SECURITIES AND EXCHANGE COMMISSION

                               WASHINGTON, D. C. 20549

                                       FORM 10-K

             (X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934 
                 
                     For the fiscal year ended January 31, 1998

                                          OR

             ( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
                       
                              Commission File No 0-631

                                ROSE'S HOLDINGS, INC. 
             (Exact name of registrant as specified in its charter)

          Delaware                                              56-2043000
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification Number)

                                 150 East 52nd Street
                                      21st Floor
                                  New York, NY  10022
                  (Address and zip code of principal executive offices)

Registrant's telephone number, including area code: (212) 813-1500

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:  

           Common Stock, No Par Value

           Stock Warrants (to purchase Common Stock)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes   X          No       

     Indicate by check mark if disclosure of delinquent filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (   ) 
                             (continued on following page)
PAGE
<PAGE>
                             (continued from previous page)

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

    Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes   X         No       

    As of January 31, 1998, of the 10,000,000 shares of common stock delivered
to First Union National Bank of North Carolina ("FUNB"), as Escrow Agent,
pursuant to the Modified and Restated First Amended Joint Plan of Reorganiza-
tion, 1,367,659 shares have been returned to the Company and canceled, and 
8,612,661 shares are outstanding.  The remaining 19,680  shares held in escrow 
will be distributed by FUNB in satisfaction of disputed Class 3 claims as and 
when such claims are resolved.  To the extent that escrowed shares of common 
stock are not used to satisfy claims, they will revert to the Company and will 
be retired or held in the treasury of the Company.

    As of April 7, 1998, the aggregate market value of common stock held by non-
affiliates of the Company (assuming all pending claims are resolved adversely
to the Company) was approximately $9,089,484.


                          DOCUMENTS INCORPORATED BY REFERENCE

       Incorporated Document                             Location in Form 10-K 

Portions of Registrant's definitive                      Part III, Items 10, 11,
Proxy Statement to be filed in                           12 and 13
connection with the 1998 Annual 
Meeting of Shareholders.
PAGE
<PAGE>
PART I

ITEM 1:  BUSINESS

     General Development of Business  

    The Company was incorporated in 1997 to act as a holding corporation, which,
pursuant to the merger described below in this Item 1, became the parent of
Rose's Stores, Inc.  Rose's* was organized in 1915 as a family partnership
consisting of Paul H. Rose and his wife, Emma M. Rose, who together opened a
"5-10-25 cent" store in Henderson, North Carolina.  By 1927, when there were 28
stores, the business was incorporated in the state of Delaware under the name
of "Rose's 5, 10 & 25 cent Stores, Inc."  In 1962, the name was changed to 
"Rose's Stores, Inc."  Over the years, Rose's opened stores of a larger size.  
As a result, Registrant's business evolved from a chain of 5, 10 & 25 cent 
stores to a chain of general merchandise discount stores.

    On September 5, 1993, Rose's filed a voluntary petition for Relief under
Chapter 11, Title 11 of the United States Bankruptcy Code (the "Bankruptcy 
Code") in the United States Bankruptcy Court for the Eastern District of North 
Carolina (the "Bankruptcy Court").  Rose's Modified and Restated First Amended 
Joint Plan of Reorganization (the "Plan") was approved by Order of the Bankrupt-
cy Court on April 24, 1995.  On April 28, 1995, the Plan became effective (the
"Effective Date").  Details of the bankruptcy proceedings are discussed in 
Note 1 to the Company's Financial Statements included elsewhere herein.

     On August 7, 1997, pursuant to an agreement and plan of merger among Stores
and two newly created, wholly-owned subsidiaries of Stores, Stores became a
wholly-owned subsidiary of the Company.  As a result of such merger, each share
of common stock, no par value ("Stores Common Stock"), of Stores was converted
into common stock, no par value ("Common Stock"), of the Company and each
warrant, option or other right entitling the holder thereof to purchase or
receive shares of Stores Common Stock was converted into a warrant, option or
other right (as the case may be) entitling the holder thereof to purchase or
receive shares of Common Stock on identical terms.  The powers, rights and other
provisions of the Common Stock was identical to the powers, rights and other
provisions of the Stores Common Stock.  

     On December 2, 1997, the Company consummated the sale to Variety
Wholesalers, Inc. ("Variety") of all of the outstanding capital stock of Stores
(the "Sale") pursuant to a Stock Purchase Agreement, dated as of October 24,
1997, between the Company and Variety (the "Stock Purchase Agreement").  The
Sale constituted the disposition by the Company of substantially all of its
assets and was approved by the holders of a majority of the outstanding shares
of Common Stock at a special stockholders meeting of the Company on December 2,
1997.  The total purchase price for the Sale was $19,200,000, including
$1,920,000 which was placed in escrow.  The proceeds of the Sale, net of certain
transaction, closing, and other costs, were $15,331,000 (including $1,920,000
which was placed in escrow).  For further information with respect to the Sale,
the Stock Purchase Agreement, and related matters, reference is made to the
Company's definitive proxy statement, dated November 10, 1997, as filed with the
Securities and Exchange Commission (the "Proxy Statement").
                   
* Reference in this Annual Report on Form 10-K to "Rose's" or the "Stores" shall
mean Rose's Stores, Inc.  Reference in this Annual Report to "Registrant" or the
"Company" shall mean Rose's Holdings, Inc.
<PAGE>
     Narrative Description of Business 

     The Company currently has no business operations and its principal asset
is the net proceeds from the Sale.  The Company is actively seeking acquisitions
and/or merger transactions in which to employ its cash so that the Company's
stockholders may benefit by owning an interest in a viable enterprise.  There
can be no assurance that the Company will be able to locate or purchase a
business, or that such business, if located and purchased, will be profitable.
In order to finance an acquisition, the Company may be required to incur or
assume indebtedness or issue securities.  Pending the use of the net proceeds
of the Sale, the Company has invested, and plans to continue to invest, such net
proceeds in liquid, high quality investments.

ITEM 2:  PROPERTIES

     As of March 31, 1998, the Company entered into a sub-lease for office space
with Gateway Industries, Inc.  The rent is approximately $2,700 a month.  This
lease runs through March 30, 2001, but may be terminated by either party with
90 days notice. Warren Lichtenstein, the Company's President, Chief Executive
Officer, and Chief Accounting Officer, is the Chief Executive Officer and the 
principal stockholder for Gateway Industries, Inc.

ITEM 3:  LEGAL PROCEEDINGS

     As a result of the Sale on December 2, 1997 to Variety of all of the
outstanding capital stock of the Registrant's wholly owned subsidiary and sole
operating entity, Stores, the Registrant was relieved of liability for claims
against Stores except to the extent of its indemnification obligations set forth
in the Stock Purchase Agreement.  Pursuant to the Stock Purchase Agreement, ten
percent ($1,920,000) of the purchase price for the sale of stock to Variety was
placed in escrow for payment of indemnified losses to Variety.  The Stock
Purchase Agreement further provides that if the aggregate cumulative
indemnifiable losses as of December 2, 1998 are less than such amount, the
balance of the escrowed amount will be disbursed to the Registrant at such time
and any further claims for indemnification by Variety shall be satisfied direct-
ly by the Registrant.  As of the date hereof, the only material claim arising 
under the indemnification obligation of the Registrant to Variety relates to the
assertion by a third party of a right to a fee in the amount of $1.3 million. 
The Company disputes its obligation to pay any such fee.

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     A special stockholders' meeting of the Company was held on December 2, 1997
to act upon the proposal (the "Sale Proposal") to authorize the Sale of all the
outstanding capital stock of Stores, a wholly owned subsidiary of the Company,
pursuant to the Stock Purchase Agreement.  On the record date, 8,612,661 shares
of Common Stock were outstanding and entitled to vote at the special meeting. 
The Sale Proposal was approved by a vote of 4,706,784 in favor, 89,652 opposed
and 9,247 abstaining.  
PAGE
<PAGE>
PART II

ITEM 5:  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
         MATTERS 
    
    The Common Stock was listed on the Nasdaq National Market System until March
11, 1998, at which time the Common Stock was delisted.  Since such date, the
Common Stock has traded on the NASD OTC Bulletin Board (symbol "RSTO").  The
Company had 2,749 holders of record of Common Stock on February 6, 1998.  The
Company paid no dividends on its Common Stock in 1997 or 1996.  High and low
prices of the Common Stock, as reported on NASDAQ, are shown in the table below:

<TABLE>
<CAPTION>
                                     Fiscal Year                                           Fiscal Year      
                                Ended January 31, 1998                                Ended January 25, 1997
                                 High                     Low                          High                    Low  
<S>                              <C>                     <C>                           <C>                    <C>
1st Quarter                      2  5/32                 1 11/16                       2  3/32                1  5/16
2nd Quarter                      1 15/16                 1  7/32                       2  1/8                 1 11/16
3rd Quarter                      1  7/8                    29/32                       1 27/32                1  1/2
4th Quarter                      1 11/16                 1  7/16                       1 31/32                1  1/2
</TABLE>

<PAGE>   <PAGE>
ITEM 6: SELECTED FINANCIAL DATA

(Dollars in thousands except per share amounts)
(Not covered by Independent Auditors' Report)

<TABLE>
<CAPTION>
                                                                  Restated   |  Restated
                                                                 Thirty-Nine |  Thirteen
                                          Fiscal Years           Weeks Ended | Weeks Ended          Fiscal Years    
                                                  Restated       January 27, |  April 29,      Restated       Restated 
                                   1997(a)          1996            1996     |    1995           1994           1993   
<S>                            <C>                  <C>            <C>           <C>            <C>            <C>
Revenue:                                                                     |
  Total revenue                $     -                -               -      |      -              -              -   
                                                                             |
Costs and Expenses:                                                          |
  Total costs and expenses            347             -               -      |      -              -              -   
                                                                             |
Other Income                          418             -               -      |      -              -              -    
                                                                             |
Earnings (Loss) From                                                         |
  Continuing Operations                71             -               -      |      -              -              -    
                                                                             |
Discontinued Operations:                                                     | 
  Earnings (loss) from                                                       |  
  operation of discontinued                                                  | 
  business                         (3,163)             380           4,401   |    70,187        (51,282)       (66,207)
  Loss from disposal of                                                      |
  discontinued operation          (22,446)            -               -      |      -              -              -   
    Earnings (loss) from                                                     |
    discontinued operation        (25,609)             380           4,401   |    70,187        (51,282)       (66,207)
Net earnings (loss)               (25,538)             380           4,401   |    70,187        (51,282)       (66,207)
                                                                             |   
Net earnings (loss) per                                                      |
  common share - basic              (2.96)            0.04            0.51   |      3.74          (2.73)         (3.53)
                                                                             |
Cash dividends                        -                 -              -     |      -              -              - 
                                                                             |
Total assets                       15,408           160,332        171,244   |   204,561        183,186        308,105
                                                                             |
Excess of net assets over                                                    | 
  reorganization value               -               21,872         25,371   |    32,201           -              -

</TABLE>
(a)  On December 2, 1997, the Company sold all of the outstanding stock of 
Stores, its sole operating entity.  The operating results of Stores prior to 
the consummation of the Sale are shown as earnings or loss of discontinued 
business.  The loss resulting from the Sale is shown as loss from disposal of 
discontinued operation.  

(b)  In accordance with Fresh-Start Reporting, the Company adjusted its assets 
and liabilities to reflect their estimated fair market value at the Effective 
Date, and made certain reclassifications between gross margin and expenses and 
changed the method of accruing certain expenses between periods (see Note 2 to 
the Financial Statements).  Accordingly, the selected financial data above for 
the 39 weeks ended January 27, 1996 are not comparable in material respects to 
such data for prior periods.  
<PAGE>
<PAGE>
ITEM 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS FROM OPERATIONS
(Dollars in thousands except per share amounts)

Results of Operations

    The following table sets forth for the periods indicated the percentage 
which each item listed relates to net sales:

<TABLE>
<CAPTION>
                                                                          Fiscal Years                     
                                                                             % to Net                                 % to Net    
                                      1997(a)                 1996            Sales              Pro forma             Sales
<S>                                    <C>                    <C>               <C>                <C>                   <C>
Revenue:
  Gross sales                         $   -                   661,684           103.1%             700,325(c)            103.2%
  Leased department sales                 -                    19,800             3.1               21,638(c)              3.2
  Net sales                               -                   641,884           100.0              678,687(c)            100.0
  Leased department income                -                     4,647             0.7                4,898(c)              0.7
    Total revenue                         -                   646,531           100.7              683,585               100.7
Costs and Expenses:
  Cost of sales                           -                   489,450            76.3              519,727                76.6
  Selling, general and 
    administrative                         347                150,143            23.4              153,900                22.7
  Depreciation and 
    amortization                          -                    (2,378)           (0.4)              (3,349)               (0.5)
  Interest                                -                     7,946             1.2                6,927                 1.0
    Total costs and expenses               347                645,161           100.5              677,205                99.8
Other income                               418                   -                 -                  -                     -
Earnings (loss) from
  continuing operations                     71                  1,370             0.2                6,380                 0.9
Discontinued operation:
  Loss from operation of
  discontinued business                 (3,163)                  -                 -                  -                     -
  Loss from disposal of 
  discontinued operation               (22,446)                  -                 -                  -                     - 
Earnings (loss) before income
 taxes and extraordinary item          (25,538)                 1,370             0.2                6,380                 0.9 
Income taxes                              -                        76             0.0                1,272                 0.2
Earnings (loss) before 
  extraordinary item                   (25,538)                 1,294             0.2                5,108                 0.7 
Extraordinary item - loss on early
  extinguishment of debt                  -                      (914)            0.1                 -                     -     
Net earnings (loss)                   $(25,538)                   380             0.1%               5,108                 0.7%
</TABLE>
(a)  On December 2, 1997, the Company sold all of the outstanding stock of 
Stores, its sole operating entity.  The operating loss of Stores prior to the 
consummation of the Sale is shown as loss from operations of discontinued busi-
ness for fiscal 1997.  The loss resulting from the Sale is shown as loss from 
disposal of discontinued operation.  For the prior years, the details of the
operating results of Stores, are shown for discussion purposes.  Accordingly, 
the selected financial data above for the 1997 fiscal year is not comparable to
the prior years.

(b)  Beginning in May 1995, the income statements reflect the application of 
Fresh-Start Reporting as described in Fresh-Start Reporting, Note 2 to the 
Financial Statements, and are therefore not comparable to prior years.  The 1995
year-to-date results are presented on a pro forma basis to reflect the results 
as if the Company had adopted Fresh-Start Reporting at the beginning of the
year.  The adjustments are related to interest expense, reorganization costs, 
depreciation and amortization, advertising accrual, LIFO shrinkage and income 
taxes.

(c)  The Company's proforma amounts represent the combination of the Company's 
historical amounts prior to the Effective Date with the historical amounts after
the Effective Date.  See Statements of Operations included in the historical 
financial statements.
PAGE
<PAGE>
Sale of Rose's Stores, Inc.

     On December 2, 1997, the Company consummated the sale to Variety of all of
the outstanding capital stock of Stores, a wholly owned subsidiary of the
Company, pursuant to the Stock Purchase Agreement.  The Sale constituted the
disposition by the Company of substantially all of its assets and was approved
by the holders of a majority of the outstanding shares of Common Stock of the
Company at a special stockholders meeting of the Company on December 2, 1997. 
The total purchase price for the Sale was $19,200 including $1,920, which was
placed in escrow. The proceeds of the Sale, net of certain transaction, closing,
and other costs, were $15,331 including the $1,920 placed in escrow.  The loss
resulting from the Sale was $22,446.  For further information with respect to
the Sale, see Item 3:  Legal Proceedings.

     Prior to the Sale, Stores had incurred a year-to-date loss of $3,163.  The
following are the details of that loss:

           Gross sales                                     $ 532,260
           Leased department sales                            14,910
           Net Sales                                         517,350
           Leased department income                            3,877
              Total revenue                                  521,227

           Costs and Expenses:
             Cost of Sales                                   391,530
             Selling, general and administrative             127,705
             Depreciation and amortization                    (1,626) 
             Interest                                          6,781
                Total costs and expenses                     524,390

           Net Loss                                        $  (3,163)
           Net Loss Per Share                              $    (.37)

     Selling, general and administrative expenses (SG&A) include income of $754
resulting from a reduction in prepetition workers' compensation loss reserves. 
Also included in SG&A is a loss of $689 related to closed store expenses.

Chapter 11 Proceedings

     In accordance with SOP 90-7, the Company adopted fresh-start reporting when
the Company emerged from bankruptcy on April 28, 1995.  Under fresh-start
reporting, a new reporting entity is created, and the Company was required to
adjust its assets and liabilities to reflect their estimated fair market value
at the Effective Date, which reduced depreciation and amortization related to
property and equipment; and created a deferred credit, excess of net assets over
reorganization value, which was being amortized over eight years.

     At the same time, the Company made certain reclassifications between gross
margin and expenses and changed the method of accruing certain expenses between
periods.  In addition, as a result of the Company's emergence, reorganization
expense and income taxes recognized by the Company prior to April 28, 1995, are
not comparable to amounts, if any, recognized subsequent to the Effective Date. 
For further information, see Note 2 to the Financial Statements.

     To facilitate a better comparison of the Company's operating results for
the periods presented, the following discussion is based on the results of
<PAGE>
operations which are presented on a pro forma basis (as described below) for
1995.  The combined historical statements of operations for the 13 weeks ended
April 29, 1995 (Predecessor) and 39 weeks ended January 27, 1996 (Successor),
are not included in the discussion due to the lack of comparability caused by
the adoption of fresh-start reporting at the end of the first quarter.  Certain
items in the Successor's pro forma statements of operations are not affected by
fresh-start adjustments and are comparable to the historical combined results
of the Predecessor and the Successor.

     The pro forma statements of operations combine the results of operations
of the Predecessor and Successor for 1995 and give effect to the transactions
occurring in conjunction with the Plan as if the Effective Date had occurred,
and such transactions had been consummated, on January 29, 1995.  The statements
of operations have been adjusted to reflect: the reduction in depreciation and
amortization expense due to the write-off of property and equipment and property
under capital leases; reclassification of DIP interest from reorganization costs
to interest expense; the elimination of all other reorganization costs;
amortization of excess net assets over reorganization value; the effects of
changing to the accrual method for advertising; the reversal of LIFO credits;
accrual of additional shrinkage; and the recording of an appropriate income tax
expense.

Revenue

     Excluding the results of discontinued operations (Stores), the Company had
no revenue for 1997.   

     In 1996, the Company reported sales of $661,684, a decrease of $38,641, or
5.5%, from fiscal 1995.  The decline in sales was due primarily to a decline in
sales on a comparable store basis of 5.0%.  Same store sales were negatively
affected by the Company's program in the fourth quarter of running less inten-
sive promotions, thereby improving the gross margin rate.

     In 1995, the Company reported sales of $700,325, a decrease of $56,031, or
7.4%, from fiscal 1994.  The closing of seven stores in May 1995 and one store
in October 1995 were the reasons for a significant portion of the sales de-
crease.  Same store sales for 1995 decreased 1.5% from 1994.  Same store sales
in 1995 were negatively affected by poor weather at the beginning of the year,
a change in layaway promotions, and by a poor Christmas selling season for re-
tailers in general.

     Inflation had little effect on the Company's operations in the last three
years.

Costs and Expenses

    In 1996, the cost of sales as a percent of sales decreased .3% from the 1995
pro forma cost as a percent of sales.  This was due primarily to (i) lower
shrinkage resulting in a decrease of the cost of sales rate by .1%, (ii)
decreased markdowns resulting in a decrease in the rate by .2%, and (iii) an
increase in the initial markon resulting in a decrease in the rate by .1%. These
decreases in the cost of sales were offset somewhat by a decrease in advertising
co-op income resulting in an increase of .1% in the 1996 cost of sales.

PAGE
<PAGE>
     In 1995, the pro forma cost of sales as a percent of sales increased .8%
from the 1994 cost as a percent of sales.  This was due primarily to (i) higher
shrinkage resulting in an increase of the cost of sales rate by .8%, (ii)
increased markdowns resulting in an increase in the rate by .5%, and (iii) no
LIFO credit was recorded in 1995 resulting in an increase in the cost of sales
rate by .7%.  These increases in the cost of sales were offset somewhat by the
reclassification of advertising co-op income and cash discounts to cost of sales
resulting in a decrease of 1.1% in the 1995 cost of sales.

     Excluding the results of discontinued operations, the Company had general
and administrative expenses of $347 in 1997 which primarily consisted of Board
of Directors' fees, insurance and professional services.

     Selling, general and administrative (SG&A) expenses as a percent of sales
were 23.4% in 1996, and 22.7% in 1995 (pro forma).

     The 1996 SG&A included a charge of $657 related to a merger agreement with
Fred's, Inc., which was terminated on August 20, 1996, and a $207 charge for the
reserve for a store closing in 1997.  Also included in 1996 SG&A, is income of
$1,397 resulting from the settlement of pre-petition tax claims and some pre-
petition workers' compensation insurance claims.

     The 1995 pro forma SG&A increase as a percentage of sales was due in part
to the reclassification of advertising co-op and cash discounts from SG&A to
gross margin and to the decline in 1995 sales.  Included in 1995 SG&A, is a gain
of $4,701 which represents the effect of canceling a postretirement healthcare
benefit, a charge of $1,170 for severance costs related to a downsizing on
February 23, 1996, of approximately 175 positions in the home office,
distribution and store operations support staff, and a gain of $586 on the sale
of a store lease.  

     Excluding the results of discontinued operations, the Company reported no
interest expense for 1997.  Interest for 1996 and 1995 pro forma was $7,946 and
$6,927, respectively.  Interest expense increased 14.7% in 1996 due primarily
to increased amortization of deferred financing costs and other interest and
decreased 25.9% in 1995 (pro forma).  

Other Income 

     The Company reported other income of $418 for 1997 which included $117 of
interest income from the investment of the proceeds of the Sale and $301 of
management fee income paid by Stores to the Company, which management fee was
to equal the costs incurred by the Company from its organization on August 7,
1997 until the Sale of Stores on December 2, 1997.

Liquidity and Capital Resources

     The Company currently has no business operations and its principal asset
is the net proceeds from the Sale.  The Company is actively seeking acquisitions
and/or merger transactions in which to employ its cash so that the Company's
stockholders may benefit by owning an interest in a viable enterprise.  There
can be no assurance that the Company will be able to locate or purchase a
business, or that such business, if located and purchased, will be profitable.
In order to finance an acquisition, the Company may be required to incur or
assume indebtedness or issue securities.  Pending the use of the net proceeds
<PAGE>
of the Sale, the Company has invested, and plans to continue to invest, such net
proceeds in liquid, high quality investments.

ITEM 8:  FINANCIAL STATEMENTS

     See the Company's Financial Statements contained elsewhere herein.

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None
PAGE
<PAGE>
PART III

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information on the Directors required by this Item is incorporated by
reference to the caption "Proposal 2. Election of Board of Directors" in the
Company's definitive proxy statement to be filed with Securities and Exchange
Commission within 120 days after the end of the Company's fiscal year covered
by this report.  The information required with respect to Executive Officers is
set forth in Part III, Item 10 below.  

    The following information is furnished with respect to each of the executive
officers of the Registrant as of February 10, 1998:

<TABLE>
<CAPTION>
Name, Age, Position            Business Experience During Past Five Years

<S>                            <C>     
Warren G. Lichtenstein (32)    Mr. Lichtenstein has served as a director of the
President, Chief Executive     Corporation since 1996.  Mr. Lichtenstein has been
Officer, and Chief Account-    Chief Executive of the General Partner of Steel 
ing Officer                    Partners II, LP, a private investment firm, since
                               1993 and Chairman of Steel Partners Services, Ltd.,
                               a private investment firm, since 1993.  Mr.
                               Lichtenstein was Executive Vice President of Alpha
                               Technologies Group, Inc., a manufacturer of
                               electronic components, from September 1994 through
                               September 1995.  Mr. Lichtenstein is a director of
                               Alpha Technologies Group, Inc., Saratoga Spring Water
                               Corporation, Inc. and Gateway Industries, Inc.
                               ("Gateway").  Gateway was the sole stockholder of
                               Marsel Mirror and Glass Products, Inc. ("Marsel")
                               from November 1995 to December 1996.  Mr.
                               Lichtenstein served as President of Marsel from its
                               formation as an acquisition subsidiary until the
                               acquisition was consummated.  Thereafter, Marsel
                               appointed a President who had no prior affiliation
                               with Gateway.  Mr. Lichtenstein served as Marsel's
                               sole director until Gateway disposed of its interest
                               in Marsel.  Marsel filed for protection under Chapter
                               11 of the Bankruptcy Code shortly following Gateway's
                               disposition of Marsel.

Jack L. Howard (36)            Mr. Howard has served as a director of the Corpo-
Vice President, Secretary,     ration since 1996.  Mr. Howard has been a registered 
Treasurer, and Chief           principal of Mutual Securities, Inc., a division of
Financial Officer              Cowles, Sabol & Co., Inc., a stock brokerage firm,
                               since prior to 1993.  He is a director of Gateway
                               Industries, Inc. and Scientific Software Intercomp,
                               Inc.
</TABLE>

     Officers of the Registrant are elected each year by the Board of Directors
to serve for the ensuing year and until their successors are elected and
qualified.  

PAGE
<PAGE>
ITEM 11:  EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to the
heading "Executive Compensation and Other Information" in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal year covered
by this report.

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference to the
headings "Principal Holders of Voting Securities" and "Stock Ownership of
Management" in the Company's definitive proxy statement to be filed with the
Securities and Exchange Commission within 120 days after the end of the Com-
pany's fiscal year covered by this report.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to the
heading "Certain Relationships and Related Transactions" in the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal year covered
by this report.

PART IV

ITEM 14:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  1.  FINANCIAL STATEMENTS

                 Independent Auditors' Report

                 Statements of Operations for the year ended 
                 January 31, 1998, for the year ended January
                 25, 1997, for the thirty-nine weeks ended 
                 January 27, 1996, and the thirteen weeks
                 ended April 29, 1995

                 Balance Sheets - January 31, 1998 and
                 January 25, 1997

                 Statements of Stockholders' Equity for the 
                 year ended January 31, 1998, for the year 
                 ended January 25, 1997, for the thirty-
                 nine weeks ended January 27, 1996, and the 
                 thirteen weeks ended April 29, 1995
                 Statements of Cash Flows for the year ended
                 January 31, 1998, for the year ended January
                 25, 1997, for the thirty-nine weeks ended 
                 January 27, 1996, and the thirteen weeks 
                 ended April 29, 1995

                 Notes to the Financial Statements

PAGE
<PAGE>
     2.  FINANCIAL STATEMENT SCHEDULES

                 All schedules are omitted because they are not applicable
                 or not required, or because the required information is 
                 included in the financial statements or notes thereto.

     3.  EXHIBITS

                 Exhibit
                   No.  

<TABLE>
                 <S>            <C>                                                     <C>
                 10.1           Second Amended and Restated Trade Debt Note dated as of April
                                29, 1997, between the Company and M. J. Sherman and Associates,
                                Inc. (Incorporated by reference to Exhibit 10.1 to Registrant's
                                Form 10-Q for the quarter ended April 26, 1997).

                 10.2           Collateral Trust Agreement dated as of April 29, 1997, between
                                M. J. Sherman and by reference Associates, Inc., as Trustee,
                                and the Company. (Incorporated by reference to Exhibit 10.2 to
                                Registrant's Form 10-Q for the quarter ended April 26, 1997).

                 10.3           General Security Agreement dated as of April 29, 1997, by the
                                Company to M. J. Sherman and Associates, Inc., as Trustee.
                                (Incorporated by reference to Exhibit 10.3 to Registrant's
                                Form 10-Q for the quarter ended April 26, 1997).

                 10.4           Second Amendment to Second Deed of Trust, Assignment of Rents
                                and Security Agreement dated as of April 29, 1997, by and
                                among the Company, Alan H. Peterson, and M. J. Sherman and
                                Associates, Inc. (Incorporated by reference to Exhibit 10.4 to
                                Registrant's Form 10-Q for the quarter ended April 26, 1997).

                 10.5           Continuing Guaranty dated as of August 6, 1997, between the
                                Lendor Group and the Company.  (Incorporated by reference to
                                Exhibit 10.1 to Registrant's Form 10-Q for the quarter ended
                                July 26, 1997).

                 10.6           Security Agreement dated as of August 6, 1997, between Foothill
                                Capital Corporationand the Company. (Incorporated by reference
                                to Exhibit 10.2 to Registrant's Form 10-Q for the quarter ended
                                July 26, 1997).

                 10.7           Amendment Number Two to Loan and Security Agreement between
                                Rose's Stores, Inc., as Borrower, Financial Institutions as
                                listed on the signature pages, as the Lenders, PPM Finance,
                                Inc., as Co-Agent, and Foothill Capital Corporation, as Agent,
                                dated as of August 6, 1997. (Incorporated by reference to
                                Exhibit 10.3 to Registrant's Form 10-Q for the quarter ended
                                July 26, 1997).

<PAGE>
<PAGE>
                10.8           Stock Purchase Agreement dated as of October 24, 1997 by and
                                between Variety Wholesalers, Inc. and the Registrant. 
                                (Incorporated by reference to Exhibit 10.1 to Registrant's
                                Form 10-Q for the quarter ended October 25, 1997).

                 10.9           Employment Agreement with R. Edward Anderson, Chairman of the
                                Board, President and Chief Executive Officer, dated October
                                23, 1997. (Incorporated by reference to Exhibit 10.2 to
                                Registrant's Form 10-Q for the quarter ended October 25, 1997).

                 27.            Financial Data Schedule
</TABLE>
(b)              REPORTS ON FORM 8-K

                 The Registrant filed the following current report on Form 8-K 
                 during the last quarter of the period covered by this report:

                 (i)            Report on Form 8-K dated December 2, 1997,
                                reporting under Item 2 the completion of
                                the sale to Variety of Stores.
PAGE
<PAGE>

                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, Rose's Holdings, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



                                      ROSE'S HOLDINGS, INC.


                                      By:  /s/ Warren G. Lichtenstein       
                                           Warren G. Lichtenstein
                                           President, Chief Executive Officer,
                                           and Chief Accounting Officer


                                      By:  /s/ Jack L. Howard               
                                           Jack L. Howard
                                           Vice President, Secretary, Treasurer,
                                           and Chief Financial Officer

                    


Date:  May 1, 1998


       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Regis-
trant and on the dates indicated:



/s/ Jack L. Howard                                /s/ J. David Rosenberg        
Jack L. Howard, Director                          J. David Rosenberg, Director


/s/ Warren G. Lichtenstein                        /s/ Harold Smith             
Warren G. Lichtenstein, Director                  Harold Smith, Director    


                                                  /s/ N. Hunter Wyche, Jr.      
Joseph L. Mullen, Director                        N. Hunter Wyche, Jr., Director




Earle May, Director
<PAGE>






MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS

January 31, 1998

     The financial statements on the following pages have been prepared by
management in conformity with generally accepted accounting principles. 
Management is responsible for the reliability and fairness of the financial
statements and other financial information included herein.
     To meet its responsibilities with respect to financial information,
management maintains and enforces internal accounting policies, procedures and
controls which are designed to provide reasonable assurance that assets are
safeguarded and that transactions are properly recorded and executed in
accordance with management's authorization.  Management believes that the
Company's accounting controls provide reasonable, but not absolute, assurance
that errors or irregularities which could be material to the financial state-
ments are prevented or would be detected within a timely period by Company 
personnel in the normal course of performing their assigned functions.  The con-
cept of reasonable assurance is based on the recognition that the cost of 
controls should not exceed the expected benefits.  
     The responsibility of our independent auditors, KPMG Peat Marwick LLP, is
limited to an expression of their opinion on the fairness of the financial
statements presented.  Their opinion is based on procedures, described in the
second paragraph of their report, which include evaluation and testing of
controls and procedures sufficient to provide reasonable assurance that the
financial statements neither are materially misleading nor contain material
errors.
     The Audit Committee of the Board of Directors meets periodically with
management and independent auditors to discuss auditing and financial matters
and to assure that each is carrying out its responsibilities.  The independent
auditors have full and free access to the Audit Committee and meet with it, with
and without management being present, to discuss the results of their audit and
their opinions on the quality of financial reporting.





                                          Warren G. Lichtenstein
                                          President, Chief Executive Officer,
                                          and Chief Accounting Officer


                                          Jack L. Howard
                                          Vice President, Secretary,
                                          Treasurer, and Chief Financial Officer
PAGE
<PAGE>
INDEPENDENT AUDITORS' REPORT 

The Board of Directors
Rose's Holdings, Inc.:

     We have audited the accompanying balance sheets of Rose's Holdings, Inc.
(the "Successor"), as of January 31, 1998 and January 25, 1997, and the related
statements of operations, stockholders' equity, and cash flows for the year 
ended January 31, 1998 and January 25, 1997, and the thirty-nine weeks ended 
January 27, 1996.   We also have audited the accompanying statements of opera-
tions, stockholders' equity and cash flows for the thirteen weeks ended April
29, 1995, of Rose's Stores, Inc. (the "Predecessor").  These financial state-
ments are the responsibility of the Company's management.  Our responsibility 
is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Successor as of January
31, 1998 and January 25, 1997, and the Successor's results of operations and 
cash flows for the year ended January 31, 1998, January 25, 1997, and the 
thirty-nine weeks ended January 27, 1996, and the Predecessor's results of 
operations and cash flows for the thirteen weeks ended April 29, 1995, in con-
formity with generally accepted accounting principles.

     As discussed in Note 3 to the financial statements, effective April 29,
1995, the Company was required to adopt "Fresh-Start" reporting principles in
accordance with the American Institute of Certified Public Accountant's State-
ment of Position 90-7, "Financial Reporting by Entities in Reorganization under
the Bankruptcy Code."  As a result, the financial information for the period
subsequent to the adoption of Fresh-Start reporting are presented on a different
cost basis than for prior periods and therefore, are not comparable.





                                                       /s/ KPMG Peat Marwick LLP
Raleigh, North Carolina                                KPMG Peat Marwick LLP
April 21, 1998

PAGE
<PAGE>
STATEMENTS OF OPERATIONS  
(Amounts in thousands except per share amounts) 

<TABLE>
<CAPTION>
                                                           Successor                               |      Predecessor
                                                                                   Restated        |       Restated
                                                            Restated              Thirty-Nine      |       Thirteen
                                   Year Ended              Year Ended             Weeks Ended      |      Weeks Ended
                                   January 31,             January 25,            January 27,      |        April 29,
                                      1998                    1997                   1996          |          1995   
<S>                                <C>                         <C>                     <C>                    <C>
Revenue:                                                                                           |  
  Total revenue                   $      -                      -                       -          |            -      
                                                                                                   | 
Costs and Expenses:                                                                                | 
  Total costs and expenses                347                   -                       -          |            -   
                                                                                                   | 
Other Income                              418                   -                       -          |            -
                                                                                                   |
Earnings (Loss) From                                                                               |
  Continuing Operations                    71                   -                       -          |            -    
                                                                                                   |
Discontinued Operation:                                                                            |   
  Earnings (loss) from operation of                                                                | 
  discontinued business                (3,163)                   380                   4,401       |          70,187
  Loss from disposal of                                                                            | 
  discontinued operation              (22,446)                  -                       -          |            -   
    Earnings (loss) from                                                                           |
      discontinued operation          (25,609)                   380                   4,401       |          70,187 
Earnings (Loss) Before Income Taxes   (25,538)                  -                       -          |            -   
                                                                                                   |   
Income Taxes (Benefits):                                                                           |  
  Current                                -                      -                       -          |            -   
  Deferred                               -                      -                       -          |            -   
    Total                                -                      -                       -          |            -   
  Net Earnings (Loss)                 (25,538)                   380                   4,401       |          70,187 
                                                                                                   |
Net Earnings (Loss)                                                                                | 
  Per Common Share - basic        $     (2.96)                  0.04                    0.51       |            3.74
                                                                                                   | 
Weighted Average Shares Used                                                                       | 
  In Calculation Of Net Earnings                                                                   |  
  (Loss) Per Common Share               8,632                  8,632                   8,632       |          18,758
</TABLE>
See accompanying notes to financial statements.
<PAGE>  <PAGE>
BALANCE SHEETS 
(Amounts in thousands)

                                                        January 31,  January 25,
                                                           1998         1997   
Assets
 Current Assets
   Cash and cash equivalents                            $   13,465        1,241
   Cash - restricted in Escrow                               1,920         -
   Accounts receivable                                        -           5,101
   Inventories                                                -         141,287
   Other current assets                                       -           4,503
     Total current assets                                   15,385      152,132

 Property and Equipment, at cost,                                  
   less accumulated depreciation and amortization             -           7,710
 Other Assets                                                   23          480
                                                        $   15,408      160,322
Liabilities and Stockholders' Equity 
 Current Liabilities
   Short-term debt                                      $     -          44,138
   Accounts payable                                              6       19,230
   Accrued salaries and wages                                 -           6,422
   Pre-petition liabilities                                   -           2,737
   Other current liabilities                                  -          10,908
     Total current liabilities                                   6       83,435


 Excess of Net Assets Over Reorganization Value,
   Net of Amortization                                        -          21,872
 Reserve for Income Taxes                                     -          12,996
 Deferred Income                                              -             339
 Other Liabilities                                            -             740

 Stockholders' Equity 
   Preferred stock, Authorized 10,000 shares;
     none issued                                              -            -
   Common stock, Authorized 50,000 shares;
     issued 8,632 at 1/31/98 and 1/25/97                    35,000       35,000
   Paid-in capital                                           1,159        1,159
   Retained (deficit) earnings                             (20,757)       4,781 
         Total stockholders' equity                         15,402       40,940 

                                                        $   15,408      160,322
See accompanying notes to financial statements.
PAGE
<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
<TABLE>
<CAPTION>
                                                                                            Retained           
                                            Voting            Non-Voting                    Earnings
                                         Common Stock        Class B Stock      Paid-In   (Accumulated)     Treasury Stock
                                       Shares    Amount    Shares    Amount     Capital     (Deficit)      Shares    Amount 
<S>                                   <C>       <C>       <C>       <C>         <C>        <C>            <C>       <C>
Balance January 28, 1995               10,800   $ 2,250    12,659   $ 18,795    $ 2,700    $  (40,313)    (4,701)   $(18,618)
Net earnings for thirteen    
  weeks ended April 29, 1995             -         -         -          -          -           70,187       -           -  
Cancellation of former equity and
  elimination of retained 
  earnings                            (10,800)   (2,250)  (12,659)   (18,795)    (2,700)      (29,874)     4,701      18,618
Issuance of new equity 
  under the Plan                        8,632    35,000      -          -          -             -          -           -    
Balance April 29, 1995                  8,632    35,000      -          -          -             -          -           -   
Net earnings for thirty-nine 
  weeks ended January 27, 1996           -         -         -          -          -            4,401       -           -     
Paid-in capital - taxes                  -         -         -          -         1,159          -          -           -    
Balance January 27, 1996                8,632    35,000      -          -         1,159         4,401       -           -      
Net earnings for fiscal
  year 1996                              -         -         -          -          -              380       -           -    
Balance January 25, 1997                8,632   $35,000      -      $   -       $ 1,159     $   4,781       -       $   -      
Net loss for fiscal
  year 1997                              -         -         -          -          -          (25,538)      -           -    
Balance January 31, 1998                8,632   $35,000      -      $   -       $ 1,159     $ (20,757)      -       $   -     
</TABLE>



See accompanying notes to financial statements.
PAGE
<PAGE>
STATEMENTS OF CASH FLOWS  
(Amounts in thousands)

<TABLE>
<CAPTION>
                                                                         Successor                              |      Predecessor
                                                                                                Thirty-Nine     |       Thirteen   
                                                   Year Ended            Year Ended             Weeks Ended     |      Weeks Ended
                                                   January 31,           January 25,            January 27,     |       April 29,
                                                      1998                  1997                   1996         |          1995    
<S>                                               <C>                      <C>                   <C>                     <C>
Cash flows from operating activities:                                                                           |
Net earnings (loss)                               $ (25,538)                  380                  4,401        |         70,187
Expenses not requiring the outlay of cash:                                                                      | 
  Depreciation & amortization                        (1,625)               (2,378)                (2,549)       |          1,812
  Amortization of deferred financing costs              562                   562                     46        |            502
  (Gain) loss on disposal of property                                                                           | 
    & equipment                                        -                      (34)                   (46)       |             (1)
  (Gain) loss on sale of discontinued                                                                           |
    operation                                        22,446                  -                      -           |           -
  Deferred income taxes                                -                       76                    (76)       |           -   
  Additional paid-in capital                           -                     -                     1,159        |           -
  LIFO expense (credit)                                -                     -                      -           |           (364)
  Extraordinary loss on early extinguishment                                                                    |
    of debt                                            -                      914                   -           |           -    
  Write off of merger costs                            -                      657                   -           |           -   
  Provision for closed stores & severance               689                    77                  1,170        |           -   
  Settlement of pre-petition liabilities               (754)               (1,397)                  -           |           -   
  Gain on termination of postretirement                                                                         |
    healthcare                                         -                     -                    (4,701)       |           -    
  Fresh-Start revaluation & debt discharge             -                     -                      -           |        (73,492)
Cash provided by (used in) assets & liabilities:                                                                | 
  (Inc.) dec. in accounts receivable                (14,239)                2,108                    824        |           (630)
  (Inc.) dec. in inventories                        (45,653)               11,903                 31,939        |        (40,291)
  (Inc.) dec. in other assets                           473                  (273)                 3,577        |         (1,197)
  Inc. (dec.) in accounts payable                    18,645                (4,615)               (13,797)       |         14,361
  Inc. (dec.) in other liabilities                      (73)                 (553)                  (177)       |         (2,142)
  Inc. (dec.) in income tax reserves                    148                   323                 12,673        |           -   
  Inc. (dec.) in reserve for store closings                                                                     | 
    & severance                                        (116)               (1,227)                (4,674)       |         (1,108)
  Inc. (dec.) in deferred income                       (339)                 (635)                  (507)       |           (201)
  Inc. (dec.) in accumulated PBO                       -                     (367)                    47        |              7
Net cash provided by (used in) operating                                                                        | 
 activities                                         (45,374)                5,521                 29,309        |        (32,557)
Cash flows from investing activities:                                                                           | 
  Purchases of property & equipment                  (1,516)               (3,644)                (4,921)       |           (510)
  Net cash from sale of discontinued operation       14,563                  -                      -           |           -   
  Funds transferred to escrow                        (1,920)                 -                      -           |           -  
  Proceeds from disposal of property                                                                            | 
    & equipment                                        -                       36                     45        |              5
Net cash used in investing activities                11,127                (3,608)                (4,876)       |           (505)
Cash flows from financing activities:                                                                           | 
  Net activity on line of credit                     44,111                10,465                (24,981)       |         58,654
  Net activity on debtor-in-possession                                                                          |
    facility                                           -                     -                      -           |           (600)
  Payments on pre-petition secured debt                -                     -                      -           |        (26,423)
  Payments on unsecured priority &                                                                              |   
    administrative claims                              (272)                 (403)                (2,463)       |         (1,593)
  Principal payments on capital leases                 (272)                 (285)                  (346)       |           (281)
  Payments of deferred financing costs                 (629)               (1,512)                  (440)       |         (2,925)
  Inc. (dec.) in bank drafts outstanding              3,533                (9,530)                 3,768        |          5,502
Net cash provided by (used in)                                                                                  | 
  financing activities                               46,471                (1,265)               (24,462)       |         32,334
Net inc. (dec.) in cash & cash equivalents           12,224                   648                    (29)       |           (728)
Cash & cash equivalents at beginning of period        1,241                   593                    622        |          1,350
Cash & cash equivalents at end of period          $  13,465                 1,241                    593        |            622
PAGE
<PAGE>
STATEMENTS OF CASH FLOWS (continued)  
(Amounts in thousands) 
                                                                         Successor                              |       Predecessor
                                                                                               Thirty-Nine      |       Thirteen  
                                                   Year Ended            Year Ended             Weeks Ended     |       Weeks Ended
                                                   January 31,           January 25,            January 27,     |       April 29,
                                                      1998                  1997                   1996         |          1995     
Supplemental disclosure of additional noncash                                                                   | 
  investing & financing activities:                                                                             |     
      Retirement of net book value of assets                                                                    |  
        in reserve for store closings             $     30                  -                         17        |            623
      Capital lease obligations entered                                                                         | 
         into for new equipment                        887                   67                      374        |           -
</TABLE>
See accompanying notes to financial statements.
PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

Year Ended January 31, 1998; Year Ended January 25, 1997; Thirty-Nine Weeks 
Ended January 27, 1996; and Thirteen Weeks Ended April 29, 1995
(Amounts in thousands except per share amounts)

1  DISCONTINUED OPERATIONS

     On August 7, 1997, pursuant to an agreement and plan of merger among Stores
and two newly created, wholly-owned subsidiaries of Stores, Stores became a
wholly-owned subsidiary of the Company.  As a result of such merger, each share
of common stock, no par value ("Stores Common Stock"), of Stores was converted
into common stock, no par value ("Common Stock"), of the Company and each
warrant, option or other right entitling the holder thereof to purchase or
receive shares of Stores Common Stock was converted into a warrant, option or
other right (as the case may be) entitling the holder thereof to purchase or
receive shares of Common Stock on identical terms.  The powers, rights and other
provisions of the Common Stock was identical to the powers, rights and other
provisions of the Stores Common Stock.  

     On December 2, 1997, Rose's Holdings, Inc. consummated the sale to Variety
Wholesalers, Inc. of all of the outstanding capital stock of Rose's Stores, 
Inc., a wholly owned subsidiary of the Company pursuant to a Stock Purchase 
Agreement, dated as of October 24, 1997, between the Company and Variety.  The 
Sale constituted the disposition by the Company of substantially all of its 
assets and was approved by the holders of a majority of the outstanding shares 
of Common Stock of the Company at a special stockholders meeting of the Company 
on December 2, 1997.  The total purchase price for the Sale was $19,200, includ-
ing $1,920 which was placed in escrow.  The proceeds of the Sale, net of certain
transaction, closing, and other costs, were $15,331 (including the $1,920 in
escrow).  The loss resulting from the Sale was $22,446.  

2    REORGANIZATION AND EMERGENCE FROM CHAPTER 11

     The Company filed a petition for reorganization under Chapter 11 of the
United States Bankruptcy Code ("Chapter 11") on September 5, 1993 (the "Filing
Date").  The Company's Modified and Restated First Amended Joint Plan of
Reorganization (the "Plan") was consummated on April 28, 1995 (the "Effective
Date").

     The Plan provided for, among other things, the cash payment of $26,423 to
the Company's pre-petition secured lenders and amounts owing under the debtor-
in-possession revolving credit agreement and various administrative and tax
claims due at the Effective Date (Note 9), and the distribution of common stock
of reorganized Rose's to be issued pursuant to the Plan to creditors (Note 11). 
Additionally, stockholders of record as of the Effective Date received their 
pro-rata share of warrants (Note 11) and the shares of stock, stock options, and
stock warrants of the Company's Predecessor were canceled.  In addition, RSI
Trading, Inc., a wholly owned subsidiary of the Company, was merged into the
Company under the provisions of the Plan.  Also, a new board of directors was
elected for the Successor.  Upon consummation of the Plan, the Company obtained
$125 million of post-emergence financing.

     Under Chapter 11, the Company elected to assume or reject real estate
leases, employment contracts, and unexpired executory pre-petition contracts
<PAGE>
NOTES TO FINANCIAL STATEMENTS

subject to Bankruptcy Court approval.  The Company established and recorded its
estimated liabilities for such items and settled or carried forward portions of
the liabilities (for assumed leases) at the Effective Date.
 
3  FRESH-START REPORTING

     In 1990, the American Institute of Certified Public Accountants issued
Statement of Position 90-7 ("SOP 90-7") "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (sometimes called "Fresh-Start 
Reporting").  The application of Fresh-Start Reporting changed the Company's
basis of accounting for financial reporting purposes.  Specifically, SOP 90-7
required the adjustment of the Company's assets and liabilities to reflect their
estimated fair market value at the Effective Date. At the same time, the Company
made certain reclassifications between gross margin and expenses and changed the
method of accruing certain expenses between periods. Accordingly, the statements
of operations and changes in cash flows commencing May 1995, and the balance
sheets beginning with April 1995, are not comparable to the financial informa-
tion for prior periods.

     In accordance with SOP 90-7, the reorganization value of the Company was
determined as of the Effective Date.  The reorganization value of $35,000 was
derived by an outside company using various valuation methods, including
discounted cash flow analyses (utilizing the Company's projections), analyses
of the market values of other publicly traded companies whose businesses are
reasonably comparable, and analyses of the present value of the Company's 
equity. 

PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

     The adjustments to reflect the consummation of the Plan and the adoption
of Fresh-Start Reporting, including the gain on debt discharge for liabilities
subject to settlement under reorganization proceedings, the adjustment to 
restate assets and liabilities at their fair value, and the adjustment to non-
current assets for the excess of the fair value of net assets which exceeded
reorganization value, have been reflected in the financial statements below:

BALANCE SHEETS 
(Amounts in thousands)
<TABLE>
<CAPTION>
                                                  Actual                                        Fresh-                 Restated   
                                                 April 29,               Debt                   Start                  April 29,
                                                   1995                Discharge              Accounting                 1995    
<S>                                             <C>                   <C>                      <C>                       <C>
Assets
 Current Assets
   Cash and cash equivalents                   $      622                                                                    622
   Accounts receivable                             12,076                                       (2,841)(a)                 9,235
   Inventories                                    160,111                                       25,018 (b)               185,129
   Prepaid merchandise                              7,100                                                                  7,100
   Other current assets                             2,475                                                                  2,475
     Total current assets                         182,384                 -                     22,177                   204,561

 Property and Equipment, at cost,                                  
   less accumulated depreciation 
     and amortization                              33,703                                      (33,703)(c)                  -   

 Other Assets                                       6,302                                       (6,302)(c)                  -   
                                                $ 222,389                 -                    (17,828)                  204,561
Liabilities and Stockholders' Equity (Deficit)
 Current Liabilities
   Current maturities of capital lease 
     obligations                                $     400                                                                    400
   Bank drafts outstanding                          5,762                                                                  5,762
   Accounts payable                                37,642                                                                 37,642
   Short-term debt                                 58,654                                                                 58,654
   Reserve for store closings and 
     remerchandising                                4,952                                                                  4,952
   Accrued salaries and wages                       5,212                                           50 (d)                 5,262
   Pre-petition liabilities                          -                   4,352 (e)                                         4,352
   Other current liabilities                        9,543                                        3,878 (f)                13,421
     Total current liabilities                    122,165                4,352                   3,928                   130,445

 Liabilities Subject to Settlement 
   Under Reorganization Proceedings               130,276             (130,276)(g)                                          -   
 Excess of Net Assets Over 
   Reorganization Value                              -                                          32,021 (h)                32,021
 Capital Lease Obligations                            593                                                                    593 
 Deferred Income                                    1,792                                         (311)(i)                 1,481
 Accumulated Postretirement Benefit 
   Obligation                                       6,055                                       (1,034)(j)                 5,021
 Stockholders' Equity (Deficit)                   (38,492)              90,924 (k)             (17,432)(l)                35,000
                                                $ 222,389              (35,000)                 17,172                   204,561

</TABLE>
PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

(2) Continued

Explanations of adjustment columns of the balance sheet are as follows:

            (a)       To reflect appropriate current value of accounts
                      receivable
            (b)       Adjusted inventories to current market value
            (c)       Wrote off long-term assets
            (d)       Increased bonuses payable as a result of emergence from
                      bankruptcy
            (e)       Reclassified pre-petition priority claims and cure
                      amounts
            (f)       Accrued an additional year of property taxes to reflect
                      such taxes on assessment date basis, increased insurance
                      and loss reserves, and accrued any remaining
                      reorganization costs to be incurred after emergence
                      from Chapter 11
            (g)       Unsecured pre-petition claims settled as follows:
                      (a)  $4,352 of priority claims and cure amounts 
                           reclassified to current liabilities
                      (b)  The remaining unsecured claims settled with stock
            (h)       The excess reorganization value was allocated to non-
                      current assets, with any excess recorded as a deferred
                      credit to be amortized over the period of 8 years
            (i)       Reduction of deferred income to current value
            (j)       Adjustment to reverse unrecognized gain on transition
                      obligation
            (k)       Extraordinary item-gain on debt discharge
            (l)       Value of new company established

     During the third quarter of 1995, the excess of net assets over
reorganization value was decreased by $3,945 for increases in the reserve for
workers' compensation claims and an additional allowance for receivables of the
Predecessor.  

     The following unaudited pro forma statement of operations reflects the
financial results of the Company as if the Plan had been consummated on January
29, 1995:
                                                                     Pro forma
                                                                     Year Ended
                                                                     January 27,
                                                                         1996   
         Total revenue                                               $  683,585
         Total costs and expenses                                       677,205
         Earnings before income taxes                                     6,380
         Income taxes                                                     1,272
         Net earnings                                                $    5,108
         Earnings per share                                          $     0.59
PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

     The unaudited pro forma statement of operations has been adjusted to
reflect:  the reduction in depreciation and amortization expense due to the
write-off of property and equipment and property under capital leases;
reclassification of DIP interest from reorganization costs to interest expense;
the elimination of all other reorganization costs; amortization of excess net
assets over reorganization value, the effects of changing to the accrual method
for advertising; the reversal of LIFO credits; accrual of additional shrinkage;
and the recording of an appropriate income tax expense.

4  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Fresh-Start Reporting  The Company has implemented the required accounting
for entities emerging from Chapter 11 in accordance with the American Institute
of Certified Public Accountant's (AICPA) Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" (SOP 90-7),
and reflected the effects of such adoption in the balance sheet as of April 29,
1995.  Under Fresh-Start Reporting, the balance sheet as of April 29, 1995,
became the opening balance sheet of the reorganized Company.  Since Fresh-Start
Reporting was reflected in the balance sheet as of April 29, 1995, the financial
statements as of January 25, 1997 and January 27, 1996 are that of a reorganized
entity, and are therefore not comparable in material respects to the financial
statements of the Predecessor.  Accordingly, a vertical black line is shown to
separate post-emergence operations from those ended prior to April 29, 1995 in
the financial statements.

    Basis of Presentation  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses 
during the reporting period.  Actual results could differ from those estimates.

     Discontinued Operations  Discontinued operations are excluded from the
income from continuing operations and included in net income before extraordi-
nary items.  Prior years have been restated to conform with generally accepted
accounting principles.

     Nature of Operations  The Company currently has no business operations and
its principal asset is cash. The Company is actively seeking acquisitions and/or
merger transactions in which to employ its cash but there can be no assurance
that suitable acquisitions will be located.
 
     Fiscal Year  Fiscal year 1997 ended on January 31, 1998.  Fiscal year 1996
ended on January 25, 1997.  Due to the emergence from Chapter 11, fiscal year
1995 is comprised of the thirty-nine weeks ended January 27, 1996 (Successor),
and the thirteen weeks ended April 29, 1995 (Predecessor).  Fiscal year 1997
contained 53 weeks.  Fiscal years 1996 and 1995 contained 52 weeks.

     Cash Equivalents  The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.  Cash
equivalents are stated at cost, which approximates market.  Bank drafts 
outstanding have been reported as a current liability.
PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

     Inventories  Substantially all merchandise inventories are stated at the
lower of cost, using the last-in, first-out (LIFO) method, or market and include
the capitalization of transportation and distribution center costs. 

     Deferred Financing Costs  The costs related to the issuance of debt are
capitalized and amortized to interest expense straight-line over the life of
the related debt.

     Depreciation and Amortization   The provision for depreciation and amorti-
zation is based upon the estimated useful lives of the individual assets and is
computed principally by the declining balance and straight-line methods.  The
principal lives for depreciation purposes are 40 to 45 years for buildings and
5 to 10 years for furniture, fixtures, and equipment. Improvements to leased
premises are amortized by the straight-line method over the term of the lease
or the useful lives of the improvements, whichever is shorter.  Capitalized
leases are generally amortized on a straight-line basis over the lease term or
life of the asset, whichever is shorter.  The amortization of the excess of net
assets over reorganization value is included with depreciation and amortization
and is amortized over 8 years. The amortization of the excess of net assets over
reorganization value was $2,937 for fiscal year 1997, $3,499 for fiscal year
1996 and $2,705 for the thirty-nine weeks ended January 27, 1996.

     Income Taxes  Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss carryforwards.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

     Reclassifications  Certain reclassifications have been made to the 1996 and
1995 financial statements to conform with the 1997 presentation.

     Earnings (Loss) Per Share  For the year ended January 31, 1998, the Company
adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128").  In accordance with
this statement, primary net loss per common share is replaced with basic loss
per common share which is calculated by dividing net loss by the weighted-
average number of common shares outstanding for the period.  Fully diluted net
income per common share is replaced with diluted net income per common share
reflecting the maximum dilutive effect of common stock issuable upon exercise
of stock options and stock warrants.  Diluted net earnings (loss) per common
share is not shown, as common equivalent shares from stock options and stock
warrants would have an anti-dilutive effect.  Prior period per share data has
been restated to reflect the adoption of SFAS No. 128.

    Earnings (loss) per share is computed on the estimated number of shares that
will be outstanding if all pending claims are resolved adversely to the Company
for fiscal year 1997, fiscal year 1996 and for the thirty-nine weeks ended
January 27, 1996, and on the weighted average number of shares outstanding 
during the period for prior periods.  The average number of shares used to com-
pute earnings (loss) per share was 8,632 shares for fiscal year 1997, for fiscal
year 1996 and for the thirty-nine weeks ended January 27, 1996; 18,758 shares 
for the thirteen weeks ended April 29, 1995.  The exercise of outstanding stock
options 
<PAGE>
NOTES TO FINANCIAL STATEMENTS

would not result in a dilution of earnings per share for 1996 and 1995 and are
excluded from the calculation.  The exercise of outstanding stock options and
warrants would have resulted in an anti-dilutive effect on loss per share for 
1997 and are excluded from the calculation.

     Stock-Based Compensation  Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," encourages, but does not require
companies to record compensation cost for stock-based employee compensation 
plans at fair value.  The Company has chosen to continue to account for stock-
based compensation using the intrinsic value method prescribed in Accounting 
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations.  Accordingly, compensation cost for stock options is 
measured as the excess, if any, of the quoted market price of the Company's 
stock at the date of the grant over the amount an employee must pay to acquire 
the stock.  Refer to Note 12.

5  ACCOUNTS RECEIVABLE  

     A summary of accounts receivable as of January 25, 1997, is as follows:

                                                       January 25,     
                                                          1997     
             Layaway receivables                     $    1,856              
             Other receivables                            3,665
                                                          5,521
             Allowance for doubtful accounts               (420)
                                                     $    5,101

    Other receivables consist primarily of amounts due from vendors for returns,
co-op advertising, and coupons.  

     The Company does not provide for an allowance for doubtful accounts for
layaways because the Company holds the merchandise.  

6  INVENTORIES 

     A summary of inventories as of January 25, 1997 is as follows:

                                                     January 25,     
                                                        1997                 

            Inventories valued at FIFO cost          $  141,287              
            LIFO reserve                                   -                
 
            Inventories substantially valued
              at LIFO cost                           $  141,287             


     As a part of Fresh-Start Reporting (See Note 3), the LIFO reserve was
written off and the base year inventory was restated to the April 29, 1995 
value.  Since the January 25, 1997 inventories at LIFO cost are greater than
FIFO cost, no LIFO reserve was warranted.
PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

7  PROPERTY AND EQUIPMENT

     Property and equipment, adjusted for Fresh-Start Reporting (see Note 3),
consists of the following:
                                                         January 25,
                                                            1997   
              Buildings                                  $      46
              Furniture, fixtures, and equipment             4,777 
              Improvements to leased premises                3,724
                Total                                        8,547
              Less accumulated depreciation
                and amortization                            (1,190)
                                                             7,357 
              Capitalized leases                               441
              Less accumulated amortization                    (88)
                                                               353
              Net property and equipment                 $   7,710 

8  DEBT

     As of January 31, 1998, the Company had no outstanding debt.  As of January
25, 1997, the Company had $44,138 outstanding in short-term borrowings, $11,971
in outstanding letters of credit and unused availability of $8,649.  The average
direct borrowings were $52,568 in 1997 and $66,576 in 1996 with an average daily
weighted annual interest rate of 9.8% in 1997 and 9.7% in 1996.  The maximum
amount of direct borrowings at any period end was $100,299 in 1997 and $96,202
in 1996.

     Foothill Capital, Inc. Facility

     On May 21, 1996, the Company entered into a new financing arrangement with
Foothill Capital, Inc. and PPM Finance, Inc., as co-agents.  The financing was
a $120,000 three-year revolving credit facility (the "Credit Facility") with a 
letter of credit sublimit in the aggregate principal amount of $40,000.  The
Credit Facility was secured by a perfected first priority lien and security 
interest in all of the assets of the Company and replaced the Company's former
revolving credit agreement which would have expired in two years.  As a result
of closing the Credit Facility, a loss on early extinguishment of debt of $914
in prepaid bank fees related to the former facility was recognized as an
extraordinary item in fiscal 1996.  The facility was terminated at the time the
Sale of Stores to Variety was consummated (December 2, 1997) and a termination
fee of $2,400 was paid to the lenders.

9  PRE-PETITION LIABILITIES

     The Company had pre-petition liabilities of $2,737 at January 25, 1997.

     During 1996, the Company settled pre-petition tax claims and some pre-
petition workers' compensation insurance claims resulting in a reduction to pre-
petition liabilities of $1,397.  The Company paid $403 for pre-petition
liabilities and reclassed $95 related to landlords to other liabilities.
<PAGE>
NOTES TO FINANCIAL STATEMENTS

     During the thirteen weeks ended April 29, 1995, the liabilities subject to
settlement under reorganization proceedings increased by $1,818 due primarily
to an additional accrual for lease rejection claims for the seven stores closed
in 1995.  As of the Effective Date, the Company paid $1,593 and reclassified to
current liabilities $4,352 of priority claims and cure amounts included in the
remaining liabilities subject to settlement under reorganization proceedings. 
The pre-petition secured debt and interest were paid with proceeds from the exit
financing when the Company emerged from Chapter 11.  Subsequent to the Effective
Date, the Company paid $2,463 of pre-petition liabilities and established an
additional liability of $2,743 for pre-petition workers' compensation insurance
claims.  

10  RESERVE FOR FUTURE STORE CLOSINGS 

     The closed store reserve increased $615 in 1997 before the balance of $970
was sold to Variety as part of the Sale.  The reserve increased $94 in 1996. 
Following are the cash and noncash changes to the reserves in 1996 and 1995:

                                           Fiscal Year             Fiscal Year
                                              1997                    1996   
     Noncash activity:
       Retirement of net book                 
         value of assets                 $                             -    
       Provision for additional               
         closing                               (689)                   (207)
       Other noncash expenses                  -                       (100)
     Cash expenses                               14                     213
     (Increase) decrease in the      
       closed store reserve              $     (615)                    (94)

     The cash expenses include the operating results until closing, rental
payments and costs of removing fixtures from closed stores as well as subsequent
expenses associated with closings.  

PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

11  STOCKHOLDERS' EQUITY

     Effective April 28, 1995, the Company authorized 50,000 shares of Common
Stock and 10,000 shares of Preferred Stock.  No Preferred Stock has been issued.
Pursuant to the Plan, the Company issued and delivered to First Union National
Bank of North Carolina ("FUNB"), as Escrow Agent for the unsecured creditors of
the Company, 9,850 shares of the Company's new Common Stock for distribution on 
allowed claims of unsecured creditors in accordance with a schedule for
distributions set forth in the Plan; and 150 shares of the Company's new common 
stock were delivered to the Escrow Agent for distribution to officers of the
Company pursuant to a consummation bonus plan approved by order of the Bankrupt-
cy Court on February 14, 1995.  

     Since emergence, distributions of the common stock, no par value, of the
Company (the "Common Stock") have been made to holders of Allowed Class 3
Unsecured Claims (as defined under the Plan) in accordance with the provisions
of the Plan.  As the result of distributions of the Common Stock pursuant to the
Plan, the Company had the following:

                                        January 31,      January 25,
                                           1998             1997   

     Common Stock outstanding              8,613            8,461
     Shares reverted to the Company        1,368              997
     Shares held in escrow                    19              542

     Shares delivered to FUNB 
       on the Effective Date              10,000           10,000

     The 19 shares held in escrow will be distributed by FUNB in satisfaction
of disputed Class 3 claims as and when such claims are resolved.  To the extent
that escrowed shares of Common Stock are not used to satisfy claims, they will
revert to the Company and will be retired or held in the treasury of the 
Company.

     On the Effective Date, all shares of the Company's pre-emergence Voting
Common Stock (8,262 shares) and Non-Voting Class B Stock (10,496 shares) were
canceled and the record owners of such stock as of such date became entitled to
warrants to purchase the new common stock of the Company. One warrant was issued
for every 4.377 shares of pre-emergence Voting Common Stock or Non-Voting Class
B Stock and allows the holder to purchase one share of the new common stock. 
The total number of warrants issued was 4,286.  The warrants may be exercised
at any time until they expire on April 28, 2002.  The initial warrant exercise
price of $14.45 was calculated pursuant to a formula set forth in the Plan.  The
formula requires that the total allowed and disputed claims of the Company's
unsecured creditors be divided by 9,850, the number of shares of the reorganized
Company's stock to be issued under the Plan.   The exercise price was adjusted
to $12.01 on April 28, 1996, the first anniversary of the Effective Date, and
will be adjusted on the second and third anniversaries of the Effective Date to
reflect adjustments to the total of allowed and disputed claims of the Company's
unsecured creditors.  The exercise price will be further adjusted on the fourth,
PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

fifth and sixth anniversaries to reflect 105%, 110% and 115%, respectively, of
the total of the allowed and disputed claims of the unsecured creditors.  

12  STOCK OPTIONS

     The Company's New Equity Compensation Plan was adopted on February 14, 1995
and was designed for the benefit of the executives and key employees of the 
Company by allowing the grant of a variety of different types of equity-based
compensation to eligible participants.  The Plan provides for the granting of
a maximum of 700 shares of stock.  The price of the options granted was not less
than 100 percent of the fair market value of the shares on the date of grant. 
The options vested immediately with the Sale of Stores.  At that time, all
options were canceled.  The following table summarizes stock option activity: 

                                     Option Price     Number of    Weighted
                                         Range         Options    Average Price

    Outstanding, January 27, 1996     2.88 - 5.75         388          4.31
    Granted                           1.78 - 1.88          55          1.85
    Canceled                          2.88 - 5.75        (125)         4.31
    Outstanding, January 25, 1997     1.78 - 5.75         318          3.89
    Granted                           1.28 - 1.28          20          1.28
    Canceled                          1.28 - 5.75        (338)         3.73
    Outstanding, January 31, 1998      -   -  -          -              -  


    Exercisable at:
    January 25, 1997                  2.88 - 5.75          88
    January 31, 1998                   -   -  -          - 


     On April 24, 1997, the Company adopted a Long Term Stock Incentive Plan
which provides for, among other things, the granting to employees and directors
of, and consultants to, the Company of certain stock-based incentives and other
equity interests in the Company.  A maximum of 500 shares may be issued under
the Plan.  The options are fully vested and exercisable when issued and expire
five years from the date of issuance.  The only options issued under this plan
have been to Directors, in lieu of their retainers or total director's fees. 
The following table summarizes stock option activity:

                                      Option Price     Number of     Weighted
                                          Range         Options    Average Price

    Granted                            1.44 - 1.94          98          1.70
    Outstanding and Exercisable,
          January 31, 1998             1.44 - 1.94          98          1.70

     The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation."  Accordingly, no compensation cost
has been recognized for the stock option plans.  
<PAGE>
NOTES TO FINANCIAL STATEMENTS

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:

    Expected dividend yield                     0.00%
    Expected stock price volatility            28.00%
    Risk-free interest rate                     6.63%
    Expected life of options                 5 years


     The weighted average grant-date fair value of options granted during 1997
and 1996 was $.64 and $.70 per share.  The pro forma disclosures have not been
included as the compensation cost based on the fair value of the options granted
in 1997 and 1996 is immaterial.

13  INCOME TAXES

     Income tax expense consists of the following:

                                                       Thirty-Nine |   Thirteen
                                  Fiscal     Fiscal    Weeks Ended | Weeks Ended
                                   Year       Year     January 27, |  April 29,
                                   1997       1996        1996     |     1995   
         Current:                                                  |
           Federal             $    -          -             952   |       -
           State                    -          -             207   |       -   
                                    -          -           1,159   |       -   
         Deferred (benefit):                                       | 
           Federal                  -            67          (67)  |       -   
           State                    -             9           (9)  |       -   
                                    -            76          (76)  |       -   
                               $    -            76        1,083   |       -   



     A reconciliation of the statutory federal income tax rate to the effective
tax rate is as follows:
                                                        Thirty-Nine | Thirteen
                                   Fiscal      Fiscal   Weeks Ended |Weeks Ended
                                    Year        Year    January 27, | April 29,
                                    1997        1996      1996      | 1995   
                                              % of Pretax Earnings (Loss)   
                                                                    |         
  Income taxes (benefits) at                                        | 
    federal statutory rates        (35.0)%      35.0%      34.0%    | (34.0)%
  State income taxes, net of                                        |
    federal income tax benefits       -          4.5        4.6     |  (4.3)
  Amortization of excess value        -       (302.8)     (19.0)    |    -
  Reorganization items                -         (5.6)        -      |  39.3
  Net operating loss                                                |
    carryforward                      -           -          -      |  (1.0)
  Valuation allowance               35.0       268.9         -      |    - 
  Other                               -           -         0.1     |   0.0
                                      - %         - %      19.7%    |    - %
<PAGE>
NOTES TO FINANCIAL STATEMENTS

     The tax effects of temporary differences since the Effective Date that give
rise to significant portions of the deferred tax assets and liabilities were as
follows:

                                             January 31,        January 25,
                                                1998               1997    
Deferred tax assets:
     Reserves                              $      -                 2,271
     Capitalized inventory                        -                    73  
     Co-op credits                                -                    10      
     VHS inventory                                -                   354  
     Percentage rent                              -                   254
     Net Operating Loss Carryforward            13,743              3,096
     Tax Credit Carryforward                      -                     2      
         Total deferred tax assets              13,743              6,060     

Deferred tax liabilities:
     Reserves                                     -                  -    
     Percentage rent                              -                  -    
     Fixed Assets                                 -                  (244)  
         Total deferred tax liabilities           -                  (244)
         Total deferred tax assets 
           (liabilities) net                    13,743              5,816    
         Less: Valuation Allowance             (13,743)            (5,816)

Net deferred tax assets                    $      -                  -        

     At January 31, 1998, the Company has certain net operating loss carry-
forwards totaling $39,265 which are scheduled to expire during the years ending
2009 through 2013.  The Company has treated net operating losses incurred prior
to the Effective Date in accordance with Section 382(l)(5) of the Internal 
Revenue Code.  As a result, there is approximately $26,620 in net operating 
losses incurred prior to the Effective Date as well as $12,645 incurred subse-
quent to the Effective Date available as carryovers.  All net operating losses
may be subject to certain limitations on utilization. 

     The Internal Revenue Service has examined the Company's federal income tax
returns for the years 1988 through 1991, and claims arising from those examina-
tions have been settled.  The provision for these claims made in prior years was
reduced during 1996 to the amount of the settled claim.  Federal net operating 
loss carryovers for fiscal years subsequent to January, 1992 are subject to 
future adjustments, if any, by the IRS.  All state income and franchise tax 
returns for taxable years ending prior to fiscal 1993 are not subject to adjust-
ment, primarily because of the application of certain facets of Bankruptcy law.

14  LEASED ASSETS AND LEASE COMMITMENTS

     As a result of the Sale, the Company no longer has any commitments under
operating leases requiring any future minimum annual payments.

     Amortization of capitalized leases was approximately $162 in 1997, $88 in 
1996, and $220 in the thirteen weeks ended April 29, 1995.  The capital lease 
assets were written off in Fresh-Start Reporting (See Note 3), thus no amortiza-
tion was incurred in the thirty-nine weeks ended January 27, 1996.
<PAGE>
NOTES TO FINANCIAL STATEMENTS

     Total rental expense for the three years ended January 31, 1998 was as 
follows:

                                     Successor               | Predecessor 
                                                 Thirty-Nine |  Thirteen
                           Fiscal      Fiscal    Weeks Ended | Weeks Ended
                            Year        Year     January 27, |  April 29, 
                            1997        1996        1996     |    1995   
Operating Leases:                                            |
  Minimum rentals      $   16,723      20,430      15,787    |    5,265
  Contingent rentals        2,909       3,417       2,990    |      843
                       $   19,632      23,847      18,777    |    6,108

     Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities and on the basis of
mileage for transportation equipment.

     Rent expense for the year ended January 31, 1998, January 25, 1997 and the
thirty-nine weeks ended January 27, 1996, did not include any payments to less-
ors controlled by or affiliated with directors of the Successor.  Included in 
rent expense was $132 for the thirteen weeks ended April 29, 1995, and $665 for 
1994, paid to lessors controlled by or affiliated with certain directors of the
Predecessor.

15  CONTINGENCIES

     As a result of the Sale on December 2, 1997 to Variety of all of the
outstanding capital stock of the Registrant's wholly owned subsidiary and sole
operating entity, Stores, the Registrant was relieved of liability for claims
against Stores except to the extent of its indemnification, obligation of cer-
tain claims, as set forth in the Stock Purchase Agreement.  Pursuant to the 
Stock Purchase Agreement, ten percent ($1,920,000) of the purchase price for the
sale of stock to Variety was placed in escrow for payment of indemnified losses
to Variety.  The Stock Purchase Agreement further provides that if the aggregate
cumulative indemnifiable losses as of December 2, 1998 are less than such 
amount, the balance of the escrowed amount will be disbursed to the Registrant 
at such time and any further claims for indemnification by Variety shall be 
satisfied directly by the Registrant.  As of the date hereof, the only material
claim arising under the indemnification obligation of the Registrant to Variety
relates to the assertion by a third party, of a right to a fee in the amount of
$1.3 million.  The Company disputes its obligation to pay any such fee.

     Certain claims, suits and complaints arising in the ordinary course of 
business have been filed or are pending against the Company.  In the opinion of
management and counsel, all material contingencies are either adequately covered
by insurance or are without merit.

16  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company's financial instruments are cash and cash equivalents and ac-
counts payable.  The carrying values of these financial instruments approximate
fair value.
PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS

17  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

        Following is a summary of the quarterly results of operations during the
years ended January 31, 1998 and January 25, 1997:
<TABLE>
<CAPTION>
                                                                    Fiscal 1997                  
                                                                   Quarters Ended                
                                               April 26,      July 26,    October 25,    January 31,
                                                 1997          1997          1997           1998   
 
      <S>                                   <C>               <C>           <C>           <C>
      Earnings from continued 
        operations                          $     -             -             -                71
      Discontinued operations:
        Loss from operation of 
          discontinued business                 (1,308)       (3,986)       (1,032)         3,163
        Loss from disposal of 
          discontinued business                   -             -             -           (22,446)
      Net loss                              $   (1,308)       (3,986)       (1,032)       (19,212) 
      Net loss per share - basic            $    (0.15)        (0.46)        (0.12)         (2.23)

                                                                    Fiscal 1996                  
                                                                   Quarters Ended                
                                               April 27,      July 27,    October 26,     January 25,
                                                 1996          1996          1996            1997   
      Earnings from continued 
        operations                          $     -             -             -               -   
      Discontinued operations:
        Earnings (loss) from operation of 
          discontinued business                    652        (2,706)          448           1,986
      Net earnings (loss)                   $      652        (2,706)          448           1,986  
      Net earnings (loss) 
        per share - basic                   $     0.08         (0.31)         0.05            0.23 
 
</TABLE>