<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-K405

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                    FOR THE FISCAL YEAR ENDED AUGUST 2, 1997
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                 For The Transition Period From _____ To _____

                        COMMISSION FILE NUMBER: 1-10767

                       VALUE CITY DEPARTMENT STORES, INC.
             (Exact name of registrant as specified in its charter)

           OHIO                                        NO. 31-1322832
  (State or other jurisdiction             (I.R.S. Employer Identification No.)
of incorporation or organization)

 3241 WESTERVILLE ROAD, COLUMBUS, OHIO                     43224
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:  (614) 471-4722

Securities registered pursuant to Section 12(b) of the Act:
Title of each class:                 Name of each exchange on which registered:
Common Shares, without par value     New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:    None

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 the
filing requirements for at least the past 90 days. YES X NO ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

Aggregate market value of voting stock held by non-affiliates of the
registrant, 9,354,911 Common Shares, based on the $8.0625 closing sale price on
October 27, 1997, was $75,423,970.

Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: 31,892,045 Common Shares
were outstanding at October 27, 1997.

                      DOCUMENTS INCORPORATED BY REFERENCE
Part III - Proxy Statement for 1997 Annual Meeting of Shareholders, in part, as
indicated.



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                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                        FORM
                                                                        10-K
                                                                       REPORT
ITEM NO.                                                                PAGE
--------                                                                ----
<S>                                                                        <C>
                                     PART I

1.  Business................................................................3
2.  Properties.............................................................13
3.  Legal Proceedings......................................................14
4.  Submission of Matters to a Vote of Security Holders....................14


                                     PART II

5.  Market for the Registrant's Common Equity and Related
       Stockholder Matters.................................................15
6.  Selected Financial Data................................................16
7.  Management's Discussion and Analysis of Financial Condition
       and Results of Operations...........................................17
7A. Quantitative and Qualitative Disclosures about Market Risk.............23
8.  Financial Statements and Supplementary Data............................23
9.  Changes in and Disagreements with Accountants on Accounting
       and Financial Disclosure............................................23


                                    PART III

10. Directors and Executive Officers of the Registrant.....................24
11. Executive Compensation.................................................24
12. Security Ownership of Certain Beneficial Owners and Management.........24
13. Certain Relationships and Related Transactions.........................24


                                     PART IV

14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.........25

Signatures.................................................................26


             TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULES

Independent Auditors' Report...............................................F-1
Consolidated Balance Sheets................................................F-3
Consolidated Statements of Income..........................................F-4
Consolidated Statements of Shareholders' Equity............................F-5
Consolidated Statements of Cash Flows......................................F-6
Notes to the Consolidated Financial Statements.............................F-7

SCHEDULES
II - Valuation and Qualifying Accounts.....................................S-1
Index to Exhibits..........................................................E-1
</TABLE>

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                                     PART I

ITEM 1            BUSINESS.

ORGANIZATION

         Value City Department Stores, Inc. ("VCDS") was incorporated on March
15, 1985 and was inactive until June 18, 1991 when it sold 8,025,000 Common
Shares in a public offering and issued 22,500,000 Common Shares to
Schottenstein Stores Corporation ("SSC") in exchange for substantially all of
the net assets of the Value City Department Store Division of SSC (the
"Division"). In connection with the acquisition of the Division, VCDS entered
into a number of agreements with SSC. These agreements are described in the
material incorporated by reference pursuant to Item 13 of this annual report on
Form 10-K.

         On September 18, 1992, VCDS acquired all of the outstanding stock of
GB Stores, Inc., a Pennsylvania corporation, from GB Stores, a Pennsylvania
limited partnership ("GB Partnership") in exchange for the issuance by VCDS to
GB Partnership of 1,312,500 Common Shares of VCDS (the "GB Acquisition"). GB
Partnership is an affiliate of SSC.

         The Company also operates the apparel, housewares and domestics
departments in two department stores in New Jersey pursuant to a license
agreement with The Valley Fair Corporation ("Valley Fair"), a subsidiary of
SSC.

         Two of the Company's department stores operated as partnerships owned
by the Company and the manager of the respective stores through July and
October 1995. During fiscal 1996 the Company bought the 25% minority interest
in the partnership stores for approximately $1,328,000 which was the net book
value of the minority interests in those partnerships.

         In July 1997, the Company entered into agreements with Mazel Stores,
Inc. ("Mazel") to create VCM, Ltd. ("VCM"), a 50/50 joint venture. VCM operates
the health and beauty aids and toy and sporting goods departments in the
Company's stores as licensed departments. The Company accounts for its fifty
percent interest in the joint venture under the equity method. See "Licensed
Departments."

         VCDS and its wholly owned subsidiaries are herein referred to
collectively as the "Company."

GENERAL

         The Company currently operates a chain of 94 department stores located
in Ohio and 14 other Midwestern and eastern states, principally under the name
"Value City." For over 80 years, the Company's strategy has been to provide
exceptional value by offering a broad selection of brand name merchandise at
prices substantially below conventional retail prices. The stores carry men's,

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women's and children's apparel, housewares, giftware, home furnishings, toys,
sporting goods, jewelry, shoes and health and beauty aids, with apparel
comprising over 60% of total sales. The Company operates large stores,
averaging 86,000 square feet, which allow it to offer over 90,000 different
items of merchandise similar to the items found in department, specialty and
discount stores.

         The Company's pricing strategy is supported by its ability to purchase
large quantities of goods in a variety of special buying opportunities. For
many years, the Company has also had a reputation in the marketplace as a
leading purchaser of buy-outs and manufacturers' closeouts.

BUSINESS STRATEGY

         The Company's strategy, to provide brand name merchandise
substantially below conventional retail prices, is reflected in its name "Value
City" and the Company's motto "Better Living for Less." Management believes
that Value City's large stores facilitate a full-line merchandise offering and
range of brands, which differentiate the Company from other off-price
retailers. The principal elements of the business strategy are discussed below.

MERCHANDISING

Selection

         Value City is a full-line, off-price retailer carrying men's, women's
and children's apparel, housewares, giftware, home furnishings, toys, sporting
goods, jewelry, shoes and health and beauty aids. Off-price retailing, as
distinguished from traditional full-price retailing and discount or off-brand
merchandise, is characterized by the purchase of primarily high quality brand
name merchandise, at prices below normal cost to retailers. A portion of the
cost savings is then passed on to customers through lower prices. The Company
strives to offer customers one-stop-shopping in terms of categories of
merchandise carried. The large physical size of the Company's stores
facilitates the offering of a wide range of merchandise categories with broad,
deep selections of goods within each category. The stores carry over 90,000
different items of merchandise similar to the items found in department,
specialty and discount stores.

         To improve store profitability and meet the changing needs of its
customers, the Company continuously refines its merchandise mix eliminating
less productive departments and introducing new merchandise categories. For
example, in 1997 the Company expanded its seasonal business such as Halloween
and Trim-A-Tree and expanded the giftware area in most stores by approximately
20% to 30%. To help provide the Company with a reliable source of predominantly
fashion merchandise, the Company has begun a private label program in certain
apparel categories.


         The following table sets forth relative contributions of each major
merchandise category to total sales.

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<TABLE>
<CAPTION>
                                                                       Percentage of Aggregate Sales Volume
                                                                                Fiscal Years Ended
                                                                                ------------------
                                                                          1997          1996       1995
                                                                          ----          ----       ----
<S>                                                                       <C>          <C>        <C>
Apparel and Ready-to-Wear - Includes Men's, Women's
   and Children's outerwear, suits, dresses, sportswear,
   sleepwear, underwear and accessories..............................      61.6%        62.2%      61.5%

Hard goods and Home Furnishings - Includes domestics, jewelry,
   housewares, giftware, small appliances, toys
   and sporting goods................................................      23.9         23.3       24.0

Licensed Departments - includes shoes, health and beauty
   and other incidental departments..................................      14.5         14.5       14.5
                                                                         ------       ------     ------
                                                                          100.0%       100.0%     100.0%
                                                                         ======       ======     ======
</TABLE>


         Customers are attracted to the Company's stores because of continuous
new offerings of value-priced merchandise acquired in special purchases. At the
same time, the Company maintains a broad and consistent range of goods in the
stores, purchases continuing lines of merchandise and offers some private label
goods to ensure constant availability of certain basic categories of
merchandise as well as current fashion trends.

Value Pricing

         The Company offers quality brand name merchandise at prices typically
50% to 70% below prices charged by department stores for similar items and at
prices comparable to or lower than prices charged by other off-price retailers.
The Company can offer exceptional values because its buyers purchase
merchandise directly from manufacturers and other vendors at prices
substantially below those generally paid by conventional retailers. See
"Supplier Relationships and Purchasing." This allows the Company to pass on the
savings directly to its customers, while still maintaining favorable profit
margins.

         Well known designer labels, brand names and original retailer names
are prominently displayed throughout the stores. Many items carry labels and/or
original price tags showing brand names identifiable with major designers,
manufacturers and retail stores, as well as tags showing original retail or
"nationally advertised" prices. In some cases suppliers may require removal of
labels or original retail price tags as a condition to a special purchase
arrangement. See "Supplier Relationships and Purchasing."

Licensed Departments

         All store departments are operated by the Company except for the
health and beauty aids,

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shoes, toys and sporting goods (beginning August 1997), and certain other
incidental departments. These departments are licensed to others, including
affiliated parties, for a percentage of net sales, generally ranging from 5% to
11%, for initial periods of up to 15 years with, in some instances, an option
to renew. In addition, the Company receives a fee from some licensees for
general and administrative expenses. The aggregate annual license fees received
by the Company from all licensees for fiscal years ended August 2, 1997, August
3, 1996 and July 29, 1995 were approximately $17,685,000, $15,162,000 and
$13,958,000, respectively.

         SSC owns 50% of the outstanding stock of the licensee that operates
the shoe departments in all of the stores, and owned a controlling interest in
L. F. Widmann, Inc. ("Widmann"), the licensee that operated the health and
beauty aids departments in the Company's stores. In July 1997, the Company
entered into agreements with Mazel to create VCM, a 50/50 joint venture.
Effective August 3, 1997, VCM purchased 100% of Widmann's capital stock and
purchased the assets of the Company's toys and sporting goods departments. VCM
operates the health and beauty aids and toys and sporting goods departments in
the Company's stores as licensed departments. The license agreements provide
for fees based on a percentage of sales, as defined, for license fees,
advertising fees and credit and administrative charges. The Company provides
certain personnel, administrative and service functions for which it receives a
monthly fee from VCM to cover the related costs. The license and joint venture
agreements are for a term of ten years ending on the last day of fiscal 2007
and contain certain provisions whereby either business partner can initiate
renegotiation of terms if certain minimum requirements are not met.

         Licensees supply their own merchandise and generally supply their own
store fixtures but in most instances utilize the Company's associates to
operate their departments. The licensees reimburse the Company for all costs
associated with such associates. Licensees operate their departments under the
general supervision of the Company and are required to abide by the policies of
the Company with regard to pricing, quality of merchandise, refunds and store
hours.  Licensed departments complement the operations of the stores and are
considered an integral part of the Company's store operations. The common
ownership interest in licensees facilitates the uniformity of merchandising
strategy in the stores, including the overall emphasis on values resulting from
special purchase opportunities.

SUPPLIER RELATIONSHIPS AND PURCHASING

         An important factor in the Company's growth has been its many years of
experience in purchasing merchandise directly from manufacturers and other
vendors at prices substantially below those generally paid by conventional
retailers. The Company believes that over the years its buyers have established
excellent relationships with suppliers and that the Company has established a
reputation for its willingness and ability to purchase entire lots of
merchandise and to make prompt payment. The Company continuously seeks to find
and negotiate special purchase opportunities. As a result of the Company's
relationships, experience and reputation for prompt payment, many suppliers
offer special purchase opportunities to the Company prior to attempting to
dispose of merchandise through other channels. Many manufacturers of brand name
merchandise are reluctant

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to sell merchandise for resale at discounted prices through their normal
channels of distribution or to retailers which may be considered to be
competitors in their regular distribution channels. By selling such merchandise
through its own retail stores, the Company is able to assure its suppliers that
the merchandise will be sold without disturbing the suppliers' regular channels
of distribution.

         Although the Company cannot quantify the amount by which the prices it
pays for its special purchases are lower, if any, than the prices paid by its
competitors for similar purchases, the Company believes that such special
purchases are made at prices sufficiently favorable to enable it to offer
merchandise to its customers at prices that are significantly lower than those
prices offered by many of its competitors.

         The Company purchases merchandise from more than 3,400 suppliers, none
of which accounted for a material percentage of the Company's purchases during
the past fiscal year. The Company does not maintain any long-term or exclusive
commitments to purchase merchandise from any one supplier. The Company
regularly purchases overstocked or overproduced items from manufacturers and
other retailers, including end-of-season, out-of-season and end-of-run
merchandise and manufacturers' slight irregulars. From time to time, the
Company also purchases all or substantially all of the inventories of
financially distressed retailers and makes other special purchases. The Company
contracts with overseas sources for the manufacture of certain apparel items
under the Company's own brand names. Also, the Company has begun to more
aggressively seek advantageous buying opportunities overseas, particularly in
non-apparel categories.

         The Company's distribution facilities are designed to enable it to
prioritize the processing of merchandise on short notice and to deliver
merchandise to the stores within days of its receipt. This allows the Company's
buyers to purchase merchandise very late in the season, when prices are more
favorable, and still deliver the merchandise to the stores before the end of
the season. At the same time, the Company has devoted a separate warehouse to
out-of-season goods. This merchandise is held until the most opportune time to
offer it in the Company's stores, which in most cases is the next season. This
ability to purchase and quickly distribute or hold merchandise in substantial
quantities has enabled the Company to offer high-quality merchandise to
customers at prices significantly below usual retail prices while maintaining
favorable profit margins. The Company believes that this ability distinguishes
it from the typical discount or off-price retailer and provides it with a
competitive advantage in making purchases as favorable opportunities arise.

         The relatively large size of the Company's stores provides Value City
with the flexibility to purchase full lots of merchandise that may not be
available to other off-price retailers with smaller stores requiring more
targeted purchases. Value City is also able to buy and economically distribute
short lots of merchandise. Although there is growing competition for the kinds
of special purchases that the Company seeks, the Company believes that, because
of the factors discussed above, it will be able to obtain sufficient supplies
of desirable merchandise at favorable prices in the future.




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DISTRIBUTION

         The Company pursues a centralized distribution strategy with eight
distribution centers, all located in Columbus, Ohio. The aggregate area of the
centers is approximately 1,700,000 square feet, however, use of multi-tier
processing levels in some of the distribution centers substantially increases
their operating capacity. The distribution centers are organized by merchandise
type, with warehouses for hanging apparel, flat apparel, housewares, domestics
and overflow and buyout merchandise. One of the warehouses, approximately
123,000 square feet, is used by VCM in conjunction with the 50/50 joint venture
between the Company and Mazel. VCM reimburses the Company for the cost of
maintaining and operating the warehouse. The Company also maintains a
"packaway" warehouse facility where out-of-season merchandise acquired at
favorable prices is held for future sale. The Company's network of warehouses
enable it to make opportunistic purchases including late season, priority
delivery and end-of-season purchases.

         The Company uses up-to-date material handling equipment in its
warehouses, including new mechanized conveyor systems to separate and collate
shipments to the stores. The Company's distribution facilities are designed to
allow priority delivery of late season purchases and fast-moving merchandise to
have it in the stores quickly to take full advantage of the remaining selling
season. The Company continues to focus on improving inventory turns by
implementing changes such as expediting the delivery of merchandise from the
store receiving area to the selling floor by distributing goods on hangers. The
Company believes that the existing distribution centers, with certain
modifications and additional equipment, will support store expansion for the
foreseeable future.

         Goods are centrally received from suppliers and transferred to the
appropriate warehouses. Upon shipment to the stores, merchandise is
consolidated to ensure full-truck loads to minimize shipping costs. The Company
leases its fleet of road tractors and owns the majority of its semi-rig
trailers. The Company's fleet makes the majority of all deliveries from its
warehouses to the stores.

ADVERTISING AND PROMOTION

         The Company commits substantial resources to advertising and believes
that its aggressive marketing strategy is one of the keys to its success. The
Company advertises frequently in print, including newspaper circulars and
flyers, and on local television and radio. The promotional strategy is
carefully planned and budgeted to include not only seasonal promotions, but
also weekly storewide sales events highlighting recent buy-outs and other
specially purchased brand name merchandise designed to maximize customer
interest. In some cases a supplier may prohibit the advertising or non-store
promotion of its brand name. See "Supplier Relationships and Purchasing."



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STORES

Store Location and Design

         The Company's department stores average approximately 86,000 square
feet, with approximately 70% of the total area of each store representing
selling space. The Company's stores are generally laid out on a single level,
with central traffic aisles providing access to major departments. Each
department strives to display and stock large quantities and assortments of
merchandise, giving the store a very full appearance. Many of the Company's
stores have an attractive pavilion entrance that gives the customer a panoramic
view of the entire store. The stores are generally open from 9:30 am until 9:30
pm Monday through Saturday and 11:00 am until 6:00 pm on Sunday. All of the
stores are located in leased or subleased facilities.

         Management has implemented several initiatives to enhance the
appearance of its stores and offer a more convenient and pleasurable shopping
experience for its customers. These initiatives include: increasing the number
of secondary aisles in the stores to improve the flow of traffic throughout the
stores; changing the fixtures and improving the use of existing space such as
columns and empty walls to display more merchandise; and, color-coding the
departments and improving the in-store signage to make it easier for customers
to identify department locations and find merchandise.

         Management believes that customers are attracted to the Company's
stores principally by the wide assortment of quality items at substantial
savings and that its stores are destination stores. They do not rely on traffic
created by the presence of other stores in their vicinity but instead
successfully generate their own traffic. Of the 94 stores open as of October
1997, 18 are free-standing and 76 are in shopping centers, 22 of which are
enclosed malls in which they serve as an anchor. All of the Company's stores
are located in suburban areas, near large residential neighborhoods and away
from downtown commercial centers.

Store Operations

         The Company is committed to offering customers a convenient,
pleasurable shopping experience and a high level of customer satisfaction. A
training program is utilized to assure that every associate maintains the
highest level of professionalism and places customer service at the forefront.
The Company's stores are designed for self-service shopping, although sales
personnel are available to help customers locate merchandise and to assist in
the selection and fitting of apparel. In all stores, a customer service desk is
conveniently located generally adjacent to the central check-out area. The
Company prides itself on ease of checkout and has invested in point of sale
scanning systems which expedite the checkout process by providing automated
check and credit approval and price lookup. Sales associates are trained to
create a "customer-friendly" environment. The Company accepts all major credit
cards, and also provides a private label credit card program in all markets.
Private label and other credit card sales are nonrecourse to the Company, with
the servicing agent assuming all of the credit risk. The Company offers a
convenient layaway program

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and maintains a liberal return policy.

         The Company's stores are organized into separate geographic regions,
each with a regional manager. Regional managers are headquartered in their
region and spend the majority of their time in their stores to ensure adherence
to the Company's merchandising, operational and personnel standards. The
typical staff for a Value City store consists of a store manager, a number of
assistant store and department managers, and full and part-time hourly
associates. Each store manager reports directly to one of the regional
managers, and each of the regional managers reports to the Vice President of
Operations.

         The Company's store managers function both as administrators and
merchants. All managers are responsible on a day-to-day basis for maintenance
of displays and inventories in all departments, for the overall condition of
their stores, for customer relations, personnel hiring and scheduling, and for
all other operational matters arising in the stores. Each store manager is
compensated, in part, based on the performance of his or her store. The
Company's store managers are an important source of information concerning
local market conditions, trends and customer preferences.

         The Company prefers to fill management positions through promotion of
existing associates. A store management training program is maintained to
develop the management skills of associates and to provide a source of
management personnel for future store expansion.

Expansion

         The Company has increased its store base from 56 stores at the start
of fiscal 1993 to 95 stores at the end of fiscal 1997. One store in western
Ohio was closed in September 1997 and another store is scheduled to close
during fiscal 1998. The Company has expanded both by leasing newly constructed
locations and by acquiring existing locations from other retailers. The Company
recently entered several new markets, including Chicago, Detroit and St. Louis
in fiscal 1995, Atlanta and Charlotte in fiscal 1996, and Memphis in fiscal
1997.

         During fiscal 1998, the Company plans to focus on improving the
profitability of existing stores and does not anticipate opening any new
stores.  Expansion will, however, continue to be an element of the Company's
business strategy with a view towards deepening penetration in existing or
contiguous markets. Factors considered in evaluating new store sites include
store size, configuration, demographics and lease terms. The Company seeks to
cluster stores in targeted metropolitan areas to enhance name recognition,
share advertising costs and achieve economies of scale in management and
distribution.



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         The table below sets forth certain information relating to the
Company's stores during the last five fiscal years:
<TABLE>
<CAPTION>
                                                        Fiscal Year
                                     ------------------------------------------------
                                     1993        1994       1995       1996      1997(4)
                                     ----        ----       ----       ----      ----   
<S>                                   <C>         <C>        <C>        <C>        <C>
Beginning of Year(1)...........       56          74         75         79         86
  Opened(2)....................       18           3          6          7          9
  Closed(3)....................        0           2          2          0          0
                                      --          --         --         --         --
End of Year(1).................       74          75         79         86         95
                                      ==          ==         ==         ==         ==
</TABLE>


 (1)  Excludes apparel, domestics and housewares departments operated by the
      Company in two Valley Fair department stores.

 (2)  For fiscal 1993, includes the 15 department stores obtained in the GB
      Acquisition, the results of operations and financial position of which
      are included in the Company's financial statements herein for all
      periods.

 (3)  During 1995, two stores were closed pursuant to their lease expirations.
      Two stores acquired in the GB Acquisition were closed during fiscal 1994
      because they were in the same market area as existing Value City stores.
      Fiscal 1993 does not include two junior apparel stores acquired in the GB
      Acquisition, which were closed in the same year.

 (4)  In September 1997, the Company closed one store and has scheduled to
      close one additional store during fiscal 1998 pursuant to lease
      expiration and termination agreements.

         In selecting a site for a new store, the Company considers such
factors as population, per capita income, traffic patterns, the visibility of
the prospective store location, parking, the security of the area and the
presence of other compatible stores, especially supermarkets or large drug
stores. The Company attempts to select a location on which there is a suitable
existing structure, generally a one-story building with a relatively open
interior, and alters the structure in accordance with the Company's
merchandising concept.

         Based upon its past experience, the Company estimates the average cost
of opening a new store to range from approximately $5,000,000 to $6,500,000,
including leasehold improvements, fixtures, inventory, pre-opening expenses and
other costs. Preparation of a store for opening generally takes between eight
and twelve weeks. The Company charges pre-opening expenses to operations
ratably over the first twelve months of store operations. It has been the
Company's experience that new stores generally achieve profitability and
contribute to net income following the first year of operations.

         The Company continually refurbishes its stores by updating the
merchandise displays and in-store signage. The costs of refurbishing on a per
store basis are generally not substantial. On an annual basis, the Company
selects stores to be remodeled, which generally involves more significant
changes to the interior or exterior of the store. The Company maintains its own
architectural design staff, construction crews and carpentry shop to refurbish
and remodel both new and existing store interiors and to build in-store display
tables and racks.




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MANAGEMENT INFORMATION AND CONTROL SYSTEMS.

         The Company believes that a high level of automation is essential to
maintaining and improving its competitive position. The Company relies upon
computerized data systems to provide information at all levels, including
warehouse ordering, store billing, inventory control and automated accounting.
The Company utilizes two IBM AS/400 computer systems to help meet its growing
needs. The Company's inventory control and POS systems are not yet year 2000
compliant. The inventory control system will require approximately $200,000 of
programing changes which are scheduled for completion in 1998. The POS systems
will be addressed during 1998 in conjunction with an upgrade to IBM software at
a cost of approximately $1,000,000.

         The Company utilizes point of sale ("POS") registers with full
scanning capabilities insuring speed and accuracy at customer check-outs and
facilitating inventory restocking. Since layaways represent an important part
of the business, an automated system to capture and control layaways is
integrated into the POS system.

ASSOCIATES

         At September 12, 1997, the Company had approximately 12,300 associates
of which 7,400 were full-time and 4,900 were part-time. Some of these
associates are covered by collective bargaining agreements which are in effect
in 13 stores covering approximately 1,000 associates. The earliest contract
expiration date is February 1998.

         Group hospitalization, surgical, medical, vision, dental, disability
and life insurance benefits and a 401(k) plan are provided to full-time
non-union associates. The Company is a co-sponsor with SSC in these plans. The
Company also sponsors an associate stock purchase plan.

         The Company believes that in general it has satisfactory relations
with all of its associates.

COMPETITION

         The retail industry is highly competitive. The Company generally
competes with a variety of conventional and discount retail stores, including
national, regional and local independent department and specialty stores, as
well as with catalog operations, factory outlet stores and other off-price
stores.

         In the discount or off-price retailing segment, the Company
differentiates itself through its store format and the breadth of its product
offering. The Company's large departmentalized stores differ from most other
off-price retailers that tend to operate substantially smaller stores focusing
predominantly on either hard or soft goods. The Company's large stores
facilitate its full-line merchandise offering and broad range of brands and
products.

         In addition, because the Company purchases much of its inventory
opportunistically, the Company competes for merchandise with other national and
regional off-price apparel and discount

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outlets. Many of the Company's competitors handle identical or similar lines of
merchandise and have comparable locations, and some have greater financial
resources than the Company.

         Competitive factors important to the Company's customers include
fashion, value, merchandise selection, brand name recognition and, to a lesser
degree, store location. The Company competes primarily on the basis of value,
merchandise quality and selection. Management believes the Company's
competitive advantages include its reputation in the marketplace for being able
to purchase and promptly pay for entire lots of merchandise, together with its
ability to either quickly distribute or hold the merchandise for sale at the
most opportune time, as well as its full-line merchandise offering and range of
brand names.

SERVICE MARKS, TRADEMARKS AND TRADENAMES

         The service mark "Value City" has been registered by SSC in the U.S.
Patent and Trademark Office. The Company's four department stores in Columbus
operate under the tradename "Schottenstein's," which has been registered by the
Company in the state of Ohio. The Company is entitled to use such names for the
sole purpose of operating department stores on an exclusive basis pursuant to a
perpetual, royalty-free license from SSC. SSC also operates a chain of
furniture stores under the name "Value City Furniture." The Company has also
registered in the U.S. Patent and Trademark Office various trademarks used in
its private label program. The Company is not aware of any conflicting use or
infringement by any third party with respect to any of the above names and
marks.


ITEM 2.           PROPERTIES.

         Of the Company's 95 department stores operating as of August 2, 1997,
24 are located in Ohio, 20 in Pennsylvania, seven in Indiana, six each in
Illinois, Maryland and Michigan, five in New Jersey, four each in Kentucky and
West Virginia, three each in Delaware, Georgia, and Virginia, and one each in
Missouri, North Carolina, Tennessee and Washington D.C.

         The Company maintains buying offices in Columbus, Ohio, Boston,
Massachusetts and Los Angeles, California. The Company operates eight
warehouse/distribution complexes located in Columbus and occasionally utilizes
temporary warehouse space. One of the warehouses is used by VCM in conjunction
with the 50/50 joint venture between the Company and Mazel. VCM reimburses the
Company for the cost of maintaining and operating the warehouse. The Company's
executive offices occupy approximately 45,000 square feet in the building which
also serves as one of the Company's apparel distribution centers.

         The stores and all of the warehouse, buying and executive office
facilities are leased or subleased. As of August 2, 1997 the Company leased or
subleased 32 department stores and all of its permanent warehouse and office
facilities from SSC or entities affiliated with SSC. The remaining 63
department stores were leased from unrelated entities. Most of the store leases
provide

                                       13

<PAGE>   14



for an annual rent based upon a percentage of gross sales, with a specified
minimum rent. On August 12, 1997, seventeen of the related party leases (13
stores and four other facilities) were renegotiated and became new unrelated
party leases pursuant to a sale-leaseback transaction between SSC and a third
party. All of the new leases for the 13 stores covered by the SSC sale
leaseback transaction eliminate percentage rent and provide for increased fixed
rent for an initial 20 year term.

         The Company's office, warehouse and distribution facilities are
adequate for its current needs and the Company believes that such facilities,
with certain modifications and additional equipment will be adequate for its
foreseeable future demands.


ITEM 3.           LEGAL PROCEEDINGS.

         The Company is involved in various legal proceedings that are
incidental to the conduct of its business. In the opinion of management, the
amount of any liability with respect to these proceedings will not be material.


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

         Not applicable.



                                       14

<PAGE>   15



                                    PART II

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

The following table sets forth the high and low sales prices of the Common
Shares as reported on the NYSE Composite Tape during the periods indicated. As
of October 27, 1997, there were 638 shareholders of record.

<TABLE>
<CAPTION>
                                                              HIGH             LOW
<S>                                                         <C>              <C>
Fiscal 1996:
First Quarter .........................................     $   9            $  6
Second Quarter ........................................         7-5/8           5-3/4
Third Quarter .........................................        10-1/8           6
Fourth Quarter ........................................        13               9-1/2

Fiscal 1997:
First Quarter .........................................     $  13-1/4         $ 8-1/8
Second Quarter ........................................        14-3/8           9-1/8
Third Quarter .........................................         9-1/2           7-1/2
Fourth Quarter ........................................         9-1/4           8
</TABLE>


The Company has paid no dividends and presently anticipates that all of its
future earnings will be retained for the development of its business and does
not anticipate paying cash dividends on its Common Shares during fiscal 1998.
The payment of any future dividends will be at the discretion of the Company's
Board of Directors and will depend upon, among other things, future earnings,
operations, capital requirements, general financial condition of the Company
and general business conditions.





                                       15

<PAGE>   16




ITEM 6.           SELECTED FINANCIAL DATA.
         (in thousands, except per share and per square foot amount and ratios)

<TABLE>
<CAPTION>
Fiscal Year                             1997             1996(1)           1995              1994          1993(1)(2)
---------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                <C>               <C>              <C>               <C>
Net Sales (3)                        $1,073,399         $954,308          $871,949         $864,855          $842,199
Operating Profit                        $10,513          $36,213           $24,209          $62,237           $57,067
Net Income (4)                           $3,951          $21,718           $13,819          $38,936           $40,252
Earnings per Share (4)                    $0.12            $0.68             $0.43            $1.21             $1.25
Total Assets                           $457,973         $437,010          $361,887         $358,606          $356,718
Working Capital                        $158,476         $161,397          $154,112         $164,140          $139,928
Current Ratio                              2.14             2.21              2.48             2.59              2.08
Long-term Obligations                   $57,763          $46,942           $20,853          $31,650           $42,396
Number of Stores (5)                         95               86                79               75                74
Sales per Selling sq. ft (6)               $217             $221              $220             $229              $222
Comp Store Sales Change (7)                 0.1%            (0.1)%            (3.8)%            2.9%              0.2%
</TABLE>


(1)      Fiscal years 1996 and 1993 include 53 weeks; all other years contain
         52 weeks.
(2)      On September 18, 1992, the Company acquired all of the outstanding
         stock of GB Stores, Inc. from a partnership affiliated with
         Schottenstein Stores Corporation ("GB Partnership") in exchange for
         1,312,500 of the Company's common shares. As a result of the
         acquisition, the Company acquired all of the net operating assets of
         the Gee Bee Department Store Division ("GB Division") of GB
         Partnership. The transaction was accounted for in a manner similar to
         a pooling of interest, and accordingly, the financial statements for
         1993 include the financial position and result of operations of the
         combined entities.
(3)      Excludes sales of licensed departments.
(4)      Fiscal 1994 includes a tax benefit of $0.07 per share due primarily to
         the elimination of deferred tax allowances. Fiscal 1993 net income and
         earnings per share includes the benefit from a change in tax status of
         the GB Division of $7.2 million or $0.22, respectively.
(5)      Includes all stores operating at the end of the fiscal year, excluding
         apparel, domestic and housewares departments operated by the Company
         in two affiliated department stores.
(6)      Excludes stores not operated during the entire year and licensed
         departments.
(7)      Comparable store sales change excludes licensed departments. A store
         is considered to be comparable in its second full fiscal year of
         operation. For fiscal 1996 and 1993, comparable store sales are
         computed using like 52-week periods.




                                       16

<PAGE>   17



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

FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996

       Net sales for the twelve month period increased from $954.3 million to
$1,073.4 million, an increase of $119.1 million, or 12.5%. Excluding the
additional $15.1 million week in last year's period due to the Company's
adoption in the prior year of the National Retail Federation's suggested retail
calendar, total sales increased 14.3% from $939.2 million to $1,073.4 million.
New stores contributed an increase in sales of $102.8 million and stores opened
during the prior year not yet considered comparable contributed an increase of
$30.1 million. Comparable store sales increased $1.3 million, or 0.1%, when
comparing like fifty-two week periods.

       Gross profit increased from $354.8 million to $375.6 million, an
increase of $20.8 million or 5.8%. Expressed as a percentage of sales, gross
profit decreased from 37.2% to 35.0%, due primarily to higher markdowns than
last year, especially in the area of overstocked merchandise, and a less
favorable physical inventory variance than last year.

       Selling, general and administrative expenses ("SG&A") increased $48.4
million, or 14.4%, from $337.1 million to $385.5 million, and increased as a
percentage of sales from 35.3% to 35.9%. New stores contributed an increase in
expenses of $33.3 million, and stores opened during the prior fiscal year that
are not yet considered comparable increased $10.4 million. New store SG&A, as a
percentage of sales, is higher than that of comparable stores, due primarily to
pre-opening expenses and the result of aggressive advertising to develop name
recognition in new markets. Home office expenses, including distribution costs,
increased by approximately $12.0 million, primarily to support the new stores.
Comparable store SG&A declined by approximately $2.1 million. The remaining
$5.2 million decline resulted from the extra week in last year's period.

       Based upon its experience, the Company estimates the average cost of
opening a new store to range from approximately $5.0 million to $6.5 million,
including leasehold improvements, fixtures, inventory, pre-opening expenses and
other costs. Preparations for opening a store generally take between eight and
twelve weeks. The Company charges pre-opening expenses to operations ratably
over the first twelve months of store operations. It has been the Company's
experience that new stores generally achieve profitability and contribute to
net income after the first full year of operations. Twelve stores opened less
than twelve months had a pre-tax operating loss of $7.0 million for this year,
including $6.3 million of pre-opening expense amortization. Seven stores opened
less than twelve months during fiscal 1996 had pre-tax net operating losses of
$0.2 million in 1996, including $2.2 million of pre-opening expense
amortization. The Company does not currently plan to open any new stores in
fiscal 1998.

         License fees from affiliates increased from $15.2 million to $17.7
million and remained

                                       17

<PAGE>   18



constant as a percentage of sales at 1.6%.

       During the year ended August 2, 1997, the Company recognized $0.4
million of net expenses for certain employee termination benefits and other
exit costs related to closing a store in September 1997. In September 1997, the
Company announced to employees the closing of another store pursuant to a lease
termination agreement. The Company expects the proceeds from the termination
agreement will exceed the related store closing costs.

       Operating profit decreased from $36.2 million to $10.5 million, a
decrease of $25.7 million or 71.0%, and decreased as a percentage of sales from
3.8% to 1.0% as a result of the above factors.

       Amortization of excess net assets over cost decreased from $1.4 million
to $0.9 million due to the amount being fully amortized as of the third quarter
of fiscal 1997.

       Interest expense, net of interest income, increased from $1.3 million to
$5.1 million due to increased borrowings.

       Other income, net, increased from $33,000 to $161,000 due primarily to a
non-cash gain on termination of a capital lease for transportation equipment.

       The Company no longer incurs an expense related to the minority interest
in partnerships due to the Company's purchase of the 25% minority interest in
the partnerships during the prior year for approximately $1.3 million
representing the net book value of the minority interest in those partnerships.

       Income before income taxes decreased from $36.3 million to $6.5 million,
a decrease of $29.8 million or 82.1%, and decreased as a percentage of sales
from 3.8% to 0.6% as a result of the above factors.

FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995

       Net sales increased from $871.9 million to $954.3 million, an increase
of $82.4 million, or 9.4%. During fiscal 1996, the Company changed its fiscal
year end to the Saturday closest to July 31 to conform to the National Retail
Federation's suggested retail calendar. This resulted in fiscal 1996 having
fifty-three, rather than fifty-two weeks. Sales for the additional week
aggregated $16.8 million. New stores contributed an increase in sales of $54.2
million and stores opened during the prior fiscal year that were not yet
considered comparable contributed an increase of $22.5 million. These increases
were partially offset by $10.2 million for two stores closed in fiscal 1995.
Comparable store sales for the fifty-two week period decreased $0.9 million, or
0.1%. In determining comparable store sales growth, only stores open for like
fifty-two week periods are included.


                                       18

<PAGE>   19



       Gross profit increased from $324.6 million to $354.8 million, an
increase of $30.2 million or 9.3%. Expressed as a percentage of sales, gross
profit remained constant at 37.2%.

       SG&A increased $20.1 million, or 6.3%, from $317.0 million to $337.1
million, but decreased as a percentage of sales from 36.4% to 35.3%. New stores
contributed an increase in expenses of $17.0 million, and stores opened during
the prior fiscal year that were not yet considered comparable increased $6.6
million. These increases were partially offset by $3.0 million for two stores
closed in fiscal 1995. All other expenses as a group decreased by $0.5 million.
New store SG&A, as a percentage of sales, is slightly higher than that of
comparable stores, due primarily to pre-opening expenses and the result of
aggressive advertising to develop name recognition in new markets. This
increase in SG&A percentage was more than offset by the savings achieved in
comparable stores SG&A, as a percentage of sales, and by the leveraging effect
of increased sales volume on administrative, warehousing and distribution
costs.

       Seven stores opened less than twelve months had a pre-tax operating loss
of $0.2 million for fiscal 1996, including $2.2 million of pre-opening expense
amortization. Six stores opened less than twelve months during fiscal 1995 had
pre-tax net operating losses of $3.0 million, including $2.1 million of
pre-opening expense amortization.

       License fees from affiliates increased from $14.0 million to $15.2
million and remained constant as a percentage of sales at 1.6%.

       Operating profit increased from $24.2 million to $36.2 million, an
increase of $12.0 million or 49.6%, and increased as a percentage of sales from
2.8% to 3.8% as a result of the above factors.

       Amortization of excess net assets over cost decreased from $1.5 million
to $1.4 million as a result of a write-off in the prior year of that portion
associated with a store that was closed.

       Interest expense, net of interest income, decreased from $1.9 million to
$1.3 million due to lower outstanding borrowings and increased interest income
in fiscal 1996.

       Minority interest in partnerships decreased from $232,000 to $41,000 as
a result of the Company purchasing the 25% minority interest in the
partnerships for approximately $1.3 million representing the net book value of
the minority interest in those partnerships.

       Income before income taxes increased from $23.5 million to $36.3
million, an increase of $12.8 million or 54.4%, and increased as a percentage
of sales from 2.7% to 3.8% as a result of the above factors.

SEASONALITY
         The Company's business is affected by the pattern of seasonality
common to most retail

                                       19

<PAGE>   20



businesses. Historically, the majority of its sales and operating profit have
been generated during the first six months of its fiscal year, which includes
the back-to-school and Christmas selling seasons.

FISCAL YEAR
       During 1996, the Company changed its fiscal year end from the last 
Saturday in July to the Saturday closest to July 31 to conform to the
National Retail Federation's suggested retail calendar. As a result, fiscal
year 1996 had 53 weeks.

INCOME TAXES
       The effective tax rate for the year ended August 2, 1997 was 39.0%. The
effective tax rate for the year ended August 3, 1996 was 40.1%. The 1.1%
reduction is due to lower state income taxes and anticipated jobs tax credits.

ADOPTION OF ACCOUNTING STANDARDS
       The Financial Accounting Standards Board ("FASB") periodically issues
Statements on Financial Accounting Standards ("SFAS"), some of which require
implementation by a date falling within or after the close of the Company's
fiscal year.

       SFAS No. 128, "Earnings Per Share," specifies the computation,
presentation and disclosure requirements for basic and dilutive earnings per
share and is effective for annual and interim periods ending after December 15,
1997 with early application not permitted. The adoption of SFAS No. 128 is not
expected to have a significant impact on the reported earnings per share of the
Company.

       SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements and is effective for fiscal years beginning after December 15, 1997.
At this time, the Company has not determined the impact this standard will have
on the Company's financial statements.

       SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997. At this time, the
Company has not determined the impact, if any, this standard will have on the
Company's financial statements.

INFLATION
       The results of operations and financial condition are presented based
upon historical cost. While it is difficult to accurately measure the impact of
inflation because of the nature of the

                                       20

<PAGE>   21



estimates required, management believes that the effect of inflation, if any,
on the results of operations and financial condition has been minor.

LIQUIDITY AND CAPITAL RESOURCES
       Net working capital was $158.5 million and $161.4 million at August 2,
1997 and August 3, 1996, respectively. Current ratios at those dates were 2.14
and 2.21, respectively.

       Net cash provided from operating activities totaled $38.7 million, $21.4
million and $28.5 million for fiscal years 1997, 1996 and 1995, respectively.
Net income, adjusted for depreciation and amortization, provided $33.5 million
of operating cash flow for fiscal year 1997. This was increased by $13.6
million representing a decrease in inventories including an increase in
accounts payable of $2.9 million. This amount was then partially offset by an
increase in prepaid expenses and other assets of $10.5 million.

       During fiscal year 1996, net income, adjusted for depreciation and
amortization, provided $45.6 million of operating cash flow which was offset by
$19.2 million representing an increase in inventories net of an increase in
accounts payable of $22.6 million.

       Net cash used for capital expenditures and other assets totaled $46.8
million, $47.7 million and $29.7 million for fiscal years 1997, 1996 and 1995,
respectively.

       During 1997, capital expenditures for new stores aggregated $29.5
million, including $1.0 million for the purchase of land for future store
development which was sold along with the building and improvements on the
land, for a profit, during fiscal 1998. Other capital expenditures include $7.1
million for capital improvements in existing stores, $0.5 million for energy
management systems, $6.7 million for renovations in existing warehouses, $0.2
million for transportation equipment and $2.7 million for M.I.S. equipment
upgrades. Capital expenditures were offset by $0.1 million of proceeds from the
sale of property and equipment. Other investing activities include cash outlays
of $0.9 million, primarily for capitalized trademark and note issuance costs
and for point of sale and other related equipment to be put into service at the
stores, and cash receipts of $0.7 million from notes receivable. The Company's
inventory control and POS systems are not yet year 2000 compliant. The
inventory control system will require approximately $0.2 million of programing
changes which are scheduled for completion in 1998. The POS system will be
addressed during 1998 in conjunction with an upgrade to IBM software at a cost
of approximately $1.0 million. Total capital expenditures for 1998 are
estimated at $22.0 million.

       Assets held for sale as of the year end include the land, building and
improvements mentioned above, leasehold improvements at an existing store for
which the lease rights will be sold for an expected profit in fiscal 1998, and
inventory and fixed assets related to the Company's toys and sporting goods
departments which were sold in fiscal 1998 pursuant to the transactions
described below.


                                       21

<PAGE>   22



       In July 1997, the Company entered into agreements to form a 50/50 joint
venture with Mazel Stores, Inc. ("Mazel") to create VCM, Ltd.("VCM"). An asset
and stock purchase agreement along with an operating agreement were signed on
July 14, 1997 pursuant to which VCM would 1) purchase 100% of the issued and
outstanding capital stock of L.F. Widmann, Inc. ("Widmann"), a related party
company, which operated the Company's health and beauty aid departments as
licensed departments and 2) purchase $15.0 million of inventory and other
assets from the Company related to its owned toys and sporting goods
departments. These transactions were completed in August 1997. VCM will operate
the health and beauty aids and toys and sporting goods departments in the
Company's stores as licensed departments. The license agreements provide for
fees based on a percentage of sales, as defined, for license fees, advertising
fees and administrative charges. The Company will also provide certain
personnel, administrative and service functions for which it will receive a
monthly fee from VCM to cover the related costs. The license and operating
agreements are for a term of ten years ending on the last day of fiscal 2007
and contain certain provisions whereby either business partner can initiate
renegotiations of terms if certain minimum requirements are not met. The
Company will account for its fifty percent interest in the joint venture under
the equity method.

       At August 2, 1997 the Company had a $100.0 million credit facility with
its bank bearing interest at or below the prime lending rate depending on
certain borrowing elections made by the Company. At August 2, 1997 the prime
rate was 8.5%, borrowings aggregated $12.0 million and $21.0 million of letters
of credit were issued and outstanding for merchandise purchases leaving $67.0
million available under the facility. During the second quarter of fiscal 1997
the Company completed a private placement for $50.0 million of senior unsecured
notes and used the proceeds to repay demand notes payable. The senior unsecured
notes require principal payments of $2.1 million in December 1997 and 1998 and
payments of $9.1 million annually beginning December 1, 1999 through December
1, 2003 and bear interest at an average fixed rate of 7.22% per annum. In July
1997, the Company made the final $10.0 million payment on the senior notes
which carried a 5.73% fixed annual rate. The Company believes that the cash
generated by its operations, along with the available proceeds from the credit
facility and other sources of financing will be sufficient to meet its future
obligations including capital expenditures.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
       The Company cautions that any forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) contained
in this Report, the Form 10-K or made by management of the Company involve
risks and uncertainties, and are subject to change based on various important
factors.  The following factors, among others, in some cases have affected and
in the future could affect the Company's financial performance and actual
results and could cause actual results for 1998 and beyond to differ materially
from those expressed or implied in any such forward-looking statements: the
ability of the Company's new senior management team to implement its
strategies, changes in consumer spending patterns, consumer preferences and
overall economic conditions, the impact of competition and pricing, changes in
weather patterns, changes in existing or potential duties, tariffs or quotas,
paper and printing costs, and the ability to hire and train associates.

                                       22

<PAGE>   23
ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Not applicable.



ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial statements and financial statement schedules of the
Company and the Independent Auditors' Report thereon are filed pursuant to this
Item 8 and are included in this report beginning on page F-1.




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

         On May 27, 1997, the Company engaged the services of Deloitte & Touche
LLP to serve as the Company's independent auditor. In connection with the
dismissal of Coopers & Lybrand L.L.P. and the retention of Deloitte & Touche
LLP, the Company filed a Current Report on Form 8-K relating thereto on May 27,
1997.



                                       23

<PAGE>   24



                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information appearing under the caption "PROPOSAL ONE: ELECTION OF
DIRECTORS" on pages 6 through 9 of the Company's Proxy Statement relating to
the Company's Annual Meeting of Shareholders to be held on December 2, 1997, is
incorporated herein by reference.


ITEM 11.          EXECUTIVE COMPENSATION.

         The information appearing in the Company's Proxy Statement relating to
the Company's Annual Meeting of Shareholders to be held on December 2, 1997
under the caption "PROPOSAL ONE: ELECTION OF DIRECTORS" on pages 10 through 13,
is incorporated herein by reference.


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

         The information appearing under the caption "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" appearing on pages 4 and 5 of the
Company's Proxy Statement relating to the Company's Annual Meeting of
Shareholders to be held on December 2, 1997, is incorporated herein by
reference.


ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information appearing under the caption "RELATIONSHIP WITH SSC AND
ITS AFFILIATES" appearing on pages 16 through 19 of the Company's Proxy
Statement relating to the Company's Annual Meeting of Shareholders to be held
on December 2, 1997, is incorporated herein by reference.



                                       24

<PAGE>   25



                                    PART IV

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

14(a)(1) FINANCIAL STATEMENTS
           The documents listed below are filed as part of this Form 10-K:
<TABLE>
<CAPTION>
                                                                                               Page in
                                                                                              Form 10-K
                                                                                              ---------
<S>                                                                                              <C>
           Independent Auditors' Report                                                          F - 1
           Consolidated Balance Sheets at August 2, 1997 and August 3, 1996                      F - 3
           Consolidated Statements of Income for the years ended August 2, 1997, August 3,
              1996 and July 29, 1995                                                             F - 4
           Consolidated Statements of Shareholders' Equity for the years ended August 2,
              1997, August 3, 1996 and July 29, 1995                                             F - 5
           Consolidated Statements of Cash Flows for the years ended August 2,
              1997, August 3, 1996 and July 29, 1995                                             F - 6
           Notes to the Consolidated Financial Statements                                        F - 7

14(a)(2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:
           The schedule listed below is filed as part of this Form 10-K:

            Schedule II.   Valuation and Qualifying Accounts and Reserves                        S-1
</TABLE>

         Schedules not listed above are omitted because of the absence of the
         conditions under which they are required or because the required
         information is included in the financial statements or the notes
         thereto.

14(a)(3) EXHIBITS:

         See Index to Exhibits which begins on Page E-1.

14(b) REPORTS ON FORM 8-K

         The Company did not file any reports on Form 8-K during the quarter
ended August 2, 1997.


                                       25

<PAGE>   26



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                       VALUE CITY DEPARTMENT STORES, INC.

Date: October 30, 1997        By:                         *
                                 ----------------------------------
                                 (Martin P. Doolan, President and CEO)

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

<TABLE>
<CAPTION>
SIGNATURE                            TITLE                                    DATE
---------                            -----                                    ----
<S>                          <C>                                            <C>
          *                  Chairman of the                                10/30/97
-------------------------    Board of Directors
(Jay L. Schottenstein)

          *                  Vice Chairman of the                           10/30/97
-------------------------    Board of Directors
(Saul Schottenstein)         Director

          *                  President, Chief Executive Officer             10/30/97
-------------------------    (Principal Executive Officer) and Director
(Martin P. Doolan)

/s/ Robert M. Wysinski       Senior Vice President, Secretary               10/30/97
-------------------------    and Treasurer (Principal
(Robert M. Wysinski)         Financial Officer)
                             Director

          *                  Controller, Assistant Treasurer                10/30/97
-------------------------    and Assistant Secretary (Principal
(Richard L. Walters)         Accounting Officer)

          *                  Director                                       10/30/97
-------------------------
(Geraldine Schottenstein)

          *                  Director                                       10/30/97
-------------------------
(Jon P. Diamond)

          *                  Director                                       10/30/97
-------------------------
(Norman Lamm)

          *                  Director                                       10/30/97
-------------------------
(Richard Gurian)

          *                  Director                                       10/30/97
-------------------------
(Robert L. Shook)

                             Director                                       10/30/97
-------------------------
(Ari Deshe)

*By:/s/ Robert M. Wysinski
    ----------------------
     Robert M. Wysinski
     (Attorney-in-Fact)
</TABLE>

                                       26

<PAGE>   27





                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and
Shareholders of Value City
Department Stores, Inc.:

                  We have audited the accompanying consolidated balance sheet
of Value City Department Stores, Inc. (a majority owned subsidiary of
Schottenstein Stores Corporation) and its wholly owned subsidiaries (the
Company) as of August 2, 1997 and the related consolidated statements of
income, shareholders' equity and cash flows for the year then ended. Our audit
also included its financial statement schedule for the year ended August 2,
1997 listed in the index at Item S-1. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audit.

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

                  In our opinion, such consolidated financial statements
present fairly, in all material respects, the consolidated financial position
of Value City Department Stores, Inc. and its wholly owned subsidiaries as of
August 2, 1997 and the consolidated results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles.  Also, in our opinion, such 1997 financial statement schedule, when
considered in relation to the basic 1997 consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.


Deloitte & Touche LLP




Columbus, Ohio
October 13, 1997



                                     F - 1

<PAGE>   28





                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and
Shareholders of Value City
Department Stores, Inc.:

         We have audited the accompanying consolidated balance sheet and
financial statement schedule of Value City Department Stores, Inc. (a majority
owned subsidiary of Schottenstein Stores Corporation), its partnerships and its
wholly owned subsidiaries (the Company) as of August 3, 1996 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the two years in the period ended August 3, 1996. These financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Value
City Department Stores, Inc., its partnerships and its wholly owned
subsidiaries as of August 3, 1996 and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
August 3, 1996 in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.


Coopers & Lybrand L.L.P.




Columbus, Ohio
October 28, 1996

                                     F - 2

<PAGE>   29




                          CONSOLIDATED BALANCE SHEETS
                      at August 2, 1997 and August 3, 1996
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                                              ASSETS
                                                                     1997                  1996
---------------------------------------------------------------------------------------------------
<S>                                                                <C>                  <C>
CURRENT ASSETS:
  Cash and equivalents                                              $11,614              $10,484
  Accounts receivable, net                                            5,683                4,525
  Receivables from affiliates                                         1,084                  769
  Inventories                                                       236,784              261,370
  Prepaid expenses and other assets                                  12,137                8,569
  Assets held for sale                                               20,776                  -
  Deferred income taxes                                               9,208                8,928
                                                                   --------             --------
         TOTAL CURRENT ASSETS                                       297,286              294,645

PROPERTY AND EQUIPMENT, AT COST:
  Furniture, fixtures and equipment                                 141,588              129,081
  Leasehold improvements                                             97,798               78,217
  Building                                                              -                  4,100
  Capital leases                                                     15,213                8,973
                                                                   --------             --------
                                                                    254,599              220,371
  Accumulated depreciation and amortization                        (101,148)             (87,610)
                                                                   --------             --------
         Property and equipment, net                                153,451              132,761

NOTES RECEIVABLE, NONCURRENT                                            -                  2,613
OTHER ASSETS                                                          7,236                6,991
                                                                   --------             --------

         TOTAL ASSETS                                              $457,973             $437,010
                                                                   ========             ========


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

                            LIABILITIES AND SHAREHOLDERS' EQUITY

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

CURRENT LIABILITIES:
  Accounts payable                                                  $69,649              $70,711
  Accounts payable to affiliates                                     11,344                7,402
  Demand note payable                                                12,000                  -
  Accrued expenses:
    Compensation                                                      8,882                9,056
    Taxes                                                            11,753               12,216
    Other                                                            22,901               23,027
  Current maturities of long-term obligations                         2,281               10,836
                                                                    -------             --------
         TOTAL CURRENT LIABILITIES                                  138,810              133,248

LONG-TERM OBLIGATIONS, NET OF CURRENT MATURITIES                     57,763               46,942

DEFERRED INCOME TAXES AND OTHER NONCURRENT LIABILITIES                4,960                4,448

EXCESS NET ASSETS OVER COST OF ACQUIRED BUSINESS                        --                   927

SHAREHOLDERS' EQUITY:
  Common shares, without par value;
    80,000,000 authorized; issued, including
    Treasury shares, 32,259,045 shares
    and 32,058,745 shares, respectively                             110,068              109,450
  Contributed capital                                                10,728                9,688
  Retained earnings                                                 139,455              135,504
  Deferred compensation expense, net                                   (982)                (368)
  Treasury shares, at cost, 368,600 shares                           (2,829)              (2,829)
                                                                   --------             --------
         TOTAL SHAREHOLDERS' EQUITY                                 256,440              251,445
                                                                   --------             --------

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                $457,973             $437,010
                                                                   ========             ========


---------------------------------------------------------------------------------------------------
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.


                                     F - 3

<PAGE>   30



                       CONSOLIDATED STATEMENTS OF INCOME
          Years ended August 2, 1997, August 3, 1996 and July 29, 1995
                    (in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                                         1997             1996            1995
                                                                       52 Weeks         53 Weeks        52 Weeks
==================================================================================================================
<S>                                                                    <C>              <C>            <C>
Net sales, excluding sales
   of licensed departments                                             $1,073,399       $954,308       $871,949
Cost of sales                                                            (697,822)      (599,460)      (547,377)
                                                                       ----------       --------       --------

   Gross profit                                                           375,577        354,848        324,572

Selling, general and administrative expenses                             (385,511)      (337,097)      (317,000)
License fees from affiliates                                               17,685         15,162         13,958
Other operating income                                                      3,162          3,300          3,093
Restructuring charges                                                        (400)            --           (414)
                                                                       ----------       --------       --------

   Operating profit                                                        10,513         36,213         24,209

Amortization of excess net assets over cost                                   927          1,390          1,451
Interest expense, net                                                      (5,126)        (1,328)        (1,921)
Other income(expense), net                                                    161             33            (15)
                                                                       ----------       --------      ---------

   Income before income taxes and minority
     interest                                                               6,475         36,308         23,724

Minority interest in partnerships                                              --            (41)          (232)
                                                                       ----------       --------       --------

   Income before provision for income taxes                                 6,475         36,267         23,492

Provision for income taxes                                                 (2,524)       (14,549)        (9,673)
                                                                       ----------       --------       --------

   Net income                                                              $3,951        $21,718        $13,819
                                                                       ==========       ========       ========

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

Earnings per share                                                          $0.12          $0.68          $0.43
                                                                       ==========       ========       ========

Weighted average number of common
  and common equivalent shares                                             32,074         31,896         32,030
                                                                       ==========       ========       ========


------------------------------------------------------------------------------------------------------------------
</TABLE>





The accompanying notes are an integral part of the consolidated financial
statements.


                                     F - 4

<PAGE>   31




                           CONSOLIDATED STATEMENTS OF
                              SHAREHOLDERS' EQUITY
         Years ended August 2, 1997, August 3, 1996, and July 29, 1995
                                 (in thousands)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                   Number of Shares

                                              Common                                                Deferred
                                 Common       Shares      Common      Contributed    Retained     Compensation     Treasury
                                 Shares     in Treasury   Shares        Capital      Earnings        Expense        Shares    Total

----------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>         <C>          <C>            <C>           <C>           <C>        <C>
BALANCE, JULY 30, 1994           32,049                  $109,354      $9,811         $99,967       $(1,754)               $217,378

  Net income                                                                           13,819                                13,819
  Exercise of stock options           2                        31           7                                                    38
  Tax liability incurred on
    vested restricted shares                                             (114)                                                 (114)
  Repurchase of common shares                   149                                                            $(1,231)      (1,231)
  Amortization of deferred
    compensation expense                                                                                711                     711
                        ------------------------------------------------------------------------------------------------------------

BALANCE, JULY 29, 1995           32,051         149       109,385       9,704         113,786        (1,043)    (1,231)     230,601

  Net income                                                                           21,718                                21,718
  Exercise of stock options           8                        65           7                                                    72
  Tax liability incurred on
    vested restricted shares                                              (23)                                                  (23)
  Repurchase of common shares                   220                                                             (1,598)      (1,598)
  Amortization of deferred
    compensation expense                                                                                675                     675
                        ------------------------------------------------------------------------------------------------------------

BALANCE, AUGUST 3, 1996          32,059         369       109,450       9,688         135,504          (368)    (2,829)     251,445

  Net income                                                                            3,951                                 3,951
  Exercise of stock options          80                       618         102                                                   720
  Tax liability incurred on
    vested restricted shares                                              (52)                                                  (52)
  Grant of restricted shares        120                                   990                          (990)                     --
  Amortization of deferred
    compensation expense                                                                                376                     376
                        ------------------------------------------------------------------------------------------------------------

BALANCE, AUGUST 2, 1997          32,259         369      $110,068     $10,728        $139,455         $(982)   $(2,829)    $256,440
                        ============================================================================================================
</TABLE>





The accompanying notes are an integral part of the consolidated financial
statements.


                                     F - 5

<PAGE>   32



                     CONSOLIDATED STATEMENTS OF CASH FLOWS
          Years ended August 2, 1997, August 3, 1996 and July 29, 1995
                                 (in thousands)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------

                                                                  1997             1996          1995
                                                                52 Weeks         53 Weeks      52 Weeks

----------------------------------------------------------------------------------------------------------
<S>                                                            <C>              <C>             <C>
Cash flows from operating activities:

Net income                                                     $  3,951         $ 21,718        $ 13,819
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation and amortization                                29,583           23,903          19,341
    Amortization of excess net assets over cost                    (927)          (1,390)         (1,451)
    Minority interest in partnerships                                --               41             232
    Deferred income taxes and other
      noncurrent liabilities                                        232             (562)          4,130
    (Gain) loss on disposal of property and equipment              (161)             (33)             15
    Restructuring charges                                           400               --             414
    Change in working capital, assets
      and liabilities:
      Receivables                                                   402             (632)           (961)
      Inventories                                                10,710          (41,894)          1,030
      Prepaid expenses and other assets                         (10,511)          (3,045)         (8,201)
      Accounts payable                                            2,880           22,646         (11,452)
      Accrued expenses                                            2,184              674          11,594
                                                               --------         --------        --------
Net cash provided by operating activities                        38,743           21,426          28,510
                                                               --------         --------        --------

Cash flows from investing activities:

  Capital expenditures                                          (46,750)         (45,407)        (28,592)
  Proceeds from sale of property and equipment                       85               65              27
  Notes receivable, noncurrent                                      738           (1,960)           (653)
  Other assets                                                     (900)            (376)           (457)
                                                               --------         --------        --------
Net cash used in investing activities                           (46,827)         (47,678)        (29,675)
                                                               --------         --------        --------

Cash flows from financing activities:

  Net proceeds from issuance of common shares                       618               65              31
  Net (payments) borrowings under
    line-of-credit agreements                                   (21,000)          33,000              --
  Proceeds from issuance of
    long-term obligations                                        50,000               --              --
  Principal payments of long-term obligations                   (20,404)         (10,777)        (10,702)
  Purchase of treasury shares                                        --           (1,598)         (1,231)
  Distributions to partners in minority
    partnerships, net                                                --           (1,328)           (225)
                                                               --------         --------        --------
Net cash provided by (used in)financing
  activities                                                      9,214           19,362         (12,127)
                                                               --------         --------        --------

Net increase (decrease) in cash and equivalents                   1,130           (6,890)        (13,292)
Cash and equivalents, beginning of year                          10,484           17,374          30,666
                                                               --------         --------        --------
Cash and equivalents, end of year                              $ 11,614         $ 10,484        $ 17,374
                                                               ========         ========        ========
</TABLE>





The accompanying notes are an integral part of the consolidated financial
statements.

                                     F - 6

<PAGE>   33


                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.       BUSINESS OPERATIONS AND BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
Value City Department Stores, Inc. ("VCDS") and its wholly owned subsidiaries
and for fiscal 1995, two partnerships. These entities are herein referred to
collectively as the "Company." The Company operates a chain of full-line
off-price department stores, principally under the name "Value City." As of
August 2, 1997 a total of 95 stores were open, located principally in Ohio (24
stores) and Pennsylvania (20 stores). The remaining stores are dispersed among
13 other states in the Midwest and Eastern sections of the country.

To facilitate comparisons with the current year, certain amounts in prior
years' financial statements have been reclassified to conform to the current
year presentation.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR:

During 1996, the Company changed its fiscal year end from the last Saturday in
July to the Saturday closest to July 31 to conform to the National Retail
Federation's suggested retail calendar. As a result, fiscal year 1996 had 53
weeks. Reference herein to the years ended August 2, 1997 and July 29, 1995
include 52 weeks.

CONSOLIDATION:

The consolidated financial statements include the accounts of the Company,
including 75% owned partnerships in fiscal year 1995, after elimination of
material intercompany accounts and transactions. During 1996 the Company bought
the 25% minority interests for approximately $1,328,000 which represented the
net book value of the minority interests in those partnerships.

CASH EQUIVALENTS:

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES:

Merchandise inventories are stated at the lower of cost or market using the
retail method.

ASSETS HELD FOR SALE:

Assets held for sale, stated at lower of cost or market, represent: 1) land,
building and leasehold improvements related to a site originally purchased for
store development which were sold in September 1997; 2) leasehold improvements
at an existing store for which the lease rights will be sold; and 3) inventory
and fixed assets related to the Company's toys and sporting goods departments
which were sold in August 1997, at cost (see note 11, subsequent events).

PRE-OPENING EXPENSES:

Pre-opening expenses are charged to operations ratably over the first twelve
months of a new store's operations. Pre-opening costs expensed were $6,943,000,
$4,059,000 and $2,064,000 for fiscal years 1997, 1996 and 1995, respectively.

PROPERTY AND EQUIPMENT:

Property and equipment are stated at cost. Depreciation and amortization are
recognized principally on the straight-line method in amounts adequate to
amortize costs over the estimated useful lives of the respective assets.
Leasehold improvements are amortized over the shorter of their useful lives or
lease term. The estimated useful lives by class of asset are:

     Buildings                                  39 years
     Furniture, Fixtures and Equipment          5 to 10 years
     Leasehold improvements                     10 to 20 years

The Company reviews long-lived assets, and reserves for impairment, whenever
events or changes in circumstances indicates the carrying amount of the assets
may not be fully recoverable.

NOTES RECEIVABLE:

To facilitate acquisitions of two store leases, the Company advanced funds to
two third party landlords in exchange for notes receivable bearing interest at
various levels above the bank prime lending rate. One of the notes was prepaid
in July 1997 and the other note in the amount of $1,906,000 as of August 2,
1997 is due in April 1998 and is classified

                                     F - 7

<PAGE>   34


           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


as accounts receivable. The note is collateralized by the property under lease.

REVENUE RECOGNITION:

Sales of merchandise and services are net of returns and allowances and exclude
sales tax. Layaway sales are recorded on the deposit method, whereby the sale
is recognized once the customer has paid for the merchandise in full.

ADVERTISING EXPENSE:

The cost of advertising is expensed as incurred. During fiscal years 1997, 1996
and 1995, advertising expense was $39,005,000, $36,020,000 and $34,129,000,
respectively.

EXCESS NET ASSETS OVER ACQUISITION COST OF ACQUIRED BUSINESS:

The excess of net assets over acquisition cost of acquired business was
amortized over seven years and was fully amortized in the third quarter of
fiscal 1997.

In fiscal year 1995, the Company wrote off $262,000 related to the closing of a
former GB store.

RESTRUCTURING CHARGES:

During fiscal years 1997 and 1995, the Company recognized $400,000 and
$414,000, respectively, of net expenses for certain employee termination
benefits and other exit costs related to closing one store in 1997 and two
stores in 1995 pursuant to their lease expirations. Net charges to the 1995
reserve aggregated $300,000 in 1995 and $114,000 in 1996. The operating losses
to close the two stores, exclusive of the restructuring charge, aggregated
approximately $600,000 during the year ended July 29, 1995.

EARNINGS PER SHARE:

Earnings per share are computed by dividing net income by the weighted average
number of common shares outstanding, including the effect of dilutive stock
options.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes.  Although these estimates are based on management's knowledge of current
events and actions it may undertake in the future, they may ultimately differ
from actual results.

RECENT ACCOUNTING PRONOUNCEMENTS:

The Financial Accounting Standards Board ("FASB") periodically issues
Statements on Financial Accounting Standards ("SFAS"), some of which require
implementation by a date falling within or after the close of the Company's
fiscal year.

SFAS No. 128, "Earnings Per Share," specifies the computation, presentation and
disclosure requirements for basic and dilutive earnings per share and is
effective for annual and interim periods ending after December 15, 1997 with
early application not permitted. The adoption of SFAS No. 128 is not expected
to have a significant impact on the reported earnings per share of the Company.

SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements and is effective for fiscal years beginning after December 15, 1997.
At this time, the Company has not determined the impact, if any, this standard
will have on the Company's financial statements.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997. At this time, the
Company has not determined the impact, if any,

                                     F - 8

<PAGE>   35




this standard will have on the Company's financial statements.

3.       RELATED PARTY TRANSACTIONS

The Company purchases merchandise from and sells merchandise to affiliates of
Schottenstein Stores Corporation ("SSC"), direct owner of approximately 63% of
the Company's common shares. Sales of merchandise from the Company's warehouses
generally are at cost plus handling charges. The Company also purchases certain
directly shipped merchandise on behalf of affiliates of SSC. Such merchandise
is billed by the Company to affiliates at cost plus delivery charges. The
related party transactions are as follows:

<TABLE>
<CAPTION>
                                  1997    1996     1995
--------------------------------------------------------------
                                     (in thousands)
<S>                             <C>       <C>     <C>
Purchases of merchandise
 from affiliates                $4,477    $6,621   $4,446
Merchandise sold to
 affiliates, including
 handling charges                   12       354    1,348
Merchandise purchased
 on behalf of and shipped
 directly to affiliates, at
 cost plus delivery charges          4        46       --
--------------------------------------------------------------
</TABLE>


Not included in the preceding table are purchases made through SSC's Importing
Division which charges the Company its cost plus an administrative charge.

The Company has license agreements with L.F. Widmann, Inc. ("Widmann") and
Shonac Corporation ("Shonac"), both related parties as a result of significant
ownership of such entities by SSC. The license agreement with Widmann for the
operation of health and beauty aid departments in certain of the Company's
stores expired in 1997 and all of the issued and outstanding capital stock of
Widmann was purchased by VCM, Ltd.("VCM")(see note 11, subsequent events). The
license agreement with Shonac is for the operation of shoe departments in all
of the Company's stores and expires in 2004. Both license agreements provide
for fees based on percentages of sales, as defined. Sales of licensed
departments and the related license fees earned are as follows:


<TABLE>
<CAPTION>
                               1997      1996       1995
--------------------------------------------------------------
                                     (in thousands)
<S>                        <C>        <C>        <C>
Widmann
  Sales                     $38,198    $40,643    $42,548
  License fees                1,841      1,942      2,339

Shonac
  Sales                    $144,035   $120,949   $105,615
  License fees               15,844     13,220     11,619
--------------------------------------------------------------
</TABLE>


The Company also leases certain store and warehouse locations owned by SSC as
described in Note 4.

Accounts receivable from and payable to affiliates principally result from
commercial transactions with entities owned or controlled by SSC or
intercompany transactions with SSC.

The Company shares certain personnel, administrative and service costs with SSC
and its affiliates. The costs of providing these services are allocated among
the Company, SSC and its affiliates without a premium. The allocated amounts
are not significant. SSC does not charge the Company for general corporate
management services. In the opinion of the Company and SSC management, the
aforementioned charges are reasonable.

The Company participates in SSC's self insurance program for general liability,
casualty loss and Ohio workers' compensation. The Company expensed $6,101,000,
$6,696,000 and $6,832,000 in fiscal years 1997, 1996 and 1995, respectively,
for such coverage.

During 1997 and 1996, the Company contributed $1,120,000 each year to a private
charitable foundation controlled by the Schottenstein family.

4.       LEASES

The Company operates stores and warehouses under various arrangements with
related and unrelated parties. Such leases expire through 2017 and in most
cases provide for renewal options. Generally, the Company is required to pay
real estate taxes, maintenance, insurance and contingent rentals based on sales
in excess of specified levels.

The Company has entered into several leasing agreements with SSC and
affiliates.  Under two Master Lease Agreements, as amended, the Company leases
fourteen store locations and

                                     F - 9

<PAGE>   36




three other facilities owned by SSC for an annual minimum rent of $4,627,000
and additional contingent rents based on aggregate sales in excess of specified
sales levels for the store locations. The Company also leased or subleased from
SSC and affiliates eighteen store locations, six warehouse facilities and a
parcel of land for specified minimum rentals, plus contingent rents based on
sales in excess of specified sales levels for the store locations. Leases and
subleases with related parties are for initial periods generally ranging from
five to twenty years, provide for renewal options and require the Company to
pay real estate taxes, maintenance and insurance.

On August 12, 1997, seventeen of the related party leases (thirteen stores and
four other facilities) were renegotiated and became new unrelated party leases
pursuant to a sale-leaseback transaction between SSC and a third party. Eleven
of the properties (eight stores and three other facilities) had been leased
under the Master Lease agreements mentioned above. All of the new leases for the
thirteen stores covered by the SSC sale leaseback transaction eliminate
percentage rents and provide for increased fixed rents for an initial twenty
year term.

The Company had a capital lease agreement for transportation equipment that
expired in 1997. Similar equipment was obtained under a new operating lease
agreement. The Company incurred new capital lease obligations aggregating
$9,400,000 and $5,800,000 in 1997 and 1996, respectively, to obtain store
facilities. Assets held under capital leases are amortized over the terms of
the related leases. The accumulated amortization for these assets was $442,000
and $2,172,000 at August 2, 1997 and August 3, 1996, respectively.

Future minimum lease payments required under the aforementioned leases,
exclusive of real estate taxes, insurance and maintenance costs, at August 2,
1997 are as follows:

<TABLE>
<CAPTION>
                            Operating Leases
Fiscal                                   Related
Year               Capital   Unrelated    Party
Ending              Leases Party Leases  Leases     Total
---------------------------------------------------------
(in thousands)
<S>            <C>          <C>          <C>     <C>
1998            $   918     $25,637      $8,049   $34,604
1999                944      24,909       7,784    33,637
2000                944      22,442       7,710    31,096
2001                944      20,593       7,734    29,271
2002                944      19,705       5,745    26,394
Future Years     22,081     176,230      62,732   261,043
---------------------------------------------------------

Total minimum
 lease payments   26,775

Less amount
 representing
 interest        (16,791)
                 -------

Present value
 of minimum
 lease payments    9,984

Less current
 portion             (78)
                 -------

Total net        $ 9,906
                 =======
</TABLE>


The Company operates apparel, houseware and domestic departments in two stores
owned by a related party under a license agreement and pays a license fee of
11% of sales against an aggregate minimum license fee of $733,000 per annum.
Two-thirds of this fee is charged to rent expense and the remainder is charged
to advertising expense.

The composition of rental expense is:

<TABLE>
<CAPTION>
                              1997      1996         1995
---------------------------------------------------------
                                    (in thousands)
<S>                        <C>        <C>         <C>
Minimum rentals:
 Unrelated parties         $14,878    $13,222     $11,625
 Related parties            15,043     11,400       9,156

Contingent rentals:
 Unrelated parties           2,469      2,288       2,580
 Related parties             2,366      1,757       1,594
                           -------    -------     -------

 Total                     $34,756    $28,667     $24,955
                           =======    =======     =======
---------------------------------------------------------
</TABLE>


Many of the Company's leases contain fixed escalations of the minimum annual
lease payments during the original term of the lease. For these leases, the
Company recognizes rental expense on a straight-line basis and records the
difference between the average rental amount charged to expense and the amount
payable under the lease as deferred rent. At the end of 1997 and 1996 the
balance of deferred rent was $856,000 and $560,000 and is included in other
noncurrent liabilities.


                                     F - 10

<PAGE>   37





5.       LONG-TERM OBLIGATIONS AND NOTES PAYABLE

Long-term obligations consist of the following:

<TABLE>
<CAPTION>
                                        1997         1996
--------------------------------------------------------------
                                         (in thousands)
<S>                                    <C>        <C>
Senior notes                                --    $20,000
Senior unsecured notes                 $50,000         --
Demand note payable
 subsequently refinanced                    --     33,000
Capital lease obligations                9,984      4,538
Other                                       60        240
                                       -------    -------
                                        60,044     57,778
Less current maturities                 (2,281)   (10,836)
                                       -------    -------
                                       $57,763    $46,942
                                       =======    =======
--------------------------------------------------------------
</TABLE>


The final annual principal payment of $10.0 million on the senior notes was
paid in July 1997.

During 1997, the Company completed a private placement for $50.0 million of
senior unsecured notes. The proceeds were used to repay demand notes payable.
At August 3, 1996, $33.0 million of the demand notes was classified as
long-term obligations as the Company had obtained commitments from investors
for the private placement. The senior unsecured notes require principal
payments of $2,143,000 in December 1997 and 1998 and payments of $9,143,000
annually beginning December 1999 through December 2003 and bear interest at an
average fixed rate of 7.2% per annum.

The terms of the senior unsecured notes require the Company to comply with
certain restrictive covenants, maintain minimum income and net worth levels and
meet certain financial ratio tests during the terms of the debt. The most
restrictive of these covenants is that the Company's consolidated funded debt
(as defined in the debt agreement) may not exceed 50% of consolidated total
capitalization (as defined). At August 2, 1997, the Company was in compliance
with the required covenants.

Other long-term obligations represent an Industrial Revenue Bond with interest
related to the prime rate and is payable through November 1997.

The book value of notes payable and long-term debt approximates fair value.

At August 2, 1997, the Company had available from its bank a $100.0 million
credit facility. All borrowings under the credit facility bear interest at or
below the prime lending rate depending on certain borrowing elections made by
the Company. At August 2, 1997, direct borrowings aggregated $12.0 million and
$21.0 million of letters of credit were issued and outstanding for merchandise
purchases leaving $67.0 million available under the facility. The weighted
average interest rate on short-term borrowings during fiscal years 1997 and
1996 was 7.11% and 7.30%, respectively.

6.       BENEFIT PLANS

The Company participates in the SSC sponsored 401(k) savings plan (the "401(k)
Plan"). Full-time employees who have attained twenty-one years of age and have
completed one year of service can contribute up to fifteen percent of their
salaries to the 401(k) Plan on a pre-tax basis, subject to IRS limitations. The
Company will match up to three percent of participants' eligible compensation.
Additionally, the Company contributes a discretionary profit sharing amount to
the 401(k) Plan each year. The Company incurred costs associated with the
401(k) Plan of $3,540,000, $3,197,000 and $2,971,000 for fiscal years 1997,
1996 and 1995, respectively. Certain employees of the Company are covered by
union-sponsored, collectively bargained, multi-employer pension plans, the
costs of which are not material to the consolidated financial statements.

The Company provides an Associate Stock Purchase Plan. Eligibility requirements
are similar to the 401(k) Plan. Eligible employees can purchase common shares
of the Company through payroll deductions. The Company will match 15% of
employee investments up to a maximum investment level. Plan costs to the
Company for fiscal years 1997, 1996 and 1995 were not material to the
consolidated financial statements.

7.       SHAREHOLDERS' EQUITY

During fiscal year 1993, the Company issued common shares to certain key
employees pursuant to its 1992 Bonus Stock Plan (the "1992 Plan"). The 1992
Plan consists of a one time grant of restricted shares issued pursuant to a
form of restricted stock agreement between the Company and the

                                     F - 11

<PAGE>   38




employee. Also, during fiscal year 1997, the Company issued common shares to
certain new key employees pursuant to each individuals employment agreement.
The 1997 agreements were approved by the Board of Directors and each consists
of a one time grant of restricted shares. As a result, the Company recorded the
market value of the shares at the date of grant of $2,100,000 in 1993 and
$990,000 in 1997 as deferred compensation expense. The agreements condition the
vesting of the shares upon continued employment with the Company with such
restrictions expiring as to 20% of the shares on each of the five anniversary
dates of the grants. Deferred compensation is charged to income on a
straight-line basis over the period during which the restrictions lapse.

On December 21, 1994, the Board of Directors authorized the purchase during the
period through December 20, 1995 of up to $5,000,000 of the Company's common
shares. As of August 3, 1996, the Company acquired a total of 368,600 shares at
an average price of $7.67 per share for a total of $2,829,000.

8.STOCK OPTION PLANS

During fiscal year 1993, the Company adopted a Non-employee Director Stock
Option Plan (the "Non-employee Director Plan") which provides for the issuance
of options to purchase up to 130,000 common shares. Prior to March 30, 1995,
one option to purchase 2,000 common shares was automatically granted to each
non-employee director on the first New York Stock Exchange ("NYSE") trading day
in each calendar year for five years beginning in fiscal year 1993. An
amendment, effective March 30, 1995, increased the grant to one option to
purchase 1,000 common shares on the first NYSE trading day in each calendar
quarter. The exercise price for each option is the fair market value of the
common shares on the date of grant. All options become exercisable one year
after the grant date and remain exercisable for a period of ten years from the
grant date, subject to continuation of the option-holder's service as a
director of the Company.

The Company adopted the 1991 Stock Option Plan which provides for the grant of
options to purchase up to 2,500,000 common shares. Such options are exercisable
20% per year on a cumulative basis and remain exercisable for a period of ten
years from the date of grant.

On March 30, 1995, The Stock Options Committee ("the Committee") of the Board
of Directors determined that the outstanding options which had been granted
previously at exercise prices of $9.75 and higher would no longer provide
sufficient incentives as a result of the decline in market price of the
Company's common shares. Accordingly, the Committee authorized the "repricing"
of the originally issued options by canceling the outstanding options and
granting the same number of new options. The new options were priced at $8.06,
which, in accordance with the formula in the stock option plan, was determined
by averaging the low of $7.88 and the high of $8.25, the trading prices of the
Company's common shares on March 30, 1995.

The following table summarizes the Company's stock option plans and related
Weighted Average Exercise Prices ("WAEP") for fiscal years ended August 2,
1997, August 3, 1996 and July 29, 1995:

<TABLE>
<CAPTION>
                             1997                      1996                     1995
                      Shares      WAEP           Shares      WAEP        Shares      WAEP                          
-------------------------------------------------------------------------------------------------------------------
                                    (Shares in thousands)
<S>                 <C>           <C>            <C>          <C>       <C>          <C>
Outstanding
  beginning
  of year             1,603       $ 7.91          1,374       $8.20         811       $8.29
Granted               1,043        10.26            378        6.98         605        8.05
Exercised               (79)        7.69             (8)       8.06          (2)       8.06
Cancelled              (169)        8.44           (141)       8.14         (40)       8.06
                    -------                      ------                 -------            
Outstanding
  end of
  year                2,398         8.90          1,603        7.91       1,374        8.20
                    =======                      ======                 =======

Options
  exercisable
  end of
  year                  808       $ 8.22           679        $8.28         441       $8.42
                    =======                      ======                 =======

Shares
  available for
  additional
  grants                 80                        174                      412
                    =======                      ======                 =======

-------------------------------------------------------------------------------------------------------------------
</TABLE>


The following table summarizes information about stock options outstanding as
of August 2, 1997:

<TABLE>
<CAPTION>
              Options Outstanding           Options Exercisable
              -------------------           -------------------
                      Weighted
                      Average       Weighted          Weighted
Range of              Remaining     Average           Average
exercise              Contract      Exercise          Exercise
prices    Shares      Life          Price     Shares  Price
--------------------------------------------------------------
               (Shares in thousands)
<S>         <C>         <C>        <C>         <C>   <C>
$5.87-
 $7.94        258       8yrs        $6.71       49    $6.91

$8.06-
 $11.19     1,882       8yrs        $8.47      743    $8.10

$13.69-
 $20.25       258       9yrs       $14.27       16   $17.47
--------------------------------------------------------------
</TABLE>



                                     F - 12

<PAGE>   39




The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") and accordingly has
elected to retain the intrinsic value method of accounting for stock-based
compensation. Had the compensation cost for the Company's stock-option plans
been determined based on the fair value at the grant dates for awards under
those plans consistent with the methods of SFAS 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                  1997           1996
----------------------------------------------------------------
                   (in thousands, except per share data)
<S>                               <C>            <C>
Net income:
     As reported                  $3,951         $21,718
     Pro forma                    $3,373         $21,548
Primary and fully diluted
   earnings per share:
     As reported                   $0.12           $0.68
     Pro forma                     $0.11           $0.68

----------------------------------------------------------------
</TABLE>


To determine the pro forma amounts, the fair value of each stock option has
been estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants in 1997
and 1996, respectively: expected volatility of 37.6% and 40.6%, dividend yield
of 0%, risk-free interest rates of 6.3% and 6.5%, and expected lives of 6.5
years. The weighted average fair value of options granted in 1997 and 1996 was
$5.06 and $3.68 respectively.

Consistent with SFAS No. 123, pro-forma net income and earnings per share have
not been calculated for options granted prior to July 30, 1995. Pro forma
disclosures may not be representative of that to be expected in future years.

9.       COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal proceedings that are incidental to the
conduct of its business. In the opinion of management, the amount of any
liability with respect to these proceedings will not be material.

The Company's inventory control and POS systems are not yet year 2000
compliant.  The inventory control system will require approximately $200,000 of
programing changes which are scheduled for completion in 1998. The POS system
will be addressed during 1998 in conjunction with an upgrade to IBM software at
a cost of approximately $1,000,000.

10.INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                           1997         1996        1995
----------------------------------------------------------------
                                   (in thousands)
<S>                       <C>          <C>          <C>
Current:
  Federal                 $2,417       $11,315      $5,272
  State and local            699         2,588       1,014
                          ------       -------      ------
                           3,116        13,903       6,286
Deferred:
  Federal                   (533)          474       2,865
  State and local            (59)          172         522
                          ------       -------      ------
                            (592)          646       3,387
                          ------       -------      ------
Income tax expense        $2,524       $14,549      $9,673
                          ======       =======      ======
----------------------------------------------------------------
</TABLE>



The provision (benefit) for deferred income taxes includes the following
amounts:

<TABLE>
<CAPTION>
                                 1997     1996        1995
----------------------------------------------------------------
                                     (in thousands)
<S>                              <C>      <C>      <C>
Type of temporary differences:
  Basis differences
    in inventory                 $(950)   $(279)       $70
  Store closing reserve           (183)      21         45
  Depreciation                     186      526        394
  Amortization of excess
    net assets over cost           382      572        612
  Other                            (27)    (194)     2,266
                               -------     ----     ------
                                 $(592)    $646     $3,387
                               =======     ====     ======
----------------------------------------------------------------
</TABLE>



A reconciliation of the expected income taxes based upon the statutory federal
rate and the effective rate for the years ended August 2, 1997, August 3, 1996
and July 29, 1995 are as follows:

<TABLE>
<CAPTION>
                                          1997       1996      1995
-----------------------------------------------------------------------
                                      (in thousands)
<S>                                       <C>       <C>       <C>
Income tax expense at
 federal statutory rate                   $2,266    $12,693   $8,222
Jobs credit                                  (59)        --     (495)
State and local taxes, net                   161      1,794    1,344

Change in estimates                           --         --      508
Other                                        156         62       94
                                          ------    -------   ------

                                          $2,524    $14,549   $9,673
                                          ======    =======   ======
-----------------------------------------------------------------------
</TABLE>


The components of the net deferred tax asset as of August 2, 1997 and August 3,
1996 are:





                                     F - 13

<PAGE>   40




<TABLE>
<CAPTION>
                                            1997    1996
----------------------------------------------------------------
                                            (in thousands)
<S>                                      <C>        <C>
Deferred Tax Assets:
  Basis differences in inventory          $8,187     $7,237
  Basis differences in fixed assets        2,302      2,467
  Accrued expenses                           181      1,616
  Other state and local taxes              1,847      1,652
  Excess net assets over cost of
    acquired business                         --        382
  Deferred compensation                      150        270
  Amortization of lease
     acquisition costs                     2,174      1,002
  Other                                    1,320        615
                                          ------     ------
                                          16,161     15,241

Deferred Tax Liabilities:
  Depreciation                            (7,508)    (7,322)
  Capital leases                          (1,915)      (905)
  Prepaid expenses                          (993)      (838)
  Other                                     (640)    (1,136)
                                         -------    -------
                                         (11,056)   (10,201)
                                         -------    -------
Total net                                 $5,105     $5,040
                                         =======    =======
----------------------------------------------------------------
</TABLE>



The net deferred tax asset is recorded on the Company's consolidated balance
sheet as of August 2, 1997 and August 3, 1996 as follows:

<TABLE>
<CAPTION>
                                            1997     1996
----------------------------------------------------------------
                                            (in thousands)
<S>                                        <C>        <C>
Current deferred tax asset                 $9,208     $8,928

Non-current deferred tax liability         (4,103)    (3,888)
                                           ------     ------

Net deferred tax asset                     $5,105     $5,040
                                           ======     ======
----------------------------------------------------------------
</TABLE>



11.SUBSEQUENT EVENTS

In July 1997, the Company entered into agreements to form a 50/50 joint venture
with Mazel Stores, Inc.("Mazel") to create VCM. An asset and stock purchase
agreement along with an operating agreement were signed on July 14, 1997
pursuant to which VCM would 1) purchase 100% of the issued and outstanding
capital stock of Widmann which operated the Company's health and beauty aid
departments as licensed departments and 2) purchase $15.0 million of inventory
and other assets from the Company related to its owned toys and sporting goods
departments. These transactions were completed in August 1997. VCM will operate
the health and beauty aids and toys and sporting goods departments in the
Company's stores as licensed departments. The license agreements provide for
fees based on a percentage of sales, as defined, for license fees, advertising
fees and credit and administrative charges. The Company will also provide
certain personnel, administrative and service functions for which it will
receive a monthly fee from VCM to cover the related costs. The license and
operating agreements are for a term of ten years ending on the last day of
fiscal 2007 and contain certain provisions whereby either business partner can
initiate renegotiation of terms if certain minimum requirements are not met.
The Company will account for its fifty percent interest in the joint venture
under the equity method.


                                     F - 14

<PAGE>   41





12.      QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                    QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
                                     (in thousands, except per share amounts)
FISCAL YEAR ENDED AUGUST 2, 1997
                                               1st Qtr          2nd Qtr.        3rd Qtr.        4th Qtr.
                                                11/2/96        2/1/97(1)          5/3/97          8/2/97
                                              (13 weeks)       (13 weeks)      (13 weeks)      (13 weeks)
                                              ----------------------------------------------------------------
<S>                                            <C>             <C>             <C>             <C>
Net Sales                                      $ 266,076       $ 322,995       $ 233,660       $ 250,668
Cost of Sales                                   (167,619)       (204,706)       (153,686)       (171,811)
                                               ---------       ---------       ---------       ---------
  Gross Profit                                    98,457         118,289          79,974          78,857
Selling, general and
 administrative expenses                         (93,591)       (102,085)        (91,825)        (98,010)
License fees and other
 operating income                                  5,301           5,541           4,990           5,015
Restructuring charge                                --              --              --              (400)
                                               ---------       ---------       ---------       ---------
  Operating profit (loss)                         10,167          21,745          (6,861)        (14,538)
Interest expense, net                             (1,194)         (1,147)         (1,271)         (1,514)
Amortization of excess
 net assets over cost                                348             347             232            --
Other income (expense), net                          153             (19)              4              23
                                               ---------       ---------       ---------       ---------
  Income before (provision)
   benefit for income taxes                        9,474          20,926          (7,896)        (16,029)
(Provision) benefit for
  income taxes                                    (3,772)         (7,987)          3,034           6,201
                                               ---------       ---------       ---------       ---------
  Net income (loss)                            $   5,702       $  12,939       $  (4,862)      $  (9,828)
                                               =========       =========       =========       =========
  Earnings (loss) per share                    $    0.18       $    0.40       $   (0.15)      $   (0.31)
                                               =========       =========       =========       =========


FISCAL YEAR ENDED AUGUST 3, 1996
                                                1st Qtr         2nd Qtr.        3rd Qtr.        4th Qtr.
                                                10/28/95       2/3/96(1)          5/4/96          8/3/96
                                               (13 weeks)      (14 weeks)      (13 weeks)      (13 weeks)
                                               ----------------------------------------------------------------
Net Sales                                      $ 217,790       $ 296,390       $ 207,620       $ 232,508
Cost of Sales                                   (134,740)       (184,833)       (131,437)       (148,450)
                                               ---------       ---------       ---------       ---------
  Gross Profit                                    83,050         111,557          76,183          84,058
Selling, general and
 administrative expenses                         (83,376)        (89,523)        (79,434)        (84,764)
License fees and other
 operating income                                  4,657           4,832           4,340           4,633
                                               ---------       ---------       ---------       ---------
  Operating profit                                 4,331          26,866           1,089           3,927
Interest expense, net                               (446)           (204)             13            (691)
Amortization of excess
 net assets over cost                                348             347             348             347
Other income (expense), net                           40               3               4             (14)
                                               ---------       ---------       ---------       ---------
  Income before minority interest                  4,273          27,012           1,454           3,569
Minority Interest                                    (41)           --              --              --
                                               ---------       ---------       ---------       ---------
  Income before provision
   for income taxes                                4,232          27,012           1,454           3,569
Provision for income taxes                        (1,730)        (10,841)           (556)         (1,422)
                                               ---------       ---------       ---------       ---------
  Net income                                   $   2,502       $  16,171       $     898       $   2,147
                                               =========       =========       =========       =========
  Earnings per share                           $    0.08       $    0.51       $    0.03       $    0.07
                                               =========       =========       =========       =========
</TABLE>

(1)       The results of operations for the quarters ended 2/1/97 and 2/3/96
          include reductions of $1.9 million and $4.4 million, respectively, to
          cost of sales representing the annual book to physical adjustment for
          the physical inventory completed in the respective quarters.


                                     F - 15

<PAGE>   42





13.      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:


<TABLE>
<CAPTION>
                                    1997              1996             1995
                              -----------------------------------------------------
                                                 (in thousands)
<S>                                <C>               <C>              <C>
Cash paid during the year for:
    Interest                        $5,700           $ 2,255          $ 2,409
                                    ======           =======          =======

    Income taxes                   $10,365           $ 8,972          $ 8,493
                                   =======           =======          =======
</TABLE>

Supplemental schedule of non-cash investing and financing activities:

The Company incurred capital lease obligations to obtain new store facilities.
Non-cash amounts of $6,155,000 and $3,906,000 were capitalized as of August 2,
1997 and August 3, 1996, respectively, under the captions of property and
equipment and long-term obligations in relation to these leases.

Amounts of $3,297,000 and $5,992,000 were recorded under the captions of
property and equipment and accounts payable for real estate improvements and
construction at new stores as of August 2, 1997 and August 3, 1996,
respectively.



                                     F - 16

<PAGE>   43




                       VALUE CITY DEPARTMENT STORES, INC.

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                             (dollars in thousands)

<TABLE>
<CAPTION>
COLUMN A                            COLUMN B              COLUMN C              COLUMN D              COLUMN E
--------------------------------------------------------------------------------------------------------------
                                   Balance at             Charge to                                  Balance at
                                    Beginning             Costs and                                      End
Description                         Of Period             Expenses           Deductions (1)           Of Period
---------------------------------------------------------------------------------------------------------------
<S>                                     <C>                <C>                     <C>                 <C>
Allowance deducted
  from asset to which
  it applies:
     Allowance for
     doubtful accounts:

     Year ended:
       July 29, 1995                    $992                 $467                  $986                  $473
       August 3, 1996                    473                  294                   276                   491
       August 2, 1997                    491                  531                   659                   363


     Allowance for
     Markdowns:

     Year ended:
       July 29, 1995                    $ 0                    $0                    $0                    $0
       August 3, 1996                     0                     0                     0                     0
       August 2, 1997                     0                $4,311                     0                $4,311


Reserves
     Store Closing
     Reserve:

     Year ended:
       July 29, 1995                     $0                  $414                  $299                  $115
       August 3, 1996                   115                   (21)                   94                     0
       August 2, 1997                     0                   400                     5                   395
</TABLE>


(1) The deductions in Column D are amounts written off against the respective
    reserve.


                                     S - 1

<PAGE>   44




                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit
                                                                                                Exhibit Index
  No.                                                 Description                                   Page No.
-------                                               -----------                                   --------
<S>      <C>                                                  <C>
    3.1  First Amended and Restated Articles                  Previously filed as Exhibit 3.2 to Registration
         of Incorporation of the Company.                     Statement on Form S-1 (file no. 33-40214)
                                                              filed April 29, 1991, and incorporated herein
                                                              by reference.

    3.2  Code of Regulations of the                           Previously filed as Exhibit 3.3 to Registration
         Company.                                             Statement on Form S-1 (file no. 33-40214)
                                                              filed April 29, 1991, and incorporated herein
                                                              by reference.

 10.1.1  Corporate Services Agreement, dated                  Previously filed on Exhibit 10.1.1
         to Form October 12, 1994, between the Company        10-Q (file no. 1-10767) filed December 12,
         and Schottenstein Stores Corporation.                1994, and incorporated herein by reference.

 10.1.2  Corporate Services Agreement, dated                  Previously filed as Exhibit 10.1.2 to
         September 27, 1995 between                           Form 10-K (file no. 1-10767) filed
         the Company and SSC.                                 October 27, 1995, and incorporated
                                                              herein by reference.

 10.1.3  Corporate Services Agreement, dated                  Previously filed as Exhibit 10.1.3 to
         October 1996 between the Company                     Form 10-K (file no. 1-10767) filed
         and SSC.                                             November 1, 1996, and incorporated
                                                              herein by reference.

   10.2  License Agreement, dated June 5, 1991,               Previously filed as Exhibit 10.2 to
         between the Company and SSC                          Amendment No. 1 to Form S-1
         re Service Marks.                                    Registration Statement (file no. 33-40214)
                                                              filed June 6, 1991, and incorporated herein
                                                              by reference.

   10.3  License Agreement, dated July 1989,                  Previously filed as Exhibit 10.3 to
         between the Company, by assignment                   Form S-1 Registration Statement ( file no.
         from SSC, and Shonac Corporation                     33-40214) filed April 29, 1991, and
         re shoe departments.                                 incorporated herein by reference.
</TABLE>



                                     E - 1

<PAGE>   45




<TABLE>
 <S>     <C>                                                  <C>
 10.3.1  Amendments dated November 9, 1993                    Previously filed as Exhibit 10.3.1 to
         to License Agreement dated in July                   Form 10-K (file no. 1-10767) filed
         1989, between the Company and Shonac                 October 26, 1994, and incorporated
         Corporation re shoe departments.                     herein by reference.

 10.3.2  Amendment dated 1995, to                             Previously filed as Exhibit 10.3.2 to
         License Agreement dated in July 1989,                Form 10-Q (file no. 1-10767) filed
         between the Company and Shonac                       December 12, 1995, and incorporated
         Corporation re shoe departments.                     herein by reference.

   10.4  License Agreement, dated July 1, 1987,               Previously filed as Exhibit 10.4 to
         as amended, between the Company, by                  Form S-1 Registration Statement (file no.
         assignment from SSC, and L.F. Widmann,               33-40214) filed April 29, 1991, and
         Inc. re health and beauty aids departments.          incorporated herein by reference.

 10.4.1  Amendment dated June 23, 1993 to                     Previously filed as Exhibit 10.4.1 to
         License Agreement, dated July 1, 1987,               Form 10-K (file no. 1-10767) filed
         as amended, between the Company, by                  October 26, 1993, and incorporated
         assignment from SSC, and L.F. Widmann,               herein by reference.
         Inc. re health and beauty aids departments.

 10.4.2  Amendment dated September 2, 1993 to                 Previously filed as Exhibit 10.3.1 to
         License Agreement dated July 1, 1987, as             Form 10-K (file no. 1-10767) filed
         amended, between the Company, by                     October 26, 1994, and incorporated
         assignment from SSC, and L.F. Widmann,               herein by reference.
         Inc. re health and beauty aids departments.

 10.4.3  Amendment dated December 5, 1995 to                  Previously filed as Exhibit 10.4.3 to
         License Agreement dated July 1, 1987, as             Form 10-Q (file no. 1-10767) filed
         as amended, between the Company by                   December 12, 1995, and incorporated
         assignment from SSC, and                             herein by reference.
         L.F. Widmann, Inc. re health and
         beauty aids department.

 10.4.4  Letter Agreement dated May 1, 1996,                  Previously filed as Exhibit 10.4.4 to
         between the Company and L.F. Widmann,                Form 10-K (file no. 1-10767) filed
         Inc. extending the license agreement dated           November 1, 1997, and incorporated
         July 1, 1987 to June 30, 1997.                       herein by reference.

   10.6  Employment Agreement, dated April 26,                Previously filed as Exhibit 10.6 to
         1991, between George Iacono and                      Form S-1 Registration Statement (file no.
         the Company.                                         33-40214) filed April 29, 1991, and
                                                              incorporated herein by reference.
</TABLE>


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<PAGE>   46




<TABLE>
 <S>     <C>                                                  <C>
 10.6.1  Agreement, effective as of May 13, 1997              
         between George Iacono and the Company
         re non-renewal of employment contract.



   10.7  Form of Indemnification Agreement,                   Previously filed as Exhibit 10.7 to
         dated 1991, between the Company                      Amendment No. 1 to Form S-1
         and its directors and executive officers.            Registration Statement (file no. 33-40214)
                                                              filed June 6, 1991, and incorporated herein
                                                              by reference.

   10.8  Form of Company's 1991 Stock                         Previously filed as Exhibit 10.8 to
         Option Plan.                                         Amendment No. 1 to Form S-1
                                                              Registration Statement (file no. 33-40214)
                                                              filed June 6, 1991, and incorporated herein
                                                              by reference.

   10.9  Master Store Lease, dated April 25, 1991,            Previously filed as Exhibit 10.9 to
         between the Company, as lessee, and SSC,             Form S-1 Registration Statement (file no.
         as lessor, re fourteen stores.                       33-40214) filed April 29, 1991, and
                                                              incorporated herein by reference.

 10.9.1  First Amendment to Master Store Lease,               Previously filed as Exhibit 10.9.1 to
         dated February 1991, between the                     Form S-1 Registration Statement (file no.
         Company, as lessee, and SSC,                         33-47252) filed April 16, 1992, and
         as lessor, re fourteen stores.                       incorporated herein by reference.

 10.9.2  Lease Modification Agreement to Master               Previously filed as Exhibit 10.9.2 to
         Store Lease, dated June 5, 1995, between             Form 10-K (file no. 1-10767) filed
         the Company, as lessee, and SSC,                     October 27, 1995, and incorporated
         as lessor, re Beckley, West Virginia.                herein by reference.

 10.9.3  Exercise of the first five-year renewal              Previously filed as Exhibit 10.9.3 to
         option commencing August 1, 1996                     Form 10-Q (file no. 1-10767) filed
         under Master Store Lease, dated                      March 19, 1996, and incorporated
         June 5, 1995, as amended, between                    herein by reference.
         the Company, as lessee, and SSC, as
         lessor, re fourteen stores.

  10.10  Master Warehouse Lease, dated April 25,              Previously filed as Exhibit 10.10 to
         1991, between the Company, as lessee,                Form S-1 Registration Statement (file no.
         and SSC, as lessor, re three warehouses,             33-40214) filed April 29, 1991, and
         office, and shop locations.                          incorporated herein by reference.
</TABLE>

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<PAGE>   47





<TABLE>
<S>      <C>                                                  <C>
10.10.1  First Amendment to Master Warehouse                  Previously filed as Exhibit 10.10.1 to
         Lease, dated February 1992, between the              Form S-1 Registration Statement (file no.
         Company, as lessee, and SSC, as lessor, re           33-47252) filed April 16, 1992, and
         three warehouse, office, and shop.                   incorporated herein by reference.
         locations.


10.10.2  Second Amendment to Master Warehouse                 Previously filed as Exhibit 10.10.2 to
         Lease, dated June 1993, between the                  Form 10-K (file no. 1-10767) filed
         Company, as lessee, and SSC, as lessor, re           October 26, 1993, and incorporated
         three warehouse, office, and shop                    herein by reference.
         locations.

10.10.3  Exercise of the first five-year renewal              Previously filed as Exhibit 10.10.3 to
         option commencing August 1, 1996                     Form 10-Q (filed no. 1-10767) filed
         under Master Store Lease, dated                      March 19, 1996, and incorporated
         April 25, 1991, as amended, between                  herein by reference.
         the Company, as lessee and SSC, as
         lessor, re three warehouse
         locations.

  10.11  Master Sublease, dated April 25, 1991,               Previously filed as Exhibit 10.11 to
         between the Company, as sublessee, and               Form S-1 Registration Statement (file no.
         SSC, as sublessor, re three stores.                  33-40214) filed April 29, 1991, and
                                                              incorporated herein by reference.

  10.12  Sublease, dated April 25, 1991, between              Previously filed as Exhibit 10.12 to
         the Company, as sublessor, and SSC, as               Form S-1 Registration Statement (file no.
         sublessee, re one warehouse, with                    33-40214) filed April 29, 1991 and
         underlying Lease, dated July 15, 1981,               incorporated herein by reference.
         between SSC, as lessee, and J.A.L. Realty
         Co., an affiliate of SSC, as lessor.

10.12.1  Exercise of five-year renewal option                 Previously filed as Exhibit 10.12.1 to
         commencing July 16, 1996 under                       Form 10-Q (file no. 1-10767) filed
         Sublease, dated April 25, 1991 between               March 19, 1996, and incorporated
         the Company, as sublessee, and SSC, as               herein by reference.
         sublessor, re 3681 Westerville
         Road warehouse.

  10.13  Lease, dated July 7, 1987, between the               Previously filed as Exhibit 10.13 to
         Company, by assignment from SSC, as                  Amendment No. 1 to Form S-1
</TABLE>

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<PAGE>   48




<TABLE>
<S>      <C>                                                  <C>
         lessee, and Schottenstein Trustees, an               Registration Statement (file no.
         affiliate of SSC, as lessor, re one store.           33-40214) filed June 6, 1991, and
                                                              incorporated herein by reference.

10.14.1  Lease, dated June 28, 1989, between                  Previously filed as Exhibit 10.14.1 to
         the Company, by assignment from SSC,                 Form S-1 Registration Statement (file no.
         as lessor, re one warehouse.                         33-40214) filed April 29, 1991, and
                                                              incorporated herein by reference.


10.14.2  Lease, dated October 27, 1989, between               Previously filed as Exhibit 10.14.2 to
         the Company, by assignment from SSC,                 Form S-1 Registration Statement (file no.
         as lessee, and Southeast Industrial                  33-40214) filed April 29, 1991, and
         Park Realty Company, an affiliate of                 incorporated herein by reference.
         SSC, as lessor, re one warehouse.

10.14.3  Lease, dated March 7, 1989, between                  Previously filed as Exhibit 10.14.3 to
         the Company, by assignment from SSC,                 Form S-1 Registration Statement (file no.
         as lessee, and Southeast Industrial Park             33-40214) filed April 29, 1991, and
         Realty Company, an affiliate of SSC,                 incorporated herein by reference.
         as lessor, re one warehouse.

10.15.1  Sublease, dated April 25, 1991, between              Previously filed as Exhibit 10.15.1 to
         the Company, as sublessor, and SSC, as               Form S-1 Registration Statement (file no.
         sublessee, re Baltimore, MD (Eastpoint)              33-40214) filed April 29, 1991, and
         furniture store location.                            incorporated herein by reference.

10.15.2  Sublease, dated April 25, 1991, between              Previously filed as Exhibit 10.15.2 to
         the Company, as sublessor, and SSC, as               Form S-1 Registration Statement (file no.
         sublessee, re Baltimore, MD (Westview)               33-40214) filed April 29, 1991, and
         furniture store location.                            incorporated herein by reference.

10.15.3  Sublease, dated April 25, 1991, between              Previously filed as Exhibit 10.15.3 to
         the Company, as sublessor, and SSC, as               Form S-1 Registration Statement (file no.
         sublessee, re Lansing, MI furniture                  33-40214) filed April 29, 1991, and
         store location.                                      incorporated herein by reference.

10.15.4  Sublease, dated April 25, 1991, between              Previously filed as Exhibit 10.15.4 to
         the Company, as sublessor, and SSC, as               Form S-1 Registration Statement (file no.
         sublessee, re Louisville, KY (Preston                33-40214) filed April 29, 1991, and
         Highway) furniture store location.                   incorporated herein by reference.
</TABLE>


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<PAGE>   49




<TABLE>
<S>      <C>                                                  <C>
  10.16  Form of Assignment and Assumption                    Previously filed as Exhibit 10.16 to
         Agreement between the Company, as                    Form S-1 Registration Statement (file no.
         assignee, and SSC, as assignor, re                   33-40214) filed April 29, 1991, and
         separate assignments of leases                       incorporated herein by reference.
         for 31 stores.

  10.17  Form of Restricted Stock Agreement,                  Previously filed as Exhibit 10.17 to
         dated 1991, among SSC, the                           Amendment No. 1 to Form S-1
         Company and certain officers.                        Registration Statement (file no. 33-40214)
                                                              filed June 6, 1991, and incorporated herein
                                                              by reference.

  10.18  License Agreements, dated April 13,                  Previously filed as Exhibit 10.18 to
         1984, as amended, between the Company,               Form S-1 Registration Statement (file no.
         by assignment from SSC, and the Valley               33-40214) filed April 29, 1991, and
         Fair Corporation for licensed apparel                incorporated herein by reference.
         departments operated by the Company.
  10.19  Lease Agreement, dated as of July 1,                 Previously filed as Exhibit 10.19 to
         1988, between SSC as sublessor and the               Form 10-K (file no.1-10767) filed
         Company as sublessee, by assignment                  October 24, 1991, and incorporated
         dated April 25, 1991, re Benwood, W.Va.              herein by reference.
         store location.

  10.20  Lease, dated July 2, 1991, between the               Previously filed as Exhibit 10.20 to
         Company as lessee and Allied Company/                Form 10-K (file no.1-10767) filed
         Saul Schottenstein Realty Company                    October 24, 1991, and incorporated
         as lessor re Springfield, Ohio store.                herein by reference.

10.20.1  Exercise of the first five-year renewal              Previously filed as Exhibit 10.20.1 to
         option commencing November 1, 1996                   Form 10-Q (file no. 1-10767) filed
         under Lease dated July 2, 1991                       March 19, 1996, and incorporated
         between the Company, as lessee, and                  herein by reference.
         Allied Company/Saul Schottenstein
         Realty Company, as lessor,  re
         Springfield, Ohio store.

  10.27  Form of Restricted Stock Agreement,                  Previously filed as Exhibit 10.27 to
         dated 1992, between the Company                      Amendment No. 1 to Form S-1 Registration
         and certain employees                                Statement (file no. 33-47252) filed April 27,
                                                              1992, and incorporated herein by reference.

  10.28  The Company's Non-employee Director                  Previously filed as Exhibit 10.28 to
         Stock Option Plan                                    Form 10-K (file no.1-10767) filed
</TABLE>

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<PAGE>   50




<TABLE>
<S>      <C>                                                  <C>
                                                              October 22, 1992, and incorporated
                                                              herein by reference.

  10.29  Lease, dated September 1, 1992, between              Previously filed as Exhibit 10.29 to
         the Company, as lessee, and SSC, as                  Form 10-K (file no.1-10767) filed
         lessor, re South Bend, IN store.                     October 22, 1992, and incorporated
                                                              herein by reference.

  10.30  Lease, dated January 27, 1992, between               Previously filed as Exhibit 10.30 to
         the Company, as lessee, and J.A.L. Realty            Form 10-K (file no.1-10767) filed
         Company, as lessor, as amended on July               October 22, 1992, and incorporated
         29, 1992, re 3080 Alum Creek warehouse.              herein by reference.


10.30.1  Exercise of the first five-year renewal              Previously filed as Exhibit 10.30.1 to
         option commencing February 1, 1997                   Form 10-Q (file no. 1-10767) filed
         under lease, dated January 27, 1992,                 March 19, 1996, and incorporated
         as amended, between the Company, as                  herein by reference.
         lessee, and J.A.L. Realty Company, as
         lessor, re 3080 Alum Creek warehouse.

  10.31  Lease, dated July 29, 1992, between the              Previously filed as Exhibit 10.31 to
         Company, as lessee, and J.A.L. Realty                Form 10-K (file no.1-10767) filed
         Company, as lessor, re 3232 Alum Creek               October 22, 1992, and incorporated
         warehouse.                                           herein by reference.

  10.32  License Agreements, dated as of June 1,              Previously filed as Exhibit 10.32 to
         1992, between the Company, as licensee,              Form 10-K (file no.1-10767) filed
         and Valley Fair, as licensor, re Linen               October 22, 1992, and incorporated
         Depts.                                               herein by reference.

10.32.1  Letter Agreement, dated December 18,                 Previously filed as Exhibit 10.32.1 to
         1995, extending License Agreements,                  Form 10-Q (file no. 1-10767) filed
         dated as of June 1, 1992 and as of                   March 19, 1996, and incorporated
         January 12, 1994, between the Company,               herein by reference.
         as licensee, and Valley Fair Corporation,
         as licensor, re Apparel and Linen
         Departments and Housewares
         Departments, respectively.

  10.33  Lease, dated October 26, 1993 between                Previously filed as Exhibit 10.33 to
         the Company, as lessee, and J.A.L. Realty            Form 10-Q (file no. 1-10767) filed
         Company, as lessor. re 2560 Valuway,                 March 14, 1994, and incorporated
</TABLE>

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<PAGE>   51




<TABLE>
<S>      <C>                                                  <C>
         Columbus, OH 43224.                                  herein by reference.

10.33.1  Lease Modification Agreement dated                   Previously filed as Exhibit 10.33.1 to
         June 16, 1995 to Lease, dated October                Form 10-K (file no.1-10767) filed
         26, 1993, between the Company, as                    October 27, 1995, and incorporated
         lessee, and J.A.L. Realty Company,                   herein by reference.
         as lessor, re 2560 Valuway, Columbus,
         Ohio 43224.

  10.34  License Agreement dated as of January                Previously filed as Exhibit 10.34 to
         12, 1994 between the Company, as                     Form 10-K (file no. 1-10767) filed
         licensee, and  Valley Fair Corporation,              October 26, 1994, and incorporated
         as licensor, re Housewares Depts.                    herein by reference.



  10.35  Ground lease, dated April 15, 1994,                  Previously filed as Exhibit 10.35 to
         between the Company, as lessee, and                  Form 10-K (file no 1-10767) filed
         J.A.L. Realty Company, as lessor, re                 October 26, 1994, and incorporated
         19 acres.                                            herein by reference.

  10.36  Agreement of Lease dated September 1,                Previously filed as Exhibit 10.36 to Form 10-Q
         1994, between Company, as tenant, and                (file no. 1-10767) filed December 12, 1994,
         Jubilee Limited Partnership, as landlord,            and incorporated herein by reference.
         re Carol Stream, IL store.
  10.37  Agreement of Lease, dated March 1, 1994,             Previously filed as Exhibit 10.37 to Form 10-Q
         between the Company, as tenant, and                  (file no. 1-10767) filed December 12, 1994,
         Jubilee Limited Partnership, as landlord,            and incorporated herein by reference.
         re Hobart, IN store.

  10.38  Agreement of Lease, date February 10,                Previously filed as Exhibit 10.38 to Form 10-Q
         1995, between the Company, as tenant,                (file no. 1-10767) filed March 14, 1995 and
         and Jubilee Limited Partnership, as                  incorporated herein by reference.
         landlord, re Gurnee Mills, IL store.

  10.39  Agreement of Lease, dated January 13,                Previously filed as Exhibit 10.39 to Form 10-Q
         1995, between the Company, as tenant,                (file no. 1-10767) filed March 14, 1995 and
         and Westland Partners, as landlord, re               incorporated herein by reference.
         Westland, MI store

  10.40  Agreement of Lease, dated January 31,                Previously filed as Exhibit 10.40 to Form 10-Q
</TABLE>

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<PAGE>   52




<TABLE>
  <S>    <C>                                                  <C>
         1995, between the Company, as tenant,                (file no. 1-10767) filed March 14, 1995 and
         and Taylor Partners, as landlord, re                 incorporated herein by reference.
         Taylor, MI store.

  10.41  Sublease, dated December 28, 1994,                   Previously filed as Exhibit 10.41 to Form 10-Q
         between the Company, as subtenant, and               (file no. 1-10767) filed March 14, 1995 and
         Shonac Corporation, as sublandlord, re               incorporated herein by reference.
         Alum Creek Drive warehouse space.

  10.42  Employment Agreement, dated                          Previously filed as Exhibit 10.42 to
         September 11, 1995, between the                      Form 10-K (file no. 1-10767) filed
         Company and Donald R. Andrus.                        October 27, 1995, and incorporated
                                                              herein by reference.

  10.43  Analysis sheet for Lease re Ft. Wayne,               Previously filed as Exhibit 10.43 to
         Indiana acquired by SSC pursuant to                  Form 10-K (file no. 1-10767) filed
         Assignment and Assumption Agreement                  October 27, 1995, and incorporated
         dated July 21, 1995.                                 herein by reference.

  10.44  Merchandise Royalty Agreement, dated                 Previously filed as Exhibit 10.44  to
         July 15, 1995, between American Eagle                Form 10-Q (file no. 1-10767) filed
         Outfitters, Inc., and the Company                    December 12, 1995, and incorporated
         re American Eagle merchandise sold                   herein by reference.
         to Value City Department Stores, Inc.

  10.45  Agreement of Lease, dated April 10, 1995,            Previously filed as Exhibit 10.45  to
         between the Company as tenant, and                   Form 10-Q (file no. 1-10767) filed
         Independence Limited Liability Company,              December 12, 1995, and incorporated
         as landlord, re Charlotte, North Carolina            herein by reference.
         Store.

  10.46  Sublease and Occupancy Agreement,                    Previously filed as Exhibit 10.46 to
         dated December 15, 1995, between the                 Form 10-Q (file no. 1-10767) filed
         Company, SSC and SSC dba Value City                  March 19, 1996, and incorporated
         Furniture, re Louisville, Kentucky                   herein by reference.
         (Preston Highway) store.

  10.47  Agreement of Lease, dated March 13,                  Previously filed as Exhibit 10.47 to
         1996, between the Company as tenant,                 Form 10-Q (file no. 1-10767) filed
         and Jubilee Limited Partnership, as                  March 19, 1996, and incorporated
         landlord, re Saginaw, Michigan                       herein by reference.
         store.

  10.48  Asset Purchase Agreement, dated as of                Previously filed as Exhibit 10.48 to
         April 24, 1996, between the Company,                 Form 10-Q (file no. 1-10767) filed
</TABLE>

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<TABLE>
  <S>    <C>                                                  <C>
         as buyer and Steinbach Stores, Inc., a               June 18, 1996 and incorporated
         subsidiary of SSC, as seller, re the                 herein by reference.
         Seaview, Shore Mall, Paramus and
         Manalapan, NJ Stores.

  10.49  Agreement of lease, dated 1996                       Previously filed as Exhibit 10.49 to
         between the Company, as tenant,                      Form 10-K (file no. 1-10767) filed
         and SSC, as landlord, re the Melrose                 November 1, 1997 and incorporated
         Park, IL store.                                      herein by reference.

  10.50  Agreement of Lease, dated October 4,                 Previously filed as Exhibit 10.50 to
         1996, between the Company, as tenant,                Form 10-K (file no. 1-10767) filed
         and Hickory Ridge Pavilion, Ltd., as                 November 1, 1997 and incorporated
         landlord, re the Memphis, TN store.                  herein by reference.

  10.51  Asset and Stock Purchase Agreement,                  
         dated as of July 14, 1997, by and among
         VCM, LTD., Mazel Stores, Inc., Valley
         Fair Corporation L.F. Widmann, Inc. and
         Value City Department Stores, Inc.

  10.52  Employment Agreement, dated July 15,                 
         1997, between Martin P. Doolan and the
         Company.

  10.53  Restricted Stock Agreement dated                     
         July 14, 1997 between Martin P. Doolan and the
         Company.

   16.1  Letter re change in certifying Accountant            Previously filed as Exhibit 16.1 to
                                                              Form 8-K (file no. 1-10767) filed
                                                              May 27, 1997 and incorporated
                                                              herein by reference.

     21  List of  Subsidiaries                                

     23  Consent of Deloitte & Touche LLP                     

     27  Financial Data Schedule                              
</TABLE>



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