UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-K405

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                      For the fiscal year ended January 31, 1998
                                       OR
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to
                          Commission File Number 1-4844

                               ECKERD CORPORATION
           (Exact name of registrant as specified in its charter)
        DELAWARE                                         51-0378122
 (State of incorporation)                 (I.R.S. Employer Identification No.)
                              8333 Bryan Dairy Road
                                 Largo, FL 33777
              (Address and zip code of principal executive offices)
                                 (813) 395-6000
               (Registrant's telephone number including area code)
           Securities registered pursuant to Section 12(b) of the Act:
                                
                                                         Name of each
  Title of each class                             exchange on which registered
  -------------------                             ----------------------------
9 1/4% Senior Subordinated Notes Due 2004            New York Stock Exchange

        Securities registered pursuant to Section 12(g) of the Act: None

        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-K405 or any
amendment to this Form 10-K405. [ X ]

        The registrant has no voting or nonvoting common equity held by
non-affiliates.

        As of March 31,  1998,  the  registrant  had 100 shares of common  stock
outstanding.

        Documents Incorporated by Reference:  None.

        THE REGISTRANT  MEETS THE  CONDITIONS  SET FORTH IN GENERAL  INSTRUCTION
I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE  FILING THIS FORM 10-K405 WITH THE
REDUCED DISCLOSURE FORMAT PROVIDED FOR IN GENERAL INSTRUCTION I TO FORM 10-K.




                               ECKERD CORPORATION
                   JANUARY 31, 1998 FORM 10-K405 ANNUAL REPORT
                                Table of Contents

Item                                                                     Page
----                                                                     ----
                                     PART I
 1.    Business                                                            3
 2.    Properties                                                          9
 3.    Legal Proceedings                                                  10

                                     PART II

 5.    Market for the Registrant's Common Equity and Related
         Stockholder Matters                                              11
 7.    Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                        11
 8.    Financial Statements and Supplementary Data                        13
 9.    Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure                                             14


                                     PART IV

14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K   15


                                       2

                                     PART I
 
Item 1. Business
General

Eckerd  Corporation  (the  "Company"  or  "Eckerd")  was formed by J. C.  Penney
Company,  Inc.("JCPenney")in 1996 for the purpose of acquiring the former Eckerd
Corporation ("Old Eckerd") in a transaction effected through a cash tender offer
of $35.00 per share for 50.1% of Old  Eckerd's  outstanding  common stock (which
was completed in December 1996),  followed by a second step merger  completed on
February 27, 1997 in which Old Eckerd  stockholders  received  0.6604  shares of
JCPenney  common stock for each  remaining  share of Old Eckerd common stock not
purchased in the tender offer (the  "Acquisition").  Unless the context requires
otherwise, references to the Company or Eckerd relating to time periods prior to
February 27, 1997 are to Old Eckerd.

The  Company,  which is a wholly  owned  subsidiary  of JCPenney , operates  the
Eckerd  drugstore  chain,  which is one of the largest  drugstore  chains in the
United States.  At January 31, 1998, the Eckerd chain  consisted of 1,873 stores
in 14 states located  primarily in the Sunbelt.  Over its 45-year  history,  the
Eckerd  drugstore  chain  has  built a strong  market  position  in areas  where
demographic characteristics are favorable to drugstore growth. Eckerd stores are
concentrated  in 10 of the 12  metropolitan  statistical  areas with the largest
percentage growth in population from 1980 to 1990.

        At January 31,  1998,  the  Company  also  managed 905 stores  ("Managed
Stores")  in 15  states,  which are  indirectly  wholly  owned by  JCPenney  and
operated  under the Eckerd name.  The Managed  Stores were formerly  operated as
Thrift and Fay's  drugstores.  No financial  results for the Managed  Stores are
included in the following  discussion or financial results. The Company receives
a  management  fee for such management services.  

        The primary  focus of Eckerd stores is the sale of  prescription  drugs,
which, during fiscal 1997,  generated  approximately 57% of the Company's sales.
Eckerd stores sell a wide variety of nonpharmacy  merchandise,  including health
and  beauty  aids,   convenience  foods,   greeting  cards  and  numerous  other
convenience   products.   Another   significant   focus  of  Eckerd   stores  is
photofinishing.  All Eckerd stores offer overnight  photofinishing services, and
at January 31,  1998 there were Eckerd  Express  Photo  one-hour  photofinishing
mini-labs in 712 stores.

        The Company  believes that customer service and convenience are critical
in positioning itself as the alternative to mass merchandisers, supermarkets and
other  large  format  retailing  channels.  The Company  emphasizes  service and
convenience  through  pharmacy  support  services,  store  location  and design,
merchandising programs and operating hours geared to the needs of the particular
market.

The Drugstore Industry

        Prescription and  over-the-counter  medications have  traditionally been
sold by independent  drugstores as well as drugstore chains, such as Eckerd. The
drugstore industry has recently undergone significant changes as a result of the
following  important  trends:  (i) the  increase  in  third-party  payments  for
prescription drugs, (ii) the consolidation within the drugstore industry,  (iii)
the aging of the United States  population  and (iv) the increase in competition
from non-traditional retailers of prescription and over-the-counter drugs.

                                       3

        During the last several years, a growing percentage of prescription drug
volume  throughout the industry has been accounted for by sales to customers who
are covered by third-party payment programs ("managed care sales"). In a typical
managed care sale, the drugstore has a contract with a managed care payor,  such
as an insurance company,  health  maintenance  organization  ("HMO"),  preferred
provider organization ("PPO"), other managed care provider, government agency or
private employer, which agrees to pay for part or all of the customer's eligible
prescription  purchases.  Although  these  managed  care sales  contracts  often
provide a high volume of prescription sales, such sales typically generate lower
gross  margins  than  non-managed  care  sales  due  principally  to the  highly
competitive  nature of this business and the high level of  competition  between
managed care firms and the resulting  efforts to reduce costs.  Larger drugstore
chains, such as Eckerd, are typically better able to service the growing managed
care segment than  independent  drugstores and smaller chains as a result of the
larger chains' more sophisticated  technology  systems,  larger number of stores
and greater penetration within their markets.

        As a result of the economies of scale from which larger drugstore chains
benefit as well as the managed care  payment  trend,  the number of  independent
drugstores and smaller  drugstore chains has decreased as many of such retailers
have been  acquired  by larger  drugstore  chains.  This  trend is  expected  to
continue  because  larger  chains are better  positioned to handle the increased
managed care sales,  purchase  inventory on more advantageous  terms and achieve
other  economies  of  scale  with  respect  to  their  marketing,   advertising,
distribution and other expenditures.

        Strong  demographic  trends  have also  contributed  to  changes  in the
drugstore  industry,  as the group of persons over age 50 is the fastest growing
segment of the United States population.  This trend has had, and is expected to
continue to have, a marked effect on the pharmacy  business in the United States
because  consumer   prescription  and  over-the-counter   drug  usage  generally
increases with age. The Company's markets have large  concentrations of, and are
continuing to experience  significant  growth in, the number of persons over age
65.

Eckerd Drugstores
        As of January 31, 1998,  the Company  operated and managed the number of
Eckerd stores and Eckerd  Express Photo centers  indicated  below in each of the
following states:

                          The Company                    Managed Stores
                          -----------                    --------------
                   Eckerd         Drugstores with                     Eckerd
                    Drug           Eckerd Express                  Drug Stores
                   Stores          Photo Centers                   -----------
                   ------          -------------    Pennsylvania       358
Florida              575                304         New York           244
Texas                459                181         New Jersey         110
Georgia              187                 80         North Carolina      76
North Carolina       183                 72         South Carolina      42
Virginia             113                  -         Missouri            16
Louisiana             97                 24         Maryland            14
South Carolina        83                 25         Kansas              13
New Jersey            49                 10         Delaware            11
Tennessee             38                  5         Ohio                 7
Oklahoma              33                  5         West Virginia        7
Mississippi           26                  1         Vermont              3
Alabama               16                  3         Kentucky             2
Delaware              12                  2         New Hampshire        1
Maryland               2                  -         Virginia             1
                   -----                ---                            ---
   Total           1,873                712                            905
                   =====                ===                            ===

                                       4

        Over the past five years the Company has implemented several initiatives
designed to improve the quality and operating performance of the Company's store
base.  Among such  initiatives  are the opening,  relocation and  acquisition of
additional stores,  the closure or divestiture of underperforming  stores and an
extensive remodeling program. The Company has also increased the degree to which
merchandise is tailored to specific  markets,  instituted a chainwide  shrinkage
reduction   program  and  made  a  significant   investment  in  its  management
information systems.
        The following table summarizes the number of Eckerd drugstores  operated
by the  Company and the sales on an  aggregate  and per store basis for the last
five years

<TABLE>
<CAPTION>

                                                                                   Fiscal Years
                                                                                   ------------
                                                          1997          1996          1995          1994         1993
                                                          ----          ----          ----          ----         ----
<S>                                                      <C>           <C>           <C>           <C>          <C>    

Number of Eckerd drugstores at
    beginning of period                                  1,756         1,715         1,735         1,718        1,696
Stores opened or acquired (1)                              189 (2)        73            88   (3)      39           52
Stores sold or closed                                      (72)          (32)         (108)  (4)     (22)         (30) 
                
                                                         -----         -----         -----         -----        -----
Number of Eckerd drugstores
    at end of period                                     1,873         1,756         1,715         1,735        1,718
                                                         =====         =====         =====         =====        =====
                             

Number with Express Photo centers                          712           587           515           481          413
Sales of Eckerd drugstores (in thousands)           $6,042,429     5,359,611     4,986,804     4,436,926    4,052,302
Average annual sales per Eckerd drug
    store (in thousands)                                $3,330         3,103         2,925         2,584        2,388

</TABLE>
------------------------------
(1)    Excludes relocations.
(2)    Includes 113 acquired Virginia stores.
(3)    Includes 40 Florida stores acquired from Rite Aid of Florida, Inc.
(4)    Consists of (i) 84 stores  that were closed as a result of the  Company's
       decision in the fourth  quarter of fiscal 1994 to accelerate  the closing
       of approximately 90 geographically dispersed, underperforming stores, and
       (ii) 24 stores closed in the normal course of business.

        The  Company   opened  or  acquired  301   drugstores   (including   112
relocations)  in fiscal 1997.  The majority of the new and relocated  stores are
freestanding  locations.  In addition to such  openings  and  acquisitions,  the
Company  sold or closed 72  drugstores  in fiscal 1997.  The Company  intends to
continue to expand its business through both internal expansion and acquisitions
of drugstore chains and independent  drugstores.  Although the Company currently
plans to  expand  within  the  Company's  existing  markets,  the  Company  also
considers  strategic  acquisitions in other markets.  The cash costs  associated
with opening a new drugstore are estimated to be approximately  $770,000,  which
includes initial inventory costs of approximately  $385,000. The Company intends
to use cash flow from  operations  and  borrowings  to finance the cash costs of
this growth.

        In  determining  the areas in which to open or acquire  drugstores,  the
Company  evaluates a number of demographic  considerations,  including the size,
growth  pattern  and  per  capita  income  of the  population,  as  well  as the
competitive environment and the accessibility of a proposed site to the customer
and to the Company's  warehouse and  distribution  facilities.  The Company also
continually  reviews these factors and the  performance of individual  stores in
determining whether to close or relocate certain stores.


Products and Services

Pharmacy

        The primary focus of Eckerd  drugstores is the sale of prescription  and
over-the-counter drugs. The Company seeks to position pharmacists as health-care
professionals  who build  relationships  with their  customers.  Over the years,
marketing  and  advertising  campaigns  have been  focused  on  reinforcing  the

                                       5

professionalism  of the  Company's  pharmacists  and  positioning  them as a key
factor in high quality pharmacy service. The Company has also instituted several
health-related  programs  such as  health  screenings,  education  and  outreach
programs.

        Eckerd pharmacy  departments are modern, clean and clearly identified by
attractive signs. The pharmacy areas in the Company's newer and remodeled stores
provide  a  consultation  area and a  waiting  area  with  comfortable  seating,
informational  brochures and free blood pressure testing. The pharmacy areas are
designed to be conducive to customer service and counseling by the pharmacists.

        The Company has devoted  substantial  resources  to marketing to managed
care payors,  such as insurance  companies,  HMO's, PPO's and other managed care
providers and government  agencies.  This effort has produced managed care sales
of  approximately  80%  of  prescription   sales  in  fiscal  1997  compared  to
approximately 58% in fiscal 1993.

Nonpharmacy Merchandise

        In addition to prescription and  over-the-counter  drugs,  Eckerd stores
sell a wide  variety of  nonpharmacy  merchandise,  including  health and beauty
aids, convenience foods, greeting cards and numerous other convenience products.
Eckerd-brand  products,  which are  attractively  priced and  generally  provide
higher margins than similar national brand products, represent a growing segment
of products offered.  Items such as Eckerd Award soft drinks,  bottled water and
cookies are examples of Eckerd brand products offered by Eckerd stores.

        Health  merchandise  offerings  include a broad  assortment  of  popular
national  brands  as well as  private  label  over-the-counter  drugs  and other
products   related  to  dental  care,   foot  care,   vitamins  and  nutritional
supplements,  feminine  hygiene,  family  planning and baby care.  Eckerd stores
offer an assortment of popular brand name cosmetics, fragrances and other beauty
products.  Skin care  products are an  increasingly  important  component of the
beauty  category  due to the aging  population  and  growing  concern  about the
effects of the  environment on the skin. The greeting card  department in Eckerd
stores offers a wide selection of contemporary and traditional cards, gift wrap,
bows and  novelties.  This wide selection and the locations of its stores should
enable customers to satisfy their card and gift needs more  conveniently than at
traditional card stores. The convenience  products merchandise category consists
of an assortment of items, including candy, soft drinks, cookies, bottled water,
tobacco products, books and magazines,  household products, seasonal merchandise
and toys. Most Eckerd stores now have a food mart section  offering  convenience
food items such as staple  grocery  shelf items,  staple and chilled  beverages,
snack foods and specialty  items. The Company also seeks to serve its customers'
needs by specifically  tailoring items in this category to meet the needs of its
customers in specific store locations.

Photofinishing

        The  Company  believes  that  it  is  one  of  the  leading  sources  of
photofinishing  in all of the major  markets in which it  operates.  The Company
believes  that its branded  processing  programs,  which  emphasize  quality and
service,  have helped  position the Company as a leader in  photofinishing.  The
Company's  photo  departments  also offer  camera and photo  accessories,  small
electronics, batteries and audio and video tapes.

                                       6


Store Operations

        The  Company  will  continue  to remodel and reset its stores to provide
modern,  well-identified  stores,  which are easily  accessible to customers and
will seek to open new stores in easily  accessible high traffic  locations.  The
Company also tailors its  merchandising to provide the product mix and selection
to best serve the  customers of each  particular  store.  The Company  typically
provides  several  conveniently  located,  modern  stores  in a  community.  The
Company's  stores  generally  range in size from 8,200 to 11,200 square feet and
are located primarily in neighborhood  strip centers or freestanding  locations.
Such stores are typically open every day of the year except Christmas, with some
open until midnight or 24 hours a day.

Purchasing and Distribution

        Merchandising, buying and supplier payments are generally centralized at
Company  headquarters to assure consistency and efficiency.  The Company uses an
electronic  buying system to aid in inventory and gross profit  management which
enables the Company to take better  advantage of quantity  discounts and forward
buying opportunities,  which the Company believes will lower the average cost of
inventory.

        Approximately  85% of  store  merchandise  is  purchased  centrally  and
distributed,  principally by Company-operated trucks, through the Company's five
centrally located distribution  facilities located in or near Orlando,  Florida;
Atlanta, Georgia;  Charlotte, North Carolina; and Dallas and Houston, Texas. The
remainder of store merchandise is shipped directly to the stores,  some of which
is purchased at the store level.

Advertising and Marketing

        A combination of newspaper  advertising and TV and radio  commercials is
used throughout the year to promote sales. The Company's concentration of stores
within its markets  enables it to achieve  economies of scale in its advertising
and marketing  expenditures and also enables the Company to negotiate  favorable
rates for advertising time and print  production.  The Company believes that its
current level of advertising expenditures is appropriate to support its existing
marketing strategies.

Information and Technology

        The  Company  intends to continue  to invest in  information  systems to
improve customer service,  reduce operating costs, provide information needed to
support management decisions and enhance the Company's competitive position with
managed care payors.

                                       7

        In 1993,  the Company and IBM Global  Services  ("IGS"),  a wholly-owned
subsidiary of International Business Machines, entered into a Systems Operations
Service  Agreement.  Under the  Company's  supervision,  IGS  manages the entire
information  systems  operation  and is  responsible  for  providing  technology
services to the Company. The Systems Operations Services Agreement has a 10-year
term, and the total  payments to be made by the Company  thereunder are expected
to  be  approximately   $750.0  million  over  such  term,  based  on  currently
anticipated  services.  The Company  believes that this arrangement has and will
continue to enable the Company to further improve customer service,  replace the
Company's existing systems,  reduce operating costs and capital expenditures for
hardware,  obtain  information  needed to  support  management  decisions  on an
improved basis and increase the Company's focus on its core business.

Competition

        The  Company's  retail  drugstores   operate  in  a  highly  competitive
industry.  The Company's  drugstores  compete primarily on the basis of customer
service,  convenience  of location and store  design,  price and product mix and
selection.

        In addition to traditional  competition from independent  drugstores and
other drugstore  chains,  the Company faces  competition  from discount  stores,
supermarkets,   combination  food  and  drugstores,   mail  order  distributors,
hospitals and HMOs. These other formats have experienced  significant  growth in
their market share of the prescription and over-the-counter drug business.

        The  Company's  Express  Photo  centers  compete with a variety of photo
processors including other mini-labs,  retail stores and photo specialty stores.
The Company's Express Photo business competes  primarily on the basis of quality
of processing, quality and speed of service and value.

Seasonality

        The Company's  sales and earnings are higher during peak holiday periods
and from  Christmas  through  Easter  in  selected  geographic  areas.  Sales of
health-related  products  peak during  seasonal  outbreaks of cough and cold/flu
virus, typically during the winter and spring.  Accordingly,  sales and earnings
are typically highest in the fourth quarter followed by the first quarter.

Regulation

        All of the Company's  pharmacists and stores are required to be licensed
by the  appropriate  state  boards of pharmacy.  The  Company's  drugstores  and
distribution  centers  are also  registered  with the Federal  Drug  Enforcement
Administration. Most of the stores sell beer and wine and are subject to various
state and local liquor  licensing  requirements.  By virtue of these license and
registration requirements, the Company is obligated to observe certain rules and
regulations, and a violation of such rules and regulations could result in fines
and/or a suspension or revocation of a license or registration.

        The Company  has a number of managed  care payor  contracts  pursuant to
which the Company is a provider of prescription drugs. "Freedom of choice" state
statutes,  pursuant to which all  pharmacies  would be entitled to be a provider
under such a contract,  have been enacted in certain states,  including Alabama,
Delaware, Georgia, Louisiana, Maryland, Mississippi, New Jersey, North Carolina,
South Carolina, Tennessee and Texas, and may be enacted in others. Although such
statutes may adversely  affect certain of the Company's  managed care contracts,
they may also  provide  the  Company  with  opportunities  regarding  additional
managed care contracts.

        In recent years, an increasing number of legislative proposals have been
introduced  or proposed in Congress  and in some state  legislatures  that would
effect major  changes in the health care  system,  either  nationally  or at the
state level. The Company cannot predict whether any federal or state health care
reform  legislation will eventually be passed,  and if so, the impact thereof on
the Company's  financial position or results of operations.  Health care reform,
if implemented,  could adversely affect the pricing of prescription drugs or the
amount of reimbursement from governmental  agencies and managed care payors, and
consequently could be adverse to the Company. However, to the extent health care
reform expands the number of persons receiving health care benefits covering the
purchase of  prescription  drugs,  it may also result in increased  purchases of
such drugs and could thereby have a favorable impact on both the Company and the

                                       8

retail drug industry in general.  Nevertheless,  there can be no assurance  that
any future  federal or state health care reform  legislation  will not adversely
affect the Company or the retail drugstore industry generally.

Employees

        As of January 31, 1998, the Company had approximately  53,800 employees,
of which 28,100 were  full-time  employees.  The Company  believes  that overall
employee relations are good. None of the Company's  employees are represented by
unions.

Patents, Trademarks and Tradenames

        No patent, trademark,  license, franchise or concession is considered to
be of material  importance  to the business of the Company  other than the trade
names under which the Company  operates  its retail  businesses,  including  the
Eckerd  name.  The  Company  also  holds  servicemarks  for  its  photofinishing
products, private label products and information systems.

Item 2. Properties

        The Company  conducts  substantially  all of its retail  businesses from
stores located in leased premises. Substantially all of these leases will expire
within the next twenty years. In the normal course of business,  however,  it is
expected that leases will be renewed through the exercise of existing options or
amendments,  or replaced by leases on other  properties.  Most of the  Company's
store  leases  provide for a fixed  minimum  rental  together  with a percentage
rental based on sales.

The material office and  distribution  center  properties owned or leased by the
Company at January 31, 1998 are as follows: 
                                                              Owned or
    Location                             Square Feet           Leased
    --------                             -----------          --------
    Largo, Florida                          488,000            Owned  (1)
    Charlotte, North Carolina               587,000            Owned
    Garland, Texas                          270,000            Owned
    Conroe, Texas                           345,000            Owned
    Orlando, Florida                        827,000            Leased (2)
    Newnan, Georgia                         244,000            Owned  (3)
    Hammond, Louisiana                      185,000            Owned  (3)(4)


 ---------------------------------------
 (1)   Includes the Company headquarters.
 (2)   In  January  1993  the  Company   assumed  a  lease  for  an  office  and
       distribution facility of approximately 587,000 square feet (lease expires
       2005).  The  Company's   existing   Orlando   facilities  and  the  Largo
       distribution  center  facility  were  consolidated  into the new facility
       during 1993.
 (3)   Construction was financed pursuant to revenue bond issues.  Because these
       properties are currently  leased subject to nominal purchase options with
       development  authorities which the Company  anticipates it will exercise,
       they are listed as owned by the Company.
 (4)   The Company closed the Hammond  distribution center and has subleased the
       former Hammond,  Louisiana  office and distribution  center.  The Company
       currently has a contract to sell this property.

                                       9

        The  Company  considers  that  all  property  owned  or  leased  is well
maintained and in good condition.

Item 3. Legal Proceedings

        On February 4, 1998, the Company was served with a civil complaint which
was filed  jointly in federal  court in Tampa,  Florida by the Florida  Attorney
General,  the U.S. Department of Justice, and the U.S. Attorney's Office for the
Middle District of Florida.  The complaint  relates to a practice,  which is not
limited to Eckerd,  known in the  drugstore  industry  as  "partial  filling" of
prescriptions  and how they are billed in those  relatively  limited  situations
when a customer fails to pick up the balance of a partially filled prescription.
The  complaint  seeks triple the amount of monetary  damages and penalties up to
$10,000 for each bill for a partially-filled  prescription.  A Motion to Dismiss
and to Strike has been filed by the Company and is  pending.  Additionally,  the
Company and a current  and a former  employee  have been  served with  subpoenas
issued by a  federal  grand  jury in the  Middle  District  of  Florida,  at the
direction  of the U.S.  Attorney's  Office,  requesting  records  and  documents
pertaining to the partial fill litigation and related  matters.  The Company has
also received a Civil  Investigative  Demand from the Tennessee Attorney General
requesting   records  and  documents   pertaining  to  the  partial  filling  of
prescriptions  in that  state.  The  Company  is  cooperating  in each of  these
investigations.

        On April 22, 1998, a purported  class action  lawsuit  entitled Board of
Trustees of the  Carpenters &  Millwrights  of Houston & Vicinity  Welfare Trust
Fund v. Eckerd  Corporation  (Civil  Action No.  598CV149) was filed in the U.S.
District  Court for the  Eastern  District  of Texas,  Texarkana  Division.  The
complaint,  which seeks  certification  of a nationwide  class  comprised of all
non-governmental  entities that have allegedly  paid Eckerd for  pharmaceuticals
and/or  prescription  medications  which  were  not  provided  to the  entities'
insureds  and  their  family  members,   alleges   certain   violations  of  the
Racketeering  Influenced and Corrupt  Organizations  Act in connection  with the
partial  filling of  prescriptions.  The  complaint  seeks  triple the amount of
monetary  damages,  as well as  punitive  damages,  attorneys'  fees,  and other
equitable relief.

        The Company denies the aforementioned  allegations and intends to pursue
the defense of these actions vigorously. Although it is too early to predict the
outcome of any of the aforementioned lawsuits or investigations,  the complaints
focus on a very  small  percentage  of the  prescriptions  filled by Eckerd  and
management is of the opinion that the  aforementioned  matters should not have a
material  adverse  effect on the Company's  consolidated  financial  position or
results of operations.

                                       10

                                     PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder 
               Matters

        Old  Eckerd's  common  stock was listed on the New York  Stock  Exchange
until February 27, 1997 when the Acquisition was completed (Symbol:  ECK). As of
March 31, 1998,  there was one holder of the Company's  common stock. All market
price per share  information below for Old Eckerd has been restated to reflect a
two-for-one  stock split effected in the form of a stock dividend declared April
1, 1996 (paid on May 13, 1996).

                                              Fiscal 1996
                                             Quarter Ended 
    Market Price                             -------------     
Per Share Information      5/4/96        8/3/96        11/2/96        2/1/97
---------------------      ------        ------        -------        ------
        High               $25.62        $25.87         $28.87        $34.87
        Low                 21.31         19.75          22.25         30.02



        The Company is subject to restrictive  covenants  under its 9.25% Senior
Subordinated Notes which restrict the payment of dividends.  The Company has not
paid or declared any dividends on its common stock.


Item 7. Management's Discussion and Analysis of Results of Operations and 
               Financial Condition

         The following narrative analysis of the Company's results of operations
is presented  pursuant to the reduced  disclosure format provided for in General
Instruction I to Form 10-K.

Condensed Consolidated Statements of Earnings
(In Thousands)


                                         1997 Fiscal Year     1996 Fiscal Year
                                         Ended January 31,    Ended February 1,
                                                1998               1997
                                                ----               ----

Sales and other operating revenue           $6,111,187          5,376,221
Cost of sales                                4,771,318          4,192,848
Operating and administrative
   expenses                                  1,100,445            969,423
Acquisition and other one-time
   expenses                                          -             16,000
                                             ---------          ---------
Earnings before interest expense               239,424            197,950
Interest expense                                65,589             60,691
                                             ---------          ---------
Earnings before income taxes                   173,835            137,259
Income tax expense                              66,298             33,322
                                             ---------          ---------
Earnings before extraordinary items            107,537            103,937
Extraordinary items                                  -             (1,499)
                                             ---------          ---------
Net earnings for the year                   $  107,537            102,438
                                             =========          =========


Results of Operations

         Sales and other operating  revenue for 1997 were $6.1 billion,  a 13.7%
increase  compared to $5.4 billion for 1996.  Sales  benefited from  significant
increases  in  drugstore  prescription  sales  as  well  as  from  increases  in

                                       11

non-prescription  (front-end)  sales.  Also contributing to increased sales were
revenues  from  Virginia  drugstores  acquired in June 1997 as well as increased
sales in relocated freestanding stores. Prescription sales were $3.5 billion for
1997, a 16.4% increase  compared to $3.0 billion in 1996.  Comparable  drugstore
sales (stores open for one year or more) for identical periods increased 8.6% in
1997 and 7.8% in 1996. The increase in comparable  drugstore sales was primarily
attributable  to  the  increase  in  sales  of  prescription  drugs.  Comparable
drugstore  sales  growth was also  positively  affected  by  increased  sales of
non-prescription items in the health category.

         Prescription  sales as a percentage  of  drugstore  sales was 57.1% for
1997  compared  with  55.9%  for 1996.  The  growth  in  prescription  sales was
primarily  the result of increased  managed care  prescription  sales,  and from
prescription  sales  from  the  acquired  Virginia   drugstores.   Managed  care
prescription  sales  represented  79.7% and 75.6% of the Company's  prescription
sales in 1997 and 1996,  respectively.  Managed care payors typically  negotiate
lower  prescription   prices  than  those  of  non-managed  care  prescriptions,
resulting in lower gross profit  margins on the  Company's  prescription  sales.
However,  contracts  with managed care payors  generally  increase the volume of
prescription sales and gross profit dollars.

         Cost of sales and related  expenses in 1997 were $4.8 billion,  a 13.8%
increase  compared to $4.2 billion in 1996.  As a percentage  of sales,  cost of
sales and related expenses were 78.1% and 78.0% for 1997 and 1996, respectively.
Cost of sales and  related  expenses  in 1997  benefited  from a slowing  in the
decline in prescription gross profit margins.  The LIFO charge was $18.6 million
in 1997 compared to $18.0 million in 1996. Operating and administrative expenses
net of $58.4 million of management fees and business  integration  costs charged
to affiliates were $1.1 billion, an increase of 13.5% compared to $969.4 million
in 1996 excluding  Acquisition  transaction  expenses of $12.5 million and other
one-time  expenses of $3.5  million.  As a percentage  of sales,  operating  and
administrative   expenses   were  18.0%  for  1997  and  1996.   Operating   and
administrative  expenses benefited from operating efficiencies related to higher
sales and cost  controls  which helped  produce  lower costs as a percentage  of
sales in such expense  categories as payroll and  insurance  which was partially
offset by higher information technology expenses and closed store costs.

         Total  interest  expense  was $65.6  million in 1997  compared to $60.7
million in 1996.  The  increase  in interest  expense was due to higher  average
borrowings and higher interest rates in 1997.

         Earnings before income taxes and extraordinary items in 1997 was $173.8
million,  a 13.4% increase  compared to $153.3  million in 1996 excluding  $16.0
million for Acquisition related and other one-time charges. The increase was due
primarily to the  increase in gross  profit  dollars as a result of higher sales
and other  operating  revenue  which was  offset  partially  by higher  interest
expense.

         Income tax expense was $66.3 million (a 38%  effective  rate) and $33.3
million  (a 24%  effective  rate) in 1997 and  1996,  respectively.  Income  tax
expense in both years represent  federal and state income taxes.  The income tax
rate was higher in 1997 when  compared  to 1996 due to the use of net  operating
loss  carryforwards  in 1996. In connection with the settlement of the Company's
Internal Revenue Service income tax return examinations for the January 31, 1987
and January 30, 1988 tax years,  the Company's net operating loss  carryforwards
were adjusted to zero and deferred tax assets in the form of alternative minimum
tax credit  carryforwards  and  deductions  relating to changes in  amortization
methods were effective for 1996.

         Earnings before extraordinary items for 1997 was $107.5 million, a 3.5%
increase  compared to $103.9  million in 1996 including  $15.3  million,  net of

                                       12

income taxes, for Acquisition  related and other one-time  expenses.  Net income
increased to $107.5 million in 1997 compared to $102.4 million in 1996 including
$15.3 million for Acquisition related and other one-time expenses.

         The  Company  had an  extraordinary  item of $1.5  million  (net of tax
benefit of $0.9 million),  in 1996, from the write-off of deferred costs related
to the bank credit agreement which was repaid in December 1996.

         The  Company  has  completed  a  comprehensive  review of its  internal
computer  systems and  applications  to identify those that might be affected by
the year 2000 issue and has developed an implementation plan to resolve the year
2000  issue.  The  Company  believes  it will be able to modify or  replace  its
affected  systems and  applications  in time to avoid any  material  detrimental
impact on its  operations.  The  Company  is in the  process  of  correcting  or
replacing  those  systems and  applications  which are not  currently  year 2000
compliant  including  some  systems  for which the year 2000 issue will begin to
impact the Company in 1999. Costs associated with these efforts, which are being
expensed as  incurred,  have not had,  and are not  expected to have, a material
impact on the Company's  financial  results. 

Item 8.  Financial Statements and Supplementary Data

        The following  consolidated financial statements and auditors' report as
of January 31, 1998 and  February 1, 1997 and for each of the years in the three
year  period  ended  January  31,  1998 as set forth  under item 14 of this Form
10-K405 are incorporated herein by reference:

        Consolidated Statements of Earnings
        Consolidated Balance Sheets
        Consolidated Statements of Stockholders' Equity
        Consolidated Statements of Cash Flows
        Notes to Consolidated Financial Statements

        Information on selected unaudited quarterly financial data also required
by this  item for the years  ended  January  31,  1998 and  February  1, 1997 is
presented below (in thousands, except per share data).

<TABLE>
<CAPTION>

                                                                                       Quarters Ended
                                                                                       --------------
                                                                   4/26/97        7/26/97         10/25/97        1/31/98
                                                                  ---------      ---------        ---------      --------- 
<S>                                                              <C>             <C>              <C>            <C>   

Year Ended 1/31/98 (52 Weeks)

     Sales and other operating revenue                           $1,381,638      1,427,782        1,467,190      1,834,577
     Cost of sales, including store occupancy,
        warehousing and delivery expense                          1,070,108      1,111,794        1,165,450      1,423,966
     Operating and administrative expenses                          230,099        250,100          266,194        354,052
     Interest expense                                                11,911         16,392           18,240         19,046
                                                                  ---------      ---------        ---------      ---------
     Earnings before income taxes                                    69,520         49,496           17,306         37,513
     Income taxes                                                    21,267         14,849            5,194         24,988
                                                                  ---------      ---------        ---------      ---------
     Net earnings                                                $   48,253         34,647           12,112         12,525
                                                                  =========      =========        =========      =========

                                       13

                                                                                       Quarters Ended
                                                                                       --------------
                                                                    5/4/96         8/3/96          11/2/96         2/1/97
                                                                  ---------      ---------        ---------      ---------
 Year Ended 2/1/97 (52 Weeks)

     Sales and other operating revenue                           $1,354,619       1,252,428       1,280,375       1,488,799
     Cost of sales, including store occupancy,
        warehousing and delivery expense                          1,051,423         979,784       1,012,451       1,149,190
     Operating and administrative expenses                          237,533         236,208         238,295         257,387
     Acquisition and other one time expenses                              -               -               -          16,000
     Interest expense                                                15,139          15,372          15,581          14,599
                                                                  ---------       ---------       ---------       ---------
     Earnings before income taxes and
        extraordinary item                                           50,524          21,064          14,048          51,623
     Income taxes                                                    11,114           4,608           3,118          14,482
                                                                  ---------       ---------       ---------       ---------
     Earnings before extraordinary item                              39,410          16,456          10,930          37,141
     Extraordinary item-early retirement of
        debt, net of tax benefit                                          -               -               -          (1,499)
                                                                  ---------       ---------       ---------       ---------
     Net earnings                                                $   39,410          16,456          10,930          35,642
                                                                  =========       =========       =========       =========
     Earnings before extraordinary item per
        common share basic                                             $.56             .23             .16             .53
     Net earnings per common share basic                               $.56             .23             .16             .51
     Basic weighted average common shares
        outstanding                                                  69,992          70,046          70,123          70,196

     Earnings before extraordinary item per
        common share diluted                                           $.55             .23             .15             .51
     Net earnings per common share diluted                             $.55             .23             .15             .49
     Diluted weighted average common shares
        outstanding                                                  71,887          71,825          72,154          72,589

</TABLE>

Earnings per common share for Old Eckerd are computed  independently for each of
the quarters.  Therefore,  the sum of the  quarterly  earnings per share may not
equal the annual  earnings per common share.  All quarters have been restated to
reflect a  two-for-one  stock  split  effected  in the form of a stock  dividend
declared  April  1,  1996  (paid  on May 13,  1996).  Eckerd  is a  wholly-owned
subsidiary of JCPenney  effective  February 27, 1997,  therefore no earnings per
share is presented for the year ended January 31, 1998.


Item 9. Changes in and Disagreements with Accountants on Accounting and 
               Financial Disclosure

        Not applicable.

                                       14

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules,  and Reports on Form 8-K

        Listed  below  are  all  financial  statements,  notes,  schedules,  and
exhibits filed as part of this Form 10-K405 annual report:

         (a)   Financial Statements and Schedules

         1. The  following  financial  statements  and  schedules of the Company
         together with the Report of Independent  Certified  Public  Accountants
         dated February 26, 1998 in this Form 10-K405 are filed herewith:


         Financial Statements:
                 Independent Auditors' Report
                 Consolidated Balance Sheets as of January 31, 1998 and February
                           1, 1997
                 Consolidated Statements of Earnings for the Years Ended January
                           31, 1998, February 1, 1997 and February 3, 1996
                 Consolidated Statements of  Stockholders'  Equity for the Years
                           Ended January 31, 1998, February 1, 1997 and February
                           3, 1996
                 Consolidated  Statements  of Cash  Flows  for the  Years  Ended
                           January 31,  1998,  February 1, 1997 and  February 3,
                           1996
                 Notes to Consolidated Financial Statements

          Schedules:

               Independent Auditors' Report
               II - Reserves

                 All other schedules for the Company are omitted as the required
          information  is  inapplicable  or the  information is presented in the
          respective consolidated financial statements or related notes.

                 Also  filed in this Form  10-K405  is the  consent of KPMG Peat
          Marwick  LLP to the  incorporation  by  reference  of their  auditors'
          report dated February 26, 1998, relating to the consolidated financial
          statements appearing in the Form 10-K405, into Registration  Statement
          Number 33-50223 on Form S-3.

          2.  Exhibits:

          Exhibits previously filed or filed by incorporation by reference:


  3.1     Certificate of Incorporation of the Company (incorporated by reference
          to Exhibit 3.1 of Form  10-K405 of the  Company  for the period  ended
          February 1, 1997 (File No. 1-4844)).

                                       15

  3.2     First  Amendment  to  Certificate  of  Incorporation  of  the  Company
          (incorporated  by  reference  to  Exhibit  3.2 of Form  10-K405 of the
          Company for the period ended February 1, 1997 (File No. 1-4844)).

  3.3     By-laws of the  Company,  as amended  (incorporated  by  reference  to
          Exhibit  3.3 of Form  10-K405  of the  Company  for the  period  ended
          February 1, 1997 (File No. 1-4844)).

  4.1     Form of  9.25%  Senior  Subordinated  Notes  Due  2004 of the  Company
          (incorporated  by reference  to Exhibit 4.01 to the Current  Report on
          Form 8-K dated October 26, 1993 of the Company (File No. 1-4844)).

  4.2     Indenture  dated as of November 1, 1993  between the Company and State
          Street Bank and Trust Company of Connecticut, National Association, as
          Trustee relating to the Company's 9-1/4% Senior Subordinated Notes Due
          2004  (incorporated by reference to Exhibit 4.02 to the Current Report
          on Form 8-K dated October 26, 1993 of the Company (File No. 1-4844)).

  4.3     First Supplemental  Indenture,  dated as of February 27, 1997, between
          the Company and State  Street Bank and Trust  Company of  Connecticut,
          National Association, as Trustee (incorporated by reference to Exhibit
          4.3 of Form  10-K405 of the Company for the period  ended  February 1,
          1997 (File No. 1-4844)).


 10.1     Master Lease  Agreement I dated as of May 18, 1993 between the Company
          and Imaging  Financial  Services d/b/a EKCC ("IFS")  (incorporated  by
          reference  to Exhibit  10.28 to  Amendment  No. 1 to the  Registration
          Statement on Form S-2 of the Company (No. 33-64906)).

 10.2     Master  Lease  Agreement  II  dated as of June 15,  1993  between  the
          Company  and IFS  (incorporated  by  reference  to  Exhibit  10.29  to
          Amendment  No.  1 to the  Registration  Statement  on Form  S-2 of the
          Company (No. 33-64906)).

 10.3     Systems Operations Service Agreement dated as of July 14, 1993 between
          the Company and Integrated Systems Solutions Corporation (incorporated
          by reference to Exhibit 10.30 to Amendment  No. 1 to the  Registration
          Statement on Form S-2 of the Company (No. 33-64906)).

 10.4     Letter  dated March 16, 1993  between IFS and the Company  relating to
          IFS Sale and Leaseback  (incorporated by reference to Exhibit 10.31 to
          Amendment  No.  2 of the  Registration  Statement  on Form  S-2 of the
          Company (No.
          33-64906)).

 10.5     Receivables  Purchase  Agreement  dated as of January 26, 1995 between
          the Company and Three  Rivers  Funding  Corporation  (incorporated  by
          reference to Exhibit  10.18 to Form 10-K405 for the year ended January
          28, 1995 of the Company (File No. 1-4844)).

 10.6     First  Amendment to Receivables  Purchase  Agreement dated as of March
          31, 1995  between the Company  and Three  Rivers  Funding  Corporation
          (incorporated  by reference  to Exhibit  10.19 to Form 10-K405 for the
          year ended January 28, 1995 of the Company (File No. 1-4844)).

                                       16

 10.7     Employment  Agreement  dated  February 4, 1996 between the Company and
          Francis A. Newman  (incorporated by reference to Exhibit 10.26 to Form
          10-K for the year  ended  February  3, 1996 of the  Company  (File No.
          1-4844)).

 10.8     Employment  Agreement  dated  February 4, 1996 between the Company and
          James M. Santo  (incorporated  by reference  to Exhibit  10.27 to Form
          10-K for the year  ended  February  3, 1996 of the  Company  (File No.
          1-4844)).

 10.9     Employment  Agreement  dated  February 4, 1996 between the Company and
          Samuel G. Wright  (incorporated  by reference to Exhibit 10.28 to Form
          10-K for the year  ended  February  3, 1996 of the  Company  (File No.
          1-4844)).

 10.10    Employment  Agreement  dated  February 4, 1996 between the Company and
          Kenneth L. Flynn  (incorporated  by reference to Exhibit 10.29 to Form
          10-K for the year  ended  February  3, 1996 of the  Company  (File No.
          1-4844)).

 10.11    Amendment No. 1 dated as of November 2, 1996 to  Employment  Agreement
          dated  February  4, 1996  between  the  Company  and Francis A. Newman
          (incorporated  by reference to Exhibit 11 to the Schedule 14D-9 of the
          Company (File No. 1-4844)).

          Exhibits filed herewith:

 12.1     Statement regarding  computation of ratio of earnings to fixed charges
          of the Company.

 23.1     Consent of Independent Certified Public Accountants.

 27       Financial data schedule year ended January 31, 1998.

          Restated Financial data schedule year ended February 1, 1997.

          Restated Financial data schedule year ended February 3, 1996.

         (b) Reports on Form 8-K

              None

                                       17




                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K405 report to
be signed on its behalf by the undersigned, thereunto duly authorized.

April 30, 1998                               ECKERD CORPORATION


                                             By:/s/Samuel G. Wright
                                                -------------------
                                                     
                                                   Samuel G. Wright
                                              Executive Vice President
                                        Chief Financial and Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on the date indicated.

        Signature                     Titles                         Date
        ---------                     ------                         ----

 /s/Francis A. Newman         Chairman of the Board, 
 -----------------------      President, Chief Executive
       Francis A. Newman      Officer and Director               April 30, 1998

 /s/Robert W. Hannan
 -----------------------
        Robert W. Hannan      Director, Vice Chairman            April 30, 1998

 /s/Stewart Turley
 -----------------------
          Stewart Turley      Director                           April 30, 1998

 /s/Charles R. Lotter
 -----------------------
       Charles R. Lotter      Director                           April 30, 1998

 /s/Donald A. McKay
 -----------------------
         Donald A. McKay      Director                           April 30, 1998

 /s/W. Barger Tygart
 -----------------------
        W. Barger Tygart      Director                           April 30, 1998

 /s/Joseph D. Williams
 -----------------------
      Joseph D. Williams      Director                           April 30, 1998

                                       18


                          Independent Auditors' Report
                          ----------------------------


         The Board of Directors
         Eckerd Corporation:

         We have audited the accompanying  consolidated balance sheets of Eckerd
         Corporation and subsidiaries (a wholly-owned subsidiary of J. C. Penney
         Company,  Inc.) as of January  31, 1998 and  February 1, 1997,  and the
         related consolidated statements of earnings,  stockholders' equity, and
         cash  flows for the years  then  ended.  These  consolidated  financial
         statements  are the  responsibility  of the Company's  management.  Our
         responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
         present fairly,  in all material  respects,  the financial  position of
         Eckerd Corporation and subsidiaries (a wholly-owned subsidiary of J. C.
         Penney Company,  Inc.) as of January 31, 1998 and February 1, 1997, and
         the results of their operations and their cash flows for the years then
         ended in conformity with generally accepted accounting principles.



                                                    /s/ KPMG Peat Marwick LLP



         Tampa, Florida
         February 26, 1998



                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                           Consolidated Balance Sheets

                      January 31, 1998 and February 1, 1997

                      (In thousands, except share amounts)



<TABLE>
<CAPTION>

                                 Assets                                                          1998                1997
                                 ------                                                          ----                ----
<S>                                                                                           <C>                 <C>    

Current assets:
     Cash (including short-term investments of $57,000 in 1997)                               $   24,883             71,874
     Receivables, less allowance for doubtful receivables of $3,000                              141,954            102,393
     Merchandise inventories                                                                   1,290,708            973,265
     Prepaid expenses and other current assets                                                     4,995              3,909
                                                                                               ---------          ---------
                  Total current assets                                                         1,462,540          1,151,441
                                                                                               ---------          ---------
Property and equipment, at cost:
     Land                                                                                         35,631             34,478
     Buildings                                                                                    96,920             92,728
     Furniture and equipment                                                                     587,210            440,253
     Transportation equipment                                                                     16,558             14,700
     Leasehold improvements                                                                      215,278            193,531
                                                                                               ---------          ---------
                                                                                                 951,597            775,690
         Less accumulated depreciation and amortization                                          384,630            329,490
                                                                                               ---------          ---------
                  Net property and equipment                                                     566,967            446,200
                                                                                               ---------          ---------
Excess of cost over net assets acquired, less accumulated
     amortization of $31,490 and $24,393                                                         123,962             85,656
Favorable lease interests, less accumulated amortization
     of $430,955 and $417,745                                                                     82,918            108,125
Unamortized debt expenses (note 3)                                                                 3,019              3,553
Other assets                                                                                      88,512             96,977
Due from affiliates (note 9)                                                                     292,162                -

                                                                                               ---------          ---------
                                                                                              $2,620,080          1,891,952
                                                                                               =========          =========

                  Liabilities and Stockholders' Equity                                           1998                1997
                  ------------------------------------                                           ----                ----
Current liabilities:
     Bank debit balances                                                                       $  53,580             54,252
     Current installments of long-term debt (note 3)                                              16,898                768
     Accounts payable                                                                            393,195            404,945
     Accrued interest                                                                             23,567             15,241
     Accrued payroll                                                                              73,880             67,172
     Other accrued expenses (note 10)                                                            270,518            241,304
                                                                                               ---------          ---------
                  Total current liabilities                                                      831,638            783,682
                                                                                               ---------          ---------
Other noncurrent liabilities (note 10)                                                           141,895            168,240
Long-term debt, excluding current installments (note 3)                                          223,931            274,951
Intercompany loan payable to  J. C. Penney (note 3)                                            1,155,000            505,000

Stockholders' equity (notes 1 and 4):
     Preferred stock of $.01 par value.  Authorized 20,000,000 shares;
         none issued or outstanding                                                                  -                  -
     Voting common stock of $.01 par value.  Authorized 1,000 and
         96,481,272 shares; issued and outstanding 100 and 70,419,975                                -                  704
     Nonvoting common stock of $.01 par value.  Authorized
         3,518,728 shares; no shares issued                                                          -                  -
     Capital in excess of par value                                                              321,254            320,550
     Retained deficit                                                                            (53,638)          (161,175)
                                                                                               ---------          ---------
                  Net stockholders' equity                                                       267,616            160,079

Commitments, contingencies and related party transactions
     (notes 8, 9, 11 and 12)
                                                                                               ---------          ---------
                                                                                              $2,620,080          1,891,952
                                                                                               =========          =========
</TABLE>

See accompanying notes to consolidated financial statements.




                       ECKERD CORPORATION AND SUBSIDIARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                       Consolidated Statements of Earnings

                 Years ended January 31, 1998, February 1, 1997
                              and February 3, 1996

                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>


                                                                          January 31,          February 1,         February 3,
                                                                             1998                 1997                1996
                                                                          (52 weeks)           (52 weeks)          (53 weeks)
                                                                           ---------           ---------           ---------
<S>                                                                       <C>                  <C>                 <C>   

Sales and other operating revenue                                         $6,111,187           5,376,221           4,997,073
                                                                           ---------           ---------           ---------
Costs and expenses:
    Cost of sales, including store occupancy,
       warehousing, and delivery expense                                   4,771,318           4,192,848           3,874,723
    Operating and administrative expenses (note 10)                        1,100,445             969,423             922,131
    Acquisition and other one-time expenses (note 1(b))                          -                16,000                 -
                                                                           ---------           ---------           ---------
                                                                           5,871,763           5,178,271           4,796,854
                                                                           ---------           ---------           ---------
              Earnings before interest expense                               239,424             197,950             200,219
                                                                           ---------           ---------           ---------
Interest expense:
    Interest expense on intercompany loan with  J. C. Penney                  44,988               4,154                 -
    Interest expense, net                                                     20,067              55,565              75,030
    Amortization of original issue discount
       and deferred debt expenses                                                534                 972               1,806
                                                                           ---------           ---------           ---------
              Total interest expense                                          65,589              60,691              76,836
                                                                           ---------           ---------           ---------
              Earnings before income taxes
                 and extraordinary items                                     173,835             137,259             123,383

Income taxes (note 7)                                                         66,298              33,322              20,600
                                                                           ---------          ---------            ---------
              Earnings before extraordinary items                            107,537             103,937             102,783

Extraordinary items:
    Early retirement of debt, net of tax benefit of $928 and
       $1,907 in 1997 and 1996, respectively (note 3)                            -                (1,499)             (9,306)
                                                                           ---------          ----------           ---------
              Net earnings                                                $  107,537             102,438              93,477
                                                                           =========          ==========           =========
   
Basic earnings per share:
    Earnings before extraordinary items                                                      $      1.48                1.53
    Extraordinary items                                                                             (.02)               (.14)
                                                                                              ----------           ---------
              Net earnings                                                                   $      1.46                1.39
                                                                                              ==========           =========
Diluted earnings per share assuming dilution:
    Earnings before extraordinary items                                                      $      1.44                1.50
    Extraordinary items                                                                             (.02)               (.14)
                                                                                              ----------           ---------
              Net earnings                                                                   $      1.42                1.36
                                                                                              ==========           =========
</TABLE>

See accompanying notes to consolidated financial statements.



                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                 Consolidated Statements of Stockholders' Equity

                 Years ended January 31, 1998, February 1, 1997
                              and February 3, 1996

                      (In thousands, except share amounts)


<TABLE>
<CAPTION>


                                                                                       Capital                        Net
                                                             Voting     Nonvoting        in                      stockholders'
                                                             common      common       excess of      Retained       equity
                                                              stock       stock       par value       deficit      (deficit)
                                                              -----       -----       --------       -------       -------
<S>                                                          <C>        <C>           <C>           <C>          <C>    

Balance at January 28, 1995                                  $  642         -          233,706      (357,090)     (122,742)

    Common stock sold in public stock offering,
       net of expenses of sale                                   54         -           82,340          -           82,394
    Expenses for secondary public stock offering                -           -             (329)         -             (329)
    Common stock sold under employee stock option plan            2         -            1,043          -            1,045
    Contribution of common stock to profit sharing plan           2         -              894          -              896
    Net earnings                                                -           -              -          93,477        93,477
                                                              -----       -----       --------       -------       -------
Balance at February 3, 1996                                     700         -          317,654      (263,613)       54,741

    Common stock sold under employee stock option plan            2         -            2,002          -            2,004
    Contribution of common stock to profit sharing plan           2         -              894          -              896
    Net earnings                                                -           -              -         102,438       102,438
                                                              -----       -----       --------       -------       -------
Balance at February 1, 1997                                     704         -          320,550      (161,175)      160,079

    Acquisition of Company by wholly-owned subsidiary
       of  J. C. Penney Company, Inc.                          (704)        -              704           -             -
    Issuance of shares to  J. C. Penney Company, Inc.           -           -              -             -             -
    Net earnings                                                -           -              -         107,537       107,537
                                                              -----       -----       --------       -------       -------
Balance at January 31, 1998                                  $  -           -          321,254       (53,638)      267,616
                                                              =====       =====       ========       =======       =======


</TABLE>

See accompanying notes to consolidated financial statements.





                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                      Consolidated Statements of Cash Flows

                 Years ended January 31, 1998, February 1, 1997
                              and February 3, 1996

                                 (In thousands)


<TABLE>
<CAPTION>


                                                                           January 31,         February 1,         February 3,
                                                                              1998                1997                1996
                                                                              ----                ----                ----
<S>                                                                        <C>                 <C>                 <C>    

Cash flows from operating activities:
     Net earnings                                                          $ 107,537             102,438             93,477
     Adjustments to reconcile net earnings to net cash
         provided by (used in) operating activities:
              Extraordinary charge related to early
                  retirement of debt                                             -                 2,427             11,213
              Depreciation and amortization                                  106,737              94,182             84,750
              Amortization of original issue discount
                  and deferred debt expenses                                     534                 972              1,806
              Decrease (increase) in deferred income taxes                    10,285             (40,372)               -
              Increase in receivables                                        (39,561)            (32,256)           (17,650)
              Increase in merchandise inventories                           (290,775)           (129,631)           (44,475)
              Increase in prepaid expenses and other assets                   (1,086)               (739)            (2,030)
              Increase in accounts payable and
                  accrued expenses                                            49,565             196,720             46,803
              Increase in due from affiliates                               (292,162)                -                  -
                                                                             -------             -------            -------
                      Net cash provided by (used in)
                          operating activities                              (348,926)            193,741            173,894
                                                                             -------             -------            -------
Cash flows from investing activities:
     Additions to property and equipment                                    (213,143)           (167,761)          (109,782)
     Sale of property and equipment                                            8,165               7,105              8,255
     Net proceeds from sale of subsidiaries                                      -                   -                5,231
     Acquisition of certain drugstore assets                                 (89,639)            (41,181)           (76,902)
     Other                                                                   (17,887)             (3,226)            (7,887)
                                                                             -------             -------            -------
                      Net cash used in investing activities                 (312,504)           (205,063)          (181,085)
                                                                             -------             -------            -------
</TABLE>

                                                                     (Continued)



                                                             

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                Consolidated Statements of Cash Flows, Continued

                                 (In thousands)


<TABLE>
<CAPTION>


                                                                           January 31,         February 1,         February 3,
                                                                              1998                1997                1996
                                                                              ----                ----                ----
<S>                                                                        <C>                 <C>                 <C>    

Cash flows from financing activities:
     Increase (decrease) in bank debit balances                             $   (672)             (5,368)            15,247
     Additions to long-term debt                                                 762              33,801              1,985
     Reductions of long-term debt                                            (34,325)               (901)            (1,848)
     Net additions (reductions) under credit agreement                           -              (460,000)             4,627
     Net additions under intercompany note to
         J. C. Penney Company, Inc.                                          650,000             505,000                -
     Common stock sold in public stock offering,
         net of expenses of sale                                                 -                   -               82,394
     Redemption of 11.125% subordinated debentures                               -                   -              (95,500)
     Redemption of 9.25% Senior Subordinated Notes                            (1,326)                -                  -
     Other, including proceeds from exercise of stock
         options and deferred financing costs                                    -                 2,742               (690)
                                                                             -------             -------            -------
                      Net cash provided by financing activities              614,439              75,274              6,215
                                                                             -------             -------            -------
                      Net increase (decrease) in cash
                          and short-term investments                         (46,991)             63,952               (976)

Cash and short-term investments at beginning of year                          71,874               7,922              8,898
                                                                             -------             -------            -------
Cash and short-term investments at end of year                             $  24,883              71,874              7,922
                                                                             =======             =======            =======

</TABLE>


See accompanying notes to consolidated financial statements.




                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

             January 31, 1998, February 1, 1997 and February 3, 1996

                      (In thousands, except share amounts)


(1)    Organization of Business

       (a)    Description of Business

              Eckerd Corporation  (Company) operates the Eckerd drugstore chain,
              which is one of the largest drugstore chains in the United States.
              The  Company's  stores are located in 14 states,  with the largest
              concentration of stores being in Florida and Texas.

              For the  years  ended  January  31,  1998,  February  1,  1997 and
              February 3, 1996,  the Company  purchased  179  drugstores  in six
              transactions  at an aggregate cost of $162,620.  The operations of
              such  stores,   which  have  been  included  in  the  consolidated
              financial  statements from dates of acquisition,  are not material
              to the Company and,  accordingly,  pro forma comparative operating
              numbers are not presented.

       (b)    Merger With Wholly-Owned Subsidiary
              of  J. C. Penney Company, Inc.

              On November  2, 1996,  the  predecessor  Eckerd  Corporation  (Old
              Company)  entered  into a  definitive  agreement to be acquired by
              Omega Acquisition  Corporation (Omega), a wholly-owned  subsidiary
              of  J.  C.  Penney  Company,   Inc.   (JCPenney).   The  aggregate
              transaction  value,  including the  assumption of Old Company debt
              and the cash out of certain outstanding Old Company employee stock
              options,  was  approximately  $3.3 billion.  The  transaction  was
              effected through a cash tender offer at $35.00 per share for 50.1%
              of the  outstanding  common  stock of the Old  Company,  which was
              completed in December  1996.  The remaining  shares of outstanding
              common  stock of the Old Company were  exchanged in a  second-step
              merger  completed  on  February  27,  1997,  in which Old  Company
              stockholders  received  0.6604 shares of JCPenney common stock for
              each share of Old  Company  common  stock.  After  completing  the
              acquisition of Old Company on February 27, 1997, Omega changed its
              name  to  Eckerd  Corporation  (the  Company).  References  to the
              Company  regarding  time periods prior to February 27, 1997 are to
              Old Eckerd. The Company also manages  approximately 900 drugstores
              which are indirectly  wholly-owned  by JCPenney and operated under
              the Eckerd name (see note 9).

       (c)    Secondary Public Offerings

              On August 3, 1995, the Company  completed an underwritten  primary
              and secondary  offering of  12,351,000  shares of its Common Stock
              for $16.12 per share.  The offering  consisted of 5,350,000 shares
              sold  by  the  Company  and  7,001,000   shares  sold  by  certain
              institutional stockholders.


                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)




              On December  15,  1995,  the  Company  completed  an  underwritten
              secondary  offering of  12,000,000  shares of its Common Stock for
              $21.00 per share.  The secondary  offering  only  included  shares
              owned by certain institutional  stockholders.  The Company did not
              receive  any of the  proceeds  from the sale of  shares  of common
              stock and was  required to pay certain  expenses of the  secondary
              offering.


(2)    Summary of Significant Accounting Policies

       (a)    Use of Estimates

              The   preparation  of  the  Company's   financial   statements  in
              conformity with generally accepted accounting  principles requires
              that management estimate certain amounts that are reported. Actual
              results may differ from these estimates.

       (b)    Principles of Consolidation

              The consolidated  financial statements include the accounts of the
              Company  and  its  wholly-owned   subsidiaries.   All  significant
              intercompany balances and transactions have been eliminated in the
              consolidation.

       (c)    Fiscal Year

              The  Company's  fiscal year ends on the last  Saturday in January.
              Fiscal year 1997 ended January 31, 1998 and consisted of 52 weeks.
              Old Eckerd's fiscal year 1996 ended February 1, 1997 and consisted
              of 52 weeks.  Old Eckerd's fiscal year 1995 ended February 3, 1996
              and consisted of 53 weeks.

       (d)    Merchandise Inventories

              Inventories consist principally of merchandise held for resale and
              are  based on  physical  inventories  taken  throughout  the year.
              Inventories  are stated at the lower of cost (last-in,  first-out)
              or market.  At January 31, 1998 and February 1, 1997,  inventories
              would have been higher than reported by approximately $128,900 and
              $110,300,  respectively,  if the  first-in,  first-out  method  of
              valuing inventories had been used by the Company.



                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)



       (e)    Property and Equipment

              Property  and  equipment  are  recorded at cost.  Depreciation  is
              computed on the  straight-line  method over the  estimated  useful
              lives of the  assets.  The  estimated  useful  lives in years are:
              buildings,  16-45; furniture and equipment,  1-10;  transportation
              equipment, 1-8; and leasehold improvements, 2-20 or term of lease.

              Maintenance  and repairs are charged to expense as  incurred.  The
              Company's  policy is to capitalize  expenditures  for renewals and
              betterments  and to reduce  the  asset  accounts  and the  related
              allowance   for   depreciation   for  the  cost  and   accumulated
              depreciation of items replaced, retired or fully depreciated.

       (f)    Favorable Lease Interests

              Favorable  lease  interests  represent  the  present  value of the
              excess of current  market rents at dates of  acquisition  over the
              below  market  rents  of  leases   acquired   (principally   store
              locations).  Such  costs  are  amortized  over  the  lives  of the
              favorable leases, averaging twenty years.

       (g)    Unamortized Debt Expenses

              Unamortized  debt  expenses  represent   underwriting   discounts,
              professional  fees and other costs related to long-term debt which
              are capitalized and amortized to interest expense over the life of
              the debt instruments.

       (h)    Advertising Costs

              Net advertising costs are expensed when incurred and were $24,198,
              $24,848 and $24,752 for the years ended January 31, 1998, February
              1, 1997 and February 3, 1996, respectively.

       (i)    Supplemental Cash Flow Information

              The  Company  considers  all  highly  liquid  investments  with  a
              maturity  of  three  months  or  less  when  purchased  to be cash
              equivalents.

              Cash paid for interest  was  $65,147,  $57,214 and $82,152 for the
              years ended  January 31,  1998,  February 1, 1997 and  February 3,
              1996, respectively.

              Cash paid for income taxes was $45,489, $23,281 and $5,337 for the
              years ended  January 31,  1998,  February 1, 1997 and  February 3,
              1996, respectively.


                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)



       (j)    Earnings Per Share and Stock Split

              The  Company  has  adopted   Statement  of  Financial   Accounting
              Standards No. 128, Earnings Per Share (SFAS No. 128). SFAS No. 128
              requires the presentation of basic and diluted earnings per share.
              Basic  earnings per share is computed as net  earnings  divided by
              the weighted  average number of common shares  outstanding for the
              period.  Diluted earnings per share reflect the potential dilution
              that could occur from issuance of common equivalent shares.

              Basic earnings per share and diluted  earnings per share have been
              computed based on the weighted  average number of shares of common
              stock outstanding; in addition, diluted earnings per share assumes
              the exercise of stock options during each fiscal year  (70,195,980
              and 72,113,725 in 1996 and 67,017,252 and 68,606,482 in 1995).

              All share information in these consolidated  financial  statements
              has been restated to reflect the two-for-one  stock split effected
              in the form of a stock  dividend  declared  April 1, 1996 (paid on
              May 13, 1996).

       (k)    Recent Accounting Pronouncements

              In April 1997,  the Financial  Accounting  Standards  Board (FASB)
              issued SFAS No. 128,  Earnings Per Share. The Company adopted SFAS
              No. 128 in the fiscal year ending  January 31, 1998. In accordance
              with SFAS No. 128,  both basic net  earnings per share and diluted
              net  earnings  per share  have  been  presented  in the  financial
              statements.  Earnings  per  share  for  prior  periods  have  been
              restated to reflect the provisions of this statement.  In February
              1998, the FASB issued SFAS No. 132,  Employers'  Disclosures About
              Pensions  and  Other  Postretirement  Benefits.  SFAS No.  132 was
              adopted by the Company in fiscal  1997;  prior year  numbers  have
              been  restated as  required.  None of the new rules had a material
              impact on the Company.

       (l)    Acquisition and Other One-Time Expenses

              In fiscal  year  1996,  acquisition  and other  one-time  expenses
              include  acquisition   transaction  costs  of  $12,500  and  other
              one-time costs of $3,500.


                                                                     (Continued)
                                                         

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)



       (m)    Fair Value of Financial Instruments

              The Company's  financial  instruments consist primarily of current
              assets and current  liabilities  stated at fair market value.  The
              fair value of the  intercompany  loan  payable to JCPenney and the
              variable  rate demand  industrial  development  revenue  refunding
              bonds approximate their carrying value,  based on the frequency of
              the interest  rate reset  periods.  The fair value of the Notes is
              approximately  $212,581,  based on their quoted market price.  The
              fair value of the other long-term debt  approximates  its carrying
              value,  based on the relatively  short  remaining  maturity of the
              debt.

       (n)    Recoverability of Long-Lived Assets

              The  Company  has  adopted   Statement  of  Financial   Accounting
              Standards  No. 121,  Accounting  for the  Impairment of Long-Lived
              Assets and for Long-Lived Assets To Be Disposed Of (SFAS No. 121),
              which  requires  impairment  losses to be recorded  on  long-lived
              assets  used in  operations  when  indicators  of  impairment  are
              present and the undiscounted  cash flows estimated to be generated
              by those  assets are less than the assets'  carrying  amount.  The
              Company has evaluated all long-lived assets and determined that no
              impairment  existed  at January  31,  1998 and  February  1, 1997,
              respectively.


(3)    Long-Term Debt

       Long-term debt at January 31, 1998 and February 1, 1997 was:
<TABLE>
<CAPTION>

                                                                                           January 31,        February 1,
                                                                                              1998               1997
                                                                                              ----               ----
<S>                                                                                       <C>                 <C>    

            Intercompany loan payable to JCPenney (a)                                     $ 1,155,000           505,000
            9.25% Senior Subordinated Notes due February 15, 2004,
                $198,674 face amount (b)                                                      198,674           200,000
            Variable rate demand industrial development revenue
                refunding bonds, due March 1, 2009 and
                May 1, 2013 (c)                                                                18,250            18,250
            Other (principally notes secured by buildings, fixtures
                and equipment)                                                                 23,905            57,469
                                                                                            ---------           -------
                    Total long-term debt                                                    1,395,829           780,719

                    Less amounts due within one year                                           16,898               768
                                                                                            ---------           -------
                    Amounts due after one year                                            $ 1,378,931           779,951
                                                                                            =========           =======

</TABLE>

                                                                     (Continued)
                                                            

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)




       The aggregate  minimum  annual  maturities of long-term debt for the next
       five fiscal years are:  1998 - $16,898;  1999 - $185;  2000 - $79; 2001 -
       $1,155,000; and 2002, $0.

       (a)    On December 17,  1996,  the Company  entered into an  intercompany
              loan facility with JCPenney.  Proceeds from this intercompany loan
              facility  were used to repay the  remaining  outstanding  balances
              under the Credit Agreement. The intercompany loan is unsecured and
              bears  interest  at .125%  over the  applicable  JCPenney  cost of
              funds.  The  intercompany  loan  facility  matures on December 17,
              2001.  At January 31,  1998,  the interest  rate on the  principal
              amount outstanding under the intercompany loan was 7.23%.

       (b)    On  November  2,  1993,  the  Company  issued  $200,000  aggregate
              principal  amount of 9.25% Senior  Subordinated  Notes (Notes) due
              February 15, 2004. The Notes are unsecured and subordinated to all
              existing  and future  senior debt (as  defined) of the Company and
              are redeemable at the option of the Company,  in whole or in part,
              at any time after February 15, 1999 at various  redemption  prices
              (as  defined)  plus  accrued  interest to the date of  redemption.
              Interest is payable  semi-annually on February 15 and August 15 of
              each year.

       (c)    The variable rate demand industrial  development revenue refunding
              bonds  currently  have an  interest  rate  which  is a daily  rate
              established by First National Bank of Chicago and is indicative of
              current  bid-side yields of high grade tax-exempt  securities.  At
              the Company's option, and under certain  conditions,  the interest
              rate may be changed to a monthly  rate or a fixed rate.  The bonds
              are  secured  by the  related  buildings,  leases  and  letters of
              credit.  At January 31, 1998,  the interest  rate on the principal
              amount of these bonds was 3.65%.

       Extraordinary  charges were recognized during the years ended February 1,
       1997 and February 3, 1996,  primarily  from the write-off of  unamortized
       debt expenses related to the significant  revision of the previous credit
       agreement  in  1995,  as well  as  from  the  redemption  of the  11.125%
       Subordinated  Debentures  in  1995,  and the  termination  of the  Credit
       Agreement in 1996.


(4)    Stockholders' Equity

       (a)    Common Stock

              The Company's  authorized common stock consists of 1,000 shares of
              Common  Stock,  par  value  $.01  per  share.  The  Old  Company's
              authorized common stock consisted of 100,000,000  shares of Common
              Stock,  par value $.01 per share (of which  3,518,728  shares were
              Nonvoting Common Stock (Series I), par value $.01 per share).


                                                                     (Continued)
                                                            
                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)




       (b)    Preferred Stock

              The Company has not authorized  any preferred  stock as of January
              31, 1998. The Old Company's  authorized  preferred stock consisted
              of 20,000,000  shares.  The preferred stock was issuable in series
              with terms as fixed by the Board of Directors.  No preferred stock
              was issued.


(5)    Stock-Based Compensation

       The Old Company had reserved 6,437,957 shares of its Common Stock for the
       granting  of stock  options  and  other  incentive  awards  to  officers,
       directors  and key  employees  under the 1993 and 1995  Stock  Option and
       Incentive  Plans of Eckerd  Corporation.  Options  were granted at prices
       which were not less than the fair market value of a share of common stock
       on the date of grant. Commencing three years after the date of grant, all
       options were  exercisable  to the extent of 50%, with an  additional  25%
       exercisable  after  each of the next two  successive  years.  Unexercised
       options expire ten years after the date of grant.  Options  granted under
       prior  plans were  surrendered  and  granted  under the terms of the 1993
       plan. In December 1996, after a change of control when JCPenney purchased
       50.1% of the outstanding  common stock of the Company,  all stock options
       outstanding  became 100% exercisable.  In connection with the acquisition
       of the Company by  JCPenney,  all option  holders were given the right to
       elect,  in whole or in part,  to convert  their options into an amount of
       cash  from  JCPenney  equal  to the  difference  between  $35.00  and the
       exercise  price of their  options.  On  February  27,  1997,  all options
       outstanding  were either  converted  into cash, if elected,  or converted
       into a pro rata number of options to acquire JCPenney common stock. After
       February 27, 1997, no options were available for grant under the 1993 and
       1995 plans. At January 31, 1998, there were options for 235,555 shares of
       Old Company Common Stock,  exercisable at $5.00 to $24.38 per share, with
       a weighted  average  option price of $10.34,  which converts into 155,561
       options to acquire JCPenney Common Stock.

       As of February  1, 1997 and  February 3, 1996,  2,836,442  and  3,531,658
       shares of Old Company Common Stock were available for grant.  At February
       1, 1997, options for 3,601,515 shares of Common Stock were exercisable at
       $2.59 to $28.25  per  share,  with a  weighted  average  option  price of
       $12.93.  At February 3, 1996,  options for 758,308 shares of Common Stock
       were  exercisable  at $2.59 to $7.00 per share,  with a weighted  average
       option price of $5.04.

                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)



       A summary of changes during the years ended January 31, 1998, February 1,
       1997 and February 3, 1996 is set forth below:
<TABLE>
<CAPTION>

                                                       Shares under              Option            Weighted average
                                                          option                 prices              option price
                                                           -----                  -----               ----------
<S>                                                    <C>                  <C>                    <C>  

              Outstanding January 28, 1995               2,551,992          $  .28  -   $14.63          $ 6.32
                  Granted                                1,059,134          $12.81  -   $22.00          $15.71
                  Exercised                               (227,940)         $  .28  -   $ 7.00          $ 4.16
                  Canceled                                (132,438)         $ 7.00  -   $19.31          $ 8.84
                                                         ---------
              Outstanding at February 3, 1996            3,250,748          $ 2.59  -   $22.00          $ 9.42
                  Granted                                  919,100          $20.75  -   $28.25          $22.49
                  Exercised                               (344,449)         $ 2.59  -   $ 8.44          $ 5.39
                  Canceled                                (223,884)         $ 7.00  -   $27.25          $12.84
                                                         ---------
              Outstanding at February 1, 1997            3,601,515          $ 2.59  -   $28.25          $12.93
                  Exercised/Converted                   (3,361,150)         $ 2.59  -   $28.25          $13.11
                  Canceled                                  (4,810)         $ 7.00  -   $24.38          $ 7.18
                                                         ---------
              Outstanding at January 31, 1998              235,555          $ 5.00  -   $24.38          $10.34
                                                         =========
</TABLE>

       The  Company  has  elected  to  continue   accounting   for   stock-based
       compensation  under the  provisions of APB No. 25,  Accounting  for Stock
       Issued to Employees. Accordingly, net income and earnings per share shown
       in the consolidated  statements of income do not reflect any compensation
       cost for the Company's  stock options.  In accordance  with SFAS No. 123,
       Accounting  for  Stock-Based  Compensation,  the fair value of each fixed
       option granted is estimated on the date of grant using the  Black-Scholes
       option-pricing  model  with  the  following  assumptions.  There  were no
       options granted in the year ended January 31, 1998.

                                                                         1996
                                                                         ----
                 Dividend yield                                              0%
                 Expected volatility                                      24.8%
                 Risk-free interest rate                                   6.3%
                 Expected life of option                                5 years
                 Fair value per share of options granted                  $7.90
                 SFAS 123 compensation expense (thousands)               $2,273

       The effect on earnings per share of recording  compensation expense under
       SFAS No.  123 was a  reduction  of  approximately  two cents per share in
       1996.

                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)


(6)    Employees' Benefit Plans

       (a)    Profit Sharing Plan

              The Company has a noncontributory profit sharing plan which covers
              all full-time employees. The Company makes annual contributions to
              the Plan at the  discretion of the  Company's  Board of Directors.
              All funds are held by a bank as trustee  under a trust  agreement.
              Included in  operating  and  administrative  expenses  are charges
              accrued  for  contributions  to the Plan of  $13,655,  $11,827 and
              $11,231 for the years ended January 31, 1998, February 1, 1997 and
              February 3, 1996, respectively.

              Plan assets at fair value,  consisting of fixed income securities,
              JCPenney's  stock and listed  stocks,  amounted  to  approximately
              $350,800 for the plan year ended December 31, 1997.

       (b)    Pension Plans

              The  Company  has a  noncontributory  pension  plan  covering  all
              full-time  employees  who qualify as to age and length of service.
              Benefits are computed based on the average annual compensation for
              the five consecutive years that produce the highest average during
              the final ten years of creditable service. The Company's policy is
              to fund the  Plan in  accordance  with  minimum  Internal  Revenue
              Service (IRS) requirements.

              Assets and  obligations  of the Company's  pension plan at January
              31, 1998 and February 1, 1997 were:
<TABLE>
<CAPTION>


                                                                                        January 31,        February 1,
                                                                                           1998               1997
                                                                                           ----               ----
                                                                                        (Projected)
<S>                                                                                     <C>                <C>    


                  Accumulated benefit obligation                                         $ 46,900            47,843
                                                                                           ======            ======
                  Projected benefit obligation:
                      Beginning of year                                                  $ 61,436            56,237
                      Service and interest cost                                             7,831             8,025
                      Actuarial gain                                                       (8,997)           (1,326)
                      Benefits paid                                                        (2,636)           (1,500)
                                                                                           ------            ------
                      End of year                                                          57,634            61,436
                                                                                           ------            ------
</TABLE>

                                                                     (Continued)
                                                       
                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)

<TABLE>
<CAPTION>


                                                                                        January 31,        February 1,
                                                                                           1998               1997
                                                                                           ----               ----
                                                                                        (Projected)
<S>                                                                                     <C>                <C>    

                  Fair value of plan assets:
                      Beginning of year                                                  $ 55,471            44,751
                      Company contributions                                                 3,694             5,081
                      Net gains                                                            12,496             7,052
                      Benefits paid                                                        (2,636)           (1,500)
                                                                                           ------            ------
                      End of year                                                          69,025            55,384
                                                                                           ------            ------
                  Excess fair value over projected benefits                                11,391            (6,052)
                  Transition asset, net of gains and prior
                      service cost (unrecognized)                                         (11,975)            4,626
                                                                                           ------            ------
                          Accrued pension cost                                           $   (584)           (1,426)
                                                                                           ======            ======
</TABLE>

              The pension costs for the years ended  January 31, 1998,  February
              1, 1997 and  February  3, 1996  included  the  following  (income)
              expense components:
<TABLE>
<CAPTION>

                                                                       January 31,       February 1,       February 3,
                                                                          1998              1997              1996
                                                                          ----              ----              ----
<S>                                                                    <C>               <C>               <C>   

                  Service costs (benefits earned during
                      the period)                                       $  3,969            3,963             3,606
                  Interest cost on projected benefit
                      obligation                                           3,862            4,062             3,790
                  Actual return on assets                                (12,496)          (7,052)          (10,308)
                  Net amortization and deferral                            7,516            2,983             6,387
                                                                          ------            -----            ------
                           Net pension cost                             $  2,851            3,956             3,475
                                                                          ======            =====            ======
</TABLE>

              Principal  assumptions  used in determining  the  accumulated  and
              projected benefit obligations were:
<TABLE>
<CAPTION>

                                                                       January 31,       February 1,       February 3,
                                                                          1998              1997              1996
                                                                          ----              ----              ----
<S>                                                                    <C>               <C>               <C>

                      Weighted average discount rate                      7.5%              7.5%              7.5%
                      Weighted average long-term
                           rate of return on assets                         9%                9%                9%
                      Weighted average rate of
                           compensation increases                           5%                5%                5%

</TABLE>

                                                                     (Continued)
                                                      
                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)




              The Company has in effect an Executive  Supplemental  Benefit Plan
              to provide  additional  income for certain of its executives after
              their  retirement  as well as  pre-retirement  death  benefits  to
              beneficiaries of such  executives.  Annual benefits will generally
              be  no  greater  than  25  percent  of  the  participant's  salary
              mid-point on the date the  participant  retires or separates  from
              service with the Company.


(7)    Income Taxes

       Income tax expense from continuing operations was:
<TABLE>
<CAPTION>

                                                                                        Year ended
                                                                    ----------------------------------------------------
                                                                    January 31,          February 1,         February 3,
                                                                       1998                1997                1996
                                                                       ----                ----                ----
<S>                                                                 <C>                  <C>                 <C>    

                    Current:
                         Federal                                     $45,388              70,065              19,309
                         State                                        10,625               3,629               1,291
                                                                      ------              ------              ------
                                                                      56,013              73,694              20,600
                                                                      ------              ------              ------
                    Deferred:
                         Federal                                       9,473             (37,142)                -
                         State                                           812              (3,230)                -
                                                                      ------              ------              ------
                                                                      10,285             (40,372)                -
                                                                      ------              ------              ------
                         Total                                       $66,298              33,322              20,600
                                                                      ======              ======              ======
</TABLE>
                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)




       For fiscal years 1997, 1996 and 1995, the income tax expense differs from
       amounts  computed  by  applying  the  Federal  statutory  rate  of 35% to
       earnings  before  income taxes and  extraordinary  items.  The actual tax
       differs from the expected tax as follows:
<TABLE>
<CAPTION>

                                                                                      Year ended
                                                                    --------------------------------------------------
                                                                    January 31,        February 1,         February 3,
                                                                      1998               1997                1996
                                                                      ----               ----                ----
<S>                                                                 <C>                <C>                 <C>    

                Expected tax                                        $60,842              48,041              43,184
                State taxes, net of Federal benefit                   7,434                 259                 839
                Changes in valuation allowance through 
                    the use of loss carryforwards                       -                   -               (42,239)
                Alternative minimum tax expense/
                    (utilization)                                       -               (17,012)             19,189
                Other                                                (1,978)              2,034                (373)
                                                                     ------              ------              ------
                                                                    $66,298              33,322              20,600
                                                                     ======              ======              ======
</TABLE>

       During the 1996 fiscal year,  the Company  reached an agreement  with the
       Internal Revenue Service for the income tax return examinations  relating
       to the January 31,  1987 and January 30, 1988 tax years.  The  settlement
       amount for the two-year period was approximately  $36,400.  In connection
       with this settlement,  the Company's net operating loss  carryforward was
       adjusted  to zero while  deferred  tax assets in the form of  alternative
       minimum tax credit  carryforwards  and deductions  relating to changes in
       amortization  methods became  available.  As such, a major portion of the
       settlement  provided  future tax benefits to the Company.  The settlement
       results  had an  immaterial  effect on the total tax expense for the 1996
       fiscal year. The Company  reached an agreement with the Internal  Revenue
       Service   during  the  1997   fiscal  year  for  the  income  tax  return
       examinations relating to the January 28, 1989, February 3, 1990, February
       2, 1991 and  February 1, 1992 tax years.  The  settlement  amount for the
       four-year period was $1,032.  This result had an immaterial effect on the
       total  income tax expense for the current  year.  The federal  income tax
       returns for the fiscal years ended January 30, 1993, January 29, 1994 and
       January 28, 1995 are currently being examined.

                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)




       Temporary  differences and carryforwards  which give rise to deferred tax
       assets and liabilities are as follows:
<TABLE>
<CAPTION>

                                                                                 January 31,          February 1,
                                                                                    1998                 1997
                                                                                    ----                 ----
<S>                                                                              <C>                  <C>    

                Deferred tax assets:
                    Reserves and other liabilities                                $30,135                 3,204
                    Amortization                                                   41,065                42,326
                    Other                                                          17,755                23,842
                    Loss carryforwards                                                -                     -
                    Credit carryforwards                                              -                  22,756
                                                                                   ------               -------
                         Gross deferred tax assets                                 88,955                92,128

                    Less valuation allowance                                          -                     -
                                                                                   ------               -------
                         Net deferred tax assets                                   88,955                92,128
                                                                                   ------               -------
                Deferred tax liabilities:
                    Inventory                                                      35,245                35,371
                    Fixed assets                                                   23,623                16,385
                                                                                   ------               -------
                         Gross deferred tax liabilities                            58,868                51,756
                                                                                   ------               -------
                         Net deferred tax assets                                  $30,087                40,372
                                                                                   ======               =======
</TABLE>


(8)    Transactions With Related Parties

       During 1996,  Merrill Lynch & Co. (which,  through  affiliated  entities,
       controlled  approximately  1% of the  Company's  common  stock before the
       JCPenney  acquisition)  acted  as  the  Company's  financial  advisor  in
       connection with the  acquisition of the Company by JCPenney.  The Company
       paid Merrill Lynch & Co.  $11,500 for its fees and expenses in connection
       with the acquisition of the Company by JCPenney.



                                                                     (Continued)
                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)



(9)    Affiliate Management Services

       The Company manages and operates  approximately 900 stores for affiliates
       as Eckerd  drugstores  as of  January  31,  1998.  The  Company  provides
       management,  consulting,  administrative  and oversight  services,  which
       include  carrying  out  all  matters  related  to  the  operation  of the
       drugstores.  The Company  receives a management fee based on a percentage
       of gross  revenues of the  affiliates.  Management  fees for 1997 totaled
       $58,380 and are netted against operating and administrative expenses. The
       results of  operations  of the  managed  stores are not  included  in the
       financial statements of the Company.

       The Company has advanced cash to its  drugstore  affiliates to fund their
       operations and has charged interest on such advances at the same interest
       rate  the  Company  pays  to  JCPenney.  Total  interest  charged  to the
       affiliates in 1997 was $10,600, which is netted against interest expense.


(10)   Store Closing Charges

       In the  fourth  quarter  of  1994,  the  Company  established  a  $49,000
       provision for future store  closings.  In addition to the small number of
       stores the Company  would  close in the normal  course of  business,  the
       Company  accelerated  the  closing  of  approximately  90  geographically
       dispersed  under-performing  stores.  Of the total charge,  approximately
       $31,000  related to lease  settlements and obligations and other expenses
       to be incurred  in  connection  with the store  closings.  The  remaining
       charge of approximately  $18,000 was for the write-off of impaired assets
       which included inventory  liquidation and the write-off of intangible and
       fixed assets.

       In  1997,  1996 and  1995,  approximately  $3,000,  $5,000  and  $20,000,
       respectively,  of the  provision  was  utilized  for  lease  obligations,
       settlements,  and asset  write-offs.  In 1996,  remaining  expenses  were
       anticipated  to be less than the  balance  of the  provision;  therefore,
       approximately  $11,000 of the provision  was made  available and utilized
       for 1996  store  closings  approved  in 1995,  primarily  related  to the
       relocation of existing stores.


(11)   Commitments

       The Company  conducts  the major  portion of its retail  operations  from
       leased store  premises  under leases that will expire  within the next 20
       years. Such leases generally  contain renewal options  exercisable at the
       option of the Company.  In addition to minimum rental  payments,  certain
       leases provide for payment of taxes, maintenance,  and percentage rentals
       based upon sales in excess of stipulated amounts.


                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)




       Rental expense for the years ended January 31, 1998, February 1, 1997 and
       February 3, 1996 was:
<TABLE>
<CAPTION>

                                                        January 31,            February 1,            February 3,
                                                           1998                   1997                   1996
                                                           ----                   ----                   ----
<S>                                                     <C>                    <C>                    <C>  

                  Minimum rentals                        $162,963                132,496                118,797
                  Percentage rentals                       24,856                 25,666                 25,651
                                                          -------                -------                -------
                                                         $187,819                158,162                144,448
                                                          =======                =======                =======
</TABLE>

       At January 31, 1998,  minimum rental commitments for the next five fiscal
       years and thereafter under noncancelable  leases were as follows:  1998 -
       $154,130;  1999 -  $149,852;  2000 - $139,489;  2001 -  $128,800;  2002 -
       $123,813; and thereafter - $1,150,421.

       In 1987,  the Company  entered into an operating  lease  agreement for 72
       stores with a third-party  lessor  established by an affiliate of Merrill
       Lynch & Co. (which, through affiliated entities, controlled approximately
       1% of the  Company's  common stock before the JCPenney  acquisition).  On
       February 17, 1997, the Company  purchased  these  properties for $33,111.
       This  transaction has been included in the February 1, 1997 balance sheet
       of the Company as if the transaction had been closed as of that date.

       During 1993  through  1995,  the Company sold  certain  photo  processing
       equipment  to an unrelated  third party for  approximately  $34,000,  and
       entered into five-year leases with respect to such equipment.  No gain or
       loss was recorded in  connection  with these  transactions.  Annual lease
       payments  by the  Company  of $6,801  are  required  over the term of the
       leases.

       During 1993,  the Company and IBM Global  Services  (IGS)  entered into a
       Systems  Operations  Service Agreement  (Service  Agreement)  pursuant to
       which IGS will manage the Company's entire information systems operation.
       The Service  Agreement  has a ten year term and the total  payments to be
       made by the Company are expected to be  approximately  $750,000 over such
       term,  based  on  currently  anticipated  services.  Of  these  payments,
       $168,000 has been accounted for as capital expenditures as of January 31,
       1998.

                                                                     (Continued)

                       ECKERD CORPORATION AND SUBSIDARIES
           (A wholly-owned subsidiary of J. C. Penney Company, Inc.)

                   Notes to Consolidated Financial Statements

                      (In thousands, except share amounts)



   
(12)   Contingencies

       In the ordinary  course of its business,  the Company and its subsidaries
       are  parties to various  legal  actions  which the Company  believes  are
       incidental  to the  operation  of the  business  of the  Company  and its
       subsidiaries.  Company  management  is of the opinion  that  although the
       outcome of such litigation  cannot be forecast with certanity,  the final
       disposition  should not have a material  adverse  effect on the Company's
       consolidated financial position or results of operations.
 


                          Independent Auditors' Report
                          ----------------------------



The Board of Directors
Eckerd Corporation:

Under date of February 26, 1998, we reported on the consolidated  balance sheets
of Eckerd  Corporation  and  subsidiaries  (a  wholly-owned  subsidiary of J. C.
Penney  Company,  Inc.) as of January  31, 1998 and  February  1, 1997,  and the
related  consolidated  statements of earnings,  stockholders'  equity,  and cash
flows for each of the years in the  three-year  period  ended  January 31, 1998,
which are included in the Form  10-K405.  In  connection  with our audits of the
aforementioned  consolidated  financial statements,  we also audited the related
consolidated  financial  statement schedule in the Form 10-K405.  This financial
statement  schedule  is the  responsibility  of the  Company's  management.  Our
responsibility  is to express an opinion on this  financial  statement  schedule
based on our audits.

In our opinion,  such financial statement schedule,  when considered in relation
to the  basic  consolidated  financial  statements  taken as a  whole,  presents
fairly, in all material respects, the information set forth therein.


                                                      /s/ KPMG Peat Marwick LLP


Tampa, Florida
February 26, 1998


                                                                    Schedule II


                       ECKERD CORPORATION AND SUBSIDIARIES
                                    RESERVES
       Years ended January 31, 1998, February 1, 1997 and February 3, 1996
                                 (In Thousands)

<TABLE>
<CAPTION>


                                             Balance at     Charged                              Balance at
                                              Beginning       to                                     End
    Description                               of Period    earnings     Deductions     Other      of Period
    -----------                              ----------    --------     ----------     -----     ----------

    Allowance for doubtful receivables (a)

    <S>                                      <C>           <C>           <C>         <C>           <C>    

      Year ended January 31, 1998              $3,000       $4,365        $4,365         -         $3,000
                                               ======       ======        ======     ==========    ======
                                                                                        
      Year ended February 1, 1997              $3,000       $5,122        $5,122         -         $3,000
                                               ======       ======        ======     ==========    ======
                                                                                        
      Year ended February 3, 1996              $3,000       $4,564        $4,564         -         $3,000
                                               ======       ======        ======     ==========    ======

</TABLE>
                                                                         
--------------
Notes:
(a)  This reserve is deducted from receivables in the balance sheets.

                                
                                 EXHIBIT INDEX

Exhibits previously filed or filed by incorporation by reference:

  3.1     Certificate of Incorporation of the Company (incorporated by reference
          to Exhibit 3.1 of Form  10-K405 of the  Company  for the period  ended
          February 1, 1997 (File No. 1-4844)).

  3.2     First  Amendment  to  Certificate  of  Incorporation  of  the  Company
          (incorporated  by  reference  to  Exhibit  3.2 of Form  10-K405 of the
          Company for the period ended February 1, 1997 (File No. 1-4844)).

  3.3     By-laws of the  Company,  as amended  (incorporated  by  reference  to
          Exhibit  3.3 of Form  10-K405  of the  Company  for the  period  ended
          February 1, 1997 (File No. 1-4844)). 

  4.1     Form of  9.25%  Senior  Subordinated  Notes  Due  2004 of the  Company
          (incorporated  by reference  to Exhibit 4.01 to the Current  Report on
          Form 8-K dated October 26, 1993 of the Company (File No. 1-4844)).

  4.2     Indenture  dated as of November 1, 1993  between the Company and State
          Street Bank and Trust Company of Connecticut, National Association, as
          Trustee relating to the Company's 9-1/4% Senior Subordinated Notes Due
          2004  (incorporated by reference to Exhibit 4.02 to the Current Report
          on Form 8-K dated October 26, 1993 of the Company (File No. 1-4844)).

  4.3     First Supplemental  Indenture , dated as of February 27, 1997, between
          the Company and State  Street Bank and Trust  Company of  Connecticut,
          National Association, as Trustee (incorporated by reference to Exhibit
          4.3 of Form  10-K405 of the Company for the period  ended  February 1,
          1997 (File No. 1-4844)).


 10.1     Master Lease  Agreement I dated as of May 18, 1993 between the Company
          and Imaging  Financial  Services d/b/a EKCC ("IFS")  (incorporated  by
          reference  to Exhibit  10.28 to  Amendment  No. 1 to the  Registration
          Statement on Form S-2 of the Company (No. 33-64906)).

 10.2     Master  Lease  Agreement  II  dated as of June 15,  1993  between  the
          Company  and IFS  (incorporated  by  reference  to  Exhibit  10.29  to
          Amendment  No.  1 to the  Registration  Statement  on Form  S-2 of the
          Company (No. 33-64906)).

 10.3     Systems Operations Service Agreement dated as of July 14, 1993 between
          the Company and Integrated Systems Solutions Corporation (incorporated
          by reference to Exhibit 10.30 to Amendment  No. 1 to the  Registration
          Statement on Form S-2 of the Company (No. 33-64906)).

 10.4     Letter  dated March 16, 1993  between IFS and the Company  relating to
          IFS Sale and Leaseback  (incorporated by reference to Exhibit 10.31 to
          Amendment  No.  2 of the  Registration  Statement  on Form  S-2 of the
          Company (No. 33-64906)).

 10.5     Receivables  Purchase  Agreement  dated as of January 26, 1995 between
          the Company and Three  Rivers  Funding  Corporation  (incorporated  by
          reference to Exhibit  10.18 to Form 10-K405 for the year ended January
          28, 1995 of the Company (File No. 1-4844)).

 10.6     First  Amendment to Receivables  Purchase  Agreement dated as of March
          31, 1995  between the Company  and Three  Rivers  Funding  Corporation
          (incorporated  by reference  to Exhibit  10.19 to Form 10-K405 for the
          year ended January 28, 1995 of the Company (File No. 1-4844)).

 10.7     Employment  Agreement  dated  February 4, 1996 between the Company and
          Francis A. Newman  (incorporated by reference to Exhibit 10.26 to Form
          10-K for the year  ended  February  3, 1996 of the  Company  (File No.
          1-4844)).

 10.8     Employment  Agreement  dated  February 4, 1996 between the Company and
          James M. Santo  (incorporated  by reference  to Exhibit  10.27 to Form
          10-K for the year  ended  February  3, 1996 of the  Company  (File No.
          1-4844)).

 10.9     Employment  Agreement  dated  February 4, 1996 between the Company and
          Samuel G. Wright  (incorporated  by reference to Exhibit 10.28 to Form
          10-K for the year  ended  February  3, 1996 of the  Company  (File No.
          1-4844)).

 10.10    Employment  Agreement  dated  February 4, 1996 between the Company and
          Kenneth L. Flynn  (incorporated  by reference to Exhibit 10.29 to Form
          10-K for the year  ended  February  3, 1996 of the  Company  (File No.
          1-4844)).

 10.11    Amendment No. 1 dated as of November 2, 1996 to  Employment  Agreement
          dated  February  4, 1996  between  the  Company  and Francis A. Newman
          (incorporated  by reference to Exhibit 11 to the Schedule 14D-9 of the
          Company (File No. 1-4844)).

          Exhibits filed herewith:

 12.1     Statement regarding  computation of ratio of earnings to fixed charges
          of the Company.

 23.1     Consent of Independent Certified Public Accountants.

 27       Financial data schedule year ended January 31, 1998.

          Restated Financial data schedule year ended February 1, 1997.

          Restated Financial data schedule year ended February 3, 1996.