<PAGE>   1
================================================================================

                                  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 June 29, 1997

                                       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 preceeding 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 July 25, 1997, there were issued and outstanding 50,000 shares of the
registrant's Class A Common Stock

================================================================================



                                       1
<PAGE>   2

                           STATER BROS. HOLDINGS INC.
                                  JUNE 29, 1997

                                      INDEX

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

          CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF SEPTEMBER 29, 1996
          AND JUNE 29, 1997                                                  3

          CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE 39 WEEKS
          ENDED JUNE 23, 1996 AND JUNE 29, 1997                              5

          CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE 13 WEEKS
          ENDED JUNE 23, 1996 AND JUNE 29, 1997                              6

          CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE
          39 WEEKS ENDED JUNE 23, 1996 AND JUNE 29, 1997                     7

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)             8

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS                               11


PART II   OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS                                                 21

ITEM 2.   CHANGES IN SECURITIES                                             21

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES                                   22

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               22

ITEM 5.   OTHER INFORMATION                                                 22

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                  22


SIGNATURES                                                                  24
</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. 29,     JUNE 29,
                                                          1996         1997
                                                        --------     --------
<S>                                                     <C>          <C>     
Current Assets
   Cash and cash equivalents.........................   $ 45,279     $ 39,830
   Receivables.......................................     19,009       19,410
   Inventories.......................................    117,372      115,739
   Prepaid expenses..................................      3,357        5,000
   Deferred income taxes.............................      4,710        4,710
   Properties held for sale..........................      1,787        1,348
                                                        --------     --------

Total current assets.................................    191,514      186,037

Investment in unconsolidated affiliate...............      7,626       11,503

Property and equipment
   Land..............................................     18,688       16,418
   Buildings and improvements........................     89,856       84,009
   Store fixtures and equipment......................     78,570       84,678
   Property subject to capital leases................     14,368       14,368
                                                        --------     --------
                                                         201,482      199,473

   Less accumulated depreciation and amortization....     87,267       93,452
                                                        --------     --------
                                                         114,215      106,021


Deferred income taxes................................      5,295        7,381
Deferred debt issuance cost, net.....................      5,221        4,335
Lease guarantee escrow...............................      6,701        7,970
Other assets.........................................      7,722        7,196
                                                        --------     --------

Total assets.........................................   $338,294     $330,443
                                                        ========     ========
</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

<TABLE>
<CAPTION>
                                                          SEPT. 29,    JUNE 29,
                                                            1996         1997
                                                          --------     --------
<S>                                                        <C>          <C>     
Current Liabilities
   Accounts payable....................................   $ 79,271     $ 63,140
   Accrued payroll and related expenses................     23,981       23,597
   Other accrued liabilities...........................     23,607       25,359
   Current portion of capital lease obligations........      1,182        1,180
                                                          --------     --------

Total current liabilities..............................    128,041      113,276

Long-term debt.........................................    165,000      165,000
Capital lease obligations, less current portion........      6,917        6,042
Long-term portion of self-insurance reserves...........     10,332        9,475
Other long-term liabilities............................      2,526        3,992
10.5% Cumulative Series B Preferred Stock:
   (stated value $100 per share)
      Authorized shares - 693,650
      Issued and outstanding shares - 693,650..........     69,365       69,365

Stockholders' equity 
   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 deficit....................................    (41,953)     (34,773)
   Less option to acquire stock........................    (14,650)     (14,650)
                                                          --------     --------

Total stockholders' equity.............................    (43,887)     (36,707)
                                                          --------     --------

Total liabilities and stockholders' equity.............   $338,294     $330,443
                                                          ========     ========
</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>
                                                             39 Weeks Ended
                                                         ----------------------
                                                          June 23,    June 29,
                                                            1996         1997
                                                         ----------  ----------

<S>                                                      <C>         <C>       
Sales..................................................  $1,244,312  $1,292,267
                                                         ----------  ----------
Cost of goods sold.....................................     959,246     997,032
                                                         ----------  ----------
Gross profit...........................................     285,066     295,235

Operating expenses
   Selling, general and administrative expenses........     239,252     248,683
   Depreciation and amortization.......................       9,220       9,858
   Consulting fees.....................................       1,125       1,125
                                                         ----------  ----------
Total operating expenses...............................     249,597     259,666
                                                         ----------  ----------

Operating profit.......................................      35,469      35,569

Interest income........................................       1,309       1,733
Interest expense.......................................     (14,943)    (14,871)
Equity in earnings (loss) from unconsolidated affiliate        (935)     (1,123)
Other income (loss) - net..............................        (187)         96
                                                         ----------  ----------

Income before income taxes.............................      20,713      21,404
Income taxes...........................................       8,390       8,777
                                                         ----------  ----------

Net income.............................................  $   12,323  $   12,627

Less preferred dividends...............................       2,155       5,448
                                                         ----------  ----------

Earnings available to common shareholders..............  $   10,168  $    7,179
                                                         ==========  ==========

Earnings per common share..............................  $   126.75  $   143.58
                                                         ==========  ==========

Average common shares outstanding......................      80,220      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 INCOME
                                   (Unaudited)
               (In thousands, except per share and share amounts)


<TABLE>
<CAPTION>
                                                              13 Weeks Ended
                                                           --------------------
                                                           June 23,     June 29,
                                                             1996        1997
                                                           --------    --------
<S>                                                        <C>         <C>     
Sales..................................................    $429,349    $427,445
Cost of goods sold.....................................     330,092     330,731
                                                           --------    --------
Gross profit...........................................      99,257      96,714

Operating expenses
   Selling, general and administrative expenses........      83,636      81,531
   Depreciation and amortization.......................       3,058       3,297
   Consulting fees.....................................         375         375
                                                           --------    --------
Total operating expenses...............................      87,069      85,203
                                                           --------    --------

Operating profit.......................................      12,188      11,511

Interest income........................................         602         738
Interest expense.......................................      (5,019)     (4,892)
Equity in earnings (loss) from unconsolidated affiliate        (387)       (544)
Other income (loss) - net..............................         (11)         99
                                                           --------    --------

Income before income taxes.............................       7,373       6,912
Income taxes...........................................       2,988       2,834
                                                           --------    --------

Net income.............................................    $  4,385    $  4,078

Less preferred dividends...............................       1,816       1,816
                                                           --------    --------

Earnings available to common shareholders..............    $  2,569    $  2,262
                                                           ========    ========

Earnings per common share..............................    $  51.38    $  45.24
                                                           ========    ========

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.


                                        6
<PAGE>   7

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

<TABLE>
<CAPTION>
                                                            39 Weeks Ended
                                                        -----------------------
                                                         June 23,      June 29,
                                                           1996         1997
                                                        ---------     ---------
<S>                                                     <C>           <C>      
OPERATING ACTIVITIES:
Net income .........................................    $  12,323     $  12,627
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Depreciation and amortization ...................        9,220         9,858
   Provision for deferred income taxes .............            2        (2,086)
   (Gain) loss on disposals of assets ..............          187           (96)
   Net undistributed loss in investment in
     unconsolidated affiliate ......................          935         1,123
   Changes in operating assets and liabilities:
    (Increase) decrease in receivables .............       (2,584)         (401)
    (Increase) decrease in inventories .............       (1,642)        1,633
    (Increase) decrease in prepaid expenses ........         (581)       (1,643)
    (Increase) decrease in other assets ............        1,167          (741)
    Increase (decrease) in accounts payable ........       (4,949)      (16,131)
    Increase (decrease) in accrued liabilities and
      long-term portion of self-insurance reserves .        7,463          (493)
                                                        ---------     ---------

Net cash (used by) provided by operating activities        21,541         3,650
                                                        ---------     ---------

INVESTING ACTIVITIES:
Investment in unconsolidated affiliate .............           --        (5,000)
Purchase of property and equipment .................      (13,658)      (14,329)
Proceeds from sale of property and equipment and
 properties held for sale ..........................       18,629        16,552
                                                        ---------     ---------

Net cash (used by) provided by investing activities         4,971        (2,777)
                                                        ---------     ---------

FINANCING ACTIVITIES:
Dividends paid or accrued on preferred stock .......       (2,155)       (5,447)
Redemption of common stock .........................      (69,365)           --
Issuance of preferred stock ........................       69,365            --
Principal payments on capital lease obligations ....         (806)         (875)
                                                        ---------     ---------

Net cash (used by) financing activities ............       (2,961)       (6,322)
                                                        ---------     ---------

Net increase (decrease) in cash and cash equivalents       23,551        (5,449)
Cash and cash equivalents at beginning of period ...       26,308        45,279
                                                        ---------     ---------

Cash and cash equivalents at end of period .........    $  49,859     $  39,830
                                                        =========     =========

Interest paid ......................................    $   9,938     $   9,629
Income taxes paid ..................................    $   7,175     $   4,275
</TABLE>


     See accompanying notes to unaudited consolidated financial statements.


                                       7
<PAGE>   8
                           STATER BROS. HOLDINGS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  JUNE 29, 1997

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 29, 1996 and June 29, 1997 and
the results of its operations and cash flows for the thirty-nine weeks ended
June 23, 1996 and June 29, 1997. 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 thirty-nine weeks ended June 29, 1997 are not necessarily
indicative of the results of operations for a full year.

NOTE 2 - INCOME TAXES

        The provision for income taxes for the thirty-nine weeks ended June 23,
1996 and June 29, 1997 consists of the following:

<TABLE>
<CAPTION>
                                              39 Weeks Ended
                                      -------------------------------
                                      June 23, 1996     June 29, 1997
                                      -------------     -------------
                                              (In thousands)

<S>                                   <C>               <C>     
      Federal Income Taxes              $  7,198           $  6,785
      State Income Taxes                   1,192              1,992
                                        --------           --------
                                        $  8,390           $  8,777
                                        ========           ========
</TABLE>

NOTE 3 - CONVERSION OF COMMON STOCK

        Effective March 8, 1996, the Company converted the Company's 50,000
shares of Common Stock held by Craig Corporation ("Craig") into 693,650 shares
of the Company's Series B Preferred Stock. The Series B Preferred Stock is
redeemable by the Company in whole but not in part for $69.4 million plus
accrued and unpaid dividends. On July 24, 1997, the Company gave notice of
exercise of option to redeem all outstanding shares of the Company's Series B
Preferred Stock for approximately $74.0 million, including accrued and unpaid
dividends.

NOTE 4 - UNCONSOLIDATED AFFILIATE

        Prior to November 1996, and since 1986, Stater Bros. Markets, a wholly
owned subsidiary of the Company, owned 49.6% of Santee Dairies, Inc., ("Santee")
an operator of a fluid milk processing plant located in Los Angeles, California.
In November 1996 and for approximately $200,000, Stater Bros. Markets increased
its ownership in Santee to 50%, but is not the controlling shareholder.
Additionally, during the quarter ended December 29, 1996, Stater Bros. Markets
acquired Preferred Stock issued by Santee for an aggregate amount of $4.8
million. Subsequently, Stater Bros. Markets exchanged the Preferred Stock of
Santee Dairies, Inc. for Common Stock of Santee Dairies, Inc. It is not
anticipated that Santee will issue dividends on its Common Stock in the
foreseeable future. Santee is not a significant subsidiary of Stater Bros.
Markets or the Company, and accordingly the Company accounts for its investment
in Santee Dairies Inc. using the equity method of accounting. The Company
recognized undistributed losses from its investment in Santee Dairies, Inc. of
$544,000 and $387,000 for the thirteen weeks ended



                                       8
<PAGE>   9
                           STATER BROS. HOLDINGS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  JUNE 29, 1997

NOTE 4 - UNCONSOLIDATED AFFILIATE (CONTD.)

June 29, 1997 and June 23, 1996, respectively. For the thirty-nine weeks year to
date, the Company recognized losses of $1,123,000 and $935,000 for 1997 and
1996, respectively.

        On July 30, 1997, the Company exchanged its Common Stock in Santee
Dairies, Inc. for a 50% ownership in Santee LLC, at which time Santee Dairies,
Inc. became a wholly owned subsidiary of Santee LLC.

NOTE 5 - CONSULTING AGREEMENT AND COVENANT NOT TO COMPETE

        Pursuant to the Consulting Agreement dated as of September 3, 1993 (the
"Consulting Agreement"), effective and commencing March 8, 1994, Craig agreed to
render consulting services to the Company for a five-year period. In
consideration for such consulting services, the Company agreed to pay Craig $1.5
million per year, payable quarterly during the term of the Consulting Agreement.
On July 31, 1997, the Company gave notice to terminate its obligations under the
Consulting Agreement. Additionally, in accordance with the terms of the
Consulting Agreement, Craig has agreed not to engage in any business that
competes with the Company in any of the five counties in which the Company
operates until the end of the five-year period of the Consulting Agreement. The
Company paid Craig $5.0 million on March 8, 1994 which is amortized to earnings
over the five-year term of the covenant not to compete included in the
Consulting Agreement.

NOTE 6 - RECLASSIFICATIONS

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

NOTE 7 - 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.

NOTE 8 - ADOPTION OF ACCOUNTING STANDARD

        The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121), which
the Company adopted at the beginning of fiscal year 1997. Management believes
that the adoption of SFAS 121 will not have a material adverse effect on the
Company's financial position or its results of operations for fiscal 1997.


NOTE 9 - SUBSEQUENT EVENTS

        In July 1997, the Company solicited and obtained the requisite consents
from the majority of the noteholders of the Company's 11% Senior Notes due 2001
which permitted the Company to amend the Indenture which governs its 11% Senior
Notes due 2001 as follows:

        1)      permit the Company to issue and sell up to $100 million
                aggregate principal amount of its 9% Senior Subordinated Notes
                due 2004, and to use a portion of the net proceeds from the
                issuance of such notes to redeem all issued and outstanding
                shares of the Company's Series B Preferred Stock, held by
                Reading Australia PTY Limited ("Reading"),


                                       9
<PAGE>   10
                           STATER BROS. HOLDINGS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  JUNE 29, 1997

NOTE 9 - SUBSEQUENT EVENTS (CONTD.)

        2)      designate Santee LLC and Santee Dairies, Inc., to the extent
                such entities ever become Subsidiaries of the Company, as
                Unrestricted Subsidiaries (as defined) which would not be
                subject to certain significant covenants of the 11% Senior Note
                Indenture,

        3)      permit the Company to make certain additional investments in
                Santee LLC (including investments funded by La Cadena
                Investments, a California general partnership which owns all of
                the issued and outstanding Common Stock of the Company),

        4)      permit the Company to repay under limited circumstances
                investments made by La Cadena in the Company to enable it to
                increase its ownership interest in Santee LLC, and

        5)      make certain other amendments to the 11% Senior Note Indenture.

        On July 24, 1997, the Company completed an offering for $100 million of
9% Senior Subordinated Notes due 2004 under Rule 144a of the Securities Act.
Proceeds from the offering were used or will be used to pay for consent
solicitation fees of approximately $5.0 million, fees and expenses related to
the offering of approximately $4.0 million, pay a financial advisory fee to La
Cadena of $2.0 million and to pay approximately $74.0 million to redeem all of
the outstanding shares of the Company's Series B Preferred Stock including
accrued and unpaid dividends.

        On July 24, 1997, concurrently with the sale of the 9% Senior
Subordinated Notes due 2004, the Company gave notice of exercise of option to
redeem all outstanding shares of the Company's Series B Preferred Stock to
Reading Australia PTY Limited ("Reading") a majority owned indirect subsidiary
of Craig Corporation ("Craig"). On August 4, 1997, the Company deposited
approximately $74.0 million into an Escrow Account for the benefit of Reading
Australia PTY Limited, the amounts required to redeem the Series B Preferred
Stock and to pay accrued and unpaid dividends up to and including August 4,
1997.

        On July 31, 1997, the Company gave notice to terminate a five-year
consulting agreement with Craig that was entered into in connection with the
1994 Recapitalization. Annual fees payable to Craig under the Consulting
Agreement were $1.5 million per year.


                                       10
<PAGE>   11
                           STATER BROS. HOLDINGS INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, 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 which are
        listed and trade on the American Stock Exchange.

        Effective March 8, 1996, pursuant to options available to the Company
        included in an Option Agreement entered into in March 1994, as part of
        the Recapitalization between the Company and Craig, the Company
        exercised its right to convert all of the Common Stock held by Craig
        Corporation into 693,650 shares of 10.5% Series B Preferred Stock. The
        redemption value of the Series B Preferred Stock is $100 per share for
        an aggregate value of $69,365,000. Dividends on the Series B Preferred
        Stock are due quarterly in arrears. On July 24, 1997, the Company gave
        notice of exercise of option to redeem all outstanding shares of the
        Company's Series B Preferred Stock to Reading Australia PTY Limited, a
        majority owned indirect subsidiary of Craig.

        Effective March 8, 1996, La Cadena became the sole Common Shareholder of
        the Company and holds all of the shares of 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.



                                       11
<PAGE>   12

                           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 and thirty-nine weeks
        ended June 23, 1996 and June 29, 1997.

<TABLE>
<CAPTION>
                                            Thirteen Weeks        Thirty-Nine Weeks
                                           -----------------    ------------------- 
                                            1996       1997      1996         1997
                                           ------     ------    ------       ------ 
<S>                                        <C>        <C>       <C>          <C>    
        Sales                              100.00%    100.00%   100.00%      100.00%
        Gross profit                        23.12      22.63     22.91        22.85
        Operating Expenses:
          Selling, general and
           administrative expense           19.48      19.07     19.23        19.24
          Depreciation and amortization       .71        .77       .74          .76
          Consulting fees                     .09        .09       .09          .09
        Operating profits                    2.84       2.70      2.85         2.76
        Interest Income                       .14        .17       .11          .13
        Interest expense                    (1.17)     (1.14)    (1.20)       (1.15)
        Equity in (loss) from
          unconsolidated affiliate           (.09)      (.13)     (.08)        (.09)
        Other income (loss)-net                --        .02      (.02)         .01
        Earnings before income taxes         1.72%      1.62%     1.66%        1.66%
</TABLE>

        Total sales for the thirteen weeks ended June 29, 1997 decreased .4% and
        amounted to $427.4 million compared to $429.3 million for the like
        period in 1996. Total sales for the thirty-nine weeks year to date ended
        June 29, 1997 increased 3.9% and amounted to $1,292.3 million compared
        to $1,244.3 million for the same period in 1996. Like store sales
        decreased .4% for the quarter and increased 3.9% for the year to date
        period. The Company operated 110 supermarkets at June 29, 1997 and at
        June 23, 1996. The increase in sales in the thirty-nine weeks of 1997
        compared to the like period of 1996 is due to many factors, including
        the favorable customer response to the Company's 60th Anniversary
        Marketing Program and slight improvements in the Southern California
        economy. Sales also increased as a result of favorable customer response
        to the Company's 1996 merchandising expansion and upgrading program
        which included expanded product offerings in the deli, bakery, frozen
        foods and dairy departments and the continuing introduction of fresh cut
        flowers and prepackaged vegetables into the Company's supermarkets and a
        decrease in competitive activity. Although comparisons of sales between
        the third quarters of 1997 and 1996 are difficult, the slight decrease
        in sales in the thirteen-week third quarter of fiscal 1997 can be
        attributed to several items including the timing of the Easter holiday
        and last year's departure of a competitor from the Southern California
        market place. Sales from the Easter holiday were reported in the third
        quarter of last year (the quarter ended June 23, 1996) and were reported
        in the second quarter of this year (the quarter ended March 30, 1997).
        Additionally, in the Company's second quarter of fiscal 1996, Smiths
        Food & Drug ("Smith's") announced the termination of its Southern
        California operations and began closing all of its supermarkets located
        in Southern California. Approximately 15 Smith's competed with the
        Company, of which five stores remain closed as of



                                       12
<PAGE>   13

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

        RESULTS OF OPERATIONS (CONTD.)

        August 1, 1997 and of the remaining ten stores that were closed and
        subsequently reopened by competitors, three stores reopened late in the
        Company's 1996 second quarter, two stores reopened in the 1996 third
        quarter and one store reopened in the Company's fourth quarter of fiscal
        1996. Management believes it has been successful in attracting and
        retaining many of the previous Smith's customers to its supermarkets.

        Management believes that like store sales increased approximately 1.0%
        in the third quarter of 1997, after adjusting for the Easter holiday and
        the increase in sales in 1996 as a result of the departure of Smith's.

        Gross profits for the thirteen weeks ended June 29, 1997, amounted to
        $96.7 million or 22.63% of sales compared to $99.3 million or 23.12% of
        sales in the same period of the prior year. For the thirty-nine week
        year to date period, gross profits increased to $295.2 million or 22.85%
        of sales compared to $285.1 million or 22.91% of sales in the prior
        year. The decrease in gross profits, as a percent of sales, for the
        third quarter and year-to-date periods reflects the Company's commitment
        to retain its existing customer base and to attract new customers as the
        Southern California economy continues to improve and experiences
        increases in population in the Company's primary trading areas, through
        its marketing strategy of Every Day Low Prices.

        Operating expenses include selling, general and administrative expenses,
        depreciation and amortization expenses and consulting fees. For the
        thirteen weeks ended June 29, 1997, selling, general and administrative
        expenses amounted to $81.5 million or 19.07% of sales compared to $83.6
        million or 19.48% of sales for the like period of the prior year. For
        the year to date period, selling, general and administrative expenses
        amounted to $248.7 million or 19.24% of sales compared to $239.3 million
        or 19.23% of sales for the like period of the prior year. The increase
        in selling, general and administrative expenses in 1997 when compared to
        1996 is due to the incremental costs and expenses incurred to operate at
        the higher level of sales, the increase in net rent expenses from the
        sale and leaseback of five supermarkets in January 1996 and an
        additional four supermarkets in October 1996, and the suspension of
        employer contributions to an over-funded collective bargaining benefits
        trust in the first and second quarters of fiscal 1996.

        Selling, general and administrative expenses in fiscal 1997 include
        increases in rent expenses, net of reductions in depreciation expenses,
        from the sale and leaseback of five supermarkets in January 1996 and an
        additional four supermarkets in October 1996 of approximately $320,000
        in the third quarter of fiscal 1997 and approximately $1.2 million in
        the year to date period of fiscal 1997. Selling, general and
        administrative expenses for the thirty-nine weeks ended June 23, 1996
        reflect reductions in expenses for employer contributions to a
        collective bargaining benefits trust of $3.8 million year to date. Such
        collective bargaining health care benefits trust was overfunded and
        employer monthly contributions to the trust were suspended for the
        months of December 1995 and January 1996.



                                       13
<PAGE>   14

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

        RESULTS OF OPERATIONS (CONTD.)

        Depreciation and amortization expenses amounted to $3.3 million and $9.9
        million for the third quarter and year to date periods ended June 29,
        1997, respectively. Depreciation and amortization expense amounted to
        $3.1 million and $9.2 million for the quarter and year to date periods
        of the prior year. Depreciation and amortization includes amortization
        of a prepaid five-year covenant not to compete between the Company and
        Craig which became effective as of March 8, 1994.

        In conjunction with the March 1994 Recapitalization Transaction, the
        Company entered into a five-year consulting and covenant not to compete
        agreement (the "Consulting Agreement") with Craig Corporation. The
        Consulting Agreement provided for a prepayment of $5.0 million, which is
        amortized to expense over the five-year term of the covenant not to
        compete. Amortization of the prepaid covenant not to compete amounted to
        $250,000 and $750,000, respectively, for the thirteen and thirty-nine
        weeks ended June 29, 1997 and June 23, 1996 and is included in
        depreciation and amortization expense.

        The Consulting Agreement also provided for annual consulting payments of
        $1.5 million, paid quarterly in arrears. Consulting fees paid or accrued
        to the benefit of Craig amounted to $375,000 for the thirteen weeks and
        $1,125,000, for the thirty-nine weeks ended June 29, 1997 and June 23,
        1996, respectively. On July 31, 1997, the Company gave notice to
        terminate the five-year Consulting Agreement with Craig.

        Operating profits for the third quarter of 1997 amounted to $11.5
        million or 2.70% of sales, compared to $12.2 million or 2.84% of sales
        in the third quarter of 1996. Operating profits for the thirty-nine
        weeks year to date ended June 29, 1997, amounted to $35.6 million or
        2.76% of sales, compared to $35.5 million or 2.85% of sales for the like
        period in 1996.

        Interest expense amounted to $4.9 million for the third quarter of 1997
        and $5.0 million for the like period of 1996. For the year to date
        periods of 1997 and 1996, interest expense amounted to $14.9 million.
        Interest expense in the third quarter and year to date periods of 1997
        and 1996, includes amortization of $295,000 and $885,000, respectively,
        from fees and expenses incurred to acquire debt.

        Income before income taxes amounted to $6.9 million and $7.4 million for
        the third quarters of 1997 and 1996, respectively, and amounted to $21.4
        million and $20.7 million for the year to date periods of 1997 and 1996,
        respectively.

        Net income for the third quarters of 1997 and 1996 amounted to $4.1
        million or .95% of sales and $4.4 million or 1.02% of sales,
        respectively, and for the year to date periods for 1997 and 1996,
        amounted to $12.6 million or .98% of sales and $12.3 million or .99% of
        sales, respectively.



                                       14
<PAGE>   15

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

        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, all of which
        was available at June 29, 1997, and a $25.0 million standby letter of
        credit facility, of which $15.5 million was available at June 29, 1997,
        maintained pursuant to its worker's compensation and general liability
        self-insurance requirements. The Bank Credit Agreement expires on June
        1, 1998. The Company intends to renew or replace its Bank Credit
        Agreement with a three-year facility with terms and conditions
        comparable, or better than the existing Bank Credit Agreement.

        Working capital amounted to $72.8 million at June 29, 1997 and $63.5
        million at September 29, 1996 and the Company's current ratios were
        1.64:1, and 1.50:1, respectively. Fluctuations in working capital and
        current ratios are not unusual in the industry.

        The net cash provided by operating activities for the thirty-nine weeks
        ended June 29, 1997 amounted to $3.7 million and consisted of reductions
        in accounts payable and the deferred tax benefits arising from the
        October 1996 sale and leaseback transaction. As of September 29, 1996,
        the Company had increased its inventory and related accounts payable in
        anticipation of the implementation of the Company's 60th Anniversary
        Marketing Program in the first quarter of fiscal 1997. Accordingly, as
        of June 29, 1997, the Company's investment in inventories and related
        accounts payable were reflected at more traditional balances. The
        increase in the deferred tax benefit of $2.1 million was due primarily
        to the timing difference between tax and book requirements for gain
        recognition and the resulting tax liability from the October 1996 sale
        and leaseback transaction.

        Net cash used by investing activities for the thirty-nine weeks ended
        June 29, 1997, amounted to $2.8 million compared to $5.0 million
        provided by investing activities in fiscal 1996. The difference between
        the comparable periods is due to the Company's capital expenditures
        during such periods, net of proceeds from asset dispositions and
        additional investment in Santee Dairies. Capital expenditures for the
        thirty-nine week periods amounted to $14.3 million in 1997 compared to
        $13.7 million in 1996. During the thirty-nine weeks ended June 29, 1997,
        the Company remodeled nine supermarkets. Capital expenditures for fiscal
        1997 were financed from cash provided by the October 1996 sale and
        leaseback transaction. Capital expenditures for fiscal 1997 are
        estimated to be approximately $25.0 million and will include
        expenditures incurred to construct two new supermarkets which are
        estimated to open in early fiscal 1998.



                                       15
<PAGE>   16

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

        LIQUIDITY AND CAPITAL RESOURCES (CONTD.)

        In October 1996, the Company completed a sale and leaseback transaction
        with an unrelated third party for four of the Company's supermarkets.
        The net proceeds from the sale of the four supermarkets amounted to
        approximately $16.0 million, which approximated fair market value. The
        Company entered into leases for the four supermarkets with initial terms
        of 20 years and with options available to the Company which extend the
        lease terms up to an additional 20 years. The Company believes the rents
        due under the leases approximate fair market rents. The gains from the
        sale of the supermarkets were approximately $2.5 million and will be
        deferred and amortized into income over the initial term of the leases.
        As a result of the additional rent expenses, net of reductions in
        depreciation expense, due on the four supermarkets, operating expenses
        for the 52-week 1997 fiscal year will increase by approximately $1.1
        million.

        In November 1996 and for approximately $200,000, the Company increased
        its ownership in Santee to 50%. Santee provides the Company with a
        significant amount of the fluid milk products offered for sale in the
        Company's supermarkets. Additionally, during the first quarter of fiscal
        1997, the Company acquired approximately $4.8 million worth of the
        Preferred Stock of Santee. Hughes Family Markets ("Hughes"), located in
        Irwindale, California, retained a 50% ownership in Santee and acquired a
        like amount of the Preferred Stock of Santee. Both the Company and
        Hughes subsequently exchanged the Santee Preferred Stock for Common
        Stock of Santee Dairies, Inc. Santee operates a fluid milk processing
        plant in Los Angeles, California and is constructing a new fluid milk
        and other fluid dairy products processing plant in the City of Industry,
        California. Mr. Jack H. Brown, Chairman of the Board, President and
        Chief Executive Officer of Stater Bros. Markets also serves as Chairman
        of the Board and Chief Executive Officer of Santee. Santee will, for the
        foreseeable future, provide the Company's supermarkets with a supply of
        high quality fluid milk and other dairy products.

        Net cash used by financing activities amounted to $6.3 million and $3.0
        million for 1997 and 1996, respectively, and consisted of payments on
        the Company's capitalized lease obligations and the accretion or payment
        of dividends on the Company's 10.5% Series B Preferred Stock. Such
        preferred stock dividends are due quarterly and the requirement to make
        such dividend payments on the Company's preferred stock commenced in
        March 1996. At the request of the holder of the Series B Preferred Stock
        the Company deferred dividend payments on the Preferred Stock until
        approximately August 4, 1997. Accordingly, as of June 29, 1997,
        dividends of $3.8 million have been accrued and remain unpaid. On July
        24, 1997, the Company gave notice of exercise of option to redeem all
        outstanding shares of the Company's Series B Preferred Stock to Reading
        Australia PTY Limited, a majority owned indirect subsidiary of Craig.



                                       16
<PAGE>   17

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

        LIQUIDITY AND CAPITAL RESOURCES (CONTD.)

        The Company is subject to certain covenants associated with its 11%
        Senior Notes due 2001 and covenants included in the Bank Credit
        Agreement between a bank and Stater Bros. Markets, a wholly owned
        subsidiary of the Company. As of June 29, 1997, 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 Company believes that cash flow from operations and proceeds from
        borrowings, including lease financings, and funds available under the
        short-term revolving credit facility will be adequate to meet the
        Company's currently identifiable working capital requirements.

        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 and effective June 1, 1996,
        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, all of which was available at June 29,
        1997 and a revolving letter of credit facility (the "LC Facility") with
        a maximum availability of $25.0 million (collectively, the "Bank
        Facilities"). As of June 29, 1997, approximately $15.5 million of the LC
        Facility was available to the Company. The Bank Credit Agreement expires
        on June 1, 1998. The Company intends to renew or replace its Bank Credit
        Agreement with a three-year facility with terms and conditions at least
        as favorable with the existing Bank Credit Agreement.

        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 $145.0 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,
        permitted indebtedness 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.



                                       17
<PAGE>   18

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

        THE BANK FACILITIES (CONTD.)

        As of June 29, 1997, for purposes of the Bank Facilities, Stater Bros.
        Markets was in compliance with all restrictive covenants and had (i) a
        current ratio of 1.89:1, (ii) tangible net worth and debt subordinated
        to the Bank of $211.4 million; (iii) a ratio of total liabilities to
        tangible net worth and debt subordinated to the Bank of 0.55:1 and (iv)
        a fixed charge coverage ratio (as defined in the Bank Facilities) of
        1.48:1. 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 PREFERRED STOCK

        In March 1994, the Company acquired, for $14.7 million, an option
        available to the Company to convert the Company's 50,000 shares of
        Common Stock held by Craig Corporation into 693,650 shares of 10.5%
        Series B Preferred Stock on or before March 8, 1996. On March 8, 1996,
        the Company exercised its option to convert the Company's 50,000 shares
        of Common Stock held by Craig Corporation into 693,650 shares of the
        Company's Series B Preferred Stock. On July 24, 1997, the Company gave
        notice of exercise of option to redeem all outstanding shares of the
        Company's Series B Preferred Stock to Reading Australia PTY Limited, a
        majority owned indirect subsidiary of Craig.

        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
        for four years in September 1994. Management believes it has good
        relations with its employees.

        RECENT ACCOUNTING STANDARDS

        The Financial Accounting Standards Board has issued Statement of
        Financial Accounting Standards No. 121, "Accounting for the Impairment
        of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS
        121), which the Company adopted at the beginning of fiscal year 1997.



                                       18
<PAGE>   19

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

        RECENT ACCOUNTING STANDARDS (CONTD.)

        Management believes that the adoption of SFAS 121 will not have a
        material adverse effect on the Company's financial position or its
        results of operations for fiscal 1997.

        SUBSEQUENT EVENTS

        Solicitation of Consents:

        In July 1997, the Company solicited and obtained the requisite consents
        from the majority of the noteholders of the Company's 11% Senior Notes
        due 2001 which permitted the Company to amend the Indenture which
        governs its 11% Senior Notes due 2001 as follows:

        1)      permit the Company to issue and sell up to $100 million
                aggregate principal amount of its 9% Senior subordinated Notes
                due 2004, and to use a portion of the net proceeds from the
                issuance of the 9% Senior Subordinated Notes to redeem all
                outstanding shares of the Company's Series B Preferred Stock,
                held by Reading Australia PTY Limited ("Reading"),

        2)      designate Santee LLC and Santee Dairies, Inc., to the extent
                such entities ever become Subsidiaries of the Company, as
                Unrestricted Subsidiaries (as defined) which would not be
                subject to certain significant covenants of the 11% Senior Note
                Indenture,

        3)      permit the Company to make certain additional investments in
                Santee LLC (including investments funded by La Cadena),

        4)      permit the Company to repay under limited circumstances
                investments made by La Cadena in the Company to enable it to
                increase its ownership interest in Santee LLC, and

        5)      make certain other amendments to the 11% Senior Note Indenture.

        Offering of $100 million of 9% Senior Subordinated Notes due 2004: 

        On July 24, 1997, the Company completed an offering for $100 million of
        9% Senior Subordinated Notes due 2004 under Rule 144a of the Securities
        Act. Proceeds from the offering were used or will be used to pay for
        consent solicitation fees of approximately $5.0 million, fees and
        expenses related to the offering of approximately $4.0 million, pay a
        financial advisory fee to La Cadena of $2.0 million and to pay
        approximately $74.0 million to redeem all of the outstanding shares of
        the Company's Series B Preferred Stock including accrued and unpaid
        dividends.



                                       19
<PAGE>   20

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

        SUBSEQUENT EVENTS (CONTD.)

        Redemption of Series B Preferred Stock:

        On July 24, 1997, the Company gave notice of exercise of Option to
        redeem all outstanding shares of the Company's Series B Preferred Stock
        to Reading Australia PTY Limited, a majority owned indirect subsidiary
        of Craig. On August 4, 1997, the Company deposited approximately $74.0
        million into an Escrow Account for the benefit of Reading Australia PTY
        Limited, to redeem the Series B Preferred Stock and to pay accrued and
        unpaid dividends up to and including August 4, 1997.

        Termination of Consulting Agreement

        On July 31, 1997, the Company gave notice to terminate the five-year
        Consulting Agreement with Craig that was entered into in connection with
        the 1994 Recapitalization.

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

        Certain statements contained in this report are forward looking
        statements. Such forward looking statements are subject to risks,
        uncertainties and other factors which could cause actual results to
        differ materially from future results expressed or implied. Potential
        uncertainties and risks include, but are not limited to, changes in the
        economic environment in the Company's market areas and changes in the
        competitive environment. Due to risks and uncertainties, actual results
        may differ from any future performance discussed in the Company's
        filings with the Securities and Exchange Commission.



                                       20
<PAGE>   21

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

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 routine
        legal actions and claims will not have a material adverse effect on the
        Company's consolidated financial position.

        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 Annual Report on Form 10-K
        for the fiscal year ended September 29, 1996.

ITEM 2. CHANGES IN SECURITIES

        At the request of the holder of the 10.5% Cumulative Series B Preferred
        Stock the Company deferred dividend payments on the 10.5% Preferred
        Stock until approximately August 4, 1997. Accordingly, the Company had
        deferred making dividend payments of $3.8 million on the Series B
        Preferred Stock as of June 29, 1997.

        In July 1997, the Company solicited and obtained the requisite consents
        from the majority of the noteholders of the Company's 11% Senior Notes
        due 2001 which permitted the Company to amend the Indenture which
        governs its 11% Senior Notes due 2001 as follows:

        1)      permit the Company to issue and sell up to $100 million
                aggregate principal amount of its 9% Senior subordinated Notes
                due 2004, and to use a portion of the net proceeds from the
                issuance of the 9% Senior Subordinated Notes to redeem all
                outstanding shares of the Company's Series B Preferred Stock,
                held by Reading Australia PTY Limited ("Reading"),

        2)      designate Santee LLC and Santee Dairies, Inc., to the extent
                such entities ever become Subsidiaries of the Company, as
                Unrestricted Subsidiaries (as defined) which would not be
                subject to certain significant covenants of the 11% Senior Note
                Indenture,

        3)      permit the Company to make certain additional investments in
                Santee LLC (including investments funded by La Cadena),

        4)      permit the Company to repay under limited circumstances
                investments made by La Cadena in the Company to enable it to
                increase its ownership interest in Santee LLC, and

        5)      make certain other amendments to the 11% Senior Note Indenture.



                                       21
<PAGE>   22

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

ITEM 2. CHANGES IN SECURITIES (CONTD.)

        Offering of $100 million of 9% Senior Subordinated Notes due 2004: 

        On July 24, 1997, the Company completed an offering for $100 million of
        9% Senior Subordinated Notes due 2004 under Rule 144a of the Securities
        Act. Proceeds from the offering were used or will be used to pay for
        consent solicitation fees of approximately $5.0 million, fees and
        expenses related to the offering of approximately $4.0 million, pay a
        financial advisory fee to La Cadena of $2.0 million and to pay
        approximately $74.0 million to redeem all of the outstanding shares of
        the Company's Series B Preferred Stock including accrued and unpaid
        dividends

        Redemption of Series B Preferred Stock:

        On July 24, 1997, the Company gave notice of exercise of option to
        redeem all outstanding shares of the Company's Series B Preferred Stock
        to Reading Australia PTY Limited, a majority owned indirect subsidiary
        of Craig. On August 4, 1997, the Company deposited approximately $74.0
        million into an Escrow Account for the benefit of Reading Australia PTY
        Limited, to redeem the Series B Preferred Stock and to pay accrued and
        unpaid dividends up to and including August 4, 1997.

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>
                      4.1       First Supplemental Indenture, between the
                                Company and IBJ Schroder Bank & Trust Company,
                                as Trustee, for $165,000,000 11% Senior Notes
                                due 2001, dated as of July 22, 1997.
</TABLE>



                                       22
<PAGE>   23

                           STATER BROS. HOLDINGS INC.
                                  JUNE 29, 1997

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

        (a)  Exhibits

             Exhibits are as follows:

<TABLE>
<CAPTION>
                  EXHIBIT NO.                     DESCRIPTION
                  -----------                     -----------
                  <S>           <C>
                      4.2       Indenture between the Company and First Trust of
                                New York, as Trustee, for $100,000,000 9% Senior
                                Subordinated Notes due 2004, dated as of July
                                24, 1997.

                      11        Calculation of Earnings Per Common Share

                      27        Financial Data Schedule
</TABLE>

                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

                                       23
<PAGE>   24
                           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:  August 11, 1997        /s/      Jack H. Brown
                                           -------------------------------------
                                           Jack H. Brown
                                           Chairman of the Board, President,
                                           and Chief Executive Officer


             Date:  August 11, 1997        /s/      Dennis N. Beal
                                           -------------------------------------
                                           Dennis N. Beal
                                           Vice President, Finance and
                                           Chief Financial Officer
                                           (Chief Accounting Officer)


                                       24