTER ENDED MARCH 1, 1997

                                                         
                                                          PAGE
PART I.         FINANCIAL INFORMATION

Item 1.         FINANCIAL STATEMENTS

      Consolidated Balance Sheets as of
      March 1, 1997 (unaudited) and
      June 1, 1996                                          3

      Consolidated  Statements  of Income  
      for the three and nine  months  
      ended March 1, 1997 and March 2,
      1996 (unaudited)                                      4


      Consolidated Statements of Cash Flows
      for the nine months ended March 1,
      1997 and March 2, 1996 (unaudited)                    5

      Notes to Consolidated Financial
      Statements (unaudited)                                6-11


Item 2.         MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS
                OF OPERATIONS                              12-15


PART II. OTHER INFORMATION

ITEM 6.         EXHIBITS AND REPORTS ON FORM 8-K           15


Signature Page                                             16











<PAGE>



PART I.  FINANCIAL INFORMATION                                      FORM 10-Q
Item 1.  Financial Statements                                       Page 3

                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   Consolidated Balance Sheets (in thousands)

                                                     March 1,       June 1,
                          ASSETS                       1997           1996
                                                     ---------      ------
Current assets:                                      (unaudited)
   Cash and cash equivalents.........................$  6,513       $  5,393
   Accounts receivable...............................   1,843          1,892
   Inventory.........................................  46,383         43,678
   Prepaid expenses and other current assets.........   3,632          1,607
                                                     ---------      --------
         Total current assets........................  58,371         52,570
                                                     ---------      --------

Property, plant and equipment, at cost...............  37,874         34,247
   Less -- Accumulated depreciation.................. (14,863)       (12,522)
                                                     ---------      ---------
                                                       23,011         21,725
                                                     ---------      --------

Other assets.........................................   3,382          3,582
                                                     ---------      --------

         Total assets................................$ 84,764       $ 77,877
                                                     =========      ========

               LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
   Current portion of long term debt.................$  2,219       $    832
   Unsecured notes payable...........................   9,100          7,100
   Accounts payable..................................  10,856          6,839
   Accrued and currently deferred income taxes.......   1,028          2,002
   Other accrued expenses and deferred income........   2,552          3,225
                                                     ---------      --------

         Total current liabilities...................  25,755         19,998

Long term debt.......................................   6,681          8,068

Deferred income taxes................................      90             90
                                                     ---------      --------

         Total liabilities...........................  32,526         28,156
                                                     ---------      --------

Commitments and contingencies........................     ---            ---

Minority interest....................................   1,619          1,619
                                                     ---------      --------

Stockholders' equity:
  Preferred stock, $.01 par value--
    Authorized--5,000 shares
    Issued and outstanding--none.....................     ---            ---
  Common stock, $.01 par value--
    Authorized--20,000 shares
    Issued and outstanding--8,461 shares
      at March 1, 1997 and 8,457
      at June 1, 1996................................      85             85
  Capital in excess of par...........................  14,811         14,792
  Retained earnings..................................  35,723         33,225
                                                     ---------      --------

      Total stockholders' equity.....................  50,619         48,102
                                                     ---------      --------
      Total liabilities, minority interest
         and stockholders' equity....................$ 84,764       $ 77,877
                                                     =========      ========

           See accompanying notes to consolidated financial statements


<PAGE>



PART I. FINANCIAL INFORMATION                                        FORM 10-Q
Item 1. Financial statements                                         Page 4


                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                        Consolidated Statements of Income
                      (in thousands except per share data)
                                   (unaudited)



                                 For the three              For the nine
                                 months ended               months ended
                              March 1,     March 2,      March 1,     March 2,
                               1997          1996          1997         1996
                             --------     ---------     ---------     --------
                             

Net sales......................$32,624     $20,680       $65,950       $44,499
Cost of sales.................. 18,126      11,794        36,918        25,352
                               --------    --------      --------      -------

Gross profit................... 14,498       8,886        29,032       19,147

Selling, general and
administrative expenses........ 10,328       8,259        25,518       20,961

Business interruption
insurance proceeds.............    ---         ---           560         ---
                               --------    --------      --------      -------

  Operating income (loss)......  4,170         627         4,074       (1,814)

Interest expense, net..........    398         144         1,166          324
                               --------    --------      --------      -------


   Income (loss) before
      income taxes.............  3,772         483         2,908       (2,138)

Provision (benefit) for
income taxes...................    566          86           410         (394)
                               --------    --------      --------      -------


Net income (loss)..............$ 3,206     $   397         2,498      $(1,744)
                               ========    ========      ========      ========


Net earnings (loss)
    per share..................$  0.38     $  0.05        $ 0.29        (0.21)
                               ========    ========      ========      ========


Weighted average shares
    outstanding................  8,540       8,456         8,498        8,455
                               ========    ========      ========      ========

                                           `





            See accompany notes to consolidated financial statements


<PAGE>



PART I. FINANCIAL INFORMATION                                       FORM 10-Q
Item 1. Financial statements                                        Page 5

                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (unaudited)

                                                    For the nine months ended
                                                      March 1,     March 2,
Cash flows from operating activities:                  1997          1996
                                                    ---------      --------
Net income (loss)...................................$  2,498     $ (1,744)
     Adjustments to reconcile net income (loss) to
       net cash provided by operating activities--
       Depreciation.................................   2,341        1,762
       Changes in assets and liabilities:
         Decrease (increase) in accounts receivable.      49         (618)
        (Increase) in inventory.....................  (2,705)      (4,816)
        (Increase) in prepaid expenses
           and other current assets.................  (2,025)        (772)
         Decrease (increase) in other assets........     200          (73)
         Increase in accounts payable...............   4,017        2,016
        (Decrease) increase in other accrued
            expenses and deferred income............    (673)       6,256
        (Decrease) in accrued and currently
           deferred income taxes....................    (974)        (710)
                                                      -------      -------
   Net cash provided by operating activities........   2,728        1,301
                                                      -------      -------
Cash flows from investing activities:
     Capital expenditures...........................  (3,627)      (5,002)
     Acquisition of inventory and fixed assets......       0       (8,917)
                                                      -------      -------
   Net cash (used in) investing activities..........  (3,627)     (13,919)
                                                      -------      -------
Cash flows from financing activities:
     Proceeds from unsecured notes payable..........  21,500       23,800
     Repayments of unsecured notes payable.......... (19,500)     (18,600)
     Proceeds from long term borrowings.............       0        8,900
     Issuance of common stock.......................      19           17
                                                      -------      -------
Net cash provided by financing activities...........   2,019       14,117
                                                      -------      -------

Net  increase  in cash and cash equivalents.........   1,120        1,499

Cash and cash equivalents, beginning of period......   5,393        2,899
                                                      -------      -------
Cash and cash equivalents, end of period............$  6,513     $  4,398
                                                      =======      =======

Non-cash activity:
     Issuance of preferred stock by subsidiary
        used in acquisition                         $     --     $  1,619
                                                      =======      =======

During the nine months  ended March 1, 1997 and March 2, 1996,  the Company paid
income taxes of $1,354 and $316,  respectively,  and paid interest of $1,100 and
$120, respectively.

           See accompanying notes to consolidated financial statements


<PAGE>



FINANCIAL INFORMATION                                               FORM 10-Q
Item 1.  Financial statements                                       Page 6


                 LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                 Notes to Consolidated Financial Statements

                             (unaudited)


1. CONSOLIDATED FINANCIAL STATEMENTS

         The  accompanying   consolidated   financial   statements  include  the
operations  of Little  Switzerland,  Inc. (the  "Company")  and its wholly owned
subsidiaries,  L.S.  Holding,  Inc. and L.S.  Wholesale,  Inc.  All  significant
intercompany  balances  have  been  eliminated  in  consolidation.  The  interim
financial  statements are unaudited  and, in the opinion of management,  contain
all adjustments  necessary to present fairly the Company's financial position as
of March 1, 1997 and March 2, 1996 and the  results of its  operations  and cash
flows for the interim  periods  presented.  It is suggested  that these  interim
financial  statements be read in conjunction  with the financial  statements and
the notes thereto included in the Company's latest report on Form 10-K.

         Effective  with the second  quarter of fiscal  year 1996,  the  Company
adopted a "4-5-4" fiscal calendar  wherein each fiscal quarter contains two four
week  periods and one five week period,  with each period  beginning on a Sunday
and ending on a Saturday.  Previously,  the Company used calendar months for its
fiscal  periods.  The  purpose  of this  change is to  provide  more  consistent
comparability  between fiscal periods. The change in fiscal calendar resulted in
one less day in the nine month period of the current fiscal year, as compared to
the prior fiscal year. Management estimates that this one day difference did not
cause any material  incomparability in the net income of the two periods.  There
was no fiscal calendar  difference in the three month period, this year compared
to last year.

         The results of  operations  for the interim  periods  presented are not
necessarily indicative of the results to be expected for a full fiscal year, due
to the seasonal nature of the Company's operations.


2. USE OF ESTIMATES

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.


<PAGE>



                                                                     FORM 10-Q
                                                                     Page 7


                 LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                 Notes to Consolidated Financial Statements
                                (unaudited)

3. TRANSACTIONS WITH AFFILIATES

         The Company  enters into a number of  transactions  with Town & Country
Corporation,  of which one of the Company's  Directors is an Executive  Officer.
The  Company  purchases  a  portion  of its  merchandise  from  Town  &  Country
Corporation   and  its   affiliated   companies  at  prices  which   approximate
arm's-length transactions.


4. CREDIT ARRANGEMENTS

     The Company  has  available a total of $17.5  million in  unsecured  credit
facilities,  of which $8.4 million is available  for borrowing  with  maturities
ranging from one to three years from March 1, 1997. Any unfunded  portion of the
facilities  can be withdrawn at the bank's  discretion.  Outstanding  borrowings
against  these  credit  facilities  totaled  $9.1  million  as of March 1, 1997.
Additionally,  in February 1996, the Company secured term debt of  approximately
$8.9 million from its two lead banks to finance the acquisition of the fixtures,
leasehold  rights and  inventories  of two stores in Barbados.  Interest on this
debt accrues at an annual interest rate of  approximately  7.25%, and is payable
monthly.  The principal is payable in equal quarterly  payments over a four year
period,  commencing  March  1997.  As of  March  1,  1997,  the  Company  was in
compliance with all restrictive covenants related to its unsecured and term debt
agreements.  Additionally,  the Company has available  separate  facilities  for
foreign exchange contracts.


5. EARNINGS PER SHARE

         Earnings  per share is based on the weighted  average  number of common
and dilutive common  equivalent shares (stock options)  outstanding  during each
period.


6. ACCOUNTING FOR INCOME TAXES

         The Company uses the liability method in accounting for income taxes in
accordance  with SFAS No. 109. This standard  determines  deferred  income taxes
based on the  estimated  future  tax  effects  of any  differences  between  the
financial  statement  and the tax basis of  assets  and  liabilities,  given the
provisions of the enacted tax laws.




<PAGE>



                                                                    FORM 10-Q
                                                                    Page 8


                 LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                 Notes to Consolidated Financial Statements
                                (unaudited)


7.  INTANGIBLE ASSETS

         The Company accounts for long-lived and intangible assets in accordance
with SFAS No. 121,  Accounting for the  Impairment of Long-lived  Assets and for
Long-lived  Assets to be  Disposed  of.  The  Company  continually  reviews  its
intangible  assets for events or changes in  circumstances  which might indicate
that the  carrying  amount of the assets  may not be  recoverable.  The  Company
assesses  the   recoverability   of  the  assets  by  determining   whether  the
amortization  of such  intangibles  over their  remaining lives can be recovered
through projected undiscounted future results. The amount of impairment, if any,
is measured based on projected  discounted  future results using a discount rate
reflecting the Company's average cost of funds.


8.  STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 - EARNINGS
       PER SHARE
        
         In  March  1997,  the  Financial   Accounting  Standards  Board  issued
Statement of Financial Accounting Standards No. 128 (SFAS No. 128), Earnings per
Share,  which  supersedes  Accounting  Principles Board Opinion 15, the existing
authoritative  guidance.  SFAS No. 128 is designed to improve the  earnings  per
share  information  provided in the  financial  statements  by  simplifying  the
existing computational  guidelines,  revising the disclosure  requirements,  and
increasing the  comparability of earnings per share on an  international  basis.
SFAS No. 128 is effective for financial  statements  for both interim and annual
periods  ending  after  December  15,  1997  and  requires  restatement  of  all
prior-period  earnings per share data presented.  The new statement modifies the
calculations  of primary and fully diluted  earnings per share and replaces them
with basic and diluted earnings per share.  Basic earnings per share includes no
dilution and is calculated by dividing net income by the weighted average number
of common shares outstanding for the period. Diluted earnings per share reflects
the  potential  dilution of stock options that could share in the earnings of an
entity, similar to fully diluted earnings per share. Earnings per share in these
financial statements would not be affected under the new pronouncement.








<PAGE>



                                                                    FORM 10-Q
                                                                    Page 9

                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)


9.  STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 -
          ACCOUNTING FOR STOCK-BASED COMPENSATION

         In December 1995, the Financial  Accounting Standards Board issued SFAS
No. 123, Accounting for Stock-Based  Compensation,  which is to become effective
for fiscal  years  beginning  after  December  15,  1995.  SFAS No. 123 requires
employee stock-based compensation to be either recorded or disclosed at its fair
value.  Management  intends to  continue  to account  for  employee  stock-based
compensation under Accounting Principles Board Opinion No. 25 and will not adopt
the new accounting  provision for employee stock- based  compensation under SFAS
No. 123, but will include the additional required disclosures in the fiscal 1997
year end financial statements.


10.  ADVERTISING

         The Company  expenses the costs of  advertising as  advertisements  are
printed  and  distributed.  The  Company's  advertising  consists  primarily  of
advertisements  with local and national travel magazines which are produced on a
periodic  basis  and  distributed  to  visiting  tourists,  and  fees  paid  for
promotional  "port  lecturer"   programs  directed   primarily  at  cruise  ship
passengers.


11.  COMMITMENTS AND CONTINGENCIES

         In September  1995,  Hurricanes  Luis and Marilyn  inflicted  damage to
several  of the  Company's  stores  and  caused  significant  damage to  various
islands'  infrastructures,  including hotels and other tourist facilities. As of
November 20, 1996, all stores had reopened.

         The  Company  has  settled  all  outstanding   claims  related  to  the
hurricanes with its insurance carrier. In connection with this final settlement,
the  Company  received  approximately  $13.4  million in property  and  business
interruption  proceeds.  The Company recorded a net gain of  approximately  $4.7
million  in  fiscal  1996,  after  write-offs   related  to  damaged  assets  of
approximately  $8.1 million,  including  furniture  and fixtures,  inventory and
other  assets  related  to  stores  affected  by the  hurricanes.  In  addition,
approximately  $560,000,  representing  fiscal 1997 lost  profits for a store in
Marigot not reopened until November 1996, was recorded as deferred income on the
Company's  consolidated  balance  sheet as of June 1,  1996.  In the nine  month
period, the Company recorded the $560,000,  as business  interruption  insurance
proceeds, which represents lost profits for the closed Marigot store.


<PAGE>



                                                                    FORM 10-Q
                                                                    Page 10


                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

                                   (unaudited)


         The  Company is  currently  insured  for  property  losses and  related
business  interruption  losses  in  excess  of 5% of the  insured  value  of the
property  subject to a claim.  For fiscal  years 1995 and 1996,  the Company was
only insured for wind related losses in excess of $5 million, subject to certain
deductibles.


12.  ACQUISITION

         On February 16, 1996, World Gift Imports (Barbados), Inc., a subsidiary
of LS Holding,  Inc.  which is a subsidiary  of Little  Switzerland,  Inc.  (the
"Company"),  purchased the leasehold  rights,  fixtures and  inventories  of two
retail stores located in Barbados,  West Indies,  from Dacosta  Mannings Inc., a
subsidiary of Barbados  Shipping & Trading Company Limited.  The two stores were
previously  operated  under  the name of  "Louis  Bayley"  and sold  merchandise
similar  to that  carried in the  Company's  retail  stores,  such as name brand
watches, jewelry, china, crystal and gift items at duty free prices. The Company
began  operating the two stores as "Little  Switzerland"  stores on February 19,
1996.


      The purchase  price of  approximately  $10.6  million was financed by bank
borrowing  provided by the Company's two primary  banks,  Chase Bank and Bank of
Nova Scotia,  of approximately  $8.9 million and the issuance of preferred stock
of  approximately  $1.6  million by World Gift Imports  (Barbados),  Inc. to the
seller.  The purchase price is subject to adjustment  three and four years after
the closing date, based on the sales performance of the two purchased stores and
any additional  stores that may be opened by the Company in Barbados during that
period.  The Company pays to the seller a management fee of 2.5% of its Barbados
stores'  annual  sales up to $15 million and 1.25% of annual  sales in excess of
$15 million,  so long as the preferred stock is unredeemed.  The preferred stock
may be  redeemed by the Company at face value at any time after three years from
the date of close  through  nine  years from the date of close.  Following  that
period,  the Company  retains the right of first  refusal to match any bona fide
offer from a third party to purchase the preferred stock.


         The  Acquisition  has  been  accounted  for as a  purchase  transaction
effective as of February 16, 1996,  in  accordance  with  Accounting  Principles
Board Opinion No. 16, "Business


<PAGE>



                                                                    FORM 10-Q
                                                                    Page 11


                    LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

                                   (unaudited)


Combinations",  and accordingly,  the consolidated  financial statements for the
period  subsequent to February 16, 1996 reflect the purchase price  allocated to
tangible and intangible assets acquired, based on their estimated fair values as
of February 16, 1996.

     Unaudited  pro forma  operating  results of the Company for the nine months
ended March 2, 1996 as adjusted for the debt financing and estimated  effects of
the acquisition as if it had occurred on June 1, 1995, are as follows:


Net sales....................................  $50,137,000
Net (loss)...................................   (1,735,000)
Net (loss) per share.........................        (0.21)

Weighted average shares outstanding..........    8,456,000
































<PAGE>



                                                                   FORM 10-Q
                                                                   Page 12


PART I. FINANCIAL INFORMATION

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


RESULTS OF OPERATIONS


NET SALES

         Net sales for the third  quarter ended March 1, 1997 were $32.6 million
or 57.8%  higher than net sales of $20.7  million for the  corresponding  period
last year.  Net sales of $66.0  million for the nine month period ended March 2,
1997 were 48.2%  higher than net sales of $44.5  million  for the  corresponding
period last year.  The  increase in net sales is  primarily  the result of sales
this year from stores that were closed for all or part of the prior year periods
due to Hurricanes  Luis and Marilyn in September  1995,  and sales  generated by
five new stores: the Royal Plaza store in Aruba, the Juneau store in Alaska, two
stores in Barbados and one in St.
Lucia.

         Net sales of $19.1  million  for  stores  which  were open for the full
three  month  period  this year and last year  increased  1.2% from net sales of
$18.9  million  for the same period  last year.  Net sales of $16.0  million for
stores which were open for the full nine month period this year decreased  18.1%
from net sales of $19.6  million for the same period  last year.  This  decrease
reflects the  temporary  shift of tourism last year to islands such as Aruba and
Curacao that were undamaged by Hurricanes Luis and Marilyn, in September 1995.

GROSS PROFIT

         Gross  profit as a  percentage  of net sales  during the three and nine
month periods ended March 1, 1997 were 44.4% and 44.0%,  respectively,  compared
to the three and nine month  periods  ended  March 2, 1996 of 43.0%  each.  This
increase in gross  margin  percentage  reflects  the  strengthening  of the U.S.
dollar as compared to the European  currencies in which the Company  purchases a
substantial portion of its merchandise.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Third quarter selling,  general and  administrative  expenses  ("SG&A")
increased  25.3% to $10.4 million for the three month period ended March 1, 1997
from $8.3 million for the same period last year. As a percent to net sales, SG&A
expenses  decreased to 31.8% for the quarter  ended March 2, 1997 from 39.9% for
the same


<PAGE>



                                                                    FORM 10-Q
                                                                    Page 13


PART I. FINANCIAL INFORMATION


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


quarter  last year.  Nine month SG&A  increased  21.4% to $25.5  million for the
period ended March 2, 1997 from $21.0  million for the same period last year. As
a percent to net sales,  SG&A  decreased to 38.7% for the nine month period this
year from 47.1% for the same period last year. The increase in SG&A expense this
year is due mostly to new and  reopened  stores this year.  The decrease in SG&A
expenses as a percentage  of net sales is due to the increase of sales this year
resulting from reopened and new stores.


BUSINESS INTERRUPTION INSURANCE PROCEEDS

         For the nine month  period  ended March 1, 1997,  the Company  recorded
$560,000,  as Business  interruption  insurance  proceeds,  which represents the
insurance  recovery for lost profits  from its closed  Marigot  store during the
period. No Business interruption insurance proceeds,  were recorded in the three
month period ended March 1, 1997.


OTHER

         Net interest expense for the nine month periods ended March 1, 1997 and
March 2, 1996 totaled $1.2 million and $324,000,  respectively.  The increase is
due  to  higher  average  borrowings  this  year  to  support  construction  and
inventories for three new stores, and the interest on long term debt utilized in
the acquisition of the fixtures,  leasehold rights and inventories of two stores
in Barbados in February 1996.

         The  Company's  effective  income tax rates for the nine month  periods
ended March 1, 1997 and March 2, 1996 consisted of a provision of  approximately
14% and a benefit of 18%, respectively. The lower effective rate for the current
year is the result of the  anticipated  utilization of net operating  losses for
two of the Company's foreign subsidiary corporations.

         This quarterly report on Form 10-Q contains certain statements that are
"forward-looking   statements"  as  that  term  is  defined  under  the  Private
Securities  Litigation  Reform Act of 1995 and releases issued by the Securities
and Exchange Commission.  The words "believe," "expect," "anticipate," "intend,"
"estimate" and other



<PAGE>
                                                                   FORM 10-Q
                                                                   Page 14


PART I. FINANCIAL INFORMATION

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


expressions  which are  predictions of or indicate  future events and trends and
which do not relate to historical matters identify  forward-looking  statements.
Forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors,  which may cause the actual results,  performance or achievements
of the Company to differ materially from anticipated future results, performance
or achievements  expressed or implied by such forward- looking  statements.  The
Company   undertakes   no   obligation   to   publicly   update  or  revise  any
forward-looking statement, whether as a result of new information, future events
or otherwise.

         The future operating results and performance  trends of the Company may
be  affected  by  a  number  of  factors,  including,  without  limitation,  the
following:  (i) the  frequency  of  tourist  visits to the  locations  where the
Company   maintains   retail  stores  (ii)  the  Company's   ability  to  retain
relationships  with its major  suppliers of product for resale (iii)  weather in
the  Company's  markets  (iv)  actions  of the  Company's  competitors  and  the
Company's ability to respond to such actions (v) economic conditions that affect
the buying patterns of the Company's  customers (vi) availability of new tourist
markets for expansion and (vii) the continued  success of the Company's  efforts
to implement its planned strategic initiatives.


LIQUIDITY AND CAPITAL RESOURCES

         Net cash  provided by  operations  during the nine month  period  ended
March 1, 1997 was $2.7 million,  compared to $1.3 million provided by operations
for the same nine month period last year.  The increase in net cash  provided by
operations primarily reflects a $4.0 million increase in accounts payable,  this
year, partially offset by an increase in inventories.

         The Company's  working capital position as of March 1, 1997 and June 1,
1996 was $32.6 million.  Current ratios were 2.3 and 2.6 as of the same periods,
respectively.  Capital  expenditures were  approximately $3.6 million during the
nine month period ended March 1, 1997,  compared to  approximately  $5.0 million
during the same period last year. Major capital  expenditures  this year include
new in-store merchandise systems and related hardware,  upgrade of the Company's
central  computer  system,  new stores in Juneau,  Alaska and St. Lucia, and the
refurbishment of stores in St. Thomas, Marigot and Antigua.



<PAGE>



                                                                    FORM 10-Q
                                                                    Page 15


PART I. FINANCIAL INFORMATION

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


         The Company has total  unsecured  credit  facilities  of $17.5  million
provided by its two lead banks.  As of March 1, 1997,  short-term  borrowings of
$9.1  million were  outstanding  against  these  facilities.  Additionally,  the
Company has secured facilities through its two lead banks for the acquisition of
the leasehold rights, fixed assets and inventory of two stores in Barbados.  The
total borrowing  provided for the acquisition was $8.9 million at an approximate
7.25% interest  rate,  with terms of interest only, for the first year and equal
principal  payments due  quarterly  over the following  three years.  It remains
management's expectation that funds available from operations and bank financing
will be sufficient to fund  operations and expansion for at least the next three
years.





PART II.  OTHER INFORMATION




Item 6.  EXHIBITS AND REPORTS OF FORM 8-K

(a)   Exhibits

                  3.1      The Amended and Restated Certificate of Incorpo-
                           ration of the Company is incorporated herein by
                           reference to Exhibit 3.3 to Amendment No. 1 to
                           the Company's Registration Statement on Form S-1,
                           Registration No. 33-40907, filed with the
                           Securities and Exchange Commission on July 10,
                           1992 ("Amendment No. 1 to the Form S-1").

                  3.2      The Amended and Restated By-Laws of the Company
                           are incorporated herein by reference to Exhibit
                           3.4 to Amendment No. 1 to the Form S-1/


(b)   Reports on Form 8-K

      No Form 8-K was issued by the  registrant  during the three  month  period
ended March 1, 1997.


<PAGE>



                                                                    FORM 10-Q
                                                                    Page 16

                 LITTLE SWITZERLAND, INC. AND SUBSIDIARIES


                                 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.


                                  LITTLE SWITZERLAND, INC.


Date:  April 10, 1997           /s/ Ronald J. Lataille
       --------------           ----------------------

                                 Ronald J. Lataille
                                 Vice President and
                                 Chief Financial Officer