<PAGE>   1







                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

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

                 For the Quarterly Period Ended October 31, 1998
                         Commission File Number 0-19714

                                PERFUMANIA, INC.


                     STATE OF FLORIDA I.R.S. NO. 65-0026340

                              11701 N.W. 101ST ROAD
                              MIAMI, FLORIDA 33178

                        TELEPHONE NUMBER: (305) 889-1600


Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Ssection 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (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 ninety (90) days.


                                 YES [X] NO [ ]



                           Common Stock $.01 Par value
               Outstanding Shares at october 31, 1998 - 6,519,440




<PAGE>   2






                                TABLE OF CONTENTS

                                PERFUMANIA, INC.



                                     PART I
                              FINANCIAL INFORMATION



ITEM 1 FINANCIAL STATEMENTS

         Consolidated Balance Sheets ........................       2

         Consolidated Statements of Operations ..............       3

         Consolidated Statements of Cash Flows ..............       4

         Notes to Condensed Consolidated Financial Statements       5


ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
       CONSOLIDATED FINANCIAL CONDITION AND
       RESULTS OF OPERATIONS ................................       9


                                     PART II
                                OTHER INFORMATION


ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K .....................      13

         SIGNATURES .........................................      14


<PAGE>   3


PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                                PERFUMANIA, INC.
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                     October 31, 1998    January 31, 1998
                                                                       -------------       -------------
<S>                                                                    <C>                 <C>          
ASSETS

Current assets:
  Cash and cash equivalents                                            $   1,806,154       $   1,554,117
  Trade receivables, less allowance for doubtful
   accounts of $794,954 and $704,954                                       5,638,831           5,186,473
  Advances to suppliers                                                    5,709,779           7,611,036
  Inventories, net of reserve of $235,336 and $2,750,000                  72,119,410          73,137,842
  Prepaid expenses and other current assets                                1,570,278           2,086,118
  Tax refund receivable                                                           --             814,766
  Net deferred tax asset                                                   1,219,856           1,219,856
  Due from related parties                                                   622,855             772,855
                                                                       -------------       -------------
     Total current assets                                                 88,687,163          92,383,063
Property and equipment, net                                               23,495,531          18,307,240
Leased equipment under capital leases, net                                 1,523,816           2,266,674
Other assets                                                               1,686,492           1,764,906
                                                                       -------------       -------------
                                                                       $ 115,393,002       $ 114,721,883
                                                                       =============       =============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Bank line of credit and current portion of
     notes payable                                                     $  37,970,490       $  34,139,766
  Accounts payable - non affiliates                                       13,455,773          13,308,914
  Accounts payable - affiliates                                           24,976,620          16,958,163
  Accrued expenses and other liabilities                                   6,049,905           6,848,923
  Income taxes payable                                                       367,542             505,098
  Current portion of obligations under capital leases                        496,516           1,030,340
  Due to related parties                                                     356,352             304,483
                                                                       -------------       -------------
     Total current liabilities                                            83,673,198          73,095,687
                                                                       -------------       -------------
Long term portion of notes payable                                         3,586,527           4,709,434
Long-term portion of obligations under capital leases                        618,212             933,615
                                                                       -------------       -------------
     Total liabilities                                                    87,877,937          78,738,736
                                                                       -------------       -------------
Commitments and contingencies                                                     --                  --
                                                                       -------------       -------------

Stockholders' equity:
  Preferred stock, $.01 par value, 1,000,000 shares
   authorized, none issued                                                        --                  --
  Common stock, $.01 par value, 25,000,000 shares
   authorized, 7,930,291 and 7,845,291 shares issued
   and outstanding                                                            79,303              78,453
  Capital in excess of par                                                52,385,511          52,386,361
  Treasury stock                                                          (5,085,435)         (4,521,068)
  Accumulated deficit                                                    (19,864,314)        (11,960,599)
                                                                       -------------       -------------
Total stockholders' equity                                                27,515,065          35,983,147
                                                                       -------------       -------------
                                                                       $ 115,393,002       $ 114,721,883
                                                                       =============       =============

</TABLE>


See accompanying notes to consolidated financial statements



                                       2
<PAGE>   4

                                PERFUMANIA, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                       Thirteen            Thirteen           Thirty-nine         Thirty-nine
                                                      Weeks Ended         Weeks Ended         Weeks Ended         Weeks Ended
                                                   October 31, 1998     November 1, 1997   October 31, 1998     November 1, 1997
                                                     -------------       -------------       -------------       -------------
<S>                                                  <C>                 <C>                 <C>                 <C>          
Net sales:
   Unaffiliated customers                            $  37,084,488       $  38,753,773       $ 115,236,827       $ 103,796,306
   Affiliates                                                   --              21,257                  --           2,251,978
                                                     -------------       -------------       -------------       -------------
                                                        37,084,488          38,775,030         115,236,827         106,048,284
                                                     -------------       -------------       -------------       -------------
Cost of goods sold:
   Unaffiliated customers                               22,064,227          22,846,084          68,900,374          59,782,336
   Affiliates                                                   --              15,921                  --           1,818,644
                                                     -------------       -------------       -------------       -------------
                                                        22,064,227          22,862,005          68,900,374          61,600,980
                                                     -------------       -------------       -------------       -------------

Gross profit                                            15,020,261          15,913,025          46,336,453          44,447,304
                                                     -------------       -------------       -------------       -------------

Operating expenses:
  Selling, general and administrative                   16,765,194          16,008,318          47,625,516          44,494,625
  Depreciation and amortization                          1,104,130           1,206,312           3,280,603           3,492,533
                                                     -------------       -------------       -------------       -------------
      Total operating expenses                          17,869,324          17,214,630          50,906,119          47,987,158
                                                     -------------       -------------       -------------       -------------

      Loss from operations before other
       Expense                                          (2,849,063)         (1,301,605)         (4,569,666)         (3,539,854)
Other expense                                           (1,010,382)           (740,067)         (3,334,049)         (2,593,656)
                                                     -------------       -------------       -------------       -------------
Loss before income taxes                                (3,859,445)         (2,041,672)         (7,903,715)         (6,133,510)
Benefit  for income taxes                                       --             816,669                  --           2,453,404
                                                     -------------       -------------       -------------       -------------
Net loss before cumulative effect of
 change in accounting principle                         (3,859,445)         (1,225,003)         (7,903,715)         (3,680,106)
                                                     -------------       -------------       -------------       -------------
 Cumulative effect of change in
  acounting principle, net of income
  tax benefit of $380,958                                       --                  --                  --            (631,418)
                                                     -------------       -------------       -------------       -------------
  Net loss                                           $  (3,859,445)      $  (1,225,003)      $  (7,903,715)      $  (4,311,524)
                                                     =============       =============       =============       =============
Basic loss per common share:
  Net loss before cumulative effect
  of change in accounting principle                  $       (0.59)      $       (0.17)      $       (1.21)      $       (0.52)
  Cumulative effect of change in
  accounting principle, net of tax benefit                      --                  --                  --       $       (0.09)
                                                     -------------       -------------       -------------       -------------
Net loss                                             $       (0.59)      $       (0.17)      $       (1.21)      $       (0.61)
                                                     -------------       -------------       -------------       -------------
Diluted loss per common share:
  Net loss before cumulative effect
  of change in accounting principle                  $       (0.59)      $       (0.17)      $       (1.21)      $       (0.52)
  Cumulative effect of change in
  accounting principle, net of tax  benefit                     --                  --                  --       $       (0.09)
                                                     -------------       -------------       -------------       -------------
Net loss                                             $       (0.59)      $       (0.17)      $       (1.21)      $       (0.61)
                                                     -------------       -------------       -------------       -------------

Weighted average number of shares outstanding:
  Basic                                                  6,519,440           7,062,922           6,533,103           7,133,372
  Diluted                                                6,577,380           7,092,142           6,559,776           7,273,934


</TABLE>



See accompanying notes to consolidated financial statements.



                                       3

<PAGE>   5

                                 PERFUMANIA, INC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                              Thirty-nine         Thirty-nine
                                                                              Weeks Ended         Weeks Ended
                                                                            October 31, 1998   November 1, 1997
                                                                              ------------       ------------
<S>                                                                           <C>                <C>          
Cash flows from operating activities:
 Net loss                                                                     $ (7,903,715)      $ (4,311,524)
 Adjustments to reconcile net loss to net cash
    provided by operating activities:
    Provision for doubtful accounts                                                 90,000          1,270,000
    Benefit for income taxes                                                            --         (2,453,404)
    Depreciation and amortization                                                3,281,168          3,492,533
    Loss on disposition                                                                 --            239,970
    Cumulative effect of change in accounting principle                                 --            631,418
    Change in assets and liabilities,
    (Increase) decrease in:                                                             --
         Trade receivables                                                        (542,358)           411,606
         Advances to suppliers                                                   1,901,257         (2,512,357)
         Inventories                                                             1,018,432         (2,434,724)
         Other current assets                                                      515,840           (399,091)
         Due from related parties                                                  150,000                 --
         Tax refund receivable                                                     814,766                 --
         Other assets                                                               77,849            218,100
      Increase (decrease) in:
         Accounts payable                                                        8,165,316          6,894,941
         Other current liabilities                                                (799,018)           171,912
         Income taxes payable                                                     (137,556)        (1,012,694)
                                                                              ------------       ------------
    Total adjustments                                                           14,535,696          4,518,210
                                                                              ------------       ------------
         Net cash provided by operating activities                               6,631,981            206,686
                                                                              ------------       ------------
  Cash flows from investing activities:
    Additions to property and equipment                                         (7,726,036)        (4,701,006)
                                                                              ------------       ------------
         Net cash used in investing activities                                  (7,726,036)        (4,701,006)
                                                                              ------------       ------------
  Cash flows from financing activities:

      Borrowings and repayments under loan payable                               2,707,817          5,872,764
      Borrowings and repayments from related parties                                51,869             16,483
      Principal payments under capital lease obligations                          (849,227)          (845,627)
      Purchases of treasury stock                                                 (564,367)          (578,656)
                                                                              ------------       ------------
         Net cash provided by financing activities                               1,346,092          4,464,964
                                                                              ------------       ------------
    Increase (decrease) in cash and cash equivalents                               252,037            (29,356)
    Cash and cash equivalents at beginning of period                             1,554,117          1,641,527
                                                                              ------------       ------------
    Cash and cash equivalents at end of period                                $  1,806,154       $  1,612,171
                                                                              ============       ============

   Supplemental disclosure of cash flow information: 
    Cash paid for:
          Interest                                                            $  3,582,915       $  3,421,770
          Income Taxes                                                             137,556          1,012,694


</TABLE>


See accompanying notes to consolidated financial statements 




                                       4


<PAGE>   6


                                PERFUMANIA, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1).  SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated financial statements include the accounts of
Perfumania and subsidiaries (the Company). All material intercompany balances
and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual 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 made are adequate to make the
information presented not misleading. The financial information presented
herein, which is not necessarily indicative of results to be expected for the
current fiscal year, reflects all adjustments which, in the opinion of the
Company, are necessary for a fair statement of the results for the periods
indicated. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1998.


(2).  STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                            COMMON STOCK          CAPITAL IN          TREASURY STOCK
                      ------------------------      EXCESS        ------------------------   ACCUMULATED
                       SHARES       AMOUNT          OF PAR         SHARES        AMOUNT         DEFICIT          TOTAL 
                      ---------   ------------    ------------    ---------   ------------    ------------    ------------
<S>                   <C>         <C>             <C>             <C>         <C>             <C>             <C>         
Balance at
January 31, 1998      7,845,291   $     78,453    $ 52,386,361    1,218,360   ($ 4,521,068)   ($11,960,599)   $ 35,983,147

Issuance of
common stock             85,000            850            (850)          --             --              --              --

Purchases of
treasury stock               --             --              --      192,491       (564,367)             --        (564,367)

Net loss for the
thirty-nine weeks
ended Oct. 31, 1998          --             --              --           --             --      (7,903,715)     (7,903,715)
                      ---------   ------------    ------------    ---------   ------------    ------------    ------------

Balance at
October 31, 1998      7,930,291   $     79,303    $ 52,385,511    1,410,851   $ (5,085,435)   $(19,864,314)   $ 27,515,065
                      ---------   ------------    ------------    ---------   ------------    ------------    ------------


</TABLE>



                                       5





<PAGE>   7




(3).  BASIC AND DILUTED LOSS PER COMMON SHARE

Basic and diluted loss per share, net of cumulative effect of change in
accounting principle, is computed as follows:


<TABLE>
<CAPTION>
                                                                      Thirteen Weeks Ended
                                                               -----------------------------------
                                                               October 31, 1998   November 1, 1997
                                                               ----------------   ----------------
<S>                                                               <C>               <C>         
Net Loss                                                          $(3,859,445)      $(1,225,003)
                                                                  ===========       ===========

Weighted average number of shares outstanding used
   in basic earnings per share calculation                          6,519,440         7,062,922
                                                                  ===========       ===========

Basic loss per common share                                       $     (0.59)      $     (0.17)
                                                                  ===========       ===========

Weighted average number of shares outstanding used
    in basic earnings per share calculation                         6,519,440         7,062,922

Effect of dilutive securities:
Stock  options                                                         57,940            29,220
                                                                  -----------       -----------
Weighted average number of shares used in diluted
   earnings per share calculation                                   6,577,380         7,092,142
                                                                  ===========       ===========

Diluted net loss per common share                                 $     (0.59)      $     (0.17)
                                                                  ===========       ===========

</TABLE>



<TABLE>
<CAPTION>
                                                                     Thirty-nine Weeks Ended
                                                                -----------------------------------
                                                                October 31, 1998  November 1, 1997
                                                                ----------------  -----------------

<S>                                                               <C>               <C>         
Net Loss                                                          $(7,903,715)      $(4,311,524)
                                                                  ===========       ===========

Weighted average number of shares outstanding used
   in basic earnings per share calculation                          6,533,103         7,133,372
                                                                  ===========       ===========

Basic loss per common share                                       $     (1.21)      $     (0.61)
                                                                  ===========       ===========

Weighted average number of shares outstanding used
    in basic earnings per share calculation                         6,533,103         7,133,372

Effect of dilutive securities:
Stock  options                                                         26,673           140,562
                                                                  -----------       -----------
Weighted average number of shares used in diluted
   earnings per share calculation                                   6,559,776         7,273,934
                                                                  ===========       ===========

Diluted net loss per common share                                 $     (1.21)      $     (0.61)
                                                                  ===========       ===========

</TABLE>


                                       6

<PAGE>   8



(4).  SEGMENT INFORMATION

The Company operates in two industry segments, specialty retail sale and
wholesale distribution of fragrances and related products. Financial information
for these segments is summarized in the following table.


<TABLE>
<CAPTION>
                                              THIRTEEN          THIRTEEN         THIRTY-NINE        THIRTY-NINE
                                             WEEKS ENDED       WEEKS ENDED       WEEKS ENDED        WEEKS ENDED
                                            OCT. 31, 1998      NOV. 1, 1997     OCT. 31, 1998      NOV. 1, 1997
                                             ------------      ------------      ------------      ------------
<S>                                          <C>               <C>               <C>               <C>         

Sales
     Wholesale                               $  6,993,408      $  8,590,382      $ 30,696,200      $ 23,464,369
     Retail                                    30,091,080        30,184,648        84,540,627        82,583,915
                                             ------------      ------------      ------------      ------------
          Total net sales                    $ 37,084,488      $ 38,775,030      $115,236,827      $106,048,284
                                             ------------      ------------      ------------      ------------

Cost of goods sold
     Wholesale                               $  6,079,837      $  6,519,325      $ 24,682,207      $ 17,772,556
     Retail                                    15,984,390        16,342,680        44,218,167        43,828,424
                                             ------------      ------------      ------------      ------------
          Total cost of goods sold           $ 22,064,227      $ 22,862,005      $ 68,900,374      $ 61,600,980
                                             ------------      ------------      ------------      ------------

Gross profit
     Wholesale                               $    913,571      $  2,071,057      $  6,013,993      $  5,691,813
     Retail                                    14,106,690        13,841,968        40,322,460        38,755,491
                                             ------------      ------------      ------------      ------------
          Total gross profit                 $ 15,020,261      $ 15,913,025      $ 46,336,453      $ 44,447,304
                                             ------------      ------------      ------------      ------------
Number of stores                                      294               283



</TABLE>


                                             October 31,       January 31,
                                                1998              1998     
                                             -----------      -----------
INVENTORY
     Wholesale                               $12,547,590      $20,368,792
     Retail                                   59,571,820       52,769,050
                                             -----------      -----------
                                             $72,119,410      $73,137,842
                                             -----------      -----------


An unaffiliated customer of the wholesale segment accounted for approximately 8%
and 7% of the consolidated net sales for the thirty-nine weeks ended October 31,
1998 and November 1, 1997, respectively, and 2% and 47% of the consolidated net
trade accounts receivable balance at October 31, 1998 and November 1, 1997,
respectively.






                                       7
<PAGE>   9







(5).  RECENT ACCOUNTING PRONOUNCEMENTS

In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up
Activities", which requires the Company to expense preopening expenses as
incurred. Previously, the Company had capitalized and amortized these expenses
over 18 months. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, does not require restatement of prior periods
and is applied as of the beginning of the fiscal year in which the SOP is first
adopted. The Company early adopted SOP 98-5 in fiscal 1997 and reported the
initial application as a cumulative effect of a change in accounting principle
in the Consolidated Statement of Operations for the year ended January 31, 1998.
Accordingly, the Company's net loss and net loss per common share for the
thirteen and thirty-nine weeks ended November 1, 1997 in the accompanying
Consolidated Statements of Operations has been restated to reflect this change.
The effect of the change in accounting principle was to reduce the net loss
before cumulative effect of change in accounting principle reported for the
first thirty-nine weeks of 1997 by approximately $258,000.

(6).  OTHER

During the fiscal years 1997 and 1996, the Company made sales to L. Luria & Son,
Inc. ("Luria's") in the amounts of $1,999,823 and $2,473,623, respectively. The
Company wrote off in 1997 receivables from Luria's in the approximate amount of
$1,200,000. The Company has been characterized as an insider in the liquidating
plan or reorganization filed on April 6, 1998 by Luria's in the United States
Bankruptcy Court, Southern District of Florida. In August 1998, the committee of
unsecured creditors in Luria's bankruptcy proceedings filed a complaint with the
United States Bankruptcy Court, Southern District of Florida, to recover
substantial funds from the Company. The complaint alleges that Luria's made
preference payments, as defined by the Bankruptcy Court, to the Company and
seeks recovery of said preference payments, as well as disallowing any and all
claims of the Company against Luria's until full payment of the preference
payments have been made. Management cannot presently predict the outcome of
these matters.





                                       8


<PAGE>   10


PART I.  FINANCIAL INFORMATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF
         OPERATIONS

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

         Perfumania does not provide forecasts of future financial performance.
Forward-looking statements in this Form 10-Q and other Company reports and press
releases are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, and, in connection therewith, the
Company wishes to caution readers that the following important factors, among
others, in some cases have affected and in the future could affect the Company's
actual results and could cause such results to differ materially from those
expressed in forward-looking statements made by or on behalf of the Company.

         SEASONALITY. The Company has historically experienced higher sales in
the third and fourth fiscal quarters than in the first and second fiscal
quarters. Significantly higher fourth fiscal quarter retail sales result from
increased purchases of fragrances as gift items during the Christmas holiday
season. The Company's quarterly results may also vary due to the level of
wholesale sales, which is not predictable, as well as the timing of new store
openings, net sales contributed by new stores and fluctuations in comparable
sales of existing stores. A variety of factors affect the sales levels of new
and existing stores, including the retail sales environment and the level of
competition, the effect of marketing and promotional programs, acceptance of new
product introductions, adverse weather conditions and general economic
conditions.

         LACK OF LONG-TERM AGREEMENTS WITH SUPPLIERS. The Company's success
depends to a large degree on its ability to provide an extensive assortment of
brand name and designer fragrances. The Company has no long-term purchase
contracts or other contractual assurance of continued supply, pricing or access
to new products. While the Company believes it has good relationships with its
vendors, the inability to obtain merchandise from one or more key vendors on a
timely basis, or a material change in the Company's ability to obtain necessary
merchandise could have a material adverse effect on its results of operations.

         DEPENDENCE ON LINE OF CREDIT. As discussed above, the Company
experiences significant seasonal fluctuations in its sales and operating
results, as is common with many specialty retailers. The Company utilizes its
line of credit to fund inventory purchases and to support new retail store
openings. Any future limitation on the Company's borrowing ability and access to
financing could limit the Company's ability to open new stores and to obtain
merchandise on satisfactory terms. The Company's current line of credit contains
financial covenants, including a net income covenant. Should the Company not be
able to meet its covenants, its borrowing ability and thus, its operations will
be seriously affected.

         DEPENDENCE ON KEY PERSONNEL. Jerome Falic, the Company's President and
Simon Falic, the Company's Chief Operating Officer and Chief Financial Officer
are primarily responsible for the Company's merchandise purchases, and have
developed strong, reliable relationships with suppliers, as well as customers of
the Wholesale division in the United States, Europe, Asia and South America. The
loss of service of either of these, or any of the Company's other current
executive officers could have a material adverse effect on the Company.

         ABILITY TO MANAGE GROWTH. While the Company has grown significantly in
the past several years, there is no assurance that the Company will sustain the
growth in the number of retail stores and revenues that it has achieved
historically. The Company's growth is dependent, in large part, upon the
Company's ability to open and operate new retail stores on a profitable basis,
which in turn is subject to, among other things, the Company's ability to secure
suitable stores sites on satisfactory terms, the Company's ability to hire,
train and retain qualified management and other personnel, the availability of
adequate capital 




                                       9
<PAGE>   11

resources and the successful integration of new stores into existing operations.
There can be no assurance that the Company's new stores will achieve sales and
profitability comparable to existing stores, or that the opening of new
locations will not cannibalize sales at existing locations.

         LITIGATION. As is often the case in the fragrance and cosmetics
business, some of the merchandise purchased by suppliers such as the Company may
have been manufactured by entities who are not the owners of the trademarks or
copyrights for the merchandise. If the Company were called upon or challenged by
the owner of a particular trademark or copyright to demonstrate that the
specific merchandise was produced and sold with the proper authority and the
Company were unable to do so, the Company could, among other things, be
restricted from reselling the particular merchandise or be subjected to other
liabilities, which could have an adverse effect on the Company's business and
results of operations.

         OTHER. The Company has been characterized as an insider in the
liquidating plan of reorganization filed on April 6, 1998 by L. Luria & Son,
Inc. ("Luria's") in the United States Bankruptcy Court, Southern District of
Florida. In August 1998, the committee of unsecured creditors in Luria's
bankruptcy proceedings filed a complaint with the United States Bankruptcy
Court, Southern District of Florida, to recover substantial funds from the
Company. The complaint alleges that Luria's made preference payments, as defined
by the Bankruptcy Court, to the Company and seeks recovery of said preference
payments, as well as disallowing any and all claims of the Company against
Luria's until full payment of the preference payments have been made. Management
cannot presently predict the outcome of these matters.

SEASONALITY

The Company's operations have historically been seasonal, with generally higher
retail sales in the third and fourth fiscal quarters than in the first and
second fiscal quarters. Significantly higher fourth fiscal quarter retail sales
result from increased purchases of fragrances as gift items during the Christmas
holiday season. Wholesale sales also vary by fiscal quarter as a result of the
selection of merchandise available for sale as well as the need for the Company
to stock its retail stores for the Christmas holiday season. Therefore, the
results of any interim period are not necessarily indicative of the results that
might be expected during a full fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal capital requirements are to fund working capital needs,
new store additions and renovation of existing stores. For the first thirty-nine
weeks of fiscal 1998, these capital requirements have generally been satisfied
by short-term borrowings and cash flows from operations.

Net cash provided by operating activities during the thirty-nine weeks ended
October 31, 1998 was approximately $6.6 million, principally as a result of the
net change in the Company's trade receivables, advances to suppliers,
inventories and accounts payable. At October 31, 1998, approximately $0.7
million of the Company's trade receivables were considered past due compared to
$0.9 million at January 31, 1998. Of the $5.6 million in trade receivables due
from unaffiliated customers at October 31, 1998, $0.1 million was due from one
customer, which also accounted for 3.3% of the Company's wholesale sales during
the thirteen weeks ended October 31, 1998. The Company's sales to this customer
are made on an open account terms and since late 1991 the Company has extended
credit terms to this customer of up to one year. The Company has not experienced
any write-offs of accounts receivable from this customer due to collectibility.

Net cash used in investing activities during the thirty-nine weeks ended October
31, 1998 was $7.7 million. This represents purchases of furniture, fixtures and
equipment for new store openings and the renovation of existing stores during
fiscal 1998.




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<PAGE>   12


Net cash provided by financing activities during the thirty-nine weeks ended
October 31, 1998 was approximately $1.3 million, which was primarily the result
of an increase in the Company's use of its line of credit. In May 1998, the
Company's $35 million line of credit was extended from April 1999 to April 2001,
and certain covenants were revised. As of October 31, 1998, the Company was not
in compliance with certain financial covenants required by the line of credit.
Management is currently negotiating a waiver of this non-compliance with the
Bank and believes that this waiver will be obtained.

Management believes that cash provided by operations together with the borrowing
under the Company's line of credit will be sufficient to fund estimated capital
expenditures associated with the Company's scheduled opening of new stores for
at least the next twelve months and other working capital requirements.

During the thirty-nine weeks ended October 31, 1998, the Company closed nineteen
stores and opened twenty-eight stores. At October 31, 1998, the Company operated
294 stores.


RESULTS OF OPERATIONS

COMPARISON OF THE THIRTEEN WEEKS ENDED OCTOBER 31, 1998 WITH THE THIRTEEN WEEKS
ENDED NOVEMBER 1, 1997.

Net sales decreased $1.7 million from $38.8 million in the thirteen weeks ended
November 1, 1997 to $37.1 million in the thirteen weeks ended October 31, 1998.
The decrease in net sales was primarily the result of a $1.6 million decrease in
wholesale sales (from $8.6 million to $7.0 million); retail sales were $30.1,
compared to $30.2 million in the prior year. The decrease in retail sales was
principally due to a 2.7% decrease in comparable store sales during the current
period when compared to last year.

Gross profit decreased 5.6% from $15.9 million in the thirteen weeks ended
November 1, 1997 (41.0% of net sales) to $15.0 million in the thirteen weeks
ended October 31, 1998 (40.5% of total net sales) due primarily to the decrease
in wholesale sales.

Gross profit for the wholesale division decreased from $2.1 million in the
thirteen weeks ended November 1, 1997 to $0.9 million in the thirteen weeks
ended October 31, 1998 as a result of lower wholesale sales and also lower
margin wholesale sales. As a percentage of net sales, gross profit for the
wholesale division decreased from 24.1% in the thirteen weeks ended November 1,
1997 to 13.1% in the thirteen weeks ended October 31, 1998.

Gross profit for the retail division increased 1.9% from $13.8 million in the
thirteen weeks ended November 1, 1997 to $14.1 million in the thirteen weeks
ended October 31, 1998 as a result of higher retail gross margins. As a
percentage of net sales, gross profit for the retail division increased from
45.9% in the thirteen weeks ended November 1, 1997 to 46.9% in the thirteen
weeks ended October 31, 1998 due primarily to less promotional sales of
merchandise at lower margins.

Operating expenses, which include selling, general and administrative expenses
as well as depreciation, increased from $17.2 million in the thirteen weeks
ended November 1, 1997 to $17.9 million in the thirteen weeks ended October 31,
1998. The increase was primarily due to costs associated with the operation of
an average of 10 additional stores.

As a result of the foregoing, the Company had a net loss of $3,859,445, or
($0.59) per diluted share in the thirteen weeks ended October 31, 1998 compared
to a net loss of $1,225,003, or ($0.17) per diluted share, in the thirteen weeks
ended November 1, 1997. Excluding the tax benefit of $816,669 in 1997, the loss
for the thirteen weeks ended November 1, 1997 was $2,041,672 or ($0.29) per
diluted share.



                                       11
<PAGE>   13


COMPARISON OF THE THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998 WITH THE THIRTY-NINE
WEEKS ENDED NOVEMBER 1, 1997.

Net sales increased 8.7% from $106.0 million in the thirty-nine weeks ended
November 1, 1997 to $115.2 million in the thirty-nine weeks ended October 31,
1998. The increase in net sales was due to a 30.8% increase in wholesale sales
(from $23.5 million to $30.7 million), and a 2.4% increase in retail sales (from
$82.6 million to $84.5 million).

The increase in wholesale sales was due to continued efforts to reduce inventory
levels. The increase in retail sales was principally due to the increase in the
number of stores operated during the thirty-nine weeks ended October 31, 1998
compared to the thirty-nine weeks ended November 1, 1997. Comparable store sales
during the thirty-nine weeks ended October 31, 1998 decreased 2.7% when compared
to last year.

Gross profit increased 4.3% from $44.5 million in the thirty-nine weeks ended
November 1, 1997 (41.9% of net sales) to $46.3 million in the thirty-nine weeks
ended October 31, 1998 (40.2% of net sales) primarily as a result of the
increase in net sales. The decrease in gross profit as a percentage of sales is
due to the increase in wholesale sales. Wholesale sales yield significantly
lower margins compared to retail sales.

Gross profit for the wholesale division increased 5.7% from $5.7 million in the
thirty-nine weeks ended November 1, 1997 to $6.0 million in the thirty-nine
weeks ended October 31, 1998. As a percentage of net sales, gross profit for the
wholesale division decreased from 24.3% in the thirty-nine weeks ended November
1, 1997 to 19.6% in the thirty-nine weeks ended October 31, 1998, primarily due
to lower margin sales.

Gross profit for the retail division increased 4.0% from $38.8 million in the
thirty-nine weeks ended November 1, 1997 to $40.3 million in the thirty-nine
weeks ended October 31, 1998. The retail division's gross margin increased from
46.9% in the thirty-nine weeks ended November 1, 1997 to 47.7% in the
thirty-nine weeks ended October 31, 1998 due primarily to less promotional sales
of merchandise at lower margins.

Operating expenses increased $2.9 million in the thirty-nine weeks ended October
31, 1998 compared to the thirty-nine weeks ended November 1, 1997. The increase
was primarily due to costs associated with the operation of an average of 13
additional stores.

During the thirty-nine weeks ended October 31, 1998 the Company had a net loss
of $7,903,715 or ($1.21) per diluted share, compared to a net loss of $4,311,524
or ($0.61) per diluted share during the thirty-nine weeks ended November 1,
1997. Excluding the cumulative effect of the change in accounting principle of
$631,418 and a tax benefit of $2,453,404 in 1997, the loss for the first
thirty-nine weeks of 1997 was $6,133,510 or ($0.84) per diluted share.




                                       12

<PAGE>   14












PART II. OTHER INFORMATION
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


(a)      Exhibits

         Exhibit 27    Financial Data Schedule (for SEC use only) (1)



-----------------------
(1) Filed herewith.


(b) The Company did not file any reports on Form 8-K during the quarter ended
October 31, 1998.












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<PAGE>   15






                                PERFUMANIA, INC.

                                   SIGNATURES



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




                                          PERFUMANIA, INC.          
                                          (Registrant)






Date:  December 15, 1998                  By: /s/ Ilia Lekach       
                                              ----------------------------------
                                              Ilia Lekach
                                              Chairman of the Board and 
                                              Chief Executive Officer
                                              (Principal Executive Officer)




                                          By: /s/ Simon Falic       
                                              ----------------------------------
                                              Simon Falic
                                              Chief Financial Officer,
                                              Treasurer and Secretary
                                              (Principal Financial and
                                              Accounting Officer)





                                       14