SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q


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

          For the quarterly period ended July 29, 2000

                                    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 of Incorporation)                            (I.R.S. Employer No.)

  455 E. Ellis Road, Muskegon, MI                                     49441
  (Address of Principal Executive Offices)                       (Zip Code)

  Registrant's telephone number, including area code:  (231) 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 July 29, 2000:  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

                                                                                                            PAGE
<S>              <C>                                                                                          <C>

PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                  Condensed consolidated balance sheets, July 29, 2000 (unaudited)
                  and January 29, 2000 (audited) ..............................................................3

                  Condensed consolidated statements of operations (unaudited) for the
                  three months and six months ended July 29, 2000, and July 31, 1999 ..........................4

                  Condensed consolidated statements of cash flows (unaudited) for the
                  three months and six months ended July 29, 2000, and July 31, 1999...........................5

                  Notes to condensed consolidated financial statements (unaudited).............................6

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
                  QUALITY STORES, INC..........................................................................9


PART II.          OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS...........................................................................13

ITEM 2.           CHANGES IN SECURITIES.......................................................................13

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES.............................................................13

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................13

ITEM 5.           OTHER INFORMATION...........................................................................13

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K............................................................13

INDEX TO EXHIBITS.............................................................................................15
                  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-
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<TABLE>
<CAPTION>

QUALITY STORES, INC.
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)



                                                                           July 29,     January 29,
                                                                            2000           2000
                                                                         -----------    -----------
                                                                         (Unaudited)     (Audited)
<S>                                                                      <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents                                               $ 12,138       $ 11,029
  Trade receivables, net                                                    12,959          7,742
  Inventory                                                                442,960        365,383
  Other                                                                      7,809         10,235
                                                                          --------       --------
Total current assets                                                       475,866        394,389
Property, improvements, and equipment, net                                 138,009        123,467
Goodwill, net                                                              290,100        293,895
Other assets                                                                11,576         10,712
                                                                          --------       --------
Total assets                                                              $915,551       $822,463
                                                                          ========       ========

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accounts payable                                                        $186,658       $124,012
  Accrued expenses and other liabilities                                    36,633         56,102
  Current portion of long-term debt and capital lease obligations           21,836         22,371
                                                                          --------       --------
Total current liabilities                                                  245,127        202,485
Long-term debt, less current portion                                       434,204        388,554
Other long-term liabilities                                                  6,661          6,797
                                                                          --------       --------
Total liabilities                                                          685,992        597,836

Stockholder's equity:
  Common stock, $.01 par value: authorized shares-3,000; issued and
    outstanding shares-100 (wholly owned by QSI Holdings, Inc.)
  Additional paid-in capital                                               211,377        209,377
  Retained earnings                                                         18,182         15,250
                                                                          --------       --------
Total stockholder's equity                                                 229,559        224,627
                                                                          --------       --------
Total liabilities and stockholder's equity                                $915,551       $822,463
                                                                          ========       ========



<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
                                      -3-

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<TABLE>
<CAPTION>

QUALITY STORES, INC.
Condensed Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Ratio)

                                                            Three Months Ended
                                                      ----------------------------
                                                      July 29,            July 31,
                                                       2000                 1999
                                                      ---------           --------
<S>                                                  <C>                 <C>

Net sales                                             $331,690            $330,830
Cost of sales                                          231,996             234,677
                                                      --------            --------
Gross profit                                            99,694              96,153

Selling, general, and administrative expense            70,967              69,320
Merger integration expenses                                 29               7,639
Amortization of intangibles                              2,186               1,865
                                                      --------            --------
Operating income                                        26,512              17,329

Interest expense                                        11,508               9,079
                                                      --------            --------
Income before income taxes                              15,004               8,250
Income taxes                                             7,061               3,874
                                                      --------            --------
Net income and comprehensive income                   $  7,943            $  4,376
                                                      ========            ========

Ratio of earnings to fixed charges                       2.1 x               1.8 x
                                                      ========            ========
<CAPTION>

                                                           Six Months Ended
                                                      ----------------------------
                                                      July 29,            July 31,
                                                       2000                 1999
                                                      ---------           --------
<S>                                                  <C>                 <C>

Net sales                                             $605,946            $489,966
Cost of sales                                          428,174             346,586
                                                      --------            --------
Gross profit                                           177,772             143,380

Selling, general, and administrative expense           141,684             107,665
Merger integration expenses                              1,851               7,639
Amortization of intangibles                              4,385               2,850
                                                      --------            --------
Operating income                                        29,852              25,226

Interest expense                                        22,230              14,554
                                                      --------            --------
Income before income taxes                               7,622              10,672
Income taxes                                             4,690               5,299
                                                      --------            --------
Net income and comprehensive income                   $  2,932            $  5,373
                                                      ========            ========

Ratio of earnings to fixed charges                       1.3 x               1.6 x
                                                      ========            ========


<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
                                      -4-

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<TABLE>
<CAPTION>

QUALITY STORES, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)

                                                                            Six Months Ended
                                                                      -----------------------------
                                                                       July 29,           July 31,
                                                                         2000               1999
                                                                      ----------         ----------
<S>                                                                  <C>                <C>
Operating Activities
Net income                                                            $   2,932          $   5,373
Adjustments to reconcile net income to net cash used in operations:
   Depreciation and amortization                                         14,739              8,833
   Changes in operating assets and liabilities                          (37,191)           (48,275)
                                                                      ---------          ---------
Net cash used in operating activities                                   (19,520)           (34,069)

Investing Activities
Purchases of property, improvements, and equipment                      (32,596)            (8,342)
Acquisitions                                                                 --           (117,369)
Other, net                                                                7,200                278
                                                                      ---------          ---------
Net cash used in investing activities                                   (25,396)          (125,433)

Financing Activities
Dividend to parent                                                           --             (1,061)
Net borrowings under line of credit                                      48,450             37,650
Proceeds from issuance of long-term debt                                     --            220,000
Payments on long-term debt                                               (3,335)           (89,406)
Other, net                                                                  910            (10,684)
                                                                      ---------          ---------
Net cash provided by financing activities                                46,025            156,499

Net increase (decrease) in cash and cash equivalents                      1,109             (3,003)
Cash and cash equivalents at beginning of period                         11,029              5,144
                                                                      ---------          ---------
Cash and cash equivalents at end of period                            $  12,138          $   2,141
                                                                      =========          =========


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

                                      -5-
<PAGE>
                              QUALITY STORES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1. PRESENTATION OF FINANCIAL INFORMATION

Quality Stores, Inc., formerly Central Tractor Farm & Country, Inc., is a wholly
owned subsidiary of QSI Holdings,  Inc., formerly CT Holding, Inc. ("Holdings"),
an affiliate of J.W. Childs Equity Partners,  L.P. ("Childs").  The consolidated
financial  statements  include  Quality  Stores,  Inc.,  and  its  wholly  owned
subsidiary,  Country General,  Inc. ("Country  General"),  as well as the former
Quality  Stores,  Inc.  and its  wholly  owned  subsidiaries,  since the date of
acquisition (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  subsidiaries.  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.

On August 17, 1999,  the Board of Directors of the Company  determined to change
the  Company's  fiscal  year.  The  Company's  fiscal  year  will now end on the
Saturday  closest to January 31. 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
fiscal year ended January 29, 2000 ("Form 10-K").


NOTE 2. ACQUISITIONS

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 Holdings.  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,  including  $4.7  million  of
transaction expenses, was $208.0 million.

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 will continue to operate stores primarily under the Central Tractor Farm
& Country,  Country General,  and Quality Farm & Fleet names.  Since the merger,
new stores  opened are  operating  under the Quality  Farm & Country  name.  The
Company  expects to convert all of the stores  over time to the  Quality  Farm &
Country name.

The non-cash portion of the Merger  consideration was contributed to the Company
by Holdings  (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,  dated May 7,
1999, with Fleet National Bank, as administrative agent for the banks, financial
institutions,  and other  institutional  lenders  party thereto (the "New Credit
Facility").

                                      -6-
<PAGE>

The  acquisition  of Quality Stores has been accounted for as a purchase and the
results of  operations of Quality  Stores has been 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             44,074
                                                                      ----------

       Excess of cost of acquisition over the allocated fair
       value of the underlying tangible net assets                 $    163,969
                                                                      ==========


NOTE 3. PRO FORMA RESULTS

The pro forma results of operations  presented below are based on the historical
financial statements of the Company included in this Form 10-Q, adjusted to give
effect to: (i) the  acquisition  of Quality  Stores by the  Company and (ii) the
debt  financing  arrangements  executed in connection  with the  acquisition  of
Quality Stores, as though these transactions had occurred on January 31, 1999.

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.


Pro Forma Results of Operations
-------------------------------
(In Thousands)
                                       Three Months Ended     Six Months Ended
                                         July 31, 1999         July 31, 1999
                                       ------------------     ----------------

Net Sales                               $  344,351              $    633,369
Operating Income                            18,650                    27,317
Net income                                   5,027                     3,722
Ratio of earnings to fixed charges           1.9 x                     1.4 x


                                      -7-
<PAGE>

NOTE 4. AMENDED CREDIT FACILITY

On May 7, 1999,  the  Company  amended  its bank  credit  facility  to allow for
borrowings up to $320.0  million,  consisting  of $220.0  million under two term
loan  facilities  (Tranche  A and  B)  and a  $100.0  million  revolving  credit
facility.  On March 31,  2000,  this  credit  facility  was  further  amended to
increase total available borrowings to $374.6 million,  including $214.6 million
under the term loan  facilities  and $160.0  million of  revolving  credit  debt
(collectively, the Amended Credit Facility). The amendment also added provisions
for seasonal "clean down" periods for the revolving  credit facility and amended
certain covenants.

The  Tranche A term  loan  under the  Amended  Credit  Facility  is  payable  in
quarterly  installments  of $5.0 million  through  October 31,  2004,  while the
Tranche B term loan has quarterly principal installments of $0.4 million through
January 31, 2004,  that increase to $9.6 million  through  January 31, 2005, and
then to $15.1 million  through April 30, 2006. The revolving  credit debt is due
in full on October  30,  2006.  The Company is also  required to make  mandatory
prepayments on the term loan facilities based on the Company's excess cash flow,
as defined.

Borrowings  under the Amended  Credit  Facility are secured by all assets of the
Company and bear  interest at the prime or eurodollar  rates plus a margin.  The
revolving  credit  agreement  is also  subject to a 0.5%  commitment  fee on its
unused portions.  The Amended Credit Facility  contains certain  covenants which
require the Company to maintain  certain  financial  ratios and also  restricts,
among other  things,  the payment of dividends,  incurrence of additional  debt,
capital expenditures, mergers and acquisitions, and the disposition of assets.

The Company failed to comply with certain financial  covenants under its Amended
Credit  Facility at or for periods  ending July 29,  2000,  and August 15, 2000.
These covenants  concerned (1) the fixed charge coverage ratio, (2) the interest
coverage  ratio,  (3)  the  ratio  of  debt to  EBITDA,  and  (4)  the  seasonal
"clean-down"  period.  Such failures caused events of default to occur under the
Amended Credit Facility.  The Company has reached an agreement in principle with
the  administrative  agent for the Amended Credit Facility to waive these events
of default and, in  connection  therewith,  to amend  certain  provisions of the
Amended Credit Facility.  A definitive written agreement containing such waivers
and amendments is being  negotiated,  but has not yet been  executed.  While the
Company has reached  agreement  with the  administrative  agent and has received
support from several key members of the bank  syndicate,  no  assurances  may be
given that such a definitive agreement will be executed or become effective. The
Company  presently  expects a  definitive  agreement  to be executed  and become
effective in September 2000 and, accordingly, has elected to continue to present
amounts due under the Amended Credit  Facility as long-term debt. The conditions
to the effectiveness of any definitive agreement are expected to include (i) the
consent of a majority  in  interest  of the  lenders  under the  Amended  Credit
Facility and (ii) the  investment  in Holdings of at least  $15,000,000  cash by
certain  existing  equity  investors  of  Holdings.  The  Company  has  received
commitments   from  certain  existing  equity  investors  of  Holdings  for  the
investment of the $15 million.


                                      -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 2000 Compared to Second Quarter of Fiscal 1999

Net sales for the second quarter of fiscal 2000 were $331.7 million, an increase
of $0.9  million,  or 0.3%,  as compared to net sales for the second  quarter of
fiscal 1999 of $330.8  million.  This  increase was  primarily due to sales from
stores  acquired in the Quality Stores  acquisition in May, 1999, and new stores
opened since the end of the second quarter of fiscal 1999,  offset by a decrease
in comparable store sales and stores closed during fiscal 1999. Comparable store
sales,  including  comparable stores acquired in the Quality Stores  acquisition
during 1999,  decreased 8.6% in the second quarter of fiscal 2000 as compared to
the second  quarter of fiscal 1999.  The decrease  was  primarily  the result of
cold, wet spring weather conditions in the Company's northeast markets,  dry and
drought  conditions  in  Colorado  and  Nebraska,  and  unusually  high sales of
generators during fiscal 1999 related to preparation for "year 2000" problems.

Gross  profit  for the  second  quarter  of fiscal  2000 was $99.7  million,  an
increase of $3.5  million,  or 3.7%, as compared to $96.2 million for the second
quarter of fiscal 1999,  principally as a result of the increase in gross profit
as a percentage of sales. Gross profit as a percentage of net sales increased to
30.1% for the second quarter of fiscal 2000, as compared to 29.1% for the second
quarter of fiscal 1999. The increase in gross profit  percentage is attributable
to the realization of the increased  purchasing  power of the Company  resulting
from the acquisition of Quality Stores in fiscal 1999.

Selling,  general and  administrative  (SGA)  expenses for the second quarter of
fiscal  2000 were $71.0  million,  an  increase  of $1.7  million,  or 2.5%,  as
compared  to the second  quarter of fiscal  1999.  This  increase  is due to the
expenses  related to the stores  acquired from Quality Stores during fiscal 1999
and the  expenses  related to the new stores  opened since the end of the second
quarter of fiscal 1999. SGA expenses as a percentage of net sales were 21.4% for
the second quarter of fiscal 2000 as compared to 21.0% for the second quarter of
fiscal 1999.

Merger and integration expenses were $29,000 during the second quarter of fiscal
2000, a decrease of $7.6 million,  or 99.6%,  compared to the second  quarter of
fiscal 1999. The merger and integration expenses related to the costs associated
with the merger of Quality Stores into the Company.  The  integration of Quality
Stores  into the  Company  was  substantially  complete  at the end of the first
quarter of fiscal 2000.

Amortization of intangibles  increased to $2.2 million for the second quarter of
fiscal 2000, as compared to $1.9 million for the second  quarter of fiscal 1999.
The increase is due to the  amortization  of goodwill  recognized as part of the
Quality Stores acquisition.

Operating  income for the second  quarter of fiscal 2000 was $26.5  million,  an
increase of $9.2 million,  or 53.2%, as compared to $17.3 million for the second
quarter of fiscal 1999.  Operating income as a percentage of net sales increased
to 8.0% for the second  quarter of fiscal 2000 from 5.2% for the second  quarter
of fiscal 1999. The increases were the result of the factors discussed above.

Interest  expense  increased to $11.5  million for the second  quarter of fiscal
2000,  as compared to $9.1 million for the second  quarter of fiscal  1999.  The
increase  is due  principally  to  additional  borrowings  used to  finance  the
acquisition of Quality Stores,  higher borrowings under the Company's  revolving
credit facility, and an increase in average interest rates between years.

Income taxes for the second  quarter of fiscal 2000 were $7.1 million,  compared
to a $3.9 million for the second  quarter of fiscal 1999.  Second quarter income
taxes as a percentage of pretax  earnings were 47.1% in 2000,

                                      -9-
<PAGE>

compared to 47.0% in 1999.  Goodwill  amortization,  which is not deductible for
income tax purposes,  has a significant effect on the Company's effective income
tax rate.

Net income for the second  quarter of fiscal 2000 was $7.9 million,  as compared
to net income of $4.4 million for the second quarter of fiscal 1999, as a result
of the factors discussed above.


Six Months Ended July 29, 2000, Compared to Six Months Ended July 31, 1999


Net sales for the six months  ended  July 29,  2000,  were  $605.9  million,  an
increase  of $116.0  million,  or 23.7%,  as  compared  to net sales for the six
months ended July 31, 1999.  The increase was primarily due to sales from stores
acquired in the Quality  Stores  acquisition in May, 1999, and new stores opened
since the end of the  second  quarter  of  fiscal  1999,  partially  offset by a
decrease  in  comparable  store  sales and stores  closed  during  fiscal  1999.
Comparable  store sales,  including  comparable  stores  acquired in the Quality
Stores acquisition  during 1999,  decreased 8.7%. The decrease was primarily the
result of cool, wet weather conditions in the company's  northeast markets,  dry
and drought  conditions  in Colorado and Nebraska,  and unusually  high sales of
generators during fiscal 1999 related to preparation for "year 2000" problems.

Gross  profit for the six months  ended July 29, 2000,  was $177.8  million,  an
increase of $34.4 million,  or 24.0%,  as compared to $143.4 million for the six
months  ended  July 31,  1999,  principally  as a result  of the  margin  on the
increase in net sales discussed above. Gross profit as a percentage of net sales
was 29.4% for the six months ended July 29, 2000, and July 31, 1999.

Selling,  general,  and  administrative  (SGA) expenses for the six months ended
July 29, 2000, were $141.7, an increase of $34.0 million,  or 31.6%, as compared
to the six months  ended July 31,  1999.  The  increase  is due to the  expenses
related to the stores  acquired  from Quality  Stores during fiscal 1999 and the
expenses  related to the new stores  opened  since the second  quarter of fiscal
1999.  SGA expenses as a  percentage  of net sales were 23.4% for the six months
ended July 29,  2000,  as  compared  to 22.0% for the six months  ended July 31,
1999.  The increase was primarily due to the decrease in comparable  store sales
and higher  expenses as a percentage of sales in the new stores opened since the
end of the second quarter of fiscal 1999.

Merger and  integration  expenses for the six months  ended July 29, 2000,  were
$1.8  million,  a decrease  of $5.8  million,  or 75.8%,  as compared to the six
months ended July 31, 1999.  The  integration of Quality Stores into the Company
was substantially complete at the end of the first quarter of fiscal 2000.

Amortization  of intangibles  increased to $4.4 million for the six months ended
July 29,  2000,  as compared to $2.8  million for the six months  ended July 31,
1999. The increase is due to the amortization of goodwill  recognized as part of
the Quality Stores acquisition.

Operating  income for the six months ended July 29, 2000, was $29.9 million,  an
increase of $4.8  million,  or 18.7%,  as compared to $25.2  million for the six
months ended July 31, 1999.  Operating  income as a percentage  of net sales was
4.9% for the six months  ended July 29,  2000,  as  compared to 5.2% for the six
months ended July 31, 1999. The decrease was the result of the factors discussed
above.

Interest  expense  increased to $22.2  million for the six months ended July 29,
2000, as compared to $14.6  million for the six months ended July 31, 1999.  The
increase  is due  principally  to  additional  borrowings  used to  finance  the
acquisition of Quality Stores,  higher borrowings under the Company's  revolving
credit facility, and an increase in average interest rates between years.

Income  taxes for the six  months  ended July 29,  2000,  were $4.7  million,  a
decrease  of $0.6  million as compared  to the six months  ended July 31,  1999.
Income taxes as a percentage of pretax  earnings was 61.5% in 2000,  compared to
49.7% in 1999.  Goodwill  amortization,  which is not  deductible for income tax
purposes, has a significant effect on the Company's effective income tax rate.

Net income for the six ended July 29,  2000,  was $2.9  million,  as compared to
$5.4 million for the six months ended July 31, 1999,  as a result of the factors
discussed above.

                                      -10-
<PAGE>
Amended Credit Facility

The Company failed to comply with certain financial  covenants under its Amended
Credit  Facility at or for periods  ending July 29,  2000,  and August 15, 2000.
These covenants  concerned (1) the fixed charge coverage ratio, (2) the interest
coverage  ratio,  (3)  the  ratio  of  debt to  EBITDA,  and  (4)  the  seasonal
"clean-down"  period.  Such failures caused events of default to occur under the
Amended Credit Facility.  The Company has reached an agreement in principle with
the  administrative  agent for the Amended Credit Facility to waive these events
of default and, in  connection  therewith,  to amend  certain  provisions of the
Amended Credit Facility.  A definitive written agreement containing such waivers
and amendments is being  negotiated,  but has not yet been  executed.  While the
Company has reached  agreement  with the  administrative  agent and has received
support from several key members of the bank  syndicate,  no  assurances  may be
given that such a definitive agreement will be executed or become effective. The
Company  presently  expects a  definitive  agreement  to be executed  and become
effective in September 2000 and, accordingly, has elected to continue to present
amounts due under the Amended Credit  Facility as long-term debt. The conditions
to the effectiveness of any definitive agreement are expected to include (i) the
consent of a majority  in  interest  of the  lenders  under the  Amended  Credit
Facility  and (ii) the  investment  in Holdings of at least $15 million  cash by
certain  existing  equity  investors  of  Holdings.  The  Company  has  received
commitments   from  certain  existing  equity  investors  of  Holdings  for  the
investment of the $15 million.

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  under  the  Company's  revolving  and term  credit  facilities,  and
short-term trade credit.

On July 29, 2000,  the Company had working  capital of $230.7  million,  a $38.8
million  increase from working capital of $191.9 million on April 29, 2000. This
increase  resulted  primarily  from a $77.6  million  aggregate  increase in the
Company's  inventory,  partially  offset by a $43.2 million increase in accounts
payable and accrued  expenses.  The increases in the Company's  accounts payable
and inventory are due primarily to seasonal increases in working capital and the
Company's new store expansion program for fiscal 2000.

Net cash used in operating activities was $19.5 million for the six months ended
July 29,  2000.  This was a decrease of $14.6  million from the six months ended
July 31,  1999,  during  which  $34.1  million  of cash  was  used in  operating
activities.  This decrease resulted primarily from an increase in earnings and a
smaller  investment in net working capital during the first six months of fiscal
2000 as compared to the same period in the prior  year.  The  Company's  capital
expenditures  were $32.6  million and $8.3 million for the six months ended July
29,  2000,  and  July  31,  1999,   respectively.   The  increase  is  primarily
attributable  to the Company's new store  expansion  program and  merger-related
capital expenditures in fiscal 2000.

The Company has reached an agreement in principle to amend certain provisions of
the Amended Credit Facility (see "Amended Credit Facility").  In connection with
the  agreement  to amend the Amended  Credit  Facility,  the Company  expects to
receive the  proceeds of an  investment  of at least $15 million cash by certain
existing  equity  investors  of  Holdings.  The Company  also intends to close a
number of underperforming stores during the remainder of fiscal 2000 and seek to
complete the sale leaseback of certain owned real property.  The Company intends
to use the proceeds of the items  discussed  above,  together with its cash flow
from  operations,  to reduce  short-term  trade credit and borrowings  under the
revolving and term credit facilities during the remainder of fiscal 2000.

The  Company  anticipates  that its  principal  uses of cash in the  foreseeable
future will be working  capital  requirements,  debt service  requirements,  and
capital  expenditures.  Based upon current and anticipated levels of operations,
the Company believes that its cash flow from  operations,  together with amounts
available  under the  Amended  Credit  Facility,  will be  adequate  to meet its
anticipated  requirements for working  capital,  and debt service through fiscal
2001.

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  second  quarter of each  fiscal  year due to the  farming
industry's  planting season and the sale of seasonal  products.

                                      -11-
<PAGE>

Working capital needs are highest during the first 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.

                                      -12-
<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

         The Company failed to comply with certain financial covenants under its
         Amended  Credit  Facility at or for periods  ending July 29, 2000,  and
         August  15,  2000.  These  covenants  concerned  (1) the  fixed  charge
         coverage ratio, (2) the interest  coverage ratio, (3) the ratio of debt
         to EBITDA,  and (4) the seasonal  "clean-down"  period.  Such  failures
         caused  events of default to occur under the Amended  Credit  Facility.
         The  Company  has  reached  an   agreement   in   principle   with  the
         administrative  agent for the  Amended  Credit  Facility to waive these
         events of  default  and,  in  connection  therewith,  to amend  certain
         provisions  of  the  Amended  Credit  Facility.  A  definitive  written
         agreement  containing such waivers and amendments is being  negotiated,
         but has not yet been executed.  While the Company has reached agreement
         with the administrative agent and has received support from several key
         members of the bank  syndicate,  no assurances may be given that such a
         definitive agreement will be executed or become effective.  The Company
         presently  expects a  definitive  agreement  to be executed  and become
         effective in September 2000 and,  accordingly,  has elected to continue
         to present  amounts due under the Amended Credit  Facility as long-term
         debt. The conditions to the  effectiveness of any definitive  agreement
         are  expected  to include  (i) the consent of a majority in interest of
         the lenders under the Amended  Credit  Facility and (ii) the investment
         in  Holdings of at least $15 million  cash by certain  existing  equity
         investors  of  Holdings.  The Company  has  received  commitments  from
         certain existing equity investors of Holdings for the investment of the
         $15 million.


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



                                      -13-
<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:  September 12, 2000                 QUALITY STORES, INC.



                                          /s/ Denny L. Starr
                                          Denny L. Starr
                                          Senior Vice-President, Finance
                                             and Chief Financial Officer


                                      -14-
<PAGE>

                              QUALITY STORES, INC.

                                INDEX TO EXHIBITS



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

EXHIBIT 27     Financial Data Schedule (electronic copy only)

EXHIBIT 99     Important Factors Regarding Forward-Looking Statements









                                      -15-