SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

(Mark One)
   X          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---------     EXCHANGE ACT OF 1934
For the quarterly period ended     October 31, 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               1-5392                

                             AMERICAN STORES COMPANY
             (Exact name of registrant as specified in its charter)

Delaware                                            87-0207226               
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                Identification No.)

299 South Main Street
Salt Lake City, Utah                                   84111                 
(Address of principal executive offices)            (Zip Code)

                                  801-539-0112                                
             (Registrant's telephone number, including area code)

                                     None                                    
(Former name, former address and former fiscal year, if changed since last
                                  report)

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

                       APPLICABLE ONLY TO ISSUERS INVOLVED
                        IN BANKRUPTCY PROCEEDINGS DURING
                            THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes____ No____

                      APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common  stock,  as of  November  28,  1998:  Common  Stock,  Par  Value  $1.00 -
274,935,153 shares.

<PAGE>


Part I. Financial Information

Item 1. Financial Statements


                             AMERICAN STORES COMPANY
                  Consolidated Condensed Statements of Earnings
                                   (unaudited)
                      (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                                           Thirteen Weeks Ended     

                                                                       October 31,               November 1,
                                                                          1998                      1997    
<S>                                                                    <C>                       <C>

Sales                                                                  $4,847,756                $4,647,465

Cost of merchandise sold, including
     warehousing and transportation expenses                            3,548,005                 3,412,766
                                                                       ----------                ----------

Gross profit                                                            1,299,751                 1,234,699

Operating and administrative expenses                                   1,102,028                 1,073,231
                                                                       ----------                ----------

Operating profit                                                          197,723                   161,468

Other(expense)income:
     Interest income                                                          737                     1,256
     Interest expense                                                     (57,050)                  (54,432)
                                                                       -----------               -----------
Net other(expense)income                                                  (56,313)                  (53,176)
                                                                       -----------               -----------

Earnings before income taxes                                              141,410                   108,292

Federal and state income taxes                                             60,665                    48,017
                                                                       ----------                ----------

Net earnings                                                           $   80,745                $   60,275
                                                                       ==========                ==========

Basic earnings per share                                               $     0.29                $     0.22
                                                                       ==========                ==========
Diluted earnings per share                                             $     0.29                $     0.22
                                                                       ==========                ==========

Average number of common shares outstanding
   used for basic earnings per share                                      274,830                   273,292
Dilutive common stock options                                               3,221                     1,809
                                                                          -------                   -------
Average number of common shares outstanding
   used for dilutive earnings per share                                   278,051                   275,101

Dividends per share                                                         $0.09                     $0.09
</TABLE>

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

See accompanying notes to consolidated condensed financial statements.


<PAGE>


                             AMERICAN STORES COMPANY
                  Consolidated Condensed Statements of Earnings
                                   (unaudited)
                      (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                                         Thirty-Nine Weeks Ended   

                                                                      October 31,               November 1,
                                                                          1998                      1997     
<S>                                                                   <C>                       <C>

Sales                                                                 $14,670,458               $14,158,283

Cost of merchandise sold, including
     warehousing and transportation expenses                           10,785,195                10,386,330
                                                                      -----------               -----------

Gross profit                                                            3,885,263                 3,771,953

Operating and administrative expenses                                   3,300,533                 3,217,134
Restructuring and impairment                                                                         13,400 
                                                                      -----------                -----------

Operating profit                                                          584,730                   541,419

Other(expense)income:
     Interest income                                                        2,556                     4,109
     Interest expense                                                    (176,138)                 (161,937)
     Shareholder related expenses                                                                   (33,913)
                                                                      -----------                -----------
Net other(expense)income                                                 (173,582)                 (191,741)
                                                                      ------------               ----------

Earnings before income taxes                                              411,148                   349,678

Federal and state income taxes                                            176,382                   165,221
                                                                      -----------                ----------

Net earnings                                                          $   234,766                $  184,457
                                                                      ===========                ==========

Basic earnings per share                                              $     0.86                 $     0.67
                                                                      ==========                 ==========
Diluted earnings per share                                            $     0.85                 $     0.66
                                                                      ==========                 ==========

Average number of common shares outstanding
   used for basic earnings per share                                      274,403                   277,355
Dilutive common stock options                                               2,234                     1,498
                                                                          -------                   -------
Average number of common shares outstanding
   used for dilutive earnings per share                                   276,637                   278,853

Dividends per share                                                         $0.27                     $0.26
</TABLE>

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

See accompanying notes to consolidated condensed financial statements.



<PAGE>


                             AMERICAN STORES COMPANY
                      Consolidated Condensed Balance Sheets
                                   (unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                     October 31,                 January 31,
                                                                         1998                        1998       
<S>                                                                  <C>                         <C>

Assets
Current Assets:
  Cash and cash equivalents                                          $   42,974                  $   47,794
  Inventories                                                         1,753,633                   1,714,229
  Other current assets                                                  442,613                     499,757
                                                                     ----------                  ----------

    Total current assets                                              2,239,220                   2,261,780

Property,   plant  and  equipment  and  property
  under  capital  leases,   less  accumulated
  depreciation  and  amortization of $2,374,626
  on October 31, 1998  and $2,552,723 on
  January 31, 1998                                                    4,362,267                   4,260,921

Goodwill                                                              1,586,651                   1,611,812
Other assets                                                            490,863                     401,502
                                                                     ----------                  ----------
    Assets                                                           $8,679,001                  $8,536,015
                                                                     ==========                  ==========

Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable                                                     $1,243,479                  $1,186,845
Other current liabilities                                               714,315                     833,554
Current maturities of long-term debt and
  capital lease obligations                                              41,828                     100,935
                                                                     ----------                  ----------
    Total current liabilities                                         1,999,622                   2,121,334

Other liabilities                                                       847,067                     903,629
Long-term debt and obligations under capital
  leases, less current maturities                                     3,335,799                   3,201,970

Shareholders' Equity - shares outstanding of
  274,920,477 on October 31, 1998 and
  273,606,510 on January 31, 1998                                     2,496,513                   2,309,082
                                                                     ----------                  ----------
    Liabilities and Shareholders' Equity                             $8,679,001                  $8,536,015
                                                                     ==========                  ==========
</TABLE>


------------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.

<PAGE>


                             AMERICAN STORES COMPANY
                 Consolidated Condensed Statements of Cash Flows
                                   (unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                          Thirty-Nine Weeks Ended    

                                                                         October 31,              November 1,
                                                                            1998                     1997    
<S>                                                                       <C>                     <C>

Cash Flows from Operating Activities:
Net earnings                                                              $234,766                $184,457
Adjustments to reconcile net earnings to net
  cash provided by operating activities:
    Depreciation and amortization                                          367,042                 347,561
    Net (gain) on asset sales                                              (12,935)                 (3,304)
    Changes in operating assets and liabilities                           (204,633)                174,825
                                                                          --------                --------
Total adjustments                                                          149,474                 519,082  
                                                                          --------                -------- 
Net cash provided by operating activities                                  384,240                 703,539  
                                                                          --------                -------- 

Cash Flows from Investing Activities:
Expended for property, plant and equipment                                (522,147)               (700,099)
Proceeds from sale of other assets                                         104,648                  38,363 
                                                                          --------                ---------
Net cash (used in) investing activities                                   (417,499)               (661,736)
                                                                          --------                --------

Cash Flows from Financing Activities:
Issuance of new debt                                                       145,000                 500,000
Payment of long-term borrowing                                             (50,000)               (343,000)
Net (decrease) increase in borrowings                                      (19,226)                291,082
Other changes in equity                                                     26,687                  34,985
Repurchase of common stock from major stockholder                                                 (550,000)
Issuance of common stock for overallotments                                                         95,914
Cash dividends                                                             (74,022)                (72,443)
                                                                          --------                --------
Net cash provided by (used in)
   financing activities                                                     28,439                 (43,462)

Net (decrease) in cash and
  cash equivalents                                                          (4,820)                 (1,659)
Cash and cash equivalents:
  Beginning of year                                                         47,794                  37,467
                                                                          --------                --------
  End of quarter                                                          $ 42,974                $ 35,808 
                                                                          ========                =========

Supplementary information - Statement of Cash Flows:

Cash paid during the year for:
Interest (net of amounts capitalized)                                    $ 170,507               $ 149,723
Income taxes, net of refunds                                             $ 168,614               $ 205,886
</TABLE>



<PAGE>


                             AMERICAN STORES COMPANY
              Notes to Consolidated Condensed Financial Statements
                                   (unaudited)
                                October 31, 1998


Basis of Presentation

In the opinion of management,  the accompanying unaudited consolidated condensed
financial  statements  contain all normal  recurring  adjustments  necessary  to
present  fairly the  financial  position  of  American  Stores  Company  and its
subsidiaries  as of October 31, 1998 and January 31, 1998 and the results of its
operations  for the thirteen  weeks ended  October 31, 1998 and November 1, 1997
and results of operations and cash flows for the thirty-nine weeks ended October
31, 1998 and November 1, 1997. The operating results for the interim periods are
not necessarily  indicative of results for a full year. For a further discussion
of the Company's  accounting  policies,  please refer to the Company's Form 10-K
for the fiscal year ended January 31, 1998.

Net Earnings Per Share

Earnings  per share  amounts are  calculated  in  accordance  with  Statement of
Financial  Accounting  Standards  No. 128,  Earnings Per Share.  

Employee Stock Purchase Plan

During the  quarter,  385,641  shares were  issued  under the ESPP at $20.32 per
share and 783,746 shares were issued  year-to-date at an average price of $19.33
per share.  As of September  30, 1998,  purchases of common stock under the ESPP
have been discontinued.

Debt

On September 22, 1998, the Company entered into a $300 million  revolving credit
agreement  with a financial  institution.  The agreement  bears  interest at the
higher of 0.50% above the latest  Federal  Funds Rate or the rate of interest in
effect  as  publicly  announced  by  Bank of  America  in San  Francisco  as its
reference  rate,  and  terminates  on the  earlier of i) the  effective  date of
consummation  of the Merger (as  defined  below),  ii) the date which is 30 days
after the date the Merger Agreement is terminated, or iii) July 1, 1999.

On March 19, 1998, the Company issued $45 million of notes under the outstanding
Series B Medium Term Note  Program.  On March 30,  1998,  the Company  issued an
additional  $100  million of notes  under the same  Program.  The $45 million of
notes  bear  interest  at a rate of 6.5% and  mature  March 20,  2008.  The $100
million of notes bear  interest at  a rate of  7.1% and  mature  March 20, 2028.
Proceeds  were  used to  refinance  short-term  debt and for  general  corporate
purposes.

During  the first  quarter  of 1998,  the  Company  repaid  $50  million  of its
outstanding  Series A Medium  Term Notes which had an average  interest  rate of
8.38%.

During 1997 the Company entered into a $100 million treasury rate lock agreement
for the purpose of hedging the  interest  rate on a portion of debt to be issued
under the Company's universal shelf registration  statement.  In March 1998, the
treasury lock was terminated in connection  with the issuance of $100 million of
notes under the registration statement.  The Company realized a net loss of $1.0
million,  which is being  amortized  over the term of the debt as an addition to
interest expense.

Part I - Financial Information (continued)

Notes to Consolidated Condensed Financial Statements (continued)


Repurchase of Common Stock

On April 8, 1997, the Company (i) repurchased  24.4 million shares of its common
stock from the family of L.S.  Skaggs,  the former Chairman of the Company,  and
certain Skaggs family and charitable  trusts (the Selling  Stockholders)  for an
aggregate price of $550 million and (ii) sold 4.6 million shares of common stock
for net proceeds of $95.9 million  pursuant to the exercise of an  overallotment
option by the  underwriters in connection with a public offering of 30.8 million
shares by the Selling  Stockholders.  On April 8, 1997 the Company also recorded
non-recurring  charges  totaling $33.9 million,  or $0.11 per share,  related to
expenses  incurred  by the Selling  Stockholders  which were  reimbursed  by the
Company.

New Accounting Standard

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 133 "Accounting for Derivative  Instruments
and Hedging  Activities."  The statement  requires that an entity  recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those instruments at fair value. The Statement is effective
for all fiscal  quarters of fiscal  years  beginning  after June 15,  1999.  The
Company has not yet determined what effect,  if any, this statement will have on
the Company.

Merger Agreement

On August 2, 1998 the Company  entered into an Agreement and Plan Of Merger (the
Merger  Agreement)  between the Company,  Albertson's,  Inc.  (Albertson's)  and
Abacus Holdings,  Inc., a wholly-owned  subsidiary of Albertson's  (Merger Sub),
pursuant to which  Merger Sub would be merged with and into the Company with the
Company surviving the merger as a wholly-owned  subsidiary of Albertson's.  Each
share of the Company's Common Stock would be converted into the right to receive
0.63  shares  of  Albertson's  Common  Stock,  with  cash  paid  in  lieu of any
fractional  shares.  The  transaction  is  intended  to  qualify as a pooling of
interests  for  accounting  purposes and as a tax-free  reorganization  for U.S.
federal  income tax  purposes.  The  merger is  subject  to certain  conditions,
including, among others, regulatory approvals and other customary conditions.

In connection with the Merger  Agreement,  the Company and  Albertson's  entered
into  reciprocal  stock  option  agreements  pursuant  to which (a) the  Company
granted  Albertson's  an option to purchase up to 54.5 million shares of Company
Common  Stock  (but in no event  more than  19.9% of the  outstanding  shares of
Company Common Stock at the time of exercise)  under certain  circumstances  and
upon the terms and  conditions  set forth in the stock option  agreement,  at an
exercise  price of $30.24 per share and (b)  Albertson's  granted the Company an
option to purchase up to 48.8 million shares of Albertson's Common Stock (but in
no event more than 19.9% of the outstanding  shares of Albertson's  Common Stock
at the time of  exercise)  under  certain  circumstances  and upon the terms and
conditions  set forth in the stock  option  agreement  at an  exercise  price of
$48.00 per share.

All options and certain  shares of restricted  stock granted under the Company's
stock  option and stock  award  plans will  automatically  vest upon a change of
control,  which is defined in such plans as  stockholder  approval of the Merger

Part I - Financial Information (continued)

Notes to Consolidated Condensed Financial Statements (continued)


or, for  options  granted  under  the  Company's  1997  Stock Option  and  Stock
Award Plan and the 1997 Stock Plan for Non-Employee  Directors (the 1997 Plans),
upon the later of stockholder approval or regulatory approval of the Merger. All
options  outstanding  on the  consummation  of the merger will be converted into
options to acquire  shares of  Albertson's  Common  Stock.  In addition,  option
holders  have the right (an LSAR),  during an  exercise  period of up to 60 days
after the  occurrence of a change of control (but prior to  consummation  of the
Merger),  to elect to  surrender  all or part of their  options in exchange  for
shares of  Albertson's  Common  Stock  having a value equal to the excess of the
change  of  control  price  over  the  exercise  price  (which  shares  will  be
deliverable  upon the Merger).  For those purposes,  the change of control price
will be the higher of (i) the highest  reported  sales  price  during the 60-day
period  ending prior to respective dates of the "change of control", or (ii) the
price paid to stockholders in the merger, subject to adjustment in both cases if
the exercise period is less than 60 days. If the Merger  Agreement is terminated
prior to  consummation  of the Merger,  option  holders who exercise  LSARs will
receive cash in lieu of Albertson's Common Stock.


Subsequent Event

On November  12,  1998,  the  stockholders  of American  Stores and  Albertson's
approved the Merger Agreement. Approval of the Merger Agreement by the Company's
stockholders accelerated the vesting of approximately 10.2 million stock options
(approximately 60% of the outstanding  stock options) and  permitted the holders
of these options to exercise LSARs.

The  exercisability  of  approximately  10.2  million  LSARs will  result in the
Company recognizing an estimated $150 million non-recurring  compensation charge
during the fourth fiscal quarter of 1998,  based on an average exercise price of
$19.23 and  assuming a change of control  price of $33.875  (the  highest  sales
price of the  Company's  common  stock  during  the 60-day  period  prior to the
Company's  special  stockholders   meeting),   whether  or  not  the  Merger  is
consummated.  LSARs relating to the  approximately  6.6 million  remaining stock
options will become  exercisable upon regulatory  approval of the Merger,  which
would result in  recognition  of an additional  charge  estimated at $67 million
based upon an average  exercise price of $23.72 and assuming a change of control
price of $33.875.  The actual  change of control price used to measure the value
of the LSARs will not be  determinable  until the date the Merger is consummated
or the Merger Agreement is terminated. Additional charges would be recognized in
the quarter in which the Merger is consummated if the change of control price is
higher than the amounts  assumed for purposes of the  foregoing  estimates.  For
every  dollar the change of control  price  exceeds  $33.875,  the Company  will
recognize an additional non-recurring compensation charge of approximately $16.8
million. If the merger is consummated, the foregoing charges will be non-cash.

<PAGE>


Part I - Financial Information (continued)

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


Results of Operations

Total  sales  for the  third  quarter  of 1998  increased  4.3% to $4.8  billion
compared to third quarter 1997 total sales of $4.6 billion.  Year-to-date  total
sales  increased  3.6% in 1998 to $14.7  billion  compared to 1997  year-to-date
sales of $14.2 billion. The increase is primarily due to increased retail square
footage from  capital  spending  over the past few years and  stronger  pharmacy
sales. Net retail square footage increased 3.6% from third quarter 1997 to third
quarter 1998.  Comparable  store sales (sales from stores that have been open at
least  one  year,  including  replacement  stores)  increased  1.3% in the third
quarter and 1.4% year-to-date  1998 over the  corresponding  periods of 1997 due
primarily  to  successful  marketing  and  advertising  promotions  and stronger
pharmacy sales.  Pharmacy department comparable sales in 1998 increased 17.9% in
the third quarter and 16.6%  year-to-date over the prior year periods.  Pharmacy
departments have benefited from new drug introductions, inflation, and continued
growth in managed care.

Gross profit as a percent of sales  increased  to 26.8% in the third  quarter of
1998 compared to 26.6% in the third quarter of 1997.  Year-to-date  gross profit
as a percent of sales  decreased in 1998 to 26.5% compared to 26.6% in 1997. The
third  quarter  gross profit  percentage  increase was  primarily  due to better
promotional  spending  and  improved  product mix in the food  departments.  The
decreases in year-to-date gross profit as a percent of sales from the prior year
were due mainly to lower pharmacy  margins  compared to the prior year caused by
the shift to third-party  payors from cash  customers,  increased  sales of new,
lower  margin  drugs and the impact of inflation on gross profit as a percent of
sales.

Operating and  administrative  expenses as a percent of sales decreased to 22.7%
in the third  quarter of 1998 from 23.1% in 1997.  Year-to-date,  operating  and
administrative  expenses  as a  percent  of  sales  decreased  to  22.5% in 1998
compared  to 22.8% in  1997.  Year-to-date  1997  operating  and  administrative
expenses  included  costs related to the sale in the first quarter of a division
of the Company's communications subsidiary totaling $13.4 million. The decreases
as a percent to sales from the prior year were primarily  attributable  to lower
self  insurance  risk expense,  improved  labor  management  and better  overall
expense control.

Total  operating  profit for the third  quarter 1998  increased  22.5% to $197.7
million  compared to $161.5  million in the third quarter of 1997.  Year-to-date
operating  profit was $584.7 million in 1998 compared to $541.4 million in 1997,
an increase of 8.0%. Operating profit was 4.1% of sales in the third quarter and
4.0%  year-to-date  1998  compared  to  3.5%  in  the  third  quarter  and  3.8%
year-to-date  1997. The increase in 1998 operating profit as a percent of sales,
excluding the 1997 one-time  charge,  is due primarily to improved gross margins
and lower operating expenses.

Interest  expense  was $57.1  million in the third  quarter of 1998  compared to
$54.4  million  in the third  quarter  of 1997.  Year-to-date  interest  expense
totaled $176.1  million in 1998 compared to $161.9 million in 1997.  Outstanding
debt levels were higher during the third quarter and year-to-date 1998 primarily
due to the continued capital  expenditure program and the financing of the stock
repurchase  (Stock  Repurchase)  from the Company's  former chairman and related
parties in April of 1997.


Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations (continued)


The  Company's  effective  income  tax rate was 42.9% in the third  quarter  and
year-to-date  1998 compared to 44.3% and 47.2% for the same periods in 1997. The
prior year  effective  tax rates were higher due to the one-time  non-deductible
expenses related to the Stock Repurchase. The year-to-date effective tax rate in
1997 excluding one-time items was 43.4%.

Diluted  earnings per share amounted to $0.29 per share in the third quarter and
$0.85  year-to-date  1998  compared  to $0.22  and  $0.66 per share for the same
periods in the prior year.

The Company recorded special charges aggregating  approximately  $100.0 million,
before  taxes,  or  $0.21  per  share,  during  1996  related  primarily  to its
re-engineering  program  initiatives.  As of the end of the second quarter 1998,
the total  reserve  had been  utilized  without  any  necessary  adjustments  or
modifications.

Liquidity and Capital Resources

Cash  provided by  operating  activities  of $384.2  million  year-to-date  1998
compares to $703.5 million in the same period of 1997. The decrease is primarily
attributable to the large amount of cash provided by operating activities during
1997  as a  result  of the  implementation  of  the  Company's  working  capital
initiatives.  The Company initially realized significant cash flow benefits as a
result of the working  capital  initiatives  which have tapered off over time as
payables have become better managed and inefficiencies have been eliminated. The
working  capital  initiatives  are  continuing  in 1998  and  cash  provided  by
operating  activities  during  the  third  quarter  of 1998 was in line with the
Company's expectations. The balance of the change is due primarily to changes in
the other  components  of working  capital and is not believed to be  indicative
of long-term trends.

Cash capital expenditures  year-to-date 1998 and 1997 amounted to $522.1 million
and $700.1 million, respectively. Total capital expenditures,  including the net
present value of leases,  amounted to $629.7 million in 1998, compared to $842.1
million in 1997.  For the third quarter of 1998,  21 new stores were opened,  12
stores were  closed and 31 stores  were  remodeled.  Year-to-date  1998,  47 new
stores were opened, 36 stores were closed and 49 stores were remodeled.  Capital
expenditures for fiscal 1998 are expected to be approximately $1.0 billion.  The
Company  currently  plans to open a total of 65 new stores and remodel 70 stores
in 1998.

On September 22, 1998, the Company entered into a $300 million  revolving credit
agreement  with a financial  institution.  The agreement  bears  interest at the
higher of 0.50% above the latest  Federal  Funds Rate or the rate of interest in
effect  as  publicly  announced  by  Bank of  America  in San  Francisco  as its
reference  rate,  and  terminates  on the  earlier of i) the  effective  date of
consummation  of the Merger (as  defined  below),  ii) the date which is 30 days
after the date the Merger Agreement is terminated, or iii) July 1, 1999.

On March 19, 1998, the Company issued $45 million of notes under the outstanding
Series B Medium Term Note  Program.  On March 30,  1998,  the Company  issued an
additional  $100  million of notes  under the same  Program.  The $45 million of
notes  bear  interest  at a rate of 6.5% and  mature  March 20,  2008.  The $100
million of notes bear  interest  at a rate of 7.1% and  mature  March 20,  2028.
Proceeds  were  used to  refinance  short-term  debt and for  general  corporate
purposes.  

Item 2. Management's  Discussion and Analysis of Financial  Condition
        and Results of Operations (continued)

During  the first  quarter  of 1998,  the  Company  repaid  $50  million  of its
outstanding  Series A Medium  Term Notes which had an average  interest  rate of
8.38%.

During 1997 the Company entered into a $100 million treasury rate lock agreement
for the purpose of hedging the  interest  rate on a portion of debt to be issued
under the Company's universal shelf  registration statement.  In March 1998, the
treasury lock was  terminated  in connection  with the issuance of $100  million
of notes  under the registration statement.  The Company  realized a net loss of
$1.0 million, which is being amortized over the term of  the debt as an addition
to interest expense.

During  the first  quarter  of 1998,  the  Company  repaid  $50  million  of its
outstanding  Series A Medium  Term Notes which had an average  interest  rate of
8.38%.

The net increase in debt of $74.7 million in the first thirty-nine weeks of 1998
is compared to a net increase of $448.1  million in the same period of 1997. The
increase in 1997 was due primarily to the Stock Repurchase.

The Company believes that its cash flow from operations,  supplemented by credit
available under the Company's existing credit  facilities,  availability under a
universal  shelf  registration  statement,  as well as its ability to  refinance
debt, will be adequate to meet its presently identifiable cash requirements.

New Accounting Standard

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 133 "Accounting for Derivative  Instruments
and Hedging  Activities."  The statement  requires that an entity  recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those instruments at fair value. The Statement is effective
for all fiscal  quarters of fiscal  years  beginning  after June 15,  1999.  The
Company has not yet determined what effect,  if any, this statement will have on
the Company.

Year 2000

In 1996,  the Company  formed the Year 2000  Steering  Committee to identify the
areas in which the Year 2000  issue  could  adversely  affect the  Company,  and
develop and implement a comprehensive program to avoid or minimize such effects.
The Committee consists of members of senior management,  information technology,
legal,  and internal  auditing  departments.  The Committee  reports directly to
senior  management and regularly advises the Company's Board of Directors on its
progress.

The  Committee  divided  the universe  of potential  Year 2000  issues  into two
categories,  (i) internal exposure issues, consisting of potential problems with
the systems and equipment  used within the Company,  and (ii) external  exposure
issues, consisting of potential problems with the systems and equipment of third
parties with whom the Company  interfaces or on whom the Company  relies for the
provision of critical products or services. To date, the Committee has completed
the following phases of its program with respect to both categories: inventoried
and assessed the exposure  associated with each issue, formed specialized teams,
developed  software and systems  solutions,  tested and certified the solutions,
implemented substantially all such software and systems solutions, and contacted
and  evaluated  responses  from  third  parties  with  respet to their Year 2000
issues. The remaining phases involve  implementation of the remaining solutions,
the development of contingency plans, and follow up on third party inquiries and
evaluations.

With respect to the internal exposure category, the Company identified potential
Year 2000 issues in each of the key areas of its business which

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations (continued)

utilize  computer  software  programs  and  operating  systems.  The Company and
outside contractors  developed solutions for each component which was identified
as  "non-compliant"  and implemented  the steps believed  necessary to make such
systems Year 2000  compliant.  The Company has completed the  implementation  of
substantially all the new systems/fixes in the internal exposure  category.  The
Company  anticipates that the implementation of remaining  systems/fixes will be
completed by the second quarter of 1999. The Company has also identified several
items of equipment such as cash  registers,  scales,  and copy machines that use
embedded chips that may not be Year 2000 compliant.  The Company is taking steps
to make them Year 2000 compliant by the second quarter of 1999.

With  respect to the  external  exposure  category,  the Company has  previously
provided Year 2000  questionnaires/certification  forms to substantially all the
vendors, financial institutions, suppliers and other third parties with whom the
Company  conducts  business and is in the process of  evaluating  responses  and
providing follow up  communications  to those third parties that did not respond
or did not  respond  satisfactorily  to the  initial  mailing.  Based on initial
results,  the Company  believes  that a  substantial  majority  of the  vendors,
suppliers,  financial institutions and other third parties that provide goods or
services to the Company of a type that are critical to its operations are taking
steps to make their systems Year 2000  compliant on a timely basis.  The Company
believes  that  the  most  significant   third  parties  from  which  Year  2000
certifications  have  not  been  obtained  are the  public  utilities  providing
electric,  gas and other  utilities to the Company's  many store,  warehouse and
office  locations.  In addition,  there are several small suppliers of goods and
services, primarily local suppliers or suppliers of specialized goods on a small
scale,  that have not responded to the  Company's  inquiries and that may not be
taking the  requisite  actions to avoid Year 2000  issues.  In most  cases,  the
Company  believes  that if Year 2000  problems  develop with the systems of such
small  suppliers,  the Company will be able to obtain  comparable  products from
other  sources or operate  without such  products  until the problems  have been
resolved.  The Company is continuing  its efforts to encourage  third parties to
address  the  Year  2000  issue  and  certify  to the  Company  that  they  have
established a plan to make their systems Year 2000 compliant.

The Company  estimates that its total cost to resolve  internal  exposure issues
will be approximately $25 million,  substantially all of which has been spent to
date. The Company estimates that total direct costs to resolve external exposure
issues will be approximately $4.1 million,  of which  approximately $2.7 million
has been spent to date and the  remaining  $1.4 million will be spent during the
fourth  quarter  of 1998 and the  first  quarter  of 1999.  All of the Year 2000
expenses are being funded through operating cash flows.

The  Company is  dependent  on the proper  operation  of its  internal  computer
systems  and  software  for  several  key  aspects  of its  business  operations
including  store  operations,   merchandise  purchasing,  inventory  management,
pricing,   sales,   warehousing,   transportation,   financial   reporting   and
administrative  functions. The Company is also dependent on the proper operation
of the computer systems and software of third parties  providing  critical goods
and   services  to  the  Company   including   vendors,   utilities,   financial
institutions, government entities and others. The failure or malfunction of such
internal or external  systems could impair the Company's  ability to operate its
business in the ordinary course and could have a material, adverse effect on its
results of operations.

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations (continued)


Management  of the  Company  believes  it has an  effective  program in place to
resolve Year 2000 issues in a timely manner.  However,  since it is not possible
to anticipate all future  outcomes,  especially when third parties are involved,
there  could  be  circumstances  in  which  the  Company's  operations  would be
disrupted  and it would be unable to  service  customers  or  maintain  adequate
inventory levels. The amount of lost revenue and potential liability  associated
with  claims  related  to the  disruption  of the  Company's  business  and  its
inability to deliver products cannot be estimated at this time.

The Company does not have a  contingency  plan in place but intends to formulate
plans with respect to its most  critical  applications  during the first half of
1999.  Contingency plans are expected to involve manual  workarounds,  increased
inventories of certain products or types of products, and extra staffing.

Environmental

The Company has identified environmental  contamination at certain of its store,
warehouse, office and manufacturing facilities (related to current operations as
well as  previously  disposed  of  businesses)  which are  primarily  related to
underground  petroleum storage tanks (USTs) and ground water contamination.  The
Company  conducts an on-going  program for the  inspection and evaluation of new
sites proposed to be acquired by the Company and the  remediation/monitoring  of
contamination at existing and previously  owned sites.  The Company  anticipates
that  all  USTs  will  be in  compliance  with  1998  UST  upgrade  requirements
established  by the  Environmental  Protection  Agency.  Although  the  ultimate
outcome and  expense of  environmental  remediation  is  uncertain,  the Company
believes that the required  costs of  remediation,  UST upgrades and  continuing
compliance with  environmental  laws will not have a material  adverse effect on
the financial condition or operating results of the Company.

Merger Agreement

On August 2, 1998 the Company  entered into an Agreement and Plan Of Merger (the
Merger  Agreement)  between the Company,  Albertson's,  Inc.  (Albertson's)  and
Abacus Holdings,  Inc., a wholly-owned  subsidiary of Albertson's  (Merger Sub),
pursuant to which  Merger Sub would be merged with and into the Company with the
Company surviving the merger as a wholly-owned  subsidiary of Albertson's.  Each
share of the Company's Common Stock would be converted into the right to receive
0.63  shares  of  Albertson's  Common  Stock,  with  cash  paid  in  lieu of any
fractional  shares.  The  transaction  is  intended  to  qualify as a pooling of
interests  for  accounting  purposes and as a tax-free  reorganization  for U.S.
federal  income tax  purposes.  The  merger is  subject  to certain  conditions,
including, among others, regulatory approvals and other customary conditions.

In connection with the Merger  Agreement,  the Company and  Albertson's  entered
into  reciprocal  stock  option  agreements  pursuant  to which (a) the  Company
granted  Albertson's  an option to purchase up to 54.5 million shares of Company
Common  Stock  (but in no event  more than  19.9% of the  outstanding  shares of
Company Common Stock at the time of exercise)  under certain  circumstances  and
upon the terms and  conditions  set forth in the stock option  agreement,  at an
exercise  price of $30.24 per share and (b)  Albertson's  granted the Company an
option to purchase up to 48.8 million shares of Albertson's Common Stock (but in
no event more than 19.9% of the outstanding  shares of Albertson's  Common Stock
at the  time of exercise)  under  certain circumstances  and upon the  terms and

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations (continued)


conditions  set forth  in the  stock option  agreement at an  exercise  price of
$48.00 per share.

All  options  and  certain  shares of   restricted   stock  granted   under  the
Company's  stock  option and stock  award plans will  automatically  vest upon a
change of control, which is defined in such plans as stockholder approval of the
Merger or, for options  granted under the Company's  1997 Stock Option and Stock
Award Plan and the 1997 Stock Plan for Non-Employee  Directors (the 1997 Plans),
upon the later of stockholder approval or regulatory approval of the Merger. All
options  outstanding  on the  consummation  of the merger will be converted into
options to acquire  shares of  Albertson's  Common  Stock.  In addition,  option
holders  have the right (an LSAR),  during an  exercise  period of up to 60 days
after the  occurrence of a change of control (but prior to  consummation  of the
Merger),  to elect to  surrender  all or part of their  options in exchange  for
shares of  Albertson's  Common  Stock  having a value equal to the excess of the
change  of  control  price  over  the  exercise  price  (which  shares  will  be
deliverable  upon the Merger).  For those purposes,  the change of control price
will be the higher of (i) the highest  reported  sales  price  during the 60-day
period ending prior to respective dates of the "change of control",  or (ii) the
price paid to stockholders in the merger, subject to adjustment in both cases if
the exercise period is less than 60 days. If the Merger  Agreement is terminated
prior to  consummation  of the Merger,  option  holders who exercise  LSARs will
receive cash in lieu of Albertson's Common Stock.

Subsequent Event

On November  12,  1998,  the  stockholders  of American  Stores and  Albertson's
approved the Merger Agreement. Approval of the Merger Agreement by the Company's
stockholders accelerated the vesting of approximately 10.2 million stock options
(approximately 60% of the outstanding stock  options) and permitted  the holders
of these options to exercise LSARs.

The  exercisability  of  approximately  10.2  million  LSARs will  result in the
Company recognizing an estimated $150 million non-recurring  compensation charge
during the fourth fiscal quarter of 1998,  based on an average exercise price of
$19.23 and  assuming a change of control  price of $33.875  (the  highest  sales
price of the  Company's  common  stock  during  the 60-day  period  prior to the
Company's  special  stockholders   meeting),   whether  or  not  the  Merger  is
consummated.  LSARs relating to the  approximately  6.6 million  remaining stock
options will become  exercisable upon regulatory  approval of the Merger,  which
would result in  recognition  of an additional  charge  estimated at $67 million
based upon an average  exercise price of $23.72 and assuming a change of control
price of $33.875.  The actual  change of control price used to measure the value
of the LSARs will not be  determinable  until the date the Merger is consummated
or the Merger Agreement is terminated. Additional charges would be recognized in
the quarter in which the Merger is consummated if the change of control price is
higher than the amounts  assumed for purposes of the  foregoing  estimates.  For
every  dollar the change of control  price  exceeds  $33.875,  the Company  will
recognize an additional non-recurring compensation charge of approximately $16.8
million. If the merger is consummated, the foregoing charges will be non-cash.

Cautionary Note

This  report  contains  certain  forward-looking  statements  about  the  future
performance of the  Company and  about its pending  merger transaction which are

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations (continued)


based on  management's  assumptions  and  beliefs  in  light of the  information
currently  available  to it. The  Company  assumes no  obligation  to update the
information  contained herein. These  forward-looking  statements are subject to
uncertainties  and other  factors  that  could  cause  actual  results to differ
materially  from such  statements  including,  but not limited  to:  competitive
practices and pricing in the food and drug industry  generally and  particularly
in  the  Company's  principal  markets;  the  implementation  of  the  Company's
re-engineering   initiatives  in  accordance  with  the  currently  contemplated
schedule and budget;  the  Company's  relationships  with its  employees and the
terms of future collective bargaining agreements; the costs and other effects of
legal and  administrative  cases  and  proceedings;  the  nature  and  extent of
continued consolidation in the food and drug industry;  changes in the financial
markets  which may affect the  Company's  cost of capital and the ability of the
Company to access the public debt and equity  markets to refinance  indebtedness
and fund the Company's capital expenditure program on satisfactory terms; supply
or quality control problems with the Company's  vendors;  changes in the rate of
inflation;  changes in economic  conditions  which affect the buying patterns of
the Company's customers;  the ability of the Company and its vendors,  financial
institutions  and  others to  resolve  Year 2000  processing  issues in a timely
manner;  changes in state or federal  legislation  or  regulation;  diversion of
management's  attention from other business  concerns to the assimilation of the
merged   operations  as   contemplated   by  the  pending  merger   transaction;
uncertainties  and  difficulties  relating  to the  integration  of  the  merged
companies  including the assimilation and retention of employees,  challenges in
retaining  customers  and  potential  adverse  short-term  effects on  operating
results;  and delays or  obstacles in obtaining  required  regulatory  approvals
and/or other  conditions  necessary to  satisfactorily  close the pending merger
transaction.



<PAGE>


Part II - Other Information


Item 1.       Legal  Proceedings --  For  a  description  of legal  proceedings,
              please  refer  to  the  footnote   entitled  "Legal   Proceedings"
              contained  in  the  Notes  to  Consolidated  Financial  Statements
              section  of the  Company's  Form 10-K for the  fiscal  year  ended
              January 31, 1998.

              The  Company is also  involved in various  claims,  administrative
              proceedings and other legal  proceedings  which arise from time to
              time in  connection  with the  ordinary  conduct of the  Company's
              business.

Item 2.       Changes in Securities -- None

Item 3.       Defaults upon Senior Securities -- None

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

               On November 12, 1998, the  stockholders of the Company voted on a
               proposal  to approve and adopt an  Agreement  and Plan of Merger,
               dated as of  August  2,  1998  among  Albertson's,  Inc.,  Abacus
               Holdings,  Inc.,  a  Delaware  corporation  and  a  wholly  owned
               subsidiary of Albertson's, and American Stores Company.

               For                      Against                      Abstain
               224,746,602              1,869,320                    587,764

Item 5.       Other Information -- None

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

              (a)    Exhibits --

                     10.1      Amendment to  American Stores Company  1997 Stock
                               Option and  Stock Award Plan, dated as of October
                               8, 1998.
                     10.2      Amendment to  American Stores Company  1989 Stock
                               Option and  Stock Award Plan, dated as of October
                               8, 1998.
                     10.3      Amendment to  American Stores Company  1985 Stock
                               Option and  Stock Award Plan, dated as of October
                               8, 1998.
                     10.4      Amendment to American Stores Company Supplemental
                               Executive Retirement  Plan 1998 Retirement  dated
                               as of September 15, 1998.
                     27.1      Financial Data Schedule.

                     (b) Reports on Form 8-K filed during the quarter --

                           Filing of the Press  Release  issued on November  12,
                           1998 announcing that the  stockholders of the Company
                           had  approved and adopted the  Agreement  and Plan of
                           Merger,  dated  August 2,  1998,  among  Albertson's,
                           Inc., Abacus Holdings, Inc., and the Company.







<PAGE>



                                   SIGNATURES


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





                                            American Stores Company         
                                                  (Registrant)





Dated December 11, 1998                           /s/ Neal J. Rider             
                                                      Neal J. Rider
                                               Chief Financial Officer
                                            (Principal Financial Officer)




Dated December 11, 1998                        /s/ Kathleen E. McDermott  
                                                   Kathleen E. McDermott
                                    Chief Legal Officer and Assistant Secretary





Dated December 11, 1998                        /s/ Bradley M. Vierig     
                                                   Bradley M. Vierig
                                        Senior Vice President and Controller
                                             (Chief Accounting Officer)