ANNUAL REPORT

1996:  The Year in Brief

Edison Brothers Stores Inc. operates apparel and footware stores focused on
serving the youth and special-size markets with a selection of quality name
brand and private-label merchandise. With more than 1,700 locations and
17,000 employees in the United States, Canada and Puerto Rico, Edison is
one of the largest mall-based specialty retailers in North America.


Apparel     
1,253 Stores   

J. Riggings 
Coda
JW/Jeans West  
REPP Ltd
Oaktree     
Phoenix Big & Tall catalog
Shifty's    
5-7-9 Shops

Footwear    
490 Stores

Bakers/Leeds
Wild Pair

<TABLE>
<CAPTION>

                          1996               1995
                          (52 weeks)         (53 weeks)

<S>                       <C>                <C>
Net sales                 $1,090,400,000     $1,389,400,000
Net loss                    (143,200,000)      (222,000,000)
Net loss per share                 (6.46)            (10.06)
Cash flow from operations     85,500,000         85,400,000

<fn7>

A discussion of results is included in Management's Discussion and Analysis
on page 18.

</fn7>
</TABLE>

To Our Shareholders,

Edison Brothers' financial performance in 1996 reflected a company in the
midst of a dramatic restructuring and repositioning. While sales trends
improved during the fourth quarter and our losses narrowed, we have much
more to do before our transformation is complete. If all goes as planned,
Edison will emerge from Chapter 11 in 1997 having made measurable progress
toward becoming a stronger, more focused specialty retailer.

Restructuring Initiatives

Edison took aggressive actions necessary for the survival of the company
and began a comprehensive restructuring process immediately after filing
for Chapter 11 in November 1995. Our efforts included consolidating our
store base and selling our entertainment division to generate an immediate
infusion of needed cash. 

During the next phase of our turnaround process, we clearly identified the
company's strengths and weaknesses, and initiated programs to help us adopt
best practices and implement improvements. These initiatives have included:

     Conducting market research for most of our chains.
     Improving merchandise quality and assortments.
     Reducing our emphasis on discount pricing to improve sales and margins.
     Investing $13 million to upgrade our stores' physical appearance in 1996
     and earmarking $16 million for 1997.  Giving store staffs more time to 
     serve customers by eliminating and   streamlining "backroom" operations.
     Implementing company-wide standards for compensation, scheduling, sales,
     service, merchandise returns, and more. Developing stronger relationships
     with our vendors to improve merchandise quality and further streamline 
     our allocation and distribution processes.  Reducing overhead and other
     costs.

These initiatives provide a solid base from which Edison can now execute
its strategic business plan -  the first the company has produced in a
number of years. The plan outlines a focus on two key markets - youth and
special size - which fit the company's current profile and offer strong
opportunities for growth. This new strategic focus will allow us to
continue to build our existing businesses and provide opportunities for
carefully targeted expansion.

1996 Performance

Edison Brothers reported a net loss excluding special charges of $32.9
million for the 52 weeks ended February 1, l997, compared to $63.9 million
for the 53 weeks of 1995. Including $110.3 million in special charges in
1996 and $167.1 million ($158.1 million after-tax) of special charges in
1995, the full-year net losses were $143.2 million, or $6.46 per share, and
$222.0 million, or $10.06 per share, respectively.

Special charges in 1996 included $74.0 million in noncash charges resulting
from the recognition of an impairment loss on long-lived assets,
principally real estate and intangibles, pursuant to Statement of Financial

Accounting Standards 121. The remaining $36.3 million in special chargers
were restructuring and reorganization expenses, primarily reserves for
store closings, and legal and consulting fees.

Same-store sales for 1996 declined by 1.9 percent to $1.02 billion from
$1.04 billion in 1995. Total sales for 1996 were $1.09 billion compared
with $1.39 billion the year before, a decrease of 20.4 percent, reflecting
a 23.4 percent decrease in the average number of stores operated by Edison
during the period.

Plan of Reorganization

On February 27, 1997, Edison Brothers filed its proposed plan of
reorganization with the U.S. Bankruptcy Court. This was followed by the
filing of an amended plan and a proposed disclosure statement on March 31,
1997. The plan is designed to provide Edison with a capital structure to
support its business strategy and reduce the company's long-term debt
level, allowing us to focus our financial resources on improving our
operations.

Edison's proposed plan of reorganization would provide unsecured creditors,
including suppliers, lenders and factors, with a combination of cash, new
corporate debt, equity and other assets representing an estimated payment
of 92 cents on the dollar for the approximately $444 million in total
unsecured claims. All of Edison's current common stock would be canceled
and 10 million shares of new common stock would be distributed to the
unsecured creditors. Current shareholders would receive two sets of
warrants that would entitle them to purchase a total of approximately 9
percent of the new stock, on a fully diluted basis, at predetermined
prices. Edison's proposed plan of reorganization and disclosure statement
are subject to further amendment and revisions before approval of the
disclosure statement.

Once the disclosure statement is approved, all creditors and shareholders
will have an opportunity to review the plan of reorganization and
disclosure statement, and vote on the plan. The court will then hold a
hearing to determine whether to confirm the plan of reorganization. If it
is confirmed, Edison will then emerge from Chapter 11. 

Edison has used the Chapter 11 process to rehabilitate its business and lay
a strategic foundation for the future. We are encouraged by our results to
date, but clearly need to maintain our momentum and make the most of our
opportunities if this initial progress is to translate into sustainable
success for Edison over the long term.

Sincerely,


/s/Alan Miller
Chairman and President
April 25, 1997

<TABLE>

Consolidated Statements of Operations
(Dollars in millions, except per share data)

<CAPTION>
                                           1996        1995       1994
                                         (52 weeks)  (53 weeks)  (52 weeks)
<S>                                      <C>         <C>         <C> 
Net Sales                                $1,090.4    $1,389.4    $1,476.4
Cost of goods sold, occupancy, 
and buying expenses                         794.9     1,033.3     1,017.4
Store operating and administrative 
expenses                                    281.4       352.1       360.3
Depreciation and amortization                41.2        62.8        69.6
Interest expense, net (excludes contractual 
interest of $35.0 in 1996 and $9.1 in 1995)   2.4        25.2        19.0
Restructuring and reorganization 
expenses                                     36.3       167.1          -
Impairment of long-lived assets              74.0           -          -
Other operating                                 -            -      (22.3)
                                          1,230.2       1,640.5   1,444.0
Income (Loss) before Income Taxes          (139.8)       (251.1      32.4
Income tax provision (benefit)                3.4         (29.1)     11.9
Net Income (Loss)                        $ (143.2)     $ (222.0) $   20.5
Net Income (Loss) per Common Share       $   (6.46)    $ (10.06) $     .93

<fn8>

See accompanying notes
</fn8>
</TABLE>

<TABLE>

Consolidated Balance Sheets
(Dollars in millions)
<CAPTION>
                                         1996        1995
                                         year-end    year-end
Assets

<S>                                      <C>         <C>
Current Assets:                                      
Cash and cash equivalents                $125.6      $139.6
Investments                                78.5           -
Merchandise inventories                   210.7       250.5
Income tax receivable                       0.8        42.8
Prepaid expenses                            5.0        10.2
Other current assets                        4.8         9.4
Total Current Assets                      425.4       452.5
Assets Held for Sale                       10.9           -
Property and Equipment, net               146.0       209.0
Intangible Assets, net                        -        50.3
Prepaid Pension Expense                    41.3        38.4
Other Assets                               10.2        11.3
Total Assets                             $633.8      $761.5



LIABILITIES AND COMMON STOCKHOLDERS'
 EQUITY (DEFICIT)            
Current Liabilities:                                 
Accounts payable                         $  69.2     $ 64.8
Payroll and vacations                       10.7       13.4
Other taxes                                  5.7        6.9
Other current liabilities                   23.1       26.0
Total Current Liabilities                  108.7      111.1
Liabilities Subject to Settlement under                          
Reorganization Proceedings                 508.3      489.8
Other Liabilities                           18.9       20.2
Common Stockholders' Equity (Deficit):               
Common stock, par value $1                   22.2      22.1
Capital in excess of par value               76.9      76.7
Retained earnings (deficit)                (101.6)     41.6
Foreign currency translation adjustment
 and other                                     .4         -
Total Common Stockholders' Equity 
(Deficit)                                    (2.1)    140.4
Total Liabilities and Equity 
(Deficit)                                  $633.8    $761.5

<fn9>
See accompanying notes
</fn9>
</TABLE>

<TABLE>

Consolidated Statements of Cash Flows
(Dollars in Millions)

<CAPTION>
                                         1996        1995        1994
                                         (52 weeks)  (53 weeks)  (52 weeks)

Cash Flows from Operating Activities:                            

<S>                                      <C>         <C>         <C>
Net income (loss)                        $(143.2)    $(222.0)    $20.5
Adjustments to reconcile net income 
(loss) to net cash provided by
Operating activities:
Depreciation and amortization               41.2        62.8      69.6
Provision for deferred income taxes,
net of valuation allowance and 
acquisitions                                   -         4.5       8.8
Restructuring and reorganization 
expenses                                     11.7       111.3         -
Impairment of long-lived assets              74.0           -         -
Changes in assets and liabilities,
net of effects from acquisitions 
and dispositions:
Merchandise inventories                      39.9         71.0    (26.7)
Income tax receivable, prepaid 
expenses,and other assets                    49.9        (16.8)   (24.9)
Accounts payable, accrued expenses,
and other liabilities                         5.4         67.7     (5.0)
Other                                         6.6          6.9      7.6
Total Operating Activities                   85.5         85.4     49.9
Cash Flows from Investing Activities:
Payment for companies and assets purchased,
net of cash acquired                          -          (14.1)   (11.8)
Capital expenditures                       (21.9)        (37.2)   (61.7)
Increase in investments                    (78.5)           -         -
Net proceeds from disposal of 
subsidiaries                                  -           17.1        -
Other                                        0.8           2.7     (0.9)
Total Investing Activities                 (99.6)        (31.5)   (74.4)
Cash Flows from Financing Activities:
Proceeds from prepetition debt 
issuance                                       -          60.0      15.0
Prepetition long-term debt 
payments                                       -          (0.1)    (35.7)
Net prepetition short-term debt
borrowings                                     -          11.4      71.1
Net postpetition borrowings
(payments) under short-term credit
facility                                    (0.2)          0.2         -
Dividends on common stock                    -            (9.3)    (27.3)
Other                                          0.3         6.1       1.0
Total Financing Activities                     0.1        68.3      24.1
Effect of exchange rate changes 
on cash                                          -        (9.6)     (5.2)
Cash Provided (Used)                          (14.0)    112.6       (5.6)
Beginning cash and cash 
equivalents                                   139.6       27.0      32.6
Ending Cash and Cash Equivalents             $125.6    $ 139.6     $27.0
Cash Payments (Receipts) for:
Interest expense                             $  0.4    $  23.9     $20.4
Income taxes                                 $(37.9)   $ (0.7)    $  4.5


<fn10>
See accompanying notes
</fn10>
</TABLE>


<TABLE>

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIT)
(Dollars in millions, except per share data)                               

                                                                      


<CAPTION>
                                                               Foreign
                                                               Currency
                                         Capital in Retained   translation
                                Common   excess of  earnings   adjustment
                                stock    par value  (deficit)  and other

<S>                             <C>      <C>        <C>        <C>
Balance at Beginning of 1994    $22.0    $75.6      $310.6     ($0.3)
Net income                        -        -        20.5         -
Stock options exercised and
 employee benefit plans           -      1.0          -        0.1
Common stock purchased - 9,000
 shares                           -      (0.1)        -          -
Foreign currency translation 
adjustment                        -        -          -        (14.9)
Dividends on common stock 
 $1.24 per share                  -        -        (27.3)       -
Balance at End of 1994          22.0     76.5       303.8      (15.1)
Net loss                         -        -        (222.0)      -
Stock options exercised and 
employee benefit plans          0.1      0.2          -          -
Spin-off of subsidiary            -        -          -        (30.9)
Foreign currency translation
adjustment                        -        -          -         15.1
Dividends on common stock
 $.42 per share                   -        -        (9.3)        -
Balance at End of 1995          22.1     76.7       41.6         -
Net loss                         -        -        (143.2)      -
Employee benefit plans           0.1      0.2          -          -
Foreign currency translation 
adjustment                        -        -          -          0.4
Balance at End of 1996         $22.2    $76.9      ($101.6)     $0.4

<fn11>

See accompanying notes
</fn11>
</TABLE>


Notes to Consoldiated Financial Statements
(Dollars im Millions, except per share data)

Note 1: Proceedings under Chapter 11

On November 3, 1995 (the Petition Date), Edison Brothers Stores, Inc. (the
Company) and 65 of its subsidiaries and affiliates (the Debtors) filed
petitions for relief under Chapter 11 of the United States Bankruptcy Code
(Chapter 11) in the United States Bankruptcy Court in Wilmington, Delaware.
The Debtors are presently operating their respective businesses as
debtors-in-possession. A statutory Creditors' Committee has been appointed
in the Chapter 11 cases. In addition, the U.S. Trustee appointed an Equity
Committee during the fourth quarter of 1996. The Chapter 11 cases of the
Debtors are being jointly administered for procedural purposes only. 

Certain foreign subsidiaries were not included in the Chapter 11 filing.
The results of their operations and financial position are not material to
the consolidated financial statements. 

The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern,
which principles, except as otherwise disclosed, assume that assets will be
realized and liabilities will be discharged in the normal course of
business. As a result of the Chapter 11 cases and circumstances relating to
this event, including the Company's debt structure, its recurring losses,
and current economic conditions, such realization of assets and liquidation
of liabilities are subject to significant uncertainty. Additionally, the
amounts reported on the consolidated balance sheet could materially change
because of the plan of reorganization, since such reported amounts do not
give effect to adjustments to the carrying value of the underlying assets
or amounts of liabilities that may ultimately result. 

In the Chapter 11 cases, substantially all liabilities as of the Petition
Date are subject to compromise or other treatment under a plan of
reorganization. For financial reporting purposes, those liabilities and
obligations whose disposition is dependent on the outcome of the Chapter 11
cases have been segregated and classified as liabilities subject to
settlement under reorganization proceedings in the consolidated balance
sheets. Generally, actions to enforce or otherwise effect repayment of all
pre-Chapter 11 liabilities as well as all pending litigation against the
Debtors are stayed while the Debtors continue their business operations as
debtors-in-possession. Schedules have been filed by the Debtors with the
Bankruptcy Court setting forth the assets and liabilities of the Debtors as
of the Petition Date as reflected in the Debtors' accounting records.
Differences between amounts reflected in such schedules and claims filed by
creditors will be investigated and either amicably resolved or adjudicated.
The ultimate amount of and settlement terms for such liabilities are
subject to a plan of reorganization and accordingly are not presently
determinable.

Under the Bankruptcy Code, the Company may elect to assume or reject real
estate leases, employment contracts, personal property leases, service
contracts, and other prepetition executory contracts, subject to Bankruptcy
Court approval. The liabilities subject to settlement under reorganization
proceedings include a provision for the estimated amount that may be
claimed by lessors and allowed in connection with the real estate leases.
The Company will continue to analyze its executory contracts and may assume
or reject additional contracts.

On February 27, 1997, the Debtors filed a proposed Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code, which was amended
by a subsequent filing on March 31, 1997 (the plan as amended, the "Plan").
On March 31, 1997, the Debtors also filed a Disclosure Statement pursuant
to Section 1125 of the Bankruptcy Code. The Court has set a hearing date of
May 13, 1997, for consideration of the adequacy of the Debtors' Disclosure
Statement. If the Disclosure Statement is approved by the Court, the
Company will then solicit acceptances of the Plan for those holders of
claims and equity interests entitled to vote thereon under the terms of the
Plan. A confirmation hearing will thereafter be held by the Bankruptcy
Court to determine whether the Plan satisfies all of the requirements for
confirmation specified in Section 1129 of the Bankruptcy Code, among which
are that the Plan be: (i) accepted by all impaired classes of claims and
equity interests or, if rejected by an impaired class, that the Plan "does
not discriminate unfairly" and is "fair and equitable" as to such class;
(ii) feasible; and (iii) in the "best interests of creditors and
stockholders that are impaired under the Plan."

The Plan and Disclosure Statement may be subject to further amendment and
revisions before the process is completed. As currently drafted, the Plan
provides for a distribution to creditors of a combination of cash, new
corporate debt, new Company common stock and other assets. General
unsecured creditors would receive: (i) a cash payment of $119 (subject to
certain adjustments); (ii) ten year, 11% unsecured notes in the principal
amount of $100 (with the first three years of interest prefunded and no
scheduled principal payments until maturity in 2007); (iii) new common
stock of the Company, which would be issued at the time of emergence and
replace all existing shares; (iv) title to the Company's headquarters
building in downtown St. Louis, which the Company would continue to occupy
under the terms of a ten year lease; and (v) excess cash of approximately
$43 from the Company's overfunded pension plan. Holders of existing equity
interests in the Company would receive a combination of three- and six-year
warrants to purchase a total of approximately nine percent of the new
common stock.

The Plan will not become effective unless and until certain conditions
specified therein have been satisfied or waived. Among these conditions are
that: (i) an order confirming the Plan, in form and substance reasonably
acceptable to the Debtors and the statutory Creditors' Committee, shall
have been signed by the Bankruptcy Court and there shall not be a stay or
injunction in effect with respect thereto; (ii) the Debtors shall have at
least $25 in cash as of July 5, 1997, after giving effect to the
distributions of cash projected to be made under the Plan; (iii) the
Debtors shall have credit availability under a working capital credit
facility providing the Debtors with working capital sufficient to meet
their requirements; and (iv) various other actions, documents and
agreements necessary to implement the Plan shall have been effected or
executed.

The Company anticipates using fresh start accounting once the Plan is
consummated.

Note 2: Description of Business and Summary of Significant Accounting
Policies

Business:  The Company owns and operates chains of specialty retailing
stores located in 49 states, Puerto Rico, the Virgin Islands, and Canada.
The Company conducts its principal operations through subsidiaries in two
segments, apparel and footwear.

Consolidation:   The financial statements include the accounts of all
subsidiaries; intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents:  Short-term investments with maturities of three
months or less at the time of purchase are reported as cash equivalents.

Investments:  Investments consist of U.S. government debt securities which
mature in less than one year, and are classified as available-for-sale. The
amortized cost, which approximates fair value, of these securities is
adjusted for amortization of premiums and accretions of discounts to
maturity. Amortization, interest and dividends are included in interest
income.

Inventories:  A portion of the inventories (76%) is determined using the
retail method and is based on the lower of cost or market. The other
portion (24%) is stated at the lower of cost, mainly average costs, or
market, based principally on anticipated realizable values.

Long-Lived Assets:   Depreciation and amortization of property and
equipment and intangible assets are computed principally on a straight-line
basis. The Company follows Statement of Financial Accounting Standards 121,
"Accounting for Long-Lived Assets and for Long-Lived Assets to be Disposed
of" (SFAS 121), in evaluating the recoverability of long-lived assets.

Income Taxes:  The liability method is used to compute deferred income
taxes resulting from temporary differences in the recognition of income and
expense items for tax and financial reporting purposes.

Interest Expense:   Interest expense for 1995 and 1994 has been reduced by
interest income of $1.8 (earned prior to the Petition Date), and $1.6,
respectively. Interest earned subsequent to the Petition Date of $8.2 in
1996 and $0.9 in 1995 is included in restructuring and reorganization
expenses.

Store Opening and Closing Costs:   Store preopening costs are charged
against income as incurred. Closing costs are accrued when the decision is
made to close a store.

Earnings Per Share:   Earnings per common share are based on the weighted
average number of shares outstanding (22,185,000 in 1996; 22,070,000 in
1995; and 22,007,000 in 1994). Shares issuable under stock option plans did
not have a significant dilutive effect on earnings per common share.

Estimates:   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 revenues and expenses during the reporting period. Actual
amounts could differ from these estimates. 

Reclassifications:   Certain prior-year items have been reclassified to
conform to the current-year presentation.

Fiscal Year:   The Company's fiscal year ends on the Saturday closest to
January 31. References to 1996, 1995, and 1994 are to the 52 weeks ended
February 1, 1997, the 53 weeks ended February 3, 1996, and the 52 weeks
ended January 28, 1995.

Note 3: Restructuring and Reorganization Expenses

The Company records restructuring and reorganization expenses in accordance
with AICPA Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code." Restructuring and reorganization
expenses for the fiscal years ended February 1, 1997, and February 3, 1996,
respectively, were as follows:

<TABLE>
<CAPTION>                                                           
                                                     1996        1995

<S>                                                 <C>        <C>
Estimated costs for store closings                  $13.7      $101.6
Loss on sale of subsidiaries                          0.9        33.0
Accelerated goodwill amortization                       -        15.1
Consulting fees                                      15.4         2.2
Legal fees                                            4.4         1.5
Interest income                                      (8.2)       (0.9)
Other                                                10.1        14.6
Restructuring and reorganization                                
expenses                                            $36.3      $167.1

</TABLE>

During 1996 and 1995, the Company recognized store closing provisions
relating to a restructuring plan designed to close unprofitable stores. In
1996, sales and store contribution for stores closed during 1996 were
$128.7 and $(2.8). Sales and store contribution recorded in 1995 for the
stores closed during 1995 were $177.2 and $(26.1). The Company is
continuing to evaluate store operating performance to determine the need
for additional store closings. 

Store closing costs of $13.7 and $101.6 in 1996 and 1995, respectively,
represent a provision to cover early lease termination claims and the
write-off of fixtures and equipment, leasehold improvements, and related
intangible assets. Charges of $19.2 in 1996 and $59.2 in 1995, representing
the net book value of fixed and intangible assets that have been disposed
of, have been made to the reserve. Lease termination claims totaling $42.8
and $38.6 at the end of 1996 and 1995, respectively, have been reclassified
to liabilities subject to settlement under reorganization proceedings.

In 1995 the Company recorded a $24.7 loss related to the sale of
substantially all the assets of its mall entertainment division. In
addition, the Company recorded provisions of $0.9 and $8.3 in 1996 and
1995, respectively, to cover the costs associated with the disposal of the
remaining operations. The two remaining entertainment locations are
expected to close in the fall of 1997.

The Company recorded a $15.1 charge in 1995 for the accelerated
amortization of Zeidler & Zeidler goodwill. An evaluation of the carrying
value of the goodwill in relation to the operating performance of the
underlying business, coupled with store closings in 1995 and provisions for
1996 closings, indicated that such goodwill had declined in value.

The Company incurred consulting and legal fees for bankruptcy activity,
restructuring efforts and the plan of reorganization. These professional
fees were for services provided to the Company, the Creditors' Committee
and the Equity Committee.

Other reorganization expense of $10.1 for 1996 and $14.6 for 1995 represent
expenses related to an early retirement program, payroll and severance
costs, retention bonuses, liquidator fees and other expenses incurred as a
result of the Chapter 11 filing. 1995 expenses also include costs related
to the closing of the Company's distribution center in Rome, Georgia.

Of the $203.4 restructuring and reorganization expenses incurred since the
petition date, $123.0 were noncash charges. Total cash payments were $20.7
in 1996 and $3.7 in 1995, primarily for professional fees. Charges of $56.0
represent payments to be made in the future, mostly for lease termination
claims.

Note 4: Property and Equipment

<TABLE>

Property and equipment are recorded at cost as follows:

<CAPTION>
                                   1996    1995
                                year-end year-end

<S>                             <C>      <C>
Land                            $  4.9   $   5.8
Buildings                         24.0      69.7
Leasehold improvements           170.3     189.7
Fixtures and equipment           137.3     147.5
Property held under capital                          
leases, principally                       
buildings                          9.6       9.6
Total cost                       346.1     422.3
Accumulated depreciation                             
and amortization                (200.1)   (213.3)
Property and equipment,                              
net                             $146.0    $209.0

</TABLE>

Depreciation and amortization expense for 1996, 1995, and 1994 was $35.3,
$52.1, and $56.9, respectively. In 1996, the Company decided to dispose of
specific corporate properties no longer used in the business. The value of
the land and buildings of $10.9 has been reclassified to assets held for
sale in the consolidated balance sheet.

Effective for fiscal 1996 and in accordance with SFAS 121, the Company
reviews long-lived assets, identifiable intangibles and goodwill for
impairment whenever events or changes in business circumstances indicate
the carrying amount of the assets may not be fully recoverable. The Company
generally performs non-discounted cash flow analyses to determine if an
impairment exists. If impairment is determined to exist, the related
impairment loss is calculated based on the present value of cash flows
using discount rates which reflect the inherent risk of the underlying
business. Impairment losses on assets to be disposed of (if any) are based
on the estimated proceeds to be received less costs of disposal.

In 1996, Apparel and Footwear long-lived assets were compared to current
estimates of the associated future cash flows over the average remaining
lease terms for the stores within those segments. For those assets
determined to be impaired, future cash flows were then discounted at a 14%
rate, which the Company believes to be consistent with current business
risk. Corporate properties were evaluated based on a review of independent
appraisals.

As a result, the $74.0 charge in 1996 represents write-downs of $39.4 for
the apparel segment and $34.6 for corporate properties. The write-downs
consist of the following:
                                                               
<TABLE>
<CAPTION>

<S>                                     <C>
Assets held for sale (corporate 
land and buildings)                      $  4.8
BuildingS                                  21.5
Leasehold improvements and other            2.0
Fixtures and equipment                      3.3
Intangibles                                42.4
Impairment of long-lived assets          $ 74.0

</TABLE>


<TABLE>

Note 5: Intangible Assets

<CAPTION>
                                  1995
                                year-end

<S>                             <C> 
Leasehold rights                $ 10.1
Goodwill                          34.0
Covenant not to compete           12.0
Other                             15.3
Total                             71.4
Accumulated amortization         (21.1)
Intangible assets, net          $ 50.3

</TABLE>

During 1996 the remaining net book value of intangibles of $42.4 was
written off and was included in impairment of long-lived assets in the
consolidated statements of operations. See Note 4 for discussion of asset
impairment adjustments determined in accordance with SFAS 121.

Intangibles are amortized over useful lives ranging from 2 to 30 years.
Amortization expense for 1996, 1995, and 1994 was $5.9, $10.7, and $12.7,
respectively. In 1995 an additional charge of $15.1 was recorded for the
accelerated amortization of Zeidler & Zeidler goodwill and was included in
restructuring and reorganization expenses in the consolidated statements of
operations.

Note 6: Employee Benefit Plans

The qualified pension plan covers employees who have met age and service
eligibility requirements. Benefits are based on each employee's highest
average compensation for any 5 consecutive full calendar years out of the
last 15 years of credited service preceding separation. The Company funds
at least the minimum amount required by funding standards. Currently, the
pension plan on an actuarial basis is overfunded and there is no current
funding by the Company.

The current qualified plan will be terminated effective May 31, 1997 and a
new plan implemented concurrent with the termination. The Company will seek
approval from the Pension Benefit Guarantee Corporation in order to
terminate the plan. The Company filed a determination letter with the
Internal Revenue Service on March 24, 1997 to assess the tax status of the
termination. Plan participants have been notified of the termination.
Participants currently receiving benefits under the qualified plan will
have annuity contracts purchased on their behalf. All participants who are
not currently receiving benefits will become fully vested upon plan
termination. The participants will have the option to have the net present
value of their vested benefits transferred into the new qualified plan, or
converted into an annuity contract. The specific terms of the new qualified
plan have not yet been finally determined.

In determining the actuarial present value of projected future benefits for
1996 and 1995, the weighted-average discount rate was 7.5% and 7.0%,
respectively, and the rate of increase in future compensation levels was
5.65% for both years. For 1996, 1995, and 1994, the assumed rate of return
on assets was 9.5%. Plan assets consist primarily of fixed income and
equity securities.

The plan's funded status is as follows:
<TABLE>
<CAPTION>

                                1996     1995
                                year-end year-end

<S>                             <C>      <C>
Actuarial present value:                                       
Vested benefit obligation       $ 45.8   $ 45.8
Nonvested benefit obligation       3.4      4.2
Accumulated benefit obligation  $ 49.2   $ 50.0

Projected benefit obligation    $(60.0)  $(62.2)
Plan assets at market value      137.9    118.1
Plan assets in excess of                              
projected benefit obligation      77.9     55.9
Unrecognized net asset          (36.6)    (17.4)
Unrecognized prior service cost     -      (0.1)
Prepaid pension expense         $ 41.3    $38.4

</TABLE>

<TABLE>

Net pension income includes the following components:

<CAPTION>
                                1996     1995       1994

<S>                             <C>      <C>        <C>
Service cost                    $(1.9)   $(1.5)     $(2.0)
Interest cost                    (4.2)    (3.5)      (3.5)
Actual return on assets          24.3     30.7        2.5
Partial recognition of                                
prior period net gain             0.7       0.7       0.1
Net (gains) losses deferred               
to future periods               (14.3)   (22.2)       5.4
Net pension income              $ 4.6     $4.2      $ 2.5


</TABLE>

The Company provides supplemental pension benefits under other
non-qualified plans which are not funded. The total liability for these
plans was $5.5 in 1996 and $4.6 in 1995. Net pension expense for these
plans for the years 1996, 1995, and 1994 was $1.1, $1.0, and $1.4,
respectively. The non-qualified pension liability is classified as
liabilities subject to settlement under reorganization proceedings for 1996
and 1995.

The Company provides an employee savings plan that permits employees to
make contributions in accordance with Internal Revenue Code Section 401(k).
Employees who meet age and service requirements are eligible to participate
by contributing up to 15% of their pretax compensation. The Company matches
a portion of the employee's contribution under a predetermined formula
based on the Company's return on equity. Company contributions to the plan
may be remitted in the form of cash or Company common stock. The Company's
expense related to the plan was $.4 for 1996, $.2 for 1995, and $.3 for
1994.

Note 7: Financing Arrangements

The Company and its subsidiary, Edison Brothers Apparel Stores, Inc., as
debtors-in-possession, are parties to a Loan Agreement dated effective
November 9, 1995, (the DIP Facility) with BankAmerica Business Credit,
Inc., as Agent and Lender, under which the Company may borrow up to $200.0,
subject to collateral restrictions, to fund ongoing working capital needs.
The DIP Facility, which has been approved by the Bankruptcy Court, has a
sublimit of $150.0 for the issuance of letters of credit. The DIP Facility
is intended to provide the Company with the cash and liquidity to conduct
its operations and pay for merchandise shipments at normal levels through
the emergence date.

At the Company's option, the Company may borrow under the DIP Facility at
the Reference Rate (as defined) plus .25% or at the Eurodollar Rate (as
defined) plus 1.5%. The current borrowing rate is 8.5%. The maximum
borrowing, up to $200.0, is limited to 50% of the value of eligible
inventory (as defined) plus 95% of the amount of cash deposited with the
Agent. The Company is required to pay a commitment fee of .375% per annum
on the unused portion of the DIP Facility. The DIP Facility contains
restrictive covenants including, among other things, a limitation on store
closings of 1,100 (as amended), limitations on the incurrence of additional
liens and indebtedness, limitations on capital expenditures and the sale of
assets, the maintenance of minimum operating earnings (EBITDA) and
inventory levels, and a prohibition on paying dividends. At February 1,
1997, the Company was in compliance with the DIP Facility covenants.

The lenders under the DIP Facility have a "super-priority" administrative
expense claim against the estate of the Company. The DIP Facility expires
on the earlier of November 9, 1997, or the effective date of a
reorganization plan that is confirmed by the Bankruptcy Court.

There were no outstanding borrowings at February 1, 1997. As of February 3,
1996, the Company had $.2 outstanding under the DIP Facility. As of
February 1, 1997 and February 3, 1996, outstanding letters of credit were
$84.5 and $112.6 and available borrowings under the DIP were $41.1 and
$56.9, respectively.

Note 8: Liabilities Subject to Settlement Under Reorganization Proceedings

The principal categories of claims classified as liabilities subject to
settlement under reorganization proceedings are identified below. All
amounts below may be subject to future adjustment depending on Bankruptcy
Court action, further developments with respect to disputed claims,
determination as to the value of any collateral securing claims, or other
events. Additional claims may arise resulting from rejection of additional
executory contracts by the Company.

<TABLE>
<CAPTION>

                                1996     1995
                                year-end year-end

<S>                             <C>      <C>
Long-term senior notes payable  $150.0   $150.0
Notes payable-banks              205.9    205.9
Cash set-off applied to debt      (3.6)    (3.6)
Capital lease obligations         12.4      8.4
Accrued interest payable           4.3      3.5
Deferred debt costs               (4.3)    (6.7)
Postretirement benefit/Pension                       
accrual                           47.7     45.6
Accounts payable                  36.1     35.9
Lease termination claims          42.8     38.6
Taxes                              6.0      4.3
Other                             11.0      7.9
Liabilities subject to 
settlement under 
reorganization proceedings      $508.3     $489.8

</TABLE>

As a result of the bankruptcy filing, no principal or interest payments
will be made on any prepetition debt without Bankruptcy Court approval or
until a reorganization plan defining the repayment terms has been approved.
Interest on prepetition obligations has generally not been accrued after
the Petition Date. 

Prior to the bankruptcy filing and certain agreements discussed below, the
Company's debt consisted of senior notes held by various institutional
lenders amounting to $150.0. The unsecured senior notes, having maturities
from 7 to 15 years, were to bear interest at rates of 7.09% to 8.04%. The
Company also has outstanding borrowings under a $125.0 revolving credit
facility as well as short-term and demand notes under uncommitted bank
lines with varying interest rates and maturity dates. In addition, the
Company had $8.4 in obligations relating to its Washington, Missouri,
distribution center which are characterized as capital leases for financial
reporting purposes.

As a result of its operating loss for second quarter 1995, the Company was
in violation of certain financial covenants under its bank and senior note
agreements. During the third quarter 1995, the Company and its subsidiary,
Edison Brothers Apparel Stores, Inc., entered into an agreement for a $75.0
secured revolving line of credit facility with BankAmerica Business Credit,
Inc. extending through February 29, 1996. In addition, the Company entered
into override agreements with its existing lenders through February 29,
1996. The override agreements covered existing 1995 financial covenants and
deferred principal repayments otherwise due December 1, 1995. Furthermore,
the Company's primary existing letter of credit bank agreed to continue to
provide international letters of credit through the override period. In
exchange for these concessions, the Company paid a one-time forbearance fee
of $3.6 and agreed to increase the interest rate on the outstanding debt to
9.75%.

As of the bankruptcy filing, the Company had outstanding $150.0 of senior
notes, $125.0 under its $125.0 revolving credit facility, $80.9 of
short-term and demand notes under its uncommitted bank lines, $8.4 of
capital lease obligations, and $21.6 under its $75.0 secured revolving line
of credit facility. The Company received authorization from the Bankruptcy
Court to make a $21.6 payment on the secured revolving line of credit
facility. In addition, $3.6 of cash was set-off by the banks against
outstanding principal and accrued interest balances. 

As part of the Chapter 11 reorganization process, the Company has attempted
to notify all known or potential creditors of the Chapter 11 filing for the
purpose of identifying all prepetition claims against the Company.
Generally, creditors whose claims arose prior to the Petition Date had
until August 1, 1996 ("Bar Date") to file claims or be barred from
asserting claims in the future. Claims arising from rejection of executory
contracts by the Company on or after July 1, 1996, and claims related to
certain other items were permitted to be filed by other dates set by the
Bankruptcy Court. Differences between amounts shown by the Debtors and
claims filed by creditors are being investigated and will either be
amicably resolved or adjudicated. The ultimate amount of and settlement
terms for such liabilities are subject to the plan of the reorganization
when confirmed, and accordingly are not presently determinable.

Note 9: Postretirement Benefits

The Company at its discretion provides a defined dollar benefit health and
life plan to its retirees and their eligible spouses and dependents. To
qualify, an employee must retire at age 55 or later with at least 15 years
of credited service under the pension plan. The health care portion of the
plan is contributory, with retiree contributions subject to adjustment
annually. The life insurance portion of the plan is noncontributory. The
Company funds, as needed, plan costs in excess of retiree contributions.
The Company reserves the right to modify or terminate these benefits.

<TABLE>

The plan's funded status is as follows:

<CAPTION>
                                1996     1995
                                year end year end
Accumulated postretirement 
benefit obligation:

<S>                             <C>      <C>
Retirees                        $35.7    $37.1
Fully eligible active plan                           
participants                      1.9      3.7
Other active plan participants    3.3      4.1
Unrecognized net gain (loss)      1.4     (3.7)
Prior service cost               (0.1)    (0.1)
Accrued postretirement benefit 
cost                            $42.2    $41.1

</TABLE>

The accrued benefit cost was classified as liabilities subject to
settlement under reorganization proceedings for year end 1996 and 1995.

<TABLE>

Net periodic postretirement benefit cost consists of:

<CAPTION>
                                1996   1995

<S>                             <C>      <C>
Service cost                    $0.2     $0.2
Interest cost                    3.1      3.2
Net periodic postretirement       
benefit cost                    $3.3     $3.4

</TABLE>

An increase in the cost of covered health care benefits of 9% for pre age
65 participants and 9% for post age 65 participants was assumed for fiscal
year 1997. This rate is assumed to decrease gradually to 6% by the year
2003 and remain at that level thereafter. A 1% increase in the health care
cost trend rate would increase the accumulated postretirement benefit
obligation by $2.9 at year end 1996 and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for
1996 by $.3. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% and 7.0% at year-end
1996 and 1995, respectively.

Note 10: Income Taxes

<TABLE>

The provision (benefit) for income taxes consists of:

<CAPTION>
                                 1996      1995      1994
Current expense (benefit):                           

<S>                             <C>      <C>        <C>
Federal                         $ 0.5    $(35.6)    $ 0.4
Foreign                           0.7       0.3       2.6
State and local                   2.5       1.7       0.1
Deferred expense (benefit)      (13.5)    (39.0)      8.8
Deferred tax valuation                               
allowance                        13.2      43.5         -
Income tax provision(benefit)   $ 3.4    $(29.1)    $11.9

</TABLE>

Significant components of the deferred tax liabilities and assets in the
consolidated balance sheets are as follows:

<TABLE>
<CAPTION>

                                1996     1995       1994 
                              year end  year end   year end
                                                     
<S>                             <C>      <C>        <C> 
Accelerated depreciation        $ 4.9    $ 9.3      $11.1
Pension income                   15.6     14.9       12.2
Other                             2.6      9.8       21.2
Total deferred tax                                    
liabilities                      23.1     34.0       44.5
Inventory capitalization          5.2      4.8        4.6
Rent expense accruals             6.3      7.7        8.0
Postretirement benefits          16.6     16.1       13.0
Acquisition-related reserves       -       1.3        2.6
Restructuring reserves           17.9     20.6          -
Net operating loss carry                             
forward                          18.8     13.9          -
Other                            20.0     13.1        22.2
Total deferred tax assets        84.8     77.5        50.4
Less: Deferred tax valuation                           
allowance                        61.7     43.5          -
Net deferred tax assets         $   -    $   -      $  5.9

</TABLE>


During 1996 and 1995 the Company concluded that it is likely it will not be
able to realize its deferred tax assets. Accordingly, an allowance against
the net deferred tax asset balance of $61.7 and $43.5, respectively, and
charges to income tax expense of $13.2 and $43.5, are reflected in the
consolidated financial statements.

<TABLE>
Reconciliation of federal statutory rates to effective income tax rates:

<CAPTION>
                                          1996       1995      1994

<S>                                      <C>        <C>        <C>
Federal corporate statutory rate         (35.0%)    (35.0%)    35.0%
State & local income taxes, net of                   
federal benefit                            0.5%      (0.4%)     3.5%
Goodwill amortization and                                               
write-off                                  4.5%       3.3%         -
Deferred tax valuation allowance          32.4%      17.3%         -
Other                                        -        3.2%     (1.6%)
Income tax provision (benefit)             2.4%     (11.6%)    36.9%

</TABLE>


Pretax earnings from foreign subsidiaries were $1.9 in 1996, $0 in 1995,
and $8.4 in 1994.

As of year-end 1996 the Company has a net operating loss carryforward for
federal income tax purposes of approximately $48.2, which is available to
offset future taxable income through 2011. The Company also has a capital
loss carryforward for federal income tax purposes of $11.9 which is
available to offset future capital gains through 2001. In addition, the
Company has an alternative minimum tax credit carryforward of approximately
$2.7, which is available to reduce future regular income taxes over an
indefinite period. Implementation of the Company's plan of reorganization
may significantly reduce the various carryforward items; additionally, a
significant change in ownership as a result of the Company's plan of
reorganization could limit the use of any remaining carryforwards.

<TABLE>


Note 11: Common Stock

<CAPTION>
                                      1996         1995      
                                   Year end       Year end

Shares:

<S>                                <C>          <C> 
Issued (100,000,000 authorized)    27,554,232   27,554,232
Less held in treasury               5,352,454    5,466,742
Outstanding                        22,201,778   22,087,490
Stockholders of record                  4,000        4,000

</TABLE>

The Company has elected to follow Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options
generally equals the market price of the underlying stock at the date of
grant, no compensation expense is generally recognized.

Because the effect of applying the fair value method under Statement of
Financial Accounting Standards 123, "Accounting For Stock Based
Compensation" (SFAS 123) to the Company's stock based awards results in net
income and earnings per share that are not materially different from
amounts reported under APB 25, pro forma disclosures have been omitted.

The 1986 and 1992 stock option plans authorize the sale of 1.5 and 1.0
million common shares, respectively, to executives and store managers.  No
options were granted under the 1986 plan subsequent to adoption of the 1992
plan.  Options are exercisable over various options terms not exceeding 10
years following the date of grant.

Activity under these plans was as follows:
<TABLE>

1996            
                                  Number of   Option
                                   Options    price pershare
<S>                                <C>         <C>
Outstanding at beginning 
of year                            1,108.096   $4.31-27.98
Granted                               -            -     
Exercised                             -           -      
Canceled                           (478,495)    11.13-27.98
Outstanding at end of year          629,601      4.31-27.98
Shares exercisable at end of       
year                                195,391    
Shares issues for options 
exercised                                 0      


1995

Outstanding at beginning of 
year                               1,068,231  $16.13-37.35
Granted                            902,080       4.31-27.98
Exercised                             -                 -
Canceled                           (862,215)   11.13-37.25
Outstanding at end of year         1,108,096     4.31-27.98
Shares exercisable at end of
year                               321,153      
Shares issues for options 
exercised                            0                   


1994

Outstanding at beginning of 
year                                570,521   $11.38-37.25
Granted                             711,700   23.75-29.81
Exercised                           (44,078)  11.38-27.15
Canceled                           (169,912)  11.38-37.25
Outstanding at end of year        1,068,231   16.13-37.25
Shares exercisable at end of
year                               260,091    
Shares issues for options 
exercised                           44,078                 

</TABLE>

Outstanding stock options under all plans were adjusted on June 29, 1995,
as a result of the Dave & Buster's, Inc. spin-off. The number of shares
subject to each option was increased by 33.1% and the exercise price was
reduced by 24.9%.

During 1995, 175,050 options with exercise prices ranging from $25.38 to
$37.25 were canceled and reissued at an exercise price of $14.81.

At February 1, 1997, 1,449,044 shares of common stock were reserved for
issuance under the stock option plans.

Each share of outstanding common stock includes a right that entitles the
holder to purchase one share of common stock for $93. Rights attach to all
new shares of common stock issued and become exercisable only under certain
conditions involving actual or potential acquisitions of the Company's
common stock. Depending on the circumstances, all holders except the
acquiring person may be entitled to purchase at the exercise price
additional shares of common stock of the Company and/or of the acquiring
person having a market value equal to two times the exercise price. The
rights remain in existence until January 26, 1998, unless they are redeemed
(at five cents per right) or terminated.

Note 12: Leases 

Most operations are conducted in leased premises. Some of the leases
include options for renewal or extension on various terms. For 1996, 1995,
and 1994, respectively, minimum rentals for operating leases were $101.2,
$136.3, and $140.6; additional percentage rentals based on sales were $2.0,
$3.5, and $4.8. Most leases also require the payment of common area
expenses and real estate taxes.

At year-end 1996 future minimum lease payments required under operating
leases are $83.8, 1997; $75.7, 1998; $68.0, 1999; $57.3, 2000; $43.6, 2001;
and $406.1, total.

Note 13: Business Segments:

<TABLE>
<CAPTION>
                         
               Net sales                     Operating profit (loss)
               1996      1995      1994      1995      1995      1994

<S>            <C>       <C>       <C>       <C>       <C>       <C>
Apparel        $765.9    $952.3    $975.8    ($44.4)   ($129.5)  $7.7
Footwear        320.7     367.9    400.2     (15.5)    (8.9)     28.7
               1,086.6   1,320.2   1,376.0   (59.9)    (138.4)   36.4
Corporate                                                          
& other           3.8      69.2     100.4    (85.8)    (87.5)    16.6
Interest                                                          
expense             -        -          -      5.9     (25.2)    (20.6)
               $1,090.4  $1,389.4  $1,476.4  ($139.8)  ($251.1)  $32.4

</TABLE>
<TABLE>
<CAPTION>

Identifiable assets      Depreciation and amortization        
               1996      1995      1994      1996      1995      1994

<S>            <C>       <C>       <C>       <C>       <C>       <C>
Apparel        $259.1    $362.2    $492.1    $28.6     $36.9     $39.9
Footwear       97.8      131.2     155.5     9.4       10.1        9.6
               356.9     493.4     647.6     38.0      47.0       49.5
Corporate
 & other       276.9     268.1     246.2     3.2       15.8       20.1
               $633.8    $761.5    $893.8    $41.2     $62.8     $69.6     

</tabel>

</TABLE>
<TABLE>
<CAPTION>               
                         Capital expenditures

              1996       1995      1994
<S>            <C>       <C>       <C> 

Apparel        $15.7     $11,2     $28.1
Footwear         5.0      10.4      14.8
                20.7      21.6      42.9
Corporate
& other          1.2      15.6      18.8
               $21.9     $37.2     $61.7

</TABLE>

Note 14: Acquisitions and Dispositions

During 1995 the Company made acquisitions for an aggregate cash
consideration of $14.1. Assets of $19.9 and liabilities of $5.8 were
recorded in connection with the acquisitions. The acquisitions were
accounted for by the purchase method, and operating results of the acquired
entities have been included in the consolidated financial statements since
their respective acquisition dates.

Effective June 29, 1995, the Company distributed all of the outstanding
shares of common stock of Dave & Buster's, Inc. owned by the Company to
Edison Brothers' stockholders of record as of June 19, 1995. Prior to the
distribution, Dave & Buster's had been a majority-owned subsidiary engaged
in the ownership and operation of restaurant/entertainment complexes. No
gain or loss was recorded as a result of the distribution. The distribution
was recorded as a dividend and, accordingly, the Company reduced retained
earnings by the net book value distributed. Through the distribution date,
Dave & Buster's reported 1995 net income of $1.0. As of June 29, 1995, it
had total assets of $49.2 and a net book value of $30.9. For fiscal year
1994, Dave & Buster's reported a net income of $2.4. As part of the
transaction, the Company guaranteed certain Dave & Buster's lease
obligations. As a February 1, 1997, the Company's only remaining obligation
was with respect to one lease containing a $2.8 construction allowance
repayment provision. Dave & Buster's has agreed, among other things, to
indemnify the Company from loss under the lease guarantees and has granted
the Company a subordinated security interest in Dave & Buster's leasehold
interests in the guaranteed leases and all real and personal property owned
by Dave & Buster's on the date of the agreement. The Company believes it
has adequate security against loss under the guarantee.

In January 1996 the Company entered into an agreement to sell substantially
all of the assets of its mall entertainment division to Namco
Cybertainment. The Company received approval for the sale from the
Bankruptcy Court and completed the sale in January 1996. As of the sale
date, the entertainment division had total assets of $51.8 and a net book
value of $44.9. The Company recorded a loss of $24.7 in 1995 in connection
with the sale. The Company intends to dispose of its remaining
entertainment operations by September, 1997 and recorded provisions of $.9
in 1996 and $8.3 in 1995 related to the remaining assets to be disposed of.
For fiscal years 1996, 1995, and 1994, the mall entertainment division
reported a net loss of $.5, $1.8 and $1.8, respectively.

Note 15: Other Operating

The $22.3 reported as other operating in the 1994 Consolidated Statements
of Operations represents the benefit resulting from recovery of
countervailing duties.

Stockholders and Board of Directors

Edison Brothers Stores, Inc.

We have audited the consolidated balance sheets of Edison Brothers Stores,
Inc. (the Company and its principal operating subsidiaries in
reorganization under Chapter 11 of the United States Bankruptcy Code since
November 3, 1995, see Note 1 to the consolidated financial statements) as
of February 1, 1997, and February 3, 1996, and the related consolidated
statements of operations, common stockholders' equity (deficit), and cash
flows for each of the three years in the period ended February 1, 1997.
These financial statements 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 consolidated financial position of Edison
Brothers Stores, Inc. at February 1, 1997, and February 3, 1996, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended February 1, 1997, in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared on a
going concern basis which contemplates continuity of the Company's
operations and realization of its assets and payment of its liabilities in
the ordinary course of business. As described more fully in Note 1, on
November 3, 1995, Edison Brothers Stores, Inc. filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code and is
currently operating its business as a debtor-in-possession under the
supervision of the Bankruptcy Court. The Chapter 11 filing was the result
of violation of certain debt covenants, recurring operating losses,
deterioration of vendor support, and cash flow problems. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans to finance operating activities and further
reorganize operations are also described in Notes 7 and 3. The
appropriateness of using the going concern basis is dependent upon, among
other things, approval of a plan of reorganization by the Bankruptcy Court,
attainment by the Company of profitable future operations, and its ability
to generate sufficient cash from operations and other financing sources to
support its business activities. As a result of the reorganization
proceedings, the Company may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those reflected in
the financial statements referred to above. Further, a plan of
reorganization, as finally approved by the Bankruptcy Court, could
materially change the amounts currently recorded. The accompanying
consolidated financial statements do not reflect further adjustments that
might be necessary to the carrying value of assets and the amounts and
classification of liabilities or stockholders' equity (deficit) as a
consequence of these bankruptcy proceedings.

As discussed in Note 4, in fiscal 1996, the Company changed its method of
accounting for the impairment of long-lived assets and for long-lived
assets to be disposed of.

St. Louis, MO
March 14, 1997


Management's Responsibility for Financial Information

Management is responsible for the integrity and objectivity of the
financial statements and other information included in this annual report.
The financial statements have been prepared in conformity with generally
accepted accounting principles. Information that is not subject to
objective determination has been developed based upon management's best
judgment.

The Company maintains accounting systems that management believes are
sufficient to provide reasonable assurance of reliable financial statements
and to maintain accountability for assets. These systems are supported by
careful selection and training of qualified personnel. The extent of
internal accounting controls implemented must be related to the benefits
derived, and the balancing of the cost of controls to the benefits derived
requires management's estimates and judgments. In addition, as part of its
audit of the Company's financial statements, Ernst & Young LLP completed a
study and evaluation of selected internal accounting controls to establish
a basis for reliance thereon in determining the nature, timing, and extent
of audit tests to be applied.

The Board of Directors has an Audit Committee, which is comprised totally
of members of the board who are not employees of the Company. The committee
meets with the independent auditors and representatives of management to
discuss auditing and financial reporting matters. The independent auditors
meet with the Audit Committee, with and without management representatives
present, to discuss the scope and results of their examinations, the
quality of financial reporting, and the propriety of management's conduct
of the business.

Management is committed to conducting its business affairs in accordance
with the highest ethical standards and in conformity with the law.


Management's Discussion and Analysis

On November 3, 1995, Edison Brothers Stores, Inc. (the Company) and 65 of
its subsidiaries and affiliates filed petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. The Company has continued to
conduct business in the ordinary course as a debtor-in-possession under the
protection of the Bankruptcy Court. A plan of reorganization has been filed
with the Bankruptcy Court, but the plan has not yet been confirmed. For
further discussion of the Chapter 11 proceedings, see Note 1 to the
consolidated financial statements. 

Business:  The Company owns and operates chains of specialty retailing
stores located in 49 states, Puerto Rico, the Virgin Islands and Canada.
Operations in Mexico were closed during 1996, as the Mexican peso
devaluation significantly reduced the Company's ability to generate
operating income in this market. The Company conducts its principal
operations through subsidiaries in two segments: apparel and footwear.
Stores within the apparel and footwear segments, with the exception of the
REPP Ltd chain of big-and-tall menswear stores, are almost exclusively
mall-based and generally range in average size from 1,700 to 3,000 square
feet. Merchandise for all segments is acquired from many vendors and the
Company is not dependent on any one supplier. Three main distribution
centers serve as receiving points for merchandise and coordinate the
distribution of shipments to the stores via common or contract carriers.
The Company sold substantially all of its remaining entertainment
operations in January 1996 but continues to operate two mall-based
entertainment centers. The Company intends to dispose of the remaining
entertainment operations by September 1997.

During 1996, the Company closed 419 apparel and footwear stores. The
Company has identified another group of approximately 75 stores that will
be closed during 1997, and has recorded a charge associated with these
closings in the 1996 consolidated financial statements. Store performances
will continue to be monitored during the remainder of the Chapter 11
process to evaluate the need for further store closings. The Company
consolidated its Precis operations with Bakers/Leeds during 1996,
eliminating duplicate responsibilities in merchandising and buying
operations. In addition, the Zeidler & Zeidler concept was discontinued in
1996, with some desirable mall locations being converted for use by other
Company chains. 

At year-end 1996, the apparel segment operated 1,253 stores in nine chains.
Six chains focus on menswear: JW/Jeans West; J. Riggings; Oaktree; CODA;
REPP Ltd; and Phoenix, the Company's catalog operation. Each menswear chain
targets a specific age group of men, with a different product mix. The
womenswear chain, 5-7-9 Shops, primarily markets casual wear and
accessories to teens and preteens. The Company also has two experimental
concepts that market to both men and women. Shifty's targets teenagers who
want to set trends with fashionable and branded merchandise. Terrasystems
provides casual wear and high performance outdoor gear and clothing to
young adults. The Company announced in April 1997 that the Terrasystems
concept will be phased out during 1997. The footwear segment operated 490
stores in three chains at the end of fiscal 1996. The footwear chains are
Bakers/Leeds and Precis, which offers popular- priced women's fashion
shoes, and Wild Pair, which focuses on advanced shoe fashion for young men
and women. 

The Company's fiscal year ends on the Saturday closest to January 31.
References to 1996, 1995, and 1994 are to the 52 weeks ended February 1,
1997, the 53 weeks ended February 3, 1996, and the 52 weeks ended January
28, 1995, respectively. 

Financial Condition:  Cash, cash equivalents and investments at year-end
1996 increased $64.5 over the prior year and included an income tax refund
of $37.6 received in February 1996. In 
addition, continued deferral of principle and interest payments on
prepetition debt increased these balances. Consistent with the prior year
presentation, prepetition liabilities of $508.3 have been classified as
liabilities subject to settlement under reorganization proceedings in the
consolidated balance sheet as of February 1, 1997 (see Notes 1 and 8 to the
consolidated financial statements). 

Merchandise inventories decreased by 15.9% between 1995 and 1996 due to the
numerous store closings and tighter inventory control. The decrease in
income tax receivable is due to the receipt of the refund discussed above.
In 1996, the Company identified $10.9 of corporate properties that it will
attempt to sell. These assets have been classified as assets held for sale
on the consolidated balance sheets. 

The decreases in property and equipment, net and intangible assets, net are
primarily due to the recognition of an asset impairment loss of $74.0 for
1996 recorded in accordance with Statements of Financial Accounting
Standards 121, "Accounting for Long-Lived Assets and for Long-Lived Assets
to be Disposed of" (SFAS 121). Specifically, an analysis of the projected
cash flows of the apparel segment indicated that certain long-lived assets,
principally REPP Ltd goodwill, were impaired. Additionally, independent
appraisals of corporate properties identified cases where the carrying
value exceeded fair value. Furthermore, property and equipment, net was
reduced by store closings. Also, capital expenditures decreased by 41.1%
from 1995 to 1996. 

Capital Resources and Liquidity:  Subsequent to the Chapter 11 filing, the
Company entered into a loan agreement (the DIP Facility) with BankAmerica
Business Credit, Inc. under which the Company may borrow up to $200.0
subject to collateral restrictions, to fund ongoing working capital needs.
The DIP Facility has a sublimit of $150.0 for the issuance of letters of
credit. The DIP Facility contains restrictive covenants including
limitations on store closings, capital expenditures and restrictions on
dividend payments. As of February 1, 1997, the Company had $41.1 available
for borrowing under the DIP Facility and $204.1 of cash, cash equivalents
and investments. The Company expects that its cash and investments and the
DIP Facility will continue to provide it with sufficient liquidity to
conduct its operations and pay for merchandise shipments through the course
of the Chapter 11 process. At February 1, 1997, the Company had utilized
$84.5 of the DIP Facility to issue letters of credit, but had no borrowings
outstanding under the DIP Facility. 

Total cash and cash equivalents decreased by $14.0 from 1995 to 1996, as a
result of excess cash being moved into investments which are not considered
cash equivalents. Including the $78.5 increase in investments, cash, cash
equivalents and short-term investments increased by $64.5 or 46.2% from
1995 to 1996. This increase compares to a $112.6 increase from 1994 to
1995, which included $60.0 of proceeds from prepetition debt issuance. 

Overall cash provided from operating activities remained constant between
1995 and 1996, although the components varied from 1995 to 1996.
Merchandise inventories decreased during 1996, but not to the same extent
as in 1995, when the Company experienced inventory flow disruptions after
the Chapter 11 filing. Cash flow from operations increased in 1996 because
of the receipt of the income tax refund. Cash flow from operations in 1995
increased $35.5 or 71.1% over 1994. The increase was primarily attributable
to a $71.0 decrease in inventory in 1995 and a $26.7 increase in inventory
in 1994, offset by the deterioration in 1995 net income. 

Cash flow from operations is expected to decline in 1997 from the 1996
levels, primarily because 1996 operating cash flow included the $37.6
nonrecurring income tax refund. In addition, capital expenditures are
expected to increase by 80% from 1996 levels. Over the last two years the
Company has focused on eliminating unprofitable stores and conserving cash
whenever possible. With updated concepts in chains, such as 5-7-9 Shops
"super" stores and REPP Ltd's "showcase" stores, the Company intends to
undertake significant remodeling of existing stores. Current business plans
anticipate approximately 100 new stores for 1997 that will require new
fixtures. In addition, the Company will begin implementation in 1997 of a
new "enterprise-wide" information system encompassing merchandising,
inventory, financial systems and other areas. Normal seasonal inventory
requirements will create additional demands on Company funds. Overall,
cash, cash equivalents and investments are expected to be reduced
significantly when the Company emerges from Chapter 11 given that a
substantial amount of cash is expected to be distributed to the creditors
under the plan of reorganization (see Note 8 to the consolidated financial
statements). 

Operating Results:  Net sales for the 52 weeks of fiscal 1996 decreased
$299.0 or 21.5% from the 53 weeks of fiscal 1995 attributable in part to
the numerous store closings that occurred at the end of 1995 and throughout
1996. The Company averaged approximately 600 or 23.4% fewer stores in
operation during 1996 as compared to 1995. Net sales for 1995 decreased by
$87.0 or 5.9% from the 52 weeks of fiscal 1994. Same-store sales (sales
reported by stores operating for the same periods during both years) were
down 1.9% in 1996 from 1995. This compares to a 4.9% decline in same-store
sales between 1995 and 1994. The footwear segment experienced a larger
decrease in same-store sales during 1996 than the apparel segment. 

Cost of goods sold, including occupancy and buying expenses, was 72.9% of
sales in 1996, compared with 74.4% and 68.9% in 1995 and 1994,
respectively. The improvement from 1995 to 1996 primarily came from
reductions in occupancy and buying costs throughout the year. The Company
successfully renegotiated approximately 300 leases during 1996, which
contributed to the reduction of occupancy and buying costs as a percentage
of sales by 1.6%. Reductions of 7% in markdowns were offset by a 7%
increase in actual merchandise costs. The increase in cost of goods sold
from 1994 to 1995 was due primarily to higher promotional markdowns needed
to stimulate sales during 1995. Markdowns as a percentage of sales were
23.6% in 1995 compared to 19.0% in 1994. 

Store operating and administrative expenses were 25.8% of sales in 1996,
compared to 25.3% in 1995 and 24.4% in 1994. The majority of the 1996
change was due to an 0.8% increase in administrative costs as a percentage
of sales, even though total administrative expenses declined 10.4% from
1995 to 1996. Store expenses as a percentage of sales were 0.2% lower than
in 1995, as underperforming stores were closed at the end of 1995 and
throughout 1996. The increase between 1995 and 1994 was due to the benefit
in 1994 of nonrecurring items. Store expenses for the total Company
remained constant between 1994 and 1995. Both the apparel and footwear
segments had slight increases but store expenses within the entertainment
operations decreased as a result of there being only a partial year of
results for Dave & Buster's in 1995 (due to the spin-off. See Note 14 to
the consolidated financial statements), which had significantly higher
store expenses as a percentage of sales compared to the Company's other
operations. 

Depreciation and amortization has continued to decline since 1994.
Reductions have resulted from store closings in both 1995 and 1996.
Depreciation and amortization for 1997 should continue to decrease due to
the 1996 impairment loss. This decrease is expected to be partially offset
by depreciation on capital expenditures planned for 1997.

Interest expense decreased by $22.8 in 1996 from 1995, as no expense was
recognized on prepetition liabilities. Higher interest expense in 1995 as
compared to 1994 was attributable to higher interest rates on a larger
borrowing base. Interest would have been $9.1 higher in 1995 had interest
on prepetition obligations after the petition date been accrued. Interest
income earned on the Company's cash, cash equivalents and investment
balances subsequent to the Chapter 11 filing of $8.2 in 1996 and $0.9 in
1995 was recorded as a credit against restructuring and reorganization
expenses in the consolidated statements of operations. Interest expense is
expected to increase significantly when the Company emerges from Chapter
11. 

Restructuring and reorganization expenses totaling $36.3 for 1996 include
$13.7 for early lease termination costs and write-offs of fixtures and
equipment, leasehold improvements and related intangible assets: $19.8 for
legal and consulting fees; and $11.0 for various other bankruptcy and
reorganization related expenses, reduced by $8.2 of interest income.
Restructuring and reorganization expenses for 1995 totaled $167.1 and
consisted of $101.6 relating to store closings, a $24.7 loss on the sale of
the remaining mall entertainment division and an $8.3 reserve to cover the
costs associated with the disposal of the remaining units, $15.1 for the
accelerated amortization of Zeidler & Zeidler goodwill, and $17.4 for
expenses related to an early retirement program, costs related to the
closing of the Rome, Georgia distribution center, liquidator fees and other
fees and expenses related to bankruptcy and reorganization. Of the $203.4
restructuring and reorganization expense incurred since the petition date,
$123.0 were noncash charges. Total cash payments of $20.7 and $3.7 were
made in 1996 and 1995, respectively. 

In 1996 the Company recorded a charge of $74.0 to recognize the impairment
of certain long-lived assets in accordance with SFAS 121. Furniture and
fixtures, goodwill and several corporate properties were written down to
their fair value. See Note 4 to the consolidated financial statements. 

During the fourth quarter of 1994, a dispute involving certain
countervailing duties on imported footwear, and accrued interest thereon,
was resolved in the Company's favor. All previous accruals of duties and
interest expense were reversed, resulting in a credit to income of $22.3. 

Pretax income for 1996, excluding restructuring and reorganization expense
and charges for impairment of long-lived assets, improved by $54.5 from
1995, primarily due to reductions in depreciation, amortization and
interest expense. Pretax income for 1995, excluding the restructuring and
reorganization expenses, decreased from 1994 pretax income excluding the
benefit resulting from the recovery of countervailing duties. The decrease
resulted from lower sales, lower gross margins due to higher markdowns, and
higher interest expense. 

Reorganization expenses will be incurred by the Company throughout the
remainder of the Chapter 11 process. In addition, as the Company continues
to monitor store performance in 1997 and identifies further store closings,
additional charges to income may occur. As discussed above and in Note 1 to
the consolidated financial statements, the financial condition of the
Company raises substantial doubt about its ability to continue as a going
concern. However, with the closing of underperforming stores and focused
attention on improving merchandising and sales strategies, the Company
believes it should experience improved results going forward. 

Forward-looking statements in this report, in particular statements
regarding cash and debt projections, capital expenditures, depreciation,
amortization, interest and reorganization expenses, and general
expectations, are made pursuant to the provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such
forward-looking statements involve various risks and uncertainties. Factors
that could cause actual results to differ materially from the Company's
projections include the following: 

1. Interest and restructuring and reorganization expenses are dependent
upon the timing of emergence from Chapter 11. The plan of reorganization,
as and when approved, may result in a different cash and capital structure
than currently anticipated.

2. Exit financing secured may carry different terms than those currently
anticipated in projections.

3. The number of store closings are subject to change based upon the
Company's actual performance and negotiations with landlords. 

4. New store assumptions may change depending upon the Company's ability to
identify and secure new mall locations. Projected rent expense relating to
new stores will be affected by actual leasing arrangements negotiated with
landlords. 

5. Costs incurred for remodeling and new store fixtures, actual number of
stores remodeled, potential acquisitions and success of store remodeling
can alter future capital expenditures.

6. The Company's ability to secure the right merchandise, in the proper
season, at competitive prices will affect operating results. Market demand
fluctuations, in style and product mix, raise the risk of inventory
obsolescence. 

7. With 70% of its merchandise purchased from foreign vendors, merchandise
purchases are subject to fluctuations in currency values, customs duty
increases, quota limitations and other foreign developments that could
cause a supply disruption.

The Company is also subject to other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission. Results actually achieved thus may differ materially from
expected results in these statements.

On a seasonal average basis the Company employed approximately 17,700
people during 1996. Salaries and wages in 1996, 1995 and 1994 were $196.4,
$241.9 and $252.6, respectively.

<TABLE>

FIVE YEAR FINANCIAL SUMMARY                                      
(Dollars in millions, except per-share data)           

<CAPTION>
                              1996      1995      1994
                                        
<S>                           <C>       <C>       <C>
Stores at the end of the year  1,745     2,077     2,761
Net sales                     $1,090.4  $1,389.4  $1,476.4
Income (loss) from continuing                      
 operations                     (143.2)   (222.0)     20.5
Net income (loss)               (143.2)   (222.0)     20.5
Total assets                     633.8     761.5     893.8
Long-term debt                      -         -      173.5
Common stockholders' equity                        
 (deficit)                        (2.1)    140.4     387.2
Per common share:                                  
Income (loss) from continuing                      
operations                       ($6.46)  ($10.06)    $0.93
Net income (loss)                 (6.46)   (10.06)     0.93
Dividends on common stock              -     0.42       1.24
Common stockholders' equity                        
 (deficit)                        (0.09)     6.36      17.58


</TABLE>

Long-term debt has been reclassed to liabilities subject to settlement
under reorganization proceedings in 1996 and 1995 (see Note 8 to the
consolidated financial statements).

<TABLE>
<CAPTION>
                              
                                 1993       1992      

<S>                              <C>       <C>                                                   
Stores at the end of the year    2,866     2,787     
Net Sales                       $1,462.9  $1,508.8  
Income (loss) from continuing
 operations                         20.9      70.4      
Net income (loss)                   20.9      47.3      
Total assets                       873.1     850.2     
Long term debt                     159.2     194.4     
Common stockholders'
equity(deficit)                    407.9     415.6     
Per common share:  
Income (loss) from continuing
operations                         $0.95     $3.24     
Net income (loss)                   0.95      2.18      
Dividends on common stock           1.24      1.15      
Common stockholders' equity
(deficit)                          18.56     18.91     

</TABLE>

Long term debt has been reclassified to liabilities subject to settlement
under reorganization proceedings in 1996 and 1995 (see Note 8 to the
consolidated financial statements).                    

<TABLE>
QUARTERLY INFORMATION                                  
(Dollars in millions, except per-share unaudited data)                                         
<CAPTION>
       
                                   Quarter               
                         1st                 2nd       
                         13 weeks            13 weeks 
                          1996      1995      1996     1995

<S>                      <C>       <C>       <C>       <C>       
Net Sales                $258.1    $318.1    $268.8    $334.7
Cost of goods sold,                                     
occupancy and buying                                   
expenses                 183.7     218.9     207.3     244.2
Net (loss)               (17.7)    (6.4)     (25.2)    (25.7)                   
Per common share:                                      
Net loss                 (0.80)    (0.29)    (1.14)    (1.17)
Dividends                   -       0.31        -       0.11
Common stock market price:                              
High                     2.94      15.75     3.88      16.75
Low                      1.31      12.38     1.63      10.25

</TABLE>

<TABLE>
<CAPTION>

                                    Quarter       
                       
                              3rd                 4th     
                           13 weeks         13 wks    14 wks
                         1996      1995      1996      1995

<S>                      <C>       <C>       <C>       <C>
Net Sales                $255.2    $319.8    $308.3    $416.8
Cost of goods sold,
occupancy and buying
expenses                 182.9     246.4     221.0      323.8
Net loss                 (11.5)    (83.3)    (88.8)    (106.6)

Per common share:
Net loss                 (0.52)    (3.77)    (4.00)    (4.83)
Dividends                  -         -         -         -
Common stock market price:
High                     1.81      10.25     2.19      4.00
Low                      1.06      2.88      1.06      1.38

</TABLE>
<TABLE>
<CAPTION>
                                                                           
                                      Fiscal Year
                                      1996     1995                     

<S>                                <C>       <C>
Net Sales                          $1,090.4  $1,389.4  
Cost of goods sold, occupancy                 
and buying expenses                  794.9    1,033.3
Net loss                            (143.2)    (222.0)
                                                        
Per common share:                                       
Net loss                              (6.46)    (10.06)   
Dividends                               -         0.42    
                                                         
Common stock market price:                              
High                                   3.88      16.75    
Low                                    1.06       1.38

</TABLE>

The company recorded charges of $74.0 relating to the impairment of long lived
assets during the fourth quarter of 1996.  Fourth quarter 1995 results 
include charges of $97.8, primarily related to store closing reserves and
reorganization expenses.

Board of Directors

Alan Miller - Chairman, President and CEO 
Bart A. Brown, Jr.- President and CEO,  Main Street and Main 
David B. Cooper, Jr. - Executive Vice President and Chief Financial Officer
Julian I. Edison
Jane Evans - President and Chief Operating Officer, Smart TV
Richard C. Marcus - InterSolve Group, Director
Karl W. Michner - Senior Executive Vice President 
Alan A. Sachs - Executive Vice President, General Counsel and Secretary 
Craig D. Schnuck - Chairman and CEO, Schnuck Markets, Inc. 

Corporate Headquarters
Edison Brothers Stores Inc.
501 N. Broadway
St.Louis, Missouri 63102
(314) 331-6000

Transfer Agent and Registrar
Boatmen's Trust Company
510 Locust St.
St.Louis, Missouri 63101

Independent Auditors
Ernst & Young LLP
St.Louis, Missouri

Common Stock
The common stock of Edison Brothers Stores Inc. is listed and traded on the 
New York Stock Exchange under the 
trading symbol "EBS".

Information Requests

To obtain copies of Edison Brothers' news releases, sales releases and
financial reports (including form 10-K), please call (314) 331-5555.
Additional queries may be directed to Shareholder Relations at the
Company's corporate headquarters address listed above.