<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                   FORM 10-Q


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                   For the quarterly period ended May 1, 1999
                                                  -----------
                                       OR
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

      For the transition period from _________________to _________________

       Commission file number             0-21406
                            ----------------------------------------------

                               Brookstone, Inc.
     ---------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                Delaware                                 06-1182895
                --------                                 ----------
(State or other jurisdiction of incorporation            (I.R.S. Employer
     or organization)                                 Identification No.)

                    17 Riverside Street, Nashua, NH  03062
                    --------------------------------------
              (address of principal executive offices, zip code)

                                 603-880-9500
                                 ------------
             (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
  (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___
     ---

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes_____ No_____

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 8,133,838 shares of common
                                                ----------
stock as of June 4, 1999.
            -------------
<PAGE>

                               BROOKSTONE, INC.

                              Index to Form 10-Q
<TABLE>
<CAPTION>
Part I:  Financial Information                                          Page No.
         ---------------------                                          -------
<S>                                                                     <C>
Item 1:
         Consolidated Balance Sheet
          as of May 1, 1999, January 30, 1999 and May 2, 1998              3

         Consolidated Statement of Operations for the thirteen weeks
          ended May 1, 1999 and May 2, 1998                                4

         Consolidated Statement of Cash Flows for the thirteen
          weeks ended May 1, 1999 and May 2, 1998                          5

         Notes to Consolidated Financial Statements                        6

Item 2:
         Management's Discussion and Analysis of Financial
          Condition and Results of Operations                              8

Part II: Other Information
         -----------------

Item 1:
         Legal Proceedings                                                11

Item 2:
         Change in Securities                                             11

Item 3:
         Defaults by the Company upon its Senior Securities               11

Item 4:
         Submission of Matters to a Vote of Security Holders              11

Item 5:
         Other Information                                                11

Item 6:
         Exhibits and Reports on Form 8-K                                 11

Signatures                                                                12
</TABLE>

                                       2
<PAGE>

                               BROOKSTONE, INC.
                          CONSOLIDATED BALANCE SHEET
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                            (Unaudited)                                  (Unaudited)
                                                            May 1, 1999          January 30, 1999        May 2, 1998
                                                           -------------         -----------------       ------------
<S>                                                        <C>                   <C>                     <C>
Assets
------

Current assets:
    Cash and cash equivalents                              $     1,808           $    17,391             $   2,258
    Receivables, net                                             6,051                 6,256                 5,507
    Merchandise inventories                                     43,443                37,444                44,079
    Deferred income taxes                                        4,787                 1,781                 5,964
    Other current assets                                         4,066                 4,623                 4,369
                                                           -------------         -----------------       ------------
        Total current assets                                    60,155                67,495                62,177

Deferred income taxes                                            3,643                 3,643                 2,916
Property and equipment, net                                     40,714                42,124                36,923
Other assets                                                     1,468                 1,299                   778
                                                           -------------         -----------------       ------------
                                                           $   105,980           $   114,561             $ 102,794
                                                           =============         =================       ============

Liabilities and Shareholders' Equity
------------------------------------

Current liabilities:
    Short-term borrowings                                  $        --           $        --             $   7,360
    Accounts payable                                            14,667                10,727                14,875
    Other current liabilities                                   10,303                18,950                10,357
                                                           -------------         -----------------       ------------
        Total current liabilities                               24,970                29,677                32,592

Other long-term liabilities                                     10,068                 9,962                 9,837
Long-term obligation under capital lease                         2,589                 2,612                 2,675

Commitments and contingencies

Shareholders' equity:
Preferred stock, $0.001 par value:
 Authorized - 2,000,000 shares; issued and
 outstanding - 0 shares at May 1, 1999,
 January 30, 1999 and May 2, 1998
Common stock, $0.001 par value
 Authorized 50,000,000 shares; issued and
 outstanding - 8,133,838 shares at May 1,
 1999, 8,064,586 shares at January 30, 1999
 and 7,935,884 shares at May 2, 1998                                 8                     8                     8
Additional paid-in capital                                      48,997                48,330                47,465
Retained earnings                                               19,395                24,019                10,264
Treasury stock, at cost - 3,616 shares at May
 1, 1999, January 30, 1999 and May 2, 1998                         (47)                  (47)                  (47)
                                                           -------------         -----------------       ------------
      Total shareholders' equity                                68,353                72,310                57,690
                                                           -------------         -----------------       ------------
                                                           $   105,980           $   114,561             $ 102,794
                                                           =============         =================       ============

</TABLE>

                                       3
<PAGE>

                                BROOKSTONE, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS
                     (In thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                      Thirteen Weeks Ended
                                          -----------------------------------------------
                                          May 1, 1999                         May 2, 1998
                                          -----------                         -----------
 <S>                                      <C>                                 <C>
Net sales                                 $    42,100                          $   37,919

Cost of sales                                  31,819                              29,032
                                          -----------                         -----------
Gross profit                                   10,281                               8,887

Selling, general and
administrative
expenses                                       17,652                              15,946
                                          -----------                         -----------
Loss from operations                           (7,371)                             (7,059)

Interest expense, net                             135                                 230
                                          -----------                         -----------
Loss before taxes                              (7,506)                             (7,289)

Income tax benefit                             (2,882)                             (2,872)
                                          -----------                         -----------
Net loss                                  $    (4,624)                         $   (4,417)
                                          ===========                         ===========
Net loss per share -
basic/diluted                             $     (0.57)                         $    (0.56)

Weighted average shares
outstanding - basic/diluted                     8,095                               7,889
                                          ===========                         ===========

</TABLE>

                                       4
<PAGE>

                               BROOKSTONE, INC.

                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                            Thirteen  Weeks Ended
                                                               --------------------------------------------
                                                                  May 1, 1999               May 2, 1998
                                                               -----------------          -----------------
<S>                                                            <C>                        <C>
Cash flows from operating activities:
Net loss                                                       $          (4,624)         $          (4,417)

Adjustments to reconcile net loss to net cash used by
 operating activities:

  Depreciation and amortization                                            2,012                      1,796
  Amortization of debt issuance costs                                         36                         39
  Deferred income taxes                                                   (3,006)                    (3,159)
  (Increase) decrease in other assets                                       (205)                       248
  Increase (decrease) in other long-term liabilities                         106                         25

Changes in working capital:
   Accounts receivable, net                                                  205                         25
   Merchandise inventories                                                (5,999)                    (6,794)
   Other current assets                                                      557                     (3,414)
   Accounts payable                                                        3,940                        435
   Other current liabilities                                              (8,647)                    (6,245)
                                                               -----------------          -----------------
Net cash used by operating activities                                    (15,625)                   (21,461)
                                                               -----------------          -----------------
Cash flows from investing activities:
   Expenditures for property and equipment                                  (602)                      (865)
                                                               -----------------          -----------------
Net cash used for investing activities                                      (602)                      (865)
                                                               -----------------          -----------------
Cash flows from financing activities:
   Borrowings from revolving credit                                           --                      7,360
   Payments for capitalized lease                                            (23)                       (23)
   Proceeds from exercise of stock options and related tax
    benefits                                                                 667                        341
                                                               -----------------          -----------------
Net cash provided by financing activities                                    644                      7,678
                                                               -----------------          -----------------
Net decrease in cash and cash equivalents                                (15,583)                   (14,648)

Cash and cash equivalents at beginning of period                          17,391                     16,906
                                                               -----------------          -----------------
Cash and cash equivalents at end of period                     $           1,808          $           2,258
                                                               =================          =================
</TABLE>

                                       5
<PAGE>

                               BROOKSTONE, INC.

                  Notes to Consolidated Financial Statements

1.   The results of the thirteen-week period ended May 1, 1999 are not
     necessarily indicative of the results for the full fiscal year. The
     Company's business, like the business of retailers in general, is subject
     to seasonal influences. Historically, the Company's fourth fiscal quarter,
     which includes the winter holiday selling season, has produced a
     disproportionate amount of the Company's net sales and all of its income
     from operations. The Company expects that its business will continue to be
     subject to such seasonal influences.

2.   The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles and
     practices consistently applied. In the opinion of the Company, these
     financial statements contain all adjustments (consisting of only normal
     recurring adjustments) necessary to present fairly the financial position
     and the results of operations for the periods reported. Certain information
     and footnote disclosures normally included in financial statements
     presented in accordance with generally accepted accounting principles have
     been condensed or omitted. It is suggested that the accompanying
     consolidated financial statements be read in conjunction with the annual
     financial statements and notes thereto which may be found in the Company's
     Fiscal 1998 annual report.

3.   The exercise of stock options which has been granted under the Company's
     stock option plans gives rise to compensation which is includable in the
     taxable income of the optionees and deductible by the Company for tax
     purposes upon exercise. Such compensation reflects an increase in the fair
     market value of the Company's common stock subsequent to the date of grant.
     For financial reporting purposes, the tax effect of this deduction is
     accounted for as a credit to additional paid-in capital rather than as a
     reduction of income tax expense. Such exercises resulted in a tax benefit
     to the Company of approximately $124,000 for the thirteen-week period ended
     May 1, 1999.

4.   Business conducted by the Company can be segmented into two distinct areas
     determined by the method of distribution channel. The retail segment is
     comprised of all full-year stores in addition to all temporary stores and
     kiosks. Retail product distribution is conducted directly through the store
     location. The direct marketing segment is comprised of the Hard-to-Find
     Tools, Brookstone Gift Collection and Gardeners Eden catalog, products
     promoted via SkyMall and the interactive Internet site www.Brookstone.com.
                                                            ------------------
     Direct marketing product distribution is conducted through the Company's
     direct marketing call center and distribution facility located in Mexico,
     Missouri. Both segments of the Company sell similar products, although not
     all Company products are fully available within both segments.

                                       6
<PAGE>

     All costs directly attributable to the direct marketing segment are charged
     accordingly while all remaining operating costs are charged to the retail
     segment. The Company's management does not review assets by segment.

     The table below discloses segment net sales and pre-tax loss for the
     thirteen weeks ended May 1, 1999 and May 2, 1998 (in thousands).

<TABLE>
<CAPTION>
(in thousands)                            Net Sales                                    Pre-tax Loss
                        ------------------------------------------       ---------------------------------------
                             May 1, 1999         May 2, 1998                 May 1, 1999       May 2, 1998
                        ------------------------------------------       ---------------------------------------
<S>                     <C>                      <C>                     <C>                   <C>
Reportable segment:
  Retail                     $  37,302           $  34,061                   $    (6,677)      $  (6,277)
  Direct marketing               4,798               3,858                          (694)           (782)

Reconciling items:
   Interest expense                ---                 ---                          (135)           (230)
                        ------------------------------------------       ---------------------------------------
Consolidated:                $  42,100           $  37,919                   $    (7,506)      $  (7,289)
                        ==========================================       =======================================
</TABLE>

5.   Effective May 3, 1999 the Company acquired certain assets relating to the
     Gardeners Eden catalog from Williams-Sonoma, Inc. The acquisition will be
     accounted for as a purchase and, accordingly, the purchase price will be
     allocated to the underlying assets based on their respective estimated fair
     values at the date of acquisition.

                                       7
<PAGE>

                               BROOKSTONE, INC.

                    Management's Discussion and Analysis of
               Financial Condition and Results of Operations for
                  the Thirteen-Week Period Ended May 1, 1999

Results of Operations
---------------------

     For the thirteen-week period ended May 1, 1999, net sales increased 11.0%
over the comparable period last year. Comparable store sales for the thirteen-
week period increased 0.5%. The sales increase reflected the results of opening
21 new stores subsequent to the first quarter of Fiscal 1998 and two new stores
during the first quarter of Fiscal 1999, offset by the closing of three stores
subsequent to the first quarter of Fiscal 1998. The total number of Brookstone
stores open at the end of the thirteen-week period ended May 1, 1999 was 198
versus 178 at the end of the comparable period in Fiscal 1998. In Fiscal 1998,
the Company operated a total of 19 summer seasonal locations at the end of the
first quarter. This program is not being repeated in Fiscal 1999. Direct
marketing sales increased 24.4% over the comparable period last year. This
increase was driven primarily by increased circulation of approximately 19%.

     Gross profit as a percentage of net sales was 24.4% for the thirteen-week
period ended May 1, 1999, versus 23.4% for the comparable period last year. This
increase was attributable to a decrease in net material costs resulting from
lower sourcing costs. In addition, occupancy costs decreased as a result of the
elimination of the summer seasonal program operated during the first quarter of
Fiscal 1998.

     Selling, general and administrative expenses as a percentage of net sales
were 41.9% for the thirteen-week period ended May 1, 1999 versus 42.1% for the
comparable period last year. This decrease in percentage was primarily due to
the continued leveraging of operating expenses.

     Net interest expense for the thirteen-week period ended May 1, 1999 was
$0.1 million compared to $0.2 million during the comparable period last year.
This decrease was related to lower borrowings resulting from lower working
capital needs.

     As a result of the foregoing, the Company reported a net loss of $4.6
million, or $0.57 per basic/diluted share, for the thirteen-week period ended
May 1, 1999, as compared to a net loss of $4.4 million, or $0.56 per
basic/diluted share, for the comparable period last year.

Financial Condition
-------------------

     For the first quarter of Fiscal 1999, net cash used by operating activities
totaled $15.6 million, primarily as a result of the net loss, purchase of
inventory and payment of income taxes. Cash used for investment activities
during the first quarter of Fiscal 1999, representing the purchase of property
and equipment, amounted to $0.6 million. Cash from financing activities during
the first quarter of Fiscal 1999 amounted to $0.6 million, acquired primarily
through proceeds from the exercise of stock options and related tax benefits.

     For the first quarter of Fiscal 1998, net cash used by operating activities
totaled $21.5 million, primarily as a result of the net loss, purchase of
inventory and payment of income taxes. Cash used for investment activities
during the first quarter of Fiscal 1998, representing the purchase of property
and equipment, amounted to $0.9 million. Cash from financing activities during
the first quarter of Fiscal 1998 amounted to $7.7 million, acquired primarily
through borrowings under the Company's revolving credit agreement.

     Merchandise inventories were $43.4 million at May 1, 1999 compared to $37.4
million at January 30, 1999. The increase in inventory is primarily to support
the new stores opened or scheduled to open during Fiscal 1999 and reflects the
timing of inventory purchases for the upcoming Father's Day holiday. The
accounts payable balance was $14.7 million at May 1, 1999 compared to $10.7
million at January 30, 1999.

                                       8
<PAGE>

     The Company's capital expenditures in the first quarter of Fiscal 1999 were
principally related to the remodeling of two retail stores and the opening of
two new stores during the first quarter of Fiscal 1999. The Company anticipates
opening approximately 15 to 20 new stores, including as many as five airport
locations, and remodeling approximately 10 stores during Fiscal 1999.

     The Company maintains a revolving credit agreement to finance inventory
purchases, which historically peak in the third quarter in anticipation of the
winter holiday selling season. At May 1, 1999, the Company had no outstanding
borrowings under its revolving credit agreement, and at May 2, 1998 it had $7.4
million in borrowings.

     Effective May 3, 1999 the Company acquired certain assets relating to the
Gardeners Eden catalog from Williams-Sonoma, Inc. The Company believes that
available borrowings, cash on hand and anticipated cash generated from
operations will be sufficient to finance this acquisition, planned retail store
openings / remodelings and other capital requirements throughout Fiscal 1999.

Year 2000 Software Compliance
-----------------------------

     Many computer programs in use today were originally written using two-digit
fields to identify years instead of four digits to define century and year.
These programs were written without considering the impact of the upcoming
change in the century and may experience difficulty in handling dates beyond
December 31, 1999. This phenomenon, sometimes referred to as "the year 2000
problem" or "the Y2K problem", could cause computer software to fail or create
erroneous results unless corrective or alternative measures are instituted.

     The Company relies on software for the efficient operation of many of its
important functions, including inventory purchasing, shipping and receiving,
logistics, inventory forecasting and replenishment, payroll and human resource
record-keeping, direct marketing operations, point-of-purchase transaction
recording and financial reporting. Nearly all of the software relied upon in the
Company's operations is purchased from outside sources (who, in some instances,
modify or customize pre-packaged software to fit the Company's needs). In
addition, the Company has entered into maintenance contracts from such vendors
to ensure that such programs will remain operable or will be upgraded at
marginal incremental cost to the Company in the event that such a program is not
functioning optimally. Since 1996, the Company has been working with its outside
software vendors to (i) assess the Y2K readiness of their products, (ii)
implement changes and upgrades necessary to eliminate the risk of Y2K problems
and (iii) test the Company's systems and components to ensure proper
functionality.

     The Company will implement upgrades of the employee timekeeping,
merchandise analysis, call scheduling and sales tax software in 1999 and will
also complete the installation of its point-of-purchase year 2000 compliant
system which is now being rolled out chain-wide after being successfully tested
in five stores. With the exception of the software mentioned in the previous two
sentences, each of the software products involved in the Company's significant
operations has been represented to be year 2000 compliant, or has been upgraded
to versions that have been represented to be year 2000 compliant, by their
respective vendors. In addition, the Company has received representations from
its primary bank and its credit card processors that the software programs they
operate to facilitate services provided to the Company are, or are in the
process of becoming, year 2000 compliant. The total incremental cost to the
Company for the software and hardware upgrades described in this paragraph is
expected to be approximately $300,000.

     Because the Y2K problem is often concealed, the Company believes that the
evaluation of its systems and the assessment of their readiness must be a
continuous process. During the first half of Fiscal 1999, the Company will
continue to test and evaluate its systems for year 2000 compliance.

                                       9
<PAGE>

     There can be no assurance that the Company's operating results would not be
adversely affected if any of its largest vendors were unable to fill the
Company's orders. The Company has received written statements from each of its
largest vendors which represent that each such vendor has addressed, or is in
the process of addressing, the year 2000 issue such that manufacturing and
shipping activities will not be disrupted by the Y2K problem. The Company's
merchandising team is also considering other sources for similar products in the
event that such vendors are unable to meet the Company's needs. Because the
products sold by the Company are oftentimes unique in the marketplace, however,
there can be no assurance that adequate substitute products will be available.
See "Outlook: Important Factors and Uncertainties -- Dependence on Innovative
Merchandising" on pages 21 - 23 of the Company's 1998 Annual Report on Form 10-
K. The Company currently uses neither electronic data interchange ("EDI")
technology, nor advance shipping notification ("ASN") technology with its
vendors.

     The Company believes that it has established appropriate measures to
minimize the risk of disruption to its business as it approaches the year 2000.
This belief is a forward-looking statement and is premised, in part, on
representations provided to the Company by third-party sources and vendors, the
accuracy of which is in many cases difficult or impossible for the Company to
validate. If any such representation relating to a software product relied upon
for a significant business function, or a representation from a significant
vendor, ultimately proves inaccurate, the Company could incur material
remediation expenses and/or lost sales. In addition, like most other retailers,
the Company could be materially adversely affected by disruption in the
externally controlled distribution channel (including ports, United States
Customs and transportation vendors), the banking and credit systems and electric
and other utility suppliers.

                                       10
<PAGE>

                                    PART II

                               Other Information


Item 1:   LEGAL PROCEEDINGS
          -----------------

          The Company is involved in various legal proceedings arising in the
          normal course of business.  The Company believes that the resolution
          of these matters will not have a material effect on the Company's
          financial condition or results of operations.


Item 2:   CHANGES IN SECURITIES
          ---------------------

          None


Item 3:   DEFAULT 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

          11 - Computation of Net Loss Per Share

       B) Reports on Form 8-K

          No reports on Form 8-K were filed during the period for which this
          report is filed.

                                       11
<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.



                                   Brookstone, Inc.
                                   ----------------
                                     (Registrant)



                                   /s/ Philip W. Roizin
                                   -----------------------------------
        June 15, 1999                        (Signature)
             ---

                                   Philip W. Roizin
                                   Executive Vice President Finance and
                                    Administration,
                                   Treasurer and Secretary
                                   (Principal Financial Officer
                                   and duly authorized to sign on behalf of
                                    registrant)

                                       12