SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 200549
                                  -------------

                                    FORM 10-Q
(Mark One)
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 X              SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended  May 1, 1999

                                       OR

__              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
__              SECURITIES EXCHANGE ACT OF 1934

                For the transition period from         to

                         Commission file number 0-24902

                              QUALITY STORES, INC.
             (Exact Name of Registrant as Specified in its Charter)

Delaware                                                     42-1425562
(State or Other Jurisdiction of Incorporation)         (I.R.S. Employer No.)

455 E. Ellis Road, Muskegon, MI                             49443
(Address of Principal Executive Offices)                 (Zip Code)

Registrant's telephone number, including area code:  (616) 798-8787

                                 Not Applicable
              (Former Name, Former Address and Former Fiscal Year,
                         If Changed Since Last Report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of May 31, 1999: 100. All of the registrant's  stock
is held by QSI Holdings, Inc. and is not publicly traded.

<PAGE>
<TABLE>
<CAPTION>

                              QUALITY STORES, INC.
                                      INDEX
<S>                                                                                                            <C>

PART I. FINANCIAL INFORMATION                                                                                    PAGE

ITEM 1. FINANCIAL STATEMENTS - CENTRAL TRACTOR FARM & COUNTRY, INC.

   Condensed consolidated balance sheets, May 1, 1999 (unaudited) and October 31, 1998                             3

   Condensed consolidated statements of income (unaudited), for the three months and six months ended
   May 1, 1999 and the three months and six months ended May 2, 1998                                               4

   Condensed consolidated statements of cash flows (unaudited), for the six months ended May 1, 1999 and
   May 2, 1998                                                                                                     5

   Notes to condensed consolidated financial statements (unaudited)                                                6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS - CENTRAL TRACTOR FARM & COUNTRY, INC.                                               9

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS                                                                                         14

ITEM 2. CHANGES IN SECURITIES                                                                                     14

ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                                           14

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                       14

ITEM 5. OTHER INFORMATION                                                                                         14

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                                          14

INDEX TO EXHIBITS                                                                                                 16

   Exhibit 3.1 - Certificate of Incorporation, as amended
   Exhibit 12 - Statement Re: Computation of Ratio of Earnings to Fixed Charges
   Exhibit 27 - Financial Data Schedule (electronic copy only)
   Exhibit 99 - Important Factors Regarding Forward-Looking Statements
</TABLE>

                                       2
<PAGE>
<TABLE>
<CAPTION>

CENTRAL TRACTOR FARM & COUNTRY, INC.
Condensed Consolidated Balance Sheets
(In thousands except share data)
                                                                          May 1,          October 31,
                                                                          1999               1998
                                                                       ----------         -----------
                                                                       (unaudited)          (Note)
<S>                                                                   <C>                 <C>
ASSETS
   Current assets:
      Cash and cash equivalents                                         $ 10,930            $  6,971
      Recoverable income taxes                                             2,628               3,134
      Trade receivables, net                                               5,820               4,648
      Inventory                                                          269,902             217,064
      Other                                                                5,090               3,010
                                                                        --------            --------
   Total current assets                                                  294,370             234,827

   Property, improvements and equipment, net                              48,358              41,627
   Goodwill, net                                                         133,241             134,037
   Other assets                                                            8,513               8,354
                                                                        --------            --------
   Total assets                                                         $484,482            $418,845
                                                                        ========            ========

LIABILITIES AND STOCKHOLDER'S EQUITY
   Current liabilities:
      Note payable to bank                                              $ 73,675            $ 32,075
      Current portion of long-term debt and capital lease obligations      3,250               3,159
      Accounts payable                                                   101,612              78,322
      Accrued expenses and other liabilities                              18,838              22,862
                                                                        --------            --------
   Total current liabilities                                             197,375             136,418

   Long-term debt, less current portion                                  147,500             149,000
   Other long-term liabilities                                             7,367               3,670
                                                                        --------            --------
   Total liabilities                                                     352,242             289,088

   Stockholder's equity:
      Common stock, $.01 par value: authorized shares-3,000; issued
        and outstanding shares-100 (wholly-owned by CT Holding,
        Inc.)                                                               --                 --
      Additional paid-in capital                                         119,155             119,155
      Retained earnings                                                   13,085              10,602
                                                                        --------            --------
   Total stockholder's equity                                            132,240             129,757
                                                                        --------            --------
   Total liabilities and stockholder's equity                           $484,482            $418,845
                                                                        ========            ========
<FN>
Note:    The balance sheet at October 31, 1998 has been derived from the audited
         financial  statements  at that  date but does  not  include  all of the
         information  and footnotes  required by generally  accepted  accounting
         principles for complete financial statements.


See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>

                                       3

<PAGE>

CENTRAL TRACTOR FARM & COUNTRY, INC.
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)
                                                   Three months ended
                                               ---------------------------
                                               May 1, 1999     May 2, 1998
                                               -----------     -----------


Net sales                                        $159,136         $143,717
Cost of sales                                     111,909          101,216
                                                 --------         --------
Gross profit                                       47,227           42,501

Selling, general and administrative expense        38,345           33,473
Amortization of intangibles                           985              860
                                                 --------         --------
Operating income                                    7,897            8,168

Interest expense                                    5,475            5,514
                                                 --------         --------
Income before income taxes                          2,422            2,654
Income taxes                                        1,425            1,279
                                                 --------         --------
Net income and comprehensive income              $    997         $  1,375
                                                 ========         ========

Ratio of earnings to fixed charges                   1.4x             1.4x
                                                 ========         ========

                                                    Six months ended
                                               ---------------------------
                                               May 1, 1999     May 2, 1998
                                               -----------     -----------

Net sales                                        $305,283         $288,110
Cost of sales                                     215,429          203,990
                                                 --------         --------
Gross profit                                       89,854           84,120

Selling, general and administrative expense        72,087           67,568
Amortization of intangibles                         1,957            1,726
                                                 --------         --------
Operating income                                   15,810           14,826

Interest expense                                   10,434           10,798
                                                 --------         --------
Income before income taxes                          5,376            4,028
Income taxes                                        2,893            2,064
                                                 --------         --------
Net income and comprehensive income              $  2,483         $  1,964
                                                 ========         ========

Ratio of earnings to fixed charges                   1.4x             1.3x
                                                 ========         ========


See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
                                                                   Six months ended
                                                             -------------------------------
                                                              May 1, 1999       May 2, 1998
                                                             ------------      -------------
<S>                                                         <C>                  <C>
Operating Activities
Net income                                                    $  2,483            $  1,964
Adjustments to reconcile net income to net cash (used in)
   provided by operations:
   Depreciation and amortization                                 5,251               4,887
   Deferred income taxes                                         2,893               2,064
   Changes in operating assets and liabilities                 (28,458)              9,020
                                                              --------            --------
Net cash (used in) provided by operating activities            (17,831)             17,935

Investing Activities
   Purchases of property, improvements and equipment, net       (8,276)             (1,437)
   Purchase of net operating assets of and advances to H.C
     Shaw Co.                                                   (9,446)               --

   Other                                                          (496)                318
                                                              --------            --------
Net cash used in investing activities                          (18,218)             (1,119)

Financing Activities
   Capital contribution from parent                               --                   120
   Net borrowings (repayments) under line of credit             41,600              (7,750)
   Payments on long-term debt                                   (1,500)             (1,500)
   Other                                                           (92)                (85)
                                                              --------            --------
Net cash provided by (used in) financing activities             40,008              (9,215)

Net increase in cash and cash equivalents                        3,959               7,601

Cash and cash equivalents at beginning of period                 6,971               7,378
                                                              --------            --------
Cash and cash equivalents at end of period                    $ 10,930            $ 14,979
                                                              ========            ========

See accompanying notes to condensed consolidated financial statements.
</TABLE>
                                       5

<PAGE>

                      CENTRAL TRACTOR FARM & COUNTRY, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 (In thousands)

NOTE 1. PRESENTATION OF FINANCIAL INFORMATION

         Central Tractor Farm & Country, Inc. is a wholly-owned subsidiary of CT
Holding,  Inc.("Holding"),  an affiliate of J.W.  Childs Equity  Partners,  L.P.
("Childs"). The consolidated financial statements include Central Tractor Farm &
Country, Inc. and its wholly-owned  subsidiary,  Country General, Inc. ("Country
General") (hereinafter collectively the "Company").

         The condensed  unaudited  consolidated  financial  statements have been
prepared  by the  Company  in  accordance  with  generally  accepted  accounting
principles for interim  financial  information and with the instructions for the
Securities and Exchange Commission's Form 10-Q and Article 10 of Regulation S-X,
and do not include all of the  information  and footnotes  required by generally
accepted   accounting   principles  for  complete  financial   statements.   The
preparation  of financial  statements  in  conformity  with  generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

         The condensed unaudited  consolidated  financial statements include the
accounts of the Company and its subsidiary.  All material intercompany items and
transactions  have been eliminated in the  consolidation.  In the preparation of
the condensed  unaudited  consolidated  financial  statements,  all  adjustments
(consisting  of normal  recurring  accruals)  have been made which  are,  in the
opinion of  management,  necessary for the fair and consistent  presentation  of
such financial statements. The operating results for the interim periods are not
necessarily indicative of the results that may be expected for the year.

         It is suggested  that the condensed  unaudited  consolidated  financial
statements contained herein be read in conjunction with the statements and notes
in the Company's  Annual Report on Form 10-K for the year ended October 31, 1998
("Form 10-K").

NOTE 2. ACQUISITIONS

         In January  1999,  the Company  acquired nine retail stores and certain
net operating assets from H.C. Shaw Co., a privately-owned  specialty  retailer,
for  approximately  $7.0  million,  subject  to  post-closing  adjustments.  The
transaction  was accounted for as a purchase.  The accounts and  transactions of
the  acquired  stores  are  included  in the  accompanying  condensed  unaudited
consolidated financial statements from the date of acquisition. Proforma results
of  operations  as if the  acquisition  had occurred on November 2, 1997 are not
materially different from the historical results of operations presented herein.

         On May 7, 1999, the Company  acquired  Quality Stores,  Inc.  ("Quality
Stores") in a transaction  in which Quality  Stores was merged with and into the
Company (the "Merger").  In connection with the Merger, the former  shareholders
and option holders of Quality Stores received, in the aggregate,  $111.5 million
in cash and 792,430  shares of common stock of Holding.  In connection  with the
Merger,  the Company  also repaid  approximately  $42.1  million in debt owed by
Quality  Stores.  The total purchase price for Quality Stores was  approximately
$208.0 million, subject to post closing adjustment.

         Quality Stores, based in Muskegon,  Michigan,  had a strong presence in
Michigan  and Ohio  and,  at the  time of the  Merger,  operated  a chain of 114
stores, with annual sales of approximately $525 million, which offer merchandise
oriented to farm and country living,  including  animal care products,  farm and
ranch supplies,  workwear,

                                       6
<PAGE>

and lawn and garden products. In connection with the Merger, the Company changed
its name from "Central Tractor Farm & Country,  Inc." to "Quality Stores,  Inc."
and relocated its headquarters to Muskegon,  Michigan. The Company will continue
to operate stores  primarily under the Central  Tractor Farm & Country,  Country
General and Quality Farm & Fleet names.

         The non-cash portion of the Merger consideration was contributed to the
Company by Holding (which,  in connection  with the Merger,  changed its name to
QSI  Holdings,  Inc.).  The  Company  funded  the  cash  portion  of the  Merger
consideration  and various  fees and  expenses  associated  with the Merger from
funds drawn under an amendment and restatement of the Company's Credit Agreement
with Fleet  National  Bank,  as  administrative  agent for the banks,  financial
institutions  and other  institutional  lenders  party  thereto (the "New Credit
Facility").  Among other things, the amendment and restatement of the New Credit
Facility  increased  the  aggregate   principal  amount  of  the  facility  from
$150,000,000 to  $320,000,000,  consisting of a $220,000,000  term loan facility
and a $100,000,000 revolving credit facility.

         The  acquisition  of Quality Stores will be accounted for as a purchase
and the  results  of  operations  of  Quality  Stores  will be  included  in the
consolidated  financial statements from the date of purchase. The estimated cost
of the acquisition over the estimated fair value of the underlying  tangible net
assets is as follows (in thousands):

     Cost of acquiring Quality Stores capital stock            $208,043
     Fair value of underlying tangible net assets acquired       51,886
                                                                -------
     Excess of cost of acquisition over the allocated fair
        value of the underlying tangible net assets            $156,157
                                                               ========

NOTE 3.   PRO FORMA RESULTS

         The pro forma  results of  operations  presented  below is based on the
historical  financial  statements  of the  Company  included  in this  Form 10-Q
filing, adjusted to give effect to: (i) the acquisition of Quality Stores by the
Company  and  (ii)  the  debt  financing  arrangements  in  connection  with the
acquisition  of Quality  Stores,  as though these  transactions  had occurred on
November 2, 1997.

         Pro forma adjustments to the historical  financial statements are based
upon  available  data and  certain  assumptions  that the Company  believes  are
reasonable.  The pro forma results of operations are not necessarily  indicative
of the  Company's  results  of  operations  that  might  have  occurred  had the
aforementioned transactions been completed as of the date indicated above and do
not purport to represent what the Company's  consolidated  results of operations
might be for any future period or date.
<TABLE>
<CAPTION>
                                                    Pro Forma Results of Operations

                                          Three Months Ended                 Six Months Ended
                                    -----------------------------       ----------------------------

                                    May 1, 1999       May 2, 1998       May 1, 1999      May 2, 1998
                                    -----------       -----------       -----------      -----------
<S>                                 <C>               <C>               <C>              <C>
Net sales                            $ 289,018         $ 266,587         $ 574,300        $ 531,532
Operating income                         8,667             7,099            24,039           15,483
Net (loss) income                       (1,305)           (2,234)            2,134           (3,458)
(Deficiency) ratio  of earnings to
  fixed charges                           (811)           (2,632)             1.3x           (3,557)

</TABLE>

                                       7
<PAGE>

NOTE 4.  NEW CREDIT FACILITY

         On May 7, 1999, the Company entered into the New Credit Facility, which
consists of a $220.0  million,  seven-year  term loan facility,  which was fully
funded, and a $100.0 million revolving credit facility under which $60.0 million
was  outstanding on May 7, 1999. The amounts  originally  funded and drawn under
the New Credit  Facility  were used, in part,  to repay  outstanding  borrowings
under the Company's prior credit facility.

         The New Credit Facility will mature on April 30, 2006. Borrowings under
the New Credit  Facility  will bear  interest  at rates  based upon prime or the
Eurodollar  Rate  plus a margin.  The term  loans  must be  repaid in  quarterly
installments  beginning July 31, 1999, plus  prepayments  based on the Company's
excess cash flow,  as defined.  The  installments,  on an annual  basis,  are as
follows:

                    FISCAL YEAR             AMOUNT
                    -----------             ------

                    1999                $   3,100,000
                    2000                   13,700,000
                    2001                   21,200,000
                    2002                   21,200,000
                    2003                   21,200,000
                    2004                   26,200,000
                    2005                   75,600,000
                    2006                   37,800,000
                                        -------------
                                        $ 220,000,000
                                        =============

         The New Credit Facility  agreement contains covenants which require the
Company to maintain a minimum Fixed Charge  Coverage  Ratio, a minimum  Interest
Coverage  Ratio and a maximum  Debt to EBITDA  Ratio  (all as defined in the New
Credit Facility agreement). The covenants also restrict, among other things, the
payment of dividends, incurrence of debt and capital expenditures.

         The New Credit Facility is secured by  substantially  all of the assets
of the Company.

                                       8
<PAGE>
                              QUALITY STORES, INC.


         Certain  statements  in  this  Report  may  contain   "forward-looking"
information  (as  defined in the  Private  Securities  Litigation  Reform Act of
1995). All  forward-looking  statements involve  uncertainty,  and actual future
results and trends may differ materially  depending on a variety of factors. For
a discussion  identifying some important factors that could cause actual results
or trends to differ  materially  from those  anticipated in the  forward-looking
statements contained herein, please see Exhibit 99 to this Report.

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

         Second Quarter of Fiscal 1999 Compared to Second Quarter of Fiscal 1998

         Net sales for the second quarter of fiscal 1999 were $159.1 million, an
increase  of $15.4  million,  or 10.7%,  as compared to net sales for the second
quarter of fiscal 1998 of $143.7  million.  This increase was due principally to
$20.0  million of sales  derived in 1999 from new stores  opened or  acquired in
fiscal 1999 to date and to a comparable store sales increase of 0.5%,  partially
offset by $3.6  million of sales  derived in 1998 from  stores  closed in fiscal
1998.

         Gross profit for the second  quarter of fiscal 1999 was $47.2  million,
an increase  of $4.7  million or 11.1%,  as  compared  to $42.5  million for the
second  quarter  of  fiscal  1998,  as a result  of the  increase  in net  sales
discussed  above and an increase in gross profit  percentage.  Gross profit as a
percentage  of net sales  increased  to 29.7% for the  second  quarter of fiscal
1999, as compared to 29.6% for the second  quarter of fiscal 1998.  The increase
in the gross profit percentage is attributable to the fuller  realization of the
increased  purchasing  power of the Company  resulting  from the  acquisition of
Country General during fiscal 1997, partially offset by lower gross margins from
the new stores opened in fiscal 1999 as compared to comparable stores.

         Selling,  general  and  administrative  (SGA)  expenses  for the second
quarter of fiscal 1999 were $38.3 million,  an increase of $4.9 million, or 14.6
%, as  compared  to the  second  quarter  of  fiscal  1998.  SGA  expenses  as a
percentage  of net sales  were 24.1% for the  second  quarter of fiscal  1999 as
compared to 23.3% for the second quarter of fiscal 1998. This increase is due to
the pre-opening  costs incurred for and the  proportionately  higher initial SGA
expenses associated with the new stores opened in fiscal 1999.

         Amortization  of  intangibles  remained  relatively  constant  at  $1.0
million for the second  quarter of fiscal  1999 as compared to $0.9  million for
the second quarter of fiscal 1998.

         Operating  income  for the  second  quarter  of  fiscal  1999  was $7.9
million,  a decrease of $0.3  million,  or 3.3%, as compared to $8.2 million for
the second quarter of fiscal 1998. Operating income as a percentage of net sales
decreased to 5.0% for the second quarter of fiscal 1999 from 5.7% for the second
quarter of fiscal 1998. The decrease was the result of the factors affecting net
sales, gross profit and SGA expenses discussed above.

         Interest  expense  remained  constant  at $5.5  million  for the second
quarter of fiscal 1999 and for the second quarter of fiscal 1998.

         Income taxes for the second  quarter of fiscal 1999 were $1.4  million,
an increase of $0.1  million as compared to the second  quarter of fiscal  1998.
Income tax as a percentage  of pretax  earnings  was 58.8% in 1999,  compared to
48.2% in 1998.  This  increase  is due  primarily  to  amortization  of goodwill
related to the acquisition of the Company by Childs, which is not deductible for
income tax purposes, being spread over a smaller pre-tax income base.

         Net income for the second  quarter of fiscal 1999 was $1.0 million,  as
compared to $1.4 million for the second  quarter of fiscal 1998,  as a result of
the factors discussed above.

                                       9
<PAGE>

         Six months ended May 1, 1999 Compared to Six months ended May 2, 1998

         Net sales for the six months ended May 1, 1999 were $305.3 million,  an
increase of $17.2 million,  or 6.0%, as compared to net sales for the six months
ended May 2, 1998 of $288.1 million.  This increase was due principally to $21.4
million of sales  derived in 1999 from new stores  opened or  acquired in fiscal
1999 to date and to a comparable store sales increase of 3.3%,  partially offset
by $11.1 million of sales derived in 1998 from stores closed in fiscal 1998.

         Gross profit for the six months ended May 1, 1999 was $89.8 million, an
increase  of $5.7  million or 6.8%,  as  compared  to $84.1  million for the six
months  ended May 2, 1998,  as a result of the  increase in net sales  discussed
above and an increase in gross profit  percentage.  Gross profit as a percentage
of net  sales  increased  to 29.4% for the six  months  ended  May 1,  1999,  as
compared  to 29.2% for the six months  ended May 2, 1998.  The  increase  in the
gross  profit  percentage  is  attributable  to the  fuller  realization  of the
increased  purchasing  power of the Company  resulting  from the  acquisition of
Country General during fiscal 1997, partially offset by lower gross margins from
the new stores opened in fiscal 1999 as compared to comparable stores.

         Selling,  general and administrative  (SGA) expenses for the six months
ended May 1, 1999 were $72.1 million,  an increase of $4.5 million,  or 6.7%, as
compared to the six months ended May 2, 1998.  SGA  expenses as a percentage  of
net sales remained  relatively constant at 23.6% for the six months ended May 1,
1999 as compared to 23.5% for the six months ended May 2, 1998.

         Amortization  of  intangibles  remained  relatively  constant  at  $2.0
million for the six months ended May 1, 1999 as compared to $1.7 million for the
six months ended May 2, 1998.

         Operating  income  for the six  months  ended  May 1,  1999  was  $15.8
million,  an increase of $1.0 million, or 6.6%, as compared to $14.8 million for
the six months ended May 2, 1998.  Operating income as a percentage of net sales
increased  to 5.2% for the six  months  ended  May 1, 1999 from 5.1% for the six
months ended May 2, 1998.  The increase was the result of the factors  affecting
net sales, gross profit and SGA expenses discussed above.

         Interest expense was $10.4 million for the six months ended May 1, 1999
as compared to $10.8 million for the six months ended May 2, 1998.  The decrease
in  interest  expense is  attributable  to a lower  average  debt  balance and a
decrease in interest rates on the Company's variable rate borrowings.

         Income taxes for the six months ended May 1, 1999 were $2.9 million, an
increase of $0.8 million as compared to the six months ended May 2, 1998. Income
tax as a percentage of pretax earnings remained  relatively constant at 53.8% in
1999, compared to 51.2% in 1998.

         Net income for the six months  ended May 1, 1999 was $2.5  million,  as
compared to $2.0  million for the six months  ended May 2, 1998,  as a result of
the factors discussed above.

         Acquisition of Quality Stores, Inc.

         On May 7, 1999, the Company acquired Quality Stores in a transaction in
which Quality  Stores was merged with and into the Company.  In connection  with
the  Merger,  the  former  shareholders  and option  holders  of Quality  Stores
received, in the aggregate,  $111.5 million in cash and 792,430 shares of common
stock of  Holding.  In  connection  with the  Merger,  the  Company  also repaid
approximately  $42.1 million in debt owed by Quality Stores.  The total purchase
price for  Quality  Stores was  approximately  $208.0  million,  subject to post
closing adjustment.

         Quality Stores, based in Muskegon,  Michigan,  had a strong presence in
Michigan  and Ohio  and,  at the  time of the  Merger,  operated  a chain of 114
stores, with annual sales of approximately $525 million, which offer merchandise
oriented to farm and country living,  including  animal care products,  farm and
ranch supplies,  workwear,  and lawn and garden products. In connection with the
Merger, the Company changed its name from "Central Tractor Farm & Country, Inc."
to "Quality Stores, Inc." and relocated its headquarters to Muskegon,  Michigan.
The Company

                                       10
<PAGE>

will  continue to operate  stores  primarily  under the Central  Tractor  Farm &
Country, Country General and Quality Farm & Fleet names.

         The non-cash portion of the Merger consideration was contributed to the
Company by Holding (which,  in connection  with the Merger,  changed its name to
QSI  Holdings,  Inc.).  The  Company  funded  the  cash  portion  of the  Merger
consideration  and various  fees and  expenses  associated  with the Merger from
funds drawn under the New Credit  Facility.  Among other things,  the New Credit
Facility  increased  the  aggregate   principal  amount  of  the  facility  from
$150,000,000 to  $320,000,000,  consisting of a $220,000,000  term loan facility
and a $100,000,000 revolving credit facility.

         The  acquisition  of Quality Stores will be accounted for as a purchase
and the  results  of  operations  of  Quality  Stores  will be  included  in the
consolidated financial statements from the date of purchase.

         New Credit Facility

         On May 7, 1999, the Company  entered into the New Credit  Facility,  an
amendment and  restatement  of its prior credit  facility,  which  consists of a
$220.0  million,  seven-year term loan facility,  which was fully funded,  and a
$100.0  million   revolving  credit  facility  under  which  $60.0  million  was
outstanding  on May 7, 1999. The amounts  originally  funded and drawn under the
New Credit Facility were used, in part, to repay  outstanding  borrowings  under
the Company's prior credit facility.

         The New Credit Facility will mature on April 30, 2006. Borrowings under
the New Credit  Facility  will bear  interest  at rates  based upon prime or the
Eurodollar  Rate  plus a margin.  The term  loans  must be  repaid in  quarterly
installments  beginning July 31, 1999, plus  prepayments  based on the Company's
excess cash flow,  as defined.  The  installments,  on an annual  basis,  are as
follows:

                    FISCAL YEAR             AMOUNT
                    -----------             ------

                    1999                 $   3,100,000
                    2000                    13,700,000
                    2001                    21,200,000
                    2002                    21,200,000
                    2003                    21,200,000
                    2004                    26,200,000
                    2005                    75,600,000
                    2006                    37,800,000
                                         -------------
                                         $ 220,000,000
                                         =============

         The New Credit Facility  agreement contains covenants which require the
Company to maintain a minimum Fixed Charge  Coverage  Ratio, a minimum  Interest
Coverage  Ratio and a maximum  Debt to EBITDA  Ratio  (all as defined in the New
Credit Facility agreement). The covenants also restrict, among other things, the
payment of dividends, incurrence of debt and capital expenditures.

         The New Credit Facility is secured by  substantially  all of the assets
of the Company.

         Liquidity and Capital Resources

         In addition to cash to fund operations,  the Company's primary on-going
cash  requirements  are those  necessary  for the Company's  expansion  program,
including inventory purchases and capital  expenditures,  and debt service.  The
Company's primary sources of liquidity have been funds provided from operations,
borrowings  pursuant to the  Company's  revolving  and term  credit  facilities,
short-term trade credit and additional equity investments.

                                       11
<PAGE>

         On May 1, 1999,  the Company had working  capital of $97.0  million,  a
$1.4 million decrease from working capital of $98.4 million on October 31, 1998.
This decrease resulted  primarily from a $64.9 million aggregate increase in the
Company's note payable to bank and accounts payable, partially offset by a $52.8
million increase in inventory,  a $6.7 million increase in other current assets,
and a $4.0 million decrease in accrued expenses.  The increases in the Company's
note payable to bank,  accounts  payable and  inventory are due primarily to the
Company's  new store  expansion  program for fiscal 1999 and the purchase of the
H.C. Shaw Co. stores in January 1999.

         Net cash used in  operating  activities  was $17.8  million for the six
months  ended May 1, 1999.  This was a decrease  of $35.7  million  from the six
months ended May 2, 1998,  during which $17.9  million of cash was  generated by
operating  activities.  This  decrease  resulted  primarily  from an increase in
inventory  during the first six months of fiscal  1999 as  compared to a smaller
increase  during  the same  period  in the prior  year.  The  Company's  capital
expenditures,  exclusive of the H.C. Shaw Co. acquisition, were $8.3 million and
$1.4 million for the six months ended May 1, 1999 and May 2, 1998, respectively.
The increase is primarily  attributable  to the  Company's  new store  expansion
program for fiscal 1999. In addition, the Company had cash provided by financing
activities of $40.0 million  during the six months ended May 1, 1999 as compared
to cash used in financing activities of $9.2 million during the six months ended
May 2, 1998.  The increase in cash provided by financing  activities  during the
first six months of fiscal  1999,  as compared to the first six months of fiscal
1998, is attributable to the purchase of the H.C. Shaw Co. stores and subsequent
cash advances and the funding of the inventory build-up and capital expenditures
related to the Company's new store expansion program for fiscal 1999.

         The  Company  anticipates  that  its  principal  uses  of  cash  in the
foreseeable   future  will  be  working  capital   requirements,   debt  service
requirements  and  capital  expenditures,  as well as  expenditures  relating to
acquisitions.  Based upon  current and  anticipated  levels of  operations,  the
Company  believes  that its cash flow from  operations,  together  with  amounts
available  under  the  New  Credit  Facility,  will  be  adequate  to  meet  its
anticipated  requirements in the foreseeable future for working capital, capital
expenditures  and debt  service.  The Company  expects that if it were to pursue
further significant acquisitions, it would arrange prior to the acquisitions any
additional debt or equity financing required to fund the acquisitions. There can
be no assurance,  however, that the Company's business will continue to generate
sufficient  cash flow from operations in the future to service its debt, and the
Company may be required to refinance all or a portion of its existing debt or to
obtain additional  financing or to reduce its capital spending.  There can be no
assurance  that any such  refinancing  would be possible or that any  additional
financing could be obtained.  The inability to obtain additional financing could
have a material adverse effect on the Company.

         Seasonality

         Unlike many specialty retailers, historically the Company has generated
positive operating income in each of its four fiscal quarters.  However, because
the  Company  is an  agricultural  specialty  retailer,  its  sales  necessarily
fluctuate with the seasonal  needs of the  agricultural  community.  The Company
responds to this  seasonality by attempting to manage  inventory levels (and the
associated working capital requirements) to meet expected demand, and by varying
its use of part-time employees.  Historically, the Company's sales and operating
income  have been  highest in the third  quarter of each  fiscal year due to the
farming industry's  planting season and the sale of seasonal  products.  Working
capital needs are highest during the second  quarter.  The Company expects these
trends to continue for the foreseeable future.

         Inflation

         Management  does  not  believe  its  operations  have  been  materially
affected by inflation.

         Year 2000

         The Year 2000 issue,  common to most companies,  concerns the inability
of  information  and other systems to correctly  recognize and properly  process
date-sensitive information after 1999 due to the use of only the last two digits
to refer to a year. This problem could affect both information systems (software
and hardware) and other equipment that relies on microprocessors. Management has
completed a  company-wide  evaluation  of this impact

                                       12
<PAGE>

on its  computer  systems,  applications  and  other  date-sensitive  equipment.
Systems and equipment that are not Year 2000 compliant have been  identified and
remediation efforts are in process. Management estimates that over 90 percent of
remediation  efforts were completed as of May 31, 1999. All remediation  efforts
and testing of  product/equipment  are  expected to be completed by September 1,
1999.

         The  Company  is also in the  process of  monitoring  the  progress  of
material  third parties  (vendors and suppliers) in their efforts to become Year
2000  compliant.  Those third parties  include,  but are not limited to: product
suppliers,  third party benefit administrators,  third party logistic providers,
insurance  institutions,   mainframe  computer  services  suppliers,   financial
institutions  and  utilities.  The Company has requested  confirmation  from all
material third parties that they will be timely Year 2000 compliant. Through May
31, 1999, the Company had received  confirmations  from approximately 70% of the
third parties that were sent these requests.

         Through May 31, 1999, the Company has spent  approximately $1.6 million
to  address  Year 2000  issues.  Total  costs to  address  Year 2000  issues are
currently  estimated  not to exceed $2.0 million and consist  primarily of costs
for the remediation of internal systems,  including  internal  programming time.
Funds for these costs are expected to be provided by the operating cash flows of
the Company.  The majority of the costs of internal system  remediation  efforts
relate  to the costs of  on-staff  systems  engineers  and,  therefore,  are not
necessarily incremental costs. The Company has not canceled or delayed any other
material projects as a result of this work.

         The Company could be faced with severe consequences if Year 2000 issues
are not  identified  and resolved in a timely manner by the Company and material
third parties. A worst-case scenario would result in the short-term inability of
the Company to sell products in its stores due to  unresolved  Year 2000 issues.
This would result in lost  revenues;  however,  the amount would be dependent on
the length and nature of the disruption, which cannot be predicted or estimated.
In light of the possible  consequences,  the Company is devoting  the  resources
needed to  address  Year 2000  issues in a timely  manner.  Management  receives
monthly  updates as to project  status.  While  management  expects a successful
resolution  of these  issues,  there can be no  guarantee  that the  Company and
material third parties,  on which the Company relies, will address all Year 2000
issues  on a timely  basis or that  their  failure  to timely  and  successfully
address all issues would not have an adverse effect on the Company.

         The Company is in the process of developing  contingency  plans in case
business interruptions do occur.  Management expects these plans to be completed
by September 1, 1999.

                                       13
<PAGE>

                              QUALITY STORES, INC.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS                              None

ITEM 2. CHANGES IN SECURITIES                          None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES                None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
        SECURITY HOLDERS                               None

ITEM 5. OTHER INFORMATION                              None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   (a) EXHIBITS - See Index to Exhibits included elsewhere herein.

   (b) FORM 8-K - The Company  filed a Form 8-K dated May 21, 1999 to report its
acquisition of Quality Stores, Inc.


                                       14

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  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.

Date: June 15, 1999                   Quality Stores, Inc.




                                      /s/James F. Hurley
                                      James F. Hurley
                                      Senior Vice President of Finance and
                                      Chief Financial Officer




                                       15
<PAGE>



                              QUALITY STORES, INC.

                                INDEX TO EXHIBITS






EXHIBIT 3.1  Certificate of Incorporation, as amended

EXHIBIT 12   Statement Re: Computation of Ratio of Earnings to Fixed Charges

EXHIBIT 27   Financial Data Schedule (electronic copy only)

EXHIBIT 99   Important Factors Regarding Forward-Looking Statements