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 October 30, 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 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 October 30, 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

                                                                                                            PAGE

<S>                                                                                                           <C>
PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                  Condensed consolidated balance sheets, October 30, 1999 (unaudited),
                  and January 30, 1999........................................................................3

                  Condensed consolidated  statements of income (unaudited),  for
                  the three months and nine months ended  October 30, 1999,  and
                  the three months and nine months ended October 31, 1998.....................................4

                  Condensed consolidated statements of cash flows (unaudited), for the
                  nine months ended October 30, 1999, and October 31, 1998....................................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...........................................................................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 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>
QUALITY STORES, INC.
Condensed Consolidated Balance Sheets
(In Thousands Except Share Data)



                                                                                          October 30,          January 30,
                                                                                             1999                 1999
                                                                                      -------------------   -------------------
ASSETS                                                                                   (Unaudited)              (Note)
<S>                                                                                <C>                    <C>
Current assets:
   Cash and cash equivalents                                                       $               5,664  $              5,144
   Recoverable income taxes                                                                           --                 2,345
   Trade receivables, net                                                                         11,092                 4,597
   Inventory                                                                                     412,009               234,868
   Other                                                                                           7,561                 2,876
                                                                                      -------------------   -------------------
Total current assets                                                                             436,326               249,830
Property, improvements, and equipment, net                                                       114,058                45,614
Goodwill, net                                                                                    284,783               135,605
Other assets                                                                                      12,429                 8,557
                                                                                      -------------------   -------------------
Total assets                                                                       $             847,597  $            439,606
                                                                                      ===================   ===================

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
   Note payable to bank                                                            $              91,000  $             44,000
   Accounts payable                                                                              163,429                85,359
   Accrued expenses and other liabilities                                                         37,982                23,160
   Current portion of long-term debt and capital lease obligations                                13,700                 5,001
                                                                                      -------------------    ------------------
Total current liabilities                                                                        306,111               157,520
Long-term debt, less current portion                                                             308,200               146,843
Other long-term liabilities                                                                        8,368                 4,001
                                                                                      -------------------    ------------------
Total liabilities                                                                                622,679               308,364

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                                                                    209,858               119,155
   Retained earnings                                                                              15,060                12,087
                                                                                      -------------------    ------------------
Total stockholder's equity                                                                       224,918               131,242
                                                                                      -------------------    ------------------
Total liabilities and stockholder's equity                                         $             847,597  $            439,606
                                                                                      ===================    ==================
</TABLE>



Note:  The balance sheet at January 30, 1999,  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.

                                      -3-
<PAGE>



<TABLE>
<CAPTION>
QUALITY STORES, INC.
Condensed Consolidated Statements of Income (Unaudited)
(In Thousands)
                                                                        Three Months Ended
                                                                ---------------- -- ----------------
                                                                  October 30,         October 31,
                                                                     1999                1998
                                                                ----------------    ----------------

<S>                                                          <C>                 <C>
Net sales                                                    $          287,085  $          131,226
Cost of sales                                                           202,749              89,476
                                                                ----------------    ----------------
Gross profit                                                             84,336              41,750

Selling, general, and administrative expense                             70,691              32,501
Merger integration expenses                                               4,357                  --
Amortization of intangibles                                               2,306                 930
                                                                ----------------    ----------------
Operating income                                                          6,982               8,319

Interest expense                                                          9,392               5,108
                                                                ----------------    ----------------
Income (loss) before income taxes                                        (2,410)              3,211
Income taxes (credit)                                                       (10)              1,797
                                                                ----------------    ----------------
Net income (loss) and comprehensive income (loss)            $           (2,400) $            1,414
                                                                ================    ================

Ratio (deficiency) of earnings to fixed charges              $           (2,410)         1.6 x
                                                                ================    ================


<CAPTION>
                                                                         Nine Months Ended
                                                                ---------------- -- ----------------
                                                                  October 30,         October 31,
                                                                     1999                1998
                                                                ----------------    ----------------

<S>                                                          <C>                 <C>
Net sales                                                    $          777,051  $          442,802
Cost of sales                                                           549,335             307,405
                                                                ----------------    ----------------
Gross profit                                                            227,716             135,397

Selling, general, and administrative expense                            178,356             100,528
Merger integration expenses                                              11,996                  --
Amortization of intangibles                                               5,156               2,686
                                                                ----------------    ----------------
Operating income                                                         32,208              32,183

Interest expense                                                         23,946              15,182
                                                                ----------------    ----------------
Income before income taxes                                                8,262              17,001
Income taxes                                                              5,289               7,615
                                                                ----------------    ----------------
Net income and comprehensive income                          $            2,973  $            9,386
                                                                ================    ================

Ratio of earnings to fixed charges                                   1.3 x               2.0 x
                                                                ================    ================
</TABLE>


See accompanying notes to condensed consolidated financial statements.

                                      -4-
<PAGE>



<TABLE>
<CAPTION>
QUALITY STORES, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
                                                                                              Nine Months Ended
                                                                                   ----------------- ---- ----------------
                                                                                     October 30,            October 31,
                                                                                         1999                  1998
                                                                                   -----------------      ----------------
<S>                                                                             <C>                    <C>
Operating Activities
Net income                                                                      $             2,973    $            9,386
Adjustments to reconcile net income to net cash (used in) provided by
   operations:
     Depreciation and amortization                                                           16,293                 7,378
     Deferred income taxes                                                                       --                 5,632
     Changes in operating assets and liabilities                                            (53,916)                3,543
                                                                                   -----------------      ----------------
Net cash (used in) provided by operating activities                                         (34,650)               25,939

Investing Activities
Purchases of property, improvements, and equipment, net                                     (22,285)               (3,735)
Acquisition of  former Quality Stores, Inc.                                                (112,368)                   --
Acquisition of Country General, Inc.                                                             --                (1,568)
Other, net                                                                                    1,553                   926
                                                                                   -----------------      ----------------
Net cash used in investing activities                                                      (133,100)               (4,377)

Financing Activities
Capital contribution from parent                                                                 --                   235
Dividend to parent                                                                           (1,061)                   --
Net borrowings (repayments) under line of credit                                             47,000               (18,955)
Proceeds from issuance of long-term debt                                                    220,000                    --
Payments on long-term debt                                                                  (91,271)               (1,500)
Financing costs relating to New Credit Facility                                              (4,990)                   --
Other, net                                                                                   (1,408)                 (128)
                                                                                   -----------------      ----------------
Net cash provided by (used in) financing activities                                         168,270               (20,348)

Net increase in cash and cash equivalents                                                       520                 1,214
Cash and cash equivalents at beginning of period                                              5,144                 5,757
                                                                                   -----------------      ----------------
Cash and cash equivalents at end of period                                      $             5,664    $            6,971
                                                                                   =================      ================
</TABLE>


See accompanying notes to condensed consolidated financial statements.

                                      -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 Transition Report on Form 10-Q for the
period ended January 30, 1999 ("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 adjustment.  The transaction
was accounted for as a purchase.  The accounts and  transactions of the acquired
stores  are  included  in  the  accompanying  unaudited  condensed  consolidated
financial  statements  from  the  date of  acquisition.  Pro  forma  results  of
operations  as if the  acquisition  had  occurred on  February 1, 1998,  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 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 was  approximately  $204.1  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 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.



                                      -6-
<PAGE>

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").  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 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              $    204,132

      Fair value of underlying tangible net assets acquired             48,779
                                                                     ----------

      Excess of cost of acquisition over the allocated fair
      value of the underlying tangible net assets                 $    155,353
                                                                     ==========

The  allocation  of the  purchase  price  reflected  in the  October  30,  1999,
unaudited  condensed  consolidated  balance  sheet  is  preliminary.  Management
expects to complete the evaluation of the fair value of the underlying  tangible
net assets acquired within twelve months of the acquisition.


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 February 1, 1998.

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
                                                                       (In thousands)
                                                   Three Months Ended                     Nine Months Ended
                                          ------------------ ------------------ ------------------ ------------------
                                               October 30,        October 31,        October 30,        October 31,
                                                  1999               1998               1999               1998
                                          ------------------ ------------------ ------------------ ------------------

<S>                                        <C>                <C>                <C>                <C>
Net Sales                                  $        287,085   $        247,147   $        920,454   $        828,951
Operating Income                                      6,982              9,739             34,128             40,931
Net (loss) income                                    (2,400)              (557)             1,219              6,495
Ratio (deficiency) of earnings to fixed
   charges                                 $         (2,410)             1.1 x              1.2 x              1.5 x
</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                    29,150,000
                      2004                    18,250,000
                      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

Third Quarter of Fiscal 1999 Compared to Third Quarter of Fiscal 1998

Net sales for the third quarter of fiscal 1999 were $287.1 million,  an increase
of $155.9 million,  or 118.8%, as compared to net sales for the third quarter of
fiscal 1998 of $131.2  million.  This  increase  was due  principally  to $141.9
million in sales derived in 1999 from stores acquired from Quality Stores and H.
C. Shaw Co., as well as $12.1  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 2.6%, partially offset by $1.4 million of sales derived in 1998 from
stores closed in fiscal 1999..

Gross profit for the third quarter of fiscal 1999 was $84.3 million, an increase
of $42.5  million or 101.7%,  as compared to $41.8 million for the third quarter
of fiscal 1998, principally as a result of the margin on the increase on the net
sales  discussed  above,   partially  offset  by  a  decrease  in  gross  profit
percentage. Gross profit as a percentage of net sales decreased to 29.4% for the
third  quarter of fiscal  1999,  as compared  to 31.8% for the third  quarter of
fiscal 1998. The decrease in gross profit  percentage is  attributable  to sales
derived  from  Quality  Stores  and H. C. Shaw Co.  stores,  which  historically
operated at a lower margin than those experienced by the Company.  These margins
are  expected  to  improve  upon  completion  of the  integration  of these  two
acquisitions.

Selling,  general and  administrative  (SGA)  expenses for the third  quarter of
fiscal 1999 were $70.7  million,  an increase of $38.2  million,  or 117.5%,  as
compared to the third  quarter of fiscal 1998.  SGA expenses as a percentage  of
net sales were 24.6% for the third  quarter of fiscal  1999 as compared to 24.8%
for the third  quarter of fiscal  1998,  due  principally  to the  inclusion  of
Quality Stores and H. C. Shaw Co. expense base. The Company recorded expenses of
approximately  $4.4  million,  or  1.5%  of  net  sales,   related  to  closing,
integration,  and relocation costs (merger integration expenses) associated with
the merger of Quality Stores into the Company.  Management  presently expects to
record  additional  merger  integration  expenses during the remainder of fiscal
1999, which is through January, 2000, as well as the first half of fiscal 2000.

Amortization  of intangibles  increased to $2.3 million for the third quarter of
fiscal 1999,  as compared to $0.9 million for the third  quarter of fiscal 1998.
The increase is due to amortization of excess costs of the two 1999 acquisitions
over the estimated fair value of the underlying tangible assets.

Operating  income  for the third  quarter  of fiscal  1999 was $7.0  million,  a
decrease of $1.3  million,  or 15.7%,  as compared to $8.3 million for the third
quarter of fiscal 1998.  Operating income as a percentage of net sales decreased
to 2.4% for the third  quarter of fiscal 1999 from 6.3% for the third quarter of
fiscal 1998. The decrease was the result of the factors discussed above.

Interest expense increased to $9.4 million for the third quarter of fiscal 1999,
as compared to $5.1 million for the third  quarter of fiscal 1998.  The increase
is due  principally to additional  borrowing used to finance the  acquisition of
Quality  Stores as well as a modest  increase in average  interest rates between
years.

Income taxes for the third quarter of fiscal 1999 were a credit of $10 thousand,
compared to $1.8 million  provision for the third quarter of fiscal 1998.  Third
quarter  income taxes as a  percentage  of pretax  earnings  (loss) were 0.4% in
1999, compared to 56.0% in 1998. The difference is due primarily to amortization
of goodwill  related to the  acquisitions  of Quality Stores and H. C. Shaw Co.,
which is not deductible for income tax purposes.

Net loss for the third quarter of fiscal 1999 was $2.4 million,  as compared net
income of $1.4 million for the third  quarter of fiscal 1998, as a result of the
factors discussed above.


                                      -9-
<PAGE>
Nine Months Ended  October 30, 1999,  Compared to Nine Months Ended  October 31,
1998

Net sales for the nine months ended October 30, 1999,  were $777.1  million,  an
increase  of $334.3  million,  or 75.5%,  as  compared to net sales for the nine
months  ended  October  31,  1998,  of $442.8  million.  This  increase  was due
principally to $305.7 million in sales derived in 1999 from stores acquired from
Quality  Stores and H. C. Shaw Co., as well as $31.6 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 1.4%,  partially  offset by $7.5 million of
sales derived in 1998 from stores closed in fiscal 1999.

Gross profit for the nine months ended October 30, 1999, was $227.7 million,  an
increase of $92.3 million or 68.2%,  as compared to $135.4  million for the nine
months  ended  October 31, 1998,  as a result of the margin  increase on the net
sales discussed above and a decrease in gross profit percentage. Gross profit as
a percentage  of net sales  decreased to 29.3% for the nine months ended October
30, 1999, as compared to 30.6% for the nine months ended  October 31, 1998.  The
decrease is due  principally  to sales derived from former Quality Stores and H.
C. Shaw Co.  stores,  which  historically  operated at lower gross  margins than
those  experienced  by the Company.  These  margins are expected to improve upon
completion of the integration of these two acquisitions.

Selling,  general,  and administrative  (SGA) expenses for the nine months ended
October 30, 1999, were $178.4 million,  an increase of $77.9 million,  or 77.5%,
as  compared to the nine  months  ended  October  31,  1998.  SGA  expenses as a
percentage of net sales increased to 23.0% for the nine months ended October 30,
1999 as compared  to 22.7% for the nine months  ended  October  31,  1998.  This
increase is due to the  inclusion of Quality  Stores and H. C. Shaw Co.  expense
base. The Company recorded  approximately $12.0 million, or 1.5% as a percent of
net  sales,  related to  closing,  integration,  and  relocation  costs  (merger
integration  expenses)  associated  with the merger of Quality  Stores  into the
Company.  Management  presently expects to record additional merger  integration
expenses during the remainder of fiscal 1999, which is through January, 2000, as
well as the first half of fiscal 2000.

Amortization of intangibles  increased to $5.2 million for the nine months ended
October 30, 1999 as compared to $2.7 million for the nine months  ended  October
31, 1998.  The increase is due to  amortization  of excess costs of the two 1999
acquisitions over the estimated fair value of the underlying tangible assets.

Operating  income for both of the nine months ended October 30, 1999 and October
31,  1998 was  $32.2  million.  Operating  income as a  percentage  of net sales
decreased to 4.1% for the nine months  ended  October 30, 1999 from 7.3% for the
nine months ended  October 31, 1998.  The decrease was the result of the factors
discussed above.

Interest expense was $23.9 million for the nine months ended October 30, 1999 as
compared to $15.2  million  for the nine months  ended  October  31,  1998.  The
increase in interest expense is attributable to additional borrowings to finance
the Quality Stores  acquisition as well as a modest increase in average interest
rates between years.

Income taxes for the nine months  ended  October 30,  1999,  were $5.3  million,
compared to $7.6 million for the nine months ended October 31, 1998.  Income tax
as a percentage of pretax earnings increased to 64.0% in 1999, compared to 44.8%
in 1998. This increase is due primarily to  amortization of goodwill  related to
the  acquisitions  of Quality Stores and H. C. Shaw Co., which is not deductible
for income tax purposes.

Net income for the nine months ended  October 30,  1999,  was $3.0  million,  as
compared to $9.4 million for the nine months ended October 31, 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
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  was  approximately  $204.1  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 will continue to

                                      -10-
<PAGE>

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 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
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 is accounted for as a purchase and the results
of  operations  of Quality  Stores are  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                    29,150,000
                      2004                    18,250,000
                      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.

                                      -11-
<PAGE>
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 October 30, 1999, the Company had working capital of $130.2 million,  a $37.9
million increase from working capital of $92.3 million on January 30, 1999. This
increase  resulted  primarily  from a $177.1 million  aggregate  increase in the
Company's  inventory,  partially  offset by a $133.8  million  increase in notes
payable to bank and accounts  payable,  and a $14.8 million  increase 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 purchases of the H.C. Shaw Co. stores in January,  1999, and
the former Quality Stores, Inc., in May, 1999.

Net cash used in  operating  activities  was $34.7  million  for the nine months
ended  October  30,  1999.  This was a decrease of $60.6  million  from the nine
months ended October 31, 1998,  during which $25.9 million of cash was generated
by operating  activities.  This decrease resulted  primarily from an increase in
inventory,  as the result of the acquisitions  mentioned above, during the first
nine 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
Quality Stores, Inc.,  acquisition,  were $22.3 million and $3.7 million for the
nine months ended  October 30, 1999,  and October 31,  1998,  respectively.  The
increase is primarily  attributable to the Company's new store expansion program
and integration  capital spending for fiscal 1999. In addition,  the Company had
cash provided by financing  activities of $168.3  million during the nine months
ended  October 30,  1999,  as compared to cash used in financing  activities  of
$20.3  million  during the nine months ended  October 31, 1998.  The increase in
cash  provided by  financing  activities  during the first nine months of fiscal
1999,  as compared to the first nine months of fiscal 1998, is  attributable  to
borrowings to fund the purchases of the Quality  Stores,  Inc. and H.C. Shaw Co.
stores and  subsequent  cash  advances  and 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  for working
capital,  and debt service  through fiscal 2000. The Company  intends to explore
the  availability  of  additional  credit to support its  strategy for growth in
fiscal 2000. 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  second  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 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>

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 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 98 percent of remediation efforts were
completed  as of October  30,  1999.  All  remediation  efforts  and  testing of
product/equipment are expected to be completed by December 15, 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 October 30, 1999,
the Company  had  received  confirmations  from  approximately  90% of the third
parties that were sent these requests.

Through October 30, 1999, the Company has spent  approximately  $1.95 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 year
end.

                                      -13-
<PAGE>

<TABLE>
<CAPTION>
                                               QUALITY STORES, INC.

                                            PART II. OTHER INFORMATION



<S>                                                                                                       <C>
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
</TABLE>


                                      -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:  December 14, 1999                       QUALITY STORES, INC.



                                               /s/ James F. Hurley
                                               James F. Hurley
                                               Senior Vice-President, Finance,
                                                 MIS and Chief Financial Officer



                                      -15-
<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


                                      -16-