FORM 10-K

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

For the fiscal year ended              January 25, 1997

Commission File No.                         0-6319

                             JACOBSON STORES INC.
--------------------------------------------------------------------------
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

    Michigan                                           38-0686330
--------------------------------------------------------------------------
(STATE OF INCORPORATION)              (I.R.S. EMPLOYER IDENTIFICATION NO.)

               3333 Sargent Road, Jackson, Michigan 49201-8847
--------------------------------------------------------------------------
         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

Registrant's telephone number, including area code:  517-764-6400

Securities registered pursuant to Section 12(b) of the Act:

                                     None

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

                          Common Stock, $1 par value
                   Series A Preferred Stock Purchase Rights
             6 3/4% Convertible Subordinated Debentures due 2011

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  [  ]

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]


STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE
TO THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES
OF SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF
FILING.
                       $30,820,000 as of March 1, 1997

(THE PERSONS CONSIDERED AFFILIATES FOR THE PURPOSE OF THE FOREGOING
COMPUTATION ARE IDENTIFIED ON PAGE 20 OF THIS REPORT.)

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

         Common Stock, $1 par value: 5,779,021-2/3 shares outstanding
                             as of March 1, 1997

                     DOCUMENTS INCORPORATED BY REFERENCE

LIST HEREUNDER THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE
PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED:

   SPECIFIED PORTIONS OF PROXY STATEMENT FOR 1997 ANNUAL MEETING OF
   SHAREHOLDERS, TO BE HELD 
   MAY 22, 1997: PART III


<PAGE>
<TABLE>
<CAPTION>



                             JACOBSON STORES INC.
                             --------------------
                                  FORM 10-K
                                  ---------
                      FISCAL YEAR ENDED JANUARY 25, 1997
                      ----------------------------------
                                    INDEX
                                    -----

                                                                          Page
                                                                          ----
PART I.
      <S>                                                                  <C>
      Item 1.     Business.                                                  1

      Item 2.     Properties.                                                8

      Item 3.     Legal Proceedings.                                         9

      Item 4.     Submission of Matters to a Vote of Security Holders.       9

      Executive Officers of the Registrant.                                 10

PART II.
      Item 5.     Market for Registrant's Common Equity and Related
                      Stockholder Matters.                                  12

      Item 6.     Selected Financial Data.                                  13

      Item 7.     Management's Discussion and Analysis of Financial
                      Condition and Results of Operations.                  13

      Item 8.     Financial Statements and Supplementary Data.              19

      Item 9.     Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure.                  19

PART III.
      Item 10.    Directors and Executive Officers of the Registrant.       20

      Item 11.    Executive Compensation.                                   20

      Item 12.    Security Ownership of Certain Beneficial Owners and
                      Management.                                           20

      Item 13.    Certain Relationships and Related Transactions.           20

PART IV.
      Item 14.    Exhibits, Financial Statement Schedules, and Reports
                      on Form 8-K.                                          21

SIGNATURES                                                                  25

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                              F-1/F-19

FINANCIAL STATEMENT SCHEDULES                                               S-1

INDEX OF EXHIBITS                                                         E-1/E-3
</TABLE>


<PAGE>



                                    PART I
                                    ------



ITEM 1.  BUSINESS.
-------  ---------

                                 INTRODUCTION
                                 ------------

     The registrant, Jacobson Stores Inc., a Michigan corporation and
successor to a business founded in 1868, operates specialty department stores
catering to discerning customers with preferences for quality merchandise.
The Company emphasizes quality merchandise, fully staffed stores,
personalized customer service and attractive, comfortable shopping
surroundings. Each store features fashion apparel and accessories for the
family, and most offer decorative accents for the home.

     The Company owns a substantial portion of the real property used in its
business, primarily through its consolidated, wholly-owned real estate
subsidiary, Jacobson Stores Realty Company ("Jacobson Realty"). The Company
also has a consolidated, wholly-owned finance subsidiary Jacobson Credit
Corp. ("Jacobson Credit"). As used in this report, the terms "registrant",
"Company" and "Jacobson's" refer to Jacobson Stores Inc. and its subsidiaries
unless the context indicates otherwise.

     Jacobson's operates in two regions and maintains separate staffs of
buyers for each region in order to better respond to customers' lifestyles
and merchandise preferences. In January 1997, the Company announced the
closing of three stores in Michigan, which closed in March 1997. The Company
has stores in twenty-five cities in Michigan, Indiana, Kansas, Kentucky, Ohio
and Florida. The principal merchandising and distribution functions are
performed through regional facilities. Functions common to all stores, such
as management coordination, sales promotion, data processing and accounting,
are centralized at the corporate headquarters in Jackson, Michigan.


MERCHANDISE AND MARKETING

     Merchandise. Jacobson's directs its primary merchandising and marketing
efforts to discerning customers with preferences for quality merchandise.
Stores are merchandised with fashion apparel and accessories for the family,
and most offer decorative accents for the home.

                                      1

<PAGE>


        The percentage contribution to sales by major class of merchandise
for the last three fiscal years was as follows:

<TABLE>
<CAPTION>

                                                                Year Ended
                                                       ----------------------------
                                                       January   January    January
                                                       -------   -------    -------
                                                         1997      1996       1995
                                                         ----      ----       ----
        <S>                                              <C>       <C>       <C> 
        Women's apparel and accessories..............    67.2%     66.7%     66.2%
        Men's apparel and accessories................    13.3      13.2      12.8
        Accessories for the home.....................     7.8       7.9       8.0
        Children's apparel and accessories...........     7.6       7.9       8.8
        Miscellaneous................................     4.1       4.3       4.2
                                                        -----     -----     ----- 
                                                        100.0%    100.0%    100.0%
                                                        =====     =====     ===== 
</TABLE>



        Personal Service. Jacobson's stores are fully staffed with
knowledgeable sales associates to ensure that customers receive prompt
personal attention. Jacobson's sales associates are experienced and
well-trained through video presentations, seminars and close working
relationships with buyers and merchandise managers. Sales associates maintain
personal trade lists of their customers' sizes, colors, fashion preferences,
and important dates, and contact customers by telephone or personal note to
alert them to the arrival of new merchandise or to remind them of birthdays
or anniversaries. Management believes that personal relationships between
sales associates and their clientele promote customer loyalty and contribute
to the Company's growth. Jacobson's has a liberal return policy and accepts
merchandise purchased at Jacobson's for return or exchange if the customer is
not satisfied. Other special services include free gift wrapping and free
parking. All regularly scheduled Jacobson's sales associates are compensated
on some form of commission program.

        Sales Promotion. The Company uses newspaper, radio, television and
direct mail advertising, as well as in-store events and billing statement
enclosures, to stimulate sales. Advertising generally is institutional and
focuses on current fashions and merchandise classifications. The Company's
policy is to price merchandise fairly and competitively and to limit its use
of sale events other than special pre-season promotions and end-of-season
clearances. Management believes that its pricing practices enhance
credibility and customer loyalty. Jacobson's in-store events include fashion
shows and wardrobing seminars to communicate fashion trends to customers.

        Store Design. Jacobson's stores are designed to project an
attractive, comfortable atmosphere similar to the style customers find in
their own homes. All aspects of the store interiors and fixturing are
coordinated by the Company's store planning personnel, using quality
fixtures, carpeting, lighting and displays.

                                      2

<PAGE>

CREDIT POLICY

        Jacobson's issues its own credit card as a customer service. The
Company offers three credit plans to its cardholders: an Option plan
requiring a minimum monthly payment of 20% of the outstanding balance; an
Extended Payment plan available primarily for furs, fine jewelry, and
furniture purchases in the Company's two stores which carry furniture; and a
Tabletop plan granting extended payment terms without finance charge for
qualifying purchases of china, crystal, silver, and table linens.

        Sales under Jacobson's credit plans averaged 44.3% of sales for the
last three fiscal years and accounted for 44.6% of the Company's sales in
fiscal 1996. In addition, sales under third party credit cards (VISA,
MasterCard and American Express) averaged 38.1% of sales for the last three
fiscal years and accounted for 39.3% of the Company's sales in fiscal 1996.
Losses related to the Company's credit card have averaged 0.45% of credit
sales over the last three years and totalled 0.54% of credit sales in 1996.
In mid-1996, the Company increased the finance charge rate on its credit card
to 20.4% from 18% and instituted a late payment fee.

        The Company maintains purchasing history on its 289,000 active
Jacobson's card holders as well as on third party charge customers, which
permits targeting of direct mail advertising and automatic increases in
credit limits of its cardholders.


OPERATIONS

        The Company operates in two regions, the Midwest and Florida. The
principal merchandising and distribution functions for the Midwest stores are
performed at a regional distribution facility in Jackson, Michigan. The
principal merchandising and distribution functions for the Florida stores are
performed at a regional distribution facility in Winter Park, Florida.
Functions common to all stores, such as management coordination, sales
promotion, data processing and accounting, are centralized at the corporate
headquarters in Jackson, Michigan.

        Jacobson's stores in Michigan are located in Birmingham, Grosse
Pointe, Livonia and Rochester (all suburbs of Detroit), Ann Arbor, East Grand
Rapids, East Lansing and Saginaw; in Indiana, in Indianapolis; in Kansas, in
Leawood; in Kentucky, in Louisville; in Ohio, in Columbus and Toledo; and in
Florida, in Boca Raton, Clearwater, Fort Myers, Jacksonville, Longwood,
Naples, North Palm Beach, Osprey, Sarasota, Tampa and Winter Park. In
addition, the Company has a clearance center in Troy, Michigan, a suburb of
Detroit. Stores in the Midwest range from 101,000 to 199,000 square feet
except for the clearance center, which is 34,000 square feet. The Florida
stores range from 23,000 to 90,000 square feet. In November 1996, the Company
opened an 80,000 square foot leased store in Mizner Park, a mixed use retail,
residential and office development in Boca Raton, Florida. In March 1997, the
Company closed underperforming stores in Jackson, Kalamazoo and Dearborn,
Michigan.

                                      3

<PAGE>

        Jacobson's maintains evening hours consistent with customer shopping
patterns in each community. Stores are open from 53 to 71 hours each week,
except during the holiday season, when evening hours may be extended.

        Annual sales, percentage increase in sales, average gross square
footage of stores in operation during the fiscal year, and approximate sales
per average gross square foot were as follows:
<TABLE>
<CAPTION>

                                                                   Year Ended
                                                          -----------------------------
                                                          January    January    January
                                                            1997       1996       1995
                                                          --------   --------  --------
<S>                                                       <C>        <C>       <C>     
Net sales (in thousands)..............................    $432,469   $414,267  $409,154
Percentage increase in sales:
   All stores.........................................         4.4%       1.2%      1.3%
   Same stores........................................        (1.5)%     (1.1)%    (0.2)%
Average gross square footage (in thousands)...........       2,658      2,537     2,439
Approximate sales per average gross square foot.......         163        163       168
</TABLE>


PURCHASING, CONTROL AND DISTRIBUTION OF INVENTORY

        Jacobson's purchases merchandise from several thousand suppliers, no
one of which accounted for as much as 5% of the Company's net purchases
during fiscal 1996. The Company maintains separate staffs of buyers for its
Midwest and Florida stores to better respond to customer lifestyles and
merchandise preferences. Merchandising decisions are directed by 2 general
merchandise managers, 12 divisional merchandise managers and 75 buyers. In
addition, the Company is currently a member of the Frederick Atkins Buying
Office, a domestic and foreign buying office serving approximately 15
retailers, which provides merchandising counsel, product information, direct
store import capability, and other services.

        An on-line computerized merchandise information system provides the
Company's buyers with detailed reports of current sales and inventory levels
for each store, by department, class, vendor, style, color and size. This
system permits the Company's merchandising staff to analyze trends on a daily
basis, to identify fast-selling and slow-selling merchandise and to respond
to customer buying preferences when making reorder and markdown decisions.

        Merchandise is generally shipped directly from vendors to the
Company's regional distribution centers in Jackson, Michigan and in Winter
Park, Florida, where it is inspected for quality by the Company's buyers,
priced and shipped to the stores by Jacobson's fleet of trucks.

        Jacobson's adopted the LIFO method of inventory valuation in 1968. At
the end of fiscal 1996, LIFO reserves totalled $17,080,000, or approximately
15.3% of pre-LIFO inventory values. Physical inventories are taken at least
once each year. Inventory shrinkage at retail over the past three fiscal
years has averaged 2.1% of owned retail sales.

                                      4

<PAGE>

EXPANSION AND CONSOLIDATION

        The Company opened two new stores in 1996, but has no commitments for
any new store locations at the present time. The Company reviews the
performance of its less profitable existing stores from time to time to
determine whether it would be in the Company's best interest to close any of
these stores. Store closings could have a significant impact on the Company's
sales, expenses and capital requirements and would likely entail significant
one time charges to effect the closing and to recognize any impairment of
assets resulting from the closing decision. In January 1997, the Company
announced its decision to close underperforming stores in Jackson, Kalamazoo
and Dearborn, Michigan, which closed in March 1997. The Company incurred a
$4,200,000 pre-tax charge in fiscal 1996 to effect the closings and to state
property and equipment at estimated fair value.

        The Company opened a 120,000 square foot leased store in the Town
Center Plaza, a shopping center in Leawood, Kansas, a suburb of Kansas City,
in March 1996.

        In November 1996, the Company opened an 80,000 square foot leased
store in Mizner Park, a mixed-use retail, residential and office development
in Boca Raton, Florida.


REAL ESTATE POLICY

        Jacobson's owns or has long-term leases of the real estate used in
the operation of its business. The Company owns approximately 66% of the
total square footage used in its business. The Company maintains a continuing
program of property improvements and renewal of existing stores and support
facilities. At January 25, 1997, mortgage loans and related secured
financings comprised approximately 36% of consolidated debt.


COMPETITION

The specialty department store business is highly competitive. The Company's
stores are in active competition with other department and specialty stores
and with regional and national department store chains, some of which are
considerably larger than the Company and have substantially greater financial
and other resources. Sales in the Company's Midwest stores were pressured as
a result of increased competition, including the addition of 950,000 square
feet of retail space to the Somerset Collection, a regional shopping mall in
the metropolitan Detroit area, in August 1996. Jacobson's competes
principally on the basis of availability of fashion merchandise, quality,
personalized service and attractive store surroundings, as well as fair
pricing and advertising. The Company believes it is a respected retail
merchandiser in the communities it serves, and that its merchandising
policies and reputation enable it to maintain its competitive position.

                                      5

<PAGE>

ASSOCIATES

        Jacobson's believes that its associates are among its key resources.
Management stresses development programs for associates and promotion from
within. The Company employs approximately 4,500 associates, 3,600 full-time
and 900 part-time. During the holiday season, the number of associates
increases to approximately 5,300.

        (a)  GENERAL DEVELOPMENT OF BUSINESS.
             --------------------------------

             Some of the principal developments affecting Jacobson's store
locations during fiscal 1996 and the current year to date are summarized on
page 5 of this report under the caption "Expansion and Consolidation".

             In March 1996, George P. Kelly, a Senior Vice President -
General Merchandise Manager resigned. In October 1996, Mark K. Rosenfeld, the
Company's Chairman of the Board and Chief Executive Officer resigned as an
officer of the Company, and P. Gerald Mills was appointed the Company's
Chairman of the Board and Chief Executive Officer. In December 1996, James
Fowler, the Company's President resigned, and P. Gerald Mills was appointed
the Company's President. In January 1997 James A. Rodefeld was named the
Company's Senior Vice President - Marketing and Beverly A. Rice was named the
Company's Senior Vice president - Fashion and Merchandising Strategy.

             To fund its working capital requirements, in 1996 the Company
had a $65,000,000 Revolving Credit and Term Loan facility under a Credit
Agreement with two banks, including a $20,000,000 Term Loan and a $45,000,000
Revolving Credit Facility. At January 25, 1997, the Company had borrowed
$51,500,000 under the Agreement, including the $20,000,000 Term Loan and
$31,500,000 under the Revolving Credit Facility.

             In March 1997, the Company obtained a $100,000,000 revolving
credit facility under a Revolving Credit Agreement with a commercial lender,
which replaced the facility described above. The new revolving credit
facility initially provides for borrowings of up to $80,000,000, subject to a
borrowing base limitation and lender reserves. The Company may increase the
maximum available borrowings under the revolving credit facility to up to
$100,000,000 in the aggregate, subject to a borrowing base limitation and
lender reserves. Loans under the new facility bear interest at either or both
of two variable interest rate alternatives as chosen by the Company. One of
the interest rates may decrease if the Company meets specified performance
measures, beginning with the fourth quarter of 1997. The facility also
permits up to $5,000,000 in letters of credit, which decrease the amount
available for loans under the facility.

               Borrowings under the new facility mature on March 24, 2000,
with automatic one year renewals on such maturity date, unless the facility
is terminated by notice from any party to the others at least 90 days before
the facility would otherwise terminate. The Company may also terminate the
facility early upon 90 days notice if it pays a termination fee equal to
one-half of one percent a year (for what would have been the remaining term
of the facility) of the average daily balance of loans and letters of credit
under the facility since its inception. The facility carries a line

                                      6

<PAGE>

of credit fee equal to one-quarter of one percent a year of the excess of the
aggregate commitments under the facility (currently $80,000,000) over the
amount of loans and letters of credit outstanding, a one-time loan facility
fee of $500,000 and an agent's fee of $45,000 a year. Borrowings under the
facility are guaranteed by the Company's subsidiaries and secured by accounts
receivables, inventory and related intangible assets and the proceeds thereof
of the Company and its subsidiaries.

        The new facility limits cash dividends to 50 percent of net income
for the immediately preceding fiscal year, subject to a maximum of $.50 per
outstanding share per year and borrowing availability restrictions. The
Company discontinued its cash dividend effective in the fourth quarter of
fiscal 1996. As of April 1, 1997 the Company had borrowed $50,321,000 under
this facility at an average annual interest rate of 8.5% and had $29,679,000
of borrowing availability under this facility.

        (b)  INDUSTRY SEGMENTS AND LINES OF BUSINESS.
             ----------------------------------------

             Jacobson's operates in a single industry, the specialty
department store industry.

             The percentage contribution to sales by major class of
merchandise for each of the last three fiscal years is set forth on page 2 of
this report.

        (c)  NARRATIVE DESCRIPTION OF BUSINESS.
             ----------------------------------

             The nature of Jacobson's business, the categories of merchandise
it sells, and the percentage contribution to sales by merchandise category
during the past three fiscal years, are set forth on pages 1-6 of this
report.

             The specialty department store business is seasonal. The holiday
season (from the day after Thanksgiving to January 1) generally accounts for
15-20% of Jacobson's net sales.

             By reason of the seasonal nature of the business, Jacobson's and
others in the industry experience significant build-up of inventory and
accounts receivable at certain times of the year. To support the seasonal
requirements, the Company has a revolving credit line currently permitting
borrowings of up to $80,000,000 (which the Company may increase to up to
$100,000,000), subject to a borrowing base limitation and lender reserves.
Further information on this line of credit is set forth on pages 6-7 and in
the Notes to the Company's Consolidated Financial Statements for the three
fiscal years ended January 1997, filed as part of this report (see
"Financing" on page F-11).

             Competitive conditions in the specialty department store
business are discussed on page 5 of this report.

             Information with respect to the Company's associates is provided
on page 6 of this report.

                                      7

<PAGE>

        (d)  FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
             ------------------------------------------------
             OPERATIONS AND EXPORT SALES.
             ----------------------------

The registrant has no foreign operations and no material export sales.

ITEM 2.  PROPERTIES.
-------  -----------

        The following table shows the location and approximate size of
Jacobson's stores and its offices and principal warehouse and distribution
facilities; whether owned by the registrant or leased; and the expiration
dates (including renewal options) of principal real estate leases. The
majority of such owned properties are subject to mortgage. In several cities,
the store consists of two buildings.

        Jacobson's management considers that these properties, as well as its
furniture, fixtures, machinery and equipment, are well maintained, suitable
and adequate for their intended purposes, and in general fully utilized.
<TABLE>
<CAPTION>

                                  Approximate                                     Expiration
                                  Total Square                                    Dates of
                                  Feet of                                         Principal
              Locations           Building(s)                Ownership            Leases
              ---------           ------------               ---------            ----------
MICHIGAN
--------
<S>                                   <C>                 <C>                     <C> 
    Ann Arbor..................       101,000             Owned                   ----
    East Lansing...............       117,000             Partly owned (1)        2028
    Saginaw....................       199,000             Partly owned (2)        1997
    Grosse Pointe..............       151,000             Owned                   ----
    Birmingham.................       179,000             Partly owned (3)        2008
    East Grand Rapids..........       148,000             Owned                   ----
    Rochester..................       106,000             Partly owned (4)        2046
    Livonia....................       150,000             Owned                   ----
    Troy Clearance Center......        34,000             Leased                  1997
    Central Office and Regional
       Distribution Center
       (Jackson)...............       238,000             Owned                   ----

INDIANA
-------
    Indianapolis...............       120,000             Leased                  2048

KANSAS
------
    Leawood....................       120,000             Leased                  2051

KENTUCKY
--------
    Louisville.................       161,000             Leased                  2036

OHIO
----
    Toledo.....................       120,000             Owned                   ----
    Columbus...................       119,000             Partly owned (5)        2079

                                      8

<PAGE>
<CAPTION>


                                  Approximate                                     Expiration
                                  Total Square                                    Dates of
                                  Feet of                                         Principal
              Locations           Building(s)                Ownership            Leases
              ---------           ------------               ---------            ----------
FLORIDA
-------
<S>                                   <C>                 <C>                     <C> 
    Sarasota...................        25,000             Partly owned (5)        2014
    Winter Park................        23,000             Leased                  2013
    Longwood...................        49,000             Leased                  2020
    North Palm Beach...........        90,000             Leased                  2022
    Osprey.....................        32,000             Leased                  2025
    Clearwater.................        52,000             Leased                  2039
    Fort Myers.................        51,000             Partly owned (6)        2085
    Jacksonville...............        82,000             Owned                   ----
    Tampa......................        48,000             Leased                  2030
    Naples.....................        46,000             Leased                  2042
    Boca Raton.................        80,000             Leased                  2052
    Regional Distribution
       Center (Winter Park)....        84,000             Owned                   ----

<FN>

    (1)  Building is owned; approximately half of land is owned and half leased.
    (2)  Approximately 29,000 square feet leased from month to month; balance owned.
    (3)  Birmingham Fashion Apparel Store (98,000 square feet) is owned. The
         Men's, Children's and Home Store (81,000 square feet) includes
         approximately 64,000 square feet owned; the balance is leased.
    (4)  Approximately 71,000 square feet and related parking area are owned.
         The balance of the shopping center is leased, of which 35,000 square
         feet are operated as part of Jacobson's store.
    (5)  Building is owned on leased land.
    (6)  Building is owned; land and parking area are leased.
</TABLE>



ITEM 3.  LEGAL PROCEEDINGS.
-------  ------------------

        (a) No material legal proceedings are pending to which Jacobson
Stores Inc. or any of its subsidiaries is a party or to which any of their
property is subject, other than ordinary routine litigation incidental to the
registrant's business, and no such proceeding is known by the registrant to
be contemplated.

        (b) Not applicable.


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

        Not applicable.

                                      9

<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT.
-------------------------------------

        The table below sets forth the name and age of each executive officer
of the registrant, all positions and offices with Jacobson Stores Inc. and
its wholly-owned subsidiaries held by each such person, and the period during
which the officer has served in such positions. Each has been elected to hold
office until the 1997 Annual Meeting of the Board of Directors (except in the
case of retirement or other termination of employment) or until a successor
is elected and qualified.
<TABLE>
<CAPTION>

                                                                                       Held
                                                                                       Office
         Name                 Age        Positions and Offices                         Since
         ----                 ---        ---------------------                         -----
<S>                           <C>        <C>                                            <C>
P. Gerald Mills                 68       Chairman of the Board, President,             1996
                                         Chief Executive Officer, and
                                         Director Jacobson Stores Inc. and
                                         wholly-owned subsidiaries

Paul W. Gilbert                 52       Vice Chairman of the Board, and               1993
                                         Director, Jacobson Stores Inc. and
                                         wholly-owned subsidiaries

Joseph H. Fisher                61       Senior Vice President-                        1991
                                         General Merchandise Manager,
                                         Jacobson Stores Inc.

Theodore R. Kolman              56       Senior Vice President-                        1991
                                         General Merchandise Manager,
                                         Jacobson Stores Inc.

Robert L. Moles                 55       Senior Vice President-Stores,                 1992
                                         Jacobson Stores Inc.

Beverly A. Rice                 63       Senior Vice President-Fashion &               1997
                                         Merchandising Strategy, Jacobson
                                         Stores Inc.

James A. Rodefeld               58       Senior Vice President-Marketing               1997
                                         Jacobson Stores Inc.

Timothy J. Spalding             41       Vice President-Controller,                    1991
                                         Jacobson Stores Inc. and
                                         wholly-owned subsidiaries
</TABLE>

        There is no arrangement or understanding between any of the officers
and any other person pursuant to which the officer was selected as an
officer, except that each of the executive officers is a party to an
employment agreement with the Company pursuant to which he is required to be
elected to the offices with the Company he currently holds, or such other
capacity as the Board of Directors or the Chief Executive Officer, as
applicable, deems advisable.

                                      10

<PAGE>

        Each executive officer except Mr. Mills, Ms. Rice and Mr. Rodefeld
has held managerial or executive positions with Jacobson's for more than five
years.

        P. Gerald Mills has served as Chairman of the Board and Chief
Executive Officer of the Company since October 1996 and as its President
since December 1996. Mr. Mills was Chairman and Chief Executive Officer of
Dayton Corporation, 1978-1981; was Chairman and Chief Executive Officer, The
J. L. Hudson Company, 1981-1983; was Chairman and Chief Executive Officer,
Dayton Hudson Department Store Company and Executive Vice President, Dayton
Hudson Corporation, 1983-1985; was Chairman and Chief Executive Officer,
Millston Corporation, a specialty store retailer, 1986-1992; and was a
business consultant from 1992-1996.

        Paul W. Gilbert was Executive Vice President and Chief Financial
Officer, 1988-1993, and Treasurer, 1991-1993, and has been Vice Chairman of
the Board since 1993.

        Joseph H. Fisher has been Senior Vice President-General Merchandise
Manager of the Company since 1991.

        Theodore R. Kolman has been Senior Vice President-General Merchandise
Manager of the Company since 1991.

        Robert L. Moles has been Senior Vice President-Stores of the Company
since 1992.

        Before joining Jacobson's in 1997 as Senior Vice President-Fashion
and Merchandising Strategy, Beverly A. Rice was Vice President, General
Manager, N. Theobald, Inc., a specialties gift and home store 1988-1995, from
which she retired.

        Before joining Jacobson's in 1997 as Senior Vice President-Marketing,
James A. Rodefeld was Chief Executive Officer, Sycamore Stores, Inc.,
1987-1992, and self-employed as a business consultant since 1992.

        Timothy J. Spalding has been Vice President-Controller of the Company
since 1991.

                                      11

<PAGE>

                                   PART II
                                   -------


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

        The Company's Common Stock is traded on The Nasdaq National Market
Tier of The Nasdaq Stock Market, under the symbol "JCBS."

        The quarterly range of high and low sales price quotations of
Jacobson's Common Stock and dividends paid per share for each quarter of
fiscal 1996 and 1995 are shown in the following schedule:
<TABLE>
<CAPTION>

                                                                Dividends
                                                                    Per
                   Year      Quarter     High        Low          Share
                   ----      -------     ----        ---          -------
                   <C>         <C>      <C>         <C>          <C>
                   1996        4th      $ 10-5/8    $  7-1/2     $  -0-
                   ----        3rd        11-1/2       7-1/4      .12-1/2
                               2nd        12-3/8       9          .12-1/2
                               1st        10           8-1/2      .12-1/2

                   1995        4th      $  9-1/2    $  8         $.12-1/2
                   ----        3rd        11           9          .12-1/2 
                               2nd        12           9-3/4      .12-1/2 
                               1st        12           9-7/8      .12-1/2 
</TABLE>




        The approximate number of shareholders of record of Jacobson's Common
Stock as of March 1, 1997 was 1,450.

        The Company's new loan facility limits cash dividends to 50 percent
of net income for the immediately preceding fiscal year, subject to a maximum
of $.50 per outstanding share per year and borrowing availability
restrictions. The Company discontinued its dividend effective in the fourth
quarter of fiscal 1996.

                                      12

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.
-------  ------------------------
<TABLE>
<CAPTION>

Selected financial data for fiscal 1992 through 1996 is as follows:

(in thousands except
 per share data)                      1996        1995        1994        1993        1992
------------------------------------------------------------------------------------------
<S>                                  <C>           <C>       <C>         <C>         <C>     
Net sales, including leased
   departments...................    $432,469      $414,267  $ 409,154   $ 403,816   $411,631
Earnings (loss) before income
   taxes.........................     (17,289)       (6,541)     6,388       4,610      5,894
Net earnings (loss)..............     (11,462)       (4,206)     4,088       3,014      3,910
Total assets.....................     260,418       262,514    268,589     248,818    250,395
Long-term debt, less current
  portion........................     130,147       119,727    120,424     108,203    105,270

Per common share:
  Net earnings (loss) -
     Primary and Fully Diluted...    $  (1.98)     $  (0.73) $    0.71   $    0.52   $   0.68
  Cash dividends.................        0.37-1/2      0.50       0.50        0.50       0.50
</TABLE>


ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------     -------------------------------------------------
            CONDITION AND RESULTS OF OPERATIONS.
            ------------------------------------

RESULTS OF OPERATIONS

The following table shows the percentage relationship to sales of the items
presented for the periods indicated.
<TABLE>
<CAPTION>


------------------------------------------------------------------------------
                                                 1996      1995       1994
------------------------------------------------------------------------------
      <S>                                       <C>       <C>        <C> 
      Net sales............................     100.0%    100.0%     100.0%
      Gross profit.........................      32.1      32.5       35.2
      Selling, general and administrative
        expenses...........................      32.9      32.2       31.7
      Interest expense, net................       2.2       2.1        2.0
      Store closing costs..................       1.0        --         --
      Gain on sale of property.............        --       0.2        0.1
      Earnings (loss) before income taxes..      (4.0)     (1.6)       1.6
      Net earnings (loss)..................      (2.7)     (1.0)       1.0
------------------------------------------------------------------------------
</TABLE>

                                      13


<PAGE>

1996 Versus 1995

        Sales in 1996 totalled $432,469,000, an increase of 4.4% from 1995.
The overall increase in sales is primarily due to the opening of a new store
in Leawood, Kansas in March 1996 and a new store in Boca Raton, Florida in
November 1996, as comparable store sales decreased 1.5%. The comparable store
sales decrease included a 4.0% decrease in sales in the Company's Midwest
stores, partially offset by a 4.8% increase in the Company's Florida stores.
Sales in the Company's Midwest stores were pressured as a result of increased
competition, including the addition of 950,000 square feet of retail space to
the Somerset Collection, a regional shopping mall in the metropolitan Detroit
area, in August 1996. In 1997, the Company expects the sales volume of the
three stores closed in March 1997 to be largely offset by the remaining
stores, including the impact of a full year's sales in the Company's Leawood,
Kansas and Boca Raton stores.

        Women's apparel and accessories represented 67.2% of the Company's
total business in 1996. Other major components were men's 13.3%, children's
7.6%, home accessories 7.8% and miscellaneous 4.1%.

        The Company's gross profit percentage decreased to 32.1% in 1996 from
32.5% in 1995, reflecting higher markdowns and incentive discounts offered to
new charge customers, partially offset by lower buying costs and a lower LIFO
provision which increased cost of goods sold by $268,000 in 1996 compared to
$1,324,000 in 1995.

        Selling, general and administrative expenses, expressed as a
percentage of sales, increased to 32.9% compared with 32.2% in 1995,
primarily due to $1,400,000 in severance obligations associated with changes
of senior managment in 1996 and the decrease in comparable store sales and
resulting lack of expense leverage.

        Interest expense, expressed as a percentage of sales, increased to
2.2% from 2.1% in 1995, primarily as a result of higher revolving credit
borrowings, partially offset by lower borrowings on other long-term debt.

        The Company incurred a $4,200,000 pre-tax charge in 1996 due to the
closing of three underperforming stores, which it announced in January 1997.
These costs include severance and related benefits ($900,000), reserves to
state property and equipment at estimated fair value ($2,350,000) and other
costs such as expense to hold closed facilities pending disposition
($950,000).

        1996 net loss totalled $11,462,000, or $1.98 per common share,
compared with a 1995 loss of $4,206,000, or 73 cents per share. As a
percentage of sales, net losses were 2.7% and 1.0% of sales in 1996 and 1995,
respectively.

        1996 results include after-tax store closing costs and contractual
severance obligations totalling $3,713,000, or 64 cents per share. 1995
results include an after-tax gain on sale of property totalling $693,000, or
12 cents per share.

                                      14

<PAGE>

1995 Versus 1994

        Sales in 1995 totalled $414,267,000, an increase of 1.2% from 1994.
Comparable stores sales decreased 1.1%, reflecting a difficult apparel retail
climate, especially in the Midwest region. The comparable store sales
decrease included a 3.6% decrease in sales in the Company's Midwest stores,
partially offset by a 5.3% increase in sales in the Company's Florida stores.
The overall increase in sales is primarily due to the opening of the
Company's Louisville, Kentucky store in November 1994.

        Women's apparel and accessories represented 66.7% of the Company's
total business in 1995. Other major components were men's 13.2%, children's
7.9%, home accessories 7.9% and miscellaneous 4.3%.

        The Company's gross profit percentage decreased to 32.5% in 1995 from
35.2%, reflecting higher markdowns and a LIFO provision which increased cost
of merchandise sold by $1,324,000, in 1995 compared with a significant LIFO
credit in 1994 which reduced cost of merchandise sold by $4,351,000.

        Selling, general and administrative expenses, expressed as a
percentage of sales, increased to 32.2% from 31.7% in 1994. The increase is
due primarily to the decrease in comparable store sales and resulting lack of
expense leverage, to first year costs associated with a new store opened in
November 1994 and to increased advertising costs, partially offset by lower
health care costs in comparable stores.

        Interest expense, expressed as a percentage of sales, increased to
2.1% of sales versus 2.0% one year ago, reflecting increased borrowings under
term loan and revolving credit facilities.

        1995 net loss totalled $4,206,000, or 73 cents per common share,
compared with 1994 net earnings of $4,088,000, or 71 cents per share. As a
percentage of sales, net loss was 1.0% in 1995 compared with earnings of 1.0%
in 1994.

        1995 and 1994 results include after-tax gains on sales of property
totalling $693,000, or 12 cents per share, and $333,000, or 5 cents per
share, respectively.

                                      15

<PAGE>

INFLATION

        The Company cannot determine the precise effects of inflation on its
business. Because of inflation, historically the Company has experienced
increases in the cost of merchandise and in certain operating expenses. The
Company generally has been able to offset the effects of these increased
expenses by adjusting prices, by using the LIFO method for valuing all
merchandise inventories and by controlling expenses. The Company's ability to
adjust prices is limited by competitive pressures in its market areas. The
Department Store Inventory Price Indexes, published by the Bureau of Labor
Statistics (BLS), are used to measure inflation's impact on inventories in
the LIFO valuation. The BLS Index increased 0.9% overall in 1996, increased
0.7% overall in 1995 and decreased 0.5% in 1994.


LIQUIDITY AND CAPITAL RESOURCES

        At January 25, 1997, the Company's current ratio was 2.81 to 1 and
working capital totalled $96,053,000, including $4,871,000 of cash and cash
equivalents. At January 27, 1996, the Company's current ratio was 2.91 to 1
and working capital totalled $95,091,000, including $3,068,000 of cash and
cash equivalents. At January 28, 1995, the Company's current ratio was 3.01
to 1 and working capital totalled $99,636,000, including $3,558,000 of cash
and cash equivalents.

        The Company uses cash flows from operations and revolving credit line
borrowings to fund its seasonal working capital needs. To support its present
and planned working capital requirements, the Company has a $100,000,000
revolving credit facility under a Revolving Credit Agreement with a
commercial lender. The revolving credit facility initially provides for
borrowings of up to $80,000,000, subject to a borrowing base limitation and
lender reserves. The Company may increase the maximum available borrowings
under the revolving credit facility to up to $100,000,000 in the aggregate,
subject to a borrowing base limitation and lender reserves. Loans under the
new facility bear interest at either or both of two variable interest rate
alternatives as chosen by the Company. One of the interest rates may decrease
if the Company meets specified performance measures, beginning with the
fourth quarter of 1997. The facility also permits up to $5,000,000 in letters
of credit, which decrease the amount available for loans under the facility.

        Borrowings under the new facility mature on March 24, 2000, with
automatic one year renewals on such maturity date, unless the facility is
terminated by notice from any party to the others at least 90 days before the
facility would otherwise terminate. The Company may also terminate the
facility early upon 90 days notice if it pays a termination fee equal to
one-half of one percent a year (for what would have been the remaining term
of the facility) of the average daily balance of loans and letters of credit
under the facility since its inception. The facility carries a line of credit
fee equal to one-quarter of one percent a year of the excess of the aggregate
commitments under the facility (currently $80,000,000) over the amount of
loans and letters of credit outstanding, a loan facility fee of $500,000 paid
at the closing, and an agent's fee equal to $45,000 a year. Borrowings under
the facility are guaranteed by the Company's subsidiaries and secured by
accounts receivable, inventory and related intangible assets and the proceeds
thereof of the Company and its subsidiaries.

                                      16

<PAGE>

        The new facility limits cash dividends to 50 percent of net income
for the immediately preceding fiscal year, subject to a maximum of $.50 per
outstanding share per year and borrowing availability restrictions. As of
April 1, 1997 the Company had borrowed $50,321,000 under this facility at an
annual interest rate of 8.5%, and had $29,679,000 of borrowing availability
under this facility.

        A part of the Company's financial strategy is to own, or obtain
long-term leases on its properties. Capital expenditures to modernize and
refixture existing stores and support facilities generally are financed with
internally generated funds. Any new stores and major expansion projects
generally are financed by first mortgages or comparable financing through the
Company's consolidated, wholly-owned real estate subsidiary, Jacobson Stores
Realty Company, or through long-term leases.


CASH FLOWS

        Cash and cash equivalents increased $1,803,000 in 1996, decreased
$490,000 in 1995, and decreased $2,341,000 in 1994. Cash flows are impacted
by operating, investing and financing activities. In 1996, operating
activities used $292,000 of cash compared to $10,377,000 provided in 1995 and
$5,997,000 provided in 1994. The decrease in 1996 versus 1995 is due
principally to the larger loss and inventory requirements of two new stores
opened in 1996. The increase in 1995 versus 1994 reflects primarily a
$1,324,000 increase in LIFO reserves compared with a $4,351,000 reduction in
1994 and planned inventory reductions, partially offset by an unfavorable
earnings variance.

        Investing activities used cash of $5,832,000, $7,747,000 and
$17,563,000 in 1996, 1995 and 1994, respectively. Investing activities
included capital expenditures for new stores, and modernization and
refixturing of existing stores and support facilities totalling $5,590,000,
$6,540,000 and $14,131,000 in 1996, 1995 and 1994, respectively. In addition,
the Company incurred capital lease obligations (not included in cash
investing activities above) primarily for computer hardware and related
software totalling $145,000 and $199,000 in 1996 and 1995 respectively. There
were no new capital lease obligations in 1994.

        Financing activities provided cash of $7,927,000 in 1996, used cash
of $3,120,000 in 1995 and provided cash of $9,225,000 in 1994. In 1996, the
Company borrowed $14,300,000 more under its former Credit Agreement than it
had borrowed in 1995 and used $4,206,000 of cash to service current
maturities of long-term debt, including the $1,725,000 annual sinking fund
payment on its 6-3/4% Convertible Subordinated Debentures. In 1995, the
Company borrowed $3,700,000 more under its former Credit Agreement than it
had borrowed in 1994 and used $3,930,000 of cash to service current
maturities of long-term debt. In 1994, the Company borrowed $10,000,000 at a
below-prime variable rate under its term loan facility, obtained $2,727,000
first mortgage financing and used $4,112,000 of cash to service current
maturities of long-term debt. In addition, the Company had borrowings of
$3,500,000 under its revolving credit line at the end of fiscal 1994. The
Company paid common stock dividends of $2,167,000 in 1996 and $2,890,000 in
each of 1995 and 1994. The Company discontinued its cash dividend, effective
in the fourth quarter of 1996.

                                      17

<PAGE>

        Cash generated from the closing of three stores in March 1997 and
disposition of related assets will be used to fund current operations and to
reduce Revolving Credit borrowings. The Company believes its cash flows from
operations, along with its borrowing capacity and access to financial markets
are adequate to fund its operations and debt maturities.


CORPORATE DEVELOPMENT

        The Company opened two new stores in 1996, but has no commitments for
any new store locations at the present time. The Company reviews the
performance of its less profitable existing stores from time to time to
determine whether it would be in the Company's best interest to close any of
these stores. Store closings could have a significant impact on the Company's
sales, expenses and capital requirements and would likely entail additional
significant one-time charges to effect the closing and to recognize any
impairment of assets resulting from the closing decision. In January 1997,
the Company announced its decision to close underperforming stores in
Jackson, Kalamazoo and Dearborn, Michigan, which closed in March 1997. The
Company incurred a $4,200,000 pre-tax charge in fiscal 1996 to effect the
closings and to state property and equipment at estimated fair value.

        The Company opened a 120,000 square foot leased store in the Town
Center Plaza, a shopping center in Leawood, Kansas, a suburb of Kansas City,
in March 1996.

        In November 1996, the Company opened an 80,000 square foot leased
store in Mizner Park, a mixed-use retail, residential and office development
in Boca Raton, Florida.

        Each of the above statements regarding future revenues, expenses or
business plans (including statements regarding the sufficiency of the
Company's capital resources to fund future operations) may be a "forward
looking statement" within the meaning of the Securities Exchange Act of 1934.
Such statements are subject to important factors and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statement, including the continued support of the Company's trade creditors
and factors, the risks inherent in the level of the Company's long-term debt
compared to its equity, the Company's ability to reduce its operating
expenses, general trends in retail clothing apparel purchasing, especially
during the Christmas season, and the factors set forth in this Management's
Discussion and Analysis of Financial Condition and Results of Operations.

                                      18

<PAGE>

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------     --------------------------------------------

        The following financial statements and supplementary financial
information are filed as part of this report on pages F-1 through F-19:

        Consolidated Statements of Earnings, Three Fiscal Years Ended January
        25, 1997.

        Consolidated Statements of Cash Flows, Three Fiscal Years Ended
        January 25, 1997.

        Consolidated Balance Sheets, January 25, 1997, January 27, 1996, and
        January 28, 1995.

        Consolidated Statements of Shareholders' Equity, Three Fiscal years
        Ended January 25, 1997.

        Notes to Consolidated Financial Statements.

        Summary of Significant Accounting Policies.

        Quarterly Information (Unaudited).

        Report of Independent Public Accountants.


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

        None.

                                      19

<PAGE>

                                   PART III
                                   --------


ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------     ---------------------------------------------------

ITEM 11.     EXECUTIVE COMPENSATION.
--------     -----------------------

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
--------     ---------------------------------------------------
             MANAGEMENT.
             -----------

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------     -----------------------------------------------

        The information called for by Part III is incorporated by reference
from those portions of the registrant's definitive proxy statement for its
1997 Annual Meeting of Shareholders to be held May 22, 1997, filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days
after the end of the fiscal year covered by this Form 10-K, appearing under
the following captions:

        "Voting Securities and Principal Holders Thereof" (pages 1-3,
             inclusive, of the proxy statement).

        "Election of Directors" (pages 4-8, inclusive, thereof).

        "Executive Compensation" (pages 9-14, inclusive, thereof); but
             excluding from this incorporation by reference everything
             appearing under the captions "Compensation Committee Report on
             Executive Compensation" and "Performance
             Graph" (pages 14-17, inclusive, thereof).

        Information with respect to executive officers of the Company is set
forth on pages 10-11 of this report.

        For the purpose of stating the aggregate market value of voting stock
held by non-affiliates on the cover of this report, the registrant considers
that the directors of the registrant, the executive officers listed on page
10 of this report, the Marjorie L. Rosenfeld Trust, David A. Rosenfeld, the
Jacobson's Retirement Savings & Profit Sharing Plan, the Jacobson Pension
Plan, and The Jacobson Stores Foundation are affiliates, and that all other
shareholders are non-affiliates. This statement is without prejudice to the
classification of any shareholder at other times or for other purposes.

                                      20

<PAGE>

                                   PART IV
                                   -------


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

        (a) The following financial statements, financial statement
schedules, and exhibits are filed as part of this report:
<TABLE>
<CAPTION>

                                                                            Page
        (1)  FINANCIAL STATEMENTS:                                          ----
             ---------------------
             <S>                                                            <C>
             Consolidated Statements of Earnings, Three Fiscal Years
                Ended January 25, 1997.                                     F-1

             Consolidated Statements of Cash Flows, Three Fiscal Years
                Ended January 25, 1997.                                     F-2

             Consolidated Balance Sheets, January 25, 1997,
                January 27, 1996, and January 28, 1995.                     F-3

             Consolidated Statements of Shareholders' Equity, Three
                Fiscal Years Ended January 25, 1997.                        F-4

             Notes to Consolidated Financial Statements.                    F-5/
                                                                            F-15

             Summary of Significant Accounting Policies.                    F-16


             Quarterly Information (Unaudited).                             F-17/
                                                                            F-18

             Report of Independent Public Accountants.                      F-19


        (2)  FINANCIAL STATEMENT SCHEDULES:

             Schedule VIII - Valuation and Qualifying Accounts and
             Reserves, Year Ended January 25, 1997.                         S-1

</TABLE>

        All schedules, except as set forth above, have been omitted since the
        information required to be submitted has been included in the
        consolidated financial statements or notes thereto or has been
        omitted as not applicable or not required.

                                      21

<PAGE>

         (3) EXHIBITS:

             Each management contract or compensatory plan required to be
        filed as an exhibit pursuant to Item 14(c) of this report is
        indicated by an asterisk (*).

              4(a)      First Amendment to Credit Agreement, dated as of
                        December 19, 1996, among Jacobson Stores Inc.,
                        Comerica Bank and NBD Bank.

              4(b)      Second Amendment to Credit Agreement and Waiver and
                        Amendment to Term Note, dated as of January 25, 1997,
                        among Jacobson Stores Inc., Comerica Bank and NBD
                        Bank.

              4(c)      Revolving Credit Agreement, dated as of March 24,
                        1997, between Jacobson Stores Inc. and The CIT
                        Group/Business Credit., as agent.


             10(a)*     Employment Agreement dated as of March 19, 1997,
                        between Jacobson Stores Inc. and P. Gerald Mills.

             10(b)*     Severance Agreement dated as of October 31, 1996,
                        between Jacobson Stores Inc. and Mark K. Rosenfeld.

             10(c)*     Amendment to Severance Agreement dated as of December
                        12, 1996, between Jacobson Stores Inc. and Mark K.
                        Rosenfeld.

             10(d)*     Severance Agreement dated as of December 20, 1996,
                        between Jacobosn Stores Inc. and James B. Fowler.

             10(e)*     Employment Agreement dated August 1, 1996 between
                        Jacobson Stores Inc. and Theodore R. Kolman.

             10(f)*     Employment Agreement, dated February 28, 1996,
                        between Jacobson Stores Inc. and Joseph H. Fisher.

             10(g)*     Amendment to Executive Employment Agreement, dated as
                        of August 1, 1996, between Jacobson Stores Inc. and
                        Joseph H. Fisher.

             11         Computation of Earnings per Share

             23         Consent of Arthur Andersen LLP

             27         Financial Data Schedule

                                      22

<PAGE>

        In addition, the previously-filed exhibits listed below are
incorporated herein by reference. (All references are to Securities and
Exchange Commission File #0-6319 unless otherwise noted.)
<TABLE>
<CAPTION>

Current                                                                 Identification of
Exhibit                  Description of Exhibit                            Prior Filing
-------                  ----------------------                         -----------------
<S>             <C>                                              <C>
3(i)(a)         Restated Articles of Incorporation,              Exhibit 19(a) to Form 10-Q,
                Jacobson Stores Inc., as amended and             Quarter Ended April 29,
                restated May 25, 1989.                           1989.

3(i)(b)         Certificate of Designation, Preferences          Exhibit 3(a) to Form 10-Q,
                and Rights of Preferred Stock of                 Quarter Ended October 29,
                Jacobson Stores Inc.                             1988.

3(ii)           By-laws, Jacobson Stores Inc., as                Exhibit 3(ii) to Form 10-K,
                amended March 21, 1996.                          Year Ended January 27, 1996.

4(d)            Election under Section 780,                      Exhibit 28 to Form 10-Q,
                Michigan Business Corporation Act.               Quarter Ended October 27,
                                                                 1984.

4(e)            Indenture dated as of December 15,               File #33-10532:
                1986 between Jacobson Stores Inc.                Exhibit 4(a) to Form S-2
                and National Bank of Detroit, as                 (Amendment No. 1), filed
                Trustee.                                         December 12, 1986.

4(f)            Rights Agreement dated as of October 4,          Exhibit I to Form 8-A and
                1988 between Jacobson Stores Inc. and            Exhibit 4 to Form 8-K,
                Manufacturers National Bank of Detroit,          October 7, 1988; Exhibit 1
                as Rights Agent; Change of Rights                to Amendment No. 1 to
                Agent, Effective June 1, 1989; Change            Form 8-A, May 16, 1989;
                of Rights Agent, Effective May 31, 1994.         Exhibit 1 to Amendment
                                                                 No. 2 to Form 8-A, June 9,
                                                                 1994.

4(g)            Credit Agreement dated as of December 21,        Exhibit 4(d) to Form 8-K
                1995, between Jacobson Stores Inc. and           dated January 11, 1996.
                Comerica Bank, as agent.

9               Voting and Transfer Restriction                  Exhibit 9 to Form 10-K,
                Agreement, effective December 31, 1990.          Year Ended January 26, 1991.

10(h)*          Employment Agreement dated as of                 Exhibit 10(b) to Form 10-K,
                February 1, 1996, between Jacobson               Year Ended January 27, 1996.
                Stores Inc. and Paul W. Gilbert.

10(i)*          Amendment, as of August 1, 1996, to              Exhibit 10(a) to Form 10-Q,
                Employment Agreement dated February              Quarter ended July 27, 1996.
                1, 1996, between Jacobson Stores Inc.
                and Paul W. Gilbert.

                                      23

<PAGE>
<CAPTION>


Current                                                                 Identification of
Exhibit                  Description of Exhibit                            Prior Filing
-------                  ----------------------                            ------------
<S>             <C>                                              <C>
10(j)*          Change in Control Severance Agreement,           Exhibit 10(f) to Form 10-K,
                dated December 18, 1995, between Jacobson        Year Ended January 27, 1996.
                Stores Inc. and Paul W. Gilbert.

10(k)*          Employment Agreement dated August 1,             Exhibit 10(c) to Form 10-Q,
                1996 between Jacobson Stores Inc., and           Quarter ended July 27, 1996.
                Robert L. Moles.

10(l)*          Jacobson Stores Inc. Deferred Compensation       Exhibit 10(h) to Form 10-K,
                Plan, as amended and restated January 24, 1996.  Year Ended January 27, 1996.

10(m)*          1996 Management Incentive Plan.                  Exhibit 10(i) to Form 10-K,
                                                                 Year Ended January 27, 1996.

10(n)*          Split Dollar Agreement, dated January 31,        Exhibit 10(k) to Form 10-K
                1992, between Jacobson Stores Inc. and           Year Ended January 27, 1996.
                Paul W. Gilbert.

10(o)*          Jacobson's Stock Option Plan of 1983,            Exhibit 19 to Form 10-Q,
                as amended and restated, effective               Quarter Ended October 26,
                May 28, 1987, and as further amended             1991.
                May 24, 1990 and August 22, 1991

10(p)*          Jacobson Stock Option Plan of 1994.              Exhibit A to Proxy Statement
                                                                 in connection with the Annual
                                                                 Meeting of Shareholders held
                                                                 on May 26, 1994.

10(q)*          First Amendment to Jacobson Stock Option         Exhibit 10(m) to Form 10-K,
                Plan of 1994.                                    Year Ended January 27, 1996.

21              Schedule of Subsidiaries                         Exhibit 21 to Form 10-K, Year
                                                                 Ended January 27, 1996.
</TABLE>

        With the exception of Exhibits 4(a), 4(b), 4(c), 4(e) and 4(g),
instruments defining the rights of holders of long-term debt of the
registrant and its subsidiaries have been omitted. The amount of debt
authorized under each such omitted instrument is less than 10% of the total
assets of the registrant and its subsidiaries on a consolidated basis. The
registrant agrees to furnish a copy of any such instrument to the Securities
and Exchange Commission upon request.

        In addition to Exhibits 10(a) to 10(k), inclusive, the registrant has
employment agreements with three other executive officers, which are not
considered material in amount or significance.

        (b) The Company did not file any reports on Form 8-K during its
fourth fiscal quarter ended January 25, 1997.

        (c)  See Item 14(a)(3).

        (d)  See Item 14(a)(2).

                                      24

<PAGE>

                                  SIGNATURES
                                  ----------


        Pursuant to the requirements of Section 13 or 15(d) 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.

DATE:     April 8, 1997         JACOBSON STORES INC.



                                By: /s/ P. Gerald Mills
                                   ------------------------------------------
                                      P. Gerald Mills, Chairman of the Board,
                                      President and Chief Executive Officer


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


        JACOBSON STORES INC.                                    Date
                                                                ----


        By:     /s/  P. Gerald Mills                       April 8,  1997
             ------------------------------------
             P. Gerald Mills, Chairman of
                the Board, President and Chief
                Executive Officer, and Director
                (Principal Executive Officer)

        By:     /s/  Paul W. Gilbert                       April 8, 1997
             ------------------------------------
             Paul W. Gilbert, Vice Chairman
                of the Board, and Director
                (Principal Financial Officer)


        By:     /s/  Timothy J. Spalding                   April 8, 1997
             ------------------------------------
             Timothy J. Spalding, Vice President
                and Controller (Principal Accounting
                Officer)

                                      25

<PAGE>


        JACOBSON STORES INC.                                     Date
                                                                 ----


        By:     /s/  Herbert S. Amster                      April 8, 1997
             ------------------------------------
             Herbert S. Amster, Director



        By:     /s/  Herman S. Kohlmeyer, Jr.               April 8, 1997
             ------------------------------------
             Herman S. Kohlmeyer, Jr.,
                Director


        By:     /s/  Kathleen McCree Lewis                  April 8, 1997
             ------------------------------------
             Kathleen McCree Lewis, Director



        By:     /s/  Patricia Shontz Longe                  April 8, 1997
             ------------------------------------
             Patricia Shontz Longe, Director



        By:     /s/  Michael T. Monahan                     April 8, 1997
             ------------------------------------
             Michael T. Monahan, Director



        By:     /s/  Philip H. Power                        April 8, 1997
             ------------------------------------
             Philip H. Power, Director



        By:     /s/  Mark K. Rosenfeld                      April 8, 1997
             ------------------------------------
             Mark K. Rosenfeld, Director



        By:     /s/  Richard Z. Rosenfeld                   April 8, 1997
             ------------------------------------
             Richard Z. Rosenfeld, Director



        By:     /s/  Robert L. Rosenfeld                    April 8, 1997
             ------------------------------------
             Robert L. Rosenfeld, Director



        By:     /s/  James L. Wolohan                       April 8, 1997
             ------------------------------------
             James L. Wolohan, Director

                                      26

<PAGE>

<TABLE>
<CAPTION>


              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF EARNINGS


                                                                    Year Ended
                                                     ----------------------------------------
                                                     January 25,    January 27,    January 28,
(in thousands except per share data)                    1997           1996           1995
----------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>      
NET SALES .....................................      $ 432,469       $ 414,267       $ 409,154
                                                     ---------       ---------       ---------

COSTS AND EXPENSES:
   Cost of merchandise sold, buying and
      occupancy expenses ......................        293,826         279,493         265,204
   Selling, general and administrative expenses        142,348         133,572         130,039
   Interest expense, net ......................          9,384           8,808           8,027
   Store closing costs ........................          4,200              --              --
   Gain on sale of property ...................             --          (1,065)           (504)
                                                     ---------       ---------       ---------

          Total costs and expenses ............        449,758         420,808         402,766
                                                     ---------       ---------       ---------

EARNINGS (LOSS) BEFORE INCOME TAXES ...........        (17,289)         (6,541)          6,388

PROVISION (CREDIT) FOR INCOME TAXES ...........         (5,827)         (2,335)          2,300
                                                     ---------       ---------       ---------

NET EARNINGS (LOSS) ...........................      $ (11,462)      $  (4,206)      $   4,088
                                                     =========       =========       =========


EARNINGS (LOSS) PER COMMON SHARE:
   Primary and Fully Diluted ..................      $   (1.98)      $   (0.73)      $    0.71
                                                     =========       =========       =========

<FN>
The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (page F-16) are an integral part of these statements.
</TABLE>




                                     F-1



<PAGE>

<TABLE>
<CAPTION>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                         Year Ended
                                                          -----------------------------------------
                                                          January 25,    January 27,    January 28,
(in thousands)                                               1997            1996          1995
---------------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>            <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings (loss) ..............................      $(11,462)      $ (4,206)      $  4,088
   Gain on sale of property, net of income tax ......            --           (693)          (333)
   Store closing costs ..............................         4,200             --             --
   Adjustments to reconcile net earnings (loss) to
     cash provided by (used in)
     operating activities:
     Depreciation and amortization ..................        10,195         10,266         10,120
     Deferred taxes .................................        (5,449)           537          1,462
     Other liabilities ..............................         1,436            911            (38)
     Change in:
        Receivables from customers, net .............         1,424            850          1,684
        Merchandise inventories .....................        (5,626)         6,599        (15,080)
        Prepaid expenses and other assets ...........         1,005           (289)        (1,719)
        Accounts payable and accrued expenses .......         1,811           (569)         6,737
        Current income taxes ........................         2,174         (3,029)          (924)
                                                           --------       --------       --------
            Net cash provided by (used in)
              operating activities ..................          (292)        10,377          5,997
                                                           --------       --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of property, net of income tax             --            827            612
   Additions to property and equipment ..............        (5,590)        (6,540)       (14,131)
   Other non-current assets .........................          (242)        (2,034)        (4,044)
                                                           --------       --------       --------
            Net cash used in investing activities ...        (5,832)        (7,747)       (17,563)
                                                           --------       --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Additions to long-term debt ......................        14,300          3,700         16,227
   Reduction of long-term debt ......................        (4,206)        (3,930)        (4,112)
   Cash dividends paid ..............................        (2,167)        (2,890)        (2,890)
                                                           --------       --------       --------
            Net cash provided by (used in)
            financing activities ....................         7,927         (3,120)         9,225
                                                           --------       --------       --------
INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS .............................         1,803           (490)        (2,341)
   Cash and cash equivalents, beginning of year .....         3,068          3,558          5,899
                                                           --------       --------       --------
CASH AND CASH EQUIVALENTS, END OF YEAR ..............      $  4,871       $  3,068       $  3,558
                                                           ========       ========       ========

<FN>
SUPPLEMENTARY CASH FLOW INFORMATION

The Company considers all short-term investments with a maturity at date of
purchase of three months or less to be cash equivalents.

Investing and financing activities not reported in the Consolidated
Statements of Cash Flows, because they do not involve cash, include equipment
acquired through capital lease obligations of $145,000 in 1996 and $199,000
in 1995. There were no new capital lease obligations in 1994.

Interest paid (net of interest capitalized) was $9,233,000 in 1996,
$8,570,000 in 1995 and $7,580,000 in 1994. The Company received income tax
refunds totalling $2,541,000 in 1996. Income tax payments were $64,000 in
1995, and $1,977,000 in 1994.

The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (page F-16) are an integral part of these statements.
</TABLE>

                                     F-2



<PAGE>

<TABLE>
<CAPTION>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS


-----------------------------------------------------------------------------------
                                          January 25,    January 27,    January 28,
(in thousands)                               1997           1996           1995
-----------------------------------------------------------------------------------
<S>                                       <C>             <C>             <C>      
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents .......      $   4,871       $   3,068       $   3,558
   Receivables from customers, net .         41,710          43,134          43,984
   Merchandise inventories .........         94,875          89,249          95,848
   Prepaid expenses and other assets          2,923           3,928           3,639
   Refundable income taxes .........            855           3,029              --
   Deferred taxes ..................          3,994           2,363           2,190
                                          ---------       ---------       ---------
        Total current assets .......        149,228         144,771         149,219
                                          ---------       ---------       ---------
PROPERTY AND EQUIPMENT, NET ........         89,802          96,597         100,258
                                          ---------       ---------       ---------
OTHER ASSETS .......................         21,388          21,146          19,112
                                          ---------       ---------       ---------
                                          $ 260,418       $ 262,514       $ 268,589
                                          =========       =========       =========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current portion of long-term debt      $   4,350       $   4,531       $   3,865
   Accounts payable ................         31,320          30,537          30,606
   Accrued expenses ................         17,505          14,612          15,112
                                          ---------       ---------       ---------
        Total current liabilities ..         53,175          49,680          49,583
                                          ---------       ---------       ---------
LONG-TERM DEBT .....................        130,147         119,727         120,424
                                          ---------       ---------       ---------

DEFERRED TAXES .....................          5,297           9,115           8,405
                                          ---------       ---------       ---------

OTHER LIABILITIES ..................          3,812           2,376           1,465
                                          ---------       ---------       ---------

SHAREHOLDERS' EQUITY:
   Common stock ....................          5,966           5,966           5,966
   Paid-in surplus .................          7,109           7,109           7,109
   Retained earnings ...............         55,311          68,940          76,036
   Treasury stock ..................           (399)           (399)           (399)
                                          ---------       ---------       ---------
                                             67,987          81,616          88,712
                                          ---------       ---------       ---------
                                          $ 260,418       $ 262,514       $ 268,589
                                          =========       =========       =========
<FN>
The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (page F-16) are an integral part of these statements.
</TABLE>




                                     F-3



<PAGE>

<TABLE>
<CAPTION>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


---------------------------------------------------------------------------------------------------
                                               Common        Paid-in       Retained       Treasury
(in thousands except number of shares)         Stock         Surplus       Earnings         Stock
---------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>           <C>            <C>      
BALANCE, January 29, 1994 ..............      $  5,966       $  7,109      $ 74,838       $   (399)


FIFTY-TWO WEEKS ENDED January 28, 1995:
   Net earnings ........................                                      4,088
   Dividends paid, 50 cents per share ..                                     (2,890)
                                              --------       --------      --------       -------- 

BALANCE, January 28, 1995 ..............         5,966          7,109        76,036           (399)


FIFTY-TWO WEEKS ENDED January 27, 1996:
   Net loss ............................                                     (4,206)
   Dividends paid, 50 cents per share ..                                     (2,890)
                                              --------       --------      --------       -------- 

BALANCE, January 27, 1996 ..............         5,966          7,109        68,940           (399)


FIFTY-TWO WEEKS ENDED January 25, 1997:
   Net loss ............................                                    (11,462)
   Dividends paid, 37 1/2cents per share                                     (2,167)
                                              --------       --------      --------       -------- 
BALANCE, January 25 1997 ...............      $  5,966       $  7,109      $ 55,311       $   (399)
                                              ========       ========      ========       ========

<FN>
PREFERRED STOCK
Authorized 1,000,000 shares, $1 par value; no shares outstanding at January
28, 1995, January 27, 1996 and January 25, 1997.

COMMON STOCK
Authorized 15,000,000 shares, $1 par value; 5,966,2212/3 shares issued at
January 28, 1995, January 27, 1996 and January 25, 1997. Shares issued
include 187,200 shares in treasury at January 28, 1995, January 27, 1996 and
January 25, 1997.


The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (page F-16) are an integral part of these statements.
</TABLE>



                                     F-4

<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


STORE CLOSING COSTS

In January 1997, the Company announced its decision to close three
underperforming stores in Jackson, Kalamazoo and Dearborn, Michigan. In
connection with the closings, the Company incurred a $4,200,000 pre-tax
charge in fiscal 1996 which is reflected as store closing costs in the
accompanying consolidated statements of earnings for the year ended January
25, 1997. Store closing costs consist of the following:

<TABLE>
<CAPTION>
     ---------------------------------------------------
     (in thousands)                                1996
     ---------------------------------------------------
<S>                                               <C>   
     Severance and related benefits............   $  900
     Reserve to state property and equipment
     at estimated fair value...................    2,350
     Expense to hold closed facilities pending
     disposition...............................      950
                                                  ------
                                                  $4,200
                                                  ======
</TABLE>

The property and equipment reserve is reflected as a reduction of property
and equipment on the consolidated balance sheets at January 25, 1997 and the
balance of store closing costs is included in accrued expenses. After
recognition of the fair value reserve, the adjusted net book value of
property and equipment of the three closed stores totalled $2,300,000.

After-tax, store closing costs totalled $2,772,000 in 1996.

GAIN ON SALE OF PROPERTY

In 1995, the Company sold its former Children's Store in Birmingham,
Michigan, at an after-tax gain of $693,000. In 1994, the Company sold its
Store for the Home in East Lansing, Michigan, at an after-tax gain of
$333,000 in connection with its phase out of furniture operations in six
stores in 1993.

TAXES

The provision (credit) for income taxes consisted of:
<TABLE>
<CAPTION>
-------------------------------------------------------------
(in thousands)              1996          1995         1994
-------------------------------------------------------------
<S>                       <C>           <C>           <C>    
Currently payable ..      $  (378)      $(2,872)      $   838
Deferred ...........       (5,449)          537         1,462
                          -------       -------       -------
                          $(5,827)      $(2,335)      $ 2,300
                          =======       =======       =======
</TABLE>

Income taxes as a percent of earnings before income taxes differed from the
statutory Federal income tax rate as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
(percent of earnings before income taxes)   1996        1995        1994
-------------------------------------------------------------------------
<S>                                        <C>         <C>          <C>  
Statutory Federal income tax rate ..       (34.0)%     (34.0)%      34.0%
State income tax ...................          --          --         0.2
Tax reserves released ..............          --        (2.6)         --
Other ..............................         0.3         0.9         1.8
                                           -----       -----        ----
                                           (33.7)%     (35.7)%      36.0%
                                           =====       =====        ====
</TABLE>


                                     F-5

<PAGE>
Deferred income taxes represent temporary differences in the recognition of
certain items for income tax and financial reporting purposes and are
classified as current or non-current in the Consolidated Balance Sheets based
on the classification of the assets and liabilities which gave rise to the
temporary differences. The components of the net deferred income tax
liability at January 25, 1997, January 27, 1996 and January 28 were as
follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                             January      January      January
(in thousands)                                                 1997         1996         1995
----------------------------------------------------------------------------------------------
<S>                                                          <C>          <C>          <C>    
Deferred Tax Liabilities:
    Accelerated depreciation ..........................      $ 3,930      $ 4,279      $ 4,429
    Additional pension cost deductible for tax purposes        5,811        5,759        4,664
    Other .............................................          827          822           88
                                                             -------      -------      -------
                                                              10,568       10,860        9,181
                                                             -------      -------      -------
Deferred Tax Assets:
    Store closing reserves ............................        1,428           --           --
    Accrued vacation pay ..............................        1,267        1,246        1,181
    Additional inventory capitalized for tax purposes .        1,076        1,079        1,086
    Alternative minimum tax credit carryforward .......          922           --           --
    Net operating loss carry forward ..................        1,119           --           --
    Deferred rent .....................................          558          303           --
    Other .............................................        2,895        1,480          699
                                                             -------      -------      -------
                                                               9,265        4,108        2,966
                                                             -------      -------      -------
    Net deferred tax liability ........................      $ 1,303      $ 6,752      $ 6,215
                                                             =======      =======      =======
</TABLE>
The Company believes it is more likely than not that deferred tax assets,
including the 1996 net operating loss carryforward of $3,300,000 (which
expires in 2011), will be used to offset future tax obligations. Accordingly,
the Company has not recorded a related valuation allowance.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Taxes other than income taxes were as follows:
------------------------------------------------------------------------------
(in thousands)                                1996         1995          1994
------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>    
Payroll taxes .........................      $ 8,074      $ 8,012      $ 7,965
Real estate and personal property taxes        4,317        4,021        4,316
Other taxes ...........................        1,084        1,305        1,245
                                             -------      -------      -------
                                             $13,475      $13,338      $13,526
                                             =======      =======      =======
</TABLE>
ADVERTISING EXPENSE

The Company expenses advertising costs the first time the advertising takes
place. Advertising expense totalled $13,962,000 in 1996, $13,625,000 in 1995
and $11,932,000 in 1994.

INTEREST EXPENSE

Components of net interest expense are summarized below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
(in thousands)                                                 1996         1995        1994
---------------------------------------------------------------------------------------------
<S>                                                            <C>         <C>         <C>   
Revolving Credit line ...................................      $2,071      $  617      $  365
Real estate obligations .................................       3,383       3,539       3,490
Long-term debt ..........................................       3,934       4,558       4,054
Capital lease obligations ...............................         120         206         369
                                                               ------      ------      ------
                                                                9,508       8,920       8,278
Less interest earned on short-term investments ..........          46          36          95
Less interest capitalized on properties under development          78          76         156
                                                               ------      ------      ------
                                                               $9,384      $8,808      $8,027
                                                               ======      ======      ======
</TABLE>

                                     F-6
<PAGE>


CUSTOMER CREDIT AND RECEIVABLES

Credit sales under Jacobson credit plans were 44.6% of total sales in 1996,
43.6% in 1995 and 44.8% in 1994. Credit plans consist of option and extended
payment accounts.

Revenues and direct costs associated with the Company's credit program are
summarized below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
(in thousands)                                               1996         1995         1994
---------------------------------------------------------------------------------------------
<S>                                                        <C>          <C>           <C>    
Finance charge revenues .............................      $ 5,313      $ 5,118       $ 5,376
                                                           -------      -------       -------
Cost of credit operation:
   Credit and collection administration .............        1,223        1,557         1,394
   Allocated interest expense .......................        3,028        2,935         2,680
   Provision for doubtful accounts, net of recoveries        1,026          843           544
   Provision (credit) for income taxes ..............           12          (74)          258


                                                             5,289        5,261         4,876
                                                           -------      -------       -------
Net income from (cost of) credit program ............      $    24      $  (143)      $   500
                                                           =======      =======       =======
   As a percent of credit sales .....................           -- %        0.1%          0.3%
                                                           =======      =======       =======
</TABLE>

The finance charge rate assessed under the Company's credit plans increased
to 20.4% in 1996 (previously 18.0%). Allocated interest expense is computed
at the average rate of interest incurred on the Revolving Credit line applied
to the average total receivables from customers. The average rate was 7.5% in
1996, 7.0% in 1995 and 6.0% in 1994.

Receivables from customers at year-end were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
                                        January      January      January
(in thousands)                            1997         1996        1995
-------------------------------------------------------------------------
<S>                                     <C>          <C>          <C>    
Receivables from customers .......      $42,460      $43,907      $44,777
Less reserve for doubtful accounts          750          773          793
                                        -------      -------      -------
                                        $41,710      $43,134      $43,984
                                        =======      =======      =======
</TABLE>

Accounts written off, net of recoveries, were $1,049,000 in 1996, $863,000 in
1995 and $581,000 in 1994 (0.54%, 0.48% and 0.32%, respectively, of credit
sales).




                                     F-7


<PAGE>

MERCHANDISE INVENTORIES

All merchandise inventories are valued at cost, which is lower than market,
as determined by the retail last-in, first-out (LIFO) method. At year-end,
merchandise inventories were as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                                    January       January       January
(in thousands)                                        1997          1996          1995
----------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>     
Inventories at first-in, first-out (FIFO) cost      $111,955      $106,061      $111,336
Less LIFO reserves ...........................        17,080        16,812        15,488
                                                    --------      --------      --------
                                                    $ 94,875      $ 89,249      $ 95,848
                                                    ========      ========      ========
</TABLE>

PROPERTY AND EQUIPMENT

Property and equipment at year-end are set forth below:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                                     January      January       January
(in thousands)                                         1997         1996          1995
----------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>     
Land and improvements ........................      $  9,010      $  9,418      $  9,472
Buildings and improvements ...................        90,739        92,082        92,663
Furniture, fixtures and equipment ............        49,364        47,864        44,299
Leasehold improvements .......................        12,286        10,601        10,824
Construction in progress .....................         1,727         2,751         2,116
Capital leases ...............................         9,954         9,809         9,610
                                                    --------      --------      --------
                                                     173,080       172,525       168,984
Less accumulated depreciation and amortization        83,278        75,928        68,726
                                                    --------      --------      --------
                                                    $ 89,802      $ 96,597      $100,258
                                                    ========      ========      ========
</TABLE>

Depreciation and amortization amounted to $10,195,000 in 1996, $10,266,000 in
1995 and $10,120,000 in 1994.

CAPITAL AND MAINTENANCE EXPENDITURES

Capital expenditures, including amounts under capital leases, for the past
three years are summarized below:

<TABLE>
<CAPTION>
------------------------------------------------------------------
                              Stores         Support 
                            and Store      Facilities
(in thousands)             Modernization  and Equipment     Total
------------------------------------------------------------------
<S>                          <C>            <C>            <C>    
1996...................      $ 4,444        $ 1,291        $ 5,735
1995...................        4,449          2,290          6,739
1994...................       12,359          1,772         14,131
</TABLE>

Stores and store modernization expenditures include those made for the
acquisition of land, buildings and improvements, and related fixtures and
equipment for new stores and expansion and re-fixturing of existing stores.
Support facilities and equipment expenditures relate to corporate office and
distribution centers and other non-store expenditures.

Repairs and maintenance expense totalled $2,201,000 in 1996, $1,943,000 in
1995 and $1,846,000 in 1994.



                                     F-8

<PAGE>
LONG-TERM LEASES

At January 25, 1997, the Company was obligated under non-cancelable long-term
leases for certain stores or portions of stores, and for certain fixtures and
equipment. Many of the leases contain renewal options. Most require payment
of taxes, insurance, and other costs applicable to the property, and some
require additional rentals based on percentages of sales.

Future minimum rental commitments as of January 25, 1997, for all
non-cancelable leases which had a remaining term of more than one year were
as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                                                    Operating    Capital
(in thousands)                                                        Leases     Leases
----------------------------------------------------------------------------------------
<S>                                                                  <C>         <C>   
1997.............................................................    $  6,334    $  633
1998.............................................................       6,942       301
1999.............................................................       8,005       212
2000.............................................................       7,769        80
2001.............................................................       7,885        80
Thereafter.......................................................     118,621       136
                                                                     --------    ------
Total minimum lease payments.....................................    $155,556     1,442
                                                                     ========    ======
Less imputed interest............................................                   251
                                                                                 ------
Capital lease obligations, including current maturities of $547..                $1,191
                                                                                 ======
</TABLE>

Capital leases provide the Company with the economic benefits and risks of
ownership. These leases are capitalized and treated as installment purchases
of depreciable property. Capital leases are included in the balance sheets as
property and equipment while the related lease obligations are included in
long-term debt. Interest based on these obligations and amortization based on
the lease terms are charged to current operations in lieu of rental expense.
All other leases are considered operating leases. Operating leases are
accounted for by recording rental expense over the terms of the leases.
Additional rentals based on percentages of sales are recorded as rental
expense for both capital and operating leases.

Rental expense (net of rental income) was as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------
(in thousands)                    1996        1995        1994
---------------------------------------------------------------
<S>                              <C>         <C>         <C>   
Buildings and improvements:
   Operating leases:
     Minimum rent .........      $5,651      $4,968      $3,831
     Percentage rent ......       1,034       1,032         993
   Capital leases:
     Percentage rent ......         292         288         290
                                 ------      ------      ------
                                 $6,977      $6,288      $5,114
                                 ======      ======      ======
Fixtures and equipment:
   Operating leases .......      $  802      $  456      $  888
                                 ======      ======      ======
</TABLE>

RETIREMENT PLANS

The Company has a trusteed non-contributory defined benefit pension plan
covering substantially all of its employees. Benefits under the plan are
based on a career average pay formula. Service cost and the projected benefit
obligation under the projected unit credit actuarial method reflect the
impact of estimated increases in compensation on future pension benefits.
Unrecognized pension costs and credits, including actuarial gains and losses,
are amortized over the average remaining service period of those employees
expected to receive pension benefits. Pension expense was $2,113,000 in 1996,
$1,023,000 in 1995 and $1,354,000 in 1994. The Company's funding policy
satisfies the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code of 1986. Pension plan
assets are managed by independent investment managers.

                                     F-9
<PAGE>
Net periodic pension expense, the funded status of the plan, and the related
actuarial assumptions for the past three years are as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Components of Net Pension Expense (in thousands)        1996            1995          1994
--------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>     
Service cost for benefits earned during the year      $  2,324       $  1,741       $  2,060
Interest cost on projected benefit obligation ..         3,634          3,318          2,803
Actual return on assets ........................        (5,895)       (11,176)         2,329
Net amortization and deferral ..................         2,050          7,140         (5,838)
                                                      --------       --------       --------
Net pension expense ............................      $  2,113       $  1,023       $  1,354
                                                      ========       ========       ========
</TABLE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                                              December 31,
                                                                  --------------------------------------
Funded Status (in thousands)                                        1996           1995           1994
--------------------------------------------------------------------------------------------------------
<S>                                                               <C>            <C>            <C>     
Actuarial present value of accumulated plan benefits:
   Vested ..................................................      $ 43,402       $ 41,948       $ 34,242
   Non-vested ..............................................         2,201          2,100          1,234
                                                                  --------       --------       --------
Accumulated benefit obligation .............................      $ 45,603       $ 44,048       $ 35,476
                                                                  ========       ========       ========

Projected benefit obligation ...............................      $ 52,724       $ 51,196       $ 40,021
Fair market value of assets ................................        58,357         50,879         38,551
                                                                  --------       --------       --------
Plan assets greater (less) than projected benefit obligation         5,633           (317)        (1,470)
Unrecognized net assets at transition ......................          (153)          (478)          (803)
Unrecognized net loss ......................................        10,227         14,367         13,247
                                                                  --------       --------       --------
Net prepaid pension cost ...................................        15,707         13,572         10,974
Accrued pension expense ....................................           181          1,424          1,293
                                                                  --------       --------       --------
Prepaid pension cost(1) ....................................      $ 15,888       $ 14,996       $ 12,267
                                                                  ========       ========       ========
<FN>
(1) Included in other assets on the consolidated balance sheets.
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------
Actuarial Assumptions                     1996        1995        1994
------------------------------------------------------------------------
<S>                                       <C>         <C>         <C>
Discount rate:
   Beginning of year................      7-1/4%      8-1/2%      7%
End of year.........................      7-1/2       7-1/4       8-1/2
Expected return on plan assets......      9           9           9
Rate of increase in compensation....      5           5           5
</TABLE>

The Company contributed and charged to expense $294,000 in 1996, $302,000 in
1995 and $293,000 in 1994 for multi-employer pension plans. These
contributions were determined in accordance with the provisions of negotiated
labor contracts and generally are based on the number of hours worked. Under
the provisions of the Multi-Employer Pension Plan Amendments Act of 1980, if
the Company should substantially or totally withdraw from a multi-employer
pension fund, it would be required to continue contributions to such plan to
the extent of its portion of the plan's unfunded vested liability. Management
has no plans to terminate operations that would subject the Company to such
liability.

The Company has a qualified salary deferral plan under Internal Revenue Code
Section 401(k). All employees of the Company who have completed one year of
service and are at least age 21 are eligible to participate in this plan
under this plan, the Company may elect to match 20% of the first 3% of
employee contributions per participant.These matching contributions vest
immediately. The charges to operations for matching contributions to the plan
were $366,000, $364,000 and $382,000 in 1996, 1995 and 1994, respectively.

                                     F-10

<PAGE>

FINANCING

At January 25, 1997, the Company had a $65,000,000 Revolving Credit and Term
Loan facility under a Credit Agreement with two banks. The Revolving Credit
portion of the Agreement provided for borrowings of up to $45,000,000. There
was $31,500,000 outstanding under the Revolving Credit line at January 25,
1997. The Term Loan portion of the Credit Agreement totalled $20,000,000.

In March 1997, the Company obtained a $100,000,000 revolving credit facility
under a Revolving Credit Agreement with a commercial lender which replaced
the facility described above. The new revolving credit facility initially
provides for borrowings of up to $80,000,000, subject to a borrowing base
limitation and lender reserves. The Company may increase the maximum
available borrowings under the revolving credit facility to up to
$100,000,000 in the aggregate, subject to a borrowing base limitation and
lender reserves. Loans under the new facility bear interest at either or both
of two variable interest rate alternatives as chosen by the Company. One of
the interest rates may decrease if the Company meets specified performance
measures. The Company's initial borrowing under the revolving credit facility
was at an annual rate of 8.5%. The facility also permits up to $5,000,000 in
letters of credit, which decrease the amount available for loans under the
facility.

Borrowings under the new facility mature on March 24, 2000, with automatic
one year renewals on such maturity date, unless the facility is terminated by
notice from any party to the others at least 90 days before the facility
would otherwise terminate. The Company may also terminate the facility early
upon 90 days notice if it pays a termination fee equal to one-half of one
percent a year (for what would have been the remaining term of the facility)
of the average daily balance of loans and letters of credit under the
facility since its inception. The facility carries a line of credit fee equal
to one-quarter of one percent a year of the excess of the aggregate
commitments under the facility (currently $80,000,000) over the amount of
loans and letters of credit outstanding, a one-time loan facility fee of
$500,000 and an agent's fee of $45,000 a year. Borrowings under the facility
are guaranteed by the Company's subsidiaries and secured by accounts
receivable, inventory and related intangible assets and proceeds thereof of
the Company and its subsidiaries.

Revolving Credit line borrowings and interest rates for the past three years
were as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
(in thousands)                                      1996        1995         1994
----------------------------------------------------------------------------------
<S>                                                <C>        <C>          <C>    
Maximum amount outstanding....................     $43,500    $30,300      $25,500
Daily weighted average amount outstanding.....      27,707      8,776        6,051
Daily weighted average interest rate..........         7.5%       7.0%         6.0%
</TABLE>

At year-end, long-term debt, less current maturities, consisted of the
following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                                     January      January     January
(in thousands)                                                         1996         1995        1994
-----------------------------------------------------------------------------------------------------
<S>                                                                  <C>         <C>         <C>     
6-3/4% Convertible Subordinated Debentures due 2011............      $ 31,050    $ 32,775    $ 34,500
Mortgage notes and collateral trust bonds due through 2013,
  at rates from 6.44% to 8.45%.................................        37,827      39,328      41,124
Term loan, at a fixed rate of 7.99%............................        20,000      20,000      30,000
Industrial development revenue bond obligations,
  due through 2015, at variable rates below prime..............         9,126       9,380       9,628
Notes under Revolving Credit line, at a blended
  rate below prime.............................................        31,500      17,200       3,500
                                                                     --------    --------    --------
                                                                      129,503     118,683     118,752
Capital lease obligations......................................           644       1,044       1,672
                                                                     --------    --------    --------
                                                                     $130,147    $119,727    $120,424
                                                                     ========    ========    ========
</TABLE>


                                     F-11

<PAGE>

The 6-3/4% Convertible Subordinated Debentures are convertible to shares of
the Company's common stock at any time prior to maturity, unless previously
redeemed, at $32.67 per share, subject to adjustment in certain events. The
debentures are redeemable, at the option of the Company at par. Mandatory
annual sinking fund payments of $1,725,000 are required each December 15. At
January 25, 1997, 1,003,000 shares of authorized common stock were reserved
for conversion.

The Company obtained a waiver of net worth and cash flow covenant
requirements at January 25, 1997 under its former Credit Agreement. The
Company's current loan agreements include, among other things, covenants
requiring minimum working capital, minimum net worth and restricting capital
expenditures, capital stock redemptions and dividend payments. The new
Revolving Credit Agreement limits cash dividends to 50 percent of net income
for the immediately preceding fiscal year, subject to a maximum of $.50 per
outstanding share per year and borrowing availability restrictions.

Aggregate maturities of long-term debt for the next five years are as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------
                                         Capital
                            Long-Term     Lease
(in thousands)                 Debt    Obligations(1)  Total
------------------------------------------------------------
<S>                          <C>          <C>        <C>    
1997..................       $ 3,803      $547       $ 4,350
1998..................         3,946       258         4,204
1999..................         4,190       186         4,376
2000..................        55,825        66        55,891
2001..................        13,092        72        13,164
<FN>
(1) Excluding imputed interest.
</TABLE>

Based on the quoted market price of the 6-3/4% Convertible Subordinated
Debentures due 2011 and on the current rates offered to the Company for other
long-term debt of similar remaining maturities, the estimated fair value of
total long-term debt, excluding capital lease obligations, was less than the
carrying value by approximately $8,100,000 at January 25, 1997, $9,971,000 at
January 27, 1996 and $14,400,000 at January 28, 1995.





                                     F-12

<PAGE>

STOCK OPTIONS

At January 25, 1997, 77,600 shares of Jacobson Stores Inc. common stock were
reserved for issuance under a stock option plan adopted in 1983. No more
options may be granted under this plan. At January 25, 1997, 318,000 shares
of Jacobson Stores Inc. common stock were reserved for issuance under a plan
adopted in 1994 and options for an additional 82,000 shares were available
for grant to directors and employees. In January 1997, the Company's Board of
Directors approved an amendment to the 1994 option plan which would increase
the available shares under the plan by 500,000, contingent on shareholder
approval at the 1997 annual meeting. Options to purchase 200,000 shares at
$8.38 per share were granted contingent on shareholder approval of the option
plan amendment. These contingent options are not reflected in the option
activity table below.

In fiscal 1996, the Company adopted the disclosure requirements of FASB
Statement No. 123, "Accounting for Stock-Based Compensation." However, the
Company continues to account for these plans under APB Opinion No. 25, under
which no compensation cost has been recognized. Had compensation cost for
these plans been determined in accordance with FASB Statement No. 123, the
Company's net loss and loss per common share would have been $12,036,000
($2.08 per share) and $4,306,000 ($0.75 per share) in 1996 and 1995,
respectively.

Option activity for the past three years was as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
                                                           Number     Option Price
                                                          of Shares     Per Share
----------------------------------------------------------------------------------
<S>                                                        <C>          <C>      
Options outstanding at January 29, 1994 .............      153,160      $   15.41
Activity during 1994:
   Granted ..........................................       37,250          14.38
   Expired ..........................................       49,810          17.49
                                                           -------
Options outstanding at January 28, 1995 (including
    exercisable options for 108,850 shares) .........      140,600          14.40

Activity during 1995:
   Granted ..........................................      204,500           9.63
   Expired ..........................................       13,750          17.83
                                                           -------

Options outstanding at January 27, 1996 (including
    exercisable options for 108,663 shares) .........      331,350          11.31

Activity during 1996:
   Granted ..........................................      186,500           8.84
   Expired ..........................................      122,250          10.70
                                                           ------

   Options outstanding at January 25, 1997 (including
    exercisable options for 239,350 shares) .........      395,600      $   10.33
                                                           =======      =========
</TABLE>

The weighted average fair value of options granted in 1995 and 1996 totalled
$5.75 and $5.27, respectively. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model.
The weighted average assumptions used in valuing the option grants for the
fiscal years ended January 27, 1996 and January 25, 1997, respectively, were
expected life, 9.85 and 9.89 years; interest rate, 6.46% and 6.35% and
volatility (the measure by which the stock price has fluctuated or will be
expected to fluctuate during the period), 34.67% and 34.87%.

At January 25, 1997, 274,500 of the outstanding options have exercise prices
that range between $8.00-$10.33, with a weighted average exercise price of
$8.96. Of these options, 142,750 options are exercisable, with a weighted
average exercise price of $8.69 and a weighted average contractual maturity
of 9.4 years. The remaining 121,100 outstanding options have exercise prices
that range between $10.33-$16.00, with a weighted average exercise price of
$13.44. Of these options, 101,100 options are exercisable, with a weighted
average exercise price of $13.73 and a weighted average contractual maturity
of 3.6 years.



                                     F-13

<PAGE>

PREFERRED STOCK PURCHASE RIGHTS

The Company has a Preferred Stock Purchase Rights Plan, under which a Right
is attached to each share of the Company's Common Stock. Each Right entitles
the registered holder to purchase from the Company one one-hundredth of a
share of Series A Preferred Stock at an exercise price of $100, subject to
adjustment. The Company has reserved 100,000 shares of Series A Preferred
Stock for issuance on exercise of the Rights. The Rights trade with the
Company's Common Stock and will become exercisable 10 days after any person
or group acquires 25% or more of the Company's Common Stock, or commences or
announces an offer for 30% or more of the Company's Common Stock. After the
Rights become exercisable, if the Company is acquired in a merger or other
business combination or if 50% or more of its assets or earning power are
sold, each Right will entitle the holder to purchase, at the then current
exercise price of the Right, shares of common stock of the acquiring company
having a market value of twice the exercise price of the Right.
Alternatively, if a 25% shareholder acquires the Company by means of a
reverse merger in which the Company and its stock survive, or if such
shareholder engages in self-dealing transactions with the Company or acquires
beneficial ownership of 40% or more of the Company's Common Stock other than
by means of a fair offer to buy all shares, each Right (except those of the
acquiring person or group) will entitle its holder to purchase, on exercise,
shares of the Company's Common Stock having a market value of twice the
current exercise price of each Right. The Rights may be redeemed by the
Company for one cent per Right until 30 days after a person or group acquires
25% or more of the Company's Common Stock, and will expire on October 25,
1998.

ACCRUED EXPENSES

Accrued expenses at year-end were as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------
                                        January      January     January
(in thousands)                            1997         1996        1995
------------------------------------------------------------------------
<S>                                      <C>         <C>         <C>
1995
Wages and vacation pay..............     $ 7,804     $ 7,293     $ 6,720
Pension.............................         181       1,424       1,293
Taxes other than income taxes.......       1,844       1,781       2,247
Interest............................       1,048         982         927
Other...............................       6,628       3,132       3,925
                                         -------     -------     -------

                                         $17,505     $14,612     $15,112
                                         =======     =======     =======
</TABLE>



                                     F-14


<PAGE>

CONDENSED BALANCE SHEETS

Condensed balance sheets of Jacobson Stores Realty Company, Jacobson Credit
Corp. and merchandising operations are shown below:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                     January       January       January
(in thousands)                                         1997          1996          1995
-----------------------------------------------------------------------------------------
JACOBSON STORES REALTY COMPANY
-----------------------------------------------------------------------------------------
<S>                                                  <C>           <C>           <C>     
Current assets ................................      $    189      $    269      $    284
Advances to Jacobson Stores Inc. ..............        25,589        23,460        19,902
Property and equipment, net ...................        51,458        55,196        59,057
Investments and other assets ..................         2,633         2,760         3,055
                                                     --------      --------      --------
             Assets ...........................      $ 79,869      $ 81,685      $ 82,298
                                                     ========      ========      ========

Current liabilities ...........................      $  2,932      $  3,186      $  3,210
Long-term debt ................................        45,746        47,500        49,241
Other liabilities .............................         2,299         2,559         2,821
Equity of Jacobson Stores Inc. ................        28,892        28,440        27,026
                                                     --------      --------      --------
             Liabilities and Equity ...........      $ 79,869      $ 81,685      $ 82,298
                                                     ========      ========      ========
<CAPTION>
-----------------------------------------------------------------------------------------
JACOBSON CREDIT CORP
-----------------------------------------------------------------------------------------
<S>                                                  <C>           <C>           <C>     
Current assets ................................      $   --        $      4      $  3,580
Advances to Jacobson Stores Inc. ..............         8,524         8,615         8,392
                                                     --------      --------      --------
             Assets ...........................      $  8,524      $  8,619      $ 11,972
                                                     ========      ========      ========

Current liabilities ...........................      $   --        $     95      $    127
Long-term debt ................................          --            --           3,500
Equity of Jacobson Stores Inc. ................         8,524         8,524         8,345
                                                     --------      --------      --------
             Liabilities and Equity ...........      $  8,524      $  8,619      $ 11,972
                                                     ========      ========      ========
<CAPTION>
-----------------------------------------------------------------------------------------
JACOBSON STORES INC.
-----------------------------------------------------------------------------------------
<S>                                                  <C>           <C>           <C>     
Current assets ................................      $149,950      $145,481      $146,276
Property and equipment, net ...................        38,344        41,402        41,201
Investments and other assets ..................        22,094        21,785        19,517
                                                     --------      --------      --------
             Assets ...........................      $210,388      $208,668      $206,994
                                                     ========      ========      ========

Current liabilities ...........................      $ 50,729      $ 47,381      $ 47,165
Long-term debt ................................        84,401        72,227        67,683
Other liabilities .............................         8,474        10,229         8,409
Advances from subsidiaries ....................        34,113        32,075        28,294
Shareholders' equity ..........................        32,671        46,756        55,443
                                                     --------      --------      --------
             Liabilities and Equity ...........      $210,388      $208,668      $206,994
                                                     ========      ========      ========
</TABLE>



                                     F-15


<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
                  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF REPORTING. Jacobson Stores Inc. operates specialty department stores
in 25 cities in Michigan, Indiana, Kansas, Kentucky, Ohio and Florida. The
consolidated financial statements include the accounts of the Company and two
wholly-owned subsidiaries, Jacobson Stores Realty Company and Jacobson Credit
Corp. All significant inter-company transactions and balances have been
eliminated.

FISCAL YEAR. The Company's fiscal year ends on the last Saturday in January.
Fiscal years 1996, 1995 and 1994 consisted of 52 weeks and ended January 25,
1997, January 27, 1996 and January 28, 1995, respectively.

SALES. Sales are net of returns. Restaurant and alteration revenues are
reflected as a reduction of cost of merchandise sold. Finance charge revenues
are recorded as income when earned and are reflected as a reduction of
selling, general and administrative expenses.

RECEIVABLES FROM CUSTOMERS. An account is reviewed for write-off if payment
of 20% (one full monthly payment) has not been received during the previous
four month period or if it is otherwise determined that the account is
uncollectible.

MERCHANDISE INVENTORIES. All merchandise inventories are valued at cost,
which is lower than market, as determined by the retail last-in, first-out
(LIFO) method.

PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Major
replacements and improvements are charged to the property and equipment
accounts. Maintenance, repairs and minor replacements are charged to expense
as incurred. When assets are sold, retired, or fully depreciated, their cost
and related accumulated depreciation and amortization are removed from the
property and equipment accounts, and any gain or loss is reflected in the
statements of earnings.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization are provided on
the straight-line basis over the estimated useful lives of the property and
equipment, or over the respective lease terms, if such periods are shorter.
Buildings and improvements are depreciated over ten to forty years.
Furniture, fixtures and equipment are depreciated over five to ten years.

CAPITALIZATION OF INTEREST. Interest expense incurred on properties under
development is capitalized to reflect properly the costs of properties up to
the time they are ready for their intended use. The amounts capitalized are
then amortized over the respective lives of the depreciable assets.

PRE-OPENING EXPENSES. Expenditures of a non-capital nature associated with
opening a new store are charged to expense using the straight-line method in
the twelve months immediately following the opening.

INCOME TAXES. Deferred income taxes result from differences between the tax
basis of an asset or liability and its reported amount in the financial
statements (temporary differences) and are adjusted for changes in tax laws
and rates.

EARNINGS PER SHARE. Primary earnings per share are computed by dividing net
earnings by the weighted average shares of common stock and common stock
equivalents outstanding during the year. Weighted average shares outstanding,
excluding treasury shares, were 5,789,703 in 1996, and 5,779,977 in 1995 and
5,779,123 in 1994. Fully diluted earnings per share are computed based on the
additional assumption that the Company's 6-3/4% Convertible Subordinated
Debentures due 2011 were converted to common stock at the date of issuance
with a corresponding increase in net earnings to reflect reduction in related
interest expense, net of income taxes. Weighted average shares outstanding
used in the computation of fully diluted earnings per share were 6,832,518 in
1996, 6,835,992 in 1995 and 6,835,138 in 1994.

FINANCIAL INSTRUMENTS. With the exception of long-term debt and shareholders'
equity, the Company records all financial instruments, including cash
equivalents, receivables from customers and accounts payable, at or in
amounts approximating market value.

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 at the date of the financial statements and the reported amounts
of revenues and expenses for the fiscal year. Actual results could differ
from those estimates.

NEWLY RELEASED ACCOUNTING PRONOUNCEMENTS. Newly issued Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings per Share, and SFAS No. 129,
Disclosure of Information about Capital Structure, become effective for the
Company in fiscal year 1997. SFAS No. 128 will require primary earnings per
share (EPS) to be replaced by basic EPS, which is computed by dividing
reported earnings available to common stockholders by weighted average common
shares outstanding. No dilution for any potentially dilutive securities is
included. Fully diluted EPS, now called diluted EPS, is still required. These
statements are not expected to have a material effect on the Company's
consolidated financial statements.

                                     F-16


<PAGE>


              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Jacobson Stores Inc.:

We have audited the accompanying consolidated balance sheets of JACOBSON
STORES INC. (a Michigan corporation) and subsidiaries as of January 25, 1997,
January 27, 1996 and January 28, 1995 and the related consolidated statements
of earnings, shareholders' equity and cash flows for each of the three fiscal
years in the period ended January 25, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jacobson Stores Inc. and
subsidiaries as of January 25, 1997, January 27, 1996 and January 28, 1995
and the results of their operations and their cash flows for each of the
three fiscal years in the period ended January 25, 1997, in conformity with
generally accepted accounting principles.






                                                      /s/ ARTHUR ANDERSEN LLP
                                                      -----------------------

Detroit, Michigan
March 24, 1997


                                     F-17


<PAGE>


              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
                      QUARTERLY INFORMATION (unaudited)


OPERATING RESULTS

The unaudited quarterly operating results shown below were prepared using the
same accounting policies that are applied to the annual data.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                           Quarter
(in thousands, except per share data)                First          Second          Third          Fourth
-----------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>             <C>             <C>      
1996
----
Net sales ..................................      $ 106,525       $  93,990       $  90,778       $ 141,176
Cost of merchandise sold, buying and
     occupancy expenses ....................         68,260          69,258          59,410          96,898
Selling, general and administrative expenses         34,436          31,586          33,355          42,971
Interest expense, net ......................          2,272           2,272           2,262           2,578
Store closing costs ........................             --              --              --           4,200
Earnings (loss) before income taxes ........          1,557          (9,126)         (4,249)         (5,471)
Net earnings (loss) ........................          1,012          (5,931)         (2,763)         (3,780)
Earnings (loss) per share:
    Primary ................................      $     .18       $   (1.02)      $    (.48)      $    (.65)
    Fully diluted ..........................            .18           (1.02)           (.48)           (.65)

1995
----
Net sales ..................................      $ 100,298       $  93,099       $  87,802       $ 133,068
Cost of merchandise sold, buying and
    occupancy expenses .....................         64,826          67,438          57,316          89,913
Selling, general and administrative expenses         33,000          31,665          32,884          36,023
Interest expense, net ......................          2,208           2,182           2,136           2,282
Gain on sale of property ...................             --              --          (1,065)             --
Earnings (loss) before income taxes ........            264          (8,186)         (3,469)          4,850
Net earnings (loss) ........................            172          (5,321)         (2,255)          3,198
Earnings (loss) per share:
    Primary ................................      $     .03       $    (.92)      $    (.39)      $     .55
    Fully diluted ..........................            .03            (.92)           (.39)            .52

1994
----
Net sales ..................................      $  97,494       $  89,917       $  86,501       $ 135,242
Cost of merchandise sold, buying and
    occupancy expenses .....................         62,974          63,529          55,509          83,192
Selling, general and administrative expenses         31,448          30,632          31,843          36,116
Interest expense, net ......................          1,858           1,899           1,942           2,328
Gain on sale of property ...................           (504)             --              --              --
Earnings (loss) before income taxes ........          1,718          (6,143)         (2,793)         13,606
Net earnings (loss) ........................          1,117          (3,993)         (1,816)          8,780
Earnings (loss) per share:
    Primary ................................      $     .19       $    (.69)      $    (.31)      $    1.52
    Fully diluted ..........................            .19            (.69)           (.31)           1.34
</TABLE>



                                     F-18


<PAGE>


The Company's business is seasonal in nature. Traditionally, a higher
proportion of sales and net earnings is generated in the fourth quarter
(which includes the Christmas season). The anticipated effective annual tax
rate is used to compute income taxes on a quarterly basis. The gross margins
used in calculating cost of goods sold for interim periods include an
allocation of the estimated annual LIFO provision, which cannot be determined
precisely until the year-end inventory value is known and the Bureau of Labor
Statistics Department Store Index is published in February.

The impact of LIFO on earnings per share as it was reported and as it would
have been had the actual charge (benefit) been known when the quarterly
allocations were made is shown below.

<TABLE>
<CAPTION>
------------------------------------------------------------
                As Reported               As Reallocated
Quarter     1996    1995    1994       1996    1995    1994
------------------------------------------------------------
<S>         <C>     <C>    <C>         <C>     <C>    <C>   
1st         $.06    $.06   $ .07       $.01    $.04   $(.12)
2nd          .01     .05     .03        .01     .03    (.11)
3rd          .03     .05     .05         --     .03    (.11)
4th         (.07)   (.01)   (.65)       .01     .05    (.16)
            ----    ----   -----       ----    ----   ----- 
            $.03    $.15   $(.50)      $.03    $.15   $(.50)
            ====    ====   =====       ====    ====   ===== 
</TABLE>




                                     F-19


<PAGE>

<TABLE>
<CAPTION>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

        SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                               JANUARY 25, 1997
                                (in thousands)

        Column A                             Column B      Column C      Column D       Column E

                                                          Additions     Deductions
                                             Balance      Charged to        For         Balance
                                            Beginning     Costs and       Amounts       End of
       Description                          of Period      Expenses        Paid         Period
-----------------------------------------   ---------     ----------    ----------      -------
<S>                                       <C>                <C>         <C>             <C>   
52 WEEKS ENDED JANUARY 25, 1997:

Store Closing Costs -
    Severance and related benefits        $       --         $  900      $       --      $  900
    Reserve to state property and
       equipment at estimated fair value          --          2,350              --       2,350
    Expense to hold closed facilities
       pending disposition                        --            950              --         950
                                          ----------         ------      ----------      ------

                                          $       --         $4,200      $       --      $4,200
                                          ==========         ======      ==========      ======
</TABLE>



                                     S-1

<PAGE>

                                   EXHIBITS


EXHIBITS
--------

 4(a)    First Amendment to Credit Agreement, dated as of December 19, 1996,
         among Jacobson Stores Inc., Comerica Bank and NBD Bank.

 4(b)    Second Amendment to Credit Agreement and Waiver and Amendment to
         Term Note, dated as of January 25, 1997, among Jacobson Stores Inc.,
         Comerica Bank and NBD Bank.

 4(c)    Revolving Credit Agreement, dated as of March 24, 1997, between
         Jacobson Stores Inc. and The CIT Group/Business Credit., as agent.


10(a)*   Employment Agreement dated as of March 19, 1997, between Jacobson
         Stores Inc. and P. Gerald Mills.

10(b)*   Severance Agreement dated as of October 31, 1996, between Jacobson
         Stores Inc. and Mark K. Rosenfeld.

10(c)*   Amendment to Severance Agreement dated as of December 12, 1996,
         between Jacobson Stores Inc. and Mark K. Rosenfeld.

10(d)*   Severance Agreement dated as of December 20, 1996, between Jacobosn
         Stores Inc. and James B. Fowler.

10(e)*   Employment Agreement dated August 1, 1996 between Jacobson Stores
         Inc. and Theodore R. Kolman.

10(f)*   Employment Agreement, dated February 28, 1996, between Jacobson
         Stores Inc. and Joseph H. Fisher.

10(g)*   Amendment to Executive Employment Agreement, dated as of August 1,
         1996, between Jacobson Stores Inc. and Joseph H. Fisher.

11       Computation of Earnings per Share

23       Consent of Arthur Andersen LLP

27       Financial Data Schedule



                                     E-1



<PAGE>


        In addition, the previously-filed exhibits listed below are
incorporated herein by reference. (All references are to Securities and
Exchange Commission File #0-6319 unless otherwise noted.)

<TABLE>
<CAPTION>
Current                                                                 Identification of
Exhibit                  Description of Exhibit                            Prior Filing
-------                  ----------------------                         -----------------
<S>             <C>                                              <C>
3(i)(a)         Restated Articles of Incorporation,              Exhibit 19(a) to Form 10-Q,
                Jacobson Stores Inc., as amended and             Quarter Ended April 29, 1989.
                restated May 25, 1989.

3(i)(b)         Certificate of Designation, Preferences          Exhibit 3(a) to Form 10-Q,
                and Rights of Preferred Stock of                 Quarter Ended October 29,
                Jacobson Stores Inc.                             1988

3(ii)           By-laws, Jacobson Stores Inc., as                Exhibit 3(ii) to Form 10-K,
                amended March 21, 1996.                          Year Ended January 27, 1996.

4(d)            Election under Section 780,                      Exhibit 28 to Form 10-Q,
                Michigan Business Corporation Act.               Quarter Ended October 27,
                                                                 1996.

4(e)            Indenture dated as of December 15,               File #33-10532:
                1986 between Jacobson Stores Inc.                Exhibit 4(a) to Form S-2
                and National Bank of Detroit, as                 (Amendment No. 1), filed
                Trustee.                                         December 12, 1986.

4(f)            Rights Agreement dated as of October 4,          Exhibit I to Form 8-A and
                1988 between Jacobson Stores Inc. and            Exhibit 4 to Form 8-K,
                Manufacturers National Bank of Detroit,          October 7, 1988; Exhibit I
                as Rights Agent; Change of Rights                to Amendment No. 1 to
                Agent, Effective June 1, 1989; Change            Form 8-A, May 16, 1989;
                of Right Agent, Effective May 31, 1994.          Exhibit 1 to Amendment
                                                                 No. 2 to Form 8-A, June 9,
                                                                 1994.

4(g)            Credit Agreement dated as of December 21,        Exhibit 4(d) to Form 8-K
                1995, between Jacobson Stores Inc. and           dated January 11, 1996.
                Comerica Bank, as agent.

9               Voting and Transfer Restriction                  Exhibit 9 to Form 10-K,
                Agreement, effective December 31,                Year Ended January 26,
                1990.                                            1991.

10(h)*          Employment Agreement dated as of                 Exhibit 10(b) to Form 10-K,
                February 1, 1996, between Jacobson               Year Ended January 27, 1996.
                Stores Inc. and Paul W. Gilbert.

10(i)*          Amendment, as of August 1, 1996, to              Exhibit 10(a) to Form 10-Q,
                Employment Agreement dated February              Quarter ended July 27, 1996.
                1, 1996, between Jacobson Stores Inc.
                and Paul. W. Gilbert.


                                     E-2



<PAGE>

<CAPTION>
Current                                                                 Identification of
Exhibit                  Description of Exhibit                            Prior Filing
-------                  ----------------------                         -----------------
<S>             <C>                                              <C>
10(j)*          Change in Control Severance Agreement,           Exhibit 10(f) to Form
                10-K, dated December 18, 1995, between           Year Ended January 27, 1996.
                Jacobson Stores Inc. and Paul W. Gilbert.

10(k)*          Employment Agreement dated August 1,             Exhibit 10(c) to Form 10-Q,
                1996 between Jacobson Stores Inc., and           Quarter ended July 27, 1996.
                Robert L. Moles.

10(l)*          Jacobson Stores Inc. Deferred Compensation       Exhibit 10(h) to Form 10-K,
                Plan, as amended and restated January 24, 1996.  Year Ended January 27, 1996.

10(m)*          1996 Management Incentive Plan.                  Exhibit 10(i) to Form 10-K,
                                                                 Year Ended January 27, 1996.

10(n)*          Split Dollar Agreement, dated January 31,        Exhibit 10(k) to Form 10-K
                1992, between Jacobson Stores Inc. and           Year Ended January 27, 1996.
                Paul W. Gilbert.

10(o)*          Jacobson's Stock Option Plan                     Exhibit 19 to Form 10-Q,
                of 1983, as amended and restated,                Quarter Ended October 26,
                effective May 28, 1987, and as further           1991.
                amended May 24, 1990 and August 22,
                1991.

10(p)*          Jacobson Stock Option Plan of 1994.              Exhibit A to Proxy Statement
                                                                 in connection with the Annual
                                                                 Meeting of Shareholders held
                                                                 on May 26, 1994.

10(q)*          First Amendment to Jacobson Stock Option         Exhibit 10(m) to Form 10-K,
                Plan of 1994.                                    Year Ended January 27, 1996.

21              Schedule of Subsidiaries                         Exhibit 21 to Form 10-K, Year
                                                                 Ended January 27, 1996.
</TABLE>



                                     E-3