<PAGE>
 
================================================================================

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

[_]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                  For the fiscal year ended January 31, 1998

[_]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

      For the transition period from _______________ to _________________
                          Commission File No. 0-5648

                         OSHMAN'S SPORTING GOODS, INC.
            (Exact name of Registrant as specified in its charter)

              Delaware                                     74-1031691
     (State or other jurisdiction                       (I.R.S. Employer
           of incorporation)                            Identification No.)

           2302 Maxwell Lane                                  77023
            Houston, Texas                                 (Zip Code)
        (Address of principal
          executive offices)

      Registrant's telephone number, including area code:  (713) 928-3171
       Securities registered pursuant to Section 12(b) of the Act:  None
          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $1.00 par value
                               (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                         Yes  [X]     No  [_]

     Indicate 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]

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of April 20, 1998 (based upon the closing sales price as of
such date) was $14,309,361.

     Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of  April 20, 1998:

                  Common Stock, $1.00 par value:   5,827,249

Documents incorporated by reference:  Proxy Statement for the Registrant's
Annual Meeting of Stockholders to be held June 19, 1998 (to be filed within 120
days of the close of Registrant's fiscal year) is incorporated by reference into
Part III.
<PAGE>
 
                                    PART I

ITEM 1.   BUSINESS.

DEVELOPMENT OF BUSINESS

     Oshman's Sporting Goods, Inc. ("Oshman's" or the "Company"), which operates
a chain of retail sporting goods specialty stores, was incorporated in Delaware
in 1946 as the successor to a proprietorship founded by J.S. Oshman in 1931.
Unless the context otherwise requires, the terms "Oshman's" and the "Company" as
used herein include the Company and its subsidiaries, whether operating under
the name "Oshman's"(R) or "SuperSports USA"(R).

     Since 1990, the Company has developed an innovative, interactive concept in
sporting goods retailing that it is implementing through its SuperSports USA
megastores.  The Company has transformed its business by focusing its efforts on
opening and operating SuperSports USA megastores occupying, on average,
approximately 60,000 square feet while rationalizing its preexisting base of
traditional stores, which average approximately 12,000 square feet.  SuperSports
USA megastores offer a dominant selection of sporting goods in an environment
featuring a variety of "play areas" that provide customers with the opportunity
to try out sporting goods merchandise.  This "play-before-you-pay" approach
encourages customers, with the assistance of qualified sales personnel, to
purchase the equipment that best satisfies their particular needs and desires
while also providing an entertaining shopping experience.

     SuperSports USA megastores are organized as a collection of distinctive
sporting goods specialty shops.  The merchandising format and layout of each
megastore is designed to lead customers along a path through the store, in and
out of specialty shops that concentrate on specific sporting goods categories
such as in-line skating and skateboarding; skiing and snowboarding; cycling;
golf; tennis and other racquet sports; fitness and exercise equipment; hunting,
fishing, hiking and camping; and team sports such as baseball, softball,
football, basketball, hockey, soccer and volleyball.  Each specialty area
merchandises sporting equipment as well as the appropriate apparel in a
department-store style.  Based on customer reception to the unique shopping
experience provided at the Company's SuperSports USA megastores, these stores
are becoming established shopping destinations.

     At the end of fiscal 1997, the Company operated 42 SuperSports USA stores,
including 36 SuperSports USA megastores ranging in size from approximately
40,000 to 85,000 square feet and six mini SuperSports USA stores, ranging in
size from approximately 19,000 to 32,000 square feet.  The mini SuperSports USA
stores include certain "play areas" and merchandise assortments similar to the
megastores, and operate under the name SuperSports USA. At the end of fiscal
1997, the Company also operated 22 traditional stores and six clearance stores.
The Company's stores are located primarily in medium to large metropolitan areas
across the United States.  In fiscal 1997, excluding results from stores closed
or targeted to close, the 42 SuperSports USA stores produced 89% of the
Company's retail sales and approximately 86% of direct store contributions.
Since the beginning of fiscal 1990, the Company has reduced its traditional
store base from 193 to 28 (including six clearance stores).  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Store Closings."  

                                       2
<PAGE>
 
The Company operates stores in Texas and California as well as in Arizona,
Florida, Kansas, Louisiana, Minnesota, New Mexico, Oklahoma, South Carolina,
Tennessee, Utah and Washington.

     Oshman's offers a full line of sporting goods equipment, sportswear and
athletic footwear focusing on middle- to high-end products.  Nationally
advertised brand name products are featured, along with the Company's own labels
in certain categories.  While certain of the Company's primary megastore
competitors employ "every-day-low-price" strategies, the Company is a
promotional retailer.  As such, the Company seeks to attract customers into its
stores through advertised price reductions on selected merchandise, while
maintaining full markups on other merchandise.  The following table sets forth
sales of sporting goods equipment, sports apparel and footwear as a percentage
of net sales during the last three fiscal years.
 
                                  PERCENTAGE OF NET SALES
                                        FISCAL YEAR
                                 -------------------------
                                 1997       1996      1995
                                 ----       ----      ----
     Sporting goods equipment     50%        49%       50%
     Sports apparel               29%        28%       28%
     Footwear                     21%        23%       22%

COMPETITION

     The market for retail sporting goods is highly competitive, fragmented and
segmented.  The Company competes with many different types of retail stores,
including full-line sporting goods chains, specialty footwear stores, warehouse-
format stores, specialty stores, discount and department stores and other stores
with a megastore format.  While its stores face competition in individual
markets from a variety of retailers, the Company believes that its greatest
competition is likely to come from other megastore operators and from warehouse-
format operations.  There can be no assurance that the Company will be able to
maintain or increase its current level of pricing, sales or profitability in
light of such competition, particularly as the Company expands into markets
served by existing competitors or as new competitors enter into the Company's
markets.  Furthermore, there is substantial competition from large-format
retailers for prime commercial locations and favorable lease terms that could
adversely affect both the Company's ability to expand and its profitability.

     The Company's ability to remain competitive is largely dependent upon its
ability to provide a selection of merchandise that appeals to its customers'
changing desires and that appropriately reflects geographical differences in
seasonality, brands and sports preferences.  A failure by the Company to
accurately identify and respond to emerging trends in sports equipment or
athletic footwear, apparel or accessories could have a material adverse effect
on the Company's financial performance and results of operations.

     Several sporting goods retailers currently operate stores with a megastore
format, including some with significantly greater resources than the Company.
In addition, there are other businesses, retailers and otherwise, with
substantially greater resources than the Company 

                                       3
<PAGE>
 
that may decide to enter the sporting goods megastore or warehouse-format retail
business. This competition could have a material adverse effect on the Company.

TRANSFORMATION PLAN

     Management believes that changing consumer preferences toward sporting
goods megastores has had a detrimental impact on the Company's existing
traditional stores and will continue to limit their potential in the future.  In
response to this trend, the Company has been focusing on opening and operating
its SuperSports USA megastores.  During fiscal 1997, the Company closed 51
stores, including one megastore, and the Company believes that it has virtually
completed its transformation to primarily an operator of megastores.  At the end
of fiscal 1997, the Company operated 42 SuperSports USA stores, including 36
SuperSports USA megastores and six mini SuperSports USA stores, 22 traditional
stores and six clearance stores.  The Company's stores are located primarily in
medium to large metropolitan areas across the United States.  Most of the 22
traditional stores are profitable and no further major store closing program is
anticipated.  The Company currently intends to open from one to three additional
SuperSports USA megastores in fiscal 1998 as it focuses on its existing store
base and improving its systems and processes.  Future store openings are,
however, dependent upon numerous factors including timing of construction and
general market conditions.

     Since the beginning of fiscal 1990 the Company has closed 176 traditional
stores including two stores converted to SuperSports USA megastores, six stores
converted to mini SuperSports USA stores and one location closed, reopened and
then closed again.  Changes in the number of stores and square footage during
the last eight fiscal years are summarized below:

<TABLE>
<CAPTION>
                                         NUMBER OF STORES                      SQUARE FOOTAGE (AT END OF PERIOD)
                      ----------------------------------------------------    -----------------------------------
                                    SUPERSPORTS
                      TRADITIONAL       USA           STORES      OPERATED
                        STORES         STORES       CLOSED OR        AT       TRADITIONAL  SUPERSPORTS
FISCAL YEAR             OPENED         OPENED       CONVERTED     YEAR END      STORES     USA STORES     TOTAL
-----------           -----------   -----------     ---------     --------    -----------  -----------  ---------
<S>                   <C>          <C>             <C>           <C>          <C>          <C>          <C>
1990............                5            2            11          189       2,090,000      158,000  2,248,000
1991............                2            0             8          183       2,036,000      158,000  2,194,000
1992............                2            3            18          170       1,879,000      337,000  2,216,000
1993............                1            3(a)         13(a)       161(a)    1,744,000      504,000  2,248,000
1994............                0            4(a)         24(a)       141(a)    1,454,000      785,000  2,239,000
1995............                0           12(b)         20          133(b)    1,196,000    1,439,000  2,635,000
1996............                0            7            25          115         948,000    1,847,000  2,795,000
1997............                0           12            51           70         438,000    2,145,000  2,583,000
 
Traditional Stores
 Converted to mini
 SuperSports USA stores (c)                  6             6                      301,000    2,282,000  2,583,000
                              ---          ---           ---                    ---------    ---------  ---------
 
 Total..........               10           43           176
                              ===          ===           ===
</TABLE>
___________________
(a)  Includes a traditional store which was expanded and converted to a
     megastore.
(b)  Includes megastores opened at seven locations purchased from SportsTown,
     Inc.
(c)  Stores ranging in size from 19,000 to 32,000 square feet which, over the
     last several years, have been opened or converted from enlarged traditional
     stores and which operate as SuperSports USA stores.

                                       4
<PAGE>
 
SITE SELECTION

     The Company subjects each potential new store location to extensive
analysis and evaluation, using its in-house staff to work with local real estate
developers and brokers.  Sites are selected primarily based on the Company's
evaluation of the potential financial return on its investment, taking into
account internally prepared sales projections, estimated gross margins and store
operating expenses as compared to required capital expenditures and inventory
investments.  The Company also utilizes demographic, geographic and competitive
analyses in arriving at its estimates for sales and gross margin.  Oshman's
seeks to locate stores in areas that are experiencing a growth in population and
have high concentrations of white-collar workers with growing families and
sufficient financial resources and disposable income to devote significant
spending to leisure and sporting activities.  Nine of the Company's existing
megastores serve as anchors for regional shopping malls and shopping centers.
The Company intends to continue to pursue locations that offer this desirable
marquee status and the associated benefits.

     Although the Company realizes certain economies of scale in warehousing,
distribution and advertising through the "clustering" of several stores in one
market (most notably in the Dallas/Fort Worth, Houston and Los Angeles areas),
it has also taken advantage of opportunities to successfully open and profitably
maintain single SuperSports USA megastores in certain markets and intends to
continue to pursue this flexible strategy.

PURCHASING AND SUPPLIERS

     The Company purchases its merchandise directly from a diverse group of
leading domestic and international suppliers, and achieves significant
efficiencies through large quantity purchases.  The Company's largest supplier,
Nike, accounted for 17.2%, 15.1% and 14.2% of the Company's total purchases in
fiscal 1997, 1996 and 1995, respectively.  No other supplier accounted for more
than 10% of the Company's purchases in any of the last three years.

DISTRIBUTION AND WAREHOUSING

     The Company utilizes a centralized distribution system operated through two
distribution centers.  One is located in Houston, Texas, and the other is
located in Santa Ana, California.  Approximately 92% of the Company's inventory
is shipped through these distribution centers.  However, for certain items that
the Company believes require more rapid delivery to stores because of higher
product turnover or other conditions, the Company uses direct delivery from
vendors.  Substantially all of the merchandise distributed to Texas, Louisiana,
Oklahoma and locations east of the Mississippi River flows through the Company's
distribution center located in Houston, Texas.  The Company's distribution
center in Santa Ana, California is responsible for distributing substantially
all of the merchandise to the Company's stores in California, Arizona, New
Mexico, Utah and Washington.

                                       5
<PAGE>
 
MANAGEMENT INFORMATION SYSTEMS

     During fiscal 1996, the Company completed the installation of new financial
accounting and reporting systems and payroll and human resources systems and in
fiscal 1997 the Company installed new sales audit software.  The Company also
installed a new IBM AS400 computer in fiscal 1997 to accommodate the new systems
and those to be installed in 1998.  In addition, the Company is in the process
of installing new merchandising information and inventory management systems
which are expected to be implemented by the end of fiscal 1998.  When
installation of these systems is complete, the Company will have updated
substantially all its computer systems and software to accommodate the year 2000
and beyond.  At the end of fiscal 1997, capital costs of approximately $3.7
million had been incurred for the purchase and installation of hardware and
software.  The Company does not expect future expenditures related to the year
2000 issue to be significant for its internal systems.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Year
2000 Issue."

SEASONAL FACTORS

     Oshman's business is highly seasonal, with sales generally higher in the
fourth quarter, peaking in December due to holiday shopping and the purchase of
ski equipment.  Any substantial decrease in sales during the fourth quarter
could adversely affect the Company's results of operations.  Weather conditions
add to the seasonal nature of the business, particularly with respect to ski
equipment and cold weather apparel.  The Company's results of operations may
also fluctuate on a quarterly basis as a result of seasonal variances and time
and costs associated with selecting, constructing, staffing, stocking and
opening new stores, as well as the timing of promotions.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Seasonality and Quarterly Fluctuations."

TRADEMARKS AND SERVICE MARKS; OTHER BUSINESS

     As of January 31, 1998, Oshman's owned approximately 23 trademarks and
service marks that were employed in its advertising and operations.  The Company
has registered the "Oshman's" and "SuperSports USA" trademarks.  The Company
believes that its marks are, in the aggregate, materially important in its
business and that the "Oshman's" and "SuperSports USA" marks are individually
material.  The Company anticipates that it will continue to own each of its
trademarks and service marks for so long as it finds it beneficial to use them
in connection with its operations.

     Since 1983 the Company has had a licensing agreement and consulting
arrangement with a major Japanese retailer, Ito-Yokado Co., Ltd., that currently
operates four stores in Japan under the Oshman's name.  The Company also sells
merchandise to this entity.  In fiscal 1997, it entered into a similar agreement
with Samsung Corporation, a major Korean company that operates two stores in
South Korea under the Oshman's name.

                                       6
<PAGE>
 
MISCELLANEOUS

     Oshman's typically satisfies its working capital needs out of internally
generated funds from current operations and its credit facilities as addressed
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations," below.

     Inasmuch as Oshman's is a retailer, backlog is not relevant to its
business.  Oshman's does not have contracts subject to renegotiation or
termination and does not conduct any material research and development
activities.

     Federal, state and local environmental regulations have not had, and are
not expected to have, any material effect upon the expenditures, earnings or
competitive position of the Company.

     As of January 31, 1998, Oshman's employed approximately 3,360 people
including part-time employees.


ITEM 2.   PROPERTIES.

     Oshman's 79,000 square foot general and executive offices are leased by the
Company and located in Houston, Texas.  A Houston warehouse and distribution
center occupies approximately 257,000 square feet of leased space in the same
building complex, and the Company also rents an office/warehouse in Santa Ana,
California, in which approximately 7,000 square feet are devoted to office space
and 151,000 square feet are used as warehouse space.  Oshman's owns properties
in Houston, Texas and in Los Angeles and Millbrae, California.  Two of the
properties owned by the Company are subject to mortgage liens of certain of the
Company's lenders, including The CIT Group/Business Credit, Inc. ("CIT").

     Substantially all of Oshman's retail stores occupy leased space in modern
structures.  As of January 31, 1998, these retail stores occupied an aggregate
of approximately 2,504,000 square feet of floor space under leases expiring at
various dates from 1998 to 2018 (exclusive of renewal options).  Traditional
stores on average are comprised of approximately 12,000 square feet, while the
average megastore occupies approximately 60,000 square feet.  One  traditional
store and one megastore in locations owned by Oshman's occupied an aggregate of
approximately 79,000 square feet of floor space.

     Aggregate rentals paid by the Company under all its leases amounted to
approximately $20.1 million during the 1997 fiscal year.  Most store leases
provide for rentals that are the greater of a fixed minimum amount or a
specified percentage of sales.  Oshman's owns the fixtures in its retail stores
and considers all property owned or leased to be well maintained, adequately
insured and suitable for its purposes.

                                       7
<PAGE>
 
ITEM 3.   LEGAL PROCEEDINGS.

     The Company is subject to certain pending legal proceedings, most of which
are ordinary and routine litigation incidental to its business.  None of such
legal proceedings, in the opinion of the Company, is material to its business or
financial condition.  The Company maintains liability insurance coverage that it
believes to be customary in the sporting goods retailing industry.

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

     Oshman's did not submit any matters to a vote of security holders during
the fourth quarter of the fiscal year ended January 31, 1998.

                     EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth the name and age of each executive officer
of the Company and all positions and offices with the Company held by each
person named:
 
      NAME           AGE             POSITIONS AND OFFICES HELD
      ----           ---             --------------------------
 
Alvin N. Lubetkin(1)  64  Vice Chairman of the Board, Chief Executive Officer,
                          President and Director
Marilyn Oshman(1)     58  Chairman of the Board and Director
A. Lynn Boerner       57  Vice President, Chief Accounting Officer and Assistant
                          Secretary
Richard G. Dennis     45  Vice President, Secretary and General Counsel
Thomas J. McVey       46  Senior Vice President
Ray Miller            51  Vice President, Treasurer and Assistant Secretary
Steven U. Rath        43  Executive Vice President
Charles Carstens      47  Vice President

----------
(1)  Member of the Executive Committee

     Mr. Lubetkin has been an officer of the Company since 1966 and a Director
since 1962. Mr. Lubetkin has overall responsibility for the Company's
operations. He was originally hired by the Company in 1961.

     Ms. Oshman was elected Chairman of the Board in April 1993 and has been a
Director of the Company since 1979. She has been employed by the Company since
1990.

     Mr. Boerner has been an officer of the Company since 1984 and was elected
Vice President in 1988. He was hired by the Company in 1971. Prior to joining
the Company, Mr. Boerner was employed by Arthur Andersen & Co. Mr. Boerner is a
certified public accountant.

     Mr. Dennis was elected Vice President in June 1994 and Secretary in July
1996. Mr. Dennis has also served as General Counsel of the Company since 1993.
Prior to that, he was employed as Managing Attorney, Banc One New Hampshire
Asset Management Company from 1992 to 1993 and Associate Attorney, Weil, Gotshal
& Manges from 1986 until 1992.

                                       8
<PAGE>
 
     Mr. McVey was elected Vice President of the Company in March 1996 and
Senior Vice President in June 1997. He is primarily responsible for store
operations. Since 1994, Mr. McVey has served as divisional Senior Vice President
and Regional Manager. Prior to that time, he was regional Vice President from
1989 to 1994.

     Mr. Miller was elected Treasurer in July 1996, Assistant Secretary in
January 1997 and Vice President in May 1997. He originally joined the Company in
1976, serving in various accounting and treasury positions. In June of 1990, Mr.
Miller left the Company and joined Profit Recovery Group, a contingency audit
firm, where he was employed until September of 1993, at which time he rejoined
the Company.

     Mr. Rath was elected as a Vice President of the Company in 1992 and
Executive Vice President in April 1998. He is primarily responsible for the real
estate functions of the Company, both with respect to new store development and
the restructuring of the traditional store operations. In fiscal 1997, Mr. Rath
assisted Mr. Lubetkin in the execution of the merchandising functions of the
Company, as well as assuming an expanded management role in overall operations.
Prior to becoming a Vice President of the Company, Mr. Rath served as a
divisional Vice President for Corporate Development from 1990 to 1992, and
Director of Corporate Development from 1988 to 1989.

     Mr. Carstens was elected as a Vice President of the Company in 1998. He is
primarily responsible for management and information systems and computer and
technical services at the Company. Prior to joining the Company in 1998, Mr.
Carstens served as Vice President of Information Technology at JumboSports, a
sporting goods retailer from March 1997 until March 1998, as Account Executive
at GSI Oustsourcing, USA division from August 1996 until February 1997, as
Director of Data Processing at Pic 'N' Save, a regional discount department
store, from July 1994 until July 1996 and as Director of Systems and Programming
at Carnett, a division of JM Family Enterprises, from February 1987 until June
1994.

                                       9
<PAGE>
 
ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Common Stock of the Company has been listed on the American Stock
Exchange under the symbol "OSH" since June 21, 1995.  Prior to that date, the
Common Stock of the Company was quoted on The Nasdaq Stock Market.  The
following table sets forth the quarterly high and low reported sales prices per
share for the Common Stock:
                                                        HIGH     LOW
                                                        ----     ---
FISCAL YEAR ENDED FEBRUARY 1, 1997
First Quarter ended May 4, 1996                        $11.00   $9.38
Second Quarter ended August 3, 1996                      9.63    7.88
Third Quarter ended November 2, 1996                     7.88    5.00
Fourth Quarter ended February 1, 1997                    5.69    4.75
 
FISCAL YEAR ENDED JANUARY 31, 1998
First Quarter ended May 3, 1997                        $ 5.19   $3.88
Second Quarter ended August 2, 1997                      6.06    4.50
Third Quarter ended November 1, 1997                     8.19    5.00
Fourth Quarter ended January 31, 1998                    7.00    4.25
 
FISCAL YEAR ENDING JANUARY 31, 1999
First Quarter ended May 2, 1998 
(through April 20, 1998)                               $ 6.75   $4.25


     As of April 20, 1998, there were approximately 1,227 holders of record of
the Common Stock.  The last reported sale price for the Common Stock on the
American Stock Exchange composite tape as of April 20, 1998, was $5.875.

     The Board of Directors of the Company suspended the payment of dividends in
March 1991 and does not anticipate paying dividends in the foreseeable future.
The Company's credit agreement with CIT places certain limitations and
restrictions on the Company's ability to pay dividends on the Common Stock.

ITEM 6.   SELECTED FINANCIAL DATA.
 
The following table provides selected consolidated financial information for the
Company's last five fiscal years.
<TABLE> 
<CAPTION> 
                                                                                 FOR THE YEAR ENDED
                                                                                OR AS OF THE YEAR END
 
                                                        JANUARY 31,      FEBRUARY 1,     FEBRUARY 3,    JANUARY 28,    JANUARY 29,
                                                            1998             1997            1996            1995           1994
                                                         (52 WEEKS)       (52 WEEKS)      (53 WEEKS)     (52 WEEKS)     (52 WEEKS)
                                                        -----------      -----------     -----------    -----------    -----------
                                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>              <C>             <C>             <C>            <C> 
Consolidated Sales                                       $342,609         $365,879        $342,889        $311,419       $307,935
Net Earnings (Loss)                                         6,372*         (27,250)          1,942             290        (19,494)
Net Basic Earnings (Loss) per Share                          1.09            (4.67)           0.33            0.05          (3.36)
Net Diluted Earnings (Loss) per Share                        1.07            (4.67)           0.32            0.05          (3.36)
Dividends per Share                                             -               --              --              --             --
Total Assets                                              148,350          160,734         162,923         135,077        126,432
Long-Term Debt                                             35.953           42,397          36,681           5,665          3,712

-----------------------
</TABLE>
*    Excludes loss of $1,299 from cumulative effect of change in accounting
     method for pre-opening expenses.  See "management's Discussion and Analysis
     of Financial Condition and Results of Operations-Change of Accounting
     Method for Pre-Opening Expenses."

                                       10
<PAGE>
 
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

OVERVIEW

     The Company has been in operation since 1931, having been incorporated in
1946 as the successor to a proprietorship founded by J.S. Oshman. After building
a base in Texas, where it is headquartered, the Company expanded into other
states across the Sun Belt, growing from 11 stores in 1970 to 193 stores at the
beginning of fiscal 1990. In fiscal 1990, the Company opened its first two
SuperSports USA megastores.  The changing nature of retailing and the new
competitive challenges in the sporting goods sector had started to effect the
results of the Company's traditional stores.  Since 1990, the Company has been
in the process of transforming its business by focusing on opening and operating
SuperSports USA megastores occupying, on average, approximately 60,000 square
feet, while rationalizing its pre-existing base of traditional stores, which
average approximately 12,000 square feet.  In the fourth quarter of fiscal 1996,
the Company announced its intention to close 53 traditional stores in 1997 and
recorded a store closing provision.

     During fiscal 1997, the Company closed 51 sporting goods stores, including
one megastore, while opening six new SuperSports USA megastores.  The Company
believes that it has virtually completed its transformation to primarily an
operator of megastores.  At the end of fiscal 1997, the Company operated 42
SuperSports USA stores, including 36 SuperSports USA megastores and six mini
SuperSports USA stores, 22 traditional stores and six clearance stores located
primarily in medium to large metropolitan areas in Texas and California as well
in Arizona, Florida, Kansas, Louisiana, Minnesota, New Mexico, Oklahoma, South
Carolina, Tennessee, Utah and Washington.

STORE CLOSINGS

     In the fourth quarter of fiscal 1996, the Company announced its plan to
close 53 of its traditional stores during fiscal 1997.  The Company recorded a
store closing provision of $13.6 million to cover inventory adjustments ($6.3
million), lease termination costs ($5.2 million), leasehold and other asset
write-offs ($1.3 million) and employee costs and other incremental store closing
costs ($839,000).  During fiscal 1997, 44 of these stores were closed, three
will continue to operate as normal traditional stores until their leases expire
at the end of fiscal 1998, and six are operating as clearance stores, pending
resolution of lease obligations.  During fiscal 1997, reserves totaling $2.6
million were used to cover lease terminations and other store closing costs.  At
the end of fiscal 1997, the Company had reserves of approximately $3.0 million
available to cover estimated costs associated with closing the remainder of
these stores.  Management believes these reserves are sufficient, however, there
can be no assurance that the Company will be successful in its efforts to
negotiate lease terminations or that amounts reserved are adequate to cover the
cost of these terminations and other store closing costs.

     In addition to the 44 store closings discussed above, the Company closed an
additional seven stores in fiscal 1997, including one megastore and three
traditional stores for which it had 

                                       11
<PAGE>
 
sold its leasehold interests. In fiscal 1996, the Company closed 25 traditional
stores and its athletic team business. During fiscal 1997, sales contributions
from stores closed in fiscal 1997 and 1996, and those targeted to close in
fiscal 1997, caused sales to decline $51.2 million from $83.5 million in fiscal
1996 to $32.3 million in fiscal 1997. During fiscal 1997, these stores incurred
direct store losses of $540,000, over and above amounts charged to store closing
reserves, as discussed above. These stores as a group had direct store losses of
$5.6 million in fiscal 1996.

CHANGE OF ACCOUNTING METHOD FOR PRE-OPENING EXPENSES

     The Company's prior accounting policy with regard to pre-opening expenses
of new stores provided that expenses related to stores larger than 25,000 square
feet in size (anticipated to be only SuperSports USA megastores) would be
deferred and amortized over a one-year period subsequent to the store opening.
Effective at the beginning of fiscal 1997, the Company changed its policy to
require that non-capital expenses related to the opening of new stores,
regardless of size, be charged to expense in the period in which the store opens
for business.  Accordingly, the Company took a charge in the first quarter of
fiscal 1997 of $1.3 million related to pre-opening expenses of megastores opened
in fiscal 1996.

                                       12
<PAGE>
 
RESULTS OF OPERATIONS

     The following table sets forth selected statements of operations data of
the Company expressed as a percentage of net  sales for the periods indicated:

                                            PERCENTAGE OF NET SALES
                                                  FISCAL YEAR

                                             1997     1996     1995  
                                            -----    -----    -----
Net sales                                   100.0    100.0    100.0
Cost of good sold                            65.6     68.5     65.3 
                                            -----    -----    -----
   Gross profit                              34.4     31.5     34.7 
Operating expenses:
   Selling and administrative expenses       34.2     35.1     33.6
   Pre-opening expenses                       0.4      1.0      0.6
   Corporate restructuring                      -        -     (0.7)
   Store closing provision                   (0.2)     2.1      0.7
   Miscellaneous income                      (1.8)    (0.2)    (0.8)
                                            -----    -----    -----
     Operating income (loss)                  1.8     (6.5)     1.4
Interest expense, net                         1.1      1.0      0.7
                                            -----    -----    -----
Income (loss) before income taxes and
cumulative effect of change in accounting
method for pre-opening expenses               0.7     (7.5)     0.7
Income tax (benefit)                         (1.2)    (0.1)     0.1
                                            -----    -----    -----
Income (loss) before cumulative effect of
change in accounting method for pre-opening   1.9     (7.4)     0.6
expenses
Cumulative effect of change in accounting
method for pre-opening expenses              (0.4)       -        -
                                            -----    -----    -----
Net earnings (loss)                           1.5     (7.4)     0.6
                                            =====    =====    =====

FISCAL 1997 COMPARED TO FISCAL 1996

     Net sales for fiscal 1997 decreased 6.4% to $342.6 million from $365.9
million for fiscal 1996.  The net decrease is attributable to the elimination of
$51.2 million of sales related to stores closed or targeted to close in fiscal
1997 and fiscal 1996 (see "Store Closings"), and also to a comparable store
sales decrease of 3.7% or $9.5 million in continuing stores.  These sales
reductions were partially offset by $37.4 million in sales from full year sales
from seven megastores opened in fiscal 1996 and to partial year sales from six
new megastores opened in fiscal 1997.  Sales from continuing stores, including
sales from new stores, increased 9.9% to $310.3 million.

     Same store sales in continuing stores declined 3.7% in fiscal 1997.
Management attributes the decline in comparable store sales to several factors,
including increased competition, the impact of liquidation sales in the
Company's own closing stores, particularly in the first quarter of fiscal 1997,
lower inventory levels related to the Company's efforts to increase margins and
improve inventory turnover rates and reduced advertising levels.

                                       13
<PAGE>
 
     Gross profit, as a percentage of net sales, increased to 34.4% in fiscal
1997 compared to 31.5% in fiscal 1996.  The increased rate of gross profit as a
percentage of net sales in fiscal 1997 is primarily due to the nonrecurrance of
a $6.3 million (1.7% as a percentage of sales) store closing provision taken in
the fourth quarter of fiscal 1996 and additional markdowns taken during fiscal
1996 to reduce excessive inventories resulting from lower than planned sales and
from stores closed during the year.

     Selling and administrative expenses as a percentage of net sales were 34.2%
in fiscal 1997, compared to 35.1% in fiscal 1996.  Even though selling and
administrative expenses in comparable stores declined approximately $4.0 million
in fiscal 1997 compared to fiscal 1996, selling and administrative expenses as a
percentage of sales in all continuing stores increased as a result of lower than
expected sales in existing stores and the impact of new stores which have not
yet grown to expected sales levels.  The increased rate of selling and
administrative expenses as a percentage of sales in continuing stores was offset
by a reduction of corporate overhead and distribution costs of approximately
$2.3 million in fiscal 1997 compared to fiscal 1996, resulting in a 0.6%
reduction in the selling and administrative expenses as a percentage of sales of
the Company's ongoing operations.  The balance of the reduction in the rate of
selling and administrative expenses as a percentage of sales is attributable to
stores closed or targeted to close which experienced a lower rate of selling and
administrative expenses in fiscal 1997 as a result of higher sales rates during
liquidation and certain expenses which were offset by reserves as discussed
above (see "Store Closings").

     Pre-opening expenses as a percentage of net sales were 0.4% and 1.0%,
respectively, in fiscal 1997 and fiscal 1996. (See "Change of Accounting Method
for Pre-opening Expenses.")

     In fiscal 1997, store closing provision as a percentage of net sales was a
benefit of 0.2% compared to an expense of 2.1% in fiscal 1996.  In fiscal 1996,
the Company recorded of a store closing provision of $7.3 million, excluding a
provision for liquidation of inventory, for 53 traditional stores it planned to
close in fiscal 1997 (see "Store Closings").

     The major components of miscellaneous income for fiscal 1997 and fiscal
1996 are set out in the table below:

                                                       FISCAL YEAR
                                                    ----------------
                                                    1997        1996
                                                    ----        ----
                                                     (in thousands)
Gain on sale of real estate and leasehold
 interests                                        $5,616       $    -
 
Fees from foreign licensees                        1,199        1,238
Other, net                                          (769)        (465)
                                                  ------       ------
     Total                                        $6,046       $  773
                                                  ======       ======

     Net interest expense for fiscal 1997 was $3.7 million, compared to $3.8
million in fiscal 1996. Net interest expense in fiscal 1997 includes interest
income of $662,000 related to a

                                       14
<PAGE>
 
Federal income tax refund. The increase in interest expense in fiscal 1997 is
related to an increased interest rate under its credit facility. Subsequent to
the end of fiscal 1997, the Company has amended its credit facility to, among
other things, reduce its interest rate.

     The $4.0 million income tax benefit in fiscal 1997 includes a benefit of
$4.1 million related to prior years' Federal income taxes.  No tax expense was
recorded related to 1997 due to the partial utilization of prior net operating
losses, which primarily had been subject to a valuation allowance.  Income taxes
in fiscal 1996 are related primarily to state income taxes.  In 1996, no Federal
Income tax benefit had been recorded despite the Company's large loss before
income taxes due to valuation allowances recorded against the deferred tax
assets generated by such losses.

     In fiscal 1997, the Company had income of $2.4 million before income taxes
and cumulative effect of change of accounting method for pre-opening expenses
compared to a loss of $27.4 million before income taxes in fiscal 1996.
Significant factors contributing to the improved results in fiscal 1997 compared
to fiscal 1996 are (i) the nonrecurrence in 1997 of a $13.6 million store
closing provision recorded in fiscal 1996,  (ii) gains of $5.6 million from sale
of real estate and leasehold interests in fiscal 1997, (iii) reduced operating
losses from stores closed in 1997 and 1996 and (iv) improved results from the
Company's continuing operations; both as a result of improved gross profit
contributions and reduced selling and administrative expenses as a percentage of
sales, including reduced corporate overhead and distribution costs and (v)
reduced pre-opening expenses.

FISCAL 1996 COMPARED TO FISCAL 1995

     Net sales for fiscal 1996, a 52 week period, increased 6.7% to $365.9
million from $342.9 million for the fiscal year 1995, a 53 week period.
Management attributed the increase in net sales to the full year sales from 12
megastores opened in fiscal 1995 and to partial year sales from seven new
megastores opened in fiscal 1996.  Megastore sales increased to $235.1 million
compared to $164.5 million in fiscal 1995, a 42.3% increase.  The increased
sales from new megastores were partially offset by decreased overall same store
sales results and the elimination of $26.9 million of sales from the combined
impact of 20 traditional stores closed during 1995 and 25 stores closed in 1996
plus the closure of the Company's athletic team business.

     Same store sales, on a comparative 52 week basis, in the Company's
SuperSports USA megastores declined 2.5% while same store sales in traditional
stores decreased 12.5%, resulting in a 7.9% decline in overall same store sales.
The Company attributed the decline in comparable store sales primarily to
increased competition and, secondly, to cannibalization of sales resulting from
the expansion of the Company's megastores. As a result of the Company's efforts
to increase margins and improve inventory turnover rates, the Company reduced
average store inventories. Although management feels that this strategy will
improve the Company's financial performance, sales may be adversely impacted on
an interim basis.

     Gross profit, as a percentage of net sales, decreased to 31.5% in fiscal
1996 compared to 34.7% in fiscal 1995.  Gross profit was negatively impacted by
an inventory adjustment of $6.3 million (1.7% as a percentage of sales) included
in the store closing provision discussed above.  

                                       15
<PAGE>
 
Gross profit as a percentage of sales was also negatively impacted by additional
markdowns taken to reduce excessive inventories resulting from lower than
planned sales and from stores closed during the year.

     Selling and administrative expenses as a percentage of net sales was 35.1%
in fiscal 1996, compared to 33.6% in fiscal 1995. Selling and administrative
expenses as a percentage of sales in stores increased as a result of lower than
expected sales in the existing stores and the impact of new stores which had not
yet grown to expected sales levels.  Although corporate overhead and
distribution costs declined as a percentage of sales, this decrease was not
sufficient to offset the increase in selling and administrative expenses as a
percentage of sales in stores.  The Company implemented expense reductions at
the end of fiscal 1996 which were expected to reduce store and overhead costs in
fiscal 1997 by approximately $4.0 million.

     Pre-opening expenses as a percentage of net sales increased to 1.0% in
fiscal 1996, compared to 0.6% in fiscal 1995. The increased rate in fiscal 1996
compared to fiscal 1995 was related primarily to costs associated with the 12
stores opened in 1995 and the seven stores opened in 1996.  The Company's policy
with regard to the pre-opening expenses was that expenses related to stores
larger than 25,000 square feet in size (anticipated to be only SuperSports USA
megastores) are deferred and amortized over a one-year period subsequent to the
store opening.  See "Change of Accounting Method for Pre-opening Expenses".

     Store closing provision as a percentage of net sales was 2.1% in fiscal
1996, compared to 0.7% in fiscal 1995.  The increase in store closing provision
is related to the recording in 1996 of a store closing provision of $7.3 million
(excluding the $6.3 million provision for inventory adjustments included in cost
of goods sold) for the 53 traditional stores that the Company planned to close
in fiscal 1997 (see "Store Closings").

     The major components of miscellaneous income for fiscal 1996 and fiscal
1995 are set out in the table below:

                                                      FISCAL YEAR
                                                     -------------
                                                     1996     1995
                                                     ----     ----
                                                     (in thousands)
Condemnation proceeds                               $    -   $1,550
Fees from foreign licensees                          1,238    1,087
Provision for earthquake loss                            -      229
Other, net                                            (465)    (252)
                                                    ------   ------
     Total                                          $  773   $2,614
                                                    ======   ======

     Net interest expense for fiscal 1996 was $3.8 million, compared to $2.3
million in fiscal 1995. The increased net interest expense is primarily related
to increased average borrowings under the Company's credit facility.

     Income tax expense for each of fiscal 1996 and 1995 are related primarily
to state income taxes.  In both fiscal 1996 and 1995, deferred tax benefits were
utilized in the calculation of 

                                       16
<PAGE>
 
income tax expense in accordance with SFAS 109, and accordingly no federal
income tax expense was recognized.

     In fiscal 1996, the Company incurred a pretax loss of $27.4 million
compared to earnings before income taxes of $2.4 million in fiscal 1995.  The
significant factors in the reduced results for fiscal 1996 are the $13.6 million
store closing provision, comparable store sales declines, increased markdowns
related to the lower sales and store closings, increased amortization of pre-
opening costs, increased borrowings, and the non-recurrence of the fiscal 1995
gain on a condemnation.

SEASONALITY AND QUARTERLY FLUCTUATIONS

     The following table sets forth certain unaudited financial information for
the Company for each of the quarterly periods in fiscal 1997 and fiscal 1996:


                                              FISCAL 1997
                                ----------------------------------------
                                 FIRST      SECOND     THIRD      FOURTH
                                QUARTER    QUARTER    QUARTER    QUARTER
                                -------    -------    -------    -------
                                        (DOLLARS IN THOUSANDS)

     Net sales                  $88,432    $82,913    $69,608    $101,656
     Gross profit               $29,962    $28,368    $25,637    $ 34,022
     Gross margin                  33.9%      34.2%      36.8%       33.5%
     Operating income (loss)    $ 1,972    $  (136)   $(2,505)   $  6,751
     Operating margin               2.2%      (0.2%)     (3.6%)       6.6%
     Net income (loss)          $  (379)   $(1,336)   $ 1,197    $  5,591
     Net income (loss) margin      (0.4%)     (1.6%)      1.7%        5.5%



                                              FISCAL 1996
                                ----------------------------------------
                                 FIRST      SECOND     THIRD      FOURTH
                                QUARTER    QUARTER    QUARTER    QUARTER
                                -------    -------    -------    -------
                                        (DOLLARS IN THOUSANDS)

Net sales                       $82,719    $92,000    $78,859    $112,301
Gross profit                    $30,179    $26,353    $29,199    $ 29,364
Gross margin                       36.5%      28.6%      37.0%       26.2%
Operating income (loss)         $  (225)   $(7,094)   $(1,928)   $(14,371)
Operating margin                    (.3%)     (7.7%)     (2.4%)     (12.8%)
Net income (loss)               $(1,221)   $(8,041)   $(2,895)   $(15,093)
Net income (loss) margin           (1.5%)     (8.7%)     (3.7%)     (13.4%)

     During fiscal 1997, 1996 and 1995, 29.7%, 30.7% and 34.2%, respectively, of
the Company's sales were generated during the fourth quarter.  As a result of
the increased sales, the Company's operating results for the fourth quarter
generally exceed the operating income for any other quarter during these fiscal
years.  However, this trend did not continue in fiscal 1996, 

                                       17
<PAGE>
 
primarily as a result of the negative impact of the store closing provision
related to 53 traditional stores expected to be closed in fiscal 1997 and losses
associated with stores closed in 1996.

COMPARABLE STORE SALES

     The following table sets forth for the fiscal years 1997, 1996 and 1995
certain information regarding the percentage increase (decrease) in comparable
store sales for comparable 52 week periods.


                              FISCAL 1997
                 -------------------------------------
                  First     Second    Third     Fourth          Fiscal  Fiscal
                 Quarter   Quarter   Quarter   Quarter   Year    1996    1995
                 -------   -------   -------   -------   ----    ----    ----
SuperSports
  USA Stores      (5.4%)     (5.9%)   (3.7%)    (1.4%)  (4.0%)  (2.5%)   5.0%
Traditional
  Stores          (7.7%)     (1.3%)    1.7%     (1.0%)  (1.8%) (12.5%)  (5.0%)
Total             (5.8%)     (5.1%)   (2.9%)    (1.3%)  (3.7%)  (7.9%)   0.8%

     In the first half of fiscal 1997, particularly the first quarter,
comparable sales in the Company's ongoing stores were unfavorably impacted by
liquidation sales in traditional stores that were being closed.  Additionally,
sales were also impacted by lower inventory levels compared to fiscal 1996 and
reduced advertising.  Sales during the second half of the year continued to be
impacted by reduced inventory levels and reduced advertising, however showed
some improvement relative to the first half due to the completion of liquidation
sales in the Company's own markets and as a result of relatively weak comparable
sales results for fiscal 1996.  The Company attributes the decline in comparable
store sales to (i) increased competition, (ii) reduced inventory levels in
fiscal 1997 as the Company attempts to improve gross margins and inventory
turnover rates and (iii) reduced advertising expenditures.

LIQUIDITY AND CAPITAL RESOURCES

     In fiscal 1997, operating activities provided cash totaling $4.3 million.
The primary sources of cash were reduced inventories of $7.3 million offset by a
related decrease in trade accounts payable of $3.3 million, earnings of $3.9
million before depreciation, gains on disposition of fixed assets, income taxes
and cumulative effect of change in accounting method for pre-opening expenses,
offset by $2.8 million used by stores closed or targeted to close.  Investing
activities provided cash of $2.3 million as proceeds from sales of real estate
and leasehold interests, together with developer provided funds exceeded amounts
used for the purchase of property, plant and equipment during the year.
Financing activities used $6.7 million as a result of reduced utilization of the
Company's credit facility and the retirement of mortgage debt on real estate
properties sold.

     Merchandise inventories were $99.9 million at the end of fiscal 1997
compared to $107.6 million at the end of fiscal 1996. The inventory decreased at
the end of fiscal 1997 primarily as a result of the closing of 51 stores during
fiscal 1997 and also due to the Company's efforts to reduce average inventory
levels and increase inventory turnover.  Merchandise inventories in 

                                       18
<PAGE>
 
comparable continuing stores and distribution centers at the end of fiscal 1997
were approximately 7.0% lower compared to the end of fiscal 1996.

     Additions to property, plant and equipment were $10.0 million in fiscal
1997, exclusive of $3.8 million funded by developers.  Approximately $6.5
million was used for the opening of six new SuperSports USA megastores.
Approximately $1.3 million was used for the renovation and refurbishment of
other stores.  Approximately $2.0 million was used for computer hardware and
software including the purchase of a new computer and merchandising systems
software which is expected to be installed during fiscal 1998.  The remaining
amount was used for renovation and refurbishment of administrative and warehouse
locations.  The Company's policy regarding developer funding of new stores is to
offset the respective construction cost of real property improvements by any
amount of funding provided by developers.  With the installation of the new
merchandising system in 1998, the Company will have completed the replacement of
its financial reporting, payroll and human resources systems as well as its
merchandising information systems with year 2000 compliant software within the
past three years.

     Capital expenditures in fiscal 1998 are expected to be approximately  $7.0
million.  The Company plans to open from one to three new megastores during
fiscal 1998 at a net cost of approximately $1.0 million, as it concentrates upon
its existing store base and improving its systems and processes.  Approximately
$3.3 million is planned to be used for renovation and refurbishment of existing
stores, $1.1 million for computer hardware and software and the balance is
expected to be allocated to improvements to warehouses and administrative areas.

     Income taxes declined at the end of fiscal 1997 compared to fiscal 1996 as
the result of the Company's recognition of the benefit of a Federal income tax
refund received in fiscal 1995 resulting from net operating loss carrybacks.

     On August 31, 1992, the Company entered into an agreement providing for a
three-year, $32.5 million revolving credit facility with The CIT Group/Business
Credit, Inc.  Advances under the facility are based on a borrowing base formula
and subject to certain loan reserves.  The facility is secured primarily by
inventory, accounts receivable and real estate.  The credit agreement includes
various restrictions, requirements and financial covenants.  During 1996, the
agreement was amended to increase the revolving line of credit to $65.0 million,
with a further seasonal increase to $80.0 million during the period from mid-
September through mid-December each year.  In addition, the Company may, at its
option, increase the line of credit by an additional $5.0 million.  Subsequent
to the end of fiscal 1997, the agreement was amended to among other things,
reduce interest rates under the agreement and to extend the term of the
agreement until August 31, 2001.

     The Company's primary source of liquidity in fiscal 1997 was the Company's
credit facility, under which average borrowings during the year were $44.7
million.  Operating activities also provided cash of $4.3 million.  Because of
the seasonal nature of its business and the build up in inventory for the
Christmas shopping season, the amount of outstanding borrowings and letters of
credit under the Company's credit facility are typically highest in the November
and reached $61.4 million in November 1997.  At January 31, 1998, the Company

                                       19
<PAGE>
 
had recorded debt with respect to its credit facility of $33.0 million and had
outstanding letters of credit (used primarily to purchase certain of the
Company's imported inventory) of $1.1 million.

     The Company believes that its existing revolving credit facility together
with cash flow from operations will be adequate to meet anticipated capital
needs, including seasonal financing needs for fiscal 1998.
 
YEAR 2000 ISSUE

     The year 2000 issue is the result of computer programs written using two
digits rather than four to define the applicable year.  Without corrective
actions, programs with time-sensitive software would potentially recognize a
date ending in "00" as the year 1900 rather than the year 2000, causing many
computer applications to fail or create erroneous results and potentially
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business practices.

     The Company presently believes that upon completion of its installation of
computer hardware and software systems described above in "Business - Management
Information Systems", the Year 2000 issue will have been adequately addressed
with respect to all of the Company's internal computer systems.  Any failure of
the Company's systems to be timely compliant, however, could have a material and
adverse impact on the business and operations of the Company.  In addition, the
Company may face risks to the extent that suppliers of products, services and
systems purchased by the Company and others with whom the Company transacts
business do not have business systems or products that comply with the year 2000
requirements.  In the event that any such third parties cannot timely provide
the Company with products, services or systems as a result of any such non-
compliance, the Company's operating results could be materially adversely
affected.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

             Disclosure not required.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     The information discussed herein includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  All statements
other than statements of historical facts included herein regarding planned
capital expenditures, store openings and closings, the Company's financial
position, business strategy and other plans and objectives for future operations
(typically using the words "expect," "plan," "anticipate," "believe," "intend"
or similar expressions), are forward-looking statements.  Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, they do involve certain assumptions, risks and uncertainties, and
the Company can give no assurance that such expectations will prove to have been
correct.  The Company's actual results could differ materially from those
anticipated by such forward-looking statements as a result of certain factors,
including: the Company's ability to manage its expansion efforts in existing and

                                       20
<PAGE>
 
new markets, availability of suitable new store locations at acceptable terms,
levels of discretionary consumer spending, availability of merchandise to meet
fluctuating consumer demands, customer response to the Company's merchandise
offerings, fluctuating sales margins, increasing competition in sporting goods
and apparel retailing, the results of financing efforts and financial market
conditions.  Many of such factors are beyond the Company's ability to control or
predict.  Readers are cautioned not to put undue reliance on forward-looking
statements.  The Company disclaims any intent or obligations to update these
forward-looking statements, whether as a result of new information, future
events or otherwise.
 

                                       21
<PAGE>
 
                                   PART III

     In accordance with paragraph (3) of General Instruction G to Form 10-K,
Part III of this Report is omitted because the Company will file with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year ended January 31, 1998 a definitive proxy statement pursuant to
Regulation 14A involving the election of directors, which proxy statement is
incorporated herein by reference.
 

                                       22
<PAGE>
 
                                    PART IV

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

                                                                        PAGE
                                                                      REFERENCE
                                                                      ---------
(a)  1.   Financial Statements  

     Report of independent certified public accountants................  25
     Consolidated balance sheets at January 31, 1998 and
       February 1, 1997................................................  27
     Consolidated statements of operations for the years  
       ended January 31, 1998, February 1, 1997 and 
       February 3, 1996................................................  28
     Consolidated statements of stockholders' equity for the 
       years ended February 3, 1996, February 1, 1997 and 
       January 31, 1998................................................  30
     Consolidated statements of cash flows for the years ended 
       January 31, 1998, February 1, 1997 and February 3, 1996.........  31
     Notes to consolidated financial statements........................  32
     Selected quarterly financial data.................................  49

     2.   Financial Statement Schedules

     Schedule II - Allowance for Doubtful Receivables - Years ended
       January 31, 1998, February 1, 1997 and February 3, 1996.........  50

     All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.

     3.   List of Exhibits

     See index to exhibits immediately following the signature page.

     The Registrant will furnish to stockholders a copy of any exhibit upon
payment of $.20 per page to cover the expense of furnishing such copies.
Requests should be directed to A. Lynn Boerner, Oshman's Sporting Goods, Inc.,
P.O. Box 230234, Houston, Texas 77223-0234.

(b)  Reports on Form 8-K

     The Company filed no reports on Form 8-K during the last quarter of the
fiscal year ended January 31, 1998.

                                       23
<PAGE>
 
        FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC
                    ACCOUNTANTS FOR INCLUSION IN FORM 10-K

                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                      JANUARY 31, 1998, FEBRUARY 1, 1997
                             AND FEBRUARY 3, 1996







                                      24
<PAGE>
 
              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
Oshman's Sporting Goods, Inc.


     We have audited the accompanying consolidated balance sheets of Oshman's
Sporting Goods, Inc. (a Delaware corporation) and Subsidiaries as of January 31,
1998 and February 1, 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended January 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 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 Oshman's
Sporting Goods, Inc. and Subsidiaries as of January 31, 1998 and February 1,
1997, and the consolidated results of their operations and 





                                      25
<PAGE>
 
their consolidated cash flows for each of the three years in the period ended
January 31, 1998, in conformity with generally accepted accounting principles.

     As discussed in Note A to the financial statements, the Company changed its
method of accounting for pre-opening expenses, effective February 2, 1997.

     We have also audited Schedule II of Oshman's Sporting Goods, Inc. and
Subsidiaries for each of the three years in the period ended January 31, 1998.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.



Houston, Texas
March 9, 1998 (except for the third paragraph of
  Note D, as to which the date is March 31, 1998)


                                       26
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                     January 31, 1998 and February 1, 1997
                            (Dollars in thousands)
 
ASSETS                                                    1997       1996
                                                          ----       ----
CURRENT ASSETS
 Cash and cash equivalents                              $    363   $    437
 Accounts receivable, less allowance of $130 in 1997
   and $225 in 1996                                        1,729      3,771
 Merchandise inventories                                  99,874    107,609
 Prepaid expenses and other                                2,838      4,143
                                                        --------   --------
     Total current assets                                104,804    115,960
PROPERTY, PLANT AND EQUIPMENT - AT COST                   91,957     98,446
 Less accumulated depreciation and amortization           48,755     54,073
                                                        --------   --------
                                                          43,202     44,373
OTHER ASSETS                                                 344        401
                                                        --------   --------
                                                        $148,350   $160,734
                                                        ========   ========
          LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
 Current maturities of long-term obligations            $    566   $    776
 Trade accounts payable                                   42,367     45,704
 Accrued liabilities                                      17,141     18,231
 Income taxes                                                 73      4,529
 Store closing reserve                                     3,852      7,311
                                                        --------   --------
     Total current liabilities                            63,999     76,551
LONG-TERM OBLIGATIONS                                     35,953     42,397
OTHER NONCURRENT LIABILITIES                               7,085      5,655
STOCKHOLDERS' EQUITY
 Common stock                                              5,830      5,830
 Additional capital                                        4,177      4,068
 Retained earnings                                        31,327     26,254
   Less Treasury stock, at cost                              (21)       (21)
                                                        --------   --------
                                                          41,313     36,131
                                                        --------   --------
                                                        $148,350   $160,734
                                                        ========   ========
See notes to consolidated financial statements.

                                       27
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
      Years ended January 31, 1998, February 1, 1997 and February 3, 1996
               (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                         1997       1996       1995
                                                         ----       ----       ----
<S>                                                    <C>        <C>        <C>
Net sales                                              $342,609   $365,879   $342,889
Cost of goods sold                                      224,620    250,784    223,737
                                                       --------   --------   --------
   Gross profit                                         117,989    115,095    119,152

Operating expenses
 Selling and administrative expenses                    117,264    128,517    115,210
 Pre-opening expenses                                     1,525      3,459      1,892
 Corporate restructuring                                      -          -     (2,401)
 Store closing provision                                   (836)     7,510      2,406
 Miscellaneous income                                    (6,046)      (773)    (2,614)
                                                       --------   --------   --------
     Operating income (loss)                              6,082    (23,618)     4,659
Interest expense, net                                     3,711      3,821      2,307
                                                       --------   --------   --------
Earnings (loss) before income taxes                       2,371    (27,439)     2,352

Income tax (benefit) expense                             (4,001)      (189)       410
                                                       --------   --------   --------
 Earnings (loss) before cumulative effect of change
   in accounting principle                                6,372    (27,250)     1,942

Cumulative effect to February 2, 1997 of change in
 accounting principle for pre-opening expenses           (1,299)         -          -
                                                       --------   --------   --------
     NET EARNINGS (LOSS)                               $  5,073   $(27,250)  $  1,942
                                                       ========   ========   ========
Earnings (loss) per share
 Earnings (loss) before cumulative effect of change
   in accounting principle
   Basic earnings (loss) per share                     $   1.09   $  (4.67)  $    .33
   Diluted earnings (loss) per share                   $   1.07   $  (4.67)  $    .32
 Cumulative effect to February 2, 1997 of change
   in accounting principle for pre-opening expenses
   Basic earnings (loss) per share                     $   (.22)  $      -   $      -
   Diluted earnings (loss) per share                   $   (.22)  $      -   $      -
 Net earnings (loss) per share
   Basic earnings (loss) per share                     $    .87   $  (4.67)  $    .33
   Diluted earnings (loss) per share                   $    .85   $  (4.67)  $    .32
 
</TABLE>

                                       28
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
      Years ended January 31, 1998, February 1, 1997 and February 3, 1996
               (Dollars in thousands, except per share amounts)

 
 
                                                    1997      1996      1995
                                                    ----      ----      ----
Proforma amounts assuming the change had been
 applied retroactively
 Earnings before cumulative effect of change in
   accounting principle                             $6,372  $(27,250)  $ 1,942
 Adjustment for pre-opening expenses                     -     1,348    (1,940)
                                                    ------  --------   -------
     NET EARNINGS (LOSS)                            $6,372  $(25,902)  $     2
                                                    ======  ========   =======
 Basic earnings (loss) per share                    $ 1.09  $  (4.44)  $     -
 Diluted earnings (loss) per share                  $ 1.07  $  (4.44)  $     -
 


See notes to consolidated financial statements.


                                       29
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
      Years ended February 3, 1996, February 1, 1997 and January 31, 1998
                            (Dollars in thousands)

<TABLE>
<CAPTION>
                                    Common stock    Treasury  Additional   Retained
                                  Shares    Amount    stock     capital     earnings
                                  ------    ------    -----     -------    ---------
<S>                               <C>      <C>       <C>       <C>          <C>
Balance at January 28, 1995        5,811    $5,811     $(21)    $3,434       $ 51,562
Compensation under stock
 option and stock bonus
 plans                                 -         -        -        351              -
Issuance of shares under stock
 option plan                          11        11        -         80              -
Net earnings for the year              -         -        -          -          1,942
                                  ------    ------    -----     ------      ---------
Balance at February 3, 1996        5,822     5,822      (21)     3,865         53,504
Compensation under stock
 option and stock bonus
 plans                                 -         -        -        168              -
Issuance of shares under stock
 option plan                           8         8        -         35              -
Net loss for the year                  -         -        -          -        (27,250)
                                  ------    ------    -----     ------      ---------
Balance at February 1, 1997        5,830     5,830      (21)     4,068         26,254
Compensation under stock
 option and stock bonus
 plans                                 -         -        -        109              -
Net earnings for the year              -         -        -          -          5,073
                                  ------    ------    -----     ------      ---------
Balance at January 31, 1998        5,830    $5,830     $(21)    $4,177       $ 31,327
                                  ======    ======    =====     ======      =========
</TABLE>



See notes to consolidated financial statements.


                                       30
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
      Years ended January 31, 1998, February 1, 1997 and February 3, 1996
                            (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                   1997         1996         1995
Cash flows of operating activities
<S>                                                                                            <C>           <C>          <C>
 Net earnings (loss)                                                                              $  5,073     $(27,250)   $  1,942
 Adjustments to reconcile net cash provided (used)
   by operating activities
   Depreciation and amortization                                                                     7,180        6,942       5,669
   Cumulative effect of change in accounting principle for
     pre-opening costs                                                                               1,299            -           -
   (Recoveries of) provision for losses on accounts receivable                                         (95)         (22)         (9)
   Recovery of corporate restructuring                                                                   -            -      (2,401)
   Charge to reserve for corporate restructuring, net of
     depreciation and amortization                                                                       -         (120)     (3,871)
   Charge to reserve for store closings                                                             (2,808)           -           -
   (Recovery) provision for losses on store closings, net                                             (471)      13,909       2,406
   Stock option and bonus plan expense, net of stock
     retained for income taxes                                                                         109          168         351
   (Gain) loss on disposition of fixed assets                                                          (30)         234          99
   Amortization of deferred rental allowance                                                          (344)        (292)       (205)
   Gain on disposition of real estate and leaseholds                                                (5,616)           -           -
   Changes in assets and liabilities
     Decrease (increase) in accounts receivable                                                      2,137         (297)         (6)
     Decrease (increase) in merchandise inventories                                                  7,311       (3,242)    (12,336)
     (Increase) decrease in prepaid expenses and other                                              (2,476)       2,907      (1,914)
     (Decrease) increase in trade accounts payable                                                  (3,337)      10,219     (10,200)
     (Decrease) increase in accrued liabilities                                                       (947)       2,093       2,331
     (Decrease) increase in income taxes                                                            (4,456)         147       4,254
     Increase in noncurrent liabilities                                                              1,774        2,147       1,955
                                                                                                  --------     --------    --------
       Net cash provided (used) by operating activities                                              4,303        7,543     (11,935)

Cash flows of investing activities
 Proceeds from (payment on) disposition of fixed assets                                              8,527         (752)         38
 Purchase of property, plant and equipment                                                         (10,047)     (19,225)    (21,655)
 Proceeds from note receivable                                                                          45           44          47
 Proceeds from landlords                                                                             3,752        6,774       1,848
                                                                                                  --------     --------    --------
       Net cash provided (used) by investing activities                                              2,277      (13,159)    (19,722)

Cash flows of financing activities
 Proceeds from stock issuance                                                                            -           43          91
 Proceeds from issuance of long-term obligations                                                         -          259       4,676
 Payments of long-term obligations                                                                  (1,293)        (883)       (472)
 (Payments) proceeds from revolving credit facility, net                                            (5,361)       6,307      27,435
                                                                                                  --------     --------    --------
       Net cash (used) provided by financing activities                                             (6,654)       5,726      31,730
                                                                                                  --------     --------    --------
Net (decrease) increase in cash and cash equivalents                                                   (74)         110          73

Cash and cash equivalents at beginning of period                                                       437          327         254
                                                                                                  --------     --------    --------
Cash and cash equivalents at end of period                                                        $    363     $    437    $    327
                                                                                                  ========     ========    ========
Supplemental disclosures of cash flow information
 Cash paid (received) during the year for
   Income taxes                                                                                   $    147     $   (297)   $ (3,690)
   Interest expense                                                                                  4,405        3,679       2,479

See notes to consolidated financial statements.
</TABLE>

                                       31
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      January 31, 1998, February 1, 1997
                             and February 3, 1996

NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

 GENERAL BUSINESS

 Oshman's Sporting Goods, Inc. (the Company) operates a chain of retail sporting
 goods specialty stores.  As of January 31, 1998, the Company operated 42
 SuperSports USA stores, 36 of which are megastores and 6 of which are mini-
 SuperSports USA stores, 22 traditional stores and 6 clearance stores.  Sales in
 Texas and California accounted for 56% and 19% of retail sales, respectively.
 The majority of the Company's sales are either cash or through major national
 credit cards.

 1.  FISCAL YEAR

 The Company's fiscal year ends on the Saturday closest to the end of January.
 Fiscal years 1997 (52 weeks), 1996 (52 weeks), and 1995 (53 weeks) ended on
 January 31, 1998, February 1, 1997, and February 3, 1996, respectively.

 2.  PRINCIPLES OF CONSOLIDATION

 The consolidated financial statements include the accounts of Oshman's Sporting
 Goods, Inc. and its subsidiaries, all wholly-owned.  In consolidation, all
 significant intercompany transactions have been eliminated.

 3.  USE OF ESTIMATES

 In preparing the financial statements in conformity with generally accepted
 accounting principles, management is required to make estimates and assumptions
 that affect the reported amounts of assets and liabilities and the disclosure
 of contingent assets and liabilities at the date of the financial statements
 and revenues and expenses during the reporting period.  Actual results could
 differ from those estimates.

 4.  CASH AND CASH EQUIVALENTS
 The Company considers all highly liquid debt instruments purchased with a
 maturity of three months or less to be cash equivalents.

 5.  MERCHANDISE INVENTORIES
 Merchandise inventories are valued principally by the retail method and are
 stated at the lower of cost, determined on a first-in, first-out (FIFO) basis,
 or market.


                                       32
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

 6.  PROPERTY, PLANT AND EQUIPMENT

 Effective January 1, 1996, the Company adopted SFAS No. 121, ACCOUNTING FOR
 IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF. This standard requires that
 long-lived assets that are held and used by an entity be reviewed for
 impairment whenever events or changes in circumstances indicate that the
 carrying amount of an asset may not be recoverable. When it is determined that
 an asset's estimated future net cash flows will not be sufficient to recover
 its carrying amount, an impairment charge must be recorded to reduce the
 carrying amount for the asset to its estimated fair value. The effect of the
 adoption of SFAS 121 was not material to the Company.

 Depreciation and amortization are provided principally by the straight-line
 method based upon estimated useful lives of 3 to 10 years for furniture,
 fixtures and equipment, 3 to 30 years for leasehold improvements and 20 to 40
 years for buildings. Estimated useful lives of leasehold improvements represent
 the remaining term of the lease in effect at the time the improvements are
 made.

 7.  AMORTIZATION OF OTHER ASSETS

 Loan acquisition costs are being amortized over the term of the related debt
 using the straight-line method.

 8.  DEFERRED RENTAL ALLOWANCES

 The Company may receive payments from landlords as inducements to sign new
 store leases. The construction costs of real property improvements are offset
 by this landlord funding. Deferred rental allowances represent payments in
 excess of the costs of the real property improvements and are recognized as a
 reduction of rent expense over the life of each applicable lease.

 9.  INCOME TAXES

 Provision has been made for deferred income taxes applicable to the temporary
 differences between earnings for financial reporting purposes and taxable
 income. Principal temporary differences include differences in accounting for
 depreciation and capitalization of certain inventory costs.


                                      33
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

 10. PRE-OPENING EXPENSE
 Effective February 2, 1997, the Company changed the method of accounting for
 pre-opening expenses.

 Expenses (other than property, plant and equipment) associated with the opening
 of new stores are charged to expense as incurred. Previously, the Company
 deferred and amortized all direct and incremental expenses related to the
 opening of a store over a one-year period subsequent to the store opening. The
 Company believes this change is preferable because there is no direct causal
 relationship between these expenses and future revenues and to improve
 comparability with other companies in its industry. The cumulative effect of
 this change on periods prior to January 31, 1998 of $1,299,000 is shown
 separately in the consolidated statement of operations.

 11. ADVERTISING COSTS

 Advertising costs consist principally of newspaper and television
 advertisements and are recorded net of any co-op received from vendors.
 Advertising costs were $14,280,000, $15,931,000 and $15,086,000 in 1997, 1996
 and 1995.

 12. STORE CLOSING PROVISION

 The Company provides a provision for store closings when the decision to close
 a store is made. The provision consists of the incremental costs which are
 expected to be incurred, including the costs of inventory adjustments, non-
 recoverable investments in fixed assets, future net lease obligations, employee
 costs and other direct store closing costs.

 13. EARNINGS PER SHARE

 Effective January 31, 1998, the Company adopted Statement of Financial
 Accounting Standards No. 128, EARNING PER SHARE. All periods have been restated
 for the adoption of this statement.

 Basic earnings per share is calculated by dividing net income available to
 common stockholders by the weighted average number of common shares
 outstanding. Dilutive earnings per share is calculated by dividing net income
 available for common stockholders by the weighted average number of common
 shares and dilutive potential common shares outstanding. Stock options may be
 dilutive potential common shares and are therefore considered in the earnings
 per share calculations, if dilutive. The number of dilutive potential common
 shares is determined using the treasury stock method.


                                      34
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996

NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

 14. RECLASSIFICATIONS

 Certain amounts in prior financial statements have been reclassified to conform
 to the 1997 financial statement presentation.


NOTE B - PROPERTY, PLANT AND EQUIPMENT

 The cost of property, plant and equipment at the end of the year consists of
 the following:
                                                      1997     1996
                                                     ------   ------
                                                     (In thousands)

     Furniture, fixtures and equipment              $56,919  $56,904
     Leasehold improvements                          29,430   32,668
     Buildings                                        2,924    4,840
     Land                                             1,973    2,927
     Leasehold improvements under capital leases        711    1,107
                                                    -------  -------
                                                    $91,957  $98,446
                                                    =======  =======


NOTE C - NOTE RECEIVABLE

 The Company has a non-interest bearing note receivable from the Company's Chief
 Executive Officer.  At the end of 1997 and 1996, the balance of the note was
 $375,000 and $418,000, respectively.  The note is payable in 228 bi-weekly
 installments of approximately $2,000 beginning April 1, 1991, with the
 remainder due September 2000.  The note is collateralized by life insurance and
 Company stock options.


                                      35
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE D - LONG-TERM OBLIGATIONS

 Long-term obligations at the end of the year consist of the following:
 
                                                            1997      1996
                                                            ----      ----
                                                            (In thousands)
 
Revolving credit facility due August 31, 1999, interest
 payable monthly, collateralized by inventory, accounts
 receivable and real estate                                $32,992   $38,353
Mortgage notes collateralized by land and buildings
 (approximate cost $4,018,000) payable in aggregate
 monthly installments of approximately $38,000,
 including interest ranging from prime (8.5% at
 January 31, 1998) plus 1% to 9.5% (fixed), maturing
 through 2005                                                3,388     4,368
Capitalized lease obligations, interest at 9.5%,
 maturing in 1998                                              139       452
                                                           -------   -------
                                                            36,519    43,173
 Less current maturities                                       566       776
                                                           -------   -------
                                                           $35,953   $42,397
                                                           =======   =======

 Following are maturities of long-term obligations for each of the next five
 years and thereafter:

    Fiscal year                                         Amount
                                                    --------------
                                                    (In thousands)

       1998                                             $   566
       1999                                              33,422
       2000                                                 432
       2001                                                 436
       2002                                                 439
    Thereafter                                            1,224
                                                        -------
                                                        $36,519
                                                        =======


                                      36
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE D - LONG-TERM OBLIGATIONS-CONTINUED

 The Company has an agreement providing for a revolving credit facility with The
 CIT Group/Business Credit, Inc. (CIT). Advances under the facility are based on
 a borrowing base formula and subject to certain loan restrictions, and the
 facility is secured primarily by inventory, accounts receivable and real
 estate. The credit agreement includes various requirements, financial covenants
 and restrictions, including a restriction on the payment of dividends.
 Currently, the revolving line of credit is $65,000,000, with a seasonal
 increase to $80,000,000 during the period from mid-September through mid-
 December each year. In addition, the Company may, at its option, increase the
 line of credit by an additional $5,000,000.

 Advances under the credit facility bear interest at the prime rate (8.50% at
 January 31, 1998) plus .375% and any unused borrowing capacity is subject to a
 line of credit fee of .375%. The Company may, under certain circumstances,
 elect to have interest computed at a rate of the London Interbank Offered Rate
 (LIBOR, 5.9375% at January 31, 1998) plus 2.875%.

 On March 31, 1998, the agreement was amended to, among other things, extend the
 maturity date to August 31, 2001 and to reduce the interest rates, effective
 March 1, 1998, to the prime rate for revolving advances and the LIBOR rate
 plus 2.125% for LIBOR loans. Additionally, the unused line of credit fee was
 reduced to .25%.

 At the end of 1997 and 1996, outstanding letters of credit were $1,055,000 and
 $1,152,000, respectively.

 The fair value of these loans is not materially different than book value.


NOTE E - INCOME TAXES

 The Company's tax (benefit) expense consisted of the following:
 
                  1997     1996    1995
                  ----     ----    ----
                     (In thousands)
   Current
     Federal    $(4,142)   $   -   $   -
     Foreign         78       28      14
     State           19       33      98
   Deferred
     Federal          -        -       -
     State           44     (250)    298
                -------    -----   -----
                $(4,001)   $(189)  $ 410
                =======    =====   =====


                                      37
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE E - INCOME TAXES - CONTINUED                 

 A reconciliation of income tax (benefits) expenses on net (losses) earnings
 before income taxes computed at the statutory Federal income tax rate and
 income taxes reported in the consolidated statements of operations is as
 follows:

                                                     1997      1996       1995
                                                     ----      ----       ----
                                                          (In thousands)

 Income tax expense (benefit) at
  statutory rate                                   $   806   $(9,329)   $   800
 Increases (reductions)
  Change in valuation allowance
   Current year operations                            (851)    9,160       (766)
   Net operating loss carryback                     (2,489)      -          -
  Carryback of net operating loss to
   periods for which tax rates exceed
   current rate                                     (1,652)      -          -
  Other items - net                                    185       (20)       376
                                                   -------   -------    -------
                                                    (4,807)    9,140       (390)
                                                   -------   -------    -------
   Income tax (benefit) expense                    $(4,001)  $  (189)   $   410
                                                   =======   =======    =======

Deferred tax assets and liabilities consist of the following:

<TABLE> 
<CAPTION> 
                                                  January 31, 1998       February 1, 1997
                                                 -----------------      -----------------
                Current                          Long-Term  Current     Long-Term  Current
                -------                          ------------------     ------------------
                                                    (In thousands)        (In thousands)
Assets
------
<S>                                              <C>       <C>          <C>       <C>  
  Accrued expenses                                $   702   $   613      $   721   $   479
  Lease incentives                                    156     2,027          122     1,606
  Store closing reserve                             1,348         -        4,760         -
  Other                                                 -         -          225         -
  NOL carryforward                                      -     8,615            -     8,959
  Business tax credits                                  -     1,069            -     1,072
                                                  -------   -------      -------   -------
                                                    2,206    12,324        5,828    12,116
                                                  -------   -------      -------   -------
 Liabilities
 -----------
  Depreciation of property and equipment                -     5,079            -     4,301
  Inventory capitalization                            916         -          886         -
  LIFO termination                                    478         -          478       478
  Store opening costs                                   -         -          442         -
  State taxes                                           9       287            9       243
  Other                                               141       128          104       127
                                                  -------   -------      -------   -------
                                                    1,544     5,494        1,919     5,149
                                                  -------   -------      -------   -------
   Net asset before valuation allowance               662     6,830        3,909     6,967
  Less valuation allowance                           (721)   (7,244)      (3,968)   (7,337)
                                                  -------   -------      -------   -------
   NET LIABILITY                                  $    59   $   414      $    59   $   370
                                                  =======   =======      =======   =======
</TABLE>

                                      38
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE E - INCOME TAXES - CONTINUED                 

 In the third quarter of fiscal 1995, the Company received Federal income tax
 refunds of $4,142,000 plus interest of $662,000 resulting from the application
 of net operating loss carrybacks.  Approximately $1,652,000 of the tax refunds
 relate to the benefit of carrying back net operating losses to periods for
 which the tax rates exceeded the current 34% Federal income tax rate.  These
 amounts resulted in tax benefits recordable in the Company's statement of
 operations in fiscal 1997 due to the expiration of the statute of limitations
 for review of the refunds.


 Deferred tax assets were reduced by valuation allowances of $7,965,000 and
 $11,305,000 at January 31, 1998 and February 1, 1997, respectively.  Due to the
 operating loss carryforward generated during 1996 from the Company's operations
 and store closing expenses, management believes that uncertainties exist such
 that it is not more likely than not that the Company's deferred tax assets will
 be realized in the future and therefore have recorded a valuation allowance
 against existing deferred tax assets.  In 1997, the Company decreased its
 valuation allowance by $3,340,000 due to net deferred tax liabilities generated
 during the year and the recognition of net operating loss carrybacks.


 The Company has net operating loss carryforwards of approximately $25,337,000.
 The carryforwards expire $3,317,000 in 2010, $3,054,000 in 2011, $12,634,000 in
 2012, and $6,332,000 in 2013.  Additionally, the Company has foreign tax credit
 carryforwards of $260,000 expiring from 1999 to 2003, job tax credit
 carryforwards of $748,000 expiring from 2008 to 2011, and alternative minimum
 tax credit carryforwards of $61,000.



NOTE F - COMMITMENTS AND CONTINGENCIES

 OPERATING LEASES

 The Company conducts certain of its operations in owned facilities with its
 remaining operations being conducted in facilities leased under noncancelable
 operating leases.  Rentals of the retail locations are based on minimum
 required rentals and/or, in certain instances, contingent rentals based on a
 percentage of sales.  Some leases contain renewal options with provision for
 increased rentals during the renewal term.


                                      39
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED

 Future minimum rental payments under operating leases at the end of 1997 are as
 follows:

 
          Fiscal year               Amount
          -----------               ------
                                (In thousands)
             1998                 $ 19,754
             1999                   19,045
             2000                   18,703
             2001                   18,464
             2002                   18,335
       Thereafter to 2017          181,683

 Minimum payments have not been reduced by minimum sublease rental income of
 $16,886,000 due in the future under noncancelable subleases.

 Total rental expense entering into the determination of net earnings (loss) is
 as follows:

                                    1997     1996     1995
                                    ----     ----     ----
                                        (In thousands)
Leased facilities
 Minimum rentals                   $18,550  $18,479  $14,302
 Contingent rentals (based on a
  percentage of sales)               1,525    1,813    2,686
                                   -------  -------  -------
                                    20,075   20,292   16,988
Other rentals                          425      388      521
                                   -------  -------  ------- 
                                   $20,500  $20,680  $17,509
                                   =======  =======  =======

 Certain leases between the Company and two trusts, which are for the benefit of
 two shareholders, provide for total minimum annual rentals of $363,000 through
 1998.  Subsequent to year end, the lease agreements were amended to extend the
 leases through November 2003, and to provide for total minimum annual rentals
 of $399,000 beginning November 1998.

                                      40
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED


 CAPITAL LEASES

 Future minimum lease payments for assets under capital leases at the end of
 1997, and the present value of such payments, are as follows:

 
      Fiscal year                                 Amount
                                                  ------
                                              (In thousands)
         1998                                      $154
                                                   ----
      Total minimum lease payments                  154
       Less amount representing interest             15
                                                   ----
      Present value of minimum obligations         $139
                                                   ====

 PROFIT SHARING PLAN

 The Company and its subsidiaries participate in a discretionary employee profit
 sharing plan.  Effective November 1, 1996, the Plan was converted to a 401(k)
 Retirement Savings Plan covering all eligible employees.  Under the Plan,
 participating employees can allocate up to 15% of their salary.  The Company
 may make discretionary contributions to the Plan.  The Company made no
 contributions to the Plan in 1997, 1996 or 1995.

 EMPLOYEE MEDICAL PLAN

 On February 1, 1997, the Company began offering a fully insured Medical Plan to
 its employees.  Prior to that, the Company had an employee medical plan that
 provided for payment of various medical expenses and was funded by
 participating employees and the Company.   The provision for the Company's
 contribution to the plan amounted to $1,781,000 and $1,382,000 for 1996 and
 1995, respectively.  The Plan was terminated on February 1, 1997 and the
 Company recorded an accrual to cover anticipated remaining obligations of the
 Plan.

 SEVERANCE PAY BONUS AGREEMENTS

 The Company has employment agreements with certain executive officers that
 become operative only upon a change in control of the Company.  Compensation
 which may be payable under these agreements has not been accrued in the
 consolidated financial statements as a change in control, as defined, has not
 occurred.


                                      41
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED


 DEFERRED COMPENSATION AGREEMENT

 The Company has a deferred compensation agreement with an executive officer
 under which the officer will receive an estimated annual retirement benefit of
 $100,000 after he attains age 65.  The benefit payments will continue until the
 face value of a purchased insurance policy from which the payments will be made
 is reduced to the amount of the premiums paid by the Company.  The Company will
 receive the remaining face value upon the death of the executive.  If the
 executive dies before all payments are made, a lump-sum payment will be made to
 his designated beneficiary.  At January 31, 1998, the cash surrender value of
 the insurance policy was $843,000 and the Company had recorded a deferred
 compensation liability of $650,000.

 LITIGATION

 Various legal claims have arisen in the normal course of business, which, in
 the opinion of management, will not have a material adverse effect on the
 Company's financial statements.


NOTE G - STOCKHOLDERS' EQUITY

 CAPITAL STOCK

 Authorized capital stock consists of 500,000 shares of $1 par value preferred
 stock and 15,000,000 shares of $1 par value common stock.  No preferred stock
 has been issued.  Common stock shares issued were 5,830,000 at the end of 1997
 and 1996 and 5,822,000 at the end of 1995, and shares outstanding were
 5,827,000 at the end of 1997 and 1996, and 5,819,000 at the end of 1995.

 COMMON STOCK OPTION PLANS

 The Company's 1994 Omnibus Plan authorizes the grant of Incentive Awards for up
 to 750,000 shares of common stock to key employees of the Company.  Awards may
 be in the form of stock options, stock appreciation rights, restricted stock,
 performance units, performance shares or other stock based awards and certain
 additional payments in the amount of Federal income taxes payable by a grantee
 and relating to an award, and are to be determined by a committee of the Board
 of Directors.


                                      42
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE G - STOCKHOLDERS' EQUITY - CONTINUED

 Stock options granted may be either nonqualified options or incentive stock
 options and may include reload options. Exercise price will be determined by
 the committee; however, in the case of incentive stock options, the exercise
 price shall not be less than 100% of the market value of the shares at the time
 the options are granted. No option is exercisable after the expiration of ten
 years from the date of grant.

 The 1994 Omnibus Plan replaces the Company's 1991 Stock Option Plan, 1986 Stock
 Option Plan and 1986 Stock Bonus Plan. However, currently outstanding options
 and grants under those plans will continue to exist until they vest and are
 exercised or expire. No awards are outstanding under the 1986 Stock Bonus Plan
 at year end.

 Additionally, the Company's 1993 Non-Employee Director Stock Option Plan
 provides for the issuance of options to non-employee directors of the Company
 at an option price equal to the average of the closing prices of the last five
 trading days preceding and including the date of grant. Unexercised options
 expire no later than ten years from date of grant or three months after the
 termination of the directorship, extended to one year if the termination of
 directorship is caused by death or disability.

 The Company records an expense based on the difference between the option price
 and fair market value of the stock at date of grant, amortized over the vesting
 period of the option. Selling and administrative expenses related to the grant
 of stock options were not material in 1997, 1996 or 1995. Upon the exercise of
 options, the proceeds are credited to the common stock account to the extent of
 the par value of the shares issued, and the proceeds in excess of the par value
 are credited to additional capital.

 RESTRICTED STOCK AWARD

 The Company granted 100,000 restricted shares of the Company's common stock to
 the Company's current Chief Executive Officer in 1994 pursuant to the 1994
 Omnibus Plan. The grantee has no rights as a stockholder with respect to the
 restricted shares, including no right to transfer or receive dividends in most
 circumstances. Grantee becomes 100% vested in restricted shares if retirement
 occurs at or after age 65 or, in the event of death or disability of the
 grantee, termination by grantee following a change in control of the Company,
 termination of grantee by the Company without cause and termination by grantee
 for good reason. Partial vesting occurs at the rate of 25% of the grant per
 year if retirement occurs at or after the grantee reaches the age of 62.
 Restrictions on the stock end on the vesting date. Additionally, the grant
 provides that the Company will pay the grantee the Federal tax benefit (if any)
 realized by the Company from the tax deduction for compensation resulting from
 the restricted stock grant. Expense recorded for the grant was approximately
 $103,000, $181,000 and $517,000 in 1997, 1996, and 1995, respectively.



                                      43
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE G - STOCKHOLDERS' EQUITY - CONTINUED

 FASB STATEMENT 123 DISCLOSURE

 The Company applies APB 25 and related Interpretations in accounting for stock-
 based compensation. Had compensation costs been determined based on the fair
 value at the grant dates for awards consistent with the method of FASB
 Statement 123, the Company's net income and earnings per share would have been
 reduced to the pro forma amounts indicated below:

                                       1997           1996          1995
                                       ----           ----          ----
                                   (In thousands, except per share amounts)
   Net (loss) income
     As reported                      $5,073       $(27,250)       $1,942
     Pro forma                         4,806        (27,271)          737
   Earnings per share - basic
     As reported                         .87          (4.67)          .33
     Pro forma                           .82          (4.67)          .13
   Earnings per share - diluted
     As reported                         .85          (4.67)          .32
     Pro forma                           .80          (4.67)          .12

 The fair value of each option grant is estimated on the date of the grant using
 the Black-Scholes option-pricing model with the following weighted-average
 assumptions used for the grants issued in 1997, 1996 and 1995:

 
                                 1997      1996       1995
                                 ----      ----       ----
   Expected volatility           56.10%    52.04%      41.37%
   Risk free rate                 5.76%      5.9%       7.05%
   Expected life of options     6 years   6 years   7.5 years
   Expected dividend yield           0%        0%          0%


                                      44
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE G - STOCKHOLDERS' EQUITY - CONTINUED

 A summary of the Company's stock options and warrants as of the end of 1997,
 1996 and 1995 and changes during those years is presented below:

<TABLE>
<CAPTION>
                                              1997                               1996                          1995
                                         Weighted-average                   Weighted-average              Weighted average
                            Shares        exercise price        Shares       exercise price     Shares     exercise price
                            ------       ----------------       ------      ----------------    ------    ----------------
<S>                     <C>               <C>               <C>               <C>             <C>      <C>
 Outstanding at
   beginning of year       511,450             $5.38           682,800            $5.98        742,350           $6.56
 Granted                   299,250              4.60            30,000             7.77        262,500            7.14
 Exercised                       -                 -             8,100             5.97         11,100            6.72
 Forfeited                 224,050              5.80           145,650             7.56         23,083            6.69
 Expired                         -                 -            47,600             5.37        287,867            7.97
                           -------                             -------                         -------           
 Outstanding at
   end of year             586,650              5.04           511,450             5.38        682,800            5.98
                           =======                             =======                         =======           
 Options exercisable
   at end of year          278,833              7.06           335,838             7.03        402,150            7.02
                           =======                             =======                         =======           
</TABLE>

 The weighted-average fair value of compensatory options granted during 1997,
 1996 and 1995 was $3.29, $5.62 and $5.02 per option.  In each of these years,
 all options had exercise prices equal to the market price of the stock on the
 grant date.

 The following table summarizes information about options and warrants
 outstanding at January 31, 1998:

<TABLE>
<CAPTION>
 
                              Options/awards outstanding                    Options exercisable
                     -----------------------------------------------  ------------------------------
                                  Weighted-average
   Range of             Number       remaining      Weighted-average    Number      Weighted-average
exercise prices      outstanding  contractual life   exercise price   outstanding    exercise price
---------------      -----------  ----------------  ----------------  -----------   ----------------
<S>                  <C>          <C>               <C>               <C>          <C>
    $0 - $1            100,000       .84 years               -                -                  -
    $5 - $7.50         476,650      5.37 years            6.02          274,833               7.03
    $7.51 - $8.80       10,000      8.38 years            8.80            4,000               8.80
                       -------                                          -------
                       586,650                                          278,833
                       =======                                          =======
</TABLE>


                                      45
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996


NOTE H - EARNINGS (LOSS) PER SHARE

 The following data show the amounts used in computing earnings per share (EPS)
 and the weighted average number of shares of dilutive potential common stock.

 
                                                        Year ended
                                            ------------------------------------
                                            January 31, February 1,  February 3,
                                               1998        1997         1996
                                            ----------- -----------  -----------
                                                       (In thousands)

Net earnings (loss)                           $5,073     $(27,250)       $1,942
Weighted average common shares used
 in basic EPS                                  5,830        5,829         5,815
  Effect of dilutive securities:
   Stock options                                 110            -           204
                                              ------     --------        ------
Weighted average common and potential
 dilutive common shares used in dilutive EPS   5,940        5,829         6,019
                                              ======     ========        ======


NOTE I - STORE CLOSING RESERVE

 In the fourth quarter of fiscal 1996, the Company announced its plan to close
 53 of its traditional stores during fiscal 1997.  Related to these planned
 closings, the Company recorded inventory mark-downs of $6,263,000 and
 leaseholds and other asset write-offs of $1,298,000.  Additionally, the Company
 accrued liabilities for estimated lease termination costs of $5,240,000 and
 other incremental store closing costs of $839,000.  During 1997, the Company
 closed 44 of the 53 stores.  Of the remaining stores, 3 will continue to
 operate as normal traditional stores until their leases expire at the end of
 fiscal 1998 and 6 are operating as clearance stores, pending resolution of
 lease obligations.  Cash costs related to the accrued liability amounted to
 $2,645,000 in 1997.  The liability was adjusted $446,000 to reflect favorable
 results in settling store lease liabilities.

 In fiscal 1996 and 1995, the 53 stores that were planned to close in 1997, had
 sales of $50,100,000 and $63,100,000, and incurred direct store losses of
 $2,500,000 in fiscal 1996 compared to direct store profits of $2,300,000 in
 fiscal 1995.


                                      46
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                      January 31, 1998, February 1, 1997
                             and February 3, 1996



NOTE J - MISCELLANEOUS INCOME (EXPENSE)

 Miscellaneous income (expense) consist of the following:


                                                1997        1996      1995
                                                ----        ----      ----
                                                      (In thousands)

Gain on sale of real estate and leasehold
  interests, net of commissions                $5,616     $    -     $   -
Condemnation proceeds                               -          -      1,550
Fees from foreign licenses                      1,199      1,238      1,087
Recovery of provision for earthquake losses         -          -        229
Other, net                                       (769)      (465)      (252)
                                               ------     ------     ------
                                               $6,046     $  773     $2,614
                                               ======     ======     ======

 Fees from foreign licenses represent annual royalties from license agreements
 which provide the licensee the ability to use the Company's name and to import
 and sell the Company's products.  Revenue under the license agreements include
 annual royalties based on the greater of a minimum or a percentage of sales in
 the licensee's stores and fees related to sales to the licensee.


NOTE K - NEW PRONOUNCEMENTS

 In June 1997, the FASB issued Statement of Financial Standards No. 131,
 DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (SFAS 131).
 SFAS 131 establishes standards for the way public enterprises are to report
 information about operating segments in annual financial statements and
 requires the reporting of selected information about operating segments in
 interim financial reports issued to shareholders.  It also establishes
 standards for related disclosures about products and services, geographic area,
 and major customers.  SFAS 131 is effective for periods beginning after
 December 15, 1997.  Management believes that the adoption of this statement in
 1998 will not have a material impact on the Company's financial statements.


                                      47
<PAGE>
 
                           SUPPLEMENTAL INFORMATION





                                      48
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                       SELECTED QUARTERLY FINANCIAL DATA
                                  (Unaudited)
               Years ended January 31, 1998 and February 1, 1997
                   (In thousands, except per share amounts)

<TABLE>
<CAPTION>
 
                                              First     Second      Third      Fourth
                                             quarter    quarter    quarter    quarter
                                             -------    -------    -------    -------
<S>                                         <C>        <C>        <C>        <C>
1997
 Net sales                                   $88,432    $82,913    $69,608    $101,656
                                             =======    =======    =======    ========
 Gross profit                                $29,962    $28,368    $25,637    $ 34,022
                                             =======    =======    =======    ========
 Net earnings (loss) before cumulative
   effect of change in accounting
   principal                                 $   920    $(1,336)   $ 1,197    $  5,591
                                             =======    =======    =======    ========
 Cumulative effect of change in
   accounting principle                      $(1,299)  $      -   $      -    $      -
                                             =======    =======    =======    ========
 Net earnings (loss)                         $  (379)   $(1,336)   $ 1,197    $  5,591
                                             =======    =======    =======    ========
 Earnings (loss) per share
   Earnings before cumulative effect
     of change in accounting principle
       Basic earnings (loss) per share       $   .15    $  (.23)   $   .21    $    .96
                                             =======    =======    =======    ========
       Diluted earnings (loss) per share     $   .15    $  (.23)   $   .21    $    .94
                                             =======    =======    =======    ========
   Cumulative effect of change in
     accounting principle
       Basic earnings (loss) per share       $  (.22)  $      -    $     -    $      -
                                             =======    =======    =======    ========
       Diluted earnings (loss) per share     $  (.22)  $      -    $     -    $      -
                                             =======    =======    =======    ========
   Earnings per common and common
     equivalent shares
       Basic earnings (loss) per share       $  (.07)   $  (.23)   $   .21    $    .96
                                             =======    =======    =======    ========
       Diluted earnings (loss) per share     $  (.07)   $  (.23)   $   .21    $    .94
                                             =======    =======    =======    ======== 
1996
 Net sales                                   $82,719    $92,000    $78,859    $112,301
                                             =======    =======    =======    ========
 Gross profit                                $30,179    $26,353    $29,199    $ 29,364
                                             =======    =======    =======    ========
 Net earnings (loss)                         $(1,221)   $(8,041)   $(2,895)   $(15,093)
                                             =======    =======    =======    ========
 Basic earnings (loss) per share             $  (.21)   $ (1.38)   $  (.50)   $  (2.59)
                                             =======    =======    =======    ========
 Diluted earnings (loss) per share           $  (.21)   $ (1.38)   $  (.50)   $  (2.59)
                                             =======    =======    =======    ========
</TABLE>


                                      49
<PAGE>
 
                                                                     Schedule II

                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                      ALLOWANCE FOR DOUBTFUL RECEIVABLES
                      January 31, 1998, February 1, 1997
                             and February 3, 1996
                                (In thousands)


 
 
          Column A           Column B    Column C     Column D      Column E
          --------           --------    --------     --------      --------
                            Balance at   Additions                 Balance at
                            beginning   charged to                   end of
        Description         of period    expense    Deductions (A)   period
        -----------         ----------  ----------  -------------- ----------

Year ended January 31, 1998    $255        $ -            $125        $130
 
Year ended February 1, 1997    $386        $ 7            $168        $255
 
Year ended February 3, 1996    $395        $33            $ 42        $386
 

(A) Reversal of provisions, net of charge-offs and recoveries.




                                      50
<PAGE>
 
                                   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.

                              OSHMAN'S SPORTING GOODS, INC.


                              By: /s/ A. Lynn Boerner
                                 -------------------------------
                              Name: A. Lynn Boerner
                                   -----------------------------
                              Title: Vice President, Chief Accounting Officer
                                      and Assistant Secretary
                                    ----------------------------      

Date: April 29, 1998

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on April 9, 1998, by the following persons on
behalf of the Registrant and in the capacities indicated.



/s/MARILYN OSHMAN                     /s/ALVIN N. LUBETKIN
----------------------------------    ---------------------------------
Marilyn Oshman                        Alvin N. Lubetkin
Chairman of the Board of Directors    Vice Chairman of the Board of Directors,
                                      Chief Executive Officer, President
                                      (Principal Executive Officer) and Director


/s/MARVIN ARONOWITZ                   /s/MANUEL A. SANCHEZ, III
----------------------------------    ---------------------------------
Marvin Aronowitz                      Manuel A. Sanchez, III
Director                              Director


/s/DOLPH B.H. SIMON                   /s/A. LYNN BOERNER
----------------------------------    ---------------------------------
Dolph B.H. Simon                      A. Lynn Boerner
Director                              Vice President, Chief Accounting Officer
                                      and Assistant Secretary (Principal 
                                      Accounting and Financial Officer)


/s/WILLIAM M. HITCHCOCK               /s/KAREN DESENBERG
----------------------------------    ---------------------------------
William M. Hitchcock                  Karen Desenberg
Director                              Director


                                      /s/STEPHEN A. LASHER
                                      ---------------------------------
                                      Stephen A. Lasher
                                      Director

<PAGE>
 
                               INDEX TO EXHIBITS

3.1       Certificate of Incorporation of Oshman's Sporting Goods, Inc., as
          amended to date (filed as Exhibit 3.1 to the Company's Form 10-K for
          the fiscal year ended January 31, 1987 (the "1987 10-K") and
          incorporated herein by reference).

3.2       Amended and Restated Bylaws of Oshman's Sporting Goods, Inc. as of
          January 30, 1997 (filed as Exhibit 3.2 to the Company's Annual Report
          on Form 10-K for the fiscal year ended February 3, 1997 and
          incorporated herein by reference).

4.1    +  Amended and Restated Financing Agreement dated December 15, 1997
          between the Company's subsidiaries and The CIT Group/Business Credit,
          Inc. (the "Financing Agreement")

4.1(a) +  Amendment dated March 23, 1998 to the Financing Agreement.

10.1   *  Executive Salary Continuation Agreement between the Company and Marvin
          Aronowitz, dated October 1, 1976 (filed as Exhibit 10.4 to the 1983 
          10-K and incorporated herein by reference).

10.2   *  Deferred Compensation Agreement between the Company and Alvin N.
          Lubetkin, dated December 29, 1988 (filed as Exhibit 10.5 to the
          Company's Form 10-K for the fiscal year ended January 28, 1989 (the
          "1989 10-K") and incorporated herein by reference).

10.3   *  Oshman's Sporting Goods, Inc. 1986 Stock Option Plan, as amended
          (filed as Exhibit 10.9 to the 1987 10-K and incorporated herein by
          reference).
 
10.3(a)*  Second Amendment to Oshman's Sporting Goods, Inc. 1986 Stock Option
          Plan (filed as Exhibit 19.4 to the 1993 10-K and incorporated herein
          by reference).
 
10.3(b)*  Third Amendment to Oshman's Sporting Goods, Inc. 1986 Stock Option
          Plan (filed as Exhibit 19.5 to the 1993 10-K and incorporated herein
          by reference).
 
10.4   *  Oshman's Sporting Goods, Inc. 1986 Stock Bonus Plan (filed as Exhibit
          10.10 to the 1987 10-K and incorporated herein by reference).

<PAGE>
 
10.4(a)  *  First Amendment to Oshman's Sporting Goods, Inc. 1986 Stock Bonus
            Plan (filed as Exhibit 10.9 to the Company's Form 10-K for the
            fiscal year ended February 3, 1990 and incorporated herein by
            reference).

10.5     *  Employment Agreement dated October 3, 1990 between the Company and
            Alvin N. Lubetkin (filed as Exhibit 10.8 to the 1994 10-K and
            incorporated herein by reference).

10.6     *  Loan Agreement dated October 3, 1990 between the Company and Alvin
            N. Lubetkin (filed as Exhibit 10.9 to the Company's Form 10-K for
            the fiscal year ended February 2, 1991 (the "1991 10-K") and
            incorporated herein by reference).
 
10.7     *  Oshman's Sporting Goods, Inc. 1991 Stock Option Plan (filed as
            Exhibit 10.10 to the 1991 10-K and incorporated herein by
            reference).
 
10.8     *  Oshman's Sporting Goods, Inc. 1993 Non-Employee Director Stock
            Option Plan (filed as Exhibit 10.14 to the 1994 10-K and
            incorporated herein by reference).
 
10.9     *  Oshman's Sporting Goods, Inc. 1994 Omnibus Plan (filed as Exhibit
            10.13 to the 1995 10-K and incorporated herein by reference).

10.9(a)  *  First Amendment to the Oshman's Sporting Goods, Inc., 1994 Omnibus
            Plan (filed as Exhibit 10.13 to the Company's Form 10-Q for the
            fiscal quarter ended July 29, 1995 and incorporated herein by
            reference).

10.10    *  Restricted Stock Grant Agreement between the Company and Alvin N.
            Lubetkin, dated July 15, 1994 (filed as Exhibit 10.1 to the
            Company's Form 10-Q for the quarterly period ended July 30, 1994 and
            incorporated herein by reference).

10.10(a) *  First Amendment to Restricted Stock Grant Agreement between the
            Company and Alvin N. Lubetkin dated as of July 15, 1994 (Filed as
            Exhibit 10.14 to the 1995 10-K and incorporated herein by
            reference).

10.11    *  Oshman's Sporting Goods, Inc. 1995 Incentive Compensation Plan for
            Senior Management (filed as exhibit 10.16 to the Company's October
            1995 10-Q and incorporated herein by reference).
 
10.12    *+ Statement of Policy Regarding Executive Severance Pay Bonus Program 
            (as amended and restated)

10.13    *+ Statement of Policy Regarding Key Executive Severance Pay Bonus 
            Program (as amended and restated)

18       +  Letter re: Change in Accounting Principles
 
21.1     +  Subsidiaries of the Registrant.
 
23.1     +  Consent of Grant Thornton LLP.
 
27.1     +  Financial data schedule.
 
-------------------
*  Management contract or compensatory plan or arrangement.
+  Filed herewith.