<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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                                   FORM 10 - Q

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



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For the Quarter Ended October 30, 1999            Commission File No. 1-6695
--------------------------------------            ------------------------------


                               JO-ANN STORES, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)



         Ohio                                             34-0720629
--------------------------------------      ------------------------------------
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)


        5555 Darrow Road
           Hudson, Ohio                                    44236
--------------------------------------      ------------------------------------
(Address of principal executive offices)                 (Zip Code)

        (330) 656 - 2600
--------------------------------------
 (Registrant's telephone number)

         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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

         Shares of Class A Common Stock outstanding at December 10, 1999:
8,973,326

         Shares of Class B Common Stock outstanding at December 10, 1999:
8,859,441


<PAGE>   2


JO-ANN STORES, INC.
Form 10-Q Index
For the quarter ended October 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

PART I.     FINANCIAL INFORMATION:

            Item 1.    Financial Statements (Unaudited)                                              Page Numbers
<S>                                                                                                  <C>
                       Consolidated Balance Sheets as of October 30, 1999 and January 30, 1999           3

                       Consolidated Statements of Income for the Thirteen and
                       Thirty-Nine Weeks Ended October 30, 1999 and October 31,
                       1998                                                                              4

                       Consolidated Statements of Cash Flows for the Thirty-Nine Weeks
                       Ended October 30, 1999 and October 31, 1998                                       5

                       Notes to Consolidated Financial Statements                                        6-7

            Item 2.    Management's Discussion and Analysis of Financial Condition
                       and Results of Operations                                                         8-12

            Item 3.    Quantitative and Qualitative Disclosures About Market Risk                        12

PART II.    OTHER INFORMATION

            Item 1.    Legal Proceedings                                                                 13

            Item 2.    Changes in Securities and Use of Proceeds                                         13

            Item 3.    Defaults Upon Senior Securities                                                   13

            Item 4.    Submission of Matters to a Vote of Security Holders                               13

            Item 5.    Other Information                                                                 13

            Item 6.    Exhibits and Reports on Form 8-K                                                  13

            Signatures                                                                                   14
</TABLE>


                                     Page 2
<PAGE>   3


                         PART I   FINANCIAL INFORMATION
Item 1.  Financial Statements
CONSOLIDATED BALANCE SHEETS
Jo-Ann Stores, Inc.
(Millions of dollars)
<TABLE>
<CAPTION>

                                                                                            (UNAUDITED)
                                                                                            OCTOBER 30,        JANUARY 30,
                                                                                               1999                1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>                 <C>
ASSETS
Current assets:
   Cash and temporary cash investments                                                    $         27.9      $          20.4
   Inventories                                                                                     562.4                420.2
   Deferred income taxes                                                                            24.1                 24.8
   Prepaid expenses and other current assets                                                        19.7                 24.7
                                                                                          ---------------     ---------------
Total current assets                                                                               634.1                490.1

Property and equipment, net                                                                        181.6                164.0
Goodwill, net                                                                                       36.5                 37.2
Other assets                                                                                        17.3                 10.1
                                                                                          ---------------     ---------------
Total assets                                                                              $        869.5      $         701.4
                                                                                          ===============     ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                       $        191.2      $         150.4
   Other current liabilities                                                                        64.5                 58.8
                                                                                          ---------------     ---------------

Total current liabilities                                                                          255.7                209.2

Long-term debt                                                                                     329.4                182.5
Deferred income taxes                                                                               21.6                 25.2
Other long-term liabilities                                                                         13.7                 25.5

Shareholders' equity:
   Common stock
     Class A, par value $0.05 per share; issued and outstanding 9,043,347
        and 9,530,330, respectively                                                                 0.5                   0.5
     Class B, par value $0.05 per share; issued and outstanding 8,861,391
        and 9,481,244, respectively                                                                 0.5                   0.5
   Additional paid-in capital                                                                      97.2                  94.4
   Unamortized restricted stock awards                                                             (2.4)                 (2.9)
   Retained earnings                                                                              190.9                 185.8
                                                                                         ---------------      ---------------
                                                                                                  286.7                 278.3
   Treasury stock, at cost                                                                        (37.6)                (19.3)
                                                                                         ---------------      ---------------
Total shareholders' equity                                                                        249.1                 259.0
                                                                                         ---------------      ---------------

Total liabilities and shareholders' equity                                               $        869.5       $         701.4
                                                                                         ===============      ===============
See notes to consolidated financial statements

</TABLE>

                                     Page 3
<PAGE>   4

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Jo-Ann Stores, Inc.
(Millions of dollars, except per share data)
<TABLE>
<CAPTION>

                                                           THIRTEEN WEEKS ENDED               THIRTY-NINE WEEKS ENDED
                                                           --------------------               -----------------------
                                                     OCTOBER 30,         OCTOBER 31,       OCTOBER 30,        OCTOBER 31,
                                                          1999              1998               1999              1998
-------------------------------------------------------------------------------------------------------------------------

<S>                                                  <C>                 <C>              <C>                <C>
Net sales                                            $     347.1         $     319.7      $      925.2       $    824.2
Cost of sales                                              177.6               167.5             487.2            441.6
                                                     ------------        ------------     -------------      -----------

   Gross margin                                            169.5               152.2             438.0            382.6

Selling, general and administrative expenses               140.4               127.6             387.6            341.4
Depreciation and amortization                                8.2                 6.8              23.5             20.3
Non-recurring charge                                         ---                 8.4               ---             25.1
                                                     ------------        ------------     -------------      -----------

   Operating profit (loss)                                  20.9                 9.4              26.9             (4.2)
Interest expense, net                                        7.6                 3.8              18.7              8.1
                                                     ------------        ------------     -------------      -----------

   Income (loss) before income taxes                        13.3                 5.6               8.2            (12.3)
Income tax provision (benefit)                               5.0                 2.2               3.1             (4.8)
                                                     ------------        ------------     -------------      -----------

Net income (loss)                                    $       8.3         $       3.4      $        5.1       $     (7.5)
                                                     ============        ============     =============      ===========



Net income (loss) per common share - basic           $       0.46        $       0.18     $        0.28      $    (0.40)
                                                     ============        ============     =============      ===========
Net income (loss) per common share - diluted         $       0.45        $       0.17     $        0.27      $    (0.40)
                                                     ============        ============     =============      ===========

See notes to consolidated financial statements

</TABLE>

                                     Page 4
<PAGE>   5


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Jo-Ann Stores, Inc.
(Millions of dollars, except per share data)
<TABLE>
<CAPTION>

                                                                                         THIRTY-NINE WEEKS ENDED
                                                                                         -----------------------
                                                                                      OCTOBER 30,       OCTOBER 31,
                                                                                         1999               1998
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>               <C>

Net cash flows from operating activities:
      Net income (loss)                                                              $        5.1      $        (7.5)
      Adjustments to reconcile net loss to net cash used for
      operating activities:
       Depreciation and amortization                                                         23.5               20.3
       Non-cash portion of non-recurring charge                                               ---                9.7
       Deferred income taxes                                                                 (2.9)              (8.4)
       Other                                                                                  1.0                1.8
      Changes in operating assets and liabilities:
       Increase in inventories                                                             (142.2)            (143.8)
       Increase in accounts payable                                                          40.8               55.8
       Other, net                                                                            14.3               (5.6)
                                                                                     -------------     --------------

Net cash used for operating activities                                                      (60.4)             (77.7)

Net cash flows from investing activities:
       Capital expenditures                                                                 (45.3)             (55.3)
       House of Fabrics acquisition, net of cash acquired                                     ---              (23.5)
       Other, net                                                                             1.9                4.7
                                                                                     -------------     --------------

Net cash used for investing activities                                                      (43.4)             (74.1)

Net cash flow from financing activities:
      (Repayment) proceeds from long-term debt                                               (3.1)             157.4
      Net proceeds from issuance of senior subordinated notes                               142.9                ---
      Decrease in other long-term liabilities                                               (11.8)               ---
      Purchase of common stock for treasury                                                 (18.7)              (0.8)
      Other, net                                                                              2.0                3.2
                                                                                     -------------     --------------

Net cash provided by financing activities                                                   111.3              159.8
                                                                                     -------------     --------------

Net increase in cash and temporary cash investments                                           7.5                8.0
Cash and temporary cash investments at beginning of period                                   20.4               14.8
                                                                                     -------------     --------------

Cash and temporary cash investments at end of period                                 $       27.9      $        22.8
                                                                                     =============     ==============

Supplemental disclosures of cash flow information:
      Cash paid (received) during the period for:
      Interest                                                                       $        8.8      $         6.8
      Income taxes                                                                           (6.2)              11.3

</TABLE>

See notes to consolidated financial statements


                                     Page 5
<PAGE>   6


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Jo-Ann Stores, Inc.
October 30, 1999, January 30, 1999 and October 31, 1998


Note 1  -  Basis of Presentation

        Jo-Ann Stores, Inc. (the "Company"), an Ohio corporation, is the largest
        national category-dominant retailer serving the retail fabric and craft
        industry, with 1,051 retail stores in 49 states. The 1,009 traditional
        and 42 superstores feature a broad line of apparel, quilting and craft
        fabrics and sewing-related products, home decorating fabrics, floral,
        craft and seasonal products.

        The consolidated financial statements include the accounts of the
        Company and its subsidiaries and have been prepared without audit,
        pursuant to the rules of the Securities and Exchange Commission. Certain
        information and footnote disclosures normally included in financial
        statements prepared in accordance with generally accepted accounting
        principles have been condensed or omitted pursuant to those rules and
        regulations, although the Company believes that the disclosures herein
        are adequate to make the information not misleading. The statements
        should be read in conjunction with the consolidated financial statements
        and notes thereto included in the Company's Annual Report on Form 10-K
        for the fiscal year ended January 30, 1999.

        The Company's business is highly seasonal with the majority of the
        Company's revenues and operating profits generated in the second half of
        its fiscal year; therefore, earnings or losses for a particular interim
        period are not indicative of full year results. In the opinion of
        management, the consolidated financial statements contain all
        adjustments (consisting only of normal recurring accruals) necessary for
        a fair statement of results for the interim periods presented.

Note 2  - Earnings Per Share

        Basic earnings per common share are computed by dividing net income by
        the weighted average number of shares outstanding during the period.
        Diluted earnings per share include the effect of the assumed exercise of
        dilutive stock options under the treasury stock method. The impact of
        stock options is not included in the earnings per common share
        calculation for the thirty-nine weeks ended October 31, 1998 as it is
        anti-dilutive.

        The following table presents information necessary to calculate basic
        and diluted earnings per common share for the periods presented (shares
        in millions).
<TABLE>
<CAPTION>

                                                                   THIRTEEN WEEKS ENDED              THIRTY-NINE WEEKS ENDED
                                                                   --------------------              -----------------------
                                                               OCTOBER 30,       OCTOBER 31,      OCTOBER 30,       OCTOBER 31,
                                                                  1999              1998             1999              1998
         ------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>              <C>              <C>                <C>
         BASIC EARNINGS PER COMMON SHARE:
         Weighted average shares outstanding                       18.0             19.0             18.3               18.9
                                                              ==============    ==============   ==============    ==============

         DILUTED EARNINGS PER COMMON SHARE:
         Weighted average shares outstanding                       18.0             19.0             18.3               18.9
         Incremental shares from assumed exercise of
         stock options                                              0.3              0.8              0.4                ---
                                                              --------------    --------------   --------------    --------------
                                                                   18.3             19.8             18.7               18.9
                                                              ==============    ==============   ==============    ==============
</TABLE>



                                     Page 6
<PAGE>   7

Note 3  -  Acquisition of House of Fabrics, Inc.

        On March 9, 1998, the Company acquired, through a cash tender offer,
        77.2% of the outstanding common stock of House of Fabrics, Inc. ("HOF")
        for $4.25 per share (the "Acquisition"). On April 21, 1998, the merger
        of HOF with a wholly owned subsidiary of the Company was approved at a
        special meeting of the shareholders of HOF. As a result, HOF became a
        wholly owned subsidiary of the Company, and all shares of HOF common
        stock not already owned by the Company were canceled and converted into
        the right to receive $4.25 in cash.

        Operating results of the continuing HOF stores have been included in the
        Company's results of operations since the date of the Acquisition
        (thirty-four of the thirty-nine weeks in the first three quarters of
        fiscal 1999).

        In accordance with Emerging Issues Task Force Issue No. 94-3, "Liability
        Recognition for Certain Employee Termination Benefits and Other Costs to
        Exit an Activity (Including Certain Costs Incurred in a Restructuring),"
        the Company recorded a non-recurring charge totaling $25.1 million
        during fiscal 1999 for merger-related costs pertaining to the
        Acquisition.

Note 4 - Financing

        On May 5, 1999, the Company entered into a $300.0 million five-year
        unsecured senior revolving credit agreement (the "Senior Credit
        Facility") that expires on April 30, 2004, and issued $150.0 million of
        10 3/8% senior subordinated notes due May 1, 2007. The net proceeds from
        the senior subordinated notes, coupled with borrowings under the Senior
        Credit Facility, were used to refinance the Company's former credit
        facility.

        The Company may borrow up to a maximum of $330.0 million under the
        Senior Credit Facility by utilizing funds available under the Senior
        Credit Facility and other lines of credit. Interest on borrowings under
        the Senior Credit Facility is calculated at an applicable margin over
        the London Interbank Offered Rate ("LIBOR"). The applicable margin, as
        well as the facility fee on the commitment amount, is based on the
        achievement of specified ranges of certain financial covenants.
        Currently, the Company's interest on borrowings is equal to LIBOR plus
        110 basis points, and the facility fee is equal to 40 basis points.

        The Senior Credit Facility contains financial covenants which require
        the Company to, among other things, maintain a minimum consolidated net
        worth, fixed charge coverage and current funded indebtedness ratios, as
        well as limit the Company's maximum leverage ratios. The Senior Credit
        Facility was amended to eliminate the minimum allowed ratio of
        consolidated current assets to consolidated current liabilities plus
        consolidated total senior balance sheet debt for the third quarter of
        fiscal 2000. The Company is in compliance with all financial covenants
        contained in the Senior Credit Facility as amended.

        Interest on the senior subordinated notes is payable on May 1 and
        November 1 of each year, beginning November 1, 1999. The Company has the
        option of redeeming the notes at any time after May 1, 2003, in
        accordance with certain call provisions. The notes are unsecured
        obligations and are subordinated to the Senior Credit Facility. The
        notes are fully and unconditionally guaranteed by each of the Company's
        subsidiaries.



                                     Page 7
<PAGE>   8

Item 2.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED OCTOBER 30, 1999 VS. OCTOBER 31, 1998

        Net sales for the third quarter of fiscal 2000 increased 8.6%, or $27.4
million, to $347.1 million from $319.7 million in the prior year. Comparable
store sales increased $13.2 million or 4.7% for the third quarter compared to a
comparable store sales increase of 3.9% for the prior year third quarter. The
remaining sales increase was primarily attributable to a greater number of
superstores in operation. During the third quarter of fiscal 2000, we operated
35 superstores versus 22 superstores in the year ago period.

        Gross margin increased $17.3 million compared to the year earlier
period. As a percent of net sales, gross margin was 48.8%, an increase of 1.2
percentage points from the 47.6% gross margin rate in the same quarter a year
earlier. The margin rate improvement was driven primarily from improvements in
point of sale margin due to a less promotionally focused marketing campaign for
the quarter coupled with an improved margin in the House of Fabrics stores,
which were in the process of stock reduction a year ago.

        Selling, general and administrative expenses were 40.4% of net sales, an
increase of 0.5 percentage points from 39.9% for the same quarter of fiscal
1999, excluding non-recurring charges. This increase consisted primarily of an
increase in store payroll expenses required to handle the increased inventory
levels quarter over quarter. During the current year, we planned to build
seasonal inventory levels earlier during the fiscal year than in prior years to
smooth our freight flow. We have been successful at achieving a smoother flow of
product in the current year. The earlier in-stock position has had a positive
impact on sales and gross margin rate performance, but it has also necessitated
the incurrence of higher freight and handling costs, both at our distribution
center and our stores, earlier in the fiscal year than in prior years. This
accelerated flow plan has also resulted in higher inventory levels earlier in
the fiscal year and an increase in related interest carrying costs.

        Depreciation and amortization expense for the third quarter of fiscal
2000 increased $1.4 million to $8.2 million from $6.8 million for the same
period of fiscal 1999 due to higher capital expenditure levels in the current
and prior year.

        Interest expense increased $3.8 million to $7.6 million from $3.8
million in the third quarter of fiscal 1999 due primarily to higher average debt
levels resulting from higher inventory levels due to the earlier flow of
seasonal product in the current year. Average borrowings were $318.6 million for
the third quarter of fiscal 2000 versus $207.9 million in the third quarter of
fiscal 1999. In addition, approximately $1.0 million of the increase in interest
expense is attributable to a higher effective borrowing rate between years.

        Our effective income tax rate was 38.0% for the third quarter of fiscal
2000 compared to 39.0% for the third quarter of fiscal 1999 reflecting a lower
effective state tax rate and federal tax credits related to our participation in
various government hiring programs.

        Net income for the third quarter of fiscal 2000 was $8.3 million, or
$0.45 per diluted share compared to net income, excluding the after-tax effect
of the House of Fabrics non-recurring charge, of $8.5 million, or $0.43 per
diluted share for the same quarter a year earlier.

THIRTY-NINE WEEKS ENDED OCTOBER 30, 1999 VS. OCTOBER 31, 1998

        Net sales for the three quarters of fiscal 2000 increased 12.3%, or
$101.0 million, to $925.2 million from $824.2 million in the prior year.
Comparable store sales increased $31.6 million or 4.6% for the first three
quarters of fiscal 2000 compared to a comparable store sales increase of 2.2%
for the first three quarters of fiscal 1999. The remaining sales increase was
primarily attributable to a greater number of superstores in operation.


                                     Page 8
<PAGE>   9


        Gross margin increased $55.4 million compared to the year earlier
period. As a percent of net sales, gross margin was 47.3%, an increase of 0.9
percentage points from the 46.4% gross margin rate in the same prior year
period. The margin rate improvement resulted primarily from improvements in
point of sale margin. The improvement in point of sale margin is the result of
earlier sell-through on seasonal products, a less promotional stance in the
third quarter, and improved margin in the House of Fabrics stores, which were in
the process of stock reduction a year ago.

        Selling, general and administrative expenses were 41.9% of net sales, an
increase of 0.5 percentage points from 41.4% for the same period of fiscal 1999,
excluding non-recurring charges. This increase consisted primarily of increases
in store expenses, due to the inclusion of House of Fabrics stores for all of
fiscal 2000 compared to thirty-four weeks in fiscal 1999, coupled with higher
store payroll costs to handle increased product flow.

        Depreciation and amortization expense for the first three quarters of
fiscal 2000 increased $3.2 million to $23.5 million from $20.3 million for the
same period of fiscal 1999 due to higher capital expenditure levels in the
current and prior year.

        Interest expense for the first three quarters of fiscal 2000 increased
$10.6 million to $18.7 million from $8.1 million in the first three quarters of
fiscal 1999 due primarily to higher average debt levels associated with the
House of Fabrics acquisition and the related capital and working capital
expenditures, coupled with higher inventory levels due to the earlier flow of
seasonal product in the current year. Average borrowings were $267.5 million
for the first three quarters of fiscal 2000 versus $144.2 million in the first
three quarters of fiscal 1999. In addition, approximately $1.4 million of the
increase in interest expense is attributable to a higher effective borrowing
rate between years.

        Our effective income tax rate was 38.0% for the first three quarters of
fiscal 2000 compared to 39.0% for the first three quarters of fiscal 1999
reflecting a lower effective state tax rate and federal tax credits related to
our participation in various government hiring programs.

        Net income for the first three quarters of fiscal 2000 was $5.1 million,
or $0.27 per diluted share compared to net income, excluding the after-tax
effect of the House of Fabrics non-recurring charge, of $7.8 million, or $0.41
per diluted share for the same period a year earlier.

LIQUIDITY AND CAPITAL RESOURCES

         We used $60.4 million of cash for operating activities in the first
three quarters of fiscal 2000 compared to $77.7 million of cash used by
operating activities in the first three quarters of the prior year. Inventories,
net of payables support, increased $101.4 million in the first three quarters of
fiscal 2000 due to the normal seasonal build for the fourth quarter holiday
selling season, coupled with the addition of 11 more superstores since the
beginning of the fiscal year.

        Capital expenditures were $45.3 million for the first three quarters of
fiscal 2000, of which $27.2 million represented investment in new stores and
upgrades through relocation of our existing store base and $12.6 million
represented capitalizable systems technology related to the installation of an
enterprise-wide system. Fiscal 2000 capital expenditures are expected to be
between $60.0 and $70.0 million as compared to $75.1 million in the prior year
and include investments in stores, logistics and systems. We have no material
commitments in connection with these planned capital expenditures. Funds for
these expenditures are expected to be provided from cash generated internally
and borrowings under our Senior Credit Facility.

        During the first three quarters of fiscal 2000, we opened 11 superstores
(with 7 additional superstores opened since the end of the third quarter) and 10
traditional stores, relocated 15 traditional stores and closed 35 smaller or
underperforming traditional stores. We have no plans to open any other stores
for the balance of fiscal 2000.



                                     Page 9
<PAGE>   10

        We purchased approximately 1.4 million shares of our common stock during
the first three quarters of fiscal 2000 at an aggregate price of $18.7 million,
or $13.27 per share, which is less than our $13.92 book value per share at
October 30, 1999. As of October 30, 1999, we could purchase up to an additional
1.7 million shares under previous authorization from our board of directors.

        On May 5, 1999, we entered into the $300.0 million five-year Senior
Credit Facility that expires on April 30, 2004 and issued $150.0 million of 10
3/8% senior subordinated notes due May 1, 2007. The net proceeds from the senior
subordinated notes, coupled with borrowings under the Senior Credit Facility,
were used to refinance our former credit facility.

        We may borrow up to a maximum of $330.0 million under the Senior Credit
Facility by utilizing funds available under the Senior Credit Facility and other
lines of credit. Interest on borrowings under the Senior Credit Facility is
calculated at an applicable margin over the London Interbank Offered Rate
("LIBOR"). The applicable margin, as well as the facility fee on the commitment
amount, is based on the achievement of specified ranges of certain financial
covenants. Currently, our interest on borrowings is equal to LIBOR plus 110
basis points, and the facility fee is equal to 40 basis points. As of October
30, 1999, we had $179.4 million of debt outstanding under the Senior Credit
Facility, not including $60.5 million of letters of credit.

        The Senior Credit Facility contains financial covenants which require us
to, among other things, maintain a minimum consolidated net worth, fixed charge
coverage and current funded indebtedness ratios, as well as limit our maximum
leverage ratios. The Senior Credit Facility was amended to eliminate the minimum
allowed ratio of consolidated current assets to consolidated current liabilities
plus consolidated total senior balance sheet debt for the third quarter of
fiscal 2000. We are in compliance with all financial covenants contained in the
Senior Credit Facility as amended.

        Interest on the senior subordinated notes is payable on May 1 and
November 1 of each year, beginning November 1, 1999. We have the option of
redeeming the notes at any time after May 1, 2003, in accordance with certain
call provisions. The notes are unsecured obligations and are subordinated to the
Senior Credit Facility. The notes are fully and unconditionally guaranteed by
each of our subsidiaries.

        We believe that our Senior Credit Facility, coupled with cash on hand
and from operations, will be sufficient to cover our working capital, capital
expenditure and debt service requirement needs for the foreseeable future.

SEASONALITY AND INFLATION

        Our business exhibits seasonality that is typical for most retail
companies, with much stronger sales in the second half of the year than the
first half of the year. Net earnings are highest during the months of September
through December when sales volumes provide significant operating leverage.
Capital requirements needed to finance our operations fluctuate during the year
and reach their highest levels during the second and third fiscal quarters as we
increase our inventory in preparation for our peak selling season.

        We believe that inflation has not had a significant effect on the growth
of net sales or on net income for the past two years.

YEAR 2000

        The "Year 2000 issue" refers to the inability of computers and related
software to correctly interpret and process Year 2000 dated transactions. The
software problem results from a memory-saving practice of using two digits
instead of four to denote years in a program. Computer systems that are not Year
2000 compliant may not be able to be relied upon to process data accurately for
transactions dated after the year 1999.



                                    Page 10
<PAGE>   11

        We have developed and are executing plans to address possible exposures
related to the impact on our computer systems of the Year 2000 issue. Our
planned modification of our existing systems was complete as of January 30,
1999, and testing and certification of these completed modifications is in
process and was approximately 65% complete at the end of the third quarter. We
expect to be 100% completed with our testing and certification work prior to
January 2000. Expenditures for modifying existing software to address Year 2000
issues are estimated to total $4.0 million to $4.2 million, of which $3.4
million has been spent through the third quarter, $1.3 million during the
current year and $2.1 million in previous fiscal years. All expenditures are
being expensed as incurred. We expect that we will be able to test and certify
the affected systems that we have modified in time to avoid any material
disruption to operations; however, unforeseen developments or delays could cause
this expectation to change.

        We are also engaged in a significantly larger project of implementing an
enterprise-wide system that began in fiscal 1999 and will continue during the
next fiscal year at a total cost of approximately $30.0 million. The project is
expected to fully integrate financial and operations systems, creating increased
reliability and usefulness of our data. Our financial systems became operational
under this enterprise-wide system implementation in the fourth quarter of fiscal
1999 and we believe those systems are Year 2000 compliant. The merchandise
operating systems are expected to become operational in fiscal 2001 and the
human resource operating system is expected to become operational in fiscal
2002.

        Where needed, we have established contingency plans based on the
assessment of our areas of greatest risk. These plans address the accessibility
and functionality of our facilities, and focus on reducing any disruption that
might be created by any product suppliers or companies with whom we do business
being Year 2000 noncompliant.

        None of our suppliers in fiscal 1999 provided more than 2% of our
products. We have communicated with our largest suppliers to identify the nature
and potential impact of the Year 2000 issue on the business of such suppliers.
We are not presently aware of any product supplier-related issue presented by
the Year 2000 issue that is likely to have a material impact on us.

        We anticipate minimal business disruption will occur as a result of Year
2000 issues. However, possible consequences include, but are not limited to,
temporary disruption of our normal business operations, loss of communications
links with store locations, loss of electric power, inability to process
transactions, problems with ordering and receiving merchandise and problems with
banks and other financial institutions. We believe that our worst case scenario
involves the inability of electric utility companies to service our various
stores due to Year 2000 problems. If the electric utility companies cannot
provide power to a significant number of our stores, our business and operations
could be materially disrupted.

RECENT ACCOUNTING PRONOUNCEMENTS

        In June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related Information," was
issued. Our traditional stores and superstores are considered one business
segment as they generally serve the same customer and have the same type of
merchandise and services offered.


                                    Page 11
<PAGE>   12

FORWARD-LOOKING STATEMENTS

        Certain statements contained in this report that are not historical
facts are forward-looking statements that are subject to certain risks and
uncertainties. When used herein, the terms "anticipates," "plans," "estimates,"
"expects," "believes," and similar expressions as they relate to us are intended
to identify such forward-looking statements. Our actual results, performance or
achievements may materially differ from those expressed or implied in the
forward-looking statements. Risks and uncertainties that could cause or
contribute to such material differences include, but are not limited to, general
economic conditions, changes in customer demand, changes in trends in the fabric
and craft industry, seasonality, our failure to manage our growth, loss of key
management, the availability of merchandise, changes in the competitive pricing
for products, the impact of competitor store openings and closings, and the
ability to address internal and external Year 2000 issues.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Not Applicable.



                                    Page 12
<PAGE>   13

                            PART II OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

          Not Applicable.

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

          Not Applicable.

Item 3.  DEFAULTS UPON SENIOR SECURITIES

          Not Applicable.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          Not Applicable.

Item 5.  OTHER INFORMATION

         On December 2, 1999, the Company issued a press release on its
         anticipated earnings for the fourth quarter of fiscal year 2000. A copy
         of the Company's press release is attached as Exhibit 99.1 of this
         report.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

          a)    EXHIBITS

                See the Exhibit Index on Page 15 of this report.

          b)    REPORTS ON FORM 8-K

                No reports on Form 8-K were filed during the 13-week period
                ended October 30, 1999.



                                    Page 13
<PAGE>   14


                                   SIGNATURES


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




                                            JO-ANN STORES, INC.


DATE:  December 14, 1999                    /s/ Alan Rosskamm
                                            ------------------------------------
                                            By:   Alan Rosskamm
                                                  Chairman, President and Chief
                                                  Executive Officer


                                            /s/ Brian P. Carney
                                            ------------------------------------
                                            By:   Brian P. Carney
                                                  Executive Vice President and
                                                  Chief Financial Officer



                                    Page 14
<PAGE>   15


JO-ANN STORES, INC.

                 FORM 10-Q FOR THE THIRTEEN AND THIRTY-NINE WEEK
                         PERIODS ENDED OCTOBER 30, 1999

                                  EXHIBIT INDEX



                                                                   SEQUENTIAL
EXHIBIT NO.                    DESCRIPTION                           PAGE NO.
--------------    -----------------------------------------      --------------

 10.1             Amendment No. 1 to Senior credit Facility              16
 27               Financial Data Schedule
 99.1             December 2, 1999 press release                         21


                                    Page 15