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

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

                                   FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934
                  For the fiscal year ended January 30, 1999

[_] 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 [_]       No [X]

    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. [_]

    The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of April 23, 1999 (based upon the closing sales price as of such
date) was $7,080,458.

    Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of April 23, 1999:

                   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 25, 1999 (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 59,000 square feet while reducing its preexisting base of
traditional stores, which currently average approximately 11,000 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.

    At the end of fiscal 1998, the Company operated 42 SuperSports USA stores,
including 36 SuperSports USA megastores ranging in size from approximately
36,000 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
1998, the Company also operated 21 traditional stores, including one clearance
store. Subsequent to the end of fiscal 1998, the Company closed a SuperSports
USA megastore in Irvine, California and opened a new SuperSports USA megastore
in Auburn Hills, Michigan. The Company's stores are located primarily in medium
to large metropolitan areas across the United States. In fiscal 1998, excluding
results from stores closed or targeted to close, the 42 SuperSports USA stores
produced 90% of the Company's retail sales and approximately 88% of direct store
contributions. Since the beginning of fiscal 1990, the Company has reduced its
traditional store base from 193 to 19 (taking into account two stores closed in
the first quarter of fiscal 1999). See "Management's Discussion and Analysis of
Financial Condition and Results of

                                       2
<PAGE>
 
Operations--Store Closings." The Company operates stores in Texas and
California as well as in Arizona, Florida, Kansas, Louisiana, Michigan,
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
                                 -----------------------
                                 1998      1997     1996
                                 ----      ----     ----
    Sporting goods equipment      52%       50%      49%
    Sports apparel                30%       29%      28%
    Footwear                      18%       21%      23%

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 1998, the Company closed seven
traditional stores. At the end of fiscal 1998, the Company operated 42
SuperSports USA stores, including 36 SuperSports USA megastores and six mini
SuperSports USA stores and 21 traditional stores, including one clearance store.
Subsequent to the end of fiscal 1998, the Company opened a SuperSports USA
megastore in Auburn Hills, Michigan and closed two of its traditional stores and
a megastore in California. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Impairment of Long-Lived Assets."
The Company's stores are located primarily in medium to large metropolitan areas
across the United States. Most of the remaining traditional stores are
profitable and no further major traditional store closing program is
anticipated. The Company currently intends to open from two to five additional
SuperSports USA megastores in fiscal 1999 as it continues to focus 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 185 traditional
stores including two stores closed in the first quarter of fiscal 1999, 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 nine 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
1998...................      0            0          7           63            377,000     2,118,000   2,495,000
Traditional Stores
  Converted to mini
  SuperSports USA stores (c) -            6          6           63            240,000     2,255,000   2,495,000
 
 Total.................     10           43        183
</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. Ten 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 16.0%, 17.2% and 15.1% of the Company's total purchases in
fiscal 1998, 1997 and 1996, 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 95% 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,
Kansas, Minnesota 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 and further upgraded all operating systems
software in the last quarter of 1998. During fiscal 1998, the Company upgraded
its personal computers making them year 2000 compliant. In addition, the Company
implemented its new merchandising information and inventory management systems
in March 1999. As a result of these acquisitions and upgrades, the Company has
updated substantially all of its computer systems with hardware and software
designed to accommodate the year 2000 and beyond.

    The Company has scheduled significant upgrades to its financial accounting
and reporting systems software and its merchandising information and inventory
management systems software for the third quarter of fiscal 1999. The Company is
continuing to test these systems, and expects to finalize testing once upgrades
are installed.

    Cumulatively, capital costs of approximately 5.0 million have been incurred
for the purchase and installation of hardware and software related to the year
2000 issue. Certain other internal costs incurred for work related to year 2000
matters have not been included in the capital costs and are not tracked
separately by the Company, but such costs are included in the related payroll
costs for its information system group. 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."

                                       6
<PAGE>
 
TRADEMARKS AND SERVICE MARKS; OTHER BUSINESS

    As of January 30, 1999, Oshman's owned approximately 25 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 five 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. However, primarily as a result of the
economic difficulties in Asia, the implementation of the agreement with Samsung
Corporation has been deferred for three years. Additionally, the sale of
merchandise under the agreement with Ito-Yokado Co., Ltd. declined significantly
in fiscal 1998.

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 30, 1999, Oshman's employed approximately 3,182 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, California. One of the

                                       7
<PAGE>
 
properties owned by the Company is subject to a lien of the Company's lender,
The CIT Group/Business Credit, Inc. ("CIT").

    Substantially all of Oshman's retail stores occupy leased space in modern
structures. As of January 30, 1999, these retail stores occupied an aggregate of
approximately 2,416,000 square feet of floor space under leases expiring at
various dates from 1999 to 2018 (exclusive of renewal options). Traditional
stores on average are comprised of approximately 11,000 square feet, while the
average megastore occupies approximately 59,000 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 $19.9 million during the 1998 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.

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 30, 1999.

                                       8
<PAGE>
 
                     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     65   Vice Chairman of the Board, Chief Executive Officer,
                            President and Director
Marilyn Oshman        59   Chairman of the Board and Director
Steven U. Rath        44   Executive Vice President
A. Lynn Boerner       58   Vice President, Chief Accounting Officer and 
                            Assistant Secretary
Charles Carstens      48   Vice President
Richard G. Dennis     46   Vice President, Secretary and General Counsel
Thomas J. McVey       47   Senior Vice President
Ray Miller            52   Vice President, Treasurer and Assistant Secretary
Richard L. Randall    56   Vice President, General Merchandise Manager
 
    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. Rath was elected as a Vice President of the Company in 1992 and
Executive Vice President in April 1998. In addition to his primary
responsibilities for the real estate and construction functions, Mr. Rath
assumed an expanded management role in the overall operations in 1997, including
oversight responsibility for the merchandising functions of the Company. In
1998, he assumed responsibility for the Management Information Systems area.
Prior to becoming Vice President of the Company, Mr. Rath served as a Divisional
Vice President for Corporate Development (1990-1992), and Director of Corporate
Development (1988-1989). Before joining the Company, Mr. Rath was Director of
Research and Strategic Planning for the Foley's Division of Federated Department
Stores, Inc.

    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. 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 Inc.,
a sporting goods retailer from March 1997 until March 1998, as Account Executive
at GSI Outsourcing, USA division from August 1996 until February 1997, as
Director of Data Processing at National Merchandise, a regional discount 
department store, from

                                       9
<PAGE>
 
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.

    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.

    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. Randall joined the Company and was elected Vice President, General
Merchandise Manager in May of 1998. He is primarily responsible for the
merchandising and advertising functions of the Company. Prior to joining the
Company, Mr. Randall was Vice President of Merchandising for Hills Department
Stores, where he was employed for approximately four years. Prior to that, Mr.
Randall was employed by Pace Warehouse Clubs for approximately two years and
B.J.'s Wholesale Clubs for approximately six years in a merchant vice president
capacity.

                                       10
<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 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 30, 1999
First Quarter ended May 2, 1998                               $ 6.75     $ 4.25
Second Quarter ended August 1, 1998                             9.38       5.63
Third Quarter ended October 31, 1998                            8.69       3.88
Fourth Quarter ended January 30, 1999                           4.75       2.88
 
FISCAL YEAR ENDING JANUARY 29, 2000
First Quarter ended May 1, 1999 (through April 23, 1999)      $ 3.38     $ 2.38

    As of April 23, 1999, there were approximately 1,400 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 23, 1999, was $2.81.

    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 30    JANUARY 31,    FEBRUARY 1,    FEBRUARY 3,    JANUARY 28,
                                                1999          1998           1997           1996          1995
                                             (52 WEEKS)    (52 WEEKS)     (53 WEEKS)     (52 WEEKS)     (52 WEEKS)
                                             ----------    -----------    -----------    -----------    -----------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                          <C>           <C>            <C>            <C>            <C>
Consolidated Sales                           $309,057       $342,609       $365,879       $342,889       $311,419
Net Earnings (Loss)                            (1,351)         6,372*       (27,250)         1,942            290
Net Basic Earnings (Loss) per Share             (0.23)          1.09          (4.67)          0.33           0.05
Net Diluted Earnings (Loss) per Share           (0.23)          1.07          (4.67)          0.32           0.05
Dividends per Share                                --             --             --             --             --
Total Assets                                  126,004        148,350        160,734        162,923        135,077
Long-Term Debt                                 28,679         35,953         42,397         36,681          5,665
</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."

                                       11
<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 affect 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 59,000 square
feet, while reducing its pre-existing base of traditional stores, which
currently average approximately 11,000 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 reserve.

    During fiscal 1997, the Company closed 51 sporting goods stores, including
one megastore, while opening six new SuperSports USA megastores, substantially
completing its transformation to primarily an operator of megastores. In fiscal
1998, the Company closed an additional seven traditional stores and at year-end
operated 42 SuperSports USA stores, including 36 SuperSports USA megastores, six
mini SuperSports USA stores, 20 traditional stores and one clearance store.
Subsequent to the end of fiscal 1998, the Company closed a SuperSports USA
megastore in Irvine, California and opened a SuperSports USA megastore in Auburn
Hills, Michigan. The Company's stores are located primarily in medium to large
metropolitan areas, in Texas and California as well as in Arizona, Florida,
Kansas, Louisiana, Michigan, Minnesota, New Mexico, Oklahoma, South Carolina,
Tennessee, Utah and Washington.

STORE CLOSINGS

    In the fourth quarter of fiscal 1996, the Company announced a plan to close
53 of its traditional stores during fiscal 1997. The Company recorded a store
closing provision and asset impairments of $13.6 million to cover lease
termination costs ($5.2 million), employee costs and other incremental store
closing costs ($839,000), inventory adjustments ($6.3 million) and leasehold and
other asset write-offs ($1.3 million). Forty-four of these stores were closed in
fiscal 1997 and an additional six in 1998. The remaining three stores are
expected to continue to operate due to the Company's inability to terminate the
leases on a satisfactory basis.

    In addition to the 50 store closings in the group of stores discussed above,
the Company closed one additional store in 1998 and seven stores in fiscal 1997,
including one megastore.

    The Company expects to close an additional six traditional stores in fiscal
1999, two of which closed in the first quarter of the year. At the end of fiscal
1998, the Company had reserves of approximately $1.0 million, which its
management believes are sufficient, to cover estimated incremental costs
associated with anticipated store closings and remaining obligations from stores

                                       12
<PAGE>
 
previously closed. During fiscal 1998, sales reductions related to stores closed
in fiscal 1998 and 1997, and those targeted to close in fiscal 1998, caused
sales to decline $29.2 million from $31.3 in fiscal 1997 to $2.1 million in
fiscal 1998.

IMPAIRMENT OF LONG-LIVED ASSETS

    In the fourth quarter of fiscal 1998, the Company recorded a charge of $3.0
million to write down the carrying value of assets in four California
SuperSports USA megastores and two traditional stores located in Texas to fair
value under the requirements of FASB 121, Accounting for the Impairment of Long-
Lived Assets. The impairment loss is related primarily to the California
megastores.

    Subsequent to the end of fiscal 1998, as a result of legal actions taken by
both the Company and the landlord of one of the California megastores, the
Company closed the store and is currently involved in litigation with the
landlord. It has also listed four other megastores in the Los Angeles/Orange
County, California market with brokers for possible re-leasing, or other
disposition. The Company intends to continue operating these four megastores and
the two traditional stores in Texas, pending an economically justifiable
resolution. The Company is continuing to explore its options and at this time is
not able to determine its financial exposure, if any, associated with the closed
store discussed above or relative to the potential disposition or continued
operation of the other impaired stores. Accordingly, it has recorded no reserves
for potential losses, if any, related to these stores. However, there can be no
assurance that the Company will be successful in its efforts to dispose of these
stores without incurring significant future costs.

    In the fourth quarter of fiscal 1996, the Company recorded an impairment
loss of $1.3 million related to certain stores included in the group of 53
stores it planned to close in fiscal 1997 (see "Store Closings").

CHANGE OF ACCOUNTING METHOD FOR PRE-OPENING EXPENSES

    Prior to fiscal 1997, the Company's accounting policy with regard to pre-
opening expenses of new stores was 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 as incurred. 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.

                                       13
<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
                                                1998       1997      1996
                                               ------     ------    ------
Net Sales                                       100.0      100.0     100.0
Cost of goods sold                               65.8       65.6      68.5
                                               ------     ------    ------
  Gross profit                                   34.2       34.4      31.5
Operating expenses:
  Selling and administrative expenses            34.4       34.2      35.1
  Pre-opening expenses                              -         .4       1.0
  Impairment of Long-Lived Assets                 1.0          -        .4
  Store closing provision                         (.2)       (.2)      1.7
  Miscellaneous income                           (1.4)      (1.8)      (.2)
                                               ------     ------    ------
    Operating income (loss)                        .4        1.8      (6.5)
Interest expense, net                             1.0        1.1       1.0
                                               ------     ------    ------
Income (loss) before income taxes and
 cumulative effect of change in accounting
 method for pre-opening expenses                  (.7)        .7      (7.5)
Income tax (benefit)                              (.2)      (1.2)      (.1)
                                               ------     ------    ------
Income (loss) before cumulative effect of
 change in accounting method for
 pre-opening expenses                             (.4)       1.9      (7.4)
Cumulative effect of change in accounting
 method for pre-opening expenses                    -        (.4)        -
                                               ------     ------    ------
Net earnings (loss)                               (.4)       1.5      (7.4)
                                               ======     ======    ======

                                       14
<PAGE>
 
FISCAL 1998 COMPARED TO FISCAL 1997

    Net sales for fiscal 1998 decreased 9.8% to $309.1 million from $342.6
million in 1997. The net reduction in sales is primarily attributable to lost
sales from stores closed in fiscal 1997 and 1998 ($29.2 million) (see "Store
Closings") and a comparable store sales decline of 6.1% in continuing stores.
Management attributes the decline in comparable store sales to several factors
including lower inventory levels related to the Company's efforts to increase
margins and improve inventory turnover rates, reduced advertising expenditures
and increased competition. Additionally, the relatively soft market in 1998 for
footwear and golf equipment, as well as a weak Christmas selling season in the
sporting goods industry, further contributed to the decline in sales.

    Gross profit, as a percentage of net sales, was 34.2% in fiscal 1998
compared to 34.4% in 1997. Gross margins in the fourth quarter of 1998 declined
approximately 2 points, as a percentage of sales, compared to 1997, primarily as
a result of lower than expected Christmas sales and higher than expected
footwear markdowns.

    Selling and administrative expenses as a percentage of net sales were 34.4%
in fiscal 1998, compared to 34.2% in fiscal 1997. Comparable store selling and
administrative costs, as well as corporate overhead and distribution costs were
reduced approximately $5.1 million in fiscal 1998 compared to fiscal 1997.
However, the reductions were not sufficient to overcome the effect of the lower
sales levels.

    The Company recorded an impairment loss of $3.0 million in fiscal 1998
related primarily to its megastores in the Los Angeles/Orange County, California
area (see "Impairment of Long-Lived Assets").

    The Company had no pre-opening expenses in fiscal 1998 as no new stores were
opened. Pre-opening expenses as a percentage of net sales were .4% in fiscal
1997. (See "Change of Accounting Method for Pre-opening Expenses.")

    Store closing provision was a benefit of $499,000 in fiscal 1998 compared to
a benefit of $836,000 in 1997. The benefit in both years is related to
management's re-evaluation of store closing reserves for lease termination
costs, leasehold and other asset writeoffs and other incremental store closing
costs. (See "Store Closings.")

                                       15
<PAGE>
 
    The major components of miscellaneous income for fiscal 1998 and fiscal 1997
are set out in the table below:
 
                                                           FISCAL YEAR
                                                         ----------------
                                                          1998      1997
                                                         ------    ------
                                                          (in thousands)
    Gain on sale of real estate and leasehold interests  $3,914    $5,616
    Fees from foreign licensees                             467     1,199
    Other, net                                             (118)     (769)
                                                         ------    ------
    Total                                                $4,263    $6,046
                                                         ======    ======

    Net interest expense for fiscal 1998 was $3.2 million, compared to $3.7
million in fiscal 1997. Net interest expense in fiscal 1997 includes interest
income of $662,000 related to a Federal income tax refund. The decreased
interest expense in fiscal 1998 is primarily related to reduced interest rates
and lower average borrowings under the Company's credit facility.

    The income tax benefits in fiscal 1998 and 1997 include benefits related to
refunds of prior years Federal income taxes of $686,000 and $4.1 million
respectively. In 1998, no Federal Income tax benefit was recorded relative to
the Company's loss before income taxes due to valuation allowances recorded
against the deferred tax assets generated by the losses. No tax expense was
recorded related to 1997 due to the partial utilization of prior net operating
losses, which had been primarily subject to a valuation allowance.

    In fiscal 1998, the Company had a loss of $2.1 million before income taxes
and cumulative effect of change of accounting method for pre-opening expenses
compared to income of $2.4 million in fiscal 1997. Significant factors
contributing to the loss in fiscal 1998 compared to fiscal 1997 are (i) the
decline in comparable store sales, (ii) the impairment loss in 1998 and (iii)
reduced gains from the sale of real estate and leasehold interests compared to
fiscal 1997, partially offset by (iv) reduced costs related to stores opened in
fiscal 1997.

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 was attributable to the elimination of
$51.2 million of sales related to stores closed or targeted to close in fiscal
1997 and 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.

                                       16
<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 was primarily due to the nonrecurrence 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. Although selling and
administrative expenses, as a percentage of sales, in continuing stores actually
increased as a result of lower than expected sales, the increased rate was more
than offset by a reduction of corporate overhead and distribution costs,
resulting in a .6% reduction as a percentage of sales for the Company's ongoing
operations. The balance of the reduction in the rate of selling and
administrative expenses as a percentage of sales was 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 store closing reserves.
(See "Store Closings.")

    Pre-opening expenses as a percentage of net sales were .4% and 1.0%,
respectively, in fiscal 1997 and fiscal 1996. (See "Change of Accounting Method
for Pre-opening Expenses.")

    The impairment loss in fiscal 1996 was related to certain stores included in
the group of 53 stores that the Company planned to close in fiscal 1997. (See
"Store Closings.")

    Store closing provision in fiscal 1997 as a percentage of net sales was a
benefit of .2% compared to an expense of 1.7% in fiscal 1996. In fiscal 1996 the
Company established of a store closing reserve of $6.0 million, excluding a
reserve for liquidation of inventory and fixed asset impairment, 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 included interest
income of $662,000 related to a Federal income tax refund. The increase in
interest expense in fiscal 1997 was related to an increased interest rate under
its credit facility. In fiscal 1998, the Company amended its credit facility to,
among other things, reduce its interest rate.

                                       17
<PAGE>
 
    The $4.0 million income tax (benefit) in fiscal 1997 included a benefit of
$4.1 million related to a refund of prior years Federal income taxes. Income
taxes in fiscal 1996 were related primarily to state income taxes. In both
fiscal 1997 and 1996, deferred tax benefits were utilized in the calculation of
income tax expense in accordance with SFAS 109, and accordingly no federal
income tax expense was recognized.

    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 were (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.

                                       18
<PAGE>
 
SEASONALITY AND QUARTERLY FLUCTUATIONS

    The following table sets forth certain unaudited financial information for
the Company for each of the quarterly periods in fiscal 1998 and fiscal 1997:

                                             FISCAL 1998
                                          -------------------
                              FIRST       SECOND       THIRD        FOURTH
                             QUARTER      QUARTER     QUARTER      QUARTER
                             -------      -------     -------      -------
                                         (DOLLAR IN THOUSANDS)

Net sales                    $72,140      $79,032     $64,312      $93,573
Gross profit                 $25,380       26,847     $24,079      $29,474
Gross margin                    35.2%        34.0%       37.4%        31.5%
Operating income (loss)      $  (149)     $ 4,094     $(1,704)     $(1,094)
Operating margin                (0.2%)        5.2%       (2.6%)       (1.2%)
Net income (loss)            $(1,124)     $ 3,420     $(2,015)     $(1,632)
Net income (loss) margin        (1.6%)        4.3%       (3.1%)       (1.7%)


                                             FISCAL 1997
                                          -------------------
                              FIRST       SECOND       THIRD        FOURTH
                             QUARTER      QUARTER     QUARTER      QUARTER
                             -------      -------     -------      -------
                                         (DOLLAR 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%

    During fiscal 1998, 1997 and 1996, 30.3%, 29.7% and 30.7%, 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 did not occur in fiscal 1998, primarily as a result of a
real estate gain recognized in the second quarter of the year, an impairment
loss recorded in the fourth quarter of the year and a disappointing Christmas
selling season.

                                       19
<PAGE>
 
COMPARABLE STORE SALES

    The following table sets forth for the fiscal years 1998, 1997 and 1996
certain information regarding the percentage increase (decrease) in comparable
store sales for comparable 52 week periods.

                    FISCAL 1998
-----------------------------------------------------
    First     Second      Third     Fourth                FISCAL    FISCAL
   Quarter    Quarter    Quarter    Quarter     Year       1997      1996
   -------    -------    -------    -------     ----      ------    ------
   (4.7)%      (5.3)%     (8.3)%     (6.2)%    (6.1)%     (3.7)%    (7.9)%

    Management attributes the decline in comparable store sales to several
factors including, lower inventory levels related to the Company's efforts to
increase margins and improve inventory turnover rates, reduced advertising
expenditures and increased competition. Additionally, the relatively soft market
in 1998 for footwear and golf equipment, as well as a weak Christmas selling
season in the sporting goods industry, further contributed to the decline in
sales compared to the prior year.

LIQUIDITY AND CAPITAL RESOURCES

    In fiscal 1998, operating activities provided cash totaling $6.1 million.
The primary sources of cash were reduced inventories of $13.4 million offset by
a related decrease in trade accounts payable of $8.9 million, earnings of $5.0
million, before depreciation, gains on disposition of fixed assets and leasehold
interests and loss from impairment of long-lived assets, offset by $2.4 million
used for stores closed or targeted to close. Investing activities provided cash
of $1.7 million from proceeds of sales of real estate and leasehold interests,
together with developer provided funds in excess of amounts used for the
purchase of property, plant and equipment during the year. Financing activities
used $7.8 million as a result of reduced utilization of the Company's credit
facility and the prepayment, at the Company's option, of a $3.1 million mortgage
secured by land and a building where it operates a SuperSports USA megastore.

    Merchandise inventories decreased 13.6%, to $86.2 million at the end of
fiscal 1998 from $99.9 million at the end of fiscal 1997. The inventory decrease
is primarily related to the Company's efforts to reduce average inventory levels
and increase inventory turnover. The Company also closed seven traditional
stores during the year. Comparable inventories decreased approximately 12% in
fiscal 1998, in addition to an approximate 7% reduction in fiscal 1997. The
Company expects, with the utilization of its new merchandising information
systems which became operational in March, 1999, to continue to improve the
productivity of its inventories in fiscal 1999.

    Additions to property, plant and equipment were $3.0 million in fiscal 1998.
The Company opened no new stores during the year. Capital expenditures were
primarily related to refurbishment of existing locations and improvement to the
Company's management information systems. Approximately $1.6 million was used
for computer hardware and software

                                       20
<PAGE>
 
including the purchase of a new computer and merchandising systems software.
Approximately $1.0 million was used for the renovation and refurbishment of
other stores. The remaining amount was used for renovation and refurbishment of
administrative and warehouse locations.

    Capital expenditures in fiscal 1999 are expected to be approximately $7.5
million. The Company plans to open from two to five new megastores during fiscal
1999 at a net cost of approximately $2.0 million. Approximately $2.5 million is
planned to be used for renovation and refurbishment of existing stores,
including the conversion of shoe departments in certain megastores to a more
customer friendly format. Approximately $1.4 million is allocated for computer
hardware and software, including communications upgrades, and the balance is
expected to be allocated to improvements to warehouses and administrative areas.

    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. In fiscal
1998, 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. Subsequent to the end of fiscal 1998, the agreement was amended to exclude
the effect of the Company's impairment loss from certain financial covenants.
With this amendment, the Company was in compliance with the financial covenants
under the agreement.

    The Company's primary source of liquidity in fiscal 1998 was the Company's
credit facility, under which average borrowings during the year were $39.8
million. Operating activities also provided cash of $6.1 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 is typically highest in November and reached
$48.4 million in November 1998. At January 30, 1999, the Company had recorded
debt with respect to its credit facility of $28.7 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 facilities together
with cash flow from operations will be adequate to meet anticipated capital
needs, including seasonal financing needs for fiscal 1999.

                                       21
<PAGE>
 
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.

    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, and further upgraded all operating systems
software in the last quarter of 1998. During fiscal 1998, the Company upgraded
its personal computers making them year 2000 compliant. In addition, the Company
implemented its new merchandising information and inventory management systems
in March 1999.

    As a result of these acquisitions and upgrades, the Company has updated
substantially all of its computer systems with hardware and software designed to
accommodate the year 2000 and beyond. The Company has scheduled significant
upgrades to its financial accounting and reporting systems software and its
merchandising information and inventory management systems software for the
third quarter of fiscal 1999. The Company is continuing to test these systems,
and expects to finalize testing once upgrades are installed. The Company
presently believes that upon completion of its installation of upgrades and
testing in fiscal 1999 of computer hardware and software systems described
above, 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.

    Cumulatively, capital costs of approximately $5.0 million have been incurred
for the purchase and installation of hardware and software related to the year
2000 issue. Certain other internal costs incurred for work relating to year 2000
matters have not been included in the capital costs and are not tracked
separately by the Company, but such costs are included in the related payroll
costs for its information system group. The Company does not expect future
expenditures related to the year 2000 issue to be significant for its internal
systems.

    The Company has substantially completed its review and assessment of its 
non-information technology systems, and has contacted vendors to uncover any
potential year 2000 problems. At this time, the Company is not aware of any
compliance problems from its non-information technology systems that could have
a material effect on the Company's operation. In addition to its internal
computer and non-information technology systems, 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. The Company is
currently assessing the year 2000 compliance of its major providers of products,
services and systems through the

                                       22
<PAGE>
 
use of surveys and formal communications. However, there can be no assurance
that the Company can correctly assess the year 2000 readiness of all its major
suppliers. Some suppliers have not responded to the Company's requests for
information. The Company is in the process of evaluating the potential effects
of non-compliance by its vendors. 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.

    The Company is developing contingency plans for its internal computer and
non-information technology systems, as well as for failure of its key suppliers
to perform. With respect to suppliers, these contingency plans are being done on
a case by case basis for those suppliers that the Company determines are at a
high risk of non-compliance. These plans may include booking orders for delivery
in advance of January 1, 2000, or finding alternative suppliers. If the
Company's contingency plans are not adequate to address non-compliance by its
computer and non-information technology systems, or by suppliers, this could
have a material adverse effect on the operating results of the Company.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    In the normal course of business, the financial position of the Company is
exposed to minimal market risk associated with interest rate movements on
borrowings under the Company's credit facility with The CIT Group/Business
Credit, Inc. Borrowings with respect to the Company's credit facility averaged
$39.8 million in fiscal 1998, and, at January 30, 1999, the Company had recorded
debt of $28.7 million. A one percent increase or decrease in the levels of
interest rates on variable rate debt with all other variables held constant
would not result in a material change to the Company's result of operations.

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 and in the letter from
the Chairman and Vice Chairman of the Company regarding expected direct store
profits, returns on investment, estimated operating costs, comparable store
sales, planned capital expenditures, store openings and closings, the Company's
financial position, business strategy and other plans and objectives for future
operations (typically using words and phrases such as "expect," "plan,"
"forecast," "anticipate," "should approximate," "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 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,

                                       23
<PAGE>
 
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.

                                       24
<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 30, 1999 a definitive proxy statement pursuant to Regulation 14A
involving the election of directors, which proxy statement is incorporated
herein by reference.

                                       25
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE> 
<CAPTION> 
<S>                                                                                 <C> 
                                                                                       PAGE
(a)  1.  Financial Statements                                                        REFERENCE
                                                                                     ---------
     Report of Independent Certified Public Accountants.........................          27
     Consolidated balance sheets at January 30, 1999 and January 31, 1998.......          29
     Consolidated statements of operations for the years ended January 30, 1999,
       January 31, 1998, and February 1, 1997.....................................        30
     Consolidated statements of stockholders' equity for the years ended
       February 1, 1997, January 31, 1998 and January 30, 1999....................        32
     Consolidated statements of cash flows for the years ended January 30, 1999,
       January 31, 1998, and February 1, 1997.....................................        33
     Notes to consolidated financial statements.................................          34
     Selected quarterly financial data..........................................          50
 
     2.  Financial Statement Schedules
 
     Schedule II - Allowance for Doubtful Receivables - Years ended
       January 30, 1999, January 31, 1998, and February 1, 1997...................        51

     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 30 1999.
</TABLE> 

                                       26
<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 30,
1999 and January 31, 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended January 30, 1999.  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 30, 1999 and January 31, 1998, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended January 30, 1999, in conformity
with generally accepted accounting principles.


                                      27
<PAGE>
 
   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 30, 1999.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.


/s/ GRANT THORNTON LLP


Houston, Texas
March 15, 1999

                                      28
<PAGE>
 
                 OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
                                        
                          CONSOLIDATED BALANCE SHEETS
                     January 30, 1999 and January 31, 1998
                             (Dollars in thousands)
<TABLE>
<CAPTION>
 
 
ASSETS                                                     1998        1997
                                                         ---------   ---------
<S>                                                      <C>         <C>
CURRENT ASSETS
 Cash and cash equivalents                               $    356    $    363
 Accounts receivable, less allowance of $88 in 1999
   and $130 in 1998                                         1,496       1,729
 Merchandise inventories                                   86,184      99,874
 Prepaid expenses and other                                 2,453       2,838
                                                         --------    --------
     Total current assets                                  90,489     104,804
PROPERTY, PLANT AND EQUIPMENT - AT COST                    87,262      91,957
 Less accumulated depreciation and amortization            52,014      48,755
                                                         --------    --------
                                                           35,248      43,202
OTHER ASSETS                                                  267         344
                                                         --------    --------
                                                         $126,004    $148,350
                                                         ========    ========
 
            LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
 Current maturities of long-term obligations             $      -    $    566
 Trade accounts payable                                    33,478      42,367
 Accrued liabilities                                       15,919      17,214
 Store closing reserve                                      1,022       3,852
                                                         --------    --------
     Total current liabilities                             50,419      63,999
LONG-TERM OBLIGATIONS                                      28,679      35,953
OTHER NONCURRENT LIABILITIES                                6,911       7,085
STOCKHOLDERS' EQUITY
 Common stock                                               5,830       5,830
 Additional capital                                         4,210       4,177
 Retained earnings                                         29,976      31,327
   Less Treasury stock, at cost                               (21)        (21)
                                                         --------    --------
                                                           39,995      41,313
                                                         --------    --------
                                                         $126,004    $148,350
                                                         ========    ========
 
</TABLE>


See notes to consolidated financial statements.

                                      29
<PAGE>
 
                 OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
                                        
                     CONSOLIDATED STATEMENTS OF OPERATIONS
       Year ended January 30, 1999, January 31, 1998 and February 1, 1997
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                           1998        1997        1996
                                                         ---------   ---------   ---------
<S>                                                      <C>         <C>         <C>
Net sales                                                $309,057    $342,609    $365,879
Cost of goods sold                                        203,277     224,620     250,784
                                                         --------    --------    --------
   Gross profit                                           105,780     117,989     115,095
Operating expenses
 Selling and administrative expenses                      106,396     117,264     128,517
 Pre-opening expenses                                           -       1,525       3,459
 Impairment of long-lived assets                            3,000           -       1,298
 Store closing provision                                     (499)       (836)      6,212
 Miscellaneous income                                      (4,263)     (6,046)       (773)
                                                         --------    --------    --------
     Operating income (loss)                                1,146       6,082     (23,618)
Interest expense, net                                       3,241       3,711       3,821
                                                         --------    --------    --------
(Loss) earnings before income taxes                        (2,095)      2,371     (27,439)
Income tax benefit                                           (744)     (4,001)       (189)
                                                         --------    --------    --------
 (Loss) earnings before cumulative effect of change
   in accounting principle                                 (1,351)      6,372     (27,250)
Cumulative effect of change in accounting principle
 for pre-opening expenses                                       -      (1,299)          -
                                                         --------    --------    --------
     NET (LOSS) EARNINGS                                 $ (1,351)   $  5,073    $(27,250)
                                                         ========    ========    ========
(Loss) earnings per share
 (Loss) earnings before cumulative effect of change
   in accounting principle
   Basic (loss) earnings per share                       $   (.23)   $   1.09    $  (4.67)
   Diluted (loss) earnings per share                     $   (.23)   $   1.07    $  (4.67)
 Cumulative effect to February 2, 1997 of change
   in accounting principle for pre-opening expenses
   Basic (loss) earnings per share                       $      -    $   (.22)   $      -
   Diluted (loss) earnings per share                     $      -    $   (.22)   $      -
 Net (loss) earnings per share
   Basic (loss) earnings per share                       $   (.23)   $    .87    $  (4.67)
   Diluted (loss) earnings per share                     $   (.23)   $    .85    $  (4.67)
</TABLE>

                                      30
<PAGE>
 
                 OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
                                        
               CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
       Year ended January 30, 1999, January 31, 1998 and February 1, 1997
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                     1998       1997       1996
                                                   ---------   -------   ---------
<S>                                                <C>         <C>       <C>
Proforma amounts assuming the change had been
 applied retroactively
 (Loss) earnings before cumulative effect of
   change in accounting principle                   $(1,351)    $6,372   $(27,250)
 Adjustment for pre-opening expenses                      -          -      1,348
                                                    -------     ------   --------
     NET (LOSS) EARNINGS                            $(1,351)    $6,372   $(25,902)
                                                    =======     ======   ========
 Basic (loss) earnings per share                    $  (.23)    $ 1.09   $  (4.44)
 Diluted (loss) earnings per share                  $  (.23)    $ 1.07   $  (4.44)
 
</TABLE>



See notes to consolidated financial statements.

                                      31
<PAGE>
 
                 OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
                                        
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
      Years ended January 30, 1999, January 31, 1998 and February 1, 1997
                                 (In thousands)

<TABLE>
<CAPTION>
                                     Common stock     
                                    ---------------   Treasury    Additional   Retained 
                                    Shares   Amount     stock      capital     earnings
                                    ------   ------   ---------   ----------   ---------
<S>                                 <C>      <C>      <C>         <C>          <C>
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
Compensation under stock
 option and stock bonus
 plans                                   -        -          -            33          -
Net loss for the year                    -        -          -             -     (1,351)
                                     -----   ------   --------        ------   --------
Balance at January 30, 1999          5,830   $5,830       $(21)       $4,210   $ 29,976
                                     =====   ======   ========        ======   ========
</TABLE>



See notes to consolidated financial statements.

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

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
       Year ended January 30, 1999, January 31, 1998 and February 1, 1997
                             (Dollars in thousands)
<TABLE>
<CAPTION>
 
                                                                  1998        1997        1996
                                                                ---------   ---------   ---------
<S>                                                             <C>         <C>         <C>
Cash flows of operating activities
 Net (loss) earnings                                             $(1,351)   $  5,073    $(27,250)
 Adjustments to reconcile net cash provided (used)
   by operating activities
   Depreciation and amortization                                   7,181       7,180       6,942
   Cumulative effect of change in accounting principle for
     pre-opening costs                                                 -       1,299           -
   Provision for losses on accounts receivable                         -           -           7
   Charge to reserve for store closings, net of
     depreciation and amortization                                (2,092)     (2,808)       (120)
   (Recovery) provision for losses on store closings, net           (264)       (471)     12,611
   Stock option and bonus plan expense, net of stock
     retained for income taxes                                        33         109         168
   Loss (gain) on disposition of fixed assets                         60         (30)        234
   Amortization of deferred rental allowance                        (458)       (344)       (292)
   Gain on disposition of real estate and leaseholds              (3,859)     (5,616)          -
   Recording impairment of long-lived assets                       3,000           -       1,298
   Changes in assets and liabilities
     Decrease (increase) in accounts receivable                      233       2,042        (326)
     Decrease (increase) in merchandise inventories               13,352       7,311      (3,242)
     (Increase) decrease in prepaid expenses and other               (61)     (2,476)      2,907
     Decrease in other assets                                          2           -           -
     (Decrease) increase in trade accounts payable                (8,889)     (3,337)     10,219
     (Decrease) increase in accrued liabilities                   (1,009)       (947)      2,093
     Increase in other noncurrent liabilities                        382       1,774       2,147
     (Decrease) increase in income taxes                            (167)     (4,456)        147
                                                                 -------    --------    --------
       Net cash provided by operating activities                   6,093       4,303       7,543
Cash flows of investing activities
 Proceeds from (payment on) disposition of fixed assets            4,197       8,527        (752)
 Purchase of property, plant and equipment                        (2,976)    (10,047)    (19,225)
 Proceeds from note receivable                                        73          45          44
 Proceeds from landlords                                             446       3,752       6,774
                                                                 -------    --------    --------
       Net cash provided (used) by investing activities            1,740       2,277     (13,159)
Cash flows of financing activities
 Proceeds from stock issuance                                          -           -          43
 Proceeds from issuance of long-term obligations                       -           -         259
 Payments of long-term obligations                                (3,527)     (1,293)       (883)
 (Payments) proceeds from revolving credit facility, net          (4,313)     (5,361)      6,307
                                                                 -------    --------    --------
       Net cash (used) provided by financing activities           (7,840)     (6,654)      5,726
                                                                 -------    --------    --------
Net (decrease) increase in cash and cash equivalents                  (7)        (74)        110
Cash and cash equivalents at beginning of period                     363         437         327
                                                                 -------    --------    --------
Cash and cash equivalents at end of period                       $   356    $    363    $    437
                                                                 =======    ========    ========
Supplemental disclosures of cash flow information
 Cash paid (received) during the year for
   Income taxes                                                  $  (244)   $    147    $   (297)
   Interest expense                                                3,134       4,405       3,679
</TABLE>

See notes to consolidated financial statements.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



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 30, 1999, the Company operated 42
 Supersports USA stores, 36 of which are megastores and 6 of which are mini-
 SuperSports USA stores, 20 traditional stores and 1 clearance store.  Sales in
 Texas and California accounted for 56% and 17% of retail sales.  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 1998, 1997, and 1996 ended on January 30, 1999, January 31, 1998,
 and February 1, 1997, 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.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

 6. PROPERTY, PLANT AND EQUIPMENT

 The Company applies SFAS No. 121, Accounting for Impairment of Long-Lived
 Assets to be Disposed Of, which 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.  Impairment charges of $3,000,000, $-0- and $1,298,000
 were taken in 1998, 1997 and 1996 to reduce the carrying value of certain
 leasehold improvements and fixtures to their estimated realizable value.

 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.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



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 it improves
 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 $11,376,000, $14,280,000 and $15,931,000 in 1998, 1997
 and 1996.

 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 future net lease obligations, employee costs
 and other direct store closing costs.  Inventory valuation adjustments, as
 necessary, are recorded as additional cost of goods sold and as a direct
 reduction to inventory.

 13.  EARNINGS PER SHARE

 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
 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.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

 14.  RECLASSIFICATIONS

 Certain amounts in prior financial statements have been reclassified to conform
 to the 1998 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:

<TABLE>
<CAPTION>
                                                     1998      1997
                                                    -------   -------
                                                     (In thousands)
<S>                                                 <C>       <C>
   Furniture, fixtures and equipment                $54,278   $56,919
   Leasehold improvements                            28,584    29,430
   Buildings                                          2,000     2,924
   Land                                               1,876     1,973
   Leasehold improvements under capital leases          524       711
                                                    -------   -------
                                                    $87,262   $91,957
                                                    =======   =======
</TABLE>

NOTE C - NOTE RECEIVABLE

 The Company has a non-interest bearing note receivable from the Company's Chief
 Executive Officer.  At the end of 1998 and 1997, the balance of the note was
 $327,000 and $373,000, respectively.  The note is payable in bi-weekly
 installments of approximately $2,768 with the remainder due September 2000.
 The note is collateralized by life insurance and Company stock options.


NOTE D - LONG-TERM OBLIGATIONS

 Long-term obligations consist of a revolving credit facility due August 31,
 2001.  Interest is payable monthly and the credit facility is collateralized by
 inventory, accounts receivable and real estate.  The balance at January 30,
 1999 was $28,679,000 and the balance at January 31, 1998 was $32,992,000.

 In the first quarter of 1998, the Company, at its option and without penalty,
 prepaid its mortgage note which totaled $3.4 million at year end 1997.  The
 Company used proceeds from its revolving line of credit to prepay this debt.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997


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.  During 1998, CIT amended one ratio covenant to exclude the
 impairment losses so that the Company would be in compliance.  The Company was
 in compliance with all other financial covenants.  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 (7.75% at
 January 30, 1999) and any unused borrowing capacity is subject to a line of
 credit fee of .25%.  The Company may, under certain circumstances, elect to
 have interest computed at a rate of the London Interbank Offered Rate (LIBOR,
 4.94% to 4.97% at January 30, 1999) plus 2.125%.  The credit facility expires
 August 31, 2001.

 At the end of 1998 and 1997, outstanding letters of credit were $1,138,000 and
 $1,055,000, respectively.


NOTE E - INCOME TAXES

 The Company's tax expense (benefit) consisted of the following:

<TABLE>
<CAPTION>
 
                   1998       1997      1996
                  -------   --------   -------
                         (In thousands)
<S>               <C>       <C>        <C>
   Current
     Federal       $(686)   $(4,142)    $   -
     Foreign          43         78        28
     State             2         19        33
   Deferred
     State          (103)        44      (250)
                   -----    -------     -----
                   $(744)   $(4,001)    $(189)
                   =====    =======     =====
</TABLE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



NOTE E - INCOME TAXES - CONTINUED

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

<TABLE>
<CAPTION>
                                                                      1998        1997        1996
                                                                    --------   ----------   --------
                                                                             (In thousands)
<S>                                                                 <C>        <C>          <C>      
   Income tax benefit at statutory
     rate                                                            $ (712)     $   806    $(9,329)
   Increases (reductions)
     Change in valuation allowance
       Current year operations                                          593         (851)     9,160
        Net operating loss carryback                                   (507)      (2,489)         -
      Carryback of net operating loss to
      periods for which tax rates exceed
      current rate                                                     (179)      (1,652)         -
   Other items - net                                                     61          185        (20)
                                                                     ------      -------    -------
       Income tax benefit                                            $ (744)     $(4,001)   $  (189)
                                                                     ======      =======    =======
</TABLE> 
 
 Deferred tax assets and liabilities consist of the following:

<TABLE> 
<CAPTION> 
 
                                                                     January 30, 1999        January 31, 1998
                                                                    --------------------    --------------------
                                                                    Current    Long-Term    Current    Long-Term
                                                                    -------    ---------    -------    ---------
                                                                    (In thousands)          (In thousands)
<S>                                                                 <C>        <C>          <C>          <C> 
   Assets
   -------
     Accrued expenses                                                $  271      $   471    $   702      $   613
     Lease incentives                                                   158        1,892        156        2,027
     Store closing reserves                                             917            -      1,348            -
     Net operating loss carryforward                                      -        9,142          -        8,615
     Business tax credits                                                 -        1,006          -        1,069
                                                                     ------      -------    -------    ---------
                                                                      1,346       12,511      2,206       12,324
</TABLE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



NOTE E - INCOME TAXES - CONTINUED

<TABLE>
<CAPTION>
                                                   January 30, 1999        January 31, 1998
                                                 ---------------------   ---------------------
                                                 Current    Long-Term    Current    Long-Term
                                                 --------   ----------   --------   ----------
                                                    (In thousands)          (In thousands)
<S>                                              <C>        <C>          <C>        <C>
   Liabilities
   -----------
     Depreciation of property and equipment       $    -      $ 4,727     $    -      $ 5,079
     Inventory capitalization                      1,078            -        916            -
     LIFO termination                                  -            -        478            -
     State taxes                                       4          190          9          287
     Other                                            50          127        141          128
                                                  ------      -------     ------      -------
                                                   1,132        5,044      1,544        5,494
                                                  ------      -------     ------      -------
       Net asset before valuation allowance          214        7,467        662        6,830
     Less valuation allowance                       (268)      (7,783)      (721)      (7,244)
                                                  ------      -------     ------      -------
       NET LIABILITY                              $   54      $   316     $   59      $   414
                                                  ======      =======     ======      =======
</TABLE>

 Deferred income taxes of $54,000 and $59,000 were included in  accrued
 liabilities  at 1998 and 1997.

 In 1998, the Company recorded Federal income tax refunds of $686,000, of which
 $219,000 plus interest of $3,000 was received by year-end, resulting from the
 application of net operating loss carrybacks.

 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 $179,000 ($1,652,000 in 1997)
 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 due to the expiration of the statute of limitations for
 review of the refunds.

 Deferred tax assets were reduced by valuation allowances of $8,608,000 and
 $7,965,000 at January 30, 1999 and January 31, 1998, respectively.  Due to the
 operating loss carryforwards generated during fiscal 1998 from the Company's
 continuing operations, management believes that uncertainties exist such that
 it cannot be considered 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 net deferred tax assets.  In 1998, the Company
 increased its valuation allowance by $643,000 due to net deferred tax assets
 generated during the year, offset by the recognition of certain net operating
 loss carrybacks.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



NOTE E - INCOME TAXES - CONTINUED

 The Company has net operating loss carryforwards of approximately $26,700,000.
 The carryforwards expire as follows:

<TABLE>
<CAPTION>
             Expiration                              Amount   
             ----------                          --------------
                                                 (In thousands)
             <S>                                         <C>  
             2007                                      $    58
             2008                                           81
             2010                                        2,980
             2011                                        2,375
             2012                                       12,159
             2013                                        6,161
             2019                                        3,074
                                                       -------
                                                       $26,888
                                                       ======= 
</TABLE>

 Additionally, the Company has foreign tax credit carryforwards of $196,000
 expiring from 2000 to 2004, 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.

 Future minimum rental payments under operating leases at the end of 1998 are as
 follows:

<TABLE>
<CAPTION>
Fiscal year                    Amount
------------------------   --------------
                           (In thousands)
<S>                        <C>
     1999                       $ 18,748
     2000                         18,716
     2001                         18,984
     2002                         19,008
     2003                         18,380
   Thereafter to 2019            174,465
</TABLE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED

 Minimum payments have not been reduced by minimum sublease rental income of
 $11,444,000 due in the future under noncancelable subleases.

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

<TABLE>
<CAPTION>
 
                                          1998      1997      1996
                                         -------   -------   -------
                                               (In thousands)
<S>                                      <C>       <C>       <C>
   Leased facilities
     Minimum rentals                     $18,862   $18,550   $18,479
     Contingent rentals (based on a
       percentage of sales)                1,003     1,525     1,813
                                         -------   -------   -------
                                          19,865    20,075    20,292
   Other rentals                             394       425       388
                                         -------   -------   -------
                                         $20,259   $20,500   $20,680
                                         =======   =======   =======
</TABLE>

 Certain leases between the Company and two trusts, which are for the benefit of
 two shareholders, provide for total minimum annual rentals of $399,000 through
 November, 2003.

 PROFIT SHARING PLAN

 The Company and its subsidiaries participate in a discretionary employee profit
 sharing plan.  The Plan is a 401(k) Retirement Savings Plan covering
 substantially all 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
 1998, 1997 or 1996.

 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.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



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
 $151,515 after he attains age 65.  During 1998, the first payment was made.
 These payments will continue for an additional nine years.  This agreement
 amends a previous deferred compensation agreement between the Company and the
 executive officer, which was funded by a purchased life insurance policy on the
 life of the executive.  As part of the revised agreement, the Company cancelled
 the life insurance policy for the full cash value at the time of cancellation.
 If the executive dies before all payments are made, the remaining payments will
 be made to his designated beneficiary under the same payment schedule.

 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 and shares
 outstanding were 5,827,000 at the end of 1998, 1997, and 1996.

 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.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



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 1998, 1997 or 1996.  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, 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
 $39,000,  $98,000 and $181,000 in 1998, 1997, and 1996, respectively.

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



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:

<TABLE>
<CAPTION>
                                              1998      1997        1996
                                            --------   -------   ----------
<S>                                         <C>        <C>       <C>
   Net (loss) income
     As reported                            $(1,351)    $5,073    $(27,250)
     Pro forma                               (1,438)     4,806     (27,271)
   Earnings (loss) per share - basic
     As reported                               (.23)       .87       (4.67)
     Pro forma                                 (.25)       .82       (4.67)
   Earnings (loss) per share - diluted
     As reported                               (.23)       .85       (4.67)
     Pro forma                                 (.25)       .80       (4.67)
</TABLE>

 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 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                    1998        1997       1996
                                 ----------   --------   --------
<S>                              <C>          <C>        <C>
   Expected volatility               55.69%     56.10%     52.04%
   Risk free rate                     5.65%      5.76%      5.90%
   Expected life of options      7.5 years    6 years    6 years
   Expected dividend yield            0.00%      0.00%      0.00%
</TABLE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997


NOTE G - STOCKHOLDERS' EQUITY - CONTINUED

 A summary of the Company's stock options and warrants of 1998, 1997 and 1996
 and changes during the years ending on those dates is presented below:

<TABLE>
<CAPTION>
                                          1998                         1997                         1996
                                    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       586,650              $7.06   511,450              $5.38   682,800              $5.98
 Granted                  317,000               5.57   299,250               4.60    30,000               7.77
 Exercised                      -                  -         -                  -     8,100               5.97
 Forfeited                290,000               6.92   224,050               5.80   145,650               7.56
 Expired                    2,500               6.75         -                  -    47,600               5.37
                          -------                      -------                      -------
 Outstanding at
  end of year             611,150               4.42   586,650               5.04   511,450               5.38
                          =======                      =======                      =======
 Options exercisable
   at end of year          38,166               5.94   278,833               7.06   335,838               7.03
                          =======                      =======                      =======
</TABLE>

 The weighted-average fair value of compensatory options granted during 1998,
 1997 and 1996 was $4.02, $3.29 and $5.62 per option.

 The following table summaries information about options and warrants
 outstanding at January 30, 1999:

<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          .45 years                  -             -                     -
   $4.50 - $6.00          491,150         8.82 years               5.21        28,166                  5.51
   $6.01 - $7.63           20,000         7.06 years               7.15        10,000                  6.68
                          -------                                             -------
                          611,150                                              38,166
                          =======                                             =======
</TABLE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



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.
<TABLE>
<CAPTION>
 
                                                           1998      1997       1996
                                                         --------   -------   ---------
                                                                 (In thousands)
<S>                                                      <C>        <C>       <C>
       Net (loss) earnings                               $(1,351)    $5,073   $(27,250)
                                                         =======     ======   ========
       Weighted average common shares used
              In basic EPS                                 5,830      5,830      5,829
                   Effect of dilutive securities:
                        Stock Options                          -        110          -
                                                         -------     ------   --------
       Weighted average common and potential
            dilutive common shares used in dilutive
            EPS                                            5,830      5,940      5,829
                                                         =======     ======   ========
 
</TABLE>

NOTE I - STORE CLOSING RESERVE

 The Company has accrued store closing reserves to cover estimated lease costs
 and other incremental closing costs of stores closed or targeted to close.
 Management believes that these reserves are adequate.


NOTE J - MISCELLANEOUS INCOME (EXPENSE)

 Miscellaneous income (expense) consist of the following:

<TABLE>
<CAPTION>
                                                                    1998               1997               1996
                                                                   -------            ------             ------      
                                                                                  (In thousands)
<S>                                                           <C>                <C>                <C>
Gain on sale of real estate and leasehold
 interests, net of commissions                                       $3,914             $5,616            $    -     
Fees from foreign licenses                                              467              1,199             1,238     
Other, net                                                             (118)              (769)             (465)    
                                                                     ------             ------            ------     
                                                                     $4,263             $6,046            $  773     
                                                                     ======             ======            ======     
</TABLE>

                                      47
<PAGE>
 
                 OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       January 30, 1999, January 31, 1998
                              and February 1, 1997



NOTE J - MISCELLANEOUS INCOME (EXPENSE) - CONTINUED

 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 includes
 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

 The Financial Accounting Standards Board issued Statement of Financial
 Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
 Activities, which is effective for financial statements issued for periods
 beginning after June 15, 1999.  SFAS No. 133 establishes accounting and
 reporting standards for derivative instruments and for hedging activities.  It
 requires that an entity recognize all derivatives as either assets or
 liabilities in the statement of financial position and measure those
 instruments at fair value.  The Company does not expect the effect of SFAS No.
 133 to be material to the financial statements taken as a whole.

                                      48
<PAGE>
 
                            SUPPLEMENTAL INFORMATION
                                        

                                      49
<PAGE>
 
                 OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                       SELECTED QUARTERLY FINANCIAL DATA
                                  (Unaudited)
               Years ended January 30, 1999 and January 31, 1998
                    (In thousands except per share amounts)

<TABLE>
<CAPTION>
 
 
                                                    First      Second       Third       Fourth
                                                   quarter     quarter     quarter     quarter
                                                  ---------   ---------   ---------   ----------
<S>                                               <C>         <C>         <C>         <C>
1998
   Net sales                                       $72,140     $79,032     $64,312     $ 93,573
                                                   =======     =======     =======     ========
   Gross profit                                    $25,380     $26,847     $24,079     $ 29,474
                                                   =======     =======     =======     ========
   Net earnings (loss)                             $(1,124)    $ 3,420     $(2,015)    $ (1,632)
                                                   =======     =======     =======     ========
   Basic earnings (loss) per share                 $  (.19)    $   .59     $  (.35)    $   (.27)
                                                   =======     =======     =======     ========
   Diluted earnings (loss) per share               $  (.19)    $   .57     $  (.35)    $   (.27)
                                                   =======     =======     =======     ========
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
                                                   =======     =======     =======     ========
</TABLE>

                                      50
<PAGE>
 
                                                                     Schedule II

                 OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES

                       ALLOWANCE FOR DOUBTFUL RECEIVABLES
                 Years ended January 30, 1999, January 31, 1998
                              and February 1, 1997
                                 (In thousands)

<TABLE>
<CAPTION>
 
 
          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
        -------------             ----------   ----------   --------------   ----------
<S>                               <C>          <C>          <C>              <C>
Year ended January 30, 1999             $130           $-            $ 42          $ 88
 
Year ended January 31, 1998             $255           $-            $125          $130
 
Year ended  February 1, 1997            $386           $7            $168          $255
 
</TABLE>

(A)  Receivables charged off, net of recoveries.


                                      51
<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 28, 1999

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on April 27, 1999, 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                
----------------------------------   --------------------------------------
Marvin Aronowitz                     Margaret A. Gilliam
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


                                      52
<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 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") (filed as Exhibit 4.1 to
            the Company's Form 10-K for the fiscal year ended January 31, 1998
            (the "1998 10-K") and incorporated herein by reference).

4.1(a)      Amendment dated March 23, 1998 to the Financing Agreement (filed as
            Exhibit 4.1(a) to the 1998 10-K and incorporated herein by
            reference).

4.1(b)      Amendment dated May 1, 1998 to the Financing Agreement (filed as
            Exhibit 4.1(b) to the Company's Form 10-Q for the quarterly period
            ended August 1, 1998 and incorporated herein by reference).
 
4.1(c)  +   Amendment dated December 16, 1998 to the Financing Agreement.
 
4.1(d)  +   Amendment dated December 28, 1998 to the Financing Agreement.
 
4.1(e)  +   Amendment dated March 5, 1999 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 Company's Form 10-K for the fiscal year ended January 29, 1983
            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).

10.2(a) *+  Amendment to Deferred Compensation Agreement between the Company
            and Alvin N. Lubetkin, dated December 31, 1998.

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 Company's Form 10-K for the
            fiscal year ended January 30, 1993 (the "1993 10-K") and
            incorporated herein by reference).

                                      53
<PAGE>
 
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).

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 Company's Form 10-K
            for the fiscal year ended January 29, 1994 (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 Company's Form 10-K for the fiscal year ended January
            28, 1995 (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 Form 10-Q
            for the quarterly period ended October 28, 1995 and incorporated
            herein by reference).

10.12   *   Statement of Policy Regarding Executive Severance Pay Bonus Program
            (as amended and restated) (filed as Exhibit 10.12 to the 1998 10-K
            and incorporated herein by reference).

                                      54
<PAGE>
 
10.13   *   Statement of Policy Regarding Key Executive Severance Pay Bonus
            Program (as amended and restated) (filed as Exhibit 10.13 to the
            1998 10-K and incorporated herein by reference).
 
10.14   *+  Repricing Stock Option Agreement Under the 1994 Omnibus Plan between
            the Company and Alvin N. Lebetkin, dated April 9, 1998.
 
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.


                                      55