<PAGE>   1
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 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 December 27, 1998

                                       OR

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

                      For the transition from ____ to ____

                        Commission file number 001-13222

                           STATER BROS. HOLDINGS INC.
             (Exact name of registrant as specified in its charter)


           Delaware                                    33-0350671
           --------                                    ----------
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)


           21700 Barton Road
          Colton, California                                     92324
          ------------------                                     -----
 (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code           (909) 783-5000
                                                             --------------


                                 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  [ ].

            As of January 22, 1999, there were issued and outstanding
            50,000 shares of the registrant's Class A Common Stock.


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                                       1
<PAGE>   2

                           STATER BROS. HOLDINGS INC.
                                DECEMBER 27, 1998


                                      INDEX



<TABLE>
<CAPTION>
PART I         FINANCIAL INFORMATION (UNAUDITED)                                 PAGE
------         ---------------------------------                                 ----
<S>            <C>                                                               <C>
ITEM 1.        FINANCIAL STATEMENTS

               CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF SEPTEMBER 27, 
                 1998 AND DECEMBER 27, 1998                                       3

               CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE 13 
                 WEEKS ENDED DECEMBER 28, 1997 AND DECEMBER 27, 1998              5

               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE 
                 13 WEEKS ENDED DECEMBER 28, 1997 AND DECEMBER 27, 1998           6

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)             7

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS                                9

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK         16


PART II        OTHER INFORMATION


ITEM 1.        LEGAL PROCEEDINGS                                                 17

ITEM 2.        CHANGES IN SECURITIES                                             17

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES                                   17

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               17

ITEM 5.        OTHER INFORMATION                                                 17

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K                                  17


SIGNATURES                                                                       19
</TABLE>



                                       2
<PAGE>   3

PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                           STATER BROS. HOLDINGS INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                                 (In thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                           SEPT. 27,       DEC. 27,
                                                             1998           1998
                                                           ---------      --------
<S>                                                        <C>           <C>     
Current Assets
   Cash and cash equivalents .........................      $ 57,281      $ 64,142
   Receivables .......................................        20,451        22,131
   Inventories .......................................       116,274       117,949
   Prepaid expenses ..................................         5,176         6,483
   Deferred income taxes .............................         4,588         4,589
   Properties held for sale ..........................         3,969         4,312
                                                            --------      --------

Total current assets .................................       207,739       219,606

Investment in unconsolidated affiliate ...............         8,472         9,270


Property and equipment
   Land ..............................................        15,924        17,170
   Buildings and improvements ........................        94,794        95,927
   Store fixtures and equipment ......................       100,781       104,415
   Property subject to capital leases ................        14,368        14,368
                                                            --------      --------
                                                             225,867       231,880


   Less accumulated depreciation and amortization ....       107,513       110,456
                                                            --------      --------
                                                             118,354       121,424


Deferred income taxes ................................         2,449         2,449
Deferred debt issuance costs, net ....................        12,294        11,591
Lease guarantee escrow ...............................         9,629        10,656
Other assets .........................................         5,381         5,624
                                                            --------      --------


Total assets .........................................      $364,318      $380,620
                                                            ========      ========
</TABLE>



     See accompanying notes to unaudited consolidated financial statements.



                                       3
<PAGE>   4

                           STATER BROS. HOLDINGS INC.
                     CONSOLIDATED BALANCE SHEETS (Continued)
                                   (Unaudited)
                      (In thousands, except share amounts)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                SEPT. 27,       DEC. 27,
                                                                  1998            1998 
                                                                ---------       ---------
<S>                                                             <C>             <C>      
Current Liabilities
   Accounts payable ......................................      $  65,553       $  70,373
   Accrued payroll and related expenses ..................         25,363          25,923
   Other accrued liabilities .............................         24,788          33,778
   Current portion of capital lease obligations ..........          1,310           1,339
                                                                ---------       ---------

Total current liabilities ................................        117,014         131,413

Long-term debt, less current portion .....................        265,000         265,000
Capital lease obligations, less current portion ..........          4,350           4,004
Long-term portion of self-insurance and other reserves ...          8,284           8,284
Other long-term liabilities ..............................          3,725           3,687

Stockholders' equity (deficit)
   Class A Common Stock, $.01 par value:
      Authorized shares - 100,000
      Issued and outstanding shares - 50,000 .............              1               1
   Additional paid-in capital ............................         12,715          12,715
   Retained earnings (deficit) ...........................        (46,771)        (44,484)
                                                                ---------       ---------

Total stockholders' equity (deficit) .....................        (34,055)        (31,768)
                                                                ---------       ---------

Total liabilities and stockholders' equity (deficit) .....      $ 364,318       $ 380,620
                                                                =========       =========
</TABLE>



     See accompanying notes to unaudited consolidated financial statements.



                                        4
<PAGE>   5

                           STATER BROS. HOLDINGS INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)
               (In thousands, except per share and share amounts)

<TABLE>
<CAPTION>
                                                                     13 WEEKS ENDED
                                                                ------------------------
                                                                DEC. 28,        DEC. 27,
                                                                  1997            1998
                                                                --------        --------
<S>                                                             <C>             <C>
Sales.......................................................    $430,918        $441,422
Cost of goods sold..........................................     332,622         339,021
                                                                --------        --------
Gross profit................................................      98,296         102,401

Operating expenses:
  Selling, general and administrative expenses..............      84,567          88,671
  Depreciation and amortization.............................       3,619           3,903
                                                                --------        --------
Total operating expenses....................................      88,186          92,574
                                                                --------        --------
Operating profit............................................      10,110           9,827

Interest income.............................................         721             775
Interest expense............................................      (7,527)         (7,531)
Equity in earnings (loss) from unconsolidated affiliate.....      (1,049)            798
Other income (loss) - net...................................          71             (58)
                                                                --------        --------
Income before income taxes..................................       2,326           3,811
Income taxes................................................         953           1,524
                                                                --------        --------
Net income..................................................    $  1,373        $  2,287
                                                                ========        ========
Earnings per share..........................................    $  27.46        $  45.74
                                                                ========        ========
Average common shares outstanding...........................      50,000          50,000
                                                                ========        ========
Shares outstanding at end of period.........................      50,000          50,000
                                                                ========        ========
</TABLE>



     See accompanying notes to unaudited consolidated financial statements.


                                       5
<PAGE>   6

                           STATER BROS. HOLDINGS INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                             13 Weeks Ended
                                                                          -----------------------
                                                                          DEC. 28,       DEC. 27,
                                                                            1997           1998 
                                                                          --------       --------
<S>                                                                       <C>            <C>     
OPERATING ACTIVITIES:
Net income .........................................................      $  1,373       $  2,287
Adjustments to reconcile net income to net cash provided
 by operating activities:
   Depreciation and amortization ...................................         3,619          3,903
   Provision for deferred income taxes .............................            (1)            (1)
   (Gain) loss on disposals of assets ..............................           (71)            58
   Net undistributed (gain) loss in investment in unconsolidated
     affiliate .....................................................         1,049           (798)
   Changes in operating assets and liabilities:
    (Increase) decrease in receivables .............................           927         (1,680)
    (Increase) decrease in inventories .............................           859         (1,675)
    (Increase) decrease in prepaid expenses ........................        (1,937)        (1,307)
    (Increase) decrease in other assets ............................          (501)          (841)
    Increase (decrease) in accounts payable ........................        (4,494)         4,820
    Increase (decrease) in accrued liabilities and long-term
     portion of self-insurance reserves ............................         6,337          9,512
                                                                          --------       --------

Net cash provided by operating activities ..........................         7,160         14,278
                                                                          --------       --------

INVESTING ACTIVITIES:
Purchase of property and equipment .................................        (7,621)        (7,811)
Proceeds from sale of property and equipment and properties
 held for sale .....................................................           270            711
                                                                          --------       --------

Net cash (used by) investing activities ............................        (7,351)        (7,100)
                                                                          --------       --------

FINANCING ACTIVITIES:
Principal payments on capital lease obligations ....................          (311)          (317)
                                                                          --------       --------

Net cash (used by) financing activities ............................          (311)          (317)
                                                                          --------       --------

Net increase (decrease) in cash and cash equivalents ...............          (502)         6,861
Cash and cash equivalents at beginning of period ...................        59,086         57,281
                                                                          --------       --------

Cash and cash equivalents at end of period .........................      $ 58,584       $ 64,142
                                                                          ========       ========

Interest paid ......................................................      $    150       $    123
Income taxes paid ..................................................      $      0       $  1,675
</TABLE>



     See accompanying notes to unaudited consolidated financial statements.



                                       6
<PAGE>   7

                           STATER BROS. HOLDINGS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                DECEMBER 27, 1998


NOTE 1 - BASIS OF PRESENTATION

        In the opinion of management, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of Stater Bros. Holdings Inc. (the
"Company") and its subsidiaries as of September 27, 1998 and December 27, 1998
and the results of its operations and cash flows for the thirteen weeks ended
December 28, 1997 and December 27, 1998. These consolidated financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's latest annual report filed on Form 10-K. The
operating results for the thirteen weeks ended December 27, 1998 are not
necessarily indicative of the results of operations for a full year.

NOTE 2 - INCOME TAXES

        The provision for income taxes for the thirteen weeks ended December 28,
1997 and December 27, 1998 consists of the following:

<TABLE>
<CAPTION>
                                                        13 Weeks Ended
                                                 ------------------------------
                                                 Dec. 28,              Dec. 27, 
                                                   1997                  1998
                                                 --------              --------
                                                         (In thousands)
<S>                                              <C>                   <C>   
         Federal income taxes                     $  737                $1,296
         State income taxes                          216                   228
                                                  ------                ------
                                                  $  953                $1,524
                                                  ======                ======
</TABLE>

NOTE 3 - UNCONSOLIDATED AFFILIATE

        The Company owns 50% of Santee Dairies LLC. Through its wholly owned
subsidiary, Santee Dairies, Inc. ("Santee"), it operates a fluid milk processing
plant located in City of Industry, California, and the Company is not the
controlling stockholder. Accordingly, the Company accounts for its investment in
Santee Dairies LLC using the equity method of accounting and recognized a loss
of $1,049,000 for the thirteen weeks ended December 28, 1997, and recognized
income of $798,000 for the thirteen weeks ended December 27, 1998. The Company
is a significant customer of Santee which supplies the Company with a
substantial portion of its fluid milk and dairy products.

Summary of unaudited financial information for Santee Dairies LLC is as follows:

<TABLE>
<CAPTION>
                                                       13 Weeks Ended
                                                 --------------------------
                                                 Dec. 28,          Dec. 27, 
                                                   1997              1998
                                                 --------          --------
                                                        (In thousands)
<S>                                              <C>               <C>     
         Current assets                          $ 38,787          $ 16,585
         Non-current assets                        96,657           109,870
         Current liabilities                       34,078            26,652
         Non-current liabilities                   83,011            81,260
         Shareholder's equity                      18,355            18,543
         
         Sales                                     43,892            48,227
         Gross profit                               3,628             3,033
         Net income (loss)                       $ (2,098)         $  1,602
</TABLE>



                                       7
<PAGE>   8
                           STATER BROS. HOLDINGS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                DECEMBER 27, 1998


NOTE 4 - COVENANT NOT TO COMPETE

        On March 8, 1994, the Company entered into a $5.0 million prepaid five
year covenant not to compete which was included in a Consulting Agreement with
Craig Corporation and is amortized to earnings over the five year term of the
covenant not to compete.

NOTE 5 - RECLASSIFICATIONS

        Certain amounts in the prior periods have been reclassified to conform
to the current period financial statement presentation.

NOTE 6 - USE OF ESTIMATES

        The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.



                                       8
<PAGE>   9

                           STATER BROS. HOLDINGS INC.
                                DECEMBER 27, 1998


PART I - FINANCIAL INFORMATION (CONTD.)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        RECAPITALIZATION TRANSACTION

        In March 1994, the Company completed a Recapitalization Transaction (the
        "Recapitalization") which transferred effective voting control of the
        Company to La Cadena Investments ("La Cadena"), reclassified the
        Company's outstanding equity, provided for certain cash payments and
        distributions to Craig Corporation ("Craig"), previously a shareholder
        of the Company, and provided the Company with an option to acquire
        Craig's remaining equity in the Company. The Recapitalization was funded
        through an offering of $165.0 million of 11% Senior Notes due 2001 (the
        "11% Notes") which are listed and trade on the American Stock Exchange.

        Effective March 8, 1996, pursuant to options available to the Company,
        the Company exercised its right to convert all of its outstanding shares
        of Common Stock (previously held by Craig) into 693,650 shares of its
        Series B Preferred Stock. The Series B Preferred Stock had a redemption
        value of approximately $69.4 million and paid dividends at the rate of
        10.5% per annum. In August 1997, the Company redeemed all of the
        outstanding shares of its Series B Preferred Stock for $69.4 million
        plus accrued and unpaid dividends. The Series B Preferred Stock
        redemption was funded through an offering of $100 million of 9% Senior
        Subordinated Notes due 2004 (the "9% Notes"), which are listed and trade
        on the American Stock Exchange.

        OWNERSHIP OF THE COMPANY

        Effective August 1997, La Cadena became the sole shareholder of the
        Company and holds all of the shares of the Company's Class A Common
        Stock which are entitled to 1.1 votes per share. La Cadena Investments
        is a California General Partnership whose partners include Jack H.
        Brown, Chairman of the Board, President and Chief Executive Officer of
        the Company and other members of senior management of the Company. Jack
        H. Brown has a majority interest in La Cadena and is the managing
        general partner with the power to vote the shares of the Company held by
        La Cadena.



                                       9
<PAGE>   10

                           STATER BROS. HOLDINGS INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        RESULTS OF OPERATIONS

        The following table sets forth certain income statement components
        expressed as a percent of sales for the thirteen weeks ended December
        28, 1997 and December 27, 1998.

<TABLE>
<CAPTION>
                                                           13 Weeks Ended
                                                     ---------------------------
                                                     Dec. 28,          Dec. 27, 
                                                       1997              1998
                                                     --------          ---------
<S>                                                  <C>               <C>    
        Sales                                         100.00%           100.00%
        Gross profit                                   22.81             23.20
        Operating expenses:
          Selling, general and administrative
          expense                                      19.62             20.09
          Depreciation and amortization                  .84               .89
        Operating profit                                2.35              2.22
        Interest income                                  .17               .18
        Interest expense                               (1.75)            (1.71)
        Equity in (loss) from
          unconsolidated affiliate                      (.24)              .18
        Other income (loss) - (net)                      .01              (.01)
        Income before income taxes                       .54%              .86%
</TABLE>

        Total sales for the thirteen weeks ended December 27, 1998, the first
        quarter of fiscal 1999, increased 2.4% and amounted to $441.4 million
        compared to $430.9 million for the same period in the prior year. Like
        store sales increased 1.4% for the thirteen week period ended December
        27, 1998. The Company operated 112 and 111 supermarkets at December 27,
        1998 and December 28, 1997, respectively.

        The increase in sales in the first quarter of fiscal 1999 was due to
        favorable customer response to the Company's first quarter marketing
        plan, which emphasized the Company's high quality and expanded product
        selections in the produce and other perishable departments, and due to a
        new supermarket, which opened in March 1998, and a new replacement
        supermarket, which opened in December 1998.

        Gross profits for the thirteen weeks ended December 27, 1998, amounted
        to $102.4 million or 23.20% of sales compared to $98.3 million or 22.81%
        of sales in the same period of the prior year. Gross profits for the
        first quarter of fiscal 1999 were reduced by approximately $3.1 million
        from the temporary increase in the cost of products purchased from
        Santee Dairies, Inc. ("Santee"). The increase in the first quarter of
        fiscal 1999 gross profits, as a percent of sales, was due to several
        factors including increased sales in perishable departments such as the
        produce, service deli and service bakery departments, which have a
        higher gross profit margin, and a reduction in competitive pricing when
        compared to the same period in fiscal 1998.

        Operating expenses include selling, general and administrative expenses
        and depreciation and amortization. For the thirteen weeks ended December
        27, 1998, selling, general and administrative expenses amounted to $88.7
        million or 20.09% of sales. For the thirteen weeks ended December 28,
        1997, selling, general and administrative expenses amounted to $84.6
        million or 19.62% of



                                       10
<PAGE>   11

                           STATER BROS. HOLDINGS INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        RESULTS OF OPERATIONS (CONTD.)

        sales. The increase in selling, general and administrative expenses in
        the first quarter of fiscal 1999, reflects expenses incurred to operate
        at the increased sales level and expenses incurred to operate the new
        supermarket opened in March 1998 and the costs incurred with the
        December 1998 opening of the new replacement supermarket in Loma Linda,
        California.

        Depreciation and amortization expenses amounted to $3.9 million for the
        thirteen weeks ended December 27, 1998 and amounted to $3.6 million for
        the like period of the prior year and included amortization of $250,000
        in both periods from a five-year prepaid covenant not to compete.

        Operating profit for the thirteen weeks ended December 27, 1998 amounted
        to $9.8 million or 2.22% of sales and were reduced by approximately $3.1
        million from the temporary increase in the cost of product purchased
        from Santee Dairies, Inc. and compare to $10.1 million or 2.35% of sales
        for the thirteen weeks ended December 28, 1997.

        Interest expense amounted to $7.5 million for the thirteen weeks ended
        December 27, 1998 and December 28, 1997. Interest expense for the
        thirteen weeks ended December 27, 1998 and December 28, 1997 includes
        amortization of $703,000 and $694,000, respectively, from fees and
        expenses incurred to acquire debt.

        The Company's equity in earnings from unconsolidated affiliate, amounted
        to $798,000 for the first quarter of fiscal 1999 compared to a loss of
        $1.1 million in the first quarter of the prior year. The 1999 first
        quarter earnings of Santee were favorably impacted by temporary
        increases in the cost of products charged to the two owners of Santee,
        Hughes Family Markets and Stater Bros. Markets, which amounted to
        approximately $4.6 million (pre-tax). In March of 1998, Santee vacated
        its Los Angeles, California facility and moved into a newly constructed
        facility in City of Industry, California. Santee has incurred expenses
        associated with commissioning the new facility and transferring and
        integrating the production of dairy products into the new facility.
        Since June 1998, the Company has accepted and paid approximately $1.0
        million per month from a temporary increase in the cost of products
        purchased from Santee by the Company. The temporary increase in the cost
        of products purchased from Santee is included in the Company's cost of
        goods sold and amounted to approximately $3.1 million in the first
        quarter of fiscal 1999. The Company believes, that the temporary
        increase in the cost of products purchased from Santee by the Company
        will continue through June 1999, but no assurances can be given that the
        temporary price increase will cease on or before June 1999. The Company
        continues to explore alternatives available to it regarding its
        investment in Santee.

        Income before income taxes amounted to $3.8 million for the thirteen
        weeks ended December 27, 1998 compared to $2.3 million for the thirteen
        weeks ended December 28, 1997.



                                       11
<PAGE>   12

                           STATER BROS. HOLDINGS INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        RESULTS OF OPERATIONS (CONTD.)

        Net income for the thirteen week first quarter ended December 27, 1998,
        amounted to $2.3 million compared to $1.4 million for the thirteen week
        first quarter of the prior year.

        LIQUIDITY AND CAPITAL RESOURCES

        The Company historically has funded its daily cash flow requirements
        through funds provided by operations and through borrowings from
        short-term revolving credit facilities. The Company's short-term Bank
        Credit Agreement is between a bank and Stater Bros. Markets, a wholly
        owned subsidiary of the Company and consists of revolving credit
        facilities for working capital purposes of $15.0 million, which was
        available at December 27, 1998, and a $25.0 million standby letter of
        credit facility maintained pursuant to its workers' compensation and
        general liability self-insurance requirements. The Bank Credit Agreement
        expires on June 1, 2000.

        Working capital amounted to $88.2 million at December 27, 1998 and $90.7
        million at September 27, 1998, and the Company's current ratios were
        1.67:1, and 1.78:1, respectively. Fluctuations in working capital and
        current ratios are not unusual in the industry.

        The net cash provided by operating activities in the first quarter of
        fiscal 1999 amounted to $14.3 million and consisted of increases in
        accounts payable and accrued liabilities, net of increases in
        inventories, receivables and prepaid expenses. The increase of $9.5
        million in accrued liabilities and current portion of long-term debt in
        the first quarter of fiscal 1999, was primarily due to the timing of
        payments on accrued liabilities such as utilities, payroll taxes, union
        benefits and the accrued interest due on the Company's long-term debt.
        The increase in net cash provided by operating activities in the first
        quarter of fiscal 1998, amounted to $7.2 million and was primarily due
        to increases in accrued liabilities and current portion of long-term
        debt, reductions in accounts payable, net of decreases in inventories,
        decreases in accounts receivables and increases in prepaid expenses. The
        increase in accrued liabilities and current portion of long-term debt of
        $6.3 million for the quarter ended December 28, 1997, was due primarily
        from the accrual of interest due on the Company's long-term debt.
        Fluctuations in net cash provided by operating activities are not
        unusual in the industry.

        Net cash used by investing activities for the thirteen weeks ended
        December 27, 1998, amounted to $7.1 million, compared to net cash used
        by investing activities of $7.4 million for the first quarter of fiscal
        1998. The difference in net cash used by investing activities between
        the comparable periods is due to the Company's capital expenditures
        during such periods, net of proceeds from asset dispositions. Capital
        expenditures amounted to $7.8 million in the first quarter of fiscal
        1999 compared to $7.6 million in the first quarter of fiscal 1998.
        Capital expenditures for the first quarter of fiscal 1999 were incurred
        to complete the construction of a new 37,377 square foot replacement
        supermarket in Loma Linda, California which opened in December 1998, and



                                       12
<PAGE>   13

                           STATER BROS. HOLDINGS INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        LIQUIDITY AND CAPITAL RESOURCES (CONTD.)

        to complete two major remodels and three minor remodels, install five
        new NCR ACS Scan systems and to acquire previously leased land.

        Net cash used by financing activities amounted to $317,000 and $311,000
        for the first quarters of 1999 and 1998, respectively, and consisted of
        payments on the Company's capitalized lease obligations.

        The Company is subject to certain covenants associated with its 11%
        Senior Notes due 2001, its 9% Senior Subordinated Notes due 2004, and
        covenants included in the Bank Credit Agreement between a bank and
        Stater Bros. Markets, a wholly owned subsidiary of the Company. As of
        December 27, 1998, the Company was in compliance with all such
        covenants. However, there can be no assurance that the Company will be
        able to achieve the expected operating results or implement the capital
        expenditure strategy upon which future compliance with such covenants is
        based.

        THE BANK FACILITIES

        Stater Bros. Markets, the Company's operating subsidiary, and Bank of
        America National Trust and Savings Association (the "Bank") entered into
        a Credit Agreement in March 1994, as amended, whereby the Bank provides
        Stater Bros. Markets with a revolving operating line of credit (the
        "Operating Facility") with a maximum availability of $15.0 million which
        was available at December 27, 1998 and a revolving letter of credit
        facility (the "LC Facility") with a maximum availability of $25.0
        million (collectively, the "Bank Facilities"). As of December 27, 1998,
        approximately $14.2 million of the LC Facility was available to the
        Company. The Bank Credit Agreement expires on June 1, 2000.

        The Bank Facilities also contain certain financial and other covenants
        applicable to Stater Bros. Markets, including without limitation,
        requirements to (i) maintain a minimum current ratio of at least 1.20:1;
        (ii) maintain minimum tangible net worth plus debt subordinated to the
        Bank (as defined) of at least $190.0 million; (iii) maintain a ratio of
        total liabilities to tangible net worth plus debt subordinated to the
        Bank of not in excess of 1.30:1; (iv) maintain a minimum fixed charge
        coverage ratio (as defined) of at least 1.10:1 for each consecutive four
        fiscal quarters beginning with the four fiscal quarters ending on Stater
        Bros. Markets' 1996 fiscal year end; (v) limit the sale of assets; (vi)
        prohibit additional indebtedness except for normal trade credit and
        indebtedness secured only by real property constructed or acquired
        within the prior twelve months; (vii) prohibit additional liens except
        for liens for indebtedness secured by real property pursuant to clause
        (v); (viii) prohibit the acquisition of other business entities; (ix)
        restrict the payment of dividends (as discussed below); (x) prohibit
        changes of ownership; (xi) prohibit the liquidation, consolidation or
        merger of the business; and (xii) repay all advances outstanding under
        the Operating Facility and not draw any new advances for at least 5
        calendar days each month.



                                       13
<PAGE>   14

                           STATER BROS. HOLDINGS INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        LIQUIDITY AND CAPITAL RESOURCES (CONTD.)

        THE BANK FACILITIES (CONTD.)

        As of December 27, 1998, for purposes of the Bank Facilities, Stater
        Bros. Markets was in compliance with all restrictive covenants and had
        (i) a current ratio of 1.84:1, (ii) tangible net worth and debt
        subordinated to the Bank of $242.8 million; (iii) a ratio of total
        liabilities to tangible net worth and debt subordinated to the Bank of
        0.56:1 and (iv) a fixed charge coverage ratio (as defined in the Bank
        Facilities) of 1.10:1. If for any reason Stater Bros. Markets is unable
        to comply with the terms of the Bank Facilities, including the covenants
        contained therein, such noncompliance would result in an event of
        default under the Bank Facilities, and could result in acceleration of
        the payment of indebtedness then outstanding under Bank Facilities or,
        in certain situations, the prohibition of payments of dividends or
        advances to the Company. In addition, no amendment, waiver or supplement
        may be made to the Indenture without the prior written consent of the
        Bank if such amendment, waiver or supplement adversely affects the
        rights of the Bank as lender to Stater Bros. Markets.

        The financial and operational covenants contained in the Bank Facilities
        significantly limit Stater Bros. Markets' ability to pay dividends and
        make loans or advances to the Company, the primary source of anticipated
        cash for the Company, and could limit the Company's ability to respond
        to changing business and economic conditions, and to finance future
        operations or capital needs including the Company's ability to achieve
        its plans to remodel and expand existing supermarkets and open new
        supermarkets.

        The Company is also subject to certain covenants associated with its 11%
        Senior Notes due 2001 and its 9% Senior Subordinated Notes due 2004. As
        of December 27, 1998, the Company was in compliance with all such
        covenants. However, there can be no assurance that the Company will be
        able to achieve the expected operating results or implement the capital
        expenditure strategy upon which future compliance with such covenants is
        based.

        LABOR RELATIONS

        The Company and other major supermarket employers in Southern California
        negotiated a four-year contract, beginning October 1995, with the United
        Food and Commercial Workers Union. The Company's collective bargaining
        agreement with the International Brotherhood of Teamsters was renewed in
        1998 and expires in September 2002. Management believes it has good
        relations with its employees.

        YEAR 2000 COMPLIANCE

        The efficient operations of the Company are dependent, in part, upon its
        computer software programs, systems and processes (collectively, the
        "Information Systems"). The Company's Information Systems are used in
        several key areas of the Company, including, but not limited to,
        supermarket operations, warehousing and distribution, merchandising and
        purchasing, inventory management, and accounting and financial
        reporting. In 1997, the Company established a Year 2000 Compliance
        Committee and developed a Year 2000 Compliance Plan. The Company's Year
        2000 Compliance Plan



                                       14
<PAGE>   15

                           STATER BROS. HOLDINGS INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        YEAR 2000 COMPLIANCE (CONTD.)

        addresses the Company's Information Systems, communications with
        vendors, financial institutions and others, and provides for contingency
        planning. The Company is in the process of updating its Information
        Systems for Year 2000 compliance requirements and has engaged
        independent consultants since mid-1998 to assist in achieving Year 2000
        compliance with its Information Systems by the third quarter of 1999.
        Additionally, the Company has also been in communication with some of
        its vendors, financial institutions and others whose computer software,
        programs and information systems may interface with those of the Company
        to assess the status of their compliance with Year 2000 requirements.
        Failure of companies (that the Company conducts business with) to comply
        with the Year 2000 requirements could have an adverse effect on the
        Company's operations.

        Based on the information currently available, the Company believes it
        will meet the Year 2000 compliance requirements through a combination of
        Information Systems modifications and through the acquisition of new
        equipment and technology that are Year 2000 compliant. The Company's
        Year 2000 Compliance Committee is developing a contingency plan for its
        Information Systems and is developing contingency plans in the event
        vendors, financial institutions and others that the Company conducts
        business with do not comply with the Year 2000 requirements. The Company
        believes that costs required to replace or modify Information Systems,
        including scheduled replacements of in-store Point of Sale equipment,
        will approximate $8.4 million, of which $6.9 million will be capitalized
        and $1.5 million will be expensed. Through December 1998, the Company
        has incurred capitalized expenditures of $3.9 million and expenses of
        $480,000. The Company believes that it will successfully achieve
        compliance with the year 2000 requirements by the third quarter of 1999,
        however, no assurances can be given that the Company's Information
        Systems and it's vendors, financial institutions and others will be
        successful in achieving Year 2000 compliance.

        The Company's ability to timely implement its Year 2000 Compliance Plan
        may be adversely affected by a variety of factors, some of which are
        beyond the Company's control, including the potential for unforeseen
        implementation problems, delays in the delivery of products, and
        disruption of store operations resulting from a loss of power or
        communication links between stores, distribution centers and
        headquarters. Based on currently available information, the Company is
        unable to determine if such interruptions are likely to have a material
        adverse effect on the Company's results of operations, liquidity or
        financial condition.



                                       15
<PAGE>   16

                           STATER BROS. HOLDINGS INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


        EFFECT OF INFLATION AND COMPETITION

        The Company's performance is affected by inflation. In recent years the
        impact of inflation on the operations of the Company has been moderate.
        As inflation has increased expenses, the Company has recovered, to the
        extent permitted by competition, the increase in expenses by increasing
        prices over time. However, the economic and competitive environment in
        Southern California continues to challenge the Company to become more
        cost efficient as its ability to recover increases in expenses through
        price increases is diminished. The future results of operations of the
        Company will depend upon the ability of the Company to adapt to the
        current economic environment as well as the current competitive
        conditions.

        The Company conducts business in one industry segment, the operation of
        retail food supermarkets, which offer for sale to the public most
        merchandise typically found in supermarkets. The supermarket industry is
        highly competitive and is characterized by low profit margins. The
        Company's primary competitors include Lucky, Vons, Albertson's, Ralphs,
        and a number of independent supermarket operators. Competitive factors
        typically include the price, quality and selection of products offered
        for sale, customer service, and the convenience and location of retail
        facilities. The Company monitors competitive activity and Senior
        Management regularly reviews the Company's marketing and business
        strategy and periodically adjusts them to adapt to changes in the
        Company's primary trading area.

        CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS" OF THE
        PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

        The Private Securities Litigation Reform Act of 1995 provides a "safe
        harbor" for forward-looking statements. Certain information contained in
        the Company's filings with the Securities and Exchange Commission (as
        well as information included in oral statements or other written
        statements made or to be made by the Company) includes statements that
        are forward-looking, such as statements relating to plans for future
        activities. Such forward-looking information involves important risks
        and uncertainties that could significantly affect results in the future
        and, accordingly, such results may differ from those expressed in any
        forward-looking statements made by or on behalf of the Company. These
        risks and uncertainties include, but are not limited to, those relating
        to domestic economic conditions, seasonal and weather fluctuations,
        expansion and other activities of competitors, changes in federal or
        state laws and the administration of such laws and the general condition
        of the economy.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        Not Applicable.



                                       16
<PAGE>   17

                           STATER BROS. HOLDINGS INC.
                                DECEMBER 27, 1998


PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

        Various legal actions and claims are pending against the Company in the
        ordinary course of business. In the opinion of management and its
        general legal counsel, the ultimate resolution of such pending legal
        actions and claims will not have a material adverse effect on the
        Company's consolidated financial position or its results of operations.

        For a description of legal proceedings, please refer to the footnote
        entitled "Legal Proceedings" contained in the Notes to Consolidated
        Financial Statements section of the Company's Form 10-K for the fiscal
        year ended September 27, 1998.


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

             Exhibits are as follows:


<TABLE>
<CAPTION>
             EXHIBIT NO.       DESCRIPTION
             -----------       -----------
<S>                            <C>
                11             Calculation of Earnings Per Common Share.
                27             Financial Data Schedule
</TABLE>



                                       17
<PAGE>   18

                           STATER BROS. HOLDINGS INC.
                                DECEMBER 27, 1998


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (contd.)

        (a)  Exhibits (contd.)


                Copies of Exhibits listed herein can be obtained by writing and
                requesting such Exhibits from: Corporate Secretary, P. O. Box
                150, Colton, California 92324.

        (b)  Reports on Form 8-K

             None



                                       18
<PAGE>   19

                           STATER BROS. HOLDINGS INC.

                                   Signatures

        Pursuant to the requirements of the Securities Exchange Act of 1934,
        Registrant has duly caused this report to be signed on its behalf by the
        undersigned thereunto duly authorized.



             Date:  February 9, 1999       /s/      Jack H. Brown             
                                           -------------------------------------
                                           Jack H. Brown
                                           Chairman of the Board, President,
                                           and Chief Executive Officer



             Date:  February 9, 1999       /s/      Dennis N. Beal            
                                           -------------------------------------
                                           Dennis N. Beal
                                           Senior Vice President, Finance and
                                           Chief Financial Officer
                                           (Chief Accounting Officer)



                                       19