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 August 4, 2001

                                    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 August 4, 2001: 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 as of August 4, 2001 (unaudited) and
                  February 3, 2001 (audited)...................................................................3

                  Condensed consolidated statements of operations (unaudited) for the
                  three and six months ended August 4, 2001, and July 29, 2000.................................4

                  Condensed consolidated statements of cash flows (unaudited) for the
                  three and six months ended August 4, 2001, and July 29, 2000.................................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

ITEM 3.           QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK
                  (See "Market Risk" Section of Item 2.)


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
</TABLE>

                                      -2-

<PAGE>
<TABLE>
<CAPTION>

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



                                                                                          August 4,            February 3,
                                                                                            2001                  2001
                                                                                        ------------          ------------
                                                                                         (Unaudited)            (Audited)
<S>                                                                                     <C>                   <C>

ASSETS
Current assets:
   Cash and cash equivalents                                                             $   4,408             $   3,382
   Receivables, net                                                                         10,547                 9,955
   Inventory                                                                               356,441               325,116
   Other current assets                                                                      6,480                10,554
                                                                                         ---------             ---------
Total current assets                                                                       377,876               349,007
Property, improvements and equipment, net                                                  125,221               134,256
Goodwill, net                                                                              282,393               286,241
Other assets, net                                                                           11,876                24,235
                                                                                         ---------             ---------
Total assets                                                                             $ 797,366             $ 793,739
                                                                                         =========             =========

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
   Accounts payable                                                                      $ 148,437             $ 132,319
   Accrued expenses and other current liabilities                                           39,984                42,507
   Current portion of long-term debt and capital lease obligations                          22,057                22,039
                                                                                         ---------             ---------
Total current liabilities                                                                  210,478               196,865
Revolving line of credit                                                                   148,000               121,200
Other long-term debt, less current portion                                                 263,796               275,496
Other long-term liabilities and capital lease obligations                                    8,769                 8,727
                                                                                         ---------             ---------
Total liabilities                                                                          631,043               602,288

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                                                              242,627               226,877
   Accumulated deficit                                                                     (76,304)              (35,426)
                                                                                         ---------             ---------
Total stockholder's equity                                                                 166,323               191,451
                                                                                         ---------             ---------
Total liabilities and stockholder's equity                                               $ 797,366             $ 793,739
                                                                                         =========             =========

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

                                      -3-

<PAGE>


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

                                                           Three Months Ended
                                                        ------------------------
                                                         August 4,      July 29,
                                                           2001           2000
                                                        ----------    ----------

Net sales                                                $ 217,249     $ 331,690
Cost of sales                                              158,437       231,996
                                                         ---------     ---------
Gross profit                                                58,812        99,694

Selling, general and administrative expenses                64,724        70,967
Merger integration expenses                                     --            29
Amortization of intangibles                                  1,973         2,186
                                                         ---------     ---------
Operating income (loss)                                     (7,885)       26,512

Interest expense                                            10,082        11,508
                                                         ---------     ---------
Income (loss) before income taxes                          (17,967)       15,004
Income taxes                                                17,091         7,061
                                                         ---------     ---------
Net income (loss) and comprehensive income (loss)        $ (35,058)    $   7,943
                                                         =========     =========
Ratio (deficiency) of earnings to fixed charges          $ (17,967)        2.1 x
                                                         =========     =========



                                                             Six Months Ended
                                                        ------------------------
                                                         August 4,      July 29,
                                                           2001           2000
                                                        ----------    ----------

Net sales                                                $ 403,240     $ 605,946
Cost of sales                                              285,272       428,174
                                                         ---------     ---------
Gross profit                                               117,968       177,772

Selling, general and administrative expenses               120,090       141,684
Merger integration expenses                                     --         1,851
Amortization of intangibles                                  3,928         4,385
                                                         ---------     ---------
Operating income (loss)                                     (6,050)       29,852

Interest expense                                            20,959        22,230
                                                         ---------     ---------
Income (loss) before income taxes                          (27,009)        7,622
Income taxes                                                13,869         4,690
                                                         ---------     ---------
Net income (loss) and comprehensive income (loss)        $ (40,878)    $   2,932
                                                         =========     =========
Ratio (deficiency) of earnings to fixed charges          $ (27,009)        1.3 x
                                                         =========     =========



See accompanying notes to condensed consolidated financial statements.

                                      -4-
<PAGE>

<TABLE>
<CAPTION>

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

                                                                                         Six Months Ended
                                                                                  ------------------------------
                                                                                  August 4,            July 29,
                                                                                    2001                 2000
                                                                                  ----------          ----------
<S>                                                                               <C>                 <C>

Operating Activities
Net income (loss)                                                                  $(40,878)           $  2,932
Adjustments to reconcile net income (loss) to net cash used in operating
  activities:
    Depreciation and amortization                                                    10,769              10,354
    Amortization of intangibles                                                       3,928               4,385
    Amortization of deferred financing costs                                          1,229               1,032
    Deferred income taxes                                                            13,869                  --
Changes in operating assets and liabilities:
    Receivables                                                                        (592)             (5,217)
    Inventory                                                                       (31,325)            (77,577)
    Accounts payable                                                                 16,118              62,646
    Other operating assets and liabilities                                             (471)            (17,043)
                                                                                   --------            --------
Net cash used in operating activities                                               (27,353)            (18,488)

Investing Activities
Purchases of property, improvements and equipment                                    (1,734)            (32,596)
Other, net                                                                               --               7,200
                                                                                   --------            --------
Net cash used in investing activities                                                (1,734)            (25,396)

Financing Activities
Capital contribution from parent and management                                      15,750                  --
Net borrowings under revolving line of credit                                        26,800              48,450
Payments on long-term debt                                                          (11,700)             (3,335)
Deferred financing costs                                                               (928)             (1,986)
Other, net                                                                              191               1,864
                                                                                   --------            --------
Net cash provided by financing activities                                            30,113              44,993

Net increase in cash and cash equivalents                                             1,026               1,109
Cash and cash equivalents at beginning of period                                      3,382              11,029
                                                                                   --------            --------
Cash and cash equivalents at end of period                                         $  4,408            $ 12,138
                                                                                   ========            ========


<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 condensed
consolidated  financial  statements include Quality Stores, Inc., and its wholly
owned subsidiaries (hereinafter, collectively, the "Company").

The condensed unaudited  consolidated financial statements have been prepared by
the Company in accordance with accounting  principles  generally accepted in the
United States 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
accounting  principles  generally  accepted  in the United  States for  complete
financial statements. The preparation of financial statements in conformity with
accounting   principles   generally  accepted  in  the  United  States  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  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.

The  Company's  fiscal  year ends 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  ("Form  10-K") for the fiscal year ended
February 3, 2001 ("Fiscal 2000").

Certain amounts  previously  reported in prior periods have been reclassified to
conform with the  presentation  used for the three and  six-month  periods ended
August 4, 2001.

NOTE 2.  NONRECURRING CHARGES

On January 9, 2001, a plan was approved to reorganize the Company's distribution
network.  The  reorganization  included  the  closure  of six  of the  Company's
satellite  distribution  facilities and a full-line  distribution  center in Des
Moines,  Iowa,  including the elimination of 110 positions in those  facilities.
The closures were fully completed by July, 2001. Liabilities of $4.6 million for
remaining  occupancy  obligations  and $0.3  million for  severance  payments to
terminated  employees were recorded as of the plan's approval date. As of August
4, 2001,  $1.5 million had been incurred and charged  against these  liabilities
($1.0  million in the second  quarter of 2001),  and no employees  remain in the
closed facilities.  Remaining  liabilities primarily relate to lease obligations
that are payable over time.

Primarily  during the fourth quarter of fiscal 2000, the Company  terminated the
employment  of 10 executive  and 45  administrative  personnel at its  corporate
headquarters.  Severance  liabilities  of $2.3 million  were  recorded as of the
employee termination dates in fiscal 2000. As of August 4, 2001, $2.1 million of
severance  payments had been made and charged  against these  liabilities  ($0.7
million in the second quarter of 2001), with the remainder payable over the next
12 months.

In September,  2000, the Company closed 17 underperforming  stores. The closings
were  completed  by January,  2001.  Expenses  related to these  store  closings
totaled  $11.8  million,  consisting  of $4.5 million of  inventory  liquidation
losses,  $1.2 million of asset  impairment,  and $6.1 million of remaining lease
obligations and other exit costs. As of August 4, 2001, $4.0 million of the $6.1
million of occupancy and other exit costs had been incurred and charged  against
the related liabilities ($0.2 million in the second quarter of 2001).  Remaining
liabilities relate primarily to lease obligations that are payable over time.


                                      -6-
<PAGE>
NOTE 3. FINANCIAL INSTRUMENTS

Effective   February  4,  2001,  the  Company  adopted  Statement  of  Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative  Instruments and
Hedging  Activities".  The standard requires that all derivative  instruments be
recorded  on the  balance  sheet at fair  value  and  establishes  criteria  for
designation  and  effectiveness  of hedging  relationships.  At May 5, 2001, the
Company  had an  interest  rate cap  agreement  with a notional  amount of $65.0
million  that expired on May 10, 2001.  Due to the short  remaining  life of the
agreement,  the  cumulative  effect  of  adopting  SFAS  No.  133 did not have a
material  effect on the Company's  balance sheet or operations as of and for the
three-month  period  ended May 5,  2001.  The  Company  did not  enter  into any
additional derivative  instruments during the three-month period ended August 4,
2001.

NOTE 4. GOODWILL AND OTHER INTANGIBLE ASSETS

The Company  follows SFAS No. 121,  "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived  Assets To Be Disposed Of", which requires  management
to periodically assess whether indicators of impairment exist that would require
the Company to  determine  whether  the net  carrying  amount of the  long-lived
assets exceeds the sum of the expected future undiscounted cash flows associated
with such assets.  If  undiscounted  cash flows exceed the net carrying value of
the  related  assets,  impairment  losses  should  be  recognized  based  on the
difference between the fair values and the carrying amounts of the assets.  SFAS
No. 121 also  requires that  long-lived  assets held for sale be reported at the
lower of  carrying  amount  or fair  value  less  cost to sell.  As a result  of
continued operating losses,  management determined that indicators of impairment
existed as of August 4, 2001,  and  completed an analysis of whether  impairment
losses should be recognized as of the end of the second quarter of fiscal 2001.
This  analysis  indicated  that the  recognition  of  impairment  losses was not
required under SFAS No. 121 at this time. In addition, management considered the
requirements  of APB  Opinion  No. 17,  "Intangible  Assets",  for the  possible
write-down of goodwill  based on currently  estimated  undiscounted  future cash
flows and determined that such an adjustment was not required.

In June 2001,  the  Financial  Accounting  Standards  Board issued SFAS No. 141,
"Business  Combinations",  and SFAS No.  142,  "Goodwill  and  Other  Intangible
Assets", effective for fiscal years beginning after December 15, 2001. Under the
new rules, goodwill (and intangible assets deemed to have indefinite lives) will
no  longer be  amortized  but will be  subject  to  annual  impairment  tests in
accordance  with the  Statements.  Other  intangible  assets will continue to be
amortized over their useful lives.

The  Company  will  apply the new rules on  accounting  for  goodwill  and other
intangible  assets  as of the  beginning  of  fiscal  2002.  Application  of the
nonamortization provisions of the Statement is expected to result in an increase
in annual  net income of  approximately  $7.6  million.  The  Company  will also
perform the first of the required  impairment  tests of goodwill and  indefinite
lived assets as of February 3, 2002.  Because  management  has not yet begun the
appraisal process  necessary to complete the impairment  analysis required under
SFAS No. 142, the total effect of adopting SFAS No. 142 on the Company's  fiscal
2002 earnings or financial  position cannot yet be determined.  However,  if the
Company continues to incur significant  operating losses, any business valuation
completed  as of the  beginning of fiscal 2002 would be  negatively  affected by
such results and  accordingly,  could result in the  recognition  of  impairment
losses that could be considered significant upon adoption of SFAS No. 142.

NOTE 5. INCOME TAXES

The Company  had net  deferred  income tax assets of $23.7  million at August 4,
2001,  which reflect the impact of temporary  differences  between the amount of
assets and  liabilities  recorded  for  financial  reporting  purposes  and such
amounts as  measured by tax laws and  regulations.  Due to its  cumulative  loss
position  over the  last  two  years,  the  Company  has  determined  under  the
provisions  of SFAS No. 109 that it is no longer more likely than not that these
assets  will be  realizable  in future  periods.  Accordingly,  the  Company has
established a valuation allowance in the amount of $23.7 million against its net
deferred  income tax  assets.  The  Company  will  reevaluate  the need for this
valuation allowance in future periods if taxable income is generated.

NOTE 6. AMENDED CREDIT FACILITY

At  February  3,  2001,  the  Company  had a bank  credit  agreement  for  which
borrowings totaled $189.4 million under two term loan facilities  (Tranche A and
B) and $121.2 million under a revolving credit  agreement.  On February 6, 2001,
contemporaneous  with an equity  infusion of $15.7 million,  an amendment to the
bank credit agreement (the "Amended Credit  Agreement")  increased the Company's
maximum revolving credit  availability to $160.0 million,

                                      -7-
<PAGE>

through a combination  of revolving  credit  borrowings up to $150.0 million and
letters of credit up to $15.0  million.  (The  combination  is limited to $160.0
million in the aggregate.) The amendment also eliminated  certain  covenants for
the period ended  February 3, 2001,  and  adjusted  such  covenants  for periods
thereafter.

The Amended  Credit  Agreement  required a reduction of the revolving  credit to
$130.0  million for 30  consecutive  days during the period from July 1, 2001 to
September  30,  2001  (the  "Cleandown  Provision").   Thereafter,  no  specific
reductions  were  required  for the  remaining  period of the  revolving  credit
facility, which extends through October 31, 2004.

On July  31,  2001,  an  amendment  to the bank  credit  agreement  removed  the
Cleandown  Provision  for the period from July 1, 2001 to September 30, 2001. In
addition,  the earnings  requirements  for the second  quarter of 2001 have been
waived.  The  debt/inventory  covenants for the period through  November 3, 2001
have been replaced  with less  stringent  covenants and the covenants  have been
further modified to accommodate the Company's current  challenges.  The revolver
balance  will  continue  to be  governed  through  the ratio of  senior  debt to
inventory. Finally, the Company will also be required to raise additional equity
capital if it is to continue to service bondholder interest requirements.

The Tranche A term loan is payable in alternating quarterly installments of $2.5
million and $7.5 million through April 30, 2004 and final quarterly installments
of $11.25 million and $0.9 million  through October 31, 2004. The Tranche B term
loan  requires  alternating  quarterly  installments  of $0.2  million  and $0.5
million through October 31, 2004 and then alternating quarterly  installments of
$28.4 million and $5.5 million  through April 30, 2006.  The Company is required
to make  mandatory  prepayments  based on the  Company's  excess  cash flow,  as
defined,  or upon the sale of  certain  assets  or the  issuance  of  additional
equity.

Borrowings  under the Amended Credit  Agreement are secured by all assets of the
Company and bear  interest at the prime or eurodollar  rates plus a margin.  The
revolving  credit debt is also  subject to a 0.5%  commitment  fee on its unused
portion. The Company's long-term borrowing  agreements contain covenants,  which
require  the  Company  to  maintain  certain  other  financial  ratios  and also
restrict, among other things, the payment of dividends, incurrence of additional
debt,  capital  expenditures,  mergers and acquisitions,  and the disposition of
assets. The Company has made all debt payments and has complied with or obtained
waivers under all bank covenants, as amended, since February 3, 2001.

NOTE 7. SUBSEQUENT EVENT

On  September  6,  2001,  the  Company  announced  its  intention  to  close  35
underperforming  stores  and  a  distribution  center,  mostly  located  in  the
Southeast.  The  Company  expects  the  closures to be  primarily  completed  by
November,  2001. The Company plans to transfer a substantial amount of inventory
from  these  stores  to other  stores  within  the  chain  and  presently  is in
discussion with several retailers and lessors regarding potential subleases. The
ultimate liability related to these closures is not presently estimable and will
be  significantly  influenced  by  the  Company's  ability  to  negotiate  lease
terminations and potential subleases.  Lease obligations related to these stores
and  distribution  center total $15.8 million as of September 6, 2001,  based on
existing lease terms.

                                      -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 2001 Compared to Second Quarter of Fiscal 2000

Net sales for the second quarter of fiscal 2001 were $217.2 million,  a decrease
of $114.5  million,  or 34.5% as compared to net sales for the second quarter of
fiscal 2000 of $331.7 million.  This decrease was primarily due to a decrease in
comparable  store sales and stores closed during fiscal 2000.  Comparable  store
sales  decreased  33.1% in the second  quarter of fiscal 2001 as compared to the
second  quarter of fiscal 2000.  The decrease  was  primarily  the result of (1)
lower  customer   purchases  of   "big-ticket",   lower-margin   product  lines,
particularly  power equipment,  reflecting an economic slowdown and a deliberate
reduction  of  sales  efforts  by  the  Company  related  to  these  lines,  (2)
out-of-stock  issues  experienced  during  the  second  quarter  of 2001  due to
interrupted  vendor  shipping  patterns,   and  (3)  fewer  sales  generated  by
advertising  and  related  promotional  pricing due to the  Company's  change in
advertising strategy.
<TABLE>
<CAPTION>
The Company's  overall sales  decrease in the second quarter of 2001 compared to
the second quarter of 2000 is summarized as follows:
<S>                                                                                            <C>
Sales decline due to reduced emphasis on certain low-margin categories, including
   power equipment                                                                              $    42.8
Sales decline related to out-of-stocks caused by interrupted vendor shipping patterns                33.8
Sales decline due to reduction in promotional pricing                                                27.7
Sales decline due to closure of underperforming stores after the second quarter of 2000              10.7
Incremental sales from new stores opened during 2000                                                  (.5)
                                                                                                ---------
                                                                                                $   114.5
                                                                                                =========
</TABLE>
Gross profit for the second quarter of fiscal 2001 was $58.8 million, a decrease
of $40.9 million,  or 41.0%, as compared to $99.7 million for the second quarter
of fiscal 2000, principally as a result of the sales decrease noted above. Gross
profit as a percentage of net sales decreased to 27.1% for the second quarter of
fiscal 2001,  as compared to 30.1% for the second  quarter of fiscal  2000.  The
decrease in gross profit percentage is primarily attributable to (1) a reduction
of negotiated  vendor discounts  which,  due to lower purchase  levels,  prevent
achieving  volume  thresholds  and  (2)  markdowns  taken  on  SKU's  that  were
eliminated from the Company's  active  assortment.  These reductions were partly
offset by margin  increases from the Company's  decisions to (1) reduce emphasis
on power  equipment  and other  low-margin  categories,  (2) reduce  promotional
pricing  associated with the Company's reduced emphasis on advertising,  and (3)
consolidate  the  distribution  network.  The Company expects to receive greater
benefit from the distribution reorganization in subsequent quarters.

Selling,  general and  administrative  (SGA)  expenses for the second quarter of
fiscal 2001 were $64.7 million, a decrease of $6.3 million, or 8.8%, as compared
to SGA expenses  for the second  quarter of fiscal 2000 of $71.0  million.  This
decrease is a result of cost reductions  either planned as part of the Company's
new operating strategies or implemented in response to the lower sales activity.
Specifically, the decline in SGA expenses is summarized as follows:

<TABLE>
<CAPTION>
<S>                                                                                         <C>
Reduction of store operating expenses due to lower sales and net store closings              $    8.2
Reduction  in  advertising  expenses  due to the  Company's  strategic reduction in
   mass-distribution advertising flyers                                                           5.3
Reduction in vendor advertising support                                                          (6.4)
Reduction of corporate payroll                                                                    1.0
Increase in other operating expenses                                                             (1.8)
                                                                                             --------
                                                                                             $    6.3
                                                                                             ========
</TABLE>
                                      -9-
<PAGE>
SGA  expenses  increased  as a  percentage  of net sales to 29.8% for the second
quarter of fiscal  2001 as  compared  to 21.4% for the second  quarter of fiscal
2000 because of the lower sales volume for the second quarter of fiscal 2001.

There  were no merger and  integration  expenses  during  the second  quarter of
fiscal  2001,  compared to charges of $29,000  for the second  quarter of fiscal
2000. These merger and integration expenses related to costs associated with the
Quality Stores acquisition,  which was substantially  complete at the end of the
second quarter of fiscal 2000.

Operating  loss for the  second  quarter  of  fiscal  2001 was $7.9  million,  a
decrease of $34.4  million as compared to operating  income of $26.5 million for
the second  quarter of fiscal 2000.  Operating loss as a percentage of net sales
was  (3.6%)  for the  second  quarter  of  fiscal  2001.  Operating  income as a
percentage  of net sales was 8.0% for the  second  quarter of fiscal  2000.  The
decrease  from  fiscal  2000 to 2001 was a result of the  factors  noted  above,
principally the decline in comparable store sales, partially offset by decreases
in SGA expenses.

Interest expense  decreased to $10.1 million during the second quarter of fiscal
2001, as compared to $11.5 million for the second  quarter of fiscal 2000.  This
decrease is due to the Company's  lower average  interest  rates between the two
periods  on  the  Company's  borrowings,  partially  offset  by  higher  average
borrowings under the Company's revolving line of credit in the second quarter of
fiscal 2001 compared to the second quarter of fiscal 2000.

Income tax  expense  for the second  quarter of fiscal  2001 was $17.1  million,
compared to income tax expense of $7.1 million for the second  quarter of fiscal
2000. As discussed in Note 5 to the condensed consolidated financial statements,
during  the  second  quarter  of fiscal  2001,  the  Company  established  a tax
valuation  allowance  under the provision of SFAS No. 109 in the amount of $23.7
million that increased income tax expense.

The net loss for the second quarter of fiscal 2001 was $35.1  million,  compared
to a net income of $ 7.9 million  for the second  quarter of fiscal  2000,  as a
result of the factors discussed above.

Six Months Ended August 4, 2001, Compared to Six Months Ended July 29, 2000

Net sales for the six  months  ended  August 4,  2001  were  $403.2  million,  a
decrease of $202.7 million, or 33.5% as compared to net sales for the six months
ended July 29, 2000 of $605.9  million.  This  decrease was  primarily  due to a
decrease in comparable store sales and stores closed after the second quarter of
fiscal 2000,  partially  offset by new stores opened since the second quarter of
fiscal 2000.  Comparable  store sales decreased 32.6% in the first six months of
fiscal 2001 as  compared  to the first half of fiscal  2000.  The  decrease  was
primarily  the result of (1) lower  customer  purchases  of  "big-ticket"  power
equipment,  reflecting an economic slowdown and a deliberate  reduction of sales
efforts by the Company  related to these and other  lower-margin  product lines,
(2) fewer sales generated by advertising and related promotional pricing as part
of the Company's change in advertising strategy,  (3) weather-related  delays in
the start of the spring  selling  season  compared to fiscal 2000,  particularly
affecting lawn and garden sales, and (4) out-of-stock  issues experienced during
the first and second quarters of fiscal 2001, due to interrupted vendor shipping
patterns.
<TABLE>
<CAPTION>
The  Company's  overall  sales  decrease  in the second  quarter of fiscal  2001
compared to fiscal 2000 is summarized as follows:
<S>                                                                                              <C>
Sales decline due to reduced emphasis on certain low-margin categories, including power
   equipment                                                                                      $  72.4
Decrease in sales related to spring weather delays and out-of-stocks due to interrupted              59.9
   vendor shipping patterns
Sales decline due to reduction in promotional pricing                                                54.0
Sales decline due to closure of underperforming stores after the second quarter of 2000              19.3
Incremental sales from new stores opened during 2000                                                 (2.9)
                                                                                                  -------
                                                                                                  $ 202.7
                                                                                                  =======
</TABLE>
Gross  profit for the six months  ended  August 4, 2001 was  $118.0  million,  a
decrease of $59.8 million,  or 33.6%,  as compared to $177.8 million for the six
months ended July 29, 2000,  principally as a result of the sales decrease noted
above.  Gross profit as a percentage of net sales decreased to 29.3% for the six
months ended August 4, 2001,  as compared to 29.4% for the six months ended July
29, 2000. The decrease in gross profit  percentage is primarily

                                      -10-
<PAGE>
attributable to (1) a reduction of negotiated  vendor  discounts  which,  due to
lower purchase levels,  prevent  achieving  volume  thresholds and (2) markdowns
taken on SKU's that were eliminated from the Company's active assortment.  These
reductions were partly offset by margin  increases from the Company's  decisions
to (1) reduce emphasis on power equipment and other low-margin  categories,  (2)
reduce  promotional  pricing  associated with the Company's  reduced emphasis on
advertising,  and (3) consolidate the distribution  network. The Company expects
to receive greater benefit from the  distribution  reorganization  in subsequent
quarters.

SGA  expenses for the six months  ended  August 4, 2001 were $120.1  million,  a
decrease of $21.6  million,  or 15.2%,  as compared to SGA  expenses for the six
months ended July 29, 2000. This decrease is a result of cost reductions  either
planned as part of the  Company's new operating  strategies  or  implemented  in
response to the lower sales activity.  Specifically, the decline in SGA expenses
is summarized as follows:
<TABLE>
<CAPTION>
<S>                                                                                     <C>
Reduction of store operating expenses due to lower sales and net store closings          $  16.1
Reduction in advertising expenses due to the Company's strategic reduction in
   mass-distribution advertising flyers                                                      9.3
Reduction of corporate payroll                                                               2.7
Increase in other operating expenses                                                        (1.5)
Reduction in vendor advertising support                                                     (5.0)
                                                                                         -------
                                                                                         $  21.6
                                                                                         =======
</TABLE>
SGA expenses  increased as a percentage of net sales to 29.8% for the six months
ended  August 4, 2001 as  compared  to 23.4% for the six  months  ended July 29,
2000.  The increase was  primarily  due to lower sales volume for the six months
ended August 4, 2001 versus the first six months of fiscal 2000.

Operating  loss for the six  months  ended  August 4, 2001 was $6.1  million,  a
decrease of $35.9  million as compared to operating  income of $29.9 million for
the six months ended July 29, 2000.  Operating loss as a percentage of net sales
was (1.5%) for six months  ended  August 4, 2001 as compared  to 4.9%  operating
profit for the six months ended July 29, 2000.  The decrease was a result of the
factors noted above, principally the decline in comparable store sales.

Interest  expense  decreased to $21.0 million for the six months ended August 4,
2001, as compared to $22.2 million for the six months ended July 29, 2000.  This
decrease is due to the Company's  lower average  interest rates between years on
the Company's  borrowings,  partially offset by higher average  borrowings under
the Company's revolving line of credit for the six months ended August 4, 2001.

Income tax expense for the six months  ended  August 4, 2001 was $13.9  million,
compared to income tax expense of $4.7 million for the six months ended July 29,
2000. As discussed in Note 5 to the condensed consolidated financial statements,
during  the  second  quarter  of fiscal  2001,  the  Company  established  a tax
valuation  allowance  under the provision of SFAS No. 109 in the amount of $23.7
million that increased income tax expense.

The net loss for the six  months  ended  August 4, 2001 was  $40.9  million,  as
compared to net income of $2.9  million for the six months  ended July 29, 2000,
as a result of the factors discussed above.

Liquidity and Capital Resources

The Company's  principal  ongoing cash  requirements are those necessary to fund
its  operations  and meet its debt service  obligations.  The Company's  primary
sources of  liquidity  have been funds  generated  from  operations,  borrowings
pursuant to its revolving and term credit  facilities,  short-term  trade credit
and additional equity contributions.

On August 4, 2001, the Company had working  capital of $167.4  million,  a $15.3
million  increase  from working  capital of $152.1  million on February 3, 2001.
This increase resulted  primarily from a $31.3 million aggregate increase in the
Company's  inventory,  partially  offset by a $16.1 million increase in accounts
payable.  The increases in the Company's accounts payable and inventory balances
since  February 3, 2001 are due  primarily to  increases  in  inventory  for the
spring season.

Net cash used in operating activities was $27.4 million for the six months ended
August 4, 2001.  This was an increase of $8.9 million from the second quarter of
fiscal  2000,  during  which  $18.5  million  of  cash  was  used  in

                                      -11-
<PAGE>

operating activities. This increase resulted primarily from a smaller investment
in net  working  capital  during the second  quarter of 2001 as  compared to the
second quarter of 2000,  during which an "overbuy" of approximately  $60 million
of spring product occurred. The Company's capital expenditures were $1.5 million
and $32.6  million for the six months  ended  August 4, 2001 and July 29,  2000,
respectively.  This  decrease  reflects the  Company's  focus on  improving  the
profitability of its existing  operations and limiting  capital  expenditures to
necessary  repairs and maintenance in fiscal 2001.  Capital  expenditures in the
second quarter of 2000 included  expenditures for new stores and  merger-related
information systems expenditures.

The  Company  anticipates  that its  principal  uses of cash in the  foreseeable
future will be for working capital  requirements,  debt service requirements and
capital expenditures.  In addition,  the Company has announced the closing of 35
underperforming  stores and a distribution center during the remainder of fiscal
2001 and will  transfer a  substantial  portion of that  inventory to performing
stores to improve  these  stores'  in-stock  position.  Based upon  current  and
anticipated  levels of  operations,  and  particularly  based upon the Company's
revised business model and operating strategies, the Company anticipates that it
will continue to be challenged with respect to obtaining sufficient inventory to
maximize sales performance. Accordingly, the Company may have difficulty meeting
the  present  level  of  debt  service   requirements   without  further  equity
contributions.  As a result,  the Company  has  initiated  discussions  with its
senior  lenders  about  restructuring  its  balance  sheet to improve  near-term
liquidity and reduce future debt service to a more manageable level.

Seasonality and Weather

Prior to the management and operational issues and related  nonrecurring charges
encountered during fiscal 2000, the Company has historically  generated positive
operating  income in each of its four  fiscal  quarters.  However,  because  the
Company is an  agricultural  specialty  retailer,  its sales  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
generally  have been highest in the second  quarter  (May through  July) 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
(February  through April).  The Company expects these trends to continue for the
foreseeable future.

The  Company's  results  are  also  impacted  by  weather  patterns,  and can be
adversely  affected by temperature and  precipitation  fluctuations  outside the
expected  pattern for each  season.  Unseasonable  weather and  excessive  rain,
drought,  or early or late frosts may affect the  Company's  sales and operating
income.

Inflation

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

Market Risk

The Company's exposure to market risk has not changed  significantly  during the
second quarter from that  discussed in its Form 10-K,  other than the expiration
of its interest rate cap agreements.

                                      -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..................................None

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

ITEM 5.  OTHER INFORMATION................................................None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

          (a)      EXHIBITS - See Index to Exhibits Included Elsewhere Herein

          (b)      Reports on Form 8-K
                   No reports on Form 8-K were filed during the quarter ended
                   August 4, 2001.



                                      -13-
<PAGE>

                                  SIGNATURE(S)


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 18, 2001       QUALITY STORES, INC.



                                /s/ Thomas J. Reinebach
                                Thomas J. Reinebach
                                Executive Vice-President and
                                  Chief Financial Officer
                                (Principal Financial and Accounting Officer)


                                      -14-
<PAGE>


                              QUALITY STORES, INC.

                                INDEX TO EXHIBITS


EXHIBIT 10.1   Amendment No. 7 and Waiver to the Second Amended and Restated
               Credit Agreement

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

EXHIBIT 99     Important Factors Regarding Forward-Looking Statements



                                      -15-