<PAGE>

-------------------------------------------------------------------------------
                                       
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1998

                                       OR

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

           FOR THE TRANSITION PERIOD FROM ___________ TO ___________

                         COMMISSION FILE NUMBER 1-11566

                                  COMPUSA INC.
             (Exact name of registrant as specified in its charter)

                  DELAWARE                               75-2261497
        (State or other jurisdiction of                (I.R.S. Employer
         incorporation or organization)               Identification No.)

                 14951 NORTH DALLAS PARKWAY, DALLAS, TEXAS 75240
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 982-4000

         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  / /

         The registrant had 93,893,059 shares of common stock, $.01 per share 
par value, outstanding as of November 5, 1998.

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

<PAGE>

                                       
                        PART I - FINANCIAL INFORMATION

<TABLE>
<S>                                                                                                              <C>
ITEM 1.  FINANCIAL STATEMENTS

         Consolidated Balance Sheets at September 26, 1998 (unaudited)
                  and June 27, 1998...............................................................................3

         Consolidated Income Statements for the thirteen weeks
                  ended September 26, 1998 and September 27, 1997 (unaudited).....................................4

         Consolidated Statements of Cash Flows for the thirteen weeks
                  ended September 26, 1998 and September 27, 1997 (unaudited).....................................5

         Notes to Consolidated Financial Statements (unaudited)...................................................6

     Separate financial statements relating to the Company's subsidiaries are omitted since all of them are wholly owned and have 
each guaranteed the Company's 9 1/2% Senior Subordinated Notes due 2000 on a full, unconditional, and joint and several basis and 
the Company does not consider such separate financial statements to be material to investors.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS...............................................................................12


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.......................................................................................21

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K........................................................................21

         SIGNATURES..............................................................................................22

EXHIBITS.........................................................................................................23
</TABLE>




                                       2
<PAGE>

                                  COMPUSA INC.

                           CONSOLIDATED BALANCE SHEETS
                          (IN THOUSANDS, EXCEPT SHARES)

<TABLE>
<CAPTION>
                                                                             SEPTEMBER 26,     JUNE 27,    
                                                                                 1998           1998       
                                                                             ------------   -------------  
                                                                              (UNAUDITED)
<S>                                                                          <C>            <C>
                                   ASSETS

Current assets:
  Cash and cash equivalents................................................  $    151,129    $    151,779  
  Accounts receivable, net of allowance for doubtful accounts of $5,492
    and $3,524 at September 26, 1998 and June 27, 1998, respectively.......       259,540         214,084  
  Merchandise inventories..................................................       776,992         520,762  
  Deferred income taxes - current..........................................         8,459           9,762  
  Prepaid expenses and other...............................................        63,578          26,480  
                                                                             ------------   -------------  
      Total current assets.................................................     1,259,698         922,867  
Property and equipment, net................................................       229,279         210,528  
Deferred income taxes......................................................        13,172          18,076  
Costs in excess of net assets of acquired businesses.......................        92,967           3,069  
Other assets...............................................................         5,424           5,970  
                                                                             ------------   -------------  
                                                                             $  1,600,540    $  1,160,510  
                                                                             ------------   -------------  
                                                                             ------------   -------------  
                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable.........................................................  $    755,687   $     534,620  
  Accrued liabilities......................................................       173,415          98,714  
  Current portion of capital lease obligations.............................           547             666  
                                                                             ------------   -------------  
      Total current liabilities............................................       929,649         634,000  
Capital lease obligations..................................................         1,729           1,872  
Senior Subordinated Notes..................................................       110,000         110,000  
Note payable to Tandy Corporation..........................................       136,000              --  
Commitments and contingencies..............................................            --              --  
Stockholders' equity:
  Preferred stock, $.01 per share par value, 10,000 shares authorized,
    none issued............................................................            --              --  
  Common stock, $.01 per share par value; 325,000,000 shares authorized
    with 93,898,014 and 93,372,545 shares issued at September 26, 1998 and
    June 27, 1998, respectively............................................           939             934  
  Paid-in capital..........................................................       278,379         278,000  
  Retained earnings........................................................       206,185         198,045  
                                                                             ------------   -------------  
                                                                                  485,503         476,979  
  Less: Treasury stock, at cost, 2,507,227 shares at September 26, 1998
    and June 27, 1998......................................................       (62,341)        (62,341) 
                                                                             ------------   -------------  
      Total stockholders' equity............................................      423,162         414,638  
                                                                             ------------   -------------  
                                                                             $  1,600,540   $   1,160,510  
                                                                             ------------   -------------  
                                                                             ------------   -------------  
</TABLE>


                                See accompanying notes.


                                            3
<PAGE>

                                  COMPUSA INC.

                         CONSOLIDATED INCOME STATEMENTS

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          THIRTEEN WEEKS ENDED
                                                     ----------------------------- 
                                                     SEPTEMBER 26,   SEPTEMBER 27, 
                                                         1998            1997      
                                                     ------------    ------------  
<S>                                                  <C>             <C>
Net sales........................................... $  1,392,140    $  1,191,812  
Cost of sales and occupancy costs...................    1,195,786       1,016,213  
                                                     ------------    ------------  
   Gross profit.....................................      196,354         175,599  

Operating expenses..................................      146,300         109,249  
Pre-opening expenses................................        1,366           1,452  
General and administrative expenses.................       32,637          25,615  
                                                     ------------    ------------  

   Operating income.................................       16,051          39,283  

Other expense (income):
   Interest expense.................................        4,383           3,055  
   Other expense (income), net......................       (1,540)         (1,918) 
                                                     ------------    ------------  
                                                            2,843           1,137  
                                                     ------------    ------------  
Income before income taxes..........................       13,208          38,146  
Income tax expense..................................        5,068          14,687  
                                                     ------------    ------------  
Net income.......................................... $      8,140    $     23,459  
                                                     ------------    ------------  
                                                     ------------    ------------  

Basic earnings per share............................ $       0.09    $       0.26  
Diluted earnings per share.......................... $       0.09    $       0.25  

Weighted average common shares......................       91,243          91,659  
Weighted average common shares assuming dilution....       93,041          95,514  
</TABLE>







                                See accompanying notes.


                                            4
<PAGE>

                                  COMPUSA INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                THIRTEEN WEEKS ENDED       
                                                                            -----------------------------  
                                                                            SEPTEMBER 26,   SEPTEMBER 27,  
                                                                               1998             1997
                                                                            -------------   -------------   
<S>                                                                         <C>             <C>
Cash flows provided by operating activities:
  Net income............................................................... $      8,140    $     23,459   
    Adjustments to reconcile net income to net cash provided by operating
      activities:
      Depreciation and amortization........................................       15,435          10,706   
      Deferred income taxes................................................        6,207          (1,453)  
      Other non-cash charges...............................................        2,410              --   
    Changes in assets and liabilities:
      Decrease (increase) in:
        Accounts receivable................................................        2,859          (4,054)  
        Merchandise inventories............................................      (81,407)       (129,853)  
        Prepaid expenses and other assets..................................        6,498          (3,014)  
      Increase in accounts payable and accrued liabilities.................      124,459         209,739   
                                                                            ------------    ------------   
          Total adjustments................................................       76,461          82,071   
                                                                            ------------    ------------   
          Net cash provided by operating activities........................       84,601         105,530   

Cash provided by (used in) investing activities:
  Capital expenditures.....................................................      (12,713)        (21,155)  
  Payment for purchase of Computer City, net of cash acquired..............      (73,341)             --   
  Other....................................................................        1,152              14   
                                                                            ------------    ------------   
          Net cash used in investing activities............................      (84,902)        (21,141)  

Cash flows (used in) provided by financing activities:
  Proceeds from issuance of common stock...................................          384           1,255   
  Payments under capital lease obligations.................................         (733)           (679)  
                                                                            ------------    ------------   
          Net cash (used in) provided by financing activities..............         (349)            576   

Net (decrease) increase in cash and cash equivalents.......................         (650)         84,965  
Cash and cash equivalents at beginning of period...........................      151,779         209,929  
                                                                            ------------    ------------   

Cash and cash equivalents at end of period................................. $    151,129    $    294,894  
                                                                            ------------    ------------   
                                                                            ------------    ------------   
</TABLE>


                                See accompanying notes.


                                            5
<PAGE>

                                  COMPUSA INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       BASIS OF PRESENTATION

         The consolidated financial statements include the accounts of 
CompUSA Inc. and its wholly owned subsidiaries (collectively, the "Company"). 
All significant intercompany accounts and transactions have been eliminated. 
In the opinion of management, the accompanying unaudited consolidated 
financial statements contain all adjustments, consisting only of normal 
recurring adjustments, necessary to present fairly the financial position, 
results of operations, and cash flows of the Company for the applicable 
interim periods. The results of operations for these periods are not 
necessarily comparable to, or indicative of, results of any other interim 
period or for the fiscal year as a whole.

         The accompanying unaudited condensed consolidated financial 
statements have been prepared in accordance with generally accepted 
accounting principles for interim financial information and with the 
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they 
do not include all of the information and footnotes required by generally 
accepted accounting principles for complete interim financial statements. 
Therefore, these financial statements should be read in conjunction with the 
Company's Annual Report on Form 10-K for the fiscal year ended June 27, 1998.

         The preparation of consolidated financial statements in conformity 
with generally accepted accounting principles requires management to make 
certain estimates and assumptions. These estimates and assumptions affect the 
reported amounts of assets, liabilities, revenues, and expenses and the 
disclosure of gain and loss contingencies at the date of the consolidated 
financial statements. Actual results could differ from those estimates.

2.       ACQUISITION OF COMPUTER CITY

         On August 31, 1998, the Company completed its acquisition of 
Computer City, Inc. ("Computer City") from Tandy Corporation ("Tandy"), for 
an initial purchase price of $211 million, payable in a note and cash. The 
purchase price is subject to certain post-closing adjustments based on the 
completion of an audit of Computer City's balance sheet as of the closing 
date. Based upon the preliminary balance sheet of Computer City as of the 
closing date, the Company has recorded a receivable of approximately $39 
million from Tandy for the excess of the consideration paid at closing over 
the purchase price due in accordance with the provisions of the purchase 
agreement, resulting in a revised purchase price of approximately $172 
million. Such receivable is included in prepaid expenses and other in the 
accompanying balance sheet.

         In connection with the acquisition of Computer City, the Company 
issued a $136 million subordinated promissory note payable to Tandy (the 
"Seller Note"). The Seller Note bears interest at a rate of 9.48% per annum 
and provides for its repayment in semi-annual installments over a period of 
ten years. The first three years of payments are interest only, with the 
first principal payment due in December 2001. The Seller Note ranks pari 
passu with the Company's 9 1/2% Senior Subordinated Notes due 2000 ("Senior 
Subordinated Notes"). The unpaid principal amount of the Seller Note may be 
prepaid, in whole or in part, at any time at the option of the Company, 
without premium or penalty.

         Effective November 1, 1998, the Company sold the seven Canadian 
Computer City supercenters acquired by the Company to Future Shop Ltd. for 
approximately $12 million in cash and the assumption of certain liabilities.

                                       6
<PAGE>

                                  COMPUSA INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

2.       ACQUISITION OF COMPUTER CITY (CONTINUED)

         The purchase of Computer City has been accounted for under the 
purchase method of accounting. Accordingly, the purchase price paid has been 
preliminarily allocated to the acquired assets and liabilities based on 
estimated fair values as of the acquisition date. The excess of the purchase 
price paid over the estimated fair values of the acquired assets and 
liabilities of approximately $90 million is being amortized over 20 years on 
a straight-line basis. The Company will assess the recoverability of costs in 
excess of net assets acquired annually based on existing facts and 
circumstances and projected earnings before interest, depreciation, and 
amortization, on an undiscounted basis. Should the Company's assessment 
indicate an impairment of this asset in the future, an appropriate write-down 
will be recorded.

         The accompanying income statement for the thirteen weeks ended 
September 26, 1998 includes the results of operations from the acquisition 
date for the 37 Computer City stores in the United States (excluding two 
"small market" stores) that the Company will continue to operate and convert 
to CompUSA Computer Superstores(SM). The results of liquidating the 55 Computer
City stores in the United States closed by the Company and the seven Computer 
City supercenters in Canada sold by the Company, are not included in the 
accompanying income statement but rather represent adjustments to the value 
of the related assets acquired and liabilities assumed. The following 
proforma combined net sales, net income, and diluted earnings per share data 
summarize the results of operations for the first quarter of fiscal 1999 and 
1998 as if Computer City had been acquired as of the beginning of fiscal 
1998. The proforma results given below are not necessarily indicative of what 
actually would have occurred if the acquisition had been in effect during the 
periods presented, and are not intended to be a projection of future results 
or trends.

<TABLE>
<CAPTION>
                                                        THIRTEEN WEEKS ENDED
                                                  -------------------------------  
                                                  SEPTEMBER 26,     SEPTEMBER 27,  
                                                      1998               1997      
                                                  ------------      ------------   
<S>                                               <C>               <C>
                                                           (IN THOUSANDS,
                                                       EXCEPT PER SHARE DATA)

Net sales........................................ $  1,515,407      $  1,373,098  
Net income (loss)................................      (12,711)           13,817
Diluted earnings (loss) per share................        (0.14)             0.14  
</TABLE>


3.       EQUITY

         The Company adopted the provisions of the Statement of Financial 
Accounting Standards ("SFAS") No. 128, "Earnings per Share," in the 
preparation of the financial statements included in the Quarterly Report on 
Form 10-Q for the thirteen weeks December 27, 1997. In accordance with the 
provisions of SFAS No. 128, the Company is required to report both "basic" 
and "diluted" earnings per share and to restate previously reported earnings 
per share amounts to conform to the provisions of SFAS No. 128. Basic 
earnings per share has been computed using the weighted average number of 
shares of common stock of the Company ("Common Stock") outstanding for each 
period presented. The dilutive effect of stock options and other common stock 
equivalents is included in the calculation of diluted earnings per share 
using the treasury stock method. Earnings per share data for the first 
quarter of fiscal 1998 presented herein has been restated to conform with the 
provisions of SFAS No. 128.

                                       7
<PAGE>

                                  COMPUSA INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

3.       EQUITY (CONTINUED)

         The calculation of basic and diluted earnings per share is 
summarized as follows:

<TABLE>
<CAPTION>
                                                                  THIRTEEN WEEKS ENDED
                                                             ----------------------------- 
                                                             SEPTEMBER 26,   SEPTEMBER 27,
                                                                 1998            1997
                                                             -------------   -------------  
                                                                    (IN THOUSANDS,
                                                                EXCEPT PER SHARE DATA)
<S>                                                          <C>             <C>
BASIC EARNINGS PER SHARE:

Net income.................................................. $      8,140    $     23,459  

Weighted average common shares outstanding..................       91,243          91,659  
                                                             ------------    ------------  

Basic earnings per share.................................... $       0.09    $       0.26  
                                                             ------------    ------------  
                                                             ------------    ------------  

DILUTED EARNINGS PER SHARE:

Net income.................................................. $      8,140    $     23,459  

Weighted average common shares outstanding..................       91,243          91,659  
Incremental shares assuming dilution........................        1,798           3,855  
                                                             ------------    ------------  
Weighted average common shares assuming dilution............       93,041          95,514  
                                                             ------------    ------------  

Diluted earnings per share.................................. $       0.09    $       0.25  
                                                             ------------    ------------  
                                                             ------------    ------------  
</TABLE>

         In September 1997, the Company's Board of Directors authorized the 
purchase of up to $60 million of Common Stock. As of September 26, 1998, the 
Company had purchased 2.2 million shares of Common Stock, to be held as 
treasury stock, for approximately $60 million (approximately $27.34 per 
share), pursuant to the September 1997 authorization and, as a result, no 
additional treasury stock purchases can currently be made by the Company.

4.       COMMITMENTS AND CONTINGENCIES

         On August 23, 1998, a lawsuit, Hoeck v. CompUSA Inc. et al., was 
filed by a stockholder of the Company in the United States District Court for 
the Northern District of Texas against the Company and certain of its 
officers, seeking class action status on behalf of the purchasers of the 
Company's Common Stock and related publicly traded options during the class 
period. The action alleges various violations of federal securities laws. 
Damages have not been specified. On June 24, 1998, a second stockholder suit 
was filed against the Company making virtually the same allegations. On 
August 24, 1998, a consolidated amended complaint was filed in the Hoeck case 
effectively consolidating the two cases. On September 25, 1998, the Company 
filed a motion to dismiss the consolidated complaint and such motion is 
currently pending. The Company believes the claims are without merit and 
intends to vigorously defend against such charges.

                                       8
<PAGE>

                                  COMPUSA INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

4.       COMMITMENTS AND CONTINGENCIES (CONTINUED)

         The Company is a defendant from time to time in lawsuits incidental 
to its business. Based on currently available information, the Company 
believes that resolution of all known contingencies would not have a material 
adverse impact on the Company's financial statements. However, there can be 
no assurances that future costs would not be material to results of 
operations of the Company for a particular future period. In addition, the 
Company's estimates of future costs are subject to change as circumstances 
change and additional information becomes available during the course of 
litigation.

5.       SUBSIDIARY GUARANTEES

         The Senior Subordinated Notes are guaranteed on a full, 
unconditional, and joint and several basis by all of the Company's direct and 
indirect subsidiaries, each of which is wholly owned. The combined summarized 
information of these subsidiaries is as follows:

<TABLE>
<CAPTION>
                                                       AS OF AND FOR THE
                                                    THIRTEEN WEEKS ENDED
                                                -----------------------------  
                                                SEPTEMBER 26,   SEPTEMBER 27,  
                                                    1998            1997
                                                -------------   -------------  
                                                       (IN THOUSANDS)
<S>                                             <C>             <C>
Intercompany receivables....................... $     56,790    $         12  
Other current assets...........................      663,697         449,229  
Noncurrent assets..............................      120,459         156,454  
Intercompany payables..........................      160,586          58,052  
Other current liabilities......................      254,556         189,720  
Long-term debt and liabilities.................        1,273           2,161  
Net sales......................................      942,405         822,357  
Intercompany revenues..........................       56,218          46,417  
Costs and expenses.............................      937,228         796,760  
Intercompany expenses..........................       38,089          30,925  
Net income.....................................       14,333          25,270  
</TABLE>

         In the preparation of the Company's consolidated financial 
statements, all intercompany accounts were eliminated. There are no 
restrictions that limit the ability of the Company's subsidiaries to declare 
and pay dividends to the Company.


                                       9
<PAGE>
                                       
                                  COMPUSA INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

6.       SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                      THIRTEEN WEEKS ENDED
                                                                              --------------------------------------
                                                                                SEPTEMBER 26,      SEPTEMBER 27,
                                                                                    1998                1997
                                                                              ------------------ -------------------
                                                                                         (IN THOUSANDS)
<S>                                                                           <C>                <C>
Cash paid (received) during the periods for:
   Interest.................................................................    $        253        $        152
   Income taxes.............................................................          (7,662)              1,597

Investing activities not affecting cash are as follows:
   Additions to property and equipment under capital leases.................    $        471        $         95
</TABLE>

7.       NEW ACCOUNTING PRONOUNCEMENTS

         The American Institute of Certified Public Accountant's (the 
"AICPA") Accounting Standards Executive Committee has issued Statement of 
Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." This 
SOP is effective for financial statements for fiscal years beginning after 
December 15, 1998. The SOP requires that entities expense start-up costs and 
organization costs as they are incurred. The provisions of SOP 98-5 were 
adopted by the Company in the preparation of the financial statements 
included in this Quarterly Report on Form 10-Q for the thirteen weeks ended 
September 26, 1998. The adoption of the provisions of SOP 98-5 had no 
material impact on the Company's financial statements.

         The AICPA has issued SOP 98-1, "Accounting for Costs of Computer 
Software Developed or Obtained for Internal Use," which is effective for 
fiscal years beginning after December 15, 1998. The Company's current policy 
falls within the guidelines of SOP 98-1.

         In June 1997, the Financial Accounting Standards Board ("FASB") 
issued SFAS No. 130, "Reporting Comprehensive Income," which establishes 
standards for reporting and displaying comprehensive income and its 
components in a full set of general-purpose financial statements. SFAS No. 
130 requires enterprises to report comprehensive income to measure more 
effectively all changes in equity of an enterprise that result from certain 
recognized transactions and other economic events other than income earned 
from the ordinary course of business. SFAS No. 130 is effective for financial 
statements for fiscal years beginning after December 15, 1997. The provisions 
of SFAS No. 130 were adopted by the Company in the preparation of the 
financial statements included in this Quarterly Report on Form 10-Q for the 
thirteen weeks ended September 26, 1998. The adoption of the provisions of 
SFAS No. 130 had no material impact on the Company's financial statements.

                                       10
<PAGE>

                                  COMPUSA INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

         In June 1997, the FASB issued SFAS No. 131, "Disclosures about 
Segments of an Enterprise and Related Information," which establishes 
standards requiring public business enterprises to report information about 
operating segments in annual financial statements and requires that those 
enterprises report selected information about operating segments in interim 
financial reports. SFAS No. 131 also establishes standards for related 
disclosures about products and services, geographic areas, and major 
customers. SFAS No. 131 is effective for financial statements for fiscal 
years beginning after December 15, 1997, and therefore the Company will adopt 
the annual disclosure requirements in the preparation of its Annual Report on 
Form 10-K for the fiscal year ending June 26, 1999, while the quarterly 
disclosure requirements will be adopted in fiscal year 2000. Management has 
not determined the impact of SFAS No. 131 on the Company's financial 
statement disclosures.

8.       CREDIT AGREEMENT

         The Company has an unsecured $300 million credit agreement (the 
"Credit Agreement") with a consortium of banks that expires in March 2001. 
The funds available under the Credit Agreement may be used for any corporate 
purpose, including purchasing or redeeming the Senior Subordinated Notes in 
part or in full. The Credit Agreement requires that the Company maintain 
certain financial ratios and a minimum net worth. The Credit Agreement 
imposes certain limitations on indebtedness, liens, and mergers and 
consolidations.

         The Company's ability to incur borrowings under the Credit Agreement 
is reduced by outstanding letters of credit and, in certain circumstances, 
further reduced based upon financial covenants contained in the Credit 
Agreement. The Company's ability to incur borrowings under the Credit 
Agreement could be further limited in certain circumstances pursuant to the 
terms of the Senior Subordinated Notes indenture.

         Concurrent with the Company's acquisition of Computer City, the 
Credit Agreement was amended with respect to certain of the financial ratios 
required to be maintained by the Company and the calculation of amounts 
available for future borrowings. As of September 26, 1998, after giving 
effect to the issuance of the Seller Note and the revisions to the Credit 
Agreement, the Company had $242 million available for future borrowings under 
the Credit Agreement, after taking into account the limitations in the Senior 
Subordinated Notes indenture.

         Borrowings under the Credit Agreement bear interest, at the 
Company's option, at either a prime rate (8.5% per annum as of September 26, 
1998) or a rate based on the London Interbank Offering Rate (LIBOR) of 5.3% 
as of September 26, 1998, plus a specified margin, currently 1.25%. The 
Company also pays certain commitment and agent fees. The Company has the 
annual option to extend the Credit Agreement for an additional year with the 
banks' approval.

         The Credit Agreement also limits the Company's ability to pay 
dividends and purchase shares of Common Stock. As of September 26, 1998, the 
Company had approximately $58.1 million available to pay dividends and 
purchase Common Stock pursuant to the provisions of the Credit Agreement. The 
Credit Agreement allows the Company to securitize up to $200 million of 
certain assets. The indebtedness under the Credit Agreement is guaranteed on 
a full, unconditional, and joint and several basis by all the subsidiaries of 
the Company. However, the Credit Agreement allows the Company to designate 
one or more of its subsidiaries to be free from most of the restrictions 
under the Credit Agreement so long as no default will exist and such 
subsidiaries do not contribute more than 10% of the Company's consolidated 
cash flow or hold more than 10% of the Company's consolidated assets.


                                       11
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE 
RESULTS

         This Quarterly Report on Form 10-Q contains forward-looking 
statements about the business, financial condition, and prospects of the 
Company, and Year 2000 issues. The actual results of the Company could differ 
materially from those indicated by the forward-looking statements because of 
various risks and uncertainties, including without limitation changes in 
product demand, the availability of products, changes in competition, the 
ability of the Company to open new stores in accordance with its plans, 
economic conditions, real estate market fluctuations, interest rate 
fluctuations, dependence on manufacturers' product development, various 
inventory risks due to changes in market conditions, changes in tax and other 
governmental rules and regulations applicable to the Company, and other risks 
indicated herein and in the Company's filings with the Securities and 
Exchange Commission. The Company's entry into the build-to-order market in 
the first quarter of fiscal 1998 with its CompUSA PC(TM) brand personal 
computers involves significant additional risks, including without limitation 
failure to achieve customer acceptance of the new products and substantial 
dependence on third parties for product quality and reliability and timely 
fulfillment of customer orders. Additionally, the Company's recent 
acquisition of Computer City involves certain risks and uncertainties, 
including without limitation the ability of the Company to operate the 
acquired stores profitably, to dispose of inventories and other assets, as 
well as future lease commitments, related to Computer City stores closed, and 
to retain Computer City's retail and corporate customers.

         All of the foregoing risks and uncertainties are beyond the ability 
of the Company to control, and in many cases, the Company cannot predict the 
risks and uncertainties that could cause its actual results to differ 
materially from those indicated by the forward-looking statements. When used 
in this Quarterly Report on Form 10-Q, the words "believes," "estimates," 
"plans," "expects," "anticipates," and similar expressions as they relate to 
the Company or its management are intended to identify forward-looking 
statements.

ACQUISITION OF COMPUTER CITY

         On August 31, 1998, the Company completed its acquisition of 
Computer City from Tandy for approximately $172 million. See "--Liquidity and 
Capital Resources." The purchase price is subject to certain post-closing 
adjustments based on the completion of an audit of Computer City's balance 
sheet as of the closing date. The acquisition was accounted for under the 
purchase accounting method.

         The Company has identified 37 Computer City stores in the United 
States (excluding two "small market" stores) that the Company intends to 
continue to operate and convert to CompUSA Computer Superstores(SM). Such 
conversion activities include conversion to CompUSA information systems as 
well as the reconfiguration of such stores to the CompUSA format. The 
conversion to the CompUSA information systems was completed in these stores 
in October 1998. The Company has initiated certain reconfiguration activities 
and expects such activities to be completed over a period of time in fiscal 
year 1999 and fiscal year 2000. The Company identified 55 Computer City 
stores in the United States for closure. Inventory liquidation sales were 
conducted at the majority of such stores through mid-October, at which time 
the stores were closed and the remaining merchandise inventories were 
transferred to other CompUSA Computer Superstores, including former 
Computer City stores, for final liquidation. Effective November 1, 1998, the 
Company sold the seven Canadian Computer City supercenters acquired by the 
Company to Future Shop Ltd. for approximately $12 million in cash and the 
assumption of certain liabilities.

                                       12
<PAGE>

         The 55 Computer City stores that the Company closed were generally 
in closer proximity to, and therefore the Company believes would have been 
more directly competitive with, existing CompUSA Computer Superstores than 
the 37 Computer City stores in the United States that have remained open as 
CompUSA Computer Superstores. Of the 37 stores acquired from Computer City 
that have remained open, 29 are located in metropolitan areas in which there 
are existing CompUSA Computer Superstores. The Company believes its decision 
to continue to operate these 29 stores is consistent with its strategy of 
opening additional Computer Superstores in existing markets to increase 
market penetration and to provide customers with more convenience and better 
service. However, the continued operation of these 29 stores may cause the 
rate of comparable store sales growth for the CompUSA Computer Superstores 
already in operation in such metropolitan areas to be lower than it would 
have been if these 29 Computer City stores had been closed.

GENERAL

         All references herein to "fiscal 1999" relate to the fifty-two weeks 
ending June 26, 1999, and references to "fiscal 1998" relate to the fifty-two 
weeks ended June 27, 1998. In addition, all references herein to "first 
quarter of fiscal 1999" relate to the thirteen weeks ended September 26, 
1998, and all references to "first quarter of fiscal 1998" relate to the 
thirteen weeks ended September 27, 1997.

         The following table sets forth certain operating data for the 
Company:

<TABLE>
<CAPTION>
                                                                                      THIRTEEN WEEKS ENDED
                                                                              --------------------------------------
                                                                                SEPTEMBER 26,      SEPTEMBER 27,
                                                                                    1998                1997
                                                                              ------------------ -------------------
<S>                                                                           <C>                <C>
Stores open at end of period................................................             203                 134
Acquired Computer City stores (1)...........................................              37                  --
Stores opened during the period.............................................               4                   5
Stores relocated during the period..........................................               2                   1
Average net sales per gross square foot (2).................................    $        281        $        317
Comparable store sales (decrease) increase (3)..............................           (1.7%)               6.1%
</TABLE>

--------------------------------------------------
(1)  As of August 31, 1998, the Company acquired 37 Computer City stores that
     the Company intends to continue to operate as CompUSA Computer Superstores.
(2)  Calculated using net sales divided by gross square footage of Computer
     Superstores open at the end of the period, including the 37 acquired
     Computer City stores, weighted by the number of months open during the
     period. For purposes of calculating average net sales per gross square
     foot, net sales are comprised of net sales generated from the Company's
     Computer Superstores, including the 37 acquired Computer City stores, as
     well as the Company's national accounts group, but exclude mail order
     sales.
(3)  Comparable store sales are net sales for the Computer Superstores open the
     same number of months in both the indicated and previous period, including
     stores that were relocated or expanded during either period. For purposes
     of calculating the change in comparable store sales, net sales are
     comprised of net sales generated from the Company's Computer Superstores,
     as well as the Company's national accounts group, but exclude mail order
     sales. The sales of the 37 acquired Computer City stores are not included
     in the calculation of the change in comparable store sales for the first
     quarter of fiscal 1999.

                                       13
<PAGE>

         Comparable store sales decreased in the first quarter of fiscal 1999 
compared with the first quarter of fiscal 1998. The Company believes the 
decrease in comparable store sales was impacted by declines in average 
selling prices of certain of the Company's products, increased sales of 
lower-end computer systems, and lower corporate sales as well as by a 
reduction of sales in its Computer Superstores in September as a result of 
the inventory liquidation sales conducted at the Computer City stores closed 
by the Company. In addition, the Company believes the opening of additional 
Computer Superstores in existing markets, as well as the acquisition of 29 
Computer City stores in existing markets, has resulted in some reductions in 
the rate of comparable store sales growth. CompUSA has historically opened 
additional stores in existing markets largely to increase market penetration 
and to provide customers with more convenience and better service. The 
Company plans to continue its strategy of opening additional Computer 
Superstores in existing markets. Management believes the resulting diversion 
of sales from existing stores has adversely affected the Company's comparable 
store sales. However, the Company believes that this strategy should increase 
its awareness with local consumers, enhance its competitive position in such 
markets, and create efficiencies in advertising and management, and therefore 
is in the Company's long-term best interest.

RESULTS OF OPERATIONS

         As a result of the expansion of the Company's store base, 
period-to-period comparisons of financial results may not be meaningful and 
the results of operations for historical periods may not be indicative of the 
results to be expected in future periods. In addition, the Company expects 
that its quarterly results of operations will fluctuate depending on the 
timing of the opening of, and the amount of net sales contributed by, new 
stores and the timing of costs associated with the selection, leasing, 
construction, and opening of new stores, as well as seasonal factors, product 
introductions, and changes in product mix. See "--Quarterly Data and 
Seasonality."

         The results of operations of the Company for the first quarter of 
fiscal 1999 include the results of operations of the 37 acquired Computer 
City stores that the Company intends to continue to operate and convert to 
CompUSA Computer Superstores. The results of operations for the first quarter 
of fiscal 1999 exclude the operating results of the 55 Computer City stores 
in the United States closed by the Company and the seven Canadian Computer 
City supercenters sold by the Company.

         The following table sets forth certain items expressed as a 
percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
                                                        THIRTEEN WEEKS ENDED
                                                --------------------------------------
                                                  SEPTEMBER 26,      SEPTEMBER 27,
                                                      1998                1997
                                                ------------------ -------------------
<S>                                             <C>                <C>
Net sales.....................................           100.0%              100.0%
Cost of sales and occupancy costs.............            85.9                85.3
                                                ------------------ -------------------
Gross profit..................................            14.1                14.7
Operating expenses............................            10.5                 9.2
Pre-opening expenses..........................             0.1                 0.1
General and administrative expenses...........             2.3                 2.1
                                                ------------------ -------------------
Operating income..............................             1.2                 3.3
Interest expense and other income, net........             0.3                 0.1
                                                ------------------ -------------------
Income before income taxes....................             0.9                 3.2
Income tax expense............................             0.3                 1.2
                                                ------------------ -------------------
Net income....................................             0.6%                2.0%
                                                ------------------ -------------------
                                                ------------------ -------------------
</TABLE>


                                       14
<PAGE>

FIRST QUARTER ENDED SEPTEMBER 26, 1998, COMPARED WITH THE FIRST QUARTER ENDED 
SEPTEMBER 27, 1997

         Net sales for the first quarter of fiscal 1999 increased 16.8% to 
$1.39 billion from $1.19 billion for the first quarter of fiscal 1998. The 
increase in net sales was primarily due to the additional sales volume 
attributable to the new stores opened subsequent to the first quarter of 
fiscal 1998 and the sales generated by the former Computer City stores 
subsequent to their acquisition. However, comparable store sales by the 
CompUSA Computer Superstores decreased 1.7% from the first quarter of fiscal 
1998. Despite an increase in overall sales and the number of personal 
computer systems sold in the first quarter of fiscal 1999, sales were 
negatively impacted by, among other things, declines in average selling 
prices for certain of the Company's products, including desktop and notebook 
computers and monitors, increased sales of lower-end computer systems, and 
lower corporate sales. The Company also believes the change in comparable 
store sales was negatively impacted by a reduction of sales in the CompUSA 
Computer Superstores in September as a result of (i) inventory liquidation 
sales conducted at the Computer City stores closed by the Company and (ii) 
the sales of the 29 former Computer City stores located in metropolitan areas 
in which there are existing CompUSA Computer Superstores. Additionally, in 
the first quarter of fiscal 1999, average net sales per CompUSA Computer 
Superstore, including the 37 acquired Computer City stores, decreased 
approximately 12% from the first quarter of fiscal 1998. The Company believes 
average net sales per Computer Superstore were negatively impacted by 
decreases in average selling prices, an increase in sales of lower-end 
computer systems and lower sales per store by the 37 acquired Computer City 
stores.

         Gross profit was $196 million, or 14.1% of net sales, in the first 
quarter of fiscal 1999, compared with $176 million, or 14.7% of net sales, in 
the first quarter of fiscal 1998. The decline in gross profit as a percentage 
of net sales in the first quarter of fiscal 1999 compared with the first 
quarter of fiscal 1998 was due, in part, to an increase in occupancy costs as 
a percentage of net sales. Occupancy costs, which are generally fixed in 
nature, deleveraged in the first quarter of fiscal 1999 as a result of lower 
average net sales per Computer Superstore compared to the first quarter of 
fiscal 1998 in general, as well as average net sales per store at the former 
Computer City stores that were lower than those of the CompUSA Computer 
Superstores. These declines were partially offset by an increase in the ratio 
of service revenues to total revenues. Service revenues were lower at the 
former Computer City stores than at the Company's other stores. Service 
revenues typically have higher gross margins than merchandise sales.

         Operating expenses were $146.3 million, or 10.5% of net sales, in 
the first quarter of fiscal 1999, compared with $109.2 million, or 9.2% of 
net sales, in the first quarter of fiscal 1998. The increase in operating 
expenses as a percentage of net sales for the first quarter of fiscal 1999 
compared with the first quarter of fiscal 1998 was due to a $2.4 million 
charge for the anticipated closure of three CompUSA Computer Superstores and 
increased personnel and facility expenses. In the first quarter of fiscal 
1999, the Company recorded a $2.4 million charge related to the costs to 
close three CompUSA Computer Superstores. The stores to be closed are located 
in markets in which there is both a former Computer City store and a CompUSA 
Computer Superstore and the former Computer City store will continue to be 
operated as a CompUSA Computer Superstore. Personnel expenses in the first 
quarter of fiscal 1999 increased as a percentage of net sales primarily due 
to increases in service revenues as percentages of net sales. Personnel 
expenses generally constitute a higher percentage of net sales for service 
revenues than for merchandise sales. In addition, personnel expenses 
constituted a higher percentage of net sales at the former Computer City 
stores than at the Company's other stores. Facilities expenses increased as a 
percentage of net sales in the first quarter of fiscal 1999 compared with the 
first quarter of fiscal 1998. Facilities expenses are generally fixed in 
nature and deleveraged in the first quarter of fiscal 1999 as a result of 
lower net sales per store. These increases were partially offset by lower net 
advertising expense as a percentage of net sales due to increased vendor 
participation.

         Pre-opening expenses consist primarily of personnel expenses 
incurred prior to a store's opening and promotional costs associated with the 
opening. The Company's policy is to expense all pre-opening expenses as 
incurred. In the first quarter of fiscal 1999, the Company incurred $1.4 
million in pre-opening expenses, compared with $1.5 million in pre-opening 
expenses incurred in the first quarter of fiscal 1998.

                                       15
<PAGE>

         General and administrative expenses were $32.6 million, or 2.3% of 
net sales, in the first quarter of fiscal 1999, compared with $25.6 million, 
or 2.1% of net sales, in the first quarter of fiscal 1998. The increase in 
general and administrative expenses as a percentage of net sales was 
primarily due to costs related to the expansion of the Company's corporate 
facilities and personnel to support the Company's growth as well as 
deleveraging of corporate facilities expenses, which are generally fixed in 
nature. In addition, general and administrative expenses increased as a 
result of costs incurred to support the operations of the acquired Computer 
City stores. These increases were partially offset by lower incentive 
compensation expense.

         Interest expense and other income, net, was $2.8 million, or 0.3% of 
net sales, in the first quarter of fiscal 1999 compared with $1.1 million, or 
0.1% of net sales, in the first quarter of fiscal 1998. The increase in 
interest expense and other income was due to the first month of interest 
expense on the $136 million note payable to Tandy Corporation related to the 
acquisition of Computer City. See "--Liquidity and Capital Resources."

         The Company's effective tax rate was 38.5% for both the first 
quarter of fiscal 1999 and the first quarter of fiscal 1998.

         As a result of the above, net income for the first quarter of fiscal 
1999 was $8.1 million, or $.09 per diluted share, compared with net income of 
$23.5 million, or $.25 per diluted share, for the first quarter of fiscal 
1998.

QUARTERLY DATA AND SEASONALITY

         The Company expects that its quarterly results of operations will 
fluctuate depending on the timing of the opening of, and the amount of net 
sales contributed by, new stores and the timing of costs associated with the 
selection, leasing, construction, and opening of new stores, as well as 
seasonal factors, product introductions, and changes in product mix.

         Based upon its past operating history, the Company believes that its 
business is seasonal. Excluding the effects of new store openings, net sales 
and earnings are generally lower during the first and fourth fiscal quarters 
than in the second and third fiscal quarters.

LIQUIDITY AND CAPITAL RESOURCES

         At September 26, 1998, total assets were $1.60 billion, $1.26 
billion of which were current assets, including $151 million of cash and cash 
equivalents. Net cash provided by operating activities for the first quarter 
of fiscal 1999 was $84.6 million, which was primarily attributable to the net 
income for the quarter and an increase in accounts payable.

         Approximately three-fourths of the Company's net sales during the 
first quarter of both fiscal 1999 and fiscal 1998 were sales for which the 
Company received payment at the time of sale either in cash, by check, or by 
third-party credit card. The remaining net sales were primarily sales for 
which the Company provided credit terms to corporate, government, and 
education customers.

         Merchandise inventories increased to $777 million at September 26, 
1998, from $521 million at June 27, 1998. The increase in merchandise 
inventories is primarily attributable to inventories at the four Computer 
Superstores opened in the first quarter of fiscal 1999 and the 37 acquired 
Computer City stores, higher inventories held at the Company's configuration 
center, as well as inventories received in anticipation of seasonal promotional
sales to be held in the second quarter of fiscal 1999.  At September 26, 1998, 
inventory per store was $3.7 million, compared with $4.4 million at September 
27, 1997.

                                       16
<PAGE>

         Capital expenditures during the first quarter of fiscal 1999 were 
$12.7 million, of which $2.2 million were for fiscal 1999 new stores, $1.4 
million were for the conversion of the acquired Computer City stores to the 
CompUSA format, and $5.7 million were for existing stores, compared with 
$21.2 million of capital expenditures during the first quarter of fiscal 
1998, of which $3.4 million were for fiscal 1998 new stores and $3.0 million 
were for existing stores. The Company plans to open 15 to 20 Computer 
Superstores in fiscal 1999. In addition to the capital expenditures incurred 
in connection with new stores, the Company also incurred capital expenditures 
in the first quarter of fiscal 1999 and the first quarter of fiscal 1998 
related to improvements in information systems and existing stores, and 
additions to property and equipment at the Company's corporate facilities. 
Excluding the effects of new store openings, the Company's greatest 
short-term capital requirements occur during the second fiscal quarter to 
support a higher level of sales in that quarter. Short-term capital 
requirements are satisfied primarily by available cash and cash equivalents 
and vendor and bank financing.

         The Company has an unsecured $300 million credit agreement (the 
"Credit Agreement") with a consortium of banks that expires in March 2001. 
The Credit Agreement requires that the Company maintain certain financial 
ratios and a minimum net worth and restricts, among other things, the 
Company's ability to incur additional indebtedness. The Credit Agreement 
allows the Company to securitize up to $200 million of certain assets. The 
Company's ability to incur borrowings under the Credit Agreement is reduced 
by outstanding letters of credit and, in certain circumstances, further 
reduced based upon the financial covenants contained in the Credit Agreement. 
The Company's ability to incur borrowings under the Credit Agreement could be 
further limited in certain circumstances pursuant to the terms of the 
indenture related to the Senior Subordinated Notes. At September 26, 1998, no 
borrowings were outstanding under the Company's Credit Agreement and the 
Company had $242 million available for future borrowings under the Credit 
Agreement, after taking into account the limitations in the Senior 
Subordinated Notes indenture.

         The Company also finances certain fixture and equipment acquisitions 
through equipment lessors. Lease financing is available from numerous sources 
and the Company evaluates equipment leasing as a supplemental source of 
financing on a continuing basis.

         In connection with the acquisition of Computer City, the Company 
issued a $136 million subordinated promissory note payable to Tandy (the 
"Seller Note"). The Seller Note bears interest at a rate of 9.48% per annum 
and provides for its repayment in semi-annual installments over a period of 
ten years. The first three years of payments are interest only, with the 
first principal payment due in December 2001. The Seller Note ranks pari 
passu with the Senior Subordinated Notes. The unpaid principal amount of the 
Seller Note may be prepaid, in whole or in part, at any time at the option of 
the Company, without premium or penalty.

         The Company believes that its available cash and cash equivalents, 
funds generated by operations, currently available vendor and floor plan 
financing, lease financing, and funds available under the Credit Agreement 
should be sufficient to finance its continuing operations and expansion plans 
through the end of fiscal 1999 and to make all required payments of interest 
on the Senior Subordinated Notes and the Seller Note. The level of future 
expansion will be contingent upon the availability of additional capital.

INFLATION

         While inflation has not had, and the Company does not expect it to 
have, a material impact upon operating results, there can be no assurances 
that the Company's business will not be affected by inflation in the future.

                                       17
<PAGE>

NEW PRONOUNCEMENTS

         In June 1997, the Financial Accounting Standards Board (the "FASB") 
issued Statement of Financial Accounting Standards ("SFAS") No. 130, 
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about 
Segments of an Enterprise and Related Information," which are effective for 
fiscal years beginning after December 15, 1997. The adoption of the 
disclosure requirements of SFAS No. 130 in the preparation of this Quarterly 
Report on Form 10-Q for the thirteen weeks ended September 26, 1998 had no 
impact on the Company's financial statements. The Company will adopt the 
annual disclosure requirements of SFAS No. 131 in the preparation of its 
Annual Report on Form 10-K for the fiscal year ending June 26, 1999, while the 
quarterly disclosure requirements will be adopted in fiscal year 2000. The 
American Institute of Certified Public Accountants (the "AICPA") issued 
Statement of Position ("SOP") 98-1, "Accounting for Costs of Computer 
Software Developed or Obtained for Internal Use," which is effective for 
fiscal years beginning after December 15, 1998. The Company's current policy 
falls within the guidelines of SOP 98-1. Also, the AICPA issued SOP 98-5, 
"Reporting on the Costs of Start-Up Activities," which is effective for 
fiscal years beginning after December 15, 1998. The Company adopted the 
provisions of SOP 98-5 in the preparation of this Quarterly Report on Form 
10-Q for the thirteen weeks ended September 26, 1998. The adoption of SOP 
98-5 has had no material impact on the Company's financial statements.

YEAR 2000 ISSUE

         The Year 2000 issue is the result of computer programs being written 
using two digits rather than four to define the applicable year. The 
Company's computer equipment and software and devices with embedded 
technology that are time-sensitive may recognize a date using "00" as the 
year 1900 rather than the year 2000. This could result in a system failure or 
miscalculations causing disruptions of operations, including, among other 
things, a temporary inability to process transactions, send invoices, or 
engage in similar normal business activities.

         The Company has undertaken various initiatives intended to ensure 
that its computer equipment and software will function properly with respect 
to dates in the year 2000 and thereafter. For this purpose, the term 
"computer equipment and software" includes systems that are commonly thought 
of as information technology ("IT") systems, including accounting, data 
processing, and telephone/PBX systems, cash registers, hand-held terminals, 
scanning equipment, and other miscellaneous systems, as well as systems that 
are not commonly thought of as IT systems, such as alarm systems, sprinkler 
systems, fax machines, or other miscellaneous systems. Both IT and non-IT 
systems may contain imbedded technology, which complicates the Company's Year 
2000 identification, assessment, remediation, and testing efforts. Based upon 
its identification and assessment efforts to date, the Company believes that 
certain of the computer equipment and software it currently uses will require 
replacement or modification. In addition, in the ordinary course of replacing 
computer equipment and software, the Company attempts to obtain replacements 
that it believes are Year 2000 compliant. Utilizing both internal and external 
resources to identify and assess needed Year 2000 remediation, the Company 
currently anticipates that its Year 2000 identification, assessment, 
remediation, and testing efforts, which began in October 1996, will be 
completed by June 30, 1999, and that such efforts will be completed prior to 
any currently anticipated impact on its computer equipment and software. The 
Company estimates that as of September 26, 1998, it had completed approximately
40% of the initiatives that it believes will be necessary to fully address 
potential Year 2000 issues relating to its computer equipment and software. 
The projects comprising the remaining 60% of the initiatives are in process 
and expected to be completed on or about June 30, 1999.

                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                                                                    PERCENT
YEAR 2000 INITIATIVE                                                             TIME FRAME         COMPLETE
                                                                              ------------------ ---------------
<S>                                                                           <C>                <C>
Initial IT systems identification and assessment............................     10/96-3/97           100%
Remediation and testing regarding central system issues.....................      5/97-4/98           100%
Remediation and testing regarding departmental system issues................      3/98-6/99            75%
Remediation and testing regarding store and distribution system issues......      8/98-6/99             5%
Upgrades to telephone/PBX and other systems.................................     3/98-11/98            80%
Electronic data interchange trading partner conversions.....................      3/98-3/99            20%
Identification, assessment, remediation, and testing regarding desktop and
   individual system issues.................................................      2/98-6/99            65%
Identification and assessment regarding non-IT system issues................     4/98-12/98            30%
Remediation and testing regarding non-IT system issues......................      9/98-6/99             0%
</TABLE>

         The Company has also mailed letters to its significant vendors and 
service providers and has verbally communicated with many strategic customers 
to determine the extent to which interfaces with such entities are vulnerable 
to Year 2000 issues and whether the products and services purchased from or 
by such entities are Year 2000 compliant. As of October 23, 1998, the Company 
had received responses from approximately 51% of such third parties, and 76% 
of the companies that have responded have provided written assurances that 
they expect to address all their significant Year 2000 issues on a timely 
basis.

         The Company believes that the cost of its Year 2000 identification, 
assessment, remediation, and testing efforts, as well as currently 
anticipated costs to be incurred by the Company with respect to Year 2000 
issues of third parties, will not exceed $5 million, which expenditures will 
be funded from operating cash flows. Such amount represents approximately 3% 
of the Company's total actual and anticipated IT expenditures for fiscal 1997 
through fiscal 1999. As of September 26, 1998, the Company had incurred costs 
of approximately $2.0 million related to its Year 2000 identification, 
assessment, remediation, and testing efforts. All of the $2.0 million relates 
to analysis, repair, or replacement of existing software, upgrades to 
existing software, or evaluation of information received from significant 
vendors, service providers, or customers. Other non-Year 2000 IT efforts have 
not been materially delayed or impacted by Year 2000 initiatives. The Company 
presently believes that the Year 2000 issue will not pose significant 
operational problems for the Company. However, if all Year 2000 issues are 
not properly identified, or assessment, remediation, and testing are not 
effected timely with respect to Year 2000 problems that are identified, there 
can be no assurance that the Year 2000 issue will not materially adversely 
impact the Company's results of operations or adversely affect the Company's 
relationships with customers, vendors, or others. Additionally, there can be 
no assurance that the Year 2000 issues of other entities will not have a 
material adverse impact on the Company's systems or results of operations.

         The Company has begun, but not yet completed, a comprehensive 
analysis of the operational problems and costs (including loss of revenues) 
that would be reasonably likely to result from the failure by the Company and 
certain third parties to complete efforts to achieve Year 2000 compliance on 
a timely basis. A contingency plan has not been developed for dealing with 
the most reasonably likely worst case scenario, and such scenario has not yet 
been clearly identified. The Company currently plans to complete such 
analysis and contingency planning by December 31, 1999.

         The Company has engaged an independent expert to evaluate its Year 
2000 identification, assessment, remediation, and testing efforts.

                                       19
<PAGE>

         The costs of the Company's Year 2000 identification, assessment, 
remediation, and testing efforts and the dates on which the Company believes 
it will complete such efforts are based upon management's best estimates, 
which were derived using numerous assumptions regarding future events, 
including the continued availability of certain resources, third-party 
remediation plans, and other factors. There can be no assurance that these 
estimates will prove to be accurate, and actual results could differ 
materially from those currently anticipated. Specific factors that could 
cause such material differences include, but are not limited to, the 
availability and cost of personnel trained in Year 2000 issues, the ability 
to identify, assess, remediate, and test all relevant computer codes and 
imbedded technology, and similar uncertainties. In addition, variability of 
definitions of "compliance with Year 2000" and the myriad of different 
products and services, and combinations thereof, sold by the Company may lead 
to claims whose impact on the Company is not currently estimable. No 
assurance can be given that the aggregate cost of defending and resolving 
such claims, if any, will not materially adversely affect the Company's 
results of operations. Although some of the Company's agreements with 
manufacturers and others from whom it purchases products for resale contain 
provisions requiring such parties to indemnify the Company under some 
circumstances, there can be no assurance that such indemnification 
arrangements will cover all of the Company's liabilities and costs related to 
claims by third parties related to the Year 2000 issue.








                                      20
<PAGE>

                                   PART II

ITEM 1.  LEGAL PROCEEDINGS

         Note 4 of the Notes to Consolidated Financial Statements in Part I, 
Item 1 is incorporated herein by reference as if fully restated herein. Note 
4 contains forward-looking statements that are subject to the risks and 
uncertainties discussed in Item 2 - "Management's Discussion and Analysis of 
Financial Condition and Results of Operations - Cautionary Statement 
Regarding Risks and Uncertainties That May Affect Future Results."

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits:

         3.1   Restated and Amended Certificate of Incorporation. (1)
         3.2   Restated and Amended Bylaws. (2)
        10     Second Amendment to the Credit Agreement, dated August 31, 1998,
               among the Company, certain lenders and NationsBank, N.A., as
               administrative lender. (3)
        11     Computation of Income per Common and Common Equivalent Share. (4)
        27.1   Financial Data Schedule. (5)
        27.2   Restated Financial Data Schedule. (5)
     (b) Reports on Form 8-K.

         Current Report on Form 8-K dated August 31, 1998, as filed with the
         Securities and Exchange Commission regarding the Company's acquisition
         of Computer City, Inc.

--------------
         (1)  Previously filed as an exhibit to the Company's Registration
              Statement No. 1-11566 on Form 8-A/A filed December 6, 1996,
              as amended and incorporated herein by reference.
         (2)  Previously filed as an exhibit to the Company's Quarterly 
              Report on Form 10-Q for the fiscal quarter ended March 26,
              1994, and incorporated herein by reference.
         (3)  Previously filed as an exhibit to the Company's Annual Report
              on Form 10-K for the fiscal year ended June 27, 1998, and
              incorporated herein by reference.
         (4)  Filed herewith.
         (5)  Included with EDGAR version only.

                                       21
<PAGE>

                                   SIGNATURES

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

                              CompUSA Inc.

Date:  November 10, 1998      By:  /s/  JAMES E. SKINNER
                                 -------------------------
                                        James E. Skinner

                                         Executive Vice President, Chief 
                                         Financial Officer and Treasurer
                                         (Principal Financial and Accounting 
                                         Officer)





                                       22