Item 14(a) 3 Exhibits has been amended to include
                               exhibit 99.1.

                               SECURITIES AND EXCHANGE COMMISSION

                                     WASHINGTON, D. C. 20549

                                           FORM 10-K/A
    (Mark One)
    (X)               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                             THE SECURITIES EXCHANGE ACT OF 1934 
                 
                         For the fiscal year ended January 25, 1997     
                                             OR
                      
    ( )                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                            OF THE SECURITIES EXCHANGE ACT OF 1934 
                                                                      
                                    Commission File No 0-631

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

                Delaware                                       56-0382475
         (State or other jurisdiction of                      (IRS Employer   
          incorporation or organization)                 Identification Number)

                    218 S. Garnett Street                            
                        Henderson, NC                           27536 
               (Address of principal executive offices)       (Zip Code)      

Registrant's telephone number, including area code: (919) 430-2600

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. ( X ) 

                          (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 March 12, 1997, 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 Reorganization, the
Company has 8,571,964 shares of common stock outstanding.  The remaining 430,909
shares held in escrow will be distributed by FUNB in satisfaction of disputed
Class 3 claims as and when such claims are resolved.  If all pending claims are
resolved adversely to the Company, approximately 8,660,179 shares of common 
stock will be outstanding.  If all pending claims are resolved in accordance 
with the Company's records, approximately 8,613,609 shares of common stock will
be outstanding.  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 March 31, 1997, the aggregate market value of common stock held by 
non-affiliates of the Company (assuming all pending claims are resolved adverse-
ly to the Company) was approximately $15,300,000.


                         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 Annual Meeting
of Shareholders to be held June 26,
1997.
PAGE
<PAGE>
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 25, 1997, for the thirty-nine weeks 
         ended January 27, 1996, thirteen weeks ended
         April 29, 1995, and the year ended January 
         28, 1995

         Balance Sheets - January 25, 1997 and
         January 27, 1996

         Statements of Stockholders' Equity for the 
         year ended January 25, 1997, for the thirty-
         nine weeks ended January 27, 1996, thirteen
         weeks ended April 29, 1995, and the year 
         ended January 28, 1995

         Statements of Cash Flows for the year ended
         January 25, 1997, for the thirty-nine weeks
         ended January 27, 1996, thirteen weeks ended
         April 29, 1995, and the year ended January 
         28, 1995

         Notes to the Financial Statements

     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.  
         10.1  Agreement and Plan of Merger dated as of           Incorporated
               May 7, 1996, by and among Fred's Inc.,             by reference
               FR Acquisition Corp. and the Registrant.
               (Incorporated by reference to Exhibit 10.1
               to Registrant's Form 10-Q for the quarter
               ended April 27, 1996).

         10.2  Loan and Security Agreement among the              Incorporated
               Registrant, as Borrower, the Financial             by reference
               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 May 21, 1996. 
               (Incorporated by reference to Exhibit 10.2
<PAGE>
               to Registrant's Form 10-Q for the quarter
               ended April 27, 1996).

         10.3  Deed of Trust, Assignment of Rents and             Incorporated
               Security Agreement for the headquarters            by reference
               property, dated as of May 21, 1996, by and
               among Registrant, Foothill Capital
               Corporation, and David L. Huffstetler,
               pursuant to the Loan and Security Agreement. 
               (Incorporated by reference to Exhibit 10.3
               to Registrant's Form 10-Q for the quarter
               ended April 27, 1996).

         10.4  Deed of Trust, Assignment of Rents and             Incorporated
               Security Agreement for the warehouse               by reference
               property, dated as of May 21, 1996, by and
               among Registrant, Foothill Capital
               Corporation, and David L. Huffstetler,
               pursuant to the Loan and Security Agreement. 
               (Incorporated by reference to Exhibit 10.4
               to Registrant's Form 10-Q for the quarter
               ended April 27, 1996).

         10.5  Subordination Agreement dated as of May 21,        Incorporated
               1996, among Registrant, Foothill Capital           by reference
               Corporation, M.J. Sherman & Associates,
               Inc., and Alan H. Peterson.  (Incorporated
               by reference to Exhibit 10.5 to Registrant's
               Form 10-Q for the quarter ended April 27,
               1996).

         10.6  Intellectual Property Security Agreement           Incorporated
               dated as of May 21, 1996, among Registrant         by reference
               and Foothill Capital Corporation, pursuant
               to the Loan and Security Agreement. 
               (Incorporated by reference to Exhibit 10.6
               to Registrant's Form 10-Q for the quarter
               ended April 27, 1996).

         10.7  Termination Agreement dated as of August 20,       Incorporated
               1996 between the Company, Fred's, Inc., and        by reference
               FR Acquisition Corp.  (Incorporated by
               reference to Exhibit 10.1 to Registrant's
               Form 10-Q for the quarter ended July 27,
               1996).

         27.   Financial Data Schedule

         99.1  Annual Report for the Rose's Stores, Inc., Variable 
               Investment Plan for the year ended December 31, 1996.

(b)  REPORTS ON FORM 8-K

     The Registrant filed no reports on Form 8-K during the last quarter of the
period covered by this report.
<PAGE>

                             SECURITIES AND EXCHANGE COMMISSION

                                   WASHINGTON, D. C. 20549

                                          FORM 11-K
    (Mark One)
      
        
    (X)                  ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
                            THE SECURITIES EXCHANGE ACT OF 1934 
                 
                         For the fiscal year ended December 31, 1996
    

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

                       ROSE'S STORES, INC. RETIREMENT SAVINGS 401(k) PLAN
                               (FORMERLY VARIABLE INVESTMENT PLAN)

                                      ROSE'S STORES, INC. 
                                     218 S. Garnett Street
                                      Henderson, NC 27536

<PAGE>

           Exhibit 
             No.                                                  

             23                Consent of Independent Certified Public
                               Accountants

             99.1              Annual Report for the Rose's Stores, Inc.
                               Variable Investment Plan for the Year ended
                               December 31, 1996

<PAGE>

                                        SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Plan Administrator, Rose's Stores, Inc., has duly caused this annual report to
be signed by the undersigned, thereunto duly authorized.


                                                  ROSE'S STORES, INC.
                                                  RETIREMENT SAVINGS 401(k) PLAN



                                                  BY: /s/Camilla Wheeler       
                                                      Camilla Wheeler
                                                      Director, Human Resources

Date:  June 30, 1997
PAGE
<PAGE>





CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



The Board of Directors
Rose's Stores, Inc.


We consent to incorporation by reference in this Registration Statement on Form
S-8 of Rose's Stores, Inc. of our report dated May 29, 1997 relating to the
statements of net assets available for Plan benefits as of December 31, 1996,
and the related statements of changes in net assets available for Plan benefits
for each of the years in the three-year period ended December 31, 1996 of Rose's
Stores, Inc. Retirement Savings 401(k) Plan and the related supplemental
schedules 1 and 2 for the year ended December 31, 1996 which report appears in
the December 31, 1996 annual report on Form 11-K of Rose's Stores, Inc.
Retirement Savings 401(k) Plan.


                                                   /s/ KPMG Peat Marwick LLP
                                                   KPMG Peat Marwick LLP

Raleigh, North Carolina
June 30, 1997
PAGE
<PAGE>





                      ROSE'S STORES, INC.
                      RETIREMENT SAVINGS 401(k) PLAN
                      (FORMERLY VARIABLE INVESTMENT PLAN)
                      
                      Financial Statements and Schedules
                      December 31, 1996 and 1995
                      (With Independent Auditors' Report Thereon)

PAGE
<PAGE>
INDEPENDENT AUDITORS' REPORT


Advisory Committee, Retirement Savings 401(k) Plan
Rose's Stores, Inc.:


We have audited the accompanying statements of net assets available for plan
benefits of the Rose's Stores, Inc. Retirement Savings 401(k) Plan (the "Plan") 
as of December 31, 1996 and 1995 and the related statements of changes in net
assets available for plan benefits for each of the years in the three-year 
period ended December 31, 1996.  These financial statements are the responsibi-
lity of the Plan'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 stand-
ards.  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 net assets available for plan benefits of the Plan as
of December 31, 1996 and 1995 and the changes in net assets available for plan
benefits for each of the years in the three-year period ended December 31, 1996
in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The supplemental Schedules 1 and 2 are
presented for the purpose of additional analysis and are not a required part of
the basic financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974.  The fund information in
the statement of net assets available for benefits and the statement of changes
in net assets available for benefits is presented for purposes of additional 
analysis rather than to present the net assets available for plan benefits and 
changes in net assets available for plan benefits of each fund.  The supplement-
al schedules and fund information have been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial state-
ments taken as a whole. 

                                               /s/ KPMG Peat Marwick LLP
                                               KPMG Peat Marwick LLP
May 29, 1997
<PAGE>
                   ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                             (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                               
      Statements of Net Assets Available for Plan Benefits with Fund Information
                                                                               
                                December 31, 1996 and 1995

<TABLE>
<CAPTION>
                                                                                     1996                    
                                                        FUNB                                     Invesco
                                                     Diversified            Fidelity              Total                Fidelity
                                                        Bond                Magellan              Return               Advisor
                                                        Fund                 Fund                 Fund                  Fund   
Assets:
<S>                                                  <C>                   <C>                  <C>                   <C>
          FUNB Diversified Bond Fund                 $1,580,610                 -                    -                     -   
          Fidelity Magellan Fund                           -               8,200,539                 -                     -   
          Invesco Total Return Fund                        -                    -               2,948,677                  -   
          Fidelity Advisor Growth Opportunity
            Fund (A shares)                                -                    -                    -                4,914,401
          Templeton Growth Fund I                          -                    -                    -                     -   
          Evergreen Fund (Y shares)                        -                    -                    -                     -   
          Evergreen Treasury Fund                          -                    -                    -                     -   
          Loans to participants                            -                    -                    -                     -   
              Net investments                         1,580,610            8,200,539            2,948,677             4,914,401

          Employee contributions receivable               2,813               14,255                3,985                 7,517

Net assets available for plan benefits               $1,583,423            8,214,794            2,952,662             4,921,918

                                                                                                                    (Continued)
</TABLE>
See accompanying notes to financial statements.
PAGE
<PAGE>
                   ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                          (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                                
      Statements of Net Assets Available for Plan Benefits with Fund Information
                                                                                
                                 December 31, 1996 and 1995
<TABLE>
<CAPTION>
 
                                                                                   1996                        

                                                     Templeto                       Evergreen
                                                      Growth         Evergreen      Treasury       Loan
                                                       Fund            Fund           Fund         Fund             Total   
Assets:
<S>                                                 <C>             <C>           <C>            <C>             <C>
          FUNB Diversified Bond Fund                     -               -              -           -             1,580,610
          Fidelity Magellan Fund                         -               -              -           -             8,200,539
          Invesco Total Return Fund                      -               -              -           -             2,948,677
          Fidelity Advisor Growth Opportunity
            Fund (A shares)                              -               -              -           -             4,914,401
          Templeton Growth Fund I                   1,793,387            -              -           -             1,793,387
          Evergreen Fund (Y shares)                      -          1,481,800           -           -             1,481,800
          Evergreen Treasury Fund                        -               -        28,314,160        -            28,314,160
          Loans to participants                          -               -              -        547,787            547,787
              Net investments                       1,793,387       1,481,800     28,314,160     547,787         49,781,361

          Employee contributions receivable             3,802           3,328         21,771        -                57,471

Net assets available for plan benefits              1,797,189       1,485,128     28,335,931     547,787         49,838,832

</TABLE>

See accompanying notes to financial statements.
PAGE
<PAGE>
                   ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                     (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                                
     Statements of Net Assets Available for Plan Benefits with Fund Information,
                                                                      Continued
                                                                               
                                December 31, 1996 and 1995
<TABLE>
<CAPTION>
                                                                                                     1995                    
                                                  Rose's                                                          Invesco
                                                  Stable              Diversified           Fidelity               Total
                                                  Income                 Bond               Magellan               Return
                                                   Fund                 Fund                 Fund                  Fund    
Assets:
<S>                                             <C>                   <C>                  <C>                   <C>
          FUNB Stable Investment Fund           $17,875,534                -                    -                     -   
          U.S. Government obligations            17,189,390                -                    -                     -   
          FUNB Diversified Bond Fund                   -              2,133,998                 -                     -   
          Fidelity Magellan Fund                       -                   -               9,178,526                  -   
          Invesco Total Return Fund                    -                   -                    -                2,591,194
          Fidelity Advisor Growth Opportunity
            Fund (A shares)                            -                   -                    -                     -   
          Templeton Growth Fund I                      -                   -                    -                     -   
          Evergreen Fund (Y shares)                    -                   -                    -                     -   
          Loans to participants                        -                   -                    -                     -   
              Net investments                    35,064,924           2,133,998            9,178,526             2,591,194

          Employee contributions receivable          31,139               4,039               23,292                 4,710
              Total assets                       35,096,063           2,138,037            9,201,818             2,595,904

Net assets available for plan benefits          $35,096,063           2,138,037            9,201,818             2,595,904

                                                                                                                (Continued)
</TABLE>
See accompanying notes to financial statements.

PAGE
<PAGE>
                         ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                               (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                             
    Statements of Net Assets Available for Plan Benefits with Fund Information, 
                                                                     Continued
                                                                               
                               December 31, 1996 and 1995

<TABLE>
<CAPTION>
                                                                  1995         

                                                 Fidelity         Templeton           
                                                 Advisor           Growth             Evergreen           Loan
                                                  Fund             Fund                Fund              Fund              Total   
Assets:
          <S>                                  <C>              <C>                  <C>               <C>              <C>
          FUNB Stable Investment Fund               -                -                  -                 -             17,875,534
          U.S. Government obligations               -                -                  -                 -             17,189,390
          FUNB Diversified Bond Fund                -                -                  -                 -              2,133,998
          Fidelity Magellan Fund                    -                -                  -                 -              9,178,526
          Invesco Total Return Fund                 -                -                  -                 -              2,591,194
          Fidelity Advisor Growth Opportunity
            Fund (A shares)                    4,692,184             -                  -                 -              4,692,184
          Templeton Growth Fund I                   -           1,077,849               -                 -              1,077,849
          Evergreen Fund (Y shares)                 -                -               758,347              -                758,347
          Loans to participants                     -                -                  -              526,492             526,492
              Net investments                  4,692,184        1,077,849            758,347           526,492          56,023,514

          Employee contributions receivable       11,459            3,879              2,710              -                 81,228
              Total assets                     4,703,643        1,081,728            761,057           526,492          56,104,742

Net assets available for plan benefits         4,703,643        1,081,728            761,057           526,492          56,104,742

</TABLE>

See accompanying notes to financial statements.

PAGE
<PAGE>
                      ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                               (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                      
       Statements of Changes in Net Assets Available for Plan Benefits with Fund
                                                                     Information

                           Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                                 1996                      
                                                 Rose's          Diver-                               Invesco
                                                 Stable          sified            Fidelity            Total            Fidelity
                                                 Income           Bond             Magellan            Return            Advisor
                                                  Fund            Fund               Fund               Fund              Fund   

Additions to net assets attributed to:
  Investment income:
<S>                                          <C>             <C>                 <C>                <C>               <C>
          Net appreciation (depreciation)
            in fair value of investments     $   720,991         24,098            885,054            359,451           771,750
          Dividends                                 -              -                  -                  -                 -
          Interest                                 2,195            190               (850)               414               114
                                                 723,186         24,288            884,204            359,865           771,864
          Employee contributions and
            roll-overs                           282,487         81,476            500,210            111,153           261,929
          Other                                    1,207           -                  -                  -                 -   
              Total additions                  1,006,880        105,764          1,384,414            471,018         1,033,793

Deductions from net assets attributed to:
          Plan benefits paid                   3,285,545        333,277          1,459,359            529,846           628,455
          Other                                     -              -                  -                  -                 -
          Trustee fees                              -             1,102              5,614              2,033             3,267
          Insurance premiums paid                  6,736          1,012              2,399                621             1,282
              Total deductions                 3,292,281        335,391          1,467,372            532,500           633,004

Net transfers of assets among funds          (32,810,662)      (324,987)          (904,066)           418,240          (182,514)

              Net increase (decrease)        (35,096,063)      (554,614)          (987,024)           356,758            218,275

Net assets available for plan benefits:
          Beginning of year                   35,096,063      2,138,037          9,201,818          2,595,904         4,703,643

          End of year                        $      -         1,583,423          8,214,794          2,952,662         4,921,918

                                                                                                     (Continued)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<PAGE>
                     ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                            (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                                
      Statements of Changes in Net Assets Available for Plan Benefits with Fund
                                                                    Information
                                                                                
                       Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>


                                                                                1996                        

                                          Templeton                                Evergreen
                                            Growth             Evergreen            Treasury            Loan
                                             Fund                 Fund                Fund              Fund              Total  

Additions to net assets attributed to:
  Investment income:
<S>                                       <C>                  <C>                 <C>                 <C>             <C>
          Net appreciation (depreciation)
            in fair value of investments    281,526              196,460              867,229             -             4,106,559
          Dividends                            -                    -                     235             -                   235
          Interest                              264                  (31)                 776           41,840             44,912
                                            281,790              196,429              868,240           41,840          4,151,706
          Employee contributions and
            roll-overs                      103,404               81,684              379,390             -             1,801,733
          Other                                -                    -                    -                -                 1,207
              Total additions               385,194              278,113            1,247,630           41,840          5,954,646

Deductions from net assets attributed to:
          Plan benefits paid                330,734              136,950            5,328,619          138,476         12,171,261
          Other                                -                    -                    -                -                  -   
          Trustee fees                        1,220                  928               22,275             -                36,439
          Insurance premiums paid               298                  508                 -                -                12,856
              Total deductions              332,252              138,386            5,350,894          138,476         12,220,556

Net transfers of assets among funds         662,519              584,344           32,439,195          117,931               -   

              Net increase (decrease)       715,461              724,071           28,335,931           21,295         (6,265,910)

Net assets available for plan benefits:
          Beginning of year               1,081,728              761,057                 -             526,492         56,104,742

          End of year                     1,797,189            1,485,128           28,335,931          547,787         49,838,832

</TABLE>
See accompanying notes to financial statements.

PAGE
<PAGE>
                 ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                          (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                             
       Statements of Changes in Net Assets Available for Plan Benefits with Fund
                                                          Information, Continued
                                                                                
                      Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                                     1995                      

                                                   Guaranteed           Diversified             Rose's
                                                     Income                Equity                Stock               Temporary
                                                      Fund                  Fund                 Fund                  Fund  

Additions to net assets attributed to:
  Investment income:
<S>                                                <C>                   <C>                     <C>                  <C>
           Net appreciation (depreciation) in fair
             value of investments                  $     -                  548,252              (15,218)                  -   
           Dividends                                     -                   16,039                 -                      -   
           Interest                                   123,929                  -                       2                  1,320
                                                      123,929               564,291              (15,216)                 1,320

           Employee contributions and roll-overs         -                     -                    -                   344,466
           Other                                         -                     -                    -                    30,034
               Total additions                        123,929               564,291              (15,216)               375,820

Deductions from net assets attributed to:
           Plan benefits paid                            -                     -                   2,195              1,080,164
           Other                                         -                     -                    -                      -   
           Insurance premiums paid                       -                     -                    -                      -   
           Transfer to successor trustee            4,992,193             3,811,005                 -                   570,902
               Total deductions                     4,992,193             3,811,005                2,195              1,651,066

Net transfers of assets among funds                  (216,550)             (280,257)              (1,003)               587,352

               Net increase (decrease)             (5,084,814)           (3,526,971)             (18,414)              (687,894)

Net assets available for plan benefits:
           Beginning of year                        5,084,814             3,526,971               18,414                687,894

           End of year                             $     -                     -                    -                      -   

                                                                                                                    (Continued)
</TABLE>
See accompanying notes to financial statements.

PAGE
<PAGE>
                     ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                              (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                                
       Statements of Changes in Net Assets Available for Plan Benefits with Fund
                                                          Information, Continued
                                                                                
                         Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                              1995                    

                                                   Life                  Bond               American
                                                 Insurance              Fund of             Balanced                 Sub
                                                   Option               America               Fund                  Total  

Additions to net assets attributed to:
  Investment income:
<S>                                                  <C>                  <C>                 <C>                   <C>
           Net appreciation (depreciation) in fair
             value of investments                      -                   27,549               11,494                 572,077
           Dividends                                   -                   16,577                2,648                  35,264
           Interest                                    -                       19                   21                 125,291
                                                       -                   44,145               14,163                 732,632

           Employee contributions and roll-overs     25,512                  -                    -                    369,978
           Other                                       -                     -                    -                     30,034
               Total additions                       25,512                44,145               14,163               1,132,644

Deductions from net assets attributed to:
           Plan benefits paid                          -                     -                    -                  1,082,359
           Other                                       -                     -                    -                       -   
           Insurance premiums paid                   25,512                  -                    -                     25,512
           Transfer to successor trustee               -                  451,357              108,752               9,934,209
               Total deductions                      25,512               451,357              108,752              11,042,080

Net transfers of assets among funds                    -                  (60,240)             (29,302)                   -   

               Net increase (decrease)                 -                 (467,452)            (123,891)             (9,909,436)

Net assets available for plan benefits:
           Beginning of year                           -                  467,452              123,891               9,909,436

           End of year                                 -                     -                    -                       -   

                                                                                                                   (Continued)
</TABLE>
See accompanying notes to financial statements.
PAGE
<PAGE>
                     ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                             (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                               
       Statements of Changes in Net Assets Available for Plan Benefits with Fund
                                                          Information, Continued
                                                                               
                             December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                                   1995                   
                                                       Rose's                                                       Invesco
                                                       Stable          Diversified            Fidelity               Total
                                                       Income              Bond               Magellan               Return
                                                        Fund               Fund                 Fund                  Fund  
Additions to net assets attributed to:
  Investment income:
<S>                                                 <C>                  <C>                 <C>                  <C>
           Net appreciation (depreciation) in 
             fair value of investments              $   866,613            141,380             608,841              251,756
           Dividends                                     24,755                663                -                    -   
           Interest                                      59,385              2,618               9,612                3,049
                                                        950,753            144,661             618,453              254,805

           Employee contributions and roll-overs        501,588             66,665             431,886               76,660
           Transfer from predecessor trustee          4,992,193            450,694           3,811,668              108,752
           Transfer from Profit Sharing Plan               -                  -                   -                    -   
           Other                                         28,016              2,386              19,266                5,131
               Total additions                        6,472,550            664,406           4,881,273              445,348

Deductions from net assets attributed to:
           Plan benefits paid                         8,581,632             97,700             488,922              134,344
           Other                                           -                    21                 338                 -   
           Trustee fees                                  24,966              4,148               9,434               37,019
           Insurance premiums paid                         -                  -                   -                    -   
           Transfer to successor trustee                   -                  -                   -                    -   
               Total deductions                       8,606,598            101,869             498,694              171,363

Net transfers of assets among funds                  37,230,111          1,575,500           4,819,239            2,321,919

           Net increase (decrease)                   35,096,063          2,138,037           9,201,818            2,595,904

Net assets available for plan benefits:
           Beginning of year                               -                  -                   -                    -   

           End of year                              $35,096,063          2,138,037           9,201,818            2,595,904  

                                                                                                                 (Continued)
</TABLE>
See accompanying notes to financial statements.

PAGE
<PAGE>
                     ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                            (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                               
       Statements of Changes in Net Assets Available for Plan Benefits with Fund
                                                          Information, Continued
                                                                                
                             December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
                                                                                   1995                        

                                                    Fidelity         Templeton          
                                                     Advisor          Growth        Evergreen              Loan
                                                       Fund             Fund           Fund                Fund           Total  
Additions to net assets attributed to:
  Investment income:
<S>                                                 <C>               <C>           <C>                   <C>           <C>
           Net appreciation (depreciation) in 
             fair value of investments                350,623            25,456         296,676              -           3,113,422
           Dividends                                     -                 -               -                 -              60,682
           Interest                                     5,168             1,305             756            25,363          232,547
                                                      355,791            26,761         297,432            25,363        3,406,651

           Employee contributions and roll-overs      184,282            63,334          45,558              -           1,739,951
           Transfer from predecessor trustee             -                 -               -              570,902        9,934,209
           Transfer from Profit Sharing Plan             -                 -         51,722,696              -          51,722,696
           Other                                        8,082             1,356             798              -              95,069
               Total additions                        548,155            91,451      52,066,484           596,265       66,898,576

Deductions from net assets attributed to:
           Plan benefits paid                         154,867            19,661          30,385            71,534       10,661,404
           Other                                           36                11              12              -                 418
           Trustee fees                                 6,160              -               -                 -              81,727
           Insurance premiums paid                       -                 -               -                 -              25,512
           Transfer to successor trustee                 -                 -               -                 -           9,934,209
               Total deductions                       161,063            19,672          30,397            71,534       20,703,270

Net transfers of assets among funds                 4,316,551         1,009,949     (51,275,030)            1,761             -   

               Net increase (decrease)              4,703,643         1,081,728         761,057           526,492       46,195,306

Net assets available for plan benefits:
           Beginning of year                             -                 -               -                 -           9,909,436

           End of year                              4,703,643         1,081,728         761,057           526,492       56,104,742
           

                                                                                                                       (Continued)
</TABLE>
See accompanying notes to financial statements.

PAGE
<PAGE>
                    ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                           (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                                
       Statements of Changes in Net Assets Available for Plan Benefits with Fund
                                                          Information, Continued
                                                                                
                            Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                                                     1994                     

                                                        Guaranteed           Diversified            Rose's              
                                                          Income                Equity               Stock               Temporary
                                                           Fund                 Fund                 Fund                  Fund   

Additions to net assets attributed to:
  Investment income:
<S>                                                    <C>                    <C>                 <C>                  <C>
            Net depreciation
              in fair value of investments            $      -                (246,171)            (51,354)                 -   
            Dividends                                        -                 175,341                -                     -   
            Interest                                      232,108                 -                    776                 6,969
                                                          232,108              (70,830)            (50,578)                6,969
            Employee contributions and roll-overs            -                    -                   -                1,224,583
                Total additions (deductions)              232,108              (70,830)            (50,578)            1,231,552

Deductions from net assets attributed to:
            Plan benefits paid                               -                    -                  6,760             5,063,376
            Insurance premiums paid                          -                    -                   -                     -   
            Other                                            -                    -                   -                   42,957
                Total deductions                             -                    -                  6,760             5,106,333

Net transfers of assets among funds                    (2,643,692)            (732,379)           (101,726)            3,580,734

                Net increase (decrease)                (2,411,584)            (803,209)           (159,064)             (294,047)

Net assets available for plan benefits:
            Beginning of year                           7,496,398            4,330,180             177,478               981,941

            End of year                               $ 5,084,814            3,526,971              18,414               687,894

                                                                                                                      (Continued)
</TABLE>
See accompanying notes to financial statements.

PAGE
<PAGE>
                     ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                           (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                              
       Statements of Changes in Net Assets Available for Plan Benefits with Fund
                                                          Information, Continued
                                                                              
                       Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>

                                                                                      1994                     
                                                    Wachovia
                                                      Bond/
                                                    Biltmore
                                                     Fixed        Life          Bond             American
                                                    Income      Insurance        Fund             Balanced
                                                     Fund        Option       of America            Fund            Total  

Additions to net assets attributed to:
  Investment income:
<S>                                                <C>             <C>          <C>               <C>             <C>
          Net depreciation
            in fair value of investments            (42,397)         -          (27,698)             (906)          (368,526)
          Dividends                                  13,335          -           27,931             3,433            220,040
          Interest                                      224          -              265                48            240,390
                                                    (28,838)         -              498             2,575             91,904
          Employee contributions and roll-overs        -           85,148          -                 -             1,309,731
              Total additions (deductions)          (28,838)       85,148           498             2,575          1,401,635

Deductions from net assets attributed to:
          Plan benefits paid                           -             -             -                 -             5,070,136
          Insurance premiums paid                      -           85,148          -                 -                85,148
          Other                                         578          -             -                 -                43,535
              Total deductions                          578        85,148          -                 -             5,198,819

Net transfers of assets among funds                (691,207)         -          466,954           121,316               -   

              Net increase (decrease)              (720,623)         -          467,452           123,891         (3,797,184)

Net assets available for plan benefits:
          Beginning of year                         720,623          -             -                 -            13,706,620

          End of year                                  -             -          467,452           123,891          9,909,436

</TABLE>
See accompanying notes to financial statements.
PAGE
<PAGE>
                  ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                          (FORMERLY VARIABLE INVESTMENT PLAN)

                             Notes to Financial Statements
                                                          
                              December 31, 1996 and 1995

(l)     Summary of Significant Accounting Policies
   
   (a)     Basis of Presentation
   
   The accompanying financial statements of the Rose's Stores, Inc.
   Retirement Savings 401(k) Plan (the Plan) have been prepared on an
   accrual basis and present the net assets available for plan benefits and
   the changes in those net assets. 
   
   (b)     Investments in Securities
   
   The investments of the Plan are held on behalf of the Plan by the
   trustee, First Union National Bank, in a unitized fund.  Investments in
   securities and mutual funds are stated at current value based on
   quotations from National Securities Exchanges of brokerage firms
   adjusted for dividends, capital gains, and fees.  Participants own units
   of the unitized fund.
   
   Securities transactions are recognized on the trade date (the date the
   order to buy or sell is executed). 
   
   (c)     Use of Estimates
   
   In preparing the financial statements, the plan administrator is
   required to make estimates and assumptions that affect the reported
   amounts of assets and liabilities, at the date of the financial
   statements and the reported amounts of additions to and deviations from
   net assets available for benefits during the reporting period.  Actual
   results could differ from those estimates.

(2)     Description of the Plan
        
        The Plan is a defined-contribution plan sponsored by Rose's Stores, Inc.
        (Rose's) and is subject to the provisions of the Employee Retirement
        Income Security Act of 1974 (ERISA). All Rose's employees are eligible
        to participate in the Plan after one year of continuous employment in
        which they have worked at least 1,000 hours.  Effective January 1, 1991,
        the Plan was amended to adopt the "safe harbor" minimum coverage
        provisions of the Internal Revenue Code, and eliminated life insurance
        as a new investment option effective December 31, 1991. Participants,
        who were enrolled in the life insurance option prior to the Plan's
        amendment were allowed to continue with this investment option.  By an
        agreement entered into on January 1, 1994, and effective January 1,
        1989, the Plan was restated bringing it into compliance with the Tax
        Reform Act of 1986 and subsequent legislation through 1993, and to
        incorporate all plan amendments.
        
        During the Plan year, the IRS completed its evaluation of the work force
        reduction which occurred from 1993 to 1994.  In the IRS Letter of
        Determination dated August 9, 1996, the IRS determined the reduction to
        be a "partial plan termination".  As a result, all affected employees
        who voluntarily terminated are considered properly vested and their
        previously forfeited accounts, approximately $585,000 which includes
        earnings from date thereon are being analyzed to determine what is
        immediately eligible for allocation pursuant to Section 7.2 of the Plan.
PAGE
<PAGE>
(2)     Description of the Plan, Continued

        On May 31, 1995, the Rose's Stores, Inc. Variable Investment Plan,
        changed trustees from Central Carolina Bank to First Union National
        Bank.  The Company amended the Variable Investment Plan as required in
        order to facilitate the merger with the Rose's Stores, Inc. Profit
        Sharing Plan.  As a result of these amendments the plan changed its name
        to the Rose's Stores, Inc. Retirement Savings 401(k) Plan.  On July 31,
        1995, the assets of the Rose's Stores, Inc. Profit Sharing Plan were
        merged into the Rose's Stores, Inc. Retirement Savings 401(k) Plan.
   
        The Plan currently offers seven investment options for employee
        contributions: the First Union National Bank Diversified Bond Fund, the
        Fidelity Magellan Fund, the Invesco Total Return Fund, the Fidelity
        Advisor Fund, the Templeton Growth Fund, the Evergreen Fund and the
        Evergreen Treasury Fund.  Participants may change their elections daily.
   
        Each participant's account is credited with the participant's
        contribution, an allocation of Rose's contribution, if any, and Plan
        earnings. Allocations are based on participant compensation or account
        balances as defined in the Plan. Participants are immediately vested in
        their voluntary contributions plus actual earnings thereon.  Vesting in
        the remainder of their accounts is based on the number of years of
        continuous service at a rate of 20% per year of credited service.
   
        The Plan permits withdrawals in the event of termination of employment,
        disability, death, or retirement.  The Plan also permits the withdrawals
        of assets previously held by participants under the Profit Sharing Plan
        (now held in the Retirement Savings 401(k) Plan as profit sharing
        assets) upon the participant reaching age 55, and assets held under the
        Retirement Savings 401(k) Plan upon the participant reaching age 59-
        l/2.  Withdrawals may also be made to meet certain financial hardships,
        as defined by the Plan. 
   
        In the event the Plan is terminated, the Trustee will assume full
        responsibility for the management and administration of the Plan. Upon
        termination of the Plan, participants may elect to receive benefits
        immediately, or may elect to defer benefits until they terminate their
        employment with Rose's or reach retirement age.
   
(3)     Contributions
        
        Employer contributions to the Plan are discretionary.  The Company may
        elect to match 50% of participant contributions up to 6% of the
        participants compensation.  Additional amounts may be contributed at the
        option of the Board of Directors.  For the years ending December 31,
        1996, 1995 and 1994, Rose's Stores, Inc. made no matching contributions
        to the Plan.
        
        Participants may contribute up to 20% of their gross annual wages not
        to exceed the IRS allowable limit.
PAGE
<PAGE>
(4)    Investments

        The following investments exceeded 5% of the Plan's net assets at
        December 31, 1996 and 1995:

                   Investment                              1996          1995

           Fidelity Magellan Fund                     $  8,200,539     9,178,526
           Invesco Total Return Fund                     2,948,677          -   
           Fidelity Advisor Growth Opportunity Fund      4,914,401     4,692,184
           Evergreen Treasury Fund                      28,314,160          -   
           FUNB Stable Investment Fund                        -       17,875,534
           U.S. Government obligations                        -       17,189,390
     
       The Plan's investments were administered by Central Carolina Bank & Trust
       Company, N.A. through June 1995 and by First Union National Bank from 
       July 1995 through December 31, 1996.  During the years ended December 31,
       1996, 1995 and 1994, the Plan had the following net appreciation (depre-
       ciation) in its investments (including investments bought and sold during
       the year):

<TABLE>
<CAPTION>
                                                 1996               1995                1994
           
<S>                                           <C>                 <C>                  <C>
Fidelity Magellan Fund - FUNB administered    $  885,054            608,841                -      
Fidelity Magellan Fund - CCB administered           -               548,252            (246,171)
Common stocks - Rose's Stores, Inc.
 non-voting Class B                                 -               (15,218)            (51,354)
Wachovia Bond/Biltmore Fixed
  Income Fund                                       -                  -                (42,397)
Bond Fund of America                                -                27,549             (27,698)
American Balanced Fund                              -                11,494                (906)
U.S. Government obligations                         -               203,552                -   
Rose's Stable Investment Fund                    720,991            663,061                -   
Rose's Diversified Bond Fund                      24,098            141,380                -   
Invesco Total Return Fund                        359,451            251,756                -   
Fidelity Advisor Fund                            771,750            350,623                -   
Templeton Growth Fund                            281,526             25,456                -   
Evergreen Fund                                   196,460            296,676                -   
Evergreen Treasury Fund                          867,229               -                   -   
                                              $4,106,559          3,113,422            (368,526)
</TABLE>
PAGE
<PAGE>
(5)    Loans to Participants
   
       The Plan permits participants to borrow 50% of their account balance,
       up to $50,000. These loans must be repaid through payroll deductions
       over a period not to exceed five years.  The interest rate for monies
       borrowed is equal to the average prime rate at the sponsor's banks, plus
       one percent.  At December 31, 1996 and 1995, there were $547,787 and
       $526,492 in loans outstanding, respectively.  These loans bear interest
       at rates ranging from 7.0% to 10% and are due at various dates through
       2000.
   
(6)     Related Party Transactions
   
        All expenses of the Plan were paid by the plan sponsor, Rose's Stores,
        Inc., in 1994.  In 1996 and 1995 the Plan paid the investment management
        fees and the sponsor paid the administrative fees.
   
(7)     Federal Income Taxes
   
        The Internal Revenue Service issued its latest determination letter in
        August 1996 which stated that the Plan and its underlying trust qualify
        under the applicable provisions of the Internal Revenue Code and the
        trust is therefore exempt from federal income taxes.  In the opinion of
        the Plan Administrator, the Plan and its underlying trust have operated
        within the terms of the Plan and trust and remain qualified and tax
        exempt, respectively.  The Plan has been amended since receiving the
        determination letter, and a request for a new determination letter was
        subsequently sent to the Internal Revenue Service.  The Plan
        administrator believes that the Plan is designed and is currently being
        operated in compliance with the applicable requirements of the IRC and
        is tax exempt.
   
(8)     Reconciliation to Form 5500

        The accompanying financial statements have been prepared on an accrual
        basis and show employee contributions receivable of $57,471 and $81,228
        at December 31, 1996 and 1995, respectively, as a component of net
        assets available for plan benefits and as part of the employee
        contributions in the statements of changes in net assets available for
        plan benefits. As well, the December 31, 1996 net assets available for
        plan benefits and net transfers of assets among funds have been adjusted
        for $18,933 on loan payments receivable.  The Form 5500 has been
        prepared on a cash basis and does not reflect these amounts.  Certain
        amounts in the statements of changes in net assets available for plan
        benefits have been classified differently between the financial
        statements and the Form 5500.  These reclassifications have not affected
        the increase in net assets available for plan benefits.
<PAGE>
<PAGE>
                                                                     Schedule 1
                     ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                              (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                
                 Item 27a - Schedule of Assets Held for Investment Purposes
                                                                
                                    December 31, 1996



                Identity of party and                                   Market
   Units        description of assets                      Cost          value

    72,783      Diversified Bond Fund                  $ 1,452,437     1,580,610
    81,034      Fidelity Magellan Fund                   7,109,896     8,200,539
   114,010      Invesco Total Return Fund                2,495,844     2,948,677
   121,304      Fidelity Advisor Fund                    3,962,451     4,914,401
    76,518      Templeton Growth Fund                    1,544,014     1,793,387
    76,046      Evergreen Fund*                          1,286,387     1,481,800
27,485,206      Evergreen Treasury Fund*                27,506,580    28,314,160
   547,787      Loans to participants with interest
                rates ranging from 7% to 10%
                with payments through 2000                 547,787       547,787
                                                       $45,905,396    49,781,361





*Denotes party-in-interest.
PAGE
<PAGE>

                                                                      Schedule 2
                    ROSE'S STORES, INC. RETIREMENT SAVINGS 401(K) PLAN
                             (FORMERLY VARIABLE INVESTMENT PLAN)
                                                                             
                    Item 27d - Schedule of Reportable Transactions (1)
                                                                             
                               Year ended December 31, 1996



<TABLE>
<CAPTION>
                                                                                    Aggregate
                                                                                        cost
                                         Aggregate              Aggregate            of assets            
                                          purchase               selling              sold or                  Net
Identity of party and                      price                  price             distributed             realized
description of assets                     (2) (3)                (2) (3)                 (2)                  gain   

<S>                                     <C>                    <C>                  <C>                    <C>
Rose's Stable Income Fund               $   887,323            36,673,238           55,202,806             1,470,432
Fidelity Magellan Fund                    1,044,250             2,907,291            2,759,523               147,768
Evergreen Treasury Money Market Fund     33,815,940             6,369,009            6,309,360                59,649

</TABLE>


(1)  This schedule presents transactions in any security where the aggregate of
     such transactions in that security exceeds five percent of plan assets at 
     January 1, 1996.

(2)  The value of securities at the time of purchase or sale is the market 
     value.

(3)  Brokerage commissions are included in purchase prices and deducted from 
     sales proceeds.